mba in perspective fundamentals in general management
DESCRIPTION
MBA in Perspective Fundamentals in General Management. Prof. dr. Pieter Klaas Jagersma BSN - Buren - May 20 2008. Points to cover. Speaker and approach History of general management Basics of general management Scanning the environment Policy formulation Policy implementation - PowerPoint PPT PresentationTRANSCRIPT
1
MBA in Perspective
Fundamentals in General Management
Prof. dr. Pieter Klaas Jagersma
BSN - Buren - May 20 2008
2
Points to cover
• Speaker and approach• History of general management• Basics of general management• Scanning the environment• Policy formulation• Policy implementation• Policy evaluation and control• Last but not least
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0
Speaker and Approach
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‘Heart’share
Science
Author
Entrepreneur
Non-executive
Private life
Speaker
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About today’s lecture ...
• Put MBA in perspective - holistic approach• Cliffhangers (frameworks/visualizations) • From Paper > Practice• ‘On the cutting edge’ - tailor made for BSN• Present some generalized lessons learned• ‘The key to success is not trying to please
everyone’/Cosby ‘95 (monologue/dialogue)• Have fun!
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Today’s core message
Transparancy is the magic word!
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1
History of General Management (GM)
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Contents
• General management: what’s in a name?• General management and faculty• Journals and professional societies• Development of general management
theory and research
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a
General Management: What’s in a Name?
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Quite clear .....
General Management is about the direction of organizations
‘Heart’ of wealth creation in modern society!
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General Management =
General management is an approach in which leading managers (‘general’ managers) decide what to do with
regard to which value chain activities in a holistic manner and oriented towards
specific organization-wide goals [MBA]
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Practice >> very old
but .....
Theory >> ‘child of sixties’
Surprise ...
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Background
• First Industrial Revolution (1750-1850): no ‘strategic’ behavior >> businesses small, little
capital employed, room for everyone,‘invisible hand of the market’
• Second Industrial Revolution (1850-1920): construction of key railroads >> mass market buil-
ding possible >> ec. of scale/scope >> rivalry ‘visible hand of general managers’: large verti-cal
integrated firms + management hierarchies to deal with (environmental) complexity
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Background (Cont.)
• Alfred Sloan (CEO GM: 1923-1946): articulated need for ‘general’ management think-ing:
business policy = f (strengths + weaknesses of Ford) developed multidivisional ‘control’ structure • WW II vs ‘general’ management: how to allocate scarce resources across an organi-
zation? (quantitative analysis/’OR’-’besliskunde’) through formal planning organizations can exert
control over market forces and future
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b
General Management and Faculty
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• First ‘Business Policy’ (GM) course at Harvard University (1912)
• GM/Business Policy course: built out of functio-nal courses like accounting, operations, finance (‘integration’)
• Case method (Harvard style)• Model for other Business Schools• First course or final course
Roots of General Management as an academic discipline
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• Professors (experienced teachers with broad view of business) + assistent/associate professors (for-mer ‘senior’ - general - managers)
• Eclecticism + holistic perspective: how to match a firm’s choices with its (competitive) environ-ment (famous ‘fit’ question)
• General Management/Business Policy as a ‘cap-stone course’
General Management faculty
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• Single ‘capstone course’ permits no development!• Faculty makes intellectual homes elsewhere• Course development work: cases (not articles and
books)• ‘Rich’ general descriptions of practice (thanks to
case writing and consulting)• In 1963 influential ‘general management’ confe-
rence at Harvard Business School (HBS)• Since early 1970s accumulation of cases and re-
search (externally)
Consequence of ‘capstone course’
19
c
Professional Societies and Journals
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Professional societies
• The Planning Forum (USA)/Business Poli-cy Society (UK) (since 1950s/1960s)
• Strategic Management Society (since 80s) >> Sponsored AMJ, AMR, AME, SMJ
• Vereniging voor Strategische Beleidsvor- ming (VSB) (since 1980s)
• NCD (since 1970s)
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General Management Journals - categories
Specific Business Journals LRP, The Planning Review (70s); JoM (60s); SMJ (80s)
and JBS (also since 80s)
General Management Journals HBR, SMR, CMR, JofB, Business Horizons, JoGM, HMR,
M@n@gement (www.managementsite.net)
Academic Journals ASQ, AMJ, AMR, Management Science, MAB, M&O,
ESB
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d
Development of General Management Theory and Research
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Birth of the General Management Field: One fundamental work/book
“Business Policy: Text and Cases”
(Harvard Textbook Andrews / Learned et al,
1965)
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Business Policy: Text and Cases (1965)
• Organization-concept of Chandler + ‘Dis-tinctive Competence’ (Selznick, ‘57) + ‘un-certain environment’ (which means instant adaptation of organizations)
• Environment (thanks to changes): ‘opportu- nities and threats’ and firm’s ‘strengths + weaknesses’ were adapted to avoid threats and take advantage of opportunities [SWOT]
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Business Policy: Text and Cases (1965) (Cont.)
