The clock is ticking: surviving privatization and deregulation by utilizing the running time

European Management Journal Vol. 17, No. 4, pp. 409–421, 1999 1999 Elsevier Science Ltd. All rights reservedPergamon

Printed in Great Britain0263-2373/99 $20.00 1 0.00PII: S0263-2373(99)00021-3

The Clock is Ticking:Surviving Privatizationand Deregulation byUtilizing the RunningTimeANNE SMITH, University of New MexicoPEGGY GOLDEN, Florida Atlantic UniversityPATRICIA PITCHER, L’Ecole des Hautes Etudes Commerciales (HEC), Montreal

Deregulation interrupts industry evolution, leadingto failure or absorption of many once-proud, domi-nating firms. Privatization also radically changesthe evolution of an organization, as itmoves from a protected, state-aligned institution to lifesubjected to the harshforces of private sectorownership andscrutiny.

European Management Journal Vol 17 No 4 August 1999 409

Yet, deregulation and privatization do not occurovernight. We identify a period in many regulated

or monopolistic industries which affordsincumbent firms and soon-to-be pri-

vatized organizations the timeto ready themselves for a

radically changed, com-petitive landscape. We

identify this per-iod as the run-

ning time.

Companiesthat sur-

viveand

thrivein apost-

THE CLOCK IS TICKING

privatization and post-regulation era initiate stra-tegic processes early in their running time. Wepresent a four stage model of strategic survival pro-cesses during the running time. We illustrate themodel by drawing upon an in-depth case studyfrom the US banking industry. 1998 ElsevierScience Ltd. All rights reserved

Following the pattern set by other deregulating industries,the playing field in the utility industry and the rules of thegame are undergoing radical change. With the bank-ruptcies, encroachment from outside the industry, mergersand acquisitions, the winners and losers are already emerg-ing … Who will survive? We believe only one out of everytwo utilities. (Weiner et al., 1995)

The change in corporate culture required to transform aformer monopolist operator of telecom infrastructure intoa competitively-minded provider of content and retail ser-vices may not be possible. (Sirois and Forget, 1995)

Who Will Survive Deregulation and/orPrivatization?

Around the world, entrenched providers of goodsand services — from pharmaceutical products inSweden to local telephone services in the US — arefacing deregulation. The key question is, which oftoday’s providers of those goods and services will beable to remake themselves? For that is what it takes;a total make-over from stodgy to sleek, from imi-tation to innovation. Why everywhere and why now?Because the world has changed.

In his now classic work on the structure of Americanbusiness, Alfred Chandler analyzed the reasonsbehind the pervasive twentieth century shift from afunctional form to what he called the M-form, or div-isional form, of industrial organization (Chandler,1962). In simplified terms, he argued that profoundchanges in transportation and in communicationsopened vast markets and stimulated corporations tobegin operating on a continental scale. Major changesin marketplace structure spawned new strategiesand, in turn, new structures and operating pro-cedures. The lesson is that structural change in themarketplace inevitably calls forth new forms oforganization, new ways of doing things. Such changeis almost always accompanied by regret, resistance,profit declines, layoffs, confusion, winners and losers.

Today, many industries are undergoing a similartransformation of their marketplace and for many ofthe same fundamental reasons. Innovations in com-munications technologies have opened the way fornew entrants into the telecommunications servicessector. Artificial boundaries that no longer makeeconomic or political sense have been eliminated inthe airlines, trucking, electricity, and banking indus-tries. Government debt and deficits have called intoquestion the viability of State-run enterprise. Yet, old

European Management Journal Vol 17 No 4 August 1999410

ways of doing business die hard. Some incumbentssurvive, and some disappear altogether.

Significant research has addressed firm activities dur-ing an era of regulation or post-deregulation fiercecompetition.1 More attention, however, is needed tounderstand processes firms undertake as they movebetween regulation to deregulation, from socializ-ation to privatization. From our positions as boardmembers, managers, and field researchers, we syn-thesize our experiences with incumbent firms facingderegulation.2 We identify the running time as thedistinct period in the evolution of an industrybetween regulation and deregulation, between mon-opoly and markets. We then present a workingmodel of strategic initiatives and processes incum-bent firms must initiate during their running time.We illustrate our model using a detailed case studyof NationsBank in the US, based on an in-depth his-tory, 3 numerous public press accounts, and fromexperience working in this firm. While this exampleillustrates the impact of deregulation, the logicapplies with equal force to privatization.

Identifying the Running Time

Industries are rarely deregulated or privatized over-night. For instance, the US airline industry experi-enced many years of stability between the initiationof laws to deregulate it and the onslaught of fiercederegulated competition and of price wars in the1980s. This pattern is also seen in the years leadingup to the privatization and deregulation of Europeancarriers in the wake of EC initiatives affecting thisindustry. Table 1 identifies the evolution from a stateof regulation toward deregulated fierce competition.4Our experiences working in and with firms in dereg-ulating industries have shown us that strategicinitiatives begun early in the running time enable afirm to survive and to thrive in an era of competition.

The Peaceful State of Protection

Protection from fierce competition can take manyforms. It can come from a natural monopoly position,like that once held by the electric utilities and tele-phone companies; from unnatural oligopolies, thoseonce formed by oil companies; or from spatially lim-ited competition with artificial boundaries seen in theUS trucking and banking industries; or from State-owned monopolies. During a period of industry pro-tection, when institutional forces, or regulators, arestrong, the survival of an incumbent firm is predi-cated on closely mimicking responses of other firmsin its industry. At the most basic level, companiesdevelop similar structures and activities, strong lob-bying and legal skills. In regulated duopolies, iso-morphism is even more evident. For instance, duringthe first decade of US cellular service, only two firms


Table 1 Stages of Industry Evolution: From Regulated to Deregulated Eras

Regulated era Transition: unraveling of Deregulated eraregulated era (the runningtime)

Characteristics of industry Restricted entry; pricing Some stakeholders in Unrestricted pricing andenvironment constraints; or limits of industry begin to push for market entry.

product and service offerings. choice. Technological shiftsor other macro-environmentalchanges allow smallcompanies to enter at edgesof regulatory barriers.

