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    v

    Contents

    List of Figures and Tables x

    Foreword xiii

    Acknowledgements xiv

    About the Authors xv

    Part I A Global Framework for Managing Complexity

    1 Managing Complexity in Organizations: How to ApplyOckhams Razor 3

    1.1 Introducing global complexity 31.2 Complexity in a flat world 41.3 Drivers of complexity and how they create managerial dilemmas 71.4 The way to manage complexity: Ockhams Razor 9

    1.5 Structure of the book 131.6 References and further reading 16

    Part II Managing the Complexity ofBusiness Models and Strategy

    Roadmap to Managing the Complexity of BusinessModels and Strategy 21

    2 Business Models and Strategy 23

    2.1 Strategic success in the BC era 232.2 Complexity drivers 242.3 Complexity simplif iers 272.4 Dealing with complexity by focusing on core strategic

    principles, not hypes or fashion trends 302.5 Alignment of mental maps for humility and

    readiness for adversity 322.6 Standardizing and decentralizing processes:

    limiting complexity to the right place 33

    2.7 Case study introduction 342.8 Case study: CANDO SA: strategy formation and

    implementation in complex environments 34

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    vi CONTENTS

    2.9 Case study discussion 402.10 References and further reading 42

    3 Complexity Drivers in Sustainable Strategies 43

    3.1 When will we see real progress in sustainability?

    433.2 Complexity drivers 453.3 Simplif iers 483.4 Complexity case study introduction 503.5 Case study: Hindustan Lever: leaping a millennium 503.6 References and further reading 57

    4 Complexity in Global Business Strategies 58

    4.1 An increasingly complex perspective 58

    4.2 Complexity simplif iers 634.3 Case study introduction 654.4 Case study: Lufthansa AG: going global, but how to

    manage complexity? 654.5 References and further reading 77

    5 Managing Risk 79

    5.1 Introducing risk management and its strategy 795.2 Complexity drivers 805.3 Complexity simplif iers 845.4 Case study introduction 885.5 Case study: Jack Millers challenging risk assessment 885.6 References and further reading 96

    6 Partnerships and Alliances 98

    6.1 Monitoring complexity in partnerships and alliances 986.2 Complexity drivers 986.3 Complexity simplif iers 1026.4 Case study introduction 103

    6.5 Case study: European Auditing andFinancial Services Inc. (EAFS): leaping forward orsliding backward? 104

    6.6 References and further reading 115

    Part III Complexity and the Organization

    Roadmap to Complexity and the Organization 119

    7 Complexity and the Organization 121

    7.1 Complexity and organizational architecture 1217.2 Complexity drivers 1237.3 Complexity simplif iers 126

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    CONTENTS vii

    7.4 Case study introduction 130 7.5 Case study: Rebuilding ABB 130 7.6 References and further reading 151

    8 Corporate Governance 154

    8.1 Corporate governance and its inherent complexities 154 8.2 Complexity drivers 155 8.3 Complexity simplif iers 158 8.4 Case study introduction 159 8.5 Case study: Failure of corporate governance at UBS 159 8.6 References and further reading 168

    9 Subsidiary Management 170

    9.1 Complexity in subsidiary management 170 9.2 Complexity drivers 171 9.3 Complexity simplif iers 172 9.4 Case study introduction 177 9.5 Case study: Pharmagroup Int. and Fluvera: when

    subsidiary governance means losingcompetitive ground 177

    9.6 References and further reading 186

    10 Project Management 188

    10.1 Project management and complexity 18610.2 Complexity drivers 18910.3 Complexity simplif iers 19110.4 Case study introduction 19510.5 Case study: Global diesel engine project: where are

    the simplif iers for the overwhelming complexity? 19510.6 References and further reading 202

    Part IV Business Functions and Their Inherent

    Complexities

    Roadmap to Complexity in Business Functions andTheir Inherent Complexities 205

    11 Marketing 207

    11.1 Marketing in a complex, global environment 20711.2 Complexity drivers 20811.3 Complexity simplif iers 213

    11.4 Case study introduction 21611.5 Case study: Disneyland Resort Paris:Mickey goes to Europe 216

    11.6 References and further reading 231

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    viii CONTENTS

    12 Supply Chain Management: The Backbone ofComplex, Global Acting Organizations 232

    12.1 Why is supply chain management so complex? 23212.2 Complexity drivers 235

    12.3 Complexity simplif iers 23812.4 Case study introduction 24212.5 Case study: Sustainable agriculture in

    Nestls supply chain: how to get everybodyon board? 242

    12.6 References and further reading 251

    13 Management of IT and Technology 253

    13.1 Introducing IT and technology 253

    13.2 Complexity drivers 25413.3 Complexity simplif iers 25713.4 Case study introduction 26213.5 The ONE Platform project for Chai-Bank 26213.6 References and further reading 269

    14 Human Resources Management 270

    14.1 Introducing human capital management 27014.2 Complexity drivers 271

    14.3 Complexity simplif iers 27314.4 Case study introduction 27814.5 Case study: War for management talent in China 27814.6 References and further reading 283

    15 Innovation Management 285

    15.1 What is innovation management? 28515.2 Complexity drivers 28615.3 Complexity simplif iers 291

    15.4 Case study introduction 29515.5 Case study: Innovation at the LEGO Group 29515.6 References and further reading 308

    Part V The People Factor and Managing Crises

    Roadmap to Complexity in The People Factorand Managing Crises 313

    16 Leadership, despite Complexity 315

    16.1 The qualities of leading in a complex world 31516.2 Leadership framework 31516.3 Case study introduction 320

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    CONTENTS ix

    16.4 Case study: Carnival in Rio: homicide or suicide? 32016.5 References and further reading 325

    17 Complexity and Stakeholders 326

    17.1 Complexities in managing stakeholders 32617.2 Complexity drivers 32617.3 Complexity simplif iers 32817.4 Case study introduction 33017.5 Case study: Transforming the global fishing industry:

    the Marine Stewardship Council at full sail? 33117.6 References and further reading 344

    18 Complexity in a Crisis 346

    18.1 Looking below the surface 34618.2 Complexity drivers 34718.3 Complexity simplif iers 35118.4 Case study introduction 35518.5 Case study: Murphys law and the crisis at

    Jurassic Oil Company 35518.6 References and further reading 362

    Part VI Managing Complexity, In Summary

    19 Managerial Implications 365

    19.1 Lessons to be learned: get the details right but take aconsistent strategic approach 365

    19.2 A great idea is just not enough 36519.3 The fish starts to smell bad from the head first 36719.4 The personal dimension: what it all means for you 368

    References 369

    Index 382

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    IA Global Framework for

    Managing Complexity

    Part

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    1Managing Complexityin Organizations:How to ApplyOckhams Razor

