Business Strategy/Strategic Change in the 1990s

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In 1970, Alvin Toffler in Future Shock described a trend towards accelerating rates of change.[1] He illustrated how social and technological norms had shorter lifespans with each generation, and he questioned society's ability to cope with the resulting turmoil and anxiety. In past generations periods of change were always punctuated with times of stability. This allowed society to assimilate the change and deal with it before the next change arrived. But these periods of stability are getting shorter and by the late 20th century had all but disappeared. In 1980 in The Third Wave, Toffler characterized this shift to relentless change as the defining feature of the third phase of civilization (the first two phases being the agricultural and industrial waves).[2] He claimed that the dawn of this new phase will cause great anxiety for those that grew up in the previous phases, and will cause much conflict and opportunity in the business world. Hundreds of authors, particularly since the early 1990s, have attempted to explain what this means for business strategy.

In 1997, Watts Waker and Jim Taylor called this upheaval a "500 year delta."[3] They claimed these major upheavals occur every 5 centuries. They said we are currently making the transition from the “Age of Reason” to a new chaotic Age of Access. Jeremy Rifkin (2000) popularized and expanded this term, “age of access” three years later in his book of the same name.[4]

In 1968, Peter Drucker (1969) coined the phrase Age of Discontinuity to describe the way change forces disruptions into the continuity of our lives.[5] In an age of continuity attempts to predict the future by extrapolating from the past can be somewhat accurate. But according to Drucker, we are now in an age of discontinuity and extrapolating from the past is hopelessly ineffective. We cannot assume that trends that exist today will continue into the future. He identifies four sources of discontinuity: new technologies, globalization, cultural pluralism, and knowledge capital.

In 2000, Gary Hamel discussed strategic decay, the notion that the value of all strategies, no matter how brilliant, decays over time.[6]

In 1978, Dereck Abell (Abell, D. 1978) described strategic windows and stressed the importance of the timing (both entrance and exit) of any given strategy. This has led some strategic planners to build planned obsolescence (business)|planned obsolescence into their strategies.[7]

In 1989, Charles Handy identified two types of change.[8] Strategic drift is a gradual change that occurs so subtly that it is not noticed until it is too late. By contrast, transformational change is sudden and radical. It is typically caused by discontinuities (or exogenous shocks) in the business environment. The point where a new trend is initiated is called a strategic inflection point by Andy Grove. Inflection points can be subtle or radical.

In 2000, Malcolm Gladwell discussed the importance of the tipping point, that point where a trend or fad acquires critical mass and takes off.[9]

In 1983, Noel Tichy recognized that because we are all beings of habit we tend to repeat what we are comfortable with.[10] He wrote that this is a trap that constrains our creativity, prevents us from exploring new ideas, and hampers our dealing with the full complexity of new issues. He developed a systematic method of dealing with change that involved looking at any new issue from three angles: technical and production, political and resource allocation, and corporate culture.

In 1990, Richard Pascale (Pascale, R. 1990) wrote that relentless change requires that businesses continuously reinvent themselves.[11] His famous maxim is “Nothing fails like success” by which he means that what was a strength yesterday becomes the root of weakness today, We tend to depend on what worked yesterday and refuse to let go of what worked so well for us in the past. Prevailing strategies become self-confirming. In order to avoid this trap, businesses must stimulate a spirit of inquiry and healthy debate. They must encourage a creative process of self renewal based on constructive conflict.

In 1996, Art Kleiner (1996) claimed that to foster a corporate culture that embraces change, you have to hire the right people; heretics, heroes, outlaws, and visionaries[12]. The conservative bureaucrat that made such a good middle manager in yesterday’s hierarchical organizations is of little use today. A decade earlier Peters and Austin (1985) had stressed the importance of nurturing champions and heroes. They said we have a tendency to dismiss new ideas, so to overcome this, we should support those few people in the organization that have the courage to put their career and reputation on the line for an unproven idea.

In 1996, Adrian Slywotsky showed how changes in the business environment are reflected in value migrations between industries, between companies, and within companies.[13] He claimed that recognizing the patterns behind these value migrations is necessary if we wish to understand the world of chaotic change. In “Profit Patterns” (1999) he described businesses as being in a state of strategic anticipation as they try to spot emerging patterns. Slywotsky and his team identified 30 patterns that have transformed industry after industry.[14]

In 1997, Clayton Christensen (1997) took the position that great companies can fail precisely because they do everything right since the capabilities of the organization also defines its disabilities.[15] Christensen's thesis is that outstanding companies lose their market leadership when confronted with disruptive technology. He called the approach to discovering the emerging markets for disruptive technologies agnostic marketing, i.e., marketing under the implicit assumption that no one - not the company, not the customers - can know how or in what quantities a disruptive product can or will be used before they have experience using it.

