Strategy Formulation, Change Management, & its Unintended 

Consequences

Dinesh IyerOhio University

Strategic Leadership

Sources of Variation in Business Unit Profitability

UnexplainedVariation 42.89%

Business Unit Effect31.71%

Industry Effect18.68%

Year Effect2.39%

CorporateParent Effect4.33%

From: Anita McGahan and Michael Porter, “How Much DoesIndustry Matter, Really?” Strategic Management Journal (1987).

This represents thevariation in profitabilityacross business units,across timethat cannot be accounted forby the identityof the business unit,its industry, its corporateparent, or the particularyear.

What about Leadership?

• Leadership Makes a difference!!!– Analysis of 200 management techniques employed by 150 companies over ten years:

• CEO’s influence 15 percent of the total variance in a company’s profitability or total return to shareholders.

• Also, found that the industry in which a company operates accounts for 15 percent of the variance in profitability.

Research on Leadership…

• Transactional (routine) and Charismatic (inspirational) leadership– Transactional leadership was not significantly related to performance.

– Charismatic leadership showed a slight positive relationship with performance.

– When the environment is uncertain, CL is more strongly related to performance.

A framework for understanding leadership

• L = f (l, gm, s)– Leader– Group members– Situational factors

Leadership framework

Leadercharacteristics

and traits

Leaderbehavior and

style

Internal andexternal

environment

Group membercharacteristics

Leadershipeffectiveness

Managing Today! By Stephen P Robbins 1997

Leadership or Management

• What’s the difference?– Management

• Planning, Organizing, Leading, Controlling etc.• Management produces order, consistency, and predictability.

– Leadership• Deals with change, inspiration, motivation, influence etc.

• Leadership produces change and adaptability.

Leadership and Management!

• A leader creates a vision (Lofty goal!?!) to direct the organization. 

• In contrast, the key function of the manager is to implement the vision. 

• The manager and his/her team thus choose the means to achieve the end that the leader formulates.

But, remember…

• The difference between leadership and management is one of emphasis: Effective leaders also manage, and effective managers also lead.

Strategic Leadership

• Unfreezing‐Realizing change needs to occur

• Change/Transition‐Making the changes happen

• Freezing‐Changes become the norm

Lewin’s Freeze Phase

• Step 1‐ Create urgency– Everyone must want the changeto occur

• Step 2‐Form a powerful coalition– Managers must convince everyone

• Step 3‐Create vision for change– Easier for company to grasp

• Step 4‐Communicate the vision– Ensure the company is on track

Kotter’s 8 Step Model

• Step 5‐Remove obstacles– Fix anything that could prevent change from happening

• Step 6‐ Create short term wins– Showed how profitable thechanges were

• Step 7‐Building on change– Provide more products to become more successful

• Step 8‐ Anchor the changes in corporate culture

– It should then become partof company’s core

Kotter’s 8 Step Model

MCKINSEY’S 7S FRAMEWORK

Saturn: A different Kind of Company

• What are Saturn’s key resources and capabilities (technology‐based, knowledge‐based, market‐based, etc.)? 

• How do these resources and capabilities result in a sustainable competitive advantage for Saturn? 

• What are the major strategic challenges facing Saturn?• What has been the relationship between Saturn’s strategy and 

General Motors’ strategy?• How does Saturn help create new capabilities for General 

Motors?

Saturn

• History– Spring Hill Manufacturing

• Ad– Alaska Ad

• Homecoming– Homecoming event– Homecoming based Ad

• Other– Other sad Ad

• Recent news link– Saturn‐Penske Deal falls through 10/1/2009

– Chevrolet refund offer 7/11/12

Board of Directors

President Executive Committee

Financial Staff

Legal Department

General Advisory Staff

GM Acceptance Corporation

Chevrolet Division

SheridanDivision

Canadian Division

Oldsmobile Division

GM Truck Division

GM Export Company

Cadillac Division

Buick Division

Inter-company

Parts Division

Oakland Division

Samson Tractor Division

Scripps Booth Corp.

Source: A.P. Sloan, My Years with General Motors, Orbit Publishing, 1972, p. 57.