Mode of competition Isomorphism. Sameness in Isomorphism or key shifts Dynamic, fierce, competitivefirm offerings. taking place inside some with new products offerings,

firms (the winners). potential price wars.Predominant managerial Lobbying, legal/regulatory Lobbying and legal skills still Marketing-oriented, fast,skills skills. Primary function: predominant. But some flexible organization.

engineering or technically managers recognize therelated. Middle managers: threat of niche players andfocus on meeting budgets, signals of impending change.cost focus. Need for increased marketing

abilities.Outcomes Few new entrants. Stable, Overall high industry Overall industry profitability

predictable profit stream. profitability. Incumbent profits can be zero or negative.may hide some losses from Winners and losers amongdiversification activities, costs incumbent firms.to re-engineer and downsize,or other non-core activities.

were licensed to compete in each market. Their ser-vices were generally indistinguishable to the con-sumer in terms of price, quality, and point-of-sale.The rules of operating wireless service were commonto both local carriers, allowing them to operateprofitably. Hence, in an era of regulation, rules ofconduct are well-established formally by regulatorsand informally by the behavior of managers whotend to mimic each other given their limited reper-toire of strategic initiatives.

The Running Time

Evidence shows that these comfortable conditions donot change overnight. World-wide trends are obvi-ous and if it’s happening to your neighbor, you’relikely to be next. The running time of an industrybegins with murmurs by customers, regulators, legis-lators and other stakeholders in that industry indicat-ing that change is needed. New niche competitorsmay enter at the edges, through use of new tech-nology, new offerings outside existing regulatoryboundaries, or through a regulatory opening. Forinstance, in the 1960s, the entry of MCI into long-distance communications was facilitated by its use ofmicrowave technology; this converged with pressureby large corporations on the Federal Communi-cations Commission (FCC) for cheaper long-distanceservice. Developing private networks for corpora-tions was a new service, and the FCC allowed MCI toremain a niche player. The writing was on the wall;


running time in the US long-distance telecommuni-cations industry began two decades before itsactual deregulation.

While the running time begins before an industry isofficially deregulated, it can continue even after thepassage of the law or after the regulatory agency dic-tates deregulating the industry. Because laws cantake years to be fully implemented, the running timecontinues as negotiations and details surrounding itsimplementation stymies new entrants and fierce com-petition. The end comes when formidable newentrants take substantial market share away fromincumbent firms. While the overall market demandmay increase from enhanced selection and decreasedprices, evidence of a fully deregulated market is sub-stantial erosion of the market share of incumbentfirms.

Yet, the running time ought to give managers theopportunity to ready their organization for approach-ing competition.5 In many regulated industries,incumbents have years to prepare before newentrants and subsequent fierce competitionmaterializes. In the US airline industry, executiveshad many years to prepare their organizations forpost-deregulation competition. Executives of incum-bent airlines actually helped to write deregulatorychanges that were first instituted in 1977. Yet, duringthe airline industry running time, only some incum-bents were able to find opportunities in the uncertainstructure. For example, American Airlines moved its


major hub from LaGuardia Airport in New York tothe new Dallas-Fort Worth Airport. This airline, fifthin size at the beginning of its running time, madesimultaneous and aggressive moves, using its under-standing of business travelers and industry trends, tocreate a frequent flier program and to pursue inter-national route expansion. By 1992, American hadmoved into the second position in the US airlineindustry. Such windows of opportunity disappearedas entry barriers fell, pricing restraints ended, andincreased competition eroded market share.

Running time is also evident in the privatization andderegulation of BT (formerly British Telecom). In theearly 1980s, with the US market set to deregulatelong distance services and break-up venerableAT&T, the writing was on the wall for major changesat BT. After its privatization in 1984, BT undertookmeasures to prepare for competition. The British tele-communications regulator Oftel allowed long dis-tance competition with the entry of Mercury Com-munications. After 1990, licenses for cable televisionwere being bought by non-UK telephone and cableconcerns; UK cable television licenses allow oper-ators to compete in cable and local telephone servicemarkets. Despite deregulation of its long distancemarket and potential competition in local marketsfrom cable operators, BT was able to sustain its lead-ership presence throughout the 1990s. In 1992, BThad 97 per cent of Britain’s telephone market (TheEconomist, 1991). Only in recent years has BT facedformidable competitors from low cost entrants suchas COLT and Energis, the consolidating British cableindustry and mobile-phone operations. Britain’s chieftelecommunications regulator stated in 1998 that by2000, ‘the British market will no longer be BT-cen-tric.’6 Therefore, BT’s running time was from theearly 1980s, with murmurs of privatization, to thelate 1990s, when viable competition was evident. Wereturn to the BT example to determine if it used itsrunning time to prepare for competitive onslaught inthe late 1990s.

Wails of Fierce Competition: Deregulation Reality

A snapshot of industry dynamics after full deregu-lation presents an environment of highly intense,fierce competition in which advantages are tempor-ary and flexibility is essential to respond to newentrant assaults. New competitors enter and create aperiod of profit erosion. As markets undergo radicalchanges, traditional incumbent firm advantages, suchas miles of copper cable or captive customers, cannotbe maintained in the face of flexible, aggressive, andinnovative competitors. As new lean entrants enterwith innovative ways of competing, many industryincumbents do not survive the brutal forces of com-petition. What can organizations, laden with tra-ditional sources of advantage, do to ready themselvesfor new entrants and for fierce competition? We


argue that an incumbent firm needs to initiate pro-cesses early in the industry running time.

From patterns of actions which we examined acrossmany incumbent firms, we provide a working modelof processes to help managers prepare for newrealities. We illustrate this model by highlightingNationsBank and its preparation for post-deregu-lation competition within a national banking systemand an anticipated convergence within financial ser-vices industries.

Model of Strategic Initiatives Duringthe Running Time

Incumbent firms operating in regulated industrieswithout dynamic competition tend to be less cus-tomer-oriented, slower to respond, inwardly focused,rule-bound, and cumbersome. Leadership, time, andrelevant strategic initiatives are needed to transformand to increase the flexibility of this type of organiza-tion. Figure 1 presents a model of running time pro-cesses. The premise of this model is that managershave the discretion to act during the running time toprepare their firms. We show that top leaderbehaviors contribute to effective use of the opport-unity afforded by the running time.

The three leadership styles used were developedfrom in-depth field research of a $20 billion, globalfinancial services firm going through deregulation(Pitcher, 1996). The styles identified were: artists,craftsmen, and technocrats. This taxonomy wasderived from a longitudinal in-depth study of topmanagers over a fifteen year period, using estab-lished personality tests (e.g. MMPI), observation, in-depth interviews, and a detailed review of internaland public documents.

