Thursday, January 10, 2008

Organizational conflict management

Organizational conflict management pressure tactics

1. What is Organizational Internal politics? – Internal politics, as practiced in organizations, is defined as follows: -- Internal politics consists of activities undertaken to gain advantage or influence organizational decision makers in ways intended to serve a purpose other than the best interests of the overall organization. Internal politics consists of the games people play to promote decisions that are based on criteria other than merit, where personal goal gets magnified and focussed and get prioritized than the Organizational goal.

2. The role organizational structure/hierarchy can play in promoting internal politics. – Internal politics can exist, and usually does, in every type of organization, regardless of organizational structure and culture. In other words, internal politics is not caused by organizational structure; consequently it cannot be eliminated by simply changing the structure. This point can be illustrated easily enough by considering the most widely used organizational structures: the functional, geographic, decentralized line-of-business, strategic business-unit, and matrix structures.

Each of these structures has its own set of advantages and disadvantages, but they are all susceptible to internal politics. In considering organizational structures, keep the following rule of thumb in mind: factors that promote internal competition – weather intentionally of unintentionally – also promote internal politics. This is because internal politics is just one more tool (or weapon) to be used anytime people within an organization compete among themselves. The competition might be about questions of who reports to whom, who gets the lion’s share of limited resources, who will fill key positions, what department will be reorganized and how, lines of authority, and any number of other issues in which people have vested interests.

The five most widely used organizational structures will reveal built in characteristics that tend to promote competition and, in turn, internal politics. In the functional structure the CEO would want to be sensitive to political machinations among the functional vice presidents. These could grow out of competition for limited resources, personality clashes, competition among the vice presidents for a future promotion to the CEO position, or misguided loyalty to the respective functional areas on the part of employees at all levels within the organization.

The geographic structure is particularly susceptible to internal politics. The Achilles’ heel of this structure is distance. Distance has a tendency to promote an “us against them” mentality that can lead to counterproductive internal competition and other forms of negative behaviour. The reason for this is simple: it is only natural to be suspicious of people you seldom or never see but with whom you compete for resources. In addition, it is difficult to establish trust, unity of purpose, and collaboration across distance. For this reason, executives in companies that are organized geographically should be especially sensitive to the issue of internal politics.

The decentralized line-of-business structure tends to promote competition among the various business enterprises/units, as well as between functional departments within these separate enterprises. This is also true of the strategic business-unit structure.

The matrix structure is the least used of the five common organizational structures. With this structure, functional specialists-human resources, accounting, marketing, and so on- are organized under functional areas, with each area having its own manager. Business ventures undertaken by the overall organization then draw on these functional areas as needed.

This structure tends to promote internal competition and, in turn, internal politics both vertically and horizontally within the matrix. Vertically there is competition for resources among the various business ventures. For example, say that all business ventures want to draw engineering services at the same time, and the functional vice president of engineering has an insufficient number of engineers. How will available engineers be allocated? Another spin on this same situation occurs when two or more business ventures want the services of the same engineer, a particularly talented individual.

Horizontally there is competition among the functional areas, certainly over resources, and possibly over personalities and misguided loyalties. For example, say the marketing vice president wants to increase the size of his staff. At the same time, the accounting vice president wants to upgrade her computer system. Resources are limited. Who gets the lion’s share?

These few examples, without even considering such other drivers as the need to fit in or personal insecurity, show that regardless of structure, the potential exists in any organization for internal politics. Consequently, managers in organizations trying to implement total quality should be sensitive to symptoms of internal politics regardless of how their organizations are structured.

An example of internal politics in action in an organization. – Politics in Status –

On the company’s organizational chart all departmental directors at Payton Temporary Employees Inc. (PTE), are equal. However, in the minds of the individuals filling these positions, equality among directors at PTE is a concept that looks good on paper but doesn’t exist in reality The more equal among equals are those directors whose offices are located in closest proximity to that of the company” CEO, John Davis. The real winners, according to company folklore, are the directors whose offices are located on the same floor as Davis’ office.

