©2000, michael a. mische mor 559 – strategic renewal university of southern california the case...

©2000, Michael A. Mische©2000, Michael A. Mische

MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal

University of Southern CaliforniaUniversity of Southern California

The Case for The Case for ChangeChange

Strategy for High Strategy for High PerformancePerformance

LECTURE 2LECTURE 2

Strategy for High Strategy for High PerformancePerformance

LECTURE 2LECTURE 2

Case for Change




Lecture 2: Lecture 2:

DESCRIPTION & OVERVIEWThis session directly draws upon our introductory lecture to strategic renewal and organizational transformation. During this session, we will introduce and focus our discussion on three concepts critical to strategic renewal: change, high-performance and strategy formulation and development.In the course of our discussion, we will address some of the key questions related to these topics, including:

• What are the dynamics and key drivers strategic change?• What are the critical questions/decisions concerning change that organizations must determine?• What are the various domains and scopes of change?• What is the definition of high-performance and the characteristics of a high-performance company?• What are the definition and elements of high-performance strategy?

DESCRIPTION & OVERVIEWThis session directly draws upon our introductory lecture to strategic renewal and organizational transformation. During this session, we will introduce and focus our discussion on three concepts critical to strategic renewal: change, high-performance and strategy formulation and development.In the course of our discussion, we will address some of the key questions related to these topics, including:

• What are the dynamics and key drivers strategic change?• What are the critical questions/decisions concerning change that organizations must determine?• What are the various domains and scopes of change?• What is the definition of high-performance and the characteristics of a high-performance company?• What are the definition and elements of high-performance strategy?

KEY LEARNING CONCEPTSStrategy lies at the core of organizational competitive survival. Organizations that master the strategy formulation process and thoroughly understand its essential elements are able to manage, anticipate and even influence change and achieve high-performance and sustained competitiveness.Our learning objectives in this lecture are to develop an understating of the three interlinked concepts of strategy, high performance and strategic change. Some of the key learning goals are to:

• Understand the dynamics of change and its key drivers.• Understand the kinds and scopes of change organizations undergo in their transformation efforts.• Define high performance and understand the key attributes of high-performance organizations.• Define strategy within the context of high performance and understand its criticality to strategic renewal.• Identify the five strategic pillars supporting all high-performance strategies.• Introduce the six strategic options available to all organizations.

In addition, this lecture introduces new concepts relevant to today’s competitive environment and strategy development, including:

• The concept of competing in a “marketspace”• The “portfolio” approach to strategy formulation and implementation

KEY LEARNING CONCEPTSStrategy lies at the core of organizational competitive survival. Organizations that master the strategy formulation process and thoroughly understand its essential elements are able to manage, anticipate and even influence change and achieve high-performance and sustained competitiveness.Our learning objectives in this lecture are to develop an understating of the three interlinked concepts of strategy, high performance and strategic change. Some of the key learning goals are to:

• Understand the dynamics of change and its key drivers.• Understand the kinds and scopes of change organizations undergo in their transformation efforts.• Define high performance and understand the key attributes of high-performance organizations.• Define strategy within the context of high performance and understand its criticality to strategic renewal.• Identify the five strategic pillars supporting all high-performance strategies.• Introduce the six strategic options available to all organizations.

In addition, this lecture introduces new concepts relevant to today’s competitive environment and strategy development, including:

• The concept of competing in a “marketspace”• The “portfolio” approach to strategy formulation and implementation

Case for Change





CLASS SCHEDULE & AGENDA

I. 6:00 – 6:15 Course Related Q&AStudent

ConcernsGeneral

Discussions

II. 6:15 – 6:30 Preview of current week’s material

II. 6:30 – 7:30 Lecture

III. 7:30 – 7:45 Break

IV. 7:45 – 9:00 Lecture & Material/Topic Discussion

V. 8:45 – 9:30 Case Examples & Discussions

VI. 9:30 – 10:00 Professor Available for Q&A, Discussion, etc.

CLASS SCHEDULE & AGENDA

I. 6:00 – 6:15 Course Related Q&AStudent

ConcernsGeneral

Discussions

II. 6:15 – 6:30 Preview of current week’s material

II. 6:30 – 7:30 Lecture

III. 7:30 – 7:45 Break

IV. 7:45 – 9:00 Lecture & Material/Topic Discussion

V. 8:45 – 9:30 Case Examples & Discussions

VI. 9:30 – 10:00 Professor Available for Q&A, Discussion, etc.

READINGSMische: Strategic Renewal, Chapter 2

Harley-Davidson, Inc., HBS, 292982, December, 15, 1992.

