Leadership

Most of the existing frameworks for strategic management assume an environment that is stable and simple. But technological advances and global changes have created dynamic, complex climates in which companies must operate. Chakravarthy examines the industry he calls Infocom & #8212; information providers, information processors, communication providers, and communication support. Technology has lowered many entry and mobility barriers among the industries; Microsoft is an example of a company that has exploited many strategic opportunities now available to Infocom companies. Chakravarthy compares and contrasts the popular frameworks for formulating competitive strategy. Porter’s framework assumes stable competitors, suppliers, and buyers. The company finds an appropriate strategy and erects the necessary barriers. But, says the author, technological change quickly makes the barriers obsolete, Infocom players have deep pockets, and government policy has a diminishing role. In the Hamel and Prahalad approach, the role of strategy is not to accommodate an existing industry structure but to change it. However, the author comments, Infocom is not evolving predictably, so benchmarking against its current structure is futile. The D’Aveni framework assumes that strategy must continually seek to change the rules of the game because companies will quickly retaliate against any new strategy. Chakravarthy points out that a firm cannot continuously move from one advantage to another. His proposed framework, applied to the Infocom industries, has three elements: Reconceptualizing strategy. Companies must repeat innovation; e.g., Canon’s successful launch of inkjet printers damaged its position in laser printers but was necessary to respond to competition. Companies must build customer networks around products or services. They must also be able to sense market flow, as Microsoft did when it found that its proprietary strategy for Microsoft Network would isolate it from the Internet. Sharing responsibility for strategy broadly within the firm. Employees must share a vision that is purposely vague but describes the firm’s guiding philosophy. Strategy must come from the bottom up and from small, focused units. Focusing on organization capabilities as the source of competitive advantage. Companies must leverage, strengthen, and diversify their competencies. In the end, according to Chakravarthy, “going with the flow” may be the best strategy for a firm in a turbulent environment. Rigid top-down strategies may be counterproductive. Firms should concentrate instead on growing distinctive competencies for the future.

Malone suggests that greater decentralization in business is a response to fundamental changes in the location of decision making; the changes are enabled by the dramatically decreasing costs of IT. A central issue for organizations in the twenty-first century, the author posits, will be how to balance top-down control with bottom-up empowerment. He proposes radically decentralized organizations such as the Internet as new models for organizing work. Malone examines the three stages in the relationship between lowered communication costs and the economics of decision-making structures. When communication costs are high, decision makers are independent and decentralized; for example, people in tribes, villages, and towns. When costs fall, decision makers become centralized, as in large, global corporations. As costs fall further, connected, decentralized decision makers can combine the best information from anywhere with their own local knowledge, energy, and creativity. Malone uses the history of retailing as an example. Mom and pop stores with unconnected, decentralized decision making are replaced by Wal-Mart type stores with connected, decentralized decision making via electronic ordering and inventory systems. The Internet is an even more decentralized form of retailing in which anyone can establish a global sales operation. The author sees three types of decision makers: cowboys, who are independent and decentralized and have low communication needs; commanders, who are centralized and, like military commanders, have high needs for communication; and cyber-cowboys, who are connected and decentralized and make independent decisions based on large amounts of information from electronic networks. Three IT-related factors determine where decision making in an organization occurs or is most desirable: (1) decision information & #8212; IT enables organizations to communicate information to people who have the knowledge, experience, and capabilities to make decisions; (2) trust & #8212; IT can increase trust by making remote decision makers more effective, controlling them, and socializing them; (3) motivation & #8212; IT enables people to make their own decisions about how to do their work. Autonomy makes them enjoy their work more. In radically decentralized organizations, Malone sees power emanating from the bottom rather than from the top. Who makes the decisions and who can overrule decisions will become crucial issues. In a growing knowledge-based economy, empowered decision makers enabled by new IT will have increasingly important roles.

Managers must adopt training and recruiting policies that compensate for institutional barriers to HR investment.

