For B39C4 - All about "Business Strategy" in a nutshell

WHY STUDY STRATEGY

If you are already performing the 5 basic tasks of a manager ( Planning, Organizing, Commanding, Coordinating and Controlling); why study strategy ? 

Many of you are held responsible for the output of your team consisting of several people - who are working in their different locations - and facing their own situations.- and some of them may not even be reporting to you! How do you get work done from such a team particularly when the circumstances are changing fast? 

It is not possible to micro-manage such a diverse group by giving them instructions for everything on a day to day basis. Even if it was possible the team will feel demotivated because you are not permitting them to exercise their own capacity of organizing themselves, feeling responsible and empowered, letting them show their judgement and creativity.

That is where the study of strategy comes into picture : it is one of the best ways of showing your ownership and purposefulness to both your subordinates and the bosses.  

THE BASIC STEPS
THE PROCESS OF FORMULATION OF STRATEGY FOR A BUSINESS UNIT , FOR A GIVEN TIME PERIOD,  CONSISTS OF 3 STEPS 

1. SITUATION ASSESSMENT involves studying your current circumstances - in terms of external and internal forces - so that you can forecast the circumstances that are likely to prevail during the future time period you are developing  strategy for. 
2. STRATEGIC OBJECTIVES involves deciding the scope and purpose.  Scope means  deciding what activities you will do (and will not do). PURPOSE means what you want to achieve by deciding to put your resources behind.   
3. STRATEGY FORMULATION involves deciding how you wish to organize yourself internally by creating a way of engaging and coordinating with all operating stakeholders so that your resources are developed and deployed towards  your  strategic objectives. The ultimate aim of doing all this is to achieve better returns from your resources than your competitors.

Such a formulations of strategy provides a strong sense of purpose to all the stakeholders without them feeling that they are over-directed (micro-managed). When good people are over-managed, they tend to lose their ability to organize themselves through their initiative, creativity and motivation. Thus, formulating a strategy and implementing it seems to achieve a good combination of central direction and self initiative of people down the line.

(It is interesting to note that the strategy as a discipline emanated from the science of war where your soldiers and support functions are spread all over various geographies and are facing their own situations and enemy formations and yet you need to command them and achieve the objectives you have set for yourself. You cannot know where exactly everyone is, you do not know the type of enemy each one is facing, you do not know what resources your soldier has at the moment, you do not know the condition of your person in the battlefield and you do not know when the circumstances will change. You CANNOT micro-manage the soldier's activities and yet you are responsible to win the war. Famously, Napoleon is said to have told his senior leaders in the army; "I am paying you not to obey  me but to know when not to listen to me because I cannot see the battleground as clearly as you can")

In a true sense, strategy is more of a process than a document because it is not difficult to produce a strategic plan document without really going through the process of formulating the strategy. Winston Churchill once said; "planning is everything; a plan  is nothing".  Formulating and implementing a strategy is all about influencing the minds of the people in the organization than about creating a strategic plan document and circulating it to all. 

BEST SITUATION exits  when the strategy is backed by the stakeholders of the organization, when it is systematically formulated based on an analysis of both external and internal environments, when it is explicitly documented, and when it is reviewed and corrected frequently. The strategy is in the minds of not only the senior people in the organization but in the minds of all the peoplke in the organization because they have contributed to its formulation.There exists a good consensus amongst the people of the organization based on discussions and agreements. A written strategic plan exists for common reference and benchmarking and it  is used to set budgets and Key Performance Indicators and linked to the operating targets of the people. It is frequently (at least half yearly) reviewed and corrective action is taken.

WORST SITUATION : Even if there is a document called "Strategic Plan" in place, it is useless if (a) it is not based on analysis of the environment (b) the goals are set without reference to the environment or the resources (c) there is no consensus in the organization on goals, scope and deployment of resources.  In this case the strategic plan is only on paper. Nobody believes in it and hence nobody will follow it willingly. 

LACK OF STRATEGY MEANS LACK OF PURPOSE AND DIRECTION AND HENCE WASTE OF TIME, ENERGY, COST

• Self-starter employees and stakeholders will not know what direction to go in and may therefore  come up with unwanted proposals - using their time and energy - which will (naturally) get rejected - which reduces the morale of the people down the line
• Also, when people are left alone without a central direction, they tend to go into many (trivial) directions rather than focusing energies on few (vital) directions. 
• Due to all this, management tends to get frustrated by these things and, instead of providing strategic direction, resorts to over-managing (micro-managing) employees by increasing supervision. This increases costs and reduces the morale.
• Without strategy, there is no long term view and long term decisions  get taken without the benefit of such a long term view. This prepares the ground for more shocks in future when the (unforeseen) future arrives and hits the business in face.

