Strategic Thinking Chapter 1

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Kelly

Bettina

Nick

Rachel

Tam

Outline

Mutually Destructive Competition Industrial Extinction Tyranny of Theory Win-Win Situation for All Creating Value for People New Moral Contract Building Shared Destiny Relationships Conclusion

Rocks and Hard Places

Dominant Theory and Practice Distributing value to Shareholders Industrial Extinction

A New Manifesto for Management Contradictory practices No fear of diversity Microsoft, ABB, 3M

Systems

Geneen’s Monkey Ford’s Assembly line Famous last words of the “System”

The Tyranny of Theory

Win-Loose Porter’s theory of

strategyValue appropriationStatic efficiency

Companies exist because markets fail

Control

Society vs. Company

New Management Philosophy

Win-Win Value creation Dynamic efficiency Markets as

organizational economies

Society and Company

Shift in Thinking

Win-Loose Porter’s theory of

strategyValue appropriationStatic efficiency

Companies exist because markets failControl

Society vs. Company

Win-Win Value creation Dynamic efficiency

Markets as organizational economies

Society and Company

Quotes Profit in business comes from repeat customers,

customers that boast about your project or service, and that bring friends with them. W. Edwards Deming

In the business world the rearview mirror is always clearer then the windshield Warren Buffett

We succeed in enterprises which demand the positive qualities we possess, but we excel in those which can also make use of our defects. Alexis de Tocqueville

Profitability in a Global Context

http://www.youtube.com/watch?v=NM_F3C8rCEQ

Recent Survey

Gary Hamel, Visiting Professor of Strategic and International Management at the London Business School:

Looking twenty years out into the future, what one characteristic—principle, practice, or structural feature—of the “modern” industrial organization will appear to be the most antiquated or anachronistic?

From HBR Online – 4 Oct 2007

Some of the Responses "Rigid hierarchical system would be the most

antiquated. Almost flat & flexible organizational structure, based on the roles one performs, will be the rule in coming years. This will allow greater interaction and innovation within new-age organizations."

"Quite simply, centralized command and control. While used by most companies as the fundamental organizational structure, it in itself has become the chief impediment keeping organizations from adapting to newer more flexible structures required to grow and compete globally. Quite a paradox!!"

Responses – Cont. "Shareholder Value Fundamentalism [will

appear anachronistic in the future]. Organizations will balance human values and not focus just on economic value."

"The management principle (and tangible structural artifacts) that views organizational change as a periodic event and which seeks constancy and stability. This principle holds that organizations should be designed based on the mental paradigm that stability is the norm and desired end state. Today, all structures, systems, processes, programs, and people strategies are based on a stability mindset."

Motorola CollaborationMotorola, Inc. and Macrovision Announces Analog Copy Protection Technology AgreementWed Oct 3 05:27:00 EDT 2007Motorola, Inc. and Macrovision Corporation announced a renewed agreement to make Macrovision's

analog copy protection (ACP) technology available in Motorola's portfolio of set-tops. This collaboration facilitates seamless mobility and the accelerated adoption of new devices and services in the digital home.

Verizon Wireless And Motorola, Inc. Announces Launch of MOTORIZR Z6tvFri Sep 28 17:30:00 EDT 2007Motorola, Inc.: Verizon Wireless and Motorola, Inc. announced the launch of the MOTORIZR Z6tv on

October 5. MOTORIZR Z6tv comes with a slider design and is equipped with V CAST Mobile TV, V CAST Music and Video.The MOTORIZR Z6tv provides 24-hour access to broadcast-quality full-length TV shows through V CAST Mobile TV from Verizon Wireless.

Infineon Technologies AG Signs Agreement with Motorola, Inc. to Develop 3G Radio Frequency Chip

Wed Sep 26 18:26:00 EDT 2007Motorola, Inc.: Infineon Technologies AG (Infineon) announced that it has signed an agreement with

Motorola, Inc. to develop a new multi-mode, single-chip 3G radio frequency (RF) transceiver based on Infineon's SMARTi UE chip. The RF transceiver is a core component in a mobile phone or other mobile cellular device. Its primary function is to send and receive digital data over the air. As consumers continue to demand more multimedia functionality from their mobile devices, the RF plays a key role in delivering the data speed and signaling needed to support mobile content and services.

Latest News

NEW YORK, Oct 3 (Reuters) - Motorola Inc. (MOT.N: Quote, Profile , Research) said on Wednesday it took $221 million in charges for job cuts in the first half of 2007, according to a regulatory filing.

Motorola said the severance costs came from cutting about 4,100 jobs.

Job cuts will result in a net pre-tax charge of around $83 million in the third quarter, the company said in its filing with the U.S. Securities and Exchange Commission

5 Year Stock PricesMotorola, Nokia and Sony

Companies as Value Creators

3M and ABB Focused on value

creation Continuous innovation People systems Encouraged new ideas

Westinghouse and Norton Zero-sum Dog-eat-dog Bought and sold businesses Value appropriation Employees, suppliers and

customers are seen and dealt with the same

Thought of company is market terms

People acted alone as if in market

Example

Enron Video

Different Beliefs = Different Results Norton and Westinghouse became

victims of their own strategy Employees were scared to fail As a result, they did not create anything

new

ABB On Adding Value

ABB’s goals are “to make economic growth and improved living standards a reality for all nations throughout the world” and that “we are, first of all, an educational institution.”

