MT1022A Lecture 1-11-12 WebCT

7/30/2019 MT1022A Lecture 1-11-12 WebCT

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MT1022 Managing &Leading Strategic

Change

Lecture 1

Prof. S HothoDundee Business School


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HP Strips Some Gears

With Strategic Shift Hewlett-Packard Chairman Ray Lane Defends

Strategy Shift at the 2011 InformationWeek500 Conference

Lane acknowledges confusion in marketfollowing its announcement to considerspinning off PC business and spotlights HP'sfocus on enterprise information technology

new CEO is eyeing a shift towards the moreprofitable software, networking and storagebusinesses.

Leo Apotheker clearly emulating IBM


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StrategicChange


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Mid 2003

BMW cars outsell Mercedes for thefirst time in six years

Sales of Mercedes SUVs below target

Mercedes assembled in China for thefirst time

Daimler Chrysler parts with Hyundai


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February 2007

DaimlerChrysler invites investmentbankers to assess strategic options for

demerger On announcement of this move,

Daimlers shares rise to six year high.


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May 2007

DaimlerChrysler announces that it willsell off its Chrysler division to private

equity fund Cerberus forapproximately 5.5 bn Euro.


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Stuttgart, Germany, August 03, 2007

DaimlerChrysler (stock-exchange abbreviationDCX) today completed the closing for the

transfer of a majority interest in the ChryslerGroup and for the related financial servicesbusiness in NAFTA to a subsidiary of CerberusCapital Management, L.P., a private-equitycompany based in New York. A subsidiary of

Cerberus takes over 80.1% in the ChryslerHolding LLC, while DaimlerChrysler retains a19.9% interest, as announced in May 2007.(from official web site)


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End of match made in

motor heaven


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And what happened next?


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What happened next

In 2008 CAR Magazine announcesalliance between Mercedes and . ?

The reason: credit crunch, marketsaturation, and that great Germanrival VW/Audi/Porsche powerhouse,

which builds more V10, V12, W12 andW16 engines than the competitioncombined


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What happened

yesterday? Financial Times, 22 September 2009

Dell in $3.9bn cash deal for PerotSystems =

Announcement of strategic change

Dell looking for large acquisitions in ITbusiness services


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Realtime Worlds

Scotlands biggest games developer

Winner of the Hottest Prospect Award

at Tech Media Invest 2008

Developing some of the worlds bestselling video games, such as

Crackdown

And what happened next?


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Realtime Worlds

APB was to be the Grand Theft Auto of the21st centurya freeform copsn robbersshootfest in a massively multiplayeruniverse

Developing the game cost the company$105m

In August 2010 the company went intoreceivership

How did this go soooooooooooooo wrong?


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Microsoft

February 2008

Microsoft makes strategic changes in

technology and business practices to enableinteroperability

Change in business practices and technology toincrease the openness of its products and drive

greater interoperability, opportunity and choicefor developers, partners, customers andcompetitors


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Microsoft 2011

Steve Ballmer gives a keynote atResearch in Motion announcing that

Bing will become default searchprovider on Blackberry devices:

Microsoft changing from domination to

alliances in gain mobile supremacy ???


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Nokia 2011

Outlines new strategy, new leadershipand operational structure to

accelerate the companys speed ofexecution in a dynamic competitiveenvironment incl strategic

partnership with Microsoft


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The biggest merger in

Scotland Which merger will affect Scotland

between 2011-2013?


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Insights into strategic change(management)

Comprehensive

Timing and time

Proactive and reactive

Hubris, promises, expectations

Difficult to get out of

Role of leadership

Shareholder value, stakeholder conflict

Ambiguous success rates

Sustainability and responsibilities

The issue of imitation

Public and private sectors


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Defining strategic change

Strategic change aims at renewal andtransformation, designed to maintaincompetitiveness. It is fundamental change.

Strategic changes aim at creating a newtype of alignment between the firm and itsenvironment (de Wit & Meyer, 2005, p. 73)

Strategic change management is theproactive management of change inorganisations to achieve clearly identifiedstrategic objectives (Lynch, 2003, p. 764)


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Strategic change illustrated

Strategic change designed to achieve renewal ornew types of alignment include

Diversification

New partnerships and configurations Outsourcing and recombinations

Changes in core technology

Changes in business processes and organisation of

work Changes in product portfolio

Changes in mission, direction, culture


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Reality check

Despite agreement on the need for strategicchange, many change initiatives result in sub-optimal performance.

Over 50% of M&A fail to deliver on long-termshareholder value (and over 70% of joint ventures) 57% of surveyed firms unsuccessful at executing

strategic change initiatives over the past four years(Allio, 2005).

Over 60% of change initiatives are consideredfailing (Burnes, 2004) In a survey among 600 managing directors of

German companies, 70% of change managementprogrammes were reported as failing (Lilie, 2002)


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Stating the obvious:The strategic change imperative

Though the complexities of changeand the strategies required to both

survive and prosper can beoverwhelming, change cannot beignored by any organisation hoping

to maintain a competitive edge(Graetz et al, 2007)


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Studying strategic change

a module introduction What are the assumptions underlying

approaches to change management

What motivates strategic change

What drives strategic change and whatanalyses can we undertake

What are the implications of strategic changeand therefore the management issues arising

from it What is the theory base, how does it help, howdo we critique it

What recommendations can we make foreffective action?


