Indo-German IT Collaboration – Prospects and Challenges

Indo-German CollaborationThere are strong signals that the collaboration between India and Germany in the IT sector is entering a new phase. So far, the focus has been on German companies hiring Indian IT experts and offshoring IT work to Indian branch offices as well as outsourcing software development and business process management services to Indian firms.

For a number of years, mostly large Indian IT firms like Tata Consultancy Services, Infosys, and Wipro have already been present on the German market. However, the total presence of Indian IT companies on the German market has been quite limited. This may soon change, as more Indian IT firms have discovered the huge potential of the German market.

Indo-German Digital Dialogue

In view of the accelerating digitalisation and the lack of IT experts in Germany, there is also a strong interest from the German business community and the German government to expand the Indo-German IT collaboration. Already in 2017, Germany and India had set up the Indo-German Digital Dialogue, which aims to shape favourable framework conditions for a digital transformation of both economies. The dialogue is headed by the German Federal Ministry for Digital and Transport (BMDV) and the Indian Ministry of Electronics and Information Technology (MeitY).

Signing of MoU between BVMW and NASSCOM

MoU signature BVMW - NASSCOM

MoU signature ceremony (from left): Benjamin Brake (BMDV), Reinhold von Ungern-Sternberg (BVMW), Parvathaneni Harish (Indian Ambassador), Gagan Sabharwal (NASSCOM), and Torge Wolters (GIZ). [Photo by Ali Garaev, BVMW]

In the context of Indo-German Digital Dialogue, the German Association for Small and Medium-sized Businesses (BVMW e.V.) and India’s National Association of Software and Service Companies (NASSCOM) signed a Memorandum of Understanding (MoU) at the Hannover Messe on 1st June 2022 to deepen their cooperation. High-ranking political representatives, including Parvathaneni Harish, Ambassador of India to Germany, and Benjamin Brake, Director General – Digital and Data Policy at BMDV, attended the MoU signing, which was embedded in an event titled “Digital transformation journey – made easier by Indo-German partnership”.

Panel discussion on Indo-German IT collaboration

Panel discussion - Hannover 2022

Panel discussion (from left): William Pike (Cyient), Milon Gupta (strategy consultant), Friedrich Schraml (IT security expert), Marcel Nebel (OPTANIUM), and Gagan Sabharwal (NASSCOM) [Photo by Ali Garaev, BVMW]

The second part of the event consisted of a panel discussion, which aimed to explore the opportunities and challenges of Indo-German IT collaboration. Panelists were William Pike, Global Practice Director – Industry 4.0 at Indian technology company Cyient, Friedrich Schraml, a German expert for IT security and data protection, Marcel Nebel, Founder and CEO of German SME OPTANIUM GmbH, and myself, Milon Gupta, strategy consultant for sustainable business development. The panel discussion was chaired by Gagan Sabharwal, Senior Director – Global Trade at NASSCOM.

The panel discussion highlighted both the opportunities as well as the challenges for Indo-German IT collaboration. The opportunities are mainly based on the complementarity between German industry, which is world-leading in sectors like manufacturing, automotive and pharma, and the Indian IT industry, which is the world’s largest exporter of IT services. This complementarity offers a high potential for collaboration through co-creation and strategic alliances.

Germany is currently only at mid-level in global digitalization rankings. However, digitalization has accelerated during the Covid-19 pandemic and is expected to progress at a fast pace, due to the central role of information and communication technologies for addressing major challenges like carbon neutrality, cybersecurity, and smart mobility.

While the market potential is huge, there are also considerable barriers for Indian SMEs intending to engage in the German IT market: 1. Competition – IT providers from the US, Germany and other countries pose strong competitive challenges, as they have large market shares and long-standing customer relationships; 2. Compliance – Complying with the high level of regulations in the EU and in Germany in areas like labour laws and data protection can be a hard task for new entrants; 3. Culture – Management approaches, communication styles, and work processes in German businesses can be quite different from an Indian perspective, which could at least initially limit the effectiveness of business acquisition and service delivery.


There is a strong mutual interest to grow the Indo-German IT collaboration. The prospects are very promising and the challenges are manageable. Overall, the opportunities of Indo-German IT collaboration clearly outweigh the challenges. By forging strategic alliances, Indian and German SMEs in the IT sector could significantly reduce their business risks while increasing their competitiveness and growth prospects.

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The importance of lived company values in difficult times

Company Values - Strategic ThinkingValues are highly popular among companies around the world. Almost every large enterprise has published a set of corporate values on their website and in glossy brochures. There is a good reason for this, because values can fulfil several important functions: they guide corporate decisions, shape company culture, influence employee behaviour and attract talent.

Between the world’s largest listed companies, there are clear trends on the most popular values and categories of values, according to the amo global corporate values survey 2021.

The five most popular values identified by the survey are: 1. Integrity, 2. Innovation, 3. Respect, 4. Responsibility, and 5. Sustainability.

In the categories of values, there has been a shift towards 1. People & community (former #2), followed by 2. Ethics & integrity (former #1), 3. Creativity & innovation, 4. Professionalism & discipline, and 5. Employees & partners.

While the survey results show, which values rank high among large global companies, they don’t provide insights on what impact these values have on the business activities of the companies.

Values-action gap

The crucial question in this context is: To what extent do the publicly stated values match the lived values in day-to-day business activities? The few available survey results indicate a substantial gap between values and actions in most companies. According to Gallup survey data, only 27% of employees strongly agree that they believe in their company’s values, and just 23% of employees strongly agree they can apply their organization’s values to their work every day.

The consequences of company values not lived and the resulting values-action gap become most apparent in difficult times, when executives and employees face complex decisions under high time pressure. In addition, difficult times also expose the large space for interpretation and potential contradictions in regard to company values.

The Russian war against Ukraine as a crucial test of company values

Crucial Decision - Strategic ThinkingOne of the biggest challenges for value-based company decisions is currently the Russian war against Ukraine. Different companies with business activities in Russia have responded differently to the situation. In the decision companies took, values play an important role, whether there has been a clear connection to the official company values or not. The examples of Nestlé and Ikea, two companies that consider themselves driven by values, illustrate the difference in responses and how they may be related to values.

Nestlé – continues doing business in Russia

After the Russian attack on Ukraine started, Swiss food company Nestlé stopped shipping non-essential items such as coffee and mineral water to Russia, but is still providing essentials like pet and baby food. This is how Nestlé explained their decision in an official statement: “In Russia, we continue to focus on meeting the needs of the local people. (…) As a food company and employer, we recognize that we also have a responsibility toward our more than 7,000 employees in Russia — most of whom are locals. We will continue to do our utmost to ensure a reliable supply of safe and essential food products for the local people. ”

This decision was heavily criticised by Ukraine’s prime minister Denys Shmyhal. He wrote in a Twitter post: “Paying taxes to the budget of a terrorist country means killing defenseless children&mothers”.

It would be interesting to understand, if and how Nestlé’s decision is rooted in the company’s declared values. According to a document by Nestlé on its purpose and values, the company’s values are “rooted in respect”. More specifically, these values include: “Respect for ourselves”, “Respect for others”, “Respect for diversity”, and “Respect for the future”.

Another Nestlé document on “Our Business Principles” adds a few more values: “Our Corporate Business Principles are at the heart of our company. They reflect the basic ideas of fairness, honesty and a concern for individuals and families, communities and the planet.”

Based on these values, any decision could be justified. Nestlé’s decision could be explained as reflecting the value of respect for individuals, families, and communities in Russia, both employees and consumers. This shows that values may provide guidance in making tough business decisions. However, values don’t predetermine such decisions, because values can be interpreted in different ways and sometimes, the values of a company may be contradictory.

IKEA – has paused business in Russia

Swedish furniture company IKEA paused its operations in Russia in early March 2022 with the following explanation: “The war has had a huge human impact already. It is also resulting in serious disruptions to supply chain and trading conditions. For all of these reasons, the company groups have decided to temporarily pause IKEA operations in Russia.” Is the decision based on IKEA’s values? IKEA has eight key values: 1. Togetherness, 2. Caring for people and planet, 3. Cost-consciousness, 4. Simplicity, 5. Renew and improve, 6. Different with a meaning, 7. Give and take responsibility, 8. Lead by example. This set of values looks much more unique and specific to the company than the rather generic set of Nestlé’s values.

However, like in the case of Nestlé, the set of values doesn’t predetermine the decision in this case. What can be said is that the decision is clearly in line with most of the values, especially “Caring for people and planet” (in this case caring first of all for the Ukrainian people), and also “Simplicity”, as this is a straightforward and clear decision, compared to Nestlé’s more complex decision of pausing some side activities while continuing the core business activities.


As the examples of Nestlé and IKEA show, values don’t save companies from ethical dilemmas and hard choices based on trade-offs between unpleasant alternatives with uncertain outcomes. However, values can give companies especially in such difficult decision situations clear guidance. In this way, values can help companies stay true to themselves and at the same time cope with the complexities and ethical dilemmas of reality.

In order to make company values suitable for this purpose, it is not enough to write them down. It is rather important to define, what the company values mean for day-to-day business activities. Every business decision made can be a reflection of the company values and at the same time deepen the meaning of the values for the behaviour of all employees. This is when abstract values turn into lived values that make a company more valuable to its stakeholders.

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The 3 major strategic challenges of the war in Ukraine for EU companies

The Russian war against Ukraine has added another global crisis. It hits the world at a time, when it is still struggling with the effects of the corona pandemic and bracing itself for the growing climate crisis. The Ukrainian people pay the highest price for the Russian aggression in terms of lost lives, injured and traumatised citizens, destroyed infrastructure and environment, and economic loss. At the same time, the whole world is economically affected by the war.

Global economy - Impact of the war in UkraineThe list of global economic impacts includes exploding energy prices, a slump in the supply of wheat and maize from Russia and Ukraine, and reduced supplies of metals like nickel, aluminum and copper from Russia. The combined effect could lead to a global recession and regional famines in areas like East Africa, which are already suffering from droughts and bad harvests.

EU companies are mostly affected by rising prices for crude oil and natural gas as well as price increases for metals and other raw materials. Energy-intensive industries are most affected, but even service providers will feel the price increases directly and indirectly. Beyond coping with these developments in the short term, this poses three major challenges, which companies in the EU, and especially in gas-dependent Germany, need to tackle, in order to stay competitive now and in the future.

1. Reduction of dependency on fossil energy

Global natural gas reserves

Global natural gas reserves (based on data from The World Factbook)

The current discussion is focusing on reducing the dependency on Russian oil and gas in the short-term. That is just a small part of the strategic challenge. Replacing Russian oil and gas with fossil energy supplies from other autocracies may be necessary as a short-term solution. However, it is not viable and desirable in the mid-term to replace one dependency with another, as it entails in every case the risk of perpetuating the lock-in to fossil fuels, including the negative effects on climate, economy, and society. The real challenge for every company is to systemically increase the energy efficiency of all processes and realise latent energy saving potentials, while shifting towards a larger share of renewable energy sources. Companies moving fast in this direction without waiting for publicly funded incentives and new regulations will have an advantage.

2. Increase of resource efficiency through circularity

The price increases for nickel and other raw materials are a strong reminder that the current take-make-waste approach to the use of natural resources in our linear economy is not viable. Companies moving towards a circular economy, in which the use of valuable natural resources is prolonged and the need for virgin materials is reduced, will become more resilient to scarcity and price shocks. That said, the transition from linear to circular business models and production systems is not easy, but it is necessary for economic, ecological and social reasons. And once the transition is on the way, the benefits for competitiveness and resilience of the company will show.

3. Continuous reassessment of business risks

The cumulative effects of the three ongoing global crises – war in Ukraine, corona pandemic, and the climate crisis – make it necessary for every company to continuously reassess its business risks in every market it operates and for every product or service it sells. One of the factors making a company more resilient is strategic foresight and the readiness to adapt to changing situations. At the same time, each company needs especially in volatile and uncertain times like today a reliable compass of values and purpose for ensuring that it takes the best decisions for its stakeholders. For a sustainable company that is part of an interconnected global economic and social system, its purpose should go beyond earning profits. The Russian war against Ukraine highlights the importance of peace for thriving companies in thriving societies. Thus, social and political factors like political stability, social justice, and level of individual freedom rights should also be part of the risk assessment.

What is your view?

Every company is facing a different set of challenges and has a different perspective. That is why I am curious to learn about your view on the current challenges for your own company and companies in the EU in general. Please feel free to post a comment.

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5 global trends that could influence your business in 2021

Strategic Thinking Outlook 2021There has been no business forecast for 2020 that came even close to what happened in this extraordinary year. At least I am not aware of any such forecast. Wildcard events like the Corona pandemic and its effects on society and economy are hard to predict for a specific year. Yes, there have been several warnings years ago that a global pandemic would strike and that we should get prepared. However, nobody knew when it would really happen.

In view of this, you might say that economic forecasts are pointless. If you expect from forecasts a precise and reliable picture of the future, I would agree. However, that is in my view not the point. Forecasts are rather about triggering your strategic thinking and planning for steering the uncertain space of possibilities we call future. In order not to raise false expectations of precise, reliable forecasts, I rather call it strategic foresight. The strategic foresight workshops I offer give participants a map of future possibilities and a good basis for strategic decisions – nothing more, nothing less.

Global Trends 2021The following five business-relevant global trends I identified for 2021 are in this sense not a forecast but rather an invitation to explore the space of possibilities through strategic foresight. Decide for yourself, which of those trends might have an impact on your business, and – more importantly – what this impact could be.

Trend 1: Corona pandemic

At least for the first half of 2021, I expect the Corona pandemic to have a strong short-term impact on the global economy and businesses around the world. Lockdown measures might continue beyond January. Only when vaccinations have reached a level considered to be satisfying by experts will the acute phase of the pandemic be over. Optimists expect this to happen by early summer. For some developed countries, this might be the case. In most developing countries, the level of vaccination and the immunity of the population against the virus could still be on a less satisfying level by summer. Nevertheless, I would expect the acute phase of the pandemic more or less to be over by summer.

Beyond the acute effects of the pandemic through lockdowns, there are also longer-term effects of the Corona crisis that will persist beyond the acute phase. In developing countries, it is expected that the level of poverty will remain significantly above pre-Corona levels for 2021 and beyond. In developed countries, we will see bankruptcies in sectors which suffered most during the crisis. In some sectors, there could also be a continued consolidation including a new wave of mergers and acquisitions. Among the more permanent changes induced by the pandemic could also be the increased number of employees working from the home office. At the same time, the level of business travel will probably remain below pre-Corona levels throughout 2021 – even in the second half of the year, when it might be possible again to travel without restrictions.

Trend 2: Climate change

In 2020, the effects of climate change have become quite obvious. Increased levels of bushfires in Australia and other parts of the world as well as the the average rise in temperatures are clear indicators. The tangible effects of climate change will continue and possibly even increase in 2021. The urgency of containing climate change and adapting to its effects will also increase. In 2020, there have been two major events that have prepared the ground for a stronger response to climate change. The first event was the US presidential election. The government of president-elect Joe Biden will return to the Paris climate agreement, which will give the global effort for containing climate change an additional push. The second event is the European Green Deal that was agreed in 2020. The European Union has committed to reducing net emissions of greenhouse gases to zero by 2050. The EU plans to mobilise at least 100 billion euro over the period 2021-2027 to achieve this goal. The crisis year 2020 has shown that radical changes are possible. In 2021, we might see some radical changes in the response to climate change become reality.

Trend 3: Smart technologies

A major factor in the transition to a more sustainable economy are smart technologies. They can help reduce greenhouse gas emissions and lower the consumption of natural resources in a circular economy. There are two major technologies that will enable the growing impact of smart technologies in all business sectors: artificial intelligence (AI) and 5G networks and services. The combination of AI and 5G will boost the Internet of Things (IoT), which will lead to novel business models and service offerings.

This trend toward smart technologies will continue to radically change a number of sectors in 2021, including transport, housing, and manufacturing. In transport and mobility, 2021 could be the year that will see a major push for e-mobility. In housing, the use of smart technology can help to increase the energy efficiency of buildings. In manufacturing, the factories of the future powered by 5G networks, AI and IoT will significantly reduce greenhouse gas emissions and optimise resource consumption. Obviously, all of this will not happen overnight. However, 2021 could be a year where many innovative smart technology solutions will be rolled out on a large scale.

Trend 4: Coopetition between China and the West

In 2020, the conflict between China and the West has escalated. The US government under president Trump had continued to pursue a tough course against China in trade negotiations and in technology matters, most notably in the area of 5G network technology and the ban of the world’s number one 5G technology provider Huawei from US 5G networks. Although the response by EU countries and other countries in the West has not been aligned with the US position, a pattern of more caution in dealing with China has emerged. The Chinese government under president Xi Jinping has benefitted from the West’s lack of political cohesion and the Corona-induced weakening of the Western economies. China is on its way to become the world’s major superpower. However, the high level of economic interdependence between the Chinese economy and Western economies limits the extent to which China can dominate the global economy.

In 2021, I expect a more cohesive response by the West in dealing with China’s superpower ambitions. President-elect Joe Biden is likely to keep the tough stance against China in economic matters. However, he will seek to coordinate the US China policy more with the EU and other Western partners. Thus, as China and the West are mutually dependent on each other, I expect to say a more balanced relationship between China and the West, which will be based on the goal of a productive coopetition.

Trend 5: Global economic recovery

In 2020, the Corona pandemic and the lockdowns to fight the pandemic caused an economic crisis of a dimension that exceeded the financial crisis of 2007-2008. Expert consider the recession of 2020 to be the worst since the end of the Second World War. In view of the severity of the crisis, a fast global economic recovery would be surprising. However, exactly that is what the OECD has predicted in its economic outlook in December 2020. The OECD predicts a global increase of the GDP by around 4.2% in 2021 and by 3.7% in 2022. This recovery will be supported, according to the OECD, by COVID-19 vaccine rollouts and accommodative fiscal and monetary policies. The OECD expects the recovery to be led by China, which is forecast to grow by 8% in 2021, accounting for more than one-third of world economic growth.

Despite this overall optimistic outlook towards 2020, the OECD has cautioned that the recovery will be uneven across countries. Countries with an effective COVID-19 response including rapid vaccinations are expected to perform relatively well. At the same time, GDP in many other countries is projected to remain below pre-crisis expectations.

There are many factors influencing to what extent the OECD forecast will come true. However, it appears extremely likely to me that we will see a strong economic recovery in 2021.


Please consider, how these five trends mean for your business. How severely has your business been affected by the Corona crisis? Or has your company benefited from the crisis? What challenges and opportunities will the fight against climate change offer you? Are you doing any business in China or with Chinese partners? How would changes in the business relations with China affect your business? How can you benefit from the economic recovery of your customers and business partners?

There are many more questions you could ask yourself to prepare your business strategy for 2021. In addition, there are probably sector-specific trends impacting your business you may need to take into consideration. Nobody has said that strategic foresight is easy. However, it should be worth your time doing it, whether your business is small or big. If you plan to organise a strategic foresight workshop for your company, please consider using the help of an external facilitator to ensure an effective process and usable results.

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5 economic trends that will influence your business in 2019

Crystal Ball 2019

No crystal ball needed to see business trends.

The year 2019 has started, and nobody exactly knows how the economy will develop over the coming 12 months. However, there are 5 trends already visible. They will have an impact on every business, no matter if you are self-employed or working for a large company.

Even if you don’t think, these trends will have an immediate impact on your business, it makes sense to anticipate them when reviewing your business strategy for 2019.

1. Economic growth slows down

According to the latest OECD forecast, economic growth in the world’s major economies will slow down. Global GDP is expected to expand by 3.5% in 2019 compared to 3.7% in 2018.

Depending on region and country, economic growth may be much different. While a few emerging economies may continue to have above-average growth rates, developed countries will face much lower growth rates. The slowdown of economic growth could be more pronounced, if some of the already visible visible risks materialise, including global trade conflicts and the weakening of the EU.

2. Global trade conflicts

In 2018, trade conflicts broke out between the United States and Europe and between the US and China. It remains to be seen, if these trade conflicts will be settled in 2019. I have serious doubts this will happen. Especially in regard to the case of the US-China trade relations, I expect the conflict to continue, as it is part of a political power struggle.