If one is to believe company gossip, the directors with offices on the third floor with Davis gain a tangible advantage in that they are more likely to bump into him in the hall, at the water cooler, or if they are male, even in the rest room. This gives them enhanced access and opportunities for sharing their ideas and proposals. Other directors, without this proximity advantage, must wait for scheduled meetings or make appointments for one-on-one time with the CEO. Right or wrong, at PTE there is a perception of proximity advantage, and this perception creates counterproductive competition, political manoeuvring, and ill will among the company’s department directors.

The political machinations of the directors take several different forms. Prominent among these are rumor-mongering, building of coalitions, undermining, electioneering when special committees and task forces are established, and the spreading of gossip. As a result, the company is a balkanized organization of warring factions with an ever shifting set of loyalties. What it isn’t, is a company in which there is unity of purpose and a concerted effort to have all managers and employees pulling on the same end of the rope toward a common vision.

The postscript to this case is as follows: John Davis’ failure to deal with the issue of internal politics at PTE eventually led to his termination. His replacement immediately set about establishing a collaborative culture at PTE; as a result, the company survived and is currently prospering.

Most commonly used methods of internal politicians.

1. Lobbying – Lobbying tactics commonly used by internal politicians are – 1) contacting people formally (by appointment) to present a personal point of view – 2) engaging people in informal discussions (over lunch, on the golf course, in the hall, etc.) and presenting a personal point of view – 3) providing carefully screened information on a selective basis - 4) doing favors to establish quid pro quo relationships – 5) helping lighten the workload of selected people – 6) applying pressure directly to individuals – 7) applying pressure through third parties – 8) exploiting personal relationships.

2. -- Building coalitions – A coalition is a group of diverse people brought together by a common interest. In government politics, coalitions are formed for the purpose of electing individuals to office, keeping other individuals from being elected, securing budget appropriations, and passing legislation. Organizational coalitions are formed for various reasons, such as getting selected individuals promoted, ensuring that others are not promoted, securing resources, guaranteeing the adoption of favourable policies or procedures, and fostering a favourable organizational structure. The individuals or individual groups that make up a coalition may have nothing in common except the simple cause that brought them together. This fact gave rise to the old adage that “politics makes strange bedfellows”. Consequently, once a cause has been satisfied, the coalition typically dissolves. In its place others will form as interests, conditions, and circumstances change.

3. Applying harassment and pressure – In government politics, when pressure is applied there is an implicit threat from voters: “Do what I ask or I won’t vote for you”. From lobbyists, the threat is more along the lines of “Vote as we ask or lose our financial support”. From colleagues in Congress, the unspoken message is “Support my bill or I won’t support yours”. In organizations, pressure is applied differently, but the implicit threat is still there. Examples of messages and tactics used by internal politicians to apply pressure are: 1) Help me out or you will be socially ostracized by your peers; or the opposite, help me out, and you will be part of the crowd.-2) Help me out or something you don’t want known will be revealed.-3) If you help me out, I’ll help you when I win. If you don’t, you’ll be left out when I win.-4) Help me out or something undesirable will happen to someone you care about; or the opposite, help me out, and something good will happen to someone you care about.-5) Ongoing harassment that ranges from distracting to threatening behaviour.

4. Electioneering – In governmental politics, electioneering means participating in the election process. Participation can take many different forms including raising money for candidates, making contributions, and getting out the vote. Of course, the purpose of electioneering is to ensure that a certain candidate is elected. Electioneering in an organization is a similar process.

Internal politicians use electioneering tactics to ensure that selected individuals are promoted, that the right people are appointed to prestigious committees, and that selected people are chosen to chair important committees and task forces.

5 – Gossiping and spreading rumors – One of the most pernicious weapons in the arsenal of the internal politician is the creation of doubt. Doubt can be created effectively by using gossip to spread rumors about a targeted individual or group. When used by internal politicians, rumors and gossip are not of the harmless chitchat variety. Rather, they are intentional, coldly calculated attempts to advance the agenda of one individual or group at the expense of another.

Rumors and gossip have the greatest impact when they cast doubt on an individual relative to high-priority organizational values.

5. Impacts of internal politicians can have on the implementation of total quality. – Organizations stricken with the disease of internal politics ultimately suffer. –

1) Loss of morale due to infighting, buck passing, and rumor-mongering –

2) Questionable decisions made for reasons other than what is best for the organization

3) Counterproductive internal competition that saps the organization of its competitive energy .