Artists are characterized by peers as intuitive,emotional, imaginative and unpredictable; they pro-vide the new visions. Craftsmen are characterized bypeers as knowledgeable and loyal, reasonable andtrustworthy; they provide wisdom and deep under-standing of how an organization and an industryoperate. Technocrats are described by peers as analyti-cal, cerebral, methodical, and uncompromising.While all three leadership types are evident in topmanagement teams in most organizations, some arebetter suited to specific conditions. A top manage-ment team dominated by technocrats mimics stra-tegic initiatives by other firms. Technocrats maydominate top management teams during industryregulation, when mimicking of strategy and structureis the norm.7 In a climate of competition however,this style can have disastrous consequences. In thisparticular corporation, a technocratic top manage-ment team destroyed the organization’s capacity tocompete and it ultimately disappeared. In fact, they


Key1: At the beginning of the running time, the board of directors needs to evaluate the profile of top managers in the organization. Ifthe top management team is dominated by technocrats, they need to be replaced by perhaps unconventional managers who displayartistic leadership.

2: Incumbent firms usually enjoy predictable profitability at the beginning of the running time. Many managers may not be fully utilized.This slack combined with predictable cash flows allow top managers discretion to act.

3: This set of strategic initiatives focuses on issues of efficiency and external positioning. Developing efficiency to face new entrantswho will “cherry pick” and scale to compete regionally, nationally, or globally are important initiatives.

4: This set of strategic initiatives focuses on experimentation to build internal capabilities.

A’ : These feedback loops reflect new skills developed from scale and efficiency initiatives or through experimentation. New resourcesare developed such as new managerial capabilities, that can be further exploited during the running time.

Figure 1 Model of Running Time Processes

did everything wrong. They stopped building scale.They rationalized the organization, cut costs, but didso blindly having fired the experienced Craftsmenwho could tell the difference between a necessaryand an unnecessary cost. They stopped using organi-zational slack to experiment; having driven out boththe Artists and the Craftsmen, innovation stopped.They centralized where decentralization was a key.

In the following sections, we highlight four processesneeded during a firm’s running time: getting theleadership right, developing scale, getting efficient inorder to free up slack resources, and deploying thoseresources to experiment and innovate. The prepara-tory processes begun by NationsBank early in its run-ning time, and continuing into 1999 as its conver-gence with other financial services industriesbecomes a reality, illustrate many of theseimportant principles.

Nationsbank: Readying for NationalBanking Competition and FinancialService Goliaths

The US banking industry continues in its runningtime in the late 1990s, but clear winners and losers


have emerged during its deregulation. We reviewevidence from NationsBank as it has managed its 15-year running time. In this firm, top managers pre-pared the medium-sized bank for national bankingcompetition and inevitable convergence with globalfinancial service industries.

Banking Acts from the 1930s created strict regu-lations for US banks. Between 1930 and 1980, bankswere legally barred from investment banking activi-ties, encountered limits on product offerings, andfaced pricing restrictions. Regulation also extendedspatial limits on the markets banks could enter. Fed-eral banking laws disallowed entry across Stateboundaries, and some State banking laws restrictedbanks to grow only within a county.

The running time for US banks began in the late1970s. The need to change banking laws was obviouswhen pricing constraints, such as interest rate ceil-ings on consumer loans, became untenable in a high-inflationary era. Banks were limited in their productofferings; they were unable to open interest-bearingchecking accounts. In 1982, laws deregulating thebanking industry were enacted, no longer guarantee-ing bank profitability. The failure of many banks andsavings and loans during the late 1980s slowedefforts to further reduce regulatory constraints,especially ones in the 1933 Glass-Steagall Act.


Because there was no federal legislation allowing sin-gle charter interstate banking until 1994, State-by-State negotiations led to bank mergers beginning inthe mid-1980s. Even though the bilateral negotiationswere contested by some States and banks, the agree-ments were approved by the Supreme Court in 1985.Movement toward deregulation has continued withthe passage of the 1997 Bank Holding Act; thisallowed bank holding companies to be involved in abroader array of financial services.

While many restrictions have been eased during thepast fifteen years, banks in 1999 remain subject to aweb of federal and State regulations. Slow pro-gression toward a national banking system and aconvergence with other financial service activitiesprovide one explanation of why the US bankingindustry is one of the most fragmented amongdeveloped nations. Pressure from many industryparticipants is forcing final changes to existing lawsand barriers; one example is the recent merger of Cit-icorp and Travelers. The decade-long running timehas been characterized by growing national bankingcompetition and by the convergence of separatedfinancial industries.

Winners and losers have been created from thederegulating US banking industry. Growing from arank of below fifty in asset size among US banks inthe early 1980s to one of the largest in 1999,NationsBank is clearly a survivor. The processesundertaken by this corporation between the early1980s and 1999 provide lessons for other firms in therunning time of their industry.

While the history of NationsBank is special andunique, we identified four strategic initiatives duringits running time: (1) board selection of a CEO withan artistic and unconventional leadership profile; (2)identification, development, and utilization of slackresources; (3) development of scale and efficiencies;and (4) experimentation in non-core businesses andin structuring.

Management Succession: Surprising Selection ofArtist Over Conventional Craftsman

In the late 1970s and early 1980s, the NationsBankboard members faced a critical succession decisionwith then-CEO Tom Storrs approaching mandatoryretirement. Under the guidance of Storrs andAddison Reese, his predecessor, NationsBank8 grewdramatically from a small North Carolina bank intothe second largest in that State. This growth was achi-eved through acquisitions and aggressive pursuit ofmarket share. During this period of strong Stategrowth, the bank relied on borrowed funds anddeveloped a major position in real estate. With theeconomic recession of the mid-1970s, this growthstrategy placed NationsBank under extreme financialpressure. After its recovery, CEO Storrs did not back


down from his vision of growth and continuedexpansion.

In the late 1970s, Storrs created a two-man race forCEO: pitting temperamental, unconventional HughMcColl against conservative banking veteran WilliamH. Dougherty, Jr. During the 1960s, 20 young man-agers were identified as potential future leaders ofthe bank; one of those was McColl. Dougherty, fiveyears his senior, was brought in from a much largerbank to shore up back room operations and to bringstate-of-the-art technology to NationsBank. Dough-erty provided a close profile to other banking CEOsat that time, who were characterized as ‘statesmen,’(Barnes, 1992, p. 591), ‘genteel’ (Covington and Ellis,1993, p. 204) ‘courtly’ (ibid., p. 279), and ‘venerable’(ibid., p. 279). Whereas, the style projected by McCollcontrasted ‘sharply with that of most members of thebanking fraternity’ (ibid., p. 7).

Two camps emerged within NationsBank in the late1970s: one favored a conservative, cautious approachto avoid a repeat of problems that created the 1970scrisis and another championed a corporate culture ofaggressive competition and risk-taking. Outsideobservers and analysts believed that Dougherty wasgoing to succeed Storrs. NationsBank historiansstated, ‘Storrs, the reserved and distinguished Ph.D.,and McColl, the impetuous ex-Marine, had becomean unlikely pair with their competing personalities’(ibid., p. 196). The board’s choice of McColl in 1981was not anticipated. Yet, the unconventional choiceof aggressiveness over convention was critical earlyin the NationsBank running time.

