Strategies for a New Millennium

OUTLINE

• The New Environment of Business

• Strategic Management Practice

• Management Thinking

• Knowledge and Learning

• New Organizational Forms

 Directions in Strategic Management
Practice

Key trends of the 1990s : Outcomes :

•Quest for shareholder value •Cost cutting : Shift to
•Adjusting to turbulence dynamic sources of
efficiency
•Refocusing on
performance
management and
performance incentives

Major influences on strategy :

•Resources, capabilities, and “core competences”
•Dynamic aspects of competition ---game theory, Schumpetarian
competition
•Competitive advantage through networks, standard, & bandwagons
•Modern financial analysis---shareholder value, economic profit, option
theory
 New Directions in Strategic Thinking

BEYOND DOWNSIZING
•Gains from cost cutting and downsizing largely
exhausted
•Need to access new sources of profitability

IMPLICATIONS :
•Emphasis on more complex sources of competitive
advantage requires development of architectural
or meta capabilities
•Emphasis on learning
•Need for new organizational forms e.g. interest
in self-organization
 Knowledge Management and the
Knowledge-Based View of the Firm
KNOWLEDGE UTILIZATION
• Need to identify knowledge with the firm ---- role of
knowledge audits, competency modeling, knowledge
libraries, identification of best practices
• Need to transfer knowledge
– Critical distinction between tacit and explicit knowledge
– Need to transform tacit into explicit knowledge
– Design of organization structure to optimize knowledge
use location of knowledge and decision
making; knowledge integration through teams; modular
structures
– KNOWLEDGE CREATION
• Traditional view knowledge created through research
• Nonaka Knowledge creation through knowledge
conversion (explicit tacit; individual firm
 New Organizational Forms
Process-based organizations Organizing around business
processes
Recognizing corporate
processes
- entrepreneurial process
- competence building process
- renewal process

Project-based organization engineering cos., consulting

cos., also manufacturing cos. e.g.
Oticon

Parallel structures separate structures of separate

management processes e.g. 3M,
TQM, change management process

Network and Virtual Organization the boundaryless corporation e.g.

Sun Microsystems, Cisco
Systems, Italian clothing
manufacturers
 New Models of Leadership

THE REQUIRED
THE LEADERSHIP NEEDS COMPETENCIES OF
OF ORGANIZATIONS BUSINESS LEADERS

The ability to: • business literacy

• build confidence • creativity
• build enthusiasm • cross-cultural
• cooperate effectiveness
• deliver results • empathy
• form networks • flexibility
• influence others • proactivity
• use information • problem-solving
• relation-building
• teamwork
• vision
 New Environment & Strategic
Change
Why are many companies surprised by changes
in their industry environments?

• Key premise is that all business environments

are in a state of change.
• Many managers are unable to see industry
changes or to appreciate the impact of those
changes on their industry.
 Factors that Contribute to Lack of
Responsiveness
• Managerial thinking and environmental
change.
– Managers fail to anticipate or adequately
respond to change for three reasons:
• They simply fail to notice the changes.
• Managers can be aware of changes, but they fail to
interpret these changes correctly.
• Even if some managers notice the changes and they
interpret them correctly, they might still fail to adopt
an appropriate course of action.
 Factors that Contribute to Lack of
Responsiveness
• The problem of noticing.

• Interpretation of data.

• Limits in organizational action.

Factors that Contribute to Lack of
Responsiveness
– Failures in organizational learning also limit
organizational adaptation and change.

– Firms that only use lower-level learning are

vulnerable to being blindsided by new rivals,
technologies, and products.
Factors that Contribute to Lack of
Responsiveness
– Lower-level learning
• Characterized by improvements in or refinements of
existing beliefs, understandings, and organizational
processes.

– Higher-level learning
• Developing totally new beliefs, understandings, and
organizational processes.
 Factors that Contribute to Lack of
Responsiveness
• Without higher-level learning, firms can fall
into “competency traps.”
– Unfortunately, most firms allocate more
resources to lower-level learning.
 Factors that Contribute to Lack of
Responsiveness
• Two factors influence the extent of higher-
level learning:
– Higher-level learning is most likely to result
from problemistic search.
– Second factor which is important to success of
higher-level learning is absorptive capacity.
 Factors that Contribute to Lack of
Responsiveness
• Organizations can overcome the dangers of
like-minded thinking in at least two ways.
– Give greater attention to “contrarian voices.”
– Encourage greater turnover among top
management ranks.
 Factors that Contribute to Lack of
Responsiveness
• Power of industry influences in limiting
organizational change.
– Industry norms and standards (the so-called
“common body of knowledge”) can blind
managers to new opportunities, technologies,
and potential competitors.
 Factors that Contribute to Lack of
Responsiveness
• Summary: 4 factors can limit responsiveness of
managers to industry changes:
– Problems associated with noticing, interpreting, and
responding to changes.
– Tendency for managers to emphasize low-level
learning over high-level learning.
– Tendency for organizational hiring and promotion
practices to foster homogeneity in managerial
thinking.
– Power of institutionalized industry practices.
 Strategic Planning Processes

• Advantages of strategic planning:

– Allow firms to determine what needs to be
done now to maximize future performance.
– Provide opportunities for managers to question
basic assumptions underlying their firms’
strategies.
 Strategic Planning Processes
• Problems or limitations associated with
strategic planning.
– Planning often fails to acknowledge the
emerging nature of much strategic activity.
– Too often planning relies on regression-based
forecasting procedures which merely extend
present trends into the future.
– Strategic planning process typically produces
“point estimates” rather than a range of possible
outcomes.
 Strategic Planning Processes
(cont.)
• Planning data are often used -- incorrectly --
for evaluating the performance of
management personnel.
– Incentives often awarded to executives for
“meeting the plan.”
Implications and Recommendations
• Organizational learning and strategic change.
– Organizational learning is essential if firms are
going to formulate and implement strategic change
successfully.
• It’s unlikely that managers will simply embrace
or welcome change.
– Therefore, managers must institutionalize change.