KEY QUESTIONS ASKED / ANSWERED 
IN THE PROCESS OF STRATEGY  FORMULATION

Many of these are interconnected questions between resources, goals and scope.

• RESOURCES : This is a natural starting point because that's all that you have at your disposal and a central concern of strategy is how to allocate / deploy these resources to various objectives so that you get the most results out of them. Your resources can be tangible (financial and physical) or intangible (human, structural and relational) 
• GOALS AND PURPOSE :  A strategy is a bridge between changing dynamics of the environment and changing stakeholders / expectations. A central concern of the strategy is getting it right the first time and then maintain adaptation .  You need to become aware what is possible (and not possible) to be achieved, how many different objectives can be achieved simultaneously, how ambitious you want to be on each of them.  There are so many combinations of goals possible and you need to choose and be clear what you want to achieve and by when. SCOPE : outlines what you will not do and hence the boundaries within which the goals are to be achieved

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You may be performing all the 5 basic managerial tasks (planning, organizing, commanding, coordinating and controlling) but are you performing them strategically?

What is the meaning of performing these tasks strategically?  It means to recognize that each business is unique - it operates in its own unique environment - and pursues its own unique goals - and has its own set of resources, constraints and compulsions - and hence its actions need to be unique by design. In other words, blindly following someone's prescription or doing something because it is fashionable is not being strategic. 

A company which behaves strategically follows DDDD loop : Discover, Diagnose, Design, Deploy route. All the major actions (deployments) of a strategic company are based on study and analysis (discover), thinking about what needs to be given for the desired output (diagnose), designing those inputs (design). These are the hallmarks of the strategy.     

Example of strategic and non-strategic statements

• Non-strategic : "In the wrench making business that we are in, the largest company in the market XYZ has changed the material specification of their wrench from cast steel to forged steel hence we should also do the same"
• Strategic : "We have analyzed the recent change in the material specification of XYZ and we have concluded that they have done it mainly because their major customers are the auto industry which finds that cast tools get deformed faster leading to increase in on-line defects. However, our main customers are domestic users and plumbers and hence we do not want to undertake the change. In fact we expect XYZ to become 8% costlier as a result of the change but our costs will remain the same and hence our customers are likely to see us more favorably"

Strategic companies approach an activity with DDDD model

• Discover : How well does the company know its ext / int environment
• Diagnose : How does the company decide which activitiesw to do and not to do
• Design : How well and SMART are activities planned  
• Deliver : are the activities implementable  

The word "Strategically" means having a long term purpose and short term goal in mind which has been decided keeping in mind 2 things (1) landscape (circumstances) under which we shall operate (2) outcomes and results we desire - and then planning inputs and actions in a deliberate fashion keeping these in mind.    

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THE NEED FOR A STRATEGIC THINKING IS FAR LESS WHEN

• the business is technically simple and most can understand it 
• the interaction with the customers and their feedback is visible,
• the extent of support of various stakeholders is known to most
• the decisions do not require a large commitment of resources 
• the environment does not change rapidly so that risk and uncertainty is visible
• the competitive landscape does not change rapidly
• the geographic, technology scope of business is small
• the employees perform general duties and know what is going on
• the employees can see most of the things for themselves

THE NEED FOR A STRATEGIC THINKING IS FAR MORE WHEN

• the business is technically complex and beyond most people's understanding  
• the interaction with the customers and their feedback is unknown to most
• the extent of support of various stakeholders is unknown to most
• the decisions need large commitment of resources 
• the environment changes rapidly so that risk and uncertainty is visible
• the competitive landscape changes rapidly
• the geographic, technology scope of business is vast 
• the employees are specialized and departmentalized and do not know going-on
• the employees cannot see most of the things for themselves

DOES FORMULATION OF A STRATEGY ENABLE SUCCESS?

Nothing in life “guarantees” success. But strategy formulation does help greatly in the strategy being a vehicle of inter company communication, binding and unification within the company and helps bring everyone on the same page and show them the same common direction and thus helps build a consensus on the broad direction for the future. This in trn helps enables the “emergent strategy” being closer to the “intended strategy”.

