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CHAPTER 3: FORMULATING STRATEGY(亨利·明茨伯格)

中國經濟管理大學15年前 (2010-01-27)講座會議311

CHAPTER 3: FORMULATING STRATEGY(亨利·明茨伯格)


  • 亨利·明茨伯格《戰略過程》


     亨利·明茨伯格 

    加拿大蒙特利爾麥吉爾大學管理研究領域克萊格霍恩(Cleghorn)講座教授。他的研究主要集中於一般管理和組織問題,特別是管理工作的性質、組織的形式以及戰略形成過程。著有《經理工作的本質》(The Nature of Managerial Work)  、《組織的結構》  (The  Structuring  of Organations)  、《明茨伯格論管理》  (Mmtzbergon Management)  《戰略規劃的興衰》  (The  rise and Fall Strategic PIanning)等。他發表於《哈佛商業評論》上的文章曾兩次獲得麥肯錫獎。
      明茨伯格教授擁有麥吉爾大學機械工程學士學位、麻省理工學院斯隆管理學院科學碩士學位和博士學位;曾獲加拿大國家勳章和魁北克傑出人士獎。
      明茨伯格教授曾于1988—1991年擔任戰略管理協會主席,現為加拿大皇家學院院士(第一位管理學院士)、管理學會會員、國際管理學會會員。他還被管理學會評為2000年度傑出學者。

     


    CHAPTER 3: FORMULATING STRATEGY

    ANDREWS, "THE CONCEPT OF CORPORATE STRATEGY"

    Summary of Reading

    I. The Strategy Concept

    Strategy is a pattern of decisions; it determines and reveals objectives, purposes, goals, it produces the principal policies and plans for goal achievement, and defines the range of business the company is to pursue, the kind of economic or human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities. Strategic decisions cover long periods of time and commit large amounts of resources. The pattern defines the central character of the company, its image, and its position in its industry and markets. The pattern will allow the specification of action plans and resource allocations. Parts of the pattern will rarely change, while other parts will change greatly. Company character is likely to persist. A strategy must be set of integrated goals and policies that crystallize from the formless reality of a company's environment a set of problems an organization can seize upon and solve.

    A summary statement of strategy will describe product line or services, offered or planned; markets and segments served, present and planned; distribution channels; financing methods; profit objectives; statement of the relative emphasis on safety versus return policy in central functions (marketing, manufacturing, procurement, R&D, labour, relations, and personnel); and statements about organizational size, form, and climate.

    Corporate strategy is an organizational process that may be analytically divided into formulation and implementation. Formulation has several sub-activities. First is what the firm might do, i.e., identifying the threats and opportunities in the environment. Second is what the firm can do, i.e., appraising the firm's strengths and weaknesses. Third is what the firm wants to do, i.e., considering the personal values of the top management. Lastly, there is what the firm should do, i.e., the ethical aspects of strategizing. Implementation of sub-activities are primarily administrative. The first is the design of an appropriate organizational structure. The second is the directing of organizational processes and systems, e.g., performance measurement, motivation, control, recruitment, and development. Lastly, there is the role of personal leadership.


    II. Relating Opportunities to Resources

    The nature of a company's environment may be described in terms of technology (the fastest‑changing and most far‑reaching element), ecology (trends in the protection of the physical environment have become much more important), economics (generally one of the better‑monitored areas), industry (risks are often blurred by familiarity and uncritical acceptance of the status quo), society (demographic trends, cultural trends, changes in attitudes), and politics (East‑West relations, North‑South relations, and business/government relations).


    To carry out a strategy, organizations must know their strengths and weaknesses, i.e., corporate competence and resources must be identified. This is actually more difficult than environmental analysis, because of subjectivity, lack of confidence, and unwillingness to face reality. Sources of capabilities include:

    - experience in making and marketing a product line, or providing a service;

    - strengths and weaknesses of the individuals in the firm;

    - the degree to which individual capability is effectively applied to the common task;

    - the quality of the coordination of individual and group effort.


    The distinctive competence of an organization is more than what it can do; it is what it can do particularly well. Start by defining the functions served by the firm. Examine also the skills that underlie whatever success has been achieved, such as new product development, marketing services, distribution methods, new quality‑price combinations, and creative merchandising.