• Internal appraisal of strengths and weaknes- ses >> ‘distinctive competencies’ and exter- nal appraisal of threats and opportunities > ‘potential success factors’ (CSFs/KSFs)
• Internal + external appraisal = foundations of ‘business policy formulation’
• ‘Business policy formulation’ is ‘analytical’ and ‘business policy implementation’ is ‘ad-ministrative’ (denken versus doen)
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Their audience ...
Professors and students
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Who influenced General Management practice?
1 General Electric (GE): in 1960s
‘godfather’ of business planning and executive education programs with help from ‘academic friends’ and
private consulting firms (McKinsey&Company)
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Who influenced General Management practice? (Cont.)
2 The Boston Consulting Group - BCG
(Henderson - mid-1960s)
Why?- Applying quantitative research to business problems- Selling powerful oversimplifications- What are basic rules for success?- The most relevant frame of reference is the ‘concept’
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How?
Concepts a. Experience curve Experience in production > market share > lower
costs > higher margins and cash flow > highest profits > dynamic aspect called for ‘competitive behavior’ (needing: ‘integrated’ management = ‘general management’)
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How? (Cont.)
b. Growth-share matrix Cash cows/dogs/stars/question marks (‘era of port-
folio analyses’)
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‘Growth-share matrix’
Star ?
Cash cow Dog
high low
high
low
Marketshare
Ind
ust
ry g
row
th
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Industry attractiveness - Competitive position matrix
Invest/ Selective Selectivitygrowth growth
high medium low
high
medium
low
Industry attractiveness (lots of criteria)
Bu
sin
ess
stre
ngt
h
Selective Selectivity Divest/ growth harvest
Selectivity Divest/ Divest/ harvest harvest
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How? (Cont.)
Spin-offs: Bain&Company etc etc ‘Thanks to’ BCG, the entrepreneurial res-
ponsibility of management was recognized to consider the long-run, dynamic direction of the firm, even while maintaining routi- ne and efficient operations (mindset of de- cision makers: from efficiency to effective- ness)
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General Management research in the 1960s/1970s
• Experiental, case-based evidence in 1960s: descriptive studies
• Systematic observation, deductive analysis and modeling (1970s): normative studies
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General Management research in the 1980s: dichotomy
Descriptive studies of how policies are for-med/implemented (‘management process’)
G. Steiner (long-range planning), H. Mintzberg (‘emergent decision making’), J.B. Quinn (‘logical incrementalism’)
Studies seeking to understand the relation- ship between organization choices and per-formance (‘management content’ school)
HBS (growth and diversification), Purdue (heterogeneity and perfor-mance within a single industry), Harvard University (IO/market po-wer and entry/exit barriers) et cetera et cetera
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General Management research in the 1990s/2000s
General Management inspired by ‘globalization’:
- third dimension of management (P/F)
productfunctions
geography
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2
Basics of General Management (GM)
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Organization performance (‘firms’)
attractive- positioning potential potential maximumness of of firm internal external profitabilityindustry synergy synergy
55% 20% 10% 15% 100%
Source: Caves (1977); Porter (1980); Goldman Sachs (1996); Jagersma (2000)
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Definition of ‘general management’
General management =
1. environmental scanning + 2. (business) policy formulation + 3. (business) policy implementation + 4. (business) policy evaluation/control
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• Future thinking/‘Controlling’ the future Design of a desired future
• (Integrated) Decision makingFundamental choices; Integration of hierarchically determined actions
• ‘Formalized procedure to produce an articu- lated result, in the form of an integrated sys- tem of decisions/actions’ (Mintzberg, 1990)Emphasis on formalization: decomposition, distinction, and rationali- zation of processes/decisions/actions
General Management is ...
