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Extrait de la publication

Managing

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Sea of

Uncertainty

Denis Couillard

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All rights reserved.© Presses internationales Polytechnique, 2006

Revised version, May 2013.

This book may not be duplicated in any way without the express writtenconsent of the publisher.

Legal deposit: 1st quarter 2006 Printed in CanadaBibliothèque et Archives nationales du QuébecLibrary and Archives Canada

ISBN 978-2-553-01150-4 (printed version)ISBN 978-2-553-01663-9 (pdf version)

Library and Archives Canada Cataloguing in Publication

Couillard, Denis

Managing in a sea of uncertainty : leadership, learning, and resources for the high tech firm

Includes bibliographical references and index.

ISBN 978-2-553-01150-4

1. High technology industries - Management. 2. Uncertainty. 3. Strategic planning. 4. Technological innovations - Management. I. Title.

HD62.37.C68 2006 658 C2005-942448-6

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In Memory of Guillaume Couillard de Lespinay (St-Malo 1588–Québec 1663) Shipwright

Pioneer in a new world Alfred Couillard (Montmagny 1860–1920) Master mariner

Alone with his crew against the sea

Pierre Couillard (Montmagny 1928–Montréal 2001) Ph.D. Marine Biology

Searching the common good ahead of his own

En souvenir de Guillaume Couillard de Lespinay (St-Malo 1588 – Québec 1663) Charpentier de marine

Pionnier d'un nouveau monde Alfred Couillard (Montmagny 1860 – 1920) Capitaine au long cours

Seul avec son équipage, face à la mer

Pierre Couillard (Montmagny 1928 – Montréal 2001) Ph.D. biologie marine

À la recherche du bien commun, avant le sien

Acknowledgments Need I say that such integration and creation efforts can only be carried out in collaboration with others. I am grateful to Professor Adrian Ryans and his colleagues from the Richard Ivey School of Business at Western Ontario for eloquently introducing me to many of these powerful concepts. I am also indebted to Jozée Lapierre of Montréal’s École Polytechnique and Bernard Sinclair-Desgagné of HEC Montréal. The diversity of views and sustained encouragement they provided over several months made for a better product–and a better learner. Hugo Tschirky of the Swiss Federal Institute of Technology in Zürich gave me that final push I needed when he advocated for integration of technology management concepts in an article published in 2000 (“On the path of enterprise science: an approach to establishing the correspondence of theory and reality in technology-intensive com-panies”). These professors and the countless academics who studied related domains in the last 100 years provided all the material I needed to complete this work. Jozée Lapierre’s perseverance and the enthusiastic editing team at Presses internationales Polytechnique ensured it would be published and made available to others.

My colleagues at Harris Corporation and more recently at Ultra Electronics afforded me the knowledge to bring these academic concepts closer to reality, hopefully making them accessible to a larger audience. I am particularly indebted to Myriam Martinez of Harris Corporation, Louis Cavanagh of Cisco Systems, and Steven Rochefort of Ericsson LMC for generously contributing some of the most interesting examples used in this book.

These acknowledgements would not be complete without thank-ing my wife Julie Anastasopoulos whose sustained encouragement over the last eight years supported both the birth and the completion of this work. Our children Louis, Nicolas, Sophie and their expected baby brother Lucas should be recognized for having patiently shared some of their quality time with the book.

It is hoped that this integrated view of technology management will help both practitioners and academics who share an interest in this emerging field.

Introduction The idea of this book formed gradually as many of us high tech managers suddenly found ourselves caught in an increasingly rapid spiral of change. Over the last 15 years, new competitors, partners, technologies and virtual teams started to pop-up from everywhere, loyalty and job security became history, and organizational structure change a seasonal activity. With time, the manager’s daily focus became the reconciliation of short and long term objectives, and the capability to choose between managing efficiency and leading change. Questions began sprouting much faster than answers:

• How can an engineering driven company develop a market-based strategy?

• Why develop a strategy if environment and opportunities change faster than that strategy can be executed?

• How can opportunities be chased if resources are not available to address them rapidly?

• How can resources be built and opportunities pursued if the weight of matrix organizations crushes initiative?

With changes in our environment apparently threatening to over-take our capability to adapt, I felt the need to consult with academics. My question for them: how should one try to manage in such uncertain technological environments? I received as many answers as PhDs I listened to. Each field of study – Management, Economics, Marketing, Engineering, Innovation Management and Social Sciences (Industrial Relations and Leadership) – had its own view of the real world. Unfortunately, there is just no simple answer or magical formula for managing in high technology. The reality is as complex as the merging of all these fields of research.

Giving birth to this book, an integration of key technology man-agement concepts, became the only option left to generate answers to all these questions and understand the new business we were in: a business of developing leadership, learning together and dynamically managing resources. Based on these three poles (Leadership, Learning and Resources), this book proposes a simple model (the “Corporate


viii Introduction

Diamond”) to elucidate the inter-relationships between the concepts underlying the management of a department – or an entire corporation. These key technology management concepts are also explained in detail and illustrated with examples taken from the high tech industry. The chapters in this book follow a logical order, and can be assembled into five themes.

Chapters 1, 2 and 3 Developing high tech products and services • Market, technology and competitive uncertainties • Product development • Market orientation

Chapter 4 Learning • Learning teams and communities • Collaboration, innovation and adaptation • Total quality management (TQM) • Information sharing and technologies • Managing knowledge

Chapter 5 Resources • Core competencies and technologies • Human resources and social capital • Alliances

Chapter 6 Leadership • Evolution of structures, networks and virtual teams • Incentives, rewards and leadership development • Values, culture and vision • Value creation • Empowering leaders

Chapter 7 Summary: The Corporate Ship and the Corporate Diamond • Strategy • The Corporation as a ship • Ambidextrous leaders • The Corporate Diamond of asset, product and service creation

Introduction ix

LeadershipChapter 6

Resources Chapter 5

Learning/ Unlearning Chapter 4

Developing Products

and ServicesChapter 3

Foreword

by Prof. Hugo P. Tschirky, Swiss Federal Institute of Technology Zürich

No crystal ball is required to predict safely that innovation competency will continue to be a critical factor distinguishing successful companies from failures. “Innovate or stagnate” is an often used saying. Although this view may well be widely accepted, the number of companies with sustained innovative growth is quite limited. Noteworthy examples of such firms include 3M, Procter & Gamble and Canon.

According to a recent survey by Accenture, CEOs regard inno-vation as critical to business success. Whereas finding innovative ideas does not seem to be a big problem, turning those ideas into business results appears to be the primary managerial challenge. Only one in ten confirmed that their company excels at innovation. On the other hand, companies with innovation leadership “. . . have a clear innovation strategy and a culture that encourages innovation, spend more on R&D, have formal processes to evaluate ideas, measure innovation, and use external resources for both idea generation and implementation.”