1. Gives a strong sense of common identity / purpose
2. Tells people collectively “what are we here for”
3. Enables people judge how they / department / company is doing
4. Helps people work towards right things
5. Helps people avoid effort in doing unwanted things
6. Provides a common language for performance conversations
7. Enables long term decisions : capacity, investments, locations, people, systems

DEFINITION OF STRATEGY

Since we shall address how to perform various tasks, we will use a task oriented definition of strategy in the course : "Analysis, Planning and Managing of major initiatives taken by your company's top management - on behalf of its various stakeholders - regarding how it develops and deploys resources and competencies - to selected issues in its chosen environments - to improve the performance of the company. This includes (a) how it chooses the organization's mission, vision (b) how it sets the objectives (c) how it developes policies and plans -  often in terms of projects and programs designed to achieve these objectives (d) how it allocates resources to implement these policies and plans, projects and programs (e) how it tracks the strategic performance of the company (in terms of balanced scorecard model)”

HOWEVER THERE ARE OTHER PERSPECTIVES

AND DEFINITIONS OF STRATEGY

The "strategy" word is used with multiple meanings  

1. Strategy as a plan : collective and documented intention : direction, course of action
2. Strategy as a ploy : a maneuver intended to outwit a competitor/s
3. Strategy as a consistent pattern : of past behavior / intended future behaviour  
4. Strategy as a position : within conceptual frame of stakeholders /environment
5. Strategy as perspective : determined by a master strategist / team

Other definitions of strategy

1. "Managing business with deep awareness of underlying purpose"
2. "An underlying pattern in a stream of decisions".
3. "Determining of basic long-term goals and objectives of an enterprise, examining various possible courses of action, selecting them, using the selected ones to decide allocation of resources, so that the goals are met"
4. "A long term direction set by the management - to satisfy the stakeholders sustainably - by choosing which aspects of external environment it will respond - in what way - and how it will develop and deploy its internal resources and competencies to do so". 
5. "Strategy provides clear guidance for taking long term decisions regarding capabilities, medium term projects and short term operations".
6. "strategy is about gaining competitive advantage or best exploiting emerging opportunities. As there is always an element of uncertainty about the future, strategy is more about a set of options ("strategic choices") than a fixed plan".
7. "Giving clarity of direction to the troops so as to focus their effort towards the right goals and yet give them enough empowerment regarding how they want to do it without straightjacketing them into a plan". 

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HOW MARKETING STRATEGY (WHICH YOU ALREADY KNOW) 
DIFFERS FROM THE BUSINESS STRATEGY 

The class seemed to know it well and drew the process view of marketing on the board sequentially as follows

• Starting with situation analysis (technique : 5C analysis)
• Followed by strategy formulation consisting of 3 components
• selecting the target market (technique : market attractiveness index)
• developing a value proposition (technique : positioning)
• developing route- to-market (technique : selection of sales channel & process)
• Arriving at marketing mix based on the strategy ( template : 7Ps)
• Acquiring and retaining customers
• Result (Outcome) of marketing : (Profit and Customer satisfaction (simultaneously))

THE HIERARCHY OF STRATEGIES

The major preoccupation of the marketing strategy is to how to allocate company resources to front-end activities to generate value for the chosen customers and how to capture a part of it through value capture. The basic unit of discussions regarding marketing strategy is a "PxM" ( Product x Market ) combination at the front end of the business. 

The major preoccupation of the business strategy is how to allocate company resources to both front-end and back-end activities so that both the front-end and back-end work together in a mutually reinforcing and efficient way to make the company sustainably competitive. The basic unit of discussions regarding business strategy is a complete combination of front end (PxM) and associated back end.

The major preoccupation of the corporate strategy is how to allocate company resources to the multiple businesses that may exist under the company banner. Which of these businesses to invest in, which to maintain and which ones to downsize, re-scope or exit. Corporate strategy is also about which tasks to consolidate centrally and which ones to decentralize. 

WHAT MAKES A COMPANY 
STRATEGICALLY SUCCESSFUL ?

The answers seem to come from two sides 

External side : Key assumption being that you will succeed if you are in the right competitive position (not to be in a highly competitive industry where revenue or margins will be under threat and hence your resources will produce less result) in the right industry (a large and growing industry where your internal resources and competence can make a difference).   

Internal side : Key assumption being that you will succeed if you have the right resources (physical, financial, intangible) which are (a) of value when operating in the competitive position you are in your chosen industry (b) not easy for your competitors to imitate (c) available to you on a sustainable basis.  

