MT Divergent thinking IND REAL LEARN no REAL IMPACT PERSPECTIVES FOR MANAGERS THE POWER OF DIVERGENT THINKING What does the future hold fora tGOnyearnold cash handling company when major trends across the world portend a shift away from cash? The company in question is Nasdaq Stockholmnlisted Loomis. Loomis has increasingly found itself at the intersection of two forces. On the one hand, an increase in the acceptance of debilJcredit card by merchants, a rise in enPayment services, the convenience of mobile wallets and many more ntech innovations are challenging the cash ecosystem. On the other hand, cash in circulation has been increasing since 2007 (except in Russia and Sweden) and it remains the most common payment method in the world in 2018.1 Within this context, Loomis employs around 25,000 people carrying out cash in transit (CIT) and cash management services (CMS) through an international network of more than 400 branches in over 20 countries with annual revenues of SEK 19.2 billion ($2 billion) in 2018. Loomis customers are primarily banks and retailers 7 two industries that are being heavily disrupted by evolving customer behaviors and a new breed ofcompetitois. "The strategies, capabilities, processes and mindsets that have led us to where we are todaywill not take us into the future," stated Patrik Andersson when he took over as the new CEO of Loomis in 2016. He launched a strategy review process and established dedicated teams comprising people from crossnfunctional areas to explore the future trajectory of Loomis's businesses what is working and what is not, what are the untapped opportunities and which threats oould derail its strategy. The challenge - slow down! As the projects went underway, Patrik had one concern. How could he ensure that the discussions and options being explored would not become incremental and internally focused? How could the teams be challenged to see diverse possibilities before converging on the best way forward? This is a common issue faced by most project teams. Typically, they are run by busy executives who commit limited time to the project work (in paralleltotheirregularresponsi ilities). Executives are in a hurry to make decisions and get going. Given the stiff timelines and tough project goals, the tendency is to quickly reach solutions that lie within the comfort zone. The assumption here is that 'We know our industry and our competitors; we know what our customers want, we just need to improve our operational efficiency and align our systems and processes to create value." Rushing to quick answers essentially means doing the same things. just working harder. This is a \"delivery\" mindset that is typically employed for managing today. However. to manage for tomorrow with a \"leader" mindset, executives need to expand the areas of choice and shape the strategic options for the company going forward. For this, they must adopt a learning attitude and explicitly challenge themselves to step out of their comfort zone. The question is \"how"? Our answer 7 by applying divergent thinking. We dene divergent thinking as a process for identifying new opportunities, finding multiple creative ways to address intractable issues or abstract problems and challenging the organizational status quo. The benet of divergent thinking is that it encourages people to think from multiple perspectives to open theoretically limitless options, followed by senseAmaking. ultimately resulting in more innovative solutions or breakthrough possibilities to address the challenge at hand. Given that there is no right or wrong answer. the process also enables a deeper understanding and signicant learning for the individual, team and the organization. Having worked with scores of executives. we find that divergent thinking does not occur on its own. First, it must be framed in a way that enables the opening of new vistas but not going off on a tangent. Second, it must be built into the project design in terms of time allocation, discussion formats and specific interventions. www.imd.org/pfm Thomas Malnight IMD Professor of Strategy and General Management Ivy Bu: h 2 Associate Director. B us l ness Tian sfonn ation initiative Victoria Kemanian Director. Business Tran sfonnation Initiative 0 NW NE] . lnlci national lnstitutu for Management Dcvciupmm Not to be used or rcproduccd Wl'it'lDut pnrinlssmn THE POWER OF DlVERGENT THlNKtNG Four lenses to power up divergent thinking As a framework to encourage teams to expand their thought process, we apply four lenses: 1)Twedirect]onal approach, 2) Purpose. 3) Outside in and 4) Disruption (see Figure 1). Each lens makes a distinct contribution to the overall strategy discussion. A combination of the Loomis applied the twodirectiona| approach to chart the next steps on its strategy roadmap. Corenfonuard thinking propelled it to expand its strengths in cash management to fare): solutions. Investing in forex solutions helped the company to unlock a range of untapped customers such as airlines, hospitality and tourism providers. independent currency exchangers, and so on. Loomis also strove to achieve better operating teams. Typically, they are run by busy executives MT Divergent thinking formats and speci c interventions. e mi? IMD - Inter nationat Ir.5titutt- m Management Dcvotoprron'. Not to be LSL-Ll or repioouccd Mitiout put mission THE POWER OF DIVERGENT THINKING Figure 1: Divergent thinking lenses rum and gmng lmndatim buslmlssos one-wring amass Pursuing pockets of 1mm Source: Authors Four lenses to power up divergent thinking As a framework to encourage teams to expand their thought process, we apply four lenses: IITwodirectjonal approach. 