©2000, michael a. mische mor 559 – strategic renewal university of southern california the case...
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©2000, Michael A. Mische©2000, Michael A. Mische
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
The Case for The Case for ChangeChange
Strategy for High Strategy for High PerformancePerformance
LECTURE 2LECTURE 2
Strategy for High Strategy for High PerformancePerformance
LECTURE 2LECTURE 2
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Lecture 2: Lecture 2:
DESCRIPTION & OVERVIEWThis session directly draws upon our introductory lecture to strategic renewal and organizational transformation. During this session, we will introduce and focus our discussion on three concepts critical to strategic renewal: change, high-performance and strategy formulation and development.In the course of our discussion, we will address some of the key questions related to these topics, including:
• What are the dynamics and key drivers strategic change?• What are the critical questions/decisions concerning change that organizations must determine?• What are the various domains and scopes of change?• What is the definition of high-performance and the characteristics of a high-performance company?• What are the definition and elements of high-performance strategy?
DESCRIPTION & OVERVIEWThis session directly draws upon our introductory lecture to strategic renewal and organizational transformation. During this session, we will introduce and focus our discussion on three concepts critical to strategic renewal: change, high-performance and strategy formulation and development.In the course of our discussion, we will address some of the key questions related to these topics, including:
• What are the dynamics and key drivers strategic change?• What are the critical questions/decisions concerning change that organizations must determine?• What are the various domains and scopes of change?• What is the definition of high-performance and the characteristics of a high-performance company?• What are the definition and elements of high-performance strategy?
KEY LEARNING CONCEPTSStrategy lies at the core of organizational competitive survival. Organizations that master the strategy formulation process and thoroughly understand its essential elements are able to manage, anticipate and even influence change and achieve high-performance and sustained competitiveness.Our learning objectives in this lecture are to develop an understating of the three interlinked concepts of strategy, high performance and strategic change. Some of the key learning goals are to:
• Understand the dynamics of change and its key drivers.• Understand the kinds and scopes of change organizations undergo in their transformation efforts.• Define high performance and understand the key attributes of high-performance organizations.• Define strategy within the context of high performance and understand its criticality to strategic renewal.• Identify the five strategic pillars supporting all high-performance strategies.• Introduce the six strategic options available to all organizations.
In addition, this lecture introduces new concepts relevant to today’s competitive environment and strategy development, including:
• The concept of competing in a “marketspace”• The “portfolio” approach to strategy formulation and implementation
KEY LEARNING CONCEPTSStrategy lies at the core of organizational competitive survival. Organizations that master the strategy formulation process and thoroughly understand its essential elements are able to manage, anticipate and even influence change and achieve high-performance and sustained competitiveness.Our learning objectives in this lecture are to develop an understating of the three interlinked concepts of strategy, high performance and strategic change. Some of the key learning goals are to:
• Understand the dynamics of change and its key drivers.• Understand the kinds and scopes of change organizations undergo in their transformation efforts.• Define high performance and understand the key attributes of high-performance organizations.• Define strategy within the context of high performance and understand its criticality to strategic renewal.• Identify the five strategic pillars supporting all high-performance strategies.• Introduce the six strategic options available to all organizations.
In addition, this lecture introduces new concepts relevant to today’s competitive environment and strategy development, including:
• The concept of competing in a “marketspace”• The “portfolio” approach to strategy formulation and implementation
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Lecture 2: Lecture 2:
CLASS SCHEDULE & AGENDA
I. 6:00 – 6:15 Course Related Q&AStudent
ConcernsGeneral
Discussions
II. 6:15 – 6:30 Preview of current week’s material
II. 6:30 – 7:30 Lecture
III. 7:30 – 7:45 Break
IV. 7:45 – 9:00 Lecture & Material/Topic Discussion
V. 8:45 – 9:30 Case Examples & Discussions
VI. 9:30 – 10:00 Professor Available for Q&A, Discussion, etc.
CLASS SCHEDULE & AGENDA
I. 6:00 – 6:15 Course Related Q&AStudent
ConcernsGeneral
Discussions
II. 6:15 – 6:30 Preview of current week’s material
II. 6:30 – 7:30 Lecture
III. 7:30 – 7:45 Break
IV. 7:45 – 9:00 Lecture & Material/Topic Discussion
V. 8:45 – 9:30 Case Examples & Discussions
VI. 9:30 – 10:00 Professor Available for Q&A, Discussion, etc.
READINGSMische: Strategic Renewal, Chapter 2
Harley-Davidson, Inc., HBS, 292982, December, 15, 1992.
