Kathryn Harrigan: Decline and Join

21 October, 2014

There are two main themes in the research and writing of strategic management professor, Kathryn Rudie Harrigan. First is businesses in decline and how mature businesses can remain profitable in contracting markets. The second is around strategies for businesses joining together in more or less formal and complete ways from full mergers and acquisitions at one end of the scale through joint ventures, to strategic alliances. These two areas of interest offer much to learn from and, if your business interests lie in one of these directions, you can be assured of rigour and subtlety from her: in the past, she has lambasted quick-fix easy solution business books and models, describing her work as being for thoughtful managers.

Kathryn Rudie Harrigan

Brief Biography

Kathryn Harrigan was born in 1951 and grew up in Minnesota. Her initial training was in the theatre, taking a Bachelor’s degree in Theatre Arts at Macalester College and starting a master’s degree in Fine Arts. Early in her career, her entrepreneurial inclinations led her to create a theatre company. In 1976 she gained an MBA from the University of Texas (Austin) and went on to study at Harvard, with Michael Porter, for a DBA.

After a spell as a junior faculty member at the University of Texas (Dallas), she moved to Columbia University in New York, where she is now Henry R. Kravis Professor of Business Leadership.

Declining Businesses

Harrigan’s first research at Harvard was into declining businesses and led to her first book, Strategies for Declining Businesses, published in 1980. She returned to this topic in her 1988 book, Managing Maturing Businesses: Restructuring Declining Industries and Revitalizing Troubled Operations, and then again in her last book to date*, Declining Demand, Divestiture, and Corporate Strategy, published in 2003.

Her core thesis is that decline is inevitable if a business fails to constantly renew and refresh itself. Growth is nice to have, managers should not underestimate the challenge and rewards of properly managing a business in a mature or even diminishing market. In her 1988 book, Managing Maturing Businesses, she sets out four strategic options:

  1. Divest quickly and be the first player to exit a declining market, maximising the price you can get for any assets, intellectual property and good will you can sell off.
  2. Shrink your business selectively, divesting the weakest parts and focusing on the most lucrative areas of business, leaving your competitors  to fight over the rest.
  3. Milk the business. Adopting the BCG metaphor of a ‘cash cow’, she offers the option of continuing to manage it as well as you can, as the market declines, to drain every last dollar of return from past investments.
  4. Be the ‘last iceman’ – serve the few customers who continue to want legacy products and make this a profitable premium niche.

Strategic Alliances

In Harrigan’s other work, she has focused on the variety of alliances that companies can make, which to select, and how to do it well. Her books on this topic started with 1983’s Strategies for Vertical Integration, and continued with Strategies for Joint Ventures (1985), Strategic Flexibility: A Management Guide for Changing Times (1985), Managing for Joint Venture Success (1986), Vertical Integration, Outsourcing, and Corporate Strategy (2003), Joint Ventures, Allliances, and Corporate Strategy (2003), and looks set to continue with future work*.

Her earlier work emphasised the dangers that vertical integration of the value chain (supply and distribution) hold by limiting a company’s strategic flexibility to rapidly adapt to market changes. She saw co-operation in the form of joint ventures and strategic alliances as the key to success in future changing world markets.

This is despite the fact that the concept of joint ventures goes back to antiquity and the maritime trading of the Egyptians and Phoenicians, and continued through the great mercantile revolutions of 16th century Europe. Harrigan defines a joint venture as ‘separate entities with two or more actively involved firms as sponsors’.

It is my sense that her predictions of the 1980s are coming true: that constellations of firms working in alliance will compete with one another, rather than individual corporations. This is clearly visible in the consumer electronics industry, where systematic outsourcing creates strategic flexibility, commercial efficiency, and the capability to take on vast projects.


* I believe she is working on a new book, Strategies for Synergies.
This  emphasises the intellectual debt she owes to Igor Ansoff.

 


Igor Ansoff: Strategic Management

14 October, 2014

Igor Ansoff was the pre-eminent thinker who codified the way we consider business strategy. Other strategic thinkers have since either followed him or reacted against him. His first major book, Corporate Strategy, laid the groundwork for the discipline and set the direction for Ansoff’s whole academic career.

Igor Ansoff

Brief Biography

Ansoff lived a long life, that encompassed three continents (if you include his conception in Japan). He was born to a Russian mother and US diplomat father in 1918, in Vladivostock, as Russia was becoming the Soviet Union. When the family returned to the United States, he was educated in New York, studying physics and mechanical engineering, before serving in the 1939-1945 war. On his return, he took a service scholarship and completed a PhD in applied mathematics at Brown University, in 1948.

