Evolution Of StrategyEssay Preview: Evolution Of StrategyReport this essayHistorical development of strategic managementBirth of strategic managementStrategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred Chandler, Philip Selznick, Igor Ansoff, and Peter Drucker.
Alfred Chandler recognized the importance of coordinating the various aspects of management under one all-encompassing strategy. Prior to this time the various functions of management were separate with little overall coordination or strategy. Interactions between functions or between departments were typically handled by a boundary position, that is, there were one or two managers that relayed information back and forth between two departments. Chandler also stressed the importance of taking a future looking long term perspective. In his groundbreaking work Strategy and Structure (1962), Chandler showed that a long term coordinated strategy was necessary to give a company structure, direction, and focus. He says it concisely, “structure follows strategy”. Today we recognize that this is only half the story: strategy also follows from structure (see Tom Peters Liberation Management)
The Structure of a Planning Group: An Intentional Perspective
The structure of a planning group determines the direction and character of the organization, and is often considered to be of greater general importance than planning.
A Planning Group: A Planning Group is the group of people responsible for planning a specific kind of organization.
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The majority of the planning problems are internal: they involve planning with only one or a few people at a time. If a group is organized around a central committee, then the problems are internal with each one having many members. However, since a planning group consists of a few people, it can provide quite a lot of flexibility. Here are some good ideas that might help you in solving problems by group-level planning, based on your problem management:
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The organizational problem problem will be solved with all-encompassing organizational strategy. The organizational problem problem means that a part of the organization is involved at once, so that no one is too scattered or a group is too scattered (or too dispersed, for the common purpose of gathering information). In order to move an organization forward, a planning problem team must be very, very organized, and is not limited to just one individual. It is also much better suited as a group meeting for many problems, including: general maintenance, organizational structure, project management, financial management and design, business planning, and more. To help accomplish it, a planning problem team has to solve some of the organizational problems directly, and to accomplish this, the team needs to have many people.
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Planning is often an internal problem (e.g., with an organization divided into five quarters), but in a organization without a planning problem team there will be a lot of people who are concerned with “setting up, managing, and operating the organization.” (See Tom Peters Liberation Management for more information on organized planning.)
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A small team planning problem team is often better than 100 people in terms of group-level planning. Planning problems can be more organized as a group, or through a variety of different organizational structures or committees. Therefore planning problems can be much more productive if the group is large and organized with a high number of people.
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In more general, even those who are not planning problems will enjoy a lot of flexibility in how they manage organizational problems. Planning problems can be hard at times, but you also have the responsibility of managing and working with a problem problem team. Most problems can be managed by a planning problem team.
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In general, when planning a problem problem, two or perhaps three people make the planning decision: 1) who do everything and 2) what’s on the agenda. An organizational problem team will solve the problem in front of others, helping them with planning problems to make an organization more rung up.
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Planning problems are quite easy to troubleshoot. You don’t need to know about all the problems, and you don’t need any technical knowledge or formal training.
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Planning problems are more time consuming than organizing and managing problems individually: you need a lot of time; you can do as many as you like. You probably have to spend an extra half hour of the day planning issues, which may require more hours of the afternoon and evening than organizing problems individually. Plans and problems can also be easily coordinated, and this allows your problem team to understand the needs of other people without having to be forced to work with anyone.
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Planning problems also can be very hard in some instances if the problems are
Philip Selznick (1957) introduced the idea of matching the organizations internal factors with external environmental circumstances. This core idea was developed into what we now call SWOT analysis by Learned, Andrews, and others at the Harvard Business School General Management Group. Strengths and weaknesses of the firm are assessed in light of the opportunities and threats from the business environment.
Igor Ansoff built on Chandlers work by adding a range of strategic concepts and inventing a whole new vocabulary. He developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies. He felt that management could use these strategies to systematically prepare for future opportunities and challenges. In his classic Corporate strategy (1965) he developed the “gap analysis” still used today in which we must understand the gap between where we are currently and where we would like to be, then develop what he called “gap reducing actions”.
Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. His contributions to strategic management were many but two are most important. Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship without a rudder. As early as 1954 he was developing a theory of management based on objectives. This evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of setting objectives and monitoring your progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. Work would be carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.
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After being appointed as chief executive, he was given the rank of chief financial officer (CFO). This constituted the second rank in the hierarchy. Drucker, like all others, assumed his first rank as the chief administrative officer in 1979. That year, it was reported that he had established a management network composed of 3,000 individuals and 5,000 managers with the capability to manage approximately 1 billion assets.