‘Business plans’
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Why business plans?
• They provide a discipline forcing managers to take a careful look ahead periodically (mngt of ‘future’)
• They require rigorous communications about mis-sion, vision, strategies, objectives, goals, and resour-ce allocations: clarity
• Basis for evaluating + integrating short-term (func-tional) plans
• They help implement changes once decided on• They make the management group coherent
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Bad General Management - numbers oriented
‘Playing tennis by watching the scoreboard instead of the ball’
- The Economist (1988)
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General Management (process): 6 basics
GM is a process - basic ingredients design great general management
Congruence/‘fit’ between ingredients is decisive Responsible for ‘pie’ is the ‘general’ manager,
CEO and/or Managing Board (RvB/Directie) The result of the GM process - a couple of steps -
is explicit and prioritized Simplicity always wins! Formulation + implementation ‘join hands’
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Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
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Basic requirements for successful General Management
Focus Fit Fitness Flexibility 4Fs
..... on ..... be- ..... of front- ..... of total customer tween will and back- organizationneeds and skill office
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3
Scanning the environment
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Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
48
External environment: what’s in a name?
• Opportunities and threats (OTs) outside the organization
• Organizational context: determines success or failure of organization
• Variables (often) not within short-run con-trol of general management
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External environment: two parts
Societal environment: forces that influen-ce the long-term decisions of an organiza-tion
Business (industry) environment: forces or groups that directly affect an organiza-tion (stakeholders, 5-forces of Porter, uni-ons, et cetera)
Scenario Building
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Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
51
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
52
Societal trends
1. Sustainability (‘CSR/’Sustainability’) 2. Information society 3. Globalization
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BV Nederland verstrikt in ‘Economische Zone des
Doods’ (EZ2D)
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Headlines of international newspapers
“The Globalization of Markets .....” “A Global Trade War on the Way?” “Protectionist Pressures are Building .....” “Ads that celebrate the Global Product .....” “Multinationals Tackle Global Marketing .....” “Globalization: The Debate Goes on .....” “P&G’s Gamble on ‘Globalization’ .....” “Going Global in Europe .....” .....
Source: Financial Times/WSJ(E)
55
Global industry - What’s in a name?
- ‘an industry in which a company’s competitive position within that industry in one country is in-terdependent with that in another country’ (Porter, 1986)
- ‘an industry in which a competitive advantage is derived from the exploitation of scale, scope and skills economies or comparative advantage across country boundaries within a centrally coordinated business system’ (Jagersma, 2002)
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Industries can be characterized on a spectrum Sources of sustainable competitive advantage
Source: Jagersma (2002)
Local >>> Emerging >>> Global Derived from Derived from worldwide country market management of business system (integration) - ‘3S economies’ - Country comparative advantage (factor costs) - Centralization of stra- tegy and (de)centraliza- tion of stages of
busi- ness system as efficien- cy and effectiveness dic- tate
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‘Doomloop’ for (most) companies
- many players- innovation- effectiveness- customer- organic growth- high margin
- (very) few players- lack of innovation/imitation- efficiency- firm and competitors- anorganic growth- low margin
localindustries
emergingindustries
globalindustries
TIME
MARGIN
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Industries can be characterized on a spectrum Industries on the MOVE
Source: Jagersma (2004 data 1980 vs 2002)
Local >>> Emerging >>> Global
47% (89%) 33% (8%) 20% (3%)
[1] Trade-off: local versus global industries[2] Turbulence plus unpredictability > alliances/M&A[3] New skills required (entrepreneurial skills?)
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[1] % companies/industries in ‘EZ2D’ [added value in terms of share of GNP]
Countries Local Emerging Global
USA 34% 29% 37% Germany 40% 30% 30% UK 39% 22% 39% France 45% 29% 26% Spain 49% 27% 24% Belgium 41% 26% 33% Netherlands 47% 33% 20% Italy 53% 35% 12% Japan 39% 29% 32% South-Korea 34% 21% 45% Source: a.o. OECD, UN, EC/EU (2000-2003)
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[2] % industries on new/mature spectrum
Countries New Growth Mature
USA 34% 26% 40% Germany 14% 32% 54% UK 29% 30% 41% France 15% 26% 59% Spain 23% 32% 45% Belgium 20% 28% 52% Netherlands 15% 30% 55% Italy 13% 23% 64% Japan 25% 35% 40% South-Korea 28% 33% 39% Source: a.o. OECD, UN, EU/EC (2000-2003)
2
1
3
5
3
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In our ‘global village’, competing globally is imperative for
countries
Countries Global ‘competitors’ Global ‘casualties’ IMD; WEF; PKJ IMD; WEF; PKJ
USA 3 Germany 7 UK 4 France 7 Spain 4 Belgium 6 Netherlands 9 Italy 10 Japan 2 South-Korea 1
?