3. Weakening of the European Union

By the end of March 2019, the United Kingdom will leave the European Union, if there is no last-minute decision for another referendum on EU membership. The UK has been one of the economic heavyweights in the EU-28. The remaining EU of 27 members will be politically and economically weaker without the UK. How much weaker depends on whether there will be a chaotic Brexit without agreement or an orderly Brexit with agreement. Every company doing business in the UK and with partners from the UK will feel the effects, not to speak of the UK companies themselves.

According to the OECD forecast, the EU’s economy will grow by 1.9% in 2019. However, in view of Brexit and lack of cohesiveness between the remaining 27 members in regard to economic and fiscal policies, this forecast may turn out to be slightly too optimistic. Especially the development of reforms in France and fiscal policy in Italy are critical factors for the EU’s growth expectations.

4. Energy demand and CO2 emissions continue to rise

According to the latest report of the International Energy Agency (IEA), global energy demand is still on the rise.

As the shift to renewable energy sources remains slow, more fossil fuels are expected to be burned in 2019 than ever. This will lead to a further rise in CO2 emissions and more global warming. Sooner or later the cost for CO2 emissions will rise dramatically, which is expected to have a direct impact on energy-intensive businesses and indirect impacts on all other businesses in the mid-term.

5. Digital transformation

The effective adoption and use of innovative digital technologies is a key factor for the competitiveness of companies and countries. If your company does not have a digital transformation strategy yet, you better start developing one.

Among the many technological trends, the most pervasive is probably the use of Artificial intelligence (AI) in a growing number of business areas, from production to services. Predictions about massive job losses caused by the replacement of humans with artificially intelligent machines are exaggerated. However, AI will continue to drive a shift of human labour from repetitive, formalised tasks in production and service to more complex and more high-touch tasks.

A central factor for many new business models is the availability of a high-speed mobile communication infrastructure. The emerging 5th generation of mobile communication technologies, 5G, is promising to deliver this infrastructure and provide an innovation push for digital businesses. Roll-out of 5G in a number of countries is expected to start in 2019. However, it will at least take until 2020, until businesses outside of the communications technology will feel the benefits of 5G. Nevertheless, it is now important for many businesses to understand the opportunities, which 5G offers for their digital business models.


The year 2019 offers many known and unknown challenges and opportunities. The better you understand the already visible economic trends and prepare for the unexpected events, the more competitive and successful your business will be in the new year.

If you have not had a strategy meeting in the past few weeks for reviewing the business challenges and opportunities for 2019 and beyond, I recommend you have one before the end of January. Feel free to contact me for free advice on how to organise such a strategy meeting.

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5 Wirtschaftstrends die Ihr Geschäft im Jahr 2019 beeinflussen

Wirtschaftsprognose 2019

Sie brauchen keine Glaskugel, um Geschäftstrends zu erkennen.

Das Jahr 2019 hat begonnen, und niemand weiß genau, wie sich die Wirtschaft in den kommenden 12 Monaten entwickeln wird. Es sind jedoch bereits 5 Trends sichtbar. Sie haben Einfluss auf jedes Geschäft, unabhängig davon, ob Sie selbstständig oder bei einem großen Unternehmen beschäftigt sind.

Selbst wenn Sie denken, dass diese Trends keinen direkten Einfluss auf Ihr Geschäft haben werden, ist es sinnvoll sie zu berücksichtigen, wenn Sie Ihre Geschäftsstrategie für 2019 überprüfen.

1. Das Wirtschaftswachstum verlangsamt sich

Nach der jüngsten OECD-Vorhersage wird sich das Wirtschaftswachstum in den größten Volkswirtschaften der Welt verlangsamen. Die OECD erwartet, dass das weltweite Bruttosozialprodukt 2019 um 3.5% wächst gegenüber 3.7% im Jahr 2018.

Je nach Weltregion und Land, kann das Wirtschaftswachstum sehr unterschiedlich ausfallen. Während einige Schwellenländer überdurchschnittliche Wachstumsraten haben können, werden die Industrieländer mit deutlich niedrigeren Wachstumsraten konfrontiert sein. Die Verlangsamung des Wirtschaftswachstums kann noch ausgeprägter sein, wenn einige der bereits sichtbaren Risiken real werden, was globale Handelskonflikte und die Schwächung der EU einschließt.

2. Weltweite Handelskonflikte

Im Jahr 2018 brachen Handelskonflikte zwischen den USA und Europa sowie zwischen den USA und China aus. Es bleibt abzuwarten, ob diese Handelskonflikte im Jahr 2019 beigelegt werden. Ich habe ernste Zweifel, dass dies geschehen wird. Insbesondere in Bezug auf die Handelsbeziehungen zwischen den USA und China erwarte ich, dass der Konflikt weiter gehen wird, da er Teil eines politischen Machtkampfes ist.

3. Schwächung der Europäischen Union

Ende März 2019 wird das Vereinigten Königreich die Europäische Union verlassen, wenn es nicht in letzter Minute eine Entscheidung für ein weiteres Referendum zur EU-Mitgliedschaft geben sollte. In der EU-28 ist das Vereinigten Königreich ein ökonomisches Schwergewicht gewesen. Die EU der verbleibenden 27 Mitgliedstatten wird ohne das Vereinigten Königreich politisch und ökonomisch schwächer sein. Wie viel schwächer hängt davon ab, ob es einen chaotischen Brexit ohne Abkommen oder einen geordneten Brexit mit Abkommen geben wird.

Jedes Unternehmen, das Geschäfte im Vereinigten Königreich macht oder mit Partnern aus dem Vereinigten Königreich, wird die Auswirkungen zu spüren bekommen, ganz zu schweigen von UK-Firmen selbst.

Nach der OECD-Prognose wird die EU-Wirtschaft 2019 um 1.9% wachsen. Doch angesichts des Brexit und des mangelnden Zusammenhalts zwischen den verbleibenden 27 Mitgliedern in Bezug auf Wirtschafts- und Finanzpolitik könnte sich diese Prognose als etwas zu optimistisch erweisen. Insbesondere die Entwicklung der Reformen in Frankreich und die Finanzpolitik in Italien sind kritische Faktoren für die Wachstums-Erwartungen der EU.

4. Energienachfrage und CO2-Emissionen wachsen weiter

Nach dem jüngsten Bericht der Internationalen Energieagentur (International Energy Agency – IEA) hält der Wachstumstrend der weltweiten Energienachfrage an.

Da die Verlagerung zu erneuerbaren Energiequellen langsam bleibt, werden 2019 mehr fossile Energieträger verbrannt als je zuvor. Das wird zu einem weiteren Anstieg der CO2-Emissionen und einer Zunahme der Erderwärmung führen. Früher oder später werden die Kosten für CO2-Emissionen dramatisch steigen. Es ist zu erwarten, dass dies mittelfristig direkte Auswirkungen auf Energie-intensive Unternehmen und indirekte Folgen für alle anderen Unternehmen haben wird.

5. Digitale Transformation

Die effektive Einführung und Nutzung innovativer digitaler Technologien ist ein Schlüsselfaktor für die Wettbewerbsfähigkeit von Unternehmen und Ländern. Wenn Ihr Unternehmen noch keine digitale Transformationsstrategie hat, wird es Zeit, eine zu entwickeln.

Unter den vielen technologischen Trends ist vermutlich der nachhaltigste die Nutzung von KünstlicherIntelligenz (KI) in einer wachsenden Zahl von Geschäftsbereichen, von Produktion bis Dienstleistungen. Vorhersagen zu massiven Arbeitsplatzverlusten, die durch das Ersetzen von Menschen durch künstlich-intelligente Maschinen verursachen, erscheinen übertrieben. Allerdings wird KI die Verlagerung menschlicher Arbeit weiter vorantreiben – von repetitiven, formalisierten Aufgaben in Produktion und Service hin zu komplexen und mehr zwischenmenschlichen Aufgaben.

Ein zentraler Faktor für viele Geschäftsmodelle ist die Verfügbarkeit einer schnellen mobilen Kommunikationsinfrastruktur. Die entstehende 5. Generation mobiler Kommunikationstechnologien, 5G, verspricht diese Infrastruktur zu sein und einen Innovationsschub für digitale Geschäftsmodelle auszulösen. In einer Reihe von Ländern wird die Markteinführung von 5G für 2019 erwartet. In Deutschland steht zunächst einmal im Frühjahr die Versteigerung der 5G-Lizenzen an, die im Vorfeld zu politischen und rechtlichen Auseinandersetzungen geführt hat. Es wird mindestens bis 2020 dauern, ehe Unternehmen außerhalb des Kommunikationstechnologie-Sektors die Vorzüge von 5G zu spüren bekommen. Nichtsdestotrotz ist es jetzt für viele Unternehmen wichtig, die Chancen zu begreifen, die 5G für ihre digitalen Geschäftsmodelle eröffnet.


Das Jahr 2019 eröffnet viele bekannte und unbekannte Herausforderungen und Chancen. Je besser Sie die bereits sichtbaren Wirtschaftstrends verstehen und sich auf unerwartete Ereignisse vorbereiten, desto wettbewerbsfähiger und erfolgreicher wird Ihr Unternehmen im neuen Jahr sein.

Falls Sie in den letzten Wochen noch kein Strategiemeeting hatten, um Ihre geschäftlichen Herausforderungen und Chancen für 2019 und darüber hinaus zu überprüfen, empfehle ich Ihnen, dies noch vor Ende Januar zu tun.

Kontaktieren Sie mich, falls Sie kostenlosen Rat dazu erhalten möchten, wie man ein solches Strategiemeeting effektiv organisiert.

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5 Signs Indicating You Need Strategy Coaching

Many C-suite and mid-level executives have by now understood and experienced the benefits of business coaching. The range of topics for business coaching is very wide. It includes leadership development, stress management, coping with change, and handling conflicts, to name just a few. One particular branch of business coaching which still requires more explaining is business strategy coaching, which happens to be may own focus.

Strategy consultingDifferences between strategy coaching and consulting

When executives hear ‘strategy’ they may think rather about consulting than coaching. However, there is a significant difference between strategy coaching and consulting. Consultants typically collect data, analyze the situation, and present their conclusions and recommendations. A strategy coach doesn’t do any of that and works mainly with the same tools as many other business coaches, including a goal-driven process, mind-opening questions, and enlightening feedback.

Strategy coaching and strategy consulting are in my view not competing but rather complementary. While a number of consultancies include coaching methods in consulting, I recommend to separate coaching and consulting, in order to use their respective strengths and avoid the drawbacks of confusing the roles of coach and consultant. As a coach, I would support the client in finding out their own answers to strategic challenges without providing any advice. As a consultant, I would provide advice based on my expertise.

Business strategy coachingSituations when you need support

As an experienced executive you may say that you and your leadership team can deal with all strategic challenges completely by yourself and don’t need a strategy coach. While this may be true in some situations, there are other situations, when executives and their companies could benefit from the support of a strategy coach.

The following list of five selected signals gives you an idea when it would make sense to hire a strategy coach.

1. There is no documented and implemented strategy or a structured strategy process.

In some small companies it is not unusual that the strategy only exists in the head of the owner and CEO. Such an implicit strategy may work well for some time. However, as soon as there are significant changes in the market, this could become a problem. Coaching can help executives change their mindset and take concrete steps.

2. Your direct reports only have a vague idea what the company’s strategy is.

Have you ever asked one of your direct reports to tell you what the company’s strategy is? If they cannot tell you, this could have different reasons: they have not paid attention when you explained it to them, or you have not properly explained it to them in the first place. In any case you may have a strategy implementation issue which you could reflect and improve through coaching.

3. The business strategy has not been reviewed for a year or more.

Going once every few years through a serious strategic planning process is not sufficient in today’s fast-changing business environment. The strategy of yesterday may not be suitable anymore for today’s challenges. Coaching can help executives establish a more regular process.

4. Strategy meetings led by you don’t produce new strategic options.

If that is the case, you should ask yourself: why? Have you considered the possibility that you contributed to this? Maybe it is because you dominate the discussion, or because you invite a too homogeneous group of people, or because you don’t push for new options. Coaching could help you in the preparation of the next strategy meeting to become more aware of your role and see how you could change your behavior to get more desired results.

5. The market in your business sector is changing, and you are not sure how to respond.

When new competitors enter the market, or new regulation changes the rules of the game, it is time to review your company’s strategy. If you and the other leaders of your company are hesitating or uncertain how to respond, coaching could be useful to gain some clarity.

There are certainly more triggers that should make executives consider either coaching or consulting. However, if you honestly watch out for any of these five signs, you increase your chances of not missing an opportunity.

Why coaching and not consulting?

Why do I suggest coaching and not right away consulting in these five cases? The reason is that I consider it crucial for executives to first get clarity on the strategic challenges for themselves, based on their own knowledge, before they call in consultants to analyze the situation and develop responses to strategic challenges.

Coaching is useful in the strategy process for opening up new perspectives based on the existing, sometimes hidden knowledge of executives themselves. Once the clarity on available strategic options has increased, it will be easier to define specific tasks in the strategy development or implementation process, where the support of consultants could be useful.

If you are an executive and have experience with either strategy coaching or strategy consulting, I invite you to share it via the comment field below. Contact me, if you would like to know more about business strategy coaching.

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5 Common Strategic Planning Mistakes SMEs Should Avoid

Strategic Planning - Strategic ThinkingThe experts have been debating the use of strategic planning for some time. Already in the mid-1990s, Canadian management professor Henry Mintzberg questioned the use of a formal strategic planning process in his book “The Rise and Fall of Strategic Planning”. And in view of fast, partly unforeseeable changes, there are good reasons to doubt the effectiveness of classic strategic planning methods and search for alternatives.

However, according to my knowledge, there is no large company, which does without a forml strategic planning process. And most medium-sized companies with 50 or more employees have a more or less formalized strategic planning process as well.

Already 10 years ago, researchers from the German university Clausthal-Zellerfeld found out in a study on the strategic competence of enterprises that 6 out of 10 small and medium-sized enterprises (SMEs) think that strategic planning is important for the success of their company. The study also showed that the success of an SME’s corporate strategy had been frequently diminished by planning deficits and organizational omissions.

Even assuming that the strategy process in most SMEs has become more professional and effective, in everyday business there are still a number of hard-to-eradicate strategic planning errors, which may limit the longer-term business success.

The following five strategic planning errors are to my impression still widespread among SMEs:

1. The strategy only exists in the head of the CEO.

Especially in smaller, owner-operated companies, the CEO/owner sets the strategy by himself, after more or less intense discussions. Frequently, this strategy is gut-based, exists only in the had of the owner and is communicated only verbally, if at all. This can work for a while, if the CEO has a good gut instinct and at least communicates operational instructions well.

If the company grows or gets into trouble, however, this can lead to problems. Because if the employees do not know exactly what the company strategy is, they can hardly implement it.

If you act as a manager in this or a similar way, I suggest the following experiment: Ask any member of your company what your company’s mission is. I bet you will be surprised at the variety of responses.

2. There is a lack of a clearly defined process.

It is a fallacy to believe that a clearly defined strategy process is only necessary for large companies. This is as if pilots of short-haul aircraft do not need a start-checklist because they do not fly a jumbo.

Under clearly defined, I understand a process described in writing.

In companies that are certified according to ISO 9001, this is self-evident anyway, but other companies can also benefit from this. It creates transparency and prevents the management from forgetting important points in the strategy process or reinventing them every year. At the same time, it is important to keep the process as unbureaucratic and manageable as possible.

3. Employees are too little involved in strategy development.

Strategy Meeting - Strategic ThinkingThe leadership team of many companies sees the role of employees only in implementing the business strategy announced from above. This gives away the opportunity to actively involve the employees in strategic development.

By this I do not mean that in a strategy meeting 100 people sit at the table and discuss the corporate strategy equally like in a grass roots democracy. What I rather mean by that is to treat employees as stakeholders on an equal footing and taking their input to corporate strategy seriously into account.

Not involving the employees has two serious drawbacks: firstly, strategy without input from the basis can lose touch with reality; secondly, the motivation of employees suffers, if they have to implement something they have not been involved in and which they may not fully understand.

4. Proven strategy tools are not used.

The knowledge about a number of strategy tools is now commonplace. The vast number of executives at medium-sized companies probably know what a SWOT analysis or a value chain analysis is. And yet such proven instruments are too little or only superficially used by medium-sized enterprises.

The quality of the resulting business strategy can suffer considerably from this. Ultimately, this increases risks in the implementation phase and can influence the bottom line. Companies that have not established these methods in-house would do well to get them at least for an annual strategy meeting via a strategy coach.

The strategy coach would at the same time free the CEO from the unfortunate role of meeting moderator. Unfortunate, because the CEO, qua office, has already a dominant role in strategy meetings, which is often further reinforced by the presenter role – to the detriment of an open debate.

5. Resources to implement the business objectives are neglected.

Setting strategic objectives for the coming fiscal year and the next five years is one thing. Planning the route to get there is another matter. One crucial factor in this is to realistically assess the resources needed and to plan the generation of still non-existent resources as a sub-goal. This involves more than new employees and money. It is also about intangible resources, such as knowledge. Many medium-sized companies neglect these resources in strategic planning, which considerably complicates implementation.


Companies that avoid these five strategic planning mistakes are at an advantage. However, even more is needed for a successful strategy process, depending on company size and competitive position. Contact me if you have any questions.

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10 Common Business Plan Mistakes and How to Avoid Them

Business Planning - Strategic ThinkingEvery company needs an up-to-date business plan. Although this is most obvious for start-ups, it applies to established firms, too. A business plan keeps everyone on track in implementing the company’s strategy and reaching its business goals.

There is plenty of information available via books and seminars on how to write a good business plan. And yet, many companies, especially start-ups, make serious mistakes in business plan writing that could have been avoided with more knowledge and effort.

As a business plan contest reviewer, I see a number of typical mistakes coming up again and again. Here are 10 of the most common business plan mistakes I have come across:

1. Boring Executive Summary

Investors, bankers, and other business plan readers usually start looking at the executive summary. It should highlight the most important points of the business plan in a pithy way. The business plan should provide a convincing story on how a a highly competent team will provide products or services to precisely defined target markets based on a consistent strategy. Moreover, it should share the company’s vision on how their products or services will make the world of their customers better in a profitable way.

In reality, many executive summaries are lackluster and incomplete summaries of a business idea whose implementation remains unclear. Sometimes, it is just cut and paste of some sections from the introduction and some other parts.

Losing the busy reader already in this part could mean that investors never care to go through the whole document. They may be missing some hidden gems. However, it is the job of the business plan writer to present these gems convincingly in the executive summary.

2. Lack of Focus

Many business plans are lacking a clear focus in defining their target markets and how the envisage products and services are competitive in serving the market needs better than others. Especially for innovative start-ups there is a risk of not focusing enough on a clearly define product/service segment and target market.

The result are often business plans describing a ‘me too’ business whose reason for existence does not become clear, not to speak of electrifying potential investors or customers.

3. Superficial Definition of Target Customers

Understanding who your target customers are and how your product adds value for them is crucial. That includes a granular segmentation of target customers and how the company’s products and services will satisfy the different needs of these different customer groups.

Many business plans, however, keep the definition of target customers very general. For example, saying that your travel app is aimed for everyone who is traveling may sound great first, because this is a very large number of people. However, different groups of travelers have different needs. Without clearly defining these needs in a differentiated way, the result will either be an app with the lowest common denominator of functionality needed by most, or it may be at risk of becoming overly complex, as it tries to please everyone.

4. Overly Optimistic Evaluation of Market Size and Opportunities

Entrepreneurs need to be optimistic to start a business in the first place. However, there is fine line between being upbeat about your business prospects and presenting a distorted view of the market size which is more driven by dreams than data. It can be related to a superficial definition of the target customers. If you think, for example, that 20% of all travelers worldwide will use your app, you would need to have a lot of supporting evidence to credibly convey how you will achieve that. It is not bad for an entrepreneur to think big. However, if you, for example, overestimate the readiness of people to buy your product, you may end up with dream figures you cannot achieve.

5. Underestimating the Competition

Many start-ups are too much self-centered. Being convinced of your product or service is certainly a good attitude. However, there is risk that this could distort your view of how it matches up against products and services of competitors who have been in the market for some time. In addition, some entrepreneurs also overlook or underestimate the possibility of new entrants who could increase competitive pressure.