READINGSMische: Strategic Renewal, Chapter 2

Harley-Davidson, Inc., HBS, 292982, December, 15, 1992.

CASESHarley Davidson, Inc. (HBS)

CASESHarley Davidson, Inc. (HBS)

Case for Change





CONCEPT DISCUSSION & QUESTIONS

1. Given the various types and domains of change, discuss the scopes and respective impacts of the change efforts organizations undergo. What type of change is most effective and most enabling with respect to strategic renewal? Which one entails the highest degree of risk?

2. What are the major objectives driving strategy and strategy formulation efforts?

3. Given the six strategic choices faced by all organizations, discuss some real-life examples for each of these strategies. For example, consider Dell Computer, DaimlerChrysler, Sears, Kodak, Microsoft, Sony, Apple Computer,etc. How well do these companies manage their strategies from a portfolio perspective?

4. Considering the concept of “marketspace”, explain how it relates to the three key drivers of change – information technology, globalization, and multiculturalism.

5. Referring to the framework of the five strategic pillars, discuss some examples of companies that demonstrate and effective use and integration of these elements in developing and implementing their competitive strategies.

CONCEPT DISCUSSION & QUESTIONS

1. Given the various types and domains of change, discuss the scopes and respective impacts of the change efforts organizations undergo. What type of change is most effective and most enabling with respect to strategic renewal? Which one entails the highest degree of risk?

2. What are the major objectives driving strategy and strategy formulation efforts?

3. Given the six strategic choices faced by all organizations, discuss some real-life examples for each of these strategies. For example, consider Dell Computer, DaimlerChrysler, Sears, Kodak, Microsoft, Sony, Apple Computer,etc. How well do these companies manage their strategies from a portfolio perspective?

4. Considering the concept of “marketspace”, explain how it relates to the three key drivers of change – information technology, globalization, and multiculturalism.

5. Referring to the framework of the five strategic pillars, discuss some examples of companies that demonstrate and effective use and integration of these elements in developing and implementing their competitive strategies.

CASE DISCUSSION & QUESTIONSCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)Interactive class discussion

CASE DISCUSSION & QUESTIONSCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)Interactive class discussion

Case for Change





LECTURE SUMMARY

Current competitive dynamics and the velocity of change demand new approaches to developing strategies as well as new basis of competing to achieve sustained high performance. Organizational must develop capabilities and characteristics that will allow them to compete in an increasingly uncertain environment, with the objective of becoming high performers and setting the competitive rules for the marketspace.

The key lessons are:

• Companies must not only react to change fast; the high-performer anticipate and create change through their strategies and deployment of the five strategic pillars.

• High-performance is a strategic imperative.

• High-performers approach the strategy development process from a portfolio perspective, maintaining their flexibility, speed and constantly adjusting to marketspace changes and challenges.

LECTURE SUMMARY

Current competitive dynamics and the velocity of change demand new approaches to developing strategies as well as new basis of competing to achieve sustained high performance. Organizational must develop capabilities and characteristics that will allow them to compete in an increasingly uncertain environment, with the objective of becoming high performers and setting the competitive rules for the marketspace.

The key lessons are:

• Companies must not only react to change fast; the high-performer anticipate and create change through their strategies and deployment of the five strategic pillars.

• High-performance is a strategic imperative.

• High-performers approach the strategy development process from a portfolio perspective, maintaining their flexibility, speed and constantly adjusting to marketspace changes and challenges.