2) Purpose. 3) Outside In and 4) Disruption (see Figure 1). Each lens makes a distinct contribution to the overall strategy discussion. A combination of the four results in: Surfacing options to accelerate growth along the company's existing trajectory Developing breakthrough ideas to change the current trajectory of the company Undelstmdir-g and swung m a trends. can pants and needs -mtsu'uer custom shim poisonous Outside In Core Po rward Cmnlb'llmg busnussns Chdiengmg the rules a the gem In the case of Pamk's challenge at Loomis, the four lenses framework resulted in a robust divergent process that delivered better outcomes by allowing the project teams to take time to slow down rst. 1. Two-directional approach A twooirectional approach. comprising core, forward and future-back thinking. serves to break the incremental mindset that prevails in many companies today. \"Core-forward" is the typical approach employed by companies as they focus on securing operational efciency. achieving shorteterm KPls, and protecting market share. Core-toward thinking alone is limiting since it focuses purely on the traditional business with an incremental agenda. To build a comprehensive picture. EQIBSIOI'WBI'G must be coupled with the "futureeback" approach. LeWIs Carrol's quote "If you don't know where you are going. any road will get you there" is a good illustration of the importance of futureeback thinking. This requires the leadership team to have a point of View on where the company is headed in the longer term. Some questions thatwe ask companies are. \"What are your KPIs beyond your budgets? What is your ambition for the business beyond financials? How will your business be fundamentally different in five years' time?" The answers to these questions often expose the company's lack of a change agenda. which holds the whole organization back. Loomis applied the twodirectional approach to chart the next steps on its strategy roadmap. Coreefonrvard thinking propelled it to expand its strengths in cash management to forex solutions. Investing in forex solutions helped the company to unlock a range of untapped customers such as airlines. hospitality and tourism providers. independent currency exchangers. and so on. Loomis also strove to achieve better operating margins by movmg up the customers' value chain through investment in new technologies. At the same time, futureeback thinking enabled it to \"seed" new platforms to handle digital payments and to enhance its technical capabilities for future payment options. This was a priority for innovation. both internally and for acquisitions. 2. Purpose Purpose is not about havmg lofty \"words on the wall\" to which companies pay nominal homage when it suits them, Purpose is the reason a company exists. It signies what it stands for, why employees want to work for it and why other stakeholders want to partner With it. We nd that purpose, done right. raises the game of a company 7 shaping what it does and why it does it e ultimately leading to business growth and protability. Fundamentally. purpose allows a company to expand its impact on multiple stakeholders. across the ecosystem. today and in the future, While executives tend to see many risks in pursuing higher order objectives, leaders! organizations who buy into purpose are willing to take that risk in their stride to seek a bigger impact. Purpose thus provides the motJvation and a reason to change decisions, actions and behaVIors. We find that by focusing on purpose. even legacy companies like Loomis can create an exciting future. Traditionally. Loomis has been the guardian of cash. It has come along way since the age of stage coaches to provide the safe transit of cash via armored vehicles and guards (CIT), which accounted for 62% of its revenue in 2018. In the last decade it started CMS, which grew steadily, accounting for 31%.2 Patrik stated. "As the specialist at creating efcient casr flow, we know better than anyone else where. when and how much cash is needed in society. Our role has been evolving tremendously as we aim to lead the transformation of the cash ecosystem." The next frontier for Loomis requires it to participate in payment systems of the future, A curious and exploratory mindset is needed to understand how payments will evolve and the opportunities this might present, and how technology can enable greater transparency. efciency and security. The big challenge for Loomis now is to apply the purpose lens to create greater value for clients, partners and society alike. is 20w IMD . Inmrnutionat Institutc tat Managcn'cn: Dot-(Ioprren: Not to be and m ii'piDdLCCd mot: permission 3. Outside in THE POWER OF DIVERBEAT THINKING As the name Implies. the outside-in lens asks. quaners. "We got to where we are because we know how to run the business. Someone Is MT Divergent thinking 2| it 2019 IMD - Inmrnatioriat Institute Iai Maiiagcn'cn: Development Not to be used oi IE'EIDULCCU Without peimissiori 3. Outside in As the name implies. the outside-in lens asks. \"What will the ecosystem of the future look like in which companies mu st play 7 and win?" The focus is on trends shaping markets, customer behaviors and the competitive landscape. While leaders do systematically look at trends, too often they end up relating them to their existing businesses and operating models. Their locus is not only internal but also backward-looking as they dene the world in terms at how they have operated in the past. However, it is critical for executives to actively understand the big trends (and even the weak signals) and what they could mean for their company. They need to ask, "How do these external trends threaten or enhance what we do today? How could they shape what we WIII be doing tomorrow?