Articles

What shapes strategy today and how has it changed? While many executives were focused on the implications of the Internet, a more powerful force was at work, contends Stanford University professor Kathleen M. Eisenhardt: globalization. Globalization has quietly transformed the economic playing field. The traditional strategic paradigms (positioning, core competence and the like) are not dead, but they are less germane than they were. Schumpeter’s “creative destruction” and similar economic views are coming into their own. The new economics is more entrepreneurial. It centers on disequilibrium, fleeting opportunities to capture competitive advantage, and the creation and destruction of wealth. Successful strategy in today’s world is simple; it uses a few clear guidelines and allows for flexibility. It is supported by organizational design; it is not handed down from on high. And timing is everything. Eisenhardt cites Colgate’s use of simplicity in a key strategic process, global product management. Colgate has found success through allowing product managers considerable freedom within a couple of simple guidelines (Maintain the Brand; Keep Relative Product Positioning Stable). That thinking also has been a boon to Ispat International, which uses uncomplicated rules for choosing and integrating acquisitions and has thus become one of the world’s fastest-growing steel companies. In contrast, Intel and SAP stumbled with their joint venture for e-commerce services, Pandesic. Although the companies had ample resources and a clear vision of their desired strategic position, their plan’s complexity kept them from adjusting as the market unfolded. Eisenhardt explains how managers can refocus their strategy on key processes and simple rules, mapping their individual businesses to market opportunities and employing an evolutionary form of timing to move from one competitive advantage to the next.

Project managers can't predict the future, but accurately gauging the degree of uncertainty inherent in their projects can help them quickly adapt to it.

Diversifying can be the best way for companies to match their capabilities to the marketplace.

The quality initiative Six Sigma is sweeping the United States. Is it good for whatever ails your company? Consultant Michael Hammer thinks not. He warns that many business leaders, in their quest for operations-performance improvement, fail to distinguish its strengths from its weaknesses. Hammer presents a strategic, holistic approach & #8212; business-process management & #8212; in which Six Sigma is only one of many useful initiatives. If a business process, such as billing customers, is fundamentally defective, why use Six Sigma to improve the performance of it? Companies that Hammer calls process enterprises (Caterpillar, Johnson & ; Johnson, Merck, Progressive Casualty Insurance, Bombardier and IBM) have found more success redesigning whole processes. Certainly, Six Sigma’s ability to unearth root causes of problems is outstanding for narrow cost-saving improvements. But it deploys statistical analytic tools to uncover flaws in the execution of an existing process without asking whether the process itself is flawed. Six Sigma assumes that the existing design is fundamentally sound & #8212; a dangerous assumption. For peak performance, companies should position Six Sigma in the context of process management and assign process owners. When a problem is amenable to a Six-Sigma solution, the process owner convenes a project team. If deeper change is needed, then a process-redesign team is organized. Process owners ensure that all performance initiatives (Six Sigma, enterprise resource planning, balanced scorecard, customer-relationship management and so on) are integrated to support strategic goals. Fitting Six Sigma into the process-management framework allows organizations to enjoy Six Sigma’s benefits while keeping it away from areas where it doesn’t belong. Process enterprises already are reaping cost savings, accelerated new-product introduction, improvements in customer satisfaction and increases in profitability.

Regardless of industry, all companies are operating on ever faster evolutionary tracks and at ever greater risk. A company’s real core capability & #8212; perhaps its only sustainable one, say authors Fine, Vardan, Pethick and El-Hout & #8212; is its ability to continually redesign its value chain, reshuffling structural, technological, financial and human assets in order to find maximum, albeit temporary, competitive advantage. The ultimate goal of strategic value-chain analysis, say the authors, is building an organizational capability for fast response to rapidly evolving industry dynamics. To execute such an analysis, the authors developed a value-chain-strategy framework during a yearlong strategic assessment at the General Motors Powertrain organization. The framework seeks to answer four key questions: Where is value being created and what activities are not adding to overall enterprise value? What areas of the business should remain in-house versus being outsourced? Where should investments be made and how should they be leveraged? How can the value chain be organized to optimize existing and emerging alliances? To answer those questions, the authors employ not only traditional economic-value-added (EVA) analysis, but also their own strategic value assessment (SVA), which considers factors such as customer preferences, the rate of change of underlying technology, competitive position in the marketplace, depth of the supply base and the integral or modular nature of the asset. The wide applicability of the framework is illustrated in the authors’ discussion of IBM’s decision to outsource its first PC microprocessor to Intel, a consumer-products company’s decision to outsource the manufacture of a branded product, and the Recording Industry Association of America’s decision to quell rather than acquire Napster’s file-sharing capability.