READINGSMische: Strategic Renewal, Chapter 2
Harley-Davidson, Inc., HBS, 292982, December, 15, 1992.
CASESHarley Davidson, Inc. (HBS)
CASESHarley Davidson, Inc. (HBS)
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Lecture 2: Lecture 2:
CONCEPT DISCUSSION & QUESTIONS
1. Given the various types and domains of change, discuss the scopes and respective impacts of the change efforts organizations undergo. What type of change is most effective and most enabling with respect to strategic renewal? Which one entails the highest degree of risk?
2. What are the major objectives driving strategy and strategy formulation efforts?
3. Given the six strategic choices faced by all organizations, discuss some real-life examples for each of these strategies. For example, consider Dell Computer, DaimlerChrysler, Sears, Kodak, Microsoft, Sony, Apple Computer,etc. How well do these companies manage their strategies from a portfolio perspective?
4. Considering the concept of “marketspace”, explain how it relates to the three key drivers of change – information technology, globalization, and multiculturalism.
5. Referring to the framework of the five strategic pillars, discuss some examples of companies that demonstrate and effective use and integration of these elements in developing and implementing their competitive strategies.
CONCEPT DISCUSSION & QUESTIONS
1. Given the various types and domains of change, discuss the scopes and respective impacts of the change efforts organizations undergo. What type of change is most effective and most enabling with respect to strategic renewal? Which one entails the highest degree of risk?
2. What are the major objectives driving strategy and strategy formulation efforts?
3. Given the six strategic choices faced by all organizations, discuss some real-life examples for each of these strategies. For example, consider Dell Computer, DaimlerChrysler, Sears, Kodak, Microsoft, Sony, Apple Computer,etc. How well do these companies manage their strategies from a portfolio perspective?
4. Considering the concept of “marketspace”, explain how it relates to the three key drivers of change – information technology, globalization, and multiculturalism.
5. Referring to the framework of the five strategic pillars, discuss some examples of companies that demonstrate and effective use and integration of these elements in developing and implementing their competitive strategies.
CASE DISCUSSION & QUESTIONSCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)Interactive class discussion
CASE DISCUSSION & QUESTIONSCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)Interactive class discussion
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Lecture 2: Lecture 2:
LECTURE SUMMARY
Current competitive dynamics and the velocity of change demand new approaches to developing strategies as well as new basis of competing to achieve sustained high performance. Organizational must develop capabilities and characteristics that will allow them to compete in an increasingly uncertain environment, with the objective of becoming high performers and setting the competitive rules for the marketspace.
The key lessons are:
• Companies must not only react to change fast; the high-performer anticipate and create change through their strategies and deployment of the five strategic pillars.
• High-performance is a strategic imperative.
• High-performers approach the strategy development process from a portfolio perspective, maintaining their flexibility, speed and constantly adjusting to marketspace changes and challenges.
LECTURE SUMMARY
Current competitive dynamics and the velocity of change demand new approaches to developing strategies as well as new basis of competing to achieve sustained high performance. Organizational must develop capabilities and characteristics that will allow them to compete in an increasingly uncertain environment, with the objective of becoming high performers and setting the competitive rules for the marketspace.
The key lessons are:
• Companies must not only react to change fast; the high-performer anticipate and create change through their strategies and deployment of the five strategic pillars.
• High-performance is a strategic imperative.
• High-performers approach the strategy development process from a portfolio perspective, maintaining their flexibility, speed and constantly adjusting to marketspace changes and challenges.