McColl fits the artist leadership type, having beendescribed in public press accounts as: ‘colorful, boast-ful…livening up the otherwise dour scenery of thebanker’s clubs around the Southeast,’ (ibid., p. 201) ‘amaverick in an industry dominated by clubbishness,’(ibid., p. 9) and ‘prone to emotional outbursts…hardcharging’ (ibid., p. 144). In keeping with his leader-ship type, McColl initiated bold preparatory pro-cesses for inevitable industry deregulation. In 1999,McColl undertook a merger with BankAmerica inwhich McColl will continue as CEO and the head-quarters of the merged entity will be in North Carol-ina. By the end of the decade, under his leadership,the bank became the third largest in the US withmore than $100 billion in assets.

By the time Storrs retired in 1983, McColl had a toe-hold in Florida. He continued to build aggressively,having selected a top management team dominatedby members reflecting his own style, personality, anddetermination. He disrupted the status quo of USbanking and pushed the regulatory boundaries of theindustry. With major acquisitions in 1988 (FirstRepublic), 1992 (C&S/Sovran), 1997 (Barnett) and1999 (BankAmerica) and smaller bank acquisitionsthroughout this period, the significant size of

Slack resources are given

at the time a new CEO takes

over and must be replenished

through other strategic

initiatives during the running

time


NationsBank ensured that it would not be taken overby a much larger bank.

Choosing McColl prepared the bank for the antici-pated national deregulation. He had the unfailingsupport of the board members, many of whom hadpreviously sold their banks to NationsBank. Heinitiated strategic processes to ensure thatNationsBank would be a viable player once fullderegulation was unleashed.

Recognizing and Deploying Slack Resources

The second strategic initiative of top managers inincumbent firms is to recognize, deploy, and buildslack resources.9 Our assertion is that managementin an incumbent firm facing inevitable deregulationshould take stock of, nourish, and use these resourcesto ready the firm for approaching deregulation. Inthe early 1980s, with McColl in charge, NationsBankwas an organization blessed with substantial mana-gerial slack: raw talent from new recruits and unde-rutilized capabilities within middle managers. WhileMcColl had more financial slack as compared withthe mid-1970s, he further developed his access tocapital and reduced his relianceon the economy of one State byundertaking aggressive acqui-sitions.

Managerial Slack. Top managersbuilt up significant manage-ment reserves in anticipation ofsubstantial growth. In the early1980s, despite a nationalrecession and double-digitinflation, the bank recruitedMBAs from prestigious schoolssuch as the Harvard BusinessSchool and Darden at the University of Virginia aswell as hundreds of new undergraduate recruitsfrom universities throughout the Southeast, includ-ing Florida A&M, the University of North Carolina,the University of Virginia, and Wake Forest Univer-sity. Not only did the size of its recruitment dis-tinguish NationsBank from other medium-sizedbanks at this time but also its training of new recruitswas very different. After a few months in the creditdepartment, recruits were sent directly to a linearea — either to the world banking group or to theNorth Carolina banking group. This process differedfrom most banks that used a ‘sheep dip’ method; newrecruits were rotated through many bank depart-ments during a two-year training program. The fasterapproach used by NationsBank allowed new recruitsto rapidly enter line positions and to start quicklyproducing.

Against most conventional wisdom, the retail branchsystem at NationsBank was an attractive career path.Coveted positions by new recruits were branches


with commercial loan portfolios. For instance, a newHarvard MBA was placed in a Charlotte branch aftertwo months with the bank; he was given a goal togrow significantly its commercial loan portfolio.Many new undergraduates were calling on commer-cial customers only six months from their hire datewith the bank. This recruiting and training approachquickly developed ready, proven talent. The combi-nation of aggressive recruiters and an innovativetraining program led to a high level of new recruitretention. NationsBank retained 1572 of 2300 newrecruits between 1979 and 1989, a retention ratealmost unheard of in the high-turnover bankingindustry (Covington and Ellis, 1993). This allowedthe bank a reserve of young talent with experienceready to be deployed into new markets.

A second aspect of managerial slack was the not-fullyutilized capabilities of experienced managers. Thesecapabilities were related to their experiences compet-ing in North Carolina during the 1960s, 1970s, andearly 1980s. North Carolina had liberal branchinglaws, whereas States, like Georgia and Florida, havehad many more restrictions on banking activities,especially limits on Statewide competition. Through-out the 1960s and 1970s, North Carolina banks

experienced fierce battles forcustomers and for market pres-ence within the State bound-aries. Managers fought againstthe established Wachovia Bankand the fierce First Unionthrough aggressive pricing,new services, or creative dealstructures. By the early 1980s,the three powerful North Caro-lina banks — NationsBank,First Union, and Wachovia —were ready for weaker South-ern opponents from larger cit-

ies such as Atlanta and Miami. These managerialabilities to fight and win market share and new cus-tomers were vital as NationsBank entered more gen-teel, placid banking markets.

Financial Slack. NationsBank did not enjoy the sub-stantial deposits and financial stability of cross-Staterival Wachovia in the early 1980s. Yet, by the timeMcColl took over, the financial scare of 1974 was wellbehind it. For example, NationsBank had a successfulstock offering in 1980. Throughout the 1980s, thegrowth strategy of the bank was, for the most part,positively received by banking analysts. However,McColl created deeper pockets for NationsBank byentering into under-banked States, spreading itsreliance beyond the North Carolina economy. WhenNationsBank acquired C&S/Sovran in 1992, ‘it cre-ated the greatest gap between large and small banksin any region of the country’ (ibid., p. 157).Expanding through mergers and acquisitionsincreased its base, allowing it to offer loans at lowerinterest rates and to afford lower margins in the short


run without risking its survival as compared withsmaller banks.

Managerial and financial slack are both stocks, staticresources when McColl took over as CEO, as well asflows, replenished by actions he undertook duringthe 1980s and 1990s. In the early 1980s, slack wasreflected in the availability of new young recruits, inthe underutilized managerial capabilities from fierceNorth Carolina competition, and from improvingfinancial strength. These resources were replenishedduring McColl’s tenure. New recruits were deployedto quickly merge newly acquired banks, thereby cre-ating new learning capabilities to be exploited infuture acquisitions. Slack resources not only are agiven at the time a new CEO takes over but also mustbe replenished through other strategic initiatives dur-ing the running time.