This survey makes a significant point: including issues of com-pany culture among the success factors of innovation competency reveals an awareness of technology and innovation management which takes innovativeness far beyond mastering “innovation techniques” in the narrow sense. It reflects a holistic and integrated view of coping with technological change consistent with the paradigm shift “from managing technologies to managing innovation-driven enterprises.”

Textbooks that follow this trend are still quite limited in number. On the one hand, virtually all publications on general management lack adequate reference to today’s new company reality characterized by technology and innovation. On the other, the majority of current publi-cations in the field of technology and innovation management are miss-ing the holistic company perspective.


xii Foreword

One reason for the lack of leading publications on innovation-driven companies is the fact that most general management textbooks originate in universities with no background in technology. Another is that works on technology and innovation management are often pro-duced by technology-oriented academic institutions that limit their management research and education to departments such as engineer-ing management or technology and innovation management.

Besides an obvious animadversion on academic institutions for not focusing on the current reality of a growing majority of businesses, this situation is very frustrating for management practitioners. For one thing, they must urgently and quickly make concrete technology and innovation decisions for their companies. This involves deciding on solutions that integrate multidisciplinary knowledge relating to the reality of their particular company. For another, they find numerous publications dealing singly with the functional aspects of management and must therefore create their own meaningfully integrated “knowl-edge units” to aid in business decision making.

Universities commonly “produce” primarily “atomized” knowl-edge rather than “knowledge units” useful for practical problem solv-ing. However, since the true meaning of “university” goes back to the Latin unus and versus connoting “turning into unity,” such institutions might be better described as “diversities.” They may someday become true “universities,” after enough problem-oriented interdisciplinary research projects are conducted in close collaboration with appropriate companies reflecting today’s business reality.

Denis Couillard’s book is one of a still small number dealing with the paradigm shift in question. It is focused on high tech companies highly sensitive to technological change and the need to excel at innovation. First, its main focus is on current and foreseeable manage-ment constraints and opportunities in high tech environments and the wide variety of social, human and technology resources available. Second, a significant part of the book is devoted to company culture, i.e., values and value creation, individual and organizational learning, formal and informal communication, empowerment, rewards and above all leadership. The decision to include the “leadership” notion in the book title is very well taken, since the term is often synonymous–and for good reason–with “cultural management,” representing the highest art of management. Finally, two concepts in this book project a comprehensive vision of key messages to the management practitioners of high tech companies: the high technology “Corporate Ship” and the

Foreword xiii

“Corporate Diamond” of competence-based, learning organizations. An especially helpful aspect is the book’s frequent reference to concrete examples from management practice.

As a whole, this work is a remarkably well executed compendium showing management practitioners of technology-based companies how to cope effectively with the challenges of technological change. It is an excellent reference work for scholars and students of technology and innovation management who believe it important to deal with integrating field-tested management concepts.

Prof. Hugo P. Tschirky, PhD, DBA


Table of Contents Acknowledgments ................................................................................. v Introduction .......................................................................................... vii Foreword ............................................................................................... xi List of Tables and Figures ................................................................... xxi Chapter 1 Managing in high tech environments ........................... 1 1.1 The growing importance of technology ......................................... 1 1.2 Systematic downsizing or repetitive acquisitions do not provide

for sustainable competitive advantage ........................................... 2 1.3 The need to integrate technology management fields of study ...... 4 1.4 Integrating technology management theory for industrial uses ..... 6 Chapter 2 The unique characteristics of high tech markets ......... 9 2.1 Market and technological uncertainty ............................................ 9 2.2 Technology cycle and competitive volatility ............................... 10

2.2.1 The technology cycle ...................................................... 10 2.2.2 Competitive volatility and increased intensity ................ 11

2.3 Customer behaviour .................................................................... 13 2.4 High tech markets: Summary ....................................................... 14 2.5 The unique characteristics of high tech companies ...................... 15 Chapter 3 The challenge of developing new products and services in a high tech market .............................. 17 3.1 The standard process of developing new products and services .. 17 3.2 Typical marketing activities in the traditional new product

development process .................................................................... 18 3.3 Importance of having a market orientation for the new product

development process .................................................................... 20 3.4 What does “market orientation” mean?........................................ 22 3.5 Conventional market research techniques to generate a product

definition: The dangers of being customer focused ..................... 24 3.6 Developing successful innovative products in high tech

environments ................................................................................ 26

xvi Table of Contents

Chapter 4 Survival skills in uncharted waters: Learning and innovation .............................................. 29 4.1 Developing the firm’s capability to extract knowledge

from the marketplace .................................................................... 29 4.2 The growing importance of learning ............................................ 32 4.3 Learning versus knowledge creation ............................................ 35 4.4 Knowledge that builds core competencies ................................... 38 4.5 Cross-functional teams versus learning teams:

Communities that build knowledge .............................................. 42 4.5.1 Communities that build knowledge ................................. 42 4.5.2 Creative abrasion and managing chaos ........................... 44 4.5.3 A common language ........................................................ 46 4.5.4 Fostering rich personal interaction .................................. 47 4.5.5 Team leadership............................................................... 47 4.5.6 Supportive environment .................................................. 49

4.6 Innovation as a learning mechanism ............................................ 50 4.6.1 The virtues of innovation ................................................. 50 4.6.2 Problem solving and TQM .............................................. 52 4.6.3 Lead users as lead innovators .......................................... 55 4.6.4 The marketplace as an R&D lab

and the empathic designer ............................................... 57 4.6.5 Experimentation .............................................................. 59 4.6.6 Seeing or creating the future ............................................ 63 4.6.6.1 Forecasting markets .......................................... 63 4.6.6.2 Forecasting technology .................................... 67 4.6.6.3 Seeing the future............................................... 69

4.7 Learning from best practices ........................................................ 70 4.8 Learning from past experience ..................................................... 71 4.9 Importing knowledge .................................................................... 72 4.10 Dynamic environments require unlearning skills ......................... 73 4.11 Capturing, transferring and using knowledge ............................... 76

4.11.1 The role of information technologies (IT) ....................... 76 4.11.1.1 The role of IT varies with knowledge type .... 76 4.11.1.2 IT supports knowledge creation, storage

and retrieval, sharing and use ......................... 77 4.11.2 Transferring knowledge ................................................... 80

4.11.2.1 A significant issue .......................................... 80 4.11.2.2 Successful transfer mechanisms ..................... 81 4.11.2.3 Informal networks fuel the sharing

and utilization of knowledge .......................... 84 4.11.3 Barriers to knowledge transfer and use ........................... 85

