Creating Networks to Avert Crisis, Create Change, & Get Ahead

By Amit S. Mukherjee

Published on September 10, 2008 by FT Press

In The Spider’s Strategy, Amit S. Mukherjee starts with a riveting description of "The Fire That Changed an Industry." On March 17, 2000, a fire broke out at the Philips chip plant in New Mexico that had reverberations around the world. Two large companies that used these chips, Nokia and Ericsson, handled this seemingly small event very differently. Nokia had the processes to deal with it immediately and work with partners to adapt. Ericsson, which did not, lost hundreds of millions of dollars immediately, and by 2004 saw its revenues decline 52 percent from pre-fire levels. The face of the mobile phone industry had changed forever, all because of a fire that had been contained in 10 minutes.

The Spider’s Strategy: Creating Networks to Avert Crisis, Create Change, and Really Get Ahead draws from Mukherjee’s exclusive interviews with top executives at Nokia and Hewlett-Packard and his study of over 500 manufacturing and retail companies to stress the importance of recognizing that "we live in a networked world in which each company partners with a set of other companies." Nokia was able to adapt rapidly after Philips’ fire because it had already created the capabilities (built into its strategy, processes and values and supported by technology) to carefully work with its network of partners on crises (and opportunities) that none could reasonably have predicted. Contrast that with the current crisis in the U.S. financial industry—despite the extensive networking of financial firms, neither executives of individual companies nor regulators have considered the importance of such capabilities. So, they got caught flatfooted, like Ericsson, when disaster struck.

The networked business environment has resulted from the combined action of three key irrevocable trends: the decomposition of work across time and space (companies outsource design and production, while financial firms get money form multiple sources), an explosion in the variety of output (i.e., Dell sells a virtually infinite variation of computers) and the blurring of traditional demarcations between industries (pharmaceuticals and medical devices are converging, as have insurance, commercial banking and investment banking). Mukherjee calls companies, like Nokia, that are intelligently and effortlessly adjusting to the implications of these trends, adaptive businesses.

The Spider’s Strategy presents four Design Principles for executives to transform their companies into Adaptive Businesses enabling them to thrive in our ever-more networked world:

1. Embed sense-and-respond capabilities within normal plan-and-execute processes. The ability to detect a problem early and correctly and the ability to react effectively are key determinants of competitive advantage.
2. Adopt strategies that promote collaborative action among networked partners. Unless companies develop cooperative relationships with their partners, they will not get preferential assistance when either a crisis or opportunity arises.
3. Value and nurture organizational learning. Companies must collect, analyze, and share knowledge, across their networks, especially about what does and doesn’t work. When a crisis hits, they will be able to act decisively, and effectively.
4. Deploy technologies that enable intelligent adjustment to major environmental shifts. To adjust to changes in the marketplace successfully, companies need four key capabilities from technologies—provide visibility, support analysis, facilitate collaboration, and enable mobility (30 percent to 40 percent of people in the United States work away from their offices at least 25 percent of the time).

Each Design Principle helps improve a company’s effectiveness; collectively, they can give a company impregnable superiority. Indeed, Mukherjee believes that any solution to the current financial crisis must incorporate some variant of the four Design Principles, or risk total failure.

The Spider’s Strategy includes proven implementation advice, based on examples from Nokia, Toyota and Hewlett-Packard, among others. Since the focus is on corporate transformation, many of the recommendations are for top managers, but becoming adaptive is "not a spectator sport for middle managers." Most chapters end with a sidebar, titled "So You Are Not the CEO," which lists critical issues and steps all professionals should consider.