Presentation for Russian students attending MBA programm at the Stockholm School of Economics

1. ‘A shift from an era of change to a change of era’
Strategic Business Planning in the 21th century
Amsterdam, August 26th 2015
Han Mesters
Sector banker Business Services
ABN Amro Bank

2. Content
1 Conceptual framework: disruption!
The ‘Why”
Innovation and the end of growth
2
3
Findings4

3. 1. Conceptual framework: disruption

4. • Crisis
• Demography
• Governance
• Generation Z
• Geo-political
shifts
• Culture
• Environment
Where are we?

5. Work: the Big picture

6. 2 facts of life:
1. Change is exponential (Kurzweil - Singularity)
2. The Internet revolution has only just begun (ongoing ‘Ryanisation’ of business
models)
Computing
(processing)
Communication
(bandwidth)
Storage Content
Moore’s Law Fiber Law Disk Law Community Law
(Metcalf’s Law)
Doubles every
18 months
Doubles every
9 months
Doubles every
12 months
2n
(where n=
# of People)

7. 7
Someone has Hit the “Reset” Button
(Jeffrey Immelt, CEO, General Electric)
We believe:
‘The economy is in an early stage of a
fundamental change with regard to the way work
is organised, managed and executed’
We know:
Many companies are looking for their ‘Why” (why
do they exist?)
Ethos:
‘is a Greek word meaning "character" that is used to
describe the guiding beliefs or ideals that
characterize a community, nation, or ideology. The
Greeks also used this word to refer to the power of
music to influence its hearer's emotions, behaviors, and
even morals’

8. Nothing is safe……

9. IBM’s Watson and professionals… ‘singularity’ effect

10. PayPal does a real-time credit score in millisec., based on your EBay purchase history
http://www.businessinsider.com/these-startups-are-replacing-banks-2014-
2?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2Falleyinsider%2Fsilicon_alley_insider+%28Silicon+Alley+Insider%29&IR=T
Bron: http://fermi.vc/post/72559525330/disaggregation-of-a-bank

11. : Smaller, faster, cheaper

12. Fuzzy sector borders
PayPal does a real-time credit score in millisec., based on your EBay purchase history

13. Forget Singularity:‘You don’t know what you don’t know’

14. How to deal with Black Swan: portfolio’s and focus on impact, not only chance
chance
‘By analyzing past returns, a distribution of returns is developed and the probabilities of achieving
a range of returns are calculated according to standard deviation’. Hmmm
(…) Extreme events have happened at a far higher rate than the bell curve model predicts.
For example, the October 1987 market crash was statistically impossible. It couldn’t happen.
Yet it did. The same impossibility applies to the back-to-back market crashes of 2000-2002 and
2007-2008. In fact, severe losses (20% or more) happen about 5 times more frequently than
estimated by most statistical models!
Source: www.investfortomorrow.com/newsletter/3rdQtr2011IFT.html

15. Innovation and institutions: unhappy marriage
“The rationale for a large firm is
that the internal transaction costs
are lower than the external ones,”
he believes. “But the Internet
has made external transaction
costs lower, so the enterprise can
become much smaller.”
IBM

16. 16
Turbulence of the environment increases
Source: Ansoff

17. Communities on the rise

18. Between ‘Markets & Hierarchy’ and ‘The Nature of the Firm’ (Ronald Coase)
Clay Shirky: “Since we have grown up with hierarchical institutions
as models for organizational structure, it’s hard to visualize another
model. But this is where social media has come in. The development
of technological features such as #hashtags has allowed people with
like interests to find each other and organize around ideas
outside a traditional institutional model.
(…) So we have an old way of viewing the organization of people
(thesis: hierarchical institutions). Now there’s a new way of looking
at things (antithesis: unmanaged cooperative
collaboration).
We (as a society) are still trying to figure out how to
navigate this (synthesis) to produce results.

19. September 2013….longer term impact of ICT on work
• Social intelligence
• Creativity
• Perception and
manipulation

20. Experience based economy…
Cloud / sofware abonnementen

21. Scandinavian/Dutch culture. The DNA for success?
Power distance (hierarchy)
0
20
40
60
80
100
VS
Canada
Duitsland
Japan
Frankrijk
Nederland
HongKong
Indonesië
WestAfrika
Rusland
China
Masculinity
0
20
40
60
80
100
VS
Canada
Duitsland
Japan
Frankrijk
Nederland
HongKong
Indonesië
WestAfrika
Rusland
China
Low power distance, feminine culture

22. Trust matters a lot

23. 2. The ‘Why’