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Implication: CHANGE necessary!
Countries
Industries
Companies
Units/departments
Managers/employees
Skills
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Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
64
Tool no. 1 - Mapping an industry landscape: SCP model
Structure Conduct Performance
Main drivers/’shocks’- Technology breakthroughs- Changes in government policy/regulations (domestic/ international)- Changes in life styles/tastes
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Tool no. 2 - Mapping an industry landscape: ‘5 forces model’ of Porter (1980)
Threat of New Entrydecline in EOS + customerheterogeinity > market frag-mentation into nichesemergence of switching costs
Bargaining Power ofSuppliersconcentration/fragmentationof suppliersforward integrationimprovement in supplier in-formationsurge or decline in supplynew means for coordinatingwith suppliers
Bargaining Power ofCustomersconcentration/fragmentationof buyersbackward-integrationimprovement in buyer in-formationsurge/decline in demandshifts in customer tastesnew means for coordinatingwith customers
Threat of Substitutesemergence of new substitutechange in barriers of entryincrease in buyer comfort witha substitute
Rivalry among Ex-isting Competitorsshift in industry growthchange in mix between fixed and variable costsemergence of dominant design or productconsolidationfragmentation/new entry.....
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Tool no. 3 - Mapping an industry landscape: ‘value net’ of Brandenburger and Nalebuff (1996)
Customers
Suppliers
Company ComplementorsCompetitors
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Four phases in the evolution of environmental scanning
Primitive Ad hoc Reactive Proactive
No impetus “Watch out” Deal with envi- Predict environmentronment to pro-
“Face it” No active search tect the future Structured effortRandom effort
No effort Sensitive to cer- Appropriate Deliberate efforttain issues responses
No purpose Scan to enhance Less specific in- Looking for compe-understanding fo collection titive advantage
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Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
69
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
70
Internal environment: what’s in a name?
• Strengths and Weaknesses (SWs) inside the organization
• Organizational content: determines success or failure of organization
• Variables within short-run control of gene-ral management
• First of all: structure, culture, and resources
71
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
72
MB
CS
BU 1 BU 2 BU 3
Headquarters/Head Office/Corporate Center
verticalsynergy
horizontalsynergy
Vertical and horizontal synergy
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Vertical synergy
MB
CS
BU 1 BU 2 BU 3
Headquarters/Head Office/Corporate Center
verticalsynergy
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Generic roles of CC/HQ
MBCs
Steer
Bind
Support
?
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Ways for CC/HQ to add value
• Coordinate• Integrate• Allocate• Initiate
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Transfer/share of skills,experience and knowledge
ECONOMIES OF SKILLS/KNOWLEDGE
How to add value as CC/HQ no. 1 - Coordinate
X
YK B
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Cost
Volume Volume Volume
X Y X/Y
ECONOMIES OF SCALE
How to add value as CC/HQ no. 2 - Integrate
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CC
X Y
Resources- People (MD)- Funds (enhance ROI)
ECONOMIES OF SCOPE
How to add value as CC/HQ no. 3 - Allocate
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How to add value as CC/HQ no. 4 - Initiate
Stand-alone BU performance improvement ‘Sounding board’ for making decisions (‘objective view’) Agreeing/monitoring performance (‘stretched targets’) Selecting/replacing BU managers Approving major capital expenditures Mobilizing special expertise (M&A skills)
Corporate development To help implement growth strategies (‘spotting’) To help implement desinvestment strategies
80
Horizontal synergy
EB
CS
BU 1 BU 2 BU 3
Headquarters/Head Office/Corporate Center
horizontalsynergy
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Why is horizontal synergy difficult to realize?