    1.1 Introducing global complexity

    If there was any further need to prove the interconnectedness of our glo-bal economy, the biggest financial and economic crisis since the GreatDepression has delivered it. Although global economic crises have certainlyoccurred before, the speed of the political and economic changes seen inrelation to the current crisis have been unprecedented; while in previous cri-ses a variety of boundaries (in the housing, banking and industry sectors, as

    well as between nations, or at least regions) conf ined and limited the impactof actions and decisions to a defined space, todays so-called flat world1allowed for a rapid spread of economic difficulties across the globe, as wellas the concerted (half-voluntary and half-involuntary) reactions of businessleaders and policy-makers alike. In this f lat world, an ever-increasing numberof players not only have access to the global economy but also interact with,

    and depend upon, one another. For multinational enterprises (MNEs) ingeneral, and managers and entrepreneurs of international organizations spe-cif ically, this makes the world increasingly complex, information ambiguousand often short-lived while previous causeeffect relationships have becomereciprocal at best. Certainly these developments have not created complexityfor institutions, but they have certainly heightened it. As such, it is not sur-prising that the application of complexity theory to management topics hasgreatly increased over the last few years.

    At IMD, Europes top-ranked business school, this topic was a major ini-

    tiative for the Thought Leadership Research Cluster, which led to variouspublications, cases and articles all based on the research and programme-participant feedback. It became clear throughout the discussions that managersand graduate students that had some work experience could easily relate to the

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    concept of managerial complexity and apply its core elements (such as the driv-ers and simplifiers of complexity that will be discussed later) to their real-lifeissues and dilemmas.

    Another observation was noted repeatedly, both in the discussions at IMD

    and in our studies of a number of companies: Some businesses and manag-ers have become overwhelmed by this increased complexity, while others find

    ways of identifying the relevant complexity drivers in their particular businessenvironments, manage them and, finally, outperform the market. What we alsodiscovered in our research, unfortunately, is that there is no panacea for thosedetermined to overcome complexity. Some managers and businesses had simplygot lucky, not really knowing what they had done right to contribute to theirsuccess. However, most successful business managers had worked rigorously tounderstand the factors shaping their business: they defined clear strategies with

    the companys values in mind and that could be understood by everyone in thefirm, executed their must-win battles2and, when required, had taken the boldsteps necessary.

    Most likely, this recipe for success sounds very familiar to you. You mayfeel that youve heard all of the relevant phrases any number of times expressions such as succeeding in globalizing economies, winning in aflattening world or the right strategies for the internationalization of yourcompany that continue to appear in business books, making them seem rel-evant, current and interesting. Its true that this book is no exception in thismatter, since we believe that a certain level of general learning is necessary,true and relevant for the reader. However, what we believe makes this bookboth distinct and useful in a similar way to our previous book, CorporateGovernance: How to Add Value3 is the documentation of the conceptualframeworks made relevant for managers and applied to different businessfunctions, as well as the successfully utilized case studies which are includedin each chapter. As such, all of the generic complexity drivers and simplif iersaddressed later in this introduction are discussed and elabourated upon inthe various book chapters and can be tested, discussed and applied in theiraccompanying case studies.

    Hence, this book is particularly targeted to an audience interested in learn-ing about managing complexity within different business functions issuesthat are illustrated with relevant case studies such as graduate and ExecutiveMaster of Business Administration (EMBA) students, programme participantsat leading business schools and managers who read management books for theirown edification. Our intention is to help readers understand what it takes tocomprehend, and analyze, complexities in their respective f ields and then comeup with the necessary strategies to successfully manage the complexity.

    1.2 Complexity in a flat world

    Again, to reiterate the bottom line about complexity: Complexity cannot justbe made simple and it will not disappear in the near future.4As such, it is

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    necessary to understand what complexity is, as well as what drives it. Knowingthat the concept of complexity is, in itself, complex and that there are differentclassifications of complexity is important.

    Complexity is a frequently used, abstract and multidimensional term in

    todays parlance. The term complexity originated in the field of natural sci-ences.5Due to the interdisciplinary investigation of the phenomenon, there isneither a universally accepted definition nor any prevalent opinion about whatconstitutes complexity.6

    The interpretation of the phenomenon complexity tends to be rather sub-jective, making the process of consideration and the context of the examinedsystem crucial.7Particularly in the context of the contemplator, his or her pointof view and his or her perception are important and determine the understand-ing and definition of complexity.8Therefore, it is essential to thoroughly set the

    parameters in which the term complexity is used.9

    The following section pro-vides an overview about different approaches to define and characterize com-plexity in the context of business science.

    There is a large spectrum of definitions and models for specifying complex-ity. In Anglo-Saxon regions the approaches to complexity are closely relatedto the works of Anthony Stafford Beer in 1959.10The origins of complexity-related organization and management research in the German-speaking worldcan be traced back to Hans Ulrichs St Gallener Schule and Werner KirschsMnchener Schule11in the late 1980s and early 1990s. They discussed ques-tions of how to cope with complexity, system-evolutionary management andcomplex adaptive systems.12

    In line with Beers system-theoretic approach, E. F. Yatesdefined (in 1978)five attributes of complexity: Significant interaction, great number of parts,nonlinearity, broken symmetry and non-holonomic13constraints, from whichone or more have to interact to create a complex system.14

    Other interpretations of complexity range from heterogeneity and diver-sity by Lawrence and Lorsch (1967), Thompson (1967) and Dess and Beard(1984), effect uncertainty by Milliken (1987), analyzability by Daft and Weick(1984) and usefulness of information for decision-making by Duncan (1972)

    to geographic concentration and changes of market shares by Sharfman andDean (1991).15

    Woodward (1993) defines complexity of system by three central dimensions:diversity, ambiguity and turbulence (DAT). He developed his DAT model inthree rounds of expert panel discussion.16

    Backlund (2002) defines a complex organization as an organization whosebehaviour is complex, or whose inner structures are complex, or whose proc-esses are complex. He concretizes that an organizational structure is com-plex if one or several of the following characteristics can be found within the

    organization:

    The organization consists of many components or subsystems. These components or subsystems are miscellaneous.

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    There are many relations and/or interactions between the components orsubsystems.

    The relations are not symmetric. The arrangement of the components and/or subsystems is not symmetric.

    The components, subsystems and relationships change over time.17

    Vesterby (2008) argues that six basic quantities define the complexity oforganizations:18

    The number of components.The number of different kinds of components.The number of elements of each kind.The number of relations.

    The number of different relations. The number of each kind of relation.