    Matching opportunity and competence is what establishes a company's economic mission and its position in the environment. Aside from distinctive competence, the principal resources found in any organization are money and people; technical and managerial. “At an advanced stage of economic development, money seems less a problem than technical competence, and the latter less critical than managerial ability.” Finally, “In each company, the way in which distinctive competence organizational resources, and organizational values are combined is or should be unique.”

    Discussion Questions

    1. How does the definition of strategy given here relate to those given in other readings?

    Andrews's definition of strategy relates well to 3 of the 5 definitions Mintzberg gives in his Chapter 1 reading “Five Ps for Strategy.” Given the emphasis Andrews places on deliberation and formulation, the definition relates strongly to strategy as plan; a consciously intended course of action, made in advance of that action, and developed purposefully. Andrews prescribes a systematic look at external threats and opportunities and internal strengths and weaknesses, taking into account the values of top management and the firm's ethical responsibilities. He also encourages detailed “summary statements” of strategy (i.e., plans). But Andrews also uses the word “pattern” quite often in his definition and discussion. He seems to acknowledge that a series of resource allocation decisions speaks louder than the words of a document. This is clearly related to Mintzberg's “strategy as pattern.” Andrews goes on to say that the pattern defines the central character of the company. He talks about how this will change only slowly, and he gives examples such as commitments to quality or high technology or good labour relations. These are all related to the concept of strategy as perspective. Lastly, he says that the pattern defines the position the company will occupy in its industry and markets. In other words, his definition also relates to strategy as position.



    2. What does Andrews mean when he says that we should not “separate goals from the policies designed to achieve those goals”?

    He means that you should not be doing something (a policy) unless you can say why you are doing it (an objective). Otherwise it is difficult for the organization to make a meaningful contribution. He puts it eloquently: “It is the interrelationship of a set of goals and policies that crystallizes from the formless reality of a company's environment a set of problems an organization can seize upon and solve.”


    3. How can it be said that “deciding what strategy should be may be approached as a rational undertaking”?

    This is a pure value judgement by Andrews, one with which many, particularly Mintzberg, would disagree with. What he is saying is that he thinks it is possible to sit down and rationally decide what strategy should be. One should, he says, examine threats, opportunities, weaknesses, strengths, managerial values, and social responsibility. One should then match opportunity and competence and formulate a unique strategy.


    4. Andrews says that strategy formulation is a four‑way balance among what a firm might do, can do, want to do, and should do. What do you think of this idea?

    Most students will agree with this statement. It is really nothing more than Andrews's idea that one should examine threats and opportunities (might do), weaknesses and strengths (can do), managerial values (wants to do), and social responsibility (should do). Some students may disagree with the very logical, almost cookbook quality of the model.


    5. In what sense can it be said that structure follows strategy, but that strategy also follows structure?

    Andrews believes the first part of this statement to be a logical proposition. In other words, strategists should examine the structural requirements of any strategy and design, or adjust the organizational structure accordingly. The second part of the question is “organizational reality”. What he means is that a firm’s existing structure is likely to shape its future strategy, in at least two ways. First, the structure should be well‑suited for the strategy for which it was designed, so there is a bias for continuing that strategy. Second, the existing structure is one of the elements shaping the way people in the firm think, which also biases action in favour of strategies consistent with the status quo.


    6. To what extent can it be said that “if purpose is determined, then the resources of a company can be mobilized to accomplish it”?

    This statement is typical of the attitude of thinkers in the strategy formulation school. In their view, the most difficult thing about strategy is formulating it, i.e., determining purpose. Once you've done that, they assert, implementation (mobilization) is straightforward. This is at best an oversimplification. At worst, it ignores the incremental nature of forming strategy from a synthesis of the pieces floating by in the stream of action in which the firm is immersed. Talking about the formation of purpose, as an activity that precedes mobilization, is inaccurate.  It may be that the best objectives are not formulated in any strict sense but evolve from an indescribable mix of operating decisions. In other words, the action or mobilization may occur first, with the purpose being determined later.


    7. How can it be said that if members of an organization can reach a consensus about the organization's core competence, then its application to identified opportunity can be estimated?