• Leading (‘general’) managers use 1950s-’70s insights (Ansoff/portfolio models - BCG etc)
• Information flows vertically, not horizontally• Within units focus on customers/market - not
on collegues in other units/departments• Bonus/incentive structure focused on own +
unit performance, not based on collaboration across organization
82
‘Portfolio management’ approach versus ‘Synergy management’ approach
Synergy
high
low
Diversificationlimited high
synergymanagement
portfoliomanagement
‘CORPORATE RESTRUCTURING’
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strategic
importance
urgency horizontalsynergy
support insideorganization
basic conditions
lower cost position and/or differen-tiation for WHOLE company. Company instead of BUs is leading
‘fertile ground’ for horizontalsynergy strategy is necessity: BU/general management !!!
HRM/IT/IS-systems;culture; quality BU-ma-nagement etc
Is horizontal synergy astrategic priority? What is the weight of horizon-tal synergy as a strate-gic priority? Do we ha-ve enough time to act?
Circumstances determining horizontal synergy
84
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
85
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
86
Leading firms have a very strong set of principles which heavily influence their behavior/culture
Goldman Sachs 14 business principles 1. Our clients’ interests always come first. Our experience shows that
if we serve our clients well, our own success will follow. 2. Our assets are people, capital and reputation. If any of these are
ever lost, the last is the most difficult to regain. 3. We take great pride in the professional quality of our work. We
have an uncompromising determination to achieve excellence in everything we undertake.
4. We stress creativity and imagination in everything we do. While re-cognizing that the old way may still be the best way, we constantly strive to find a better solution to a client’s problem.
5. We make an unusual effort to identify and recruit the very best per-son for every job.
87
Leading firms have a very strong set of principles which influence their behavior/culture (2)
Goldman Sachs 14 business principles 6. We offer our people the opportunity to move ahead more rapidly
than is possible at most other places. We have yet to find the limits to the responsibility that our best people are able to assume.
7. We stress teamwork in everything we do. We have no room for tho-se who put their personal interests ahead of the interests of the firm and its clients.
8. The dedication of our people to the firm and the intense effort they give their jobs are greater than one finds in most other organizations.
9. Our profits are a key to our success. They replenish our capital and attract and keep our best people. It is our practice to share our profits generously with all who helped create them.
88
Leading firms have a very strong set of principles which influence their behavior/culture (3)
Goldman Sachs 14 business principles 10. We consider our size an asset that we try hard to preserve. We
want to be big enough to undertake the largest project that any of our clients could contemplate, yet small enough to maintain the loyalty, the intimacy and the esprit de corps that we all treasure and that contri-bute greatly to our success.
11. We constantly strive to anticipate rapidly changing needs of our clients and to develop new services to meet those needs.
12. To breach a confidence or to use confidential information impro-perly or carelessly would be unthinkable.
13. Our business is highly competitive, and we aggressively seek to expand our client relationships.
14. Integrity and honesty are the heart of our business.
89
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
90
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
91
Resources
• Human resources (human ‘beings’)HRM
• Financial resources FM• ICT resources IM• Knowledge/ideas KM
GM requires a‘holistic approach’
92
To summarize
Societal environment
Industry environment
Internal environment
93
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
94
4
Policy formation
95
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
96
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
97
Mission: what’s in a name?
The purpose/reason for the organization’s existence. Alternatives:
A broad mission A narrow mission
98
Mission: examples
Broad mission We provide transportation vehicles to
people throughout the world
Narrow mission We build exclusive cars for the US and
Europe
99
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
100
Vision (example) To become the leading European supplier of
oriental products
East India Companies, Netherlands (1602)
101
Vision (example) To make a contribution to the world by ma-
king tools for the mind that advance human kind
Apple
102
Vision (example) To become the leading consumer marketing
company in the USA and internationally
Sara Lee Corporation
103
Vision (example) We want to be the leading supplier of PCs
and PC servers in all customer segments
Compaq Computer
104
Vision (example) Campina wil als cooperatieve onderneming
met succes zuivel- en zuivelverwante pro-ducten van hoge kwaliteit op de markt brengen voor de consument en de industrie
Campina
105
Vision (example) We want to provide value to our customers
- to make their lives better via lower prices and greater selection; all else is secondary
Wal-Mart
106
Vision (example) We want to honorably serve the community
by providing products and services of supe- rior quality at a fair price to our customers
Motorola
107
Vision is important according to Executives
• 1,500 senior leaders/870 CEOs• 20 different countries• Key traits/talents and skills by year 2000
‘Strong sense of vision’ is most important TRAIT (98%!)AND
‘Strategy formulation to achieve a vision’ is most important SKILL(gap of 25% with other skills)
Source: Korn Ferry/Columbia University (1989)
108
What about skills and ability of managers?
