What is strategy? •
Corporate strategy is the pattern of major objectives, purposes or goals and essential policies and plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.(Andrews) • Strategy is the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the needs of markets and to fulfill stakeholder expectations. • More simply stated: • Strategy is the organisation’s sense of purpose. •
The two main frameworks of strategy processes > The prescriptive strategy > The emergent strategy
Assumptions behind the prescriptive strategy • • • •
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The future can be predicted accurately enough to make rational discussion and choice It is possible and better to forgo the short-term benefit in order to obtain long-term good The strategies proposed are, in practice, logical and capable of being managed in the way proposed The chief executive has the knowledge and power to choose between options, without needing to persuade anyone nor compromise the decisions After careful analysis, strategy decisions can be clearly specified, summarised and presented Implementation is a separate and distinctive phase that only comes after a strategy has been agreed
Problems with the emergent strategy •
Board members will not accept operating companies just pottering along • Resources need to allocated - this means having some basic plans and some strategic overview • Having no fixed strategy is somehow abdicating responsibility for final decisions that need to be taken • Rational decision-making based on evidence and logic has a greater likelihood of succeeding than hunch and personal whim
Strategy is different •
Many firms have many aspects of management right: > Finance and accounting > Human relations > Optimised information technology
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For these areas it is both right and normal to look to the best practice in other firms • Strategy is different > Copying competitors often leads to failure > Strategy should not be copycat > It is rather based on doing well what rivals cannot do, not what they can do or are already doing
When small change is not enough: Reinventing the firm • Sometimes corporations face situations where just incremental change is not enough • Such companies do not need to improve themselves, they need to reinvent themselves • Reinvention is not changing what is, but creating what isn’t • A reinventing firm is one that alter the underlying assumptions and all the invisible premises on which decisions and actions are based. • It changes the context of the corporation • Before reinventing itself, an organisation must uncover its hidden context • Reinvention is not about stretching yourself, it is about doing things in a totally different way
Reinvention example •
Ford Motor Company > 80-82: a 3 B$ loss, in 88: profit of 5.3 B$, return: 26.3% > In five years time: √ Market share up from 15 to 22% in the US √ Cycle time for development of a car down from 8 to 5 years √ Quality jumped from the bottom 25% to the top 10%
> Reason: The company managed to change from being a rigidly hierarchial company driven by financial considerations to become a flexible company concerned with quality and product development > Employees reported that Ford had somehow become an entirely different company; surveys of both union and salaried employees recorded dramatic, positive shifts in their perceptions of management, morale and company loyalty
Creating a new context • •
Reinvention is like taking on a 500-pound gorilla ”The journey to reinvent yourself and your company is not as scary as they it is, it is worse” • Reinvention is a “sink-or-swim proposition” • Main problem: Often difficult to see the root of your trouble • An analogy: > A house with lamps sending out blue instead of yellow light > Try to do something with the objects of the house rather than the light > Example: IBM
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Success example: Motorola > From car radios to television to consumer electronics to semiconductors to microcomputers and to cellular phones and pagers - often by selling off profitable businesses to gamble on new ones > Gavin changed the context to one of self-questioning, outward looking, humble - but to aim at becoming “the world’s premier company
The doing trap • • • • • •
Insanity: Doing the same things again and again and expecting different results (Rita Mae Brown) Analogy: Einstein and time as a constant Doing seems to be the managerial constant, but what if it’s not? The executive who will master reinvention must venture into the uncomfortable territory of being Context sets the stage, being pertains to whether the actor lives the part or merely goes through the motions People are being something all the time > conservative > hard charging > resistant to change
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Japan: the journey across life has to do with perfecting one’s inner nature, kokoro
Context examples •
Nordstrom > Motto: Respond to unreasonable customer requests √ changing a flat tyre √ paying parking tickets because gift-wrap took too long √ scrapbook of “heroic” acts
> Norstrom is Nirvana for go-getters who love to sell > Competitors try to mimic Nordsstrom, but lacks the right context “Customers always first (within reason)” against “Crazy customers is an opportunity of heroic acts”
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Europcar > 1992: In Europcar in costed 13$ to process a rental (1$ with Avis) > The Greenway project: A plan to revamp the entire operation > Bickering between the country managers and the design team threatened the whole project > Important meeting in Nice 1993 - disbelief and alienation turned into exitement about possibilities - a true shift in being
Visions •
Statements of vision can be important > Sir Colin Marshall declared that British Airways should be the “world’s favourite airline” when it ranked among the worst > John Riccitiello, manager of Häägen-Dazs International introduced a new vision: “celebrating the experience of being alive” to replace “selling pleasure, beating competition, being the best” > Introduced a senior position “Director Magic” to generate ideas for employees to make a visti to a Häägen-Dazs shop en exiting event for both staff and customers.
Steps to reinvention • • • •
Assembling a critical mass of key stakeholders Doing an organisational audit Creating urgency, discussing the undiscussable Harnessing contentions > Conflict jump-starts the creative process > Even in Japan conflicts are important - waiyaga sessions
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Engineering organisational breakdowns