Strategic Thinking, Chapter 1 Robin, Reed, Joel, New BA – Fall 2008

Problem? Is there anything wrong with corporate America? Is there a disconnect between management and labor?

Corporate America is Broken People consistently rate managers the lowest of the low ▫Even below politicians and journalists! 1980s: Corporations started cutting excess fat, and they haven’t stopped

Old Paradigm Jaws of the pincer ▫Doctrine (strategy, structure, systems) ▫Theory  Porter’s Theory of Strategy: Competition to Appropriate Value  Companies exist because markets fail Enhance competitiveness by increasing operating efficiencies Bad relationship between firm and its employees and suppliers

Static vs. Dynamic Efficiency Old paradigm ties managers to static efficiency rather than dynamic efficiency Static efficiency – shift resources to their highest valued use Dynamic efficiency – create new options and new resources; move economy to a new level

Group Breakout Discussion Break into groups of 3-4 people You have 3 minutes Scenario: ▫Economic market is downturned ▫Senior management is asking for you to reduce expenses within the organization Objective: ▫How would you do this under static efficiency? Under dynamic efficiency?

New Paradigm Value creation vs. creative destruction The three Ps ▫Purpose ▫Process ▫People nYhttp:// nY

Dog-Eat-Dog World vs. Value Creation Westinghouse3M Buy attractive companies Sell off companies when too much competition Appropriate value from suppliers, customers, and employees Good only at enhancing the efficiency of existing activities Create value through continuous innovation Encourage collaboration though shared goals and values Invest in employees Create innovations and value

Paradigms of Job Security Dependence of job security Independence of employability Trap employees through specialization Reduces an employee’s power for wage negotiations Emphasis on getting what you can from the employee Smart people leave before they get stuck Employees must promote personal image Educate employees to be generally more employable Freedom to leave makes employee’s voice louder Emphasis on bettering employees Exciting environment encourages people to stay Employees collaborate to cause gain for whole company

What New Employment Paradigm Isn’t Does not release managers from responsibility to protect jobs Is not about providing free education to people so they can leave Is not just a new HR department program

Game Time!

References Barney, J. & Hesterly, W. (2008). Strategic management and competitive advantage. Upper Saddle River, NJ: Pearson. Ghoshal, S., Bartlett, C. A., & Moran, P. (2001). A new manifesto for management. In M. Cusumano & C. Markides (Eds.), Strategic thinking for the next economy (pp. 9-32). San Francisco, CA: Jossey-Bass.

Proposed Essay Questions Discuss the difference between static and dynamic efficiencies. What are the drawbacks of the “old paradigm?” What about advantages of the old? What are the benefits of the “new paradigm?” Are there disadvantages? What are the jaws of the pincer composed of? How does that impact organizations? In which of Porter’s five forces would you see the new and old paradigms working? Give examples. ▫We are thinking something along the lines of: Consider the “threat of substitutes.” If some companies are only operating under “static efficiencies” and the “old paradigm,” companies that operate under “dynamic efficiencies” and the “new paradigm” may get an edge through their innovative ideas.