Blue Ocean Strategy

Risk Management

It is not often that you can be sure about the future. If you explode a bomb you can be sure there will be some destruction. This is because we are following the routine of the past. A doctor who treats a streptococcal infection with penicillin can be reasonably sure that it will effect a cure. Again, this is repeating a routine that has worked in the past.

In China there is said to be a deficit of 100 million women. This is the result of the ‘one child’ policy. Baby girls are not much valued because they are not so helpful in the fields or in your business. Girls get married and then look after the aging parents of their husbands. So who is going to look after you when you get old? So, somehow, the girl babies disappear. The result is a deficit of 100 million women - and even wife kidnapping.

Each family is allowed to have one boy and must then have more children. This is the ‘one boy’ policy. The result is equal boys and girls. At the moment of conception there is an equal chance of the embryo being a boy or a girl. Since no one is being killed, this equal chance continues. On average each family has two children. This is less than is required for population replacement, which needs about 2.3 children. So there is a declining population of equal boys and girls and everyone gets the chance to have a boy. No babies are ‘lost’ or killed.

E-business

Business and technology are now inextricably linked. Today, e-business is just business, a real business.

There are no technology decisions that are not business decisions, and there are no business decisions today that don't involve technology, according to Jim Cassidy, IBM's Director Asia-Pacific.

Business processes must not only incorporate timely company information – for improved customer relationship management, supply chain management, and beyond, they must also be kept up-to-date with fast-changing business needs. E-business facilitating these processes is the way most business soon will be transacted. Whether or not you ever plan to sell products or services over the Web, your most important customer or supplier may one day insist upon using Web for all transaction.

The fastest growing companies are moving aggressively to bring e-business into all their operations. They align their systems with their fast-changing business priorities and use these systems strategically, for growth. In addition, successful businesses are employing information technology to gather and interpret data about their ultimate customers, including demographics, trends, and buying behavior.

Set the Priorities

Teamwork is one of the rallying cries of the new management. Many of the results have become legendary, like the ultra-successful 1989 launch of the LandRover Discovery, produced in 27 months, roughly half the time needed for the previously typical British car. Tony Gilroy, the father of the Discovery, was so impressed by the project that he applied the same principles at his new job, chief executive of Perkins Engines, where by 1994 900 project teams were busily at work revolutionizing performance.
That's a basic principle of teamwork: nobody's perfect - including the team leader - and everybody can be improved. The whole Xerox empire had compelling reason for seeking self-improvement. As the 1980s began, when compared to surging Japanese competition, its indirect/direct cost ratio was double: it used nine times as many suppliers: assembly line rejects were ten times higher: product lead-times twice as long: defects per 100 products seven times as many. All these deficiencies meant that unit manufacturing cost equated with the Japanese selling price.

Management Decision Making Styles

The behavior of the human maverick can be well short of honourable and may even cut the corners of legality. But whether sharp practice was typical of the eponymous Samuel Maverick, a Texan cattle-raiser, is beside the management point. The reality is that the best maverick managers make the world go round. Without them many great companies and industries would not exist. Indeed, far from being the exceptions that prove the rule, the mavericks disprove it.

You could easily maintain that all great managers, certainly all important entrepreneurs, are mavericks, rule-breakers who disregard the herd and obey their own instincts and intellects. None of these makers and shakers can ever be described as conformist. One fine example of the breed is Philip Knight of Nike, who has now retired as the shoe company’s chief executive for the third time. That in itself is highly unconventional; but when his replacements for the first two retirements didn’t work out, Knight stepped back in. Remarkable recovery and revitalised growth duly followed.

Population Ecology

Population Ecology (in Biology) is a major sub-field of ecology that deals with the dynamics of species populations and how these populations interact with the environment.

Organization as Organism: metaphor used by Morgan in Images of Organization, is totally different from the traditional view of organization. They perceive organizations as living organism. As Evolution of Species in the process of natural selection, create chances for living being to survive, success or to fail. Same with organizations, this process will help to give survival strategies (Hannan & Freeman) . All the steps are same with biological evolution.

• Veriation

Entreprenural or innovative veriations occur in organization.

• Selection

Enviroment Selec some of the best veriation from them.

• Retantion

Now time to instituionlise the selection and this is the survival of the fittest.

(Reference: Population Ecology by Hannan & Freeman, http://en.wikipedia.org/wiki/Population_ecology)

Birth of strategic management

Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. His contributions to strategic management were many but two are most important. Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship without a rudder. As early as 1954 he was developing a theory of management based on objectives. This evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of setting objectives and monitoring your progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. He predicted the rise of what he called the “knowledge worker” and explained the consequences of this for management. He said that knowledge work is non-hierarchical. Work would be carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.

In 1985, Ellen-Earle Chaffee summarized what she thought were the main elements of strategic management theory by the 1970s:

• Strategic management involves adapting the organization to its business environment.
• Strategic management is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses.
• Strategic management affects the entire organization by providing direction.
• Strategic management involves both strategy formation (she called it content) and also strategy implementation (she called it process).
• Strategic management is partially planned and partially unplanned.
• Strategic management is done at several levels: overall corporate strategy, and individual business strategies.
• Strategic management involves both conceptual and analytical thought processes.

(referenece: http://en.wikipedia.org/wiki/Strategic_management)

Dynamic Model of the Strategy Process

Several theorists have recognized a problem with this static model of the strategy process: it is not how strategy is developed in real life. Strategy is actually a dynamic and interactive process. Some of the earliest challenges to the planned strategy approach came from Linblom in the 1960s and Quinn in the 1980s.

Charles Lindblom (1959) claimed that strategy is a fragmented process of serial and incremental decisions. He viewed strategy as an informal process of mutual adjustment with little apparent coordination.

James Brian Quinn (1978) developed an approach that he called "logical incrementalism". He claimed that strategic management involves guiding actions and events towards a conscious strategy in a step-by-step process. Managers nurture and promote strategies that are themselves changing. In regard to the nature of strategic management he says: "Constantly integrating the simultaneous incremental process of strategy formulation and implementation is the central art of effective strategic management." (?page 145). Whereas Lindblom saw strategy as a disjointed process without conscious direction, Quinn saw the process as fluid but controllable.

Joseph Bower (1970) and Robert Burgelman (1980) took this one step further. Not only are strategic decisions made incrementally rather than as part of a grand unified vision, but according to them, this multitude of small decisions are made by numerous people in all sections and levels of the organization.

Henry Mintzberg (1987) made a distinction between deliberate strategy and emergent strategy. Emergent strategy originates not in the mind of the strategist, but in the interaction of the organization with its environment. He claims that emergent strategies tend to exhibit a type of convergence in which ideas and actions from multiple sources integrate into a pattern. This is a form of organizational learning, in fact, on this view, organizational learning is one of the core functions of any business enterprise (See Peter Senge's The Fifth Discipline (1990).)

(reference: http://en.wikipedia.org/wiki/Strategy_dynamics)

Static Model of the Strategy Process

According to many introductory strategy textbooks, strategic thinking can be divided into two segments : strategy formulation and strategy implementation. Strategy formulation is done first, followed by implementation.

Strategy formulation involves:

1. • Doing a situation analysis: both internal and external; both micro-environmental and macro-environmental.
   • Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term), mission statements (medium term), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
   • These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to obtain these goals.

This three-step strategy formation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there.

The next phase, according to this linear model is the implementation of the strategy. This involves:

1. • Allocation of sufficient resources (financial, personnel, time, computer system support)
   • Establishing a chain of command or some alternative structure (such as cross-functional teams)
   • Assigning responsibility of specific tasks or processes to specific individuals or groups
   • It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.
   • When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes

(Reference: http://en.wikipedia.org/wiki/Strategy_dynamics)

Laws of the Fifth Discipline

• 1) Today's problems come from yesterday's "solutions."
• 2) The harder you push, the harder the system pushes back.
• 3) Behavior will grow worse before it grows better.
• 4) The easy way out usually leads back in.
• 5) The cure can be worse than the disease.
• 6) Faster is slower.
• 7) Cause and effect are not closely related in time and space.
• 8) Small changes can produce big results...but the areas of highest leverage are often the least obvious.
• 9) You can have your cake and eat it too ---but not all at once.
• 10) Dividing an elephant in half does not produce two small elephants.
• 11) There is no blame.

(reference: Senge, Peter M. (1990), The Fifth Discipline)

The Learning Disabilities

• 1) "I am my position."

People fail to recognize their purpose as a part of the enterprise. Instead, they see themselves as an inconsequential part of a system over which they have little influence, leading them to limit themselves to the jobs they must perform at their own positions. This makes it hard to pinpoint the reason an enterprise is failing, with so many hidden 'loose screws' around.

