أ. شريف نايف عوايص

محاضر في ادارة الأعمال- رئيس قسم التسجيل - عمادة القبول والتسجيل

Strategic Manag2

Historical development of strategic management

 Birth of strategic management

 Strategic management as a discipline originated in the 1950s
and 60s. Although there were numerous early contributors to the literature, the
most influential pioneers were Alfred D. Chandler, Jr., Philip Selznick, Igor
Ansoff, and Peter Drucker.

 Alfred Chandler recognized the importance of coordinating
the various aspects of management under one all-encompassing strategy. Prior to
this time the various functions of management were separate with little overall
coordination or strategy. Interactions between functions or between departments
were typically handled by a boundary position, that is, there were one or two
managers that relayed information back and forth between two departments.
Chandler also stressed the importance of taking a long term perspective when
looking to the future. In his 1962 groundbreaking work Strategy and Structure,
Chandler showed that a long-term coordinated strategy was necessary to give a
company structure, direction, and focus. He says it concisely, “structure
follows strategy.”[3]

In 1957, Philip Selznick introduced the idea of matching the
organization's internal factors with external environmental circumstances.[4]
This core idea was developed into what we now call SWOT analysis by Learned,
Andrews, and others at the Harvard Business School General Management Group.
Strengths and weaknesses of the firm are assessed in light of the opportunities
and threats from the business environment.

Igor Ansoff built on Chandler's work by adding a range of
strategic concepts and inventing a whole new vocabulary. He developed a
strategy grid that compared market penetration strategies, product development
strategies, market development strategies and horizontal and vertical
integration and diversification strategies. He felt that management could use
these strategies to systematically prepare for future opportunities and
challenges. In his 1965 classic Corporate Strategy, he developed the gap
analysis still used today in which we must understand the gap between where we
are currently and where we would like to be, then develop what he called “gap
reducing actions”.[5]

Peter Drucker was a prolific strategy theorist, author of
dozens of management books, with a career spanning five decades. His
contributions to strategic management were many but two are most important.
Firstly, he stressed the importance of objectives. An organization without
clear objectives is like a ship without a rudder. As early as 1954 he was
developing a theory of management based on objectives.[6] This evolved into his
theory of management by objectives (MBO). According to Drucker, the procedure
of setting objectives and monitoring your progress towards them should permeate
the entire organization, top to bottom. His other seminal contribution was in
predicting the importance of what today we would call intellectual capital. He
predicted the rise of what he called the “knowledge worker” and explained the
consequences of this for management. He said that knowledge work is
non-hierarchical. Work would be carried out in teams with the person most
knowledgeable in the task at hand being the temporary leader.

In 1985, Ellen-Earle Chaffee summarized what she thought
were the main elements of strategic management theory by the 1970s:[7]

             Strategic
management involves adapting the organization to its business environment.

             Strategic
management is fluid and complex. Change creates novel combinations of
circumstances requiring unstructured non-repetitive responses.

             Strategic
management affects the entire organization by providing direction.

             Strategic
management involves both strategy formation (she called it content) and also
strategy implementation (she called it process).

             Strategic
management is partially planned and partially unplanned.

             Strategic
management is done at several levels: overall corporate strategy, and
individual business strategies.

             Strategic
management involves both conceptual and analytical thought processes.

Growth and portfolio theory

In the 1970s much of strategic management dealt with size,
growth, and portfolio theory. The PIMS study was a long term study, started in
the 1960s and lasted for 19 years, that attempted to understand the Profit
Impact of Marketing Strategies (PIMS), particularly the effect of market share.
Started at General Electric, moved to Harvard in the early 1970s, and then
moved to the Strategic Planning Institute in the late 1970s, it now contains
decades of information on the relationship between profitability and strategy.
Their initial conclusion was unambiguous: The greater a company's market share,
the greater will be their rate of profit. The high market share provides volume
and economies of scale. It also provides experience and learning curve advantages.
The combined effect is increased profits.[8] The studies conclusions continue
to be drawn on by academics and companies today: "PIMS provides compelling
quantitative evidence as to which business strategies work and don't work"
- Tom Peters.

The benefits of high market share naturally lead to an
interest in growth strategies. The relative advantages of horizontal
integration, vertical integration, diversification, franchises, mergers and
acquisitions, joint ventures, and organic growth were discussed. The most
appropriate market dominance strategies were assessed given the competitive and
regulatory environment.

There was also research that indicated that a low market
share strategy could also be very profitable. Schumacher (1973),[9] Woo and
Cooper (1982),[10] Levenson (1984),[11] and later Traverso (2002)[12] showed
how smaller niche players obtained very high returns.

