© Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 1 Agenda Introduction Strategic Management for SMEs “Navigating in Turbulent Times” Business

© Fraunhofer IAO Stuttgart / IAT Universität Stuttgart Slide: 1

AgendaAgenda

• Introduction

• Strategic Management for SMEs “Navigating in Turbulent Times”

• Business and Technology Strategies

• Portfolio, Balanced Scorecards and other Tools

• How Scenarios and Roadmaps can help (Cases)

• Business and Technology Scouting


Current Current ChallengesChallengesforforManagementManagement

Strategic Strategic ManagementManagement

Management Management Success Success FactorsFactors




It is the age of change.

Most organizations are facing dramatic changes in their socio-economic landscape and operating environment. The changes are far reaching and global. Manager are being challenged by the following questions:

a) How do you track and make sense of the changes in order to survive and compete in such turbulence markets?

b) How do you manage the transformation required?

c) How do you grow the organisation and ensure its long-term sustainability?

Current Challenges for Management?


Knowledge-Based

Organisations

ResourcesKnowledge-intensity & Learning


StructuresNetworking and Connectivity


SystemsGlobalisation (pulsating economical systems)


GrowthInnovation, risk and speed(idea-driven growth)


Social fabricExperience, attention andhealth


Value CreationDematerialisation


TechnologyTechnological advancement(digitisation)


BusinessBusiness in the knowledge-based economy in the knowledge-based economy will be based on ideas, knowledge and will be based on ideas, knowledge and

innovationinnovation and the modern business and the modern business organisation should be orientedorganisation should be oriented, concerning e.g. , concerning e.g.

organisational form and management, organisational form and management, accordinglyaccordingly..

Business

Mega Trends in the Knowledge-Based Economy


Structures – Networking and Connectivity

RESOURCEScustomer drivenservice-enhancedcustomisation

tangiblescarce

intangibleabundant

VerticalIntegration

Traditional,monolithic,rigid organisations

ExtendedEnterprise

VALUE

SmartOrganisations

EcosystemVirtual

Organisation

internetworked,knowledge-driven,agile organisations

supplier drivenmass production

Knowledge-Based

Organisations
















Application Project planning

and controlling CAD-System Simulation ...

Handling Changing ...

TasksStatus control ...

Access Profile Project manager Planer Analyst ...

Project Management Distributed Project Management Shared Applications ...

EngineeringPortal

Project Portal Team Portal ...

Processes and Organisation Integrated

Process Management Horizontal

Organisation Structures ...

Application Integration System Supply Data Integration ... Reverse

EngineeringRapidPrototyping

DigitalPrototyping

EngineeringVisualisation/Digital Mock Up

SimulationCAx

CAD CAx Documents

... ...

. . .

Documents Drawings Layouts Notices ...

Data CAD-File FEM-File AINSI ...

PDM/EDMBackbone

Processes System Conception Module Design Components Layout Change Process ...

Technological Advancement: Digitisation of Business Processes e.g. Automotive Product Development

Knowledge-Based

Organisations
















Resources – Importance of Knowledge and Learning

business

2

Prod/Serv 1 Prod/Serv 2

--

Core product

2

business

1

Core product

1

Corecompetence 1

Corecompetence 2

Corecompetence 3

Prod/Serv 3 Prod/Serv 4 Core competences enable a

company to provide a particular

benefit to customers

• Providing potential access to a

wide variety of markets,

• Enhancing the end product

significantly and add a value

perceivable to customers,

• Making it difficult for competitors

to imitate perceived customer

benefits.

Knowledge-Based

Organisations
















Value Creation - Dematerialisation

Source: Hubert Saint-Onge, 2001

Knowledge-Based

Organisations
















Growth – Innovation, Risk and Speed

Source: The Innovation Premium; R. Jonahs, T. Sommerlatte, 1999

Innovation performance versus Shareholder Return

Bottom of innovative companies

Top innovators

5,51%

9,99%

14,28%16,92%

19,44%

5

10

15

20

25

•338 out of the Fortune 500 companies

have been classified into 5 level of

innovation performance.

•The most innovative companies attain

an innovation premium on stock price

• Innovation will get more important as

a factor of growth

TotalShareholder Return (CAGR 1987-1996)

Increasing innovation performance of the companies

(based on executive/analyst rating of 338 out of 500 fortune companies)

Knowledge-Based

Organisations
















Paradoxical times for SMEs?

• We’re in the transition from the ‘managerial’ to the ‘entrepreneurial’ economy….

but …

• … SMEs are increasingly stuck in paradoxes, e.g. between • local roots and global thinking• small SME identity and constant growth• etc.

(Source: Schmidt, 1998)

(Source: Johannisson, 1993)


Recent Responses to Uncertainty in the SME sector

Major trends in SME sector:

• Specialisation

• especially due to innovation

• Decentralisation

• especially due to pressure for cost reduction

• Cooperation

• especially due to increasing competition

• not only in manufacturing, but also in service industries(Source: Schmidt, 2000)


Managing the networks

Interacting withinnetworks

Co-operation - competition between networks

Flexible networks

Trust between companies

Synergies with partners

Networking pertners

Restructure the cost management in networks

From product tocompetence orientation

Train your employees

Increase skillsof employees

Competence management

Build macro competencies

Assessment of strengths, weaknesses, competencies

Speed of change

Fast reactions on changing markets

Fast reactions on changing markets

Appropriate tools

Increasing flexibility

Change efficiently

Unpredictable environmentBetter forecasting

Scanning the market

Anticipate the environment trands

Speed mattersGlobal market

More dynamic markets

Products are complex solutions

Shorter time to market

Standardisationvs.

adaptation

Information overload

Share of knowledge amoung managers and workers

Knowledge cycles accelerate

Knowledge and products expire faster

Use existing knowledge throughout

all company workersHow to evaluate intangibles

Convergence oftechnologies

in the products

Product service strategy

Increasing complexityof products

Differentiate on products

Cost management

SMSs should take time to thinkabout what they are doing

Focus on opportunities

Get a more process view

Need for managerial skills

How to overcome the SMSs inertia

Source: Symphony Consortium 2001-2004

Manifestation of Recent Management Problems


Turbulence drivers Turbulence manifestation

The Causes for Turbulence

Resources

Markets

Customers

Identification of Future Capabilities, Erosion/Substitution of Competencies, „War for Talents“

Inclusion into Value Chains, „Hybrid Customers“, Higher Expectations, Constant Evaluation of Goods, from Mass Production towards Customised Production, towards Modular Products, towards Service-enriched Products etc.

Multiple Point Competition, Splitting of Value Chain (Intermediation), Replacement of Value Chain Components (Dis-Intermediation), Outpacing Strategies, Short Innovation Cycles, Fight for Standards, Fight for Market Access, etc.


/ C

riti

cal s

ucc

ess

fact

ors

Change and Dynamics oriented

enterprises

enterprises

Financial oriented enterprises

Price productivity L

on

g t

erm

cu

sto

mer

del

igh

t n

ess

an

d

Su

stai

na

ble

en

terp

rise

d

evel

op

men

t

Price productivity

Quality

controlled quality

Price productivity

Quality

produced quality

Flexibility Variancy of

Products

Price productivity

Quality

produced quality

Knowledge & Motivation Change Mgmt.

USP of enterprise Innovation management

Sh

ort

ter

m

Cu

sto

mer

sa

tisf

act

ion

Goal accumulation

Shift of strategic paradigm

Price productivity

Quality produced

quality

Time Speed for on

time delivery

Speed & Time orientedenterprises

Strategy & Structures Organisational Dynamics

Source: Warnecke, 1995

Quality oriented Flexibility Variancy of Products

Flexibility Variancy of Products

Time Speed for on time delivery

enterprisesFlexibility oriented

70s 80s 90s 2000+

Emergence of new Objectives …?


Certainty Uncertainty

Striving for StabilisationStriving

for FlexibilityStrategic

Planning to achieve and maintain Certainty

Strategic Planning to cope with uncertainty

Strategic Planning as an extrapolation of trends

… together with a new Management Focus …

(Source: Klimecki/Gmür, 1997)


… and hence a Change of Success Factors.

Success Factors for Environments with average dynamics

Success Factors for highly dynamic

Environments

• Procurement• Production• Sales• Personnel• Capital• Technology• Information• ...

• Flexibility• Innovativeness• Synergies• Ability to cooperate• Openness and Transparency• Financial Power• Co-ordination and Integration• ..

MetaSuccessFactors

Easily measurableSuccessFactors

Source: Bea/Haas, 1995





„„All around us we see evidence of All around us we see evidence of an accelerating rate of change and increased volatilityan accelerating rate of change and increased volatility, ,

arising from the dense connectivity of the information economy—just look at the rapid rise in arising from the dense connectivity of the information economy—just look at the rapid rise in

business failures and in CEO turnover, or the tenfold increase in S&P 500 stock price business failures and in CEO turnover, or the tenfold increase in S&P 500 stock price

variability over the past two decades. The only response, indeed variability over the past two decades. The only response, indeed the new management the new management

imperative,imperative, is to abandon assumptions of stability and control, to accept the reality of is to abandon assumptions of stability and control, to accept the reality of

constant change, and to build the capacity to respond ... The constant change, and to build the capacity to respond ... The practical implications of an practical implications of an

adaptive managementadaptive management frameworkframework, which derives its fundamental principles from , which derives its fundamental principles from

evolutionary systems, evolutionary systems, will transform the future workplace...will transform the future workplace...““

Source: Chris Meyer & Stan Davis, It‘s Alive (www.knowledgeboard.com) , May 2003Source: Chris Meyer & Stan Davis, It‘s Alive (www.knowledgeboard.com) , May 2003

Towards a new Management Approach


Sense - and - respond

Assumption: unpredictable change

Goal: become an adaptive enterprise

Coordination of capabilities

. Commitmentmanagement

Open system

Context• purpose and bounds

•adaptive structure

Internal feedback

External signals

Adapting

Make - and - sell

Assumption: predictable change

Goal: efficient enterprise

Missionand policy

Strategy

Structure

Command & control

Closed

system

Sou

rce:

in a

ccor

dan

ce w

ith

IB

M C

onsu

ltin

g G

rou

p

Is there a new Management Paradigm?


First approaches: Increase Sense & Respond time trough ‘Agility’

Source: Meredith/Francis (2000)

Agile Strategy Agile Processes

Agile People Agile Linkages

• Agile Scoreboard

• Full Deployment

• Strategic Commitment

• Wide-Deep Scanning

• Continuous Learning

• Rapid Able Decision-Making

• Multi-Skilled Flexible People

• Adaptable Structures

• Performing Relationships

• Aligned Suppliers

• Deep Customer Insight

• Agility Benchmarking

• Flexible Assets and Systems

• Fast New Product Acquisition

• Rapid Problem Solving

• Rich Information Systems

The ‚Agile Wheel‘


“business organisation is seen as a living organism, or a complex-adaptive system, which is in continuous interaction with its environment”

“Look at almost any corporation in America that is based on some strong assumptions of the world as a machine. In a machine, you have separate parts. They have to be well-tooled; they're replaceable. You can't tolerate change with a machine; you want a stable environment.” - Wheatley, 1992

A metaphor: Machines vs. Organisms


The Manager as a Navigator through Uncertainty

Source: Chaharbaghi, 1995


Network Strategy

Corporate Strategy

Business Strategy / Technology Strategy

Pre-requisite for Navigation: Consider Multiple Strategic Perspectives


ExploitationExploitationEnvisioningEnvisioning Managing changing Managing changing business opportunitiesbusiness opportunities

Define strategic Define strategic intent, resources and intent, resources and

organisational organisational structurestructure

Identify businessIdentify businessOpportunities,Opportunities,implement new implement new

business processes business processes and allocate resourcesand allocate resources

Capitalise and Capitalise and monitor monitor

opportunities, opportunities, improve business improve business

processes and processes and resources resources

continuously.continuously.