24. The heart of the problem

25. Companies experience 3 major problems
1. Gross margin pressure
2. Unique selling point/competitive edge
3. Value added proposition
-5%
-3%
-1%
1%
3%
5%
7%
9%
11%
13%
15%
15% 20% 25% 30% 35% 40%
Brunel The Netherlands
Adecco The Netherlands
USG People The Netherlands*
Randstad Group Netherlands
Olympia Nederland
Bruto marge
EBIT marge
2010
2009
2010
2009
2009
2010
2010
2009 2010
2009
1) USG People, EBIT Margin = EBITA Margin, Gross Margin not available, estimate
Bron: Annual Reports

26. Standard ‘reflex’ to these Three Big Challenges

27. The ‘WHY’: ABN Amro roots: 1824
NHM: Nederlandsche Handel-Maatschappij
De N.V. Nederlandsche Handel-Maatschappij werd op initiatief van koning
Willem I in Den Haag opgericht op dinsdag 9 maart 1824
De doelstelling was (Art. 59) "bevordering van handel, scheepvaart,
scheepsbouw, visserij, landbouw en (het fabriekswezen)", in voortzetting van
wat tijdens de Franse overheersing van 1795 tot 1813 was ingezet.
Het hogere doel was volgens de koning dat de NHM zou fungeren als een
“large lever to stimulate and support the national
wealth of our country".

28. Professional services: From a Brand to a ‘Stand’

29. 29
Can institutions make this shift…..
► autonomy/trust
► mastery
► purpose
Bron : Daniel Pink
‘The purpose of work is to work on purpose!’
Joey Reiman

30. 3. Innovation and the end of growth

31. Stallpoints for growth
20
Stallpoints for Growth
Market cap
In $ bln
10
30
40

32. Causes for Stallpoints
Bron: http://hbr.org/2008/03/when-growth-stalls/ar/1
‘Four categories account for more than half
the occurrences of root causes we
cataloged—
• premium-position captivity,
• innovation management breakdown,
• premature core abandonment,
• and talent bench shortfall

33. Profitability without growth………
S&P 500 Q3 2014
Source: www.zerohedge.com/news/2014-12-08/q3-2014-earnings-breakdown-do-you-still-believe-miracles

34. S&P 500 Eps growth + 268% How? Share buy backs…with debt

35. S&P 500 in 2015: follow the cash….

36. Sell side estimates 30 companies of the Dow Jones Industrial Average
http://www.zerohedge.com/news/2015-08-14/welcome-revenue-recession

37. The People versus the Balanced Score Card: ‘Death by KPI’
‘Culture attracts the right professionals, who will generate added value’

38. Case: (Dutch) Recruitment…a few years ago
Publish job
opening
Search with
profile in mind
Review
applicationst
Approach
prospect
Determine
profile of
candidate
Select
candidate
ActiveserachPassivesearch

39. …..and now
Adverteren van
vacature
Zoeken met
profiel
Beoordelen
sollicitaties
Benaderen
prospect
Opstellen profiel
Selectie
kandidaat
ActiefwervenPassiefwerven

40. Non financial (soft) indicators are the basis for future competitive edge

41. The instrument of value creating: massive lay-offs?
Source: Bloomberg

42. What’s going on? Disruption from new start-ups is here to stay

43. No science fiction anymore…

44. 1. Agility score:
• % of non owned assets/contingency (non employed) labour
2. Innovation score
3. ‘Futureproofness’ of ICT infrastructure
4. Company culture
Strategy is forward looking: what to look for in a time of high change?
Hard lesson for banks and accountant:
Assessment of ‘Probability of Default’ driven by future based
variables, not by historical financials!

45. Different types of innovation
1. Strengthen:
Slight improvement in existing product/service
2. Stretch:
Offering existing products/services to new clients
or offering new products/services to existing
clients
3. Blue Ocean:
New service, new market
Incrementeel
Disruptief

46. Rise of the Network economy

47. Passion and craftmanship belong to an analog world?

48. The end of ‘pace setting’ leadership
The eldest of four children, Dunham enlisted in the Marine Corps in 2000.
Jason Dunham stepped into the role of protector long before he ever donned a
Marine uniform.
As a teenager, he put himself between a friend and an adversary to protect his
buddy during a fight. As a brother, he would warn his little sister to watch out
for boys. As a man, he dreamed of becoming a state trooper — so long as
work didn’t take him too far from home, where he could keep an eye on those
he loved most. Dunham died as he had lived, said the minister at his burial last
May: “Caring more for others than himself.”

49. Food for thought

50. 4. Findings

51. The rise of the network economy
1. Facts of Life not well understood
2. Structural/disruptive changes outweigh the business cycle
3. ‘Never waste a good crisis’
4. Growth returns in 2015 or: ‘profitability without growth’?
5. Innovate or die
6. Institutions are ….so nineties?
7. The Innovator’s dilemma indeed: most of your clients are not smarter than we are
…but the wisdom of the crowd beats everybody
8. Trust is crucial for letting your professionals shine
9. You don’t know what you don’t know
10.Culture determines success ‘culture eats strategy for breakfast’, but…
11...culture is not measured/appraised well enough