    If an organization can figure out what is its core competence, it has a chance to make a contribution, to solve some problems or fill some needs. It can do this by seeking out opportunities and problems, which its distinctive competence can exploit or solve. If it is not known what it's good at, it can make no such moves. Andrews's point is that this self‑knowledge is essential, but the method of attaining it is not. Even if strategists discern their organization's competence in a subjective way, that is adequate.


    8. What are the implications of the statement that “The insight required to identify the essential strength justifying new ventures does not come naturally”?

    Andrews is saying that a firm which is very good at something often comes to take its skill for granted. It may not even know what is the underlying strength beneath the skill. The implication of this is that strategists must devise ways to penetrate that barrier of familiarity. Andrews offers only the “recognition of the need for analysis”. Others have offered things such as the Devil's Advocate and dialectical inquiry techniques, or the notion of counterbalanced prescriptions.


    9. What do you think of the authors assertion that “Money seems less a problem than technical competence, and the latter is less critical than managerial ability”?

    This question is designed to stimulate discussion and to open the eyes of students to an interesting point made by Andrews. Most students assume that the biggest resource constraint facing organizations is financial. They further assume that managerial and technical talent is about balanced in importance. Andrews argues that the most important resource constraint is management talent. Technical talent is the second most important, and money is last in importance. As evidence he points to the many instances of diversification where the money to diversify was there, but the talent to manage the new parts of the company was not. When one reviews the points made in the previous chapter, about the skills needed by strategic managers, one realizes just how rare they are.

    RUMELT, "EVALUATING BUSINESS STRATEGY"

    Summary of Reading

    When a firm is either formulating or adjusting strategy, strategy evaluation is needed. The latter is an attempt to appraise the fundamental factors and trends that govern organizational success. Strategy evaluation must answer three questions: Are the objectives of the business appropriate? Are the major policies and plans appropriate? Do the results obtained to date confirm or refute critical assumptions on which the strategy rests? These are difficult questions; insight and a reasonable store of situation‑based knowledge are required. It complicates things that strategy is unique for each firm. Also, strategy is concerned with the selection of goals and purposes, which are easier to set than to evaluate (partly because people are better trained in problem solving than in problem structuring). Lastly, there are problems of conflict, usually concerning who is competent to evaluate strategy.

    Four Tests of Strategy

    Strategy is “a set of objectives, policies, and plans that, taken together, define the scope of the enterprise and its approach to survival and success. Alternatively, we could say that the particular policies, plans, and objectives of a business express its strategy for coping with a complex competitive environment.” Strategies must be submitted to tests, which will fall into one of four categories: consistency (the strategy must not present mutually inconsistent goals and policies), consonance (the strategy must represent an adaptive response to the external environment and to the critical changes occurring within it), advantage (the strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity), and feasibility (the strategy must neither overtax available resources nor create insoluble subproblems).

    Consistency may be a problem if the strategy has evolved or if a formulated strategy contains compromises. Consistency is needed to provide coherence to organizational action. Indicators of strategic inconsistency include conflicts that persist despite changes in personnel, success for one department meaning, or being interpreted to mean failure for another; and operating problems that continue to be referred upwards (despite attempts to delegate) for policy resolution. There must also be consistency between objectives and top management values.

    Consonance exists when the basic mission or scope of the firm matches its environment over time; the firm will then have a generic strategy. Critical threats form without usually threatening an entire group of firms. The key to evaluating consonance is understanding why the business exists at all, and how it assumed its current pattern.

    Competitive strategy focuses on the differences among firms rather than their common missions. It is the art of creating or exploiting those advantages that are most telling, enduring, and most difficult to duplicate. Competitive advantage can normally be traced to one of three roots: (1) superior resources; (2) superior skills; or (3) superior position. The first two are obvious. The third comes from intelligent arrangement of resources, to enhance their combined effectiveness. Positional advantage tends to be self‑sustaining and defensible. That means that it (1) returns enough value to warrant its continued maintenance, and (2) would be too costly to capture, so rivals are deterred from attacks on the core of the business. The two most common manifestations of positional advantage come from size and scale. Some type of uniqueness is a prerequisite. Successful trade names are another type of positional advantage. Other sources include geographical location, service leadership or experience, and good reputation.

