Strategic Thinking Chapter 1

1. Strategic Thinking Chapter 1 Brought to you by… Kelly Bettina Nick Rachel Tam

2. Group Warm Up

3. Outline • Mutually Destructive Competition • Industrial Extinction • Tyranny of Theory • Win-Win Situation for All • Creating Value for People • New Moral Contract • Building Shared Destiny Relationships • Conclusion

4. Rocks and Hard Places • Dominant Theory and Practice • Distributing value to Shareholders • Industrial Extinction

5. A New Manifesto for Management • Contradictory practices • No fear of diversity • Microsoft, ABB, 3M

6. Systems • Geneen’s Monkey • Ford’s Assembly line • Famous last words of the “System”

7. The Tyranny of Theory Win-Loose • Porter’s theory of strategy • Value appropriation • Static efficiency • Companies exist because markets fail • Control Society vs. Company

8. New Management Philosophy Win-Win • Value creation • Dynamic efficiency • Markets as organizational economies • Society and Company

9. Shift in Thinking Win-Loose • Porter’s theory of strategy • Value appropriation • Static efficiency • Companies exist because markets fail • Control Society vs. Company Win-Win • Value creation • Dynamic efficiency • Markets as organizational economies Society and Company

10. Quotes • Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them. W. Edwards Deming • In the business world the rearview mirror is always clearer then the windshield Warren Buffett • We succeed in enterprises which demand the positive qualities we possess, but we excel in those which can also make use of our defects. Alexis de Tocqueville

11. Profitability in a Global Context http://www.youtube.com/watch?v=NM_F3C8rCEQ

12. Recent Survey Gary Hamel, Visiting Professor of Strategic and International Management at the London Business School: Looking twenty years out into the future, what one characteristic—principle, practice, or structural feature—of the “modern” industrial organization will appear to be the most antiquated or anachronistic? From HBR Online – 4 Oct 2007

13. Some of the Responses • "Rigid hierarchical system would be the most antiquated. Almost flat & flexible organizational structure, based on the roles one performs, will be the rule in coming years. This will allow greater interaction and innovation within new-age organizations." • "Quite simply, centralized command and control. While used by most companies as the fundamental organizational structure, it in itself has become the chief impediment keeping organizations from adapting to newer more flexible structures required to grow and compete globally. Quite a paradox!!"

14. Responses – Cont. • "Shareholder Value Fundamentalism [will appear anachronistic in the future]. Organizations will balance human values and not focus just on economic value." • "The management principle (and tangible structural artifacts) that views organizational change as a periodic event and which seeks constancy and stability. This principle holds that organizations should be designed based on the mental paradigm that stability is the norm and desired end state. Today, all structures, systems, processes, programs, and people strategies are based on a stability mindset."

15. Motorola Collaboration Motorola, Inc. and Macrovision Announces Analog Copy Protection Technology Agreement Wed Oct 3 05:27:00 EDT 2007 Motorola, Inc. and Macrovision Corporation announced a renewed agreement to make Macrovision's analog copy protection (ACP) technology available in Motorola's portfolio of set-tops. This collaboration facilitates seamless mobility and the accelerated adoption of new devices and services in the digital home. Verizon Wireless And Motorola, Inc. Announces Launch of MOTORIZR Z6tv Fri Sep 28 17:30:00 EDT 2007 Motorola, Inc.: Verizon Wireless and Motorola, Inc. announced the launch of the MOTORIZR Z6tv on October 5. MOTORIZR Z6tv comes with a slider design and is equipped with V CAST Mobile TV, V CAST Music and Video.The MOTORIZR Z6tv provides 24-hour access to broadcast-quality full-length TV shows through V CAST Mobile TV from Verizon Wireless. Infineon Technologies AG Signs Agreement with Motorola, Inc. to Develop 3G Radio Frequency Chip Wed Sep 26 18:26:00 EDT 2007 Motorola, Inc.: Infineon Technologies AG (Infineon) announced that it has signed an agreement with Motorola, Inc. to develop a new multi-mode, single-chip 3G radio frequency (RF) transceiver based on Infineon's SMARTi UE chip. The RF transceiver is a core component in a mobile phone or other mobile cellular device. Its primary function is to send and receive digital data over the air. As consumers continue to demand more multimedia functionality from their mobile devices, the RF plays a key role in delivering the data speed and signaling needed to support mobile content and services.

16. Latest News NEW YORK, Oct 3 (Reuters) - Motorola Inc. (MOT.N: Quote, Profile , Research) said on Wednesday it took $221 million in charges for job cuts in the first half of 2007, according to a regulatory filing. Motorola said the severance costs came from cutting about 4,100 jobs. Job cuts will result in a net pre-tax charge of around $83 million in the third quarter, the company said in its filing with the U.S. Securities and Exchange Commission

17. 5 Year Stock PricesMotorola, Nokia and Sony

18. Companies as Value Creators • Westinghouse and Norton • Zero-sum • Dog-eat-dog • Bought and sold businesses • Value appropriation • Employees, suppliers and customers are seen and dealt with the same • Thought of company is market terms • People acted alone as if in market 3M and ABB • Focused on value creation • Continuous innovation • People systems • Encouraged new ideas

19. Example Enron Video

20. Different Beliefs = Different Results • Norton and Westinghouse became victims of their own strategy • Employees were scared to fail • As a result, they did not create anything new

21. ABB On Adding Value • ABB’s goals are “to make economic growth and improved living standards a reality for all nations throughout the world” and that “we are, first of all, an educational institution.”