A number of strategists use scenario planning techniques to deal with change. Kees van der Heijden (1996), for example, says that change and uncertainty make “optimum strategy” determination impossible. We have neither the time nor the information required for such a calculation. The best we can hope for is what he calls “the most skillful process”.[16] The way Peter Schwartz put it in 1991 is that strategic outcomes cannot be known in advance so the sources of competitive advantage cannot be predetermined.[17] The fast changing business environment is too uncertain for us to find sustainable value in formulas of excellence or competitive advantage. Instead, scenario planning is a technique in which multiple outcomes can be developed, their implications assessed, and their likeliness of occurrence evaluated. According to Pierre Wack, scenario planning is about insight, complexity, and subtlety, not about formal analysis and numbers.[18]

In 1988, Henry Mintzberg looked at the changing world around him and decided it was time to reexamine how strategic management was done.[19][20] He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning. Instead he concludes that there are five types of strategies. They are:

  • Strategy as plan - a direction, guide, course of action - intention rather than actual
  • Strategy as ploy - a maneuver intended to outwit a competitor
  • Strategy as pattern - a consistent pattern of past behaviour - realized rather than intended
  • Strategy as position - locating of brands, products, or companies within the conceptual framework of consumers or other stakeholders - strategy determined primarily by factors outside the firm
  • Strategy as perspective - strategy determined primarily by a master strategist

In 1998, Mintzberg developed these five types of management strategy into 10 “schools of thought”. These 10 schools are grouped into three categories. The first group is prescriptive or normative. It consists of the informal design and conception school, the formal planning school, and the analytical positioning school. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are the entrepreneurial, visionary, or great leader school, the cognitive or mental process school, the learning, adaptive, or emergent process school, the power or negotiation school, the corporate culture or collective process school, and the business environment or reactive school. The third and final group consists of one school, the configuration or transformation school, an hybrid of the other schools organized into stages, organizational life cycles, or “episodes”.[21]

In 1999, Constantinos Markides also wanted to reexamine the nature of strategic planning itself.[22] He describes strategy formation and implementation as an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is planned and emergent, dynamic, and interactive. J. Moncrieff (1999) also stresses strategy dynamics.[23] He recognized that strategy is partially deliberate and partially unplanned. The unplanned element comes from two sources: emergent strategies (result from the emergence of opportunities and threats in the environment) and Strategies in action (ad hoc actions by many people from all parts of the organization).

Some business planners are starting to use a complexity theory approach to strategy. Complexity can be thought of as chaos with a dash of order. Chaos theory deals with turbulent systems that rapidly become disordered. Complexity is not quite so unpredictable. It involves multiple agents interacting in such a way that a glimpse of structure may appear. Axelrod, R.,[24] Holland, J.,[25] and Kelly, S. and Allison, M.A.,[26] call these systems of multiple actions and reactions complex adaptive systems. Axelrod asserts that rather than fear complexity, business should harness it. He says this can best be done when “there are many participants, numerous interactions, much trial and error learning, and abundant attempts to imitate each others' successes”. In 2000, E. Dudik wrote that an organization must develop a mechanism for understanding the source and level of complexity it will face in the future and then transform itself into a complex adaptive system in order to deal with it.[27]

ReferencesEdit

  1. Toffler, Alvin Future Shock, Bantom Books, New York, 1970.
  2. Toffler, Alvin The Third Wave, Bantom Books, New York, 1980.
  3. Wacker, W. and Taylor, J. The 500 Year Delta, Capstone Books, Oxford, 1997.
  4. Rifkin, J. The Age of Access, Putnum Books, New York, 2000 ISBN 1-58542-018-2.
  5. Drucker, Peter The Age of Discontinuity, Heinemann, London, 1969 (also Harper and Row, New York, 1968).
  6. Hamel, Gary Leading the Revolution, Plume (Penguin Books), New York, 2002.
  7. Abell, Derek “Strategic windows”, Journal of Marketing, Vol 42, pg 21–28, July 1978.
  8. Handy, Charles The Age of Unreason, Hutchinson, London, 1989.
  9. Gladwell, Malcolm (2000) The Tipping Point, Little Brown, New York, 2000.
  10. Tichy, Noel Managing Strategic Change: Technical, political, and cultural dynamics, John Wiley, New York, 1983.
  11. Pascale, Richard Managing on the Edge, Simon and Schuster, New York, 1990.
  12. Kleiner, Art The Age of Heretics, Doubleday, New York, 1996.
  13. Slywotzky, Adrian Value Migration, Harvard Business School Press, Boston, 1996.
  14. Slywotzky, A., Morrison, D., Moser, T., Mundt, K., and Quella, J. Profit Patterns, Time Business (Random House), New York, 1999, ISBN 0-8129-31118-1.
  15. Christensen, Clayton "The Innovator's Dilemma", Harvard Business School Press, Boston, 1997.
  16. van der Heyden, Kees Scenarios: The art of strategic conversation, Wiley, New York, 1996.
  17. Schartz, Peter The Art of the Long View, Doubleday, New York, 1991.
  18. Wack, Pierre “Scenarios: Uncharted Waters Ahead”, Harvard Business review, September October, 1985.
  19. Mintzberg, Henry “Crafting Strategy”, Harvard Business Review, July/August 1987.
  20. Mintzberg, Henry and Quinn, J.B. The Strategy Process, Prentice-Hall, Harlow, 1988.
  21. Mintzberg, H. Ahlstrand, B. and Lampel, J. Strategy Safari : A Guided Tour Through the Wilds of Strategic Management, The Free Press, New York, 1998.
  22. Markides, Constantinos “A dynamic view of strategy” Sloan Management Review, vol 40, spring 1999, pp55–63.
  23. Moncrieff, J. “Is strategy making a difference?” Long Range Planning Review, vol 32, no2, pp273–276.
  24. Axelrod, R. and Cohen, M. Harnessing Complexity : Organizational implications of a scientific frontier The Free Press, New York, 1999.
  25. Holland, J. Hidden Order: How adaptation builds complexity Addison-Wesley, Reading Mass., 1995.
  26. Kelly, S. and Allison, M.A. The Complexity Advantage, McGraw Hill, New York, 1999.
  27. Dudik, E. Strategic Renaissance, Amacon, New York, 2000.
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Last modified on 12 March 2011, at 21:07