    Vesterby (2008) is in line with Keuper (2004), Grossmann (1992) and Schlange(1994) who define complexity by two dimensions: First, the structure of a sys-tem given by the elements and, second, the links and the change of these ele-ments and links in the course of time.19

    During the last 16 years a general consensus in the literature that the numberand diversity of the elements and their relationships, as well as system-inherentdynamics, constitute complexity was established.20This different definition wereadvanced and improved upon by Lane et al. (2006) and Steger et al. (2007).

    Recognizing the various classifications of complexity is a good place to start,although identifying them is not necessarily self-evident, especially given thestress and time pressure with which most executives have to cope and which canlead to unnecessary confusion. The basic complexity types are:

    Apparent complexity: The situation appears complex but is really based ona simple pattern.Detail complexity: The situation is confusing due to the large number of

    variables.Dynamic complexity: There are a large number of interconnectionsbetween the variables. The impacts of multi-causal relationships are not eas-ily discernible.Inherent complexity: The situation is extremely complicated. There is a greatdiversity of variables and a great number of interconnections that interact in arapidly changing environment. Interpretations are largely ambiguous.

    It is the last complexity type inherent complexity that constitutes a leaders

    decision-making landscape in an MNE and on which we want to focus thereaders attention. In the flat world one cannot avoid being connected to theglobal economy, no matter how high or low profile a managers or companysleadership position may be. Therefore, it is crucial to learn to function and

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    succeed with inherent complexity. Whether companies (or divisions or teams)become entangled in too many problems, battling shifting markets, drowningin competing demands from within the company, governments, local commu-nities and employees, the leader is the one standing in the middle of the centrif-

    ugal forces that pull away at resources and energy. His or her perceptions, andhow he or she chooses to act upon them, are critical to the way an organizationunderstands and manages complexity.

    1.3 Drivers of complexity and how they createmanagerial dilemmas

    The old paradigm of cause and effect deduction no longer holds true sinceresults or impacts have become increasingly unpredictable. Indeed, solving one

    problem often leads to another one and variables are interlocked in a dance ofreciprocal causality. Soon management feels trapped in a vicious circle of forcesfrom which it seems impossible to disengage. The question is: what are the typi-cal dilemmas that complexity creates? From our research of the literature (seeabove), and our own experience, we have identified four fundamental dilem-mas that we believe to be the most relevant to a broad variety of industries:diversity, interdependence, ambiguity and fast flux (using the acronym DIAFcan be useful in remembering the complexity drivers). They will be described,in general, over the next pages and in more detail for every business function inthe respective chapters. It is important to note in advance that while all driversof complexity are often, by themselves, difficult to manage, they are all inter-related and almost always have to be understood and managed as a total entity,

    which is what makes it so complex!

    Diversity

    Organizations, and especially MNEs, are confronted with a diverse set of chal-lenges from both within and without the organization. Diversity, defined as aplurality of elements, covers two major aspects of complexity: The number of

    elements (multiplicity) and the dissimilarity of the elements (variety). Startingwith the different stakeholders, like employees, customers, suppliers, investors,competitors and other organizations with interests in the companys opera-tions (such as non-governmental organizations(NGOs) or regulators), man-agers need to find the balance between the different, and mostly opposing,interests of these different stakeholders (multiplicity) and between the samestakeholders groups, such as customers in different markets (variety). As such,managers have become responsible and accountable to a diversity of deliverables financial goals, quality goals, environmental goals, social goals, etc. Below (see

    Table 1.1) are some examples of internal and external drivers of diversity inglobal organizations.

    To deal with, and manage, multiplicity and variety is not at all trivial. Clearly,the ease of storing and analyzing information has helped to deal with the existing

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    diversity but, at the same time, the vast amounts of information available to

    managers has also increased both multiplicity and variety on the one hand,due to the availability of information and on the other, due to the possibility ofcreating new information through various forms of media (some of which willbe discussed in Chapter 13 on the management of IT and technology).

    As such, the diversity must be constantly monitored and the strategy adaptedaccordingly in order not to miss opportunities or, in a worst-case scenario, befeatured on a breaking newscast, accused of wrongdoing (whether the allega-tions are true or not).

    InterdependenceInterdependencies are caused by common access to scarce resources like capital,labour, technological or management know-how and, as a result, can createdilemmas.21Similarly, the supply-side competition (getting the resources fromsuppliers) and the demand-side (getting your products and services to the cus-tomers) leads to a one- or multi-sided dependency concerning amount, qualityand the timeliness of transferring intermediate and finished products. For exam-ple, if a competitor increases the production of a product that is also offered byanother company, competition for the resources necessary to make the product

    increases (raw materials, workers, etc.). This can lead to price increases on thesupply side while at the same time, due to a limited customer demand, the priceson the demand side may also, simultaneously, be affected. Such interdependen-cies can also be observed internally, where two or more units are competingfor project resources and the decision to go ahead with one project affects theother departments as well. As such, actions in one unit, or area, have direct, orindirect, effects in one or more other units this can be understood as inter-dependence. However, cause and effect are often blurred and can be reciprocal.For managers (and all others alike) it is, therefore, often diff icult to understand

    the results of certain actions or the causes of certain reactions. In many cases,managers need to be the firemen for unintended consequences. Nevertheless,the acknowledgement and cognition of interdependencies is the prerequisite forcoordination between the different units and stakeholders.

    Table 1.1 Examples of Diversity

    Diversity from within the organization Diversity from outside the organization

    Human resource pool Stakeholders (investors, customers, suppliers)

    Organizational structures RegulationsSystems and structures (IT, compensation, risk, etc.) Competitors

    Key performance indicators (KPI) Cultures

    Personal preferences

    Leadership styles

    Products

    Business models

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    Ambiguity

    Ambiguity evolves from the necessity to cope with incomplete or incorrectinformation. The concept covers issues like the richness, predictability, accuracyand availability of information. Clearly, the availability and wealth of informa-

    tion has increased even more lately, due to mobile communication. But, at thesame time, the accuracy and predictability of that information has decreased,making it increasingly more difficult to interpret and apply insights.

    Ambiguity can be external when the available business environment infor-mation is unclear (which is generally the case) and it can also be internal, espe-cially when there is a lack of standardization (such as accounting standards).Both external and internal ambiguity is often created purposefully, usually forcompetitive and political reasons a competitor might release misleading dataor a colleague may attempt to steer clear of responsibility by avoiding giving

    out any clear information. Ambiguity can arise, at the same time, due to a lackof standardization, as well as from different interests that can lead to biases,making the interpretation of information dependent on the person lookingat the data. Furthermore, ambiguity makes it difficult for managers to deter-mine cause-and-effect relationships. What, for example, are the value driversof your business? Are they price, service, image, relationships, adaptability,something totally different or all of these factors combined?