More than 90 percent of managers reported
a lack in confidence in their own skills and ability to formate and implement a vision
Source: Korn Ferry/Columbia University (1989)
109
Visions can help organizations .....
Make better strategic/operational decisions faster focus - “It’s easy to say what you’re going to do. The
hard thing is figuring out what you’re not go-ing to do” (Michael Dell)/offers direction
acquire required and wanted resources (employees /skills/investors)/stimulates development of certain capabilities (‘direction’)
Promotes/accelerates change vision as ‘change road map’ (IBM)
110
Visions can help organizations (2) .....
Basic element for strategic plan the ‘building block’ strategic management process integrates short-term actions which have to be pro-
ductive to long-term interests ‘compass’ for decentralized/global corporations It motivates and inspires individuals/groups their effort contributes to a larger picture employee pride and motivation >> performance Public Affairs-tool
111
Visie en visioen
Visie = Visioen
Collectief Individueel +Individueel!
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What is a vision?Source: Jagersma (2007)
It is a guide to corporate priorities that re-flects a fact-based view of the future and sets forth aspirations that are demanding but achievable
113
Mission or vision?
Mission =
What is our Business?
Source: Peter Drucker (1973)
114
Vision + mission + et cetera: what’s in a name?Source: Jagersma (2007)
Question Answer
Who are we? Mission
Where are we heading? Vision
How do we get there? Strategy
How do ‘I’ contribute? Targets/Bonus/ Incentives (APs)
115
‘Vision rollout process’ (‘VRP’) =
A process in which relevant employees meet in small groups - with their peers, supervisors, and /or more senior managers - to learn about the vision + discuss what it means for them
Technique to encompass the ‘three requirements’ Two basic forms: A cascade rollout, which moves through func-
tions or units down the company/organization A horizontal rollout, which involves peer group
meetings
116
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
117
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
118
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
119
Objectives and goals: what’s in a name?
Objectives are ‘qualitative’ by nature (long- range and short-term objectives)
Goals are quantified objectives
Achievement should result in fulfilling of VISION
120
Specific objectives/goals
• Profitability• Quality ([T]QM/EFQM)• Efficiency (low-cost operations)• Teamwork/productivity• Effectiveness (customer orientation)• Flexibility• Corporation: ‘good place to be’• .....
121
Specific examples
• Achieve a ROI of 10% for the period 2008-’09 (short-term goal)
• Become number one in global automotive market share by 2012 (long-term objective)
• Increase domestic car and truck market sha- re by more than 5,15 procent by Q3 in 2013 (long-term goal)
122
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
123
Strategy: what’s in a name?
• Corporate strategy• Business strategy• Competitive strategy• Functional strategy
1 Hierarchy2 Interrelated3 Coordination/Integration
124
Corporate strategy: what’s in a name?Source: Jagersma (2008)
A corporate strategy states:• How and where the corporation will growth /divest
activities (external coordination) and• How the corporation will optimize its internal orga-
nization (internal coordination) ..... and therefore will achieve its vision and ob-
jectives/goals Corporate strategy ‘describes’ how an organization intends to
achieve its vision and objectives/goals
125
Corporate strategy: questions to be answered
• Should we stay in the same business(es)?• Should we leave this business entirely or just parts of
it by merging, liquidating, and/or selling part of our corporation?
• Should we try to grow in this business by start-ups, alliances, or M&A?
• Should we try to grow internationally?• Should we grow in another business?• .....
126
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
127
Business strategy: what’s in a name?Source: Jagersma (2008)
A business strategy states:• How and where the BU will growth/divest activi-
ties (external coordination) and,• How the BU will optimize its internal organization
(internal coordination) ..... and therefore will achieve its vision and ob-
jectives/goals Business strategy ‘describes’ how a business unit intends to
achieve its vision and objectives/goals
128
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
129
Competitive strategy: what’s in a name?Source: Jagersma (2008)
Five dimensions an integrated set of actions aimed at achieving a sustainable reputation
in an industry (segment) that is over competitors in serving markets by finding alternatives to produce a better
relationship between cost and benefits for customers.