• 2) "The enemy out there."
• 3) The Illusion of Taking Charge
• 4) The Fixation of Events

The tendency to see things as results of short-term events undermines our ability to see things on a grander scale. Cave men needed to react to events quickly for survival. However, the biggest threats we face nowadays are rarely sudden events, but slow, gradual processes, such as environmental changes.

• 5) The Parable of the Boiled Frog
• 6) The Delusion of Learning from Experience
• 7) The Myth of the Management Team

(Reference : http://en.wikipedia.org/wiki/The_Fifth_Discipline)

The Fifth Discipline

The Fifth Discipline: The Art and Practice of the Learning Organization (Senge 1990) is a book by Peter Senge (a senior lecturer at MIT) focusing on group problem solving using the systems thinking method in order to convert companies into learning organizations. The five disciplines represent approaches (theories and methods) for developing three core learning capabilities: fostering aspiration, developing reflective conversation, and understanding complexity.

The Five Disciplines

The five disciplines of the learning organization discussed in the book are:

• 1) Personal mastery
• 2) Mental models
• 3) Building shared vision
• 4) Team learning
• 5) Systems thinking
  

(Reference: http://en.wikipedia.org/wiki/The_Fifth_Discipline)

Strategy and the Internet

Internet is an extremely important new technology, and it is no surprise that it has received so much attention from entrepreneurs, executives, investors, and business observers Caught up in the general fervor, many have assumed that the Internet changes everything, rendering all the old rules about companies and competition obsolete. That may be a natural reaction, but it is a dangerous one. It has led many companies, dot-coms and incumbents alike, to make bad decisions –decisions that have eroded the attractiveness of their industries and undermined their own competitive advantages. Some companies, for example, have used Internet technology to shift the basis of competition away from quality, features, and service and toward price, making it harder for anyone in their industries to turn a profit. Others have forfeited important proprietary advantages by rushing into misguided partnership sand outsourcing relationships. Until recently, the negative effects of these actions have been obscured by distorted signals from the marketplace. Now, however, the consequences are becoming evident.

(by Michael E. Porter)

Environmental Movementn in Strategies

The environmental movement, a term that includes the conservation and green movements, is a diverse scientific, social, and political movement for addressing environmental issues.

Environmentalists advocate the sustainable management of resources and stewardship of the environment through changes in public policy and individual behavior. In its recognition of humanity as a participant in (not enemy of) ecosystems, the movement is centered on ecology, health, and human rights.

The environmental movement is represented by a range of organizations, from the large to grassroots. Due to its large membership, varying and strong beliefs, and occasionally speculative nature, the environmental movement is not always united in its goals. At its broadest, the movement includes private citizens, professionals, religious devotees, politicians, and extremists.

Strategic Management

Sun Tzu Before Christ a great Chinese warrior. "The Way of War", widely acceptable book that gave basic nitty-gritty for strategy making schools. The utterance strategy has taken from military as they known for their war plans. However in business world the style of strategy making is same as construction a war plan. It includes how to defeat competitor, how to win in turbulent as well as stable situations, how to takeover competitor's market share & along with how to build a strong position in the eye of customers better than competitors. Subsequently strategic management is an art and science of making cross-functional decisions that will enable an organization to achieve its long-term objectives. It is the process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives and then allocating resources to implement the policies, and plans, projects and programs. Strategic management seeks to coordinate and integrate the activities of the various functional areas of a business in order to achieve long-term organizational objectives. A balanced scorecard is often used to evaluate the overall performance of the business and its progress towards objectives. Hence in simple words strategic management is basically the completion of three foremost steps: 

• Strategic Formulation
  
• Strategic Implementation
  
• Strategic Evolution
  

(Further details of each of the strategy making steps are coming soon.)   

Management Learning

Learning is an unconscious phenomena of mind.  It's a kind of intuitional thinking that needs knowledge, rational experiences, strong five senses but also vision beyond the boundary of these senses.  In the 7000 years of history start from the Egyptian era there are many examples of learning, we found the first written documents about this phenomena. That first man was Socrates, who worked on societal science in his fictional society in "The Republican". That was all about management of political economic system. So no doubt Socrates was the management master.  Then as the time passed developed management was going on through Aristotle, Plato and also other names of BC philosophers. But now in 21^st century, learning and management are the same also. Learning organizations and the organizational management are the leading topics of business management.  Strategic management came from military (extracted by Sun Tzu, Michael Porter) as well as project management came from the early engineer's (Fredrick Taylor) efforts.  So today, it's a great challenge for every manager to deal with all learning streams of management knowledge to get competitive advantage.