CLASS & INDIVIDUAL ASSIGNMENTS Current material available at http://www-rcf.usc.edu/~mische (September 2000)
CLASS & INDIVIDUAL ASSIGNMENTS Current material available at http://www-rcf.usc.edu/~mische (September 2000)
SUPPLEMENTAL MATERIALCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)
SUPPLEMENTAL MATERIALCurrent material available at http://www-rcf.usc.edu/~mische (September 2000)
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
““Change is the law of life. And those who look only to Change is the law of life. And those who look only to
the past or the present are certain to miss the futurethe past or the present are certain to miss the future.”.”
John F. KennedyJohn F. Kennedy
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
The Realities of The Realities of Strategic ChangeStrategic Change
Strategic Change can assume various forms:
DISCRETEDISCRETE
SUDDENSUDDEN
SEQUENTIALSEQUENTIAL
PLANNEDPLANNED
RANDOMRANDOMCHAOTICCHAOTIC
The Competitive Imperative Is to:a. Recognize the type of change.b. Anticipate it.c. Manage it successfully.
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Foundation for Change…Foundation for Change…
Organizational change is complex and
difficult.
Failing to respond to change will result in
failure.
Failing to change properly will result in
failure.
The key questions for any organization are:
WHEN to
change?
HOW to
change?
WHAT to
change?
How FAST to change?
How to ensure the
CAPABILITY to change.
How to MANAGE change?
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Foundation for Change…Foundation for Change…
The five domains of change for any organization are:
To achieve competitive advantage and successful systemic change, companies can rarely change only one element: they must change all domains (Majchrzak, Blumenthal, Mische, others).
STRATEGYSTRATEGY
PROCESSPROCESS
PEOPLEPEOPLETECHNOLOG
Y
TECHNOLOGY
KNOWLEDGE
KNOWLEDGE
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Five Levels & Complexity of ChangeFive Levels & Complexity of Change
In organizations, change occurs at 5 different levels:
ENTERPRISE-WIDEENTERPRISE-WIDEENTERPRISE-WIDEENTERPRISE-WIDE
BUSINESS UNITBUSINESS UNITBUSINESS UNITBUSINESS UNIT
OPERATIONAL UNIT/BUSINESS OPERATIONAL UNIT/BUSINESS PROCESSPROCESS
OPERATIONAL UNIT/BUSINESS OPERATIONAL UNIT/BUSINESS PROCESSPROCESS
ORGANIZATIONAL UNITORGANIZATIONAL UNITORGANIZATIONAL UNITORGANIZATIONAL UNIT
HUMAN HUMAN BEHAVIORBEHAVIOR
HUMAN HUMAN BEHAVIORBEHAVIOR
Extent of Complexity
Org
an
izati
on
al Level
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
The Types and Scopes of ChangeThe Types and Scopes of Change
Organizations plan and experience various types of change, including:
– Operational & Process
– Technological
– Organizational
– Behavioral
All change falls within three main categories:
INCREMENTAL CHANGE
INCREMENTAL CHANGE
TACTICAL CHANGE
TACTICAL CHANGE
SYSTEMIC CHANGE
SYSTEMIC CHANGE
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Three Scopes of ChangeThree Scopes of Change
INCREMENTAL CHANGE: Confined to designated area Low targets of 5-15% value
improvement Generally cost reduction Low risk/low impact
TACTICAL CHANGE: Cross-functional process
change Radical redesign of processes
and selected organizations High risk/high return
SYSTEMIC CHANGE: Complete organizational
change Redefines rules/creates new
market dynamics Linked to innovation strategies Very high risk and return
Level of
Ch
an
ge &
Ris
k
Strategic Implications &
Value
SYSTEMICSYSTEMIC
TACTICALTACTICAL
INCREMENTALINCREMENTAL
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Keys to Successful Organizational ChangeKeys to Successful Organizational Change
All change efforts should be driven by 3 major goals:
The need to create and sustain high-performance.
The need to achieve a definable goal or correct a specific problem.