6. Underestimating Business Risks

Understandably, entrepreneurs focus on exploiting opportunities. Some, however, underestimate or even neglect serious business risks that could endanger the existence of the company. Ignoring the risks will not make them disappear. Instead, it will leave the company unprepared, if a risk materializes. Apart from risk caused by changing demand trends, increasing competition, or unexpected increase of production there are also political and regulatory risks to be considered. If you have, for example, an export-oriented business, you need to take into account global trends like increasing protectionism and regulatory barriers in your target markets.

7. Too Detailed Description of the Product or Service

Especially innovative technology start-ups, often led by engineers, are really excited about the technical details of their product or service. It is part of a credible story to provide enough details so the reader understands that the product or service is well designed. However, if it drifts into jargon and technical details not relevant for understanding the business impact or innovative edge of a product, then details can become a distraction or even barrier, putting off the reader.

8. Unrealistic Financial Projections

This mistake is related to false assumptions on, for example, market size, competitive pressure, and financial risks. Nobody knows the future, and projections can, thus, not be exact. However, they can be based on real data related to general market trends and past revenue and cost development.

9. Unconvincing Presentation of the Executive Team

Quite often, there are just a couple of portrait photos and CVs pasted into the business plan without explaining to the reader, why exactly this team is complementary in their competencies specifically for running the particular business presented in the plan. Investors can get very critical, if they see that important competencies in an executive team are lacking. For example, if a group of engineers without business experience is launching a start-up, there will be questions on how competence gaps in areas like financial management and marketing will be covered.

10. Lack of Review

A team working enthusiastically on a business plan is at risk of false, overly optimistic assumptions and other mistakes that can easily be overlooked, if you are immersed in the process. Thus, not having a review of the business plan by an experienced consultant or a friendly business partner who has been there can lead to mistakes with detrimental effects. A review can help find flaws in the overall business rationale, market and customer definition, or the financial projections. Even if you are not looking for external funding, not having your business plan reviewed is a serious omission.

How to Avoid Business Plan Mistakes

The simple answer would be to be aware of these mistakes and make sure not to do them. However, it is not that easy. Even if you are aware of potential mistakes, it does not automatically mean you are capable of avoiding them. It is like with people who have bad eating habits. They know all about healthy eating and are fully aware of their mistakes. And yet the still continue making these mistakes.

This is where coaching comes in. You can either try self-coaching in the executive team, which requires a high level of awareness, openness and self-distance. Or you can hire an external coach to help you discover your blind spots, become aware of unproductive habits and attitudes like, e.g., over-optimism, and change them.

I would be interested to receive comments from entrepreneurs on what mistakes they have made in business plan writing and how they fixed them.

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Listen to Your Intuition | Business Lessons from the World Chess Championship Match Carlsen – Karjakin, Part 6

Carlsen - Karjakin, Tiebreak, World Chess Championship, New York 2016After 12 games of the world chess championship between Magnus Carlsen and Sergey Karjakin the score was 6-6, and a tiebreak became necessary to get a decision in the match. The tiebreak on Wednesday, 30 November, consisted of four rapid games with 25 minutes plus 10 seconds increment per move for each player.

With such a relatively short time for a whole game, systematic and deep calculation becomes less important and intuitive move selection more relevant. And this is where Carlsen excels. In his own view, his excellent intuition is the success factor that characterizes him the most. And as the tiebreak has illustrated, Carlsen’s intuition works particularly well in games with short time limit.

In the first game, Carlsen comfortably equalized with the black pieces and reached a safe draw. In the second game, he outmaneuvered Karjakin and reached a winning position. But then he made several mistakes and allowed Karjakin a Houdini-like escape into draw through stalemate.

By game 3, Carlsen’s intuition had reached its peak: in a complicated game, he seized the initiative with Black and found an intuitive pawn sacrifice that gave him excellent practical attacking chances. Due to a blunder by Karjakin under time pressure, the pawn sacrifice was swiftly rewarded with a win for Carlsen. In the 4th game, the desperate Karjakin, who had to win with Black and, thus, sought complications, never had a real chance: Carlsen made fast, confident moves and kept a significant advantage with White. In a brilliant final blow he sacrificed his queen to checkmate.

In all four games, Carlsen generally made his moves much faster than Karjakin. In 2013, at the age of 22, he told “The Guardian” in an interview that he usually knows after 10 seconds what he wants to do – the rest is checking. Sometimes he just feels a move is good, without being able to explain why.

Carlsen’s outstanding chess intuition is in my view not a gift provided predominantly by his genes. It is rather the product of a lot of practice, deep understanding, and a fabulous memory. Wherever his intuition is coming from, it helped him secure his third world champion title in chess exactly on his 26th birthday.

Business lesson

Learn from Carlsen and listen to your intuition. This is the seventh success principle from my book on the seven success principles of chess masters (only available in German yet), and it is probably the one success principle that makes the difference between a very good player and a real champion. In a business context, executives often pretend that their decisions are mainly driven by hard facts and calculation. Quite often, their decisions are rather driven by intuition – everything else is just checking.

In order to develop an outstanding intuition, executives need to first gain a lot of experience and consciously reflect their experiences, in order to gain a deep understanding of the interplay between the various factors in their business environment. Despite all the available hard facts, executives need to make decisions based on intuition. Being aware of this and listening to your intuition when making important business decisions can make a positive difference for your career and the success of your organization.

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Face Your Mistakes | Business Lessons from the World Chess Championship Match Carlsen – Karjakin, Part 5

Carlsen – Karjakin, Game 10, New York 2016Game 10 of the world chess championship match between Magnus Carlsen and Sergey Karjakin was a tragicomedy of errors. In a slightly better position, Carlsen gave up his advantage through an inaccurate exchange of bishops in move 19. After that, Karjakin missed two opportunities for immediately forcing a draw. In view of his one-point lead in the match, this would have been good for him. Instead, he had to defend a worse position in the endgame. After a long defense, Karjakin lost through a serious mistake in move 56, which allowed Carlsen a decisive breakthrough to even the match score (5:5).

In the press conference after the game, Karjakin was fully aware, what his decisive mistake was and how he could have played better. Top chess players like Karjakin and Carlsen make much less decisive mistakes than other players. And if they do, they immediately analyse their mistakes and find out why they blundered and how they could have played better. Facing their mistakes with the utmost objectivity and constantly improving their play from game to game enables them to stay at the top in a highly competitive environment.

Business lesson

Even the highest-performing executives make mistakes. In contrast to top chess players, many executives do not endeavor to face their mistakes with objectivity. In many companies, openly admitting mistakes is not encouraged. It could hurt the career of executives doing it – or at least they think so.

Furthermore, causes and effects as well as responsibilities for mistakes are usually distributed among different people. That makes it easier to deny responsibility for business decisions gone wrong. However, at the same time, it makes it impossible for a management team to learn from their collective mistakes and improve their decision making.

Thus, executives need to face their mistakes both individually and collectively. They should take the time to analyse decisions that have led to unintended results, like Carlsen and Karjakin do after every game. And they should create a corporate climate that supports the constructive analysis of mistakes. Executives and companies who proactively face their mistakes have the ability to correct their course of action in time. They will be more successful than those who avoid facing their mistakes.

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Managing Risks with Circumspection | Business Lessons from the World Chess Championship Match Carlsen – Karjakin, Part 4

Carlsen – Karjakin, Game 8, New York 2016On Monday, 21 November, the world chess championship match between titleholder Magnus Carlsen and his challenger Sergey Karjakin saw the first decided game after seven draws. Game 8 took a dramatic course and ended in a win for Karjakin with the black pieces after 52 moves.

The game perfectly illustrates the fourth success principle from my book on the seven success principles of chess masters: Chess champions manage risks with circumspection. While Karjakin demonstrated his excellent ability of limiting his risk while maintaining good options, Carlsen took high risks in return for low potential rewards.

In an equal position, Carlsen repeatedly tried to complicate the game to avoid another draw. His determination to win with the white pieces led him to ignore the counter chances of his opponent. That was unusual, as it is normally Carlsen who puts his opponents under pressure without exposing himself to a high risk of losing. Karjakin on the other hand, avoided any risky continuation, even if it looked very promising.

Business lesson

In the hope of high returns, some entrepreneurs enter high risks without weighing the risks against the opportunities. Being an entrepreneur in itself involves certainly involves a certain degree of risk. However, what distinguishes excellent entrepreneurs from most others is their ability to pursue promising opportunities while at the same time limiting their risks. They pursue opportunities without turning blind to the threats along the way. Master the art of actively seeking business opportunities with circumspection. If you anticipate risks, you can avoid them or contain their impact.

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Be Prepared | Business Lessons from the World Chess Championship Match Carlsen – Karjakin, Part 3

Carlsen – Karjakin, Game 6, New York 2016The Spanish writer Miguel de Cervantes (1547-1616) coined the famous phrase: “To be prepared is half the victory.” The current world chess championship match between titleholder Magnus Carlsen and his challenger Sergey Karjakin is proof that this old wisdom still applies.

Both contestants appear extremely well prepared on three levels: chess openings, mental robustness, and physical fitness.

Opening preparation

At the top level in chess, opening preparation is very important. Both Carlsen and Karjakin are able to exploit even small advantages. In order to avoid a bad position after the opening, both spend a lot of time and care on preparing variations that increase their own chances and are unpleasant for the opponent. The equal character of the match so far – 3.5 to 3.5 points after game 7 – is partly due to the fact that both players and their seconds have done good work in the opening.

Mental robustness

Mental robustness is another key factor, especially after the opening phase is over and each player is own his own. Especially if you have to defend, the mental pressure is very high. A contender for the chess crown has to be exceptionally robust to perform well under pressure. That is particularly true in time trouble. When a game is approaching the first time control at move 40, at least one player is usually in time trouble, which means he has less time per move than he would like to have in order to calculate and evaluate move options sufficiently. Making crucial decisions with insufficient time on the clock requires good nerves.

Physical fitness

Finally, the longer the game lasts, the ability to concentrate fully even after 5 or 6 hours of play becomes very important. Physical fitness can help maintain a good level of concentration for a longer time. Magnus Carlsen is regarded as one of the physically fittest chess players in the world. He plays all kinds of sports to keep himself in good shape. Sergey Karjakin worked on his physical fitness in the months before the match. Especially games 3 and 4 ran very long, with 78 and 94 moves respectively. If both players had not been in good shape, their error rate in these games could have been higher.

Business lesson

Executives and their businesses need to be well prepared to perform well and be competitive. Firstly, they need to master their subject matter, e.g. the generation of their product or service. Secondly, they need to have the mental robustness to keep up their performance when things get rough, i.e. when business is slow and competition is fierce. And finally, paying attention to the physical fitness of executives and employees is important to maintain a high level of performance.

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How to be Resilient | Business Lessons from the World Chess Championship Match Carlsen – Karjakin, Part 2

Carlsen – Karjakin, Game 4, New York 2016The character of the world chess championship match between world champion Magnus Carlsen and his challenger Sergey Karjakin has changed: while they were testing each other’s (and the viewers’) patience in games 1 and 2, just waiting for the other side to make a mistake that never happened, the next two games were characterized by a fierce and long fight.

In games 3 and 4, Carlsen put Karjakin under heavy pressure in the endgame, the final phase of a chess game, where the number of pieces on the board is reduced. Usually, Carlsen’s opponents crack under the pressure of the world champion’s almost perfect skills in converting small endgame advantages. Not so Karjakin: in both games he successfully defended inferior positions and achieved two draws against Carlsen. Commentators rightly praised Karjakin’s defensive skills. Some even jokingly suggested that the challenger should become Russia’s defense minister.

Business lesson

Karjakin’s resilience sets an example for executives and entrepreneurs who face adversity in business. How did Karjakin develop his resilience, and how could you transfer this to the business world?

At the root is willpower, as I explained in my German book on the seven success principles of chess masters. The good news is that you can strengthen your willpower by managing your energy level, attitude and habits. In order to be as resilient as Karjakin, a strong belief in yourself and your resources is crucial. That belief will be strengthened through experience. Before the match against Carlsen, Karjakin had already successfully defended hundreds of difficult chess positions against other world class players.

However, that is not enough. You also need to regulate your emotions, replacing destructive feelings of despair in view of seemingly insurmountable difficulties with a constructive ‘can do’-attitude that enables you to find the hidden resources in a difficult situation. Please do not confuse this with blind optimism. In order to find the hidden resources, Karjakin had to be brutally honest with himself about the situation he was in. A realistic evaluation of the situation is the basis for being purposefully resilient.

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Business Lessons from the World Chess Championship Match Carlsen – Karjakin | Part 1: The Importance of Patience

Carlsen – Karjakin, Game 1The Norwegian world champion Magnus Carlsen and his Russian challenger Sergey Karjakin started their fight for the chess crown in New York on 11 November 2016. Some commentators were disappointed by the first two games of the world chess championship: they both ended in a draw without any exciting things happening on the board. In both games, the opponents were happy with early swapping of some material, which led to an equal endgame each time.

Obviously, both opponents were not ready to take a lot of risk in this early phase of the 12-game match. The duel between the 25-year-old champion and his 26-year-old challenger appears to be at eye level so far, despite the fact that Carlsen has a much better rating and leads in their personal encounters 4:1.

In the press conference after the 2nd game, Carlsen asked the public for understanding, saying that this is a long match, and there won’t be fireworks in every game. That reminds me of former world champion Tigran Petrosian (1929-1984), whom I quote in my German book on the seven success principles of chess masters as a prime example for prophylaxis and circumspection. When confronted in 1971 by the chess press with the accusation that his match games against Victor Korchnoi were boring, he said that he could play more exciting and lose. Obviously, he was not ready to do this.

All world champions have demonstrated a high level of circumspection in combination with good nerves that gave them the patience to wait for their chance and use it.

Business lesson

Sometimes it is important to patiently wait for opportunities to come, rather than to force matters. Withstanding the pressure of external and internal expectations may sometimes be wise, in order to avoid unpredictable risks and be in a better position, when the opportunity comes.

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Strategic Investing Means Long-Term Investing – Interview with Stock Market Expert Thomas Anton Schuster

Thomas Anton Schuster

Stock market expert Schuster recommends to invest long-term.

Thomas Anton Schuster is the owner of a forwarding agency in the greater Munich area. In addition, he has been investing in stocks for more than three decades and is sharing now his investment knowledge as a speaker.

In an interview with Milon Gupta he explains exclusively to readers of the Strategic Thinking Blog, what typical mistakes make individuals and businesses commit when they invest and how to invest with strategic vision.

What investment options are generally available to investors?

Schuster: There are basically two options: either to lend your money or to build property in the form of tangible assets.

I decided from the beginning for the development of property. I consider this the much more profitable way, especially in the current low-interest phase; because even if you lend your money to the state for a period of 10 years, the return is currently around zero. This makes no sense in my opinion. By the way, what many people do not know: even if you deposit your money in a checking account at the bank, you lend your money to the bank. And you don’t get hardly any positive interest rates as well. Some banks have even moved to negative interest rates for larger amounts. This means that you must even pay money to lend it to the bank. I find that quite remarkable.

On the other hand, the annual dividend return of DAX shares alone is at about 3 percent; thus, much more than fixed-income investments.

In building wealth based on real assets, there are generally the following opportunities: shares, meaning: investments in businesses, real estate, precious metals such as gold or silver, and commodities like oil or copper.

With shares I have had the best experiences; because you get ongoing returns in the form of dividends.

What is the meaning of strategic investing for you?

Frankfurt stock exchange

Frankfurt stock exchange (Foto: Pythagomath 2014 – Creative Commons License CC BY-SA 4.0)

Schuster: In my stock strategy, strategic investing really means long-term investing. No gambling! I invest exclusively in companies I believe in and stick to them – preferably for life. If the stock prices of these companies temporarily decline, I specifically average down on these stocks. Averaging down at good prices propels my returns. That allows me to achieve a long-term annual return of 8 to 10 percent.

Why have you focused your investment strategy on shares?

Schuster: Because I was able to already invest relatively small amounts in my youth. In addition, I can very well spread with shares, which means dividing my money among several companies, so that I get a spread of risk, if one of my investments should turn out to be a mistake.
Furthermore, I can benefit from global economic growth by investing in global companies.

What are the most common strategic mistakes in investing, and how can you avoid them?

Stock market - Strategic Thinking

Schuster: reduce your risk by diversifying your investment.

Schuster: In long-term investing, there is of course always the problem that no one can predict the future for several years or even decades. You can reduce this risk by spreading the funds, which means investing in several stock market values; in my experience it is best to pick 10 to 15 global companies. Thus, I have always been able to compensate for bad investments and yet achieve annual returns of 8 to 10 percent in the long term.

What advice do you have for the strategic, far-sighted build-up of an investment portfolio?

Schuster: Invest in 10 to 15 solid global companies, and average down when stock setbacks happen. The problem is your own psyche: many lose their nerves and sell at very low rates during economic slumps. Thus, losses are inevitable of course. I recommend the opposite: to buy when everyone else sells; and not to allow being driven crazy by doomsday prophets. By now, I have experienced all the highs and lows at the stock exchange for over 30 years now and gained the following insight: at some point, every crisis is over. And then, stock prices of solid companies will increase again and reach new peak values.

And finally: what investment advice would you give medium-sized enterprises?

Schuster: My tip for medium-sized entrepreneurs: diversify your investments!
I am myself managing partner in a medium-sized forwarding agency. Therefore, I know: many medium-sized companies put all their money in their own company. That makes perfect sense, because we identify with our company. The company is a big part of our lives. The risk here, however, is the formation of lumps. What I mean by this is the investment of a large part of our assets in only one investment object. However, nobody can predict the future here as well. How many successful industries have become obsolete because of digitization, for example, or have changed completely; or through political decisions?

With stocks, you have the opportunity to invest a part of your assets in completely different industries and to diversify the investment risk.

Further information about Thomas Anton Schuster is available on his website at (in German)

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3 Core Principles of Strategic Leadership under Uncertainty

Ships on a Stormy Sea - van de Velde

Ships on a Stormy Sea – van de Velde

We live in uncertain times. Today, leadership may often feel like being the captain of a sailing ship in a heavy thunderstorm. While you are keeping the ship above water, you are struggling to keep your orientation, and you don’t know what will happen next.

Just think back 12 months. In August 2015, we didn’t know about a number of events and trends that are impacting business today. Think of Volkswagen’s Diesel manipulation scandal in the US, which was only revealed in September 2015. Or of the British vote to leave the EU, which most people didn’t expect to happen.

Did anyone last year expect the huge success of the location-based augmented-reality game Pokémon Go? There are many more events and trends that can be logically explained with hindsight, but which nobody exactly predicted a year ago. And many seemingly unrelated trends influence each other, which adds to the unpredictability.

Welcome to the VUCA world

Another term pundits are using to describe our current period of uncertainty is VUCA, which stands for volatility, uncertainty, complexity, and ambiguity. While many people just consider it to be a clever term for chaos, the four VUCA elements describe distinctly different aspects of what is happening.

VUCA ConceptLet us take the example of Brexit. Before and after the vote, there was a high degree of uncertainty of what exact economic impacts Brexit would have in the longer term. Nevertheless, the Brexit vote led to highly volatile responses of financial markets. Leaving the EU itself is a highly complex process that offers various options for the future economic relationship between the UK and the EU-27.

Looking at it from a British perspective the vote has an inherent ambiguity: leaving the EU means more independence from EU regulations on the one hand, while it could also mean less access to the EU’s common market, depending on the negotiations between the EU and the UK. By now it is not even clear, when the leave process is officially triggered by the UK government. The latest status is that it will not happen before 2017.

Brexit in itself is already very VUCA. However, there are also other, partly inter-related trends and events, like the refugee situation or the situation in Turkey, which add to the whole picture. Do these trends and events have an impact on your business? They could. However, it is rather uncertain, when and how.

How does this VUCA world fit into the neat world of traditional business planning? The simple and disillusioning answer is: it does not. Strategic planning as we knew it, is not sufficient for coping with the VUCA world. Companies that want to thrive in uncertain times need a fundamentally different approach to strategic leadership.

There are three principles that I consider essential for VUCA-proof strategic leadership:

1. Anticipate market and technology trends, opportunities and risks.

This principle may appear paradoxical. Isn’t the whole point about VUCA that you can hardly predict what will happen? And yet, you should anticipate trends? While it is true that you can hardly predict most events and trends with a high degree of certainty, you can nevertheless anticipate them.