The truth, of course, is that both are required to succeed : you need to choose the right industries to operate in, get into the right positions in these industries and finally you need to build the right capabilities within your company. 

APPLICATION ASSIGNMENT

Setting strategic agenda : take up the case of your whole company - or any one of the business divisions (not departments) - and using the techniques taught in the class identify 5 areas of action and prioritize them. You may refer (click here) or you may refer to the simple method of CONICS

• Capitalizing on which opportunities should not be missed by us
• What obstacles need to be overcome
• Neutralizing important threats
• Scaling up and improving the areas where positive performance already exists
• Correction of those weaknesses that are coming in our way
• What  problems must be solved 

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STRATEGY FAILS 
IF PEOPLE DO NOT UNDERSTAND IT

Without communicating the strategy clearly: The people won't know where the organization is going, or how to help you get there. They'll probably get frustrated and confused; customers may feel dissatisfied; and other stakeholders may lose their faith in your organization's ability to deliver. 

So your business needs both effective strategic planning as well as a good communication of strategy.  Just as a map is more effective than a list of directions, so in strategy "Pyramid of purpose" is more effective than a big document.

The strategy essentially answers why are we doing what we are doing? What do we need to do to fulfill our intended purpose? How exactly are we going to do what needs to be done? Who (or what) is going to make sure it's done?

A hierarchy of questions emerges: In order to answer question 4, you need to answer question 3; to answer question 3, you need to answer question 2; and to answer question 2, you need to answer question 1. 

• Question 1 – "why" – refers to your organization's values, mission, and vision.
• Question 2 – "what" – covers objectives and goals.
• Question 3 – "how" – refers the actions needed to realize these goals.
• Question 4 – "who" – refers to the people, systems and tools which deliver these.

How to build your own Pyramid Of Purpose

STARTING POINT

If the purpose is to communicate strategy to customers and stakeholders of your organization (an external audience), a good place to start your pyramid is with a vision statement. For an internal audience, the "why" level might focus on the mission statement, or indeed include both vision and mission statements in your pyramid.

("Mission" and "Vision" are different jobs. A Mission is the organization's purpose and is to be used by the leadership team and owners as the key measure of success. A vision also defines the purpose but in more inspirational / value terms rather than in terms of bottom line.  The vision statement communicates both the purpose and values of the organization. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with customers, it shapes customers' understanding of why they should work with the organization. Mission Statements and Vision Statements usually refer to an organization or an organizational unit) 

An entrepreneur explains his strategic plan to potential investors as a Pyramid 

1. Why: Vision / Mission : To delight and enthrall parents and children alike with beautiful, collectable, wooden toys and games, and in so doing, become the nation's leading retailer of high quality, wooden toys and games.
2. What: Objectives : Prove the concept by launching a pilot store and reaching profitability within 18 months.
3. How: Actions : Identify the pilot store location, Source good quality wooden toys and games, Design attractive store front and merchandising approach
4. Who: People : Responsible for location selection; Responsible for supplier identification and product sourcing; Responsible for selecting store designers and shop fitters;

Once you have described the "why", the next steps of building your pyramid must define the "what", then the "how" and finally the "who". And you need to do this in a way that clearly explains your strategy to your specific audience.  putting the various elements of a good strategic plan into a pyramid form, it is easy to see the "big picture" and relationships between different elements of the plan in a form that is easy to understand: The purpose shown at the apex cascades from one level of strategy to the next. There are no hard and fast rules for building a Pyramid of Purpose: Use it to convey your plan in the way your intended audience is most likely to understand.

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Is your strategy well-stacked (cascaded) ?

How Organizational Activities Deliver Your Vision ?

Is your team headed in the right direction? Is everyone working together, towards the same objectives? Do your objectives reflect your ultimate vision? And will your day-to-day activities help you achieve that vision? 

It's easy to focus so much on day-to-day activities that you lose track of your original business plan. Strategies become redundant or unnecessary, vision and mission statements lose relevance, tactics may not lead to the results you want-and you may not even realize that you've inadvertently changed direction. VMOST is an analysis framework that helps you avoid this trap by checking whether the five VMOST elements – Vision, Mission, Objectives, Strategies, and Tactics – are in alignment.

The tool serves two purposes. First, it helps you re-connect to your business vision, and highlights any problem areas that you need to address. Second, it helps you create and evaluate plans for the future, so that you can make sure that they're aligned with your vision of that future.