His first job was at the Rand Corporation, where he used his mathematics to contribute to operations research and strategic management, but he became frustrated with the lack of application of his work and also by his inability to truly excel as a mathematician. Seeking a new direction, he moved to Lockheed, first as a long-range planner, then leading acquisitions and diversification, and finally, taking a senior management role, where he learned how to manage people. He was successful in leading a profitable division, but wanted something else from his life, so he deliberately left Lockheed and sought an academic role.

A series of academic appointments followed, first at Carnegie-Mellon University (from 1963), where he wrote his seminal book, Corporate Strategy, then to found the Graduate School of Management at Vanderbilt University (from 1969). Here, he published the paper: ‘The Concept of Strategic Management‘ that led people to refer to Ansoff as the ‘father of strategic management’. Finding the distractions of running a school not to his taste, Ansoff moved to Europe in 1975, to join the European Institute for Advanced Studies in Management, in Brussels. Here, he wrote the book that was to address the need to incorporate strategic thinking into day-to-day implementation, Strategic Management, 1n 1979. He saw this as his most important work.

Ansoff’s final academic post was back in the US, when he joined the US International University in 1983. Here he wrote the follow up to Strategic Management in 1984: Implanting Strategic Management. He retired from academic life in 2000, becoming a distinguished emeritus professor, and died in 2002.

Ansoff’s Ideas

At the heart of Ansoff’s thinking was the idea that strategic planning could be approached in a rigorous way, using a variety of practical tools. Most notable of these tools is his 2×2 matrix, now best known as The Ansoff Matrix. This first appeared in a paper in 1957, while he was at Lockheed. The matrix offers a simple tool for assessing four growth strategies.

Ansoff Matrix

Ansoff introduced many new concepts, two of which have become management commonplaces. The first is the much over-used and often misunderstood concept of synergy: that by bringing together the right components and integrating them effectively, the final result is more valuable than the sum of its parts – ‘2 + 2 = 5′ in Ansoff’s memorably simple explanation. The second is the concept of ‘gap analysis’. This is the idea of determining where you want to get to, understanding where you are, and then identifying what it will take to bridge the gap.

The problem that Ansoff found was that his focus on rationality and his extensive kit of strategic thinking and decision-making tools were leading managers into what he called ‘paralysis by analysis’ - another coinage that has become commonplace. This led him to focus his efforts on understanding why this was happening and how to overcome it. In so doing, he effectively became his own most ardent critic. This led him from Corporate Strategy to Strategic Management – an understanding of how people behaved strategically. This was quite a theoretical analysis, synthesising ideas from many fields. So his 1979 Implanting Corporate Management put the focus on practical ‘how-to-do-it’ techniques.

His later research sought to underpin many of his hypotheses with strong empirical evidence. Ansoff always stayed close to working business leaders and his students were able to conduct detailed research into what Ansoff called his ‘Strategic Success Hypothesis’.  This asserted that a business could optimise its returns by matching strategic activities to its changing environment, and by developing internal structures and capabilities to support its strategy. In this way, he anticipated the McKinsey 7S model, in much the same way as Ansoff anticipated a lot of our modern understanding of strategic management.

Pocketbooks you may enjoy include:

The Strategy Pocketbook

 

 


Michael Dell: Born to Sell

7 October, 2014

My apologies for the rhyming title, but it seems to me to be absolutely true: Michael Dell is the entrepreneur’s entrepreneur, who started selling stamps at 12, when his friends were swapping them; whose high school teacher was shocked to find, in an economics assignment, that Dell’s income really did exceed hers and that he had not made an arithmetical error; and who founded a fortune 500 company that enjoyed 80% annual growth for its first eight years, leaving him one of the richest people alive.

Short Biography

Michael Dell was born in Texas, in 1965, and was already a successful salesperson by the time he left school, having sold stamps to auction houses and newspaper subscriptions to newly weds. In his first year at The University of Texas, he founded PCs Limited, rebuilding and selling computers. A year later, in 1984, he dropped out of University to set up Dell Computer Corporation, on a shoestring, at the age of 19.
With little capital, Dell kept little stock and built computers to order. This has been a core plank of his business strategy and one of the main drivers for profitability. The business grew rapidly:

  • in 1988, trading revenue exceeded $250 million and the company was floated in an IPO valuing it at $30 million. It ended the year with a market capitalisation of over $80 million.
  • in 1992, the company entered the Fortune 500, and Dell was the youngest CEO ever of a Fortune 500 company
  • in 1994, Dell moved online, launching dell.com, starting online sales in 1996
  • In 1997, online revenues exceeded $3 million per day
  • This rose beyond $70 million per day in 2000, with annual revenue of $27 billion
  • In 1999, Dell and his wife established the Michael & Susan Dell Foundation to offer philanthropic support to a variety of global causes
  • In 2003, the company diversified into managed networking services
  • In 2004, Dell stepped down as CEO, but stayed on as Chairman
  • in 2007, Dell returned to the role of CEO, at the request of the board
  • In 2013, Dell led a successful campaign to buy out shares from the market place and de-list the company, returning it into private hands under his own control. After many years of troubles caused by narrow margins and the decline of its core market – PCs – Dell wants to be able to invest for the future, without worrying about the effect of quarterly performance on share prices
  • In June 2014, Dell was named the United Nations Foundation’s first Global Advocate for Entrepreneurship

What we can learn from Michael Dell

Like all great entrepreneurs, we can see a gritty determination and ruthless commercial acumen in Dell. But there are more specific lessons that made the business great.

  1. Dell valued effective execution above all. His low inventory and rapid turnaround were not just a strategy, they became an art form. Delivery is as important to Dell as selling.
  2. Customer loyalty is key for Dell, and the problems his business ran into in the early years of the century following off-shoring their call centres (when ‘Dell hell’ became an internet meme), led him to spend over $100 million in 2006 to roll out new customer service processes.
  3. Rapid recognition of the potential offered by new technology – the internet – for profitably transforming his business, and new products – servers and networking – for defending volumes. Arguably, this is his intent in the leveraged buyout of 2013.
  4. Early on, Dell allowed himself to be persuaded to withdraw from seemingly fantastic deals to place his product with huge retailers like Walmart. This turnaround and its effects illustrate three things:
    1. the brilliance of his sales acumen to tie up huge deals with vast retailers,
    2. his wisdom in allowing himself to listen to counter arguments and publicly change his mind at last minute, despite the loss of face it must have involved
    3. the long-term success of this decision, in moving out of low margin supply to retailers and into high margin direct supply to customers

Michael Dell has recently said

‘I’ll care about Dell even after I’m dead. So this is a pretty personal process. And when you’re doing what you love and it’s working, you don’t get tired working what other people might consider long hours or crazy schedules.’

This, of course, is one of the things that allows a great entrepreneur to succeed.

Dell has recently done an interview with Inc.com: ‘Michael Dell: How I Became an Entrepreneur Again

 


Brené Brown: Shame, vulnerability, worthiness and courage

30 September, 2014

Brené Brown is a social work researcher, working at the Graduate College of Social Work, at the University of Houston. I am sure that is what her job description says, but she describes herself as a researcher-storyteller. And the subject of her research and stories is vulnerability and shame, and all that flow from these two, very human emotions.

Brené Brown

Brief Biography

Brené Brown grew up in Texas and attended the University of Texas at Austin, where she took a Bachelor of Social Work degree. She later gained a Masters degree and then a PhD in Social Work, at the University of Houston Graduate College of Social Work. In 2010, she spoke about her research at a TEDx event in Houston. That talk has since become one of the most viewed TED talks, with over 16 million views to date. You can see it, and her subsequent TED talk, at the bottom of this blog.

Brené Brown’s Work

Brown started out to study the connections between people, and quickly learned, through many formal interviews and focus groups, that when she asked about connection, people rapidly started to speak about disconnection and their fear of it. At the heart of her understanding of connection emerged shame – the fear of disconnection and of not being worthy of connection.

Brown characterises shame as a feeling that ‘I am not good enough’ and even of asking ourselves the question: ‘who do you think you are?’ Shame, she points out, is a reflection of our sense of self, which she compares with guilt, which is about our sense of what we have done. Her research shows that depression and poor social functioning – even mental illness – is linked to a sense of shame, but not to guilt. People who have a strong capacity for guilt can address their behaviours, whilst still holding onto their sense of self-worth, or worthiness.

Worthiness is fundamental to Brown’s thinking. The difference between people who have a strong feeling of love and belonging, and those who struggle to find love and belonging is that strong sense of worthiness. This arises from four things: courage, compassion, connection and, crucially, vulnerability.

It is when we own up to our own imperfections and vulnerability that we can find our authenticity and start to feel worthy. People who do this are ‘wholehearted people’.

Brown has articulated this powerfully in her second book, The Gifts of Imperfection: Let Go of Who You Think You’re Supposed to be and Embrace Who You are. Her subsequent book, Daring Greatly: How the Courage to Be Vulnerable Transforms the Way We Live, Love, Parent, and Lead, extends these ideas further.

