MBA Advantage LR

THE
MBA
ADVANTAGE
Next-generation answers to age-old management questions
First published in 2018 by Major Street Publishing Pty Ltd
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Disclaimer: The material in this publication is of the nature of general comment

only, and does not represent professional advice. It is not intended to provide specific
guidance for particular circumstances and it should not be relied on as the basis for
any decision to take action or not take action on any matter which it covers. Readers
should obtain professional advice where appropriate, before making any such
decision. To maximum extent permitted by law, the authors, editors and publisher
disclaim all responsibility and liability to any person, arising directly or indirectly
from any person taking or not taking action based upon the information in this
publication.
ABOUT THE EDITORS
Nick Loke is a chemical engineer by training and has an established

career as a technical consultant for the oil and gas industry. His early
career focused on process systems design and more recently
transitioned into project management and business development roles.
An accomplished team leader, Nick has successfully led multi-
disciplinary, multicultural teams and completed large complex projects
for major oil and gas clients. Originally from Kuala Lumpur, Nick
speaks English, Malay, Cantonese, and Chinese Mandarin.
Geoff Batt runs boutique consulting agency Lucid Science, providing
research management, specialist geoscience analysis, and stakeholder
communication services to corporate and government clients in Perth,
Western Australia. He has over 20 years of experience in applied
geoscience and higher education and completed the UWA full-time
intensive MBA program in 2017 to help hone the commercial focus
of his work.
Allan Trench is research professor (Value & Risk) at the Centre for
Exploration Targeting, The University of Western Australia (UWA),
Professor at the UWA Business School, a non-executive director of
several ASX-listed minerals companies – and the Perth representative
for CRU Consulting, a division of independent metals and mining
advisory CRU Group.
John Sykes is undertaking a multidisciplinary doctorate at the
Centre for Exploration Targeting, UWA. He is also director of
Greenfields Research, a consultancy specialising in the analysis of
mining and exploration across the base, precious and specialty
metals sectors.
Allan and John are the authors of Strictly Mining Boardroom II
(Major Street Publishing, 2016)
ACKNOWLEDGMENTS
For the editors, The MBA Advantage is the culmination of our year-
long journey through the full-time intensive MBA program at the
University of Western Australia (UWA) – a journey made possible
by the support of an incredible network surrounding and encourag-
ing us. Reflecting on this debt, we seek first to thank the pillars of
that support edifice – our partners, children, parents, family and
friends – for providing the moral and emotional encouragement we
needed to get through the challenges of this experience.
In terms of the book you hold in your hands, we offer our thanks
to the UWA Business School Board, without whose support and
endorsement this publication would not have been possible. To our
industry sponsors and program mentors, thank you for the financial
assistance and networking opportunities. Your generous provision
of scholarships, time and advice has enriched our lives and provided
the springboard necessary for the next steps in our careers.
We would like to thank the UWA professors and lecturers who
contributed to our journey of discovery in the MBA program. We
hope that our enthusiastic participation in lectures meant that there
were shared learning experiences for you too. We especially thank
Allan Trench and John Sykes for their drive to unleash our vision and
creativity as business thinkers and for charting a course to help make
this book a reality.
Thank you to the team at Major Street Publishing. We are proud
that The MBA Advantage has taken its place among your list of
publications and we look forward to collaborating with you again in
the future. To all the new friends that we have made through the
networking events and industry talks of the past year, we look
forward to maintaining and strengthening our relationships in the
years ahead.
THE MBA ADVANTAGE
Although this book comprises largely essays and writings under-

taken – or at least begun – in the course of the authors’ MBA studies,
it represents more than just academic output. The MBA Advantage
is, in many ways, our passion project and a legacy of the time we
spent together as a cohort. We are excited to share our thoughts,
ideas and musings with the readers of this book.
We have been inspired and we hope you will be too.
Nick Loke and Geoff Batt
vi
FOREWORD
The opportunity to step back and reflect on ‘career to date’, simultane-

ously contemplate what the future might bring and effectively re-tool
your management and leadership kit bag is an opportunity that comes
to few of us. What we can all do, however, is enjoy this opportunity
vicariously by stepping inside the experience of the University of
Western Australia’s MBA class through The MBA Advantage.
I enjoyed each of the essays in this intriguing book. Each is a
different approach towards common themes emerging in the four
sections and such is their diversity that the commonalities you find
may not be the same ones I discerned. As a non executive director of
AGL Energy I was fascinated to explore further the scenario planning
approach to strategic planning – because it’s AGL’s preferred tool. And
I know I will remember and often paraphrase Geoff Batt’s key point
in ‘The Bradbury framework’ which captures the heart of the thinking
in this book – there is an unavoidable reality of uncertainty in business
– best get on and prepare for it.
Throughout the book there are practical tips on just how to get on
and prepare – at an organisational and at a personal level. The case is
made, and made well, around the increasing pace of change and what
organisations need to do to process information faster in a world
where technological cycles outpace planning cycles. And there are
fascinating insights on what comes after preparation – recognising
that luck, both good and bad, is the everyday currency of all of our
lives and the personal insight and resilience needed to take advantage
of that luck.
I trust you will enjoy this book as much as I did.
Diane Smith-Gander
July, 2018
vii
CONTENTS
Part I – Modern Business Culture–3

1. What is corporate culture, really? Ben McRobb–7
2. The relevance of old-school wisdom in a knowledge
economy Nick Loke–19
3. The business opportunity hiding in diversity if it can be
separated from equity Philip Daglish–35
4. Can a social media culture solve age-old challenges?
A case study in disaster relief Lisa Napier–48
Part II – Managing Uncertainty and Disruption–55

5. The Bradbury framework: luck, preparation and the wary
follower Geoff Batt–59
6. Updating business strategy in the age of digital disruption
Luana Barron–78
7. Human-centred design and innovation in the healthcare
industry Siew Keong Kwok–91
8. Disruption in the classroom: education innovation for the
21st century Natalie Sim–107
Part III – Scenario Planning–119

9. A walk through the different approaches to scenario
planning Nick Loke and Asher Abedini–123
10. Collaboration without consensus: the reality of scenarios
Philip Daglish–144
11. Scenario planning your career after an MBA
Tat Tongchant–158
12. The grand energy transition: an Australian perspective
Patrick Walton–171
THE MBA ADVANTAGE
Part IV – Strategy–187
13. Stick with your knitting: why companies should iterate
rather than innovate Rohan Versteegen–193
14. Rocks and sirens: avoiding bad strategic choices
Mike Godfrey–205
15. Business models and innovation: critical and modern
strategies Marco Hui–219
16. Seeking opportunity in the Chinese century
James Tang–232
17. Best practices for new product development
Stuart Young–247
18. Sustainable mining: oxymoron or challenge?
Bindi Shah–260
2
PART I
MODERN
BUSINESS
CULTURE
ON MODERN BUSINESS CULTURE
Business culture describes the fundamental behaviour and values

within an organisation. While ephemeral and challenging to
define with precision, culture nevertheless influences many more
tangible elements of business operation including the nature of
communication, the hiring and retention of talent, the ability to
innovate and how an organisation responds to external pressure.
This presents a key challenge to modern business – if we hope to
enforce or change this crucial underpinning of organisational
performance, we must first understand what culture is and how
to codify it.
The four essays in Part I of this book explore this challenge at
a range of different levels. Each essay provides us with a different
viewpoint on the nature of business culture and the extent to
which a manager can hope to control it.
Ben McRobb begins this journey for the reader with his essay
‘What is corporate culture, really?’, which addresses the funda-
mental question of how culture emerges from and defines the
nature of an organisation. McRobb provides a model of culture as
a mechanism of social control within the workplace – not, perhaps,
as the fountainhead of all business success as is sometimes argued
– stating that corporate culture is a key element that needs to be
understood and aligned with internal strategy to provide a platform
for optimal business performance.
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THE MBA ADVANTAGE
Taking a more personal approach to the subject, Nick Loke

explores the appropriate foundation for modern organisations in
his essay ‘The relevance of old-school wisdom in a knowledge
economy’. Loke presents a meditation on the comparative
relevance of traditions and experience against novel concepts and
innovation as the basis of corporate culture. Who will prosper in
the knowledge economy of the coming century – companies that
stick with proven wisdom or those that embrace new philoso-
phies and nascent technologies?
The third essay in this section moves from abstract considera-
tion to the practical significance of culture, with author Phil Daglish
exploring the implications of one of the great cultural movements
of modern business in ‘The business opportunity hiding in diversity
if it can be separated from equity’. Through illustrating the better
business outcomes resulting from more diverse workforces,
Daglish builds a case that embracing the cultural tide of diversity
in all its forms offers a pragmatic business advantage that even the
most reactionary of managers should seek to acquire. The future
workforce is coming, he argues, and it is deeply diverse in age,
gender, class and every colour of the rainbow.
Completing our exploration of culture, Lisa Napier presents
a compelling study of the benefits of cultural change in her essay
‘Can a social media culture solve age-old challenges? A case study
in disaster relief ’. As Napier illustrates through her study, the
world-conquering expansion of the mobile phone over the past
two decades is so much more than a technological change – the
accompanying culture of decentralised communication has fun-
damentally changed the flow of information within organisations
and societies, providing a remarkably robust and flexible network
that has solved some of the most challenging aspects of dealing
with natural disasters.
6
1. What is corporate culture, really?
BEN McROBB
The idea in brief

The issue: Corporate culture and its function in organisations is
heralded as critically important, but it still remains a tantalising,
poorly understood and intangible asset. Just what is culture?
A one-line definition, while informative, does not quite suffice in
understanding the true value that culture can either create or
destroy. For the record, culture can be summarised as a social
control mechanism that guides acceptable behaviours and
approaches to problem-solving and instils a sense of belonging
to the group, thus creating the potential to improve performance.
One often-stated maxim is that 'culture eats strategy for breakfast' -
but is this really true?
The context: Senior leaders often refer to culture as providing
their competitive advantage in the marketplace. They may do this
to highlight the importance of the bi-directional interplay between
culture and all the other macro-elements and activities that
comprise the organisational model such as people, formal
structures, strategy and, indeed, all meaningful activities.
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THE MBA ADVANTAGE
Leaders often describe culture with reference to their values

statement as it is the most tangible and available element of culture
that external observers can comprehend.
The solution: I believe that all macro-elements of an organisation,
tangible and intangible, are important in delivering business
success. The key lies in achieving congruence between each
element of the organisational model. It is the primary function of
leadership at all levels to identify lack of congruence and
implement change to rectify these differences.
Corporate culture confusion

My interest in understanding corporate culture and its impor-
tance in organisations gradually rose during my year of full-time
MBA studies. We were lucky enough to hear from many business
leaders about the challenges and opportunities that their busi-
nesses were facing and some of the key learnings they had
developed throughout their career.
A common question asked of these business leaders was ‘what
is your company’s competitive advantage and how do you differen-
tiate yourself in a competitive market?’ Almost every time, the
leader responded with ‘it’s our culture that differentiates us’ and
when they were asked to describe their culture, they would go on
to describe their company’s value statement. These responses never
felt 100 per cent satisfactory to me as I thought there must be far
more to culture than a company’s value statement. I never felt
informed enough to probe further into why most business leaders
thought culture drove their competitive advantage and why they
describe culture as their values statement listed on their corporate
website. I endeavoured to find out more.
Being an engineer by trade, I have always been a fairly
analytical thinker and Peter Drucker’s famous quote ‘culture eats
8
What is corporate culture, really?
strategy for breakfast’ has never really resonated with me as a

consequence. Deep down, I have always thought if you have a
solid plan which is robust to a range of outcomes and you identify
which resources you need to deliver that plan, then you’ll be on
the path to success. How can there be an intangible motive such
as culture which delivers organisational benefits that exceed those
of a well-defined strategy?
Given my aspirations to be a business leader in the future, it’s
important that I demystify culture in my own head, especially as
it is so broadly acknowledged to be one of the most important
macro-elements of any organisation. In some ways, I hope that
you are also confused by the organisational culture concept. I also
hope that this essay serves as a simple guide to you achieving a
greater understanding of corporate culture and its role in the
wider organisation for employees at all levels. Let’s clear up our
confusion together.
My approach: frameworks are your friend when

uncertainty is present
After an insightful discussion with one of my mentors, a graduate
of Stanford Graduate Business School who has spent a large
portion of his career in senior leadership roles, I began to realise
that to answer the question ‘what is corporate culture?’, I have to
understand the macro-elements that make up an organisation, of
which culture is one. I also have to understand the interactions
between each of the macro-elements and particularly those
interactions involving culture.
Reflecting on my MBA, I now have a greater appreciation of
how frameworks can be used to simplify unstructured problems
and allow the user to draw useful insight. This is a key learning and
one that I will apply to resolve this corporate culture confusion.
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THE MBA ADVANTAGE
Given all of the above, I will use my mentor’s insightful

comments to develop a generic organisational model which I will
dissect to understand the interplay between each element and
hopefully demystify the role of culture in organisations. This
organisational model will be introduced later, as I first need to
develop a definition of corporate culture based on the most
renowned academic literature as an initial input to understanding
the role of culture in organisations.
This essay includes my thoughts, observations and interpreta-
tions of real-life businesses coupled with selected academic
literature. I do not have any empirical evidence to substantiate my
conclusions, therefore please consider my views in conjunction
with your own to form your personal answer to the question ‘what
is corporate culture?’.
What does the literature say about corporate culture?

Culture is a very broadly researched topic. Two of the seminal
textbooks relating to corporate culture are Corporate Cultures: The
Rites and Rituals of Corporate Life by Deal and Kennedy (1982)
and Organizational Culture and Leadership by Schein (2010).
Deal and Kennedy define corporate culture as consisting of
five elements:
1. Business environment. The environment in which a firm
operates dictates what they must do well to be successful
and is the single greatest influence in shaping corporate
culture. Examples of external factors that define a firm’s
environment include customers, competition and
government influence.
2. Values. Values form the heart of corporate culture and
define the basic concepts and beliefs of an organisation.
Companies with a strong corporate culture have a well-
defined system of values that are shared by all employees.
10
3. Heroes. People identified as heroes exemplify a

corporation’s culture, the targeted values and provide
employees with a tangible role model to follow. Heroes are
both ‘born’ into this role (e.g. visionary leaders) and ‘made’
from within, for example, resulting from memorable
moments in organisational histories.
4. The rites and rituals. These are the systematic and
normative routines of daily life within an organisation. They
show employees the behaviour that is expected of them
through both mundane rituals and extravagant ceremonies.
5. The culture network. This informal network is the primary
communication avenue within the organisation and is the
carrier of corporate values and heroic transcripts.
Considering the five elements above, Deal and Kennedy distil

corporate culture to being a ‘system of informal rules that spell
out how people are to behave most of the time’ (p. 15) which
‘enables people to feel better about what they do, so they are more
likely to work harder’ (p. 16).
Schein defines organisational culture as a pattern of shared
basic assumptions learned by a team that has been used to solve
both external adaption and internal integration problems. These
assumptions have been effective enough to be broadly accepted
and taught to new members of the group. Schein then goes on to
describe the following three levels of culture:
1. Artefacts. These are the visible and ‘feel-able’ structures
and processes within an organisation that could include the
very architecture of its physical environment, language,
technology, style, emotional displays, published values and
rituals or ceremonies. Artefacts are easy to observe but
difficult to decipher as it is unknown what those artefacts
mean to the group.
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THE MBA ADVANTAGE
2. Espoused beliefs and values. These are the ideals, goals,

values and aspirations of the group. These can be considered
organisational norms of behaviours and define how
employees represent themselves both to the organisation
and to others. Often espoused beliefs and values can be
contradictory and, therefore, it is important to identify which
are congruent with the organisation’s underlying assumptions
and those which reflect idealisations or rationalisations.
3. Basic underlying assumptions. These are the unconscious,
taken-for-granted beliefs and values that determine
behaviours, perceptions, thoughts and feelings within an
organisation. These are so deeply embedded in the
organisation they are rarely acknowledged. When an
espoused belief or value (e.g. a solution to a problem) is
broadly accepted by the group, it becomes a basic
underlying assumption.
O’Reilly (1989) describes the function of corporate culture as that

of ‘social control’ whereby most individuals care about the people
who surround them and if they share a common set of rules or
expectations, they are under their control whenever they are in
each other’s presence.
My definition of corporate culture

The notion that culture serves the function of social control over
a group of people is a neat umbrella under which you can group
other academics’ views of corporate culture. Given this, I will
combine the multiple sources described above to define corporate
culture as follows:
Corporate culture is a social control function for members
of a group that:
12
• defines a broadly accepted informal set of rules for

acceptable behaviour;
• enables internal and external problem-solving through
application of organisational norms, values and underlying
assumptions; and
• makes people feel better through instilling a sense of
belonging, which improves individual and collective
performance.
Pondering the applications of my blended definition of corporate

culture, I hypothesise that the social control function of culture
can be established within an organisation through a directive (i.e.
top-down) or collaborative (i.e. bottom-up) manner.
For example, a systems-focused company will likely use a
more directive approach to establishing its culture whereby man-
agement will drive the use of procedures, rigorous documenta-
tion and standardisation across the business. This would result
in ‘tight’ social controls.
In contrast, a technology-driven company focused on innova-
tion will likely use a more collaborative approach to establishing
a culture whereby the employees will be driven to own and
improve all elements of their business. This would result in
‘looser’ social controls that allow for flexibility and interpretation.
The importance of leadership

It appears leadership, particularly authentic leadership (George,
Sims, McLean and Mayer, 2007), is the most likely macro-element
of an organisation that will determine if culture (or social control)
will be established in a directive or collaborative manner.
Furthermore, leaders are continually being observed and critiqued
by members of the organisation. Any message from, or action by,
a leader is referenced against what is understood by the members
13
THE MBA ADVANTAGE
of the group to be the corporate culture. If inconsistencies are

identified, confidence in leadership is gradually eroded and can
result in under-performance.
How does culture interact with the other

macro-elements of an organisation?
My interpretation of an organisational model that highlights the
macro-elements of any organisation is illustrated in Figure 1.1.
This model draws together some of the key elements taught in
traditional organisational behaviour, namely values, leadership
and culture, and is intended to highlight the important links and
interactions between each element. This model is neither mutually
exclusive nor collectively exhaustive (MECE). Sorry to all the
management consultants out there, but it does not need to be for
this purpose.
Figure 1.1: Generic organisational model
External environment
Threats and opportunities
Overarching goal
Mission and vision
Business environment
Strategy
Objectives, activities, tasks
People Culture
Capability, motivation, Informal rules, norms,
management, etc. values and assumptions
Formal organisation
Structure, control systems, incentive
schemes, decision rights, etc.
= Leadership
14
As Figure 1.1 suggests, culture is linked to all the other elements

of the organisation with each of the links being able to achieve bi-
directional influence on each other (e.g. culture can influence
people and people can influence culture). Because of the bi-
directional influence, the entire organisation is working to achieve
a fine balance between each element to maximise organisational
congruence, which ultimately drives success (however ‘success’ is
defined in your organisation).
A key point to note is that leadership ‘circles’ every link as it
plays a mediating role in identifying dissonance between each
element and driving change to achieve alignment and maximise
organisational success.
Let’s take a closer look at each element of the model:
• Starting at the top, the external environment highlights the
threats and opportunities the organisation needs to identify
and then respond to in order to achieve its overarching goal
or vision. Vice versa, the organisation can exhibit an influence
on the external environment; however, the level
of impact depends on the industry and the maturity of the
market (e.g. Amazon has had a major influence on the
e-commerce business as it essentially established the market).
• The overarching goal constitutes the organisation’s mission
(i.e. why it exists) and vision (i.e. what it wants to be),
influenced by the external environment but broad enough to
prevent frequent wholesale changes unless a significant
external influence is observed.
• Strategy serves as the link between the organisation’s
overarching goal and the actual activities or tasks completed
within the organisation. The organisation’s strategy defines
its competitive game plan to achieve the company’s vision.
Strategy can be adjusted more frequently to adapt to
15
THE MBA ADVANTAGE
external environment nuances but must maintain alignment

with the company’s vision.
• Objectives, activities and tasks are the physical actions
performed by the organisation to implement its strategy.
Physical actions are influenced by all other elements of the
model, and a level of alignment must be achieved to
maximise organisational success.
• Culture defines the unwritten rules of behaviour that are
considered acceptable when solving a problem or
implementing an action. In addition, approaches to
problem-solving that have been effective in the past and are
now broadly accepted within the organisation are woven
into the fabric of culture.
• Formal organisation refers to the structures, systems and
processes in place to drive organisational efficiency. The type
of culture within the organisation must complement the
formal structures and systems in place. For example, if an
organisation has a strong technology-focused culture, it is
likely to use less formal structures, systems and processes to
maximise internal creativity and flexibility to adapt quickly.
• People constitute the human resources within the
organisation with the goal of motivating those resources to
maximise the organisation’s capability. Culture facilitates
engagement and enablement of employees through defining
acceptable behaviours, norms and organisational values.
In addition, culture provides employees with a sense of
belonging which hopefully drives their intrinsic motivation
to contribute to the greater good of the organisation.
So… what is corporate culture?

Corporate culture is a social control mechanism within an
organisation that guides acceptable behaviour and approaches to
16
problem-solving and instils a sense of belonging to the group

which, ultimately, influences performance.
The organisational model in Figure 1.1 demonstrates the bi-
directional interplay between culture and all other macro-
elements within an organisation. Most importantly, it highlights
the importance of achieving congruence between the elements
as a key factor in delivering organisational success.
Now that I have an understanding of what corporate culture
is and how it interacts with other elements of the organisation,
I can attempt to form a view on Drucker’s famous quote ‘culture
eats strategy for breakfast’. I will start by looking at the culture of
different peoples as a historical benchmark for corporate culture.
The culture of different peoples has historically been hypoth-
esised as being a key influence on the successful development of
nations (Acemoglu and Robinson, 2012). For the most part, this
hypothesis has since been discredited as elements of culture such
as ethics, religion and values are just not important in under-
standing the inequalities that now exist between nations.
Drawing parallels to business, it could be inferred from eco-
nomic history that the broadly accepted notion that culture eats
strategy for breakfast is incorrect, with culture playing a far less
important role in shaping an organisation’s success. Could
academics and business leaders be making the same mistakes as
economic historians by assigning culture excessive credit for
shaping a company’s success?
I consider the answer to be yes. I believe each macro-element
of an organisation is equally important in contributing to an
organisation’s success with the key factor being achieving con-
gruence between the elements. Drucker’s quote ‘culture eats
strategy for breakfast’ highlights the importance of culture but,
in reality, all elements of the organisational model are equally
important.
17
THE MBA ADVANTAGE
When a senior leader says it is their culture that defines their

competitive advantage, I think they are simply acknowledging the
importance of culture’s effect on the other macro-elements in
their organisational model. In other words, they are acknowledg-
ing the organisational cohesion resulting from culture. In addition,
they are likely indirectly acknowledging their people and provid-
ing a pat on the back so to speak, something an authentic leader
should do often.
Furthermore, senior leaders go on to describe their culture
using their values statement, as values are the most tangible con-
tributor and potentially the most meaningful description of
company culture to external observers. As Schein highlights,
cultural artefacts are easy to observe but difficult to interpret.
Hence, values are used to describe culture over behaviours, norms
or assumptions which have little meaning outside the organisation.
So, are you now more or less confused about what corporate
culture is? Do you agree with my perspective that ‘culture eats
strategy for breakfast’ is not a universal truth in business? While
this personal journey ‘into’ culture has helped me to gauge the
importance of culture, and better understand how culture
evolves, it has also left me hungry for more knowledge on the
subject. How about you?
Author: Ben McRobb

Ben is an experienced engineer who is now transitioning to
business management with a keen interest in business
strategy. He has a track record of delivering complex work
scopes in a dynamic team environment. Ben is passionate
about continuous improvement, innovation and collaboration
driving change within organisations.
This essay is copyright of Ben McRobb, 2018.
18
2. The relevance of old-school
wisdom in a knowledge economy
NICK LOKE
The idea in brief

The issue: The business environment of today is heavily influenced
by a knowledge-based view of the firm and a fascination with and
focus upon acquiring more data and new knowledge. However, amid
all the knowledge hoarding, the modern business world may have
lost an appreciation for the value of wisdom.
The context: Wisdom can be an esoteric concept and lost in
philosophical ideas, and so it is difficult to find a place for it in the
logical and empirical world of business. However, it is the practical
side of wisdom that makes it relevant and beneficial to
contemporary business organisations.
Practical wisdom is still a critical necessity for modern-day
organisations and plays an important role in building corporate
strategy and culture, instilling ethical leadership and enabling
judicious decision-making. Organisational wisdom is also important
when considering two important elements that will shape the
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THE MBA ADVANTAGE
workplace of the near future - the rise of artificial intelligence (AI)

and a new generation of Millennials in the workforce.
The solution: One way to reintroduce the concept of wisdom into
the organisational setting is by using the data, information,
knowledge, wisdom (DIKW) hierarchy. The DIKW hierarchy can be
used as a framework to bridge the process of collecting an
immense amount of raw factual data into using the knowledge to
discern judgments. This in turn enables organisations to take
appropriate leadership decisions and actions.
My first lesson on wisdom

‘Through wisdom a house is built, and by understanding it
is established; by knowledge the rooms are filled, with all
precious and pleasant riches.’
(Proverbs 24:3-4)
As a child, I loved learning new facts and then going on to demon-
strate to others that I knew a lot – that I was clever. Basically,
I was your archetypal know-it-all kid and I’m pretty sure the adults
in my family didn’t enjoy my fact-sharing sessions as much I did
holding them. At one family dinner, when I was about nine years
old and going about my merry way of being a walking, talking
encyclopedia, one of my uncles turned to me and said, “There is a
time and place for everything. You may know a lot but there is a
difference between knowing stuff and knowing how and when to
use what you know”. Even if I did not understand it then, I had just
received my first life lesson on the value of wisdom.
Where does wisdom fit in today’s business world?

Wisdom sounds like such an archaic word in today’s lingo. It is a
word that conjures up images of sages meditating on mountain
20
The relevance of old-school wisdom in a knowledge economy
tops, completely withdrawn from the world and unaware of the

goings-on of modern society. We now live in a world of unpar-
alleled information and knowledge, built upon the foundations
of and reliance on science and technology. Wisdom is seemingly
so incompatible to the values of the modern corporate world. In
western business culture, there are other greater valued qualities
such as skill, leadership, logic, ambition, power, achievement and,
especially, mastery of knowledge.
Knowledge is power, as the saying goes, and this certainly holds
true in today’s postmodern world. Intelligence and knowledge are
prized assets in the workplace, supported by the popularity of the
knowledge-based view (KBV) of the firm. The KBV considers
knowledge as the most important strategic resource within a firm
and, therefore, the capability to create, integrate and apply knowl-
edge is critical to the development of sustainable competitive
advantages (Bierly III, Kessler and Christensen, 2000).
Therefore, companies have learned that capturing, storing and
distributing knowledge is a tool and catalyst for continual innova-
tion and performance improvement (Nonaka and Takeuchi, 2011).
The domino effect then permeates – companies seek to hire the
most intelligent personnel and develop the most advanced data-
processing capabilities to fit within their idealised view and struc-
ture of organisational nous. Individuals in turn strive to attain
greater capacity for knowledge and increase their skill base to make
themselves more attractive for employment and advancement.
Wisdom is devalued at both the individual and

corporate level
This preoccupation with knowledge and intelligence leaves us in
a situation where there is a lack of discussion on the value of
wisdom. For example, a quick Google Scholar search using the
21
THE MBA ADVANTAGE
keyword ‘knowledge’ returned 5.4 million results, compared to

2.4 million results when searching for ‘wisdom’. An even greater
contrast was observed when searching UWA’s library database;
there were 10.9 million articles and dissertations on the topic of
‘knowledge’ compared to 1.1 million on ‘wisdom’.
This has led many to observe, and even lament, that the
concept of wisdom is a vanishing and unappreciated quality in the
western world. Merriam Bleyl (2009) offers the following seven
reasons why wisdom is increasingly devalued in western society:
1. The past is devalued
2. The elderly are devalued
3. Technology and innovation are considered the all-important
keys to humanity’s survival
4. Individual achievement is heralded
5. Experience is devalued
6. Wisdom is not considered a topic worthy of study
7. Science, aided by technology, is the only way to know truth.
If this is true in everyday life at the societal level, then the topic of
wisdom is even more restricted in corporate vernacular. Wisdom
is reduced to a subcategory of the discipline of leadership.
Memoirs, workshops and seminars by esteemed business leaders
guised as pearls of wisdom actually teach tactics, tools and
techniques from an experiential lens. Self-help gurus such as
Stephen Covey, Robin Sharma and Anthony Robbins address
wisdom in their writings but usually from a personal reflection,
philosophical or spiritual perspective. These generic methods of
teaching wisdom have a very targeted approach, in the sense that
they are tailored primarily to meet the audience’s objectives of
character education and self-growth.
Meanwhile, business schools and management studies have
long adopted the scientific approach to focus on practical
22
relevance and academic rigour (Roca, 2008). Unsurprisingly,

most management programs, as a consequence, place emphasis
on techniques, analytical tools and quantitative analysis. The
topic of wisdom is virtually absent from business studies and is
still confined within the academic disciplines of humanities and
philosophy. For example, a search of the curricula of the 10
leading MBA programs, selected from the most recent Financial
Times rankings, found no courses with the explicit title ‘wisdom’
in their program structures (Financial Times, 2018).
Why wisdom is still essential in the knowledge economy

Aristotle made the distinction between theoretical reason (which
is concerned with the profound truths of life) and practical wisdom
(which investigates what we can change and aims at making good
judgments). This is an important distinction to understand because
practical wisdom is part of our everyday lives in reality, rather than
confined to the esoteric and the realm of ideology (Rooney,
McKenna and Liesch, 2010). This essay will focus on practical
wisdom as it is the most relevant to modern business organisations.
Wisdom helps formulate corporate strategy and culture

‘Wisdom is the right use of knowledge.’
(Charles Spurgeon)
A major critique of the KBV to corporate strategy is that it is
based on an underlying assumption that greater success is derived
from more information and knowledge. I believe that, rather than
just maximising knowledge, the most successful firms know what
is strategically most important to their firm and can then make
the best use of what they know.
Bierly III et al (2000) posit that organisational wisdom involves
the judgment, selection and use of specific knowledge for a
23
THE MBA ADVANTAGE
specific context. Organisational wisdom, simply put, requires a

choice of what kind of knowledge to select, apply and institution-
alise within the organisation.
Developing corporate strategy remains the remit of the board,
the chief executive officer (CEO) and the executive team in most
organisational settings. As such, it is important to have wise
leaders in charge of formulating vision and strategy. However,
corporate strategy that is developed by an exclusive group of top
executives and is not communicated down to the entire workforce
fails to have any material impact on employees’ behaviours and
actions, and is unable to take root to form organisational culture.
Organisational wisdom essentially requires that individual
wisdom is articulated and transferred to others so that employees
can translate the CEO’s vision into reality.
Transforming organisational wisdom

The individual wisdom of the select few (the executive or
leadership team) can be transformed into organisational wisdom
through three different means (Bierly III et al, 2000):
1. Transformational leadership. This is where leaders
broaden and elevate the interests of their employees to gain
a greater awareness and acceptance of their function as a
group, to build a sense of community and to put aside their
own self-interests for the greater good of the group.
2. Organisational culture. Building organisational culture and
structure forms common characteristics and shared values.
Research has found that organisations with coherent,
homogeneous, stable and pervasive belief systems
outperform organisations with relatively weaker cultures
in financial measures such as return on investment (ROI),
24
return on assets (ROA) and growth in assets (Collins and

Porras, cited in Bierly et al, 2000).
3. Organisational wisdom. This can be empowered through
an organisational communication system that promotes
learning. As knowledge is transferred from individual to
individual, department to department, function to function,
not only is the organisation’s overall knowledge base
increased, but its practicality and usefulness is also
transmitted. Over time, the organisational wisdom becomes
institutionalised and remains with the organisation long
after the initial source has left (Bierly III et al, 2000).
Wisdom is the foundation of ethical leadership

‘Knowledge comes, but wisdom lingers.’
(Alfred, Lord Tennyson)
In contrast to knowledge, wisdom is generally considered to have
a moral facet to it and is, therefore, a foundation of business
ethics. Researchers and practitioners not only emphasise the
importance of virtues and personal character, but also advocate
for their application in the business setting and in interactions
with wider communities. This practical form of leadership
wisdom is required to tackle myriad business challenges from
dealing with moral dilemmas and ethical leadership predica-
ments to managing conflict and addressing complex problems in
the workplace (Moberg, 2007; Roca, 2008).
Practical wisdom is a mutual necessity of moral virtues such
as justice, courage and self-control and Melé (2010) asserts that
practical wisdom introduces ethics in decision-making by
considering both the end goal and the means to achieve the end
from the perspective of human good. Conversely, altruism and
25
THE MBA ADVANTAGE
the common good have also long been associated with wisdom
because wisdom is the beacon for the shift from a basic sense of
self towards the greater common good (Bigelow, cited in Rowley,
2006). According to Nonaka et al (2011), the altruistic element is
the first of six abilities of a wise leader; see Figure 2.1 for all six
abilities.
Figure 2.1: The six abilities of wise leaders
Makes decisions Grasps the Creates shared

for the greater good essence of any contexts for all
of the organisation situation and fathoms staff to construct
and society the meaning new meaning
Communicates Exercises political

in a way that power to bring Fosters practical
everyone people together wisdom in others
understands from conflict
(Adapted from Nonaka and Takeuchi, 2011)
The business leaders of today are undoubtedly smart. However,

businesses continue to face challenges and in all this uncertainty,
some leaders lose their way due to deplorable moral and ethical
mistakes. We have seen corporate scandals and financial mis-
management orchestrated by incredibly intelligent leaders who
were guided mainly by economic values and who seemingly ignored
the moral content of their actions and decisions (Roca, 2008).
Being ‘the smartest guys in the room’ did not help in the case of
Enron, with the ensuing scandal offering a salient lesson in the
dangers of knowledge in the absence of wisdom. Enron carefully
presented itself as a knowledge-intensive, innovation-focused
business; its collapse was not a good endorsement for the benefits
of a knowledge-intensive business or a knowledge-based economy
(Rooney et al, 2010).
26
Wisdom in guiding business decisions

‘Men must be decided on what they will not do, and then
they are able to act with vigour in what they ought to do.’
(Mencius)
Business decisions today are increasingly backed by data, analysis,
scientific deduction and logical persuasion. The data-driven
decision-making (DDDM) model espouses business decisions
that can be backed up with quality data that is verifiable,
effectively analysed and interpreted for application. A study by
the Massachusetts Institute of Technology (MIT) Center for
Digital Business found that companies that used data-driven
decision-making were, on average, five per cent more productive
and six per cent more profitable than their competitors (McAfee,
Brynjolfsson and Davenport, 2012). Unsurprisingly, the business
community has played its part in the etymological shift from
‘making wise decisions’ to ‘making informed decisions’.
Data-backed decisions are limited in their use in situations
where trends can be observed and deduced into quantitative
models. These models rely on explicit and tacit knowledge so that
data can be codified, measured and generalised (Nonaka et al,
2011). However, a business model solely dependent on explicit
knowledge does not cope well with change, and today’s business
reality is characterised by discontinuity and uncertainty. The
volatile, uncertain, complex and ambiguous (VUCA) situations
faced by companies place more demands of rigor on analytical
decision-making tools but this does not necessarily translate to
more accurate or correct decisions.
Procedural knowledge versus wisdom

Fundamentally speaking, factual and procedural knowledge is
very different from wisdom. That is why all the knowledge in the
27
THE MBA ADVANTAGE
world did not prevent the collapse of the financial system during
the 2007 to 2008 global financial crisis, nor did it stop the collapse
of institutions such as Lehman Brothers and Washington Mutual
(Nonaka et al, 2011).
There is indication that the practical side of wisdom is still very
relevant to contemporary business decision-making. Modern
corporations still hold leaders in high esteem who exhibit the
practical wisdom-related talents of ‘experience’, ‘good judgment’
and ‘making business from the gut’ (Moberg, 2007).
The Nobel laureate economist Daniel Kahneman made the
distinction between slow and fast thinking in his book Thinking,
Fast and Slow. Both modes of thinking operate simultaneously to
solve complex problems. The slower information-processing mode
tends to be more deliberative, more logical and to operate in a more
rational way. However, it is the fast, intuitive information-process-
ing mode which operates automatically and stems from what we
know based on our experience – this is the quintessence of
practical wisdom (Webb, 2017).
Wisdom to marshal the rise of artificial intelligence

‘The saddest aspect of life right now is that science gathers
knowledge faster than society gathers wisdom.’
(Isaac Asimov)
At a recent United Nations (UN) discussion on how to help
communities in parts of the world without access to the internet
or electricity, a panellist by the name of Sophia offered the sugges-
tion that ‘if we are smarter and focused on win-win type of results,
AI [artificial intelligence] could help proficiently distribute the
world’s existing resources like food and energy’ (Chin, 2017). Who
is Sophia? Sophia is Hong Kong-based Hanson Robotics’ latest and
most advanced robot (Hanson Robotics, 2017). As advanced as
28
Sophia is, she is just the beginning of a wave of AI and autonomous

technology that is set to disrupt the workplace.
Experts agree that an ethical framework is needed to ensure
that AI technology is used for good and not to the detriment of
society, especially considering predictions that fully sentient
machines could emerge within the next few years. The ethical and
moral dimensions behind AI are possibly more complex than the
actual technology itself. It is therefore the role of human wisdom
to marshal and efficiently manage the rising influence of AI.
From a machine learning and AI perspective, the inputs to an
AI system are data; the processing of those inputs is data centric;
and the outputs are simply more data. That is a lot of data and
certainly more than the average human is capable of processing.
The differentiator is that human wisdom is needed to understand
what AI is doing (Wood, 2017).
Steve Jobs once said that ‘it’s technology married with liberal
arts, married with humanities, that yields us the results that make
our hearts sing’ (Lehrer, 2011). To differentiate the data-heavy
‘skeleton’ of the AI machine requires bringing wisdom of the
‘heart’ into AI. It has been suggested that people with backgrounds
in liberal arts and humanities need to play a greater role in the
conceptualisation of AI – to take a moral stand and really under-
stand the human needs behind any innovation in AI and balance
out the purely technocratic approach of scientists and engineers
(Chin, 2017).
Wisdom for a new generation of Millennials in the

workforce
‘We are made wise not by the recollection of our past
but by the responsibility of our future.’
(George Bernard Shaw)
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THE MBA ADVANTAGE
Millennials, the generation born between 1980 and 2000, repre-

sent the new workforce in the global market and now number
two billion strong, which is 27 per cent of the global population.
It is estimated that Millennials will make up 75 per cent of the
US workforce by 2025, and this is expected to be a similar trend
for most developed countries (Donston-Miller, 2016).
Millennials are fast becoming the world’s most significant
generational cohort for consumer spending growth, sourcing of
employees and overall economic prospects (Sillman, Petersom
and McCaffrey, 2016).
Millennials are achievement-oriented, smart, resourceful,
talented, highly educated and well-networked. However, it is also
observed that the average Millennial does not understand proper
corporate behaviour and also lacks discretion and prudence in
taking ‘no’ for an answer (Ritter, n.d.). This generation has grown
up in a time of rapid technological change, globalisation and
economic disruption and has a very different worldview, giving
them a set of priorities and expectations sharply different from
previous generations (Goldman Sachs, n.d.). This is the reason
some managers think that Millennials may be the hardest genera-
tion to manage.
Human resource management and policy needs to deal with
two important issues when considering the increase in numbers
and influence of Millennials in the workplace. The first is the need
to indoctrinate and preserve organisational wisdom and organ-
isational practices from the previous generations as Baby Boomers
(born between 1946 to 1964) retire and leave the workforce. The
second aspect involves wisdom for leading Millennials. As
discussed earlier, a distinctly different style and approach is
required to lead and manage Millennials given their very different
worldviews, learning preferences, work ethic and personal
motivations.
30
Robert Swaim (2016), a colleague of Peter Drucker for many

years, advises that harsh implacable management styles that were
used and tolerated by previous generations would not be stood
for by Millennials. Furthermore, Millennials emphasise an
equitable system and believe that their diligence and accomplish-
ment will always be rewarded with acknowledgment, encourage-
ment and increase (Hershatter and Epstein, 2010). These are just
a few examples from the growing body of insight into the leader-
ship requirements for a workforce of Millennials. This growing
field requires an element of practical wisdom as much as it calls
for further scholarly research.
Case study: Leading a team of Millennials

I was part of a student team working on a pro bono project for a not-for-
profit organisation. The team comprised three MBA students (who were
between 30 and 35 years old and had about 10 years of work
experience) and four undergraduates (all around 20 years old and with
no prior professional work experience). As team leader, it was my
responsibility to deliver the work to the client and manage the internal
team. The project was to be completed in a short time frame and was
being run on part-time commitment levels.
I found the leadership experience to be challenging. A big part of it was
due to my unfamiliarity with the nature of the work, but I also found it
difficult to connect with the younger team members (let’s call them the
Millennials). I had never worked in a team that had a majority
composition of Millennials and I believe that this played a part in the
team dynamics. The Millennials all knew each other from previous
projects and were familiar with the nature of work. They were smart,
quick, technologically savvy and diligent. However, they had a strong
social clique, did little to guide and integrate the other team members
and tended to communicate within their own closed channels instead of
the team-wide forum. The MBA students, despite having more work and
life experience, struggled to keep up due to unfamiliarity with the work
and not having ever worked with each other.
Towards the end of the project, I sensed a rift in the project team and a
forming of two camps. The Millennials ran the show while the older team
31
THE MBA ADVANTAGE
members were marginalised and became less engaged in the project.

