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9/21/2012
The Problem
2
Strategy Formulation
Water-tight
compartmentalization
between
assumptions about the external environment, the specific mission and the
core competencies.
The difference between successful and unsuccessful companies is the difference between valid and not so valid theories of businesses.
Valid theories of business must pass the following tests: 1. They must fit reality 2. They must fit one another 3. They must be communicated throughout the organization, and 4. They must be tested constantly.
INDIAN INSTITUTE OF MANAGEMENT RAIPUR 9/21/2012
The Framework
t=1 C1 C2 C3 C4 t=0 C1 O2 C2 O3 C3 O4 C4 O5 C5 O5 O4 O3 O2 t=0 O1 t=1 O1
O6
O7 IMPLEMENTATION GAP FORMULATION GAP
The Framework
5
(Prahalad).
There need not be a strict one-is-to-one correspondence between competencies and opportunities (3M and Sony).
Between the two, the opportunity vector is likely to change first. Competencies tend to be more sticky to the stable states (Rent Seeking Behavior).
Once the Opportunity vector changes, there will have to be changes in the competence vector, which will involve either dropping of competencies or creating new competencies (Strategic alliances; Joint ventures; Mergers and acquisitions).
INDIAN INSTITUTE OF MANAGEMENT RAIPUR 9/21/2012
Mintzberg identifies three fallacies that lead to inappropriate formulation: The fallacy of prediction:
not recognizing environmental changes acting on the wrong uncertainty level assumption of the core competencies do not fit reality, the typical, it can never happen to us reaction this is our business, let us stick to it assumption that numbers are sacrosanct wrong assumptions of specific mission
INDIAN INSTITUTE OF MANAGEMENT RAIPUR 9/21/2012
Competency-mission gap Competency-environment gap Mission-environment gap 1. Organization structure and relationships 2. Organizational processes and behavior 3. Role of leadership
Barriers to Implementation
Strategy Stoppers
1. 2. 3. 4. 5.
Strategy Stoppers
8
Structure:
Systems:
Strategy Stoppers
9
Culture:
These are the systems and values that are embedded in the fabric of the organization and are not easily amenable to change.
The three levels of culture (universal, collective and individual) can have different implications so far as the implementation of strategy is concerned, and can raise different level of resistance.
Ethics:
It is the practice of moral principles, and these moral principles depend on values. It is important to realize that these values are a vector: they have direction and intensity.
Ethical constraints encompass all organizations, especially as ethics are not defined at the organizational level, and then to be more individual specific.
9/21/2012
Strategy Stoppers
10
Leadership:
1.
2.
3.
Communication: Visions and strategies need to be communicated. The communication must result in a two-way negotiation..
Empowering: Every leader needs to stress that the organizations bigger than him. Thus succession planning becomes an important function for any leaders.
INDIAN INSTITUTE OF MANAGEMENT RAIPUR 9/21/2012
4.
The Integration
11
For strategy to success there has to be both successful formulation and successful implementation. To minimize the risk of formulation failure: Organization needs to minimize the gap between the assumption and reality To minimize the risk of implementation failure: Organization needs to minimize the gap between the different components of environment, specific mission, and core competency
9/21/2012