Tag Archives: Strategy

Niccolò Machiavelli: The Prince

For the last of our solo* Management Thinkers… and Doers, we turn to a thinker on leadership and a politician supreme. His thinking has influenced 500 years’ of politicians, and has been influencing managers since the term came to have a real meaning in the mid 19th Century.

Niccolò Machiavelli arguably saw far into his future, and his writings hold genuine nuggets of wisdom and debate for today’s generation of managers.

Niccolò Machiavelli 1469-1527

Niccolò Machiavelli 1469-1527

Short Biography

Niccolò Machiavelli was born in Florence, in 1469. At the time, Italy was just a set of small, frequently warring, states. Florence was ruled by the powerful Medici family, so despite his patrician roots, there were few opportunities for a talented young man. However, the regime changed and when, in 1498, Florence became a republic, Machiavelli secured a senior administrative post as Secretary of the second Chancery.

He served Florence for 14 years in roles we may now recognise as collectively politician, civil servant, and diplomat. During this time, he travelled widely around European courts and met with powerful people.

However, in 1512, after another of Italy’s persistent small wars, and with Papal politics underwriting them, the Medici’s regained control of Florence, and Machiavelli’s career in public service came to an abrupt end. But before the tedium of exile came a short interlude (that probably seemed very long) of imprisonment and torture.

After his expulsion, Machiavelli turned to writing and very soon (1513) produced the book for which he is best known, Il Principe, or The Prince. A large number of other political books followed, along with dramatic and historical works. After another 14 years of working his land and writing in the evenings, Machiavelli died, at the age of 58, in 1527.

His name and his work, however, persist 500 years on. I wonder how many of our contemporary thinkers on politics and leadership will achieve that.

Themes from The Prince that Touch on Modern Management

I’m not the first to think of this idea. In an out-of-print book called Management and Machiavelli, Anthony Jay examines just this. Let’s look at three areas where Machiavelli’s writing offers us some food for thought.

I am not, by the way, inclined to think he necessarily offers us the ‘right’ answers. After all, although he did not use the phrase ‘the end justifies the means’, he is very much associated with that level of political pragmatism. And we all know where that can lead in the wrong hands.

And finally, before I kick off onto three themes, I want to emphasise that Machiavelli’s conception of a ‘Prince’ is not one of a royal personage, with hereditary rulership rights. Instead,  it is one of a modern ruler who takes their place by election or power; rather like the modern day rulers of our corporations.

Personal Leadership

Above all, Machiavelli believed that skillful leadership is crucial for any endeavour to thrive. And yes, he does suggest that if you can’t have both, it is better to be feared than loved. But he also plays down the importance of luck and knowledge. He says it is often easy to gain power, but harder to hold onto it, and for that you need to be shrewd. Political acumen is still very much an essential part of managerial leadership.

But he also emphasises the importance of a well organised and well-practised team, so for him a shrewd organiser will trump a charismatic leader or a technocrat any day.

Corporate Structure

This is not to say that he didn’t see a role for technocrats. He was, after all, one of them himself. In the debate, still very current, between centralisation and decentralisation, he sees a need for skilled bureaucrats to go into the parts, and run them quasi-autonomously, because of the communication challenges the late mediaeval rulers faced.

However, there are limits to this quasi-atonomy. Machiavelli favoured bureaucratic structures where place-men run components of the distant territories, over federal structures of self governing territories. In the latter, he sees too much scope for these small leaders to build a power base and overthrow the overall ruler. In the bureaucratic structure, it is easier for the prince to exert control, and effectively divide and rule.

Two modern day examples illustrate these choices.

Berkshire Hathaway is a highly federal corporation. Each of its many divisions operates almost entirely autonomously. Its CEO and leadership team have total freedom to make the decisions they choose, to optimise their business. They can compete against one another, change direction when they need to, and need only provide the thinnest of reporting to the Berkshire Hathaway executive.

Honeywell also has a small (though nowhere near as small) centre. But its trading divisions are largely shells, served by highly technocratic functions. All the power resides with functional leads at multiple levels. Profit and Loss accountability may sit with general managers and managing directors, but their goods are designed by engineering verticals, their marketing sits with a marketing function, and cross brand sales teams sell their products.Look inside the ‘business’ that represents a go-to-market brand, and there’s little to see.