ABB On Adding Value

Employees were encouraged to take risks

Employees had job security Shared resources between departments

Managers Should…

• Avoid status quo• Lead change• Facilitate cooperation • Establish a sense of purpose• Create an environment for entrepreneurs to

be unleashed• Develop people systems• Shift from value appropriation to value

creation

Out With the Old, In With the New

Strategy

Structure

Systems

PurposeProcessPeople

S

P

A Win-Win Situation

Managers have opportunity to influence their employees

Make them the best they can be Employees win, company wins,

economy wins

The Old Way…

Advantage from monopoly over people’s jobs

Specialization an asset Unwillingness to compromise This type of job security unrealistic in

our new economy

The New Way…

Value creation takes more than that The company sets the tone

Quote

“Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a

civilization work.”

~Vince Lombardi

A New Moral Contract…

Employee responsibility Employee mobility Enhanced employee value

Motorola Corporate Responsibility Corporate responsibility means

harnessing the power of our global business to benefit people. It also means doing the right thing in all aspects of our business, including how we treat the environment, our employees, our customers, our partners and our communities.

Motorola Business Principles

Community support Economic opportunities and growth

Motorola University

Every employee required to take 40 hours per year

Shows their commitment to adding value to people

Competitive advantage Six sigma

Individual Dignity Entitlement1. Do you have a substantive, meaningful job that

contributes to the success of Motorola?2. Do you know the on-the-job behaviors and have the

knowledge base to be successful?3. Has the training been identified and been made available

to continuously upgrade your skills?4. Do you have a personal career plan, and is it exciting,

achievable, and being acted on? 5. Do you receive candid, positive or negative, feedback at

least every thirty days that is helpful in improving or achieving your personal career plan?

6. Is there appropriate sensitivity to your personal circumstances, gender, and cultural heritage so that such issues do not detract from your personal career plan?

Quote

“Few things help an individual more than to place responsibility on him, and to let

him know that you trust him.”

~Booker T. Washington

What the New Contract Is Not… An excuse not to protect the jobs of

employees An act of altruism A program to be installed by HR, rather

an entirely different way of thinking

Shared Destiny Relationships• Creating value for internal and external

customers• Stated objective and proven outcome• Successful companies e.g.

Canon: Promoting Bubble-Jet Printer yielded higher functionality-to-cost ratioIntel: Creating next generation chips allowing customers to do new thingsMcKinsey & Company and Anderson Consultant: Recruiting the best talent by giving the promise of employability

Example: Unipart’s Transformation

• different from “being and doing good to all.” • two-way dependence • making the destiny mutually attractive• “an expansive positive-sum value-creation

perspective”• “… We must create shared destiny

relationships with all our stakeholders: customers, employees, suppliers, governments, and the communities in which we operate. It is not altruism; it is commercial self-interest.” P.28

A Manifesto for Reclaiming Managerial Legitimacy

“value creation for all constituencies” more satisfying and more effective

Examples

• “Environment, Health, and Safety (EH&S) is a shared responsibility, and all staff members are responsible and accountable for our performance. All staff are expected to understand and comply with Amgen’s commitment to EH&S and are encouraged to actively participate in its continuous improvement.” –Amgen Inc.’s Environmental Commitment Statement

Examples – Cont.• “Purveying quality coffees means much

more than selecting the finest beans on the market. Starbucks strongly believes in the importance of building mutually-beneficial relationships with coffee farmers and coffee communities with which we work. The success of the farmers with whom we do business is a critical component of our own success. We are taking an integrated approach to building relationships with coffee communities….” –Starbucks’ social responsibility statement

Conclusion

• Value Appropriation’s problem: Self-defeating, get squeezed more and more into a corner, and value being destroyed for all components

• Value Creation’s power: customer satisfaction, employee enthusiasm, and shareholder wealth

• Ideas matter• “Get out of the pincer’s grip.” p.31

References

• Cusumano, M.A., & Markides, C.C. (Eds.). (2001). Strategic Thinking for the Next Economy. San Francisco: Jossey-Bass A Wiley Company.

• http://www.amgen.com/about/environmental_sustainability_commitment_statement.html

• http://www.starbucks.com/aboutus/origins.asp

This is a test…

Be afraid

Essay Questions Do you think the recent agreement

between General Motors and the UAW union is a reflection of a change in the relationship between GM and its employees ? Explain your view. What might be the motives ?

Can white collar crime be explained as an outcome of a strategic focus on value appropriation ? Explain.

Essay Questions – Cont.

A company director laments: “my best people always leave first when there is a threat of job cuts”. What advice might you give him ?

Why does dynamic efficiency in companies have a positive impact on society ?

Westinghouse and Norton Zero-sum Dog-eat-dog Bought and sold businesses Value appropriation Employees, suppliers and customers

are seen and dealt with the same Thought of company is market

terms (people started acting alone People acted alone as if in market