Understanding the VMOST Tool

1. Vision – This is your organization's purpose, in terms of its values or how it goes about doing business. It should inspire staff, and help customers understand why they would want to use the company's products or services.
2. Mission – This is also your organization's purpose, but expressed in terms of key measures that must be reached to achieve your vision.
3. Objectives – These are specific goals that you must meet to achieve the mission.
4. Strategy – This is the overall plan you'll follow to meet your objectives.
5. Tactics – These are specific sets of actions needed to execute your strategy.

Looking from the top down, you need alignment because a clear vision drives the mission – which, in turn, lets you set your objectives or goals to achieve that mission. You design strategies to meet your objectives, and you implement your strategies with specific tactics or activities. Looking from the bottom up, your tactical actions should fulfill your strategies, which help you meet your objectives, which help you accomplish your mission, which, in turn, helps you realize your company's overall vision.

How to Use the Tool

To conduct a VMOST analysis, you need to determine whether all five VMOST elements are in alignment, both from a top-down and from a bottom-up perspective. Go through each step below to check how well the VMOST elements fit together in your situation.

• Step 1: Choose the scope of your analysis. Do you want to assess how well your whole organization's day-to-day activities contribute to its vision? Or do you just want to focus on your own contribution, or that of your team?
• Step 2: Collect the five sets of information for the scope you chose in Step 1:
• Vision statement.
• Mission statement.
• Key objectives.
• Strategy document.
• Tactics used to deliver that strategy.
• Step 3: Answer the following questions:
• Do the key measures in your mission statement fit the values described in your vision statement?
• If you achieve the objectives, will the measures in the mission statement reach the levels described in the mission statement?
• Does your organization's strategy support the achievement of the objectives?
• Will your tactics deliver the strategy?

If the answer to every question in Step 3 is yes, you can be reassured that you, your team, or your entire organization – depending on your scope from Step 1 – contributes to your overall vision through your day-to-day activities.

However, if you answered no to any of the questions in Step 3, you need to adjust or redefine one or more of the VMOST elements. For example, if the tactics will not deliver the strategy – and if no tactics you can identify will deliver the strategy – you'll need to reconsider everything else.

The Hoshin Planning System

Steering Everyone in the Right Direction 

The challenge faced by many people in the organizations of today is that there is a strategic destination they're all supposed to reach but they don't always have a convenient device to help them reach their objective. Sometimes individuals, teams, and even whole departments can get so far off course that they seem not even to remember what the final destination was supposed to be! This is where it's useful to have a system to co-ordinate different parts of your organization and keep them on course. One such system is "Hoshin Kanri."This approach aligns all parts of an organization to accomplish an important objective.

The Hoshin Process

1. Select a key objective.
2. Aligns implementation plans at all levels.
3. Implements, reviews, and improves the plan on an ongoing basis.

The process of hoshin planning follows Deming's Plan-Do-Check-Act cycle. In fact, PDCA is an influential tool that was used to create Hoshin Kanri. PDCA is a generic method for continuous improvement, which is what hoshin planning aims to be. Below, we've shown how the various steps of Hoshin Kanri align with PDCA.

Step 1: (Plan) Define What You Want to Improve

This is most often a key strategic objective that needs a significant change in how things are done. 

Step 2: (Plan) Establish Sub-Goals to Achieve Your Objective

• What organizational (or team/functional/departmental) goals for the year are need to achieve this objective?
• What checkpoints are necessary to keep the goals on track?
• What controls can you put in place to ensure that the goals are successfully reached?
• How will you measure progress and evaluate success?

Record these, and use them as the basis for your review process.

Step 3: (Do) Communicate the Plan

• Communicate your plan throughout the organization.
• Ensure that all levels of the company understand your vision and goals.
• Have each department and team set its own goals to link directly to the objective and the sub-goals you've established.
• Make sure that managers in these departments and teams "ripple goals down" so that everybody knows their part in the plan, and is using the Hoshin process to manage the people who report to them.
• Assign clear responsibility for each item in the implementation plan.
• Make sure that you have agreement on all items within the plan with all of your reports, and make sure that this agreement has rippled down as well.

Step 4: (Check) Develop a System to Collect Information on Your Control Parameters, and Then use it to Manage Change

Are your key metrics being met? If not, why?

Create a review table that shows the:

• Goal.
• Goal owner(s).
• Time frame.
• Performance metrics.
• Targets.
• Actual results.

