ROLAND BERGER STRATEGY CONSULTANTS
CONTENT
How to survive in the
VUCA world | Lessons
in agility from today's
meta-winners | The
seven principles
of the Light Footprint
approach | Prepare
your company for the
future
OCTOBER 2013
Fresh thinking for decision makers
ROLAND BERGER DEVELOPED A
MATURITY MATRIX
TO ASSESS WHETHER FIRMS ARE FOLLOWING A LIGHT FOOTPRINT APPROACH
THE LIGHT FOOTPRINT APPROACH IS FOUNDED ON SEVEN PILLARS COVERING THREE AREAS
ACTION PLAN
Draw up a scorecard
and compare your
firm with best
practices
Implement best
practices and extend
them where possible
WHERE
DOES YOUR
FIRM
STAND?
1. TECHNOPHILIA
2. CYBERNOMICS
3. SPECIAL FORCES
Adapt your firm on
a continuous basis
INNOVATION
ORGANIZATION
4. EXTREME AGILITY
5. OPENNESS
APPROACH
6. SECRECY
7. RISK MITIGATION
MATURITY STAGE
AWARENESS
IMPLEMENTATION
MATURITY
Source: Roland Berger analysis
CONTENT
Do challenges and opportunities that used to take months to mature now suddenly strike
you without warning? If so, you're not alone. What you are experiencing is the VUCA world:
Volatile, Uncertain, Complex and Ambiguous.
Today's companies operate in a world where VUCA has become the norm. They face a sim
ple choice: To be bogged down by their own inertia or to embrace the new normal and adapt
to it with agility, new models, fresh thinking and innovative approaches.
IT'S A VUCA WORLD
The world is becoming less linear and turning
into a complex adaptive system
VOLATILITY
Competition means that firms need to continuously adapt to their changing environment.
Companies can lose their edge overnight. Trends such as digitization, regulatory uncertainty, emerging markets, deconstruction of the value chain and the need for greater organiza
tional agility are sea changes for the business world. Firms must innovate continuously
to stay ahead of the competition.
UNCERTAINTY
In a recent study at Roland Berger, we looked at how fifty firms from a range of industries
and with different maturity levels are adapting to the new VUCA world. Some stood out as
clear "meta-winners" – firms so singular that they are game-changers in their industry
and in some cases have even created a whole new industry segment. Many of these
meta-winners were born into a world where VUCA was already the norm. A few of them are
known around the world, including Google, Amazon, Facebook and Apple. Others are primarily known in their home markets, such as the French telecom company Free and the US
provider of on-demand Internet streaming content Netflix, or their home continent, such as
the Spanish fashion retailer Zara, part of the Inditex Group. Asia also has its meta-winners,
such as the Chinese Alibaba Group and South Korea's Samsung.
Our investigation revealed seven key principles used by meta-winners to survive the
VUCA world. Together, these principles form what we call the "Light Footprint" approach, in
reference to a striking example of adaptation to the VUCA world: the strategy implemented
by the United States military during the Obama administration in reaction to the transfor
mation of warfare.
SEVEN PRINCIPLES OF THE LIGHT FOOTPRINT APPROACH
1. Technophilia
Meta-winners are technophiles, constantly innovating and integrating external technological innovation into their business models. An example of technophile thinking is the
connected vehicle – the integration of the Internet, e-mail, iPhone connections and such
like into cars, with the ultimate aim of creating a fully automated vehicle. GE, Google,
BMW, Audi and Toyota are all developing aspects of the connected vehicle that are set to
revolutionize the industry, bringing substantial benefits in terms of safety, energy efficiency and traffic management.
L ig ht Fo o t pr i nt
?
COMPLEXITY
AMBIGUITY
ROLAND BERGER STRATEGY CONSULTANTS
CONNECTED MOBILITY 2025
The connected vehicle – a prime example of
technophile thinking
06/2012
ROLAND BERGER STRATEGY CONSULTANTS
STUDY
In-depth knowledge for decision maker s
* E conomic costs per annum due to paralyzed traffic
flows in the world's 30 biggest megacities alone
USD
266
billion*
CONNECTED MOBILITY 2025
How tomorrow's passenger transportation will add new value
Source: http://rbsc.eu/115x6MD
What will technophilia look like in the medium term? One key trend we identified is
service robotics: Robots at the service of humans or industrial equipment, customized for
often complex tasks and with a degree of autonomy that goes far beyond mere industrial
automation. Service robots were first used in military applications and field robotics; they
are now increasingly common in areas such as medical surgery, domestic tasks and entertainment. No one country has yet emerged as the clear leader, but the United States, South
Korea, Japan and Germany are all at the forefront. In the medium term, players that make
the most of this technology will gain a substantial advantage over their competitors.
2. Cybernomics
The second principle of the Light Footprint approach is what we call "cybernomics" – the
ability to leverage new technology, in particular Web 2.0, big data-mining capacities and
digitization. The US military calls cyberspace the fifth domain, after the air, land, sea and
space. Meta-winners are companies that are able to win a decisive advantage in this fifth
domain. Through cybernomics they achieve maneuverability and keep their organization
lean, with their modular structures ensuring agility.
A striking example of a meta-winner using cybernomics is the US provider of on-demand
Internet streaming content Netflix. Netflix recently leveraged its knowledge of customers
to support expansion into a new business segment: the production of content.
3. Special forces
Meta-winners make use of special forces within their organizations – small, multidisciplinary, autonomous teams dedicated to achieving a particular goal. These special forces are
the business equivalent of the small, highly trained units set up by the US military in place
of large battalions, such as the Navy SEALs. For companies they are the real "gemba" – the
place where value is created – optimizing the contribution of the workforce thanks to their
multidisciplinary expertise, commitment and motivation.
Meta-winners use special forces to foster innovation and accelerate change. Nestlé is a
good example: It set up special teams to accelerate the use of digital change throughout its
organization. Similarly, GE set up Local Growth Teams (LGTs) to stimulate innovation.
4. Extreme agility
In the VUCA world, it is vital for firms to respond quickly to any change in their circumstances, realigning themselves without delay. This requires a subtle balance between
centralization and decentralization: A strong command unit combined with the freedom of
local entities to make their own decisions.
One meta-winner here is the fashion retailer Zara. Key functions are centralized: All
designers are located in the company's headquarters in A Coruña (Spain), from where the
logistics and marketing tasks are also managed. But Zara's strength lies equally in its
CONTENT
L ig ht Fo o t pr i nt
ability to operate in the field. The company gathers constant feedback from its stores all
over the word. Designers regularly travel to spot trends as they emerge on the ground.
Store managers are allowed to decide largely by themselves which clothes to order from
Zara's distribution centers. This mix of centralization and decentralization lends the firm
exceptional agility, enabling it to bring new fashion trends into its stores in just two to four
weeks – way ahead of the competition.
5. Openness
In today's increasingly complex world, it is unsurprising that the most successful actors
are those who build the strongest partnerships – with different firms, customers, public
services, researchers, local partners, and others.
One of the best examples of a collaborative approach with customers is the French telecom-munications company Free. Free has built a community of its users – "Freenautes", as
they are known – by allowing them to create websites about its products. It also organizes
events to stimulate interest in the company and its offering, and holds regular exchanges
between its CEO Xavier Niel and journalists.
6. Secrecy
Being open does not mean that you should share everything with everyone. In fact, metawinners tend to be highly secretive about key issues. This secrecy applies in particular to
innovation, protecting the ability to take the competition by surprise.
For instance, the telecommunications company Free cultivates an open attitude toward
the public yet retains tight control of information about new products. It releases a new
version of its Freebox product every two years, but no information about it is leaked before
the official release date. The CEO makes regular statements to the press to create a buzz
about the new version. The result is that the firm places a spotlight on innovation and
grandstands its new releases in a way reminiscent of Apple.
7. Risk mitigation
The final principle employed by meta-winners is risk mitigation. In a volatile world, it is not
always possible to predict the consequences of your actions. Business actors must make
it part of their strategy to minimize the risk of damage. Where damage does occur, they
must own up to it and put their efforts into limiting its extent.
Here, again, Free offers a good example. The company's strategy is aggressive, with low
costs and strong rhetoric. This attitude is bound to have some unwanted consequences,
and dealing with them is part of Free's strategy. The company owns up to its mistakes
immediately. For example, when a mobile offer led to its website crashing, CEO Xavier Niel
acknowledged that it was "a catastrophe" – while at the same time suggesting that it only
proved how eager people were to switch to Free.
OPENNESS CAN AND MUST BE BALANCED
WITH CAREFUL INFORMATION CONTROL
Build a strong
network of
relationships
OPENNESS
SECRECY
Keep control of
information on
vital issues
ROLAND BERGER STRATEGY CONSULTANTS
ROADMAP FOR TRANSFORMATION
How to turn companies into adaptable, "poststrategic" business organizations
The seven principles of the Light Footprint approach can be summarized as follows: Make
the right investment – in terms of financial resources, organizational setup and information – in the right place to maximize your impact where you want to be, and be agile
enough to move to that place quickly. Successfully employing this approach will ensure
you a place alongside the meta-winners.
LIGHT FOOTPRINT CHAMPIONS
What does it mean to be a meta-winner in today's VUCA world? How can you turn your
business into a Light Footprint champion? The following examples show how firms are
successfully adapting to changes in their environment, leveraging innovation and
restructuring their organizational setup to ensure agility.
NETFLIX
Netflix is an expert in market disruption. It started out as a service warehousing DVDs
and renting them out to its online members, shipping the DVDs to them by traditional
mail. Since then it has shifted its activities more than once, changing the rules of
the game in each market segment it has entered. From being a pioneer in DVD rental
shipping and later streaming/VOD, it is now becoming a successful producer of content.
Source: http://rbsc.eu/1884mMi
This constant reinvention has allowed Netflix to survive many threats from its competitors. In particular, it has been able to outmaneuver established players such as the TV
networks, Hollywood and larger video rental chains and retailers. Indeed, it contributed
to the downfall of traditional players such as Blockbuster.
