Chapter 8 strattegic planning - Strategic Management & Business Analysis

Chapter 8
Strategic Management & Business Analysis
MGMT608
Supervisor:
Prof. Dr. Lawrence
Presented by: Ala Abu Allan
Ibrahim FAYOUMI

Introduction
The issue of strategic alignment
The paradox of revolution and evolution
Perspective on Strategic Change
Managing the paradox of revolution and evolution.
Strategic change from an international perspective.
readings

Introduction
In a rapidly changing world, firms must adapt strategically to
improve conditions. This involves distinguishing between
operational adjustments to maintain efficiency and strategic
changes focused on aligning the firm's fundamental structure
with the dynamic environment. While operational changes work
within the existing framework, strategic changes aim to create a
new alignment, impacting the business model and organizational
system. Managers face the challenge of implementing timely
strategic changes to stay competitive. This ongoing process,
termed 'strategic alignment,' involves adjusting business models
and organizational structures to align with external conditions.

Introduction Cont.
*For a ‘Living’ organization, change is a given.
*Not all change is strategic – much change is “to make very small changes to something in order
to make it work, as well as possible” alternatives where changes are directed at increasing the
firm's performance within the existing system's confines and limitations
*strategic changes are directed at creating a new type of alignment between the firm's basic
set-up and the environment's characteristics.
*The process of enacting strategic changes to remain is called ‘strategic alignment.’

* Many actions constitute a strategic change, e.g., a
reorganization, a diversification move, a shift in core
technology, a business process redesign, or a product
portfolio reshuffle.

Chapter 8 strattegic planning - Strategic Management & Business Analysis

Areas of strategic alignment
“Firms are complex systems with many elements, each of which can be changed.”
Business model:
‘how a firm makes money, ‘ or the specific configuration of resources, value-adding activities, and
product/service offerings directed at creating value for customers.
Organizational system:
‘how a firm is organized’ or ‘how the individuals populating a firm have been configured and relate to one
another to facilitate the business model.’
The organizational system supports the business model.

Organizational structure
refers to the clustering of tasks and people into smaller groups.
Organizational processes
refers to the arrangements, procedures, and routines used to control and coordinate the people and
units within the organization.
Organizational culture
Refers to the worldview and behavioral patterns shared by the members of the same organization.

General view of the business model and the organizational system

The magnitude of change
The size of the change steps is called the magnitude of change.
-Scope of change - The scope of change is broad when many aspects and parts of the firm are aligned
same as or can be narrowly focused on a specific organizational aspect.
-Amplitude of organizational changes – The amplitude of change is high when there is a radical
departure from the previous situation.
-Where a change is comprehensive and radical, the magnitude of the change step is significant.

The pace of change
-Timing of change – the pace of change depends on the moment at which changes are initiated. The
timing of change can be interrupted or constant.
-Speed of change – the pace of change depends on the period within which changes occur. The speed
of change can be high or low.

The demand for revolutionary change processes
Revolutionary change is needed when an organization is rigid so that more minor changes do not
bring the firm into movement.
Typical sources of organizational rigidity include:
Psychological resistance to change.
Individuals often resist change due to the uncertainty and ambiguity that come with departing
from established routines. Overcoming this psychological resistance might require the imposition of
a new business model or organizational system to break through established patterns.
Cultural resistance to change :
People often become resistant to cues because their mental maps are outdated.
political resistance to change
Organizational change, in essence, produces winners and losers, and the change is likely to be
opposed by people who see themselves as possible losers. Fear of losing authority can cause
departments or individuals to become major roadblocks to strategic changes.

Investment lock-in:
An investor is "locked in" when they are unwilling or unable to trade security because of regulations,
taxes, or penalties that prevent it from being profitable or make it illegal.
Competence lock-in:
When the firm cannot gradually shift the organization to an alternative set of competencies because
the entire business model and organizational system have been aligned to the old set.

Systems lock-in:
Lock-in situations can also arise with proprietary systems (like SAP enterprise resource planning
software) or open standards (such as measurements in inches and GAAP accounting procedures).
Switching to a different platform becomes difficult and expensive once a standard or system is put
into place. Gradual or inexpensive transfers are sometimes impractical.
Stakeholder lock-in: Highly restricted commitments to stakeholders, including long-term agreements
with suppliers and customers, warranties, and duties to local governments and communities, may
bind an organization. These responsibilities may force businesses to follow a particular strategic path.