CLASS & INDIVIDUAL ASSIGNMENTS Current material available at http://www-rcf.usc.edu/~mische (September 2000)

CLASS & INDIVIDUAL ASSIGNMENTS Current material available at http://www-rcf.usc.edu/~mische (September 2000)

SUPPLEMENTAL MATERIALCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)

SUPPLEMENTAL MATERIALCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)

Case for Change




““Change is the law of life. And those who look only to Change is the law of life. And those who look only to

the past or the present are certain to miss the futurethe past or the present are certain to miss the future.”.”

John F. KennedyJohn F. Kennedy

Case for Change




The Realities of The Realities of Strategic ChangeStrategic Change

Strategic Change can assume various forms:

DISCRETEDISCRETE

SUDDENSUDDEN

SEQUENTIALSEQUENTIAL

PLANNEDPLANNED

RANDOMRANDOMCHAOTICCHAOTIC

The Competitive Imperative Is to:a. Recognize the type of change.b. Anticipate it.c. Manage it successfully.

Case for Change




Foundation for Change…Foundation for Change…

Organizational change is complex and

difficult.

Failing to respond to change will result in

failure.

Failing to change properly will result in

failure.

The key questions for any organization are:

WHEN to

change?

HOW to

change?

WHAT to

change?

How FAST to change?

How to ensure the

CAPABILITY to change.

How to MANAGE change?

Case for Change




Foundation for Change…Foundation for Change…

The five domains of change for any organization are:

To achieve competitive advantage and successful systemic change, companies can rarely change only one element: they must change all domains (Majchrzak, Blumenthal, Mische, others).

STRATEGYSTRATEGY

PROCESSPROCESS

PEOPLEPEOPLETECHNOLOG

Y

TECHNOLOGY

KNOWLEDGE

KNOWLEDGE

Case for Change




Five Levels & Complexity of ChangeFive Levels & Complexity of Change

In organizations, change occurs at 5 different levels:

ENTERPRISE-WIDEENTERPRISE-WIDEENTERPRISE-WIDEENTERPRISE-WIDE

BUSINESS UNITBUSINESS UNITBUSINESS UNITBUSINESS UNIT

OPERATIONAL UNIT/BUSINESS OPERATIONAL UNIT/BUSINESS PROCESSPROCESS

OPERATIONAL UNIT/BUSINESS OPERATIONAL UNIT/BUSINESS PROCESSPROCESS

ORGANIZATIONAL UNITORGANIZATIONAL UNITORGANIZATIONAL UNITORGANIZATIONAL UNIT

HUMAN HUMAN BEHAVIORBEHAVIOR

HUMAN HUMAN BEHAVIORBEHAVIOR

Extent of Complexity

Org

an

izati

on

al Level

Case for Change




The Types and Scopes of ChangeThe Types and Scopes of Change

Organizations plan and experience various types of change, including:

– Operational & Process

– Technological

– Organizational

– Behavioral

All change falls within three main categories:

INCREMENTAL CHANGE

INCREMENTAL CHANGE

TACTICAL CHANGE

TACTICAL CHANGE

SYSTEMIC CHANGE

SYSTEMIC CHANGE

Case for Change




Three Scopes of ChangeThree Scopes of Change

INCREMENTAL CHANGE: Confined to designated area Low targets of 5-15% value

improvement Generally cost reduction Low risk/low impact

TACTICAL CHANGE: Cross-functional process

change Radical redesign of processes

and selected organizations High risk/high return

SYSTEMIC CHANGE: Complete organizational

change Redefines rules/creates new

market dynamics Linked to innovation strategies Very high risk and return

Level of

Ch

an

ge &

Ris

k

Strategic Implications &

Value

SYSTEMICSYSTEMIC

TACTICALTACTICAL

INCREMENTALINCREMENTAL

Case for Change




Keys to Successful Organizational ChangeKeys to Successful Organizational Change

All change efforts should be driven by 3 major goals:

The need to create and sustain high-performance.

The need to achieve a definable goal or correct a specific problem.

The need to advance and perpetuate the organization to a better, more competitive position.

Case for Change




Successful Strategic Renewal… Commitment to Successful Strategic Renewal… Commitment to High-PerformanceHigh-Performance

Successful change requires:– Direction– Commitment

Critical to commitment are two considerations:

1. What behaviors, competencies and financial resources are necessary to sustain the organization’s commitment to such a strategy?

2. Is the strategy the correct one for creating high-performance?

Key Point…Key Point… To create and sustain high performance, an organization must set as its core strategy the commitment to become a high-performance organization.

To create and sustain high performance, an organization must set as its core strategy the commitment to become a high-performance organization.

Case for Change




High Performance: Central Issues…High Performance: Central Issues…

1. What does high-performance mean?

2. Can such a term and concept be realistically defined in a strategic context?

3. Relative to past performance, individual performance, an industry measure, some other benchmark, “how can high-performance be measured”?

4. What are the trademarks, the strategic, operating and managerial characteristics of a high-performance organization?

5. How did the high-performance organizations become high-performers?

6. What are the six strategic choices available to all companies?

Case for Change




Defining High Performance…Defining High Performance…

“High Performance” as a strategic doctrine is extremely elusive and confusing.

“A high-performance organization is one that consistently sets the performance standard in

creating and sustaining competitive advantage, extraordinary financial performance and

stakeholder value over a long period of time.”Mische: Strategic Renewal

Case for Change




The High Performance ImperativeThe High Performance Imperative

High performance is the key strategic objective of successful renewal – it is a strategic imperative.

High performance is a continuous and institutionalized process.

Organizations that can leverage and create synergies of purpose are high-performers. Specifically, they:

– create synergy of purpose and design in their operations.

– demonstrate the ability to create extraordinary leverage and competitive advantage through the integration of resources and competencies.

Case for Change




High Performance & Competitive High Performance & Competitive AdvantageAdvantage

In the context of high performance, competitive advantage extends beyond beating industry rivals.

High performers constructively compete against themselves.

To the great companies…

“… competitive advantage is about being significantly better than the competition by being the competitive

standard that sets the rules.” Mische: Strategic Renewal

Case for Change




Evaluating High Performance: Key IndicatorsEvaluating High Performance: Key Indicators

1. Financial Performance and Shareholder Value Creation

2. Strategic Positioning

3. Leadership and Innovativeness

4. Governance and Social Responsibility

5. Brand Recognition and Quality of Products

Case for Change




The Five Strategic Pillars: The Keys to High The Five Strategic Pillars: The Keys to High PerformancePerformance

InnovationInnovationOperationalOperationalExcellence &Excellence &

AgilityAgility

LeadershipLeadership

InformationInformationTechnologyTechnology

KnowledgeKnowledge

Case for Change




New Bases of Competing: Keys to Strategic New Bases of Competing: Keys to Strategic RenewalRenewal

KNOWLEDGE INFORMATION

TECHNOLOGY ORGANIZATIONAL

AGILITY & OPERATIONAL EXCELLENCE

LEADERSHIP INNOVATION

Knowledge is disseminated

Quality is given

Size and location are neutralized by technology

Leadership is shared

Products are implicit

The five components form a new construct for developing strategies and creating competitive advantages… These are the wellsprings for production and services.

A company must have all five of these components to create a competitive advantage and achieve high performance.

The five components form a new construct for developing strategies and creating competitive advantages… These are the wellsprings for production and services.

A company must have all five of these components to create a competitive advantage and achieve high performance.

Case for Change




The Five Strategic Pillars: The Keys to High The Five Strategic Pillars: The Keys to High PerformancePerformance

Element Attributes

Knowledge Management:Knowledge must be relevant, accessible and used if it is to be a source of competitive advantage. Knowledge is difficult to measure, but is inherently recognized for its value.

Information Technology: IT must be used to create new operational processes and organizational designs and support knowledge management and effective transfer. It is rarely a strategy itself; however, if properly aligned with organizational resources, infrastructures and strategy, it enables effective execution and implementation for competitive advantage.

Organizational Agility Organizational agility involves not only speed, but the ability & Process Excellence: to adopt to changes and redeploy and reconstitute its assets

and resources. Process excellence involves operational leverage, zero defects and usually high velocities.

