A veteran consultant explains how globalisation is making strategy more important than ever - and how Australia and the region have a unique window of strategic opportunity.
A management consulting veteran with experience spanning 25 years and 26 countries, Luca Martini has helped drive large-scale business transformation in some of the world’s largest companies. Working with financial services clients in Europe during the global financial crisis (GFC) until 2010, he witnessed first-hand how economic pressures can force businesses to change rapidly or perish in the attempt.
Now managing director of Accenture’s Australian-New Zealand strategy practice, Martini brings that European experience to the region – and he can’t help but notice things are different on this side of the world. As a result, he argues that Australian and regional companies have a unique window of opportunity to respond to the disruptions sweeping through the world economy.
At the same time, he warns that strategists face an unprecedented level of global opportunities and threats. That, he says, is changing the nature of the strategist’s work.
Beyond the burning platform
Martini believes the GFC “really created the conditions for very fast-paced change” in businesses around the world. They had to cut costs, reduce the demands on capital, increase margins and find new areas for growth.
“For all companies, the GFC created quite an important burning platform,” he says.
However, he argues that these pressures have so far not hit Australia and its regional neighbours as intensely as they have hit other developed nations. As he puts it, “When you compare Europe and the US with Asia as a whole, you see that the burning platform is still not there [in Asia].”
That gives organisations in the region a rare opportunity to drive strategic transformation in a comparatively benign economic environment, while their balance sheets remain strong.
"Typically, cost reductions are butchery exercise ... we can do it in a much smarter way."
He cautions, though, that these benign conditions will not last forever. “There’s definitely a slowdown. Everybody knows that growth is not going to be as fast as in the past.”
Meanwhile, the absence of an immediate imperative for change has its disadvantages. “On the one hand … there’s this sense of complacency. On the other hand, they could do it well,” says Martini.
“They could do really bold investment for the medium and long term; things that, for example, in Europe are difficult to do, because [in Europe] you really need to do initiatives that pay off in the short term.
“It’s a huge opportunity to improve productivity in a sustainable manner. If you think about other continents, typically cost reductions are butchery exercises to reduce costs immediately. We can do it in a much smarter way, a more sustainable way.”
Crossing the world
Raised and educated in Verona in northern Italy, Martini did two years of compulsory military service as an officer before joining Accenture in 1991, at a time when it was still known as Anderson Consulting. He joined McKinsey five years later, working with clients on five continents, including a stint in Australia in 2010. He speaks four languages.
Despite his impeccable consulting credentials, Martini is not your average strategist. A motorcycle-riding, guitar-playing child of the 1960s, he’s happiest with his beloved Gibson Les Paul 57 in hand, jamming to classic rock.
“Iron Maiden and Black Sabbath are my favourites,” he says.
Now he’s back at Accenture and back in Australia. So why did he return?
“After living in Australia, my family didn’t want to move, it’s as simple as that … I had to find my way back,” he says.
Evolution of strategy
In his 25 years of consulting, Martini has seen dramatic shifts in the way organisations approach and execute strategy. He identifies three key stages in the evolution of strategic thinking – culminating in the growing importance of the chief strategy officer.
“Stage one was about knowing the profit pool, how the profit pools would unfold in the future, picking the right pools, investing there and capturing growth,” he says.
“Stage two was about digital disruption. Typically, boards were asking management: what kind of disruption do you envision? Is the institution ready to answer? What is the amount of profit at risk?
“Stage three is now: what kind of opportunities can we pursue? What kind of businesses can we actually start up? How can we leverage gamification to engage more customers, particularly generation Y customers? How can we transform our ecosystem and build our own ecosystem to be much more competitive?”
Is globalisation slowing down?
At the same time, strategy has become more important than ever as companies react to an increasingly globalised and unpredictable business environment.
“The uncharted territory is wider,” says Martini.
“If we go back 10 years … it was very simple. Companies had to find the right combination of segments and geographies and simply invest there.Now we don’t have any limit on our distribution footprint.”
In addition, technology not only gives potential competitors global reach, it also allows them to bring new products to market with unprecedented speed.
“The time to market and the prototyping and implementation kind of cycle is now very short,” says Martini.
“The question is how to leverage this kind of disruption as an opportunity.”
The control tower
That’s where the chief strategy officer, or CSO, has a crucial role to play. Martini says a good CSO functions both as a “control tower” and a centre of influence, connecting and coordinating change agents and strategic initiatives across the organisation.
“When we step back and we think about the corporate strategy and how the corporate strategy is impacted by these kinds of new trends, I think someone with a broader view is required to, number one, coalesce the different views in the company, and number two, help the CEO to communicate [that vision] to the markets.”
The challenge for CSOs is to maintain a broad strategic vision while managing the complexities of change in a world where technological innovation is increasingly widespread.
“The strategy officer now has a quite complicated role, because … everything is blurred between say [the] understanding of the business, understanding of technology developments, understanding of the competition, understanding all the digital start-ups – all these kind of technological trends.”
A key part of that role is to challenge the business’s assumptions and truly push management to challenge themselves and set bold ambitions.
The fundamentals of globalisation: the global context
It’s about “creating an internal debate around where to invest in the medium and long term, how to allocate strategic resources to create those capabilities”, says Martini.
He urges companies to “stretch the boundaries of ambition” by asking “how can we be the best company in the world? How can we be the best growth centre in the world? How can we be the best bank in the world? How can we be the best insurer in the world?” He adds: “We want … to help manage those conversations, those ideas.”
Power of incumbency
Martini says that, with the right strategic “radar”, established businesses are often exceptionally well-positioned to capitalise on technological change. While they may lack the agility and innovative flair of a start-up, they have some decisive advantages – including the balance-sheet strength to simply step in and buy potential competitors while they are still small.
First, they need to re-examine their own value chains to understand exactly where the threats and opportunities lie.
“I’ve done that with a client,” says Martini. “We said, ‘Let’s just take this small piece of the value chain, and let’s google how many start-ups there are.’ There were 15 different start-ups dealing with that particular thing! The point is, how many of them are going to be successful?
“This kind of radar screen is really important … You can increase the capabilities of your own company, simply because you buy something.”
Martini nominates Accenture’s own purchase of design and innovation consultancy Fjord as an example.
“We thought that digital experience, digital design, customer-centred design was strategic … so eventually we bought a company,” he says.
Saving to invest for growth
Martini emphasises that good CSOs need to combine a long-term vision with immediate productivity-raising initiatives. He calls it “saving to invest for growth” and says it’s critical for every CSO who wants to create impetus for strategic change.
“We need to finance those investments with more productivity … because otherwise we may be jeopardising short-term results. When short-term results are jeopardised, immediately you cut investments. That sets off a vicious cycle, undermining the ability to compete in the medium and long term.”
The danger is that the organisation will simply revert to business as usual, trying to extract maximum value from the existing business model.
“But you can’t squeeze a lemon forever,” says Martini. “Eventually you arrive at the end, at the last drop.”
The key, he says, is to visualise the company’s future state, then move towards it incrementally, improving productivity and driving revenue growth along the way.
“Then the idea is to really create, in a very swift, agile and effective manner, the implementation of all the steps required. Just think about digitalising a process, for example. We can … do one product in two weeks, another product in two weeks, another product in three weeks.
“If you do that at scale, you’re changing the company.”
Which business leader do you most admire and why?
Luca Martini nominates Sir Richard Branson as his most admired business leader, because the Virgin Group founder shows the benefits of being “provocative, bold ... cheeky with yourself, with your business, with the community”.
He is particularly impressed by Branson’s willingness to make mistakes and turn them to his advantage.
“In many companies, the culture is not making mistakes. If you make a mistake, you are a loser ... that culture needs to change.”
The first step is to acknowledge your mistakes so you can learn from them, rather than sweeping them under the carpet.
“The US Army is amazing on that, amazing. They take a snafu [chaos] and they simply analyse every single aspect to improve it. That’s why they succeed.”