Tag Archives: strategy

Why are strategic initiatives important for corporate strategy?

 

A personal note:

I caught the strategy bug back as a senior at business school since I have been thinking and working on corporate strategic issues for about a decade now. I owe this interest to my dear professor and the dean of Williams Business School, Bishops University, Bill Robson. I took Business Policy and Strategy with him and it was an enlightening experience to say the least. Then I understood that strategy is not only crucial in the business survival of the firm but also in the personal life of every individual.

Now it gives me a great joy to write this paper for your application. The way I decided to do this is the following: I did my research and used your research database and scholar.google to download all papers pertaining to the topic which with cutting it down came to 4000 articles out of which about 40 percent were available in full text.

However, I decided not to read them right away but to write the first page by explaining my thoughts on the topic and then use the second and third for literature review and my reflections on it.

Why are strategic initiatives important for corporate strategy?

 

In my career I have had the opportunity to be in the position to strategize frequently and even more often to do it without the permission of my superiors. I am referring to my position as a quality officer at Makpetrol, Skopje. This is the largest oil distribution company in Macedonia which was known as Yugopetrol until the end of the 1970’s before becoming independent from the national one and changing the name to Makpetrol. This is a company with a tradition of social way of leading. Specifically, they always promote from within, they always employee young people who are sons and daughters of retired employers. I was one of them. My father led their gas department and my mother was head of social help and development unit. Both earned their positions and my acceptance with hard work and building tight personal relationships.

For two decades this firm was led by an extraordinary man called Gavro (his first name because everyone knew him and called by it) who passed away before his time. Gavro had an open door policy and not only knew every of the 4000 employees by name but he also knew their families and personal problems.

In 1995 a new management was appointed and a person who had been heading their London division was awarded the CEO position. New management who is still in place slowly but surely changed the way things were done in the company. When I joined their ranks back in 2004 as a newbie with a lot of ambition, ideological way of looking at things and considered to have all it takes to succeed I saw something very different from what I was used to hearing at my parents get togethers with colleagues at our house. Suddenly the sentence most heard in the headquarters hallways and offices was: “In Gavro’s time…. things were different, this or that would never happen”. Mind you Macedonia has an unemployment rate over 30% and this is a company that gave the feeling of security, once you are in, you stay there until the day of your retirement. Makpetrol was a socialist system leftover in every sense of the word. Majority of the employees were in their fifties and settled in their ways.

The second most heard thing for a decade as I later found out was that changes are about to come, layoffs, company reengineering. This management did things differently. To get a meeting with the CEO you had to send a letter to his personal assistant who will decide whether to give it to the CEO and then if by a slim chance you get a date it will be three to six months later.

The second issue that went through the grapevine happened about a year since I started working there. One Friday lists were sent from above that detailed geographically who will go to which office, desk, and department. All of us had to come the next day, Saturday and move our belonging to the new office we had been assigned to. I walk in Saturday morning and it is a mess, chairs and desks in the hallway, flowers and other personal belongings. No one knew what is to happen. For three months no one knew what their new tasks would be. The new structure changed from customer oriented to product oriented. One department was taken into pieces and from fifteen top managers the firm now had twenty two. Needless to say this whole badly planned and executed left people feeling even more stressed, frozen and unable to perform the ambiguous tasks they were assigned.

My job was made that much harder. Not only did I have to do semiannual quality audits throughout all of the departments but now I had to ask people about their job when they themselves weren’t sure what that job was. Bearing in mind that ISO9001:2000 had only been implemented and awarded a year before.

Another very important issue was that at that time the managers were afraid of a hostile take-over from Russian Lukoil and they made every shareholder (most employees and retired employees) sign agreements that they will not sell, otherwise their jobs are not guaranteed nor the jobs of their children who worked there. Obviously this didn’t hold up in court but it did however do its purpose, people were afraid to sell and not surprisingly what were their options. At a time when one share was trading at 3,000 euros on the Macedonian Stock Exchange people didn’t sell and the courageous ones that did lost their jobs or were sent to dead end positions. There were cases when employees had to sell a few to pay for medical expenses and they were reprimanded with six months of 30% pay deduction.

Imagine my delight when two years later I was offered a lecturer position and the University American College where I had been finishing my MBA in the last year and a half. I accepted and was out of Makpetrol in less than two weeks after the offer. UACS was a completely new territory, one I only read about in books, open door policy, free to make your own schedule, complete support from the rector and the university management. Corporate initiatives were heard and if sound implemented and the person who put it forward was made an owner of the process and compensated. More than that intrinsically it was an environment where I felt I was achieving self-actualization.

Now I would like to turn your attention to the short literature review.

Strategy and strategic initiatives have been widely researched. It has been a topic of the academic and business world alike for more than decades now. I would like to point out the period when American automobile and electronic business were attacked and lost market share on their own turf which prompted the very famous research of Professor Michael Porter and the Supply Chain, The Diamond and Five Competitive Forces Model that I use more than often.

Any new strategic direction hence new strategy means change. Change in technology, in the way things are done and most importantly people. Shading a light on the end of the tunnel and showing people where we need to be without lighting up the whole tunnel and making them realize why destination B is much more preferred than current position A is crucial. Participative management and getting people on board and managing any possible sabotage should the focus of every strategic initiative but we know too well now that that is not the case always.