    Fast flux

    Long-range planning under rapidly changing conditions, especially underconditions that change or may change at any moment under the impact ofnew commodities and technologies, is like shooting at a target that is not onlyindistinct and hard to see but is moving, and moving jerkily at that. Doesthat sound familiar? Although it may sound au courant, Joseph Schumpeter

    wrote it in 1942 in his seminal book Capitalism, Socialism and Democracy.22He called the dynamics in the economy creative destruction those that con-stantly destroy any equilibrium (an equilibrium that is never reached in the firstplace). As a result, managers need to be aware of the changes in dynamics thatoccur at all levels of the firm, internally and externally. Fast flux makes all of thesolutions in managing the previously described complexity drivers temporary,at best; often, todays solutions are outdated by tomorrow.

    1.4 The way to manage complexity: Ockhams Razor

    In all decisions about how to deal with an MNEs complexity regarding dif-ferent organizational and functional issues good judgement is always neces-sary. This is true because, ultimately, there is no available rule or model due

    to the ambiguities that already exist. Managers must take great care whenanalyzing the situation due to the fact that almost all of their decisions arebiased; for example, by previous experiences, personal interests, stereotypesand the like.

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    We need, nevertheless, to deal with complexity and not necessarily by apply-ing Ashbys Law of Requisite Variety that states that organizations must be ascomplex as their environments, because this can overwhelm them. Rather, we

    want to look at a different philosopher (and friar) the Englishman William of

    Ockham. In the 14th century, William of Ockham developed the law of parsi-mony which says that entities should not be multiplied unnecessarily or, simi-larly, that plurality should not be posited without necessity.23At the beginningof the 18th century, the Austrian physicist and philosopher Ernst Mach appliedOckhams Razor to economics by what he called the principle of economy:Scientists must use the simplest means of arriving at their results and excludeeverything not perceived by the senses.24Applied to managers dealing withcomplexity, this implies that they need to understand their complex internaland external environments and find ways to manage them by simplifying the

    complexity to a manageable level, in order to reach their goals and targets. Or,in the words of Albert Einstein, Everything should be made as simple as pos-sible, but not simpler.25

    In our research we have identified four key issues that should help manag-ers deal with complexity that are called complexity simplifiers: alignment ofcommon goals and behaviours; focus; decentralization; and standardization ofcore processes. Again, over the next pages, these simplif iers will be described ingeneral, while the remaining chapters analyze them in detail for the respectivefunctions.

    Alignment of common goals and behaviours

    Certainly you have read about the importance of a framework for prioritizinggoals or the concept of must-win battles they are mentioned in almost everybusiness book.26Again, this book is no exception. A set of goals and behav-iours, which is understandable and applicable to your business, helps not onlyto manage in simple and stable environments but more importantly, can serveas a kind of guiding star in complex and turbulent environments. Every man-ager in the company should be able to clearly understand what really drives the

    business, what the fundamentals of the business profitability and sustainabilityare and why the company is in business in the f irst place. The values the busi-nesss shoulds and oughts help managers determine priorities, especially inbusiness dilemmas; they also help focus actions and give both external businesspartners and employees a feeling of consistency.

    Those companies that are the most successful in dealing with complexitiesrarely have more than four core values values that are never compromised and

    which support the business logic. Having more core values by trying to codifyand regulate all possibilities and eventualities is more like having a laundry list,

    which leads to confusion or even chaos, especially in crisis situations. The clearlydefined and accepted set of core values, as well as fixed behavioural values,should allow for certain flexibility and, therefore, account for the diversity atthe periphery by empowering local adaptation, learning and experimentation.

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    Focus

    Everyone is probably tired of the buzzwords outsourcing and focusing oncore activities, which have been around for a long time. Nevertheless, theyare part of managing the complexity. As such, focus can be described as know

    what you can do, know what you can learn and, most importantly, know whatyou cant do.

    The key to focus, as we see it, is keeping and expanding, or shrinking, yourbusiness within a previously defined mission and vision (that is, where do you

    want the company to be in the future and what do you want it to achieve?). If,for example, a new business opportunity fits into this framework and makessense from a business perspective, taking the risk is well worth considering.

    Yet, if the situation is just a business opportunity that creates a nice, short-termrevenue stream but not one that you are able to fit into your overall corporate

    vision, you might be well advised to stay clear and let it pass. Or, to use thewords of management guru Peter Drucker: If what looks like an opportunitydoes not advance the strategic goal of the institution, it is not an opportunity.It is a distraction.27

    Focus can also be applied on the personal level (as long as Peters Plateauhas not been reached).28Employees and managers should focus their work onthe things they can learn and do, not on what they cannot do but may actuallydesire. Not every top-notch engineer can teach others to be excellent engineersor even good ones; often, the excellent engineer is, in reality, an inferior team

    leader (also refer to Chapter 14 on human resources management).

    Decentralization

    Decentralization means that decision-making authority is delegated locallyor functionally and, as such, decentralization ideally empowers the managers

    where the action takes place. At headquarters, the decisions should be takenconcerning the general strategy the direction in which the company is head-ing. The core values are also established at headquarters. Meanwhile, the execu-tion of the strategy and the decisions about how to execute them can, and often

    should, be where the appropriate expertise lies; that should, in turn, increaseboth speed and flexibility. For example, a product manager in the headquartersof a global food group based in Switzerland will not interfere with the distribu-tion strategy in India. He might be informed and be able to veto the strategy (ifhe feels it violates the companys basic values); decisions, however, are usuallymade by those managers in closer proximity to the customers.

    The right level of decentralization is dependent upon the industry and thelevel of diversification in the MNE. The higher the degree of diversificationand the more varied markets and customers are (as is the case, for example, in

    the fast-moving consumer goods(FMCG)industry; less so in machinery orsteel), the more empowered local managers should be, working with a higherdegree of decentralization. One key element that makes decentralization pos-sible is standardization.

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    Standardization of core processes

    In order to standardize core processes, it is first important to understand thatcore processes are those processes that are common and used across the com-pany. They vary from business to business (also depending upon the degree of

    diversif ication) and may include activities such as accounting, human resources(HR) or information technology (IT). IT itself is an important simplifier instandardizing core processes on which competitive advantages can be built(please note that IT can also be a cause for increased complexity if managedincorrectly). We will elaborate on some of the possibilities of using informationtechnology to standardize core processes (refer to Chapter 13 on the manage-ment of IT and technology). If taken too far, however, standardization can alsoimpede flexibility by creating unnecessary complexity. A small subsidiary of alarge MNE will not need the same decision processes or risk-management sys-

    tems as its parent. Again, standardization needs to be done within boundariesand with good judgement. In general, standardized processes help to establishtransparency and accountability across the company two important elementsfor taking responsibility.