General Motors’ Organization Structure, 1921

Board of Directors

President’s Council Corporate Functions

North American Operations

Delphi Automotive Systems

International Operations

GM Acceptance Corporation

Hughes Electronics

Midsize & Luxury Car Group

Small Car Group

GM Power Train Group

Vehicle Sales, & Marketing Group

Development & Technical Cooperation Group

GM Europe

Asian & Pacific Operations

Latin American, African, & Middle East Operation

General Motors’ Organization Structure, 1997

Corporate Executive OfficeChairman & CEO

Corporate StaffFinance Business R&D Human Legal

Development Resources

GE AircraftEngines

GE Trans-portation

GEIndustrialSystems

GEPlastics

GEAppliances

GESupply

GE PowerSystems

GE MedicalSystems

GELighting

GESpecialtyMaterials

NBC GE Capital

26 businesses organized into 5 segments: Consumer Mid-market Specialized Specialty EquipmentServices Financing Financing Insurance Management

Service Divisions

General Electric’s Organization Structure, 2002

Corporate Executive OfficeChairman & CEO

Corporate StaffBusiness Development LegalCommercial & Communications Global Research Corporate Initiatives Group Human Resources Finance International

TechnologyInfrastructure• Aviation• Enterprise Solutions• Healthcare • Transportation

Industrial & Commercial• Appliances• ConsumerElectronics• Electrical Distribution• Lighting

Energy Infrastructure• Energy• Oil & Gas• Water & Process

Technologies

GE Capital

• Aviation FinancialServices

• Commercial Finance

• Energy Financial Services

• GE Money• Treasury

NBC Universal• Cable • Film• International Network

• Sports & Olympics

General Electric’s Organizational Structure, January 2009

12© 2010 Robert M. Grantwww.contemporarystrategyanalysis.com

Strategic group map of selected retail chains

Whole Foods Aims to Alter 'Price Perception' as It Expands – Annie Gasparro – WSJ 2/15/2012

• Whole Foods Aims to Alter 'Price Perception' as It Expands – Annie Gasparro

• “Whole Foods Market Inc. doesn't want to be known as the pricey grocery store for well‐heeled, organic‐food sophisticates.”

• “The grocery chain, which mostly entices young, trendy city dwellers, is now moving into smaller, suburban areas where its new, smaller stores are seeing stronger returns. But to make it work, Whole Foods has to rid itself of its top‐dollar reputation. A nickname like "Whole Paycheck" will make it tough to draw in the new demographic, since lower‐priced competitors are homing in on the fresh‐food fad.”– To counter its reputation for being expensive, Whole Foods is offering more 

price promotions and discounts in all of its stores, and lately it has held many of its grocery prices flat despite its own costs rising. The idea is for customers to feel that while there may be certain product prices that are going up, they are finding plenty of good deals to make up for that, said executives, who call the strategy "price perception."

• Whole Food’s mission statement “promote vitality and well‐being for all individuals by offering the highest quality, least processed, most flavorful natural and naturally preserved foods available.” 

Components of Value Created

Cost

Producer’s Profit

Consumer surplus

Value created

B

PC

Strategy or Positioning•Differentiation based on price•Segmentation targeted at core market segments•May use extensive advertising to drive demand and achieve economies of scale•Emphasis on economies of scale and absolute cost advantages

Core Competencies (Resources & Capabilities)•Process Research & Development•Manufacturing, Purchasing, & Logistics Management

Organization•“Functional” Organization Structure•Centralized Controls & Procedures•Culture Focused On Running “Lean & Mean”

The Cost-Leadership Strategy

Strategy or Positioning•High Degree of Differentiation Through Positioning & Brand Image•Extensive Product Proliferation Over Many Market Segments•Use of Advertising & Marketing To Shape Preferences•Extensive Innovation & Product Development

Core Competencies (Resources & Capabilities)•Product Research & Development•Sales & Marketing Expertise•Brand Name Capital

Organization•Product Market Organization•Decentralized Authority & Controls•Culture Which Emphasizes Creativity & Flexibility

The Differentiation Strategy

Creating a simple strategy

• http://www.amazon.com/Week‐1/dp/B0050K7K9O/ref=pd_ys_iyr3– Season 2, E2: 2:00‐14:00: Toygaroo– Season 2, E2: 17:30‐24:00: Bacon– Season 2, E2: 24:15‐29:10: Vurtego– S2, E2: 29:15‐42:45: Nose filter

Thank you!