4.11.3.1 General concepts ............................................ 85

Table of Contents xvii

4.11.3.2 Barriers to R&D and marketing integration ... 87 4.12 Graphical summary: The Learning Organization ......................... 90 Chapter 5 Being prepared for the voyage: The company resources ............................................... 91 5.1 Core competencies ....................................................................... 91

5.1.1 Strategic thinking ............................................................ 91 5.1.2 Resources and core competencies ................................... 92 5.1.3 Products: Short-lived testimonies of the firm’s

evolving competencies .................................................... 94 5.1.4 Wellsprings of products and services .............................. 96 5.1.5 Access to other markets .................................................. 98 5.1.6 The dynamic life of the firm’s core competencies .......... 99 5.1.7 Path dependency and core rigidities challenge

the building of new competencies ................................. 101 5.1.8 Identifying current and future core competencies ......... 103 5.1.9 Nurturing and building competencies ........................... 107 5.1.10 Transferring competencies ............................................ 110

5.2 Technology as a resource ........................................................... 111 5.2.1 Technology and core competencies .............................. 111 5.2.2 The technology life cycle .............................................. 112 5.2.3 The management of technologies .................................. 114

5.3 Firm and resource flexibility ...................................................... 115 5.4 The management of human resources ........................................ 117

5.4.1 People as the most valuable resource ............................ 117 5.4.2 The human resources department as a resource

producer ........................................................................ 120 5.4.3 Strategic human resource management ......................... 121 5.4.4 Talent management systems ......................................... 123 5.4.5 Social capital in the organization .................................. 124

5.5 Alliances and partnerships as resources ..................................... 125 5.5.1 Outsourcing ................................................................... 125 5.5.2 Alliances and partnerships ............................................ 127 5.5.3 On acquisitions .............................................................. 128 5.5.4 Strategic alliances to join regulatory and technology

diffusion resources ........................................................ 129 5.5.5 Strategic alliances to team up with complementary

skills .............................................................................. 130 5.5.6 Strategic alliances that build competencies ................... 131 5.5.7 Strategic alliances that create knowledge

and hybrid products ....................................................... 132 5.5.8 Network and cellular organizations ............................... 134


xviii Table of Contents

Chapter 6 Getting there: Company leadership, structure and collaboration mechanisms .................................. 139 6.1 Leading or managing: Change or continuity .............................. 139 6.2 The Retreat of the Ten Thousand, 401 B.C. ............................... 141 6.3 Leadership in the learning organization ..................................... 142 6.4 Organizational structure ............................................................. 145

6.4.1 The levelling of organizational pyramids ...................... 145 6.4.2 The need for new organizational structures ................... 148 6.4.3 The challenges of emerging organizational structures .. 151 6.4.4 Using teams against all odds ......................................... 153

6.4.4.1 The network organization ............................... 153 6.4.4.2 Virtual teams .................................................. 154

6.4.5 Devising the management structure for an organization of task forces ................................................................. 157

6.4.6 The Age of the Network ................................................ 159 6.4.7 Growing a web out of a pyramid ................................... 161

6.5 Managing chaos: Alignment, linking and sharing mechanisms . 163 6.5.1 Crossing boundaries ...................................................... 163 6.5.2 Rewards, incentives and recognition for knowledge

workers .......................................................................... 164 6.5.3 Incentives that kill learning ........................................... 166 6.5.4 Career planning and leadership development for knowledge workers .................................................. 170 6.5.5 Creating shared language and convergent thinking ....... 172 6.5.6 Creating a unifying vision in an organization

of knowledge workers ................................................... 174 6.5.7 Strategic added-value statements .................................. 175 6.5.8 Maintaining creative tension to transform the organization ............................................................. 176 6.5.9 Culture ........................................................................... 178 6.5.10 Core values .................................................................... 183 6.5.11 From values to products ................................................ 184

6.6 Leadership in the hierarchy ........................................................ 186 6.6.1 The illusion of leadership in the multinational corporation ..................................................................... 186 6.6.2 Where senior leadership can make a difference ............ 188 6.6.2.1 The challenge ................................................... 189 6.6.2.2 Reinforcing the organization’s culture and values ......................................................... 190 6.6.2.3 Actions that support a learning culture ............. 192 6.6.3 The middle manager ...................................................... 194

Table of Contents xix

Chapter 7 The Corporate Ship and the Corporate Diamond .. 197 7.1 Strategy the creative way ........................................................... 197 7.2 Planning for market opportunities .............................................. 198

7.2.1 Strategic market planning for short/medium-term opportunities .................................................................. 198

7.2.2 Strategic planning process to compete for the future .... 201 7.2.3 Organizational strategy and knowledge management ... 203

7.3 The Corporate Ship .................................................................... 204 7.4 The ambidextrous organization .................................................. 205

7.4.1 Juggling with conflicting priorities ............................... 205 7.4.2 Parallel organizations .................................................... 208

7.5 The Corporate Diamond ............................................................. 210 7.5.1 Strategic management for the high tech firm ................ 210 7.5.2 The asset creation triangle ............................................. 211 7.5.3 The product and service creation triangle ..................... 212 7.5.4 Toward a sustained competitive advantage ................... 213

Chapter 8 Conclusion ................................................................... 215 Bibliography ....................................................................................... 219 General index ...................................................................................... 239 Index of firms and organizations ........................................................ 247


List of Tables and Figures

Table 2.1 The sources of market and technological uncertainty (Moriarty and Kosnik, 1989)

Table 3.1 Aspects of the market-oriented firm Table 4.1 A summary of definitions Table 4.2 Typical teams and communities in an organization

(Wenger and Snyder, 2000) Table 4.3 TQM problem solving process as implemented at Harris

Corporation (Microwave Communication Division) in 1989

Table 4.4 Implication of cognitive science research on mentoring (adapted from Swap et al. 2001 and Harris MCD’s experience)

Table 5.1 Examples of core competencies Table 5.2 Emerging functions of the knowledge era Table 6.1 The manager and the leader, as seen by Bennis (1994) Table 6.2 Organizational forms: N-form is “in”, M-form is “out”

(adapted and expanded from Hedlund 1994) Table 6.3 The contribution of the four organizational forms

Figure 2.1 The Technological Cycle (Anderson and Tushman, 1990) Figure 2.2 The Technology Adoption Life Cycle (Moore 1991) Figure 3.1 Traditional product development process Figure 3.2 The activities of the market-oriented firm (Mohr, 2001) Figure 3.3 Market orientation is a subset of the wider concept of

learning organization Figure 3.4 The challenge of developing new products and services in

a high tech market: summary Figure 4.1 The creation of new knowledge as described by Nonaka

