Wednesday, November 19, 2014

BOOK SPECIAL......Business Strategy: Managing Uncertainty, Opportunity, and Enterprise,

In Business Strategy: Managing Uncertainty, Opportunity, and Enterprise, J.-C. Spender takes what he calls the “entrepreneurial” path to corporate growth and market response. To the peripatetic business professor and retired dean of the School of Business & Technology at SUNY/Fashion Institute of Technology, strategy is the product of executive imagination and judgment, not just logic; the strategy process involves balancing the known, the unknown, and the unknowable. The purpose of strategic analyses, frameworks, and methods is to inspire inventiveness and inform judgment.


Spender arrives at this position by comparing the quantitative planning techniques popular in organizations after World War II—which were mostly developed by the military during the war—with the more subjective, less rigid strategic methodologies that appeared in the 1980s and that are now widespread in the business world. In the earlier era, the dominant idea was to match a firm’s resources to the market’s demands. The company’s business model was tailored to customer needs, suppliers’ offerings, labor availability, logistics, and the like. If a mismatch occurred, the resulting inefficiencies would reduce profit and threaten the firm’s survival.
By contrast, explains Spender, the modern strategy process must be a much more forward-looking activity, because efficiency is no longer enough to deliver a decisive strategic advantage in many industries; instead, a so-called monopoly-based strategic advantage is needed. He cites Apple’s dominance of the tablet business to illustrate the overwhelming necessity of innovation as a means of securing sustainable, above-normal profits, “especially where the ‘windows of competitive advantage’ seem to be opening and closing with increasing speed.”
Business Strategy does an extremely thorough job of surveying the consulting tools and academic economic models and theories available to corporate strategists. The book describes in some detail the salient facets of the most essential methodologies and concepts, including SWOT, Porter’s five forces, the experience curve, the balanced scorecard, the value chain, horizontal and vertical integration, and more. But again and again, Spender returns to the notion that companies must avoid letting these tools stymie their flexibility by over-objectifying decision making. Ultimately, he argues, added value stems from the strategist’s choices—the entrepreneur’s imagination and judgment—not from reams of analysis or data-based conclusions.
By way of example, Spender compares two strategic milestones: IBM’s decision in the 1940s to turn down the patents and processes for electrophotography developed by Chester Carlson, which became the basis of the Xerox machine, and Intel’s ceding of the DRAM market to low-cost Japanese competitors in the 1980s in order to focus on microprocessors. Based on market conditions at the time, IBM believed the customer base for electrophotography was too small and chose to sit on the sidelines; Intel, meanwhile, decided it could build a monopolistic position in microprocessors when neither the market potential nor the manufacturing challenges were well understood. In Spender’s view, IBM hewed to the safety of the known to its detriment, whereas Intel rode the wave of strategic risk by using data analyses as the basis of a calculated leap into the unknown and unknowable.
Spender devotes a chapter in the book to the role of executives in communicating the organization’s strategy to employees so that it is effectively executed. And although he delves deeply into a variety of techniques for disseminating a company’s strategic program (rhetorical, formal and informal, group and individual), he concedes that if successful strategies—and, indeed, successful companies—are built on imagination, motivating people to collaborate requires equally inspired approaches. As Spender advises: “The rhetorical practice that shapes the creative actions of others is precisely what makes the modern firm possible.”

Executives will ignore at their peril the fundamental message of Business Strategy: Once-popular mechanistic planning methodologies no longer work; they have been replaced by innovation-based models that demand flexibility and creativity. A choice to use anything less, Spender argues, is the precursor of corporate atrophy.

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