4) Loss of the best and brightest employees as they make a statement about their dissatisfaction by leaving

5) Perpetuation of outdated processes, procedures, and technologies as internal politics is used to promote organizational inertia by those opposed to change.

6) Constant conflict as the political machinations of one group are countered by those of others

7) Loss of quality, competitiveness, and customers as the organization’s focus is diverted from what really matters.

Internal politics tends to perpetuate outdated processes, procedures, and technologies. This is because the tactics of the internal politician are ideally suited for opposing change. Change comes hard for most people. Psychological comfort with the status quo is inherent in the human condition. When internal politics becomes part of the corporate culture, organizations find it even more difficult than usual to make the changes necessary to stay competitive. With a little lobbying, some electioneering, and just the right amount of pressure wisely applied, the natural resistance of people to change can be magnified exponentially by internal politicians opposed to the change. When this happens, the employees of an organization gain the psychological comfort associated with the status quo, but the organization loses the competitive edge associated with change.

6. How managers can control internal politics in an organization. – Trying to control internal politics in organizations is a lot like trying to prevent overeating in individuals. Both involve, finding ways to subdue human nature, both require persistent effort, and both demand constant vigilance. Controlling internal politics in an organization requires a comprehensive effort involving all employees. Such an effort should have at least the following components: strategic planning, leadership, reward/recognition, performance appraisal, customer focus, conflict management, and cultural.

1. Strategic planning – The strategic planning components of an organization’s effort to control internal politics should have at least the following elements:-

1) Explaining the strategic plan to all employees and how it is to be used in guiding all decisions and actions in the organization. –

2) Building a guiding principle into the strategic plan that conveys the message that collaboration is the expected approach in the organization. – All employees should have a copy of the strategic plan, the plan should be thoroughly explained, and employees should be given ample opportunity to ask questions and seek clarification about the plan In other words, it’s not enough for employees to have a plan – they need to understand it.

One of the most important components of a strategic plan is the one that contains the organization’s guiding principles. The organization’s core values are described in its guiding principles. These principles explain in writing what is most important to the organization and how it intends to do business. Consequently, one of the guiding principles of every organization should be collaboration. If employees from the CEO to line worker, know that collaboration is a high priority, it becomes more difficult for them to play the games collectively known as internal politics.

2. Leadership – A fundamental premise of leadership is setting a positive example. Managers must be consistent role models of the behaviour they expect of employees. If a manager practices internal politics, employees will respond in kind. Consequently, it is important that managers be seen using the organization’s strategic plan as the basis for all actions and that they insist on all employees following suit.

3. Reward/recognition – If you want to promote a certain type of approach – for example, collaboration – reward it, and recognize employees who practice it. Managers should examine their organization’s incentives carefully to identify ways in which internal politics is rewarded, either directly or indirectly. The most obvious question is “What happens to employees at any level who are found to practice internal politics”? Another question is “Does the organization provide incentives that promote employee collaboration, and, if so, what are those incentives”? A well designed reward/recognition system will simultaneously provide disincentives to internal politics and incentives that promote collaboration. Disincentives that can work against internal politics include negative performance appraisals, verbal warnings, and written reprimands. Incentives can be both formal and informal, and there are hundreds of both varieties.

4. Performance appraisal – The periodic performance appraisal is how most organizations formally let employees know how they are doing. Consequently, one or more of the criteria in an organization’s performance/appraisal instrument should relate to collaboration, two examples: -1) this employee basis all actions on what is best for the organization, always, sometimes, usually, or never. -2) what is this employee’s collaboration rating, excellent, above average, average, or poor. Making collaboration an issue in performance appraisals ties it directly to pay and promotions. This is critical. Remember that internal politics is driven by self interest. Tying pay and promotion to an employee’s willingness to practice collaboration means that internal politics no longer serves his or her self-interest.

5. Customer focus – Customer focus is a fundamental cornerstone of total quality. In organizations with a customer focus, quality is defined by customers, and the organization’s strategic plan is written from the perspective of attracting, satisfying, and retaining customers. A customer focus is achieved by partnering with customers.