Corporate Strategy

Of course, both Berkshire Hathaway and Honeywell grew by acquisition, and Italian states grew in much the same way – but with more casualties. Machiavelli points out that subjugating a whole population is not easy. You cannot rule from afar, with the threat of oppression as your local implementation.

Instead, he tells us to swap in some of your most trusted people as key managers to replace those whom you cannot trust. Get them out of the way, and the rest of the population will fall in line, according to how well those managers meet the concerns of the populace.

And of course this leads us to every manager’s favourite quote from Machiavelli (you’ll see my own favourite next week).

‘It must be considered that there is nothing more difficult to carry out ,
nor more doubtful of success, nor more dangerous to handle, than to
initiate a new order of things.’


* We may add a few additional solo representatives to this list, from time to time, but with well over 150, we are starting to find new candidates of genuine quality thin on the ground. So we are going to turn instead to Management Pairs; thinkers and practitioners whose best work was done or is being done in collaboration. Watch out for that series to start in a couple of weeks.

Alfred Chandler: Business History

It’s just a few people who could claim to have invented an academic discipline, but one who could, with some justice, is Alfred D Chandler. He was a historian who studied business, and in so doing, he inferred large historical patterns that still inform our thinking.

Alfred Chandler

Alfred Chandler, 1918 – 2007

Short Biography

Alfred DuPont Chandler was born in 1918 into a Delaware family that had commerce in its blood. In one branch of his family was grandfather Henry Poor, of Standard and Poors, and in another was the duPont family. He studied for a Masters degree at Harvard College before the war, where he was a friend of John F Kennedy. After service in a non-combat role, he returned to Harvard to finish his Masters and earn his PhD with a study of Henry Poor and the coming of the American railroads..

An appointment to MIT allowed him to study more large corporations in depth. His analysis of duPont, General Motors, Standard Oil, and Sears Roebuck & Co led to the publication in 1962 of the first of his three most noteworthy books (among over 25 in total): Strategy and Structure.

He also worked for a while at Johns Hopkins University, before returning Harvard in 1970, as the Isidor Strauss Professor of Business History at the Harvard Business School. There, he wrote his second major work, 1977’s The Visible Hand: The Managerial Revolution in American Business. This exceptional work won Chandler the Pulitzer Prize for History, and was the first business book to be recognised with a Pulitzer Prize. The title is a deliberate reply to Adam Smith, whose ‘invisible hand’ is the market. We’ll see what Chandler was referring to in a moment.

In 1990, Chandler published the last of his three major books, Scale and Scope: Dynamics of Industrial Capitalism. In this he shows that it is not just scale of operations that bestows big economies and hence competitive advantage. It is also scope – capturing a diverse spread of markets early on. Uncharacteristically, Chandler looked to economics and borrowed the term ‘first mover advantage’.

Having retired from the Harvard faculty in 1989, Chandler continued to work, write and comment on changes in business, and was a visiting professor at numerous institutions. He died in May 2007.

Themes of Alfred Chandler’s Work

Chandler’s approach of wide-ranging comparative analysis to find historical patterns of evolution and change initially encountered a lot of resistance from the academic business community. These academics favoured using economic and quantitative analysis to build their theories, but Chandler was able to change many (though not all) attitudes. Today’s business school focus on case studies and the rise to prominence of academics and writers like Jim Collins.

Strategy before Structure

The primary thesis of Chandler’s ‘Strategy and Structure‘ is that strategy must come before (and therefore dictate) the structure of the corporation. His historical observations led him to conclude that market forces need to drive shifts in the way organisations evolve, and he was able to predict the increasing trend for decentralisation that continues, in the largest businesses, today.

More recently, academic and business commentators have disagreed. Tom Peters observes that it is structure that determines which strategy a corporation will select, and Richard Tanner Pascale argued that Chandler assumed that organisations act rationally. They don’t, and he also notes that organisational structures play a big role in shaping strategy.

Trust Gary Hamel to sort it out, by seeing the subtlety of the competing views. He notes that the two are intertwined: new challenges lead to new structures, and new structures present new challenges. He concludes:

‘Few historians were prescient. Chandler was.’

Arguably, Chandler is, along with Igor Ansoff, one of the founding advocates of the study of business strategy.

Professional Management

Chandler also charted the rise of professional management; first in Strategy and Structure and then, more fully, in The Visible Hand. He saw managerially led corporations in the US rise with the growth of the railways and the need for complex, geographically-spread, systems. These first arose within the railway companies, and then in the corporations that grew nationally, due to the opportunities that long-distance transport offered.

It was the visible hand of an organisation’s managers that replaced Smith’s invisible hand of the market as a major driver of the structure of a modern business.

Further Reading

I rarely cite another website for further reading about our Management Thinkers, but in this case, I am compelled by the excellence of the article at the Strategy + Business site. I have deliberately avoided borrowing from it. If you are interested in Chandler, this should be your next port of call.

 

Jean-Claude Larréché: Marketing Momentum

Why is it that some of the most successful companies spend surprisingly small percentages of their revenue budgets on marketing? The answer, if you think about it, is obvious: as total revenue income goes up, if you are a successful business, you get more bang for your marketing buck. They may be spending a lot, but the proportion is lower.

So, how do you get your business to this enviable position? The answer, says INSEAD Professor, Jean-Claude Larréché, is momentum. Some products do not need to be aggressively marketed to deliver superior sales performance: instead, their fit with customers’ needs and desires is so great, that they gain a momentum of their own.

Jean-Claude Larreche

Jean-Claude Larreche

Short Biography

Jean-Claude Larréché was born in 1947 and studied electronic engineering at INSA in Lyon, where he was awarded a bachelor’s degree in 1968. He followed this with an MSc in Computer Science at the University of London (1969), and an INSEAD MBA, in 1970. He then went on to research marketing modelling at the Graduate School of Business at Stanford University, where he was awarded a PhD in 1974.

Larréché’s research led him to develop a now widely used marketing simulation, MarkStrat, and his growing expertise in the modelling of how marketing works led to a non-executive appointment to the board of Reckitt & Coleman (now Reckitt Benckiser), that he held from 1983 to 2001.

In 1982, he returned to INSEAD as Professor of Marketing, becoming The Alfred H. Heineken Chaired Professor of Marketing in 1993. He continues to hold this role. Whilst collaborating in a number of books, Larréché’s most significant publication is his 2008 book, The Momentum Effect.

The Momentum Effect

Larréché differentiates between ‘upstream marketing’ and ‘downstream marketing’. Upstream marketing is designed to start the process of product or service awareness among appropriate prospects, and allow the business to refine their product or service offering, to meet potential buyers’ needs. You do this with customer insight and content marketing tactics. Downstream marketing is the communication and promotion that puts your products and services to the market, to generate purchasing intent.

The key, Larréché asserts, is to divert funds from downstream to upstream marketing, to ensure that you have a product or service that is so attractive to customers, that it creates its own momentum. The obvious example he cites is Apple’s marketing of the iPhone and iPad ranges.

Larréché’s book sets out his 8 component ‘Momentum Strategy’, which he summarises in a diagram like this one:

Twin Engines of Momentum - Larreche

Twin Engines of Momentum – Larreche

Here, Larréché separates out the design and execution (or build-sell-support) components of product development, giving equal weight to the two sides. He also shows these two components as interacting cycles. The cyclical metaphor is an important aspect to note: Larréché argues strongly for our continuing refinement of our offering, to continue to drive momentum.

Here is Larréché talking about his ideas in an InSEAD video

Larréché has transcended his earlier career focus on marketing. With The Momentum Effect, he is really talking about business strategy, and placing his ideas about successful marketing at the heart. You can get a real sense of this in this interview, where he answers some excellent challenging questions, including about how companies lose momentum.

Indra Nooyi: Flawless Execution

Indra Nooyi is neither a ‘business thinker’ nor a successful entrepreneur. She is a great example of talent and hard work combining to reach the top. As CEO of Pepsico, her leadership offers some great lessons for leaders and managers.

Indra Nooyi

Short Biography

Indra Krishnamurthy was born in Chennai (then, Madras) in southern India, in 1955 and studied Physics, Chemistry and Maths at Madras Christian College, earning her Bachelor’s degree in 1974. She then secured an MBA from the Indian Institute of Management Calcutta (now Kolkata), before working as a product manager in India for two international corporations.

In 1978, she moved to the US, to study for a Masters in Public and Private Management, at Yale. During that time, she also did an internship with leading consultancy firm Booz Allen Hamilton. When she completed her Master’s, she went to work for another consultancy, Boston Consulting Group, as a strategy consultant. She followed this by two further appointments in industry, before moving to Pepsico in 1994, as their Chief Strategist. 

With successful major projects to her name, she was promoted to President and CFO in 2001 and, when that continued, along with substantial profit growth, she emerged as the successful candidate for CEO and was appointed in 2006.

Five Business Lessons from Indra Nooyi

Nooyi’s success with the business has been won in the face of adverse market conditions. This offers us some important lessons.

1. Acknowledge Hard Truths

The first lesson is her early determination to face up to the hard truth that junk food and sugary drinks are unhealthy, yet these accounted for a large part of Pepsico’s business. Her alternative would have been to carry on regardless, and see her market fall away.

2. Embrace the Zeitgeist

Following on from this, she followed the trend of health awareness, rather than fighting it. Although the strategy has shifted again, Nooyi completely re-organised Pepsico’s business into three categories:   ‘fun for you’ (such as potato chips and regular soda), ‘better for you’ (diet or low-fat versions of snacks and sodas), and ‘good for you’ (items such as oatmeal). Now, she is embracing a new and more nuanced approach, evolving her strategy with the times.

3. Lead with your Strategy

As a former strategy consultant and Chief Strategy Officer, this may not be surprising, but it is a lesson. When she took over as CEO, sales were dropping substantially – for Pepsico and many of its competitors. She could easily have focused on stripping out costs and delivering profit for a few years and then, when all the fat was gone from the business (and much of the muscle too), she could have moved on, leaving the problem for the next CEO. But Nooyi set out a long term strategy that her board accepted. They also accepted that: ‘there will be hiccups along the way, but you have our support, so go make it happen.’ The effect on shareholder dividends has been pleasing to most.

4. Engage with Difficult Stakeholders

Pleasing to most; except, possibly to investor Nelson Peltz, who took the role of activist investor and called for a major demerger, that Nooyi rejected. She also saw it as a major distraction. But rather than fight it or ignore it, she chose to engage positively: the two sides agreed to appoint an adviser to Peltz’s Trian Partners as a ‘neutral’ nominee to the board. She was able to argue her case rationally, with a stakeholder who was now in a position to listen.

5. Demanding Standards

Finally – and Nooyi is far from the only person in our Management Thinkers series to have this characteristic – she exhibits total attention to detail and demands both flawless execution of the smallest details, along with a brutally rapid response to any shortcomings. This is especially so where the brand is at stake.

In her own words

There are some great videos of Nooyi speaking about herself and her work on the Makers website.

C K Prahalad: Strategy Reinvented

C K Prahalad was one of the giants among academics thinking about corporate strategy at the end of the twentieth century and into the twenty-first. It may be that his revolutionary ideas form a core of real global transformation in the years to come. Prahalad was instrumental in transforming our understanding of corporate strategy twice, during a sadly short academic career of only 35 years.

C K Prahalad

 

Short Biography

Coimbatore Krishnarao Prahalad was born in 1941 and grew up in Coimbatore, in the Southern Indian state of Tamil Nadu. He was an exceptional academic student, graduating high school three years early and gaining a BSc in Physics from Chenai’s Loyola College in 1960, at the age of 19. He joined Union Carbide, first as an intern and later was promoted to be its youngest manager. But he left in 1964, to join the first MBA class at the Indian Institute of Management (IIM), earning his MBA in 1966.

From there, he joined a manufacturing firm, Indian Pistons, which offered the stability to marry and start his family. But the call of the academy continued and in 1973, with his family, he went to the US and started his DBA research at Harvard – while his wife, Gayatri, started her master’s degree in education.

After Harvard, he took up a teaching post at IIM, and gradually acquired others, coming to base himself at the University of Michigan. There, he was recognised as the outstanding teacher in the business school. There too, he met doctoral student Gary Hamel. Together they built a combative rapport that generated the highly influential 1990 Harvard Business Review paper, ‘The Core Competence of the Corporation’.

They then developed these ideas into the best-selling book, ‘Competing for the Future‘. They continued to work together, and Prahalad also worked with other collaborators, perhaps most notably with marketing academic Venkat Ramaswami to produce ‘The Future of Competition: Co-Creating Unique Value With Customers‘, which looked at how some of the emerging big players on the internet were co-opting their customers to generate value for themselves and their peers.

Prahalad’s biggest idea was one that he worked on alone and only time will tell how successful it really is. Wondering how so many billions of people remain in poverty despite the apparent success of our best management and technological developments, he argued that the bottom 5 billion people by wealth still account for a potential market of over $10 trillion. He figured that addressing that market could equally benefit those people and the corporations that do so. His ideas and research were published in 2004, in ‘The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits‘.

Competitive Advantage

In throwing out existing data and process led theories of strategy formation, Prahalad and Hamel developed a simple model of how corporations can achieve competitive advantage. This simplification of their ideas is mine and any errors of interpretation I have introduced are mine too.

Step 1: Corporate Imagination

This is where corporate leaders visualise new markets and how to exploit them ahead of their competitors. They argued that to do this effectively, executives have to:

  1. get away from their natural focus on existing markets
  2. look for new product concepts
  3. be prepared to challenge radically their old assumptions about pricing (this idea would recur in Prahalad’s thinking about how to create markets at the Bottom of the Pyramid)
  4. lead customers by creating expectations, rather than follow them by meeting expectations

Hamel and Prahalad had little time for small scale intrapreneurial innovation. They advocated big, revolutionary changes in markets that would allow a corporation to dominate, such as:

  • adding wholly new functionality to your existing products
  • delivering your proven functionality through new products
  • using existing products to deliver functionality in new ways

To do this, they argue that an organisation must understand its ‘core competencies’ – the abilities it has to create and innovate by bringing together its skills, technologies, assets, and relationships in ways that dominate multiple markets by offering big benefits to customers in a way that competitors find hard to duplicate.

The threat of relying on core competencies, however, is two-fold. Firstly, it may cause market and product diversification into arenas where the corporation has insufficient depth of understanding or presence to be effective. This can lead to large failures. Alternatively, over-focus on core competency leads to a rigidity of thinking that is reinforced by a sense of comfortableness, and leads to a sense of complacency. Such circumstances lead to being replaced in your core markets by insurgent competitors.

Step 2: Implementation

Hamel and Prahalad’s focus on core competencies leads them to focus what they say about implementation on building up core competencies and their supporting infrastructures of assets, resources and technologies.

Step 3: Consolidate your Control of Emerging Markets

You do this through what they call ‘Expeditionary Marketing’ to understand how the parameters of feature-sets, performance, and pricing need to be balanced to penetrate, consolidate and dominate your market.

The Bottom of the Pyramid

How do you build a market among people who are too poor to buy your products? By re-thinking entirely how you deliver your products and the pricing model you use. Prahalad was able to find and research numerous case studies that show how corporations can do this successfully, to create:

  • Affordability – creating offerings that dramatically change what people need to pay and how they can pay for it
  • Accessibility – thinking carefully about the local context, rather than applying first-world distribution models
  • Availability – getting products to where they are needed, when they are needed, in a form that makes it possible for people to buy.

Hear Prahalad speaking about this and more…

You may also like…

The Strategy Pocketbook

David Maister: Trust and Professionalism

David Maister was described to me by a friend and colleague* as ‘the first good consultant’s consultant’. A former Harvard Business School professor, who hails from the United Kingdom, Maister carved out a niche as perhaps the most influential thinker about professional services and and the role of trust in business.

David MaisterBrief Biography

David Maister was born in London, in 1947,and studied Maths, Economics, and Statistics at the University of Birmingham. He went on to achieve a Masters in operational research from the London School of Economics and a DBA from Harvard Business School, in 1976. He then taught, first at the University of British Columbia, and then, from 1979 to 1985, at Harvard Business School.

During this time, he specialised in transportation and logistics. His books on the topic are now all out of print. He left academia to establish his own consultancy and started to focus on advising professional firms, like accountants, lawyers, marketers and consultants. This led to his keystone work, in 1993, ‘Managing the Professional Services Firm‘. This remains in print and a strong seller. Maister had found his niche. I came under his spell when given a copy of his 1993 book, ‘True Professionalism‘, while a manager at Deloitte. It was written for people like I was then: professional services managers, looking to build a career, a reputation, and a client portfolio.

Perhaps Maister’s most influential book, however, was his 2000 book (co-written with Charles Green and Robert Galford), ‘The Trusted Advisor‘, which introduced us to ‘The Trust Equation’. His last book (to date) is ‘Strategy and the Fat Smoker: Doing What’s Obvious But Not Easy‘. The subtitle summarises the book’s thesis succinctly. At the start of 2010, Maister announced his retirement, shortly after being awarded the Carl S Sloane Award for Excellence in Management Consulting. He now spends his time in his home town of Boston, having forsworn air travel, enjoying the arts with his wife. How unusual and refreshing to see a top business person enjoying a fulfilling retirement.

Five Inter-connected Ideas

I’d like to summarise and interpret some of Maister’s ideas and how they link together by isolating five inter-connected themes, and showing how Maister joins them up.

1. The Trust Equation

At the heart of ‘The Trusted Advisor’ is The Trust Equation, which Maister and his co-authors use to illustrate how the ‘four realms’ of trust interact, to answer questions like: ‘My client knows I am credible and reliable, so why doesn’t my client trust me?’. Trust (T), they argue is the result of four factors: Credibility (C), Reliability (R), Intimacy (I), and Self-orientation (S).

T = (C + R + I ) / S

But trust, they say, is not about knowing and it is not about tactics: it is all about attitudes and character. People will trust you if you show an interest  in them, demonstrate a genuine desire to help them, and have a low self-orientation – that is, you are less interested in yourself than in them. Excellence, Maister says, arises from acting according to agreed principles and values, which also build trust (through reliability – or being predictable in your ethical choices).

Here is the first link: A high trust business will experience high growth. Trust is the best business strategy.

2. Business Strategy

Maister observes that many professional services firms in the same market will often have near-identical strategies. So what will determine which one wins, competitively. Since they are all smart, it isn’t the choice of customers, products, services or marketing: it is the drive and commitment to implement the strategy effectively. And this comes from people and how the leaders of the business manage and lead them.

Here is the second link: To deliver a business strategy, you need energy, excitement and enthusiasm from your team

3. Management

Management is about people, passion and principle. Maister says that one-on-one management is the only real managerial activity, because this is the only way to properly engage with people. A manager’s agenda must be to create a great place to work, rather than working at building their own career: that will follow.

In an article published in 2002 (Business: The Ultimate Resource), Maister sets out 13 rules on which successful managers model their behaviour. I have selected some of my personal favourites:

  • Act as if not trying is the only sin
  • Act as if you want everyone to succeed
  • Understand what drives individuals
  • Know all your people as individuals

Here is the third link: Management is about doing what’s right over the long term for your clients and people. This is the route to great client service.

4. Client Services

Maister sees the world of client services in a fairly simple way. But his work has been able to justify this with logic and evidence. A manager’s role is to energise their people. These people will then serve their clients excellently. Clients will reward the company with their patronage and loyalty. This will lead to great financial performance.

So stop focusing on the financial results – they are a lagging indicator of what matters: focus on energising your people. Maister notes that formal systems, policies and procedures do little to build a business: what it needs is managers to use their informal influence on employees, and demonstrate honour, character and integrity.

Here is the fourth link: Honour, character and integrity are the foundations of a meaningful career

5. Career – Professionalism

True Professionalism was where I started with Maister, and his subtitle neatly summarises Maister’s point of view: ‘the courage to care about your people, your clients, and your career’. His definition of professionalism takes in four critical commitments:

  1. to provide the best, most effective services to your clients
  2. to self-improvement
  3. to caring about your clients
  4. to not compromising your values

Here is the final link, back to the start: Not compromising your values is the key to ‘values in action’. Without this, there can be no trust.


* Michael Coleman, who sadly died in September 2011.

Henry Mintzberg 2: Management Thinker

This is our 250th weekly Management Pocketblog.
We’re looking forward to the next 250!

In last week’s blog, we started our exploration of Henry Mintzberg, Gadfly Generalist. In this second blog, I want to examine two other aspects of his work: the way organisations are structured, and how they think strategically. But first, I feel the need to add in, gratuitously, another of Mintzberg’s more memorable quotes.

Mintzberg Delayering

Mintzberg on The Structure of Organisations

Mintzberg has visited this topic twice: in his 1979 book, The Structuring of Organisations, and then again, in 1989, in Mintzberg on Management. His earlier work identified five archetypical organisational structures or types, which he later revised to six.

  • Entrepreneurial Organisations are small, informal, with loose allocation of roles, but frequently strong leadership from a single chief executive.
  • Machine Organisations are excellent at repetitive tasks like manufacturing, placing efficiency of process at their heart, and formalising everything.
  • Diversified Organisations create a central administrative function to serve a range of operating units that are more or less autonomous. The degree of autonomy seems to vary in cycles with the current cycle creating a high degree of centralisation. See the earlier article, Kenichi Ohmae: Irrational Strategy.
  • Professional Organisations might also be called knowldege organisations. They use the skills and knowledge of their highly trained workforce to deliver fairly standardised services.
  • Innovative Organisations are flexible, informal and multi-disciplinary, allowing them to adapt and innovate. Mintzberg saw these as increasingly succeeding over competitors in the future.
  • Missionary Organisations have a clear mission that provides the basis for strategic choices and the motivation for employees.

Mintzberg on Adhocracy

I am going to make more of this than it may strictly deserve, as it is just one of very many topics on which Mintzberg writes. But it is one that interests me, especially with the emergence in recent years of the concept of holacracy, which seems a natural successor.

The term was, I think, first coined by Warren Bennis and then taken up and popularised by Alvin Toffler in his book, Future Shock. An adhocracy is a way of governing an organisation, not through formal structures, but through informal networks in which individuals take on the roles that are needed at the time. Such organisations are fluid and undocumented and unstructured knowledge has a high value.

Mintzberg developed these ideas, advocating small scale, temporary organisations coming together within the larger whole, to deliver a project, or one product or service, or to serve one customer. He saw two models:

The Operational Adhocracy, which works on behalf of it clients, like service businesses such as consulting

The Administrative Adhocracy, which comes together to serve its parent organisation.

Both of these models are excellent at creating adaptability and reacting to changes in circumstance. Consequently, both are poor at strategy building, because members have little investment in the adhocracy’s long-term development.

Mintzberg on Organisational Strategy

Mintzberg has made several influential contributions to thinking about organisational strategy too. His most notable influence has been, like Ohmae, to advocate non-linear, creative thinking over formulaic, analysis-driven strategy development. Once again (see last week) Mintzberg’s HBR article on the subject is very widely read and, once again, the enterprising reader could find a copy notwithstanding HBR’s copyright if you chose to. His books on the subject include: Rise and Fall of Strategic Planning (1994), The Strategy Process (1996), Strategy Safari (1998), and Strategy Bites Back (2004). Many of these are in revised editions and remain valuable today.

He sees three major pitfalls in traditional strategy making and rejects any assertions that our volatile, uncertain times are anything special – try telling that to people in Stalingrad during the Second World War, he says. All people at all times have seen their world as complex and uncertain.

Mintzberg’s three pitfalls are:

  1. Assuming that we can predict discontinuities. We tend to assume, implicitly, that the future will flow from the past and that changes will arise from trends. This is a theme that Nassim Nicholas Taleb has recently made his own, with his best selling book, The Black Swan.
  2. Planners are often detached, in the ivory planning towers, from daily realities. They are focused on the hard data and its analysis and miss out on the soft information that would alert them to big shifts. This says that operational managers need to be highly engaged in any strategic work.
  3. A belief that formal strategy development can follow a linear process. Instead, he argues, creative, divergent thinking is needed, which can make links outside of the logic-chain, subverting established categories and dogmas.

So, to end this exploration of Mintzberg’s thinking, one last, telling quote.

‘The real challenge in creating strategy lies in detecting the subtle discontinuities that may undermine a business in the future. And for that there is no technique, no program, just a sharp mind in touch with the situation.’


Pocketbooks you might enjoy

I am a little loath to include a book on the process and tools of strategy, but it is a good book and I have included it alongside others on creative thinking!