Then use this table to manage movement towards these goals on an ongoing basis.

This "check" step ensures that your plan is a living document. It doesn't just sit on a shelf to collect dust once it's finished. Hoshin planning is based on the idea that to reach your strategic goals, the company needs to be in a constant state of reflection and evaluation.

On your review table, note any differences between the target and actual performance. This information will be used for subsequent plans, because Hoshin planning builds in levels over time. The plan you create this year will be used as the basis for next year's plan.

Step 5: (Act) Analyze Results, and Take Corrective Action Where Needed

If there are any differences between expected and actual results, identify the sources of those differences. Discuss these, organize corrective action, and implement this action.

• What is going right?
• What is going wrong?
• Do the plans meet the realities of your business and the problems you face?
• Are measures appropriate?
• What can be done better, or differently, to reach your destination?

This stage of the process ensures a system of continuous improvement. To keep moving the company toward its vision, review the plans not just once a year, but on an ongoing basis to determine how daily work should be done. With this review (or act) step, you can ensure that plans continually evolve to take into account a changing environment.

Step 6: Repeat the Process as Needed

This process can be cycled over and over to maximize the quality of your efforts. It can also be used within your various business units, functions, and teams to ensure that their specific strategies have the same goal alignment and commitment to continuous improvement.

Tip 1:

A tightly controlled approach like this only suits certain situations and certain industries. Use your best judgment when applying this tool to your own situation.

Tip 2:

Peter Drucker's Management by Objectives (MBO) was very influential in developing Hoshin Kanri. The idea of various levels of organizational objectives, from management down to the workers, is a fundamental part of hoshin planning.

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Seven Strategy Questions  you should not miss

1. Who Is Your Primary Customer? These are the customers to whom you should devote most of your company's resources.
2. How Do Your Core Values Prioritize Shareholders, Employees, and Customers? Real core values indicate whose interest comes first when faced with difficult trade-offs. Prioritizing core values should be the second pillar of your business strategy. Most companies with whom I deal would answer "Customers of course". But in practice, it is often not the case. There is no right or wrong, but choosing and consistently sticking to your choice is necessary.
3. What Critical Performance Variables Are You Tracking? It's your job to ensure that your managers are tracking the right things by singling out those variables that spell the difference between strategic success and failure. Like the preceding two questions, the focus in this question is again on the adjective "critical". These variables should tell where the company is going, unlike your accounting statements that tell you where you've been.
4. What Strategic Boundaries Have You Set? Strategic boundaries, which are always stated in the negative, ensure that the entrepreneurial initiative of your employees aligns with the desired direction of the business. I prime example of failing to do this was the Enron experience.
5. Are You Generating Creative Tension? Sustaining ongoing innovation in organizations is notoriously difficult. People fall into comfortable habits, sticking with what they know and rejecting things that cause them to change their ways. Yet without innovation in a world characterized by rapid change, the company will eventually wither and die. To overcome such inertia, you must push people out of their comfort zones and spur them to innovate. The author shows how to accomplish this.
6. How Committed Are Your Employees to Helping Each Other? This is a lot of what teamwork is all about. If your organization requires teamwork to succeed (and I believe that most do), then it's critically important to build norms so that people will help each other succeed—especially when you're asking people to innovate.
7. What Strategic Uncertainties Keep You Awake at Night? No matter how good your current strategy is, it won't work forever. So adapting to change becomes imperative. Adapting is critical to survival, but it's extremely difficult to do. With change constantly surrounding us, employees often do not know where to look or how to respond. 

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Birkinshaw's Four Dimensions of Management

Developing an Appropriate Management Model

Price, specialization, quality, and service – these are just some of the ways that you can gain an advantage in your industry. But have you ever thought that you could be more successful by tailoring your organization's approach to management to fit your business strategy? You can explore this with the "Birkinshaw's Four Dimensions of Management" model. We'll look at the four dimensions in this article, and we'll explore how you can use them to develop a more effective management model for your business.

About the Four Dimensions

Each dimension has two opposing principles – these principles are "assumptions or beliefs about the way something works or should work." These principles underpin the routine actions that your organization's managers take. The principles on the left side of each dimension are traditional principles: these are the approaches to management that organizations have used for many decades. The principles on the right are alternative principles: these are newer ways of thinking about management.

Managing Across: Activities

How managers coordinate activities with people over whom they have no direct control.  

Bureaucracy :

• what is it : uses formal  rules, job roles, procedures, formats and rules to get things done and to acheive predictable results.  
• Plus : important when you work with risk ( health or safety) . 
• Negative : makes change difficult and may stifle initiative, creativity, flexibility, and autonomy and may also disengage and demoralize people. 

Emergence :  

• what is it : leave it to people to organize themselves, work independently, and take appropriate decisions and action quickly. For this you need to assume that people are self motivated and enabled. 
• Plus : People  Emergence leads to innovation and creativity, as well as to higher morale and better engagement.  
• Negatives : The downside of emergence is that, unless effective structures are in place, teams and organizations can feel chaotic and disorganized. People can lose focus because there are too few boundaries and rules in place, and they can end up taking actions which are rational from the team's perspective, but are harmful from a big-picture perspective.

Managing Down: Decisions

This dimension relates to how people make decisions in the organization. The principles are:

Hierarchy :  

• what is it : Hierarchy is based on authority and power. Senior managers make decisions, as they are perceived to have more expertise and a better view of the big picture than subordinates.  
• Plus : Hierarchy can motivate people to work hard in the long-term, because they want to move up to more powerful positions in the organization. It can also be effective for assigning accountability, organizing work, and handling decision making, especially in larger organizations. 
• Negatives : "the boss knows best," is not always true. It can block upward communication within the organization, and this can lead to poor decision-making by powerful people. Management based on hierarchy can also lower morale and engagement if managers don't listen to and support to team members, or if they don't give people credit for their contributions.

Collective Wisdom :  

• What is it : people across all levels of the team and organization contribute to decision-making, and work to solve problems collectively. 
• Plus : This improves morale and engagement, and leads to better decisions when knowledgeable people – for example, customer-facing staff – are involved in the decision-making process. 
• Negative : The disadvantage of using collective wisdom is that it can take a long time to make decisions if too many people are involved in the process. This is a serious problem if you need to make timely decisions.

Managing By Objectives 
This dimension relates to how people set and pursue organizational goals. The principles are:

Alignment

• What is it : everyone works towards common goals set by the organization. 
• Plus : This principle offers managers a simple way to get their team members moving in the same direction, and this is hugely important if the organization is pursuing a strategy that needs significant, coordinated action. 
• Negative : managers instinctively try to use key performance indicators to measure progress. These can be ineffective or counter-productive in hard-to-define areas such as creativity and innovation. Alignment can also put too much focus on short-term results rather than long-term growth, and it gives people less flexibility in how they reach their objectives. 

"Obliquity" 

• what is it : people pursue goals and objectives indirectly. For example, instead of setting a direct goal to "increase sales by 15 percent," an organization might set goals that measure how efficiently staff deal with new customers, or that look at employee happiness. 
• Plus :  A long-term consequence of this will hopefully be that sales increase – the organization's overall objective.  With this principle, team members are also encouraged to work towards their own individual goals, which they intuitively believe will contribute to the overall objectives of the organization. (They may not be able to "prove" this in a straightforward way.)  With obliquity, team members have greater ownership over their work and they decide how they reach their goals. This can lead to high productivity and engagement.  Obliquity is often effective in new and evolving businesses, those that demand a high degree of creativity and innovation, or those that need to exploit a wide variety of niches. 
• Negatives : A downside of obliquity is that people can lose direction and momentum if their overall objectives aren't clear, and they can be wrong in their intuitions, which can lead to wasted resources and missed opportunities. It can also make it difficult to achieve results that need significant, coordinated effort.

Managing Individual Motivation

This dimension relates to how people are motivated in the organization. The principles are:

Extrinsic : 

• what is it : a motivation that come from outside the people being motivated, such as pay raises, promotions, or praise. Negative factors such as pressure and threats can also be part of extrinsic motivation. 
• Plus : It's relatively easy for organizations to measure performance and reward team members using extrinsic motivators.  
• Negative : The downside of extrinsic motivation is that these drivers don't always address the deeper needs that we have as human beings, and it can leave us feeling dissatisfied, disengaged, unhappy, and unfulfilled. 

Intrinsic : 

• what is it : Intrinsic motivation relates to the rewards that people experience from doing a task or activity well. Intrinsic motivators are often very satisfying. 
• Plus : Most hobbies and leisure activities are based around intrinsic motivation – we do them because we enjoy them, not because we have to, and this is particularly powerful when it applies to work. 
• Negative : However, intrinsic motivators can be difficult to manage, as these often rely on the activity that a person is doing, and his or her perception of it.