(1991) Figure 4.2 Innovation, generator of new knowledge for the learning

organization Figure 4.3 Gartner's “Hype Cycle” for Wireless Networking, 2004 Figure 4.4 Learning mechanisms in a learning organization

xxii List of Tables and Figures

Figure 5.1 Products and services as the short-lived end results of a continuous learning and competency building exercise

Figure 5.2 Innovation and market orientation Figure 5.3 The firm’s “virtual circle” of leveraging and building

competencies (Sanchez and Thomas, 1996) Figure 5.4 Identifying core competencies: the value chain of British

Telecom and France Telecom in the early 1990s (Viardot, 1998)

Figure 5.5 Identifying core competencies: A view of the competence pyramid (Walsh and Linton, 2001)

Figure 5.6 The S-curve of the technology life cycle (Twiss, 1980) Figure 5.7 Technology succeeding technology Figure 5.8 From learning organization to competencies to products Figure 5.9 Selective outsourcing at Cisco Systems (2003) Figure 5.10 Possible alliance partners along the supply chain (Mohr,

2001) Figure 6.1 Buckminster Fuller’s geodesic dome Figure 6.2 The spider’s web organization (Quinn, Anderson,

Finkelstrein, 1996) Figure 6.3 The four ages of organization (Lipnack and Stamps, 1994) Figure 6.4 Learning, enabler of a successful competency-based

strategy Figure 6.5 The company’s mind and body: from values to products Figure 7.1 “Winning Market Leadership” planning process (Ryans et

al., 2000) Figure 7.2 Harris Corporation’s strategic planning process in 2002 Figure 7.3 The high-technology Corporate Ship Figure 7.4 The Corporate Diamond of the competence-based,

boundaryless, learning organization

Chapter 1

Managing in High Tech Environments

1.1 THE GROWING IMPORTANCE OF TECHNOLOGY

According to the U.S. Department of Commerce,1 technical progress has been the single most important factor in generating sustained economic growth over the past 50 years. Government statistics show that technology intensive markets are growing at twice the growth rate of the economy. In 1996, information technology industries alone accounted for 33% of U.S. GNP growth.2 Technology is the foundation of today’s fastest growing companies, providing for high-wage jobs3 and growth in every major industrialized nation.

Understanding that new business development and sustainable competitive advantages flow directly from the growth of new technol-ogies, companies, governments and universities have recently been focusing on ways to better manage this resource.

1 Technology in the National Interest (1996), Committee on Civilian Industrial

Technology, Technology Administration, U.S. Department of Commerce (accessed January 7, 2002; www.ta.doc.gov/reports).

2 Mandel, M. (1997), “The new business cycle,” Business Week, March 31, p. 58-68. 3 While high technology industries accounted for less than 12% of employment in

California, Massachusetts and Virginia, they accounted for about 20% of the total payroll for all industries in these states. See The Dynamics of Technology-based Economic Development – Second Edition (2001), Office of Technology Policy, U.S. Department of Commerce (accessed January 7, 2002; www.ta.doc.gov/reports).

2 Chapter 1

1.2 SYSTEMATIC DOWNSIZING OR REPETITIVE ACQUISITIONS DO NOT PROVIDE FOR SUSTAINABLE COMPETITIVE ADVANTAGE

In the 1990s, management teams in high technology companies were under pressure from shareholders to boost returns to unprecedented high levels. In that context, the traditional management response to low growth, declining market share or shrinking margins had been restruc-turing or, more specifically, downsizing. In a 1994 article, G. Hamel and C.K. Prahalad called this generalized behaviour “denominator management” and described it as “an accountant’s short path to asset productivity”:

ROI (or return on net assets or return on capital em-ployed) has two components: a numerator – net income – and a denominator – investment, net assets, or capital employed (in a service industry, a more appropriate denominator may be head count). Managers know that raising net income is likely to be harder than cutting assets and head count. To increase the numerator, top management must have a sense of where new oppor-tunity lies, must be able to anticipate changing cus-tomer needs, must have invested in building new compe-tencies, and so on. So under intense pressure for a quick ROI improvement, executives reach for the lever that will bring the fastest, surest result: the denominator.4

Although restructuring exercises can be an opportunity to shed under-performing resources, ballooning overhead or defocusing businesses, they rapidly become a way to sell market share and an organization’s future when used single-mindedly. The most productive company in the world will achieve little revenue with demoralized employees and executives focused on cutting costs instead of building the firm’s competencies and ability to recognize future opportunities.

4 G. Hamel and C.K. Prahalad (1994), “Competing for the Future,” Harvard Business

Review, July/August, p. 125.

Managing in High Tech Environments 3

More recently, the temptation has also been great to boost the bottom line (thus boosting share price) simply by using the firm’s capital to acquire companies showing positive earnings. Similarly, many have not resisted the temptation to acquire highly valued (if not profitable) innovative start-ups. In a prophetic view of what was to happen to the acquisition-crazed telecommunications industry in 2000, Mark C. Scott wrote in 1998:

The problem with basing a growth strategy on acqui-sition is that the only way to grow tends to become to acquire. Sooner or later the good targets will be exhausted, price will become inflated and, as with any narcotic, things go wrong. Long-term shareholder value will be eroded. Unless a firm is able to produce growth out of its core assets, acquisitions or no acquisitions, it will be in trouble.5

Widespread over-confidence in global market demand for the new WDM6 fibre optic market – which fuelled frantic spending of free-flowing speculative cash – was probably the single most important factor in the industry’s stock market collapse in 2001. And companies such as Nortel, Lucent and Cisco that had aggressively focused their growth on acquisition were the worst hit.

Between September 2000 and September 2001, Nortel Networks shares plummeted from CAN$110 to CAN$7.7 Much of the company’s $19.4 billion loss in the second quarter of 2001 came from the write-downs of overpriced acquisitions.8 Cisco laid off 8,500 employees in

5 Scott, M.C. (1998), Value drivers – The Manager’s Framework for Identifying the

Drivers of Corporate Value Creation, John Wiley & Sons Ltd., p. 170. 6 Wavelength Division Multiplexing or WDM is a fibre coupling technology allowing

optical wavelengths to be combined onto a single fibre, drastically expanding the throughput capacity of a single fibre span.

7 In the same period, Lucent Technologies shares went from US$40 to $6; Cisco Systems’ from US$64 to $13.

8 “America’s high tech companies – Beyond the Valley,” The Economist, July 28, 2001, p. 62. Between January 1998 and January 2000, Nortel spent more than $15B to acquire companies with IP (Internet Protocol) and CRM (Customer Relationship Management) competencies; see Y. Barcelo (2000), “La révolution permanente chez Nortel,” Commerce Magazine, Montreal, February 2000.