Anticipate - Strategic ThinkingIn the case of Brexit, you could have anticipated positive and negative effects on your business for both possible outcomes. In that way, you would not give yourself the impossible task to predict events and trends, but rather be prepared for possible trends and events.

Ask yourself a few questions to sharpen your anticipatory senses, like:

  • What would be the worst that could happen?
  • What could be the best that could happen?
  • What would be the most unexpected event that could happen?

By anticipating events and trends as much as you can, you reduce uncertainty for your business and increase the level of preparedness for any kind of event that may happen.

2. Adapt your strategy to expected and unexpected developments when necessary.

From anticipating events and trends, you and your organization will gather an understanding of how this will affect your business. Based on this understanding, you need to regularly evaluate, whether there is a need to change your strategy.

You need good collective experience and good judgment in your leadership team to find the right balance between persistence and change. Not every change in your business environment requires that you change your strategy. And sometimes, even if no spectacular change has happened yet, you may need to proactively adapt your strategy to envisaged future trends.

In any case, you need to be permanently ready to adapt your organization’s strategy. Whether you do it, and how you do it, should be subject to careful consideration.

3. Act in an agile way to implement your adapted strategy.

Adapting your organization’s strategy is not enough. You also need to make sure, it is implemented as swiftly as possible. In order to decrease the time from strategy update to implementation, you need to have agile structures and processes in place. There has been plenty of erudite discussion about the agile organization. Yet, few of them seem to exist.

Nevertheless, being agile is increasingly becoming a crucial success factor for organizations. That implies decentralizing executive power on the operational level. In today’s fast-paced business world, there is just no time for hierarchical decision-making processes on operational matters. Instead, an agile organization needs to practice the principle of subsidiarity, meaning that operational decisions should be taken as close to point of impact as possible.

In order to make this work, you need employees on all levels of your organization, who are capable of thinking strategically. They need to see the big picture and understand the impact of their operational decisions on the whole organization. In return, they should not be hampered by excessive control from their superiors, in order to keep the organization moving at a good pace.


Today’s VUCA world puts tremendous pressure on most organizations and their leaders. Fast change and high uncertainty expose management mistakes more brutally than ever. Organizations that don’t adapt risk to decline. By consequently applying the three core principles outlined above, leaders and their organizations stand a good chance of sailing successfully through the turbulent sea of our unpredictable world.

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What The Brexit Means For Your Business

BrexitOn 23 June 2016, 51.9% of the British electorate voted in a referendum for leaving the European Union. The consequences of this vote for Brexit, short for ‘British exit’, are not yet fully clear. Many open questions remain, like, for example:

  • When will the British government invoke article 50 of the EU treaty on withdrawing from the Union?
  • Will the British government do it at all?
  • Will there be a second referendum on staying or leaving?
  • Will Scotland have a referendum on leaving the UK and remaining in the EU?
  • Provided the UK will withdraw from the EU, what terms will be negotiated for the EU-UK relationship after the two-year negotiation period?

While these questions have not been clarified to date, one thing is clear: the Brexit vote has already increased volatility and uncertainty in the market. And this will have an impact on the business strategy of every company in the UK, the EU, and beyond.

There are four economic areas that are directly affected by a Brexit: exchange rates, trade, direct investment, and employment.

Exchange rates

GBP-Euro exchange rate, 22-24-06-2016

Exchange rate of GBP to EUR, 22-24 June 2016 (source: European Central Bank)

The exchange rate of pound sterling to US dollar went down 8.1% on the day after the Brexit vote. At the same time the pound lost 5.1% to the euro, while the euro lost 2.8% to the US dollar.

In the short term, central banks all over the world will do their best to stabilize exchange rates. However, in the mid- to longer term, market forces may be expected to put continued pressure on pound sterling and euro.

Export-oriented business may get short-term benefits from this. However, the longer-term effects of more volatile exchange rates and increased import costs may outweigh any export benefits.


It is difficult to predict how trade would develop after Brexit, as this depends on the results of the negotiations between the UK and the EU-27. Depending on what agreement is reached, trade would not necessarily have to suffer. However, the negotiation period of two years would create significant uncertainty and might have a negative effect on trade relationships between the UK and the EU-27. Especially export-oriented companies that had close ties with the UK could suffer. This would particularly affect the car industry.

Direct investment

The Brexit is likely to have to effects on direct investment: re-allocation from the UK to the EU-27, and overall reduction due to uncertainty over the future economic relationship between Britain and the EU. Especially companies in the finance sector are expected to re-allocate offices from London’s financial center and move them to Frankfurt or Paris. Investments in new industrial plants and offices are likely to be either postponed in the transition period, or they will be shifted to suitable EU-27 Member States.


Employees of branch offices of continental firms in the UK as well as EU-27 citizens working in the UK are facing significant uncertainty in regard to their future career in Britain. The British Leave campaign particularly focused on curbing immigration from EU-27 countries. While this may have been largely campaign rhetoric, the uncertainty remains. The moving of branch offices to continental Europe alone could lead to loss of jobs in the UK and the creation of new jobs in some regions of the EU-27.

Companies that are active on the British market will be forced to make decisions about their non-UK staff within the next two years. In the best case, from an economic perspective, the negotiations will result in the UK joining the European Economic Area (EEA). This would include free movement of persons, goods, services and capital between the UK and the internal market of the European Union (EU). However, it is not clear, if such an agreement would be politically feasible in the UK, as particularly the free movement of persons was one of the features of the EU that the Leave proponents rejected.


Business Vision - Strategic ThinkingThe implications of the Brexit for companies in Europe will be to a varying degree significant. Independently how close the business ties with the UK are, companies should better take Brexit and its effects into account for their business strategies. It seems that most companies in the EU have failed to do so by now.

A survey by British law firm Pinsent Masons, which was conducted in May 2016, revealed that only about a quarter of the interviewed firms had a plan for dealing with Brexit.

Pinsent Masons had asked senior decision makers at over 1,000 businesses across the UK, France and Germany. Only 26% of firms had a tangible plan in place for dealing with the risks arising from the Brexit vote. Just over half (53%) of respondents added that there had been no board level discussion about the potential commercial impacts of the referendum.

If your company is among those who have not considered the implications of Brexit on business strategy and operations, I would strongly recommend that you do. Contact me, if you have questions on how to perform an analysis of the Brexit impact on your business and review your corporate strategy in view of the changing European context.

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The 3 Best Ways to Avoid Bad Decisions Caused by Groupthink

Swissair plane

Swissair – From ‘flying bank’ to business crash due to groupthink [Photo: Roland Zumbühl (2000). License: Creative Commons Attribution-ShareAlike 3.0 Unported (CC BY-SA 3.0)]

Do you remember Swissair? In the 20th century, this airline used to be as economically solid as a Swiss bank, which is why some people called it the “flying bank”. And yet, it was the first airline to collapse in the crisis of 2001.

Researchers Aaron Hermann and Hussain G. Rammal from the University of Adelaide argue in their paper ‘The grounding of the “flying bank”‘ (2010) that a major factor contributing to the demise of Swissair was bad strategic decision making resulting from groupthink.

Let us have a closer look at what groupthink is and what companies can do to prevent it.

Causes and Results of Groupthink

Groupthink happens, when a group of people jointly makes worse decisions than each group member would have done on their own. The causes for this irrational behaviour are based on group dynamics driven by mutual pressure for homogeneity and conformance to real or perceived group values as well as a hierarchical group structure where the leader is always right and everyone else conforms quickly to what he said he wants or what they guess he might want.

Too much homogeneity can lead to groupthink

Too much homogeneity can lead to groupthink [Copyright: fotolia/cartoonresource]

The result of groupthink is that only a limited number of options are considered, sometimes even just one, and that no open and thorough discussion of the pros and cons is happening, as the group quickly converges on one option. It may be either due to a dominating leader or the group tendency towards harmony over decision quality. Especially for complex strategic decisions, the result of groupthink is usually a bad decision in terms of the gap between the intended and the actual outcome.

The economic cost of bad decisions based on groupthink can be enormous, as examples from Enron to Swissair and more recently Volkswagen show. Allowing groupthink to happen when high-stake decisions are taken is completely unacceptable, as the methods for avoiding groupthink have been known for at least four decades. Irving Janis, the research psychologist from Yale University who first explored the phenomenon scientifically, already presented a number of useful methods in his book “Victims of Groupthink”, first published in 1972.

How to Prevent Groupthink

There are three methods that I consider best for preventing groupthink. They are simple, but no always easy to implement. Here they are:

Method 1: Diversity of Minds

Homogeneity of group members in terms of their professional background and corporate socialisation is usually favouring groupthink. It usually does not make a big difference, if you have ethnic and gender diversity in a group. People who have been exposed to the same corporate culture on a similar hierarchical level for a long time will typically have a tendency to converge in their thinking.

Thus, for making important corporate decisions, it is advisable to foster the diversity of minds by including some people with contrarian views and different career paths in the process. If you pick someone from a lower hierarchical level than the rest of the group, it is important to make sure that power differences between members are irrelevant in the discussion, which should focus on the subject and the merits of different arguments.

Method 2: Effective Facilitation

In order to achieve a free flow of arguments and an open discussion uninhibited by considerations of hierarchical power and departmental interests, it is important to have an unbiased facilitator who neutrally enforces the rules like a referee in football.

What happens quite often is that the CEO is chairing the meeting. Apart from the fact that he is already the most powerful person in the room, his role is further strengthened by the fact that he can steer the discussion in whatever direction he likes. Ideally, the facilitator should be an executive who is well-respected by his peers and who is adequately trained in group facilitation, or alternatively an external professional facilitator who has the authority to lead a meeting of senior executives.

Method 3: A Devil’s Advocate

Devil's Advocate

A devil’s advocate can help prevent groupthink. (photo – copyright: fotolia/cartoonresource)

Methods 1 and 2 might already do the job. However, there could still be a risk that participants avoid a controversial discussion and converge too quickly on a decision before they have properly explored a number of options. It is thus advisable to include a devil’s advocate in the discussion. His main job is to challenge assumptions, detect weaknesses in the majority-supported option, and defend unconventional options.

Ideally, the devil’s advocate should be an external facilitator or coach who has no personal stake in the decision and who is well versed in group dynamics and decision making processes. The devil’s advocate should not dominate the discussion, but just give impulses to the discussion when everyone else is converging too quickly on a certain option without sufficiently exploring all relevant options.


Groupthink is a major scourge of executive boards and supervisory boards. The three recommended methods can help avoid groupthink and enable a higher quality of executive decisions in companies of all sizes. Consider hiring an external facilitator and an external devil’s advocate for meetings on major strategic decisions. Apart from reducing the risk of groupthink it would also help avoid organisational blindness.

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5 Reasons Why You Need Strategic Thinking On All Levels Of Your Organisation

Generally, the assumption still prevails that strategy and strategic thinking are an exclusive domain of a company’s executives. This assumption is historically well founded. And it is wrong in today’s business environment.

Greek strategist Pio Clementino

The ‘strategos’ in ancient Greece had the license to think strategically

The Greek word “strategos”, of which the term “strategy” is derived, means “general”. And the general in ancient Athens as well as in the classical structure of the military up to the 20th century designed the battle plans and gave orders. Soldiers were required to follow blindly and think as little as possible, not to speak of questioning orders.

When at the end of the 19th century the term strategy, together with strategic concepts, entered companies, the meaning was basically similar: the boss thought, planned, and gave orders, the employees executed. In quite some companies it works more or less like that until today.

There are, however, good reasons, why this structure and distribution of roles is ineffective in today’s economy and why it has negative impact on a company’s competitiveness. Or, to put it positively: if you would like to keep your company competitive in the mid-term, you should promote strategic thinking of employees at all levels. In my view there are five substantial reasons for this:

1. The high complexity of companies and markets

Already in medium-sized enterprises processes heavily based on the division of labor have reached a degree of complexity that neither a CEO nor department heads alone could understand and centrally plan.

In strategic planning as well as in strategy implementation it is necessary to have not just people who work, but also people who think. Only if you consider the big picture in your operational work, the gap between corporate strategy on executive level and strategy implementation on the operational level can be closed.

In many companies this doesn’t work properly, with the result that the board is every year surprised why the employees don’t properly execute their ingenious corporate strategy.

2. Pressure to adapt due to strong dynamics of change

The job of executives has become much more challenging and demanding since the times of the economic miracle in the 1950s. This is supported by increased complexity and the high dynamics of change caused by global economic processes and technical innovations.

The rapid pace of change can easily lead to a situation, where the corporate strategy from the beginning of the year has become obsolete at the end of the year through new developments.

Many of these new developments will be first registered at the touchpoints, where company and customers come into contact. However, in most cases executives are not at the touchpoints, but rather normal employees, like salespeople or customer service staff. If employees think ahead proactively and register changes which they communicate to the board level, it can significantly accelerate the adaptation of corporate strategy to changed market realities.

3. The cost of hierarchical corporate structures

Centrally-managed hierarchical companies bring considerable costs due to efficiency losses.
They are caused by the permanent strain of executives who have to take all strategic decisions, as well as all the important operational decisions without getting the decision-relevant information by employees.

Employees, on the other hand, are frustrated by decisions, which are frequently decoupled from their reality at the operational level. If, in addition, there is a corporate culture in which proactive thinking is not rewarded, that can lead to frustration, and in extreme cases to passive resistance against the plans from the top.

4. The necessity of agile organisational structures

Many successful companies, like for example Alphabet (formerly know as Google) or Lego, have discovered how important it is to create and sustain agile organisational structures.
Only through agility can enterprise respond appropriately to fast changes caused by innovative technologies, changed customer needs, and new competitors.

However, an agile organisation can only function with employees who think strategically.
If the horizon of employees ends at the borders of their own work area, fast adaptations are hard to implement. Agility requires that change cannot only be started from the top, but also from the bottom, from employees at the grass-roots level.

5. Qualification and motivation of employees

In today’s knowledge economy, companies depend on highly qualified employees.
In recent decades, low-qualification jobs have been systematically transferred to low-wage countries.

During the advanced phase of industrialisation in Germany at the end of the 19th century it would have been hardly destined for success to expect proactive thinking from workers at the production line. Because the work processes were designed in a way that it was not desirable and necessary.

In the meantime the work processes and skills profiles have changed considerably.
Today, in developed industrial nations like Germany there are predominantly well qualified employees, who are aware of their qualification. And they often have more expectations towards their work than to get money into their account at the end of the month.

An executive who wastes this huge potential of qualification and motivation runs the risk that employees go inter inner resignation with the effect that the company loses competitiveness. This can be prevented by engaging employees at all levels in the strategy process. It could be in the planning phase as “sensors” for market developments or in the implementation phase as proactively thinking “intrapreneurs”. Employees could intelligently and self-controlled adapt corporate strategy in their work area to the operational realities.


There are many good reasons to promote strategic thinking not only for executives but also for employees at all levels. Those who understand and consequently implement this can sustainably strengthen the competitiveness of their company.

The promotion of strategic thinking includes the creation of adequate structures and an open corporate culture. Specifically, this means that strategy workshops should not only be performed for the top management level. It is rather advisable to perform on all levels of a company educational measures which promote strategic thinking.

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Success and Failure of Strategic Management in 2015 – Part 2

In part 1 of “Success and Failure of Strategic Management in 2015” I had presented three cases of what I consider good strategic management. In part 2, I will now focus on examples of bad strategic management that emerged in 2015.

Business Failure - Strategic ThinkingBad Strategic Management

Usually, bad strategic management only becomes visible to the public when it is too late, i.e. when serious damage has already happened as a consequence. There is certainly a risk to conclude from every business failure that bad strategic management must have preceded. While this may be true more often than not, it is not automatically the case. With that caveat, it is still fair to say that the year 2015 offered some spectacular cases of bad strategic management. I picked three that in my view stood out.


In September 2015, the US Environmental Protection Agency, EPA, revealed that Volkswagen Group had circumvented environmental regulations of NOx emissions. This was done via “defeat devices” in its diesel engines of the 2009-2015 models of Volkswagen and Audi cars (see my earlier blog article “Five Strategic Lessons from the Volkswagen Emissions Scandal”).

The systematic violation of environmental regulations in the US and other countries dramatically revealed an approach to strategic management that lacked an appropriate sense of risk and values. It also revealed deficiencies in the leadership culture of the world’s biggest car maker. The scandal reduced the stock value of VW within days by half. As a consequence, Volkswagen chief executive officer Martin Winterkorn resigned.

Until the scandal emerged, VW was extremely successful, and there were only few doubts about its strategic management. Volkswagen stood for the good image of German engineering across the world. Through a dangerous combination of ignorance, complacency and haughtiness, this icon of German industry created a serious crisis. The unconvincing behavior of the VW leadership under its new CEO Matthias Müller did not help to contain what could be the worst crisis in the history of the company. The financial damage and the detrimental effect on VW’s reputation can be attributed to bad strategic decisions and shortcomings of a hierarchical leadership culture which needs to be revised, if Volkswagen wants to return to its former success.


Two decades ago, US electronics retailer RadioShack was the largest seller of consumer telecommunications products in the world. In February 2015, 94 years after it was founded, the company filed for bankruptcy protection. This was the result of a long decline, which started around the beginning of the new millennium. It is a textbook case of bad strategic management.

RadioShack failed to respond in due time to key trends affecting its business, ranging from e-commerce and the entry of competitors like Best Buy and to the resurgence of the maker movement. Once the decline was in full swing, it was hard to stop. RadioShack is a cautionary example of what can happen, if you ignore technological trends and fast rising competitors. At the root of this development is the failure of creating a corporate structure and a strategic approach, which would have enabled RadioShack to discover, reflect and adapt to emerging opportunities and threats when there was still sufficient room to maneuver.


In contrast to RadioShack, which mainly failed due to a combination of complacency, ignorance and lack of adaptability, Quirky is an example of a completely different kind of strategic failure.

The invention platform Quirky was founded in 2009 and immediately attracted millions of startup funding. Altogether, Quirky raised 156 million euro in seven years from firms like Norwest Venture Partners LP, RRE Ventures, General Electric Co.’s GE Ventures LLC, and Andreessen Horowitz Fund LP.

It is easy to understand why so many respectable investors believed in Quirky’s business idea to connects inventors through a platform with companies that specialized in a specific product category. And the interest by inventors and companies was overwhelming: by August 2015, 280,000 inventions had been registered via the portal; business partners included General Electric, Mattel, Harman, and PepsiCo.

What made the business model very risky was that Quirky manufactured and marketed the inventions that it considered promising while paying royalties to the inventors. Initially, it seemed to work – first products like the Pivot Power, a flexible power strip that sold more than 1.5 million units, turned out to be successful.

However, Quirky did not really have a plan B in case of less fortunate product choices, like the digital egg tray that told consumers how many eggs were left in the refrigerator. The ensuing losses ate up capital at a frightening speed, as its roster of products grew from 34 to 150. Quirky’s rapid expansion of its operations was not matched by a coherent product development approach.

In early 2015, Quirky decided to get out of the product development business. However, this did not solve the liquidity problems of the company. When Quirky CEO Ben Kaufman was fired in August 2015, it was already too late to change the downhill course or Quirky – the company filed for chapter 11 bankruptcy in September 2015.

Quirky highlights the risks for investors betting on a brilliant but risky business idea. Good risk management and flawless strategy implementation are hallmarks of good strategic management. Quirky showed what can happen to a promising business idea, if risks are not addressed appropriately in time.

Most startups fail. From that perspective, Quirky would not have been special. What made it special was the huge amount pumped into the company by over-optimistic investors who ignored the requirements of good strategic management.

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Success and Failure of Strategic Management in 2015 – Part 1

For many businesses, the year 2015 was challenging. At first glance, the opportunities outweighed the threats. Cheap money and cheap oil stimulated the business of many companies. However, not every company was able to benefit from the opportunities.

Business Success - Strategic ThinkingThe year 2015 saw interesting examples of success and failure, which were significantly influenced by the quality of strategic management. While some executives were able to reap the fruits of their good strategic decisions, others had to suffer the consequences of bad strategic decisions in the past.

I picked three examples each for good and for bad strategic management in 2015, which could offer interesting insights for your business in 2016 and beyond.