The need to advance and perpetuate the organization to a better, more competitive position.
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Successful Strategic Renewal… Commitment to Successful Strategic Renewal… Commitment to High-PerformanceHigh-Performance
Successful change requires:– Direction– Commitment
Critical to commitment are two considerations:
1. What behaviors, competencies and financial resources are necessary to sustain the organization’s commitment to such a strategy?
2. Is the strategy the correct one for creating high-performance?
Key Point…Key Point… To create and sustain high performance, an organization must set as its core strategy the commitment to become a high-performance organization.
To create and sustain high performance, an organization must set as its core strategy the commitment to become a high-performance organization.
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
High Performance: Central Issues…High Performance: Central Issues…
1. What does high-performance mean?
2. Can such a term and concept be realistically defined in a strategic context?
3. Relative to past performance, individual performance, an industry measure, some other benchmark, “how can high-performance be measured”?
4. What are the trademarks, the strategic, operating and managerial characteristics of a high-performance organization?
5. How did the high-performance organizations become high-performers?
6. What are the six strategic choices available to all companies?
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Defining High Performance…Defining High Performance…
“High Performance” as a strategic doctrine is extremely elusive and confusing.
“A high-performance organization is one that consistently sets the performance standard in
creating and sustaining competitive advantage, extraordinary financial performance and
stakeholder value over a long period of time.”Mische: Strategic Renewal
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
The High Performance ImperativeThe High Performance Imperative
High performance is the key strategic objective of successful renewal – it is a strategic imperative.
High performance is a continuous and institutionalized process.
Organizations that can leverage and create synergies of purpose are high-performers. Specifically, they:
– create synergy of purpose and design in their operations.
– demonstrate the ability to create extraordinary leverage and competitive advantage through the integration of resources and competencies.
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
High Performance & Competitive High Performance & Competitive AdvantageAdvantage
In the context of high performance, competitive advantage extends beyond beating industry rivals.
High performers constructively compete against themselves.
To the great companies…
“… competitive advantage is about being significantly better than the competition by being the competitive
standard that sets the rules.” Mische: Strategic Renewal
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Evaluating High Performance: Key IndicatorsEvaluating High Performance: Key Indicators
1. Financial Performance and Shareholder Value Creation
2. Strategic Positioning
3. Leadership and Innovativeness
4. Governance and Social Responsibility
5. Brand Recognition and Quality of Products
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
The Five Strategic Pillars: The Keys to High The Five Strategic Pillars: The Keys to High PerformancePerformance
InnovationInnovationOperationalOperationalExcellence &Excellence &
AgilityAgility
LeadershipLeadership
InformationInformationTechnologyTechnology
KnowledgeKnowledge
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
New Bases of Competing: Keys to Strategic New Bases of Competing: Keys to Strategic RenewalRenewal
KNOWLEDGE INFORMATION
TECHNOLOGY ORGANIZATIONAL
AGILITY & OPERATIONAL EXCELLENCE
LEADERSHIP INNOVATION
Knowledge is disseminated
Quality is given
Size and location are neutralized by technology
Leadership is shared
Products are implicit
The five components form a new construct for developing strategies and creating competitive advantages… These are the wellsprings for production and services.
A company must have all five of these components to create a competitive advantage and achieve high performance.
The five components form a new construct for developing strategies and creating competitive advantages… These are the wellsprings for production and services.
A company must have all five of these components to create a competitive advantage and achieve high performance.
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
The Five Strategic Pillars: The Keys to High The Five Strategic Pillars: The Keys to High PerformancePerformance
Element Attributes
Knowledge Management:Knowledge must be relevant, accessible and used if it is to be a source of competitive advantage. Knowledge is difficult to measure, but is inherently recognized for its value.
Information Technology: IT must be used to create new operational processes and organizational designs and support knowledge management and effective transfer. It is rarely a strategy itself; however, if properly aligned with organizational resources, infrastructures and strategy, it enables effective execution and implementation for competitive advantage.
