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4/6/2011 patching 1
 ëhat is it?
à 
  is the process by which corporate executives
routinely remap businesses to match rapidly changing
market opportunities.
à t can take the form of adding, splitting, transferring,
exiting, or combining chunks of businesses.
à Patching is not seen as critical in stable, unchanging
markets.
à ëhen markets are turbulent and rapidly changing,
patching is seen as critical to the creation of economic
value in a multibusiness company.

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 Proponents of patching
à View traditional corporate strategy as creating defensible strategic
positions for business units by acquiring or building valuable assets,
wisely allocating resources to them, and weaving synergies among
them
à n volatile markets, they argue, this traditional approach results in
business units with strategies that are quickly outdated and
competitive advantages rarely sustained beyond a few years
à As a result, strategic analysis should center on 


more than 


 
à n these volatile markets, patchers strategic analysis focuses on
making quick, small, frequent changes in parts of businesses and
organizational processes

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 A practical approach
ºSTRATEG LOG
pursue opportunities
ºSRATEG STEPS
1.jump into confusion
2.keep moving
3.seize opportunities
4.FSH STROG.
ºSTRATEG QUESTO
how should we proceed͟
ºADVATAGE
key processes and unique simple rules.
ºëorks best in rapidly changing ambiguous markets.
ºRSK
too tentative in executing promising opportunities.
ºPERFORMA E GOAL
GROëTH
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 Some success stories courtesy
PAT HG
Hewlett
Packard
HP's managers relied on a corporate
level process
we call j




 
  shifting mix of highly focused,
tightly aligned businesses that could respond to changing market
opportunities. n the case of laser
jet printing, the executives lopped off
pieces of the core business to form new businesses like networked
printers, keeping the laser
jet managers focused on their booming
business. They launched businesses in related products like scanners
and faxes. They transferred businesses from one division to another to
make better use of skills and to optimize scale. They combined
businesses to create critical mass and increase cash flow in order to
drive net growth. Most significant, Hewlett
Packard's managers relied
on patching to develop a second printer business built around ink
jet
technology, and later used patching to revitalize their ëintel and U
computer businesses. Today these businesses represent roughly 80% of
the 4/6/2011
company's revenues. patching 5
 The Economist
The 
j




  

 
chunks of
scope than its rival 


means that the 


j
    
but with a smaller number of
departments and fewer writers. Having fewer writers lets the

j 
  







talented ones.
This creates a virtuous cycle in which writers cover lots of different
issues and industries and so are able to write the more insightful,
varied, and creative stories that characterize the magazine. These
engaging and sophisticated stories have attracted an increasing
number of readers, and the 
  



And, since these readers tend to be wealthy businesspeople,
advertising revenues and profits have grown even faster.
4/6/2011 patching 6
 Dell computers
Dell omputer regularly uses splits to focus more
closely on target markets, in 1994, Dell split into
two segments. The transaction segment dealt with
customers who bought equipment in quantities of
one or two, the relationship segment catered to
customers who bought in greater quantities. By 1996,
Dell's managers had split the company into six
segments. Since then. Dell has announced a new split
almost every quarter.

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 More to come
Hewlett
Packard is not the only corporation that
has relied on patching to sustain long
term reinvention
and growth. Patching is a key factor in the success
of several traditionally high
performing companies
like 3M and Johnson & Johnson. 3M's
managers, for example, grew their highly successful
micro replication operations by adding, combining,
and transferring businesses around market applications
as diverse as computer privacy screens and reflective
guardrails. Patching is also part of the repertoire
at new
economy stars like Dell omputers
and isco Systems
4/6/2011 patching 8
 insights
At first glance, patching may seem to be just another
name for reorganizing. But patchers have a
distinctive mind
set. ëhile managers in traditional
companies see structure as mostly stable, managers
in companies that patch believe structure is inherently
temporary. Patchers also develop corporate
strategy differently. Traditional managers set corporate
strategy first, whereas managers who patch
keep the organization focused on the right overall
set of business opportunities and then let strategy
4/6/2011 emerge from individual businesses.
patching 9
 Reorganization v/s Patching

4/6/2011 patching 10
 think evolution, not revolution
Patching changes are usually small in scale and
made frequently
think evolution, not revolution.
Managers at patching companies pay extraordinary
attention to the size of their business units, which
should be small enough for agility and large enough
for efficiency. They've also learned that patching
won't work without the right infrastructure: business
chunks must be modular, business
unit
level
metrics should be fine grained and complete, and
compensation within the company needs to be
consistent.
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 emergence
Many management thinkers today are asking, an the
corporation add value beyond that of the sum of the
businesses?
The answer is yes. Managers who can quickly reconfigure
resources into the right chunks at the
right scale to address shifting market opportunities

in other words, managers who can patch
well
can create multibusiness companies that outperform
even the most efficient capital markets.
Patching is a crucial, corporate
level strategic process
that can build extraordinary value by dynamically
stitching the quilt of businesses within the
corporation.
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 Size Matters

Managers who patch well constantly manage the

size of their businesses. They balance on the edge
of chaos between agility and efficiency. Small
business units allow managers to focus on the specific
demands of key customer segments and to exploit
niche opportunities for growth.

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 Principles for Patching ëell
ºDo it fast
Patching decisions are best made quickly

in two or three months at most. Fast choices reduce
anxiety and politicking.
ºDevelop multiple options, then make a roughly right
choice
ëhen a patching occasion arises, managers
instinctively focus on one response and analyze it
thoroughly
but that process is too slow. Effective
patchers develop three or four alternatives.
This is surprisingly easy to do. n fact, patchers can
often generate several options in a few hours.
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 Principles for patching well
ºTake an organizational test
drive
Rather than
painstakingly plan out the details in advance, savvy
patchers prototype new patches before they make
a final decision. This test
drive speeds up analysis
and lowers the chances of major errors, just as it
would in new product development.
ºGet the general manager right
Selecting the
appropriate general manager for the business unit is
also essential for effective patching.

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 Principles for patching well
ºScript the details. After the decision has been
made on the new patch, the main concern is ensuring
that the work itself doesn't get neglected in the
confusion of complicated organizational change.
That may involve keeping a development project
moving, say, or making sure customers don't fall
through the cracks. Successful patchers follow a
script after the patching is announced. Laying out
a detailed plan
sometimes even specifying day
byday
activities for the first 30 to 60 days
helps to coordinate
the many tasks and people involved in the
patch.
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 Thank you.

4/6/2011 patching 17