“A strategic initiative is one that: responds to an issue that, when resolved, will have a significant impact on the organization’s results, and requires cross-functional support to succeed.” (Snyder, 2008)

Four steps to successfully sponsoring a Strategic Initiative: 1. Initiating the effort – Gathering support. 2. Launching – Agreeing on the approach. 3. Executing – Producing results. 4. Gaining momentum – Communicating results. (Snyder, 2008)

Norton and Kaplan introduced The Balanced Scorecard to the academic and business world which supplemented traditional financial measure with criteria that measured performance from three additional perspectives – those of customers, internal business processes, and learning and growth. It therefore enabled companies to track financial results while simultaneously monitoring progress in building capabilities and acquainting the intangible assets they would need for the future. Companies are using the scorecard to: clarify and update strategy, communicate strategy throughout the company, align unit and individual goals with the strategy, link strategic objectives to long-term targets and annuals budgets, identify and align strategic initiatives, and conduct periodic performance reviews to learn about and improve strategy. (Kaplan, Norton, 1996) Refer to Annex for a strategy analysis on different industries. (McGee. Thomas, 1986)

Based on Kaplan’s and Norton’s paper “Creating the Office of Strategy Management” I will go through the strategic process both the unsuccessful one. (Kaplan, Norton; 2005)

The process starts sometime in the middle of the fiscal year, when the strategic planning department organizes a multi-day offsite meeting for the executive leadership team to update strategy based on a review of the company’s strengths, weaknesses, opportunities, and threats, and in light of changing circumstances and the new knowledge gained since the last strategy meeting, a year ago. Ninety-five percent of employees claim they are not aware of or do not understand the strategy.

The barriers to successful implementation of strategic initiatives are the most common ones including structure, management processes, systems and HR policies: top-down senior management style, unclear strategy and conflicting priorities, an ineffective senior management, poor vertical communication, poor coordination across functions, inadequate down-the-line leadership skills and development. (Kaplan, Norton, 1996)

The successful companies transform key management processes to focus on strategy execution. Nine cross-functional processes have been identified that should be managed or integrated by an Office of Strategy Management: scorecard management, organization alignment, strategy reviews, strategy planning, and strategy communication, initiative management, planning and budgeting, workforce alignment, best practice sharing. (Kaplan, Norton, 1996)

A key starting point is the acceptance of the counterintuitive notion that the strategic-planning process should not be designed to make strategy. Henry Mintzberg, argues that real strategies are rarely made in paneled conference rooms but are more likely to be cooked up informally and often in real time. No strategy process can guarantee brilliant flashes of creative insight, but much can be done to increase the odds that they will occur: prepare the minds, encourage creative mind, top-down: Drive crosscutting themes and add strategy to the job title. (Mintzberg, 1987)

Hamei and Prahalad argue that Western companies focus on trimming their ambitions to match resources and, as a result, search only for advantages they can sustain. By contrast, Japanese corporations leverage resources by accelerating the pace of organizational learning and try to attain seemingly impossible goals. These firms foster the desire to succeed among their employees and maintain it by spreading the vision of global leadership. (Hamei, Parahalad, 1989 and Kaplan, Norton, 1996)

  • Provide employees with the skills they need to work effectively-training
  • Give the organization time to digest one challenge before launching another.
  • Establish clear milestones and review mechanisms
  • Translate the strategy into operational terms.
  • Align the organization to the strategy.
  • Make strategy everyone’s everyday job.
  • Make strategy a continual process.
  • Mobilize change through executive leadership.

Strategy will have us puzzled for many years to come and with the ever changing environment where the automobile industry has less than two years to market and the software industry less than three months strategy is an ever evolving topic.

References

 

M. Beer, R. Eisenstat, “The Silent Killers of Strategy Implementation and Learning” Sloan Management Review, summer, 2000.

 

E. D. Beinhocker, “Robust adaptive strategies,” in Michael A. Cusumano and Constantinos C. Markides (editors), Strategic Thinking for the Next Economy, San Francisco: Jossey-Bass, 2001.

 

D. Campbell, S. Datar, S. Kulp, and V.G. Narayanan, “The Strategic Information Content of Non-financial Performance Measures,” HBS Working Paper, 2004.

 

M. Csikszentmihalyi, Creativity: Flow and the Psychology of Discovery and Invention,

New York: HarperCollins, 1996.

 

R. N. Foster and S. Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market—and How to Successfully Transform Them, New York: Currency/Doubleday, 2001.

 

Hamei, Parahalad, “Strategic Intent” The High Performance Organization, Harvard Business Review, 1989.

 

S. Kaplan, D. Norton, “Creating the Office of Strategy Management” Harvard Business Review, 2005.

S. Kaplan, D. Norton, “Using the Balanced Scoredcard”, Harvard Business Review, 1996.

S. Kaplan, D. Norton, “How Balanced Scorecard Companies Thrive in the New Business Environment, The Strategy focused Organization”, Executive Book Summary, 2001.

 

J. McGee, H. Thomas, “Strategic Groups: Theory, Research and Taxonomy”, Strategic Management Journal, 1986.

 

H. Mintzberg, “Crafting Strategy,” Harvard Business Review, Harvard Business Review, October 2004, pp 62-72, 1987.

 

R. Snyder, “Strategic Initiatives for Results – Making Changes that Dramatically Improve Results”, Breakthrough Inc. 2008

 

Submitted to Department of Industrial Engineering and Management
Aalto University, School of Science

15th of December, 2011

 

 

 

 

 

 

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