In April 2014, many TV and radio broadcasts and publications in the media informed us that Greece had recovered. We must admit that the elite of the EU, IMF and ECB put considerable effort in the media to mislead European citizens that the Greek economy was improving. Why do they take Greece as example?
The story starts every year with the World Economic Forum in Davos, Switzerland, where the heads of the corporate world meet: CEOs, political friends and the consultancy-whisperers. They blame the politicians who are not able to solve the crisis, corporate management already has a focus on the future, and multinationals take the lead in solving the big future challenges: sustainability, growth and poverty.
Dutch multinationals are facing strong competitors from outside the EU, who are confronted less with the difficult market circumstances prevailing in Europe. According to research by the Dutch Financial Times FD, this concerns multinationals such as AkzoNobel, Aegon, DSM, Wolters Kluwer, KPN, Heineken and Shell. Philips and Ahold are stuck in the middle, and Reed Elsevier and Randstad are the only outperformers.
‘Strategic’ is one of the most misused words in management today and is often used to mean ‘important’. However, strategic decisions are about decisions with consequences of future impact for the organization. Compare this with M&A activity. Numerous research studies during the past 25 years have confirmed that 85 percent of all mergers and acquisitions fail.
In the previous post “Companies compete in arenas, not in sectors of industry” we explained how crucial it is to go beyond an industry analysis towards analyses of arenas. This means it is no longer enough to look at the industry sector in which your company competes. A further step Is required, namely conducting an analysis of the ‘competitive arena’.
Management needs to get out of its defensive mode and must be open to intelligence and welcoming to news, even if it is bad news. Companies need different systems for managing their core business and for managing new opportunities. Industry analysis is part of the core business, while arena analysis deals with new opportunities.
Choosing a strategy entails making decisions that explicitly cut off possibilities and options. It is a natural reaction to make the challenge less daunting by turning it into a problem that can be solved with tried and tested tools. The strategic plan is supported with detailed spreadsheets that project costs and revenues quite far into the future. At the end of this strategy process everyone feels much less scared; so this is about coping with fear of the unknown.
We have reported on the continuous threats to banks, and have identified that these are not Black, but Grey Swans. Black swans are large-scale unpredictable and irregular events of massive consequence for which we hardly can prepare ourselves. Grey Swans, on the other hand, are events which have a very high impact, but one for which organizations are able to prepare themselves. Banking is such a huge Grey Swan. Why is this?
You will have the ability to out-think your rivals in the marketplace if your company is able to observe emerging trends before its competition does. A key challenge is to organize the early warning signs of critical changes.
Can you imagine that five years after the financial crisis, the financial system in Europe has still not yet improved? Banks still continue to package ‘risky financial products’ into special entities. Our bankers still behave the same as they did before the financial crisis. Why is this so? Bankers think they are better protected against the next financial crisis, because they have a higher percentage of equity on total assets. It’s business as usual all over again.