Applying Birkinshaw's Four Dimensions of Management

To use this tool, go through each dimension and think about where your team or organization is right now. Then, think about where your organization should be on each dimension, so that it can best achieve its strategy. Your aim is to develop the most appropriate management model – as highlighted earlier, this is a set of choices about how the work of management gets done. Remember that there is no "right" or "wrong" side of the scale. Your approach will depend on your organization, your current situation, and where you want to go strategically.

In reality, many organizations will be on the left-hand end of each scale, which may be fine if that is what their strategy requires. The challenge for managers comes if they want to move from more traditional management principles (on the left-hand side of the dimensions) to the alternative principles (on right-hand side of the dimensions).

Let's look at some of the tools and strategies that you can use to do this.

Moving from Bureaucracy to Emergence

A certain level of bureaucracy is necessary to run an organization effectively, but, often, organizations get bogged down in it. You can develop emergence within your team and organization in several ways. Start by reviewing your organization's business processes and procedures, so that you can eliminate unnecessary steps. As part of this, map processes out, and challenge the necessity of each step and rule that's applied. Also, get regular feedback from team members on how you can remove bureaucracy and improve processes and procedures. Then, work on building a culture of trust, so that people know that they can be trusted to do their jobs properly without excessive bureaucracy. As part of this, empower your people, and share as much information with them as you can. Additionally, give your team members further autonomy by avoiding micromanagement, and by encouraging them to use initiative, where appropriate.

Moving from Hierarchy to Collective Wisdom

At least some level of hierarchy is essential for most organizations to function. However, you can use the principle of collective wisdom in many ways. Again, build an environment of trust, so that you encourage your people to communicate with one another and speak freely without fear of being judged negatively. This will help you take advantage of your team members' expertise, and will encourage people to be more creative. Next, involve your people in collaborative decision-making if possible, and use tools such as Hartnett's CODM Model to solve problems collectively.  You can also encourage people to use social networking tools such as blogs, intranet forums, and Twitter to communicate with one another, and you can ask people to present their ideas at team meetings. This will further help people collaborate and share knowledge.

Moving from Alignment to "Obliquity"

Obliquity relies on people pursuing "indirect" goals that you and they intuitively believe will benefit the organization in the long term, rather than working on specific, more measurable, shorter-term goals. To move towards obliquity, establish a clear mission for your team or organization, but then give people flexibility in how they'll work towards this mission, rather than setting out for them how to do their work day-to-day. One approach – famously used by Google – is to give people a dedicated time-slot during the working week to "follow their hunches." You and other team members can review these projects regularly, and give backing to those that show potential. You can also brainstorm indirect goals that, when achieved, have the potential to contribute to your team or organization's overall objectives.

Moving from Extrinsic to Intrinsic Motivation Extrinsic motivators are often effective; however, you will likely find it best to motivate your people using a combination of extrinsic and intrinsic motivators. Each person on your team will be motivated by different things, so use tools like McClelland's Human Motivation Theory and Self-Determination Theory to understand what motivates them as individuals (both intrinsically and extrinsically). Then, encourage people to use tools like the MPS Process, so that they can understand what type of work suits their personality and their strengths, and, where you can, allow them to craft their jobs to suit them better.  Also, remember that changing your management approach in each of the other three dimensions can help people experience more intrinsic motivation. For example, you could get these benefits by allowing team members more freedom in how they reach their goals, and by giving them a say in organizational decision-making.

 
The Balanced Scorecard

Motivating Employees to Deliver your Strategy

You'll most likely have heard the saying "What you measure is what you get." This is something that's true across many areas of management – if you set people targets, and reward them when they meet these targets, they'll often do all they can to achieve them.

This is great in principle, but can be disastrous in practice: One problem is that it's much easier to measure financial results than it is to measure progress in other essential areas (such as staff satisfaction). This leads to an over-reliance on financial measurement. A second issue is that people will, quite rightly, drop other activities to meet challenging goals – this is part of why stretch goals are set. Taken together, this means that organizations often focus their efforts on short term financial results, at the same time that the underpinnings of their business wither away, neglected. This is where the idea of the "Balanced Business Scorecard" is important – as a tool for improving the performance of a whole organization, a large department or a small team. The Balanced Scorecard or Weighted Scorecard helps you measure and improve performance in an integrated way.