By the early 1980s the paradoxical conclusion was that high
market share and low market share companies were often very profitable but most
of the companies in between were not. This was sometimes called the “hole in
the middle” problem. This anomaly would be explained by Michael Porter in the
1980s.

The management of diversified organizations required new
techniques and new ways of thinking. The first CEO to address the problem of a
multi-divisional company was Alfred Sloan at General Motors. GM was
decentralized into semi-autonomous “strategic business units” (SBU's), but with
centralized support functions.

One of the most valuable concepts in the strategic
management of multi-divisional companies was portfolio theory. In the previous
decade Harry Markowitz and other financial theorists developed the theory of
portfolio analysis. It was concluded that a broad portfolio of financial assets
could reduce specific risk. In the 1970s marketers extended the theory to
product portfolio decisions and managerial strategists extended it to operating
division portfolios. Each of a company’s operating divisions were seen as an
element in the corporate portfolio. Each operating division (also called
strategic business units) was treated as a semi-independent profit center with
its own revenues, costs, objectives, and strategies. Several techniques were
developed to analyze the relationships between elements in a portfolio. B.C.G.
Analysis, for example, was developed by the Boston Consulting Group in the
early 1970s. This was the theory that gave us the wonderful image of a CEO
sitting on a stool milking a cash cow. Shortly after that the G.E. multi factoral
model was developed by General Electric. Companies continued to diversify until
the 1980s when it was realized that in many cases a portfolio of operating
divisions was worth more as separate completely independent companies.

The marketing revolution

The 1970s also saw the rise of the marketing oriented firm.
From the beginnings of capitalism it was assumed that the key requirement of
business success was a product of high technical quality. If you produced a
product that worked well and was durable, it was assumed you would have no
difficulty selling them at a profit. This was called the production orientation
and it was generally true that good products could be sold without effort,
encapsulated in the saying "Build a better mousetrap and the world will
beat a path to your door." This was largely due to the growing numbers of
affluent and middle class people that capitalism had created. But after the
untapped demand caused by the second world war was saturated in the 1950s it
became obvious that products were not selling as easily as they had been. The
answer was to concentrate on selling. The 1950s and 1960s is known as the sales
era and the guiding philosophy of business of the time is today called the
sales orientation. In the early 1970s Theodore Levitt and others at Harvard
argued that the sales orientation had things backward. They claimed that
instead of producing products then trying to sell them to the customer,
businesses should start with the customer, find out what they wanted, and then produce
it for them. The customer became the driving force behind all strategic
business decisions. This marketing orientation, in the decades since its
introduction, has been reformulated and repackaged under numerous names
including customer orientation, marketing philosophy, customer intimacy,
customer focus, customer driven, and market focused.

The Japanese challenge

By the late 70s people had started to notice how successful
Japanese industry had become. In industry after industry, including steel,
watches, ship building, cameras, autos, and electronics, the Japanese were
surpassing American and European companies. Westerners wanted to know why.
Numerous theories purported to explain the Japanese success including:

             Higher
employee morale, dedication, and loyalty;

             Lower
cost structure, including wages;

             Effective
government industrial policy;

             Modernization
after WWII leading to high capital intensity and productivity;

             Economies
of scale associated with increased exporting;

             Relatively
low value of the Yen leading to low interest rates and capital costs, low
dividend expectations, and inexpensive exports;

             Superior
quality control techniques such as Total Quality Management and other systems
introduced by W. Edwards Deming in the 1950s and 60s.[13]

Although there was some truth to all these potential
explanations, there was clearly something missing. In fact by 1980 the Japanese
cost structure was higher than the American. And post WWII reconstruction was
nearly 40 years in the past. The first management theorist to suggest an
explanation was Richard Pascale.

In 1981 Richard Pascale and Anthony Athos in The Art of
Japanese Management claimed that the main reason for Japanese success was their
superior management techniques.[14] They divided management into 7 aspects
(which are also known as McKinsey 7S Framework): Strategy, Structure, Systems,
Skills, Staff, Style, and Supraordinate goals (which we would now call shared
values). The first three of the 7 S's were called hard factors and this is where
American companies excelled. The remaining four factors (skills, staff, style,
and shared values) were called soft factors and were not well understood by
American businesses of the time (for details on the role of soft and hard
factors see Wickens P.D. 1995.) Americans did not yet place great value on
corporate culture, shared values and beliefs, and social cohesion in the
workplace. In Japan the task of management was seen as managing the whole
complex of human needs, economic, social, psychological, and spiritual. In
America work was seen as something that was separate from the rest of one's
life. It was quite common for Americans to exhibit a very different personality
at work compared to the rest of their lives. Pascale also highlighted the difference
between decision making styles; hierarchical in America, and consensus in
Japan. He also claimed that American business lacked long term vision,
preferring instead to apply management fads and theories in a piecemeal
fashion.