A Question of Scale and Efficiency

In the early 1980s, when Storrs and McColl were bothtop managers of NationsBank, they articulated a fearthat once deregulation was unleashed on this indus-try, the bank would be taken over by a large NewYork money center bank. With North Carolina satu-rated, Storrs and McColl looked across State bordersfor growth opportunities. Scale was critical for amedium-sized bank, such as NationsBank, todevelop. The bank also faced increasing encroach-ment by non-banks that were poised to ‘cherry pick’some banking products by offering a similar productat a substantially lower price. Banks experienced pre-liminary assaults by non-banks, including suchactivities as mutual fund companies offering servicessimilar to checking accounts, insurance firms compet-ing for real estate loans, and AT&T offering creditcards. Therefore, developing scale and efficiencywere important to manage the dual threat of nationalbanking competition and convergence with otherfinancial services industries.

NationsBank achieved scale and efficiencies duringits running time through the efforts of two seeminglyopposing forces: senior craftsman managers andyoung banking mavericks. By craftsmen, we referback to the leadership categories, where a craftsmanwas identified as a loyal manager with deep knowl-edge of an organization or industry; craftsman seniormanagers were critical to the development of scaleand some efficiencies. Young mavericks refer to thehundreds of new managers hired between the late1970s and early 1990s; they provided energy toquickly integrate mergers and to extract mergerefficiencies.

Scale and Efficiency through Craftsmen. In the early1980s, venerable banker Smith was close to retire-ment, having spent most of his career in banking.Smith provided quiet counsel to new bankers whowere shouldering significant loan portfolios early in


their careers. As NationsBank senior credit officer,Smith provided a steady, rational voice in loan com-mittee meetings. He understood and respectedMcColl’s vision, but he also worked to keep loanrisks at an appropriate level and to educate youngmanagers about the commercial lending business.His wisdom and judgment saved many of them frommaking embarrassing lending mistakes. By reducingsome critical lending mistakes, Smith was one of sev-eral senior craftsmen bankers who bridged the visionof growth and the inexperience of the young,aggressive recruits. Smith, along with other seniorcraftsmen managers, kept loan losses at a lower levelthan would have been otherwise expected with suchinexperienced loan officers.

In industries where spatial competition hinderedfree, unfettered movement between markets,developing scale was critical for medium-sized firmslike NationsBank to survive. Recognizing the impor-tance of scale, McColl aggressively pursued acqui-sitions in advance of other regional competitors. Agroup of senior craftsmen managers identified cre-ative loopholes that enabled the rapid nationalexpansion of NationsBank. In 1981, a NationsBanksenior executive, Paul Polking, identified a legalloophole that allowed the bank to enter Floridabefore a bilateral pact between North Carolina andFlorida was finalized. The loophole was the acqui-sition of a small Florida trust company, made dec-ades before, that had remained ‘little more than anafterthought’ (ibid., p. 157). Sanctioned by nationalregulators, NationsBank’s entry into Florida gave ita head start in acquiring attractive banks in thisdeposit-rich, conservative banking State.

In 1988, Chief Financial Officer Tim Hartmann wasinvolved in NationsBank’s bid for failing FirstRepublic Bank. To accomplish this, Hartmannexploited an obscure tax advantage known to himfrom his previous CFO role with a large diversifiedfirm. This tax loophole, not identified by much largerNew York money center banks, allowed NationsBanka $1 billion tax advantage, thereby increasing its bidto the national banking regulator (FDIC) overseeingthe sale of this failing bank. Many other acquisitionsby the bank were aided by long-standing personalrelationships between its senior managers and bankpresidents. The experience of these craftsmenallowed NationsBank a first-mover advantage innew markets.

Without efforts by senior craftsmen, such as Polking,Hartmann, and Smith, developing scale would havebeen much slower and loan losses probably higher.Yet, clever acquisitions do not necessarily lead toefficiencies. Many banks have been plagued withpoor integration and unrealized synergies fromacquisitions. For instance, Atlanta-based C&Sspurned NationsBank’s advances and mergedinstead with Virginia-based Sovran in 1989. Itsinability to integrate this merger and to extract


efficiencies weakened the C&S/Sovran performance,creating an opening for NationsBank to acquire it in1992. Once acquired, the bank deployed its talented,youthful managers to rapidly merge new acquisitionsand to quickly extract post-merger efficiencies.

Efficiency through Maverick Integration Efforts. Sizealone does not create efficiencies. To begin,NationsBank was not a bank associated with extrava-gant spending, unlike other similar-sized banks. Forinstance, in 1988, when NationsBank bought FirstRepublic in Texas, it found ‘style and opulencebeyond anything they or their predecessors had everbuilt…. They found expensive oil paintings, includ-ing a Gainsborough’ (ibid., p. 248). NationsBankgained efficiencies by quickly trimming excessesfrom its acquisitions and rapidly integrating them.

Senior managers developed detailed merger agree-ments with acquisition targets. They dictated thetechnology and systems that would be used, thename of the merged entity, and the top managementteam. After completion of this agreement andapproval of the merger, young managers weredeployed to rapidly integrate it. Individual careerswere greatly enhanced by involvement in mergerintegration activities. For instance, in 1988, beforeFirst Republic, senior executives worried that ifanother acquisition did not happen soon, ‘the bankwas going to begin losing some of its promisingyoung recruits who were eager to make their mark’(ibid., p. 210).

The Texas merger provides an example of the speedand conscientious integration to develop efficiencies.The assets from the acquisition exceeded the assetsof NationsBank at the time of its purchase. Just beforethe national regulators decided which bank wouldwin the ailing Texas bank, over two hundred youngNationsBank officers were summoned to immedi-ately report to Charlotte. There, they were briefedabout the impending decision, received a 146-pagenotebook with details about the merger, signed aconfidentiality pledge, received an airline ticket, andwere told about the game plan if the decision wasfavorable. From this orientation, these young man-agers were told what to say to Texas employees andto customers and what their primary task would beonce in place at each branch. These managers werein place within 24 hours of the decision in favor ofNationsBank’s bid; they worked, on average, 12-hourdays, deciding which loans to keep and which to giveto the national regulator for workout or write-off. Onthe first day of a merger, a well-informed team was inplace with specific tasks and a challenging deadline.