In the first part, let us have a look at examples of good strategic management.

Good Strategic Management

Good strategic management starts at the top. It is, thus, no surprise that the three companies I selected each have CEOs with extraordinary strategic acumen.

Novo Nordisk

Danish multinational pharmaceutical company Novo Nordisk has a simple and, so far, successful strategy: 85% of Novo Nordisk’s business is based on drugs and devices for diabetes treatment. The decision to focus on diabetes was taken under Lars Rebien Sørensen, who has been the company’s CEO since 2000.

The diabetes-focused strategy paid off – Novo Nordisk has a market capitalization of 136 billion euro and is ranked number 46 in terms of market value on the Forbes list. In 2015, Harvard Business Review selected Mr Sørensen as Best-Performing CEO of the Year, based on his enduring success.

Clear strategic focus and excellent strategy execution make Novo Nordisk a role model of strategic management. However, the diabetes-focused strategy may not work forever in view of new emerging treatments that could render Novo Nordisk’s products obsolete one day.


In contrast to Novo Nordisk, US-based pharmaceutical company Pfizer has a very diversified product portfolio. Pfizer has expanded this portfolio in recent years through skillful, yet not always successful acquisitions. In 2014, the attempted acquisition of UK-based AstraZeneca was rejected by the AstraZeneca board. In 2015, Pfizer went on a shopping spree again, which might turn out more successful.

In February 2015, Pfizer and Hospira agreed that Pfizer would acquire Hospira for approximately 14 billion euro. Hospira is the world’s largest producer of generic injectable pharmaceuticals. The deal gives Pfizer access to Hospira’s portfolio of generic acute-care and oncology injectables, biosimilars, and integrated infusion therapy and medication management products. According to Ian Read, Pfizer’s Chairman and CEO, Hospira’s business aligns well with Pfizer’s pharmaceutical business.

And later that year Mr Read presented an even bigger deal: on 23 November 2015, Pfizer and Allergan, formerly known as Actavis, announced their intention to merge for an approximate sum of 160 billion US dollars, making it the largest pharmaceutical deal ever, and the third largest corporate merger in history. As part of the deal, Pfizer’s CEO, Ian Read, would become CEO and chairman of the new company, to be called “Pfizer, plc”, while Allergan’s CEO, Brent Saunders, would becoming president and chief operating officer.

The Allergan deal is expected to be completed in the second half of 2016. However, there are still some caveats, as the deal is subject to US and EU approval, approval from both sets of shareholders, and the completion of Allergan’s divestiture of its generics division to Teva Pharmaceuticals.

Pfizer’s strategic acquisition moves in 2015 deserve praise for their calculated risk-taking and could result in catapulting Pfizer to the top in the pharma business. That said, a failure of the Allergan deal is still possible and could seriously hurt Pfizer. Thus, Mr Read’s courageous strategic management could finally still result in failure. However, good strategic management involves a certain degree of risk-taking and is no guarantee for success.

Slack Technologies

Slack Technologies is a software startup founded in 2009 under the name Tiny Speck, which provides an innovative cloud-based team collaboration tool called Slack. Slack Technologies has become the record-holder for fastest achieving a billion-dollar valuation – by the end of 2015 it had a 2.8 billion dollar valuation. Ten thousands of teams are already using Slack, and the user base is fast-growing. Due to its stunning growth and success, Slack was awarded the title “Company of the Year” by Inc. magazine.

Slack Technologies CEO Stewart Butterfield, who also co-founded Flickr, has taken Slack from idea to fast-growing software company in just over three years. The simple, but hard-to-copy recipe behind Slack’s success is an easy-to-use product that fulfills the growing need for team collaboration. According to Inc., “Slack is the exemplar of a trend analysts have dubbed the consumerization of enterprise technology.”

Like similar products, Slack is based on a Freemium model with free basic services and special enterprise services at a fee. What makes Slack’s business strategy special is that their marketing and sales are entirely based on word of mouth. It works because of a product that is well designed and very easy to use. Somehow in the process, Slack turned from user-friendly to user-adored, the dynamics of which are similar to the success of the iPhone, yet hard to copy.

Despite its huge startup success, it is still possible for Slack to fail later. However, up to 2015 it definitely has been a role model for strategic management of a startup.

Read in part 2 of “Success and Failure of Strategic Management in 2015” about examples of bad strategic management.

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Why Climate Change is Relevant for Your Business

When the 2015 United Nations Climate Change Conference ended with the Paris Agreement on 12 December, one of the first to comment was Paul Polman, CEO of multinational consumer goods company Unilever. In a statement published on the same day, Polman praised the agreement as “a clear path to decarbonise the global economy”. He considers the envisioned zero emissions economy to be “the greatest business opportunity of the century”.

Global Warming - Strategic ThinkingPolman’s position is not shared by everyone in business. Benjamin Sporton, Chief Executive of the World Coal Association, is not in a hurry to decarbonise the global economy. In his view, the Paris Agreement leaves room for the coal industry to grow. He wants to reduce CO2 emissions from coal use via efficient, low-emission coal technologies and carbon capture and storage.

Effects of climate change on business

Whatever you think about decarbonising the economy, one thing is sure: climate change will sooner or later, directly or indirectly, affect your business – if it has not done so already.

A recent article lists 22 devastating effects of climate change. Many of the predicted effects will occur whatever action for CO2 reduction is taken after the Paris Agreement. In other words, even if the ambitious goal of limiting the rise of the global temperature to well below 2 degrees Celsius is achieved, climate change and its effects on the environment, on people, and on business will happen in any case.

Assuming a temperature rise of 2 degrees Celsius by 2100, a number the IPCC has suggested we are “more likely than not” to exceed, the sea level will rise by 0.5 meters in the same period – with severe effects. In this scenario, a number of coastal cities, like Calcutta and Miami, will be in big trouble. Everyone else should get ready for extreme weather conditions and a decline in wheat and maize production, which are only a few selected effects.

In a globalized economy, this will sooner or later have an impact on every business – including yours. The major strategic question for every executive and business owner should be now, how to respond to the challenge of climate change.

Three principal responses to climate change

There are three principal responses to climate change: ignore, adapt, contain.


Ignoring climate change has worked fine for many businesses so far. However, this will change in the next years, and businesses that are not prepared for the effects of climate change will be surprised about the negative effects. This could be, for example, production bottlenecks at suppliers in Asia due to extreme weather conditions, seasonal water shortages, or increasing energy costs.


Adapting to climate change has two major aspects: firstly, preparing for the effects of climate change and their impacts on business, and secondly, finding and exploiting business opportunities that climate change may bring. Adaptation will be partly forced by increasing regulation, for example in regard to permitted CO2 emissions and energy efficiency. From regulation and the need for energy-efficiency, opportunities for innovative products, services and processes emerge. Whoever spots and exploits them first, may gain a competitive advantage.


While adapting to climate change is more a reaction to it, the third option entails proactive efforts for containing CO2 emissions beyond regulatory requirements. While, for example, investments in energy-efficient processes may lead to increased costs in the short term, the mid-term and longer-term effects will be not only environmentally, but also economically beneficial for your enterprise. In addition, serious commitment in the fight for containing climate change will have positive reputation effects in the eyes of customers, which could help sales.


Climate Change is relevant for every business. Companies who understand this and consider it in their business strategies will create benefits for themselves and for society. Or in the words of Paul Polman: “If we don’t tackle climate change, we won’t sustain economic growth or end poverty”.

Checklist for Subscribers of Strategic Business Insights

If you are already a subscriber of Strategic Business Insights (SBI) you can access the Checklist on Business and Climate Change, which complements the article, by entering the access code sent in SBI issue 48 when prompted. If you are no subscriber yet, consider to subscribe for free via the SBI page.

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5 Reasons Why Every Company Needs a Cybersecurity Strategy

It happened on Saturday, 14 November 2015: unknown hackers accessed the app store database of VTech, a global supplier of electronic learning products with headquarters in Hong Kong. The hackers captured a significant amount of user profile data of children and their parents, as BBC News reported. The profile data included name, email address, encrypted password, secret question and answer for password retrieval, IP address, mailing address and download history.

Cybersecurity | Strategic Thinking-500x647Why do I tell you this? I believe your company could be next, if you don’t have a comprehensive cybersecurity strategy. I am aware that most medium-sized and large companies have an IT department and a set of IT security processes. However, a comprehensive cybersecurity strategy should go beyond that. Here are the five main reasons why I think, every company should have a comprehensive cybersecurity strategy for preventing and mitigating cyber attacks.

1. A growing part of business is happening via the Internet

More and more business is happening in cyberspace. Every sector and every business of any size is affected by digitization. Businesses and customers have moved at high speed to the Internet. There are over 3.2 billion Internet users today, about 40 percent of the global population, according to Internet Live Stats. More and more business transactions are done via mobile devices, like smartphones and tablets. Out of 3.65 billion mobile users, 1.9 billion are using smartphones (source: Statista). Accordingly, the value of global e-commerce via mobile devices is growing rapidly – in the second quarter of 2014 it amounted to 130 billion dollars (source: Statista).

As e-commerce is further growing at a rapid pace, the importance of making sure e-commerce is secure is increasing. The relevance of cybersecurity is growing even further, if you think of emerging business trends like the smart connected home and e-health.

2. Number and intensity of cyber attacks are increasing

In parallel to the growing number of Internet users and e-commerce transactions, number and intensity of cyber attacks have increased as well. There are no reliable, comprehensive data. However, data from surveys confirm this statement. In a survey conducted in 2014 by ISACA, the Information Systems Audit and Control Association, 77 percent of respondents said that cyber attacks increased between 2013 and 2014, and 82 percent consider it likely or very likely that their enterprise will be attacked in 2015.

According to the same study, cyber threats in 2014 originated mainly from cyber criminals (46 percent), non-malicious insiders (41 percent), hackers (40 percent) and malicious insiders (29 percent).

The cost of these attacks for the affected companies is substantial. A study by the Ponemon Institute gives an average cost of 7.7 million dollar per organization per year,
with a range from 0.31 million dollar to 65 million dollar.

3. Customer trust is based on the integrity of their data

Every business is built on the trust of its customers. In the case of business done via the Internet, this trust is basically built on the integrity of customer data and how well these data are protected by companies. Put yourself in the shoes of a customer: would you rather buy from a company that was recently hacked, like VTech, or from one that hasn’t been hacked?

In view of emerging business scenarios around the Internet of Things, where you have lots of connected devices in your household and your workplace, having an effective cybersecurity strategy in place is a pre-condition for keeping or building the required customer trust, no matter if it is B2C or B2B.

4. Cybersecurity is more than a task for the IT department

In a number of companies, cybersecurity is treated mainly as a task for the IT department. Through technical measures, IT professionals are expected to ensure that the digital business of their companies are protected from cyber attacks.

However, this approach is fundamentally flawed. Leaving it to the IT department to sort out cyber threats is not enough. Cybersecurity is a challenge for the boardroom and not just the IT room.

Cybersecurity affects the whole company and should be treated accordingly.

5. Employees could either be a security risk or an asset

Cybersecurity is as much an issue of personnel as it is an IT topic.

Many cybersecurity risks are created or increased by inattentive employees. Take for example the loss of mobile devices, which constitutes a major security risk, as data found on those devices could provide access to sensitive company data. In the ISACA survey already mentioned, 83 percent of companies provide their employees with mobile devices, and 91 percent of these companies reported a loss of mobile devices in 2014.

This example shows that the behavior of employees is a major security factor that needs to be to be considered for a comprehensive cybersecurity strategy. In such a strategy, awareness building, user training and incentives for employees to behave responsibly when dealing with digital data and communication devices should be included.

There should also be procedures and safeguards against the effects of the occasional employee, who creates deliberately or inadvertently a cybersecurity threat. In practice, you will not be able to achieve 100 percent secure behavior by all employees all of the time. Thus, you need to have safeguards and procedures for mitigating any risk.


In the area of cybersecurity, complacency is dangerous, and a certain level of paranoia healthy. It is important to have a holistic view on cybersecurity and to develop a comprehensive cybersecurity strategy. It should be a topic handled on boardroom level, and not just in the IT department. This will require executives to get a better understanding of IT systems and of IT professionals in the organization to get a better understanding of business processes.

Checklist for Subscribers of Strategic Business Insights

If you are already a subscriber of Strategic Business Insights (SBI) you can access the “Cybersecurity Strategy Checklist”, which complements the article – enter the access code sent in SBI issue 47 when prompted. If you are no subscriber yet, consider to subscribe for free via the SBI page.

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How to Cope with Business Complexity

Business complexity has globally increased in the last three decades. Scope and diversity of products, services, processes and stakeholder relationships have significantly grown.

Business Complexity | Strategic ThinkingThe growth of complexity has come at a price: The world’s largest companies are on average losing more than 1 billion dollar each due to unnecessary complexity. At least this is what the Simplicity Partnership and Warwick Business School found out in a study conducted in 2011. [Mick James: Putting a price on complexity, Consultant News, 17 March 2011]

Factors Driving Complexity

A number of factors have contributed to surge of business complexity. The main drivers have been the growing interdependence of companies and markets in a globalized economy as well as digitization and the Internet, which have enabled globalization and accelerated the pace of global business.

The ability to cope with complexity has become a central success factor for all businesses. What makes it challenging is that complex systems do not behave in a linear predictable way, but are rather non-linear and unpredictable. That makes decisions in a complex environment rather difficult.

The American computer scientist Alan Jay Perlis (1922 – 1990) half-jokingly summarized the options people choose for dealing with complexity as follows: “Fools ignore complexity. Pragmatists suffer it. Some can avoid it. Geniuses remove it.”

All responses mentioned by Perlis usually don’t work in today’s economy. Ignoring business complexity comes at the price of lower effectiveness and competitiveness. Just suffering and not doing anything about it leads to the same result. Avoiding complexity is practically impossible for most businesses. And removing complexity is next to impossible as well, even for geniuses.

In order to better understand the options businesses have for dealing with complexity, it is important to first understand the different types of complexity. There are basically two.

Internal and External Complexity

Internal complexity means the complexity inside a company as distinct from external complexity, which relates to complexity outside of a company in a business sector, country, or region.

Factors driving internal complexity include organizational structure, type and number of processes, a silo-oriented corporate culture, and business activities like product and service development and mergers & acquisitions.

External complexity, on the other hand, is often caused by regulation, new technologies, and market developments as well as environmental and political changes. In contrast to internal complexity, executives even of large companies usually only have very limited influence they could leverage for reducing external complexity, for example by softening regulation impacting their business activities.

Internal complexity, however, can be directly influenced and reduced through executive decisions on structures, processes, personnel, and products. Especially in large companies, restructuring has often led to unnecessary complexity which negatively impacted the bottom line.

Strategies for Dealing with Complexity

In order to cope with complexity, you need to define and implement adequate strategies.
There are three basic strategies you could apply for dealing with internal and external complexity:

  1. Avoid increasing complexity
  2. Reduce complexity
  3. Adapt to complexity

Let us have a closer look at how to apply these basic strategies in practice.

1. Avoid increasing complexity

Imagine you are the CEO of a small company that is growing quickly in terms of turnover and employees. At some point, you will no longer be able to make all major decisions and need to rethink your company structure. This is the point, where quite often unnecessary organizational complexity is added. Do you really need another management layer? Consider an alternative that avoids increasing complexity, like, for example, empowering team leaders to take more far-reaching business decisions instead of inserting a middle manager between them and you. There is no universal solution to this challenge. Just make sure you avoid adding unnecessary complexity.

2. Reduce complexity

One of the major problems Nokia had until recently was that its product portfolio in the mobile phone domain was too large and diverse. It added huge organizational complexity, undermined marketing, and confused consumers. Apple, in comparison, just offered one mobile phone, the iPhone. It kept the organization focused and facilitated branding.

3. Adapt to complexity

In many cases, you will not be able to contain external complexity. In this case, the best option you have is to adapt to it. Take, for example, environmental standards in manufacturing. If your company is not one of the big global industry players, your chances of influencing regulation are rather slim. The only reasonable choice you have is to know and understand regulatory changes early in advance and adapt your production processes and outputs accordingly. Adapting early and efficiently to external complexity that you cannot control will give your company a competitive advantage compared to those industry players who are dragging their feet in implementing new regulation.


It is up to you, whether you allow complexity to undermine the effectiveness and profitability of your organization by letting things happen, or if you choose to take the bull by the horns and actively tackle complexity. Companies like Apple that have demonstrated how to conquer complexity can serve as benchmark for your own strategies for coping with complexity. To a certain extent, complexity is inevitable in a globally networked economy. Where you establish a competitive advantage is in how much of the unnecessary complexity you can avoid or remove.

Checklist for SBI Subscribers

If you are already a subscriber of Strategic Business Insights you can access the Business Complexity Checklist, which complements the article – enter the access code sent in SBI issue 46 when prompted. If you are no subscriber yet, consider to subscribe for free.

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How to Increase the Odds of Startup Success

Nine out of ten startups fail. Or, if you prefer to look at the bright side, one out of ten startups succeeds. The crucial questions is now: what could you do to increase the odds of being the one in ten? There is no easy answer, and you will get ten different answers, if you ask ten different experts.

Startup-Erfolg | Strategic ThinkingAll I can do is offer you my take on the question, together with the advice to get answers from different people, compare them, review them and adopt the ones that make sense to you and fit your startup’s situation. At the same time, you should also be aware that even if you do everything right, provided there is anything like “right” in this context, there are still external circumstances that may undermine your plans and business activities. Nevertheless, even then, you can increase your adds through good strategic decisions.

After this preamble, here are my five recommendations for increasing the odds of startup success:

1. Keep your goals and structures flexible

Every startup is beginning with an idea of what products and services it wants to provide to which customers. As important as it is to start with a good idea and a clear purpose, getting fixated on your original idea could undermine your success.

The early phase of a startup is mainly a learning experience. It would be quite exceptional, if you could get the fit between your products and services on the one hand and the market demand by customers as well as the business model on the other hand right from the start. Don‘t worry, if you don‘t belong to this seemingly lucky group. Even renowned companies like PayPal (launched in 1998) and Flickr (launched in 2004) didn‘t find their purpose immediately – Paypal started in security software for handheld devices and Flickr in online gaming.

Thus, as long as you are still on a journey to discover your enterprise’s real purpose, you should avoid casting your organisational structure in stone. Instead, you should keep your structure flexible, in order to nimbly adapt to changes in the direction and purpose of your firm.

Responsibilities and personal accountability are important at every stage of a startup. However, you should avoid that people get too comfortable in a certain niche that might disappear when you decide to change the purpose and structure of your company.

2. Create a culture of focus and purpose

While the purpose of your startup may change once or twice in the initial phase, it is important that everyone in your enterprise is fully motivated to jointly implement the current goals.

You are out on a journey into uncertainty, and you will only make progress, if you are going jointly with a high level of energy in the same direction. If your own and your staff‘s attention is spread across numerous daily activities without a clear sense of purpose, you run the risk of being all very busy without gaining traction towards your business goals.

As an entrepreneur, your main challenge is to avoid spending time and resources on secondary activities. Things like office furniture and choosing a CRM system may be fun to do, but they are usually secondary, if you don‘t have many visitors and many customers yet. On any matter of secondary importance, you should be pragmatic, trying to go for simple and cost-effective while leaving the option to scale up later when your company is growing.

3. Define clear roles and responsibilities

Startups often begin their entrepreneurial journey with a small staff. However, even if you are just three or four people, everyone should know what their role and responsibility is. Make sure, important roles are adequately covered. Let us assume you are three developers developing a new gaming app that aims to be the new “Angry Birds”. It would be understandable, if all of you want to get equally involved in the programming of the app. Yet, this would not be effective.

While it may be unavoidable that everyone of the three will have multiple roles, there should be only one main responsible for every major aspect of the business: one, for example, could be CEO, CFO and HR manager, another one could be COO and CIO, while the third covers marketing and sales. Failing to clearly assign each important role runs the risk of neglecting important tasks. For example, if you don‘t assign the CFO role, there is a risk that you lose control over your finances and you burn capital faster than you should.

4. Plan your capital needs and sources

One of the important strategic decisions you need to make when launching a startup is whether you make do, at least initially, with the capital you can raise among your founder partners, or if you go for outside capital. In order to make that decision, you need to plan your short-term capital needs and make financial forecasts for different growth scenarios. While it may sound great to get outside capital, you should perform an analysis of the pros and cons.