One year later The Mind of the Strategist was released in
America by Kenichi Ohmae, the head of McKinsey & Co.'s Tokyo office.[15]
(It was originally published in Japan in 1975.) He claimed that strategy in
America was too analytical. Strategy should be a creative art: It is a frame of
mind that requires intuition and intellectual flexibility. He claimed that
Americans constrained their strategic options by thinking in terms of
analytical techniques, rote formula, and step-by-step processes. He compared
the culture of Japan in which vagueness, ambiguity, and tentative decisions
were acceptable, to American culture that valued fast decisions.

Also in 1982 Tom Peters and Robert Waterman released a study
that would respond to the Japanese challenge head on.[16] Peters and Waterman,
who had several years earlier collaborated with Pascale and Athos at McKinsey
& Co. asked “What makes an excellent company?”. They looked at 62 companies
that they thought were fairly successful. Each was subject to six performance
criteria. To be classified as an excellent company, it had to be above the 50th
percentile in 4 of the 6 performance metrics for 20 consecutive years.
Forty-three companies passed the test. They then studied these successful
companies and interviewed key executives. They concluded in In Search of
Excellence that there were 8 keys to excellence that were shared by all 43
firms. They are:

             A bias
for action — Do it. Try it. Don’t waste time studying it with multiple reports
and committees.

             Customer
focus — Get close to the customer. Know your customer.

             Entrepreneurship
— Even big companies act and think small by giving people the authority to take
initiatives.

             Productivity
through people — Treat your people with respect and they will reward you with
productivity.

             Value-oriented
CEOs — The CEO should actively propagate corporate values throughout the
organization.

             Stick to
the knitting — Do what you know well.

             Keep
things simple and lean — Complexity encourages waste and confusion.

             Simultaneously
centralized and decentralized — Have tight centralized control while also
allowing maximum individual autonomy.

The basic blueprint on how to compete against the Japanese
had been drawn. But as J.E. Rehfeld (1994) explains it is not a straight
forward task due to differences in culture.[17] A certain type of alchemy was
required to transform knowledge from various cultures into a management style
that allows a specific company to compete in a globally diverse world. He says,
for example, that Japanese style kaizen (continuous improvement) techniques,
although suitable for people socialized in Japanese culture, have not been
successful when implemented in the U.S. unless they are modified significantly.

Gaining competitive advantage

The Japanese challenge shook the confidence of the western
business elite, but detailed comparisons of the two management styles and
examinations of successful businesses convinced westerners that they could
overcome the challenge. The 1980s and early 1990s saw a plethora of theories
explaining exactly how this could be done. They cannot all be detailed here,
but some of the more important strategic advances of the decade are explained
below.

Gary Hamel and C. K. Prahalad declared that strategy needs
to be more active and interactive; less “arm-chair planning” was needed. They
introduced terms like strategic intent and strategic architecture.[18][19]
Their most well known advance was the idea of core competency. They showed how
important it was to know the one or two key things that your company does better
than the competition.[20]

Active strategic management required active information
gathering and active problem solving. In the early days of Hewlett-Packard
(H-P), Dave Packard and Bill Hewlett devised an active management style that
they called Management By Walking Around (MBWA). Senior H-P managers were
seldom at their desks. They spent most of their days visiting employees,
customers, and suppliers. This direct contact with key people provided them
with a solid grounding from which viable strategies could be crafted. The MBWA
concept was popularized in 1985 by a book by Tom Peters and Nancy Austin.[21]
Japanese managers employ a similar system, which originated at Honda, and is
sometimes called the 3 G's (Genba, Genbutsu, and Genjitsu, which translate into
“actual place”, “actual thing”, and “actual situation”).

Probably the most influential strategist of the decade was
Michael Porter. He introduced many new concepts including; 5 forces analysis,
generic strategies, the value chain, strategic groups, and clusters. In 5
forces analysis he identifies the forces that shape a firm's strategic
environment. It is like a SWOT analysis with structure and purpose. It shows
how a firm can use these forces to obtain a sustainable competitive advantage.
Porter modifies Chandler's dictum about structure following strategy by
introducing a second level of structure: Organizational structure follows
strategy, which in turn follows industry structure. Porter's generic strategies
detail the interaction between cost minimization strategies, product
differentiation strategies, and market focus strategies. Although he did not
introduce these terms, he showed the importance of choosing one of them rather
than trying to position your company between them. He also challenged managers
to see their industry in terms of a value chain. A firm will be successful only
to the extent that it contributes to the industry's value chain. This forced
management to look at its operations from the customer's point of view. Every
operation should be examined in terms of what value it adds in the eyes of the
final customer.