    The test of feasibility asks whether the strategy can be attempted within the physical, human, and financial resources available. Financial resources are the most easily quantified and are normally the first limitation against which strategy is tested. The less quantifiable but more rigid limitation on strategic choice is that imposed by the individual and organizational capabilities that are available. Answering three questions helps assessing capability: Has the organization demonstrated that it possesses the problem solving abilities and/or special competencies required by the strategy? Has the organization demonstrated the degree of coordinative and integrative skill necessary to carry out the strategy? Does the strategy challenge and motivate key personnel and is it acceptable to those who must lend their support?

    The political structures of firms make strategy evaluation an implicit process that is difficult to separate from planning, reporting, control, and reward systems. It is less an intellectual task, more a continual organizational process. “Ultimately, a firm's ability to maintain its competitive position in a world of rivalry and change may be best served by managers who can maintain a dual view of strategy and strategy evaluation—they must be willing and able to perceive the strategy within the welter of daily activity and to build and maintain structures and systems that make strategic factors the object of current activity.”

    Discussion Questions

    1. What does the author say is the whole point of strategy? What is your assessment of this statement?

    He says that "the critical factors determining the quality of results are often not directly observable or simply measured, and that by the time strategic opportunities or threats do directly affect operating results, it may well be too late for an effective responses.”  He continues, saying that strategy evaluation should appraise "those more fundamental factors and trends that govern success in the chosen field of endeavour." In other words, in Rumelt's view, strategy evaluation should be very much forward‑looking. Students will react to this in various ways. It's difficult to disagree with the statement. But it is certainly possible to wonder about how one goes about fulfilling Rumelt's prescription. No one has a crystal ball to examine the future. Recall, too, that in an earlier reading Quinn pointed out that strategy deals not only with the unpredictable, but also with the unknowable. This makes forward-­looking strategy evaluation difficult.


    2. What are the implications of strategy evaluation's needing "a reasonable store of situation-­based knowledge and more than the usual degree of insight”?

    The first of these points implies that people intimately familiar with the situation being evaluated must do strategy evaluation. It is not an abstract analytical activity that can be done by anyone, e.g., a consultant. It must be done by people who are so familiar with the business, and all the conditions surrounding it, so that they can make an informed evaluation. The second point implies that the evaluators must nevertheless be able to detach themselves from the strategy and the situation, so that they can examine it thoroughly and “see things that might be hidden if they keep their perceptual filters on.”



    3. Strategy evaluation rests on situational logic. How might this be a problem, if at all?

    It is a problem only if one is looking for universal solutions to strategic problems, as an outside consultant might. Universal solutions in management have been discredited for a long time. Rumelt is saying here that it is possible to strategically succeed in many ways. It is up to the well­-informed strategy evaluators to have the proper feel for whether a given approach is appropriate for the given firm. Rumelt's thinking here is certainly consistent with Mintzberg, who argues that successful strategy will develop over time as highly‑involved managers carefully nurture it.


    4. What is the difference between problem solving and problem structuring? Do we over-emphasize the former, leading to difficulties?

    A problem is a condition where the decision-maker is not achieving her or his desired state. Problem solving means returning to normalcy by taking action to achieve that desired state. Problem structuring means identifying the problem in the first place. It is much more difficult than problem solving. Rumelt says that people find it easier to set goals than to evaluate them. Goal setting is a problem solving activity—we specify the desired state we wish to achieve. Goal evaluation is a problem structuring activity—we try to figure out which are the best goals, or whether the goals we have are good or not. There is little question that in most business education programs, problem solving is taught better than problem structuring. Many excellent tools have been developed to facilitate problem solving. There are virtually no tools for problem structuring. In this reading, Rumelt is suggesting some problem structuring tools - his four tests. Rigorous, and successful, use of his tests would help strategists decide whether goals were adequate: are the goals consistent? Do they confer an advantage? Are they adaptive to environmental demands? Can they be achieved given our skills and resources?