Pros include mainly that your startup could move quicker and grow bigger as well as build your dream team with the qualified people you really need. However, there are also some cons to consider: going after venture capital can be time-consuming and always involves a loss of control to a certain degree. Venture capitalists don‘t give you their money for the goodness of their hearts, but in order to get a return out of your company. This often entails that you will be pushed to go big. If this is in line with your plans, go for it. However, if you have more modest ambitions, at least for the near future, you might be better off without venture capital.

Checklist | Strategic ThinkingIf you go for venture capital, make sure your startup is investor ready. I wrote a checklist on investor readiness that you can access, if you are a subscriber of Strategic Business Insights (enter the access code sent in SBI issue 45 when prompted; if you are no subscriber yet, consider to subscribe for free).

In this context, you should be aware of the differences between business angel investors and venture capitalist firms (VCs). Business angels are individuals, often senior business people, who invest their own money. VCs use other people’s money, which they raise by offering investors a chance to take part in a fund that is then used to buy shares in a private company.

In general, business angels are most likely to invest at an early stage. VCs typically come on board at a later stage, when the business concept has been proven and initial revenues have been obtained, in order to accelerate the growth of the company.

5. Have a convincing exit strategy

Having an exit strategy is a must for startups looking for outside capital – investors require it, as the exit is what gives them a return.

There are different exit strategies. The four most common are:

  1. Initial Public Offer (IPO): you sell a part of your business to the public in the form of shares.
  2. Private Offering: you conduct a private offering of your shares to individuals or a select group of investors to raise capital.
  3. Merger: the option to merge with another company becomes relevant in case your company’s cash flow or liquidity become an issue.
  4. Cash Cow: This is rather a postponed exit strategy. Cash cows are firms that have a high market share in an industry characterized by low growth. They are able to sustain enough capital to stay afloat for the foreseeable future, as they promise years of increased profits.

Be aware that investors will want to know how they will get their money back before they invest in your company. Thus, you should present a credible and convincing exit strategy when you pitch to them.


There is no guarantee that you will be successful with your startup. However, if you apply the five recommendations above, you will increase your odds. And even if your first startup does not succeed, you improve your chances that you will not fail for avoidable reasons under your own control.

Thus, even if your first startup is not successful, it will at least improve the quality of the lessons you get out of your initial entrepreneurial experience and will help you be more successful with your next startup. The lessons learned, a good strategy, a dedicated team, and the determination to succeed will finally put you on a success path.

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How Strategic Leaders Use Storytelling

Storytelling has proven to be an effective leadership tool in business communication. Or like US psychologist Howard Gardner said: “Every great leader is a great storyteller”. Strategic Storytelling | Strategic ThinkingThus, it is not surprising that executives at many major companies, like 3M, Nike, and Procter & Gamble, have embraced storytelling.

A number of strategic leaders at these and other companies have used storytelling to drive the process of strategic planning and strategy implementation. The following story provides a concrete example of how storytelling can be practically used in the strategy process.

The Knowledge Management Strategy

Melinda J. Bickerstaff

Melinda J. Bickerstaff

Shortly after Melinda J. Bickerstaff had become Chief Knowledge Officer at Bristol-Myers Squibb (BMS), an American pharmaceutical company headquartered in New York City, she was facing a problem: her team had developed a fifty-page document on a proposed knowledge management strategy for the company, and she knew that the president of BMS would never read it. Thus, she suggested to her team to present the essence of the plan in a story. The proposal did not meet much enthusiasm, as Ms Bickerstaff remembers: “They looked at me like I was from Mars.”

At the next team meeting, she explained again why the knowledge management plan needed to be presented as a story to get the attention of the president. This time the response was: “We don’t know how to do that.” Unperturbed by the lack of support, she tried again at a third meeting. And this time a creative member of the team came up with a proposal that was adopted after some discussion.

When Ms Bickerstaff saw the president two months later before a meeting, she gave him a copy of a Financial Times article about BMS. He took the copy with him to the meeting. When he glanced at it, the Financial Times article immediately caught his attention. It featured a photo of himself and the headline “Bristol-Myers Squibb Named Top-Ranked Global Pharmaceutical Company: Managing Intellectual Assets Attracts Top BMS Alliances—Blockbuster Drugs Follow”.

He thought: “I don’t remember this interview or photo shoot. Did I miss
something?” Then it dawned on him that, despite the semblance, this was not a Financial Times article, but a story about the future. He understood what the knowledge management group tried to tell him, saw the benefits of the plan for the company and finally accepted it.

This story, which I adapted from the interesting book Wake Me Up When the Data Is Over, highlights a number of benefits that storytelling can provide when properly done.

Benefits of Storytelling

There are five major benefits of storytelling for developing and communicating strategic plans, goals and values, and for driving strategy implementation.


Since the days when our ancestors were sitting around campfires and telling each other stories, people have been receptive for stories. Just watch yourself in a business meeting, when presenter A goes through explaining bullet points and figures on the screen, slide by slide. After a while, most people’s attention will fade. Presenter B, in comparison, starts with a story from personal experience and only quotes a few selected facts to support his narration. Most people’s attention is likely to remain high until the end of his presentation, provided the story is relevant.


One of the reasons that stories are more engaging than a purely factual presentation is that stories quite often create an emotional response. Personal stories of overcoming adversity and achieving goals through persistence invite listeners to identify with the hero of the story and feel the disappointment and joy of the hero.


What do you think is more motivating: an order by your superior to achieve your goals, or a story in which the hero achieves his goals through persistence? Most people outside of the military respond automatically with a certain reserve when they get orders. At least they are not particularly motivated, if they do not fully understand, why they should do it.


At American multinational corporation 3M, bullet points were already banned in the late 1990s. Instead, 3M introduced strategic narratives. Lists of bullet points in memos and slide presentations rarely enhance the understanding of the relationships between different factors and do not provide a good picture of the whole context. Through narration you can create mental images that put developments, relationships, and facts into contexts.


The fact that good stories create vivid mental images makes storytelling the ideal tool for communicating a vision and achieving a shared understanding of a desired future state among a group of people. Like in the famous quote by Antoine de Saint-Exupery: “If you want to build a ship, don’t drum up people to collect wood, and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.”


Strategic leaders should hone their storytelling skills. Stories are an effective tool in the strategy process and for communicating and achieving strategic objectives. Stories take listeners on a journey and can facilitate strategic thinking and a shared understanding.

As an additional resource, see also the “Checklist and Resources for Strategic Storytelling”.

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The Power of Strategic Questions

Let me start with a question: how frequently do executives and employees ask general, business-related questions in your organization? If your answer is ‘Not too often’, I would recommend to ask yourself ‘Why?’ and ‘How could we change this?’.

A tool for strategic leaders

Strategic Questions | Strategic ThinkingQuestions are an indispensable tool for strategic thinking. Questions are the machete of strategic leaders, enabling them to blaze their trail through the thicket of business challenges in a fast-changing competitive environment.

At the same time, questions can include and motivate employees on all levels in shaping the development of your organization. Encouraging questions can foster an open and innovative corporate culture.

Heather Bresch, Mylan

Heather Bresch, CEO of Mylan N.V.

Take, for example, UK-based global pharmaceuticals company Mylan N.V.: its CEO, Heather Bresch, once said that she tries to “create an environment where good questions and good ideas can come from anyone”.

Used deliberately and systematically, questions can significantly improve the planning and implementation of corporate strategies. However, in order to use questions effectively, it is important to avoid the following three mistakes in asking questions.

Three common mistakes in asking strategic questions

1. Leading questions

In order to get good answers, strategic questions should be formulated as openly as possible. Your implicit assumptions and suggestions should not limit the scope of possible answers. If you ask, for example, “How could we achieve a growth target of 10 percent?”, you are already taking a growth target of 10 percent for granted, limiting the scope of answers to this target. Even if others dare to transcend the limits of the question, it may create a priming effect which may unconsciously limit the scope of answers to a figure close to 10 percent.

2. Narrow, closed questions

Closed questions as such don’t have to be necessarily bad. If you ask “Should we aim for growth next year?” this may be a valid strategic question. Although it is closed and basically leaves only the binary options ‘yes’ and ‘no’, it is generic enough to elicit an open discussion. However, the following question would be too narrow: “Should we aim for a growth target of 10 percent?” You could only ask this question after a strategic conversation for getting formal agreement among board members. However, as a driver for a strategic conversation, such a question would be useless.

3. Short-cutting the search for answers

Asking relevant questions in an open way is only the first condition for an effective strategic conversation. The second condition is that you don’t go for the easy answer. Or as US economist and Nobel laureate Paul Samuelson once said: “Good questions outrank easy answers.” In other words, don’t spoil the value of a good question by being satisfied with an obvious, easy-to-find answer. It pays off to dig deeper.

In order to allow for a real conversation and multiple, diverse answers, it is particularly important that the CEO does not dominate the search for the answers, as this could inhibit other executives to come up with their own answers.

Sample questions for the strategy process

There are many suggestions for questions to be asked in order to progress the strategy process. As valuable as it may be to consider these questions, I would strongly advise you create your own set of strategic questions.

Nevertheless, here are three questions from a set of twelve questions I developed for facilitating the strategy process:

  • Which vision and strategic goals do we pursue?
  • How do we measure performance on our strategic goals?
  • Which factors had a significant impact on our performance?

Subscribers of “Strategic Business Insights” have access to the full set of my twelve strategic questions as well as a selection of strategic questions by other authors.

As the sample questions show, strategic questions don’t have to be particularly original or clever in themselves. They should rather be open and thought-provoking, in order to trigger good answers and drive the strategy process.

Any questions?

Feel free to share your own experiences with strategic questions by providing a comment via the reply option below. Let me know, if you need support for facilitating strategic conversation sessions in your organization. I wish you success in utilizing the power of strategic questions.

Additional resource for SBI subscribers

Subscribers of my free weekly “Strategic Business Insights” have access to the additional resource “Selected Questions for Your Business Strategy” (enter the password you received with SBI 43/2015 when prompted).

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Balanced Scorecard Revisited – How to Use BSC in Strategic Management

One of the most popular tools for strategy implementation is the Balanced Scorecard (BSC). More than two decades after it was presented to the public by Robert S. Kaplan and David P. Norton in 1992, the BSC has turned out to be one of the most popular management tools, which is not only used by private companies, but also by public institutions and non-governmental organizations.

Balanced Scorecard in a nutshell

Balanced Scorecard

The four standard perspectives of the Balanced Scorecard

One of the reasons for the popularity of BSC has been its apparent simplicity combined with its holistic perspective on business beyond finance. The original core concept is based on four perspectives:

  1. Financial
  2. Customer
  3. Internal processes
  4. Learning and growth

These perspectives are meant to be of equal importance, hence the word ‘balanced’ in BSC. The concept is based on closed-loop control, a fundamental concept from cybernetics, where actual performance is measured, the measured value is compared to a target value, and based on the difference between the two corrective action is taken.

For each perspective, objectives, measurements, targets, and initiatives for achieving these targets are defined. In the late 1990s, Kaplan and Norton complemented the concept by adding the Strategy Map, which is a graphical representation of the strategic objectives for each of the four perspectives and their relationships.

As simple and convincing as the expanded BSC concept appears, the actual outcomes and experiences have been of mixed quality. Some companies achieved measurable benefits, while others failed and sometimes even abandoned BSC in frustration. However, the failures have not necessarily been the fault of the BSC, but were usually caused either by inadequate strategic objectives, ill-defined measures, or avoidable mistakes in implementing the BSC.

The three most common mistakes in BSC implementation

1. Lack of balance between perspectives

Visually presenting the four perspectives as balanced does not necessarily mean that they are balanced in practice. There is a risk that the financial perspective gets too much weight, as it is tempting to let short-term financial objectives dominate the other three perspectives. Especially the last two perspectives “Internal process” and “Learning and growth” usually don’t have a measurable impact on the bottom-line in the short-term. However, for the achievement of strategic objectives and sustainable business success maintaining the balance against short-term temptations is crucial.

2. Unthoughtful use of standard perspectives, objectives, and measures

Starting from the four classical perspectives ‘Financial’, ‘Customer’, ‘Internal processes’, and ‘Learning and growth’ is certainly a good way to approach BSC implementation. However, this should not lead to a mechanical, unthoughtful adoption of these perspectives. Instead, there should be a specific reflection of the organization’s strategy and strategic objectives in order to determine, how to define the perspectives. The concept is flexible enough to allow less or more perspectives.

The four classical perspectives, and variations thereof, have been proven as useful and generic enough. But that doesn’t mean, it is also the perfect choice for your organization. And even, if you end up with these four, it would be important to go through a deep strategic conversation process, in order to have a clear and shared understanding on how these perspectives are used, especially how they are related your organization’s strategic objectives. In the same way, it is crucial to spend some thought on the choice of measures and targets for each perspective.

3. Confusing Balanced Scorecard with strategy setting

The Balanced Scorecard is a tool for strategy implementation. It translates an organization’s vision and strategy into measurable objectives, links them to individual performance in different areas, and creates a feedback loop which allows to adjust objectives accordingly. However, BSC is not a tool designed for strategy setting. Instead, the effectiveness of BSC-based strategy implementation depends on the quality of the strategy-setting process and the strategic objectives emerging from the process. In other words, if the strategy and the strategic objectives are inadequate, even the best BSC implementation is not very likely to contribute to successful strategy implementation and sustained success of the organization.


More than two decades after its introduction, the Balanced Scorecard is still one of the most effective tools for strategy implementation. In order to reap its full benefits, organizations need to have a clear strategy-setting process in place that leads to adequate strategic objectives. As long as an organization implements BSC in a deliberate way and with full commitment by its leadership, there is a high likelihood that BSC will contribute to long-term success.

Against a still widespread prejudice, the Balanced Scorecard can also be implemented in small businesses, despite their usually tight resource constraints. Thus, the Balanced Scorecard can be a major tool for the strategic management for organizations of all types and sizes.

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How to Use Key Performance Indicators for Strategy Implementation

Key performance indicators (KPIs) have become commonplace in large and medium-sized companies worldwide. However, despite the widespread use of KPIs, many companies still have not managed to get a high benefit from KPIs. Frequently, KPIs are just seen as a tool for measuring performance on an operational level. This approach misses the benefits KPIs can offer for strategic planning and strategy implementation.

The role of key performance indicators in strategic planning

Key Performance Indicators and Strategy

The role of key performance indicators (KPIs) in strategic planning

Key performance indicators can be an essential success factor for strategy implementation. In the strategic planning process, KPIs can be directly linked to the achievement of strategic objectives (see figure).

A company’s strategy is the way in which it endeavors to realize its vision in the mid- to long-term. In order to reach the envisioned state, the strategy needs to be translated into action via strategic objectives. They can be further broken down into operational objectives. The achievement of both strategic and operational objectives needs to be regularly monitored in order to see, if the corporate strategy is on track.

This is where KPIs come in. They provide evidence on the degree to which strategic and operational objectives have been achieved. In this way, KPIs serve as an early-warning system for strategic and operational problems. If deviation between the measured performance and the targeted performance is at a significant level, it is time to reconsider, analyze the causes, and take action.

While this may sound straightforward, implementing KPIs in practice entails a number of challenges, and quite often, KPIs are not used in the most effective way.

Five common mistakes in using KPIs

1. KPIs are not aligned with strategic objectives

The crucial word in ‘key performance indicators’ is ‘key’. You can collect data for numerous performance indicators. However, in order to get the data that you need for making the right strategic decisions, you first need to decide, which performance indicators are key.

The criterion for branding a performance indicator as key is, how much it is aligned with a strategic objective. Let us assume you are a start-up company with the strategic objective of increasing the number of customers within the next year to 1,000. Then, a KPI called ‘Number of newly acquired customers’ would be aligned with this strategic objective. A KPI named ‘Level of financial reserves’ would not be aligned with this objective. It might even be opposed to the objective, as achieving it may require investments in marketing campaigns that could undermine the financial reserve.

2. Selection of KPIs is limited to those easily measurable

It is very tempting to limit yourself to KPIs that are easy to measure, like, for example, capital expenditure. However, depending on your strategic objectives, this may be insufficient. As Albert Einstein once said: “Not everything that can be counted counts, and not everything that counts can be counted.”

If you are in the service business, ‘Customer satisfaction’ is very likely an important KPI. However, it is not really countable like capital expenditure. Nevertheless, it is possible to get an indication of the level of customer satisfaction, for example via a customer satisfaction survey.

It gets even more difficult, if you have a strategic objective of sustaining an innovation-friendly corporate culture. Although this is basically impossible to measure directly, you may find indicators for it, like, e.g., the number of new ideas for product features submitted by employees in a month.

3. Selection of KPIs gives too much weight to the past

There is a distinction between backward-oriented KPIs and forward-oriented KPIs. Both are important. However, if you have only backward-oriented KPIs, you create a strategic problem for your company. It is like only looking in the rear-view mirror while you are driving. Backward-looking KPIs are those that are focused on past results; sometimes they are also called key results indicators (KRIs). This could be, for example, turnover. It is important to know the turnover for the last quarter, but you have no chance of changing the result. A forward-looking KPI has influence on a future result and offers, thus, the opportunity to influence it through your decisions. This could be, for example, ‘Customer orientation’, which may help drive sales and turnover.

4. KPIs are used as instruments for controlling employees

The risk of some KPIs is that they can be used for controlling and even punishing employees. Take, for example, a KPI like ‘Number of sales per sales representative’. Although it may be interesting to know the data down to an individual sales rep level, you may provoke behavior that is counterproductive. If employees notice that their honestly produced data will be used against them, e.g., for reducing their bonus, it may stimulate counterproductive behavior, e.g. sales reps sell at loss-making discounts, in order to increase their number of sales.

5. No distinction between strategic and operational KPIs

There is a difference between strategic and operational KPIs, which is often neglected. Strategic KPIs are relevant for longer-term performance. Thus, gathering data for them is not as frequently required as for operational KPIs. For some operational KPIs, especially in production processes, data need to be captured and monitored almost in real-time, while for strategic KPIs a monthly or quarterly data gathering and monitoring frequency would be sufficient.

Three recommendations for using KPIs

Based on the insights above, I would like to give three recommendations for getting the best out of KPIs.

1. Closely align strategic KPIs with strategic objectives.

Keep strategic KPIs relevant to your strategy implementation and your regular strategy review, by making sure, they are relevant and closely linked to a specific strategic objective.

2. Integrate KPIs in a strategic management framework.

You can increase the effectiveness of KPIs by integrating them in a strategic management framework. One of the most popular frameworks is Balanced Scorecard. Despite some challenges in its practical implementation, I would still recommend to use it.

3. Apply stringent criteria for selecting your KPIs.

KPIs are like torchlights used to shine into different corners of your business. Due to limited resources, you cannot shine into every corner. Thus, you should make a stringent selection of KPIs based on criteria like relevance to your strategic objectives, balance between forward-looking and backward-looking KPIs, and comprehensibility of KPIs.


KPIs can make the difference between successful strategy implementation and failure to detect and adapt to strategic challenges early enough. The key is to implement strategic and operational KPIs in the right way, which means that they should be aligned with the corporate strategy and relevant to the purpose.

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The Strategic Importance of Corporate Core Values

Despite their widespread use, corporate core values are probably one of the most underrated factors for competitive advantage.

Rise of Corporate Values After the Dot-com Bubble

All major companies nowadays have defined corporate values for themselves. See for example the results of a study conducted by Booz Allen Hamilton and the Aspen Institute already in 2004, in which 89 percent of respondents said that their companies have written values statements. The use of explicit corporate values had soared after the bursting of the dot-com bubble in 2001, when financial scandals involving Enron, WorldCom, Tyco, and others seriously undermined the customers’ trust in large corporations.

Superficial Values

The defensive nature of the development of explicit corporate values led in some cases only to a rather superficial introduction of such values, without sustained efforts to deeply ingrain these values into corporate culture as guiding posts for strategic and operational decisions.

The most recent example of a company with praiseworthy corporate values which seriously violated exactly those same values is Volkswagen. Until recently, the German car maker seemed to have been a textbook example of a company that lives up to its values. They claimed that “we conduct our business activities on a responsible and long-term basis and do not seek short-term success at the expense of others”  , and people believed them.