From its many large mergers, NationsBank managersdeveloped valuable experience that was deployed inlater merger integration activities. It developed areputation as an excellent post-acquisition integrator,but it also gained the reputation as a brutal cutter ofmanagers in acquired companies. Many craftsmen, a


management type critical to NationsBank’s owngrowth, were lost through firing, inattention, orattrition in acquired banks. NationsBank executivesacknowledged that their heavy-handedness to cen-tralize activities, rapidly integrate operations, andextract efficiencies led to the loss of talented man-agers in acquired firms. As a senior personnel execu-tive stated in 1991, ‘We have learned a lot about howto handle the people issues. And frankly, some ofthat knowledge came from our own mistakes’ (ibid.,p. 308). In Florida, for instance, 23 senior managersleft during an eight- or nine-year post-acquisitionperiod. According to a senior human resourcesexecutive, ‘All but three of those people wererecruited, and we wanted them to stay, but for a var-iety of reasons they didn’t’ (Mildenberg, 1992, p. 24).

Maintaining the balance between youthful managersand craftsmen knowledge is difficult, a balance fewfirms today, in this era of slash-and-burn downsizing,have come to recognize. Given the experience andthe recognition by NationsBank of lost craftsmen tal-ent in acquired firms, its handling of senior craftsmenin the BankAmerica merger should be improved.

Yet, scale and efficiencies are not enough to assuresuccess after fierce national competition is unleashedin the banking industry and a convergence within thefinancial services sector. The final set of actions pro-moted by McColl during the running time was exper-imentation leading to increased flexibility and agilityto respond to industry changes and financial serviceindustry challenges.

Experimentation to Create Agility

A recent study identified a ‘knee-jerk’ reactionamong incumbent firms facing deregulation: creationof diversified subsidiaries (Gardner and Gilson,1993). Examples of such behavior include creation ofa car rental subsidiary by an airline, internationalexpansion of electric utilities, and creation of retailstores to sell telecommunications hardware equip-ment by a local telephone company. While theauthors of that report argue that experimentation is awaste of resources for incumbent firms, other studieshave discovered that experimentation with newactivities and structures has the potential to createnew managerial capabilities and organizationalflexibility, useful in a deregulated environment(Smith and Zeithaml, 1996). The activities byNationsBank during its running time support the lat-ter argument that experimentation aids organiza-tional flexibility.

Diversification. During the McColl tenure,NationsBank has significantly diversified beyond itscore commercial banking capabilities to ready itselffor future competition in many financial servicesareas. Despite selling its mortgage activities in theearly 1980s, by the early 1990s, it was the fifth largest

The banks that survive are

the ones that pick those

market segments they can best

compete in


mortgage service company in the United States. Dur-ing its running time, the bank also developed or aug-mented its presence in other non-core activities, suchas becoming the third largest factoring company, theeighth largest bankcard operation, and the tenth larg-est bank trust department in the US. In addition tobeing the first to open a full-service securities broker-age, NationsBank was one of the first to purchase aUK merchant bank and to offer life insurance pro-ducts.

Many non-core activities were separated from thecommercial banking operations. For instance, McCollacquired CTR, a derivatives firm, in 1993, an acqui-sition only two other banks in the world had under-taken at that time. While there was a possible futureknowledge transfer from this derivatives acquisitionto risk management activities, CTR was not inte-grated into its core banking activities and remaineda separate division. This separation may have beendue to a previous experiment that was too closelyintegrated into its core banking operations. In 1992,NationsBank formed a joint venture with DeanWitter to market investment products through thebank’s multi-State branch system. New brokers, notpreviously part of NationsBank, were placed in thebranches, many times unsuper-vised but with challenginggoals. After allegations ofimproprieties brought by cus-tomers and by formeremployees, this joint ventureexperiment was dissolved in1994. The underwriting andbrokerage operations remainedseparate, as well, from the com-mercial bank but within its holding company. Thesenew non-core activities brought new skills and capa-bilities into the holding company. While not inte-grated into core banking activities, they appear to bepromising hedges with an approaching convergenceof several financial services industries.

Innovative Organizational Design. During its runningtime, the growth and strength of NationsBank restedon its commercial banking capabilities. In this corearea, it experimented with different structures toreflect changing market needs; in the early 1990s, it‘emphasize[d] an organizational structure that ismore decentralized — more local — thanNationsBank traditionally has had’ (Milligan, 1993).Efforts to decentralize were evident in its approachto branch banking, its focused marketing areas aboutcustomer segments, its close connection to communi-ties served, and its overall rearrangement of busi-nesses within its holding company.

Early in the 1980s, Buddy Kemp, a member of theMcColl top management team, revitalized theNationsBank branch system. When he took over thistask, ‘the retail business was sleepy and sluggish.Growth was slow’ (Covington and Ellis, 1993, p. 247).


Kemp built up training programs for branch man-agers, developed new measurement systems, andrewarded new recruits who performed well. Heincreased accountability by carrying reporting onoperations and profitability down to the branch level,instead of just a city report. NationsBank led theindustry in placing young business school graduatesin significant positions of responsibility in large citybranches; a branch manager position with a commer-cial loan portfolio was seen as a ‘fast-track’ assign-ment. This approach to its branch system fits itsstrong marketing efforts toward medium-sized busi-nesses.

The branch system was different from many banks,and this was evident during its merger integration.For instance, the First Republic branch system wasstructured as independent operating units with abranch manager in charge of daily reports, mainte-nance, and human resources — covering mostaspects of branch operations. This independence leftlittle time for marketing and for calling on customersto grow a commercial loan portfolio, especially ascompared with the NationsBank branch managers.When NationsBank took over, it applied its market-focused branch banking approach to its acquisitions.

The primary focus of thebranch manager was marketingand servicing the bankingneeds of individuals, smallbusinesses, and mid-size com-panies in the branch callingarea.

During the 1980s, NationsBankcreated structures to reflect cus-

tomer needs. For instance, some commercial loanofficers were assigned to an area focusing on compa-nies in the high growth oil and gas industry; otherloan officers were assigned to learn the peculiaritiesof electric utilities in order to expand the bank’s pres-ence in this industry. As market conditions changed,some of these segments were closed, and new oneswere created. For instance, in 1984, a middle marketsegment was established, with focused marketingefforts on businesses with $5 million to $250 millionin sales. Ken Lewis, the executive heading this newarea, stated, ‘The banks that survive are the ones thatpick those market segments they can best competein’ (Barnes, 1992, p. 589). During the running time,NationsBank deployed resources around emergingsignificant segments.

During the 1980s, as banks were bought and oper-ations in new States were added, NationsBank wasprimarily structured along geographic boundaries. In1990, its activities were restructured along lines ofbusinesses. Its commercial lending activities andbranch systems were placed in the ‘general bank’ ofthe holding company which focused on consumersand mid-sized companies. Its higher risk activities,such as investment banking, securities businesses,


and its derivatives acquisitions, were placed in its‘institutional bank.’ This restructuring paralleledanticipated convergence with other financial servicesactivities, reflected in its ‘institutional bank’ activities,requiring separate attention and different managerialcapabilities and expectations compared with its corebusiness. To manage the dual tensions between geo-graphic and business demands, senior managerswere assigned responsibility for both a line of busi-ness as well as their existing geographic responsi-bilities.