    In this regard, we disagree again with Ashbys Law of Requisite Varietybecause we believe that a reduction of complexity, especially the internal com-plexity where no value is added, promises to be more successful. Nevertheless,even when core processes can be standardized, complexity will still have to bemanaged.

    Embracing complexity

    These four generic strategies represent the essence of how to simplify in situ-ations of pressing complexity. Common goals and behaviours, focus, decen-tralization and standardization of core processes represent not just promisingbut tested and proven ways to cope with complexity as we outline in this book.They work in both the short- and mid-term to deal with overwhelming diver-sity, interdependence, ambiguity and flux.

    In taking a holistic approach, however, companies, managers and leaders are

    strongly advised to enhance their capability to deal with complexity via additionalpathways, beyond the dominant way of simplification. Over time, two addi-tional directions of capability development should be consciously approached.On the one hand, key thinkers working in a corporate setting should embracecomplexity. Gone are the days where states of stability allowed for frictionlessdevelopment and implementation of strategies and projects. Management andleadership now morph into a constant management of challenges and crises. Theissue is not whether a crisis will come but when it does that it cannot be inter-preted as the impotence, or incompetence, of company executives. Rather, man-

    agement should expect, anticipate and prepare for adversity (see also Chapter 18which deals with complexity in a corporate crisis). Flux is so tremendous thatsteering the ship in stormy waters will not only be challenging but will beoverwhelming to many. Recruiting and developing the types of managers and

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    HOW TO APPLY OCKHAMS RAZOR 13

    leaders that understand that crises are the norm, and not the exception, will bekey to future success. This, however, also has its consequences. Experts and highperformers (with integrity) are needed, not only to design and implement solu-tions but also to embrace the right attitudes about complexity. Furthermore,

    there are implications beyond HR selection and development issues. When itcomes to organization, establishing fire-fighter and rapid-response teams, as

    well as additional f inancial resource buffers, becomes essential. Thus, embrac-ing complexity refers to preparing mindsets and organizational set-ups proac-tively. It clearly includes building up capabilities to match complexity demandsover time and with the right mindset and organizational solutions.

    Next to simplifying and embracing complexity, a final way of dealing withcomplexity is to consciously relocate it. There are two areas where this makesparticular sense. Relocating complexity can take place when there is above-

    average customer value created, leading to tangible rents for companies. Themoment of truth is, thereby, the actual perceived value created, as always,through the eyes of the customer and not just the salesperson. This mustentail the willingness to pay more than would otherwise be the case. Onlyif it all leads to a better business case, can relocating complexity make sense.Of course, there are different business models that may unfold their full logiconly over time. Some companies have opted for conquering markets f irst, kill-ing off competition or building brands in the short term. In times of fast f lux,shortening lifecycles and black swans29entailing unforeseen events as we willoutline in this book one cannot count on certainty when unfolding a multi-

    year business strategy. Next to relocating complexity to areas where customerscan experience a unique value, relocating complexity to parts of the organiza-tion where the latter has rare benefits leads to a compelling logic. This refersto gaining a unique information endowment, singular access to resources anda one-of-a-kind practice in certain f ields. Again, the financial bottom line willbe the jury.

    In this book, the particular emphasis is on how to simplify this is wherewe see that there are substantial needs in MNEs today. The concepts above whether they are embracing and relocating or even intentionally increasing

    complexity should be included in modern approaches to managing complexityfor actual, sustainable success in todays challenging environment.

    1.5 Structure of the book

    As previously mentioned, the complexity drivers and simplifiers just described aregeneric and are applicable to all functions, processes and organizational struc-tures and will be elaborated on in more detail in each of the books chapters.Following this introduction, A Global Framework for Managing Complexity

    (Part I), the book is structured top-down (as outlined in Table 1.2). Part II,Managing the Complexity of Business Models and Strategy, includes chapterson the following topics: Business Models and Strategy, Complexity Drivers inSustainable Strategies, Complexity in Global Business Strategies, Managing Risk

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    14

    Table 1.2 Overview of Featured Case Studies

    Part/topic Chapter Name of case study (and case number,where applicable)

    Industry

    Part II:Managing the

    Complexity of

    the Business

    Models and

    Strategy

    2 BusinessModels and

    Strategy

    CANDO SE: Strategy Formation andImplementation in Complex Environments

    (Authors: Alexander Schwandt, Christoph

    Nedopil and Ulrich Steger)

    Retail

    3 Complexity

    Drivers in

    Sustainable

    Strategies

    Hindustan Lever: Leaping a Millennium

    (Authors: Wolfgang Amann, Aileen Ionescu-

    Somers and Ulrich Steger)

    Abridged from Case Numbers: IMD 3-1073,

    IMD-2-0122, IMD-2-0123, IMD-2-0124

    Consumer

    goods

    4 Complexity

    in GlobalBusiness

    Strategies

    Lufthansa AG: Going Global, but How to

    Manage Complexity? (Authors: Simon Tywuschik, Christoph

    Nedopil, Ulrich Steger)

    Abridged from Case Number: IMD-3-1746

    Airline

    5 Managing Risk Jack Millers Challenging Risk Assessment

    (Authors: Christoph Nedopil, Ulrich Steger)

    Abridged from Case Number: IMD-3-1803

    Retail

    6 Partnerships

    and Alliances

    European Auditing and Financial Services,

    Inc. (EAFS): Leaping Forward or Sliding

    Backward? (Authors: Wolfgang Amann,

    Jochen Brellochs, Ulrich Steger)

    Case Number: IMD-3-1552

    Accounting

    and financial

    services

    Part III:

    Complexity

    and the

    Organization

    7 Complexity

    and the

    Organization

    Rebuilding ABB

    (Authors: Tatiana Zalan, Vladimir Pucik)

    Case Number: IMD-3-1797

    Equipment

    8 Corporate

    Governance

    The Failure of Corporate Governance at

    UBS

    (Authors: Christoph Nedopil, Ulrich Steger)

    Case Number: IMD-3-2003

    Banking

    9 Subsidiary

    Management

    Pharmamed and Fluvera: When Subsidiary

    Management Gets out of Control

    (Authors: Jochen Brellochs, Christoph

    Nedopil, Ulrich Steger)

    Case Number: Abridged from IMD-3-1706

    Pharmaceutical

    10 Project

    Management

    Global Diesel Engine Project: Where Are

    the Simplifiers for the Overwhelming

    Complexity?