Brené Brown’s relevance to Management

At the start of her 2012 TED talk (below), Brown tells how businesses who want her to speak at their events constantly ask her to speak about three topics: creativity, innovation, and change. She points out that:

‘Vulnerability is the birthplace of
creativity, innovation, and change.’

However, I think the strongest link from her work to management is in the way we manage and lead. Daring Greatly is about taking the risk of making yourself vulnerable – of admitting your fears, rather than hiding them behind the fake certainties of dogma and the false strengths of arrogance and blame.

Too much management and leadership is based on a need to be certain, a need to be right, and a need to be a hero. Allowing yourself to be vulnerable to new ideas, to mistakes, and to weakness opens up a raft of opportunities, not only for new ideas, but also for your colleagues and team members to shine. If you do nothing else, watch the first of these videos.

The Power of Vulnerability

Brené Brown’s 16 million+ views TEDx talk from 2010.

Listening to Shame

Brené Brown’s subsequent TED talk in 2012 has had over 4 million views.


Meredith Belbin: Team Roles

23 September, 2014

Meredith Belbin is the leading management thinker in developing our ideas about team roles. His research in the 1970s led him to develop the team-role theory that bears his name. This is now a widely used model, supported by a range of commercially available tools distrbuted and supported by the company he founded in 1988 with his wife, Eunice, and his son, Nigel Belbin.


Brief Biography

Meredith Belbin was born in 1926, and grew up in the English Home Counties during the Second World War. After the war, he went to Cambridge to read classics, but transferred to study psychology, where he met his wife, and went on to gain a PhD. His early work was focused on the needs of older workers, but it was when working with his wife at the Industrial training research Unit (ITRU) that he did his breakthrough research.

He was invited to conduct research at the Administrative Staff College (now Henley Management College) and set up a long-running programme of studies with co-researchers, Bill Hartston, Jeanne Fisher, and Roger Mottram. Year after year, they observed teams of managers competing in business games, recording the way team members contributed and cross referencing this with results of numerous psychometric tests.

Belbin documented the conclusions of this research in his now classic 1981 book, Management Teams: Why they Succeed and Fail, which is currently in its third edition. Since then, he has written a number of books, perhaps the most successful of which has been Team Roles at Work.

Belbin’s Ideas

We have covered much of the detail of Belbin’s Team Roles model in an earlier blog: Meredith Belbin’s Team Roles Model. The fundamental thesis is simple: management succeeds or fails, not on the strengths of individuals, but on the strengths of the team. Because individuals bring individual strengths, personalities, and thinking skills, the strength of a team depends upon the mix of people in it. The components Belbin particularly looked at were:

  • intelligence
  • extroversion/introversion
  • stability/neuroticism
  • dominance

What Belbin was able to do, was merge the many different psychological and aptitude factors into eight (later extended to nine) archetypes*, which he has carefully noted are not pure personality types. This means that one individual can fulfill more than one of the team roles and, indeed, this is often desirable. Belbin found that the most successful teams had a balance of all of the team roles, but also that teams of around five members are optimal.

Belbin’s later research and writings have been more anthropological and philosophical in nature and have failed to gain much traction. They seem neither as grounded in empirical research as team roles, nor as practical in their application. However, Belbin’s place as a leading thinker is assured. Whilst other models of team roles have emerged – most notably that of Charles Margerison and Dick McCann – Belbin’s core ideas have stood the test of time, and the nine team roles he identified and the tools his company supplies remain the most widely used by management teams.

 


* ‘archetypes’ is my word, not his – and I do not intend it to suggest any particular affinity between Belbin’s work and Jungian archetypes. In fact, the primary psychometric instrument Belbin used in his research was Cattell’s 16PF.


Reg Revans: Action Learning

16 September, 2014

Reg Revans made one of the most significant contributions to management and leadership training. His influence continues to be felt, yet his name is comparatively unknown.

Reg Revans

Brief Biography

Reg Revans’ early life placed him alongside genius. Born in 1907, he attended Florence Nightingale’s funeral at the age of three and competed in the 1928 Olympic Games. He went on to study physics at University College London (BSC) and Cambridge (PhD), later working as a post-doctoral fellow with Nobel Prizewinners including Thompson and Rutherford. He found them to be brilliant teachers; not through their instruction, but because of their willingness to listen, question, and discuss. The Times obituary reports that Revans recalled Albert Einstein saying to him:

‘If you think you understand a problem,
make sure you are not deceiving yourself.

