Friday, October 12, 2012

The role that experience and exposure plays in strategic instinct and risk perception

Recently I read an article titled ‘Execution as Strategy’. The title fooled me into thinking that authors are talking about a new approach to strategy. Fortunately, to my understanding, there wasn’t any such attempt in the article because execution is not strategy. In fact another good article that I read this week, ‘Strategy or Execution', which is more important’ clearly explains why execution is not strategy. I am still puzzled over the choice of title to the first article I mentioned above. It nevertheless is an intriguing and insightful article.

From a research, covering 18 companies (in emerging economies), across Asia, Latin America and Middle East, the authors present cases of three companies and their approach to business growth. They all focused on execution as strategy, authors claim. I do not agree with them that execution is the strategy or that these companies do not have a strategy. But those cases presented an interesting picture. They highlighted the difference in strategic make-up and the relevance of it in strategy formulation.

What is the role that experience with respect to stability / environment / economic conditions play in the minds of people who strategize?  The way they perceive risk? The way they operate? A business that has roots in a country known for instability and environment hardships and handled all of them would in all probability be better positioned to take on risks that a western company would hardly be prepared for. The article, 'Execution as strategy' presents the case of Orascom Telecom's, which is from Egypt, entry into turbulent hotspots like Jordan, Lebanon, Yemen, Tunisia, and Algeria and to places like North Korea to capitalize on business opportunities to grow the business. How many western telecom players would consider these countries as potential market for entry? These countries do present business opportunities and some of them with huge markets, yet not all who are capable would enter these markets that too straight away  It requires experience of handling things in similar markets or terrible guts. Not just that, but readiness to compromise on some of the proclaimed corporate values. That begs a question whether companies from the developed world are at a disadvantage, irrespective of their strategy and operational capabilities and sophistication, compared to companies from emerging economies in capturing business opportunities in emerging countries?

It’s not just entering turbulent / unstable economies that emerging economy companies have advantage in but also they can decide and act quickly as exampled by Grupo Bimbo’s case, as given in the article ‘Execution as strategy’. Businesses for which stability is not a given and grew up in fluctuating environments would move faster to seize opportunities. They would probably not go through tedious strategic planning exercises to vet numbers and then decide on entry. Planning an entry in five years’ time or even in two years’ time, as would many western companies plan, would be foreign to them.

Strategy is about choices but how aggressive are those choices and how quickly a business can strategize and move are determined by the background of a business or the people who lead the business if we go by the cases presented by the authors of ‘Execution as strategy’.  In the article they claim that businesses from emerging economies have a higher appetite for risk and higher tolerance for failure. So the strategic make-up  if I could it term it that way, plays a vital role in the strategy of a business. How aggressive is the strategy and how quickly a business decides and acts is hugely determined by the strategic make-up of the company. 


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