SETTING STRATEGIC DIRECTION

Visionary Companies Premier institutions Widely admired Significant impact on the world Visionary companies made mistakes, faced difficulties, but they bound back Visionary made extraordinary long-term performance

The Companies in the Research 3M American Express Boeing Citicorp Ford General Electric Hewlett-Packard IBM Johnson & Johnson Marriot Merck Motorola Nordstrom Philip Morris Proter & Gamble Sony Wal-Mart Walt Disney  Norton  Wells Fargo  McDonnell Douglas  Chase Manhattan  GM  Westinghouse  Texas Instrument  Burroughs  Bristol-Myers Squibb  Howard Johnson  Pfizer  Zenith  Melville  RJR Nabisco  Colgate  Kenwood  Ames  Columbia

Cumulative Stock Returns of $1 Invested Jan. 1, Dec. 31, $1000 $2000 $3000 $4000 $5000 $6000 General market, $415 Comparison companies, $955 Visionary companies, $6356

The first step in setting strategic direction is to define WHO YOU ARE

Collins and Porras’ (1996) Ideas Core ideology Core values Core purpose Envisioned future BHAG Vivid description It’s who are you It’s the benefits you provide to the society It’s your dream It’s the picture of you in 10 years

An Example: Our Values Communication: We have an obligation to communicate. Here, we take the time to talk with one another… and to listen. We believe that information is meant to move and that information moves people. Respect: We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Integrity: We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won’t do it. Excellence: We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be.

Video: Starbucks Identify core values of Starbucks? Why do you think these are core values? How important these core values are to the success of Starbucks?

Whose missions are they?...to create software for the personal computer that empowers and enriches people in the workplace, at school and at home....is to be the world's best quick service restaurant experience To maximize profits to shareholders through products and services that enrich people's lives.

Robin Hood What problems were facing Robin and his band? Create a mission for Robin and his band. Based on the mission, decide what the band should do on the following issues:  What are the core values of the band?  Who are the real "competitors"? (Sheriff or the rich?)  Who are key "customers"?  Should the band impose a fixed tax?  How to recruit people? What to motivate people?  Should the band joint-venture with King Richard's supporters?  Should it expands nationally? What do we learn as for modern managers?

GROUP EXERCISE: “ROBIN HOOD” What are strategic implications for Robin Hood and his band if they follow one of the following missions: Mission 1: “Fight for the fairness and equality. Rob from the rich and give to the poor” Mission 2: “Create our own world. Fight for a better lives for the team members”

ORGANIZATION SYSTEM, STRUCTURE, AND CULTURE

Organisational Structure Organisational structure describes:  Who is responsible for what  Patterns of communication and knowledge exchange  Skills required to move up the organisation Types of structure  Emphasis on one structural dimension Functional; Multidivisional; Holding  Mixture of structural dimensions Matrix; Transnational; Team; Project

Figure 10.2a Functional Departmentalization Advantages Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations Coordination within functional area In-depth specialization Disadvantages Poor communication across functional areas Limited view of organizational goals

Figure 10.2c Product Departmentalization +Allows specialization in particular products and services +Managers can become experts in their industry +Closer to customers –Duplication of functions –Limited view of organizational goals Source: Bombardier Annual Report.

Figure 10.2b Geographical Departmentalization Advantages More effective and efficient handling of specific regional issues that arise Serve needs of unique geographic markets better Disadvantages Duplication of functions Can feel isolated from other organizational areas

Team-based Structure Combines both horizontal and vertical co-ordination through cross functional teams Often built around business processes Contains mixture of specialists Advantages  Good for knowledge sharing  Flexible  Highly motivated Disadvantages  Complexity  Difficulties of control  Problems of scaling up

The Organization ’ s Culture Organizational Culture  A system of shared meanings and common beliefs held by organizational members that determines, in a large degree, how they act towards each other.  “The way we do things around here.” Values, symbols, rituals, myths, and practices  Implications: Culture is a perception. Culture is shared. Culture is descriptive.

Benefits of a Strong Culture Creates a stronger employee commitment to the organization. Aids in the recruitment and socialization of new employees. Fosters higher organizational performance by instilling and promoting employee initiative.

Organizational Culture Sources of Organizational Culture  The organization’s founder Vision, mission, and values  Past practices of the organization The way things have been done  The behavior of top management Continuation of the Organizational Culture  Recruitment of like-minded employees who “fit”  Socialization of new employees to help them adapt to the culture

The Learning School

What Is Learning? Accumulation of knowledge (What are they?) Creation of meanings (What do they mean?) Transformation of perspectives and behaviors (What should I do? Or change?)

Process of Learning Cognitive: Collect, processing information (rational thinking) Social: observation and follow others (socially acceptable ways to do things) Reflexive: reflection of one own experiences to create new meanings (what have I done? What should I have done?)

Quote “Every plan looks good on paper --- until we meet the enemies” (US former President Bush – about the war in Iraq)

The Knowledge Spiral Socialization (Discuss with your friends) Externalization (Write it down) (Think - reflect) Internalization (training) Combination From Tacit Explicit Tacit To Explicit

Organization Learning Framework Intuiting Experience Images Metaphors Interpreting Language Cognitive map Conversation Integrating Shared understand. Mutual adjustment Interactive Institutionalizing Routines Systems Rules Individual Group Organization Level Process Inputs/Outcomes

Case: Toyota Production System Describe the Toyota Production System and policies? Why can it maintain high quality? What are special about TPS? Why is that so hard to copy? What were the risks in Toyota's system?