130
Competitive strategy: five key wordsSource: Jagersma (2008)
Key words Implications for general manager
Actions Do something different than ‘business as usual’
Sustainable Find long-term position not easily duplicated Reputation Achieve lower cost or more benefits
for same cost or both Competitors (Re)action(s)? Customers Understand why they buy
131
Three characteristics of good competitive strategies
Customer:clear product/market definition (i.e., business/value proposition)
Market
Product
1
2
exclusive massnational
global
132
Three characteristics of good competitive strategies (2)
Company: cost/benefit leadership (relati-ve and real or perceived)
Benefitsmore
Costmore expensive
industry averagebetter positioning
worse positioning
133
Three characteristics of good competitive strategies (3)
Competitors: sustainability Customers’ needs/preferences change continuous-
ly Competition is dynamic process: own actions in-
fluence those of competitors (‘game theory’)
134
Types of sustainable competitive advantage
Structural advantages resource access (Gazprom; BHP Biliton et cetera) market dominance (eBay) switching barriers (Microsoft) governmental effects - regulation (Telmex) Reputation corporate image (Amex) corporate identity (Rabobank; Goldman Sachs)
135
Types of sustainable competitive advantage (2)
Business system/value chain superiority superior performance in one function(s) (Merck;
McKinsey; ‘outsourcing virtuosos’) Metaskills innovation (Apple) organizational skills - time-based competition (3M) adaptability (Nokia)
136
A good competitive strategy will tell you .....
Which Customer segments to emphasize What Competitors count in each segment How long the Company’s advantage can be
expected to last: sustainability of position
What to do functionally?
Functional strategies
137
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
138
Functional strategy: what’s in a name?
An integrated set of actions aimed at achie- ving a sustainable competitive advantage in a functional element of the value chain/bu- siness system, that is over competitors
Marketing/sales strategyLogistics strategy
R&D strategyTax management strategy
HRM strategy .....
139
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
140
4
Policy implementation
141
Policy implementation: what’s in a name?
The process by which decisions are put in-to action by action programs/actions
operational execution
ANNUAL PLANS
142
Action programs: what’s in a name?
• What is needed (resources) to realize speci- fic functional objectives and goals (what to do; how to do it; when to do it; and what do we need?)
• Embedded in annual plans of business units /departments of Corporate Center/HQ (bud-get)
143
Basics of GM process
Scanning the Policy Policy Policy environment formation roll-out evaluation
External Mission Action pro- BBS/EFQM- Societal Vision grams (performance) - Industry Objectives (margin)
Goals Internal Strategies - Structure (C, B, C, F)- Culture - Resources
‘FIT’
ING
RE
DIE
NT
SExplicit; prioritization; consistency; communicate; responsibility
144
5
Policy evaluation/control
145
Introduction
To measure is the first step to improve
146
Evaluation and control: what’s in a name?
The process in which strategies, choices, de-cisions, actions etc and performance results are monitored so that actual performance can be compared with desired performance
147
Evaluation and control: tools
BBS/EFQM/INK
148
Evaluation and control: (1) BBS (Kaplan and Norton, 1992)
FinancialPerspective
(How do we look to shareholders?)Goals/Measures
Innovation +Learning
Perspective(Can we continue to im-prove + create value?)
Goals/Measures
Internal Business
Perspective(What must we excel
at?)Goals/Measures
CustomerPerspective
(How do customers see us?)
Goals/Measures
149
Evaluation and control: (2) EFQM / INK-’Model Nederlandse Kwaliteit’ (MANS, 1995)
Ondernemingsresultaten
Waarderingdoor personeel
Waarderingdoor klanten
Waarderingdoor maat’pij
Management van processen
Middelenmanagement
Personeelsmanagement
Beleid & Strategie
Leiderschap
Resultaatelementen
Organisatieelementen
150
General Management: to summarize
What were/are our aspirations? (Mission and Vision)
How much to grow/contract? (Objectives and Goals)
Which initiatives do we need? (Strategy and Action Programs)
What is our ‘platform’? (SWOT) to achieve our aspiration(s)
Pol
icy
eval
uati
on/c
ontr
ol(B
BS
/EF
QM
/IN
K)