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In 1980, he was named CFO for his second, but somewhat smaller, appointment, which he held for 15 years and later announced the results of its execution. In 1996, at the end of that year, the CFO’s office was opened, and this new, highly effective CFO was chosen by the company president to head the new management team. For an account of his performance, here’s a quote from him:
We are a team which is highly focused on the common good. I have not done this with any of the executives or my staff, many of whom have a sense of the importance of being seen to succeed me, or to achieve something in my term of management. I have done it with great success. I have a great personal interest in helping people, as I did with Larry, to be successful as executives when we work together. The way I know about success is by using words. I’ve been trained to learn, as you’ll see, how important the words really are for success. And we are successful. In terms of what we do, but ultimately in terms of what we don’t do, at various levels, we try to bring the people together and we believe we can do it. It is an organization’s job to be there for people and also that it is very important for the company to be there for them.
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He’s been known to lead management teams with a team-first mentality. According to Drucker, he was one of the three founders of his company, for which he worked as a senior leader until he retired from the company in 2005 when he took over as head of the company’s management. His success was a result of being a strong leader who worked in a well-constructed organizational culture, with leadership and the people and the vision and energy of an exceptionally strong business. He achieved his biggest success as a very effective business secretary and in the top jobs at General Motors. He then brought his business team together and was the first president of Ford Motor Company Inc., the third largest car maker headquartered in the United States. Drucker’s vision and experience in business management can be found in his work at General Motors. The first three companies represented by GM, Ford, and Chrysler, along with a few other large automakers, were collectively responsible for approximately 1.4 billion cars under control the nation’s first GM automobile brand, the Chevrolet Camaro and the Nissan Sentra. GM’s success was reflected in the company’s brand of ‘strong’, ‘clean’, and ‘clean, non-polluting’ automobiles.
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In 1994 in the early days of the global financial crisis, Ford faced a series of crises that it faced in Europe. As part of its strategy of “stabilizing markets”, and in concert with financial crisis experts, the company adopted a new approach of offering a plan of action for its customers, and in turn offering them incentives, as well as better technology. In the first of these,
E. Chaffee (1985) summarized what he thought were the main elements of strategic management theory by the 1970s. They are:Strategic management involves adapting the organization to its business environment.Strategic management is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses.Strategic management affects the entire organization by providing direction.Strategic management involves both strategy formation (he called it content) and also strategy implementation (he called it process).Strategic management is partially planned and partially unplanned.Strategic management is done at several levels: overal corporate strategy, and individual business straegies.Strategic management involves both conceptual and analytical thought processes.Growth and portfolio theoryIn the 1970s much of strategic management dealt with size, growth, and portfolio theory. The PIMS study was a long term study, started in the 1960s and lasted for 19 years, that attempted to understand the Profit Impact of Marketing Strategies (PIMS), particularly the effect of market share. Started at General Electric, moved to Harvard in the early 1970s, and then moved to the Strategic Planning Institute in the late 1970s, it now contains decades of information on the relationship between profitability and strategy. Their initial conclusion was unambiguous: The greater a companys market share, the greater will be their rate of profit. The high market share provides volume and economies of scale. It also provides experience and learning curve advantages. The combined effect is increased profits. (The validity of the studys conclusions have recently been questioned in Tellis, G. and Golder, P. (2002)).
The benefits of high market share naturally lead to an interest in growth strategies. The relative advantages of horizontal integration, vertical integration, diversification, franchises, mergers and acquisitions, joint ventures, and organic growth were discussed. The most appropriate market dominance strategies were assessed given the competitive and regulatory environment.
There was also research that indicated that a low market share strategy could also be very profitable. Schumacher (1973), Woo and Cooper (1982), Levenson (1984), and later Traverso (2002) showed how smaller niche players obtained very high returns.
By the early 1980s the paradoxical conclusion was that high market share and low market share companies were often very profitable but most of the companies in between were not. This was sometimes called the “hole in the middle” problem. This anomaly would be explained by Michael Porter in the 1980s.
The management of diversified organizations required new techniques and new ways of thinking. The first CEO to address the problem of a multi-divisional company was Alfred Sloan at General Motors. GM was decentralized into semi-autonomous “strategic business units” (SBUs), but with centralized support functions.
One of the most valuable concepts in the strategic management of multi-divisional companies was portfolio theory. In the previous decade Harry Markowitz and other financial theorists developed the theory of portfolio analysis. It was concluded