Strategic Managing in a Turbulent World

Learning to Make Your Organization Future-proof

Norbert Greveling, Roland Bushoff

• Publisher: Management Impact Publishing
• Year: 2020
• Print ISBN: 9789462762947
• eBook ISBN: 9789462763678
• Topic: Business
• Subtopic: Management
• Index: Business

Old and well-known strategy models are hardly usable when making strategic choices in this era of ever-increasing turbulence.Innovative business and organizational insights on strategic management, appealing examples and practical tools and instruments.Guidance to leaders, professionals and students who wish to further develop their skills in strategic management issues.

Introduction

1

Over the past decades the professional field of strategic management has produced various interesting models and theories. However, many of them do not fit in well with the strategic issues of today’s leaders. That is not so much because of the theories and models themselves, but because of the turbulence which constantly continues to build up. Important and basic assumptions, which used to be the foundations of these theories and models, no longer apply in this day and age. Future-proofing of organizations is becoming less and less self-evident due to technological, social and political developments. There is more reason than ever to manage strategically! But how?

In this book we will outline a contemporary paradigm for strategic management with new theories. Such as: how you can look at organizations and think about future successes, about the core leadership tasks and about an approach to the strategic management process itself. We are not trying to improve the professional field itself, but hope to guide and inspire leaders with whom we work every day and who we regularly witness struggling with strategic issues. By starting from the idea, “that there is nothing as practical as a good theory”¹, we want to provide guidance to leaders by means of this new paradigm, which we worked out in three parts. But first, in this introductory chapter, we will look at the development of the strategic management field in recent decades, the turbulence faced by leaders and the need for a new paradigm.

1.1Historical perspective

As a professional field, strategy development has been quite instrumental over the years, providing proper support to leaders while making strategic choices. New visions and approaches were developed regularly which suited the economic, social and political developments of those times. But do these approaches also provide sufficient support in this era of increasing turbulence? Before we answer this question, we will first look back briefly at the various developments from the early times of the professional field at the end of the fifties of the previous century.

The interest in strategy development and strategic management originated in the middle of the last century. That post-war period was dominated by reconstruction and polarization between Western and Communist countries. In the Western world, there was a strong industrialization of the economy (gas, oil, infrastructure, shipbuilding and ports). In a period of stability and expansion, strategic issues were linked with the increasing complexity of rapidly growing organizations. An important strategic vision was that organizations should decentralize into largely autonomous divisions² in order to reduce the complexity. In addition, diversification was recommended in the form of acquisitions of alluring companies in attractive, but quite often totally different sectors. As a result, long-term strategic planning commenced.

In the 1970s companies were unable to plan ahead for more than five years, due to two oil crisis situations. Central planning and diversification became less popular. Large companies, such as GE and Siemens, found that their results were declining. The important strategic issues were about finding a balance between market opportunities, threats and between one’s own strengths and weaknesses. Strategic actions were based on analyses of the SWOT (Strengths, Weaknesses, Opportunities and Threats) and on the balance between the efforts and revenues of various product-market combinations, made visible e.g. with the Boston Consulting Group (BCG) matrix.

The 1980s were characterized by increasing liberalization, privatization and deregulation. With the increased entrepreneurial space, the strategic focus shifted to being able to create a distinctive competitive position, based, among other things, on the work of Michael Porter³. Competitive strategy was about being different: opting for a distinctive range of activities, offering a unique value mix. A company could distinguish itself by explicitly choosing a generic strategy of cost leadership, differentiation or focus. Much later these views were captured in the theory about the value disciplines: building a unique market position by excelling in one of three value disciplines⁴: product leadership, operational excellence and customer intimacy. For the two value disciplines that were not chosen, performance had to be at least competitive.

After the publication of the report Beyond the Limits⁵, attention in the nineties focused on being able to combine economic growth with more sustainable development. Company-specific core competencies were able to help companies successfully introduce new products and services to the market. Core competencies that were already existing or deemed desirable for the future, were to help achieve a unique competitive position. By designing the business processes in such a way that they would deliver maximum value to customers, the use of existing resources such as business systems, equipment and personnel were optimized (business process redesign).

The financial and subsequent economic crisis caused a period of hyper-competition at the beginning of the 21^st century. This resulted in rapidly disappearing competitive advantages. It was reinforced by the rise of platform companies, which developed completely new business models on the basis of new internet technologies, therefore removing the pillars from the success of existing business models. The solution was sought in the development of so-called dynamic capabilities⁶, which makes it easier for companies to adapt to change, such as the ability to be more innovative, more agile and more strategic in building alliances.