In 1993, John Kay took the idea of the value chain to a
financial level claiming “ Adding value is the central purpose of business
activity”, where adding value is defined as the difference between the market
value of outputs and the cost of inputs including capital, all divided by the
firm's net output. Borrowing from Gary Hamel and Michael Porter, Kay claims
that the role of strategic management is to identify your core competencies,
and then assemble a collection of assets that will increase value added and
provide a competitive advantage. He claims that there are 3 types of
capabilities that can do this; innovation, reputation, and organizational
structure.

The 1980s also saw the widespread acceptance of positioning
theory. Although the theory originated with Jack Trout in 1969, it didn’t gain
wide acceptance until Al Ries and Jack Trout wrote their classic book
“Positioning: The Battle For Your Mind” (1979). The basic premise is that a
strategy should not be judged by internal company factors but by the way
customers see it relative to the competition. Crafting and implementing a
strategy involves creating a position in the mind of the collective consumer.
Several techniques were applied to positioning theory, some newly invented but
most borrowed from other disciplines. Perceptual mapping for example, creates
visual displays of the relationships between positions. Multidimensional
scaling, discriminant analysis, factor analysis, and conjoint analysis are
mathematical techniques used to determine the most relevant characteristics
(called dimensions or factors) upon which positions should be based. Preference
regression can be used to determine vectors of ideal positions and cluster
analysis can identify clusters of positions.

Others felt that internal company resources were the key. In
1992, Jay Barney, for example, saw strategy as assembling the optimum mix of
resources, including human, technology, and suppliers, and then configure them
in unique and sustainable ways.[22]

Michael Hammer and James Champy felt that these resources
needed to be restructured.[23] This process, that they labeled reengineering,
involved organizing a firm's assets around whole processes rather than tasks.
In this way a team of people saw a project through, from inception to
completion. This avoided functional silos where isolated departments seldom
talked to each other. It also eliminated waste due to functional overlap and
interdepartmental communications.

In 1989 Richard Lester and the researchers at the MIT
Industrial Performance Center identified seven best practices and concluded
that firms must accelerate the shift away from the mass production of low cost
standardized products. The seven areas of best practice were:[24]

             Simultaneous
continuous improvement in cost, quality, service, and product innovation

             Breaking
down organizational barriers between departments

             Eliminating
layers of management creating flatter organizational hierarchies.

             Closer
relationships with customers and suppliers

             Intelligent
use of new technology

             Global
focus

             Improving
human resource skills

The search for “best practices” is also called
benchmarking.[25] This involves determining where you need to improve, finding
an organization that is exceptional in this area, then studying the company and
applying its best practices in your firm.

A large group of theorists felt the area where western
business was most lacking was product quality. People like W. Edwards
Deming,[26] Joseph M. Juran,[27] A. Kearney,[28] Philip Crosby,[29] and Armand
Feignbaum[30] suggested quality improvement techniques like Total Quality
Management (TQM), continuous improvement, lean manufacturing, Six Sigma, and
Return on Quality (ROQ).

An equally large group of theorists felt that poor customer
service was the problem. People like James Heskett (1988),[31] Earl Sasser
(1995), William Davidow,[32] Len Schlesinger,[33] A. Paraurgman (1988), Len
Berry,[34] Jane Kingman-Brundage,[35] Christopher Hart, and Christopher
Lovelock (1994), gave us fishbone diagramming, service charting, Total Customer
Service (TCS), the service profit chain, service gaps analysis, the service
encounter, strategic service vision, service mapping, and service teams. Their
underlying assumption was that there is no better source of competitive
advantage than a continuous stream of delighted customers.

Process management uses some of the techniques from product
quality management and some of the techniques from customer service management.
It looks at an activity as a sequential process. The objective is to find
inefficiencies and make the process more effective. Although the procedures
have a long history, dating back to Taylorism, the scope of their applicability
has been greatly widened, leaving no aspect of the firm free from potential
process improvements. Because of the broad applicability of process management
techniques, they can be used as a basis for competitive advantage.

Some realized that businesses were spending much more on
acquiring new customers than on retaining current ones. Carl Sewell,[36]
Frederick Reicheld,[37] C. Gronroos,[38] and Earl Sasser[39] showed us how a
competitive advantage could be found in ensuring that customers returned again
and again. This has come to be known as the loyalty effect after Reicheld's
book of the same name in which he broadens the concept to include employee
loyalty, supplier loyalty, distributor loyalty, and shareholder loyalty. They
also developed techniques for estimating the lifetime value of a loyal
customer, called customer lifetime value (CLV). A significant movement started
that attempted to recast selling and marketing techniques into a long term
endeavor that created a sustained relationship with customers (called
relationship selling, relationship marketing, and customer relationship
management). Customer relationship management (CRM) software (and its many
variants) became an integral tool that sustained this trend.

