Academy of Management Executive, 2003, Vol. 17, No.

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Miles and Snow: Enduring insights for managers

Academic Commentary by Sumantra Ghoshal

The Academy of Management Executive exists to serve as a bridge between management academics and business practitioners. In this brief commentary, I suggest that the framework Professors Raymond Miles and Charles Snow (M&S, in future references) presented in Organizational Strategy, Structure, and Process (OSSP in future references) remains even today, twenty-five years after publication, one of the most comprehensive, insightful, and useful ways for senior managers to understand and respond to the challenges they face in their own organizations. Yet, few of todays managers, I suspect, are actually familiar with this framework. So, in this commentary, I summarize what I see as the most managerially relevant arguments of the book and illustrate them with the recent experiences of one companySony. M&S induced the framework from their study of a number of mostly small, local American organizations in the 1970s. By demonstrating the power of that framework in illuminating the challenges and responses of a large, global Japanese company in the 2000s, I wish to establish the enduring and broad relevance of this seminal contribution and to generate awareness of and interest in this book among todays practitioners. The Adaptive Cycle The basic proposition in OSSP is that successful companies need to develop consistency among their strategy, the business model they adopt, including the choice of technology, and their organizational capability, including human resource practices. What is interesting is that M&S proposed this model well before the better known 7-Ss model (Strategy, Structure, Systems, Staff, Skills, Style and Shared values) was published by Richard Pascale and Anthony Athos (1981) in their famous book The Art of Japanese Management, and by Tom Peters and Robert H. Waterman (1982) in their even more famous In Search of Excellence.1 Also, the basic framing of the problem in OSSP is
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not a static analysis of fit but rather the dynamic problem of adaptation. How do organizations adapt to changing environments? Why do adaptive failures occur? These were the starting questions for M&S.

How do organizations adapt to changing environments? Why do adaptive failures occur? These were the starting questions for M&S.
They saw the adaptive process as consisting of three sets of problems that a company has to solve in a mutually consistent way (see Figure 1). The first is what they described as the entrepreneurial problem, focused on the choice of product-markets that the company would serve. In an established company, this choice is constrained by the existing activities of the firm: Should it remain within its historical domain, or should it venture out to exploit new opportunities that may lie outside that domain? Let me illustrate the nature of the problem through the recent experiences of Sony. In the second half of the 1990s, this much-admired Japanese consumer electronics company was facing precisely this problem in an acute way. Historically, Sony has been a producer of analogue-technologybased, stand-alone audio and video products. These markets were becoming increasingly profitstarved because of low-cost competition from Korean chaebols such as Samsung and the LG Group as well as increasing commoditization. At the same time, the market itself was changing. The evolution of digital technologies was driving a convergence between consumer electronics, information technology, and media businesses. Consumers increasingly demanded an integrated offering in which they could combine music and movie software from the Internet with their audio and video equipment, and access the entire enter-

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FIGURE 1 The Adaptive Cycle

Reproduced with permission from Figure 2.1, p. 24, of R.E. Miles and C.C. Snow, Organizational Strategy, Structure, and Process. Stanford: Stanford University Press, 2003. A Stanford Business Classic.

tainment package through their laptops, mobile phones, PDAs, or game machines. How could Sony respond to these new challenges and opportunities? It was clear to the company that the main gateway to the Internet was the personal computer and it was on the PC that this integration would occur, at least initially. Sony did not produce or market a PC. It had tried to enter the market on two earlier occasions and had failed abysmally. Sony excelled in creativityin giving customers products they could not imagine. Constrained by Wintel standards and already commoditized and subject to intense price competition, the PC was not Sony-like. M&S wrote: The entrepreneurial function remains a top-management responsibility. This is precisely what occurred at Sony. Its incoming CEO, Nobuyuki Idei, declared regeneration as the new management theme and put VAIOVideo Audio Integrated Operations (but also, symbolically, an integration of analogue technology reflected in the wave of VA and of digital technology in the IO)as

the new entrepreneurial domain of the company. He articulated a new vision of the PC, beyond an efficiency tool to an entertainment gateway, on which all of Sonys product and service offerings could be integrated. The companys successful new VAIO computers are a part of its response to the entrepreneurial problem. The second problem in the adaptation process is what M&S described as the engineering problem, involving the creation of a system which puts into actual operation managements solution to the entrepreneurial problem. In other words, the company has to select an appropriate business model including a choice of technology. Anticipating the much richer description and analysis of the problem by, among others, Clayton Christensen in his book The Innovators Dilemma,2 M&S highlighted the tensions that are created because of potential conflicts between the business model necessary for successfully implementing an innovation and the companys existing business model. Once again, let me illustrate this problem in the

