The Strategic Management Society is delighted to present the Strategy Imagination Forums. These Imagination Forums share cutting-edge thinking on current strategy issues and topics presented by accomplished strategy thinkers from academia, business, and consulting.
The Forums are open to all current Strategic Management Society members, as well as to members of the consulting and business communities. Each Forum is 60-90 minutes, consisting of a presentation followed by Q&A. We look forward to you joining us for these exciting discussions.
This Forum will be held on Thursday, January 21, 2021 at 10:00 am EST. Click here to register.
The COVID-19 pandemic, a severe and multifaceted global health, economic and social crisis, has prompted companies in every sector of the global economy – large and small, public and private, for-profit and non-profit – to reinvent and reimagine themselves to be able to survive and prosper. Executive leaders from around the world are taking a hard look at how to do business in the post-COVID-19 era by considering the design and implementation of new customer-centric business models. That is, executives are reimagining the boundary-spanning activity systems of their firms, with the objective of creating value for all stakeholders. At the same time, they are also thinking about how their own firms can capture sufficient value from these new business model innovations, which complement product and process innovations. These developments have already spurred notable business model innovations, heightening the need for all corporate and entrepreneurial leaders to develop a well-crafted Business Model Innovation (BMI) strategy.
In this Strategy Imagination Forum, which draws on their recently published book, Business Model Innovation Strategy (Wiley, 2021), Raphael Amit and Christoph Zott will explain what BMI strategy is and how it complements traditional forms of strategy such as business or corporate strategy. They will also provide examples of business model innovators from around the world to illustrate the power of BMI strategy. The concepts introduced, and the illustrations provided, will prompt executives and those who guide them to examine their business model innovation strategies and ask themselves such questions as: What is our current business model? Does it create sufficient value? Is it fit for the future? Or should we consider innovating it? What is our BMI strategy? Why should we have one? How can we develop a BMI strategy? Amit and Zott welcome questions and comments from the audience during this forum and look forward to lively interactions.
This Forum was held on Thursday, December 10, 2020 at 10:00 am EST. Click here to watch the session recording. The speaker, Josh Baron of BanyanGlobal, has also written responses to some of the questions that came in during the session that were not answered live:
Q&A with Josh Baron
How do you define a Family firm?
A business where ownership control is exercised by two or more family members (through a majority of shares or voting shares, being the trustee of voting shares held in trust, etc.), either concurrently or sequentially.
What is the title of the book that you mentioned during the point about racing to scale?
I mentioned two books:
The Company, by John Micklethwait and Adrian Wooldridge
Lords of Strategy, by Walter Kiechel
Is public ownership and family ownership necessarily mutually exclusive? If yes, why? What about Walmart, Danaher Corp, Comcast etc.?
They are definitely not mutually exclusive. There are a number of public companies that are also family businesses, either because the family has a majority of overall shares or control over the voting shares. In my work on the connection between ownership structures and competitive advantage (https://hbr.org/2019/01/is-your-companys-strategy-aligned-with-your-ownership-model), I categorize companies as private, public, and hybrids that have aspects of both. A publicly traded, family-controlled business is a hybrid. It has aspects of being a family business as well as of being a public company.
Bloom & Van Reenen (2007) argue that the evidence on inherited family firms suggests that family ownership has a mixed effect on firm profitability, but family management has a substantially negative effect.
I love this research. It’s one of the few efforts I have seen to study how different ownership structures affect business practices. I believe the finding is more nuanced – when the CEO is chosen by primogeniture, then they tend to be badly managed. Companies that select the CEO from all family members are no worse managed than other firms. This is from their Quarterly Journal of Economics 2007 paper.
Studies have shown family firms' nepotism and priority in serving family members' emotional needs can negatively affect nonfamily shareholders' interests. The family firms are likely to suffer from this public bias (e.g., tunneling, higher non-family CEO turnover than family CEO turnover, career ceiling, etc.). What's your response to this? How should family firms respond to this public bias? What about the second agency problem in FBs: the conflict between family and non-family owners.
A few thoughts on these questions:
- The notion of a principal-agent problem between family and non-family owners makes sense in theory and I think your research shows it in practice, Raffi. At the same time, I believe your research also shows that even with this problem, non-family members are better off investing in a family firm. This is consistent with the work done by George Stalk and his colleagues that shows superior performance of publicly traded family firms compared to publicly traded non-family firms across the business cycle. So, even with this problem, I’m not sure how it reduces the competitive advantage of these family companies
- Family businesses often have objectives that are not narrowly focused on maximizing shareholder returns (e.g., environmental sustainability). I believe this is a feature rather than a bug, and the source of potential competitive advantage. To the extent that minority shareholders also have these objectives, then this form of principal-agent problem is less severe even if returns are not maximized.
- As described in #3 above, we’re talking about a subset of family businesses when we speak of those with minority investors. The vast majority of family businesses – certainly of the ones I have met or advised – do not allow any non-family owners. So, while this challenge may be a real one for a subset, I’m not sure it’s relevant for most.
- If I understand what you mean by public bias correctly – that the public may discount a firm for being family-controlled – it at least raises the question of whether public ownership is the right model for some family companies. In one of my classes I teach the Pentland Group case. They cite this issue as one reason for taking their company private.