\" For Loomis. an in~depth analysis of the implications of the external trends enabled it to tackle the fundamental challenge of leveraging the transition occurring in the overall cash ecosystem? Outside-in thinking highlighted the single most important trend impacting Loomis r the increasing willingness of banks and retailers to outsource cash management in order to increase their cost elficiency and security (depending on the maturity of the market). Cash in transit was usually outsourced First, followed by other aspects of cash management, and finally associated value- adding services to its portfolio. Retail players were looking for advancedfintegrated POS solutions while banks sought to consolidate branches and ATM networks. This was an opportunity for Loomis to launch planning and forecasting serVIces. Patrik explained, "Instead of going to an ATM or retailer to pick up or hand in cash, we Will take care of the entire planning process. When the retailer is stocking up in the morning, we can tell him how much money he needs, and in which currencies and denominations. The bank does not have to tell us when to go to an ATM. We can do that ourselves. I Will be surprised and disappointed if we don't make SEK'I billion from the new services by 202'I."3 Loomis built an aggressive acquisition agenda targeting candidates to add new related services and technologies. Software and hardware solutions for back/front ofce and other planning tools were at the top of the list. 4. Disruption We find Ihatitisacombination ofcomplacency and an'ogance that blindsides leaders and prevents them from recognizmg disruption from different THE POWER OF DIVERBEAT THINKING quaners. "We got to where we are because we know how to run the business Someone is always talking about disruption. but I don't see it in my area." is a common retrain. This lens looks at disruptive players who challenge existing businesses by changing the rules of the game. Disruptive threats are normally not on the radar of incumbent firms. As such. companies are not set up to disrupt themselves or even think about cannibalizing themselves. The logic of innovation Within big companies is built upon big budgets. big teams and long timeframes to come up With a proven bet. The tear of failure is so high that at one company we were told that they prefer "100% successlul entrepreneurs." This is in sharp contrast to disruptive innovation whereby the initial minimum viable proposition is targeted at a less-demanding customer base and brought to the market at maximum speed. Over time. the productlsewice is continuously improved upon so much that mainstream customers make a shift to this new offering. For Loomis, it would be well worth the leadership time to identify potential disruptive players. Disruption could come Irom the proliferation of new payment methods spearheaded by fintech companies or from potential \"one-stopvshops" that could provide integrated back- and front-ofce digital payment and transaction management solutions To counter such threats, Loomis made a bold move to bridge the diVIde between digital and physical cash by partnering with Sonect, a SWIss company that converts retail shops into "virtual ATMs." Sonect provides a platform for consumers to access digital cash at retail locations and withdraw it as physical cash. This reduces the cost of cash distribution for banks and simplies in-store cash management for merchants via a location-based on-demand serVIce. Building upon the recommendations of the project teams, Lcomis' leadership charted a new strategy map to 2021 (see Figure 2). Increased growth and profitability would be achieved not only by developing the company's core business but also through new strides up the cash management value chain and over time through new payment serVIces, In line With the new strategy, Loomis launched several initiatives and committed investment on priority areas. For example, it opened two Centers of Excellence in 2018 that would focus on further developing solutions for retail customers and expanding its offering in CIT and CMS. Patrik stated, "We have entered a new chapter in Lcomis's evolution."4 How (l0 these external Ire/ids thieaton or enhance who! we do tor/ii; 7 How, could they shape who: we will be itmiu; lD/llOiiOt'l'? l a -; 2mg IMD llllL'rI'olldlldl Institute iui Nariddcrrlulll outiwmunt Nollo housed at IL'lJItJLiuLL'd warm: pmmmmn THE POWER OF DIVERGENT THINKING Figure 2: Lcomis's strategy 2018-2021 Key enablers: services and technologies. Software and hardware solutions for backlfront office and other planning tools were at the top of the IISL 4. Disruption We find thatit is a combination olcomplacency and an'ogance that blindsides leaders and prevents them from recogniztng disruption from different servtces, In line With the new strategy, Loomis launched several initiatives and oommitted Investment on priority areas. For example, it opened two Centers of Excellence in 2018 that would focus on further developing solutions for retail customers and expanding its offering in CIT and CMS. Patrik stated, "We have entered a new chapter in Loomis's evolution.