James Gilmore and Joseph Pine found competitive advantage in
mass customization.[40] Flexible manufacturing techniques allowed businesses to
individualize products for each customer without losing economies of scale.
This effectively turned the product into a service. They also realized that if
a service is mass customized by creating a “performance” for each individual
client, that service would be transformed into an “experience”. Their book, The
Experience Economy,[41] along with the work of Bernd Schmitt convinced many to
see service provision as a form of theatre. This school of thought is sometimes
referred to as customer experience management (CEM).

Like Peters and Waterman a decade earlier, James Collins and
Jerry Porras spent years conducting empirical research on what makes great
companies. Six years of research uncovered a key underlying principle behind
the 19 successful companies that they studied: They all encourage and preserve
a core ideology that nurtures the company. Even though strategy and tactics
change daily, the companies, nevertheless, were able to maintain a core set of
values. These core values encourage employees to build an organization that
lasts. In Built To Last (1994) they claim that short term profit goals, cost
cutting, and restructuring will not stimulate dedicated employees to build a
great company that will endure.[42] In 2000 Collins coined the term “built to
flip” to describe the prevailing business attitudes in Silicon Valley. It
describes a business culture where technological change inhibits a long term
focus. He also popularized the concept of the BHAG (Big Hairy Audacious Goal).

Arie de Geus (1997) undertook a similar study and obtained
similar results. He identified four key traits of companies that had prospered
for 50 years or more. They are:

             Sensitivity
to the business environment — the ability to learn and adjust

             Cohesion
and identity — the ability to build a community with personality, vision, and
purpose

             Tolerance
and decentralization — the ability to build relationships

             Conservative
financing

A company with these key characteristics he called a living
company because it is able to perpetuate itself. If a company emphasizes
knowledge rather than finance, and sees itself as an ongoing community of human
beings, it has the potential to become great and endure for decades. Such an
organization is an organic entity capable of learning (he called it a “learning
organization”) and capable of creating its own processes, goals, and persona.

The military theorists

In the 1980s some business strategists realized that there
was a vast knowledge base stretching back thousands of years that they had
barely examined. They turned to military strategy for guidance. Military
strategy books such as The Art of War by Sun Tzu, On War by von Clausewitz, and
The Red Book by Mao Zedong became instant business classics. From Sun Tzu they
learned the tactical side of military strategy and specific tactical
prescriptions. From Von Clausewitz they learned the dynamic and unpredictable
nature of military strategy. From Mao Zedong they learned the principles of
guerrilla warfare. The main marketing warfare books were:

             Business
War Games by Barrie James, 1984

             Marketing
Warfare by Al Ries and Jack Trout, 1986

             Leadership
Secrets of Attila the Hun by Wess Roberts, 1987

Philip Kotler was a well-known proponent of marketing
warfare strategy.

There were generally thought to be four types of business
warfare theories. They are:

             Offensive
marketing warfare strategies

             Defensive
marketing warfare strategies

             Flanking
marketing warfare strategies

             Guerrilla
marketing warfare strategies

The marketing warfare literature also examined leadership
and motivation, intelligence gathering, types of marketing weapons, logistics,
and communications.

By the turn of the century marketing warfare strategies had
gone out of favour. It was felt that they were limiting. There were many
situations in which non-confrontational approaches were more appropriate. The
“Strategy of the Dolphin” was developed in the mid 1990s to give guidance as to
when to use aggressive strategies and when to use passive strategies. A variety
of aggressiveness strategies were developed.

In 1993, J. Moore used a similar metaphor.[43] Instead of
using military terms, he created an ecological theory of predators and prey
(see ecological model of competition), a sort of Darwinian management strategy
in which market interactions mimic long term ecological stability.

Strategic change

In 1970, Alvin Toffler in Future Shock described a trend
towards accelerating rates of change.[44] He illustrated how social and
technological norms had shorter lifespans with each generation, and he
questioned society's ability to cope with the resulting turmoil and anxiety. In
past generations periods of change were always punctuated with times of
stability. This allowed society to assimilate the change and deal with it
before the next change arrived. But these periods of stability are getting
shorter and by the late 20th century had all but disappeared. In 1980 in The
Third Wave, Toffler characterized this shift to relentless change as the
defining feature of the third phase of civilization (the first two phases being
the agricultural and industrial waves).[45] He claimed that the dawn of this
new phase will cause great anxiety for those that grew up in the previous
phases, and will cause much conflict and opportunity in the business world.
Hundreds of authors, particularly since the early 1990s, have attempted to
explain what this means for business strategy.

