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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Video: Think ahead and succeed!

Milon Gupta - Think ahead and succeed



The video presents selected parts of a keynote speech by Milon Gupta on how to think ahead and succeed. It features the effective use of thought patterns, the importance of imagination, and how to use your intuition. In addition, Milon Gupta shares some thoughts on his approach to speaking, training, and coaching.

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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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