\" I 3 2m? WI] i'lttflullJliJl 'r";li|ulv itii Nufiuqulllt'll Dutulzpviiiiit \\'ol lo bu use: m lLUIJL'uLL-d w ['lUJl pci'tli'q'oiLli THE POWER OF DiVERGENT THiNKiNG Figure 2: Loomis's strategy 2018-2021 Key enablers: - A strong sponsor: The leaders role as an h | ii/{l'i'iiMi'i Targ ets: 24 Source' Loomis annual report 2018 Ii 'i iil.ltiiifl ii iil'."'tltl m M iii in in. i- i), t'r'ililll'w i- Designing divergent thinking into the process People tend to spend a greater proportion or their time taking action rather than discovering, discerning and deciding. Embedding divergent thinking into the project process requires Tapping into the knowledge oftho organization There are pockets of excellence and rich perspectives that lie within functional or business silos These can be brought to the surface either through workshops designed around particular topics With cross-functional groups or Via one-on- one conversations with a cross-section of people across markets, hierarchy. level of experience, etc. Seeking these different points of view enables divergence even though it is derived from vvithin the organization. It also informs the project team about potential success tactors/derailers for the company strategy going forward. Making external visits. This is about experiential learning rather than just reading about best practices and success stories. Project teams should choose to visit companies that span industries. markets and customer proles. The Visits should be sthctured around issues that matter rather than the novelty of the company being visited They are not "tourism visits" but should serve to break the barriers of complacency and arrogance. Holding customer/stakeholder conversations These conversations should not locus on selling but gaining insights into customers' needs and challenges, Additional insights from other stakeholders across the ecosystem are also key to develop a holistic perspective of the issues at hand. Growth opportunities come from responding to unmet needs. not from fighting for market share. Engaging subject matter experts. The role of the topic expert is not just to share insights but to be a provocateur who challenges the teams' thinking. He/she is not there to proVide the answers but to raise the level ot the questions being asked. internal sponsor is critical in prowding gutdan ce and intellectual stimulation. Beyond that. hot she connects thedots and provides a compass that enables coherence and relevance A sponsor's involvement has a powerful impact in building ownership and engagement within the team and the organization . A safe space to enable the right discussions: Tapping into the collective intelligence of the organization requires the involvement of a broad spectrum of people with diverse areas of expertise and builds on an iterative process To fully leverage the diversity of perspectives. it is important to embed an open and collaborative mindset that invites contributions. challenges and experimentation from all involved. ' A clear focus on the ttierries. Wliilo divergence explores an issue and options to address it. and the outcome may be open-eided. the process requires adhering to the specic areas collectively identied as strategic ones To avoid over-scoping. there must be a clear mandate. dened and agreed on at the stait. with a common understanding otthe task ahead. Periodic checks to stay on track: The exploration effort requires effective coordination within and across the topic areas. More importantly. setting up a roadmap With milestones and expected outputs in line with the overall goal is crucial for effective monitoring and acceleration, where necessary. Ideally. teams should appomt an internal resource at the corporate level who supports this effort. - An external provocateur to \"hold" the uncenainty' The benefits of an external challenger who brings an objective and credible voice are numerous; probably the most relevant is the ability to navigate and take teams through a process that creates. by design, several uncertainties Managing the tension between what we know and what we do not know throughout the process is critical to generate new ideas and options. The power of divergent thinking lies in expanding the areas of choice beyond what is bemg done today. and to butld concrete options for acompany to remain relevant and succeed in the future. References- \"Bis Quarterly Review. March 2018. \"LOOmlS Annual report 2018 i: Farrik Andeisson. Capital Market Day Presentation. 28 September 2017 \"President's statement. LoomisAnnual report 2018 Mt iiJiii .. iiin Mimi.\" iiwi-iinn n.-iiiii-.ir.ii CREATIVE PROBLEM SOLVING Read the article and explain the benefits using DIVERGENT THINKING brought to this Company/Team All essays or papers should be emailed directly to the instructor at by the given deadline. Papers should be written using Microsoft Word, and should conform to the following format: 12-point Times New Roman font Double-spaced 1-inch margins all around Must include a title Should be revised and edited for spelling, grammar, and other errors If references are used must be identified at the end with details of where did you find it. Word length or limit will be given for each individual assignment