As one industry observer stated, ‘There is going tobe radical change in banking.... Unthinkable thingsare happening’ (Covington and Ellis, 1993, p. 313).NationsBank undertook strategic initiatives duringits running time to ensure that it would have thecapabilities to flexibly respond to these ‘unthink-able things.’

Summary and Conclusions

Unthinkable things are happening in all industries assweeping restructuring overtakes all national econ-omies. Incumbent firms are being challenged both byreduced barriers and by fierce new competitors. Asthe NationsBank example demonstrates, one factoressential to a successful response is aggressive useof the running time by top managers to orchestrateinternal processes and external positioning, evenunder conditions of great uncertainty. Some compa-nies have all these processes in place and lead therest of their industry in being ready for a changedcompetitive landscape. Other firms have undertakenonly some of these processes during their runningtime, and their outcome is less certain. One companythat exhibits partial implementation of preparatoryprocesses during the running time is British Tele-com (BT).

With over a decade to prepare for formidable compe-tition in the late 1990s, BT exhibits implementationof only two of the four preparatory processes seen inour model. First, its CEO Sir Peter Bonfield has beencharacterized as ‘rather stiff and remote despite hisblokeish accent — an old-school believer in alliancesand lobbying, with little flair for marketing and apoor grasp of the technological forces shaping theindustry.’10 The board selection of Sir Peter in 1995seems to have emphasized the conventional over theleader with an artistic flair. Second, BT has not beenable to develop into a player with substantial globalscale. With its loss of MCI to Worldcom in 1998, BTdoes not have the substantial increase in size andscale as has been seen in recent telecommunicationsacquisitions such as AT&T and TCI, SBC and Ameri-tech, Bell Atlantic and GTE, Vodaphone and Air-touch. BT’s efficiency to counter domestic upstarts isquestioned in a recent account, ‘BT uses three timesas many people as Energis to generate a given


amount of revenue. BT’s long-standing businessrelationships and high standards of service are somekind of protection, but the firm is terribly vulnerableon price’ (ibid., p. 20).

Yet, BT has undertaken two processes which shouldhelp it be ready for formidable domestic and globalcompetition. First, it has allowed areas of entrepren-eurial activity and ‘encouraged a new generation ofentrepreneurial senior managers and given themmuch greater autonomy’ (ibid, p. 19). These seniormanagers have explored new areas such as multime-dia and European joint ventures and developed newtalent for the firm. Second, BT has significant slackresources. It is financially strong and has minimaldebt. BT clearly has a leg-up on other European tele-communications firms such as France Telecom andDeutsche Telecom who, in the late 1990s, were justbeginning to work through the reality of privatiz-ation. Therefore, BT does have some clear advan-tages, but facing down global entrants into the Britishmarket as well as lean upstarts could expose the lackof initiation of all four processes during its runningtime.

In all of the cases with which we are familiar thesethings stand out: winners are separated from losersby their leadership, by their strategies, and by theirstructures. Let us look at each in turn.

What characterizes the winners is, for one thing, far-sightedness. All of the successful incumbents havehad top managers who sensed the shape of thefuture, who felt the rumblings of impending change,before anyone else. Those managers were all bold;they aggressively sought to meet the challenge head-on, to shape it, to direct it, to profit from it. Many ofthem thought, and acted, global long before anyonetalked about what has now become cliche — globaliz-ation. They’re risk-takers; old-style entrepreneurs inthe guise of sophisticated modern managers. Theymake people nervous. Especially boards. They’reunpredictable. They do things out of the ordinary.As people, they’re excitable and exciting. They stirthings up.

Their strategies are all growth and innovation ori-ented. Build scale. Acquire weaker rivals. Penetratenew markets. Experiment with new products. Suchexperimentation calls for decentralization. They puttheir faith in the creative capacities of others.

But growth and innovation cost money; in dollars, inpounds, in rubles, in men and machines. This money,this slack, they find inside the organization as muchas outside. Protected markets often meant high costs;costs too high to meet the competition. They cut thosecosts, they re-engineer their processes but not bymindless cutting and hacking, ‘slash and burn’ tac-tics. They keep Craftsmen in charge of the process;experienced middle-managers who know what’s fatand what’s not. Giving themselves sufficient lead-


time to change, if staff must be cut it can be doneby attrition and not brutally. If the innovation effortswork, staff may not have to leave at all, but may beredeployed into high growth areas. This kind of re-engineering promises to keep the loyalty and motiv-ation of employees. The kind of manager that just‘delayers’ eliminates the knowledgeable middle man-agers who, by all evidence (Dougherty, 1995), areessential to innovation. As we saw in theNationsBank example, it was the so-called old-timers,who spotted some of the loopholes through whichthe Bank managed to pass on its way to bigger andbetter things.

This leads us to several suggestions. Early in its run-ning time, the board should review the top manage-ment team and determine if a succession decision isneeded. If so, the board should consider unconven-tional candidates for the top position in terms of age(for example, it’s conventional to go young, uncon-ventional to go old), background (conventional to sel-ect a business school graduate, unconventional anentrepreneur), temperament (conventional to go forsolid, unconventional, strange), and industry (today’sor tomorrow’s) norms. It is trite to say that this per-son needs vision; this is a given. Rather, the boardshould consider how a candidate fits an artistic lead-ership style — bold, unpredictable, imaginative,emotional — perhaps using new diagnostic tools.Surround him or her with Craftsmen and yes, evenTechnocrats, to keep the wheels from falling off allthe carts. Of course, this takes boards with nervesof steel.

If this kind of team is already in place, it should beencouraged, and financed, to experiment with non-core activities and new structures. It should allowsmall pockets of experimentation in non-core activi-ties and restructuring around customer segments andmarket. Experimentation is a hedge that is best leftseparated from core activities until laws change orthe organizational benefit of integration is clear.These efforts, in turn, can create new managerialcapabilities and flexibility in dealing with marketchanges. Getting more efficient will mean re-engin-eering but this re-engineering will produce slackresources to build scale and is critical when facingformidable new entrants into a deregulating market.Mobilization of resources for new allocations and cre-ative decisions by top managers are necessary, butthose actions must be taken early in the industry run-ning time. The outcome of these running time initiat-ives is a more flexible organization, able to withstandthe harsh winds of deregulation.