Leadership: All organizations require leadership at various levels. To becompetitive, organizations require leaders who can communicate, have extensive personal experiences and insights and encourage learning and innovation.

Innovation: Strategic renewal requires the ability to constantly innovate its processes, products, organization and management practices. This requires an organizational environment conducive to innovation.

Case for Change




Developing Strategies for High PerformanceDeveloping Strategies for High Performance

Case for Change




Economy, Market & Industry Convergence and Integration

Economy, Market & Industry Convergence and Integration

Creation of MARKETSPACE As A New Competitive Domain

Creation of MARKETSPACE As A New Competitive Domain

The concept of creating/competing in a MARKETSPACE:

Abandons the restrictive definitions and frontiers of traditional industries and markets

Allows for quick adaptation to environmental changes and new imperatives

Allows for innovation and creation of new products/markets/infrastructures, etc.

Discounts old sources of competitive advantage and takes a full advantage of the new, key bases for competing (i.e. 5 pillars of strategy)

Is aggressively pursued by the great companies and leads to their sustained high performance (e.g. Dell, Charles Schwab, Wal-Mart…)

The concept of creating/competing in a MARKETSPACE:

Abandons the restrictive definitions and frontiers of traditional industries and markets

Allows for quick adaptation to environmental changes and new imperatives

Allows for innovation and creation of new products/markets/infrastructures, etc.

Discounts old sources of competitive advantage and takes a full advantage of the new, key bases for competing (i.e. 5 pillars of strategy)

Is aggressively pursued by the great companies and leads to their sustained high performance (e.g. Dell, Charles Schwab, Wal-Mart…)

Today’s Strategic Givens…Today’s Strategic Givens…

Case for Change




The Objective of Strategy…The Objective of Strategy…

“The objectives of strategy and strategic change are to create and sustain long-term high-performance and competitive and economic dominance.”

M. Mische: Strategic Renewal

KEY ASPECTS:

1. Long-term focus

2. Long-term sustainability

3. Achieving competitive and economic dominance

Case for Change




The Six Strategic Choices for CompetingThe Six Strategic Choices for Competing

Most Most AggressiveAggressive

Most PassiveMost Passive

11 22 33 44 55 66

INNOVATEINNOVATE SUBSTITUTESUBSTITUTE IMITATEIMITATE COMPLEMENTCOMPLEMENT COLLABORATCOLLABORATEE

WITHHOLDWITHHOLD

High expense

High risk Very high

return potential

Create new rules

Force competitors to change

Set the pace

Create or capture market within the industry

Leverage existing assets and channels

Force competitors to make changes

Provide flexibility

Lack innovation

Perform better than leader

Content with being a follower

Lower risk

Unsure as to what to do

Peaceful coexistence

Complement leader’s services and products

Backfill needs and requirements

Create partnerships

Provide value-added content

Share risk Requires

trust Requires

commitment

Preserve the right to compete

Failure to act

Unclear direction or need

Acquire necessary resources

Wait for clear signal

Case for Change




Selecting a Strategy: Center Themes…Selecting a Strategy: Center Themes…

Great companies use a portfolio approach, selecting any given strategy or a combination of these strategies.

At any time, one or more choices will have a priority over other alternatives.

Choices of strategy or strategies are influenced by a number of factors, including industry dynamics, age of the organization, speed and capability of innovation , changes in customers and/or customer demand, etc.

Case for Change




““Winning is not a sometime thing. It is an all time Winning is not a sometime thing. It is an all time

thing. You don’t win once in awhile, you don’t do thing. You don’t win once in awhile, you don’t do

things right once in awhile, you do them right all of the things right once in awhile, you do them right all of the

time. There is no room for second placetime. There is no room for second place.”.”

Vince LombardiVince Lombardi

©2000, michael a. mische mor 559 – strategic renewal university of southern california the case...

Documents

change strategy

key drivers strategic

dynamics of change

strategy development

change mor

scopes of change organizations

definition of highperformance

strategic pillars