How do leaders make decisions during corporate transformation?

At any given moment, an entire industry may be at a tipping point—transitioning from one stage to another. However, such stage transitions are often unpredictable, inconsistent, and confusing. Certain segments of an industry may undergo stage transitions earlier than others; moreover, these transitions may occur steadily and systematically—or sporadically and unevenly. In some industries, suppliers may advance to the next stage before original equipment manufacturers (OEMs) are ready to invest; in others, the reverse may hold true. All these complexities mean it is often difficult to give a definitive answer to the question: “Which stage is your industry currently in?” Corporate leaders frequently face a series of intricate, stage-specific strategic decisions. Generally speaking, timing strategy for transformation depends on numerous factors. The most critical among them is the nature of the competitive advantage your company currently enjoys—or aspires to create. This includes many possibilities—for instance, improved production efficiency, reduced production costs, outstanding product innovation, flexible or customized manufacturing, streamlined or shortened supply chains, accelerated time-to-market, proprietary and unique intellectual property, enhanced customer intimacy, readiness to capture non-customer segments, benefits from network effects and information asymmetry, or building a robust business ecosystem. Depending on your company’s nature, its current strengths and weaknesses, and its competitive environment, certain competitive advantages will be more relevant and practical than others. Moreover, your company’s ability to create and leverage these advantages, in turn, hinges on the stage it occupies within the additive manufacturing (AM) technological revolution. Therefore, when considering how to respond to the current stage of your industry, corporate leaders must first deeply understand the strategic nature of that stage, the competitive advantages underpinning their present success, and those advantages required to sustain future success. Other relevant factors corporate leaders should consider when assessing their current stage and selecting a timing strategy for transformation include the following: • Technological and strategic developments driven by other companies: Your company’s stage strategy may be influenced by technologies and timing strategies being developed by 3D printer manufacturers, software vendors, or competitors. Such influences may include cost reductions, emergence of new materials, improved usability, enhanced reliability, and other factors. For example, you might feel that AM currently offers only marginal advantages for most of your production needs—but if it can boost manufacturing speed by 10% while cutting per-unit material costs by 5%, that may represent an ideal inflection point, rendering 3D printing a viable option. In such a case, you would want to closely monitor technological developments in your field—and stand ready to act swiftly once that inflection point arrives. • Degree of investment in current or prior-stage technologies and strategies: The more capital your company has invested in existing machinery, software, and so forth, the greater its dependence on current strategies. A lack of flexibility and limited exit options may lock you into the current stage—and increasingly heighten your perception of risk in shifting to new approaches. • An unrelenting drive to “stay one step ahead,” or fear of losing others’ respect, personal “face,” or authority—may compel you to cling to existing strategies.

Corporate Management — Ideation Chapter — Transformation Strategies Under Crisis Reveal a Company’s Cognitive Height

02 Under External Shocks, Companies Favor "Track-Shifting" The survey results (Figure 2) show that over half of the 581 surveyed enterprises implemented transformation during the pandemic, demonstrating strong strategic flexibility—adjusting themselves promptly “to meet change with change.” For instance, during the pandemic, several oil companies, automakers, and home appliance manufacturers rapidly pivoted to cross-sector production of epidemic prevention supplies such as masks—not only meeting domestic demand but also providing aid to overseas countries. Figure 2: Overall Distribution of Chinese Enterprises’ Transformation During the Pandemic Action Strategies and Pathways for Enterprise Transformation During the Pandemic Once an enterprise decides to transform, it must begin contemplating concrete transformation strategies and implementation methods under the corresponding transformation orientation. Based on the survey findings—and drawing upon the methodology of domestic scholars Wu Jiaxi and Hu Honghao—we categorize specific enterprise transformation strategies into three major types: industry-switching, track-shifting, and upgrading (Figure 3). Figure 3: Primary Models and Pathways of Enterprise Transformation in China Fundamentally, enterprise transformation entails shifting from one state to another—that is, transitioning across industries or shifting between different development models. The former manifests as “industry-switching,” primarily addressing the question of “what to do”: enterprises keenly sense environmental changes and emerging trends, quickly identify opportunities and threats, and enter new industrial domains or create new markets. The latter manifests as “track-shifting,” focusing on the question of “how to do it”: enterprises concentrate on core businesses while enhancing management systems and organizational functional units, achieving an overall leap in organizational capability—for example, channel innovation from offline to online, or shifting from low-cost strategies to differentiation strategies. Additionally, there exists a third dimension of transformation content termed “upgrading,” which refers to synergistically advancing both industrial transformation and core business capability enhancement—for instance, shifts in brand strategy, transition from independent innovation to collaborative R&D, or adjustments in strategic priorities—thereby elevating the enterprise’s position within the industrial value chain. Survey results indicate that among the 319 enterprises implementing transformation, a total of 883 transformation strategies were executed, averaging 2.77 strategies per enterprise. This finding appears to suggest that, during the pandemic, enterprises preferred hybrid (three or more strategies) or dual-mode (two strategies) transformation approaches—i.e., simultaneously pursuing deep “industry-switching” strategies (e.g., entering new industries) alongside incremental “track-shifting” and “upgrading” strategies (e.g., optimizing production processes, brand upgrading, etc.). Among post-pandemic transformation strategies, the deep-transformation strategy involving strategic reallocation of resources—namely, “industry-switching”—was implemented only 241 times, accounting for 27.3% (Figure 4). By contrast, enterprises more frequently adopted “track-shifting” strategies targeting process optimization, management system improvement, and organizational capability enhancement—executed 377 times, representing a high proportion of 42.70%. Furthermore, “upgrading” strategies were implemented 261 times, accounting for 29.56%. This figure is understandable: during the pandemic, adopting brand- and R&D-focused transformation strategies to elevate an enterprise’s position in the industrial value chain may have been perceived as “using distant water to quench immediate thirst,” since such strategies tend to focus on long-term outcomes and require sustained resource planning and investment.

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