    (Authors: Christoph Nedopil, Wolfgang

    Amann, Ulrich Steger)

    Case Number: IMD-3-1742

    Automotive

    Part IV:

    Business

    Functions and

    Their Inherent

    Complexities

    11 Marketing in

    a Complex,

    Global

    Environment

    Disneyland Resort Paris: Mickey Goes to

    Europe

    (Authors: Karsten Jonsen, Martha Maznevski)

    Case Number: IMD-4-0280

    Entertainment

    continued

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    Table 1.2 continued

    Part/topic Chapter Name of case study (and case number,where applicable)

    Industry

    12 Supply ChainManagement:

    The Backbone

    of Complex,

    Global-Acting

    Organizations

    Sustainable Agriculture in Nestls SupplyChain (Authors: Heike Leitschuh-Fecht,

    Ulrich Steger and Aileen Ionescu-Somers)

    Case Number: IMD-2-0106

    Food

    13 Management

    of IT and

    Technology

    The ONE Platform Project for Chai-Bank

    (Authors: Christoph Nedopil, Ulrich Steger)

    Banking

    14 Human

    ResourcesManagement

    The War for Management Talent in China

    (Authors: Rebecca Chang, William Fischer)Case Number: IMD-3-1876

    General

    15 Innovation

    Management

    Innovation at the LEGO Group

    (Authors: Rob Crawford, David Robertson)

    Case Number: IMD-3-1978

    Toys

    Part V:

    The People

    Factor and

    Managing

    Crises

    16 Leadership,

    despite

    Complexity

    Carnival in Rio: Homicide or Suicide?

    (Authors: Christoph Nedopil, Ulrich Steger)

    Automotive

    17 Complexity

    and

    Stakeholders

    Transforming the Global Fishing Industry :

    The Marine Stewardship Council at Full Sail

    (Authors: Alexander Nick, Oliver Salzmann,Ulrich Steger, Aileen Ionescu-Somers)

    Case Number: IMD-2-0083

    NGO

    18 Complexity in

    a Crisis

    Murphys Law and the Crisis at Jurassic Oil

    Company

    (Authors: Richard M. McEarlean Jr, Ulrich

    Steger)

    Case Number: IMD-2-0076

    Oil

    and Partnerships and Alliances. Part III, Complexity and the Organization looksat different organizational functions, such as the organization (co-authored with

    Alexander Schwandt), corporate governance, subsidiary management and projectmanagement. Part IV, Business Functions and Their Inherent Complexitiesaddresses managing the complexity of different business functions, such as mar-keting and supply chain management: The Backbone of Complex, Global-ActingOrganizations (co-authored with Alexander Schwandt and Thomas Rappl),Management of IT and Technology, Human Resources Management (co-authored

    with Karsten Jonsen) and Innovation Management (co-authored with SebastianGlende). Then, in Part V, The People Factor and Managing Crises, the chaptersare concerned with: Leadership, despite Complexity, Complexity and Stakeholdersand Complexity in a Crisis. Managing Complexity, In Summary, Part VI of thebook, reviews the authors findings and provides some personal insights into man-agerial implications, which the reader can take away and put to use.

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    16 MANAGING COMPLEXITY IN ORGANIZATIONS

    The book chapters are all structured in a similar pattern. First, there is ananalysis of what is driving the complexity, since we believe that it is importantto create a common understanding about what propels complexity (most likelythe reader will already have a sense that the respective business function is com-

    plex). Next, is an explanation about how its possible to deal with the complex-ity by elaborating on different complexity simplifiers. Each chapter includes areal case study30that is introduced and discussed according to the previouslydescribed complexity drivers and simplifiers and provides ideas about how toanalyze the case in a management discussion or classroom setting. Table 1.2provides an overview of the case studies used throughout the book.

    At this point, the reader may have already noted that the purpose of the bookis not to interpret the various structures, functions and process of an enterprisein detail. Numerous other books written by much more savvy writers, business-

    men and academics with expertise in all of these topics have done that (we doprovide some ideas for further reading about every function at the end of eachchapter). Instead, we want to help the reader understand the complex relation-ships between the various structures, functions and processes. Most impor-tantly, we wish to provide the manager/leader with the tools to successfullymanage the complexity relevant to his or her work arena.

    1.6 References and further reading

    Appelhans, 1998; Ashmoset al., 2000; Backlund, 2002; Bandte, 2007; Beer,

    1959; Bliss, 2000; Beinhocker, 1997; Boydand Fulk, 1996; Cannonand St JohnCaron, 2007; Chisumand Truvey, 2006; Cilliers, 1998; Daft and Weick, 1984;Dess and Beard, 1984; Drucker, 2001; Duncan, 1972; Encyclopedia Brittanica,2009; Flckiger and Rautenberg, 1995; Friedman, 2005; Grossmann, 1992;Heywood et al., 2007; Keuper, 2004; Killing, 2005; Kirsch, 1998; Kirsch andKnyphausen, 1991; Knyphausen-Aufse, 1995; Krieger, 2001; Lane et al., 2006;Lawrence and Lorsch, 1967; Milliken, 1987; Mintzberg, 1977; Moldoveanuet al., 2004; Peter and Hull, 1969; Richardson and Cilliers, 2001; Robertson,2004; Schlange, 1994; Schumpeter, 1942 (2008); Sharfman and Dean, 1991;

    Steger and Amann, 2008; Steger et al., 2007; Stttgen, 1999; Taleb, 2008;Thompson, 1967; Ulrich, 1984; Ulrich and Probst, 1988; Vesterby, 2008;

    Woodward, 1993; Yates, 1978.

    Notes

    1. Cf. Friedman, 2005. 2. K illing et al., 2005. 3. Steger et al., 2008. 4. Steger et al., 2007. 5. Cf. D. A. Robertson, 2004, p. 72. 6. Cf. Ibid.; M. Stttgen, 1999, p. 16 et seq.; D. Appelhans, 1998, p. 103; H. Bandte,

    2007, p. 77; H. Mintzberg, 1977, p. 327; D. z. Knyphausen-Aufse, 1995, p. 327;D. P. Ashmos et al., 2000, p. 592.

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    HOW TO APPLY OCKHAMS RAZOR 17

    7. Cf. M. Flckiger and M. Rautenberg, 1995, p. 4. 8. D. z. Knyphausen-Aufse, 1995, p. 327. 9. Cf. M. Flckiger and M. Rautenberg, 1995, p. 4.10. Cf. S. Beer, 1959, p. 32 et seq.11. Cf. W. Kirsch and D. z. Knyphausen, 1991; H. Ulrich and G. J. B. Probst, 1988;

    H. Ulrich, 1984.12. Cf. M. Stttgen, 1999, p. 13.13. A non-holonomic constraint is defined as constraint that cannot be described by

    a function of influencing elements. Thus, the constraint not only depends on thedeterminants of a system and time but also on other non-system-inherent factors.