The full benefit of a customer focus—from the perspective of preventing internal politics—is gained by ensuring that all employees are thoroughly informed concerning customer input and feedback. In this way, customer needs and preferences become the critical criteria by which the viability of policies, procedures, practices, and decisions can be judged. Such criteria make it difficult for internal politicians to play their games. Even the most accomplished internal politician will find it difficult to justify recommending decisions that run counter to customer preferences.

6. Conflict management – Internal politics tends to generate counterproductive conflict. This is one of the reasons that managers in organizations should do what is necessary to prevent internal politics. However, it is important to distinguish between conflict and counterproductive conflict. Not all conflict is bad. In fact, properly managed conflict that has the improvement of products, processes, people, and/or the work environment as its source is positive conflict. By practicing conflict management, managers in an organization can make it difficult for internal politicians to play their games. Conflict management has the following components: -1) establishing conflict guidelines – 2) helping all employees develop conflict prevention/resolution skills – 3) helping all employees develop anger management skills – 4) stimulating/facilitating productive conflict.

7. Cultural – There are many different definitions for the term culture. The American Heritage College Dictionary defines it as follows: “The totality of socially transmitted behaviour patterns, arts, beliefs, institutions, and all other products of human thought”. The key part of this definition reads “socially transmitted behaviour patterns”. As applied to an organization, the concept means the way things are done in the organization. In other words, an organization’s culture is the everyday manifestation of its actual beliefs. It is important to note that the concept grows out of actual beliefs as opposed to written beliefs. An organization’s culture should be the everyday manifestation of the guiding principals found in its strategic plan.

8. Strategies for overcoming territorial behaviour. – Overcoming territorial behaviour requires a two-pronged approach: (a) recognizing the manifestations described earlier and admitting that they exist, and (b) creating an environment in which survival is equated with cooperation rather than territorially. Simmons recommends the following strategies for creating a cooperative environment:

1. – Avoid jumping to conclusions – Talk to employees about territoriality versus cooperation. Ask to hear their views, and listen to what they say.

2. – Attribute territorial behaviour to instinct rather than people – Blaming people for following their natural instincts is like blaming them for eating. The better approach is to show them that their survival instinct is tied to cooperation, not turf. This is done by rewarding cooperation and applying negative reinforcement to territorial behaviour.

3. – Ensure that no employee feels attacked – Remember that the survival instinct is the motivation behind territorial behaviour. Attacking employees, or even letting them feel as if they are being attacked, will only serve to trigger their survival instinct. To change territorial behaviour, it is necessary to put employees at ease.

4. – Avoid generalizations – When employees exhibit territorial behaviour, deal with it in specifics as opposed to generalizations. It is a mistake to witness territorial behaviour on the part of one employee and respond by calling a group of employees together and talking about the issue in general terms. Deal with the individual who exhibits the behaviour and focus on specifics.

5. – Understand irrational fears – The survival instinct is a powerful motivator. It can lead employees to cling irrationally to their fears. Managers should consider this point when dealing with employees who find it difficult to let go of survival behaviours. Be firm but patient, and never deal with an employee’s fears in a denigrating or condescending manner.

6. – Respect each individual’s perspective – In a way, an individual’s perspective or opinion is part of his or her psychological territory. Failure to respect people’s perspectives is the same as threatening their territory. When challenging territorial behaviour, let employees explain their perspectives and show respect for them, even if you do not agree.

7. – Consider the employees point of view – In addition to giving an appropriate level of respect to employee’s perspectives, managers should also try to “step into their shoes”. How would you, as a manager, feel if you were an employee? Sensitivity to the employee’s point of view and patience with that point of view are critical when trying to overcome territorial behaviour.

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Friday, August 11, 2006

Agent Based Modeling for Marketing Strategies and Planning

Business competition is getting fierce and the consumer market more dynamic. It is very important for any industry to know, how the consumer is reacting to the changes they brought in terms of policies, products, budgets with respect to geographic, demographics market preferences, inorder to identify the Market Penetration, Market Share, Sales over a period of time etc.

To analyze the dynamics of the consumer market, it is very important to model and simulate the following six stages.