At what amount of accumulated capital should someone first start considering establishing a family firm? What are the first few practical steps?
I’m not sure there’s a minimum size, other than it has to create a viable economic opportunity for the next generation. Contrary to the “three generation rule” logic, many great family business stories are based on 2nd or 3rd generation entrepreneurs building off a small first generation company. On the key choice points for building a family business, please see: https://hbr.org/2021/01/build-a-family-business-that-lasts
Will the slides be available after the session?
It’s still a work in progress, so I prefer not to share the entire deck broadly. But if you want the slides, please contact me at email@example.com You can also read this article I wrote on the topic: https://hbr.org/2016/03/why-the-21st-century-will-belong-to-family-businesses
Family ownership has long been recognized as bringing tangible benefits to companies. For most of the last century, those benefits were largely outweighed – at least in the advanced economies of North America and Europe – by the limits on growth that came from not having access to outside capital by selling ownership to the public. In the “race to scale”, family companies were at a marked disadvantage.
But the game has changed. This century will be characterized by dramatically increased volatility in demand, supply, winning business models, talent and financial resilience. Today and into the future, being big is no longer a guarantee of survival or an impediment to success in most industries. Instead, the people-friendly, fiscally conservative, decisive, community-oriented, and actively involved manner in which effective family owners run their companies can create a lasting competitive edge, one that is simply unavailable to public companies.
Based on an assessment of global trends and experience working with family-controlled companies around the world, Josh Baron, Co-founder and Partner at BanyanGlobal, will highlight five “survival strategies” that can help family businesses to thrive in 21st century and provide insights that executives of public companies should consider.
This Forum was held on Wednesday, September 30, 2020 at 9:30 am EDT. Click here to watch the session recording.
The work of strategy consultants is often dismissed with the adage that consultants “borrow your watch to tell you the time.” Or that the analysis was thorough but didn’t provide any new insights. Strategists, whether in a consulting firm or an internal strategy group, can quibble over the extent to which these critiques are fair, but there is no question they are out there in the ether. Roger Martin—writer, strategy advisor, and 2017’s #1 management thinker according to Thinkers50— asserts that these concerns are responsible for the rise in prominence of the design firms, who are increasingly seen as more creative substitutes for mainstream strategy firms. That is, if one wants thorough analysis, one should hire a strategy firm and if one wants creativity, hire a design firm.
That trade-off doesn’t need to be forced on clients (whether internal or external). The process for making strategy choices can feature both rigor and creativity. In this Strategy Imagination Forum session, Roger Martin will lay out an end-to-end process for creating strategy that infuses it with insights from both design thinking and integrative thinking.
The inaugural forum featured Martin Reeves, Chairman of the BCG Henderson Institute, speaking on “The Imagination Machine”. This virtual event was held on Wednesday, July 29, 2020 at 10 am EDT. Click here to watch the session recording. We are excited to share that Martin has provided written answers to some of the questions submitted during the live session! Click here to view his responses.
As business environments become more changeable and long-term growth rates decline, companies increasingly need to innovate - across their operations, offerings, and business models. We know the powerful effects of innovation, but what is upstream of innovation? How can we understand and shape the murky mental territory that leads to good ideas: the realm of imagination? How can we harness this uniquely human capacity in an age when more routine cognitive tasks are being substituted by machine learning?
Big businesses often struggle to make use of imagination. They may try to make it a mechanical process and end up with routinization and incrementalism. Or they may treat it like a magical power, celebrated in tales of great innovators, in the hope that good ideas will appear as needed without any special efforts. As companies grow, it becomes harder for them to be imaginative. Larger companies tend to focus on exploiting what they know and what originally gave them scale. Corporate vitality - the capacity for future growth and reinvention – measurably decreases with size.
Of course, we have the imagination of entrepreneurs to help create new products, services, and business models. Yet, the idea that entrepreneurs take the lead in imagining new businesses and big companies can focus only on managing established ones at scale, is falling apart. All companies – large and small, new and old, local and global, in traditional developed markets and in dynamic emerging markets -- face increasingly unpredictable environments and the prospect of stagnation or disruption if they do not continuously imagine and innovate.
Fortunately, business environments are increasingly malleable, and offer many yet unrealized opportunities to create and capture value, if we can first imagine them. As well as competing on scale efficiency, we must increasingly compete on imagination. We need to get serious about understanding this capacity, how it works individually and collectively, and how to deploy it reliably and powerfully, especially in large mature businesses that have been successful through one way of doing and seeing things.
Unfortunately, there isn’t a textbook or a playbook of how corporate imagination works or how to systematically enhance and harness it. Drawing on research for a forthcoming book from Harvard Business Press, we will examine:
We are excited to partner with the BCG Henderson Institute for this session. Bruce Henderson, for whom the Institute was named, was a founding member of the Strategy Management Society. He was active with the SMS from its very beginning including helping design the first SMS conference in London, England in 1981 alongside early strategic management luminaries Henry Mintzberg, Derek Channon, Igor Ansoff and Dan Schendel. Bruce was on the board of the SMS for many of its early years. He was also an SMS Fellow until his death at 77 in 1992.