In 1997, Watts Waker and Jim Taylor called this upheaval a
"500 year delta."[46] They claimed these major upheavals occur every
5 centuries. They said we are currently making the transition from the “Age of
Reason” to a new chaotic Age of Access. Jeremy Rifkin (2000) popularized and expanded
this term, “age of access” three years later in his book of the same name.[47]

In 1968, Peter Drucker (1969) coined the phrase Age of
Discontinuity to describe the way change forces disruptions into the continuity
of our lives.[48] In an age of continuity attempts to predict the future by
extrapolating from the past can be somewhat accurate. But according to Drucker,
we are now in an age of discontinuity and extrapolating from the past is
hopelessly ineffective. We cannot assume that trends that exist today will
continue into the future. He identifies four sources of discontinuity: new
technologies, globalization, cultural pluralism, and knowledge capital.

In 2000, Gary Hamel discussed strategic decay, the notion
that the value of all strategies, no matter how brilliant, decays over
time.[49]

In 1978, Dereck Abell (Abell, D. 1978) described strategic
windows and stressed the importance of the timing (both entrance and exit) of
any given strategy. This has led some strategic planners to build planned obsolescence
into their strategies.[50]

In 1989, Charles Handy identified two types of change.[51]
Strategic drift is a gradual change that occurs so subtly that it is not
noticed until it is too late. By contrast, transformational change is sudden
and radical. It is typically caused by discontinuities (or exogenous shocks) in
the business environment. The point where a new trend is initiated is called a
strategic inflection point by Andy Grove. Inflection points can be subtle or
radical.

In 2000, Malcolm Gladwell discussed the importance of the
tipping point, that point where a trend or fad acquires critical mass and takes
off.[52]

In 1983, Noel Tichy recognized that because we are all
beings of habit we tend to repeat what we are comfortable with.[53] He wrote
that this is a trap that constrains our creativity, prevents us from exploring
new ideas, and hampers our dealing with the full complexity of new issues. He
developed a systematic method of dealing with change that involved looking at
any new issue from three angles: technical and production, political and
resource allocation, and corporate culture.

In 1990, Richard Pascale (Pascale, R. 1990) wrote that
relentless change requires that businesses continuously reinvent
themselves.[54] His famous maxim is “Nothing fails like success” by which he
means that what was a strength yesterday becomes the root of weakness today, We
tend to depend on what worked yesterday and refuse to let go of what worked so
well for us in the past. Prevailing strategies become self-confirming. In order
to avoid this trap, businesses must stimulate a spirit of inquiry and healthy
debate. They must encourage a creative process of self renewal based on
constructive conflict.

In 1996, Art Kleiner (1996) claimed that to foster a corporate
culture that embraces change, you have to hire the right people; heretics,
heroes, outlaws, and visionaries[55]. The conservative bureaucrat that made
such a good middle manager in yesterday’s hierarchical organizations is of
little use today. A decade earlier Peters and Austin (1985) had stressed the
importance of nurturing champions and heroes. They said we have a tendency to
dismiss new ideas, so to overcome this, we should support those few people in
the organization that have the courage to put their career and reputation on
the line for an unproven idea.

In 1996, Adrian Slywotsky showed how changes in the business
environment are reflected in value migrations between industries, between
companies, and within companies.[56] He claimed that recognizing the patterns
behind these value migrations is necessary if we wish to understand the world
of chaotic change. In “Profit Patterns” (1999) he described businesses as being
in a state of strategic anticipation as they try to spot emerging patterns.
Slywotsky and his team identified 30 patterns that have transformed industry
after industry.[57]

In 1997, Clayton Christensen (1997) took the position that
great companies can fail precisely because they do everything right since the
capabilities of the organization also defines its disabilities.[58]
Christensen's thesis is that outstanding companies lose their market leadership
when confronted with disruptive technology. He called the approach to
discovering the emerging markets for disruptive technologies agnostic
marketing, i.e., marketing under the implicit assumption that no one - not the
company, not the customers - can know how or in what quantities a disruptive
product can or will be used before they have experience using it.

A number of strategists use scenario planning techniques to
deal with change. Kees van der Heijden (1996), for example, says that change
and uncertainty make “optimum strategy” determination impossible. We have
neither the time nor the information required for such a calculation. The best
we can hope for is what he calls “the most skillful process”.[59] The way Peter
Schwartz put it in 1991 is that strategic outcomes cannot be known in advance
so the sources of competitive advantage cannot be predetermined.[60] The fast
changing business environment is too uncertain for us to find sustainable value
in formulas of excellence or competitive advantage. Instead, scenario planning
is a technique in which multiple outcomes can be developed, their implications
assessed, and their likeliness of occurrence evaluated. According to Pierre
Wack, scenario planning is about insight, complexity, and subtlety, not about
formal analysis and numbers.[61]

In 1988, Henry Mintzberg looked at the changing world around
him and decided it was time to reexamine how strategic management was
done.[62][63] He examined the strategic process and concluded it was much more
fluid and unpredictable than people had thought. Because of this, he could not
point to one process that could be called strategic planning. Instead he
concludes that there are five types of strategies. They are:

             Strategy
as plan - a direction, guide, course of action - intention rather than actual

             Strategy
as ploy - a maneuver intended to outwit a competitor

             Strategy
as pattern - a consistent pattern of past behaviour - realized rather than
intended

             Strategy
as position - locating of brands, products, or companies within the conceptual
framework of consumers or other stakeholders - strategy determined primarily by
factors outside the firm

             Strategy
as perspective - strategy determined primarily by a master strategist

In 1998, Mintzberg developed these five types of management
strategy into 10 “schools of thought”. These 10 schools are grouped into three
categories. The first group is prescriptive or normative. It consists of the
informal design and conception school, the formal planning school, and the
analytical positioning school. The second group, consisting of six schools, is
more concerned with how strategic management is actually done, rather than
prescribing optimal plans or positions. The six schools are the
entrepreneurial, visionary, or great leader school, the cognitive or mental
process school, the learning, adaptive, or emergent process school, the power
or negotiation school, the corporate culture or collective process school, and
the business environment or reactive school. The third and final group consists
of one school, the configuration or transformation school, an hybrid of the
other schools organized into stages, organizational life cycles, or
“episodes”.[64]

In 1999, Constantinos Markides also wanted to reexamine the
nature of strategic planning itself.[65] He describes strategy formation and
implementation as an on-going, never-ending, integrated process requiring
continuous reassessment and reformation. Strategic management is planned and
emergent, dynamic, and interactive. J. Moncrieff (1999) also stresses strategy
dynamics.[66] He recognized that strategy is partially deliberate and partially
unplanned. The unplanned element comes from two sources: emergent strategies
(result from the emergence of opportunities and threats in the environment) and
Strategies in action (ad hoc actions by many people from all parts of the
organization).

Some business planners are starting to use a complexity
theory approach to strategy. Complexity can be thought of as chaos with a dash
of order. Chaos theory deals with turbulent systems that rapidly become
disordered. Complexity is not quite so unpredictable. It involves multiple
agents interacting in such a way that a glimpse of structure may appear.
Axelrod, R.,[67] Holland, J.,[68] and Kelly, S. and Allison, M.A.,[69] call
these systems of multiple actions and reactions complex adaptive systems.
Axelrod asserts that rather than fear complexity, business should harness it.
He says this can best be done when “there are many participants, numerous
interactions, much trial and error learning, and abundant attempts to imitate
each others' successes”. In 2000, E. Dudik wrote that an organization must
develop a mechanism for understanding the source and level of complexity it
will face in the future and then transform itself into a complex adaptive
system in order to deal with it.[70]

Information and technology driven strategy

Peter Drucker had theorized the rise of the “knowledge
worker” back in the 1950s. He described how fewer workers would be doing
physical labour, and more would be applying their minds. In 1984, John Nesbitt
theorized that the future would be driven largely by information: companies
that managed information well could obtain an advantage, however the
profitability of what he calls the “information float” (information that the
company had and others desired) would all but disappear as inexpensive
computers made information more accessible.

Daniel Bell (1985) examined the sociological consequences of
information technology, while Gloria Schuck and Shoshana Zuboff looked at
psychological factors.[71] Zuboff, in her five year study of eight pioneering
corporations made the important distinction between “automating technologies”
and “infomating technologies”. She studied the effect that both had on
individual workers, managers, and organizational structures. She largely
confirmed Peter Drucker's predictions three decades earlier, about the
importance of flexible decentralized structure, work teams, knowledge sharing,
and the central role of the knowledge worker. Zuboff also detected a new basis
for managerial authority, based not on position or hierarchy, but on knowledge
(also predicted by Drucker) which she called “participative management”.[72]

In 1990, Peter Senge, who had collaborated with Arie de Geus
at Dutch Shell, borrowed de Geus' notion of the learning organization, expanded
it, and popularized it. The underlying theory is that a company's ability to
gather, analyze, and use information is a necessary requirement for business
success in the information age. (See organizational learning.) In order to do
this, Senge claimed that an organization would need to be structured such that:[73]

             People
can continuously expand their capacity to learn and be productive,

             New
patterns of thinking are nurtured,

             Collective
aspirations are encouraged, and

             People
are encouraged to see the “whole picture” together.