He left academia to work, first for Essex Council (as an education officer) and then for what became the National Coal Board (as Director of education), where he started to formulate his ideas about management training. In 1955, he returned to academic life as Professor of Industrial Management at The University of Manchester. There, he developed his ideas of what became Action Learning, based on a simple principle that he held to be fundamental: the key to better performance lay not with ‘experts’ but with practitioners themselves.

Revans’ Ideas

At the heart of his thinking was a belief that practitioners learn best when working together to help each other with their problems, and then taking their answers away and implementing them in the workplace. Revans distinguished between two complementary aspects of learning:

Programmed Knowledge

Knowledge conveyed by traditional pedagogy, lectures, classes, books, videos.  This is most valuable when the body of knowledge is well established, uncontested, and largely settled

Insightful Questions

Questions asked of experiences, at the right time, and considered with care, will yield new insights. This approach to learning is best suited to arenas where personal insights are most useful, where there is no fixed body of knowledge that commands a strong consensus, or where the situation is subject to constant change.

He expressed the learning process as an equation:

Learning (L) = Programmed Knowledge (P)
+ Insightful Questions (Q)

Action Learning

Revans designed the process of Action Learning to exploit the power of insightful questions to raise awareness and prompt meaningful action. The process is well documented elsewhere but is based on small groups (5-8 members) working together to solve real problems that each member of the Action Learning Set brings to the group. Participants focus on exploring answers to simple but deep questions like:

  • What do we really want to achieve
  • What is stopping us?
  • What could we do about it?
  • Who has knowledge (P) that we could use?
  • Who has an interest in solving the problem?
  • Who has the power to get something done?

Whilst Action Learning Sets initially benefit from a skilled facilitator, their modern incarnation as high functioning mastermind groups, learning loops and other similar structures do not always require a separate facilitator. As participants get used to the process, they can manage it themselves.

Here is a short (3 mins) video of Revans speaking about his ideas.

 


Susan Scott: Being Fierce

9 September, 2014

When I read Susan Scott’s first book, Fierce Conversations, it blew me away. Scott is not as well known as the other thinkers we have covered so far, but her insights will be extraordinarily valuable to anyone who seeks to manage or lead in an organisation today.

Susan Scott

‘Paying fierce attention to another, really asking, really listening, even during a brief conversation – can evoke a wholehearted response.’

‘In fierce conversations there is neither a struggle for approval nor an attempt to persuade.’

What is not to love in a book that is filled with practical and insightful guidance as to how we can truly draw success out of people, one conversation at a time?

Short Biography

Susan Scott grew up in Tennessee, and worked in training and executive search, before running executive think-tanks for fourteen years. In 2001, she founded Fierce Inc, to provide the kind of conversations and leadership training that are truly transformative.

Fierce Leadership

In her second book, Fierce Leadership, Scott challenges business best practices in a bold, pragmatic and fierce way. It is a thought-provoking read in which you will find six established ‘best practices’ challenged by alternative ‘fierce practices’.

‘Best’ Practice: 360-Degree Anonymous Feedback
‘Fierce’ Practice: 360-Degree Face-to-Face Feedback
Let’s have the courage to have fierce conversations with our colleagues..

‘Best’ Practice: Hiring for Smarts
‘Fierce’ Practice: Hiring for Smart + Heart
Why settle for smart IQ, when you could get IQ and EQ (Emotional Intelligence) together. Cognitive intelligence and emotional intelligence are not mutually-exclusive.

‘Best’ Practice: Holding People Accountable
‘Fierce’ Practice: Modelling Accountability and Hold People Able
Place expectations on people rather than set out to punish failings.

‘Best’ Practice: Employee Engagement Programs
‘Fierce’ Practice: Actually Engaging Employees
This is one of my hot topics (see The Influence Agenda) – we need to get out there and actually engage with all stakeholders.

‘Best’ Practice: Customer Centricity
‘Fierce’ Practice: Customer Connectivity
This is one of my hot topics (see The Influence Agenda) – we need to get out there and actually engage with all stakeholders. Oops – I think I already said that!

‘Best’ Practice: Legislated Optimism
‘Fierce’ Practice: Radical Transparency
This is a fierce exposure of the truth that allows people to recognise the need for solutions and quips them with the information they need to fully understand the problem.

Here is a short (4 min) video of Scott. She needs to get an invite to TED!

http://youtu.be/wQPCM40fb-s


Follow

Get every new post delivered to your Inbox.

Join 619 other followers

%d bloggers like this: