mt1022a lecture 1-11-12 webct
TRANSCRIPT
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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.