Business is a Never-ending Game
Timo Ritakallio (above):
Traditionally, business has been compared to a game that lasts for a certain duration before the winner is announced. Today, it is a never-ending game. Rapid changes in the operating environment mean that not much is known in advance: more teams join in, disappear, some go bankrupt. Even the rules change in the middle of the game along with things like new legislation. In a world like this, the role and quality of the strategy process are increasingly important. Alternate routes – scenarios for outlining the future of the game – become necessary. The good news is that technology can generate plenty of data on customer behavior. Our bank has detailed information on when the online bank is busy with people and how the use of mobile banking has increased. Data of this type is used for mapping out the future.
Timo Vuori (right):
A changing operating environment means leaders need to be open to not necessarily always knowing the best option. Accepting uncertainty and being flexible are important. These days, good strategy work is not about creating a clear goal and blindly pushing towards it. You have to work with different options in mind.
Create Scenarios i.e. Alternate Paths
TR: “As the world around keeps changing and becomes more complex, strategy work needs to focus on creating diverse scenarios and alternate models for events. The changes are then analyzed, and understanding is sought on changes in customer behavior, technology, or the competitive environment. Strategy always involves decisions, which need to be made relatively often. Drawing up a strategy and aiming to execute it say for a course of five years is not enough. It is important to adjust the strategy and thus the organization according to scenarios and information from experimentations, for instance.”
TV: “In drawing up scenarios, you need to listen to different types of groups to achieve a multidimensional snapshot. Personnel can provide genuine input that can enrich and broaden the thinking of executives. Management needs to think along these questions: 1.) What is happening and what does the future look like? 2.) What alternate methods do we have for addressing the situation? 3.) How can we test or measure the best alternative?”
Experiment, Analyze, Dismiss Quickly
TR: “Companies need to constantly renew themselves. This requires experimentation. At OP, we are currently testing a payment system in the staff canteen using facial recognition. We don’t know whether it will become more common or replace card payments yet, but we want to experiment to find out: if it becomes widespread, we are already familiar with it. We are also experimenting with voice recognition in online banking. If a test is unsuccessful, it would be wrong to deem it a failure. You just need to cross things over and try again. Experimentations help align the strategy towards a new direction.”
TV: “At Google, advancing through experimentation plays a key role – they often test which alternate method is the most effective. When Risto Siilasmaa became chairman of the board at Nokia, scenario work and charting, analyzing, and testing different alternatives were given a bigger role. Generally speaking, management needs to communicate the strategic situation and options with personnel: we will concentrate on this – but depending on this and this, we may change the focus points.”
Technology Helps Address the Technological Revolution
TR: “The more facts and data, the easier rational decisions become. These days, data is easily available. Directors should not make decisions based on their mood, although there are plenty of examples of this also in the banking world. While working on my dissertation, I came across a situation where a bank was assessing the Russian market based on an individual’s personal experiences. With technology, the validity of personal scenarios and observations can be assessed systematically.”
TV: “The market changes along with new technology: borders between sectors become blurred, new companies surrounding the sector deliver the same service more effectively, and so on. Companies need to adapt. But technology is also part of the solution: it enables to examine a number of alternatives. Technology allows to better chart what is going on. You could, for instance, examine three different options for achieving a goal. Humans interpret the outcomes of analyses and come up with alternatives, giving meaning to data and inventing different ways to operate.”
Leaders Need to Listen to Others
TR: “Management doesn’t have all the information. In strategy work, you need to pay more attention on stakeholders, personnel, customers, all relevant groups. Too often the company is thought to hold all the necessary information, but it’s not the case.”
TV: “Instead of forcing answers, management needs to ask more questions. This is what’s key: a genuine desire to learn and understand the possibilities that are opening up – instead of advocating a single cause with lots of ego. It ties in with the psychosocial capabilities of an organization. Management needs to create an atmosphere that is open to new options and is ready to accept unfavorable information, such as indicators of a favorite idea not being as good as it seemed. Everyone needs to be clear on the leadership philosophy: that the company keeps the facts and data in mind when examining possibilities, and scrutinizing and criticizing different alternatives is justified. It is vital to understand that thoughts can change along with new information. Changing one’s mind doesn’t mean being a turncoat but being sensible.”
Development Pace of Technology Over- and Underestimated
TR: “The development pace of disruption is overestimated: thinking that technology would bring about change faster than in the past. Banking will not change in an instant, but – and here’s what’s key – in the end, the impact of the change far exceeds our estimations.”
TV: “New, major trends alongside the technological shift need to be acknowledged in strategy work: urbanization, the aging of the population, climate change… Change doesn’t happen in major spurts but as a continuum. For example, the invention of Excel in the 90s made it much easier to analyze scenarios and alternatives than before.”
Timo Ritakallio and Timo Vuori discuss about the concept of living strategy in the Aalto CEO Circle -network. In 2019 the network focuses on strategy process change during an era of technological revolution. Read more about Aalto CEO Circle.
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Book Project Started from Ritakallio's Dissertation
President of OP Financial Group Timo Ritakallio and Assistant Professor Timo Vuori, who researches strategic leadership at the Department of Industrial Engineering and Management at Aalto University, met when Ritakallio was writing his doctoral dissertation with Vuori as his supervisor. The dissertation focused on the strategies of the biggest European banks. Ritakallio had practical experience in strategy processes from the world of banking, Ilmarinen Mutual Pension Insurance Company, and the boards of several listed companies, while Vuori was versed in theory and research. “An idea to refine our shared thoughts into a book was born, so others could benefit, too”, says Ritakallio. The publication by Ritakallio and Vuori is entitled Elävä strategia (Engl. transl. Living strategy, Almatalent 2018).