    14. Cf. F. E. Yates, 1978, p. 201; K. A. Richardson and P. Cilliers, 2001, p. 8; V.Vesterby, 2008, p. 91.

    15. Cf. B. Boyd and J. Fulk, 1996, p. 3; M. P. Sharfman and J. W. Dean, 1991,p. 700.

    16. D. Woodward, 1993, p. 5.

    17. Cf. A. Backlund, 2002, p. 3; P. Cilliers, 1998, p. 119 et seq.18. Cf. V. Vesterby, 2008, p. 91.19. Cf. F. Keuper, 2004, p. 16 et seq.; C. Grossmann, 1992, p. 17; L. E. Schlange,

    1994, p. 2 et seq.20. Cf. H. Ulrich and G. J. B. Probst, 1988, p. 58; D. Appelhans, 1998, p. 102 et

    seq.; W. Kirsch, 1998, p. 205; U. Steger et al., 2007, p. 5; C. Bliss, 2000, p. 34;D. Woodward, 1993, p. 7.

    21. Dilemmas occur when there are two or more conflicting legitimate goals that can-not be simultaneously achieved with the given resources.

    22. Schumpeter, 1942 (2008); Schumpeter in this quote was referring to financial

    planning. When looking at the rest of his writing though, it seems pretty certainthat he had a similar view on long-range planning in general.

    23. The Latin original is Pluralitas non est ponenda sine necessitate; Cf. EncyclopediaBritannica, 2009.

    24. Cf. Chisum and Truvey, 2006.25. Cf. Krieger, 2001.26. Killing et al. (2005).27. Drucker, 2001.28. Peters Plateau is the level of personal incompetence that, according to the Peter

    Principle, every employee in a hierarchy tends to reach at some point (Peter and

    Hull, 1969).29. Cf. Taleb, 2008.30. The cases were all successfully tested in IMD executive education programmes

    and selected according to their usefulness for the respective topic from the IMDcase database (also see www.ecch.com). All cases reflect real business situations,although some of the cases needed to be disguised since the topics were too criticaland sensitive to be published in their original form. Also, the case studies selectedfor the book vary in length and depth, to better reflect the complexity of thedifferent topics.

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    382

    Index

    ABB 125, 126, 130, 170

    AD after the disaster 23

    added value 205, 233

    Aircraf t on Ground (AOG) 237

    Aldi 210

    Alignment of Common Goals and

    Behaviors complexity simplif ier 10, 119, 205Alliance of Independent Auditing and

    Financial Services Firms (EAFS) 103

    Amaras Law 257

    Ambiguity complexity driver 5, 7, 9, 27, 41,

    47, 62, 74, 80, 82, 100, 124, 147, 157, 185,

    190, 202, 211, 236, 255, 277, 288, 328

    Ashbys Law of Requisite Variety 10, 12, 85,

    98, 126

    Bandwagon effect 182, 257, 327

    BC before the crisis 23, 30, 32, 79

    bell curve 85, 289

    below the line marketing

    Birthday Present Syndrome, the 256

    Black Swan Theory, the 13, 84, 87

    burnout, burnout zone 68, 87

    business level strategies 27

    business models 105, 111, 112

    C-levels (chiefs, such as CEO, COO, etc.) 103

    channel length 209, 210

    chief information off icer (CIO) 258

    Cirque du Soleil 29

    Cloud computing 261

    Collaborative Planning, Forecasting and

    Replenishment (CPFR) 241

    collateralized debt obligations (CDOs) 163

    collective intelligence 254

    Common Goals and Behaviours complexitysimplif ier 10, 12, 119, 191, 205, 214, 258,