1.Life Events
Life events occurring in customer’s life sometimes force them to take purchase decisions which they have not thought about. It is important to analyze the rate at which the major events are occurring in customer’s life to identify possible market growth opportunities.
For Example: In case of Insurance industry, there are many reasons or events occurring in customer’s life such as new home, new job, moved to new place, divorce, marriage etc which force the consumer to go for new policy.

2.Customer Experience
Customer experience is very important factor in deciding future purchase by the customer. Depending upon whether the customer had GOOD or BAD experience previously, they decide whether to go for shopping with same company or not.
For Example: In case of Insurance industry, Bad/Good claim experience, rate increase, poor service experience, poor service by agent, dropping by the insurer, etc these all have a cumulative effect on the customer’s mind that decide whether to buy the insurance from previous carrier or chose the new carrier.

3.Personal Motivation
As the market is dynamic, there are many providers for the same products customer wants to use/ buy. Hence, customer is always looking for GOOD DEALS that he can buy, that meets his/her need better, which provide value to the investment, that meets his financial needs, the deals with which he/she is satisfied. Hence, the customer has got no specific traits. The business intelligence is needed to extract this information through surveys and classify them as “Personal Motivation” of customer for purchase.
For Example: The customer will go through all above stages mentioned and then will decide whether to buy that particular policy or search for a BETTER DEAL that meets his/her requirements.

4.Marketing Efforts
Every organization spends millions of dollars on advertising, just to make sure that there are reaching their customers through different channels that customer prefer. Surveys are conducted and the information is used for deciding future advertising strategies. It is important to analyze how the customer react to ads, what impressions do they have about the company and how likely are they to be biased towards that company after seeing the ad.
For Example: In case of Insurance industry, there are many insurance providers and there is a tough competition. All of them spend millions of dollars on advertising. If someone wants to know how likely the customer will buy the products from particular insurance provider, then one must take into account the marketing efforts and its interpretation by the customer.

5.Consumer Activity
Consumers have their own views about the company from which they purchased products previously based upon their experience. With this, they tend to evaluate products provided by different companies, compare prices for better deal, recommend product to their neighbors, friends, relatives, co-workers etc. This makes the consumer market even more dynamic to analyze. One must take the Consumer Activity into account if he wants to analyze the final market share.
For Example: In case of Insurance industry, consumers have their own experiences with previous or current insurance provider. Due to this they are likely to evaluate products by other companies, compare prices, ask their friend about their opinions, recommend somebody for the insurance etc. These all things make the Insurance market very dynamic and complex. To analyze the market share of Insurance providers, Consumer Activity is a very important factor.

6.Selling Process
There are Agents / distributors who sell products for the company. They have their own methods of working and their selling effectiveness affects the final decision made by consumer whether to buy the product or not. The factors such as Price Attractiveness, Product Appeal etc also affect the final decision by consumer. Hence, while analyzing the dynamics of consumer market, Selling Process is another important factor that has to be considered.
For Example: In case of Insurance industry, Agents effectiveness is very important that affects the consumers final decision whether to by the insurance or not. Hence, sometimes, customers just shop and they leave without buying the products or they get defected by other Company Agents.

Agent based Modeling” helps to analyze all above six factors affecting the consumer market. It helps to analyze the possible growth opportunities, the areas of improvement. It provides an insight into “Emerging Behavior” of overall market. Generally, the data required for this modeling and simulation is obtained through various surveys. Finally, the model helps to identify the Market Penetration, Market Share, Sales over a period of time etc.

The “Agent Based Modeling” is widely used in business/various industries to analyze the emerging behavior of the market and develop-operate the strategies for grab more market share.

Tuesday, May 16, 2006

Google Inc Vs Yahoo Inc - Strategies : Summary of Case Studies

Yahoo Inc:

Yahoo, an internet portal, operates search, directory and programming services for navigating the increasingly complex environment of the world wide web. Like many internet-related firms, Yahoo makes all its money from advertising revenues. Yahoo’s major competition comes from other search engine firms such as Google. Yahoo’s service philosophy is to minimize the amount of time that users must spend at its site. As a service provider, the firm Yahoo believes that before the new product is released to the outside world, it needs to be more robust than the typical internet software beta. The market risk of broad, public testing is too high; users who try a new service once and have a poor experience with it are unlikely to return. Further it is assumed that once a new service is released, innovative features will be copied by competing firms like Google. These factors made Yahoo to adapt delayed development cycle compared to other competitors as Google.

So, Yahoo’s development/ service process is based upon “slow” release of softwares to users as a new product becomes progressively more robust. Apart from helping to quickly scale services in response to demand fluctuations, the Yahoo setup also has benefit in more effective experimentation. With such a setup, Yahoo also has the flexibility to tailor the customers that first try a new service. Yahoo has high risk of experimentation and external testing as compared to Google.

The competition between Yahoo and Google is Smart Player Vs Smart player.

What makes the game between these two players is

  1. Source of turbulence :Customers , Internet users, Competitors, Technology
  2. Flexibility required in product/service development
  • Time to complete the projects
  • Response time relevant to text and context is small
  1. Sequential product development
  • Concept –design – prepare- produce
  • Experimentation is required
Google Inc:

Google started as a small search company over the web, went adding new features for its users and has evolved into the world's no.1 search engine. It is now on the verge of scaling even more heights with its email service. When Google entered the online search market, Yahoo was the market leader. In a short span of time, Google has become the best search engine by eating into the market share of Yahoo and other players. Since its inception, Google has been successful in giving its competitors a run for their money. Its innovative strategy to generate revenue by placing advertisements on sites which contain information related to those ads has indeed made Google highly profitable. Google's popularity among Internet surfers was mainly because of its superior search technology. Having improved its reputation as the most reliable and useful search engine, Google surprised everyone by announcing the launch of Gmail, its email service, with a massive storage space of 1GB and was quite successful in attracting users of Yahoo and Hotmail.

One of the special features is the speed at which Gmail works. Through Gmail, users can enjoy a faster and more efficient service. A Gmail user need not store the messages in separate folders as all the mails corresponded are grouped into a conversation. This kind of feature is not provided by Yahoo.

Google even came up with search technology for Wireless Application Protocol (WAP) enabled phones and other handheld devices. Google pioneered the concept of Ad Words and Ad Sense, and thus created a sensation in the field of online advertising.

The innovation is major strength, in case of Google. The smart strategies they played right from the start have wondered Yahoo. Apart from searching information and answering queries, Google has been offering various features for its users. Recently, it has partnered with world's top most universities like Harvard, Oxford and some others to digitize their libraries. It has acquired Keyhole Corporation - a map service provider, for Geographical Information System (GIS) applications.

Revenue Model Yahoo Vs Google:

The difference between Google and Yahoo is the revenue factor. Yahoo gets its revenue from Yahoo mail, ads, and some other features where as Google gets almost 85% of its revenue from ads. Google’s technological innovations and focus on user-friendliness to its popularity. Google’s unique business model has made it one of the rare dotcoms to earn profits. While most search engine companies spent a lot of money on marketing to build their brands, Google, focused solely on building a 'better' search engine.

Opportunities for Google are more as compared Yahoo:

Google has been generating enough revenue from its Ad Words, Ad Sense and Gmail service. Its IPO has been successful. Recent reports suggest that Google wants to increase the storage space in Gmail from 2GB to 10GB. Once this happens, its competitors like Yahoo will be left in a quandary, diminishing their power in the market. They are already struggling to keep pace with the fast and vast Gmail. In the years to come, Google can expand its business horizon by developing its own operating system, thus challenging Microsoft's top position in the global software market.

Challenges for Both Yahoo and Google:

Although, Google may seem invincible, it has some challenges ahead. In recent studies, Google topped the "Customer Experience Rankings" list of search engines followed by Yahoo, MSN. Since then, both Yahoo and MSN have brought significant changes in their operations. Yahoo and MSN both made significant gains in several key areas, largely closing the perception gap with Google. So, Google needs to work towards offering better features than its competitors so as not to lose loyal search users to the competitors Yahoo and MSN Search. The storage space of 10GB in Gmail is a definitely a cause of concern for competitors. Nevertheless, Google has to check out if it is technically feasible before promising the same to the users. Even if it is feasible, there is no guarantee that this service will not be charged in the coming years once Google realizes that the users are totally hooked to Gmail and they have no place to go.