With deregulation and/or privatization approaching,the incumbent firm that has used its running timeeffectively can sustain a leadership position in itsindustry. We believe that top managers have the stra-tegic discretion to prepare their incumbent organiza-tions in advance of changing environmental con-ditions, if they have the wit and the will. So, we have


come full circle — the right senior management is thekey to everything else. Whereas the twentieth cen-tury transformation described by Chandler calledforth new organizational structures, the transform-ation of our post-industrial era apparently calls fornew types of managers and proactive strategic initiat-ives to steer the firm during an uncertain, but brief,time period.

Notes

1. Academic studies during regulation include Ramasamy etal. (1994); Mahon and Murray (1981). Studies after regu-lation include Smith et al. (1992); Silverman et al. (1997).

2. The authors have considerable experience working in orclosely researching deregulating industries, including:banking, financial services, telecommunications services,and airlines. Through many conversations, we have ident-ified similar patterns of actions and initiatives in incum-bent firms that prepare them for impending deregulation.

3. Covington and Ellis’ recent in-depth history ofNationsBank (see cites below) supplemented our alreadydeep knowledge of this firm.

4. We use the term ‘deregulation’ to refer to economicderegulation — freeing pricing constraints, opening ofmarkets to new competition, and unleashing limits onnew product and service offerings. We are not includingin our definition those regulations that protect the safetyof workers (e.g. OSHA regulations), consumers (e.g. FDAregulations), or society at large (e.g. EPA regulations).

5. We recognize that the running time can be much shorterfor some industries. For instance, imitation of deregulat-ory efforts by regulators and rapid erosion on incumbentmarket share was evident in the long-distance telephoneindustries in Canada and in Chile. This short runningtime may be due to regulators learning from the deregu-lation of other countries, using these experiences as a tem-plate and moving rapidly to implementation of deregu-lation. New entrants can cause rapid erosion because theycopy initiatives seen in previously deregulated countries.In those countries and industries when the running timeis very short, incumbents will either have to rapidlyinitiate strategic processes in our model or take a differ-ent path.

6. This quote by Oftel chief regulator Don Cruickshank wascited in The Economist, April 4, 1998, p. 21.

7. In Pitcher’s study, the board made a poor successionselection early in its running time. It chose a managerwith a technocratic orientation to succeed its retiringchairman. This succession choice doomed the company.This financial institution was eventually absorbed by asmaller one.

8. We refer to this bank as NationsBank to reduce readerconfusion. In reality, the name of the bank was NCNB(North Carolina National Bank), until 1992.

9. Our working definition of slack is ‘Organizational slackis that cushion of actual or potential resources whichallows an organization to adapt successfully to internalpressures for adjustment or to external pressures forchange in policy, as well as to initiate changes in strategywith respect to the external environment’ (from Bour-geois (1981)).

10. This quote is from The Economist (1998).

References

Barnes, F.C. (1992) NationsBank Case. UNC-Charlotte.Bourgeois, J. (1981) On the measurement of organizational

slack. Academy of Management Review 6, 29–39.


Chandler, A.D. (1962) Strategy and Structure. MIT Press, Cam-bridge, MA.

Covington, H.E. and Ellis, M.A. (1993) NationsBank: TheChanging Face of American Banking. The University ofNorth Carolina Press.

Dougherty, D. (1995) The effects of downsizing on productinnovation. California Management Review 37(4), 28–44.

Gardner, T.P. and Gilson, L.D. (1993) Predictable patterns:navigating the continuum from protected monopoly tomarket competition. Working paper, Venture Associates.

Mahon, J.F. and Murray, E.A. (1981) Strategic planning forregulated companies. Strategic Management Journal.

Mildenberg, D. (1992) NCNB faces the nation. North CarolinaBusiness, p. 24.

Milligan, J.W. (1993) Hugh McColl’s cult of growth. Insti-tutional Investor March, p. 47.

Pitcher, P. (1996) The Drama of Leadership. Wiley, New York.Ramasamy, K., Thomas, A.S. and Litschert, R.J. (1994) Organi-

zational performance in a regulated environment. Stra-tegic Management Journal.

Silverman, B.S., Nickerson, J.A. and Freeman, J. (1997) Profit-ability, transactional alignment, and organizational mor-

ANNE SMITH, Depart- PEGGY GOLDEN,ment of Organization Stud- Department of Manage-ies, Anderson Schools of ment, International Busi-Management, University of ness and Entrepreneurship,New Mexico, Albuquerque, Florida Atlantic University,New Mexico 87131-1221, 220 SE 2nd Avenue, Ft.USA. Lauderdale, FL 33301, USA.

E-mail: [email protected] Smith is AssistantProfessor of Organization Peggy Golden is AssociateStudies at the University of Professor of ManagementNew Mexico. Her current and International Business

research interests include transformation patterns of at Florida Atlantic University. She is currently study-firms in deregulating industries, international expan- ing corporate governance and marketing orientation insion processes, and international partner formation. firms in economies in transition, alliance behavior ofShe has done much work on the telecommunications small firms, and the effects of reputation on small firmindustry. performance and multinationalization of large firms.

PATRICIA PITCHER,Service de l’Enseignementde la Direction et de la Ges-tion des Organisations,Ecole des Hautes Etudes(HEC), 3000 chemin de laCote-Sainte-Catherine,Montreal, Canada H3T2A7. E-mail: [email protected]

Patricia Pitcher is Professorof Strategic Leadership at Ecole des Hautes Etudes,Montreal. Previous appointments in the private sectorinclude Chief Economist at the Toronto StockExchange. Her latest book The Drama of Leadership,has been translated into five languages.


tality in the U.S. trucking industry. Strategic ManagementJournal 18, 31–52.

Sirois, C. and Forget, C.E. (1995) The Medium and the Muse, p.98. The Institute for Research on Public Policy, RenoufPublishing Co., Montreal.

Smith, A.D. and Zeithaml, C.E. (1996) Garbage cans andadvancing hypercompetition: the creation and exploi-tation of new capabilities and strategic flexibility in tworegional Bell operating companies. Organization Science7(4), 388–399.

Smith, K.G., Grimm, C.M. and Gannon, M.J. (1992) Dynamicsof Competitive Strategy. Sage.

The Economist (1991) Please try again. The Economist March2, pp. 55–56.

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Weiner, M., Walker, J. and Smith, J. (1995) Preparing forindustry upheaval: why electric utilities must re-engin-eer. In The Privatization of Public Utilities, ed. L.S. Hyman,Chap. 18, pp. 208–209. Public Utility Reports, Inc.,Vienna, VA.

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The clock is ticking: surviving privatization and deregulation by utilizing the running time

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