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context of Sonys very contemporary adaptation challenge. Consider, first, the issue of technology and product design. If the VAIO personal computer had to integrate all of Sonys existing audio and video products, then it had to have a communication linkpreferably wirelesswith those products. Yet, the inclusion of any such linking device would make the stand-alone product, say a camcorder, less attractive because of the unavoidable increase in size. With miniaturization as its core competence and key source of competitive differentiation, this was a very real conflict and a key reason why Sonys divisional managers were initially extremely reluctant to proceed with the VAIO strategy. Similarly, Sonys historical product development process was also inappropriate for creating a new PC. Sony prided itself in creating breakthrough products such as the Walkman, which consumers could not imagine. Therefore, product development was purely technology and engineering driven, with little attention to customer needs. For the PC, however, such a customer-divorced approach to product development would have been disastrous. The logistics chain presented another source of conflict. PCs have a far shorter life cycle than television sets or DVD players. So, Sonys historical two-step distribution process with substantial inventories would not work in the PC business where the need was for a system that would yield close to zero inventories. Sonys resolution of the engineering problem has been remarkably close to how M&S suggested that it be solved. The company developed some completely new technological devices, including the memory stick and the iLink to create the necessary connectivity. It created a completely different product-development and logistics system for the new business. And these, as suggested by M&S, were both the causes and the consequences of the changes it had to make to the administrative systemthe third of the three components of the overall adaptation challenge. The administrative problem relates to the structure and processes of the organization: how to build the organizational arrangements necessary to efficiently implement existing activities without jeopardizing the companys ability to create new activities in response to evolving market demands. Here again, anticipating much of the subsequent elaboration, such as by Michael Tushman and Charles OReilly in their description of the ambidextrous organization,3 M&S clearly highlighted the need for organization design with these two often conflicting objectives in mind: the goal of stimulating innovations and of efficiently rational-

izing and administering the established businesses. Back to Sony. Perhaps the greatest challenge of the company lay in precisely this administrative component of the adaptation process. Historically, the Sony organization was fragmented into highly autonomous product divisions that carried full responsibility for all aspects of the business for their allocated products: from research and new product development through manufacturing and logistics to marketing and customer service. While this organization facilitated innovation within the separate product categories, it was unsuitable for managing the more integrated business envisioned by Sony CEO Idei. The solution to the problem adopted by Sony entirely matches the solution hinted at in OSSP and developed in greater detail by M&S in their subsequent work.4 Essentially, the company built a version of the network organization in which the back-end of production and logistics activities was consolidated across all the different product divisions into Sony Engineering, Manufacturing, and Customer Service (EMCS), enabling efficiency and productivity gains in the existing businesses, while the front-end units were regrouped into a set of solutions organizations that actively develop the new, integrated, network-based offerings. Categorization Based on the Adaptive Process Perhaps the most enduring and insightful contribution of M&S lies in their developing a categorization scheme for organizations based on how they respond to the adaptive challenge. In contrast to most work on strategic and organizational archetypes that tend to be grounded in static analysis of organizational snapshots, M&Ss scheme is based on a view of organizations as integrated wholes in dynamic interaction with their environments.