Conclusion: Yahoo’s Orientation

As the world is getting more competitive every day, no company can rest assured of its success. Every company, whether it is big or small, has to put continuous efforts to come up with innovative business ideas in-order to achieve the ultimate objective of being profitable. So is the case with Google. Analysts predicted in 2003, that Google would soon compete with Yahoo for the top slot in the online destination turned out to be true. Google came up with many other features on its search engine, many innovative ideas like Blogs, Ad Words, and video search. In-order to move up the ladder, Google has to strike the right chord. What is it that will elevate Google's status further? What's more in the offering from Google? These are the major questions that Yahoo has to look for and they have to orient in the same direction if it wants to be at the top. Yahoo needs to be more innovative, flexible/fast to capture/retain the market.


Tuesday, April 05, 2005

The optimal size of the Corporate Center

An interesting short article for the topic of this forum can be found in the HBR of April 2005 on the added value of corporate headquarters. Michael Goold and David Young have investigated whether lean headquarters perform better, as many people think.
Surprisingly, they found that there is no evidence that a lean and mean headquarters is associated with superior financial performance.
Because corporate centers add value in different ways, depending on a firm's strategy and the businesses in which it competes, the appropriate size and nture of staff functions are bound to differ, too.
The bottom line is: There is no standard or ideal model or size for a succesful headquarters and the Corporate Center should simply reflect the chosen corporate strategy.

Wednesday, December 29, 2004

Bestselling Corporate Strategy Books

Saturday, October 23, 2004

Blue and Red Ocean S.

W. Chan Kim and Renée Mauborgne in HBR of Oct 2004 don't deny that competition matters. But they do say that by focusing on competition and "competitive advantage" markets have become crowded and bloody and are looking like 'Red Oceans' as Kim and Mauborgne call them. Indeed they have a point if they claim that scholars, companies, and consultants have somewhat over-focused on 'competitive edge' and in doing so ignored 'Blue Ocean strategy':

"So why the dramatic imbalance in favor of red oceans? Part of the explanation is that CS is heavily influenced by its roots in military S. The very language of S. is deeply imbued with military references—chief executive “officers” in “headquarters,” “troops” on the “front lines.” Described this way, S. is all about red ocean competition. It is about confronting an opponent and driving him off a battlefield of limited territory. Blue ocean S, by contrast, is about doing business where there is no competitor. It is about creating new land, not dividing up existing land. Focusing on the red ocean therefore means accepting the key constraining factors of war—limited terrain and the need to beat an enemy to succeed".

Unfortunately the authors do not give much specific tools on how we can create and develop such Blue Oceans. We'll have to wait for their forthcoming book. If you don't want to wait you can find such tools plus a further review of the article here: Blue Ocean S.

Tuesday, September 14, 2004

Core Value Proposition

In the most recent HBR (Augusts 2004), George Day makes a case for determining a growth S. based on your company's value proposition. "To craft a winning growth S, you must first firmly identify your company’s value proposition—including its capabilities, assets, and cultural DNA. What is your company really good at? Do you best compete on price, on integrated solutions, or on innovation? Based on your true value proposition, you should select the S. that imbues this proposition with meaning and direction. Growth will naturally follow". Day recommends:
- Price-value leaders grow best by extending their low-cost value proposition to adjacent markets.
- Relational players can look for latent customer needs that they can solve well.
- Performance-value leaders grow best through continuous innovation—think. These companies should exploit emerging and converging technologies.
To achieve superior profitability, you need to beat your competition in at least one of these value arenas and equal them in the other two.
Remarkably Mr. Day not even mentions the book "The Discipline of Market Leaders" from Treacy and Wiersema (1994).

Thursday, June 24, 2004

CS versus BS

On this management quotes site I noticed this intersting lamentation from Prahalad and Hamel: "How many senior executives discuss the crucial distinction between competitive S. at the level of a business and competitive S. at the level of an entire company?" I wonder how many of you CS professionals share this same frustration? What is your top workaround?