    5. Is there a tendency to confuse values with objectives? If so, why does this create problems?

    Rumelt makes an interesting assertion here. He argues that people confuse values (fundamental expressions of human personality) with objectives (tools for directing organizational action). There is probably no right answer to this question. Some people will agree that people get too bound up in their value systems when they are setting or evaluating objectives. Others will disagree. If organization members do confuse values and objectives, then evaluating objectives becomes very difficult. They will find it difficult to be unbiased about objectives, which they feel cut right to the heart of their value systems. This is similar to the point Selznick made about institutions having value and being difficult to change.


    6. If we reject Rumelt's definition of strategy, what does that do to the validity of his four tests?

    Rumelt's definition of strategy fits squarely into the idea of strategy as plan. He says that the set of objectives, policies, and plans that guide its approach to success is the strategy, or they are the expression of it. As Mintzberg pointed out in Chapter 1, this is only one way of looking at strategy. It may be defined in at least three other ways—pattern, position, and perspective. If we reject Rumelt's definition, his four tests, with the possible exception of consistency, are still valid. Even if the strategy is mostly emergent, chances are that the strategists agreed upon the pattern because it was consonant with what the environment wanted. Or it fit the capabilities of the organization (it was feasible). Similarly, the advantage test fits with the notion of strategy as position. Whether a firm's management chose particular strategies because of deliberate attempts to gain advantage, or things just emerged that way, is not as relevant as the existence of the advantage. Mintzberg's ideas about deliberate and emergent strategy really deal only with intentions and realization. They do not get to soundness of the intentions or the realized strategy. Rumelt's four tests, by contrast, go directly to the question of whether or not a strategy (intended or realized) is a good one.


    7. A key function of strategy is to provide coherence to organizational action, but how truly necessary is it to state the strategy clearly and explicitly?

    This is something of a trick question. Rumelt says that a clear and explicit concept of strategy “can foster a climate of tacit coordination that is more efficient than most administrative mechanisms”. However, he does not actually advocate an explicit statement of strategy, only a clear and explicit concept of strategy; policies may be transmitted to organization members over time as part of the mix of operating decisions. Strategy may not even be written down - it might not even be possible to easily articulate it. But members would know what it was, and it would provide tacit coordination.


    8. What is the point of the author's discussion of values and strategy?

    If one is formulating strategy, one must take managerial values into account. If one is evaluating strategy, the same is true. The strategy in either case must be consistent with management values. If it is not, it is generally the strategy that must be changed, not the values (which are usually close to immutable). Rumelt cautions, though, that strategists must be careful when making these adjustments; they must give "special attention to a firm's competitive position."


    9. How is the distinction between generic and competitive strategy related to Mintzberg's five Ps of strategy from Chapter 1?

    In his discussion of strategy as position, Mintzberg discussed how most uses of this concept focused on the idea of competition. This would fit with Rumelt's advantage test, which is associated with competitive strategy. But Mintzberg also said that the view of strategy as position could be based on the achievement of any viable position, whether or not directly competitive. This fits with Rumelt's consonance test and the notion of generic strategy. As he puts it: "The role of the evaluator in this case is to examine the basic pattern of economic relationships that characterize the business and determine whether or not sufficient value is being created to sustain the strategy."


    10. In discussing position, the author proposes two kinds of advantages—those related to size, and those related to uniqueness. How does this mesh with the Porter readings in the next chapter?

    Positional advantage based on size is related to Porter's Cost Leadership strategy. This is because size has had a tendency to be associated with economies of scale, which in turn lead to lower costs. Advantage based on uniqueness is related to differentiation. Actually, differentiation is advantage based on uniqueness.


    11. Rumelt says that individual and organizational capabilities are “more rigid limitations on strategic choice” than the more quantifiable resources. How could this be? How does this relate to the Andrews reading?

    It takes a long time to modify individual and organizational capabilities. People have to be trained, retrained, or hired outright. Organizations have to be redesigned. Work groups have to be formed, reformed, or modified. Technology has to be transferred, and so forth. Quantifiable resources, especially cash, are extremely flexible. There are at least four ways to get money: make a profit, borrow it, get people to invest, or sell assets. Some of these ways can be very fast—getting loans secured by inventory, for example. This point is closely related to Andrews's point that “money seems less a problem than technical competence, and the latter (is) less critical than managerial ability.”


    12.  How does the author relate consistency to feasibility?

    Rumelt sees consistency as a way of creating organizational skills that could contribute to making more strategies feasible. He says that one of the sub‑tests of feasibility is the degree of coordinative and integrative skill extant in the organization. Earlier, he argued that consistency facilitated coordination, integration, and the firm's ability to mobilize its resources. So consistency, if it can build these skills and abilities, is related to feasibility. He also says that managers must be motivated by the strategy. If they are not, then it fails in a major way. One could argue that this relates to his earlier comment that strategy must be consistent with the values of management.


    13. So, is strategy evaluation a purely intellectual task or an organizational process? Which should it be? What are the implications of each alternative?

    The key word is “purely.” Rumelt is saying that strategy evaluation has an intellectual component, but it is too important to be an abstract, purely intellectual exercise. He argues that it is tied up in the everyday processes of the firm. It is reinforced by the organization's other systems (e.g., information, planning, reward), but it is one of them, not something apart. He argues that strategy evaluation is something that happens all the time, because it is built into the activities in which the members of the firm engage.


    PRAHALAD AND HAMEL, "STRATEGIC INTENT"

    Summary of Reading

    Regaining competitiveness means rethinking basic strategic concepts. The established Western perspective is fundamentally different from that of the new global competitors – typically, Japanese firms. They started with excessive ambition and then fostered, and sustained, an obsession with winning global leadership. We term this obsession “strategic intent”. This envisions a desired leadership position, complete with criteria for charting progress. It also encompasses an active management process that includes focusing on winning, motivating by communicating the value of the target, encouraging team and individual contributions, sustaining enthusiasm, and using strategic intent to guide resource allocation. Strategic intent captures the essence of winning. It is stable over time, lengthening the organization's attention span but ensuring short-term consistency. It sets a target that deserves personal effort and commitment. American managers talk in term of shareholder wealth. Firms guided by strategic intent talk in terms of global market leadership. The latter, to beat or stay the best, is more motivational.

    Global leadership will emerge neither from planning nor by accident. Nor will it come from “Silicon Valley”-type innovation using tools like skunkworks. A management that waits for entrepreneurial successes from below adds little value. By contrast, strategic intent is clear about ends, but creative about means. Creativity is unbridled but not uncorralled. Top management provides the criterion for testing actions, and middle management must keep their departments heading in the direction specified by the strategic intent. Strategic intent implies sizeable stretch. Traditional thinking about strategy prescribes a fit between capabilities and opportunities. Strategic intent implies an “extreme misfit.” Top management challenges the organization to close the gap by systematically building new advantages.


    "Strategic intent is like a marathon run in 400 meter sprints." No one knows the terrain at mile 26, so management focuses the organization on the terrain in the next 400 meters. This might be done with a series of corporate challenges as a way to create focal points for employees' attention in the near to medium term. Again, management is specific about ends but less prescriptive about means. Challenges succeed only when people in the organization understand them and see their implications for their own jobs. Some of the things top management can do include creating a sense of urgency, developing a competitor focus at every level through widespread use of competitive intelligence, and giving the organization time to digest one challenge before launching another. Managers should practice "reciprocal responsibility," sharing pain and gain with their employees. This is crucial because competitiveness ultimately depends on the pace at which the firm embeds new advantages deep within it. Less important is the stock of advantages at any given moment. The scorecard must be expanded beyond the usual of low costs and price premiums.


    Few competitive advantages are long lasting, and the first organization to develop one gains a greater advantage. “The essence of strategy lies in creating tomorrow's competitive advantages faster than competitors mimic the ones you possess today .... An organization's capacity to improve existing skills and learn new ones is the most defensible competitive advantage of all.” To win against better‑resourced competitors, managers must fundamentally change the game in ways that disadvantage stronger rivals. The goal is competitive innovation, not imitation. Four approaches to competitive innovation have been popular: building layers of advantage, searching for loose bricks, changing the terms of engagement, and competing through collaboration.