1.2The perfect strategy

The development of strategic management described before, took place during the second industrial revolution, with management theory based on Fredrick Taylor’s⁷ “Principles of Scientific management”, which in turn were based on the laws of Isaac Newton, who eventually paved the way for the first industrial revolution⁸. Newtonian and Taylorian management theories assumed that companies were a kind of machine which could function with certainty and predictability. Companies were stable and controllable and could be efficiently managed in such a way that risks and imbalances are avoided.

Leaders in this model work top-down, from hierarchical organizations, play a limited game and are guided by the idea that there is only one best solution, one best answer and one best strategy. The traditional leader focuses on efficiency and he uses analysis as a way to always find that one best solution. Organizations are divided into separate (atomic) constituents, which are connected by rigid laws such as cause and effect and interconnected by influence and power.

Looking back on the developments in the strategic management field, we see that many of the visions and approaches developed for strategy development are in line with this type of management theory. The emphasis in the developed strategy theories and models is on analysis, rationality and stability. External developments and trends are recognized and their impact is analyzed in terms of opportunities and threats. Internal strengths and weaknesses are identified and analysis has to give a definite answer about the possibilities for cashing in on opportunities and avoiding threats. An analysis of the size and the stage in the life cycle of product-market combinations is used to decide on the desired investments. It is only after extensive analysis of the various competitive forces that the decision to enter new markets is made. Strategic decisions are made rationally based on periods of three to five years with a high degree of stability. To verify this, the analyses are checked annually for validity and plans are adjusted slightly if necessary.

Fragmented approach

The fragmented approach, which is so characteristic of the Newtonian way of thinking, can be seen in the various strategy models and theories that have been developed over the years. Each theory only highlights one facet or theme that is currently in the spotlight. Strategy theories and models can be about:

Organization (e.g. McKinsey’s 7S model).

Investments (e.g. the BCG Growth-Share matrix).

Environmental analysis (e.g. the DEPEST model).

Processes (including Porter’s Value Chain).

Process optimization (e.g. BPR, Lean, TQM).

Competition (e.g. the Competitive Forces model by Porter).

Learning organizations (e.g. Senge’s Fifth Discipline).

Distinctiveness (e.g. Value Disciplines by Treacy & Wiersema).

The Why of organizations (e.g. Sinek’s Golden Circle).

Core competencies (e.g. Core Competencies by Prahalad & Hamel).

Performance of organizations (including Kaplan & Norton’s Balanced Scorecard).

Value creation (e.g. Business Model Canvas by Osterwalder et al.).

These strategic themes have succeeded each other over the past decades. Hypes have often arisen around every issue, causing almost all companies and corporations to address such an issue at the same time, until the next hype came up. As a result, the strategic management field was often regarded as an accumulation of models and hypes, pushed by consultants, in which every couple of years a new issue emerged that matched that era. Now you can find them on various websites⁹ and in books with collections of management and strategy models. Each model seems to stand on its own and any connection between them you have to find yourself.

Through the ever-changing strategy models and theories, leaders have been asked to focus on one particular type of strategic issue, such as competition, competence, process optimization, organizational structure, resource utilization, maneuverability, and so on. Leaders had to focus on one theme and converge to mostly the same type of solution. As if there is one strategy that is best for all companies and corporations! Many efforts have been focused on research for that one perfect strategy that always ensures success under different circumstances.

The consequence of this fragmentary approach is that leaders have hardly been able to develop a coherent picture of what strategic management is actually about. They have not learned how to identify the crucial strategic issues in their own organization. From different perspectives on certain issues they may have identified a number of fragments, but what is missing is the overview and understanding of how issues are interrelated.

1.3A new era

As indicated before, many strategy models and theories were developed in the previous century in a period of relative stability, a period that coincided with the peak of the second industrial revolution. Relative, because many organizations in the past also had periods of commotion, but still stable, since that commotion cannot be compared with the ever-increasing turbulence in the business environment which almost all organizations currently are facing. We are referring to the digital revolution which is currently going on, that started at the end of the previous century with the rise of the Internet and in which we can now distinguish three waves.

Digital...

Table of contents

• Cover Page
• Title Page
• Copyright
• Table of Contents
• Prologue
• Preface
• 1 Introduction
• Part I Strategic Managing
• Part II Strategic Choices
• Part III Strategic Managing in Practice
• Appendices
• Index
• About the authors
• Back Cover