22. ABB On Adding Value • Employees were encouraged to take risks • Employees had job security • Shared resources between departments

23. Managers Should… • Avoid status quo • Lead change • Facilitate cooperation • Establish a sense of purpose • Create an environment for entrepreneurs to be unleashed • Develop people systems • Shift from value appropriation to value creation

24. Out With the Old, In With the New Strategy Structure Systems • Purpose • Process • People S P

25. A Win-Win Situation • Managers have opportunity to influence their employees • Make them the best they can be • Employees win, company wins, economy wins

26. The Old Way… • Advantage from monopoly over people’s jobs • Specialization an asset • Unwillingness to compromise • This type of job security unrealistic in our new economy

27. The New Way… • Value creation takes more than that • The company sets the tone

28. Quote “Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work.” ~Vince Lombardi

29. A New Moral Contract… • Employee responsibility • Employee mobility • Enhanced employee value

30. Motorola Corporate Responsibility • Corporate responsibility means harnessing the power of our global business to benefit people. It also means doing the right thing in all aspects of our business, including how we treat the environment, our employees, our customers, our partners and our communities.

31. Motorola Business Principles • Community support • Economic opportunities and growth

32. Motorola University • Every employee required to take 40 hours per year • Shows their commitment to adding value to people • Competitive advantage • Six sigma

33. Individual Dignity Entitlement • Do you have a substantive, meaningful job that contributes to the success of Motorola? • Do you know the on-the-job behaviors and have the knowledge base to be successful? • Has the training been identified and been made available to continuously upgrade your skills? • Do you have a personal career plan, and is it exciting, achievable, and being acted on? • Do you receive candid, positive or negative, feedback at least every thirty days that is helpful in improving or achieving your personal career plan? • Is there appropriate sensitivity to your personal circumstances, gender, and cultural heritage so that such issues do not detract from your personal career plan?

34. Quote “Few things help an individual more than to place responsibility on him, and to let him know that you trust him.” ~Booker T. Washington

35. What the New Contract Is Not… • An excuse not to protect the jobs of employees • An act of altruism • A program to be installed by HR, rather an entirely different way of thinking

36. Shared Destiny Relationships • Creating value for internal and external customers • Stated objective and proven outcome • Successful companies e.g. Canon: Promoting Bubble-Jet Printer yielded higher functionality-to-cost ratio Intel: Creating next generation chips allowing customers to do new things McKinsey & Company and Anderson Consultant: Recruiting the best talent by giving the promise of employability

37. Example: Unipart’s Transformation • different from “being and doing good to all.” • two-way dependence • making the destiny mutually attractive • “an expansive positive-sum value-creation perspective” • “… We must create shared destiny relationships with all our stakeholders: customers, employees, suppliers, governments, and the communities in which we operate. It is not altruism; it is commercial self-interest.” P.28

38. A Manifesto for Reclaiming Managerial Legitimacy • “value creation for all constituencies” • more satisfying and more effective

39. Examples • “Environment, Health, and Safety (EH&S) is a shared responsibility, and all staff members are responsible and accountable for our performance. All staff are expected to understand and comply with Amgen’s commitment to EH&S and are encouraged to actively participate in its continuous improvement.” –Amgen Inc.’s Environmental Commitment Statement

40. Examples – Cont. • “Purveying quality coffees means much more than selecting the finest beans on the market. Starbucks strongly believes in the importance of building mutually-beneficial relationships with coffee farmers and coffee communities with which we work. The success of the farmers with whom we do business is a critical component of our own success. We are taking an integrated approach to building relationships with coffee communities….” –Starbucks’ social responsibility statement

41. Conclusion • Value Appropriation’s problem: Self-defeating, get squeezed more and more into a corner, and value being destroyed for all components • Value Creation’s power: customer satisfaction, employee enthusiasm, and shareholder wealth • Ideas matter • “Get out of the pincer’s grip.” p.31

42. References • Cusumano, M.A., & Markides, C.C. (Eds.). (2001). Strategic Thinking for the Next Economy. San Francisco: Jossey-Bass A Wiley Company. • http://www.amgen.com/about/environmental_sustainability_commitment_statement.html • http://www.starbucks.com/aboutus/origins.asp

43. This is a test… Be afraid How much do you know?

44. Essay Questions • Do you think the recent agreement between General Motors and the UAW union is a reflection of a change in the relationship between GM and its employees ? Explain your view. What might be the motives ? • Can white collar crime be explained as an outcome of a strategic focus on value appropriation ? Explain.

45. Essay Questions – Cont. • A company director laments: “my best people always leave first when there is a threat of job cuts”. What advice might you give him ? • Why does dynamic efficiency in companies have a positive impact on society ?

46. Westinghouse and Norton • Zero-sum • Dog-eat-dog • Bought and sold businesses • Value appropriation • Employees, suppliers and customers are seen and dealt with the same • Thought of company is market terms (people started acting alone • People acted alone as if in market