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The World Might Be Flat, But Without a Strategy It is Still a Dangerous Place
Posted By Ceci On 2 September, 2010 @ 11:04 am In Edition 34,Strategy | No Comments
By: Giulio Chiesa
Thoughts on a difficult concept: thinking strategically.
Among the concepts that make up a company’s management and administration, the one that has caused more controversy in both the business and academic world is strategy. I remember that it started to infiltrate the industrial and commercial field at the end of the sixties. I came across it during a violent positioning struggle between the four giants of the American chemical sector and the pharmaceutical companies, which were the first to show a disturbing ability to take over competitors. Bruce Henderson from the Boston Consulting Group started this revolution with his “Growth-Share Matrix” and the “Experience Curve”, which shook corporations and universities to the core.
Throughout the years, several articles, books, and booklets on strategy have appeared in several languages, seeking to formulate an appropriate definition or “how” to develop a strategy. oday in 2010, after so many ups and downs in the business world, some more enlightening than others, it is clear that strategy is a decisive factor in the results obtained by any organization or institution. It has been argued that strategic thinking begins with a good business model that takes into account those necessary economic variables related to the goal.
In a competitive world, value creation is a function that company’s top management should take on with enthusiasm. In fact, it is now argued today that a company’s final goal is the creation of value. However, the presence of a competitor demands from us a better search of business alternatives, which implies distinguishing ourselves from the rest. But distinguishing in terms of what? This list of options can be very long. We will concentrate on what is “essential”: innovation (not only technological), choice of markets and clients, adoption of exemplary customer service philosophies, empowerment, and an ethical stance. Entrepreneurial history is written by those elements of distinction.
In 1964, Peter Drucker wrote one of his most renowned management books, which he planned to entitle Business Strategy. His editor conducted some informal surveys because at that time the word “strategy” was inevitably tied to military situations.
Drucker cleverly realized a title’s commercial importance and agreed to change it. It became “Managing for Results”, a real poem in business literature.
Drucker cleverly realized a title’s commercial importance and agreed to change it. It became “Managing for Results”, a real poem in business literature.
Unlike war situations, where there is a winner and a loser (nowadays it might not be so) in the business world there is room for more than one winner. Wal-Mart, in the United States, is definitely a winner as well as Harvard Business School (HBS). But Target is also a winner by choosing as its core strategy to create value based on style and fashion for its customers, without exclusively focusing on the lowest price, as well as the visionary Business School of the University of Virginia that in a recent survey outranked the very liberal HBS. Those companies wanting to please everyone will lose because they are not able to compete with an edge. Success is limited by their reluctance to change; in other words, they do not want to venture into the land of strategic thinking.
There are three referees: stockholders, markets, and employees. Stockholders do not have a lot of patience. The market had some, but it is becoming more rebellious. Employees are more flag bearers than referees. There is only one rule: be aware.
When these ideas are taken to a global scale, strategic thinking loses linearity, the implementation of strategies becomes more complicated, and the amount of energy required in both human and financial resources increases to incredible levels.
Luckily, someone always appears on the scene with research and publications, deserving a round of applause such well-known cases are Michael Porter and Henry Mintzberg, and more recently (1989) of Gary Hamel (consultant), and C.K. Prahalad (professor at the University of Michigan, who left us on April 10, 2010).
Quoting the authors of “Strategic Intent” (article published in 1989 in Harvard Business Review):
…regaining competitiveness will mean rethinking many of the basic concepts of strategy. As “strategy” has blossomed, the competitiveness of Western companies has withered. This may be coincidence but we think not. We believe that the application of concepts such as “strategic fit” (between resources and opportunities) “generic strategies” (low cost vs. differentiation vs. focus) and “the strategy hierarchy” (goals, strategies and tactics) have often abetted the process of competitive decline.
These are harsh words for those who have not been able to anticipate the actions of global competitors.
Planning will never become a substitute for leadership. Strategic leadership, based on the intellectual harmonious rapport among individuals (CEO, general directors, presidents), groups ( management teams) and corporate government, goes beyond the interpersonal aspects and issues normally associated with leadership, aimed to obtain a higher level, ethically flawless performance (Finkelstein).
The leader is the first to understand the difference between strategic thinking and strategic planning. Any confusion can cause extremely unpleasant situations. The leader teaches and is encouraged to teach that the objective of planning is to create winning strategies and not to dedicate excessive resources to show their convenience. . In contrast, strategic thinking directs the company to face the markets’ competitive realities ,and to detect and exploit those constantly emerging opportunities. Once strategic thinking is allowed to roam freely in the company’s hallways, it is capable of creating a formal discipline of planning which is the best path to develop successful strategies free from internal rivalries (Mintzberg, Andrews).
Strategy is fruitful. Making a strategic plan is like bearing children. An effective plan makes improvements both in strategy as well as in performance. There is no better task for directors than to shape their strategic initiatives into the action plan. Our experience as company directors is like a self-tailored suit that shines more by adding accessories created by others. The following are some examples:
In a serious, unadorned, pragmatic and non-academic way, we can mention some of Top Management’s efficient steps in its participation in the strategic process.
Epilogue
The analysis of management concepts and its complex topics, such as the concept of strategy, must not end with the lightness of proverbs or with definite or unchangeable conclusions. Therefore, our conclusions aim to only highlight some issues not included in the previous pages and those that I think should be kept in mind:
Strategically speaking, innovating is eliminating old ways of thinking (organizational pyramids), old ways of acting (working solo), taking away what is useless (wordiness, circumlocution, demagogy), matching content and form (presentations, assemblies), and developing one’s own style (tidiness, kindness, awareness).
A company’s life (actually, life in general) is a trade-off that is the strategic equivalent of a fork in a road. Whether ascending, descending, or walking there are always many forks. If the “world is flat”, an insidious idea, , we should expect to find fewer detours on such plains. However, this is not the case. Even on the plains we can make the wrong turn in the absence of a compass (our strategy). That would be a shame, right?
Bibliography
Prahalad, C.K., y Gary Hamel, (1994). “Competing for the future”, HBS Press.
Prahalad, C.K. (2004). “The Future of Competition”, HBS Press.
Prahalad, C.K. (2004). The Fortune at the Bottom of the Pyramid, Wharton Publishing.
“La inclusión como estrategia central” (junio-julio 2010), Gestión, pp. 116-120.
Finkelstein, Hambrick, Cannella. (2009). “Strategic Leadership”, Oxford University Press.
Mintzberg, H. (1994). The Rise and Fall of Strategic Planning, The Free Press.
Hamermesh, R. G. (2001). “Making Planning Strategic”, Harvard Business Review 1991.
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