[tweetthis remove_url=”true”]Effective core values need to be emotionally appealing and workable. #CorporateValues #Leadership[/tweetthis]

Benefits of Corporate Core Values

Many companies consider corporate values mainly of strategic importance for building their corporate reputation and keeping the customers’ trust and loyalty. That, however, is only a small share of the strategic benefits which corporate values could offer.

Further benefits include:

  • guidance for decision-making on all levels
  • selection criterion for new employees
  • driver for individual and corporate behavior on all levels supporting the vision, mission, and goals of the company
  • effective definition and implementation of core values.

In order to achieve a widespread adoption of core values in a company, it is important to define values that are more than just a few words that sound nice. Effective core values need to be emotionally appealing and workable.

Example of Core Values: Zappos

Tony Hsieh, CEO of Zappos

Tony Hsieh, CEO of Zappos (photo license: CC BY-SA 2.0)

One of the current role models for definition and implementation of corporate values is, a US-based online shoe and clothing shop affiliated to
Zappos has the following ten core values:

  1. Deliver WOW Through Service
  2. Embrace and Drive Change
  3. Create Fun and A Little Weirdness
  4. Be Adventurous, Creative, and Open-Minded
  5. Pursue Growth and Learning
  6. Build Open and Honest Relationships With Communication
  7. Build a Positive Team and Family Spirit
  8. Do More With Less
  9. Be Passionate and Determined
  10. Be Humble

Under CEO Tony Hsieh, Zappos has been very successful with its a loyalty-based business model and relationship marketing. The performance of the company is closely related to its corporate culture, which is based on the ten core values. The leadership challenge is to sustain a corporate culture, in which the individual values of employees is to a large extent congruent with the corporate core values. Zappos and a few other companies seem to have achieved this, while for other companies, like Volkswagen, the gap is wider than it should be.

Free Corporate Core Values Check-list

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Five Strategic Lessons from the Volkswagen Emissions Scandal

The resignation of Martin Winterkorn as chief executive of Volkswagen on 23 September has so far been the climax of the emissions cheating scandal. On 22 September, Volkswagen admitted to using software to change emissions test results for 11 million of its diesel engine cars sold between 2009 and 2015.

The cheating and the emissions violations had came to light through investigations of Volkswagen’s diesel engines by the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board. Volkswagen had used software to manipulate test results in order to get emissions compliance of its TDI diesel engines approved in the US.

2009 Volkswagen Jetta Diesel Sedan

Snapshot from happier days: 2009 Volkswagen Jetta Diesel Sedan, Green Car of the Year.

Many questions are yet to be answered, in order to fully understand what drove the behavior of Europe’s largest car maker: Who developed the scheme? Who knew about it? Why haven’t European regulators discovered the emissions cheating?

In view of the large amount of unknown information, it may be too early to draw final conclusions from the case. Nonetheless, I venture to draw some early strategic lessons from the Volkswagen emissions scandal. I am aware that I may need to revise one or the other conclusion, while new facts emerge. So please take the following five lessons as my initial and by no means conclusive insights.

Lesson 1: Failing to think through the possible consequences of your actions can lead to bad decisions.

Whoever at Volkswagen is responsible for this massive cheating did not consider the possibility of getting caught by the authorities, or at least did not give this possibility sufficient weight. This perfectly human behavior of wishful thinking and not sufficiently considering adverse outcomes may have been exacerbated in this particular case by two factors: hubris and experience.

Being Europe’s and in the first half of 2015 even the world’s largest car maker can get to some peoples head and make them believe they are more clever than anyone else and can get away with anything. Such a self-delusion may have been supported by the experience of rather tame authorities in Europe that did not seem to have questioned the emission tests for Volkswagen’s diesel engines seriously enough.

Lesson 2: An inferior strategy cannot be fixed with tactical measures.

The interesting question is why a successful car maker is doing such systematic cheating on a grand scale. One possible explanation could be that Volkswagen ran into the limits of its Diesel strategy: fulfilling tightened emissions standards with its so-called clean diesel technology and at the same time stay within the cost limits for middle-class cars seems to have posed a strategic problem for the corporation to which it didn’t find an appropriate answer.

Compensating the shortcomings of the clean diesel strategy with cheating may have been more tempting than admitting the the strategy was wrong. However, in retrospect it might have been better to have an honest re-evaluation of the clean diesel strategy at the headquarters in Wolfsburg, Germany, instead of trying anything to justify the clean diesel strategy.

Lessons 3: Seemingly remote events can affect your business.

One might think that Volkswagen’s European competitors have now every reason to be happy about the deep fall of the market leader. However, the opposite is true, particularly for German car makers.

[tweetthis remove_url=”true”]The #Volkswagen emissions scandal may undermine customer trust in diesel cars in general. #Dieselgate[/tweetthis]

The emissions scandal has not only damaged Volkswagen, but also raised suspicion against other German car makers. All major European car makers have invested heavily in diesel technology and are dependent on the sales of diesel cars. The emissions scandal may undermine the customers’ trust in diesel cars in general.

However, the effects of ‘dieselgate’ may even go further and could damage the good reputation of all German tech firms, as Volkswagen has been a beacon of tech products made in Germany.

Lesson 4: Corporate values are an important strategic factor.

Volkswagen, like other multinational corporations, is officially promoting commendable values: “For the Volkswagen Group, sustainability means that we conduct our business activities on a responsible and long-term basis and do not seek short-term success at the expense of others.” (Volkswagen Sustainability Report 2014)

Having corporate values written down in glossy brochures is one thing, implementing them on all levels worldwide is another thing. While some may still think that corporate values are something for do-gooders and not for successful executives, the truth is that implementing values in a credible, transparent way, can lead to a strategic advantage. Failing to implement corporate values, on the other hand, can have disastrous consequences, as ‘dieselgate’ illustrates.

Lesson 5: Investing in strategic thinking is cheaper than paying for strategic failure.

There is no guarantee for avoiding strategic failure. However, it is quite feasible to avoid strategic failure on an epic scale, as just experienced by Volkswagen. It requires that on all levels where decisions are made, the decision makers are trained in strategic thinking, which involves having the competence to rationally discover and compare options as well as foresee consequences of those options. The decision makers at Volkswagen directly responsible for ‘dieselgate’ have demonstrated, that a lack of strategic thinking in combination with a lack of responsible, value-based behavior can lead to dire consequences for themselves, their company, and even an entire industry.

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The Five Major Strategic Challenges for HR

Human Resources | Strategic-Thinking

Addressing the five major HR challenges is crucial for the success of an organisation.

Human resource management plays a key role for the sustained success of a company.

While this has always been true, the relative importance of HR in today’s business environment of fast change and high complexity and uncertainty has even further increased. At the same time, the challenges for HR have changed, as two recent studies by Kienbaum Consultants and The Hackett Group show. The two studies come to different conclusions, which makes comparing them even more interesting.

Based on the studies by Kienbaum and Hackett, I have identified the following major strategic challenges for HR:

1. Increase the quality of leadership and management

This is the major challenge identified in the Kienbaum study. And I fully agree that this challenge should have top priority. No organisation will be able to navigate the stormy seas of today’s business environment without a highly qualified team of executives on deck. In my view, the operational management quality in most organisations in developed countries is already quite high.

The area where I see the highest need for continued development is the increase of leadership quality, and particularly the further development of strategic leadership skills. It may not surprise you that I consider strategic thinking and decision making as key skills for leaders which need to be honed on a regular basis. By the way, the need for increased quality of leadership and management also includes executives in the HR department.

2. Manage the changing business needs for talent and skills

Companies can only stay successful in a fast-changing business environment, if they have a workforce that is in line with market needs and which has the right attitudes and skills for agile adaptation to changing business environments. The challenge for HR is to acquire the right talent in a fierce competition for the brightest brains and to continuously develop the skill-set and commitment of employees in a way that advances the growth of the individual and the growth of the company at the same time.

3. Define a forward-looking workforce strategy

HR, like every other department in a company, is at risk of getting bogged down in operational management and losing sight of longer-term strategic goals. That can be very risky, as demographic change and the importance of having a diverse workforce requires strategic planning and a vision for the workforce development that translates into coherent action.

Interestingly, in the Kienbaum study, respondents from HR ranked diversity management very low, which in my view underlines the need for improving strategic thinking. Diversity is one of those factors that seems to be very soft and without effect on the bottom-line, but which can make a difference in corporate culture and productivity. In general, diversity of the workforce in regard to age, gender, and ethnic background – if managed strategically – can have a positive effect on creativity and productivity.

4. Foster innovation throughout the organisation

HR can have a huge influence on how innovative an organisation is. In the Hackett study, more than half of the companies surveyed responded that their business is driven by innovation. Particularly for them, having a workforce that is able to consistently deliver the innovation required to stay competitive is key. HR can have an impact on the innovativeness of company in many ways, e.g. by recruiting the right talent, developing innovative skills, and creating a corporate culture conducive to innovation through setting the right incentives.

5. Use data analytics to improve HR-related decisions

The Hackett report considers data analytics an important area for action by HR, and I agree that this is a strategic challenge which offers a huge potential for every larger organisation. Interestingly, the use of Big Data in HR ranks very low in the list of priorities of respondents in the Kienbaum survey.

This is understandable, for two reasons: firstly, many people in HR don’t have a clue about the potential benefits of using Big Data for strategic HR management; secondly, many of those who have looked into it, will have noticed a plethora of issues related to the use of data and analytics in HR management. These issues include, for example, data privacy concerns, the complexity and cost of setting up a data-driven HR analytics system as well as the need for HR personnel qualified in the use of data analytics. Nonetheless, if an organisation manages to utilise data analytics in HR, it will have significant benefits in regard to understanding emerging issues much earlier and improving HR strategies and operational decisions.


If you are an HR executive, you would be well advised to continuously review your department’s and company’s strategic priorities. You may come to different conclusions on what your specific challenges are compared to the ones identified by Kienbaum, Hackett, or myself. However, it is important that you seriously think about your strategic challenges to ensure HR adds value to the organisation.

The Hackett report comes to a devastating verdict about HR regarding how HR addresses critical challenges: “HR is largely underprepared to address the issues critical to achieving the most important enterprise goals, including innovation, workforce strategy and leadership.”

💡 This harsh judgment may not apply to your organisation. Yet you should ask yourself: what is HR contributing to achieve the strategic goals of my organisation?

Contact me, if you wish to discuss the strategic challenges for HR in your organisation.

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Why Artificial Intelligence is Relevant for Your Business Strategy

Artificial Intelligence | Strategic Thinking

Artificial Intelligence will change your business.

Artificial Intelligence (AI) has been around for a long time. The term was coined in 1955 by John McCarthy. The concept goes back to the early days of computing when British computer pioneer Alan Turing hypothesized about intelligent machines in his seminal paper on “Computing Machinery and Intelligence” (1950). Progress of AI has been slower than its pioneers had expected. At the start of the 2nd millennium the most notable outputs related to Artificial Intelligence were science fiction movies.

Boom in Machine Learning

That has changed in recent years. All major service providers in the information and communication technology sector have brought services to the market that have some artificial-intelligence capabilities. Think of Apple’s Siri, Google’s Google Now, Microsoft’s Cortana, and Facebook’s DeepFace. It is debatable whether any of these services could be called intelligent in a human sense. However, they do perform some limited tasks previously limited to humans. What these services have in common is machine learning, and learning is one of the characteristics of intelligence.

After years of quiet at the AI front, an AI gold rush seems to happen today. The kick-off for this gold rush could have been the victory of IBM’s Watson supercomputer against the best human players in the quiz show game Jeopardy! in 2011. The boost for AI was caused by the convergence of advances in Big Data, machine learning, and computational power.

Machine Translation

Now, it seems, the sky is the limit, at least in terms of business applications of AI. One of the areas where tremendous progress has happened is speech recognition and machine translation, as highlighted in the May 9th edition of The Economist. Internet giants Baidu and Microsoft invest heavily in making automatized simultaneous translation happen, or in plain words: I talk to you in German, and you hear instantly a machine translation in English. It my not be perfect, but good enough to get the meaning out of what I said. In the mid-term, the jobs of human translators may be at risk. And so are a number of other white-collar jobs.

AI Impact on Professions and Business Sectors

In the finance industry, clever algorithms are already used to analyze and predict stocks and markets. Automated financial advisers like Betterment and Wealthfront have emerged in recent years, which could become serious competition to human financial advisers. And it doesn’t end there. Intelligent machines fed with Big Data will get good at anything involving the processing of large amounts of information, from medical diagnosis to preventive policing and criminal profiling.

You may not work in any of the professions or sectors I mentioned. However, that doesn’t mean your profession or sector won’t be affected in the near future. Whatever sector you are in, I strongly recommend you take AI into account for your business strategy, as it will likely impact your sector directly or indirectly , if it hasn’t done so yet.

Strategic Questions on AI

I suggest you ask yourself the following strategic questions, in order to determine how AI may impact your current business strategy, respectively how to change your business strategy in order to cope with the challenges and exploit the opportunities of AI:

  • Which part of my business could be enhanced through the use of AI?
  • How could my organization automate managerial and administrative processes that are currently labor intensive?
  • What would be the social, economic and financial impact of introducing AI in some identified business processes?
  • Are any competitors or new market entrants on the horizon employing AI for processes that are labor intensive in your industry?
  • How long would it take to implement an AI -driven process or service in a specified area of your business?

The earlier you ask yourself and other decision-makers in your organization these questions, the better you will be prepared for the impact of AI on your business.

Contact me, if you would like to discuss, how a strategic discussion on the challenges and opportunities of AI could be organized in your company.

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The Five Key Traits of Strategic Leaders

Strategic Leadership ♔ Strategic Thinking

Strategic leaders are visionary, open, focused, courageous, and prudent.

The prevalent pressure for good quarterly results has led to the dominance of executives with a short- to mid-term focus. This applies particularly to large corporations. Truly strategic leaders have become rare these days. However, in the current times of uncertainty and rapid change, strategic leaders are needed more than ever.

What are the distinguishing characteristics of a strategic leader? How do you recognise one? And how do you acquire the traits of a strategic leader? Based on my experience and encounters with strategic leaders, I have identified the following five traits, which I consider essential for strategic leadership:

1. Vision

Great strategic leaders have a clear and compelling vision that is going far beyond the current reality. These leaders are able to communicate their vision in an effective and inspiring way to mobilise commitment within their organisation and sector.

There have been a number of strategic leaders with such a clear and compelling vision. Steve Jobs and his vision of the iPod and iPhone comes to mind. However, there are also brilliant examples of strategic leadership outside of the US.

NR Narayana Murthy

NR Narayana Murthy, founder of Infosys

One of the most impressive strategic leaders I have met is N.R. Narayana Murthy. In 1981 he founded Infosys, a global software consulting company headquartered in Bangalore, India. He designed and implemented the vision of a global delivery model in IT consulting, which has become the foundation for the huge success of the Indian IT services outsourcing industry. At the time in the 1990s, implementing IT projects with distributed resources was revolutionary.

When I met Mr Murthy at a conference in Frankfurt in October 2006, he had already retired as CEO of Infosys and had focused on mentoring the top executives of Infosys. What struck me at the time was the concise analysis of the challenges in India and his clear views on how to address them. That was an impressive demonstration of how to communicate your vision effectively.

2. Openness

Strategic leaders are aware of the fast pace of change and that they cannot know it all. Their antennae are always on, as a seemingly minor detail might challenge their current strategic plans and be the trigger for changing the strategy for their organisation or department.

One of the strategic leaders who impressed me most for his openness was the late Klaus Tschira, who died in March 2015, one of the founders of German software giant SAP AG. At the headquarters of his foundation in Heidelberg, he used to attend lectures of Nobel prize winners and other eminent scientists he invited, listen intently and ask very precise questions, which both showed understanding and genuine interest.

Strategic leaders are open to learn about new trends in their own or other sectors as well as about developments within their organisation. By living a philosophy of openness they promote a culture of openness in their whole organisation, which facilitates the flow of information and the capacity of the organisation to adapt to a changing environment and turn challenges into opportunities.

3. Focus

Strategic leaders have the ability to focus their attention and energy on what they perceive as the most important activities and projects. Apple co-founder Steve Jobs is a prime example of a leader with a relentless focus. Instead of producing a whole family of smartphone models, he insisted on just having one iPhone model. Keeping it simple and focusing on making one product the best on the market at the time it was launched, had incredible benefits for product management and marketing.

There is, by the way, no contradiction between openness and focus. Openness is required in the decision-making phase. Once a decision is taken you need to focus relentlessly on implementation.

4. Courage

In the face of complexity and uncertainty, a strategic leader can never be sure, if his or her strategic decisions will turn out to be successful, despite all the information gathering and due diligence. Thus, strategic leaders need to have the courage to act and push changes they consider necessary, even if their decisions are not popular with some stakeholders.

A good example of a leader having the courage to make unpopular decisions is Marissa Mayer, President and CEO of Yahoo Inc. In November 2013, she introduced a controversial performance review system based on ranking of employees by managers, with employees at the low end of the bell curve being fired. Employees complained about the process, and the media criticized her, too. Yet, she stuck to her decision.

I am not in a position to judge whether her decision was right or wrong. The point is rather that you should have the courage to stick to a decision, if you think it is right. At the same time, you should be open for new insights and have the courage to revise a decision, if you come to a new evaluation.

5. Prudence

Strategic leaders act prudently. While being ready to take calculated risks, they avoid gambling and try to minimize risks where possible. A prime example of a prudent leader is the already mentioned N.R. Narayana Murthy. In 1995, he faced an unpleasant situation in which a major customer with a 25 percent share in the turnover of Infosys, was trying to squeeze fees to a point unsustainable for the Indian IT provider. Losing this customer left Infosys financially exposed.

Mr Murthy and his team drew lessons from this and developed a de-risking strategy. It entailed the creation of a risk mitigation council, which will, for example, ring the alarm when the dependency on a single client exceeds a certain threshold. This measure, according to Mr Murthy, has stabilised revenues and profits of Infosys. Finding the right balance between calculated risk-taking and prudence without getting overcautious is the art of great strategic leaders.


Anyone who wants to be a good strategic leader is well advised to study the world’s best strategic leaders and adopt their attitudes and behaviours. Remember: leaders are made, not born. If you need support on your way to the next level of strategic leadership, do not hesitate to contact me.

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Business lessons from the World Chess Championship Match Carlsen – Anand | Part 4: Paying attention to details

Chess offers useful insights for business. On occasion of the current World Chess Championship 2014, I will highlight in a series of articles different business lessons to be learned from the game of kings. In part four, I explain why paying attention to details pays off in chess and business.

Champions like Carlsen and Anand pay attention to details.

Champions like Carlsen and Anand pay attention to details.

Top chess players can focus their attention for a long time, even in positions that do not seem to be overly exciting to the average player. More importantly, top players focus their attention on the critical details in a position, which reflects their deep understanding of the structure and relationships of the pieces. Game 4 of the world championship match presented a good example of how Magnus Carlsen and Vishy Anand pay attention to important details.

Carlsen with the white pieces had not achieved much in the opening. Thus, the position was in a dynamic balance in the middle game, while each exchange of pieces seemed to bring the game closer to a seemingly unavoidable draw. Situations like this are psychologically not easier to handle than complicated, unbalanced positions. The main challenge is to sustain your focus and stay vigilant for your opponents threats and potential opportunities hidden in the position.

After some more exchanges, the game had reached an endgame with only one queen and pawns on each side. In one critical position at move 41 it seemed that Anand with the black pieces had two equally good queen moves, which both looked to be good enough for an easy draw.

In the press conference, Anand explained that in his prior calculation he had the intention to make the first, obvious queen move. But then he saw a hidden opportunity for White, which would have led to a slight White advantage. Anand chose a better move and finally drew without difficulty. However, if he had not paid full attention to the details of the position in the critical situation, he might have had to struggle. While in retrospect commentators find it easy to identify the critical junctions in the course of the game, it is far from easy to understand during the game that you have reached a critical junction, which requires mastery and focused attention.