Chapter 2

The Unique Characteristics of High Tech Markets

2.1 MARKET AND TECHNOLOGICAL UNCERTAINTY

The past 25 years have seen several attempts to clarify the distinctive characteristics of high technology markets. Moriarty and Kosnik (1989) proposed two fundamental characteristics to differentiate between high technology marketing and traditional marketing: high technology marketing can be characterized by (a) strong market uncertainty and (b) strong technological uncertainty (Table 2.1). Shanklin and Ryans shared this vision upon noting in 1984 that the high technology industry was characterized by rapid technological changes and a revolution or a creation of markets.

Table 2.1 The sources of market and technological uncertainty (Moriarty and Kosnik 1989)

Sources of Market Uncertainty Sources of Technological Uncertainty

1. What needs might be met by the new technology?

1. Will the new product work as promised?

2. How will needs change in future? 2. Will the delivery timetable be met?

3. Will the market adopt industry standards?

3. Will the vendor give high-quality service?

4. How fast will the innovation spread?

4. Will the product or service have side effects?

5. How large is the potential market?

5. Will the new technology make ours obsolete?

10 Chapter 2

To better comprehend the challenges of high technology market-ing, we complete Moriarty and Kosnik’s definition with two further traits, which we develop in the next sections: competitive volatility and customer confusion.

2.2 TECHNOLOGY CYCLE AND COMPETITIVE VOLATILITY

2.2.1 The technology cycle Trying to determine the stage of a product’s life cycle can be very difficult in a high technology environment. The growth of high tech products is often swift and unlike that of non-high tech products. Several authors have suggested that a technology life cycle which tracks the sales of a technology rather than a product may be of more strategic use, helping to understand how the firm’s own product history fits into the overall life of a technology (MacInnis and Heslop 1990). Shanklin and Ryans (1984), Anderson and Tushman (1990), Davies and Brush (1997) and Christensen, Suarez and Utterback (1998) demonstrate the strategic importance of technology cycles and reveal the existence of a window of opportunity14 for successful entry into an emerging business.

Based on earlier work by Abernathy and Utterback (1978), Anderson and Tushman (1990) modelled a four-stage technology cycle (Figure 2.1) in which a dominant product design emerges after a period of turbulence initiated by the appearance of technological discontinuity. Discontinuities challenge the leadership of accepted product paradigms and open an era of competition among designs offered by competing firms. After considerable trial and error in the marketplace, one design or a narrow class of designs begins to emerge as the most promising, thus giving birth to a new accepted standard or paradigm (e.g., the DC-3 airplane design, the use of quartz movements in watches). A period of incremental product change follows during which the firm’s strategy gradually evolves to one of demand-side 14 In studying the U.S. hard disk drive industry between 1975 and 1990, C.M.

Christensen, F. Suarez and J.M. Utterback (1998) found that success and survival were maximized when firms entered the market just before the apparition of a dominant design. Too early an entry was dangerous (contrary to the popular notion of first entrant or pioneer’s advantage) while barriers to entry rapidly appeared after a dominant design emerged.

Chapter 3

The Challenge of Developing Innovative Products

and Services in a High Tech Market

3.1 THE STANDARD PROCESS OF DEVELOPING NEW PRODUCTS AND SERVICES

The most visible show of a company’s know-how is its products and services. To understand how organizational practices and proper leader-ship can make new products successful is to understand the source of a company’s success.

Most companies today use phase based (or stage-gate) systems for the development of new products and services. A decision gate follows each significant phase of the development process. At each gate, decisions are made regarding project continuation and the project mandate is updated if project changes so require. The first version of the mandate is created at the end of the conceptualization phase (typically at “Gate 1”) to serve as an ongoing control and coordination mechanism. Both IEEE (IEEE standard 1074) and ISO (ISO 12207) have documented this “Life Cycle Process” (Figure 3.1).

While most agree that the industrial context might very well change in the course of the development program, such a formal plan-ning process is required to prevent chaos during product development. It basically provides a mechanism to control project technical spec-ifications, cost and timetable. In high tech markets, however, product development plans would ideally remain flexible enough to allow for improvisation should unforeseen circumstances arise. To shorten product development cycle time, several of the process phases will typically overlap in time.

18 Chapter 3

Figure 3.1 Traditional product development process

3.2 TYPICAL MARKETING ACTIVITIES IN THE TRADITIONAL NEW PRODUCT DEVELOPMENT PROCESS

We described above the traditional phase-based approach to new-product and service development. In this process, a strong market focus is typically felt in two or maybe three of the five product development phases.

In the Concept phase (Phase 1), market research is conducted to identify:

Gate 3: Prototype

Phase 1: Concept

Gate 1: The product proposal is presented (1st version of mandate)

Phase 2: Definition

Gate 2: Technical and financial feasibility study

Phase 3: Design

Phase 4: Validation (the test of reality)

Gate 4: Launch

Phase 5: Transfer to Operation

Gate 5: Analyzing product performance (post-mortem)

Gate 0: New product ideas are filtered


The Challenge of Developing Innovative Products and Services 19

• Viable market segments16 followed by target market or markets • Customers and potential market size • The positioning of the new product (target user group, modular

versus optimized design etc.) • The needs it would fill • The barriers to market entry (regulatory barriers, competition, etc.) • The basic characteristics of the required marketing mix (product,

place, price and promotion)

In the following phase of product definition (Phase 2), market knowl-edge is effectively translated into required product specifications. Many companies today use some variant of QFD (Quality Function Deploy-ment), originally developed at Mitsubishi in 1972 and piloted in North America in the late 1980s. QFD is a method used to link critical cus-tomer attributes to specific design parameters. Working as a team, design engineers and marketers first identify critical customer attributes and establish their relative weight. Once the customer requirements have been sufficiently assimilated, the team establishes the critical design parameters that drive system performance. The next step is to evaluate the relationship between the previously identified customer attributes and these technical parameters.

This work, known as filling the “House of Quality,” is completed when customer perceptions are documented and the interactions be-tween design parameters are established. The House of Quality is actu-ally a framework that provides for product specifications to be estab-lished and negotiated in an informed, effective manner through the solid interaction of marketing and R&D personnel (Clark and Wheelwright 1993).