    A wider portfolio of advantages leads to less risk. Global brands are more defensible advantages than are lower costs. Several Western practices lead to lower advantage levels. “Fast-tracking” of managers creates over‑reliance on numbers for management, since managers rarely develop deep business knowledge and must therefore rely on “numbers.” Short‑term assignments lead either to goals that fail to get commitment or to unrealistically short time frames. "Aiming to be number one in a business is the essence of strategic intent; but imposing a three‑ to four‑year horizon on that effort simply invites disaster." The familiar dichotomy between strategy formulation and implementation "undermines competitiveness by fostering an elitist view of management that tends to disenfranchise most of the organization." Two other reasons for elitist management are (1) successful managers want to perpetuate myths about themselves and (2) top managers don't want to admit that they don't have all the answers when a crisis looms. The latter—a widely perceived threat that no one talks about— creates more anxiety than a clearly defined threat that becomes the focal point for organizational problem solving. "That is one reason honesty and humility on the part of top management may be the first prerequisite of revitalization. Another reason is the need to make participation more than a buzzword."


    Administrative innovations require more than new structures. They require genuine two‑way communication. Japanese companies win, because they have developed ways to harness the “wisdom of the anthill.” Astronauts get the glory, but the real intelligence behind the mission is firmly on the ground. “Developing faith in the organization’s ability to deliver on tough goals, motivating it to do so, focusing its attention long enough to internalize new capabilities. This is the real challenge for top management. Only by rising to this challenge will senior managers gain the courage they need to commit themselves and their companies to global leadership.”

    Discussion Questions

    1. What is your reaction to the authors' definition of strategic intent?

    Students may be positively impressed by the apparent simplicity of strategic intent— excessive ambition and an obsession with winning global leadership. Strategic intent envisions a desired leadership position, complete with criteria for charting progress. This simplicity and vision base is some of the reason this concept is so appealing. However, its simplicity does not imply that strategic intent is easy. It also encompasses an active management process that includes focusing on winning, motivating by communicating the value of the target, encouraging team and individual contributions, sustaining enthusiasm, and using strategic intent to guide resource allocation. It is vital to get students to realize the great difficulty (and hence the great value) of strategic intent.


    2. What is the significance of strategic intent's being “stable over time”?

     As several of the Mintzberg readings emphasize, strategy is a force for stability: it implies stability. Strategy is a “pattern in a stream of action over time.” The coherence needed to create a pattern is provided by some stability. Strategic intent provides long‑term stability (and hence patterning) through its overall vision and obsession with global dominance. It provides short‑term stability by helping to guide actions, like resource allocations, “in the moment.”



    3. What is your reaction to the authors' criticism of the "Silicon Valley" approach to innovation?

    Students may have a hard time with the authors on this one. Theirs is a stinging criticism. The authors say that most of the cherished tools of American management: pay‑for‑performance schemes, quality circles, and especially skunkworks and intrapreneurship—are bankrupt. They assert that managers who wait for entrepreneurial successes from below are “non value-adding.” These are probably valid criticisms, but it should be interesting to see how students react to them. If their faith in some of what they have been taught in other courses is shaken, that is probably a good (albeit upsetting) thing.


    4. What is the significance of strategic intent's being "unbridled but not uncorralled”?

    The authors are, in essence, arguing for "umbrella strategy," to use Mintzberg's term from Chapter 1—set up a motivating and challenging target and let the details of the strategy emerge. The target is the corral, and letting the details emerge is the unbridled aspect.


    5. The authors say that strategy should be an "extreme misfit" between resources and opportunities. What do you think?

    One of the most common complaints in organizations is the lack of resources. So it seems odd that Prahalad and Hamel should be arguing in favour of resource constraints. Some students may pick up on the reason—the resource shortage is designed to spur creativity. Firms that have lots of resources that typically let their creativity atrophy. There is no motivation to change anything. So rival firms pass them by. Strategic intent gets around this problem, in theory, by setting up a brass ring that is always out of reach of the company. In striving to grasp it anyway, its members are forced to be creative.


    6. What is your reaction to the metaphor of strategic intent being like a “marathon run in 400 meter sprints”?

    Even students who are not into sports should recognize the value of this metaphor. Marathons are sufficiently long races that they are analogous to the "never ending journey" of business. But the authors make some changes to adjust for the inevitable breakdown of the analogy. For example, in most marathons, the runners have scouted the course and know the terrain. But in business, no one knows what the future will bring. So cutting the race up into smaller pieces where people can know what to expect is a good idea. Another breakdown: most marathon runners pace themselves for the course. But in business, a company that coasts will lose enough in the short distances to end up losing the whole race. So the “runners” must sprint each of the increments.