Perhaps the most enduring and insightful contribution of M&S lies in their developing a categorization scheme for organizations based on how they respond to the adaptive challenge.
Basically, they argued that organizations can create the coherence in their strategy, structure, and processes that is needed for effective adaptation in some distinct ways. While theoretically a very large number of different permutations and combinations of the different dimensions was pos-

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Table 1 The Four Organizational Archetypes

Defender Broad market with continuous development Broad environment scanning Growth through product and market development Acquisition to obtain new technologies Multiple markets, some stable, others changing Marketing and R&D-oriented environmental scanning Steady growth through market penetration and new business development Tendency toward a fast-follower strategy Prospector Analyzer Reactor Inarticulated or ambiguous strategy with no clear direction or prioritizing Adherence to a strategic path rendered unviable by environmental changes

Entrepreneurial Problem

Focused and narrow market segment Limited environment scanning Focus on efficiency and productivity Incremental growth through deeper market penetration within segment Some product development close to existing products Multiple technologies Low degree of routinization Technology embedded in people Dual technological core with stable and flexible components Large and influential applied research group Moderate degree of technical efficiency Matrix structure Marketing and applied research carry most influence Moderately centralized control with horizontal sharing of information Complex, multidimensional co-ordination Complex planning and multi-attribute performance management

Engineering Problem

Single core technology Investment in technology to improve efficiency Tendency toward vertical integration Product division organization Marketing and R&D carry most influence Large, diverse, and transitory top management Proliferation of task forces and project teams Decentralized control Extensive rather than intensive planning

No clear business model

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Administrative Problem

Functional organization Production and financial control carry most influence Long tenure of top management Centralized control Intensive rather than extensive planning Co-ordination through standardization and scheduling Performance measurement against own history Effective in dynamic environments, but vulnerable to low profitability and loss of focus

Organizational features not consistent with strategy Organizational features not coherent among themselves Persistence with an unsuitable strategystructure fit

Risks and Benefits

Difficult for competitors to dislodge, but major shift in market can threaten survival Unable to exploit new opportunities

Robust but needs constant review of portfolio Can be overwhelmed by internal complexity

Inability to respond effectively to market changes Poor performance, potential crisis

Summarized with permission from Figures 3-1 (p. 48), 4-1 (p. 66), and 5-1 (p. 79) of R.E. Miles and C.C. Snow, Organizational Strategy, Structure, and Process. Stanford: Stanford University Press, 2003. A Stanford Business Classic.

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sible, M&Ss field research in companies revealed only four archetypes, of which threewhich they labeled as the Defender, Prospector, and Analyzerwere stable, in the sense of being coherent and sustainable, and the fourththe Reactor was incoherent and therefore fragile. Defenders are organizations that focus on a welldefined and narrow market in which they attempt to remain competitive by constantly improving their efficiency and productivity. The parallel with Porters cost leadership strategy is clear, as with Treacy and Wiersemas category of companies that compete on operational excellence.5 Prospectors focus on constant innovations. They search for new market opportunities and tend to be highly flexible and entrepreneurial. Once again, the similarities between this category and Porters differentiation strategy and Treacy and Wiersemas product leadership strategy are striking. Analyzers are more complex organizations that combine some aspects of both Defenders and Prospectors. They operate in some businesses that are relatively stable, in which they compete on the Defenders strengths of efficiency and low cost, and others that are dynamic, in which they act like Prospectors, searching for innovations.

Analyzers are more complex organizations that combine some aspects of both Defenders and Prospectors.
Finally, Reactors are organizations that lack consistency in their strategy, structure, and processes. They are, therefore, unable to create a coherent and sustainable position for themselves and are unable to respond effectively to environmental change, unless somehow forced to do so by external influences. What is remarkable about this categorization scheme is the comprehensiveness of organizational attributesacross strategic orientation, organizational features, and management processesthat it captures (see Table 1). It is in the comprehensiveness of the scheme that the M&S framework distinguishes itself from other categorization schemes that relate primarily to the strategy of firms, with limited insights into the associated organizational attributes, such as Michael Porters generic strategies,6 or to organizational structural attributes, with limited attention to either strategy or process, as in Oliver Williamsons distinctions among F, H, M, and corrupted M forms,7 or even in schemes that span strategy and organization, such as Henry Mintzbergs or Danny Millers typologies.8