Senge identified five components of a learning organization.
They are:

             Personal
responsibility, self reliance, and mastery — We accept that we are the masters
of our own destiny. We make decisions and live with the consequences of them.
When a problem needs to be fixed, or an opportunity exploited, we take the
initiative to learn the required skills to get it done.

             Mental
models — We need to explore our personal mental models to understand the subtle
effect they have on our behaviour.

             Shared
vision — The vision of where we want to be in the future is discussed and
communicated to all. It provides guidance and energy for the journey ahead.

             Team
learning — We learn together in teams. This involves a shift from “a spirit of
advocacy to a spirit of enquiry”.

             Systems thinking
— We look at the whole rather than the parts. This is what Senge calls the
“Fifth discipline”. It is the glue that integrates the other four into a
coherent strategy. For an alternative approach to the “learning organization”,
see Garratt, B. (1987).

Since 1990 many theorists have written on the strategic
importance of information, including J.B. Quinn,[74] J. Carlos Jarillo,[75]
D.L. Barton,[76] Manuel Castells,[77] J.P. Lieleskin,[78] Thomas Stewart,[79]
K.E. Sveiby,[80] Gilbert J. Probst,[81] and Shapiro and Varian[82] to name just
a few.

Thomas A. Stewart, for example, uses the term intellectual
capital to describe the investment an organization makes in knowledge. It is
comprised of human capital (the knowledge inside the heads of employees), customer
capital (the knowledge inside the heads of customers that decide to buy from
you), and structural capital (the knowledge that resides in the company
itself).

Manuel Castells, describes a network society characterized
by: globalization, organizations structured as a network, instability of
employment, and a social divide between those with access to information
technology and those without.

Stan Davis and Christopher Meyer (1998) have combined three
variables to define what they call the BLUR equation. The speed of change,
Internet connectivity, and intangible knowledge value, when multiplied together
yields a society's rate of BLUR. The three variables interact and reinforce
each other making this relationship highly non-linear.

Regis McKenna posits that life in the high tech information
age is what he called a “real time experience”. Events occur in real time. To
ever more demanding customers “now” is what matters. Pricing will more and more
become variable pricing changing with each transaction, often exhibiting first
degree price discrimination. Customers expect immediate service, customized to
their needs, and will be prepared to pay a premium price for it. He claimed
that the new basis for competition will be time based competition.[83]

Geoffrey Moore (1991) and R. Frank and P. Cook[84] also
detected a shift in the nature of competition. In industries with high
technology content, technical standards become established and this gives the
dominant firm a near monopoly. The same is true of networked industries in
which interoperability requires compatibility between users. An example is word
processor documents. Once a product has gained market dominance, other
products, even far superior products, cannot compete. Moore showed how firms
could attain this enviable position by using E.M. Rogers five stage adoption
process and focusing on one group of customers at a time, using each group as a
base for marketing to the next group. The most difficult step is making the
transition between visionaries and pragmatists (See Crossing the Chasm). If
successful a firm can create a bandwagon effect in which the momentum builds
and your product becomes a de facto standard.

Evans and Wurster describe how industries with a high
information component are being transformed.[85] They cite Encarta's demolition
of the Encyclopedia Britannica (whose sales have plummeted 80% since their peak
of 0 million in 1990). Many speculate that Encarta’s reign will be
short-lived, eclipsed by collaborative encyclopedias like Wikipedia that can
operate at very low marginal costs. Evans also mentions the music industry
which is desperately looking for a new business model. The upstart information
savvy firms, unburdened by cumbersome physical assets, are changing the
competitive landscape, redefining market segments, and disintermediating some
channels. One manifestation of this is personalized marketing. Information
technology allows marketers to treat each individual as its own market, a
market of one. Traditional ideas of market segments will no longer be relevant
if personalized marketing is successful.

The technology sector has provided some strategies directly.
For example, from the software development industry agile software development
provides a model for shared development processes.

Access to information systems have allowed senior managers
to take a much more comprehensive view of strategic management than ever
before. The most notable of the comprehensive systems is the balanced scorecard
approach developed in the early 1990's by Drs. Robert S. Kaplan (Harvard
Business School) and David Norton (Kaplan, R. and Norton, D. 1992). It measures
several factors financial, marketing, production, organizational development,
and new product development in order to achieve a 'balanced' perspective

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