Organizational Agility Organizational agility involves not only speed, but the ability & Process Excellence: to adopt to changes and redeploy and reconstitute its assets
and resources. Process excellence involves operational leverage, zero defects and usually high velocities.
Leadership: All organizations require leadership at various levels. To becompetitive, organizations require leaders who can communicate, have extensive personal experiences and insights and encourage learning and innovation.
Innovation: Strategic renewal requires the ability to constantly innovate its processes, products, organization and management practices. This requires an organizational environment conducive to innovation.
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Developing Strategies for High PerformanceDeveloping Strategies for High Performance
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Economy, Market & Industry Convergence and Integration
Economy, Market & Industry Convergence and Integration
Creation of MARKETSPACE As A New Competitive Domain
Creation of MARKETSPACE As A New Competitive Domain
The concept of creating/competing in a MARKETSPACE:
Abandons the restrictive definitions and frontiers of traditional industries and markets
Allows for quick adaptation to environmental changes and new imperatives
Allows for innovation and creation of new products/markets/infrastructures, etc.
Discounts old sources of competitive advantage and takes a full advantage of the new, key bases for competing (i.e. 5 pillars of strategy)
Is aggressively pursued by the great companies and leads to their sustained high performance (e.g. Dell, Charles Schwab, Wal-Mart…)
The concept of creating/competing in a MARKETSPACE:
Abandons the restrictive definitions and frontiers of traditional industries and markets
Allows for quick adaptation to environmental changes and new imperatives
Allows for innovation and creation of new products/markets/infrastructures, etc.
Discounts old sources of competitive advantage and takes a full advantage of the new, key bases for competing (i.e. 5 pillars of strategy)
Is aggressively pursued by the great companies and leads to their sustained high performance (e.g. Dell, Charles Schwab, Wal-Mart…)
Today’s Strategic Givens…Today’s Strategic Givens…
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
The Objective of Strategy…The Objective of Strategy…
“The objectives of strategy and strategic change are to create and sustain long-term high-performance and competitive and economic dominance.”
M. Mische: Strategic Renewal
KEY ASPECTS:
1. Long-term focus
2. Long-term sustainability
3. Achieving competitive and economic dominance
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
The Six Strategic Choices for CompetingThe Six Strategic Choices for Competing
Most Most AggressiveAggressive
Most PassiveMost Passive
11 22 33 44 55 66
INNOVATEINNOVATE SUBSTITUTESUBSTITUTE IMITATEIMITATE COMPLEMENTCOMPLEMENT COLLABORATCOLLABORATEE
WITHHOLDWITHHOLD
High expense
High risk Very high
return potential
Create new rules
Force competitors to change
Set the pace
Create or capture market within the industry
Leverage existing assets and channels
Force competitors to make changes
Provide flexibility
Lack innovation
Perform better than leader
Content with being a follower
Lower risk
Unsure as to what to do
Peaceful coexistence
Complement leader’s services and products
Backfill needs and requirements
Create partnerships
Provide value-added content
Share risk Requires
trust Requires
commitment
Preserve the right to compete
Failure to act
Unclear direction or need
Acquire necessary resources
Wait for clear signal
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
Selecting a Strategy: Center Themes…Selecting a Strategy: Center Themes…
Great companies use a portfolio approach, selecting any given strategy or a combination of these strategies.
At any time, one or more choices will have a priority over other alternatives.
Choices of strategy or strategies are influenced by a number of factors, including industry dynamics, age of the organization, speed and capability of innovation , changes in customers and/or customer demand, etc.
Case for Change
MOR 559 – Strategic MOR 559 – Strategic RenewalRenewal
University of Southern CaliforniaUniversity of Southern California
©2000, Michael A. Mische©2000, Michael A. Mische
““Winning is not a sometime thing. It is an all time Winning is not a sometime thing. It is an all time
thing. You don’t win once in awhile, you don’t do thing. You don’t win once in awhile, you don’t do
things right once in awhile, you do them right all of the things right once in awhile, you do them right all of the
time. There is no room for second placetime. There is no room for second place.”.”
Vince LombardiVince Lombardi