Upon reflection, I feel that I underperformed as a team leader because,
although we delivered a quality service to the client, the team
performance and cohesion could have been much better. I also reflect
that I should have paid more attention to, and applied more wisdom to,
the nuances required to work with a team of predominantly Millennials.
A framework for organisational wisdom

Rowley (2006) observes that although the DIKW hierarchy has
been around since the 1970s to represent a structural relationship
between data, information, knowledge and wisdom, very little
attention is focused on the capstone concept of wisdom – recent
iterations of the hierarchy put data, information and knowledge in
order of highest priority and then wisdom follows. See Figure 2.2
for a visual representation of the differences between data,
information, knowledge, insight and wisdom.
Figure 2.2: Visual representation of the difference between

data, information, knowledge, insight, and wisdom
Data Information Knowledge Insight Wisdom
(Adapted from Beco, 2016)
To implement the practical aspects of organisational wisdom, a

framework is required to tie in all the different elements of the
DIKW hierarchy into usable and applicable methods for the
business organisation, as represented in Figure 2.3. This framework
for organisational wisdom can also incorporate the principles of
32
the learning organisation – an organisation which processes and

learns from both the competitive experience and the way the
organisation experiences it (McGill and Slocum, 1993).
Figure 2.3: A framework for progressing data through to

organisational wisdom
Data
> > > Information
Provide
Knowledge
Analyse and
Wisdom
Use knowledge
Collect raw facts meaning to synthesise derived to establish insight
collected data information and achieve goals
(Adapted from Bierly III et al, 2000)
There have also been suggestions for more teaching of practical

wisdom in business schools and corporate training programs.
Roca (2008) suggests that practical wisdom in management
education should have the following goals:
• To assist business leaders to discern the moral aspects of
the situations they face;
• To help them critically evaluate the data and information
they receive; and
• To question the moral consequences of their decisions.
Summary
It is a curious anomaly that humanity has prized wisdom for
thousands of years and across all cultures, only for a sharp
devaluation of wisdom to occur in the west since the turn of the
last century. Surprisingly, even less is said about wisdom in the
contexts of business and management.
33
THE MBA ADVANTAGE
I have spent my entire adult life studying in and building my

career in the western world. My training as an engineer,
meanwhile, has shaped my mindset into one based on logic and
analysis. Throughout my career, I have worked with many
intelligent people and have also been inspired by great leaders in
the workplace. However, I have yet to hear any explicit mention
of wisdom in the business setting – not by any of the colleagues,
managers, mentors, academics or MBA students that I have come
across. This is not to say that I have not met anyone wise; I believe
it is more a case that there is a lack of open discussion about
wisdom in the professional scene.
My fascination with the topic of wisdom may be shaped by my
Asian heritage or religious faith and yet, writing this essay has
made me realise that the pursuit of wisdom is not necessarily
restricted to certain cultural and spiritual affiliations. There is
justification that a business model built on the principles of
wisdom is applicable to organisations across the world and should
be a strategic talking point for building a business on the principles
of sustainability, values and social responsibility. My view is that
organisations have the opportunity to rekindle an interest in
wisdom and that a ‘wisdom-based model of the firm’ is as impor-
tant as a knowledge-based view.
Author: Nick Loke

Nick is a chemical engineer by training and has an
established career as a technical consultant for the oil and
gas industry. His early career focused on process systems
design and more recently transitioned into project
management and business development roles. An
accomplished team leader, he has successfully led multi-
disciplinary multicultural teams and completed large complex
projects for major oil and gas clients. Originally from Kuala Lumpur, Nick speaks
English, Malay, Cantonese, and Chinese Mandarin.
This essay is copyright of Nick Loke, 2018.
34
3. The business opportunity
hiding in diversity if it can be
separated from equity
PHILIP DAGLISH
The idea in brief

The issue: Industries and corporations have realised that adding
diversity to a workforce can result in versatile, better business
outcomes. However, industries often take a narrow view of diversity.
So, are businesses missing an opportunity by not looking deeper
into what other forms of diversity have to offer?
The context: The impacts of diversity are hard to measure. A focus
upon diversity simply as a politically correct optic for modern
business has emerged. Not surprisingly, such a perspective will not
capture the full opportunity that a truly diverse workforce can bring.
The solution: Most mainstream workforces are trapped 'within the
box' of shared thinking. Those among the workforce who have
diverse views and could challenge the status quo of 'the box' need
nurturing. However, many organisations are not actively seeking to
35
THE MBA ADVANTAGE
build diverse teams or have poor understanding of how to achieve it.

This essay introduces a novel reimagining of share portfolio
diversification and looks at how diversity in teams may help
organisations remove idiosyncratic risk and prevent herd mentality
in their workforce. It also looks at the benefits of returning to the
original definition of diversity and removing the connection to equity,
allowing each to stand alone with appropriate importance.
What is diversity?
Diversity is often discussed in similar contexts with equity and
equality; however, I believe they should be treated very differently.
One definition indicates that diversity is the state or fact of being
diverse; difference; a state of unlikeness.
According to Mohammed and Angell (2004), there are two
commonly accepted types of diversity:
1. Surface-level diversity. These are the easy-to-identify
differences that can be sensed immediately such as gender,
ethnicity, height, eye colour, physical features, disabilities
and even body odour.
2. Deep-level diversity. These are the difficult-to-see qualities
such as hidden disabilities, values, religious beliefs, culture,
personality, etc.
Figure 3.1 shows that the two concepts of diversity are not fully
divorced from each other. However, there is often too much
credence placed on surface-level diversity; it is seen as a proxy for
deep-level diversity. This small difference is key to understanding
why diversity is often misunderstood. Deep-level diversity can be
referred to as ‘diversity of thought’. For this essay, the term diversity
shall be used to mean deep-level diversity.
36
The business opportunity hiding in diversity if it can be separated from equity
Figure 3.1: Diversity diagram
Deep
level
diversity
Surface
level
diversity
(Adapted from Huszczo and Endres, 2013)
Equity
Equity is a term that is often misquoted and used as a synonym
for equality, particularly in the context of women in the
workplace. As far as definitions go, the two terms are described
as follows:
• Equity. The quality of being fair or impartial; fairness;
impartiality.
• Equality. The state or quality of being equal;
correspondence in quantity, degree, value, rank or ability.
Equity can be as simple as providing the appropriate resources to

give everyone a fair chance. Whereas, equality means treating
people equally.
The challenge with equity is that the definition of ‘fair’ is
generally in the eye of the beholder and can be twisted to suit a
desired outcome. Equity should also be held as an input, not an
output i.e. people need to be given the opportunity to thrive and
the tools to succeed, but success should be judged on the
performance. The target of gender equity should be that women
37
THE MBA ADVANTAGE
are given a fair chance to succeed; in fact, the target of true gender
equity is for a person’s gender not to be a factor when making a
decision.
The differences between equity and diversity

Equity and diversity are two perspectives on the same issue, but
they deal with the same set of characteristics differently. Equity
places the focus of creating fairness and rising above the
perceived differences to give equal opportunity. Diversity cele-
brates the differences and stands firmly by those differences to
differentiate between people.
The business world often focuses heavily on equity and
surface-level diversity but loses out on the rich potential of
diversity of thought.
A perfect example of this is the McKinsey report on diversity
which focuses almost exclusively on surface-level diversity
(Vivian Hunt, 2015). It is ironic for a firm that prides itself as a
global thought leader to fall into this trap so easily. Further proof
that the subject of equity, equality and diversity are not
adequately divorced can be found on the McKinsey gender
equality webpage, which starts with statements on diversity
rather than gender equality (McKinsey & Company website,
2017). This is not an attempt to try to vilify McKinsey’s work; it
is more an illustration of how even the biggest and best thought
leaders are getting things confused and missing the point.
The double-edged sword

The notion of the double-edged sword in diverse cultures
highlights that there are great challenges and advantages of
having teams with diversity of thought (Trefry, 2006). The
challenges include increased conflict and slow progress, but the
38
advantages are creative outcomes and well-developed ideas. The

problem with diversity of thought is that it is difficult to quantify
and, therefore, difficult to measure. Surface-level diversity is more
obvious, easier to measure and to set targets and quotas for – it
is easier to use as a proxy for equity.
Is diversity always a good thing?

There are many studies about diversity within teams and
organisations that pose conflicting views on whether diversity is
a good or bad thing (Curşeu and Schruijer, 2010). Many of the
studies focus on surface-level diversity and, as mentioned
previously, this is arguably flawed. In addition to this, there are
many factors that influence how a diverse team performs.
The quality of leadership, level of trust, task requirements,
team culture and the required output are all factors that would
influence how the success of diverse teams could be assessed
(Jayne and Dipboye, 2004). There are also situations where
diversity is not a good thing; for example, in high-functioning
teams such as firefighters, diversity matters less because
execution is key. This speaks to why I dislike tethering diversity
and equality together because if diversity is not preferred, equity
should still exist.
Let’s look at education

Educational institutions have always faced challenges around
diversity of thought. When children enter school, they are at
different levels of capability – mentally, physically and emotionally.
Schools must manage these different capabilities and educate all
students towards a common goal.
When we talk of diversity of thought, there is probably no
greater evidence of the double-edged sword than in schools
39
THE MBA ADVANTAGE
(Trefry, 2006). So, how do schools manage this effectively?

Nowadays, there is more focus on adapting to the specific needs
of students and providing a supporting network to allow adap-
tion. This is evident through the Montessori method, which has
been popular because of its child-centred learning approach and
the way it encourages students to pose their own questions before
discovering the answers themselves (Kayili and Ari, 2011).
Learning difficulties and disabilities

The term ‘learning difficulties’ most often refers to difficulties in
learning to read and write, but is also applied in other areas of
learning, including mathematics. It is estimated that 10 to 16 per
cent of Australians have a learning difficulty and 4 per cent of
Australians have a learning disability (Louden et al, 2000). These
include but are not limited to:
• Autism
• Asperger’s Syndrome
• Dyslexia
• Dysgraphia
• Dyscalculia
• Dyspraxia.
Schools have come a great distance in dealing with children who

have learning challenges or difficulties. There has been a gradual
shift to move away from viewing these individuals as disabled and
to see them as people who view the world through different
thought processes (Chard, Vaughn and Tyler, 2002).
Today, school programs are developed to adapt the learning
outcomes to suit the requirements of the child, rather than trying
to adjust the child to fit the system. In the past, however, there was
a lot of stigma associated with learning disabilities and a general
40
misunderstanding of how to address the issue. The use of terms

like ‘disability’ and ‘difficulty’ have not helped (Shifrer, 2013).
Marketing myopia
The ability of the education system to adapt and focus on the
student invokes the thoughts of Theodore Levitt’s seminal work
on marketing myopia (Levitt, 1960). The modern-day education
sector has succeeded in solving the problem of the ‘customer’ (i.e.
the student) and adapted the services they bring to enable the
best outcomes for the customer.
See Figure 3.2 for a visual representation of the three product
levels commonly used in the marketing field.
Figure 3.2: The three levels of product
Augmented product
Delivery After-sale
Actual product
and credit service
Brand
Features
name
Core
benefit
Quality
Design
level
Packaging
Installation Warranty
(Claessens, 2015)
In this case, the core product is the student; the actual product is
the education; and the augmented product is the extracurricular
options. I believe organisations can learn from the education
system on how to provide support for diversity of thought.
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THE MBA ADVANTAGE
Perhaps we should start to view diversity of thought with better

descriptors such as ‘diversity of ability’ to allow for talents that
are not particularly thoughtful e.g. skill of hand.
Driving diversity in the workplace

How can businesses promote diversity? This is a tough question
to answer as the best way to promote diversity in the workplace
is to utilise a diversity of thought model. One option is to utilise
psychometric testing to develop a broad base of thinkers.
Currently, psychometric testing is used to do the opposite – to
identify if the employee conforms to the culture of the company
(Michael Page, 2016).
If businesses develop a diversity of thought development plan
and build teams around the ideal formula, then the company
culture will be developed and influenced by the team’s diversity.
This is a risky strategy because it releases management’s control
over corporate culture and lets it develop organically.
Another option is to target specific groups of diverse thinkers.
This might include seeking out individuals with diverse learning
styles and challenges through the hiring process. By targeting
such people, businesses have the chance to utilise different
thinking models that are inherent in these groups. This approach
involves overcoming significant stigma and cognitive biases.
Some companies, such as Bankwest, are already taking on this
challenge (Torre, 2017).
How businesses can adapt to promote diversity in the

workplace
There are simple changes that can be utilised to promote diversity
in the workplace. These changes are centred around understanding
that we are all different, and if businesses want to get the best from
their employees, then slight adaptions can be made, such as:
42
• Provide flexible arrangements for employees who are

parents, e.g. by providing childcare, flexible work hours
(in the evenings and/or early mornings), resources or
programs to allow them to bring their children to work.
• Provide quiet working rooms for people who work better
in quiet locations.
• Provide employees with the option to submit reports in ways
that suit them, e.g. by video, audio or as a written report.
These suggestions illustrate the point that it wouldn’t take a

monumental shift to alter workplace situations to better focus on
the needs of employees. By doing this, the employer is able to
create an environment where different skills can flourish. The
diverse skills and unusual contributions from a team made up of
different people create synergistic relationships and team outputs.
These skills, contributions and characteristics can include humour,
artistic or graphic skills, linguistic skills, strategic thinking, con-
ceptual thinking, quick thinking, practical leadership, skill of hand,
memory, tact, forthrightness, etc. When taken in isolation, these
appear to be trivial traits but, combined into a diverse team, may
produce results that exceed the sum of the parts.
What are the challenges?

The challenge is to shift the focus away from an environment
where the employee has to fit the organisation’s pre-existing
practices and move instead to a more diversity-focused, employee-
centred approach. This means that companies need to have the
ability to adapt the workplace to suit the employee.
This is not something that can be half done. It is important
that all employees are given freedom to self-centre their work.
Driving significant diversity into the workplace is likely to lead to
conflict, but if it is understood that not all conflict is bad, then
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THE MBA ADVANTAGE
the conflict or resistance can be planned for (Erwin and Garman,

2010). In fact, some conflict is helpful – this is referred to as the
interactionist approach (De Dreu and Van de Vliert, 1997). The
interactionist approach to conflict suggests that humans need
some level of conflict to perform and that conflict allows individ-
uals to air and resolve differences. Conflict, if kept at a controlled
level, prevents people from developing apathy, complacency and
unresponsive work practices.
The biggest challenge to instilling diversity measures is
attempting to change the management’s mentality. It can be diffi-
cult for management to see the value of change; much like under-
standing the value of marketing, it is unlikely to be an overnight
success and immediately create value. The improvements will be
hard to quantify and hard to measure, which could then make it
difficult to justify. It can also be challenging to identify where the
drive or urgency to make the change comes from. Without
urgency, it is unlikely to pass the first step in transformational
change (Kotter, 2012).
Another challenge is the need for additional human resources.
This is due to the potential conflict that will result in the work-
place when change occurs. Also, if there are people with a
learning difficulty working in the organisation, then the firm will
need to provide specialised assistance, counselling and support.
Despite these challenges, I believe that there is a place for all
people in society, so why can’t workplaces be the same?
Why make the change?

This is a fun topic because it derives from this fundamental
question: why should businesses diversify their workforce? I enjoy
reading the conflicting papers on whether it is better (or not) for
organisations to diversify their business.
44
Diversity in the workplace can be viewed in the same way as

stocks and shares. Why do investors diversify their investment
portfolios? Do they do it to get the best returns? Or do they
diversify portfolios to eliminate idiosyncratic risk?
Let’s, just for a moment, get very transactional and view
everyone in an organisation as a stock or share that is part of an
investment portfolio. How would we, as a company, feel about all
the shares being the same or very similar? I am guessing that
there would be talk of diversifying the risk. What does diversify-
ing the risk mean? It doesn’t necessarily garner superior return;
its purpose is to reduce our exposure to market volatility, as first
suggested by William Sharpe in 1964 (Sharpe, 1964). To do this,
we would look to get different type of stocks in to ‘balance’ the
portfolio. If we return to people as diversity components, I fail to
see this as different. I think that saying diversity in people gives
better results is like saying that a diversified portfolio will beat
the market. Diversity reduces risk in all contexts.
How does diversity in the workplace benefit business?

Promoting diversity in the workplace reduces the risk of
individualism and herd mentality. It creates a culture that is able
to look at the problems the business is facing from multiple angles
which, when utilised properly, can allow a business to adapt
quickly to market change and mitigate any risks associated with
business cycle fluctuation. This ability may result in a more stable
business and reduce the idiosyncratic risks – it makes sense for a
company to reflect the diversity of society to ensure it better
understands the needs of society.
In addition to this, there is a rich resource of individuals who
think differently and are traditionally considered to have learning
difficulties or disabilities. If it is possible for these differences to
45
THE MBA ADVANTAGE
be accommodated in the workplace, then businesses may find

they can harness the non-traditional thought processes of these
groups. It could be argued that businesses are missing out on
highly functioning ‘super computer’ individuals – i.e. people with
autism who outperform computers but are socially impaired.
Currently, all this capability and diversity is being lost because
companies struggle to find a way to adapt their organisations
towards a tolerant system that is able to adapt to needs of
individuals. Individuals with learning disabilities often feel stig-
matised and ashamed in the workplace and don’t feel comfort-
able opening up to their employer. Therefore, employees don’t
understand that these differences can be easily accommodated
to provide a better work environment for their employees with
special needs.
Diversity can be difficult to handle and needs to be managed
very carefully – it is not a one-size-fits-all approach. However,
with informed leadership and understanding, the results can be
extraordinary, humbling and powerful as even the brightest of
minds become dwarfed by the collective wisdom.
Summary
I believe most organisations are missing an opportunity to
diversify their workplaces by not utilising a diversity of thought
model and not opening their organisations up to employees with
learning difficulties who can add value through their work if given
adequate resources to excel. The term ‘diversity’ is often thought
to mean the same as ‘equality’ and, although both are extremely
important, I believe there is benefit treating diversity as separate
from equality.
The business world can learn from the education industry by
providing simple but adaptable measures that are centred around
46
the needs of the employee. Finally, diversity is important for

workplaces as it removes idiosyncratic risk, prevents herd
mentality and an organisation with a diverse team better reflects
our society.
Author: Philip Daglish

Philip is a senior consultant to the oil and gas industry with
over 15 years’ experience in delivering specialist expertise
and project management. Philip has worked with a variety of
oil and gas companies from large multinationals to small,
single-asset operators and has extensive experience in
offshore leadership roles. During his MBA, Philip focused on
developing his knowledge in the fields of leadership, scenario
planning, strategy and organisational transformation.
This essay is copyright of Philip Daglish, 2018.
47
4. Can a social media culture solve
age-old challenges? A case study
in disaster relief
LISA NAPIER
The idea in brief

The issue: The frequency and severity of natural disasters knows
no political, cultural or socioeconomic borders globally. Many
affected regions lie in developing countries that lack infrastructure
and where clear supply-chain channels are absent even under
normal business conditions. Aid organisations face a challenge to
bring relief to those communities most in need, including physical
geographical barriers and cultural and language hurdles.
The context: The proliferation and widespread adoption of multiple
social media channels and the emergence of crowdsourcing are two
recent technology-related global developments that can have
positive effects in unexpected areas. Disaster management and the
efficient provision of emergency aid relief are a good example of
this. Positive case studies illustrate the immediate effect of social
media and crowdsourcing in times of urgent need. Challenges
48
Can a social media culture solve age-old challenges?
remain, however, and the real-time communication of misinformation,

either accidental or purposeful, is one area that requires focus.
The solution: Aid organisations have been quick adopters of the
new developments and are moving to adopt a culture of harnessing
social media and information technologies in high-risk geographic
regions before natural disasters occur. For example, new
technological tools can be used by volunteers to supply local maps
in remote areas to deliver better and faster disaster relief.
The International Federation of Red Cross and

Red Crescent Societies
The International Federation of Red Cross and Red Crescent
Societies (IFRC) is the largest humanitarian organisation in the
world, with a presence in almost every country via its volunteer
workforce of over 17 million people. The IFRC strives to ‘provide
assistance without discrimination as to nationality, race, religious
beliefs, class or political opinions’. The IFRC provides aid both
before, during and after disasters and health emergencies (IFRC,
2017).
Efforts focus on three key areas: disaster response and recovery,
development, and promoting social inclusion and peace. This essay
will focus on the IFRC’s disaster response and recovery efforts.
The IFRC goal with respect to worldwide disaster response is ‘to
reduce the numbers of deaths, injuries and impact from disasters’
(IFRC, 2010).
Teaming and collaboration at the IFRC

The IFRC uses a combination of local citizens and global networks
in its relief efforts. When a disaster strikes, the first people to
respond are those within the local community. As such, the IFRC
endeavours to recognise high-risk regions and to have a presence
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THE MBA ADVANTAGE
there. Time is then invested to prepare at-risk communities for

potential incidents.
Efforts focus on working with local communities to recognise
risks and predict potential disasters. A plan is established to both
mitigate the risks as much as possible but also to teach response
techniques in the event of a disaster that will maximise the value
added by people of the community and reduce duplication of
efforts (IFRC [2], 2017). When the local community cannot
respond to the disaster at hand or is overwhelmed, IFRC reaches
out to its global community for support ‘…as more people around
the world rely on social media to seek information and assistance
in emergencies, humanitarians must ensure that we are part of
that conversation’ (ICRC, 2017).
The use of social media and crowdsourcing in disaster

response
Emergency response organisations, including the IFRC, are
recognising the value to be gained from technological advances
and the ability to communicate rapidly with technology. It is a
growing trend in disaster response efforts to use information
gained from social media to better understand where help is
needed and best direct aid efforts. Abedin and Babar (2017)
discuss the role of social media to rapidly propagate information
during disasters. In effect, the use of social media creates a type
of virtual team in the disaster response effort. Rapid information
exchange is critical during disaster management and, where
possible, the IFRC uses the local community as first responders,
but it also uses social media.
50
Case study: The 2010 Haiti earthquake

The Haiti earthquake in 2010 was a landmark moment for using social
technology for humanitarian efforts (Cernigoi, 2015). The traditional
emergency response services had failed but text messages were still
being successfully transmitted and so volunteers quickly established a
text message reporting system (Munro, 2017). Text messages were
trawled through in search of information regarding where people may be
affected by the disaster and what effects were being experienced. This
information was then used to create maps and search-and-rescue plans.
The biggest challenge, however, was that most of the messages were in
the native language of Haitian Kreyol, which was not widely understood
by the aid providers. To overcome this challenge, crowdsourced
translation was utilised. Collaboration occurred online to translate the
messages into English and to use local knowledge to fill in the gaps,
such as the location of where incidents were being reported. This data
gathering and translation occurred rapidly with critical information
reported back to the responders within 10 minutes, and they were then
able to create digital maps and action plans (Munro, 2017). Digital
mapping has played a key role in emergency response efforts ever since
(Cernigoi, 2015).
The Missing Maps Project

The American Red Cross (a member of the IFRC) launched the
Missing Maps Project in 2014 with recognition that maps are vital
when delivering humanitarian aid but are often missing in the
developing world (American Red Cross, 2017). Missing Maps is
a pre-emptive project that is open and collaborative as volunteers
from around the globe create maps that are missing in developing
regions which are at risk to natural disaster.
Missing Maps is a three-step process:
1. Volunteers from around the world trace satellite imagery
onto OpenStreetMap – a free editable map of the world
(HOT, 2017).
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THE MBA ADVANTAGE
2. Details such as neighbourhoods, street names and

evacuation centres are added by community volunteers in
the area.
3. Humanitarian organisations use this mapped information to
plan their efforts of risk reduction and disaster response
plans.
Crowdsourced information, together with information gained

from platforms such as Facebook, Twitter, wikis and SharePoint,
create new ways for information from many people to be gathered,
analysed and used in disaster relief efforts. According to Abedin
et al (2017), using social media and crowdsourced data is benefi-
cial as it not only provides information to responders but it also
provides information to those affected and helps to create a sense
of community in times of crisis.
Shortcomings, liabilities and recommended mitigations

Abedin et al (2017) note the biggest value of social data is its ability
to gather information rather than provide instruction. The efficacy
of social media for directive purposes is currently limited and
traditional methods are preferred. It was found that erroneous
information was being posted on social media during emergency
response efforts. In most instances this was accidental; however,
there is also the possibility that intentional misinformation may
lead to undermining aid activities or create unsafe conditions for
aid workers (ICRC, 2017). In a worst-case scenario, exploitation
by terrorist groups or hackers could occur with catastrophic
impact.
The vulnerability of emergency systems to hacking is becoming
increasingly prominent. In 2013, there was an incident whereby a
US TV station broadcast an emergency alert warning about a
52
zombie apocalypse thanks to the work of hackers (Storm, 2013).

Emergency response organisations need to be mindful of the risk
of hacking when using social media and adopt cyber security
measures to the best of their ability. However, the ability to verify
the truthfulness of all posts/texts is impossible and poses a key
shortcoming of the use of social media in disaster response efforts.
Another concern facing the IFRC is one that challenges the
very heart of the Federation and its reason for being. The
fundamental principle of the IFRC is its intention to provide
humanitarian assistance to all people, irrespective of class and
social standing (ICRC, 1996). However, one might argue that
using social media in a disaster response effort will be of little or
no use to millions of the world’s most vulnerable sufferers who
do not have access to such technology (ICRC, 2017).
This inequity could provide quite a conundrum to the IFRC.
How can technological advances be utilised without discriminat-
ing against the poorest or most vulnerable people? One potential
solution is to provide temporary communication devices in times
of disaster. Satellite communication is commonly used for
disaster management and provides mobile communication for
responders and victims in regions where no mobile communica-
tion is possible – either due to a lack of services generally in the
region or due to a destruction of communication networks due
to the disaster (United Nations, 2011).
In the longer term, the IFRC may want to focus efforts on
using social media to communicate with impacted people (rather
than just those reporting on observations) and encourage
development of technologies and infrastructure in developing
regions to better support their emergency response capacity.
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THE MBA ADVANTAGE
Summary
The IFRC provides a solid approach to disaster response that has
been built from years of experience. Traditional approaches
remain the focus for disaster response, based on detection of high-
risk areas and providing a physical presence in these areas.
However, as we move into an era of technological growth and
innovation and the increased use of virtual teams, it is evident that
the IFRC can increase its efficacy by selectively incorporating new
technologies into its response plans. Social media and crowd-
sourcing are new ways to gain collaboration across the globe and
enhance the IFRC’s traditional processes, however, they don’t
come without limitations and risk. The IFRC faces both data
integrity and ethical challenges that will need to be tackled to
ensure it continues to provide a high level of service while staying
true to its values.
Author: Lisa Napier

Lisa is a corporate strategy and transformation advisor with
extensive experience working with executive leadership to
establish and implement corporate strategy. Lisa works
across diverse organisations to communicate strategy, align
the workforce and drive effective outcomes.
This essay is copyright of Lisa Napier, 2018.
54
PART II
MANAGING
UNCERTAINTY
AND
DISRUPTION
ON MANAGING UNCERTAINTY
AND DISRUPTION
Why do some companies thrive in uncertainty, even chaos, while

others that seem to have gold-plated business models one day
suddenly fall from the business firmament the next? In Part II,
four authors explore the implications of uncertainty and
disruption for modern business, providing informative examples
of how companies might prepare themselves to ride out the
swings of fortune – both good and bad – and succeed in the
modern world of business where we are increasingly told that the
one thing we can reliably predict is that change is inevitable.
Opening this conversation, Geoff Batt presents an exploration
of the role of luck in business planning in his essay ‘The Bradbury
framework: luck, preparation and the wary follower’. Framed
against speed skater Stephen Bradbury’s iconic gold medal win
at the Salt Lake City Winter Olympics, Batt illustrates the
unavoidable reality of uncertainty in business and the compelling
case in favour of preparing for it. Fortune, both good and bad,
need not define corporate destiny.
In the following essay, Luana Barron moves to the specific
uncertainties of the modern age in ‘Updating business strategy
in the age of digital disruption’. Barron explores the idea that
disruptive technological and cultural change is transforming the
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THE MBA ADVANTAGE
world of business at an unprecedented rate. The sheer speed of

this change, she argues, is reducing the value of traditional
strategic business models and instead places a premium on
adaptability at all levels of an organisation.
Moving from insight into application, Siew Keong Kwok
investigates how disruptive innovation can be harnessed to
improve the function of modern organisations in his essay
‘Human-centred design and innovation in the healthcare
industry’. Through examples drawn from the dynamic healthcare
sector, Kwok introduces the reader to the leading approaches to
participatory design in business planning and their application
to achieving productive change in complex organisations with
minimal disruption and risk.
Continuing the theme of harnessing disruption, Natalie Sim
completes Part II with her essay ‘Disruption in the classroom:
education innovation for the 21st century’. Sim argues that
nurturing children’s innate passion for divergent thinking and
experimentation through human-centred and open-ended
approaches to learning offers a path to instilling the creativity and
innovation our society needs to grow and prosper through the
21st century and beyond.
58
5. The Bradbury framework: luck,
preparation and the wary follower
GEOFF BATT
The idea in brief

The issue: For a business to survive and prosper takes both luck
and preparation, with neither sufficient on their own to guarantee
success. Classical strategic planning, however, often characterises
luck as something external to the business process. In reality, luck
- good and bad - is the everyday currency of life, with unexpected
events bringing both challenges and opportunities to a business at
every scale.
The context: Companies who fail to appreciate the stochastic
reality of the business environment - the unavoidable occurrence
of unexpected events that can change the competitive landscape -
are essentially hostage to fate. In the long term, these companies
will fall behind competitors that prepare themselves in a pragmatic
fashion for the consequences of luck.
The solution: Good strategy needs to be developed upon a three-
fold foundation of the existing strengths of the business, the past
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THE MBA ADVANTAGE
history of events in the market in which it operates and a vision of

the range of unexpected events it might be expected to encounter
over the term of the strategic planning horizon.
Salt Lake City, Utah, 16 February 2002

The four skaters fly down the back straight for the last time,
athletic figures low to the ice in aerodynamic formation. The
American favourite, Apolo Ohno, drives hard in the lead, buoyed
by the patriotic cheering of the 15,000-strong Salt Lake City
crowd, close enough now to taste the sweet fulfillment of his
Olympic dreams. In tight formation behind stream the three
rivals he has traded the lead with throughout the race – China’s
Lia Jiajun, Canadian Mathieu Turcotte, and Ahn Hyun-soo of
South Korea.
As the four enter the final turn, the aggressive Jiajun makes
his move, an ambitious drive past Ohno on the outside. Throwing
every athletic fibre of his honed physique into a final push for
national glory, Jiajun mis-judges his moment and collides with
the American, falling hard. Ohno, racing momentum broken,
struggles to regain his balance but his knee touches the ice,
swinging him into the path of Hyun-soo trying to pass on the
inside. Both men tumble, and Turcotte – himself driving power-
fully for the line in the Korean’s slipstream – is unable to avoid
the unfolding disaster.
All three men hit the ice, their momentum carrying them into
the wall, ricocheting back onto the track. As the four speedsters
lie splayed in a tangle of limbs, stunned and bloodied, agonising
metres from victory, a fifth lycra-clad figure appears around the
curve of the track. Australian Steven Bradbury – so far off the
pace he wasn’t even in the television frame for the cataclysmic
crash – snakes smoothly past the prone forms of his more fancied
60
The Bradbury framework: luck, preparation and the wary follower
rivals, raising his arms in almost disbelieving triumph as he glides

calmly across the finish line – and it’s gold! Gold for Australia!
Gold! (Ford, 2017).
Definition: ‘Do a Bradbury’

v. (1) To achieve something seemingly by accident. (2) To win against
extreme odds, usually when more fancied competitors have eliminated
themselves from a contest because of unforeseen circumstances.
(3) To plan to run last in an event as a tactical move to capitalise on any
mishaps that may occur. (Adapted from the Online Slang Dictionary)
The strategic narrative of the Bradbury victory

The sporting world stood agape, with the global reaction aptly
summarised by USA Today: ‘The first winter gold medal in the
history of Australia fell out of the sky like a bagged goose’ (Gordon,
2003). Struggling to classify Bradbury’s success, the international
media painted him as ‘the luckiest gold medal winner in Olympic
history’ (Knight, 2002) – a human-interest story for Salt Lake City
to rival underdog ski jumper Eddie ‘the Eagle’ Edwards at the 1988
Calgary games and swimmer Eric ‘the Eel’ Moussambani from
Equatorial Guinea at the Sydney Olympics in 2000.
While perhaps narratively satisfying, such comparisons ulti-
mately ring hollow. In a critical difference to these everyman
crowd favourites from previous years, Bradbury was going home
from the games with a gold medal around his neck, and his
success is deserving of deeper analysis.
To flippantly cast Bradbury as ‘the accidental hero’ (Gordon,
2003) is a deep disservice to his achievement. A former speed
skating world champion in the 5,000-metre relay discipline and
competing in his fourth Olympic games at Salt Lake City,
Bradbury had all the ‘luck’ of someone who had trained and
prepared himself for this moment through a 12-year international
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THE MBA ADVANTAGE
sporting career. Clearly, the turn of events in the final played a

key role in the outcome, but even this – while unpredictable in
its spectacular detail – was not unforeseen by Bradbury and those
around him.
To give Bradbury his own voice on this point, ‘I was the oldest
bloke in the field and I knew that, skating four races back-to-back,
I wasn’t going to have any petrol left in the tank. So there was no
point in getting there and mixing it up because I was going to be
in last place anyway. So I might as well stay out of the way and be
in last place and hope that some people get tangled up’ (Craddock,
2012).
Rather than the simple speculative ‘give it a go and hope for
the best’ that some commentators cast his victory as then,
Bradbury had made a clear and deliberate tactical decision to
hang behind the other four finalists in the expectation – and here
is the key point that elevates this to the level of strategy – that if
two or more of them were to fall, he would be in the position to
capitalise on this and gain a foothold on the medal podium.
Further lifting its relevance, unlike many such ‘strategies for
success’ touted by business leaders and sporting victors on the
motivational speaking circuit, Bradbury’s statement on this point
is no mere reverse-engineering of a plan through the lens of
hindsight. Rather, it can be shown to have evolved during the
Games through careful and salient diagnosis of his position.
Bradbury had already ridden his luck through the earlier
stages of the competition and, in so doing, had been forced to
confront the magnitude of his challenge. With only the top two
finishers in early races going through to the next round of
competition, Bradbury had come perilously close to elimination
in his quarter final – finishing third on the ice behind Apolo
Ohno and world-champion Marc Gagnon of Canada, before
62
Gagnon was disqualified for obstructing another racer. Bradbury

advanced to the next round, but by a margin no thicker than his
lycra racing suit.
Having survived this close-call, Bradbury and Australian
national coach Ann Zhang sought to develop a viable game plan
to take forward into the later rounds (Gordon, 2003; Bradbury,
2017). Crashes are an everyday risk in high-level speed skating, as
closely matched testosterone-fuelled competitors flash around the
track, jostling aggressively for position (Quinn, Lun et al, 2003).
Accepting the reality that his 28-year-old frame couldn’t
match the competition in terms of raw pace, Bradbury and Zhang
focused on the realisation that trying to challenge the young
bucks of the speed skating world on the ice directly would, in all
likelihood, only increase his own chances of falling (Craddock,
2012; Bradbury, 2017). Instead, Bradbury would lurk behind his
opponents, clear of the physical challenging for racing advantage,
but hoping that the intense competitiveness would take one or
two racers out and give him an opening (Figure 5.1 overleaf ).
Although they didn’t describe it in these terms, what Bradbury
and Zhang had done through this process was to execute a
textbook strategic planning exercise, which included:
1. Diagnosing Bradbury’s position through a sporting SWOT
analysis that addressed his relative strengths and weaknesses
as a competitor, the opportunities of his position and the
threats posed by his competitors.
2. Developing a guiding policy from this analysis: being ready
and prepared to take advantage when an opportunity
presented itself.
3. Preparing a specific action plan for his racing: hang safely off
the front-runners and wait for a crash.
63
THE MBA ADVANTAGE
Figure 5.1: Figurative representation of Bradbury and

coach Zhang’s strategic evaluation for the speed skating
competition at Salt Lake City
On-track collisions
bringing down one or
Clean race – no collisions more competitors
Honourable Loser Train Wreck

Skating to his Pushing himself
limits, Bradbury is against stronger Skate to
unable to match the opponents, Bradbury the limits
of your
Level of Bradbury’s effort
pace of his younger is likely to cause or

competitors be caught up in ability
collisions
No chance of victory No chance of victory
Passive Observer Opportunist

Bradbury watches Bradbury stays
from the back of the clear of trouble, but
field as his younger remains ready to
Hold back
competitors establish strike if opportunity
a new world order presents itself
No chance of victory Chance of victory
Events on the racetrack
Applying this new plan in his semi-final – age and guile brought to
bear against the advantages of youth and vigour – Bradbury trailed
the field in last place for much of the race, well off the pace of the
favourites. Exactly as he and Zhang had prepared for, however, three
of the leading competitors – defending Olympic champion Kim
Dong-sung of South Korea, multiple Olympic medalist Li Jiajun of
China, and Canada’s Matthieu Turcotte (the latter two of whom
Bradbury would go on to meet again in the final) – crashed.
Executing his strategy to perfection, the Australian seized the
resulting opportunity, sailing through to secure his place in the final
in a made-for-Hollywood foreshadowing of his coming victory
(Craddock, 2012).
64
Far from mere random happenstance then, Bradbury’s unlikely

triumph came from leveraging his luck through skating to a
deliberate and empirically validated action plan, built on assessing
his relative competitiveness and the nature of the competition.
The role of luck in business

The classical study of strategic management is underpinned by an
assumption that high performance arises from the intersection of
effective strategy and managerial excellence (Parnell, 2005; Morrow,
Sirmon et al, 2007; Morrow, 2011). This belief in managerial
causality, however, is at odds with much day-to-day experience.
Viewed in the longer term, all business is essentially stochastic
in nature. Industry conditions and company success may conform
to reliable trends over short time spans, but these periods of
predictable behaviour are punctuated by unexpected events –
luck, in broad terms (Chermack, Lynham et al, 2001; Ramírez and
Selin, 2014). These might range in scale from the minor – a chance
encounter with a potential client perhaps, or an unexpected
celebrity endorsement – to the profound – an airline faced with
the aftermath of the terrorist attacks on the World Trade Centre
in 2001 – and their net impact can alter the business landscape to
such an extent as to make it close to unpredictable (Parnell and
Dent, 2009). Organisations must repeatedly confront and react to
such events in order to survive and prosper.
This recognition of uncertainty as an irreducible element of
business reality underlies the modern field of scenario planning
(Ramírez et al, 2014). Any particular scenario imagined for the
future of a business may be unlikely, so the scenario planner seeks
to test business strategies against multiple plausible future
situations (Chermack et al, 2001), and thereby help business
leaders and policy makers anticipate hidden weaknesses and
points of inflexibility in their organisations: is the business ready
65
THE MBA ADVANTAGE
to survive and capitalise upon the luck, good and bad, that the
world might cast its way?
From medals to mines

Moving from the introduction of this concept through sporting
glory to gold of a different tenor, this relationship is perhaps easier
to isolate in mineral exploration than in many other fields of
business. There are very few parts of the world where you can
genuinely be the first person to explore the landscape and assess
its potential mineral endowment. Others have almost invariably
been there before you, evaluated the economic potential of the
geology and moved on.
The art of exploration then is to find things that others have
overlooked – or perhaps not even known how to look for. At its
core, good exploration relies on expert knowledge and experience
to identify ground with the potential to host substantial mineral
resources. Before baiting your hook, after all, it’s a good idea to
address the question of whether there are any fish around. Or
even any water.
Atop this layer of the controllable, however, the fundamental
act of physical discovery – a drillcore penetrating the ore body,
or the right sample picked up in the field to validate your
exploration model – introduces raw luck as a component of
mineral exploration success.
The Telfer gold-copper deposit

The Telfer mine in Western Australia’s remote Paterson region, for
example, offers a salient lesson in the harsh reality of missed
opportunity – lucky breaks wasted through lack of preparation and
perseverance. Since production began there in 1977, the world-
class Telfer resource has yielded 13.1 Moz of gold and 412 kt of
66
copper, with remaining measured and indicated resources stand-

ing at 12.6 Moz of gold and 990 kt of copper (Newcrest, 2017).
French prospector Jean-Paul Turcaud first stumbled across this
rich prize in 1971 (Tyrwhitt, 1995; Adcock, 1999). Recognising
apparent clues pointing to mineralisation in the folded strata of
the area, he sampled the gossans (weathered remnants of
mineralised veins) exposed across the hilly landscape, including a
spectacular 10-metre-thick horizon that ringed the amphitheatre
of the main dome structure ‘like a coal seam’, in the evocative
words of later developer David Tyrwhitt (Tyrwhitt, 1995).
Grading at an average of 10 g of gold per tonne and running
for over five linear kilometres around the eroded dome (Tyrwhitt,
1979; Tyrwhitt, 1995), this spectacular reef – the eventual heart
of the Telfer mine development – lay naked and exposed at the
surface to the touch of Turcaud’s sun-toughened hands. Such a
discovery surely ranks as the most spectacular piece of good
fortune a prospector could hope for – a once-in-a-lifetime
moment of providence. But for Turcaud it came to nothing – he
wasn’t ready for his luck when it arrived.
Suspecting the potential of what he had found, but lacking
both the geological knowledge to understand his discovery and
the resources to fully investigate it, Turcaud took his observations
(and his samples) to the major mining companies working in
Australia at the time. Promisingly, two of them – Western Mining
Corporation and Anglo American – were interested enough in
the field-hardened Frenchman’s story to come up into the remote
Paterson country inland from Port Hedland in the far north of
Western Australia and look over the ground for themselves
(Tyrwhitt, 1995).
Neither group, however, proved any more ready than Turcaud
to secure the bounty that fate had brought to their door. Blinkered
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THE MBA ADVANTAGE
by a focus on the base metal priorities of the contemporary

Australian minerals scene, neither the teams of company geologists
visiting this remote prospect nor their French host thought to test
the landscape or any of the samples collected for gold. Not once
then, or even twice, but three times, the opportunity of Telfer’s
riches was handed to different players, and on each occasion, they
proved unprepared for the lucky break offered, with Telfer’s golden
bounty instead falling to the later independent discovery of
Tyrwhitt, working for Newmont Australia (Tyrwhitt, 1995).
As the discovery of Telfer illustrates, luck and preparation are
interacting elements in business (see Figure 5.2 opposite), with
neither an adequate predictor of success in isolation. Luck, both
good and bad (in the sense of unexpected events with the potential
to manifestly affect corporate destiny) falls to many companies over
the course of their operations – a chance encounter with a potential
client, perhaps, or in the case of mineral exploration, the final
discovery hole penetrating mineralisation and validating the
exploration model.
Case study: Margaret Hawke and Sandfire Resources

For a contrasting tale of luck firmly grasped, consider the experience of
Margaret Hawke and Sandfire Resources. In the winter of 2009, Hawke
was a junior exploration geologist working on the company’s promising,
but so-far unproven, Doolgunna gold prospect near Meekatharra in
Western Australia’s dusty interior.
At the end of an otherwise unsuccessful exploration campaign targeting
shallow oxide gold mineralisation, and with the company – cash balance
dwindling – about to up-sticks and leave the field to lick its wounds and
consider a new round of cost-cutting measures, Hawke took the bold
initiative of signing off on a final drill hole without the approval of her
absent boss, Sandfire’s technical director John Evans (Batten, 2013).
Departing from previous investigations, this was planned as a vertical
hole, rather than the inclined pattern of the rest of the campaign, and
68
running deeper, below the oxidised regolith layer to target the fresh rock
below. Hawke’s speculative hole intersected 75 metres of spectacular
sulphide mineralisation containing rich grades of copper, gold and zinc –
and marked the discovery of the fabulous DeGrussa deposit (Batten,
2013; Piper, 2014; Washbourne, 2014).
Today, this body is the heart of the largest copper producer in Western
Australia, yielding 300,000 tonnes of high-grade copper concentrate
(around 67,000 tonnes of contained copper) and over 35,000 ounces of
gold per year (Sandfire, 2017).
Figure 5.2: Figurative summary of the interacting roles

of luck and preparation in business
Wasted Opportunity Hollywood Narrative

Catch a lucky break Lucky opportunity
but lack the readiness arises and the business
to capitalise on the is in a position to
opportunity capitalise on it
Extent of good luck
Business failure Business success
Self-fulfilling Prophecy Heroic Failure

Business fails to position Business does everything
itself for success, so right, but fails to capture
the relative level of good the zeitgeist or secure
fortune it experiences a lucky break
is immaterial
Business failure Limited success at best
Extent of preparation
Disaster Area Great Survivor

Fundamental business Business model
Bad luck
weaknesses leave it anticipates the

unable to withstand misfortune or creates
even minor external structural robustness to
pressure withstand it and recover
Business failure Business survival
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THE MBA ADVANTAGE
Where much of the press coverage of Sandfire’s success story focused

on the apparent serendipity of Hawke’s ‘accidental’ discovery (Batten,
2013; Piper, 2014; Washbourne, 2014), this simplistic characterisation
once again fails to capture the full reality of the situation. Hawke was no
naïve waif stumbling in the outback dust and turning up a nugget of
gold. Instead, she was a qualified and creative geologist pursuing a
hypothesis – albeit a speculative one. Further, Hawke was only on the
Doolgunna ground with a drilling team at her disposal due to the long-
term work of John Evans and the Sandfire team on the prospect and
their recognition and backing of its fundamental potential to host
substantial mineralisation.
The circumstances of the final spectacular drill intersection – so perfect
for the narrative framing of the heroic tale of discovery – may be an
example of luck in its purest form, but this was luck the participants had
prepared for individually (through training and experience) and
collectively (through Sandfire’s exploration strategy) for many years.
Hawke and the Sandfire team were ready for their luck when it came and
fully able to capitalise on it (refer back to Figure 5.2).
Nevertheless, it is important not to discount the role of that lucky turn of
fortune in this storybook tale of exploration success too heavily. Had
Hawke’s final drill hole placement instead been as little as a few tens of
metres away – perhaps to avoid a fallen tree – or had Evans caught wind
of the unauthorised extension to the drilling program and ordered his
junior staff member to stop ‘wasting’ the company’s dwindling resources
and get back to Perth – a different ‘sliding doors’ future presents itself
where all the training and preparation of Hawke and the Sandfire team
count for naught.
For every DeGrussa jackpot, there are likely a dozen such ‘final rolls of
the dice’ where, absent the luck of final discovery, the end result of even
well-prepared and well-founded exploration plans is nothing more than
the brass name plate of another failed small-cap mining company being
quietly unscrewed from an office building in West Perth.
Luck – perhaps not always of the spectacular form enjoyed by Hawke
and Sandfire in 2009 – will inevitably play a role in commercial success,
with the true craft of a good business operator being to make sure they
are prepared to grab their opportunity – or equally, to deal with the
consequences of misfortune – when it arises.
70
Watchful preparedness: the wary follower strategy

Considerable competitive advantage can accrue to a company that
is able to lead the way through innovation or development into a
new market (Zahra, Sisodia et al, 1994; Wunker, 2012). Moving
into such ‘blue ocean’ conditions (Chan Kim and Mauborgne,
2005; Kim and Mauborgne, 2014) – devoid of competition and
expectation – the innovator gains an opportunity to shape the
market and establish their brand position as leader in the eyes of
customers.
In business as in racing, however, competitors can adopt a
range of strategies to suit their individual strengths and expecta-
tions (Wunker, 2012) – and such leading from the front is not
always a guarantee of ultimate success. The innovation and novelty
required to be a bold first mover can be expensive and risky, for
example. Without precedent as a guide, the pioneer may misjudge
the scale or mood of the market, or fail to achieve expected levels
of penetration and growth, and find themselves over-capitalised,
over-extended and vulnerable to the competition (Zahra et al,
1994; Wunker, 2012).
A recognised alternative to such risky leadership into uncharted
business waters is to instead follow the lead of innovators –
adapting business plans in response to the market experience of
the pioneer in order to follow smoothly in their wake (Wunker,
2012). Such ‘fast followers’ take fewer risks than the first movers
they seek to emulate. Nor do they incur the sometimes-high costs
of research and development needed to identify true innovative
opportunity.
The obvious downside of the position, however, is that by
definition a follower is tied to the fate of the leader. If the
innovator succeeds, the strategy is proven viable and the market
may be prepared to credit followers applying a similar business
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THE MBA ADVANTAGE
plan. If the leader stumbles or fails, however, any close follower

– market image anchored to the leader and pursuing the same
strategy – is likely to be tarnished by association and runs a
substantial risk of being caught up in the fall (Wunker, 2012).
Recognising this potential, other followers prefer to adopt a
more measured and longer-term approach. Rather than the agile
pursuit of the fast follower, such slow followers delay entry to the
market to observe its evolution, and assess the strengths and
weaknesses of the market leader and any early followers in
planning a response (Wunker, 2012).
Perhaps the most successful proponent of this strategy in
recent corporate history has been Apple. Time and again – with
the personal computer, mobile phone, streaming music and
wearable technology – the Cupertino-based tech giant, today the
most valuable company in the world by market capitalisation
(Statista, 2017), has come as a late entrant into a product sector,
observing and assessing early innovators and customer responses
before launching their own market-redefining offerings and
capturing dominant market share and profits (Lee and Kwon,
2017; Wang, 2017).
Translated from the ice rink to the hotter fields of business,
Bradbury’s winning strategy from the Salt Lake City Olympic
Games contains elements of both the fast follower and slow
follower approaches to market entry. Bradbury defined his plan
around an assumption that he would not be leading the race –
ceding the dominant position to his competitors. Unlike a fast
follower eager to catch the leader’s slipstream, however, to
preserve his energy and avoid the realistic potential of collisions
on the ice he elected to stay well clear of his competitors and hold
back from the full cut-and-thrust of the race. Unlike a genuine
slow follower though, he had to be in the game from the start.
Further, knowing that the window to capitalise on any
72
missteps by his elite and highly motivated opposition would likely

be slim, Bradbury also needed to stay close enough to the leaders
to capitalise on his chance if it came. These hybrid characteristics
are here taken to define a distinct strategy – the wary follower:
agile and responsive to competitors and conditions but at arm’s
length from the competition, watching and waiting in the hope
and expectation of failure among the leaders (Table 5.1 overleaf ).
In low-risk conditions such deliberate distancing from the
market leader and failure to engage competitively could be
expected to leave the wary follower at a substantial disadvantage.
As an entry strategy to a high-risk competitive market, however,
this approach offers the potential of a strong position in the event
of the market leader becoming distressed. Close behind and active
in the market, in these circumstances, the wary follower may be
able to pivot around the failing leader and closely strategically
aligned early entrants to establish a leading market position.
Case study: Slater & Gordon

In 2007, Australian law firm Slater & Gordon became the first publicly
listed legal firm in the world (Grech and Morrison, 2009). Enthralled
by the prospect of tapping into the profitable legal sector through such
a leading and long-established firm, the market climbed aboard, driving
the firm’s share price steadily upwards over the next eight years
(shown in Figure 5.3 overleaf) and making substantial fortunes for the
existing partners.
While many other firms in the traditionally conservative legal world
were slow to follow the innovative lead, two substantial companies –
Shine Corporate and Spruson & Ferguson – followed onto the ASX
in subsequent years and watched their values track the path of
Slater & Gordon ever higher.
73
Table 5.1: Summary of the characteristics and relative advantages of
different approaches to strategic positioning for market entry
Business strategy First mover Fast follower Late follower Wary follower
Racing equivalent Lead from the front The slip-streamer – The late entrant – The back-marker –
staying close in the not competing, just staying clear of trouble
wake of the leader analysing the field and waiting for an
to develop tactics opportunity
for next year
Characteristics First adopter of new Aligns closely to the Delays entry to market Deliberately retains strategic
technology or leading market leader, pivoting to monitor the success distance from the market
entrant into new and adapting business of pioneers. leader to avoid association
74
market. Leads through model to follow its with its possible failure but
innovation and finding strategic lead. remains close enough to
ways to address take advantage of the market
market barriers to entry. opportunity it may provide.
THE MBA ADVANTAGE
Advantages Innovative position Low-cost market entry. Ability to distil the Avoids association with lead
allows establishment of Following established successes and failures entrants in the event of their
brand recognition and market precedent. of early market failure. Able to learn from
customer loyalty before entrants. and capitalise upon mistakes
competitors arrive. made by early entrants.
Disadvantages Uncertainty of position Tied to the success Yields market lead to If the market leaders
– no precedents to and strategic framing early entrants. Opportu- succeed, the wary follower
follow. Expense of of the market leader. nity for the late follower is excluded from advantage.
research and At risk in the case of only arises if first mover
innovation. Its failure. makes a mistake.
Figure 5.3: Comparative stock price performance of

ASX-listed legal firms 2007 to 2017
— Slater & Gordon Stock price increase*
— Shine Corporate 1000%
— Spruson & Ferguson
S&F listing 750%

October 2014
500%
Shine listing
S&G listing April 2013 250%
April 2007
0%
-250%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Start of calendar year
To allow for comparison, prices are plotted in terms of percentage gain normalised to the performance
of market pioneer Slater & Gordon.
* = Relative to S&G parity at launch.
Data extracted from Yahoo Finance on 10 December 2017 – https://au.finance.yahoo.com
This happy experiment was brought to a shuddering halt in 2015,

with pioneer and former market darling Slater & Gordon plunging
catastrophically from a share price high of $7.85 to less than $0.25 in
the space of a year. $2.8 billion was wiped off the market value of the
company, with the legal firm becoming – in something of a supreme
irony – itself the target of a class action suit by investors over the
sudden and dramatic collapse in its value (Letts, 2017).
This spectacular fall from grace is attributed to a near-perfect storm of
corporate over-reach and fraud in the company’s ill-fated and over-priced
acquisition of the professional services division of UK firm Quindell for
AUD$1.3 billion (Shapiro, 2017), compounded by legislative change to
limit injury liability claims (a key element of the Slater & Gordon business
model) in the UK market (Shapiro, 2017). In essence, these problems
were specific to Slater & Gordon and should have had little impact on
the market around the company (Humphrey-Jenner, 2017).
As the Slater & Gordon share price plunged, however, down alongside
them tumbled Shine Corporate – free-falling 85 per cent in value. Spruson
& Ferguson, meanwhile, remained conspicuously immune from market
opprobrium – doubling in value through 2015. The radical difference in
75
THE MBA ADVANTAGE
performance of these two followers may reflect their respective strategic

distance from the pioneering Slater & Gordon. Shine, a personal injury
and consumer law firm cut from the same cloth as the now-disgraced
market pioneer, was pilloried alongside them (Walsh, 2017). In contrast,
Spruson & Ferguson, an IP and patent attorney firm, was able to maintain
a position at arm’s length from Slater & Gordon as it fell, even benefiting
through transferal of investment from investors keen to maintain exposure
to the legal sector.
In essence, Shine – perceived as following fast in the footsteps of the
pioneering Slater & Gordon – was unable to escape the market’s wrath
as sentiment turned against the Melbourne-based company. Spruson &
Ferguson, in contrast, was distinctive enough in its market offering to
avoid damaging guilt by association, while still close enough to the core
legal services position of the former market leader to capitalise on its
distress.
Essentially, Spruson & Ferguson played the nimble Bradbury –
a successful wary follower dodging disaster – to Shine’s unlucky
Matthieu Turcotte – fast-following and unable to avoid the fate of the
leader – as the skaters tumbled to the ice in Salt Lake City.
Doing a Bradbury: a powerful illustration of strategic

planning
Far from the global punchline it was initially framed as then,
Bradbury’s unexpected win at the 2002 Salt Lake City Winter
Olympics should instead be viewed as a powerful illustration of
the potential of strategy and careful preparation when under-
taken in light of the role of luck to transform the competitive
landscape.
Although he undeniably rode the serendipity of his com-
petitors’ crashes across the line to take gold, the true foundations
of Bradbury’s victory came from his years of preparation and
experience, and the strategy that saw him perfectly placed to
capitalise on his good fortune when it came. As Bradbury himself
said in an interview immediately after the race, ‘Obviously
76
I wasn’t the fastest skater. I don’t think I took the medal for the
minute-and-a-half of the race I actually won. I took it for the last
decade of hard slog I put in’ (Gordon, 2003).
Summary
While businesses experience periods of predictable behaviour,
these are inevitably punctuated by unpredictable events and
unforeseen changes in the business landscape – luck, good and
bad. This stochastic reality, however, does not obviate the need
for strategy and planning in building a sound business plan –
even the most spectacular examples of good fortune are no
guarantee of success if the recipient lacks the knowledge and
preparedness to utilise them effectively.
In light of this duality, strategic business planning should be
undertaken around a three-way foundation of (1) identifying the
existing strengths of the business, (2) analysing the past history
of events in the market in which it operates and (3) considering
the range of unexpected events the business might be expected
to encounter over the term of the strategic planning horizon.
Author: Geoff Batt

Geoff runs boutique consulting agency Lucid Science,
providing research management, specialist geoscience
analysis, and stakeholder communication services to
corporate and government clients in Perth, Western Australia.
He has over 20 years of experience in applied geoscience
and higher education, and completed the UWA full-time
intensive MBA program in 2017 to help hone the commercial
focus of his work.
This essay is copyright of Geoff Batt, 2018.
77
6. Updating business strategy in
the age of digital disruption
LUANA BARRON
The idea in brief

The issue: The speed of disruption and the global connectedness
inherent in the modern business environment are rendering
traditional notions of competitive advantage increasingly precarious
across a broad range of industries.
The context: Disruptive technological and cultural change is
transforming the world of business at an unprecedented rate. This
dramatically reduces the value of traditional strategic models
anchored in the development and defence of specific capabilities
and places a premium on adaptability at all levels of an
organisation.
The solution: Business strategy needs to move from a deliberative
to an emergent model with innovation at the heart of organisational
culture. The organisations that will succeed and dominate in the
business environment of the coming decades will be those that can
continue to devise ambitious visions for the future, yet
78
Updating business strategy in the age of digital disruption
simultaneously remain agile, experimental and capable of coping

with complexity and change.
Survive or thrive
‘In an era of digital business and rapid technology
change, virtually no company can ignore the imperative to
innovate. Failing to do so is an invitation to lose business.’
(PwC, 2017)
Open a business journal or blog these days and you could be
forgiven for wondering how today’s organisational leaders
manage to maintain any focus or grasp on their company’s future
state at all. References to the ‘increasingly dynamic business
environment’, ‘rapidly changing landscape’, ‘accelerating pace of
change’ and ‘disruptive forces’ are copious.
Much of this turbulence is attributed to the rise of the digital
era or, as some have heralded it, the ‘fourth industrial revolution’.
This current period of technological change by its very nature is
allowing adoption and adaptation of new technologies faster than
ever.
In contrast to the relatively stabilising inventions of the steam
engine and electricity, digital technologies are seen to be advanc-
ing at an exponential pace. The development of these technolo-
gies is taking place in a highly connected global setting, allowing
new technologies to be captured at fast download speeds with
the relative ease of a click of a button.
Broadly, this dynamism in the business setting is driving
companies across many industries to place increased emphasis
on innovation to survive and thrive. Innovation in the business
context is a creative, often unpredictable process for developing
and exploiting new business ideas into commercially viable
solutions. But strategy has historically emphasised prediction and
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THE MBA ADVANTAGE
control. How then have strategic management theories evolved

to remain relevant under current business conditions?
This essay will examine the evolution of strategy over recent
decades and explore some of the 21st century additions to
management literature that attempt to bring innovation and
adaptation into harmonious synchrony with the strategy setting
process.
A brief overview of the evolution of business strategy

The beginnings of business strategy are rooted in military
operations, which conceived strategy as the deliberate means for
overcoming a targeted enemy through the formulation of calcu-
lated battle tactics and planning for the deployment of troops and
artillery. This conception of strategy was translated into the
business world as the way a company defines how limited
company resources should be deployed to beat the competition,
with attention on efficiency and precision.
In the 1960s, widely recognised as the onset of the heyday for
strategic management, business strategy became largely synony-
mous with corporate planning (Ansoff, 1965; Mintzberg, 1994),
with an emphasis on analysis, forecasting, goal setting and
resource planning. This progressively evolved into the art of port-
folio planning. Porter (1979) introduced awareness of industry
attractiveness as a strategic consideration through his Five Forces
model, and Mintzberg (1987) proposed the view of strategy as
market positioning. These ideas retained at their core the notion
of strategy as a competitive position, seeking to guide business
decisions on where to play to win market share and profits.
In the 1980s, Porter introduced the notion of competitive
advantage (Porter, 1985), referring to the attributes of a firm which
provided leverage or dominance over its competitors. The
resources-based view of the firm encouraged strategy formulation
80
around the tangible and intangible assets available to the firm

(Wernerfelt, 1984). Over this period, as globalisation saw
industries becoming increasingly crowded and competitive, the
focus of corporate strategy became increasingly introspective,
recognising the importance of identifying the core competencies
or distinctive capabilities which allowed a particular firm to stand
apart from its rivals (Prahalad and Hamel, 1990).
Towards the close of the century, the dialogue around strategy
began to increasingly reflect the dynamic nature of doing busi-
ness in a connected, global context. Mintzberg had articulated
the distinction between deliberate versus emergent strategies,
which recognised both the need and tendency for business plans
and intended actions to be adapted in response to unforeseen
environmental influences (Mintzberg and Waters, 1985).
Heightened recognition of change and uncertainty crept into
management concepts; a renewed interest in scenario planning
emerged as a means to cope with such uncertainty (Rigby and
Bilodeau, 2007), along with the related techniques of horizon
scanning and strategic risk management.
Mintzberg also emphasised the importance of strategic
thinking over strategic planning, recognising that strategy was
not merely something that could be devised and codified but
needed to be continually revisited and revised (Mintzberg, 1994).
This aligned well with the growing interest in the development
of the ‘learning organisation’, one which is able to continuously
absorb new knowledge and capability as it evolves (Senge, 1990).
These developments, alongside various changes in the business
landscape, have culminated in substantive shifts in how
organisations view strategy. Technology has played a significant
role in this, with the enhanced connectivity and transparency
provided by digital information systems and the internet creating
increased access to knowledge and heightened competition
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THE MBA ADVANTAGE
(Wurster and Evans, 2000). The result is that the old notion of
competitive advantage is now recognised as increasingly preca-
rious across a broad range of industries (McGrath, 2013). As such,
the focus of strategy has shifted towards greater preparedness for
change and adaptability. In this context, the push for innovation
within products, services and business models has become an
ever-pressing focus for businesses in the 21st century.
Strategy versus innovation

These days, just about every large corporation will espouse a
commitment to ongoing learning and innovation in their business;
indeed, the pursuit of innovation has come to be seen as a vital
aspect of an organisation’s strategy. In practice, however, innova-
tion initiatives are frequently separate to or misaligned with the
overall company strategy (PwC, 2017).
Many organisations maintain rigid or narrow corporate visions
and continue to define their strategy along the conventional planes
of desired market position and company capabilities. Attempts at
promoting innovation can often be seen as being introduced as
an add-on to the core business through relatively minor invest-
ment in research and development (R&D) along existing product
lines, rather than a key pillar of business strategy.
Today much of management theory will draw a distinction
between incremental innovation or continuous improvement
initiatives, step change innovation and disruptive or radical inno-
vation. These delineations are useful to business leaders as the
appropriate organisational designs and practices which support
these diffferent outcomes will vary. For most companies, a
combination of each is desirable, with the emphasis on the most
important type being dependent on company resources, scale and
industry (PwC, 2017).
82
Digital innovation or transformation is particularly attention-

grabbing, as it rapidly transcends the boundaries of an individual
firm or industry. One only needs to scan the list of highest market
capitalisation companies, including Apple, Alphabet and Amazon,
to see the dominance of digital businesses within the global
economy. Digital transformation involves the integration of digital
technologies, such as advanced analytics, artificial intelligence and
mobile technology, into an organisation’s strategy and operations.
The application of digital technologies within existing indus-
tries is having highly disruptive effects, breaking down existing
competitive hierarchies and reshaping business models. As an
illustrative example, the successful application of digital tech-
nologies to the transport sector allowed Uber’s business model
to upset not only its main competitors in the taxi industry but
also potentially redefine the model of car ownership entirely.
In order to meet this growing aspiration of innovation, new
models of innovation beyond the traditional R&D department
are being increasingly embraced. These operating models are
generally more externally focused and inclusive, involving
practices such as open innovation, design thinking and co-
creation with partners, customers and suppliers (PwC 2017).
More and more, there is evidence of established companies
collaborating in their innovation efforts; by partnering with start-
ups; creating innovation platforms or networks which invite
participation from external collaborators; and using idea competi-
tions or hackathons as crowdsourcing techniques to tap into new
ideas beyond organisational boundaries. Design thinking is also
gaining wider popularity and application, no longer being used
just for products but also to devise strategy and manage change.
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Aligning innovation with strategy: what matters now?

As evidenced by the historical review of strategy and manage-
ment theories, the paradigm of business strategy has evolved
considerably. Volatility, complexity and ambiguity necessitate
agility and flexibility in organisational strategies and structures.
In today’s context, priming the organisation for adaptability to
change is as critical as defining compelling aspirations or targets
for the company’s future.
The Boston Consulting Group (BCG) has openly recognised
this shift in strategic thinking, replacing the old dogma of competi-
tive advantage with a newer framework for ‘adaptive advantage’,
illustrated in Figure 6.1. The company describes this framework as
‘a strategy that acknowledges the unpredictability of today’s
environment and unlocks the dynamic qualities of competition’
(BCG, 2017).
Figure 6.1: Adaptive advantage framework
Ex
pe
al rim
gn en
Si tat
ion
Position
Org
ial
-Soc
an
Capability
isat
Eco
ion
Adaptive Advantage
Systems
(BCG, 2017)
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This framework is developed around five distinct sources of

advantage for a company:
1. Signal. Capturing the right information, extracting signals
and acting on them rapidly.
2. Experimentation. Generating and testing innovative ideas
at low cost.
3. Organisation. Creating structures and settings that enable
flexibility and learning.
4. Systems. Coordinating complex networks of players with
diverse assets and capabilities.
5. Eco-social. Sustainably aligning business models with the
broader social and ecological context.
The transformation to become an adaptive competitor is not an

insignificant undertaking, especially for large, established corpo-
rations that have typically developed systems and processes
designed for stability and control over many decades. Such
companies have been traditionally organised around managing
for scale and efficiency and have consequently developed hier-
archical structures and rigid processes which inhibit the diversity
and flexibility needed for rapid learning and change.
The drive for innovation requires the modern enterprise to
rethink its traditional approach to strategy and operation. Build-
ing on from the BCG framework, the following list of organisa-
tional capabilities, adapted from Reeves and Deimler (2011),
aligns closely with my own observations and experience as the
important criteria for success in the modern era.
1. The ability to read and act on signals of change

This requires an organisation to be ‘tuned in’ to capture the right
information and data, as well have the capabilities to extract and
interpret important signals. Doing this allows the organisation to
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develop appropriate ‘early warning systems’ which serve as

guiderails for correcting the overall business strategy. In the
context of environmental uncertainties, this also suggests an
increased emphasis on monitoring and sense-making rather than
forecasting and prediction, contributing to a renaissance for
scenario planning techniques (Rigby and Bilodeau, 2007).
2. The ability to experiment rapidly and frequently

The rapid pace of technological change in the market promotes
an experimental approach to innovation, requiring a greater
degree of fault tolerance to allow for small failures in this
approach. This was described by Collins and Hansen (2011) as
‘empirical creativity’, the process of first firing ‘bullets then
cannonballs’.
Long development cycles are no longer sustainable as new
products can be left obsolete as they are leapfrogged by the next
big thing. Principles of agile development are being borrowed
from the tech industry and applied across a variety of industries.
This capability applies not only to products and services, but also
with business models, processes and strategies. The conditions
of today are prompting companies to shift away from making ‘big
bets’ on the future to creating a portfolio of ‘real options’.
3. The ability to connect and manage complex networks of

stakeholders
The processes of signal detection and experimentation require
companies to think beyond the boundaries of the business unit
and work in a more integrated way with customers and suppliers,
both internal and external. This requires a shift away from
hierarchical structures to a more networked form of organisation
that relies on informal structures, more organic development and
clustering to promote enhanced collaboration.
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4. The ability to motivate employees and partners

Creating an organisation that is not only resilient but embracing
of change is one of the biggest challenges for management in
dynamic business environments. Such conditions demand
increased presence and communication from business leaders to
create the desired culture and refocus organisational efforts
following a course correction or change in priorities and
activities. New business models require employees and partners
to be highly committed to the success of the business to ensure
delivery of the envisioned change.
Critics of the call for adaptive strategies claim these can be seen
as an ‘excuse for not making hard, dangerous choices’ (Martin,
2014). However, the development of an adaptive approach to
strategy does not exempt organisations from making strategic
decisions within uncertain contexts; rather, it sets the organisa-
tion up so that these choices can be re-evaluated and updated
rapidly as required by the external environment. Satell (2014)
holds that companies ‘must continue to define “where to play and
how to win”, but on a radically compressed time frame’, arguing
that this ‘doesn’t make strategy easier, it makes it exponentially
harder’.
Case study: General Electric

In discussing the evolution of strategy and management into the digital
era, General Electric (GE) stands out as an obvious case study of this
decades-long process of change and transformation. GE is an
organisation that has continuously adapted its strategic processes over
the years, striving repeatedly to adapt to the conditions of the time.
In the 1950s and ’60s, under the reign of CEO Ralph J. Cordiner, GE’s
management philosophy was one of structure and control. Cordiner
(with the help of Peter Drucker) was credited with establishing a
renewed form of scientific management, outlining detailed governing
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THE MBA ADVANTAGE
principles for its general managers within GE’s famous ‘blue books’
(Kay, 1995). Within this environment, GE also became an authority in
corporate planning, particularly portfolio planning, with the creation of
the GE-McKinsey matrix as the in-house tool for the strategic evaluation
of strategic business units.
Over time, however, as GE grew into a large conglomerate business,
these activities became increasingly burdensome to the company.
In the 1970s, then CEO Reginald H. Jones began to note that this
system ‘required a tremendous amount of effort… we were committing
too much of the time of the corporate executive office [to the review of
strategic business plans]’ (Ocasio and Joseph, 2008).
When Jack Welch took the helm of GE in the 1980s, he began a process
of overhauling the company’s indoctrinated management approach in
an attempt to reduce bureaucracy and improve productivity. Welch was
critical of the company’s devotion to strategic planning, with not enough
energy being seen to be dedicated towards visionary pursuits of new
businesses or markets. At the time, Welch was quoted as noting that
‘the books got thicker, the printing got more sophisticated, the covers
got harder and the drawing got better’, but these efforts were not
reflected in improved performance (Freedman, 2013).
Therefore, Welch set about reforming GE’s strategic planning process,
famously axing the company’s planning department in 1983 and
introducing a notion of strategy more synonymous with Mintzberg’s
emergent strategy and the adapative strategies proposed today:
‘Strategy was not a lengthy action plan. It was the evolution of a central
idea through continually changing circumstances’ (Welch, cited in
Freedman, 2013). For Welch, vision was central to the company’s
strategy, stating ‘good business leaders create a vision, articulate the
vision, passionately own the vision, and relentlessly drive it to
completion’ (Kay, 1995).
Although this strategic vision led GE through some of its most
successful years, Welch was criticised for his role in increasing the
company’s exposure to its financial services business, GE Capital.
GE’s profitability suffered considerably following the global financial
crisis of 2007 and 2008. After struggling to regain ground for a number
of years, in 2015, under CEO Jeff Immelt, GE began efforts to refocus
the company, divesting its finance business. Around the same time,
GE ramped up its process of transforming into a ‘digitial industrial’
company, investing heavily in software and analytics capabilities.
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The company also continued in its attempts to promote flexibility and

adaptability within its company culture, notably scrapping the long-
established annual performance management cycle in favour of more
dynamic, up-to-date feedback systems.
However, the performance of GE since launching its digital division has
been underwhelming, as the company has experienced various
technical problems and delays with the launch of its digital platform.
Most recently, GE has taken steps to simplify the company futher,
divesting a number of business units. GE’s market capitalisation has
declined considerably since its peak in 2000, reflecting that it has not yet
managed to successfully transform its strategy to adapt to the digital
age. Although only time will tell how GE fares in its digital transformation,
for the time being at least, GE serves as a cautionary tale of how once-
effective strategic decision-making frameworks are losing efficacy in the
fast-changing and dynamic business world.
Summary
As students of strategy in the MBA program, we find ourselves in
exciting times. The current wave of innovation and entrepreneur-
ship is creating a fascinating environment of new business models,
new companies and even entirely new industries. The opportuni-
ties for an MBA graduate in this context are diverse and plentiful,
providing many interesting new career avenues to pursue.
Within the halls of business schools, the godfathers of man-
agement and corporate strategy are still taught religiously; yet,
we are also increasingly called upon to embrace disruption and
harness the shifting trends in technology, connectivity and social
organisation to transform business models. Today, traditional
management theories are complemented with more modern
ideas from the digital era such as design thinking, open innova-
tion and agile development. However, it is interesting to ponder
whether this current assortment of business models will serve to
adequately prepare us as future organisational leaders for the
turbulence and disruption of the modern era.
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THE MBA ADVANTAGE
In my view, the traditional lenses of corporate strategy are not

obsolete; they remain relevant and useful in today’s business
context, providing us with a collection of frameworks through
which varying business problems can be analysed and under-
stood. Yet it is the manner in which these are required to be
applied that has been transformed: the nature of strategy has
evolved from the controlled and prescriptive to the dynamic and
adaptive. In today’s fast-moving world, where technological
cycles outpace planning cycles, there is a constant need to
continuously re-evaluate operating environments and make
strategic decisions in a more rapid timeframe.
To do this, organisations must process information faster, be
open to change and responsive to signals, and be openly creative
and consultative with other market participants. The stability and
dependability required for faithful adherance to yesterday’s
business models and long-range plans has been buckled by the
disruptive forces of technology and globalisation. The organisa-
tions that will prosper in the modern business environment will
be those that can continue to devise ambitious visions for the
future, yet simultaneously remain agile, experimental and capable
of coping with complexity and change.
Author: Luana Barron

Luana is an energy professional with a diverse skillset
developed over eight years’ experience working in the
Western Australian oil and gas industry. Luana has a strong,
technical foundation in petroleum engineering, which is
complemented by recent experience in strategy and
innovation-focused roles. Luana is a strategic and analytical
thinker who enjoys engaging with diverse teams to solve
complex business challenges.
This essay is copyright of Luana Barron, 2018.
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7. Human-centred design and
innovation in the healthcare industry
SIEW KEONG KWOK
The idea in brief

The issue: Many hospital organisations lag the wider business
sector in adopting modern management practices and technologies
to adapt to and meet the needs of today's evolving healthcare
demands. This often renders healthcare institutions inefficient and
irrelevant, which can lead to increased healthcare costs for both the
operators and consumers.
The context: As diseases are becoming more complex, it is more
difficult to manage chronic conditions in the usual way. Healthcare
management has to overcome this challenge and focus on delivering
a high standard of care at a lower cost in order to remain efficient.
The solution: The design thinking and appreciative inquiry (AI)
approaches to innovation in a healthcare system offer a powerful
foundation for hospital management systems to help them adapt
and meet the current and future needs of the societies they serve.
The participatory and human-centred nature of these approaches
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are geared towards producing outcomes tailored to meet the needs

of stakeholder groups, with minimal associated disruption and risk.
The need for innovation in the healthcare industry

Inefficient business operations and processes are increasingly
viewed as structural problems in hospital management
(Chanpuypetch and Kritchanchai, 2017). Attempts to improve
efficiency through re-designing healthcare systems, however, are
often unsuccessful due to the complexity and conservatism of the
sector and the challenges of obtaining collaboration and co-
ordination between the many individuals and functions involved.
Although most health systems are effective at their primary
function – treating medical conditions – current systems are
often poorly prepared to adapt to complex emerging health
issues, such as increasing rates of obesity and diabetes, health and
economic disparities and cost control (Roberts et al, 2016).
Pressure to respond to these issues is driven by many different
stakeholder groups, including governments, healthcare providers
and patients themselves. In the US, physicians face one of the
highest burnout rates among professionals (Roberts et al, 2016)
and more than 70 per cent of adults agree that the US health
system requires a complete overhaul (Roberts et al, 2016).
With such mounting pressures to reform healthcare institu-
tions, healthcare services must redevelop to become more robust
in capacity, and be better aligned to the current and future needs
of society (Roberts et al, 2016). To do so, health systems must
have the ability to innovate their healthcare services.
To encourage innovation to occur, this essay will present two
frameworks, design thinking and appreciative inquiry, and
examine how they can be utilised to drive innovation and
improvements creatively, therefore providing the potential for
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Human-centred design and innovation in the healthcare industry
broad-scale integration of multi-disciplinary and human-centred

approaches towards healthcare management.
What is design thinking?

Design thinking is a form of human-centred thinking that
approaches problem solving systematically and with an emphasis
on empathy (Matheson et al, 2015). The approach focuses specifi-
cally on the desires, needs and challenges of end-users to derive a
thorough understanding of problems and identify comprehensive
and effective solutions (Chanpuypetch et al, 2017).
By encouraging practitioners to confront the context, desires,
emotions and needs of the key stakeholders in this way, design
thinking aims to produce solutions better able to meet their full
needs (Matheson et al, 2015). This method operates as a struc-
tured process guiding participants on a path of discovery, ideation
and rapid prototyping – ultimately leading to implementation of
a desirable, feasible and viable output (see Figures 7.1 and 7.2).
Figure 7.1: Steps of design thinking by University of Illinois
Design a
Clearly articulate prototype (or series
the problem you of prototypes) to
want to solve test all or part of
your solution Engage in a
continuous short-
Empathise Ideate cycle innovation
process to continually
improve your
design
Define Prototype
Brainstorm
Develop a deep
potential solutions;
understanding of
select and develop
Test
the challenge
your solution
(Centre for innovation in Teaching and Learning, 2017)
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THE MBA ADVANTAGE
Figure 7.2: Design thinking process by

Stanford University’s d.School
• Understand
impediments
Empathise Ideate • What works?
• Role play
• Iterate quickly
Define Prototype
• Share ideas
• All ideas
Test
worthy
• Interviews • Personas • Diverge/ • Mockups
• Shadowing • Role objectives converge • Storyboards
• Seek to • Decisions • ‘Yes and’ • Keep it simple
understand • Challenges thinking • Fail fast
• Non-judgmental • Pain points • Prioritise • Iterate quickly
(Stanford d.School, 2017)
Design thinking follows through a train of thought as depicted in

the figures above. Design thinkers begin with a program of
engagement with the people who have the most knowledge about
– or who are most affected by – a product, service or experience
(Chanpuypetch et al, 2017). These insights form a contextual
framework and help design thinkers transit into an analytical
phase where they work with a diverse range of participants and
key stakeholders to formulate alternative methods of attaining
desired results. They then critically review all their ideas until the
best solution that meets most, if not all, of its expectations and
constraints is arrived at. Finally, it goes into a rapid iterative
process of prototyping and testing of solutions, typically in a
small-scale, trial-and-error manner to learn about the effective-
ness and limitations of the new solutions. After a series of these
evaluations, it is hoped that an ideal, optimised solution emerges
and is ready for scaled implementation. With the key problems
clearly articulated in this way, design thinkers engage with
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participants through an analytical process to formulate a range

of alternative methods by which the desired changes might be
achieved.
The following process outlined in Figure 7.3 below shows how
you can implement design thinking into your organisation.
Figure 7.3: Figurative representation of the core elements

of the design thinking process
Empathy with the end-users leads design thinkers to

focus on creating a deep and diverse understanding
Developing of their explicit and latent needs, desires and values.
empathy Even when people are unable or unwilling to verbalise
their needs accurately, design thinkers can gain this
empathetic insight through observing actual
behaviour for clues to unmet needs. Since what people say is often very
different from what they actually do, a good way to start healthcare
changes is to creatively engage target groups of people within the
context of their daily lives, such as where they live, work and play.
The concept of radical collaboration is a natural

element of healthcare service design, reflecting the
reality that no discipline can address complex health Radical
issues in isolation. The creative tension arising from collaboration
differing opinions and ideas can provide an effective
basis for developing greater understanding of dynamic
healthcare challenges. Instead of having to choose one idea over
another, radical collaboration translates into taking the best elements of
multiple ideas and merging into one to create a superior outcome.
Before arriving at a final solution, design thinking

incorporates a phase of iterative testing, evaluating
Rapid many elementary concepts and prototypes. The aim
prototyping of this process is to evaluate the reality and
implications of various strategies in order to identify
the best practical solution for further refinement.
(Chanpuypetch and Kritchanchai, 2017)
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Let’s look at these three steps in the process in more detail

(Chanpuypetch et al, 2017).
Ways to develop empathy:
• Contextual observation: Observe end-users’ lives in their
daily environment, which you would not observe in a
controlled setting.
• Self-documentation: Encourage end-users of your services
to share photographs, audio, video, drawings or writings to
prompt discussion about their environment and experiences.
• Extreme user stories: Understand the challenges of people
with atypical life experiences and situations.
• Analogous scenarios: Use analogies from other industries
with similar problems and solutions.
How to achieve radical collaboration:

• Outside-in participation: Enable design team members
to be ‘un-stuck’ by exposing members to new ideas and
experiences, such as having an individual from another
industry join in the session or making a field trip to another
industry’s organisation for observation.
• Stop brainstorming: Evidence suggests that brainstorming
stifles creativity, so employ disruptive forms of brain-
storming such as ‘brainswarming’.
• Introducing constraints: It may seem counter-intuitive to
instil restraints in creativity, but infinite opportunities may
also stifle creativity. Testing various constraints and altering
them accordingly can help design thinkers to reframe
problems and think differently for solutions.
Ways to succeed in rapid prototyping:

• Identify variables: Leverage current data to identify
particular variables required for testing.
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• Contextual prototyping: Refine understanding of

problems and solutions of end-users by testing prototypes
with end-users in their daily environment. Do not explain
how the product is supposed to work, rather allow end-users
to experience the product offering with no direction and
observe what happens.
• User-driven prototyping: Engage end-users in the proto-
typing process.
Design thinking benefits

Although developed originally around the manufacture of
products, design thinking ideas have proven useful in wider
contexts, including the development of innovative programs,
services and policies, all of which are relevant with respect to
innovation in the management of chronic diseases (Matheson et
al, 2015).
Design thinking is an effective way to gain insights and frame
solutions to the problems facing an individual or a community
(Chanpuypetch et al, 2017). It allows movement away from a
traditional ‘thinking-to-do’ approach to a ‘doing-to-think’ approach,
identifying unforeseen challenges and unintended consequences
through the practical engagement and experimental prototyping
of the approach (Brown and Martin, 2015). By facilitating learning
from experience in this way, design thinking can help cut project
costs, time and resources (Chanpuypetch et al, 2017).
Through observing behaviour and identifying the true needs
of stakeholders, design thinkers gain valuable insight into the
end-user’s emotional experience (Kolko, 2015). Such insights are
usually hard to quantify, and organisations that understand
design thinking typically use emotional language and employ
words associated with desires, aspirations, engagement and
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THE MBA ADVANTAGE
experience to describe their products and end-users. As such,

design thinking takes into consideration the emotional aspects
of a value proposition in addition to more utilitarian product
requirements.
Rapid prototyping in design thinking allows a quick under-
standing of the potential success of ideas (Brown and Martin,
2015). Design thinkers can never fully predict end-users’ reactions
and receptivity to new ideas and changes, so a quick prototype
can allow them to obtain feedback early, and by repeating this
process quickly, the output product can be modified until the end-
users’ needs are addressed.
Design thinking limitations

Even though collaborative approaches to healthcare management
have long been established in hospitals, teams commonly default
to consensus-building and defensive behaviours rather than
seeking to understand different mindsets and opinions
(Chanpuypetch et al, 2017). This tendency often leads to group-
think, with participating members reinforcing existing beliefs and
suppressing novel or differing opinions. Where such behaviour
occurs, people may make decisions and adopt opinions early in the
problem-solving process, leading to erroneous over-simplification
of problems and preventing the implementation of design thinking.
What is appreciative inquiry?

Appreciative inquiry (AI) is a participatory, active research
process aimed at fostering cross-disciplinary interaction between
groups and promoting a unified approach towards change
(Trajkovski et al, 2015). AI offers an adaptable framework
intended to allow change to take place from the grassroots up,
and it promotes effective, diverse collaborations to meet the
specific needs of an organisation (Trajkovski et al, 2013[2]). The
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approach is built around an acknowledgment that differing

opinions can co-exist within collaborative groups and make
equally valid and vital contributions.
By accepting this model and respecting all contributions, AI
emphasises solidarity and social construction in the development
of solutions. By focusing on affirmation, mutual appreciation and
positive dialogue, AI has the potential to shift innovation from its
traditional problem-based orientation to a strengths-based model
where innovation builds and capitalises on ‘what works well within
an organisation’ (Trajkovski et al, 2015; Trajkovski et al, 2013[2]).
This approach has demonstrated applications in the management
of workforce engagement, promotion of organisational learning
and the development of positive organisational changes in the
healthcare industry (Trajkovski et al, 2013[2]).
The democratic basis of AI helps to break down vertical
hierarchies and work structures, distributing power more equally
among stakeholders (Trajkovski et al, 2013[2]). By doing so, the
method empowers individuals or groups to contribute their
individual opinions and experiences towards an egalitarian
decision-making process aimed at improving a shared problem.
The success of AI is attributed to its potential for broad
revelation of information and its emphasis on dialogue.
Researchers applying this approach look for examples of best
practice in people, organisations and the external environment,
while actively acknowledging and celebrating success wherever
it is found. This contributes to the development of collective
vision and shared ownership of a unified action plan for initiating
changes via the AI process.
Commonly referred to as the 4D cycle, the AI approach to
design can be described in terms of four phases of activity:
discovery, dream, design and destiny (Trajkovski et al, 2013[1])
(see Figure 7.4 below).
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THE MBA ADVANTAGE
Figure 7.4: Appreciative Inquiry 4D Cycle
Discovery
‘What gives life?’
(The best of what is)
Appreciating
Destiny Dream
‘How to empower, learn Affirmative ‘What might be?’
and adjust/improvise?’
topic Envisioning results/
Sustaining choice impact
Design
‘What should be –
the ideal?’
Co-constructing
These stages of activity are supported by the core principle of

affirmative topic choice and the belief that the key elements of
change can be found in the very first questions we ask
(Cooperrider and Whitney, 2005; Trajkovski et al, 2013[1]).
Affirmative topic choice

The focus of the inquiry should be framed in a positive manner
and should align with the organisation’s objectives or mission.
This foundation provides the conceptual anchor point for the 4D
cycle making up the AI process. Such topics could include
initiating changes in specific healthcare services, or healthcare
services as a whole including multi-disciplinary work groups and
community healthcare initiatives.
Phase 1: Discovery
The first phase is all about discovering by inquiry: exploring,
understanding and appreciating what ‘gives life and energy’ to
people and their work. The focus here is to obtain insights and
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understanding from the affirmative stories being told. This

typically happens through discussions about the selected topic,
initiated through channels including interviews, storytelling and
discussion groups via positively framed questions.
Typically, interviews last an hour while focus groups may take
up to four hours. Through this open dialogue, patients, healthcare
workers and other stakeholders are guided to express the positive
experiences encountered during their interactions with the
organisation or system.
Phase 2: Dream
The dream phase builds on the insights gained through the
discovery phase by trying to understand the potential of solutions.
Participants are brought together to imagine what the future
should be; they are particularly encouraged to think out of the box
in identifying alternative futures. Typically, the discovery and
dream phases occur in the same setting as personal stories and
can easily translate into a vision for the future.
Visualisation of alternate futures is encouraged through the
use of ‘miracle questions’ that ask participants to consider how
things might differ within the organisation in the event of a
miracle.
Phase 3: Design
In the design phase, emphasis is placed on what the organisation
should be like in an ideal world, and it builds on the past successes
and achievements of an organisation. Participants collaborate to
design plans and future directions and identify the steps that would
be required to turn the provocative propositions into a reality. This
phase involves many key stakeholders across a range of disciplines
in the hospital, including healthcare service providers, policy
makers, managers, community groups and patients.
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Phase 4: Destiny
This last phase emphasises the development of a sustainable
future. It focuses on action planning, committing to tasks and
processes, and creating networks and work structures to support
an environment promoting the changes identified through the AI
process, while eliminating any negative practices identified. This
may include prioritising initiatives to turn vision into daily
practice, identifying future developments or managing staff and
resource allocation.
Appreciative inquiry benefits

AI is a non-linear work process that can cycle continuously as an
organisation evolves, thereby offering the potential for continual
improvement (Trajkovski et al, 2013[1]). Since AI focuses on
enhancing an organisation’s positive core, it commonly builds on
and reinforces the organisation’s existing goals, strengths and
successes. In doing so, the approach fosters the development of
a flexible and transferrable framework that can aid in multiple
aspects of organisational function.
Appreciative inquiry limitations

AI requires practitioners to shift away from the typical problem-
solving approach of beginning by identifying and framing a
problem, to an appreciative approach whereby topics of focus are
selected with reference to the positive core of an organisation and
in the absence of an initial problem statement.
Some AI practitioners caution that approaching problems
through this positive core focus could risk ‘glossing over’ real
challenges facing an organisation, and that if the AI practitioner
leaves before a new vision is created, false hopes may be created
from the process.
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Lastly, sometimes the ‘destiny’ envisioned may be incompat-

ible with the key strengths and resources of the organisation,
therefore compromising its overall strategy and effectiveness.
Case study: using design thinking to create CareCube

At Thomas Jefferson University in Philadelphia, Dr Bon Ku, an
emergency department physician, collated feedback from healthcare
providers and medical students and created a novel paediatric pain-
scoring device called the CareCube (Kalaichandran, 2017).
Whereas adult patients are normally asked to rate their pain level on a
score between one and ten, paediatric healthcare workers appreciated
that the emotional and cognitive needs of their patients made this
approach less effective. In response, they designed a cube – the
CareCube – with a different facial expression on each of its six surfaces,
such as a frown or a smile, each corresponding to a particular pain score.
This toy-like object was more inviting to the paediatric patients and
offered a more effective means for young children to identify and
communicate their pain score by pointing to a face. This led to
enhanced communication between nurses and children and helped
nurses understand whether the children’s pain was being well-managed.
Case study: using appreciative inquiry to transform

Heartland Family Practice
The Heartland Family Practice has more than 30 years of experience in
managing its local community patients’ health needs (Carter et al, 2007).
As the local patients grew concerned about declining healthcare
outcomes and rising healthcare costs and prevention efforts, the
business was starting to struggle to maintain a healthy financial margin.
The practice adopted an AI approach to transform its healthcare service
in order to meet those challenges.
Affirmative topic choice. The manager began reflecting on and
observing the daily operations of the clinic and held discussions and
interviews with clinicians, supervisors and administrative staff members
about the ongoing goals and challenges of the clinic. The practice
manager then identified emerging themes such as loss of positive
interactions between work colleagues and between clinicians and
patients. This made work less enjoyable and decreased potential intrinsic
rewards for clinicians.
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Discovery. The manager then had the employees reflect on two questions:
(1) Given the current situation, how can practice staff move beyond their
usual roles to develop a rewarding and relationship-centered approach to
patient care and the work environment?; and (2) How can the practice still
be sensitive to patients’ needs while being proactive in their care
approach? Participants shared their personal experiences and high points
at work, accomplishments, strengths and successes, both in pairs and
within the larger group setting. Every participant was then asked to
summarise what they had heard or shared using a single word or a phrase.
Dream. Participants were next asked to imagine how the practice might
look like in three years if the peak experiences shared earlier were
adopted more widely in the workplace. They then broke out into groups,
each comprising a mix of at least one clinician, a clinical staffer and an
administrative staff member, and were tasked to imagine and illustrate
how the practice would look. As each group shared their visions, they
were written onto sticky-notes and pasted onto walls, and similar themes
were identified between groups.
Design. The groups reconvened a week after the dream session to
discuss a plan for transforming the current practice into a version of that
ideal vision. After hearing all the suggestions, participants voted for an
initiative that they felt had the greatest potential impact and they were
willing to work towards. Once the idea was identified, a team was
formed to study and propose any recommendations to the practice
based on the suggestion chosen.
Destiny. The groups reconvened again to present what they had
achieved from their proposed recommendations and reflect on the
lessons learned along the way. The groups also shared how they went
about implementing their recommendations, such as through surveys or
engaging an external consultant. Through sharing, the groups were able
to identify people with suitable skills to contribute in these work groups
and worked together in ensuring the sustainability of new initiatives such
as the financing and workflow models.
My personal reflection
Each strategy has its own merits and limitations with respect to
the potential for driving innovation and improvement. It would
be foolish to assume that any particular model or framework
represents a one-size-fits-all approach applicable to any health-
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care or workplace challenge. In the healthcare industry where

organisations are geared to the fundamental management of
patients, it is only logical that any innovation research should also
be patient-oriented. Therefore, human-centred design approaches
such as design thinking and AI represent promising avenues of
enquiry. By integrating one or more of these approaches with
traditional performance improvement models, we hope to obtain
the best of both worlds and create a unique and robust solution
to the problem.
Design thinking is similar to traditional process improvement
systems within organisations with a focus on brainstorming, end-
user needs and collaboration (Roberts et al, 2016). However, the
two approaches complement each another as each addresses
different types of problems at various parts of the innovation
cycle. For example, design thinking is useful in addressing
complex problems, while typical process improvement frame-
works are good for problems that are more straightforward
(Trajkovski et al, 2013[2]). Applying both frameworks together
can provide a holistic understanding of the problem space for an
organisation, leading to the creation of more robust solutions.
Similarly, by being positively focused in its approach to
problems, it has been argued that AI complements traditional
methods of action research due to its encouragement of genera-
tive learning (Trajkovski et al, 2013[2]). By focusing on the
positives, participants in AI are found to be less defensive and
more open to discussion when tackling complex problems. The
approach also capitalises and builds on the strengths of an
organisation, rather than focusing on a lack of resources or other
challenges. Incorporating AI into traditional process improve-
ment frameworks can therefore help organisations to both
capitalise on their strengths and address their weaknesses so as
to develop more robust approaches to growth and change.
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Summary
Embracing human-centred design tools and techniques opens the
door to incorporating the realities of our human nature in
developing solutions that disrupt existing healthcare business
models with the higher-order goal of preventing diseases and
encouraging healthy lifestyle. Human-centred design approaches,
such as design thinking and AI, therefore offer a powerful
contribution towards fostering innovative professional environ-
ments ready to meet the complex challenges of today’s healthcare
systems. The use of such approaches can complement traditional
problem-oriented performance improvement frameworks, offer-
ing a pathway to the creation of a thriving healthcare industry with
robust mechanisms for innovation and advancement.
Author: Siew Keong Kwok

Siew Keong Kwok is passionate about making a difference in
people’s lives. He has worked as a podiatrist for three years
delivering evidence-based podiatric management of high-risk
foot and musculoskeletal conditions. During this time, Siew
Keong Kwok was involved in quality improvement initiatives
and enjoyed seeing positive changes yielding results. His role
also included ensuring the provision of quality care services as
he values the importance of patient experience.
This essay is copyright of Siew Keong Kwok, 2018.
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8. Disruption in the classroom: education
innovation for the 21st century
NATALIE SIM
The idea in brief

The issue: How do we educate our children for the 21st century
when we can't foresee what the economy will look like at the end of
next week? The state school system in Australia evolved alongside
the industrialisation of our society through the 20th century. The
12 years of conformity and standardised testing designed to meet
the needs of that earlier age, however, have left students poorly
prepared to meet the demands for agility and creativity in the
modern knowledge-driven economy.
The context: Automation and progress in artificial intelligence (AI)
promises to radically alter the employment landscape of our nation
over the coming decades. For students to thrive in this future,
education needs to focus on developing areas such as divergent
thinking, creativity and imagination - uniquely human talents that
serve as the fountainhead of the innovation, agility and creativity
the future economy will demand.
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The solution: Children are born with an innate passion for

divergent thinking and experimentation. Nurturing these qualities
through human-centred and open-ended approaches to learning,
such as design thinking, will foster the capacity for creativity and
innovation our society needs to grow and prosper through the 21st
century and beyond.
Times are changing – and fast!

In this fast-paced world, technology is changing rapidly. Nobody
can assure you that the world is going to be same in five years as
things change with the blink of an eye. If you want to move at the
same pace as the world then you must be agile, creative and
innovative.
To put this into perspective, my eight-year-old daughter does
not understand why we say ‘wind’ down the car window; in her
whole life she has never needed to wind the window down
because windows have always been electric. I have explained to
her that I didn’t grow up with a remote control for the TV, let
alone that the internet wasn’t in households until the late 1990s
(when I was in high school) – ‘but you had Siri though?’ was her
response.
My daughter has never used or seen a one or two cent coin.
It’s even more intriguing when you think that my now one-year-
old daughter will probably never need to use money as we have
our whole lives. By the time she is a teenager there will potentially
be no more paper money in use!
Agility, creativity and innovation

So why is agility, creativity and innovation so important for the
future of businesses? Digital disruption is transforming the way
companies and agencies operate and how they engage with their
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Disruption in the classroom: education innovation for the 21st century
customers. New digital technologies and business models are

affecting the value proposition of existing goods and services. It
requires innovation to break the ranks of the status quo; as a
means to redefine the norm and change the markets, industries
and competitors.
Netflix is a good example of this – it has disrupted two
industries, namely the entertainment and advertising industries.
Netflix has accomplished this by changing how content is accessed
by customers and monetised by advertisers. For example, free-to-
air networks can still receive income from broadcasting TV
shows, but they can’t charge as much for advertising as they could
when there were only a few networks for all viewers to use (Knight
and Lynch, 2015).
So, why do great companies fail? The biggest risk is to not do
anything at all, to ignore the waves of digital disruption in
business and society; this has invariably led to extinction for
many previously great companies (Christensen, 2014).
Nokia, despite owning 30 per cent of the world’s mobile
patents, finds itself struggling to stay relevant; Kodak invented
the digital camera technology but failed to capitalise on it (Estrin,
2015); General Motors produced the first commercial electric car
almost 20 years ago, stopped its rollout and now finds itself trying
to catch up with the Japanese hybrids; bookstores, the music
industry and newspapers, all of which were the giants of their
time, now find themselves trying to avoid extinction (Girn, 2014).
Well-managed companies routinely drive sustainable tech-
nological improvements, including incremental and breakthrough
improvements, in their existing product lines. Digital disruptions
offer a fundamentally better alternative that captures new
customer segments and then start to move into the markets once
owned by larger companies, or no one at all, and over a very short
period of time, leave static companies behind (Christensen, 2014).
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THE MBA ADVANTAGE
For example, the iTunes ecosystem disrupted the music industry

but also opened up a whole new industry for software developers
to develop apps for mobile devices.
Success is gained and sustained through continual innovation
and disruption. It is about timing, creativity, bringing the idea
together and then implementing the idea through innovation.
The process for a successful business is represented in Figure 8.1.
Figure 8.1: Process for a successful business
Agility
Creativity Continual Digital Sustained

innovation disruption success
Innovation
My question then becomes: how do we educate our children to

take their place in businesses of the 21st century given that we
can’t foresee what the economy will look like at the end of this
month? My one-year-old daughter will be retiring in 2086 – we
have no idea what the world will be like then. We say we can only
learn from our past and, if anything, our recent past has taught
us that the world is moving faster and faster each year. It is
baffling that we teach our children to do what we did in the past,
essentially drawing upon an education system built in the 18th
century where children are taught to conform and creativity is
squandered (Robinson, 2008). The emergence of digital cultures
poses stark challenges to this archaic education system and
hinders the unprecedented opportunities.
110
What does the current education system train

children for?
The current education system was designed in the 18th century
and evolved over the 19th century to meet the demands of organ-
isation. The structure of mass education stemmed from the era of
Henry Ford and the assembly-line technique of mass production
(Watters, 2015).
These systems were designed to prepare children for when
they leave the school system and move onto university or into the
workforce. The system did and still does group children by
manufacture date and they are expected to linearly progress
through the standardised syllabuses, at the same speed as one
another. The expected result is to produce identical young adults
with creativity educated out of them and ready to conform into
their new roles in life (Robinson, 2008).
Herein lies the problem. During the industrial revolution,
western society was required to produce ‘robots’ to do the
mundane processes of assembly line production with exact
precision. Young adults would start their working lives at the
bottom of an organisation and gradually progress through the
organisational ranks. But now that we are in the digital technology
revolution, we have automation, technology and AI for those
roles (Napier, 2017).
How will digital disruption affect employment?

Cognitive computing and digitalisation mean that the nature of
employment and the type of work humans do is going to change
dramatically in the coming few decades. Computers and robots
are increasingly replacing human jobs, leaving only high-skilled
jobs that require creative thinking, such as senior leadership
roles, and complex low-skilled jobs that involve non-routine
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THE MBA ADVANTAGE
physical elements (e.g. caring work). This means that, as well as

large numbers of Australian jobs disappearing, the remaining
entry-level jobs will be seriously affected by computerisation
(Sim, 2017).
With an education system that has a deep assumption that
higher intellect is currency, how will humans continue to be
better than robots? What can humans do that robots are unable
to do? What is our blue ocean? (Blue ocean strategy is a
marketing theory; a blue ocean is an uncontested market space
– therefore making competition (i.e. AI) irrelevant.) And how do
we ‘teach’ it to our children?
Let’s return to the processes that make a business successful.
Innovation and creativity are the two things that are unable to be
automated and AI is currently unable to undertake the type of
divergent thinking that fuels innovation.
We have produced generations of children who think that
they’re either smart or they’re not because academic ability has
been the primary measure of intelligence. But, does that make
any sense in the digital disruption revolution? Richard Branson
dropped out of school at 15 years of age. David Karp dropped out
of school when he was 15 years old, Philip Emeagwali when he
was 13 years old and Quentin Tarantino left school at 15 years of
age – the list goes on (Gillett, 2015). These are all very successful
people who built success on divergent thinking. Even Thomas
Edison only had three months of formal education. The pivot that
made these and many more individuals very successful was
innovation. To fully utilise the potential of our future generations,
their blue ocean strategy needs to be creativity and culture (Kim
and Mauborgne, 2016).
112
How do we introduce creativity into the school

curriculum?
To answer this question, I want to use my daughters as an
example. In the school holidays, I watched them play all day with
a couple of rocks. They have a playroom full of toys, but they were
happy playing this game with rocks. The game lasted all day and
they created a whole family of rocks, cars, spaceships, pets, etc.
It occurred to me then that this is creativity – when imagination
is allowed to run free. So, how can we capture that essence and
use it in our ability to grow these future generations?
The education system needs to evolve to encourage divergent
thinking as it is an essential capacity for creativity. Land and
Jarman (1998) found through their analysis and longitudinal study
of divergent thinking in kindergarten students that 98 per cent of
kindergarten students scored genius level in divergent thinking.
However, re-testing every subsequent five years found significant
reductions in each student. We need to focus on how to capture
this natural ability and not siphon it out through standardised
testing and conformity.
How do we ‘teach’ creative and divergent thinking? Who is best
equipped to teach it? Our children are better at using and under-
standing technology than we are. They are growing up ‘speaking
the tech language’ so should we as adults still be the ones to teach
them about a language that still seems so foreign to most of us?
How do we transform the education system and come up with a
result that yields more successful businesses?
I believe this can be done through two fundamental changes in
the current education system: design thinking and growth hacking.
Enabling creativity through divergent thinking

Design thinking is a strategy used to solve complex problems. It
is solution-focused, not problem-focused and is action-oriented
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THE MBA ADVANTAGE
towards creating a preferred future. It draws upon logic,

imagination, intuition, empathy, experimentation and systematic
reasoning to explore possibilities of what could be (IDEO, 2017).
Companies that have introduced design thinking have out-
performed the S&P500 over the past 10 years by 219 per cent.
Notable success stories of design thinking include companies
such as Apple, Coca-Cola, IBM, Nike, Procter & Gamble and
Whirlpool (Work, 2016).
‘Design thinking is a human-centred approach to

innovation that draws from the designer’s toolkit to
integrate the needs of people, the possibilities of
technology, and the requirements for business success.’
(Tim Brown CEO, IDEO)
Carroll et al (2010) experimented with design thinking in a Year 5

class, and design thinking became a part of the classroom
learning environment. Students were able to explore different
aspects of design as they created prototypes, sketches and
projects. They were energised, excited and challenged by their
design tasks as they brainstormed with their peers.
‘The most important learning was that design thinking fosters
the ability to imagine without boundaries and constraints’ (Carroll
et al, 2010). This is critical as the development of creative
confidence should be an essential part of learning. Through design
thinking, students can become empowered in their own learning
and will possess the tools and the confidence to change the world.
Visiting d.school
As part of our MBA international study tour to Silicon Valley, we
visited Stanford’s Design Thinking School, d.school, where we
spent the day understanding how the process of design thinking
114
takes place and what some of the outcomes are from the powerful
invoking of divergent thinking.
Everybody has the capacity for new thinking and d.school
provides a technique through which creativity can produce out-
standing tangible results. One of the projects involved teachers
taking on the role of a student for a day, where they would shadow
another fellow student all day, wear their uniform, sit at their desk,
do their work, eat their lunch, etc. The results were remarkable,
as you would have probably guessed, a resounding uniform
response from the participants reported on uncomfortable clothes
and chairs, boring content in class and no chance for imagination
and creativity throughout the day.
This experiment encapsulates Stanford d.school’s eight core
abilities (Stanford, 2017):
1. Navigate ambiguities
2. Learn from others (people and contexts)
3. Synthesise information
4. Experiment rapidly
5. Move between concrete and abstract
6. Build and craft intentionally
7. Communicate deliberately
8. Design your design work.
I believe that through design, children can learn that they have
the power to change the world. Through developing students’
creative confidence, they will be able to focus on developing
empathy, promoting a bias towards action, encouraging ideation,
developing metacognitive awareness and fostering active problem
solving. Incorporating design thinking into the classroom would
also capture a whole new segment of customers: the children that
don’t want to be taught, the ones that fail and drop out.
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Growth hacking in schools

Children are not frightened of being wrong and yet we, as adults,
run companies with a culture of being afraid to be wrong and
where mistakes are stigmatised – even to the point that making
a mistake is the worst thing that could happen in your profes-
sional career. After 12 years of standardised testing and grading
against peers of the same age, the growth mindset of a child has
evolved into a fixed mindset where there is an ever-growing fear
of failure. Has formal education institutionalised our children and
erased their ability for divergent thinking?
Growth hacking is a process of rapid experimentation to
identify the most efficient ways to achieve massive growth in a
business quickly. Using growth hacking in the design thinking
process encourages divergent thinking and will quickly generate
ideas and solutions to challenge the opportunities. Growth
hacking is the process of generating ideas, capturing these ideas
and testing them on a small scale allowing a safe place to fail, then
investing in only the ideas that succeeded.
‘Growth hacking is the use of out of the box thinking and

technology to achieve massive growth in a short time.’
(O'Kelley, 2015)
Although the term growth hacking was developed as a marketing

tool, I believe the same principles can be applied to innovation
and business growth.
When Twitter was first launched, it didn’t have large retention
rates for users. It appeared to have a large audience wanting to
sign up for a few days, then leave and never return. Twitter
decided to invest in some testing to see where the system could
improve. Twitter started modifying small parts of the app and,
116
by using data analytics, was able to see what worked and what
failed. The company was then able to take the successful parts
and invest in re-building those systems instead of re-building the
entire system all at once (Scott, 2015). By building on one of
Stanford d.school’s core abilities, experiment rapidly, and
applying the principles of growth hacking, Twitter was able to fail
fast and safe. Only modifying small parts of the app at a time
allowed Twitter to test the idea quickly; if it didn’t work, they
quickly moved onto the next change, until they saw success and
invested in the right place.
For me personally, my biggest growth last year in the MBA
program was to realise that it is OK to fail. I have grown up with
a mentality (from my grandfather) that it’s not OK to fail, it’s not
OK to come second, or take a few attempts at finding out what
works. The pressure and anxiety that puts on young minds is
horrifying.
So how can we nurture the natural instinct of a young child
who has a growth mindset and is capable of growth hacking
techniques throughout the school years and into their future in
business and succeed like Twitter, even after its rocky start? By
abolishing standardised testing, which tests a child to pass or fail
the year against other children of the same age, and instead mov-
ing to more experimental learning and protecting the environ-
ment in which they fail. We need to protect the environment in
which we allow students to fail, so they are able to fail fast and
safe without hurting themselves or their surroundings.
If we can encourage students to grow through design thinking
and growth hacking processes and techniques, there will be a
fundamental change in the way the next generations are
measuring success. Unicorn successes like Twitter, Airbnb and
SpaceX can become the norm.
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THE MBA ADVANTAGE
Summary
At the start of this essay, I asked how we can educate our children
to take their place in businesses of the 21st century given that we
can’t foresee what the economy will look like at the end of next
week. I believe we can’t. However, we can prepare and arm our
children with the ability to adapt, create and innovate by
integrating design thinking and the ‘fail fast and safe’ concept into
the school curriculum. Young children have the greatest ability
for divergent thinking and fail fast, which is essential for
creativity. Nurturing these qualities in our students will build
workforces alongside automation and AI that will accelerate
businesses into the future.
Author: Natalie Sim

Natalie is a Petroleum Engineer with 14 years experience in
Oil and Gas in Drilling Operations and Optimisation. Natalie
has managed drilling projects worth over $300 million and
delivered successful drilling campaigns in both Australia and
abroad from feasibility studies through to operations. After
taking time away from the workforce to complete her MBA,
Natalie has followed her passion for driving the future of
organisations to deliver effective business outcomes by joining a global
management consulting firm.
This essay is copyright of Natalie Sim, 2018.
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PART III
SCENARIO
PLANNING
ON SCENARIO PLANNING
In a world where uncertainty and disruption are increasingly

recognised as inseparable from progress, long-term planning
seems to move ever more from a rational component of business
strategy towards becoming an oxymoron. Industry conditions
may conform to reliable trends over short time spans, but these
periods of predictable behaviour are punctuated by events that
change the business landscape to such an extent as to be
unpredictable.
The scenario planning method builds from an acceptance of
this fundamental unpredictability and provides a structure to
evaluate current or potential business strategies against a
framework of multiple future scenarios; encapsulating plausible
extensions from the problems and opportunities facing an organ-
isation or business environment at the present time. Any partic-
ular scenario may be unlikely, and the intention is not to predict
the specific future of the business as such but rather to test
business strategies against multiple plausible future situations.
In Part III, our four authors offer us a practical overview of
this innovative approach and its application in modern business
planning. Nick Loke and Asher Abedini begin this journey with
their essay ‘A walk through the different approaches to scenario
planning’ in which they provide a high-level overview of the
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THE MBA ADVANTAGE
range of scenario planning processes and the evolution of this

approach as a modern business tool.
Prying beneath the surface, Phil Daglish then offers a deeper
investigation of the philosophies underlying the scenario planning
method in his offering ‘Collaboration without consensus: the
reality of scenarios’. The key strength of scenario planning, Daglish
suggests, is its ability to gain greater perspective on the future
through soliciting input from diverse stakeholders. Achieving this
diverse input is critically dependent on fostering trust within the
working group and should be the foundation of any attempt to
apply this methodology.
Moving to the application of scenario planning, Tat Tongchant
guides us through ‘Scenario planning your career after an MBA’.
Through the personal example of her decision-making processes
at a crucial career crossroads, Tongchant provides a human-scale
introduction to the reality of how scenario planning can guide
strategic thinking and planning, providing a structured test bed
for re-evaluating and exploring the assumptions and motivations
underlying our choices.
In the final essay, Patrick Walton expands the scale of
consideration from personal decision-making to addressing some
of the wicked problems facing global society in his essay ‘The
grand energy transition: an Australian perspective’. As many
serious commentators are increasingly acknowledging, western
society is heavily reliant on the unsustainable use of fossil fuels.
The long-term future of our society and the way of life that
sustains it will require a transition to renewable energy. Through
presenting a scenario planning investigation of this future
challenge, Walton illustrates how this approach can challenge our
assumptions and open consideration of alternative destinies.
122
9. A walk through the different
approaches to scenario planning
NICK LOKE AND ASHER ABEDINI
The idea in brief

The issue: Scenario planning is a popular process that is used
as an input to strategic planning, decision-making and providing
guidance on competitive moves. The usefulness of scenario planning
can be ascribed to its ability to overlay corporate strategy,
environmental analysis and forecasting processes in volatile,
uncertain, complex and ambiguous (VUCA) contexts and situations.
The context: In the 50 years since the inception of scenario
planning, the technique has seen increased usage by corporations
for looking into the future. As the practice of scenario planning
continues to evolve and augment, this multi-disciplinary field starts
to intertwine even more with other elements of strategic planning
and systems thinking. This results in an ever-increasing number of
processes and variations being developed, which makes identifying
and classifying the different scenario planning types challenging.
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The solution: Rather than discuss all the variations that exist,
this essay provides a high-level overview on the different types
of scenario planning processes that have been developed and
utilised, with a focus on the more established and documented
typologies. The essay then discusses a case study which not only
demonstrates the importance of the initial step of selecting the
scenario method to use, but also how a scenario study can be
completed within a short timeframe.
Scenario planning: an introduction

Scenario planning, a process that stimulates imaginative and
creative thinking to better prepare an organisation for the future,
was first industrialised by Royal Dutch Shell (Shell) in the 1960s
and is now widely used within the energy sector, as well as many
other sectors. Scenario planning has found widespread use and
popularity due to its practicality as an input to strategic planning,
decision-making and providing guidance on competitive moves
(Garvin and Levesque, 2006). The usefulness of scenario planning
can be ascribed to its ability to overlay corporate strategy, environ-
mental analysis and forecasting processes in VUCA contexts and
situations (Mercer, 1995).
Scenario planning is set apart from conventional strategic
planning due to its ability to entertain multiple possibilities to a
strategic question. Conversely, scenario planning investigates
several uncertainties simultaneously (as opposed to contingency
planning’s focus on a single uncertainty) and involves both
subjective interpretation as well as objective analysis (Garvin et
al, 2006). Wilkinson and Kupers (2013) offer that ‘perhaps the
greatest power of scenarios [as distinct from forecasts]’ is that
they introduce discontinuities and break the habit of telling a
story of the future by extrapolating from present conditions.
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A walk through the different approaches to scenario planning
A brief history on the development of scenarios

Herman Kahn is usually credited as the first person to introduce
the use of scenarios while he was working at RAND Corporation
for the US military in the 1950s. Kahn used the term scenario as a
‘technique for describing the future’. By the 1960s, there was
growing academic interest in the subject and this era saw
numerous authors begin to conduct research on scenario methods.
At the same time, more organisations started experimenting
with scenarios as a means for strategic planning. Pierre Wack
then initiated a more practical and business-focused use for
scenarios in the 1970s when he shifted the theoretical and
academic focus of scenario studies to the industrial and business
context at Shell. Shell’s use of scenario planning to evaluate long-
term decisions and its profitable navigation of the 1970s oil crisis
has become the best-known endorsement of the benefits of
scenario planning (Peterson, Cumming and Carpenter, 2003).
It has been more than 50 years since the inception of scenario
planning but its popularity remains enduringly strong today. In
2000, a poll placed scenario planning as the most popular tool
used by corporations for looking into the future, ahead of other
well-known planning methods such as SWOT analysis, Delphi
polling and Porter’s five forces of competitive advantage (Ogilvy,
2015). Meanwhile, a more recent Bain report cites that over 65
per cent of companies were projected to have used scenario
planning in 2011 (Wilkinson et al, 2013).
When is it best to use scenario planning?

Scenario planning, like other forecasting techniques, attempts to
manage the parameters of time and predictability in a
complementary manner. Figure 9.1 illustrates the timing where
scenario planning is most effective: when it balances the tensions
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THE MBA ADVANTAGE
between identified drivers of change (predetermineds) and

factors that are difficult to predict (uncertainties).
Figure 9.1: Scenario planning and predictability
Forecasting Scenario Speculation

planning
Predictability
Uncertainties
Predetermineds
Distance into the future
(Adapted from Van der Heijden, 2011)
Similarly, Peterson, Cumming and Carpenter (2003) espouse that

scenario planning is appropriate for systems in which there is a
high degree of uncertainty that is not controllable. In other
situations, techniques such as adaptive management, optimal
control and hedging may be more appropriate for use (see
Figure 9.2).
Figure 9.2: The best situation to use scenario planning
High
Adaptive Scenario
management planning
Uncertainty
Optimal Hedging
control
Low
Controllable Uncontrollable
Controllability
(Adapted from Peterson, Cumming and Carpenter, 2003)
126
Limitations of scenario planning

Scenario planning has proven its merit and endured in popularity,
however, it still has its limitations and pitfalls, just like any other
planning or modelling technique. Here we present a cautionary
list of issues to be aware of when applying the scenario planning
process:
• There is no quick fix with any form of strategic planning and
scenario planning is no different. Other strategic methods
can be more effective for conditions where urgent problems
need attention and action.
• It is difficult to completely ascribe all victory to scenario
planning. For example, there is still debate about what level
of success and efficacy can be attributed to Shell’s original
scenarios in the 1970s.
• Company culture could be another hurdle. Senior managers
who are unfamiliar with the technique may need to be
convinced and buy-in to the concept of scenario planning.
Even though the potential upsides of scenarios are major,
due to results not being tangible in the short term some
managers may need to be convinced of its use.
• Scenario planning is a resource-consuming and ongoing
process. As such, it is not suitable for firms with short vision
or low patience as it may take years for the process to yield
all its benefits.
• Its usefulness is dependent on the creativity, experience and
vision of its participants and facilitators, and there is little
safeguard to ensure viability of the process outside their
collective wisdom.
• Integrating the scenarios into other planning and forecasting
techniques is difficult. For example, budgeting and
forecasting generally rely on a single view of the future;
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THE MBA ADVANTAGE
however, implementing the multi-view technique of

scenarios is not an easy practice.
The basic process of generating scenarios

As the practice of scenario planning continues to evolve and
augment, this multi-disciplinary field starts to intertwine even
more with other elements of strategic planning and systems
thinking. This results in an ever-increasing number of processes
and variations being developed, which makes identifying and
classifying the different scenario planning types challenging.
There have been many suggested typologies and yet, even
among scenario practitioners, there is no consensus on how to
categorise and delineate scenario studies (Höjer et al, 2008;
Börjeson et al, 2006). There is also little consensus on the exact
definition of scenario planning, which further underpins the
difficulty of categorising typologies. The general agreement
inherent to various definitions states that scenarios are not a pre-
diction, hypothetical, causally coherent and internally consistent
(van Notten, 2006).
An extensive review of scenario literature is beyond the scope
of this essay, as it is not feasible to cover all scenario typologies
since there is no existing classification that is detailed enough to
cover the broad categorisation of scenarios (van Notten et al,
2003). Furthermore, scenario methods can range from ad-hoc
tools to formal standalone methods and hybridised models,
therefore blurring the lines even further on how to delineate them
(Policy Horizons Canada, 2016). Despite the challenges of
classifying scenarios, it remains an important starting point for
scenario users to select the most appropriate scenario types for
their specific situations and project goals (Höjer et al, 2008).
128
Regardless of the typology, scenario planning typically unfolds

into an orderly, methodical process when broken down to its
most basic components (Ogilvy, 2015). One ‘simple’ view is that
scenario planning requires just six basic steps. The production of
the scenarios themselves (steps 3 to 5) is what radically differ-
entiates scenario planning from other forms of long-range
planning (Mercer, 1995):
1. Deciding the drivers for change;
2. Bringing drivers together into a viable framework;
3. Producing initial (seven to nine) mini scenarios;
4. Reducing to two or three scenarios;
5. Writing the scenarios; and
6. Identifying the issues raised.
There are several other more elaborate examples of step-based

scenario planning including Orru and Relan’s 13-step process;
Schoemaker’s ten-step process; Gugan’s six-step method; and the
Shell scenario planners’ four-stage process (Ramírez and
Wilkinson, 2016), but we find the Garvin and Levesque (2006)
breakdown to be most straightforward and all-encompassing.
Their premise is that there are eight basic elements to scenario
planning: the key focal issue; driving forces; critical uncertainties;
and the scenario framework; all of which interact to form the
scenarios themselves. The scenarios are then further developed
to generate early warning signals (EWS) or to form narratives (or
stories) which are then used to construct implications and
options (Garvin and Levesque, 2006). See Figure 9.3 below for an
illustration of the typical components of the scenario planning
process as described by Garvin and Levesque (2006).
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Figure 9.3: Components of scenario planning process
Driving forces Key focal issue
Critical uncertainties
Early warning signals

Scenario framework Scenarios
Implications and options
Narratives
(Adapted from Garvin et al, 2006)
In Table 9.1 (adapted from Garvin et al, 2006; Ogilvy, 2015), we

have elaborated on the features of each component of the
scenario planning process.
Classifying the different types of scenarios

Scenarios can be generated in a number of different ways depend-
ing on their different objectives and starting points (Höjer et al,
2008). Scenarios can also combine (due to numerous factors) to
form different scenario methods; for example, quantitative versus
qualitative, exploratory versus normative, analysis versus intuition
and inductive versus deductive (Policy Horizons Canada, 2016).
Some of the better-known scenario planning methods include:
• Scenarios can be classified as possible, probable and/or
preferable futures (Amara, cited in Börjeson et al, 2006).
• Classification is based on identifying present trends,
panoramic view and questioning all the others (Marien,
cited in Börjeson et al, 2006).
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Table 9.1: Features of each component of scenario planning
Component Features
Key focal issue The scenario planning exercise begins with
identifying what an organisation will focus on and
is built around an upcoming critical issue which
has long-range consequences for the
organisation.
Driving forces The scenario team brainstorms a longlist of
factors that could affect the focal issue.
Subsequently, research (e.g. interviews) is used
to uncover the major driving forces (i.e. social
dynamics, economics, political affairs and
technology).
Critical uncertainties This step involves identifying the two most
influential and informative of the driving forces to
define the critical uncertainties.
Scenario framework Each critical uncertainty is condensed to a single
axis of uncertainty with polar cases at each
extremity. The two axes combined create a 2x2
matrix with four delineated quadrants of
uncertainty (or futures) to be explored.
Scenarios The different futures developed by the interaction
of the critical, selected uncertainties are called
the scenarios.
Narratives This step involves the creative process of
storytelling for each chosen scenario, as the
scenarios are expanded into narratives.
Implications Once the narratives are created, participants
return to the key focal issue and each scenario is
played out to its conclusion. The organisation is
placed within each of the four scenarios and
implications of each alternative future is explored.
Early warning signals Early warning signals serve as early indicators of
emergence of one scenario or big changes that
differentiate one scenario from another.
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• Classification is based on three approaches: extrapolation,

utopian and visionary (Masini, cited in Börjeson et al, 2006).
• Ramírez and Selin’s (2014; cited in Sykes and Trench, 2016)
three-dimensional typology consists of a 2x2x2 matrix in
which the axes reflect whether: quantitative or qualitative
techniques are favoured; plausibility or probability is used to
guide the assessment of the scenarios; and whether there is a
preference for scientific or artistic methods.
• van Notten’s classification is based on three broad macro
characteristics: the goals of scenario studies; the design of
scenario studies; and the content of the scenarios. This is
essentially a classification based on addressing the why, how
and what of a scenario study (van Notten, 2006). For
example, a ‘goals’ characteristic addresses why we are doing
the study. Is it simply for exploration or is it meant for pre-
policy research? Working off the study goals, the next more
detailed level of breakdown could then make the distinction
of values in the scenario process (are they meant to be
descriptive or normative?).
A different classification example based on the ‘design’
characteristic starts by differentiating whether the study is
intuitive or analytical in nature. The subsequent level of
breakdown could then distinguish between the inputs used
– would they be qualitative or quantitative?
• Börjeson et al (2006) distinguish three main categories of
scenarios based on the principal questions of what the user
may want to pose about the future: what will happen?
(predictive); what can happen? (explorative); and how can a
specific target be met? (normative). Each of the three
categories contain two further scenario types as shown in
Figure 9.4 below.
132
Figure 9.4: Börjeson’s scenario typology with

three categories and six types
Forecasts
Predictive
What-if
External
Scenarios Explorative
Strategic
Preserving
Normative
Transforming
Qualitative versus quantitative scenarios

Scenarios can be characterised by the nature of the input data
used to construct and convey the scenarios; the data can be either
qualitative or quantitative (van Notten et al, 2003). Qualitative
(narrative) scenarios are most useful for analysis of complex
situations with high levels of uncertainty and when it is difficult
to quantify relevant information. Examples of appropriate
application of qualitative scenarios include studies on human
emotions, workplace behaviour and organisational values.
Quantitative scenarios, in contrast, are often developed using
computer models, mathematical functions and algorithms (van
Notten et al, 2003). In scenario modelling and forecasting
functions, the ‘quantitative answer’ is expressed in mathematical
and numeric terms, such as revenue projection, return on invested
capital and market share. Among the most common applications
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of this tool is in the field of investment banking and for evaluating

mergers and acquisitions (Thomas, 2012).
According to Stockholm Energy Institute (2007), the broad
steps involved in developing quantitative scenarios are as follows:
• Specify the boundaries of the study;
• Select indicators;
• Decide on a model structure;
• Estimate the time, decide on a schedule and revise the
scope if necessary;
• Iteratively develop, test, document, and release the
sub-models (variable); and
• Release the final set of quantitative scenarios (variable).
Quantification is essential to scenarios, and a combination of

qualitative and quantitative elements will enhance the consis-
tency and robustness of the scenarios generated (van Notten,
2006). This is important because, especially in the business world,
the usability and persuasive power of scenarios relies on an
effective combination of narrative and numbers (Wilkinson et al,
2013).
Predictive versus explorative versus normative

scenarios
In the guide developed by Börjeson et al (2006), the three
scenario categories distinguished at the highest level are predic-
tive, explorative and normative.
Predictive scenarios
The primary aim of predictive scenarios is to attempt to predict
what is going to happen in the future. Predictive scenarios are
split into forecasts (what will happen on the condition that the
134
likely development unfolds?) and what-ifs (what will happen on

the condition of some specified events?).
Forecasts are conditioned by a basic supposition that the
resulting scenario is the most likely development and are there-
fore a useful aid in planning (e.g. organisations planning for the
business environment). What-if scenarios can be considered to
consist of a group of forecasts, but they are primarily used to
investigate what will happen on condition of some specified near-
future events. The specified events could be external events,
internal decisions or a combination of both.
Explorative scenarios
Explorative scenarios are defined by the response to the question
‘what can happen?’ and are sub-categorised as either external
scenarios or strategic scenarios. Explorative scenarios aim to
explore situations or developments that are regarded as possible
to occur from a wide variety of perspectives and usually with a
long-time horizon (as opposed to what-ifs, which have a near-
term boundary) to allow for more explicit structural and
profound changes (Börjeson et al, 2006).
External scenarios respond to the question ‘what can happen
to the development of external factors, and, therefore, only focus
on external factors that are beyond the control of the stakeholders
(for example, governmental policy). The external scenarios can
then help scenario planners develop robust strategies that can
withstand different kinds of external influence.
Strategic scenarios on the other hand respond to the question
‘what can happen if we act in a certain way?’. This type of scenario
aims to describe a range of possible consequences of strategic
actions; they take into consideration both internal factors and
external aspects. In terms of application, strategic scenarios are
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not only useful for organisational decision-makers but could also

be of interest to external parties such as policy analysts and
research groups (Börjeson et al, 2006).
Normative scenarios
The final question on the Börjeson et al (2006) typology deals
with how a specific target can be reached; normative scenarios
are therefore distinguished based on how the system structure is
treated. The focus of interest for normative scenarios is on certain
targeted future situations or objectives and how these can be
realised.
The first sub-type of normative scenarios – preserving
scenarios – are concerned with how the target can be reached by
adjustments to the current situation. The primary task of norma-
tive preserving scenarios is, therefore, to find out the most
efficient way to meet a certain target. An example is the use of
qualitative optimisation modelling on a group of targets con-
cerning environmental, social, economic and cultural factors
(Börjeson et al, 2006).
Meanwhile, normative transforming scenarios are used to
identify how the target can be reached when the prevailing struc-
ture hinders the necessary changes. In terms of methodology, the
starting point for normative transforming scenarios is by setting
a high-level and highly prioritised target, but this target is con-
sidered unreachable within the confines of the existing structure.
This type of scenario is useful for situations when a struc-
turally different system is needed to attain organisational goals.
A well-known method of normative transforming scenarios is
using the back-casting approach; the result of which is a number
of target-fulfilling images of the future and the discussion on the
structural changes needed in order to reach these images
(Börjeson et al, 2006).
136
Van Notten (2006) and van Notten et al (2003) have a different

approach of classification and they start by first addressing the
specific project goals to delineate the role of values in scenario
studies and, therefore, classify scenarios as either normative or
descriptive. Within the context of scenario development, the
distinguishing factor is that descriptive scenarios explore possible
futures while normative scenarios describe probable or preferable
futures.
Another way of looking at a normative scenario is to think of it
as a cross between a scenario environment and a vision statement;
a normative scenario describes what an organisation wants to be
or the environment that emerges. Therefore, a normative scenario
helps provide an organisation with a target list of activities for
manipulating its operating environment (Thomas, 2012).
The starting point for the normative method in generating
scenarios is to articulate a preferred future and use scenarios to
explore wider conditions that might occur. These scenarios are
then used to evaluate whether the preferred future can arise in
any, some or all of the scenarios and to identify the pathways
required for the vision to be progressed under each of the
scenarios (Ramírez et al, 2016).
Van Notten et al (2003) also emphasise the vantage point from
which scenarios are developed as a distinguishing feature, which
they then categorise as either exploratory (forecasting) scenarios
or anticipatory (back-casting) scenarios. Forecasting scenarios have
a vantage point of using the present as their starting point and are
often exploratory rather than used to support decision-making.
In contrast, back-casting scenarios reason from a specific
future situation and explore the paths needed to arrive at the
desirable future.
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Probabilistic versus plausibilistic scenarios

Two other broad schools exist within the field of scenarios with
one focusing on plausibility and the other on probability
(Wilkinson et al; Ramirez and Selin, cited in Sykes and Trench,
2016). The probabilistic method is deployed based on complex
mathematical techniques and seeks to generate new ideas and
open up possibilities. As such, these techniques can be considered
a form of hypothesis generation method.
Plausibility scenarios take a more qualitative and ‘storytelling’
artistic approach. From a methodological perspective, the
probabilistic approach is inclined to reduce options and uncer-
tainty. Due to this streamlining effect, the plausibility approach
requires relatively less human resource intensity and is therefore
favoured by smaller companies (Sykes and Trench, 2016).
Deductive versus inductive scenarios

Both the deductive and inductive methods are subsets of the
intuitive approach to scenarios. Intuitive methods are char-
acterised as depending on qualitative knowledge and creative
insights for developing scenarios. Intuitive methods contrast with
the analytical approach, which focuses on quantification with
mathematical model-based techniques, computer simulations
and algorithms, and desktop research.
The deductive approach imposes a framework from early on,
which is then used to structure the rest of the scenario process
and develop the scenario storylines (van Notten, 2006). In the
deductive method, two or three mutually independent drivers are
selected to produce a framework of logical combinations. An
example framework would be a 2x2x2 matrix looking at economic
growth versus societal cohesion versus ecological sustainability
(Ramírez et al, 2016).
138
The inductive method is a freer process that uses in-depth

discussions and detailed explorations to determine the drivers of
change and identifiable trends (van Notten, 2006). Inductive
scenarios are less structured and rely on group discussions to
generate stories from associations and causal patterns. As such,
they are best applied in a workshop environment where partici-
pants use post-it notes arranged sequentially to form storylines.
In the inductive method, the drivers of change do not need to
be independent of each other and do not necessarily need to
combine to form a structure as in the deductive method above.
Instead, the inductive nature of the approach means that the
structure of the scenario set is only formed after developing
several relevant, challenging and contrasting stories. This then
allows the variances among the scenarios to be compared against
each other. See Figure 9.5 for a visual comparison of the inductive
and deductive approach to scenario planning.
Figure 9.5: Visual comparison of inductive and deductive

approach to scenarios
Inductive Deductive
Scenario 1
Scenario 2 Scenario 1 Scenario 2
Scenario 3
Scenario 3 Scenario 4
(Adapted from Policy Horizons Canada, 2016)
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Case study: assessing scenario types for a study on future

energy scenarios
As part of our MBA capstone unit, our team undertook a project
sponsored by the World Energy Council (WEC) to characterise the
energy professional of the future through an Australian lens. Our scope
of work focused on developing new relevant scenarios for the Australian
energy professional of 2020, 2030 and 2060.
Due to the limited timeframe of eight weeks to complete the project, it
was decided that one of the main objectives of the project would be to
ensure that the new scenarios align with the WEC global scenarios that
have already been developed. This case study discusses the rationale
behind the project team’s selection of its scenario planning methodology.
A review of the World Energy Scenarios 2016 report indicates that WEC
had conducted the global study ‘using an explorative approach rather
than the more commonly used normative methodology’. The three
scenarios developed in the WEC global report are themed as follow:
1. Modern Jazz – representing a digitally disrupted, innovative and
market-driven world;
2. Unfinished Symphony – characterising a world in which more
intelligent and sustainable economic growth models emerge as the
world drives to a low carbon future; and
3. Hard Rock – a fragmented scenario which explores the
consequences of weaker and unsustainable economic growth with
inward-looking policies.
The methodology section of the World Energy Scenarios 2016 report
describes that the study was conducted with the following six-step
iterative process:
1. Executive interviews, three exploratory workshops, text analytics;
2. Scenario-framing workshops supported by expert insights from
global experts;
3. Two scenario-building workshops and eight regional workshops to
test ideas;
4. Refinement of trends and mapping to energy drivers;
5. Historical analysis and benchmarking to quantify key input drivers; and
6. GMM MARKAL modelling (a tool used to quantify and enrich the
scenario storylines developed by WEC) supported by robust quality
control process.
140
Figure 9.6 below describes the key outcomes of each of the six steps in
the process employed by WEC.
Figure 9.6: Key outcomes from the World Energy

Scenarios 2016 six-step process
6
5
Run model
4 and analyse
Define
3 model outputs
Develop
2 dynamic inputs
Develop
1 distinctive model
Define
alternative scenarios
Agree
on critical dynamics
trends
Analysis of case study

A review of the methodology section of the World Energy
Scenarios 2016 report provided minimal information on the
typology applied. The only key information provided was that the
study used an exploratory approach and that some degree of
quantification was done in the final benchmarking and modelling
stages (in steps five and six). Our project team decided it was best
to employ a similar methodology, where appropriate, to align
with the work and method that had been employed by WEC.
Our team also expected that input data for the project would
predominantly be qualitative in nature. Some degree of quan-
titative input data was collected, reviewed and analysed, but any
extensive and complex quantitative modelling was not progressed
as it was deemed beyond the scope of the project. Our project
team also decided on a similar exploratory approach, using an
exploratory ‘what can happen?’ high-level question to set the
framework upon which to further develop the project-specific
scenarios and narratives.
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The strategic exploratory method was the most appropriate

choice as it allowed the project to capture sufficient insight from
both external influence and strategic viewpoints. An exploratory
approach to the project also provided a beneficial vantage point
of using the present as a starting point to develop the scenarios.
Finally, the scenario planning of the project was structured to be
inductive in nature, similar to the WEC approach of using
interviews and workshops, rather than have a deductive-styled
framework imposed from the onset.
Summary
This essay began by presenting and discussing the many different
typologies of scenario planning and it is evident that there are
several classification approaches. Rather than describe the
different typologies in detail, this essay presents a case study on
how our MBA project team, making the most of a limited
timeframe, was able to quickly select the best scenario type to use
on our project, which was then used as the requisite steps of the
further scenario planning process.
The successful completion of our scenario planning study in
just eight weeks is an example of how this powerful technique can
give results in a short time. While it is certainly true that large-
scale scenario studies (such as WEC’s flagship global energy
scenarios study) require an extensive amount of time and effort,
often spanning months of research and requiring the collaborated
efforts of hundreds of individuals, a more scaled-down version of
scenario studies could prove to be attractive and beneficial to
smaller-sized organisations. From our conversations with scenario
planning practitioners, we have come to understand that most
scenario studies are commissioned and successfully completed
within a typical timeframe of a few weeks.
142
Authors: Nick Loke and Asher Abedini

Nick is a chemical engineer by training and has an
established career as a technical consultant for the oil
and gas industry. His early career focused on process
systems design and more recently transitioned into
project management and business development roles.
An accomplished team leader, Nick has successfully led
multi-disciplinary, multicultural teams and completed large
complex projects for major oil and gas clients. Originally
from Kuala Lumpur, Nick speaks English, Malay, Cantonese, and Chinese
Mandarin.
Asher is a results-driven leader with extensive experience in

the resources sector. He has proven his competency in
leading cross-functional teams, offering robust analytical and
organisational skills, and his core expertise covers strategic
thinking, operation management and multi-million dollar
accounts management. Prior to 2011, Asher’s work consisted
of technical contribution to marketing projects as well as
engagement with international supply chain challenges and
large third-party/relationship management practices. As part of his personal
development plan he then took part in the UWA MBA program in 2017.
This essay is copyright of Nick Loke and Asher Abedini, 2018.
143
10. Collaboration without consensus:
the reality of scenarios
PHILIP DAGLISH
The idea in brief

The issue: The word collaboration has two connotations. One
defines the essence of harmonious activities while the other is the
quintessential betrayal of trust and siding with the enemy. It is ironic
that business relies so heavily on collaboration (first definition) and
yet is also susceptible to being derailed by collaboration (second
definition). Consensus, meanwhile, is prized in organisational
decision-making because it implies that general agreement has
been reached within the team and a decision can then be finalised
and progressed to actions.
The context: I have developed a matrix of the high and low
collaboration and high and low consensus models. In this matrix, the
creators are characterised as individuals within a team with high
collaboration but low consensus. These creators are the ones who
actively engage in organisational goals and activities but constantly
develop new perspectives on the problems and bring diversity of
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Collaboration without consensus: the reality of scenarios
thought and provision of counterarguments to the problem-solving

process.
The solution: A key strength of the scenario planning technique is
its ability to gain greater perspectives on the future by making use
of a diverse team that can take a broad view and question future
views from multiple angles. Therefore, the ideal group to participate
in a scenario exercise is the creators. While there are challenges of
working and developing the creators group, the removal of fear and
the creation of respect and trust can achieve benefits. It then
requires fostering trust throughout the activities and understanding
that the loss of trust can quickly derail any team outcomes.
What is scenario planning?

Scenario planning is, at its core, the development of a combina-
tion of perspectives into a number of scenario outcomes. The
process on how to get to those scenarios is dependent on the tools
used and, most importantly, the people who are providing inputs.
Creating scenarios is as natural to humans as assessing risk.
We make conscious and unconscious risk assessments every day;
in a similar vein we run scenarios. Some people do this more
naturally than others, but I would suggest we all run scenarios
effortlessly. One example that springs to mind is travelling to the
airport for a holiday. We all run many possible scenarios through
our minds in ensuring that we arrive at the airport on time:
1. Get to the airport without delay and sail through without
delay
2. Get stuck in traffic on the way to the airport
3. Get held up in the airport by long queues.
We then risk assess the outcomes and make some decisions

around when to leave and how early we want to arrive. This rather
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crude approximation is really the basis of scenarios – we develop

an opinion on what may happen and where the markers are to
effectively cover all the scenarios. If you are like me, this generally
means spending a lot of hours in airports waiting for departures.
In business, the scenario planning process looks much further
than the example above and tries to develop an understanding of
the key drivers in the process.
In the beginning, there was fear

It is fundamental to business practice to acknowledge the role of
fear in both the act of getting things done and in standing in the
way of progress. This perhaps is because it is not the kind of fear
that is associated with the adrenalin-fuelled fight-or-flight
response induced by coming face-to-face with a tiger or during
extreme adventure. The fear in business is the disquiet in the
mind that just repeats ‘I don’t want to do this’ or ‘this is going to
be bad’. It is fair to assume most people don’t feel their life is
threatened at work but most live with some level of underlying
fear about their work. That fear may be that their job is threatened
or that their work is of insufficient quality.
By looking at Plutchik’s wheel of emotions, we can break down
fear into its many subcomponents (see Figure 10.1). This gives a clear
indication of the types of emotions that can exist and are rooted in
fear. The subset shows how fear can manifest in the workplace and
how fear can evolve into feeling scared, anxious or threatened.
In my opinion, most associate fear with feeling scared, but fear
is a far deeper emotion. Figure 10.1 shows how common emotions
rooted in fear may be encountered in a work environment. It is
the essence of fear that derails the collaboration process, but it
doesn’t need to. By understanding the potential for fear in a
business context, we can understand how to refine processes and
create collaboration.
146
Figure 10.1: Breakdown of the components of fear
Helpless
Scared
Frightened
Worried
Anxious
Overwhelmed
Inadequate
Insecure
Inferior
Fear
Worthless
Weak
Insignificant
Excluded
Rejected
Persecuted
Nervous
Threatened
Betrayed
(Adapted from Tarr, 2017)
From fear is born resistance and distrust

Fear is the natural state of existence for most complex living
organisms and we know that fear is a primary component of
resistance within a business context. Resistance to ideas, change
or input is a major contributor to distrust. Distrust is the poison
that kills business – business activities can be derailed by a loss
of trust from the parties involved. I think this is something that
everyone who has worked will have experienced at some point.
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Where does collaboration fit into this?

The word collaboration has two connotations and they are opposites.
One defines the essence of harmonious activities and the other is the
quintessential betrayal of trust, traitorously working with the enemy.
There is a wonderful irony that the essence of business relies so
heavily on collaboration (first definition) and is susceptible to being
derailed by collaboration (second definition) and is so magnificently
dichotomised in this frequently utilised word.
In this context, clearly the positive side of collaboration is the
focus. The idea of working together is often implied to be in
conjunction with consensus, but I contest that these are not the
same. In fact, I believe most people share this notion that collabora-
tion cannot exist without consensus.
The strengths and opportunities of collaboration

Positive collaboration with other people allows an individual to
explore greater aspects of their knowledge and to further their own
understanding. As Isaac Newton said in developing his theories, he
was ‘standing on the shoulders of giants’, referring to the work of
Robert Hooke (who, ironically, was a physically small man).
With collaboration, there is always the opportunity that some
great insight is developed, and the insight is greater than the sum
of the parts. It is well documented that collaboration stimulates
creativity (Paulus and Nijstad, 2003) and is perceived as more valid.
The threats and weaknesses of collaboration

Collaboration does have its weaknesses as it tends to be a slower
process than working alone, which can also derail projects and
time-critical activities. Are there threats to collaboration? Collab-
oration requires trust. Trust is a very hard emotion to manage
because it is fragile, easily broken and once lost it becomes very
hard to restore.
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Where does consensus fit into this?

Consensus is an ambiguous word as it has two similar but subtly
different interpretations; one is of ‘general agreement’ but it is
also defined as a common experience, value and interest (Kroeber
and Parsons, 1958). Though these differences are subtle, one
definition focuses on a common agreement that is reached and
the other is related to the underlying social context that exists. A
general agreement can simply describe a democratic vote where
the majority may be referred to as the consensus. For this essay,
it is the underlying values and interests that are more relevant to
business performance. This is referred to as consensus theory.
Consensus of thought
Consensus is the light at the end of the tunnel for most teams, i.e.
‘we have consensus, so we are done’ but, equally, there is consensus
of thought processes. I think it is fair to say that the adage ‘birds of
a feather flock together’ can be interpreted to mean that consensus
is easily found when like-minded people are in teams together. And
this links nicely to trust because when consensus of thought occurs,
we find it easier to have respect for the other person. After all, it is
easier to trust someone whose values, character and behaviour are
similar to ours and understandable. Consensus of thought is just a
simple short cut to overcoming fear and gaining trust.
The strengths and opportunities of consensus

Consensus creates a unity of communication – there is one goal,
one vision and there is efficiency of understanding as well as
efficiency of execution. The ultimate version of this is the ‘elite
team’ as each individual within the team has a very similar mindset
and quickly forms trust and understanding with one another.
Consensus can develop solutions efficiently and there is little
deviation or resistance in these groups. A team can understand
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the strengths and weaknesses of each other, and because they

share values and capabilities the solution can be found quickly
and be implemented with satisfaction. Consensus makes a very
comfortable workplace as it creates unity of ideas, a sense of
belonging and the feeling of being understood.
The threats and weaknesses of consensus

The threat of consensus is complacency, as is described in the
Harvard Business Review article ‘Change for Change’s Sake’
(Vermeulen, Puranam and Gulati, 2010) which further highlights
the threat of the comfort of complacency on business. I would also
predicate consensus as the step before complacency, or it is
certainly one of the most significant components.
Consensus can create group think, which also leads to a
hierarchical approach to problem solving that leads to the belief
that the senior, more experienced team members have the best
solutions. Group think can lead to the belief there is only one
solution and miss that there are better solutions available.
How do collaboration and consensus fit together?

I have developed a matrix of the high and low collaboration and
high and low consensus models, as shown in Figure 10.2. In this
matrix, we explore four types of employees – the model employee,
soloists, creators and rebels. Each type of employee is described
in detail below.
Figure 10.2: Matrix of collaboration and consensus
High collaboration Low collaboration

High consensus Model employees Soloists
Low consensus Creators Rebels
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Model employees
Model employees are the team members who agree with the
perspectives presented and are willing to work together to meet
the challenge. They are the people who managers love to work
with because they understand, do not ask questions and work
hard. Model employees produce work efficiently, meet deadlines
and are great team players. We all love them! However, this group
does not foster many new ideas and they are unlikely to stand up
to point out difficulties or offer a different perspective.
Soloists
Soloists are the people who want to be left to do their work and
are not interested in the team outcomes. They typically take on
tasks that can be completed individually, therefore sharing little
with and requiring little from other people. This usually means
the task gets done quickly but not necessarily efficiently. Problem
solving through this approach requires limited input from other
people and creativity is limited by the ability of the soloist to
define, diagnose and solve the problems they face. Soloists
typically produce a result with many duplications of work and
little perspective.
Creators
Creators are the team members who actively engage in activities
but constantly develop new perspectives on the problems; they
offer diversity of thought and provision of counterarguments.
Creators challenge the status quo and, as a result, they produce
highly creative outcomes. However, these teams may be uncom-
fortable to work in as they seem to be constantly questioning and
disagreeing with other team members. This can lead to slow
progress in the team and an output that is not agreed upon by
the majority.
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Rebels
Rebels are individuals who do not engage in the team activities
and disagree with the objectives. They can be saboteurs or a devil’s
advocate depending on their level of power. The rebels may be
seen as obstinate and disruptive. They may be creative but are
limited to their individual ability. These teams tend to produce
little and are beset with distrust and in-fighting. There is typically
lots of backstabbing and disillusion that can result in apathy and
presenteeism. Rebels can be useful; however, they can also test the
boundaries of ideas, test concepts with stubbornness and they can
be tiresome to work, which rarely results in a positive outcome.
Bringing it all back to scenarios

Often in the world of business the interactions between the
various entities cannot be easily understood, and simple tactics
are not effective in managing the organisation. These problems
can be referred to as wicked problems. This means there is an
unpredictable element to the cause and effects.
Scenario planning is a tool that weaves a path through possible
interactions and identifies the key drivers which will impact the
future of an organisation. Axson’s (2011) definition of scenario
planning appropriately identifies its essence, ‘Scenario planning
is a way of understanding forces that will shape the future
including environmental sustainability, technological change, and
globalization’. This simple definition identifies the three key
elements of scenarios:
1. It acknowledges the forces influencing organisations;
2. It includes the perspective on the future (noting that it is not
a forecast); and
3. It includes all aspects of an organisation, both its internal
and external environment.
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Scenario planning at its base is derived from activities we as

humans do naturally without huge consideration. The adage ‘hope
for the best and plan for the worst’ sums up how ingrained this is
to our nature and describes a simplified notion of scenario
planning where two possible futures are considered and accounted
for – the good and the bad. Once this is done, we naturally form
a plan to protect ourselves from the downside without diminish-
ing the upside.
The military are credited with the inception of scenario
planning and the development of these techniques during World
War II. The corporate world, as with a lot of strategic develop-
ments, caught up in the 1970s. Shell has been seen as the organisa-
tion at the forefront of this movement and the company has
developed its own technique to conduct scenario planning
(Garvin and Levesque, 2005). Shell’s system for scenario planning
is as follows:
• Identify the core focal point or decision;
• Examine the key influencers of success on that focal point;
• Brainstorm the drivers of these influencers and
macroeconomic factors that affect success;
• Rank these factors and drivers and separate important from
unimportant;
• Develop scenarios around those important factors;
• Develop narrative for the scenario;
• Examine implications for each of the scenarios; and
• Develop lead indicators to identify which path is being
followed.
This process can be very probabilistic (based on probability

calculations) or creative depending on the focus.
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When does it make sense to utilise scenario planning?

Scenarios are increasingly becoming the tool of choice for
organisations that are exposed to the volatile, uncertain, complex,
ambiguous (VUCA) world. In the modern world of disruption
and change, it is hard to think of organisations that are not
exposed on some level or other to VUCA environments.
It is also important to understand that scenario planning is a
tool and as the saying goes, ‘if your only tool is a hammer,
everything looks like a nail’. Scenario planning has a use, but it is
not a crystal ball that can foresee the future. It is subjective and,
therefore, at the mercy of the preconceptions of the participants.
That said, it is also a very powerful tool that can provide insight
into current practices and strategy to identify the gaps or simple
actions which can futureproof the business.
Scenario planning with creators

Since the key benefit of scenario planning is its ability to gain
greater perspectives on the future, it makes sense that the ideal
group to participate in a scenario exercise is the creators – a team
with high diversity that can take a broad view and question all
points from multiple angles.
Why is this so hard then? Diversity of thought is hard to deal
with as it involves working closely with people who don’t share
your views on the world and who often disagree with your ideas.
The creators group approach has also been called ‘stretch
collaboration’. According to Kahane (2017):
‘Unconventional stretch collaboration abandons the assump-
tion of control. It gives up unrealistic fantasies of harmony,
certainty, and compliance, and instead embraces messy realities of
discord, trial and error and co-creation.’
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The irony of the low consensus high collaboration model is

that it feels like really hard work for the majority of the time. We
do not like people disagreeing with us and feeling challenged by
our opinions, but if you can pull off this model, the output is
beyond what you thought possible. The tipping point is when you
come to trust and respect the opposition to your values, opinions
and perspective.
Creating such an environment comes back to removing fear
and creating trust between parties. As the team comes together,
it is important to develop an understanding that things are going
to be difficult and that, at the end, the output might not be aligned
exactly with any individual’s opinion.
The first of Kotter’s eight steps to change emphasises a need
to create a sense of urgency (Kotter, 2012). Once this urgency is
established, the next step is to build trust by providing freedom
to express opinions without judgment and understanding that
success will not be measured in alignment of opinion but on the
creativity of output.
Once trust is established, it must be protected at all times. If
trust is lost then the whole process will risk being derailed. If trust
is lost, it cannot be re-established without excessive effort and
the team may quickly turn into a team of rebels.
Wrapping up the whole story

There is much to be said for the impact of fear on the ability of
teams to produce meaningful results. Without trust, there can be
little hope of reducing fear; trust leads to collaboration and
collaboration makes scenario planning very effective. The utilisa-
tion of consensus is a very effective way to build trust but it is not
the only way.
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In scenario planning, there is a need for collaborative creativity

but if consensus occurs, the creativity may be diminished. By
utilising a common understanding that the change is occurring
and building trust through respect, we can develop teams into
collaborative states quickly without the need to obtain consensus.
Once trust is established the need for consensus is diminished.
Summary
In this essay, we have explored some fairly well-established
notions of fear, trust and collaboration. We have looked at
diversity through the lens of consensus theory, the fundamental
notions of scenario planning and collaboration and consensus
situations where there are high and low cases. Each of the cases
has been named – model employees, soloists, creators and rebels.
By analysing how each of these teams is characterised, I have
provided the basis for why the creators group would be best
suited to scenario planning.
Working with and developing the creators group can be
challenging. However, steps associated with consensus can be
taken to overcome these challenges, specifically the removal of
fear and the creation of respect and trust. It is then about
fostering trust throughout activities and understanding that the
loss of trust is likely to derail the team, resulting in pushing the
team from being creators into the rebels.
Finally, I hope that after reading this essay you have a stronger
sense that there are different ways of viewing teamwork in
business. It is important to have ‘horses for courses’ and I am not
trying to advocate for every team being a ‘creators’ team. However,
I hope that it is clear that there are situations where collaboration
is important and there are situations where consensus is not
important. One of these situations is in scenario planning. Being
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in a creators group for scenario planning may not be a comfortable

experience but it will most likely be rewarding.
Author: Philip Daglish

Philip is a senior consultant to the oil and gas industry with
over 15 years’ experience in delivering specialist expertise
and project management. Philip has worked with a variety of
oil and gas companies from large multinationals to small,
single-asset operators and has extensive experience in
offshore leadership roles. During his MBA, Philip focused on
developing his knowledge in the fields of leadership, scenario
planning, strategy and organisational transformation.
This essay is copyright of Philip Daglish, 2018.
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11. Scenario planning your career
after an MBA
TAT TONGCHANT
The idea in brief

The issue: Scenario planning is a strategic planning method
traditionally applied to help formulate long-term business plans.
However, in this essay, I consider scenario planning in a slightly
different context. The 'business' to be considered is my own career,
with a fundamental drive to evaluate current or potential strategies
against a framework of multiple future scenarios.
The context: Many of us engage in career planning at some point
and attempt to lay out a path to future success over the short term,
medium term and then further beyond. Functional career planning -
the process of analysing and creating realistic options and viable
action plans - is a challenging prospect as many uncertainties must
be factored into consideration.
The solution: One approach that might help us to prepare for
disruption and develop more robust career plans would be to
borrow from the scenario planning approach to business strategy
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Scenario planning your career after an MBA
in opening ourselves to a greater awareness of the external forces

and uncertainties. This essay presents an example of the scenario
planning technique used to plan my career post-MBA study.
Planning for the future

Many of us engage in career planning at some point in our lives
where we lay out a path to future success over the next three
years, five years, ten years and beyond. While elementary in its
concept, functional career planning – the process of analysing
and creating realistic options and viable action plans – is a more
challenging prospect.
Usually, we have a rough idea of what career path we hope to
pursue. We can set a career goal of what we think we want to
achieve and then create a career development plan to lead us
towards that goal. Such constructs do not always go according to
the plan, however.
Many uncertainties must be factored into our consideration,
a great many of which are out of our control. The environment
around us is continuously changing and, rooted as they are in the
realities of human psychology, our career goals may themselves
prove inconstant over time, changing radically in response to
significant events in our lives – the birth of a child, illness or even
a chance encounter with an inspirational figure. Once we
encounter events or challenges that were not incorporated in the
construction of our original career plan, continuing down the
path we might have intended becomes a more difficult prospect.
One approach that might help us to prepare for such disrup-
tion and develop more robust career plans would be to borrow
from the scenario planning approach to business strategy in
opening ourselves to a greater awareness of the external forces
and uncertainties around us. Rather than attempting a prediction
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of some ultimate end point, this approach builds around the

consideration of multiple alternate scenarios – plausible hypo-
theses of the future environment we might find ourselves facing.
By considering the implications of these varied scenarios and
how we might respond to them, the method encourages us to
take a more holistic view of the range of possible futures arrayed
before us and perhaps reach a deeper understanding of our
fundamental motivations and fears.
In this essay, I will present an example of this approach to
career planning using myself as an example. Inevitably, therefore,
it falls to me to first provide the reader with an insight into the
background, skills and career vision that has brought me to this
point – beginning with the circumstances that led me to
undertake an MBA degree.
Why an MBA?
My professional background is in the frontline of oil and gas
production, where I have spent 10 years as a project drilling engi-
neer. This work has also seen me take charge of procurement and
contract management, and lead complex teams of field engineers,
service providers and business partners on major drilling projects.
Perhaps with a degree of irony, while rich in operational man-
agement responsibilities, this career experience had never
provided me with an opportunity to consider theories, frame-
works and alternative strategies that might have informed my
management choices. For me, MBA study was about tackling this
gap in my understanding of the broader business and manage-
ment landscape.
With that vision in mind, I came into the program with the
aim of exploring and developing my management skills outside
the immediate domain of my prior expertise. It was also a time
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to open myself to other opportunities – might there be broader

(or even better) pathways to fulfilment outside the technical side
of the business I had previously been pursuing?
Why scenario planning?

Scenario planning is a strategic planning method traditionally
applied to help formulate long-term business plans (Bradfield et
al, 2005). In this context, the ‘business’ to be considered is my
own career but the analogy holds well, with the fundamental
drive in both cases being to evaluate current or potential
strategies against a framework of multiple future scenarios
(Ramírez and Selin, 2014) encapsulating plausible extensions
from significant problems and opportunities that can be identi-
fied within the business environment at the present time.
Any particular scenario may be unlikely, and the intention is
not to predict a specific future but rather to test business strategies
against multiple plausible future situations (Chermack, Lynham
and Ruona, 2001) and thereby help business leaders and policy
makers anticipate hidden weaknesses and points of inflexibility in
their plans.
The fundamental premise of scenario planning is that all
business is stochastic in nature to some extent. Industry condi-
tions may conform to reliable trends over short time spans, but
these periods of predictable behaviour are punctuated by events
that change the business landscape to such an extent as to be
unpredictable (Chermack et al, 2001; Ramírez et al, 2014).
Organisations must therefore repeatedly confront and react to
such unpredicted events to survive in the longer term.
In this aspect, scenario planning can be viewed as a functional
component of the processual or adaptive strategy paradigms
(Bradfield et al, 2005) through which organisations aim to take
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control of the restrictions imposed on their strategic space by the

external environment and turn these challenges into opportunities
by framing new strategic space (Ramírez and Heijden, 2007).
A quick user’s guide to career planning using scenarios

The future of work is garnering a lot of recent attention, and watchful
eyes are particularly focused on how automation, robotics and artificial
intelligence (AI) would shape how we work, where we work and the skills
we need to work (Manyika, 2017).
Considering uncertain futures, ever-changing environments and
numerous career possibilities, scenario planning could be used to chart
the path of uncertainty and plan for all career possibilities. Career
planning using the scenarios process can be done by following five
simple steps.
Step 1 – Establish the driving forces
Begin by brainstorming a longlist of factors (i.e. the variables, trends and
events) that could affect your career choice. For example, the oil crisis of
the late 2000s is a significant factor in my decision whether to remain in
my chosen profession of petroleum drilling engineer. Each factor
(uncertainty) is then ranked according to their importance, resulting in a
catalogue of uncertainties for evaluation.
Step 2 – Create the scenario grid
Once all the uncertainties have been identified, the two most important
and influential factors are used to form the axes of a 2x2 grid, therefore
describing four distinct scenarios. Using my own example again, the two
major factors that would impact my future career move are ‘employment
in an existing field’ and ‘jobs that require/utilise an MBA skillset’.
Step 3 – Develop narratives for each scenario
Imagine possible futures and create stories or narratives for each
chosen scenario. These narratives can be in the form of fictional but
plausible news stories. For example:
The Final Oil War, March 2028
Tension in the Middle East flares up to fully-fledged war with global
superpowers China and the US on opposing sides of the conflict.
Already suppressed petroleum production falls to an all-time low, but
rapid uptake of renewables over the last 10 years means that the oil
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price fluctuations will not have as significant an impact compared to

previous energy crises.
Step 4 – Identify implications

Evaluate the implications of each scenario’s narrative and possible
actions one should take to prepare for each possibility. I approached
this step by using a strengths, weaknesses, opportunities and threats
(SWOT) analysis to identify both favourable and unfavourable outcomes
for each scenario.
Step 5 – Track indicators
Prepare and recognise events and developments for indication of
emergence of one scenario over another. Test your actions and
decisions against these indicators (or early warning signals) regularly to
help anticipate your reaction to the emerging scenario. For example, if
there is concrete evidence of another prolonged oil conflict looming,
perhaps I should hastily exit the petroleum industry and transition to a
career in renewable energy.
(Adapted from Ali, 2009; Schwartz, 2009; Elvington, 2013; Fabode, 2016)
My career options as a scenario grid

Viewed in traditional terms, the heart of my career planning
challenge lies in combining my existing experience as a drilling
engineer with the knowledge gained through completing my
MBA studies. However, applying a scenario planning approach
requires that I remain open in my consideration of other varied
opportunities and exposure.
The matrix for my career options is shown in Figure 11.1 on
the following page.
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Figure 11.1: A 2x2 matrix for my career options post-MBA study

Requires and utilises MBA skills
Entrepreneur/
commercial role Commercial
in non-energy roles in energy
sector sector
MBA skill set

Work in Work in
unfamiliar existing
or new energy
sectors sector
Drilling
No job engineer in
prospects oil and gas
Doesn’t require/utilise MBA skills
Sector familiarity
On this basis, I have derived four viable scenarios for consideration:
1. Drilling engineer in the oil and gas industry

Strengths of going back to the same job
The technical skills in this field have no finite limit, providing sub-
stantial scope for continued growth and development. Drilling
engineering is a limited niche role, meaning the sector would
return to being highly valued by the industry when the oil price
is high again.
Having performed this role before, this could also be expected
to be the scenario in which I would be the least challenged and
the most comfortable. On this basis, the drilling engineer career
path could also be expected to offer the highest pay among the
scenarios considered here, in light of the 10 years of experience
I have acquired in the role already.
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Weaknesses of going back to the same job

With the oil price remaining low and the job market for drilling
engineers relatively depressed, the chance of returning to such a
role after the break for my MBA studies is low. The oil price has
also demonstrated a high volatility in the recent past and there is
every chance it could swing to a lower point again in coming
years, introducing the substantial possibility of low demand and
lay-offs in the sector in the future.
Opportunities of going back to the same job

The drilling engineering discipline remains heavily male
dominated and with increasing social pressure towards gender
equity and diversity in the workplace, this might lead to sub-
stantial opportunities for me as a woman in the industry.
This might open the way to an enhanced career path in this
field, facilitating progress into a leadership position in the medium
term. This also creates an opportunity to act as a pioneer in this
space. By staying on the technical side of the business, I could be
an agent of this positive change, acting as a role model to younger
women coming through in science, technology, engineering and
mathematics (STEM) roles within the industry.
Threats of going back to the same job

I might not be able to utilise the new knowledge and insights that
I have gained from the MBA program as much as I would like to.
Having taken the time out to complete my studies at this point, I
also feel that I am standing as close to the cusp of career change
as I possibly could at this point. If I choose not to make the
change now, it may become more difficult for me to make a
change in the future, locking me into the technical side of the
business as my new-found skills and inspiration fade.
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2. A commercial role in the energy sector

Strengths of a commercial role in the energy sector
This scenario offers the attraction of bridging between the new
skills and ideas acquired from my MBA studies and my existing
experience in the energy sector. Commercial roles in this context
might include work in business analysis, supply chain manage-
ment, and business development.
Weaknesses of a commercial role in the energy sector

As a more generic field open to people from many backgrounds,
the salary potential of commercial roles would be expected to be
lower than that of a drilling engineer role. Transitioning into this
domain with no record of direct experience would also entail a
greater effort to learn and strengthen my professional skillset
than a return to the comfort of my previous technical role – with
a corresponding likelihood of a delayed career progression.
Opportunities of a commercial role in the energy sector

The commercial side of the oil and gas sector offers abundant
variety and corresponding potential for growth as a career path.
This could offer greater flexibility and expanded horizons for my
working future.
Threats of a commercial role in the energy sector

This would be a competitive arena in which I would be a new
entrant, rather than being able to rely on the experience and
networking advantages of my previous technical experience – a
red ocean strategy involving vigorous existing competitors. I
would need to work actively to differentiate myself from others
and create opportunity for advancement.
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3. An entrepreneurial/commercial role in the non-energy sector

Strengths of an entrepreneurial/commercial role in the
non-energy sector
This scenario offers the greatest opportunities for change and
growth – a blank canvas of possibility where my commercial skills
could be applied towards new ends aligned with my passions.
Weaknesses of an entrepreneurial/commercial role in the

non-energy sector
A blank canvas offers boundless opportunity, but this comes with
the caveat of nothing to build on. It means starting all over again
from a career perspective – with salary expectations commensu-
rate with a new graduate, or even absent entirely if I fully indulge
in entrepreneurship.
Opportunities of an entrepreneurial/commercial role in

the non-energy sector
My personal circumstances are right for the flexibility and fail-
fast, learn lessons, start again cycle demanded by this dynamic
scenario. While I am young and single, I have the capacity to
focus myself wholly in pursuing my business ideas or learning in
a completely new professional role.
Threats of an entrepreneurial/commercial role in the

non-energy sector
In terms of competitiveness this is the most challenging of my
scenarios. I would have to engage as a new entrant with diverse
competitors from different backgrounds. In the modern agile
world of business things move fast, with disruptive small
businesses launching and growing or fading into obscurity at
break-neck speeds.
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In pursuing a commercial role in the non-energy sector,

I would again be faced with competing against young fresh
graduates who might have more current links between their
qualifications and the job requirements of roles in the rapidly
changing workplace.
4. No job prospects
Strengths of having no job prospects
This scenario offers the potential of room and time to breathe. In
the absence of job responsibility and its attendant pressures,
I could take time off to relax after 10 years of hard work and
career building capped by intensive MBA studies. This might
offer the luxury and mental space to reflect purely on myself.
Weaknesses of having no job prospects

The financial implications of no income are obvious and would
see pressure increasing as time wore on. Self-evaluation and
personal space are indeed luxuries, but these luxuries cost money.
The weaknesses of this scenario extend beyond the purely
financial, however. I am a driven person and find great satisfac-
tion in my professional achievements. After the first week of an
empty schedule, I consider it highly likely that doing nothing, and
being responsible for nothing, would prove a challenge to my
mental and physical health.
Opportunities of having no job prospects

The freedom of personal time afforded by this scenario could be
an opportunity for me to spend more time with my parents who
are getting older every day, after all. I could also do more of the
scuba diving I have come to enjoy as a hobby or build on my half-
marathon experience and challenge myself to step up to a full
marathon next year. Outside of personal development, this would
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present an opportunity for me to give back to society by applying

my skills in a volunteer role.
Threats of no having job prospects

The message we are sent in regard to career planning is that the
longer the gaps in an employment record, the harder it can be to
get back in the game. You can only tell the difference between a
career hiatus and a career end when you find out what comes next
–waiting for that next essay to begin can feel immensely
challenging.
Summary
Challenging though career planning – and, in particular, career
transition – can be in the modern world of fast-paced disruption
and uncertainty, the skills and perspectives gained through my
MBA studies have provided me with the tools to take on this
uncertain terrain with confidence.
Through my studies, I have come to understand the drivers and
challenges of business: the intricacies of finance, the tools for
undertaking strategic analysis and consulting, the power and
influence of marketing and supply chain support, and the funda-
mentals of human psychology and decision-making. Alongside
this, I have learned more about myself from both professors and
fellow students completing the challenge alongside me – my
strengths and weaknesses and the real motivations that get me out
of bed in the morning.
I am proud to have been a part of the intensive full-time MBA
program at the University of Western Australia 2017 and I leave
with the foundations of what I expect will be a richer and more
fulfilling life.
The outcome of my career development exercise remains to
be seen but, through the scenario planning exercise laid out here,
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I have been able to identify and begin preparing myself for the
potential of many possible futures.
Author: Tat Tongchant

Tat has over 10 years’ international experience in the oil and
gas industry with Schlumberger and Chevron as a project
drilling engineer. She was also in charge of procurement and
contract management as a contract owner. She has proven
her ability to introduce new technology as well as performing
feasibility analysis, gaining significant cost savings and
revenue increasing.
Tat is an enthusiastic, practical and adaptable person who is mobile and works
well in diverse and multicultural environments.
This essay is copyright of Tat Tongchant, 2018.
170
12. The grand energy transition:
an Australian perspective
PATRICK WALTON
The idea in brief

The issue: Australia is an energy-rich nation with diverse reserves
across all types of fossil and sustainable sources. That said,
Australia is currently deciding how to shape its future energy mix
as rapid technological change creates both new business
opportunities and poses considerable disruptive threat to the
current energy infrastructure. These threats exist both internally to
Australia as consumers of energy but also externally as other
nations redefine their own energy mixes, which then shifts demand
for the type of energy exports Australia has to offer.
The context: The World Energy Council 2016 Global Report details
three plausible scenarios for the 'grand transition' towards
sustainable energy between 2015 and 2060: 'Modern Jazz',
'Unfinished Symphony' and 'Hard Rock'. To characterise the
Australian energy professional based on these diverse scenarios,
this essay presents an analysis of the Australian energy landscape
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from which the validity of these scenarios for Australia can be

assessed and the current most accurate scenario identified.
The solution: There has been considerable upheaval in the energy
sector, both globally and in Australia. Australia has experienced
substantial turmoil in deciding its long-term energy policy, and there
is evidence that Australia is heading down the Hard Rock scenario
path in its energy journey. Innovation in energy has significant
potential to disrupt the existing structure, which is evident from the
many emerging technologies such as battery storage and micro-
distribution that have already started to be developed and are
coming to market.
The World Energy Council

The World Energy Council (WEC) is a specialist in scenario
planning, which forms the basis of its 2016 report. In the report
(see the case study below for more detail), the WEC posited a
‘grand transition’ towards sustainable energy generation between
2015 and 2060 (Vargas and Davis, 2016). It makes key assump-
tions about reasonable certainties and uncertainties that go into
the scenarios, based both on relatively certain historic trends
(such as demographic changes) and variables that cannot be
foreseen (such as the technological pace of change).
This essay explores the Australian landscape as of 2017, with
the aim to characterise the Australian energy professional of the
future and serve as the Australian lens for the WEC global report
and contrasting scenarios therein (Vargas et al, 2016). The validity
of these scenarios through the Australian lens is assessed and the
current position established.
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The grand energy transition: an Australian perspective
Case study: WEC scenarios

Like all future analysis studies, the WEC report distinguishes between
elements that are relatively forecastable over the scenarios’ horizon
(in this case 2015 to 2060) and those that are important yet uncertain.
The elements that are relatively predictable are called predetermined
elements, while critical uncertainties represent what we do not yet
understand about the energy sector’s trajectory.
Pre-determined elements defined by the WEC study include: predictable
changes to the global population and thus workforce, expected to grow
by 40 per cent over the scenario period; new technologies, particularly
the combinational impacts, for example the adoption of electric vehicles
and impact upon energy systems; planetary boundaries, particularly
water stress and limiting global warming to below 2°C; and shifts in
global power, notably towards Asia where India is most populous and
China the largest economy (Vargas et al, 2016).
The WEC hypothesises that there are three critical uncertainties on the
path to possible sustainable economic growth: productivity; climate
change policy and outcomes; and international governance in the face
of shifting power to Asia. The WEC then chose two scenarios that
explore ‘uplands’ of the grand transition — one that uses predominantly
state directives and the other predominantly markets. A third scenario
explores the ‘lowlands’ of weaker and unsustainable economic growth
and investment driven by inward-looking policies (Vargas et al, 2016).
The three scenarios that were established – Modern Jazz, Unfinished
Symphony and Hard Rock – each describe the environment of a
possible future world, from which the potential impacts on the energy
system can be determined (see Figure 12.1) (Vargas et al, 2016).
Figure 12.1: Plausible future world scenarios from the

2016 WEC report ‘The Grand Transition’
Modern Jazz Unfinished Symphony Hard Rock

• Global sustainability • Global sustainability • Climate change and
driven by the markets driven through sustainability achieved
• Policies enable internationally aligned, by need for energy
sustainable growth climate focused policy security
and unified action • Protectionism and mis-
• Emergence of new
business models • Markets adapt accord- aligned focus means
ingly, as economies policy and markets aren’t
become circular sole sustainability drivers
(Adapted from Vargas et al, 2016)
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THE MBA ADVANTAGE
The current Australian energy landscape

Australia is an energy-rich nation with a diverse mix of high
quality energy resources. It is ideally placed for the transition to
sustainable energy, with both plentiful fossil and renewable
resources. Given this abundance, it is perhaps surprising that
there is still such a heavy reliance on coal for energy (Australian
Energy Market Operator, 2017) and that energy prices have
materially risen in recent years in some states (Australian Energy
Regulator, 2017).
In the aftermath of the post global financial crisis mining
boom, Australia is currently at a crossroads in deciding its energy
future in terms of both mix and energy diversity, and how it
prioritises green commitments against the cost of energy
production. There is strong desire to de-carbonise the system;
however, without clarity as to a firm long-term policy, a diverse
set of solutions have come into place, some of which are likely to
be only short term.
New liquefied natural gas (LNG) projects have come online
and gas is becoming the solution to the retirement of ageing coal
power plants. LNG is viewed as a cleaner, but potentially unsus-
tainable, transition fuel on the pathway to alternative sustainable
technologies in the future. An emerging market has also appeared
in domestic generation and community schemes as people try to
reduce their dependence on expensive and, in some cases,
unreliable grid supplies during this transition.
The pace of change is accelerating. The WEC global report was
published only two years ago and, while the difference is not
expected to be great, 2017 saw the increasing development and
application of innovative technologies likely to disrupt the energy
sector. The 2016 to 2017 period has also seen dramatic events
occur in global politics, with the rise of a potentially more
174
protectionist economic agenda in the United States for example.

Electric cars have the potential to disrupt both the oil and gas
supply chain as well as the domestic electricity grids, while grid-
based battery storage technology has emerged as a potential
solution to many of the variability problems faced with current
renewable technologies.
Using the WEC scenarios, it is possible to establish what path
Australia is currently heading down and also assess whether
Australia sits outside the current WEC scenarios, therefore
requiring a new or customised model.
Australia benefits from plentiful energy reserves, both fossil
based and renewable. It has an estimated 32 per cent of the
world’s uranium resources, 9 per cent coal, 1.6 per cent gas and
0.3 per cent oil, while also being one of the top locations for
renewable options such as wind and solar (Geoscience Australia
and BREE, 2014).
The boundary of what might affect the energy landscape is
also very broad; it is not simply the mining of energy sources for
power networks or the mix of power generation but also the
effect of changes made by other energy users on the industry.
Such changes include the recent boom in lithium demand,
spurred by the development of battery storage and electric
vehicles creating an ‘indirect’ energy industry where cars are now
increasingly ‘fuelled’ from the grid.
Energy storage itself is a hot topic, with significant scope for
disruption. While lithium dominates the future view today, there
is the potential for lithium battery technologies to become
obsolete should new and better energy storage technologies
emerge (Placke et al, 2017).
Innovation in these areas is partly driven by a desire for
sustainable living, leading to radical advances in renewable and
carbon-neutral technologies. It is also driven by a desire to
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THE MBA ADVANTAGE
leverage new-found opportunities and for self-sufficiency from

the existing networks. While fossil fuels and grids still dominate
today’s landscape, emerging technologies have significant power
to disrupt, and the potential impact on the energy segment
represents an existential threat both to current fossil fuel focused
upstream energy companies and power utilities.
Energy resources
With access to large reserves of oil and natural gas, Australia has
abundant supplies from which to tap, but many options require
substantial lead times and material investment to bring to market.
LNG production rose 35 per cent from 2016 to 2017 (Cullinane,
2017), leading Australia to become the world’s second largest
LNG exporter. Reserves are predicted to last 47 years at current
rates of production, and production rates are set to increase
further over the next few years (Department of Industry,
Innovation and Science, 2017).
Australia also benefits from a wide variety of renewable and
low-carbon energy natural resources. While hydro is limited by
water availability (Geoscience Australia and BREE, 2014), wind
is growing fast; however, other resources are left relatively
underdeveloped, particularly solar (Geoscience Australia and
BREE, 2014). Another issue is that energy infrastructure is often
located near areas of the greatest consumption and major fossil
fuel resources. To utilise more renewable resources (such as wave,
tidal and geothermal), significant technological hurdles still exist.
This has led to the creation of initiatives such as the Australian
Renewable Energy Agency (ARENA) – an organisation that is
designed to aid research and reduce barriers to market entry
(Geoscience Australia and BREE, 2014).
Other low-carbon resources include the abundant reserves of
uranium and thorium, of which Australia has been identified as
176
having the largest reserves in the world. However, while Australia

is an established uranium miner it does not have a domestic
nuclear power industry (Geoscience Australia and BREE, 2014).
This could change, with the potential for nuclear industry should
thorium reactors become commercial. At present, all mined
uranium is exported overseas (Geoscience Australia and BREE,
2014).
Secondary energy resources, those that go into energy tech-
nologies, are also abundant in Australia and major opportunities
exist; for example, in lithium, cobalt and graphite mining. These
materials go into battery technologies, which then power heavy
energy users such as electric vehicles or grid storage technologies,
themselves powered by the electrical grid (Pash, 2016).
Energy generation
Australia is currently undergoing a transition in its energy mix,
with many older and particularly coal-fired power plants being
decommissioned as they have reached end of life. Major events
such as the South Australian blackout in September 2016
(Australian Energy Market Operator, 2017) have raised the profile
of energy security in Australia and long-term policy is being
drawn into the public eye.
Gas turbines are seen as facilitating the transition to a more
sustainable long-term energy mix, considered cleaner than coal
and ideally placed with the increasing domestic production of
LNG (Stewart, 2017). As shown in Figure 12.2, there has been
substantial withdrawal of coal capacity, either planned or com-
pleted, while gas, solar and wind have seen significant growth in
the six months leading up to March 2018.
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THE MBA ADVANTAGE
Figure 12.2: Installed capacity on the National

Electricity Market (NEM)
Generated capacity (MW)

25,000
20,000
15,000
10,000
5,000
Coal CCGT OCGT Gas Solar Wind Water Bio- Storage Other
other mass
Technology
■ Announced withdrawal—■ Committed—■ Existing less announced withdrawal

■ Proposed—■ Withdrawn
(Australian Energy Market Operator, 2018)
There has also been growth in domestic solar installations

(Australian Solar Council, 2017) as energy prices have risen and
long-term policy settings remain undecided. By fitting panels to
their properties, individuals are supplementing their own energy
supplies and earning money by supplying excess energy back to
the electricity grid.
Energy storage
With the loss of base-load supplies and the increase in renewables
and domestic solar, there has been increased focus on energy
storage solutions to smooth out demand. The Tesla Powerwall was
introduced for domestic producers, and Tesla also announced the
construction of a large-scale ‘battery farm’ in South Australia
(Harmsen, 2017).
178
Wider industry advances and disruptors

The rise of micro-generation has spawned the development of a
new energy market in which green power is traded from domestic
energy generators. Companies such as Power Ledger are
leveraging blockchain technology to create micro-transaction
markets where consumers can also generate and trade with
others in their community (Power Ledger, 2017).
Advances in big data and artificial intelligence (AI) tech-
nologies are accelerating, with the potential to significantly
disrupt the workplace (Meister, 2017). By coupling big data with
deep-learning AI, solutions are emerging where professionals are
being augmented in their roles by technology, requiring a new set
of skills. Woodside is one such company, based in Perth, Western
Australia (WA), that is actively exploring the possibilities of using
big data, AI and robotics to monitor, control and maintain remote
sites as well as to efficiently gather and share in-house knowledge
(Gregory, 2017). Other companies are already looking at
automation of once-specialised roles, with Rio Tinto now running
an autonomous mine where all the ore trucks are now driverless
(Rio Tinto, n.d.).
2017 also saw the release of the Tesla Model 3, an electric car
powered by lithium batteries (Tesla, 2017). Along with the
recently installed electric highway by the Royal Automobile Club
(RAC, 2015) in WA, Australia is starting to prepare for a longer-
term shift to electric vehicles. This could well mark a shift from
the oil economy to a lithium/electric economy, as transport
technology moves away from fossil fuels to electricity, introduc-
ing an increased strain on energy generators as people now
charge their vehicles overnight.
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THE MBA ADVANTAGE
Analysis of the World Energy Council global report

Scenarios and findings
The WEC’s scenarios assume that growth in population and
labour force will be less than during the previous 45 years and
that there will be a geopolitical and economic shift of power
towards Asia. A new range of powerful technologies will emerge
and there will be a stronger understanding of the boundaries of
the planet’s environment.
Uncertainties include:
• The unpredictability of the pace of innovation and
productivity;
• How international governance and politics will change;
• The weight of priority given to sustainability and climate
change; and
• The balance between tools used to affect action, such as the
use of markets and state directives (Vargas et al, 2016).
From this basis, the WEC global report details three scenarios
based on the degrees of success the world has achieved in
creating sustainable economic growth based on the tools used to
affect action (refer to Figure 12.1).
Under the Modern Jazz scenario, the world has successfully
transitioned to a market-driven, disruptive and innovative
sustainable economy, while the Unfinished Symphony achieves
similar success through intelligent state policy as the world drives
towards a low-carbon future. Less successful is the Hard Rock
scenario in which a patchwork of both state policy and market
action leads to a nationalistic focus on local, rather than global,
policy and a less successful transition to a sustainable economy
as a whole (Vargas et al, 2016), as shown in Figure 12.3.
180
Figure 12.3: Multiple plausible ‘directions’ in which

energy markets in Australia might evolve
success
High
Modern Unfinished
Jazz Symphony
Market Policy
driven driven
Hard Rock
success
Low
(Adapted from scenarios described in Vargas et al, 2016)
The WEC report draws the following conclusions:

• Global energy demand growth will slow and per capita
demand will peak before 2030
• Electricity demand will double by 2060
• The use of solar and wind energy will increase
• The demand for oil and coal will peak
• The de-carbonisation of global transport forms a difficult
obstacle
• Global warming that is limited to less than 2°C will take a
tremendous and enduring effort
• The ‘energy trilemma’ will need to be balanced through
global cooperation, sustainable economic growth and
technological innovation.
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THE MBA ADVANTAGE
How did the scenarios stand in 2017?

Since the 2016 WEC global report, significant changes to the
global energy landscape have already happened. By examining
the three scenarios, a basic analysis can be drawn of how the
models held up in 2017.
With the inauguration of US President Donald Trump,
questions have been raised as to the future of global cooperation,
leading to the rise of nationalist policy and a set-back to efforts
towards minimising climate change. US policy has renewed vigour
towards coal and fossil fuel technologies, while environmental
agencies such as the United States Environmental Protection
Agency (EPA) have new leadership (Parker and Davenport, 2016).
On the other hand, China has made significant shifts towards
renewables (Young, 2017) and reduced the once rapid growth in
coal fired electricity generation (Dockrill, 2017).
The Australian economy is still recovering from the investment
phase of the mining boom, but Australia’s new LNG projects are
now coming online. A new minerals boom could be on the
horizon with the advent of new lithium and graphite mining
developments to meet demand from lithium battery technologies.
Sustainable economic growth is a future in which growth can be
maintained without creating significant problems in other parts
of the economy or for future generations. This excludes the boom
tendencies of Australia’s past and, with a potential new boom in
lithium and graphite, Australia looks likely to maintain an
‘unsustainable’ economy. Reliance on debt and slow wage growth
also reflects poorly on sustainability (Kent, 2015) and with a
budget deficit, Australia currently fails to meet the requirements
for sustainable growth.
Innovation continues with significant focus on energy storage
and battery technology. Small-scale solar and off-grid commercial-
182
scale solar remains a strong contender in Australia, with many

seeking to guarantee their supplies and minimise the cost of rising
energy bills while politicians battle out the future of base-load
generation. The emergence of companies such as Power Ledger has
meant the creation of micro-distribution energy markets within
communities that threaten to significantly disrupt traditional
means of energy supply.
Summary
It remains too soon to be able to evaluate the eventual long-term
outcome for Australia in terms of energy settings. Indeed, it would
be fundamentally at odds with the principles of scenario planning
by attempting to forecast which ultimate path will be taken.
The aim of this essay is to establish whether the plausible
futures are relevant to Australia and identify where Australia is
today. There was considerable upheaval in the energy sector
during 2017, both globally and in Australia. To analyse the state
of the WEC scenarios in 2017, the energy trilemma of global
cooperation, economic sustainability and technological innova-
tion offer the best points for analysis (Vargas et al, 2016).
1. Global cooperation. On the global scene, the US and China
are the big players and have strongly diverging interests.
There has been a significant shift in emphasis in China with
a push towards renewables as a solution to air pollution,
while other economies such as the US have arguably moved
in a different direction with a shift towards nationalist
policy; for example, the US’ decision to pull out of the Paris
Agreement on climate change mitigation. This has made
global cooperation a difficult proposition in 2018. Australia
itself has had significant turmoil in deciding long-term
policy, which has led to market solutions filling in the cracks
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THE MBA ADVANTAGE
while policy is advanced. This is leading to disruptive

changes in the sector that could lead to government policy
being adapted further to ensure inclusion retrospectively.
2. Economic sustainability. Pushing down both fossil and
sustainable energy paths, long-term policy has yet to be
agreed upon for the future of Australian energy, with gas
increasingly seen as the transition fuel. Coupled with
Australia’s tendencies to embrace mineral booms and the
potential for lithium, alongside a fluctuating trade balance
and slow recovery in wage growth, Australia has yet to
develop a truly sustainable economy or energy portfolio.
3. Technological innovation. Innovation is one area that has
seen significant gains, with scope to disrupt the existing
structure. Many technologies have started trials, with
battery storage and micro-distribution models such as
Power Ledger coming to the market. Electric vehicle
adoption remains low; however, infrastructure projects are
already underway (for example, the electric highway (RAC,
2015). Electric vehicles, in particular, offer significant
potential to radically change the energy infrastructure as
they shift the sustainability requirements onto the electrical
network. These technologies have thrived thanks more to
market forces rather than state policy, which has significant
potential to affect and even kill new technologies if it is
poorly considered.
Overall, it appears that Australia is currently heading down the

Hard Rock path through the great transition; however, there are
active debates and a strong desire for sustainable energy (Vargas
et al, 2016). Numerous examples can be seen where policy is
trying to develop based around current technology, while market
184
forces throw curve balls to sway opinion. A great example of this

is the Tesla battery project in South Australia where supporting
infrastructure was desired to prevent load shedding and a market
player spotted an opportunity, typifying the fragmented Hard
Rock direction towards sustainability. While Australia has started
down the Hard Rock path on its energy journey, it has done so
early on, with significant opportunity still available to shift
towards Unfinished Symphony or Modern Jazz and a higher level
of coordinated sustainable success.
Author: Patrick Walton

Patrick is a chartered engineer with an extensive research and
development background in aerospace, leading disruptive
product innovation and designing project teams while
delivering cutting-edge products to market. Patrick is task
driven, approachable and thrives in collaborative
environments. He has a long-term mindset and is driven to
developing strategies that consider the bigger picture and
ensuring future benefits to the whole organisation. Having lived in multiple
countries, Patrick loves to travel and develop multinational teams and
partnerships.
This essay is copyright of Patrick Walton, 2018.
185
PART IV
STRATEGY
ON STRATEGY
Addressing the pragmatic reality of business, Part IV of this book

takes us past the safe boundaries of abstract questioning and
analysis to confront the pragmatic challenge of formulating
business strategy. By completing the narrative journey in this way,
we aim to emulate the arc of the MBA experience; moving from
understanding theories and undertaking analysis to applying
knowledge to address the real problems of business management
and leadership.
The first of these integrated explorations of strategy comes
from Rohan Versteegen, with his essay ‘Stick with your knitting:
why companies should iterate rather than innovate’. Versteegen
offers a thoughtful challenge to the zeitgeist of innovation as the
latest ‘must-have’ for business. Recent valuations have seen the
market willing to pay a substantial innovation premium to start-
up companies that espouse a philosophy of innovation –
essentially gambling that this novelty will pay off through actual
profits in the future. Caught up in this excitement, many existing
and stable organisations are being pressured to act like start-ups,
with even governments and charities feeling the need to be seen
to be innovative in what they do. Through critically examining
this phenomenon, Versteegen builds a counter-view that, for
established companies, the pursuit of innovation could result in
189
THE MBA ADVANTAGE
a destruction of shareholder value, with a wiser course to be

found by focusing on core strengths and the iterative
improvement of products and services.
Continuing this theme, Mike Godfrey argues for the import-
ance of critical thinking in the corner office in his essay ‘Rocks
and sirens: avoiding bad strategic choices’. Reacting against a
culture of innovation for its own sake, Godfrey builds a case for
executive decision-making to be built on a firm foundation of
data and tools appropriate to the level of ambiguity faced. The
value of measured and robust strategic decisions, he argues, far
outweighs the cost in time and resources taken to unpick and
analyse problems.
Building from these theoretical beginnings, Marco Hui’s essay
offers ‘Business models and innovation: critical and modern
strategies’. Drawing from examples in the banking sector, Hui
presents a summary of leading business models and their use in
organisational analysis, illuminating the strengths and pitfalls of
this approach as a tool for strategic business innovation.
In the first of three following essays exploring practical applica-
tions of strategy, James Tang examines the potential to be found
in Australia’s relationship with the emerging economic super-
power of Asia in ‘Seeking opportunity in the Chinese century’.
Alongside an evaluation of the strategic implications of China’s
thirteenth five-year plan outlining policies for growth and
development out to 2020, Tang explores the complexity of doing
business with this key nation. While China is key to the growth of
the world economy – and Australia in particular – through the
coming decades, Tang explains, taking advantage of the
opportunities this presents requires the development of local
partnerships and a corresponding familiarity with cultural and
national values.
190
On strategy
In the following essay ‘Best practices for new product

development’, Stuart Young leads the reader through a generic
examination of the frameworks and practices that underpin
successful product development in modern business. Breaking
away from existing practice and launching a new product or
service can be one of the most valuable actions a business can
undertake, but these opportunities are balanced by a correspond-
ing risk of failure. In his exploration of this dynamic relationship,
Young establishes a platform of established strategies that can
assist a business in identifying and navigating the inherent
challenges it poses.
Completing our journey, Bindi Shah illustrates the strategic
potential for change in the mining sector with ‘Sustainable
mining: oxymoron or challenge?’ On top of the traditional
challenges of technological innovation, production cost and
volatile commodity price, the mining sector faces increasing
regulatory and social pressure to internalise the costs of negative
environmental impacts associated with its activities. Shah outlines
a strategic approach to this existential challenge, illuminating the
potential for a more collaborative and sustainable future for the
global mining industry.
191
13. Stick with your knitting:
why companies should iterate
rather than innovate
ROHAN VERSTEEGEN
The idea in brief

The issue: Innovation is the latest must-have in business and all
companies are being pressured to act like start-ups. Even
governments and charities feel the need to be innovative. But
innovation only works as a strategy if it is the sole focus of the
company and is not confined to innovation labs and hackathons.
The context: Companies that are ranked among the most
innovative, such as Amazon, Tesla and Salesforce, have innovation
at the core of everything they do. This focus is well understood by
the market, which is willing to pay an innovation premium for these
companies, gambling that all this innovation will pay off through
actual profits in the future. For established companies, the pursuit
of innovation could result in a destruction of shareholder value.
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THE MBA ADVANTAGE
The solution: An innovation discount may apply with the company

becoming a target for activist shareholders. These companies
should focus on their core strengths and iterate their products and
services to maintain value for customers.
Innovation at Company ABC

It’s the 2017 corporate strategy session at Company ABC, a listed
company in the ASX200 boring and predictable sector. The CEO
has brought his top people together to develop the company’s
one-, two- and five-year plans. Normally these sessions go
smoothly with last year’s plans getting dusted off and updated
before everyone hits the bar. This year is different. At the start of
the meeting, the CEO gets up and says, ‘The board and I are
worried we’re going to get disrupted. I need you guys to bring me
some innovation’.
The room went silent. Everyone had heard about this innova-
tion thing, but nobody knew how to do it. A working group was
set up with the task of reporting back at the end of the strategy
session with a plan for how to bring innovation to Company ABC.
The team scoured Harvard Business Review for the latest thinking
and pulled together a tight slide deck. At the end of the session,
they presented their findings and proudly declared, ‘We need to
do some design thinking to disruptively innovate a pivot towards
the blue ocean’ (as shown in Figure 13.1). The team was given a
standing ovation and Company ABC proudly embarked upon its
new, innovative future.
If your company is considering embarking on a bold, new
innovation program, it’s time to think again.
194
Stick with your knitting: why companies should iterate rather than innovate
Figure 13.1: Company ABC’s design thinking process
ory
ect
traj
in ing
sta
t su Pivot
ben ry
um cto
Inc aje
tr
Prototype tive
rup
Define Dis
Empathise
Ideate Test
The move towards innovation

This scene has been repeated by c-suites across Australia and the
world over the last couple of years as the innovation train has
rolled its way through the corporate world. The Australian
government is in on the act, with its innovation agenda and
ministers for innovation in every state and federal jurisdiction.
Even charities feel the need to be innovative these days.
Médecins Sans Frontières (Doctors Without Borders) is currently
soliciting for donations by talking about the innovative new
technology it is using to provide medical care in difficult
locations, putting its own spin on design thinking/lean start-up
principles with the tagline ‘invest. test. treat’ (Ries, 2011).
With all this innovating going on, one could justifiably ask
whether anyone is left looking after the day-to-day operations.
After all, nobody wants their medication to be a minimum viable
product or their bus to pivot halfway through the commute
home. It’s probably fortunate that all of this innovation has been
confined to innovation labs, design jams and hackathons and
hasn’t emerged into the real world where it could do some
damage.
Large corporations should embrace start-up culture in order
to become more innovative. One of the key elements is following
the approach Eric Ries advocates in his book, The Lean Startup,
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THE MBA ADVANTAGE
where detailed business plans are ditched in favour of business

model hypotheses that are tested with customers by creating a
minimum viable product. If this doesn’t work, the company can
‘pivot to a new solution without having spent large amounts of
money and time’ (Ries, 2011).
Many large companies have embraced this process by creating
innovation labs where a small team can come together, free from
the usual big company bureaucracies and rules, to create new
products, services and processes to be rolled out across the
company. However, this kind of setup has been criticised as
‘innovation theatre’ performed to appease nervous boards and
investors, and evidence is emerging that companies are closing
or downsizing these labs (Yoo, 2017).
Innovation requires a singular focus to be successful

Amazon is regularly cited as being one of the most innovative
companies in business today and has maintained this innovative
culture even as it has grown to become a company with over
500,000 employees and a market capitalisation greater than
US$500 billion. It has done this through a singular focus –
maintaining a start-up culture.
Jeff Bezos, the founder and CEO of Amazon, regularly talks
about every day at Amazon being ‘day one’ and works in a building
named Day 1 to remind himself and his employees that the vitality
of start-up culture is essential to their success. In Amazon’s 2016
annual report (Amazon, 2016), Bezos explains what he thinks day
two looks like for a company by saying, ‘Day two is stasis. Followed
by irrelevance. Followed by excruciating, painful decline. Followed
by death. And that is why it is always day one’.
Amazon reinforces this message by including a copy of its first
letter to shareholders in each subsequent year’s annual report.
196
This letter outlines Amazon’s investment philosophy and makes

it clear to investors what a focus on day one looks like. One of
these investment philosophies is to make ‘bold rather than timid
investment decisions’ in the knowledge that ‘some of these
decisions will pay off, others will not’ (Amazon, 1997).
This reflects Amazon’s focus on innovation and the knowledge
that, just as most start-ups fail, not all efforts at innovation will
be successful. Amazon also puts forward a clear statement about
its approach to short-term profits stating, ‘When forced to
choose between optimizing the appearance of our short term
GAAP accounting and maximizing the present value of future
cash flows, we’ll take the cash flows’ (Amazon, 1997).
In other words, Amazon is investing today’s profits to maxi-
mise future growth. By outlining this philosophy and restating it
every year, Amazon is sending a clear message to its investors that
when you buy Amazon stock, you’re actually buying potential
future growth funded by research and innovation. The market
understands the message and is willing to bet that Amazon can
achieve the growth required to deliver profits to investors in the
future.
Creativity must be encouraged

The latest fashionable literature on corporate innovation has a lot
to say about the process of innovation but less about its reliance
on creativity. Without creativity, following a standard innovation
process would inevitably result in all companies coming up with
the same ‘innovations’.
Therefore, to become an innovative company, the organisation
must have processes and practices in place that encourage
creativity in the workforce. In order to do this, it is necessary to
understand the factors that make up creativity.
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THE MBA ADVANTAGE
Teresa Amabile defines creativity in the workplace as arising

from the confluence of expertise, creative thinking skills and
motivation (shown in Figure 13.2), with intrinsic motivation
being far more powerful than extrinsic motivators like money
(Amabile, 1998). Organisations can recruit knowledge and
creative thinking skills but, if they wish to enhance creativity, they
must create a culture that maximises intrinsic motivation.
Amabile defines six factors that management must focus on (see
Table 13.1) and we can see these elements at play in the cultures
of the most innovative companies today.
Figure 13.2: The intercepting elements of creativity
Creative
Expertise thinking
skills
Creativity
Motivation
Table 13.1: The six elements of building a culture of creativity
Challenge Work Encour-

Freedom Resources Support
group agement
Match Give people Provide Diversity is Generously Collaboration
people to autonomy adequate important recognise is important.
jobs where concerning time and and team creative Office
challenge is the process money. members work. politics will
optimised. but not the People are must share Encourage kill creativity.
end result. less creative excitement. risk-taking.
under time
pressure.
198
It’s not as easy as it looks

So, it appears that embracing innovation is not as easy as it looks.
It requires a whole-of-company focus and a willingness to
sacrifice short-term profits for the possibility of longer-term
payoffs. In that case, why would an established company want to
embrace start-up culture when we know that around 90 per cent
of start-up companies fail? Would a responsible company spend
shareholders’ money on any other project that had a 90 per cent
chance of failing?
One common answer is that, like the CEO of Company ABC,
managers are concerned about being disrupted by other, more
innovative, companies. ‘Innovate or die’ is the catchphrase, and
the parable of Kodak has been told so many times in boardrooms
and business schools that it has become accepted wisdom that
companies must constantly innovate in order to merely survive,
lest they go the way of the film camera. The more modern
versions are the story of Amazon and the havoc it has wreaked
in retail markets across the globe or Uber’s disruption of the taxi
industry.
Jealousy as a motivator
An alternative motivation for wanting to be in the innovation
game has its roots in good old-fashioned jealousy. Companies
that are seen to be highly innovative are often overvalued by the
market when looked at through traditional metrics such as the
price/earnings ratio.
Dyer, Gregersen and Christensen (2011) have called this the
innovation premium, which is defined as the difference between
a company’s market capitalisation and the net present value of its
current cash flows. Forbes (2017) publishes a list of the most
innovative companies each year based on this metric. In 2017,
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THE MBA ADVANTAGE
the top three companies were Salesforce, Tesla and Amazon with
innovation premiums above 70 per cent, which means that the
market values these companies over 70 per cent higher than it
would a non-innovative company with similar cash flows (see
Figure 13.3). While these companies currently make minimal
profits, or even losses, the market is betting that somewhere
down the line all this innovation is going to pay off in a big way.
Of course, other CEOs wish that their companies could be
valued based on revenue or user growth. If only their share price
could have risen almost 500 per cent over the past five years
without having to make any meaningful profits. That would be
great come bonus time! It might even get them on the cover of
Forbes magazine. Instead, they’re stuck managing a profitable but
boring business in a world that now values potential profits much
more highly than actual profits. It’s understandable that a
flirtation with innovation could suddenly seem very attractive.
Figure 13.3: Forbes’ most innovative companies for 2017
Salesforce
Tesla
Amazon
Shanghai RAAS
Netflix
Incyte
Asian Paints
Navar
Regeneron
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Innovation premium
200
Case study: where did all the good ideas go?

A group of economists from Stanford and MIT has performed research
which shows that research productivity has been steadily decreasing
since the 1940s, indicating that it’s becoming harder to find new ideas
and achieve the productivity gains required to sustain growth (Bloom et
al, 2017). The research shows that as the number of researchers has
increased, the productivity of those researchers, as measured by their
contribution to economic growth, has been declining.
Research productivity versus number of researchers

Moore’s Law is the observation that the transistor count on an
integrated circuit doubles approximately every two years and is
seen as one of the driving forces of economic growth through
increased computing capacity (Bloom et al, 2017). This research
shows that achieving this doubling of capacity today takes
approximately 18 times the effort it did in 1971.
When looked at in relation to business strategy, these findings
have broad implications for businesses pursuing an innovation
agenda. If the costs of innovation are steadily increasing relative
to the returns, it is clear that this will have an impact on bottom
line profitability.
The innovation discount

So, where does this leave the CEO of Company ABC and its quest
for innovation? Especially in a world where it seems like great
ideas are getting harder to find (as shown in the previous case
study)? We can see that Amazon shares trade at a premium
because investors value its innovation and growth focus and are
willing to pay handsomely now for potential long-term profits.
However, the opposite can also be true and a company with an
investor base that values its stability and profitability may cause
a backlash if it suddenly decides to invest profits in large research
and development (R&D) and innovation programs.
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THE MBA ADVANTAGE
While once fashionable, conglomerates now attract a diversifi-

cation discount because investors who are looking to diversify
their investments can do so themselves. In the same way, investors
looking to gamble on innovation can find companies, like
Amazon, whose core business is innovation. They do not need
established companies to do this gambling for them, and firms
that dabble in innovation and R&D programs will increasingly find
themselves subject to an innovation discount.
This means that, when determining strategy, managers need
to take into account the views of the company’s owners and the
shareholders. If a Woolworths investor is worried about Amazon
disrupting the grocery market and hurting their investment, they
can buy Amazon shares as a hedge against this risk. It is not in
the Woolworths owners’ best interests for the company to be
investing millions into online platforms that are not part of its
core competencies.
Activist investors
In recent years, we have seen the rise of activist investors;
although some who remember the corporate raiders and vulture
capitalists of the 1980s and 1990s might call it merely a rebrand-
ing. These investors buy stakes in companies they believe are
underperforming with the specific intention of pressuring the
management to change its strategy. The management of BHP has
been under pressure this year from the activist hedge fund Elliott
Management and there are numerous other recent examples of
investor intervention into public companies whereby investors
have taken control of board seats and forced a change in strategy.
Companies investing heavily into innovation programs outside
their core skills leave themselves open to this type of attack.
Jeff Immelt’s demise as CEO of GE provides a cautionary tale
for managers of established companies considering a big bet on
202
innovation. Immelt considers the The Lean Startup to be one of

the main influences on his career (Immelt, 2017). In 2013, GE was
seen as an example of a large corporation embracing innovation
and lean start-up principles (Blank, 2013). Immelt doubled GE’s
investments in R&D and made multi-billion-dollar investments
in digital transformations. Unfortunately, GE also significantly
underperformed its peers on an earnings per share (EPS) basis,
which resulted in the overall value of the company being cut in
half during Immelt’s tenure.
This encouraged Trian, an activist investment firm, to buy a
$2.5 billion stake in GE and begin agitating for change. Trian
(2015) published a white paper titled ‘Transformation Underway…
But Nobody Cares’ and instead of innovation programs demanded
a $2 billion cut in expenses, an increase in operating margins and
the return of capital to the shareholders. The result is that the CEO
and most of his innovation-minded executive team have been
replaced and Trian has a seat on the board. GE is now focused on
cutting costs and increasing EPS.
Summary
As Peters and Waterman (1982) found, the best companies are
those that stick to their knitting and focus on their core com-
petencies. But this doesn’t mean that companies should stand still
and there are many lessons that established companies can take
from the innovators.
One of the key lessons is to focus relentlessly on the customer
experience and use customer data to iterate existing products.
Companies such as Facebook and Amazon capture large amounts
of customer data, which enables them to better target their
products to existing customers and attract new ones. The use of
the latest technology to improve existing products is not
necessarily new or innovative – it’s just good business.
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THE MBA ADVANTAGE
The ability to iterate is vital to remaining relevant to your

customers but it doesn’t require an innovation lab to figure it out.
Theodore Levitt realised in the 1960s that customers don’t want
a quarter-inch drill (Christensen, Cook and Hall, 2005) and if
you’re not close enough to your customers to figure out what it
is they do want, then Amazon will innovate a way to deliver them
a quarter-inch hole via FedEx. Although they probably won’t
make a profit out if it.
Financial gravity will grab hold of the innovators and the
vulture capitalists will come for their pound of profitable flesh.
The innovation phase will pass, and the next big thing will
soon come along to take its place. In the meantime, the CEO of
Company ABC should focus on listening to their customers and
iterating products and services to maximise their value to those
customers. The day will come when investors get tired of waiting
for future profits from the innovators and an activist investor with
deep pockets will force them into day two. Meanwhile the
ASX200 boring and predictable sector will carry on the same way
it always has: boring, predictable and profitable.
Author: Rohan Versteegen

Rohan is an experienced general manager with a background
in successfully building and managing cross-functional teams
in the oil and gas industry. He has been responsible for
formulation and execution of strategic, commercial and
marketing plans as well as effective introduction and
management of organisational change. Rohan has lived and
worked in Australia, the UK and India and enjoys the challenge
involved in leading diverse teams and seeing them succeed.
This essay is copyright of Rohan Versteegen, 2018.
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14. Rocks and sirens:
avoiding bad strategic choices
MIKE GODFREY
The idea in brief

The issue: The role of a leader - at either board or senior
executive level - in almost any organisation is a difficult, stressful
one. There will be constant demands on your time, your activities will
be scrutinised in detail both inside and outside of the organisation,
and it will feel like all of the decisions you make will be significant,
complex and made with insufficient information.
The context: One of the critical roles of a leader is to chart out
and communicate the strategic vision for the company, allocate
resources and monitor their use with the intent of delivering a better
than market return. You will need to either establish a team to do so
or take on the challenge by yourself to scan the horizon for rocks,
make macro strategy adjustments (only if needed) and explicitly
set out how and where the company will compete. You then need to
make yourself comfortable with the options available to respond to
issues 'outside the beige box' and make sure that your management
teams look after what is within it. These harder, more ambiguous
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THE MBA ADVANTAGE
issues require a different approach and are best tackled by a

diverse, knowledgeable, well-led team.
The solution: The tools and systems that you use depend on the
level and type of ambiguity that exists in each instance - case-
based analysis, quantitative scenario analysis with root and branch
outcomes or open scenarios - with both qualitative and qualitative
elements that will need to be examined and unpicked. Once the
direction is set and the causes and likely effects can be quantified,
it now needs to be implemented and measured so that the actions
of middle management and frontline staff advance the strategic
objectives of the company.
An introduction to strategic planning

The word ‘strategic’ is often used to designate senior decision-
making levels in an organisation’s hierarchy, i.e. member of the
‘strategic leadership group’ or to indicate significant scale, i.e. a
$3 billion acquisition may be talked about in a press release to be
of ‘strategic magnitude’.
Often the words ‘planning workshop’ are appended to form
one of the more misleading terms in business – the strategic plan-
ning workshop. After a lot of discussions and team building
exercises, usually not at the corporate office, people go back to
work with few significant changes being made.
At best, the major divisional operating costs and capital cost
numbers for the next five years will be displayed on Microsoft
PowerPoint after they have been approved. The supporting docu-
mentation will have been worked on separately and is designed
to be a long-range annual budget for the organisation. But,
somehow, adding another three to four years of substantially the
same content is supposed to transform a goal-setting exercise
into a longer-term business strategy.
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Rocks and sirens: avoiding bad strategic choices
These documents and the time it takes to produce them are

not entirely wasted, but filling in the same frameworks and com-
piling excel spreadsheets year after year is not going to establish a
strategy that will enable the corporation to ‘beat the market’
(Bradley, 2013). If it is accepted that the purpose of the firm is to
achieve a return to shareholders that is consistently above the cost
of capital for that organisation, then a strategy that enables the
firm to do so will be considered a success by many stakeholders.
Senior executives and board director roles are primarily
responsible for setting the strategic direction of a company. The
next challenge is to align both people and policies to support this
direction and to allocate the necessary resources to enable the
implementation of the initiatives. This can be broken down into
three distinct areas – ends, ways and means (Clausewitz, 1968)
– as shown in Figure 14.1.
Figure 14.1: Setting directions, methods and allocating

resources – building a skeleton for strategy
What is the purpose of the company?

How do we win?
Ends Where do we play and where do we not?
What specific steps do we take?

When do we take them?
Ways Who controls and monitors the progress?
What resources will we need?

What resources do we have?
Means How do we fill the gaps?
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THE MBA ADVANTAGE
The ends: set your direction, watch out for rocks

and sirens
There is no perfect way to define a company’s purpose and
direction. A company’s core purpose can be either static (like
BHP or Maersk) or flexible (like Google or Tesla). Neither option
is perfect by itself, and the key to success is to know when and
how to adjust your execution to take advantage of changes in
markets or competition (rocks) and when to hold fast and not
become distracted (sirens).
Navigating through the rocks

If the market or business landscape shifts drastically and your
strategy is unable to accommodate those changes then it is time
to modify the core business strategy. In the 1840s, Wells Fargo
was a delivery company that utilised horse-drawn stagecoaches
and also had a small finance arm. After increased competition
from road and rail early in the 20th century, it spun off the
stagecoach division and concentrated on the financial services
arm, remaining in the finance business ever since 1914.
A company’s ability to adapt and make significant strategy
changes to respond to market dynamism was referred to as
‘emergent strategy’ by Mintzberg and Waters (1985). This flexible
and responsive strategy archetype allows companies to respond
to or take advantage of external changes more quickly.
This is currently referred to as ‘agile strategy’. However, it is
not the awesome, brand new idea Silicon Valley and TEDx
presenters make it out to be. It suits fast-moving markets where
even transient advantage can be significant, such as in aspects of
biomedical and technology sectors. There may be downsides to
this method of strategy formulation. For example, if the
organisation is not capable of managing regular, major directional
208
shifts, it may confuse employees, waste company resources and

waste resources that were previously deployed in what was rightly
‘core business’.
Case study: the value of Viagra

Perhaps the most famous emergent strategy execution came from
Pfizer’s cardiothoracic research and development team, which was
targeting a compound to treat hypertension and angina. Trials for UK-
92480 were disappointing and were almost abandoned until the male
trial volunteers reported an ‘unexpected’ side effect.
The pill was renamed Viagra and became one of the highest selling,
most valuable drugs of all time. They found vacant space in the market
for this type of drug, as there were no direct oral treatment competitors,
and the alternatives were direct injections or a prosthetic implant, which
were both expensive and painful.
The alternative type of strategy to an emergent or agile strategy

is referred to by Mintzberg and Waters (1985) as ‘deliberate
strategy’ which is where the intention of the organisation is well
defined, communicated and executed as conceived. Amazon
(Bezos, 1997), Procter & Gamble’s Olay transformation (Lafley
and Martin, 2015) and the Bunnings roll out (Davis, 2016) are
other examples of deliberate strategies that were executed as
intended. These have been very successful, delivering market-
beating shareholder performance.
These strategies were static only at the macro level and were
flexible enough in execution to ensure success. Amazon still
refers to its 1997 five-page letter to shareholders as ‘its defining
strategy document’ (Stone, 2013). In the letter, CEO Jeff Bezos
(1987) set out his guide for the company, including:
• Amazon’s purpose: ‘Our success will be the shareholder
value we create over the long term’
• Amazon’s position: ‘Online commerce’
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THE MBA ADVANTAGE
• Amazon’s strategy: ‘Extend and solidify current market

leadership position. The stronger our market leadership, the
more powerful our economic model’.
In setting the company’s strategy, the executive needs to set out

the future vision for the company and articulate where and how
it will compete. This will also mean that they will have to make
decisions about what the company will not do, which is almost
as important. This can be a confusing, ambiguous process which
will involve essentially ‘betting the company’ on outcomes that
are not only uncertain but are also unknowable.
Hold fast and resist the sirens

In order to make the decisions more comfortable, executives may
need more data and analysis just to be more certain. If there is
considerable ambiguity in the end state, performing more analysis
and adding more data will not improve the risk profile of the
decision or increase the probability that the result will benefit the
company.
If there is enough information to accept the unknowns and set
the direction of a company with the risks as they are seen and
iterate its product offering to adapt – the leaders should do so.
By taking decisive action and refining the approach as they learn
more, the process will be of more benefit to the corporation than
if they adopt a ‘wait and see’ approach to strategy and never move
to execution.
The ways: decisions made the right way and at the

right level
Once the vision for the organisation is defined, distilling this into
specific options for the company will require the strategy team
to define the problem and the solution space correctly. There are
210
many different ways of doing this; some are famous, such as

McKinsey’s ‘seven steps of problem solving’; and some are
anonymous.
These frameworks all serve to set out two significant pieces of
information that will help the company decide how to respond
to a range of circumstances:
1. Can the company define what factors will cause the
company to be successful?
• What capabilities does the company have and what
gaps need to be filled?
• What economic, social and political conditions
need to be present for the company to be successful?
• What actions will other players in the market –
competitors or suppliers – make and what effects
will that have on the company?
2. What is the quantum and probability of each outcome?
Depending upon where the company finds itself in terms of
both the causality and outcome (effects) spectrum, there are
various approaches that can guide executives to assess the
situation and make an informed decision on the future
direction of the company. Figure 14.2 sets out the ways that
strategy teams should approach each situation.
The most straightforward situations, with low levels of uncertainty

in both the likely outcome or cause, e.g. ‘inside the beige box’,
should be dealt with by line management in the normal course of
business. Rarely, however, will strategic decisions have both
certain causes and certain outcomes, such that they can be dealt
with through a ‘normal’ capital budgeting or investment selection
process. An example of this situation would be a brownfields
expansion of a known mining operation or the purchase of a utility
or toll road with regulated flows and pricing structures.
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THE MBA ADVANTAGE
These should be reasonably straightforward management calls

due to their quantifiable causation factors and effects that can be,
at worst, known within a range and can be worked out through
statistical modelling using Monte Carlo or similar statistics-based
simulation methods.
This work, while vital for proper decision-making and execu-
tion, is not setting business strategy – this is simply thorough
execution planning. As long as these types of projects or oppor-
tunities fit within the company strategy and available resources,
all they require is approval and diligent management.
If these straightforward decisions need to be made by the
board or executive levels, then the people that occupy those
positions need to ensure that management is aware of their own
decision-making levels and act accordingly. The board and senior
executive team’s time is valuable and should not be taken up by
issues that should be dealt with by line management.
Figure 14.2: Different levels of certainty in cause and effect

suit specific analysis methods
High
Care-based system Open scenario planning
Argenti System, with both quantitative and
Ambiguity in causality
(SWOT, gap analysis) qualitative aspects
Multivariant, probabilistic
simulation
Quantitative
Monte Carlo scenario analysis
Capital real options discrete case or
budgeting analysis decision tree method
DCF and IRR
‘Normal’ execution decision tools
Low Ambiguity in outcome High
212
Reasonable levels of ambiguity are expected in business, and a

company’s standard business planning techniques will need to be
robust enough to cater for them.
For the decisions that are unusual, rare, high impact and/or
risky, thinking outside the beige box requires careful analysis,
diverse thinking and the willingness to challenge the status quo.
These skills need to be cultivated inside the company if this is to
become a core competitive advantage for the company. Maersk,
IBM and Disney all have well regarded internal ‘consulting’ teams
that are used in these situations.
Known outcomes but unknown causes call for a

case-based approach
This is a reasonably common phenomenon in business – we
made several changes and got a great result. What was the real
reason for our success?
• Used when the potential causes are uncertain but when the
outcomes are able to be deduced with reasonable certainty
after the causes are provided.
• Some types of propriety strategic planning archetypes,
such as the Argenti Model, can be used here.
• The process starts by establishing a baseline from known
data that describes the past and present, such as customer
demographics and product sales history, internal and
competitor data, macroeconomic information, regulatory
environment, etc.
• Then, the teams create a set of specific, detailed and future-
oriented possible or probable scenarios that set out
information about the product or service changes and social,
industry, technical trends (Postma and Liebl, 2005).
• Financial impact is then set out, with assumptions made
about how the company will respond.
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THE MBA ADVANTAGE
The tricky part is defining and communicating the future state,

which is where the benefits of diversity in the team will come to
the fore. A team that has a range of ages, backgrounds, education
levels and lifestyles can use these attributes to bring better
perspectives to a situation where divergent thought and
ambiguity tolerance is hugely beneficial (Franco, Meadows and
Armstrong, 2013). These differences could potentially induce
conflict within the team and, provided that it is managed well,
this can also help the problem-solving process (Roberto, 2005).
Known actions and unknown effects call for a

quantitative scenario analysis technique
This is what businesses should take into consderation when using
a quantitative scenario analysis technique:
• Used when the causes are known with reasonable certainty
but there is considerable uncertainty when it comes to the
how these actions will impact financially.
• Given this uncertainty, single-point financial forecasts –
i.e. ‘the net present value (NPV) of this project will be
$33.77 million’ – are not a reasonable expectation for
decision-makers to have but the outputs should be used
as a guide for what is the possible solution space.
• The most common way of representing these outcomes
is a driver tree, as shown in Figure 14.3 below, listing the
decision, the anticipated outcome likelihood and the range
of financial impacts that will result from that outcome.
In this example, the company has a strategic advantage in the

production and distribution of alcoholic beverages and wants to
expand its offering. We assume that the company can manufac-
ture any single beverage and would like guidance from its team
on what the best option is. In this circumstance, however, there
214
is no standout single best option. This type of analytical guide can

be useful for both the board and the executive team when they
come to balance this new opportunity with funding models or
risk profiles of existing company products.
Figure 14.3: An illustrative decision driver tree;

reasonably certain causes, but uncertain outcomes
Demand Estimated Profit

range (kL) profit ($K/kL) range ($M)
Brewery Ale 20-55 8-19 0.16-1.04

Stout 35-41 6-23 0.21-0.94
Vineyard Red 14-33 8-36 0.11-1.19

White 19-28 18-29 0.34-0.82
Distillery Gin 7-19 27-52 0.19-0.99

Scotch 8-10 60-75 0.48-0.75
What to do when it becomes chaotic

When chaos rules the land, the best option is scenario planning
with quantitative and qualitative approaches. Significant ambigu-
ity in both causality and outcome is not an unusual space for a
strategy team to find itself playing in. The response to these types
of problems is to use an open scenario planning method, with
one of the most valuable outcomes of this work being the sign-
posts that companies can monitor or seek to influence.
An example of this type of problem is the situation Boeing and
Airbus faced in the late 1990s to early 2000s with each company
developing and then publicly declaring their different viewpoints
about:
• How people want to travel: point to point, hub and spoke or
a new operating model?
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THE MBA ADVANTAGE
• How best to meet this demand: single aisle, widebody

and/or ultra-large airframes?
• What size would each market segment be?
• What would the impact on the current business models be if
the market moves contrary to the way they implement?
This tangled, multivariate problem required the company to

make a genuinely strategic decision; shutting off avenues, re-
deploying assets even though they had no way of knowing the
future or the effects of the decision.
Table 14.1: Divergent future visions, endorsed by

the company, and the resultant outcomes
Airbus Boeing
How will people Hub and spoke Point to point
want to travel?
Product line 1. Ultra-large (A380) 1. Widebody (787)
implication, and 2. Narrow body (A320) 2. Narrow body (737-800)
priority order 3. Widebody (A350) 3. Ultra-large (747-8F)
Current business Capital and Capital and engineering
impact engineering effort effort prioritised Widebody
prioritised Ultra-large Aircraft (787)
Aircraft (A380)
The difference in each company’s view on the ‘ends’ question of

‘how are we going to win the future of air travel?’ resulted in
different strategic views being endorsed by both company execu-
tive and board teams, as outlined in Table 14.1 above. This
decision resulted in the ‘ways’ question of ‘what specific steps do
we take?’ which sets out the product lines that will be prioritised
or not addressed. The effects can then be modelled and it is
recommended that teams use a tree and branch diagram as per
Figure 14.3.
216
The means: deploying resources and execution

The ‘what’ and ‘why’ is often seen as difficult, challenging work
done by senior managers, their trusted advisers and an army of
outside experts and expensive consultants. Execution is seen as
something that comes after strategy, done by other people and has
been used as both a scapegoat – ‘strategies most often fail because
they aren’t well executed’ (Bossidy, 2002) – and a business
opportunity by the traditional blue chip strategy consultants.
The execution of strategy will fall down if:
• The resources (time, people or financial) are not adequate;
• The purpose of the strategy is not well communicated,
explained and understood; or
• The priorities set down in the strategy are not
complementary.
Summary
The most effective measurement of successful execution of any
strategy is the end result; one that both fulfils the intent of the
strategy and delivers a successful outcome. The method that the
military uses to explain missions is insightful: ‘We are going to
enter and take control of village X and locate and extract person Y
in the furtherance of our objective to degrade and eliminate the
capability of ISIS to conduct international terror operations’. This
style of briefing gives both the direct role of a team, the reason why
they are there and how it fits inside the macro-strategic intent.
This enables the execution team to improvise if they see a
better way to further the strategic intent, i.e. if the person of
interest is found to take long walks away from the village, they
can amend the execution tactics yet still advance the strategic
objectives.
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THE MBA ADVANTAGE
The key to the execution step is communication and under-

standing. If strategic objectives are poorly understood by either
middle management or at the frontline, directions appear
unrelated and management initiatives are disconnected from the
overall strategy, then there will be little chance of success. By
contrast, if everyone knows what needs to be done, the tools and
capabilities are available to do it and the reasons for these actions
are known, then success is more likely than without those
execution levers.
These outcomes should be able to be measured and this closed
loop of define > communicate > execute > monitor should signif-
icantly increase the chances of the business beating the market.
Author: Mike Godfrey

Mike has developed a diverse career that has spanned
technical, operational and strategic roles in mining and heavy
industries. He has developed and led in-house technical
teams in Australia and West Africa and run large,
multidisciplinary recovery and transformation projects. Mike’s
recent consulting experience has been focused on helping
distressed companies find a path back to profitability.
This essay is copyright of Mike Godfrey, 2018.
218
15. Business models and innovation:
critical and modern strategies
MARCO HUI
The idea in brief

The issue: All companies have business models, which are defined
here as conceptual, abstract representations of business activities.
Business models are often misunderstood by stakeholders and, on
occasions, conflated with one or more business strategies or
business slogans.
The context: Not only must businesses understand their own
business model, but businesses need to actively engage in business
model innovation in order to survive and then thrive. If business
models themselves are poorly understood, what chance do many
stakeholders have of clearly understanding how to innovate?
The solution: A typology of business models can close the gap in
understanding. In this essay, we explore a number of business
models, such as the 'razors and blades' model, the 'freemium' model,
'from pipes to platforms' and 'servitisation', asking along the way
what to look for in terms of business model innovation. Inevitably,
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THE MBA ADVANTAGE
some innovations will succeed where others will fail. A common

thread driving opportunities for advantageous business model
innovation is the rapid pace of technological change.
What exactly is a business model?

Despite its wide application in the world of business strategy, a
precise definition of ‘business model’ remains somewhat elusive.
According to Joan Magretta (Parsons, 2017), the term first
became popular when personal computers and the spreadsheet
came along, which is when it became possible for entrepreneurs
to ‘run some numbers’ on their businesses.
With the advent of these technological developments it became
possible to model how different parameters, such as costs and
revenue streams, affected the bottom line. It is important to note,
however, that a business model is not simply a financial model.
Rather, it should instead be viewed as a simplified, conceptual,
abstract representation of a business, but not so simplified that
it becomes a one-liner as seen in the widely derided Silicon Valley
pitch style where start-ups describe themselves to potential
investors as the ‘Uber for X’, ‘Airbnb for Y’, etc.
A more comprehensive definition of a business model might
be taken from Osterwalder and Pigneur (2010) where they state,
‘A business model describes the rationale of how an organization
creates, delivers, and captures value’.
Osterwalder and Pigneur (2010) break down the business
model into nine building blocks:
1. The value proposition of what is offered to the market
2. The segment(s) of clients that are addressed by the value
proposition
3. The communication and distribution channels to reach
clients and offer them a value proposition
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Business models and innovation: critical and modern strategies
4. The relationships established with clients

5. The key resources needed to make the business model
possible
6. The key activities necessary to implement the business
model
7. The key partners and their motivations to participate in the
business model
8. The revenue streams generated by the business model
(constituting the revenue model)
9. The cost structure resulting from the business model.
What about business model innovation?

With Osterwalder and Pigneur’s nine building blocks in mind, we
can think of business model innovation (BMI) as the process of
changing one or more of these building blocks to come up with
new ways to conduct business. BMI has the following benefits:
• It’s easy and low-cost. You don’t need new products or new
technologies, which are normally expensive. All you are
really doing is delivering existing products to existing
markets using existing technologies, just in a different way
than everyone else.
• It’s a way to avoid competition. In highly competitive
industries, BMI helps to carve out a new space with less
competition. This is a form of blue ocean strategy in that
with BMI, you may be creating a new client segment which
is made up of ‘non-consumers’ in the current market.
• It’s useful during downturns. During downturns, demand
may be shrinking, which is something out of the control of a
business. However, we can take the initiative to look at cost
structure, for example, from a BMI perspective.
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THE MBA ADVANTAGE
• It helps to address disruptions. This applies both for start-

ups trying to disrupt existing markets and for established
players in the market that are taking a defensive strategy
against disruptions.
BMI has been defined and applied in a range of models. Let’s

explore four examples.
The razors and blades model

Although widely credited to King Camp Gillette, this model was
actually invented by his competitors. The idea is to sell a product
at an artificially low price (the razor), or even offer it for free, in
order to sell more complementary goods alongside the original
product in the future (the disposable blades). For the model to
work, the company would have to hold a monopoly status on the
complementary good.
As a personal example of this model – albeit one many readers
might be familiar with – I was very happy when I thought I had
acquired a bargain on a Hewlett-Packard (HP) printer at JB Hi-
Fi, only to find out the ink cartridges are extremely expensive.
There is no way to use a non-HP ink cartridge in the printer as it
detects whether it is a genuine HP ink cartridge every time you
replace it.
Other examples of this model include game consoles and
games and mobile phone contracts that are locked to a single
provider. Another interesting example of this model can be
shown in the tactics of Sony and Apple, companies that compete
in the supply of both music devices and the delivery of content.
Case study: Apple and Sony

During the late 1990s, Sony had arguably the best technologies in
devices, backed by content agreements with the big record labels.
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Apple, however, was still able to come in with its disruptive iPod and
iTunes offerings and win over the market.
Apple achieved this by adopting a reverse version of the razor and
blades model, delivering the music on iTunes (the blades) at a very low
price so that it can charge a premium on the iPod (the razor). Many
people were convinced Apple won with technology (the iPod), but we
can also argue that Apple won with a good product wrapped with an
even better business model for delivering content, which Sony failed to
envision (Gobble, 2014).
The freemium model

The freemium model is a form of razors and blades model, which
is most commonly applied to software and mobile applications
(apps). The term derives from a combination of the words ‘free’,
i.e. when the software is offered to customers at no initial cost,
and ‘premium’, i.e. when users are charged for access to additional
features (see Figure 15.1). This model is particularly suitable for
software as the distribution cost of the product is minimal.
Examples of extra features offered by the freemium model
include an ad-free version of a mobile app and in-game purchases
commonly found in mobile app games. Such in-game purchases
started off in the mobile gaming sector but have since spread to
traditional gaming platforms such as on PCs and consoles. This
became controversial in the gaming community as gamers with
more money to spend in-game are more likely to win, which
many participants find unfair. Criticism has also been levelled at
app developers for allowing this model in games targeted at
children, with widely publicised examples of parents (albeit
perhaps only those unfamiliar with the importance of security
and limitations on mobile accounts accessed by children)
receiving unexpected and, in some cases, considerable bills from
Apple from the activity of their children.
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THE MBA ADVANTAGE
Figure 15.1: Freemium business model
Tier n
Service
Tier 2
offerings
Tier 1
Freely available
Free tier
to all users
The pipes to platforms model

Choudary (2014) classifies business models into two broad
families: pipes and platforms. We are perhaps more used to the
traditional pipe system found in the manufacturing sector where
value is produced upstream and consumed downstream. This is
a system where companies produce goods and services and these
are pushed to the customers along the ‘pipeline’.
Platforms are a little more complicated; they enable users to
both create and consume value. Value is exchanged or shared on
the platform between users. With the advent of the internet, we
are now seeing more platforms than pipes. For example, tradi-
tional free-to-air television is a pipe system where the network
produces programs that are delivered to viewers. YouTube, on the
other hand, is a platform system where users produce content for
other users to watch (Choudary, 2014).
The implications of this model can be explored conceptually
through the experience of companies attempting to transition
from pipe to platform modes of delivery. Let’s consider the elec-
tricity industry. The product (electricity) is traditionally produced
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upstream and sold to consumers via a centrally controlled grid

with wholesalers and retailers in between. However, Perth start-
up company Power Ledger is working to disrupt this classic
pipeline operation via a platform using blockchain technology to
enable peer-to-peer electricity trading on a micro-grid. Users of
the system can be both consumers and producers of electricity
via the solar systems installed on their rooftops and battery
storage systems. The platform allows users to trade electricity
with one another without the need for intermediary retailers.
Similarly, the traditional banking industry operates as a pipe
system where clients receive banking services (card products,
loans, mortgages, insurance, etc.) directly from a provider. UK
bank HSBC rolled out an alternate platform model of business
called Connection Hub for its small and medium enterprise (SME)
clients in 2017. The platform allows clients to create their own
business profiles, with customers then able to search, view and
connect with other users. The bank is essentially disintermediated
as a controller of user data and access and instead acts more as a
professional matchmaker to facilitate business for its clients.
This disruptive model is a particularly bold move in a banking
sector more commonly known for its bureaucracy and conser-
vatism, and its development by HSBC may serve as an illustra-
tion of the pressure the traditional banking industry is under
from disruptive financial technology (fintech) start-ups.
Large multinational banks are increasingly demonstrating
willingness to cooperate with fintech firms in similarly innovative
offerings, with the recent emergence of a new business model of
‘open banking’ in the sector. Open banking uses open application
software to enable fintech firms to create applications using
valuable database information held by the traditional providers.
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THE MBA ADVANTAGE
The servitisation model

This model originated from the manufacturing sector as a
response to the increasing challenges of commoditisation and the
rise of low-cost emerging markets. Under these conditions, simply
making a product and selling it for one-off revenue becomes an
increasingly untenable proposition.
Instead, manufacturers began to offer services together with
their products, such as add-on after-sales service and consultancy
services. The benefit to the supplier is that one-off revenue is
turned into a more stable, long-term revenue stream. Also, unlike
products, services have a lower elasticity of demand, allowing
firms to charge more. Services are also more difficult to imitate,
reducing the likelihood of competition from copy-cats. Customers
are better off too because, if firms want to be in a position to
charge more from their clients, they are more motivated to
provide better services to retain them from the first instance.
The music industry, for example, has gone through three
stages of business development towards a servitisation model. In
the traditional form of the industry, customers bought music in
pre-packaged physical formats – CDs and, in earlier years,
cassette tapes and vinyl albums. Even when a customer only
wanted the hits, the inflexible nature of the business required
them to also buy the filler songs in an album.
The advent of Apple’s iTunes platform made it easier for
customers to curate their purchases at the level of individual
songs. Spotify then provided a second level of disruption to the
industry with its service model changing the way music is
consumed by many users. Instead of paying for ‘ownership’ of
individual songs, music under the Spotify model is streamed real-
time to consumers who pay a subscription fee for an all-you-can-
listen-to service. In this example, advances in technology (the
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internet and faster connections enabling streaming) allow for

BMI which would previously have been impossible.
Private banking is another industry that has gone through a
similar transition. Under their traditional model of operations,
private banks ran on an execution-only model similar to that of a
broker, with banks earning transaction fees or commissions on
the sale of financial products to clients. This model is challenged
where clients adopt a buy-and-hold strategy with a long-term view
or in market downturns where trading volume (and, therefore,
revenue) is reduced.
These weaknesses fostered the emergence of an alternate
model in the sector where private banks don’t just sell financial
products but instead provide their high-net-worth clients with
holistic wealth management services. This requires a deeper
understanding of the client’s financial goals, risk appetite, personal
income and expenditure which, when achieved, allows the bank
to offer financial advice and tailor-made solutions using a
combination of different products – either in-house or sourced
from third parties.
On top of transaction fees, the banks charge advisory fees and
annual management fees depending on the size of the client’s
asset under management. These fees offer the bank a more stable
revenue stream, which is agnostic to market performance and
clients’ trading volume.
What to look out for in business model innovation

When considering business model innovation, it is important to
be aware of the following common occurrences.
1. Make sure the model fits

In selecting an appropriate business model, the first requirement
is to ensure a suitable fit to the culture of an organisation and its
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THE MBA ADVANTAGE
employees. For example, if a manufacturer decides to adopt a

servitisation approach to its current business model, the workforce
must be able to shift from being process driven and focusing on
efficiency of the production line to a customer-centric mindset.
Where such change occurs, appropriate training must be
provided to the workforce to facilitate this transition, perhaps
aimed at improving the interpersonal and communication skills
of the manufacturer’s workforce. It may even be necessary to
develop a new organisational structure to suit the new business
model. Such fundamental change also requires a creative and
innovative culture within the company. Employees must be open
to change, comfortable and free to express new ideas and be able
to receive honest and constructive feedback.
2. Don’t get too fixated on ideation

Some companies spend too much time coming up with new ideas
but never get down to execution. Having ideas is meaningless
without execution. This is where the fast prototyping of design
thinking and similar modern approaches to organisational change
become valuable. New ideas and models should be rapidly devel-
oped into executable prototypes and tested in the reality of the
business environment. Timely assessment and feedback allows for
the prototypes to be refined or, if unsuccessful, abandoned with
lessons learned and the organisation free to move on to the next
concept.
3. Portfolio bloat
Portfolio bloat occurs when an organisation becomes bogged
down with too many uncoordinated bottom-up innovations,
stretching resources and preventing evaluation of results. This
results in unbalanced and overlapping portfolios of experiments
without enough evidence and clarity of significance to win
management support.
228
4. Keep scaling-up in mind

Many new business models may pass all the tests applied to them
during the prototyping phase, and even enjoy success when
initially implemented, but it could begin to become problematic
when the company seeks to scale-up the new model to wider
application.
Sometimes, it is simply a matter of the initial excitement dying
down and no more attention and resources being allocated to
facilitate the wider roll-out. Other times, it will be a capacity issue
– the new model may not be able to cope on scale-up simply
because it was not originally designed to function on the wider
scale of the whole business. The blockchain technology behind
bitcoin is currently running into this problem, for example,
because when the underlying algorithms of the model were first
written, the potential of bitcoin being adopted as a mainstream
medium of transaction was not considered. As this is becoming
more of a reality, with ownership of bitcoin expanding and many
financial institutions and corporations moving to accept it as a
viable currency, it is becoming increasingly apparent that the
algorithm cannot provide the transaction speed and certainty
necessary to warrant such mainstream status. This realisation has
driven the development of a number of different ‘forks’ or
variations of bitcoin, e.g. bitcoin cash and bitcoin gold, seeking
to address this limitation in some sectors.
5. Be mindful of imitation
A business model, unlike a physical product or a technology, is
difficult to patent. Does that mean that there is no point in BMI?
Not necessarily, as there are actually some barriers to the
replication of models by a competitor (Teece, 2010).
First of all, sometimes the BMI occurs behind the scenes, with
competitors and other external parties oblivious to the change –
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THE MBA ADVANTAGE
seeing nothing more than market share being taken away from
them by the successful innovator. Other times, the implementa-
tion of the new business model may be observed, but external
parties may not be aware of the rationale or mechanism behind it.
Even if competitors are aware of a BMI, are able to see the new
business model and know how it works, sometimes they just
simply lack the strategic resources that would be required to
implement a comparable change. Other established industry
players might also be constrained in imitating a new business
model as it might mean cannibalising revenue from their existing
products or jeopardising relationships with business partners.
6. Watch out for historical bias

Lastly, we should be careful not to fall into the trap of historical
bias. It is very easy to hold on to an existing business model,
especially if an organisation is making substantial profit with that
model. This applies to established companies in a mature market
but also to entrants that may have had a taste of early success.
This is especially relevant today as technology allows people
with no prior industry knowledge to come in and disrupt a
market with speed never before seen in the business sector. The
mantra ‘innovate or die’ is more relevant today than ever before,
with many large companies now having specific departments in
charge of ‘self-disruption’, tasked with imagining different
scenarios in which their market position could be disrupted and
to come up with corresponding strategies.
Summary
The biggest driver of BMI for the last decade has been the pace of
technological change. New technology has allowed for many
different business models to emerge and challenge traditional ways
of conducting business. Some even argue that in the modern
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business environment all companies are tech companies. Emerging

technologies, such as artificial intelligence, robotics, blockchain
and the internet of things, promise to accelerate this process and
bring about the development of business models as yet unseen.
It is not enough to know about our own industries now. We
would be better advised to look for inspiration in the business
models of other industries and ask how to draw elements from
them to improve the function of our own organisations.
BMI is not rocket science. It doesn’t require a lot of quanti-
tative analysis and it is cheaper than coming up with new
products. The starting point of successful innovation in this space
may be as simple as talking with the stakeholders of a business,
especially the clients. The more clients you talk to, the easier it is
to spot a pattern that could provide the opening for an innovative
development.
Drawing out such insights and mapping them across
Osterwalder and Pigneur’s (2010) nine building blocks can be the
basis of truly innovative and valuable new business ideas. At the
end of the day, however, we should bear in mind that an idea is
just an idea without proper execution. Innovative businesses need
to be prepared to test their ideas, fail fast, learn lessons and move
on rather than dwell on ideation.
Author: Marco Hui

Marco is an offshore banker with nine years of experience in
the banking and finance industry in Hong Kong. Over the
course of his career, Marco has established an active client
base and various referral channels in Greater China.
This essay is copyright of Marco Hui, 2018.
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16. Seeking opportunity in the
Chinese century
JAMES TANG
The idea in brief

The issue: The complementary nature of the trade of goods
between Australia and China has presented key opportunities for
businesses from both countries to thrive., most notably for Australia
in areas such as natural resources, agriculture, education and
tourism. China's constantly evolving social, economic and political
landscape poses additional challenges but at the same time forms
new industries for innovative organisations to take advantage of. For
Australian firms, strategies aiming to capture economic opportunity
by simply employing fundamental western business practices may
not be sufficient to succeed going forward.
The context: Since the 1980s, China's 'opening up' reform period
and transition away from a centrally planned economy to a 'socialist
market economy with Chinese characteristics' has resulted in
endless market opportunities for countries and firms worldwide.
Looking forward, improved middle class living standards,
innovation-driven development, focus on environmental protection
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Seeking opportunity in the Chinese century
and globalisation will underpin the next wave of growth, particularly

in services, high tech, e-commerce and other value-add sectors.
The solution: Maintaining a sustainable business in China requires
a firm to establish partnerships based upon an understanding of
China's national values. Firms should continuously scan China's
political horizon, culture and the economic landscape to form
sustainable business strategies. For example, China's 13th five-year
plan (FYP), a roadmap set out by the Chinese government, can be
used as a tool to provide insight into where the country is heading.
In turn, this helps firms identify potential shifts in Chinese focus.
This process can be utilised by Australian firms to navigate the
highly competitive market and used as a basis to undertake further
scenario planning.
The Australia–China relationship

The relationship between Australia and China can be described
as complex and multidimensional. Australia’s economic growth
and rising living standards are strongly linked to China’s success,
with China being its largest trading partner (Drysdale and Zhang,
2016). Australia is endowed with rich natural resources, a high
standard of education and quality of life and has been comple-
mentary to China’s appetite for growth in urbanisation and the
unprecedented rise of the Chinese middle class. At the same time,
Australia is politically and strategically aligned with the United
States (US), with its shared democratic values, mutual security
commitment and cultural affinities.
As a result of rising tensions between China and the US on
issues such as the US’ involvement in the South China Sea and
China’s alliance with North Korea (Boutin, 2015), Australia is
constantly confronted with dilemmas about how to balance its
foreign relationships with its own economic and political agendas.
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THE MBA ADVANTAGE
From a macro to micro level, this highlights how Australia’s

strategic partnerships can affect the wellbeing and security of its
people. For Australia to continue to enjoy growing prosperity, a
bilateral relationship with China must be addressed carefully,
which is built on mutual respect and understanding without
undermining its core national values. In the same context, for
Australian firms to thrive and take advantage of the opportunities
the Chinese market presents now and into the future, it is
necessary to assess the environment holistically by understanding
its history, political system and economic agenda.
Historical and political context: the importance of China’s

five-year plans
Since 1978 after the death of Mao Zedong, China began a series
of reforms and systematic transformations to open up (‘gaige
kaifang’) and move away from a previously planned economy.
Deng Xiaoping continued accelerating reforms to establish a
‘socialist market economy with Chinese characteristics’ during
his leadership until 1992 (Zheng, 2016), and his philosophies
continue to drive China’s economy to this day.
Continuous reforms led China down a path of rapid indus-
trialisation, restructuring state control over the economy and
allowed rural to urban migration – the biggest migrations seen
in human history (The Economist, 2012). It resulted in a
significant shift in demographics across China, with the urban
population rising from 18 per cent in 1978, to 44 per cent in 2006
(Cao, 2010) and to 57 per cent in 2016 (Statasia, 2016). This
represents 790 million of 1.38 billion people currently living in
Chinese cities – a significant opportunity for businesses to service
the needs of a massive middle class with rising living standards.
The Chinese Communist Party (CCP) played the leading role
in this significant transformation that took place to re-shape the
234
country. A great deal of insight can be drawn from the CCP’s

FYPs, which set out a roadmap for the country’s social and
economic development initiatives.
The first five-year plan: 1953 to 1957

The first FYP began as a policy planning system inherited from
the command economy similar to that of the Soviet Union. In the
Mao era, the FYPs were strictly implemented. Specific targets and
production quotas, such as for grain and steel, had to be met. It
was through the second FYP, for example, that the Great Leap
Forward was implemented. But, in this case, it had disastrous
consequences, with great famine and economic regression
occurring due to squandered resources and tight government
controls (Zheng, 2016), a period that many critics have called the
Great Leap Backward. By the 1980s, the CCP loosened its grip
on the economy and rather than using the FYP as a rigid
framework, it became a rough guide as to how the leaders wanted
to steer the country.
The 13th five-year plan: 2016 to 2020

Looking forward, the 13th FYP provides significant insight for
countries and multinational companies operating in China. It can
be used as a strategic tool to understand the country’s direction
and help formulate their foreign policies or business strategy. In
terms of economic growth, it anticipates a 6.5 per cent five-year
average growth rate which, in the context of China, is the lowest
gross domestic product (GDP) growth rate since 1991 (World
Bank, 2016).
This slowed growth rate reflects the country’s focus away from
heavy industrial growth, towards the services sector and
advanced manufacturing. The FYPs are also no longer just
economic in focus but are placing significant importance on
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THE MBA ADVANTAGE
environmental protection; for example, there are specific targets

on aggressively cutting carbon emissions.
Although the plans are not as rigid as in the past, the CCP still
has overwhelming power to place significant weight on its imple-
mentation. The party expects local officials, banks, state-owned
enterprises and large private companies to change their strategies
and rhetoric to be in line with the plans. With the historical and
political context in mind, a few key opportunities for Australian
sectors are examined in the following sections.
Natural resources
The unprecedented scale of China’s urbanisation, industrial-
isation and manufacturing has resulted in a tremendous demand
in metals, raw materials and energy in the past two decades.
Australia’s rich abundance in natural resources has helped to fuel
this growth. The resource-intensive nature of China’s investment-
led growth helped Australia weather the recession that gripped
other OECD economies in the 2008 global financial crisis
(Andornino, 2017).
China is now the world’s largest user of steel (for which iron
ore and metallurgical coal are essential ingredients), which is used
for construction of high-rise buildings and infrastructure such as
railway lines. Its automobile, home appliances and machinery
manufacturing sectors are key drivers of global copper and
aluminium demand. Australia’s high-quality, low-cost ore reserves
and close geographical proximity have naturally complemented
China’s appetite for raw materials. Australia is also China’s largest
supplier of liquefied natural gas (LNG), supplying 28 per cent of
China’s demand in 2015. The mining boom in Australia helped
fuel even bigger investment in LNG capacity, which will make
Australia the biggest exporter of LNG within a few years (Drysdale
and Zhang, 2016).
236
Despite a slowing Chinese economy, an oversupply in the

property market and a shift away from industrial growth, the
commodities trade will endure as a key foundation in the
Australia–China relationship and will continue to present
opportunities for Australian mining companies. Even with falling
commodity prices, trade dependency continues and the share of
imported industrial inputs in domestic consumption is at an all-
time high (Huisken, 2017). A progression towards a higher-end,
value-added manufacturing sector, which follows the footsteps
of countries such as Japan, will boost the demand for metals such
as aluminium and copper (Drysdale and Zhang, 2016).
Environmental protection is a key recurring theme in the FYP
with commitment to environmental management and protection,
clean energy and emission controls, ecological protection and
development of green industries (CCP, 2016). Residents in many
major Chinese cities such as Beijing can attest to the air pollution
from factories, the burning of dirty coal and car emissions that
are trapped in the cities as being a major health concern and one
that considerably reduces the standard of living.
Air pollution treatment will indirectly increase the consump-
tion of gas with gasification projects in key air pollution control
areas, transport, natural gas power generation and distribution
projects. Low carbon emissions are the main competitive
advantage of gas-fired power compared with coal and refined oil
fuels. The FYP outlines rolling out ‘coal to gas’ projects in the
Beijing-Tianjin-Hebei region, the Yangtze River Delta, Pearl River
Delta and in north-eastern China, which is a significant step in
promoting the rapid growth of natural gas (Zhen and Qing, 2017).
This presents a significant opportunity for LNG producers
worldwide to command a greater share of a growing market.
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THE MBA ADVANTAGE
Demand for strategic minerals, such as lithium and graphite,

represents a space with high growth potential needed to satisfy a
growing rechargeable battery market for high-tech applications. In
anticipation of the high-tech shift, Chinese battery manufacturers
have planned to construct numerous factories to rival Tesla’s
massive Gigafactory for the production of rechargeable battery
packs used in their electric vehicles (Benchmark Minerals, 2017).
As outlined in the FYP, the CCP has set a specific target of at
least five million electric vehicle sales for use in private, public
transport and taxi services in major cities to reduce air pollution
in the major cities. To put this into context, global battery electric
vehicle sales in 2017 amounted to only around one million
globally, with China accounting for more than a third of all sales
(Roskill, 2017).
Agriculture
Post-war Australia–China trade began in agriculture with large
scale wheat exports to China from 1960 (Wilczynski, 1965) and
remained the main export until the 2000s. Although mineral
exports have overtaken since, Australia still plays an important
role in China’s agriculture market and vice versa. Geographically
on opposite hemispheres, and in relatively close proximity, the two
countries are ideal to complement the counter-seasonal products
to fill domestic supply gaps and allow for quick market access.
Australia’s largest agricultural exports ordered by value in
2015 were grains, wool, cotton, livestock, beef, dairy, wine, lamb,
breeder cattle, mutton, horticulture, sugar and other crops
(ABARES, 2016). Australia is China’s largest source of wool
imports and represented more than AU$2 billion. Australian beef
exports to China were worth more than AU$736 million.
Australia is also China’s second largest wine supplier by value
(Drysdale and Zhang, 2016).
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Australia’s reputation as a safe and reliable source of high-

quality produce also endows exporters with a significant growing
market for an increasingly food safety conscious Chinese
consumer (Qian and Chen, 2016). Food safety tops the list of
Chinese consumer concerns ahead of heath care, education and
environment, especially for the younger generation with 63 per
cent aged between 18 to 25 expressing dissatisfaction with food
safety (Walters and Kuo, 2016).
Conceivably, the greatest growth opportunities exist to offer
premium products to serve Chinese middle-income consumers
in areas such as wine (rather than bulk exports), livestock (beef
consumption has grown at a rate of more than 200 per cent per
year) and dairy products (China is Australia’s second largest
market). Chinese investors can help Australian agribusiness carve
out distribution channels either directly to retail or as inputs into
the food supply chain. The majority of food exports to China are
unprocessed so there is scope for Australian agribusiness to
transform raw unprocessed foods and livestock into high quality
value-added, safe and respected food brands (DFAT, 2014).
Services
Since the third plenary session of the 18th CCP Central Committee
in 2013, and together with continued emphasis in the FYP on
consumption-led growth, China is expected to expend significantly
more on services both domestically and from overseas. Australia’s
services sector is substantial – it makes up 53 per cent of Australia’s
entire industry and includes accommodation and food, informa-
tion, media and telecommunications, finance and insurance, rental
and real estate, professional and technical industries, public admin-
istration and safety, transport, education and training, healthcare
and social assistance, arts and recreation services (ABS, 2015).
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THE MBA ADVANTAGE
According to Cheng (2016), Australian exports to China will

double their proportion of total trade by 2025 and will be mainly
led by growth in transport, telecommunications, computer and
information services.
Travel for education and tourism currently represents the
greatest Chinese demand for Australian services (4.9 per cent of
Australian exports to China). Over a quarter (136,000 students)
of Australia’s international student population are from China
(DFAT, 2016) and amounted to AU$4.8 billion in 2015 (ABS,
2016). Chinese tourist arrivals in Australia accounted for 14 per
cent of total international arrivals in 2015, exceeding one million
for the first time. In the same year, total expenditure by Chinese
visitors increased by 30 per cent (Drysdale and Zhang, 2016).
Australia is well regarded as a premier tourist destination but in
order to ensure inbound tourism remains sustainable, the growth
must be also distributed beyond the gateway cities of Sydney and
Melbourne. Innovation in improving tourism infrastructure in
rural and regional areas gives firms many possible blue ocean
strategies to capitalise on new markets.
The rapidly aging population in China is causing a declining
workforce and increasing healthcare costs (Li, 2012). This has
repercussions for many aspects of the country’s development,
including economic growth, aged care and social welfare issues.
It is receiving increased attention from the Chinese government,
which recognises that it can’t tackle these issues alone and
encourages participation from the private sector (Li, 2012).
Australia’s healthcare facilities are considered the best in the
world (Brown and van Nieuwenhuizen, 2016) alongside Japan
and the US. Together with the China–Australia Free Trade
Agreement, this gives Australian exporters the opportunity and
incentive to service the Chinese market by providing training and
education programs, home care services, operation and
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management of retirement villages and quality health care

products such as functional and healthy foods, additives and
nutrition, vitamins and assisted living (Austrade, 2016).
Innovation and the internet

Another reiterated theme of the FYP is the emphasis on
innovation-driven development, with science and technology
playing a central role. Specifically, it highlights core technologies
in fields such as next generation information and communications,
new energy, new materials, aeronautics and astronautics,
biomedicine and smart manufacturing, deep sea, deep earth, deep
space, deep blue (i.e. information technology) (CCP, 2016).
It will also focus on designing programs aimed at finding
systematic technological solutions to addressing bottlenecks in
modern agriculture, urbanisation, environmental governance,
health care, elderly care and public services (CCP, 2016). In line
with higher-end, value-add production, Chinese production is
aiming to shift away from previous models based around
adaption and imitation.
The CCP also specifically aims to develop modern internet
industries through the Internet Plus plan, which will help
transform methods of production and organisation to bringing
about a new pattern of industrial development that is intelligent,
internet-based and service oriented (CCP, 2016). According to the
plan, the integration of the internet into multiple fields, a national
big data strategy and adoption of e-commerce and public start-
ups will be encouraged. Australia’s high quality tertiary education
sector and its commitment to the National Innovation and Science
Agenda make it a natural partner for China’s transformation.
Significant opportunities are available to Australian exporters
that learn to take advantage of e-commerce and accessing the
Chinese market through platforms such as Alibaba, Tmall and
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THE MBA ADVANTAGE
Taobao. Alibaba Group has forged a strategic partnership with

Australia Post since 2014, immediately providing Australian small
to medium exporters access to 420 million active Chinese
consumers. Leading natural health company Blackmores has
formed strategic partnerships with similar service providers to
combat the rise of counterfeit food sold across China by creating
an innovative platform which tracks ‘food from paddock to plate’
(Drysdale and Zhang, 2016). The initiative will leverage
Blackmores’ secure, reliable and fast service through exploring
blockchain technology – a decentralised database that obtains
crucial details of where and how the food was grown as it maps
its journey across the supply chain (Targeted News Services,
2017).
The Belt and Road Initiative

The Belt and Road Initiative (BRI) was announced five years ago
by Chinese president Xi Jinping and is seen by many to be the
biggest move in China’s foreign policy and economic strategy
agenda of ‘opening up’ to the world since Deng Xiaoping’s policy
reforms. Through the development of international economic
cooperation corridors, the BRI focuses on policy communication,
infrastructure connectivity, trade facilitation, capital flow, energy
and resources production chains and people-to-people exchanges
with connected countries in Asia, Europe and Africa (CCP, 2016).
The economic corridors outlined in the FYP include the China-
Mongolia-Russia corridor, the China-Central Asia-Western Asia
corridor, the China-Indochina Peninsula corridor, the new
Eurasian Continental Bridge, the China-Pakistan corridor and the
Bangladesh-China-India-Myanmar corridor (CCP, 2016). The BRI
was derived from the concepts of an overland ‘Silk Road Economic
Belt’ which economically links Europe to China through countries
242
across Eurasia and the Indian ocean; and the ‘21st century
Maritime Silk Road’, which links Africa and Oceania (Wade, 2017).
Since its announcement, many projects have been completed
such as the X-Xin-Ou transcontinental railway that transports
goods between Asia and Europe, the Greek Port of Piraeus that
helps shorten transport times and the China-Europe land and sea
line that passes Macedonia, Serbia and Hungary (Junchi, 2017).
It is the infrastructure projects of the BRI such as railways,
roads, ports, energy systems and telecommunications networks
that are receiving most attention from critics and commentators
alike.
Opportunities and risks for Australia

Looking just at Australia’s natural resources industry, the
opportunities driven by infrastructure development and trade
appear to be huge. China has an enormous deficit in many com-
modities such as zinc concentrate, copper, bauxite, nickel, iron
ore, gold, potash and copper concentrate. It relies on imports to
satisfy its demand, which have had a significant bearing on the
price.
These commodities have been subject to overseas investment
targets by Chinese companies to prevent an excessive reliance on
third-party imports (CRU, 2017). For example, Chinese com-
panies have recently invested in numerous copper production
projects in neighbouring countries such as Myanmar. China has
been raising investments in commodities for both strategic and
financial reasons. Countries such as Australia, Brazil and Chile
are expected to benefit greatly as they will be able to fill the
commodity demand deficits in China.
Despite the basic economics of the BRI being so compelling,
Australia is reluctant to sign up. It is unclear as to why – as of
October 2017, 60 countries including New Zealand have signed
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a memorandum of understanding with China but Australia is yet

to show signs of interest. The BRI presents a range of economic
and geostrategic risks and opportunities but many commentators
differ in speculating what China’s real objectives are. Signing up
to the BRI indicates Australia’s support for China’s vision of the
world, but Australia has expressed concern about the lack of
detail and transparency behind China’s long-term goals (Cheng,
2016).
Some believed the Australian Federal Government previously
rejected a proposal to link the BRI to the development of
Australia’s north due to security concerns of ‘a geostrategic global
takeover by economic stealth’ while others believe that the US
has privately expressed its views to Australian officials (Munro,
2017). Nevertheless, the upside opportunities are endless as
trillions of dollars’ worth of infrastructure funding will be needed
in the Asia-Pacific region in the next few decades. Although
Australia will never have a huge amount of influence, not being
part of the conversation means having zero influence and risks
Australia missing out on economic advantages.
Summary
It is clear from the 13th FYP that endless opportunities exist for
the Australia–China bilateral relationship. However, it has also
been seen that on even the country level, economic pursuits
cannot be considered in isolation when dealing with a different
culture and balancing national interests.
Horizon scanning is, therefore, essential for businesses to
understand China’s economic, political, historical and social
landscape before attempting to formulate a China strategy. For
Australian firms – whether they are operating a business in China,
leading Chinese staff, entering the market or appealing to Chinese
244
consumers – applying western business practices without con-

sidering cultural differences can have disastrous consequences.
For the many western firms that have been successful, they have
invested in and properly developed relationships through
mutually beneficial partnerships. Partnerships based on relation-
ships (in Chinese called ‘guanxi’) are a crucial cultural concept in
China’s collectivistic culture where there is much stronger reliance
on networks that are based on personal contacts.
Consider Australian iron ore miner Fortescue Metals Group
(FMG), which established customer-centric partnerships with
steel mills in China despite having a lower-grade product than its
competitors. Powerful strategic partnerships helped FMG
successfully enter the iron ore market in the Pilbara in 2007 and
sustain its place as a top producer, breaking up the duopoly long
enjoyed by the more established Rio Tinto and BHP Billiton.
Even before it began full production, FMG had already
secured contracts with each of the 10 Chinese steel mills. It
established a China advisory board to help guide its close ties
with key customers and invested significantly in developing a
partnership with a research centre in China Central South
University, which published findings that favoured their product.
FMG’s China strategy was so successful because it was not
concentrated on producing iron ore based on current market
specifications but rather forging strong customer relationships
based on partnerships (Stockport, 2011).
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Author: James Tang

James is a bilingual consultant with a career focus on
bridging the cultural barriers between Australian and Chinese
businesses. He spent four years working in Beijing and
worked on projects spanning China, Indonesia, Myanmar,
Japan and the Philippines that advised numerous clients on
large mining investment decisions globally.
Prior to this, James was a site engineer in the Pilbara,
Western Australia for an iron ore operation which also involved building
relationships with equipment manufacturers from China. He has a strong interest
in Australia–China relations having studied Chinese language and culture, and
James also holds executive positions in Australia–China not-for-profit
associations.
This essay is copyright of James Tang, 2018.
246
17. Best practices for new
product development
STUART YOUNG
The idea in brief

The issue: Customers are the starting point for any product
development strategy and they are at the centre of all product and
process development frameworks.
The context: Customer preferences and behaviours are not always
clear. For example, different customer segments may behave very
differently, even when purchasing identical products from a single
seller. A lack of understanding of customer behaviour can leave
business opportunities untested or, worse still, unrecognised.
The solution: Identifying customer needs using a design thinking
approach will provide for the most comprehensive understanding of
the target market and inform the product development process in
the most value-adding way. Disciplined, iterative product
improvements must ensure that limited resources are not wasted,
and failures create valuable learnings. The approach can be
tempered with a flexible attitude that allows pivoting into new
directions if the improvement or learnings reveal new opportunities.
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The importance of product development

Developing and launching a new product (or service) remains
one of the riskier activities of any business. This is especially true
for business start-ups where the success of a launch is typically
fundamental to the success of the business itself. The risk of
failure in mature and established businesses launching a new
product is arguably reduced, given that failure of a launch may
not lead inexorably to the failure of the business.
Even in such cases, however, the financial and reputational
damage caused by a failure can still be significant. Taking an idea
from development and to the point of reliable revenue generation
is fraught with uncertainty and risks, with estimates of success
rates for start-ups ranging from at best 50 per cent to as low as
10 per cent by some venture capitalists; in other words, ‘most
firms fail’ (Sarasvathy and Menon, 2002). These stats are echoed
in the world of established businesses launching new products
where the success rate is put at 25 per cent in part due to
consumers typically sticking to what they know for most of their
household needs (Schneider and Hall, 2011).
If the key dimensions of a business are strategy, operations,
finance and marketing, the last on the list is arguably the most
important for any start-up. Marketing offers a customer-centric
approach to identify whether a prospective entrepreneur’s idea
solves a real problem better than competing products and
whether customers are willing to pay for it. Marketing also
informs the process of branding to then position the product as
the best solution to the customer’s problem, as shown in
Figure 17.1.
248
Best practices for new product development
Figure 17.1: Process for integrating customer-centric thinking,

product development, and branding
Customer
Iterative development Customer-centric Branding

Validates assumptions thinking
How customers
and incorporates Informs strategy and perceive the product
learnings into product development
development process
Product
New product development

New and existing product development processes are the key to
the creation of value within a business. Figure 17.1 illustrates the
iterative process required to achieve revenue through product
sales. The number of ‘cycles’ through this process required to
achieve reliable revenue generation is impossible to determine a
priori for a start-up, with the product and the customer needs
beginning as nothing more than abstract constructions.
In this essay, I aim to identify and distil some of the more
applicable frameworks for tackling this important challenge, with
the ultimate goal of identifying common threads that may
facilitate the launch of a start-up by reducing uncertainty and
minimising cost and risk arising through the product develop-
ment process.
Analysis of product development frameworks

A wide range of frameworks have been developed to facilitate
product development before and after launch to market and, in
many instances, these mimic the iterative approaches that are
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THE MBA ADVANTAGE
used to improve internal business processes. Fundamentally,

systematic design of anything requires a hypothesis, testing, trial
and error, analysis and refinement – a process analogous in many
respects to the scientific method. Below are some of the more
well-known models for product and process development.
The stage (or phase) gate process

This is a step-by-step process of whittling multiple initial ideas
down into viable end products. Each stage of development
requires certain targets to be achieved prior to passing through
the ‘gate’ to the next stage of development. For example:
1. The idea generation – Is the idea worth considering?
2. Idea screening – Is the idea compatible with company
objectives, strategies and resources?
3. Concept development and testing – Can we develop a
concept that consumers say they would buy?
4. Marketing and strategy development – Can we find a
cost-effective affordable marketing strategy?
5. Business analysis – Will this product meet our profit goal?
6. Product development – Have we got a technically and
commercially sound product?
7. Market testing – Have product sales met expectations?;
if yes:
8. Commercialisation – Are product sales meeting
expectations? If no:
9. Modify the product or marketing program.
This process is generic and applied across multiple industries,

products and services – its key advantages being the provision of
clarity and visibility for cross-functional teams while at the same
time offering a structured and dispassionate approach to idea
testing and product development.
250
Lean start-up
One of the recent movements focused on start-ups is captured
by Ries (2011) in his book, The Lean Startup. It suggests a strategy
of minimum viable products (MVPs) developed with as little time
and cost as possible prior to shipping to customers. Blank (2013)
also claims the MVP approach and embracing customer feedback
during product development avoids many of the pitfalls inherent
in the traditional approach of inflexible business plans, large
upfront development budgets and covert R&D prior to product
release. The lean start-up approach minimises the costs of failure
and allows the developer to rapidly pivot in response to customer
demands. It achieves this through a focus on short development
cycles, as shown in Figure 17.2.
Figure 17.2: Lean Start-up Development Cycle
Require- Require-
Planning ments Planning ments
Analysis Deploy Customer Analysis

Evaluation Evaluation
& design MVP feedback & design
Implem- Implem-
Testing entation Testing entation
Lean manufacturing
Lean start-up borrows ideas and principles from ‘lean
manufacturing’ and the man many believe started the movement,
W. Edwards Deming. Deming is credited with influencing the
Japanese manufacturing industry in the 1950s during the country’s
recovery from World War II, which eventually led to the
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THE MBA ADVANTAGE
development of lean manufacturing and ‘kaizen’ (continuous

improvement) principals, which were made famous by companies
such as Toyota. Deming (2000) was focused on improving product
and process quality to achieve customer satisfaction. His mantra
was, ‘the consumer is the most important part of the production
line’. Deming developed frameworks for incremental improve-
ments such as the plan, do, check, act (PDCA) cycle, which
essentially provides an investigative process that can be pursued
iteratively until a given problem is solved. Deming later modified
this framework to include plan, do, study, act (PDSA), replacing
the conformist quality control check action to a more analytical
and open-ended study action.
ISO 9000 standards

Also stemming from the 1950s and focused on quality, the UK
and US defence forces developed and implemented standards to
shift responsibility for product quality assessment from the buyer
onto the supplier, eliminating costly duplication of effort by
buyers. The assurance for buyers was then provided via third-
party certification of suppliers to the relevant standards. These
standards spread via government campaigns into civilian
industries and were amalgamated with the publication of the
international ISO 9000 standards in 1987, which evolved to
include frameworks for the continuous improvement of product
quality for various industries.
The current (2015) version has seven guiding principles, with
the first being ‘customer focus’ where customer needs are con-
stantly verified in an effort to exceed expectations. Although the
standards are focused on the quality of produced goods, this is
achieved in part by addressing internal business processes as well,
lowering costs and increasing quality for increased customer
252
satisfaction, market share and, ultimately, profit. In this framework,

quality is a proxy for customer satisfaction, with the underlying
principle that an enterprise starts and ends with the customer.
ISO 9000 also makes an important distinction between
continuous and continual improvement. Continual improvement
refers to a repeated sequence of actions resulting in discrete and
measurable performance improvement. The standards make this
distinction to reinforce the notion that small, incremental and
measurable (continual) changes in performance are more robust
than a general upward (continuous) trend in performance that
cannot be traced to specific causes.
A sudden loss of performance is mitigated, as shown in Figure
17.3, by the continual approach, as the ‘last improved level’ shown
on the right-hand chart is the conceptual level of improvement
the quality or production system has reached due to previous
improvement measures.
Figure 17.3: Continuous vs continual improvement
Continuous improvement Continual improvement
Point of failure
Point of failure
Last
improved
level
Improved phase
Consolidation phase
Initial level of performance Initial level of performance
(Subramanian, 2009)
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Design thinking
Design thinking stems from design principles (as opposed to
scientific or engineering) and was developed for use in large scale,
complex problems in business and society, especially where an
absence of data makes data-driven decision-making impractical.
It promotes a structured method which is facilitated by tools such
as problem framing, effective brainstorming and action (i.e. idea
and product testing on target markets) rather than insular
thought or discussion.
When used for new product development, design thinking
looks at the problem in the broadest context available, addressing
multiple user experience needs based on Maslow’s hierarchy of
needs (Burnett, 2016). It begins with the consideration of wide-
ranging and multidisciplinary ideas before whittling down to the
most viable solutions. Design thinking for products (and services)
often involves looking at a product or service that already exists,
taking a step back and attempting to solve the larger ‘problem’ in
a new way and identify a solution that improves the customer
experience, the product itself and/or the impact on the business
profits.
Case study: design thinking for healthcare services

A San Francisco based enterprise Golden Gate Regional Center (GGRC)
provided services and financial support to people with disabilities,
including children. Many applicants would withdraw part-way through
the minimum three-month process as the distress experienced by the
children was too great for the parents to continue. The process involved
multiple assessments from various medical professionals to establish
the child’s eligibility for the support.
Using the design thinking framework, two Stanford University students
worked with a GGRC staffer (who also had an autistic child) and
mapped all the steps required for an application; identifying the
emotions the children and their parents were going through at each
254
step. This process identified where the significant waiting times and
gaps in the customer experience lay, as well as recognising that the
GGRC departments engaged at each step were not aware of the other
departments and how poorly they were coordinated.
Radical ideas were encouraged, one of which resulted in a trial of a
Winnebago with eight medical professional staff visiting the homes of the
applicant children, which resulted in nine children being fully assessed
and qualifying for assistance in a single day. The bus solution was too
expensive, but it revealed a vastly improved customer experience, which
showed GGRC staff that prototyping ideas resulted in learnings, if not the
final solution. The process has continued with improved service, outreach
to prospective applicants and a significant and positive shift in GGRC
culture within the organisation (Sutton and Hoyt, 2016).
Case study: design thinking at Apple

One aspect of design thinking is that it draws attention to the customer
experience in terms of higher-order emotions and fulfillment.
Traditionally, this is expressed in terms of a product’s ‘form’ rather than
its function, which is to simply perform the task for which it was
designed, such as a mobile phone making calls.
Apple is one company that has found success by respecting these
higher-order needs a great deal more and actually requires that one of
the product’s ‘functions’ is to actually delight the user, which was
previously seen as an aesthetic ‘form’ appeal.
According to Burnett (2015), people generally ‘felt stupid and
inadequate’ when using computers and other technology, which ended
up being one of the central tenants of Apple’s design philosophy: to
ensure that their products were intuitively user friendly. With respect to
the mobile phone, it included simple user experience improvements
such as sharing a mobile phone contact while you were mid-call without
accidentally (but inevitably) hanging up on the other party, right through
the operating systems and to the touch screen on the iPhone that only
displayed keyboard characters that were required for the given
operation at the time.
These examples didn’t make the product operate any better in its core
function, but the user experience in terms of higher-order needs was
dramatically improved. This resulted in widespread adoption and
ultimately enormous profits.
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Recommendations for a start-up company

Within the five frameworks of Stage Gate Process, Lean Start-up,
Lean Manufacturing, ISO 9000 Standards and Design Thinking,
two common themes can be highlighted and recommended for
implementation by a start-up enterprise. The frameworks cover
different levels of the business operation but hold a strong
marketing theme with customer-centric thinking at the core.
The first theme is that customers are the starting point for any
product development strategy and are at the centre of all product
and process development frameworks. Identifying their needs
using a design thinking approach will provide for the most
comprehensive understanding of the target market and inform
the product development process in the most value-adding way.
Second, disciplined, iterative product improvements must
ensure that limited resources are not wasted and that failures
create valuable learnings. The approach can be tempered with a
flexible attitude that allows pivoting in new directions if the
improvement or learnings reveal new opportunities.
Customer focus
In the past, products and services were built and then the
customer was sought out and targeted with sales techniques to
generate revenue. This ‘build it and they will come’ approach is
derided by modern analysts and blamed for the failure of a host
of enterprises, including start-ups, over many decades (Cassis
and Minoglou, 2005; Ries, 2011).
This outcome is surprising given the manufacturing quality
principles of lean manufacturing and ISO 9000 have been promot-
ing customers as the primary focus since the mid-20th century.
Although, Deming (2000) says the incumbent view in US
manufacturing firms back then was that quality and high produc-
tion volumes were incompatible. Perhaps these frameworks were
256
only ever adopted by established and profitable business looking

to incrementally improve quality or possibly only when mandated
by their clients in the case of ISO 9000.
In contrast to western countries, the more fervent adoption
of Deming’s principles by Japanese firms since the 1950s has
proven the viability of the framework and the customer-focused
principles it espouses, as demonstrated by the consistently high
quality and well-priced manufactured goods available from
Japanese firms.
Focusing on the customer stands out as the common factor at
the heart of all the product development frameworks whether
implicitly or through a proxy of quality and customer satisfaction.
The approach to customers in design thinking is perhaps the
most explicit manifestation of this relationship, where the
customer’s needs, wants, emotions and desires must precede and
influence the product development strategy. Their problems must
be solved in a cheaper, faster and more pleasing manner than an
alternative product or service for the customer to commit and
generate revenue. This applies equally to B2B and business-to-
consumer (B2C) products and services.
Controlled, measured and iterative development

The most robust theme in all the product development frame-
works assessed is the notion of an iterative product development
process, with each refinement step controlled by a hypothesis and
then assessed to determine the level of improvement it provides.
These development iterations can happen internally prior to
exposure to customers, and software companies have the luxury
of running split tests to compare two different refinements.
Fundamentally, for an improvement to provide a useful contribu-
tion to the systemic design process, it must be directly attribut-
able to a corresponding developmental change.
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THE MBA ADVANTAGE
The ISO 9000 approach is perhaps the best model to demon-

strate this notion as a straight-line continuous improvement
campaign can easily lead to a fallacious ‘correlation = causation’
conclusion and a lazy management response of continuing
‘business as usual’ without understanding their own success. It is
easy to see here the temptation for companies to follow this
model as it presents the lowest cost – any more effort to under-
stand the improvement would add agency costs and reduce
profitability. However, this ignores the risks of not understanding
the success and the potential blindside that is around the corner
should a significant cost or revenue lever be moved in the wrong
direction. Clearly a start-up cannot afford this laissez-faire
approach with the stakes so much higher in the absence of
revenue and cash flow.
The integrated framework

By adopting a continual step change approach modelled on the
design thinking, ISO 9000 and lean start-up frameworks (as
shown in Figure 17.4), each improvement is traceable and
measurable and, therefore, proves the performance increase or
alternatively provides clear learning outcomes in the absence of
any change.
Each step change can be tightly controlled for costs, which
leads to a more profit-focused deployment of resources and holds
down the burn rate of capital. This control also facilitates the
drive for faster cycle times on product development to further
drive the efficient deployment of resources and revenue oppor-
tunities. The ISO 9000 principles can also be applied here as each
validated improvement shores up the business strategy against
the next stages of uncertainty and minimises future setbacks.
258
Figure 17.4: Continual product development cycle
Require-
Planning ments
Analysis
Evaluation
& design
Require-
Planning ments Customer Implem-
feedback Testing entation
Analysis Deploy
Evaluation MVP
& design
Require-
Planning ments Customer Implem-
feedback Testing entation
Analysis Deploy
Evaluation
& design MVP Each improvement
to be permanent
Implem-
Testing entation
Work to reduce
development
cycle times
Measurable
change or
learning
Author: Stuart Young

Stuart is a project manager and civil engineer with 15 years’
experience in construction and manufacturing, recently
delivering several of the largest ever precast concrete supply
contracts in WA. He thrives when working with quality teams
to solve complex problems, identifying improvement
opportunities and delivering results. Stuart strives to foster
positive working environments to deliver the best outcomes
for projects and people.
This essay is copyright of Stuart Young, 2018.
259
18. Sustainable mining:
oxymoron or challenge?
BINDI SHAH
The idea in brief

The issue: The concept of sustainability has been used to critique
impacts of the mining industry. In response, mining companies now
promote their activities and projects as being 'sustainable' - this is
a strategic approach and a necessity. Investors and financial
institutions require strict compliance based on stringent rules for
sustainable developments for companies requiring funding. Is the
notion of 'sustainable development ' in the mining industry an
oxymoron? Benefits of a sustainable development are, by definition,
ever-lasting., however, mining activities result in the depletion of a
finite and non-renewable resource. Can sustainable development in
mining be achieved in a manner that balances economic,
environmental and social considerations and generates benefits
beyond mining cessation?
The context: Mining companies must not only deal with the direct
costs associated with extracting minerals, but the availability of
minerals depends on technological innovation, production cost and
260
Sustainable mining: oxymoron or challenge?
commodity price volatility. Negative externalities arising from both

direct and indirect mining activities can also be costly. A conflict
between the community and a mining company, for example, can
result in the loss of a social licence to operate - placing the
company's future at risk. The boundaries on which stakeholders are
responsible to combat negative externalities are blurred and need
to be addressed.
The solution: Negative externalities are both a threat and an
opportunity. Companies can implement both outreach (e.g.
corporate philanthropy) and in-reach (e.g. shared value) processes
to work together with all stakeholders, building trust with the
community and leveraging off their core resources and capabilities.
When managed well, new value is created 'beyond the mine gate'.
Mining companies in developing countries can implement global
best-practice policies and processes to undertake social and
environmental impact assessments that are in line with the goals of
sustainable development. Sustainable development in the mining
context is complex and challenging, but is achievable.
An introduction to sustainable development

Sustainable development ‘meets the needs of the present without
compromising the ability of future generations to meet their own
needs’ (Brundtland, 1987). Mining companies often promote
themselves and their projects as being a sustainable development
or mine (Kirsch, 2010). This appears to be a strategic approach
as investors and financial institutions require companies to
provide evidence on how project(s) have addressed sustainability
issues and require strict compliance with stringent rules in order
to confer funding (Laurence, 2011).
Many banks and mining companies belong to the Dow Jones
Sustainability Index (DJSI), which was launched in 1999 as the
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THE MBA ADVANTAGE
first global sustainability benchmark (RobecoSAM, 2017[1]).

Investors have more confidence in companies with a higher
ranking in the DJSI as it indicates which companies are best
positioned to create long-term value. The rankings of some of the
top Fortune 500 companies (e.g. Rio Tinto, Newmont Mining
Corp, Barrick Gold, etc.) are published in the annual RobecoSAM
sustainability yearbook (RobecoSAM, 2017[2]).
While sustainable development has become ‘business as usual’
for major companies, the notion of sustainable development in
the mining industry can be argued as being an oxymoron. Mining
projects can last for less than a year for a small mine and up to
several decades for a larger development. The Brundtland defini-
tion implies that the benefits of a sustainable development are
everlasting; however, mining activities result in depletion of a
finite and non-renewable resource (Horowitz, 2006; Rajaram and
Parameswaran, 2005) in a relatively short period of time.
Sustainable development does not have to be antithetical in the
mining of resources context (Horowitz, 2006). Laurence (2011)
argues that sustainable mining is achievable, even though the
resource is finite, if the benefits arising from mining operations
can be prolonged. That is, if an area affected by the direct and
indirect impacts of mining activities is better off after mining
cessation (Joyce and Smith, 2003), the sustainable mining
challenge has been met.
There is a strategic and competitive advantage (Porter and
Kramer, 2006) if companies can demonstrate the capability to
develop, build, operate and rehabilitate a mine in a responsible
and sustainable manner (Plastrik, 2012; Babi et al, 2016).
Sustainable development in mining is achieved when ‘con-
ducted in a manner that balances economic, environmental and
social considerations’ (Rajaram et al, 2005). These considerations
are often referred to as the ‘three pillars of sustainability’ and
262
consist of a process of mutual interdependence to achieve

sustainable development (see Figure 18.1) that is bearable, viable
and equitable (Barbier, 1987).
Figure 18.1: Three pillars of sustainable development

and the mutual interdependence
Social
Bearable Equitable
✓
Sustainable
development
Environment Economic
Viable
(Adapted from Barbier, 1987)
The relationship between mining and socioeconomics

The mining industry provides a range of economic benefits both
globally and regionally. Global benefits include natural resources
for consumption. In-country benefits (e.g. in developing regions)
include jobs, a higher level of education due to the construction
of schools for workers in mines, increased wealth through
increased prices of real estate (local and regional) and a source of
foreign and fiscal revenues (Polanská, Lacková and Stalmachová,
2011; Babi et al, 2016). The revenue generated from mining
activities is seen as crucial in developing countries as it provides
the basis of economic development (Doku and Appiah-Kubi, 2014;
Polanská et al, 2011).
263
THE MBA ADVANTAGE
However, mining activities do not only bring benefits. The

resource curse hypothesis (Sachs and Warner, 1995) implies that
countries with an abundance of natural resources can have lower
rates of income growth; suffer from inadequate protection of
human rights and the environment; lack essential services and
infrastructure; and have higher rates of bribery and corruption
(Genasci and Pray, 2008; Bice, 2014).
The scope of this essay does not explore ethics and human
rights issues; licence to operate in developing countries with
political instability and armed/civil conflict; and does not focus
on accepting or rejecting the resource curse hypothesis. This
essay will focus on the impacts of mining that may lead to side
effects called external effects or externalities.
Externalities
Externalities are the environmental, social and economic impacts
(that may be unintended, positive or negative) of producing a
good or service that is not directly reflected in the market price
of the good or service exchanged (Polanská, Lacková and
Stalmachová, 2011).
The deflected costs that arise from negative externalities are
imposed on stakeholders rather than mining companies and are
not internalised by companies as they make decisions based on
mining activities (Adler et al, 2007). Negative externalities associ-
ated with mining are often delayed, accumulating for decades after
mineral extraction (Adler et al, 2007; Hodges, 1995).
Table 18.1 provides a summary of perceived negative and
positive externalities that may result from mining activities.
264
Table 18.1: Summary of externalities from mining activities
Externality Economic Social Environmental

Positive • Increased employ- • Foundations set • Research on
impacts ment in the region up by mining biodiversity
• Higher education companies can habitats, flora and
levels from invest- play a key role in fauna in remote
ment in schools for structuring, areas where
mineworkers and coordinating and baseline surveys
communities funding activities have not been
• Promotion of national such as health undertaken
and international trade care facilities and
• Increase in prices of schools
real estate in the • Social cohesion
mining region and among
state-wide communities on
• Access to communi- issues related to
cation services mining activities
• Provision of infra- (direct and
structure by mining indirect)
companies such as
roads opens new
areas and integrates
new areas into the
national economy
Negative • Decline in affordability • Increase in crime, • Depletion of
impacts and shortage of prostitution and natural resources
housing for local violence • Potential loss of
community due to • Mental health biodiversity and
higher real estate issues and suicide habitats
prices during the • Marital breakdowns • Contamination of
‘boom’. Low-income • Reduced sense of water (beyond the
earners and community disturbed areas
indigenous/native • Cultural conflicts from mining
communities are with indigenous activities)
impacted due to the peoples or • Impacts on air
inability to access communities quality (dust
affordable housing, • Substance abuse emissions)
leading to • Alienation of land • Energy intensive
overcrowding, from communities, and requires non-
homelessness and depriving com- renewable fuels
forced relocation munities of their leading to green-
surface rights and, house gas
as a result, depriv- emissions
ing communities of
source of livelihood
265
THE MBA ADVANTAGE
Externality Economic Social Environmental

Negative • High median incomes • Health risks arising • Potential
impacts mask inequality in from potential environmental
(cont.) earnings contamination of degradation of
• Commodity price groundwater and abandoned mines
volatility surface water
• Inability of non-mining • Some community
sectors to projects funded by
attract/retain labour mining companies
and provide essential only endure for the
services. High labour period of mining
costs and business activity.
turnover limit Communities are
opportunities for left without
economic additional revenue
diversification. and become
Increased unsustainable.
vulnerability of local • Pressure on
workers, especially in existing physical
single commodity infrastructure
resource towns. (sewage, water
• Co-dependency of supply, etc.) due
businesses on mine to increase in
population. On mine transient
closure, there may be workforce
a decline in regional
economic growth
(Source: Polanská, Lacková and Stalmachová, 2011; Lawrie, Tonts and Plummer, 2011; McKenzie et al,
2008; Doku and Appiah-Kubi, 2014; Hajkowicz, Heyenga and Moffat, 2011; Adler et al, 2007; World Bank
and International Finance Corporation, 2002; Babi et al, 2016)
Case study: Pascua-Lama mine

This case study has been compiled from Li (2016), Nolen (2014) and
Team (2014).
Pascua-Lama mine is a suspended open-pit mining project located in
the Andes Mountains on the Chilean (75 per cent) and Argentinian
(25 per cent) border. The mine is owned by Canada’s Barrick Gold (TSX,
NYSE:ABX), one of the world’s largest gold producers. Construction of
the mine has been at a standstill since October 2013 and won’t resume
until Barrick Gold resolves permitting problems with the Chilean
government. This case showcases how a project can be placed on hold
as a result of the actions of mining activists arising from actual and
perceived negative externalities.
266
Pascua-Lama had an estimated gold reserve of 15 million ounces

(approximately 425 tonnes as at 2013), compared to total reserves of
104 million ounces (approximately 2,950 tonnes) across the entire Barrick
Gold operations. In addition to the gold, it would be one of the world’s
largest silver mines and it also contains significant reserves of copper.
The mine site is located at an elevation of 3,800 metres to 5,200 metres.
A processing plant and tailings storage facility sit on the Argentinean
side, adding to the challenge of managing the project. Chile and
Argentina have had a long history of conflict over mineral resources,
security concerns and taxation issues.
It took Barrick Gold until 2006 to obtain environmental approvals and
another three years to finalise agreements about the mine between Chile
and Argentina. Barrick Gold was given the all clear to commence
construction in 2009. The company took a controversial step and
decided to build the mine in-house for the first time despite being on
unfamiliar territory and difficult geography.
In 2009, Barrick Gold estimated construction costs of US$2.8 to US$3
billion. In 2011, the company raised this estimate by around 40 per cent
due to rising labour, material and energy costs. Barrick Gold further
raised the estimated construction costs to US$7.5 to $8 billion in July
2012 as a result of the decision to manage construction in-house rather
than hiring external contractors.
Ironically, the decision to build the project in-house was to save on
costs. The estimated project cost was again increased to US$8 to
8.5 billion in November 2012 due to construction delays and higher
project management costs. Barrick Gold had spent around US$5 billion
on the project by the time it decided to suspend construction activity.
Pascua-Lama pushed the limits of human labour and technology. Mining
operations and machinery were designed for the cold, snow and high
altitude, but mine workers protested against the harsh working
conditions. In January 2011, construction workers who were hired by a
sub-contractor blocked access to a tunnel that was designed to transport
materials between Chile and Argentina to demand better compensation.
Gold mining is water intensive and reliant on chemicals including
cyanide. In order to obtain a permit, Barrick Gold came up with a
comprehensive environmental management plan that demonstrated
how water (whether precipitation or groundwater) that came into contact
with the mine would be treated before being used in mining operations.
267
THE MBA ADVANTAGE
Barrick Gold’s communication materials that explained these (and other)

environmental aspects did not reassure the valley community. From the
outset, the local people were worried that the river might be poisoned
and/or run dry. In 2006, Barrick Gold agreed to spend US$60 million
over 20 years to improve water infrastructure to make up for the
damages that people feared the mine would bring. The projects,
however, proved to be of much greater value to the industrial farmers
than to those people with small plots. The small farmers felt they were
inadequately consulted and became very angry.
In 2001, Barrick Gold’s proposed environmental impact assessment
sought to move the glaciers from the mine site to another location with
bulldozers and front loaders using controlled explosives to break the ice.
This proposal intensified opposition to the project. The Chilean
government eventually approved the Pascua-Lama project with more
than 400 conditions – one of them being that the glaciers could not be
relocated or destroyed. By 2004, the scheme to break up and move the
ice was no longer publicly acceptable. In the next iteration of the mining
proposal, Barrick Gold said it would leave the glaciers alone.
Chile had been in the grip of a drought during the construction period of
the mine and the lack of rain heightened tensions about the glaciers.
Barrick Gold engaged a glaciologist to undertake research on whether
the mining activities would impact on the glaciers or not. The
environmental monitoring results indicated that ‘all glaciers in Chile are
shrinking, due to the drought from the El Niño cycle and climate change.
The glaciers at Pascua-Lama were not melting faster than the others’.
The local community dismissed the findings because Barrick Gold had
commissioned and financed the study. The local community was
convinced that glaciers were key to their survival and that the mine
activities would destroy them.
In 2009, shortly after the start of construction, regional health and water
authorities inspected the mining site and detected ‘unforeseen impacts’
on the Estrecho glacier and the extraction of water from unauthorised
points. Inspectors recommended a fine for non-compliance with
environmental mitigation plans to protect the glaciers, including taking
preventative measures to reduce the amount of dust that could cover the
glaciers and cause them to melt.
In 2013, Barrick Gold was fined 8 billion pesos (US$16 million), the
highest possible fine under Chilean law, for violations to its environmental
permit and failure to install a water management system and meet
compliance with the glacier monitoring plan.
268
Barrick Gold also faced legal challenges from the Diaguita Huascoaltinos
Indigenous and Agricultural Community, indicating the growing influence
of indigenous groups in conflicts over mining activity. The Chilean
government legally recognised the Diaguita people as a distinct ethnic
group in 2006 around the time Barrick Gold obtained its environmental
permits to commence construction.
The Diaguita people took Barrick Gold to court and accused the
company of violating environmental regulations, including those related
to the protection of glaciers. The Diaguita community demanded that
Barrick Gold’s licence be revoked and, on 9 April 2013, the court of
appeals in Copiapó considered their claims and ordered a halt to
construction work at Pascua-Lama.
The Supreme Court of Chile upheld the company’s environmental permit
in September 2013, but required that Barrick Gold construct a water
management system in order to continue with the project. In October
2013, faced with a heavy debt burden and the project’s increasing costs,
Barrick Gold announced the decision to temporarily suspend the
Pascua-Lama project.
Making sense of it all: a literature review

Mining companies appear not only to be dealing with costs
associated with extracting finite sources of non-renewables, but
their availability depends on technological innovation, production
cost and volatile commodity prices (Hodges, 1995). Mining
companies are striving to lower their transaction costs, and
negative externalities arising from both direct and indirect mining
activities can ‘throw a spanner in the works’.
While mining contributes positively to economic growth and
social development, there is much debate in the literature as to
the roles of governments, communities and mining companies
and their respective responsibilities for mitigating impacts of
negative externalities.
Davis and Franks (2014) and Polanská et al (2011) suggest that
governments have a responsibility to monitor and regulate negative
externalities. Polanská et al (2011) suggest that governments can
achieve this through:
269
THE MBA ADVANTAGE
• Legal restrictions;
• Fines and taxes (environmental taxes);
• A system of property rights;
• Regulatory rules and regulations (emission, air pollution and
concentration limits); and
• Subsidies to reduce negative externalities (motivational effect).
The constraint to this approach is that there is a risk in many

countries where governments have not managed funds received
from taxes, royalties and interests of the community wisely
(Hajkowicz et al, 2011), which results in lower economic growth
and limited poverty alleviation. Some governments in developing
countries have focused upon the financial benefits of mineral
exports and viewed the impacts of environmental degradation
and human rights violations as inconsequential relative to gains
from resource exploitation (Hodges, 1995).
Babi et al (2016) identified through a stakeholder consultation
process that in order for mining companies to meet the sustainable
development challenge there needs to be collaboration between
industry, governments and local communities and a recognition of
sustainability as a shared responsibility.
The key themes that arose from the consultation process
included:
• The role (direct and indirect) of mining companies in
fostering community sustainability
• The magnitude of social impacts of mine closure
• The risks to the security of the employees
• The measures to be taken to minimise health impacts on
local population
• The amount of investment to be requested from mining
companies to guarantee the long-term viability of local
communities
270
• Understanding of inter-generational equity

• Environmental management practices to be employed
• Post-mine closure planning.
As the transaction cost boundaries between mining companies,

community and government appear to be blurred (Doku et al,
2014), broad-based internalisation of the costs of negative
externalities by mining companies may be required (Hodges,
1995; Centemeri, 2009; Adler et al, 2007).
This may be a key strategy in mining companies obtaining
their social licence to operate (SLO) as it is earned from the local
community and is increasingly considered as important as a legal
licence to operate (Plastrik, 2012). The SLO is an intangible
agreement that a mining project should proceed or continue and
is secured through a process of negotiations with local
stakeholders (Lacey, 2013; Fordham et al, 2017). The negotiations
reflect the natural fluctuations in the status and quality of a
relationship between a company and a community (Fordham et
al, 2017).
Harvey (2014) recommends that an SLO strategy may consist
of outreach and in-reach programs. Good outreach is achieved by
involving local communities at all stages of the mine’s activities,
including the decision-making processes that enable mining
companies to identify which negative externalities require urgent
attention (Doku et al, 2014).
Outreach programs generally relate to corporate social
responsibility (CSR) voluntary initiatives (also referred to as
community outreach, external affairs, corporate citizenship or
stakeholder consultation), which typically include issues related
to business ethics, community investment, environment, gover-
nance, human rights and labour issues in the workplace (Doku et
al, 2014).
271
THE MBA ADVANTAGE
In-reach programs involve communities and companies

affected by the mining development tapping into their respective
resources and capabilities to draw business and community
activities together that form mutually beneficial outcomes
(Harvey, 2014; Kemp and Owen, 2013). This has been referred to
as shared value (Porter and Kramer, 2011). In-reach activities
include recruitment of local people through provision of training,
joint environmental monitoring programs, cultural awareness
training, procurement activities targeting local services and
offerings, designing infrastructure that meets both operational
requirements and community needs, etc.
The outreach and in-reach processes not only build trust with
the community (Jijelava and Vanclay, 2017), they also tap into local
skills and experience (Harvey, 2014); determine how and whether
the company can operate (Costanza, 2016) based on improved
profitability (Prno, 2013); and magnify economic and social
benefits through an economic multiplier effect (Moritz et al, 2017).
While there may be additional costs associated with addressing the
negative externalities, improved technology may compensate for
additional costs necessary for environmental protection and social
development (Hodges, 1995). Such costs escalate as ore grades
decline; however, higher mineral commodity prices may eventually
result as a consequence (Hodges, 1995).
The overall maintenance of the SLO may also result in reduced
costs from delays in obtaining environmental permits or political
issues, fewer labour disputes, lower production costs, lower mine
closure costs, lower retention costs, improved investor relations
and confidence (Davis et al, 2014; Rajaram et al, 2005) and it
addresses the interdependency requirements of sustainable
development (see Figure 18.1).
It is also important for companies to ensure these outreach and
in-reach programs are established from exploration to mine
272
closure stages of mining activities and are well balanced with all
three pillars of sustainable development, as is shown in Figure 18.2.
Figure 18.2: Phases of a mining project that need to be considered

in evaluating mining sustainability
Exploration
Feasibility
Planning and
Sustainable Closure
design
development planning and Completion
principles Construction implementation
Operations
Decomissioning
and closure
(Source: Austrade, 2013)
Lessons from the Pascua-Lama mine project

The Pascua-Lama case study highlights the importance of
internalising negative externalities and using effective outreach
and in-reach processes with effective stakeholder engagement.
This will ensure that the local community is involved in decision-
making processes from feasibility through to mine closure stages
to build trust and establish which attributes the local communities
value the most. This may offer both a social and environmental
licence to operate and it lowers the transaction costs.
The Pascua-Lama project also showcased the complexities
that can arise from changing market conditions such as political
strife, working conditions, security and commodity price
volatility (Babi et al, 2016; Davis et al, 2014; Hajkowicz et al, 2011)
that can still lead to suspension or even abandonment of projects.
These are some of the key challenges of sustainable mining.
Mining companies that are working in countries where
regulation may not be well established, battling political issues
273
THE MBA ADVANTAGE
and potential social conflict should consider policies and

processes that are in line with global best practices such as the
Equator Principles (The Equator Principles Association, 2013) or
the IFC Performance Standards (World Bank Group, 2017).
These documents provide guidance on undertaking social and
environmental impact assessments that are in line with the goals
of sustainable development.
The impact assessments would provide baseline assessments
to monitor impacts of mining activities on local, regional and
country areas. These can then be used to assess impacts of mining
activities over time to determine whether there is an increase in
negative externalities that need to be addressed.
Companies that create annual reports can also base it on the
reports published by the Global Reporting Initiative (GRI), which
aims to ‘helps businesses, governments and other organizations
understand and communicate the impact of business on critical
sustainability issues such as climate change, human rights,
corruption and many others’ (GRI, 2017). Investors, lenders or
companies wanting to buy or finance projects can also use these
principles, DJSI rankings and GRI reports to assess whether they
are investing in sustainable developments with more confidence.
This is a strategic approach and can be used as a competitive
advantage because long-term value has been generated (Porter
et al, 2006).
Summary
Sustainable development in the mining context is not an
oxymoron – it is a challenge. If companies adopt sustainable
development principles throughout their practices – from
exploration to the mine closure stages – and attempt to ensure
that current and future generations are not negatively impacted,
then the challenge can be met. Mining activities can give rise to
274
negative externalities, which are often delayed and accumulate for

decades after mineral extraction.
The boundaries and joint responsibilities between companies,
governments and communities to manage potential negative
externalities are often blurred. Companies can internalise nega-
tive externalities and implement outreach and in-reach processes
to collaboratively work with all stakeholders. The outreach and
in-reach process not only builds trust with the community but
also taps into local skills and experiences, creates shared value
and a multiplier effect and, ultimately, determines how and
whether the company can operate.
Mining companies that are working in countries where regula-
tion may not be well established and/or are battling political issues
and potential social conflict should consider policies and
processes that are in line with global best practices such as the
Equator Principles or the IFC’s Performance Standards and under-
take GRI reporting. This makes company performance more
transparent and provides lenders and investors confidence in their
funding and investments. Higher DJSI rankings can also provide
companies with a competitive advantage as they can demonstrate
performance that is sustainable.
Author: Bindi Shah

Bindi is a resource and construction advisory professional
who works with major Australian companies in the
engineering, energy, environmental, rail, town planning,
mining and construction industry sectors. She is passionate
about sustainability issues and is a KeepCup warrior. Bindi
has a high level of engagement, collaboration and focuses on
bringing people together to solve problems. In her spare
time, Bindi can be found organising social events, volunteering at community
groups, indoor rock climbing, baking cupcakes or enjoying local arts and theatre.
This essay is copyright of Bindi Shah, 2018.
275
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The University of Western Australia Business School aims to
advance the welfare and the prosperity of the people through
excellence in business education and research. Recognised as one
of the premier business schools in the Asia-Pacific region, the
UWA Business School offers a broad range of business and
management courses. The School’s flagship MBA suite has pro-
duced leaders across the public, private and not-for-profit sectors,
and allows students to complete a range of specialisations,
including in Natural Resources.
The UWA Business School holds international accreditation
through both EQUIS (European Quality Improvement System) and
AACSB (Association to Advance Collegiate Schools of Business).
In addition, the School’s commitment to corporate sustainability
and social responsibility is cemented by its role as a signatory to the
United Nations Principles of Responsible Management Education
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ing universities. UWA is the only Western Australian university
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THE

A catalogue record for this

Internal design by Production Works

Disclaimer: The material in this publication is of the nature of general comment

Nick Loke is a chemical engineer by training and has an established

Although this book comprises largely essays and writings under-

Nick Loke and Geoﬀ Batt

The opportunity to step back and reﬂect on ‘career to date’, simultane-

Part I – Modern Business Culture–3

Part II – Managing Uncertainty and Disruption–55

Part III – Scenario Planning–119

Business culture describes the fundamental behaviour and values

Taking a more personal approach to the subject, Nick Loke

The idea in brief

Leaders often describe culture with reference to their values

Corporate culture confusion

strategy for breakfast’ has never really resonated with me as a

My approach: frameworks are your friend when

Given all of the above, I will use my mentor’s insightful

What does the literature say about corporate culture?

3. Heroes. People identiﬁed as heroes exemplify a

Considering the ﬁve elements above, Deal and Kennedy distil

2. Espoused beliefs and values. These are the ideals, goals,

O’Reilly (1989) describes the function of corporate culture as that

My definition of corporate culture

• deﬁnes a broadly accepted informal set of rules for

Pondering the applications of my blended deﬁnition of corporate

The importance of leadership

of the group to be the corporate culture. If inconsistencies are

How does culture interact with the other

Objectives, activities, tasks

As Figure 1.1 suggests, culture is linked to all the other elements

external environment nuances but must maintain alignment

So… what is corporate culture?

problem-solving and instils a sense of belonging to the group

When a senior leader says it is their culture that deﬁnes their

Author: Ben McRobb

This essay is copyright of Ben McRobb, 2018.

The idea in brief

workplace of the near future - the rise of artificial intelligence (AI)

My first lesson on wisdom

Where does wisdom fit in today’s business world?

tops, completely withdrawn from the world and unaware of the

Wisdom is devalued at both the individual and

keyword ‘knowledge’ returned 5.4 million results, compared to

relevance and academic rigour (Roca, 2008). Unsurprisingly,

Why wisdom is still essential in the knowledge economy

Wisdom helps formulate corporate strategy and culture

speciﬁc context. Organisational wisdom, simply put, requires a

Transforming organisational wisdom

return on assets (ROA) and growth in assets (Collins and

Wisdom is the foundation of ethical leadership

Makes decisions Grasps the Creates shared

Communicates Exercises political

(Adapted from Nonaka and Takeuchi, 2011)

The business leaders of today are undoubtedly smart. However,

Wisdom in guiding business decisions

Procedural knowledge versus wisdom

Wisdom to marshal the rise of artificial intelligence

Sophia is, she is just the beginning of a wave of AI and autonomous

Wisdom for a new generation of Millennials in the

Millennials, the generation born between 1980 and 2000, repre-

Robert Swaim (2016), a colleague of Peter Drucker for many

Case study: Leading a team of Millennials