BIG DATA MINING: CIRCLES OF
PROBABLE SUCCESS
House of Cards
(BBC)
David
Fincher
House
of Cards
(US)
One key to Netflix's strategy is to make use of large datasets on customers and viewing
trends – in other words, its assets in cybernomics – to help people find content that is
of interest to them. These data-mining capabilities have also had other consequences.
Thus, Netflix realized that if a viewer had watched the BBC show House of Cards, there
was a high probability that that same viewer had also watched movies featuring Kevin
Spacey (e.g. American Beauty) or directed by David Fincher (e.g. The Social Network).
Their conclusion was clear: They should produce a US version of House of Cards featuring
Kevin Spacey and involving David Fincher. They did so, and the show is a hit.
FREE
Kevin
Spacey
When it started to produce content, Netflix used
big data algorithms to determine what show it
should produce
French telecommunications player Free revolutionized the French telecommunications
market with its low-cost products, first in the area of Internet access with its Freebox and
then in the mobile arena. In so doing it drove down prices in the French market from
among the highest in Europe to among the lowest. It also forced traditional French players such as Orange, SFR and Bouygues Telecom to redefine their strategies, pushing
them to launch their own low-cost products such as Sosh, Joe Mobile and B&You.
Free balances its sense of creating a show with extreme secrecy about its new products
and versions. It has built a strong Internet community by allowing users to create product
-related websites such as Univers Freebox, Le Journal du Freenaute, Free&Mac, and
others. It organizes annual events and has developed new channels for its users to meet
CONTENT
L ig ht Fo o t pr i nt
and exchange ideas, such as the Freebox Universe concept stores. CEO and founder Xavier
Niel is personally involved in this strategy and meets regularly with journalists.
This collaborative attitude to customers translates into two key competitive advantages.
First, it secures customer loyalty. Polls show that Free's customers are more willing to
recommend it to their friends than is the case for competitors. Churn rates are also lower.
Second, collaboration with customers enables savings in other areas. For example, the
proliferation of user websites dedicated to Free's products reduces its costs for aftersales
services. The firm thus achieves a more favorable cost structure than other operators, with
support functions and CRM/marketing representing around 15% of sales, compared to
approximately 30% for Orange.
ZARA
Spain-based global apparel retailer Zara is extremely agile in the area of supply chain management, with exceptionally short production cycles. The brand was created in 1974, so
before the advent of the VUCA world. However, it quickly became a leading actor in the industry thanks to its outstanding organizational agility.
Zara is able to bring a fashion trend into its stores quicker than any of its competitors,
usually in less than a month. Thanks to the constant feedback it receives from its stores,
it can immediately identify new trends. It produces its collections closer to the stores than
other retailers – in Europe and North Africa rather than Asia – which translates into shorter
shipping times. As a result, it can update its collections faster and more often than any
other fashion retailer. This quick turnover means that customers visit the stores more
often: 15 to 20 times a year, compared to 4 or 5 times a year for some competitors. It also
encourages customers to buy items now, as the item may not be available next week. All of
this generates a strong performance: Over the past five years, Zara has grown an average
of 11% per year.
CONCLUSION
In today's VUCA world, firms can go rapidly from domination to stagnation and vice versa.
Traditional players who fail to adapt will soon slump. A prime example is Kodak, toppled
from its position of market leader into steep decline due to its inability to adapt to the
digital revolution.
The good news is that the "Kodak syndrome" is not inevitable. Our study identified several
examples of traditional companies that have succeeded in transforming themselves into
Light Footprint champions: BMW with its connected vehicles, Target with its ability to mine
big data, Chanel with its mastery of secrecy.
Most meta-winners were born into the VUCA world and so agility and flexibility form part of
their DNA. Traditional players should implement the seven principles above to turn themselves into Light Footprint champions. In a volatile and uncertain world, profitable growth
largely depends on your ability to react to changes in your situation in a matter of days or
even hours. But there is no reason why that should be the prerogative of new players.
RAPID RESPONSE FOR INNOVATIVE
PRODUCTS
3
Zara takes around three weeks to design, produce
and put a new item on the shelves
IF YOU HAVE ANY QUESTIONS,
PLEASE FEEL FREE TO CONTACT US:
Charles-Edouard Bouée, Partner and COO
charles-edouard.bouee@rolandberger.com
Christophe Angoulvant, Partner
christophe.angoulvant@rolandberger.com
Aude Saint-Paul, Consultant
aude.saintpaul@rolandberger.com
think:act CONTENT
…ditors:
Prof. Dr. Burkhard Schwenker, Charles-…douard Bouée
Overall responsibility: Dr. Torsten Oltmanns
Project management: Dr. Katherine Nölling
Design: Roland Berger Media Design
Roland Berger Strategy Consultants GmbH
Am Sandtorkai 41
20457 Hamburg, Germany
+49 40 37631-4421
katherine.noelling@rolandberger.com
www.think-act.com
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