Lastly, in the Validation phase (Phase 4), the product prototype and all the assumptions that stood behind it are matched against reality in what would ideally be well-managed beta tests. True beta tests would normally be carried out with demanding real customers and sufficient product quantities for a sufficient amount of time. Proper preparation and management of beta tests is critical as their purpose is to gather valuable feedback for critical product modification prior to launch and profitable improvement of the overall development process. 16 Firms should do market segmentation on a regular basis. Viable market segments

meet the following criteria: They are measurable, accessible, substantial, differen-tiable (they respond differently to different marketing mix elements and programs), and actionable (effective programs can be formulated for attracting and serving the market). For more details on this and on Marketing Management in general, see Kotler, P. (2000) Marketing Management: The Millennium Edition, Prentice-Hall.

Chapter 4

Survival Skills in Uncharted Waters: Learning and

Innovation

No matter the industry, a corporation consists of business units with finite life spans: the technological and market bases of any business will eventually disappear. Joseph Bower and Clayton Christensen in “Disruptive technologies: catching the wave,” Harvard Business Review, 1995.

The age-old levers of competition – labor, capital, and land – are being supplemented by knowledge, and the most successful companies . . . will be those that . . . exploit knowledge about customer behaviour, markets, economies, and technology faster and more efficiently than their competitors. Louis V. Gerstner, Jr., Chairman, IBM – quoted by The Conference Board, 2000.

4.1 DEVELOPING THE FIRM’S CAPABILITY TO EXTRACT KNOWLEDGE FROM THE MARKETPLACE

The relevance of developing a firm’s ability to read its external envi-ronment is not new as it relates closely to the establishment of a market oriented company. Shanklin and Ryans (1984), MacInnis and Heslop (1990), Avlonitis and Gounaris (1997), and Ottum and Moore (1997) have all confirmed a direct relationship between a strategic market orientation (i.e., customer and competitor orientation), and corporate success. Gatignon and Xuereb (1997) have demonstrated that the organ-ization must in practice dose and balance the customer, competition and technological focus of its strategy with reference to the environment.


30 Chapter 4

The firm’s market orientation is effectively realized through the imbedding of a marketing focus in all of its functions. One talks here about spreading the seeds of marketing throughout the entire organ-ization as part of its culture rather than about doing a simple integration exercise. In his 1990 book on market-driven strategy, George Day quoted HP’s George Packard expressing this in a provocative sentence:

Marketing is far too important to leave to the market-ing department.

Trilogy Software, one of the largest privately held software companies in the U.S., illustrates this concept. Instead of vesting responsibility for identifying new opportunities in a new-business development group, Trilogy has charged all marketers – and to a large extent all employees – with that responsibility. As part of an entry-level training exercise, for example, one new hire came up with the idea of expanding a core service line by bundling products and targeting a new segment. Instead of reporting to his original assignment when training ended, he joined a team newly assembled to pursue the opportunity, which eventually accounted for 30% of the company’s business (Aufreiter et al. 2000).

Ottum and Moore (1997) spotlight the firm’s general ability to recognize the value of external information, assimilate it and, above all, use it for commercial ends. This capability was defined several years ago as the company’s absorptive capacity (Cohen and Levinthal 1990). An organization can maximize its absorptive capacity by sensi-tizing a large number of potential “receptors” in various company departments to the need for importing pertinent market knowledge18 and by fostering cross-functional teams. For example, when the tech-nology is new and unproven and the market’s needs are unclear, using additional skills and information from sales, manufacturing and field services will help marketing and R&D better manage market and technological uncertainties (Moriarty and Kosnik 1989). Field deploy-ment services and presale system design departments in particular can

18 Mr. Aizawa, VP of R&D at Epson Japan in the 1980s would go as far as telling his

development staff members that “they need to be both an engineer and a marketer in order to be promoted within our firm.” See Imai, K.-I., I. Nonaka, H. Takeuchi, (1985), The Uneasy Alliance – Managing the New Product Development Process: How Japanese Companies Learn and Unlearn, Harvard Business School Press, p. 546.


Survival Skills in Uncharted Waters: Learning and Innovation 31

play an instrumental bridging role, with their unique mix of hands-on technical expertise and close exposure to customers’ applications and needs. In the U.S. military tactical communication market, for instance, General Dynamics field technicians have been known to regularly exceed their contractual terms of reference by observing their cus-tomers, understanding their problems and stepping forward to propose unsolicited solutions. They are significant actors in GD’s business development.

The ability to effectively integrate technological and market demand issues significantly affects the speed, variety and success of product development. This has been called the firm’s integration com-petencies (Fowler et al. 2000). The typical Japanese approach of including product managers, design engineers and R&D engineers (i.e., non marketing personnel) in the search for external information to drive new-product development summarizes the ultimate objective of market orientation for a high tech firm (Czinkota and Kotabe 1990). The ability to use the entire organization to gather, spread and apply new information is instrumental in building the knowledge-creating com-pany described by Nonaka in his key 1991 article. It holds promise for long-term sustainable competitive advantage. Exposing more employees and functions to customers also helps develop a customer bond so broad and deep that it supersedes any one employee and helps drive home the fact that the firm is more than a friendly salesman (Bendapudi and Leone 2001).

As with individuals, organizations need prior knowledge to successfully evaluate, assimilate and tap new knowledge. For assimila-tion to be effective, that prior knowledge must relate closely to the new information, suggesting a significant path dependency effect (Cohen and Levinthal 1990, 1994). The Japanese are well known for their skills at deploying a marketing mindset throughout their organizations. They will use personnel rotations or form mixed R&D-Marketing research teams to allow their employees the opportunity to build a broader base of prior knowledge, thereby establishing significant knowledge absorp-tion capacity in their organizations. Since Cohen and Levinthal and others have focused on R&D activities as the primary builders of absorptive capacity in science-based industries, it has also been suggest-ed that the presence of highly educated people and of more geogra-phically distributed research labs increases the firm’s absorptive capac-ity (Mangematin and Nesta 1999, Voelker and Stead 1999). In other

Chapter 5 Being Prepared for the Voyage:

The Company Resources

5.1 CORE COMPETENCIES

The traditional ‘competitive strategy’ paradigm (e.g., Porter 1980), with its focus on product-market posi-tioning, focuses on only the last few hundred yards of what may be a skill-building marathon. Gary Hamel, London Business School, in Strategic Management Journal, Vol. 12, 1991.

5.1.1 Strategic thinking For 50 years, there have been two fundamentally different approaches to studying the strategic management of the firm.

• The “general management” approach focuses on what good manage-ment and good business policies should be. It addresses internal aspects of the firm, such as leadership, HR management and learning, and assumes that an internally cohesive, well-motivated organization will show superior performance.