Industry leaders care for details

You may have already guessed the business lesson from this story: pay attention to details on all levels and in all areas of your business. Many excellent companies, which are often – not accidentally – market leaders in their sector, have a corporate philosophy that encourages and rewards attention to detail. Famous examples of corporations that have become global market leaders by paying attention to detail are retailer Wal-Mart and car manufacturer Toyota. These two companies have demonstrated successfully what American football player and coach Lou Holtz meant when he said: “In the successful organization, no detail is too small to escape close attention.”

Boring is the new interesting

Like in a chess game, there is no magic spotlight highlighting the areas of your business you should direct your attention to. It requires continuous effort to find these areas and the details that deserve your attention. If something is mundane and seemingly boring, it could be easily overlooked as an area for improvement. And yet, it might offer hidden potential. Try to adopt the attitude suggested by mindfulness expert Jon Kabat-Zinn: “When you pay attention to boredom it gets unbelievably interesting.” Or to put it more provocatively: boring is the new interesting.

Especially world champion Magnus Carlsen has shown in many of his games that seemingly boring positions offer sufficient room for creating opportunities. The same is true for business champions like Ikea who pay meticulous attention to detail from product design through choice of materials to production, distribution and sales. Many of these details could appear boring. However, they make the difference between excellent strategy execution with high profits and mediocre strategy execution with mediocre profits. If you want to go beyond mediocre, you should follow the champions and pay close attention to details.

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Business lessons from the World Chess Championship Match Carlsen – Anand | Part 3: Prepare for success

Chess offers useful insights for business. On occasion of the current World Chess Championship 2014, I will highlight in a series of articles different business lessons to be learned from the game of kings. In part three, I explore the role of preparation for success.

Carlsen - Anand, World Chess Championship, game 3

Anand’s preparation made Carlsen sweat and lose.

Already three centuries ago, a famous American chess player knew about the importance of preparation – Benjamin Franklin. Most people know him as one of the founding fathers of the United States, but he was also the first documented chess player in the American colonies in 1733. He said: “By failing to prepare, you are preparing to fail.” Or formulated positively: you need to prepare, if you want to be successful.

It seems that Vishy Anand heeded Franklin‘s advice. The opening preparation of his team for the first three match games was excellent and in game 3 it finally bore fruit. After his loss in game 2 Anand was under pressure to play for a win with White. Magnus Carlsen had this time chosen a different opening – the Queen‘s Gambit Declined instead of the Grunfeld Defense. That did not surprise Anand at all. He played his, obviously prepared, opening moves very quickly, and by move 17, Carlsen had used already over 30 minutes more of his clock time than Anand. In move 20 Anand played a prepared new move, which increased Black‘s difficulties. The combination of a very well prepared opponent, a difficult position and the dwindling clock time put Carlsen for the first time under really heavy pressure, which he finally could not cope with. He surrendered in move 34.

The players‘ comments in the press conference after game 3 shed some light on their preparation. Anand said: “I have been preparing for some time, also went to gym for a while to unwind. I prepared three to four hours.” Carlsen said on the same topic: ” Well, I did spend a lot of time in preparation, but he was well-prepared and i’m surprised at it, yes.”

There are different business lessons you can draw from the third match game. As the game and the comments illustrated, it is not enough just to prepare. In this case, both players had prepared with a similar amount of time and intensity. What had made Anand‘s preparation more effective was that his preparation had two distinctive elements, which significantly contributed to his success. Firstly, he had prepared for the right thing, which means he had anticipated Carlsen‘s chosen opening. Secondly, Anand had prepared a novelty, which confronted his opponent with problems he had not anticipated.

How can you apply this insight in a business context? One area, where you can directly apply this are contract negotiations. Try to anticipate the arguments and potential counter-arguments of your negotiation partner, and then think of convincing responses that may tip the balance in your favour. Prepare in a comprehensive way. Business negotiations are not only about figures and rational arguments, but also about small but sometimes crucial elements like timing, seating order and unexpected negotiation behaviour on your side, which may put your negotiation partner off balance.

Knowing that there will be some believers in the win-win negotiation philosophy among the readers, I would like to stress that excellent and deep preparation is as important when you aim for win-win as it is, if you aim for win-lose. In an ideal world, everyone would aim for win-win most of the time. However, if it is only you, and if you are not even perfectly prepared, you increase the likelihood of you losing and your better prepared negotiation partner winning.

Deep, thorough preparation is also crucial in other business contexts, like, for example, when you want to pitch a new business idea to your company‘s board of directors. The better you are prepared and take into account every factor potentially influencing the decision, the higher your chance of success.

Prepare deeply for success, or prepare superficially for failure – the choice is your‘s.

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Business lessons from the World Chess Championship Match Carlsen – Anand | Part 2: Seizing the initiative

Chess offers useful insights for business. On occasion of the current World Chess Championship 2014, I will highlight in a series of articles different business lessons to be learned from the game of kings. In part two, I explore the topic of seizing the initiative.

Carlsen - Anand, Sochi 2014, game 2

Carlsen seized the initiative and won in game 2.

The second game of the World Chess Championship Match between world champion Magnus Carlsen and challenger Viswanathan (Vishy) Anand on 9 November brought the first decision – Carlsen won convincingly with the White pieces. How did it happen? The opening was rather quiet, and Black seemed to have equalised fairly easily. The first mover advantage that White usually has seemed to have vanished.

However, in a position, where everything looked peaceful, the Norwegian champion in good Viking style launched an attack on the black kingside seemingly out of the blue. Although the attack objectively probably was not as dangerous as it looked and could have been neutralised with precise moves, it put Anand under a lot of pressure. While Carlsen had the initiative, Anand had to react – and react correctly at every move. When Anand in beginning time trouble failed to find the right moves, Carlsen’s pressure grew so strong that it provoked a fatal blunder by Anand which immediately ended the game.

The business lesson from game 2 appears trivial, but is nonetheless important: do not hesitate to seize the initiative. This is your best chance for a competitive advantage, even when the situation initially does not seem to offer much. When you are proactive in driving the course of events, opportunities will open up. If you wait too long, someone else – in chess your opponent, in business one of your competitors – will take the initiative, and you will be forced into a reactive, passive position, which limits your options and very likely your chances of success, if you cannot find a way for counterattack.

Think of how Apple seized the initiative on the smartphone market by launching the iPhone in 2007. There had been smartphones before, but none with a user-friendly multi-touch screen. From that year on, all competitors have remained in a reactive position, responding to the latest moves from the headquarters in Cupertino, while having to concede the lion’s share of the market to Apple.

Seizing the initiative is not necessarily the same as taking huge risks. In the case of Carlsen taking the initiative in game 2, the only risk he had was that the game could have remained equal, while it opened up new opportunities for himself and opportunities for Anand to make mistakes. When in doubt, it is better to take some calculated risks for seizing the initiative than to stay passive and wait for the competition to act. It requires a proactive mindset and a good sense for timing. Act too early, and it may backfire; act too late, and the competition may have used the opportunity to take the initiative. Finding the write time for seizing the initiative is a rather an art than a science and requires the combination of reflected experience with intuition and self-confidence.

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Business lessons from the World Chess Championship Match Carlsen – Anand | Part 1: The importance of resilience for success

Chess offers useful insights for business. On occasion of the current World Chess Championship 2014, I will highlight in a series of articles different business lessons to be learned from the game of kings. In part one, I will focus on the importance of resilience for success in chess and business.

Vishy Anand - World Chess Championship 2014, game 1

Vishy Anand, the challenger

On 8 November 2014, the World Chess Championship Match between world champion Magnus Carlsen and challenger Viswanathan (Vishy) Anand started in Sochi, Russia. After Anand’s crushing 3,5:6,5 loss in last year’s title match in Chennai, India, most experts would not have expected the former world champion from India to qualify for the title match against the Norwegian world champion. And yet, he did.

Magnus Carlsen - World Chess Championship 2014, game 1

Magnus Carlsen, the World Chess Champion

Due to the fact that 23-year-old Magnus Carlsen is ranked number one in the rating list of the world chess federation FIDE, and the 44-year-old Anand is ranked number six, experts have given Anand only slim chances to win back the title. Nevertheless, the first game of the match on 8 November showed that the challenger has bounced back from last year’s defeat and displayed impressive resilience under pressure.

In the opening, Anand with the white pieces had put Carlsen under some pressure, and Carlsen invested considerable time to find a precise way to equalising the position. In time trouble, Anand got wobbly and made some second-best moves, which gave Carlsen the opportunity to develop a dangerous initiative. After time control at move 40, Anand faced a passive position in which his opponent had serious threats. Many weaker players would have collapsed under this pressure. Not so Anand: he found some hidden resources to activat his rook and queen. Finally, Carlsen couldn’t find a way to win and allowed perpetual check and draw. Anand’s resilience in a critical situation got rewarded.

The business lesson for executives from this game and Anand’s path to qualifying for the World Championship is straightforward: if you want to be successful in the long run, you have to be resilient in the face of unavoidable adversity, both on an individual and an organisational level. Before I discuss, how executives can strengthen their resilience, let us first clarify what resilience actually is.

The American Psychological Association (APA) defines resilience as follows: “Resilience is the process of adapting well in the face of adversity, trauma, tragedy, threats or significant sources of stress — such as family and relationship problems, serious health problems or workplace and financial stressors. It means ‘bouncing back’ from difficult experiences.”

The APA article further points out that resilience is rather ordinary than extraordinary. This may be true for coping with adverse situations in life. However, according to my personal experience in chess and management, resilience is much more extraordinary, when it comes to achieving excellence under high competitive pressure.

In order to nurture psychological resilience, APA mentions a number of contributing factors. These include supportive relationships, the ability to make and pursue realistic plans, a positive self-concept, communication and problem-solving skills as well as the ability to manage strong impulses and feelings.

It seems that positive emotions play a very important role for building resilience. According to research by Michele M. Tugade and Barbara L. Fredrickson, resilient individuals use positive emotions to bounce back from negative experiences. The question then is how to sustain positive emotions.

In my view it requires a combination of awareness, discipline and trained mental processes to stay emotionally balanced under pressure. Despite the emotional rollercoaster both Anand and Carlsen went through in their first match game, they appeared emotionally balanced and confident. Both had shown in the game that they are capable of acting confidently and decisively under pressure and changing circumstances. Executives are well advised to build and sustain the some level of resilience in themselves as well as their employees, in order to stay on a successful course in the ups and downs of business.

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Book contribution on strategic action published in GSA Top Speakers Edition

gsa-top-speakers-edition-5In August 2014, German publisher GABAL released volume 5 of the GSA Top Speakers Edition: “Die besten Ideen für erfolgreiche Führung” (The best ideas for successful leadership).

For this anthology by the German Speakers Association (GSA), editor Lothar Seiwert, Germany’s leading time management expert and founder of the GSA Top Speakers Edition, had assembled 24 distinguished speakers and trainers to write on a broad range of topics related to leadership.

The contributions are structured into four sections:

  1. “Führung im Wandel” (leadership in change),
  2. “Führungspersönlichkeit” (on personality aspects of leaders),
  3. “Führungsinstrumente” (leadership tools), and
  4. “Führung von Mitarbeitern und Teams” (leadership of employees and teams).

Section 3 on leadership tools contains a contribution by strategic thinking expert Milon Gupta on strategic action and what executives can learn from chess masters (“Strategisch handeln – was Führungskräfte von Schachmeistern lernen können”). The article explains the seven success factors of chess masters and how executives can benefit from them.

Those who are not able to read German and wish to learn more about the seven success factors of chess masters will have to wait for the English book on the topic by Milon Gupta, which is planned to be published in autumn 2016. A German book on the topic will be published in spring 2016.

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Strategic thinking – The key competence of successful business leaders

Successful leaders take time to think strategically - The Thinker by Auguste Rodin (Photo: Daniel Stockman 2010, Creative Commons Attribution-Share Alike 2.0 Generic license)

Successful leaders take time to think strategically – The Thinker by Auguste Rodin (Photo: Daniel Stockman 2010, Creative Commons Attribution-Share Alike 2.0 Generic license)

Business leaders need a broad skillset in order to be successful. This includes a wide range of social and intellectual capabilites. However, the one competence that distinguishes sustainably successful leaders is their ability to think strategically. This is the key results of a study by Management Research Group, conducted in 2013 among 60,000 managers in 140+ countries and 26 industries (source: blog article by Robert Kabacoff, Harvard Business Review, 7 February 2014).

On average, the responding managers considered strategic thinking 10 times more important for business success than other behaviours studied. They regarded strategic thinking to be twice as important as communication and almost 50 times more important than hands-on tactical behaviours. In a follow-up study , Management Research Group asked 10,000 senior executives to select the leadership behaviours most critical to their organizations’ future success – 97 percent of the respondents chose strategic thinking.

What does it actually mean to think strategically? It means that you think ahead of the curve, take a broader and deeper look into business options for the future, and consider what effects major trends and potential strategic decisions have on the different areas of your company. It requires a combination of systematic, rational analysis with an intuition-driven holistic insight into the pros and cons of different strategic options. Strategic thinking is an art that unites mindset, analytical techniques, intuition, and creativity.

Now, if strategic thinking is so important for business success, what can executives do to foster their own strategic thinking and that of their employees?

There are three measures executives can apply to create a fertile ground for strategic thinking:

  1. Set aside time for strategic thinking. Under the daily pressure of operational tasks, this may be easier said than done. However, if you want to plan for future success, you need to have that time, or you will be driven by the strategies of others. Enter an appointment with yourself or with you executive team in your calendar to spend time for reflection on strategic options.
  2. Keep your mind open and stay alert for information that may be relevant to the strategic direction and future success of your company. It is important that you also absorb information from other business sectors and companies, as their cases and experiences may have strategic lessons or inspirations for your own strategies. This should become a regular habit.
  3. Get professional training for yourself and your executive team. Even seasoned executives need to keep their minds sharp and up-to-date with strategic thinking techniques. Furthermore, getting feedback on your strategic thinking habits in a workshop will help you be aware of your cognitive biases and, thus, enable you and your team to avoid serious strategic errors.

Contact me, if you wish to know more about how to foster your strategic thinking.

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Business Insights from the World Chess Championship 2013

The game of chess is a model for strategic thinking and decision making under highly competitive conditions. Understanding how the world´s top chess players achieve success can give executives valuable insights on how to improve their own strategic thinking and decision making.

What executives can learn from Anand versus Carlsen

Viswanathan Anand (photo: Stefan64 - GNU Free Documentation License)

Viswanathan Anand (photo: Stefan64 – GNU Free Documentation License)

The World Chess Championship in Chennai, India, in November 2013 offered a particularly interesting opportunity for studying two of the world´s leading strategic thinkers and their struggle to win. The match between Viswanathan Anand, the 43-year-old defending champion from India, and Magnus Carlsen, the 22-year-old challenger from Norway, offered insights beyond the boundaries of the 64 squares of the chessboard, which can have also significance for strategic decision-making at the boardroom.


Magnus Carlsen (photo: Stefan64 – GNU Free Documentation License)

At the end the score was 6.5 : 3.5 for the young challenger from Norway who became the new word champion.

This result did not come as a surprise to the chess world, as Carlsen went into the match as the favourite, due to the fact that he has been the top-ranked player in the world for the last three years, while Anand is only ranked no. 8 in the rating list of the world chess organisation FIDE. The difference in their Elo rating – something like the stock price for chess players – is almost 100 points (Carlsen: 2870; Anand: 2775).

So, what is it, then, that executives can learn from Anand and Carlsen? And what are the factors that have given Carlsen the competitive edge so far, which could be related to success factors in business?

Competitive advantage in chess and business

Let us first have a look at the similarities and differences of what constitutes competitive advantage in chess and business. In chess, the advantage is mainly based on the player´s superior knowledge and thinking skills. Otherwise, starting conditions before any match are at first sight the same: both players have the same number of chess pieces on the chessboard and the same time on the chess clock.

In business starting conditions may be very different between competitors. Established companies may have more capital and more employees, while start-ups usually have much less capital and employess, but often an edge in terms of innovativeness and flexibility.

However, even in business, good strategic decisions are ultimately at the root of a sustained competitive advantage. This is increasingly important in a business environment that is characterised by knowledge-driven innovation, rapid technological change, and a high level of uncertainty. So the qualities that made Anand and Carlsen successful in their domain, superior knowledge and thinking skills, are also increasingly important in a global business environment.

Like in chess, where you can make 40 good moves, but loose due to one single bad move, single strategic and operational errors can also have severe consequences in a highly competitive global business environment.

Factors of superior knowledge and thinking skills

The interesting question that follow is how you can acquire superior knowledge and thinking skills. In the cases of Carlsen and Anand as well as any other top chess players it is a combination of talent, practice, persistence and ambition. You need a high score for all of these factors to get to the top in Chess. If only one factor is missing, you will not make it. Even if you have plenty of talent, practice, persistence and ambition, it does not guarantee that you will play for the world championship.

Sometimes you also need the right opportunity and constellation at the right time. Some people may call it luck, but luck alone will not get you to the top, if you lack any of the other factors. You could say that Carlsen was lucky that Anand played a bad move in each of the games 5 and 6 that led to a win for Carlsen. However, in order to get a player of Anand´s experience and skill so heavily under pressure that he makes a mistake, you need to make excellent decisions move after move.

Transferring this insight to business, you would have to constantly make good decisions in order to get a sustained competitive edge. Obviously, there is no easy formula for making good decisions, otherwise everyone would do it. Yet, top chess players show that through rigorous training and practice as well as a ruthlessly honest review of your bad decisions, you can reduce the number of strategic errors and increase the number of good decisions.

In comparison between chess and business, executives are at a disadvantage, as business decisions are often much more complex, and, unlike chess players, they will not get fast feedback on whether their decision was good or bad. This, however, makes it even more important to critically review important strategic and operational decisions in business. If you accept second-best decisions in the longer run, even if there are no immediate negative effects on the bottom-line, you will face a competitive disadvantage sooner or later. Top chess players like Anand and Carlsen know that and, thus, work relentlessy on becoming aware of their own blind spots in order to reduce errors and make better decisions.

The importance of preparation

Anand and Carlsen, supported by their teams of seconds, spent most of the time after a game preparing for the next game. In fact, anything they did when they were not playing a game was preparation for the next game. A lot of time is spent on preparing for the opening, the first 10 to 20 moves in a game, for which a huge stock of knowledge already exists. However, preparation is more comprehensive. Sleeping, proper eating, and physical exercise are also important elements of preparation.

Executives can learn a lot from this holistic approach to preparation. Physical fitness and sufficient sleep are of crucial importance for the performance at the chessboard. Carlsen is an excellent example. He is doing all kinds of sports, including football and climbing, which gives him the stamina, to play long games without losing his concentration, which could immediately lead to an irreversible error. The risk of losing your concentration is extremely high after having played for four or more hours. Executives facing important meetings and negotiations should have a similarly professional approach to mental and physical preparation, in order to avoid loss of concentration which could lead to a higher chance of bad decisions.

What remains invisible to the spectators of the world championship is the work of the seconds. Both Carlsen and Anand have a team of very strong grandmasters who help in many aspects of the preparation, most notably the opening preparation, but also in regard to psychological factors of the competitive situation. Only Anand gave away the names of his seconds. His team consists of strong grandmasters from India, Poland, and Hungary. The striking characteristic of his team members is their diversity of playing styles. It can be expected that Carlsen has an equally strong and diverse team of seconds.

The lesson for executives is that they should consult a team of advisors for important decisions. In order to make this effective, the team composition should be diverse, and each team member should be a strong decision-maker in his own right. This will help to avoid blind spots and group think, which can lead to bad decisions both in business as in chess match preparation.

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The need for strategic thinking in a complex world

My name is Milon Gupta, and I am the author of the Strategic Thinking Blog. The current financial crisis in Europe is for me another proof that decision-makers on all levels in politics an business need to expand their strategic thinking skills. The issues at hand have reached a level of complexity which cannot be sufficiently addressed with the strategies and thinking patterns that brought us to the situation we are in.

Politics and business need to adopt all the best practices, proven methods and scientific insights for effective strategic thinking and decision-making that are available, but not widely known. Only then will society and economy in Europe and globally be able to keep up with the complex challenges of a fast-moving uncertain world, beyond the daily crisis management and short-term solutions.

This blog aims to make a contribution to this necessary evolution of strategic thinking. I sincerely hope to enter into a productive discussion with all people interested in the topic – independent of whether they share my belief in the need of progressing strategic thinking.

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