    275, 313

    Complexity Drivers: Diversity,

    Interdependence, Ambiguity, Fast

    Flux 130, 188, 313

    Complexity Simplifiers: Alignment of

    Common Goals and Behaviours, Focus,

    Decentralization and Standardization of

    Core Processes 10, 238, 313

    complexity, market-driven 126, 152, 313

    complexity, organization-driven 127, 151

    complexity, types of: Apparent, Detail,Dynamic, Inherent 6

    compound annual growth (CAGR) 196

    contract manufacturing organizations

    (CMOs) 92

    contract research companies (CSOs) 91

    core competencies 41, 92, 99, 121

    core functions 260

    core processes 10, 12

    corporate social responsibility (CSR) 48, 49, 50

    corporate sustainabil ity (CS) 22, 45

    cost leadership 27, 38, 45

    cost structure 70, 111, 262

    costbenefit analyses 272

    costbenefit ratio 210

    cost-driven 28

    cost-efficient 239

    countercyclical 354

    creative destruction 9, 21, 29

    cross-border 58, 115

    cross-business 195

    cross-functional 175

    cross-geographic 195

    cross-shareholding 99

    customer relationship management systems

    (CRM) 253

    cybernetics 98

    DAT model (three central dimensions of

    complexity, by Woodward in 1993) 5Decentralization 10, 11, 12, 49, 64, 76, 87,

    96, 103, 128, 174, 193, 215, 260

    Decentralization and Standardization of Core

    Processes complexity simplif ier 10, 12

    Deregulation 65, 133

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    INDEX 383

    DIAF acronym for complexity drivers of

    Diversity, Interdependence, Ambiguity and

    Fast Flux 205, 313, 316, 347Diversity complexity driver 5, 7, 24, 40, 59,

    73, 80, 98, 112, 123, 147, 155, 171, 189,

    202, 208

    earnings before interest and taxes

    (EBIT) 138, 141

    easyJet 26, 66

    effective strategy, keys to: appropriateness,

    desirability and feasibility 25, 66

    Electronic Data Interchange (EDI) 241

    end products 288

    enterprise resource planning (ERP) 253

    Equator Principles 327, 344

    European Medicines Evaluation Agency(EMEA) 92

    European Union (EU) 92, 211

    Fast Flux complexity driver 7, 9, 13, 28, 33,

    47, 62, 75, 101, 125, 150, 168, 191, 205

    Fast Moving Consumer Goods Industry

    (FMCG) 236

    fat tails 85, 86

    firefighting pattern (seen in bureaucratic

    organizations) 367

    Five Forces (see alsoPorters Five Forces)24, 85

    flag carriers 67

    Focus complexity simplif ier 6, 11, 39, 84,

    103, 129Food and Agriculture Organization, United

    Nations (FAO) 332

    Food and Drug Administration, United States

    (FDA) 92, 182

    Gardner Curve of Innovations 44

    Goldfish Bowl, global 346global strategies 21, 58, 61

    globalization 58, 62, 66

    GlobeGround 99

    Gmail 33, 99

    governance archetypes, in IT: business monarchy,

    IT monarchy, feudal, federal and anarchy 260

    Grameen Bank Initiative 52

    greenfield investments 170

    greenwashing 47, 329

    gross national product (GNP) 67, 329

    heat maps (for risk) 87, 329

    heavy tail 86

    HERMES method 193

    heterarchy 74, 75

    Hindustan Levers (HLL) Project

    Millennium 50

    hub and spoke model 67, 73human capital 270

    human resource management (HRM) 270

    human resources (HR) 12, 82

    information and communication technologies

    (ICT) 291

    information technology (IT) 12, 64, 79

    interdependence complexity driver 8, 25,

    41, 62, 82, 99, 124, 157, 209, 230

    International Accounting Standards 107, 235

    International Air Transport Association

    (IATA) 65

    International Monetary Fund (IMF) 280

    International Organization forStandardization (ISO) 326

    Interoperability 288

    just-in-sequence 237, 239

    just-in-time 349

    Key Performance Indicator (KPI) 8, 87

    key processes 174, 259

    key resources 24, 259

    knowledge management systems 259, 272

    lapdogs 105, 272

    lead users 289, 292

    lead-time 236

    leadership, six core competencies: TakingAuthority, Cooperat ion, Inner Strength,

    Making Connections, Engaging Followers

    and Authenticity 313, 315, 317

    LEGO 295

    life cycle 82, 99, 101, 290

    line organization 193, 290

    long tail 86, 290long-haul 73, 76

    low cost 76, 211, 286

    Lufthansa 65

    mail order 35

    Marine Stewardship Council (MSC) 331

    market pull 287

    market segmentation 208

    market-driven 29, 126

    mash-up 253

    McKinseys 7-S Framework model 26media network business 219

    merger and acquisitions (M&As) 81, 219

    micro-credit 50

    micro-finance 52

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    384 INDEX

    Mintzberg, Henry 84, 85

    Moores Law 256

    multidomestic strategies 122

    multinational enterprise (MNE) 3, 6, 7, 9, 11, 13

    multipoint pricing strategy 211

    Must-Win Battle concept 4, 10, 87Mutually Aided Cooperative and Thrift

    Societies (MACTs) 54

    Nestl 145, 173

    9/11 76, 84, 141

    nine sigma events 86

    no frills 26, 66

    non-captive bank 265

    non-core competencies 233

    non-governmental organizat ion (NGO)

    242, 314North American Free Trade Agreement

    (NAFTA) 321

    Ockham, Wil liam of 3, 5, 7, 9

    Ockhams Razor 9, 10, 11

    Open Innovation 287

    Open Sky Agreement 75, 287

    Organisation for Economic Co-operation and

    Development (OECD) 247

    organization-driven 127, 151

    organization, line 193organization, project-based 193

    organizational architecture 121

    Organizational Commitment Questionnaire

    (OCQ) 102

    Organizational Conflict of Interest(OCI) 102

    Organizational Culture Assessment

    Questionnaire (OCAQ) 102

    original equipment manufacturers

    (OEMs) 139, 197

    over-the-counter drugs (OTCs) 93

    parsimony, law of 10, 92

    pay for performance 76, 92

    payback 51, 92

    peer-to-peer networking 254

    Peoples Republic of China (PRC) 28, 280

    PESTEL (Political, Economic, Social,

    Technological, Ecological and Legal

    forces) 24, 123

    Peter Principle 324, 368

    Peters Plateau (associated with the PeterPrinciple) 11, 17

    phenotype: the four supply chain management

    phenotyes are Efficient, Accurate,

    Responsive and Agile 201, 241

    point of sale 213, 241

    point-to-point connections 67, 75

    Porters Five Forces 85, 123

    power-law distr ibution 85, 86, 123

    price elasticity of demand (PED) 212

    PRINCE2-method 193principle of economy (from Ernst Mach) 10

    PrincipleAgent theory 154

    process-oriented 235

    Project Management Institute (PMI) 193

    project management off ice (PMO) 193

    project-based organization 193

    Ps, 4Ps concept in marketing: Product,

    Pricing, Placement (including distribution),

    Promotion 207

    Ps, 7Ps in marketing: adding to the

    4Ps People, Processes and PhysicalEvidence 207

    pull strategy 210

    pure plays 76

    push strategy 210

    quality 27

    quality goals 7

    quality insurance 114

    quality issues 28

    radio frequency identification (RFID) 255RAMSIS (in the automotive industry) 293

    research and development (R&D) 62, 82, 99,

    103, 129

    retail concentration 209

    return on assets (ROA) 60, 216return on capital employed (ROCE) 60

    return on equity (ROE) 60

    return on sales (ROS) 60

    revenue model 24, 60

    risk management 79, 85, 95

    S-curve 289

    Salamis, Battle of 30

    sales and operations planning (S&OP) 240

    SarbanesOxley Act 254

    Schumpeter, Joseph A., author of the 1942

    book, Capitalism, Socialismand Democracy;

    coined the term creative destruction 9

    SCM supply chain management 206, 232

    secondment 275

    semi-globalization 99

    service-dominant perspective 207Shakti, project 50

    Sky Team 65

    standardization of core processes complexity

    simplif ier 12, 56, 128, 150, 173

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    INDEX 385

    Star Alliance 65

    startup 177

    stock-out 233strategic information alignment (SIA) 254

    strategy 19, 23

    strengths, weaknesses, opportunities andthreats (SWOT) 25, 33

    stringing pearls strategy 82

    subprime crisis 86, 159

    subsidiariesheadquarters, relationship 170

    supersonic 291

    supply chain management (SCM) 206, 232

    Tata Motors 29, 287

    Thanksgiving Turkey Trap 32, 287

    Themistocles 31

    There is No Alternative (TINA) Shellsscenarios about the future 83

    think-tank 331

    360-degree assessments (of capabilities)

    276, 293

    top-down 49, 119

    top-team 156, 195

    transnational strategies 61, 175

    trendsetter 289

    trouble-shouting 241

    under-performance 241unique selling proposition (USP) 48, 241

    United Nations (UN) 326

    universal mobile telecommunications system

    (UMTS) 257unsustainability 43

    upmarket 39

    US dollar (USD) 296

    user-centric 291user-driven 292

    user-driven innovation or user

    integration 291, 292

    V-Modell 193

    value added 66, 75, 109

    value adding information 29

    value at risk (VaR) 193

    value proposition 242, 270

    value system 274

    VDA labels 241

    vertex 85, 241

    War for Talent 270watchdogs 105, 336

    web of firms versus another web pattern 98

    wikis 253

    Work Breakdown Structure (WBS) 193

    work councils 24

    World Commission on Environment and

    Development (WCED) former name

    for the World Council on Economic and

    Developments Brundtland Commission 43

    World Health Organization (WHO) 179

    write-downs 159

    Xerxes I of Persia, King 31

    zero-failure 239Zuckerberg, Mark 293

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