• The “industrial organization economics” approach focuses on Indus-try structures and competitive product strategies to explain the firm’s superior performance. This approach studies game theory, strategic groups and value-chains to explain the firm’s strategy in the context

92 Chapter 5

of its external environment. For example, Porter38 followed this tradition with his well-known writings on competitive and posi-tioning strategies in the 1980s.

The latter approach, a product-centered perspective on strategy, is much more helpful for explaining a firm’s current competitive advan-tage than for designing strategies that create future competitive advan-tage. Studies have actually shown that firms that focus on products have struggled to keep up with rapid changes in markets and tech-nology (Fowler et al. 2000).

Sanchez and Heene (1997) proposed that the notion of core com-petencies introduced by Prahalad and Hamel in 1990 offers a vehicle for bridging the internal views of general management and the external focus of the economic school, providing for a unifying model of strat-egy. While a product-centered strategy focuses on developing im-provements to current products, a competence-based strategy focuses on the firm’s ability to consolidate skills and technologies into compe-tencies that empower individual businesses to adapt quickly to changing opportunities (Prahalad and Hamel 1990). By tying in the firm’s collective learning to provide for actionable skills and knowledge and looking at changes in the external environment as opportunities for new types of products and services, core competencies provide long-term strategic advantage.

Competency-based strategies provide competitive advantage for the future by allowing for quick adaptation to changing opportunities.

5.1.2 Resources and core competencies The notion of competencies springs from the older idea that resources are a source of competitive advantage (Penrose 1959). As a result of growing levels of market and technological uncertainties caused by globalization and accelerating technological developments, the external

38 See M. Porter (1980), Competitive Strategy; (1985), Competitive Advantage; (1990),

The Competitive Advantage of Nations, New York: The Free Press.


Being Prepared for the Voyage: The Company Resources 93

environment is too unstable to remain the sole basis of a firm’s strategy for survival and prosperity in future. Interest has therefore shifted away from the well-established product/market approach and turned instead towards a resource- or competency-based view of the firm. The central idea is that competitive advantage is gained through the way in which firms configure and manage their internal resources and that this will increasingly become a major source of difference/advantage between them (Griffiths et al. 1998). While Porter talks about product posi-tioning and competitive analysis, Prahalad and Hamel (1990) focus on portfolio of businesses and portfolio of competencies.

Sometimes called invisible assets (Itami and Roehl 1987) or core capabilities (Leonard-Barton 1995), core competencies have imposed themselves as a concept in both industry and academic circles. Some authors (Walsh and Linton 2001, Marino 1996, Leonard-Barton 1995) distinguish competencies, which are mainly technical in nature, from capabilities, which relate to processes, managerial systems, culture, values and norms. Like Walsh and Linton, we use the term “core competencies” to include both the technical competencies and mana-gerial capabilities of the firm. Because core competencies typically consist of an extended set of interdependent resources, systems and practices, they must be managed as systems.

Not all of a firm’s competencies or abilities are core. Core com-petencies are a result of the long-term collective learning of the organi-zation and can be identified by the following characteristics (Hamel 1994, Prahalad and Hamel 1990):

1. A core competency is an integration of skills and technologies. Leonard-Barton (1995) suggests that a complete definition must also include the managerial and technical systems that exploit these capabilities and the reward, education and value systems that protect and promote them.

2. Core competencies are a product of organizational learning in that they incorporate both tacit and explicit knowledge. They are hard to accumulate.

3. They deliver some kind of functionality that makes a significant contribution to the perceived customer benefits of the end product.


Chapter 6

Getting There: Company Leadership,

Structure and Collaboration Mechanisms

6.1 LEADING OR MANAGING: CHANGE OR CONTINUITY

The cult of efficiency in administrative theory and practice is a modern way of overstressing means and neglecting ends. . . . Leadership goes beyond efficiency (1) when it sets the basic mission of the organization and (2) when it creates a social organism capable of fulfilling that mission. Philip Selznick in “Leadership in Administration – A Sociological Interpretation,” 1957.

We saw in Chapter 4 (Section 4.6.6) that many high tech firms focus on doing the same thing better or more efficiently in an effort to create wealth, while they should instead be creating new wealth by looking at doing better things. Excessive pursuit of efficiency is the enemy of adaptation. Adaptation to major changes requires creating new knowl-edge that is not needed to carry out incremental innovations. Both tacit and explicit knowledge are essential to developing competencies and cannot be acquired quickly by organizations that are perfectly efficient. Rapid adaptation to changes benefits from maintaining a diversity of perspectives, countercultures, and a certain amount of personnel, finan-cial and organizational slack (Rycroft and Kash 1999).

140 Chapter 6

While the search for efficiency has been associated with traditional management work, looking at doing new and better things requires pulling oneself or an organization into the unknown and adapting to an environment we know is dynamic. While managers promote stability, leaders press for change. Only organizations that embrace both sides of that contradiction can thrive in turbulent times (Kotter 1990). In recent years, leadership has taken a more prominent place than ever in response to a business environment that has become more competitive and more uncertain.

Like Zaleznik (1977) before them, both Kotter (1990) and Bennis (1994) made a clear distinction between managers and leaders. Bennis clarifies the attributes of the leader by contrasting them with those of managers (Table 6.1): Table 6.1 The manager and the leader, as seen by Bennis (1994)

The Manager… The Leader…

Has his eye on the bottom line. Has his eye on the horizon. Has a short-range view. Has a long-range perspective. Administers. Innovates. Does things right. Does the right thing. Relies on control. Inspires trust. Accepts the status quo. Challenges it.

Gardner (1993) has pointed out, however, that every leader must per-form management functions to some degree, and prefers to speak of “typical managers” and “leader/managers.” He suggests six points that characterize these leader/managers: • They think longer term. • They think of how their organization fits into a larger organization

or larger outside world. • They cross bureaucratic boundaries and jurisdictions (with regard

to this point and the previous one, Deming (1994) speak of “mana-ging the company as a system”).

• They emphasize intangibles such as vision, values and motivation. • They have the political skills to cope with conflict. • They think in terms of renewal.

Getting There: Company Leadership, Structure and Collaboration 141

Efficiency is the enemy of adaptation.

Innovation and change require leadership.

Leaders:

• Think long term. • Manage the company as a system. • Have a vision, and values. • Welcome change.

6.2 THE RETREAT OF THE TEN THOUSAND, 401 B.C. The Greek philosopher Xenophon found himself, some 2400 years ago, in a small mercenary force isolated in the heart of Mesopotamia after the death of Cyrus, their employer and defeated pretender to the throne of Persia. Surrounded by a sea of hostile Persians, Xenophon and 10,000 other Greek soldiers began a strenuous 3,200-kilometre journey back to the borders of Greece.