Let me once again use Sony to illustrate the virtues of this comprehensiveness. In 1995, the year Idei was elevated to the CEO position, Sony was in the midst of what is often described by company insiders as the years of darkness. Sales were flat for the entire first half of the 1990s, and profits had declined from $900 million in 1992 to $149 million in 1994. Debt, once a scant 18 per cent of capitalization, had soared to nearly 50 per cent. Most critically, Sonys celebrated innovation engine was creaking, with no new killer products other than the Playstation emerging in several years. Why did the company encounter this adaptation problem? OSSP provides a clear insight. Historically, Sony was a classic Prospector. All attributes of its strategy, structure, and processes were textbook illustrations of this approach.9 In the second half of the 1980s, Norio Ohga, then CEO of Sony, had made some sharp changes in the companys management processes. In particular, he had installed a centralized and relatively rigid budgeting and control system in an effort to achieve higher efficiencies. So, he had injected the Defenders processes into a Prospectors strategy and structure. Both internal and external analysts of Sony agree that this loss of coherence in the companys overall management system was at least in part to blame for the adaptive problems faced by Sony. The Sony envisioned by Idei is an Analyzer that will defend its position in the traditional consumer electronics businesses while simultaneously building a leadership position in the emerging integrated home entertainment market. The changes initiated by Idei almost mirror how M&S would suggest that this evolution be managed. Idei has split up the research organization, enhancing the role of applied research. He has established a more effective matrix structure, empowering geographic managers in different regions of the world to balance the historical primacy of divisional managers in Japan. He has built several mechanisms for horizontal integration across the businesses including the highly influential Sonyjuku, a cross-divisional action-learning forum that he personally facilitates. Does the framework yield any insights into what Idei has not yet done but ought to consider? Yes, it does. Sony has not yet adopted the more externally oriented, multidimensional, and flexible performance-management system that M&S saw as necessary in effective Analyzers. Perhaps we will soon see this change. There is much more in OSSP that managers can learn from: illustrations of how to apply the framework to diagnose an existing organizational con-

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figuration, including a specific heuristic for such diagnosis; descriptions of the role that external consultants can play in the process; and so on. Space limitations prevent me from providing a pre cis of all the highly practical and insightful contents of this marvelously small and tightly written book. In any case, my purpose here is merely to whet appetites; those managers who find the brief summary I have provided to be useful for thinking about their current situation are highly recommended to the original if only to see how much more nuanced the framework is than the synopsis I have provided. I would welcome any comments or questions that readers may have.

6273; Miles, R. E., & Snow, C. C. 1994. Fit, failure and the Hall of Fame: How companies succeed or fail. New York: The Free Press. 5 Porter, M. E. 1980. Competitive strategy: Techniques for analyzing industries and competitors. New York: The Free Press; Treacy, M., & Wiersema, F. 1995. The discipline of market leaders. Reading, MA: Addison Wesley. 6 Porter, 1980, op. cit. 7 Williamson, O. E. 1975. Markets and hierarchies: Analysis and antitrust implications. New York: Free Press. 8 Miller, D. 1990. The Icarus Paradox: How exceptional companies bring about their own downfall. New York: Harper Business; Mintzberg, H. 1979. The structuring of organizations: A synthesis of the research. Englewood Cliffs, NJ: Prentice-Hall. 9 For details, see Kida, T., Yamaguchi, H., & Ghoshal, S. 2002. Sony Regeneration (A and B). London: London Business School. Sumantra Ghoshal is professor of strategy and international management at the London Business School. He has published 11 books and over 60 articles. His most recent book, A Bias for Action (with Heike Bruch), will be published in 2004. He earned doctoral degrees from both MIT and Harvard and is a member of the Harvard Business Schools Committee of Overseers. Contact: sghoshal@london.edu.

Endnotes
1 Pascale, R. T., & Athos, A. G. 1981. The art of Japanese management. New York: Simon & Schuster; Peters, T. J., & Waterman, Jr., R. H. 1982. In search of excellence. New York: Harper & Row. 2 Christensen, C. M. 1997. The innovators dilemma: When new technologies cause great firms to fail. Boston: Harvard Business School Press. 3 Tushman, M. L., & OReilly, III, C. A. 1997. Winning through innovation. Boston: Harvard Business School Press. 4 Miles, R. E., & Snow, C. C. 1986. Network organizations: New concepts for new forms. California Management Review, 28:

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