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Module @ a glance

Teaching

Workload

AssessmentLearning support & handouts

Schedule

Contacts= Module @ WebCT


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Week 1 - Overview

Understanding the change imperative

The importance of analysis: Recognising triggers for change

Analysing industry dynamics

The challenges of managing strategic change


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The world as it used to be

The Fordist Age characterised by Relative stability of (domestic) markets

and industries Relative stability of boundaries and

hierarchies (intra/inter organisational)

Focus on mass production and cost

Relative homogeneity of customer baseand customer expectations

= Steady growth = evolution


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The Post-Fordist (contemporary)business environment

Globalisation Increasing levels of interdependency,

complexity andriskAdvantages of economies of scale, cost

reduction, and standardisation versus

Hyper-competition, cultural diversities,

identities, resistances, self-expression Investor power

= power reversals, shifting locus of control


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The contemporary businessenvironment

Knowledge-based economy Shift from transformation to transaction

economy

Value creation based on information flows and

efficient processing and harnessing ofinformation and knowledge

Value created by production superseded byvalue created by knowledge and information

Superior knowledge is competitive advantage

= focus on human capital, employees as assets,building, binding, tying, losing human assets =once more shift in locus of control

= The basis of competitive advantage today :

business analytics


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Drivers

New technologies Reduction of cost of communication

Redefinition of products and services

Opportunity to unbundle activities

Requirement for networked organisations

Increase interdependence between organisations

Increased velocity

DISSOLUTION OF INDUSTRY BOUNDARIES =E.G. telecom operators, internet services andcable TV providers


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Examples of new

technologies


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Drivers

New customer behaviours

End of the age of deference

End of the age of mass consumption New technologies new expectations

New means of trading new means of

consumption New technologies increased expectations

But also : supply exceeding demand


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Drivers

What precisely do we mean by this?


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Drivers

The power of the internet = the search for

new business models Content is free content is not free? Advertising, subscription, micro payments

Good bye to the middle man

The innovation imperative and openinnovation

The End of competition ???


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The current economic climate

A catalyst or a cause?

The example of the car industry

The case of banking

The observation that the credit crunchis the big issue here and not on the

continent

Lessons learned?


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Summarising trends

BuyersMarket

1945Production dominatespeople

2000People dominateproduction

Suppliersmarket

TaskOriented time

Value orientatedtime

Product/serviceOrientedtime

ProcessOriented time


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Drivers of the change imperative

Change pressures result from the interplayof drivers located in The extra-institutional environment

(technological advances, demographics, socialmovements, management logics,interdependencies)

The institutional environment (regulatorysystems, education systems, rule making, capital

markets) The industry (competitive dynamics)

The firm (management action, strategic intent,performance, history).

(based on Child, 2005)


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Two types of change*

1. Incremental changeassociated with those periodswhen the industry is in equilibrium and the focus for

change is doing things better.

2. Discontinuous changewhich occurs during periodsof disequilibrium. It involves a break with the past

rather than an extrapolation of past patterns of

change.

*From Hayes, Theory and Practice of Change Management (2002, 2007)


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Change occurs

In all industrial categories, organisations

go through periods of continuous and

discontinuous change with some degree of

regularity

When such discontinuous change occurs,the equilibrium (of organisation, of

industry) is punctuated


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A new pattern of change

The gap between periods of discontinuity

may vary across industrial categories, but in

many industries this gap is closing and

discontinuities are occurring morefrequentlyage of hyper-competition

From Hayes,

Theory and Practice of Change Management (2002, 2007)


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Recognising change

triggersNeed for change arises where

Businesses competencies and capabilitiesare no longer aligned with key successfactors in industry

Discontinuous changes in environment occur

Congruence no longer exists between

environment, value and resources Consequently strategic inflection point is

reached


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Recognising change triggers*

Based on P Strebels Model of the EvolutionaryCycle of Competitive Behaviour (1996)

Model can be used to anticipate technological andeconomic changes in the environment

Model can be used to assist in planning for strategicchange Model argues that competitive behaviour in

industries follows a certain pattern or cycle The cycle has two phases, interrupted by

breakpoints the first phase is the innovation phase, the second

the efficiency phase The phases are interrupted or signalled by

breakpoints


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Recognising triggers for change For example the computer industry

Innovation phaseVariety creation: IBMrethinking

mainframe to SonysVaio and beyond

Convergenceof offerings compete on cost ?

little scope for addedvalue through innovationBreakpoint

Breakpoint: Apple & DECdevelop mini computers

Divergenceof offerings

Efficiency phaseSurvival of the fittest

Start


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Recognising breakpoints

Indicators of divergence: Falling demand for standardised products Declining margins throughout the industry

Indicators of convergence: the breaking down of traditional customer

segment groups convergence between previously separate

industries

a relative absence of potential new entrants supplies and technology becoming standardised

and commodity-like a shift in bargaining power towards distribution


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Strategic change

management means Analysing and assessing change pressures Assessing the organisations change capacity Understanding the organisations change readiness Building such readiness Making strategic choices Providing leadership Responding to the consequences of strategic change Coping with the unexpected Understanding the resistance to change

Evaluating the effectiveness of change and taking actionaccordingly


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The module

will address these issues through

Discussion of relevant theory Discussion of relevant research

themes

Discussion of cases, some longer,some shorter, some interesting, somereally boring


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Tutorial Task

What are the key strategic issues HP?

What strategic change moves wereannounced?

How do you evaluate these?

What other options (strategic change) areavailable?

To answer the questions use the materialprovided or ad other sources. We refer tothe changes announced by Leo Apotheker.

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MT1022A Lecture 1-11-12 WebCT

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