When individual improvement methods such as TQM or concurrent engineering fail to achieve the desired results, managers can merge techniques to better their chances of success. Each method has a particular perspective, special language, analytical tools, and change tools. By understanding each element, a manager can choose among a plethora of methods and link one technique with others. Having several perspectives instead of just one can eliminate the possibility of focusing on one technique as a cure-all. Language or jargon may be identified with a particular group or function; for instance, operational managers will probably prefer just-in-time methods, because the terminology is familiar, while accountants prefer activity-based costing methods. Euske and Player offer a framework of "family trees" to help managers understand the commonality of different methods. In each tree, the methods are more closely related to each other than to methods in other trees. For example, in the process-based tree, business process reengineering, benchmarking, hoshin planning, process mapping, and story- boarding are all linked. Certain tools can be used in several different families. Flowcharts are used in activity-, process-, quality-, and time-based methods. By also understanding these relationships, managers can gain a more complete view of the improvement process. The authors use the example of customer-order handling to illustrate how one manager initially used process mapping to evaluate order processing. She eventually combined it with time compression management, activity-based costing, and a quality-based improvement method to leverage the results of her initial effort.

Executives today face many difficult, potentially explosive situations in which they must make decisions that can help or harm their firms, themselves, and others. How can they improve the ethical quality of their decisions? How can they ensure that their decisions will not backfire? The authors discuss three types of theories -- theories about the world, theories about other people, and theories about ourselves -- that will help executives understand how they make the judgments on which they base their decisions. By understanding those theories, they can learn how to make better, more ethical decisions.

In their Fall 1995 article, the authors discussed the four elements necessary to establish a behavioral context that rejuvenates a company's employees -- discipline, support, trust, and stretch. In this sequel, they trace the common threads in successful companies' transformation processes -- simplification, integration, and regeneration. In an extensive study, they discovered that carefully phased or sequenced processes were more effective than sudden frenzied commitment to the latest management fad. Along with a phased approach, the successful companies recognized that the real challenge in transformation was to change people's attitudes, assumptions, and behaviors. Only when managers committed to the long-term effort required to establish the four characteristics necessary for a new behavioral environment were they able to create companies that could renew themselves.

Why are some companies able to remain vital, even after extensive reengineering, while others flounder and fail? The answer, according to these authors, lies in a company's ability to rejuvenate its employees by establishing a behavioral context with four characteristics -- discipline, support, trust, and stretch. The authors trace postwar corporate history to identify the pernicious qualities that have ossified many companies, using the example of Westinghouse to illustrate an oppressive context based on the elements of compliance, control, constraint, and contract. They also show how companies like Intel and 3M have been able to renew themselves by creating an environment in which people are the most important resource.

Companies are examining their use of space more carefully to reduce occupancy costs. Misconceptions about the role of accommodation in organizations have led to costly inefficiencies in space planning and building use. Reducing square footage provides a company with a two-stage opportunity for improvement. First, space "right sizing" and redesign can lead to a better "fit" between work-space design and users' tasks; employees' work space can more effectively support work performance and improve productivity. Second, the process of making space cuts and changes is an opportunity for initiating broader-based corporate change in companies seeking to reduce overhead, empower employees, and reengineer work processes. The author offers examples that show how some companies have used work-space changes to transform their business and how CEOs can take full advantage of this opportunity.

For managers, the challenge of understanding nonmarket forces — government, interest groups, activists, and the public — is frequently more difficult than understanding the market environment. The author develops a strategy system of principles, frameworks, and action plans to deal with the issues, in-stitutions, interests, and information that characterize the nonmarket environment. He uses the concept of a rent chain, analogous to the value chain, to show how com-panies can participate in policy-setting processes and generate leverage to their own benefit.

When employers focus only on the direct, out-of-pocket costs of health care, they fail to consider the indirect costs of illness in the workplace form workers' impaired functioning on the job and absenteeism. The authors present a case study of the effects of clinical depression on direct and indirect health-related costs and provide a model that employers can apply to a wide range of illnesses to analyze their investments in health care. The authors apply the framework to several workplace situations -- employees' depression, cigarette smoking breaks, and arthritis -- to estimate the costs of lost productivity. They also show how to do a break-even analysis to determine when employers' investments in health interventions are likely justified.