Over the next 15 months, that group traveled an uncharted route through regions as diverse as the flat, hot lands of Iraq, the snowy peaks of Kurdistan, and the rugged mountains and fast rivers of Arme-nia. They encountered 24 different nations and peoples, most of them hostile. Some would attack them with horses and arrows, others with javelins and swords, and others with rocks. Incredibly, only a few hun-dred men did not make it to the Black Sea, the gateway to Greece. In his memoirs, Xenophon tells how the Greek army, after its officers were treacherously murdered, rebuilt its entire command structure overnight through democratic elections. He describes innovative march

Chapter 7

The Corporate Ship and the Corporate Diamond

7.1 STRATEGY THE CREATIVE WAY

I believe that strategic thinking is a necessary but greatly overrated element of business success. If you know how to design great motorcycle engines, I can teach you all you need to know about strategy in a few days. If you have a Ph.D. in strategy, years of labor are unlikely to give you ability to design great new motorcycle engines. Richard Rumelt, University of California’s Haas School of Business, in The many faces of Honda, 1996.

The E-conomy requires companies to continuously iden-tify and execute new opportunities rather than try and sustain old ones. Those companies that have the competency to make these changes rapidly will have a distinct advantage. “Net Ready,” published in 2000 to present the Cisco view of the Internet economy.

To help cope with an uncertain environment, the firm must have a competency-based strategy that will tap its learning and adaptation capabilities, matching strategic options to opportunities in the environ-ment. Rather than spending months planning rigid strategies, the leader must assume a creative attitude and see strategy not as a roadmap but a compass, always looking for a new road. Rather than developing plans and then seeking capabilities, one builds capabilities and then encourages the development of plans for exploiting them when opportunities arise. Increasingly, the resources that enable strategy are intangible, non-tradable and hard to build, examples being employee know-how and talents, market position and special technological competencies. By contrast, the focus has historically been on discussing financial resource requirements (Hayes 1985).

198 Chapter 7

The visionary leaders that help companies adapt to turbulent environments and an uncertain future do not limit themselves to devising strategies that bridge existing competencies to identifiable target markets. They prefer to see life from a creative rather than reactive viewpoint. Their ability to recognize opportunities to build strategic options for the future is seen in the way they select certain customers, projects or investments. Chaparral Steel, for example, sought its much-coveted steel certification from the Japanese not because management ever expected to sell much steel in Japan. The firm undertook this project because it was convinced that the Japanese would go through the company’s processes carefully – and Chaparral would learn from the exercise, thus further reinforcing its competencies (Leonard-Barton 1995).

In the long-term strategy of competence-based organization, means come before ends.

7.2 PLANNING FOR MARKET OPPORTUNITIES

7.2.1 Strategic market planning for short/medium-term opportunities

Because of the resources, focus and multifunctional commitment re-quired, one does not go haphazardly about building capabilities and competencies. One of upper management’s key roles is to set core competency and technology strategies that will nurture capabilities that create value today, while creating options for an uncertain future. In parallel, the organization and its members devise market strategies to bridge existing competencies to opportunities, generating the revenues needed to fuel the business and feed the building of future capabilities.

By having a clear vision of the competency strategy and long-term business targets, individuals at all levels can make sound invest-ment choices and quickly determine whether an unexpected business opportunity will help move the company in the right direction. Given the turbulence of high tech markets, these market opportunities may or may not have been identified in an annual sales or strategic plan.

Ryans et al. (2000) of the University of Western Ontario have pro-posed an iterative, continuous market planning process that takes account of the need to evaluate or re-evaluate new emerging opportunities.

The Corporate Ship and the Corporate Diamond 199

Their integrated “Winning Market Leadership” planning process is presented in Figure 7.1.

The Winning Market Leadership planning process begins with the identification of potential markets of interest (the “business arenas” to be targeted by the strategic business unit). The market environment is then thoroughly analyzed to get an in-depth understanding of the opportunities.

Figure 7.1 “Winning Market Leadership” planning process (Ryans

et al. 2000)

• The market is segmented. • The competitive forces are defined through the identification of

competitors, complementors, customers, potential entrants, substi-tutes and suppliers. The potential profitability of the market segment is assessed.

Implement the Strategy

Define the Business Arena

* Define the arena within which you will search for attractive opportunities

Identify Attractive Opportunities

* Segment the market * Evaluate market

forces

Understand the Market

Environment * Lay out market

chain(s) * Understand buyer

choice/rejection

Assess Resources and Competencies

* Identify resources and competencies

* Determine fit

Understand the Profit Dynamic

* Estimate market acceptance

* Develop price, cost and investment forecasts

Complete the Winning Strategy

* Detail complete strategy

* Ensure strategic leverage for market chain members

Plan Critical Relationships

* Identify key players * Plan relationships * Organize

relationship teams

Make Tough Strategic Choices

* Review past strategy

* Identify strategic issues

Understand the Competitive Challenge

* Analyze current and potential competitors

* Understand strategy drivers

Planning Process


200 Chapter 7

• Buyer’s choice/rejection behaviour and existing barriers to entry are investigated. Market chain (industry value chain) analysis is used to understand how key market players create value.

• Market drivers are identified.

Once the external environment has been understood, internal resources and competencies are evaluated. Should the competencies of the firm not be able to offer value to the customer, create profits and propel the firm to a market leadership position, the opportunity might be abandoned at that point. If the opportunity is addressable, its fit and relative attractiveness within the organization’s portfolio of opportunity is evaluated. Competitive strategy, alliances with complementors, relationships with other critical players in the market, a review of the profit dynamics and a marketing plan complete a winning market strategy for the opportunities that are retained.

To ensure effective implementation of the market strategy, this process assumes that the people who will play key implementation role have been heavily involved – and committed to – the strategy. As with learning and building competencies, strategic market planning requires the ideas, energy and engagement from all of the company’s main functional units.

The Winning Market Leadership process is iterative in the sense that managers don’t just work their way sequentially through the process once. Instead, they gain new insights as they work around the process, asking new questions that lead them to revisit an area they previously dealt with, thus going through the cycle more than once. Being able to drive such an iterative, cross-functional and knowledge rich process requires that certain fundamentals be in place, most of which we have already examined in detail in this book (Ryans et al. 2000): • Effective cross-functional, hierarchy and geography spanning teams. • A corporate culture that supports market orientation, speed,

“boundarylessness,” and reflection, while fostering trust and open-ness (encouraging questions and making “no” decisions acceptable to all, for example).

• Key support systems in place, allowing for access to internal and external information, for virtual teamwork and knowledge sharing and for proper control and progress reviews of the projects.

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