    7. What do you think of the list of things top management can do to engage the entire organization?

    The list—(1) create a sense of urgency; (2) develop a competitor focus at every level through widespread use of competitive intelligence; (3) provide employees with the skills they need to work effectively; (4) give the organization time to digest one challenge before launching another; and (5) establish clear milestones and review mechanisms to track progress and ensure motivation, is a good one. The overall impression is one of focused action, keep moving forward with the needed skills and capacity. The only exception is number four, giving the organization time to digest challenges. People who are sprinting through a marathon need to catch their breath a little bit.


    8. The authors think that “reciprocal responsibility” is crucial to competitiveness. Why do they say that, and what is your reaction to their argument?

    The rank‑and‑file members of an organization must feel that they are being fairly treated; otherwise they will not be sufficiently motivated. If they are not motivated, they will not do the one thing that is a sustainable advantage, which is keeping up the pace of adding advantages to their operations. Since most students are unlikely to see themselves in the position of C.E.O. anytime soon, they are likely to understand and agree with the authors here. There may be a few who see management as a ticket to personal fortune, as opposed to organizational achievement, and those may not like the idea of reciprocal responsibility.


    9. What do the authors say is the “essence of strategy”? What are the implications of their point?

    Few competitive advantages are long lasting, and the first organization to develop one gains a greater advantage. “The essence of strategy lies in creating tomorrow's competitive advantages faster than competitors mimic the ones you possess today .... An organization's capacity to improve existing skills and learn new ones is the most defensible competitive advantage of all.” The implications are clear—the organization's members must constantly be learning new things and new ways of doing things. Whatever you are currently doing can ultimately be copied, so you have to “stay ahead of the curve” by creating new things that force your rivals to copy you even more, and so on. This is difficult and requires a lot of effort by everyone, which is another aspect of the “reciprocal responsibility” mentioned in the previous question.


    10. What do the authors say is necessary for winning against stronger competitors? What is your reaction to their argument?

    To win against better‑resourced competitors, managers must fundamentally change the game in ways that disadvantage stronger rivals. The goal is competitive innovation, not imitation. Four approaches to competitive innovation have been popular: (1) building layers of advantage; (2) searching for loose bricks (finding “weak spots” in rivals’ strategies);  (3) changing the terms of engagement (inventing “new rules” for the competitive dynamics of the industry); and (4) competing through collaboration (forming strategic alliances, both for gaining short‑term advantage and long‑term learning). Students are likely to be confused by this whole line of thinking by Prahalad and Hamel. They can easily understand the idea of playing a game, but may not realize that industry games don't have independent rule‑makers. The organizations involved may attempt to evade the rules whenever they wish. The problem is that only the global leaders actually do change the rules successfully.



    11. What are the many points of the authors’ critique of Western management practices? What do you think of their critique?

    Several Western practices lead to lower advantage levels. “Fast‑tracking” of managers creates over‑reliance on numbers for management, since managers rarely develop deep business knowledge and must therefore rely on numbers. Short‑term assignments lead either to goals that fail to get commitment or to unrealistically short time frames. The familiar dichotomy between strategy formulation and implementation undermines competitiveness by fostering an elitist view of management. Managerial elitism is also fostered by the perpetuation of myths about managers and unwillingness to admit not having all the answers. Students who have been socialized in a business programme may have a hard time with these ideas. They want to believe that managers can “manage by the numbers.” They may believe that short‑term assignments are how one should get ahead. They may believe in the action orientation of short time frames. They may also aspire to being powerful managers who want to share in the mythology. They may not even believe that most managers don't have all the answers. Yet most experienced people would agree that the picture painted by the authors is in sharp focus.


    12. What are the implications of “tapping the wisdom of the ant hill”?  What do you think of this metaphor?

    Students may not like this metaphor very much, but it is actually a pretty good one. Much research on ants (as well as termites and honeybees) has shown that relatively unintelligent individuals working together in a “hive” mentality will be able to accomplish remarkable things. Since people are much more intelligent than insects, the potential for “human hives” (or “colonies”) is enormous. If many unintelligent individuals acting together can do so much, what could intelligent individuals do?



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