A radical approach to strategic alignment is often necessary if only a short period is available for a
significant change.
Common triggers for revolutionary strategic change are:
Competitive pressure:
Under intense competitive pressure, pressure and its market position erode quickly; a rapid and
dramatic response might be the only approach possible.
Regulatory pressure:
Firms can also be put under pressure by the government or regulatory agencies to push through
major changes within a short period of time.
First mover advantage:
Being the first to provide a new technology, service, or product is another proactive motivation to
start a revolution in order to create obstacles for competitors who enter the market later.

The demand for evolutionary change processes
Evolution is a process whereby a constant stream of moderate changes gradually accumulates over a
more extended period. A new business model and organizational system can evolve from the old.
Reasons for evolutionary change:
Since learning is a slow process, the organizational learning approach is applied in these situations.
It is impossible to force radical changes on the company because power is too distributed.

Revolutionary change is necessary to create discontinuity in the alignment process – radical and
swift breaks with the past.
Evolutionary change is necessary to ensure continuity in the alignment process- moderate and
gradual change.
The discontinuous alignment perspective.
People and organizations are naturally resistant to change
Continuous change creates organizational confusion.
Long periods of stability are necessary for firms' proper functioning, but a significant change is
needed to overcome rigidity.
Significant changes can be made due to a crisis, e.g., new technology or government regulations.

The continuous alignment perspective
revolution commonly leads to the need for further revolution at a later stage.
A yearning for stability follows revolutionary change.
Slower change is more effective – the story of the hare and the tortoise.
A preference for revolution reflects an obsession with the short term. Continuous alignment is
focused on the long term.
Everyone in the firm must be motivated to learn and adapt continuously.
Everyone in the firm is involved in evolutionary change – it is not imposed by top management.

Managing the Paradox of Revolution and Evolution
Navigating
Over the long term, the pattern of environmental change is casual . Periods of relative stability are
discontinuous by short and dramatic periods of instantly – ‘punctuated equilibrium.’
When the environment is in flow, organizations must align. Strategizing managers must possess a
variety of options in dealing with environmental change.
During periods of relative stability, the emphasis should be on evolutionary adaption.
During periods of discontinuous change, firms need to be able to be revolutionary.

Managing the Paradox of Revolution and Evolution
Discontinuous alignment VS continuous alignment perspective

Strategic change in international perspective
spread of mechanistic organizations
Internal relationships are depersonalized and calculative. In more organic forms of organization, e.g.,
in Japan and Germany, management and production activities are not strictly separated, leading to
less top-down decision-making. Internal relationships are based on trust, cooperation, and a sense of
community.
Machine bureaucracies are more resistant to change; therefore, revolutionary change is more
common.
Clan-like organizations can better reorganize around new issues, so there is a preference for
continuous alignment.

Position of employees
In a mechanistic organization, people who work for the organization are seen as valuable but
expendable. Employers want to minimize their dependence on employees, so organizational
learning should be captured in formal systems and procedures so employees can be replaced.
Employees will only tie themselves firmly to the organization. More conducive to revolutionary
change
In a clan, people are the organization. Employees’ organizational positions are more secure;
information is more readily shared. Employers can invest in people instead of systems as
employees are loyal to the firm. More conducive to continuous change.

Role of top management
In some countries, top management is the organization's ‘ central processing unit,’ visible top-down
leadership is the norm, and strategic change is the top managers’ responsibility. This leads to a
discontinuous perspective.
In other countries, management could be more direct and more visible. Change comes from within
the organization’s body and will be more evolutionary.

Reading 1: ‘Reengineering Work’ by Michel Hammer.
"It is the idea of

discontinuous thinking - recognition and moving away from
outdated rules and basic assumptions that underlie operations.”
He urges managers to “think big” by setting high goals and making decisions.
Bold steps and boldness in accepting high risks.
Reading 2: ‘Building Learning Organizations’ by Peter Seng.
Leaders must facilitate organizational learning- leaders “ are responsible for building
organizations where people are continuously expanding their capabilities to shape
their future.”

Reading 3: ‘Ambidextrous organizations: Managing evolutionary and revolutionary
change.’ By Michael L. Tushman and Charles A. O'Reilly IIP
Authors argue that while short periods of revolutionary change are
necessary to break away from outdated business models, more
extended periods of gradual change are decisive for adapting to the
evolving market demands. They propose the idea of "punctuated
equilibrium“.
The punctuated equilibrium model aims to explain why public policies tend to be characterized by
long periods of stability punctuated by short periods of radical change.

Chapter 8 strattegic planning - Strategic Management & Business Analysis

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