Three Key Navigation Processes



Change Change management management (Decision & (Decision &

Implementation)Implementation)

Operational Operational management management (Information)(Information)

Monitoring Monitoring (Decision base)(Decision base)

Collect, store and Collect, store and diffuse information.diffuse information.

Identify and monitor the Identify and monitor the information in a decision information in a decision base.base.

Define, decide, plan, evaluate Define, decide, plan, evaluate and assure the changes in a and assure the changes in a turbulent and unpredictable turbulent and unpredictable environment.environment.

Three Support Processes



Embeddedness in Networks: Reasons from the product development perspective

e.g. Strategic Alliances, Joint Ventures and other Partnerships in the Internet Industry:

Source: Orgnet.com (2003)

Reasons to join networks:

• Speed up new product introduction• Fill product line gaps• Exploit Economies of scale• Increase capacity utilisation• Leapfrog generation of product

technology• Develop up-stream technology

Source: Krubasik/Lautenschlager (1993)

Emering central hubs: AOL, Microsoft, Yahoo and AT&T,


Embeddedness in Networks: The Consequences

Characteristics of Networking Org.

• Wide abandonment of bureaucracy and formalism

• Fostering of interweavement on personal level and technical level

• Principle of subsidiarity: Actors looks for solutions on the lowest possible level

• Abandonment of (hierarchical) structures

Consequences

• Less (social) security• Tendancy towards

specialisation, therefore less autarky

• Tendancy towards intra-organisational dependence on single persons

• Risk of too much complexity


The Role of the Organisation in future collaborative Structures:A Snapshot from Workshops with Industry and Academia

Profit oriented short term

perspective

Competition

Specialisation

Efficiency

Regional/ Local Specialties

Sharp Borders

Simple collaborative

structures

Human centeredLong term social issues

Collaboration

Creativity

Fluid Borders

Globalisation

Complex structures

Multiple Capabilities

Source: THINKcreative Workshops 2003


"It's much more effective to allow solutions to problems to emerge from the people

close to the problem rather than to impose them from higher up."

- Roger Lewin

Needs Decision ActionInformation

Valid for :

• Different organisational levels

• Internal and external information

• Different timeline


Enabling Navigation in a Network Context


Three fundamental capabilities

Gain orientation – Know where you are (1) Set the objective - Know where you want to go (2) Initiate transformation – Know how to start (3)

1

2

3

?

Corporate Strategy – Set the Corporate Goals and Boundaries



Stakeholder Value Creation Model Core CompetenciesCore Activities

Expectations Achievements Success Factors

SymLogic – Where are you and where do you want to go?

Sources: Symphony Consortium 2001-2004Graphics: Impromatur, Chinatech, University of St. Gall, 2003


Objective

Stakeholders

Initiative 1

Objectives

Main Activities + Success Factors

Transformation Roadmap Communicate Goals Internally and Externally

SymLogic – Initiate Transformation



Strategy as the Link between Outside-in and Inside-out Perspective

Source: De Wit/Meyer (1998)

Outside-in Perspective

Inside-out Perspective

Emphasis on Markets over resource Resources over markets

Orientation Market/ industry driven Resource driven

Starting point Market/ industry structure Firm’s resource infrastructure

Fit through Adaptation to environment Adaptation of environment

Strategic focus Attaining advantageous position Attaining distinctive resources

Strategic moves Market/ industry positioning Developing resource base

Tactical moves Attaining necessary resources Industry entry and positioning

Competitive weapons Bargaining power and mobility barriers

Superior resources and imitation barriers


The Challenge of Strategic Management: Align the Company with its environment

Integration of Strategy and Technology




Management Management Success Success FactorsFactors


• To have To have consistency of short, mid and long term planningconsistency of short, mid and long term planning; ;

• To pick up weak signals and to To pick up weak signals and to act on leading indicatorsact on leading indicators (e.g. early warning); (e.g. early warning);

• To orient all business activities To orient all business activities towards a common visiontowards a common vision / strategic intent/ strategic intent; ;

• To promote a leadership and culture aimed at To promote a leadership and culture aimed at growthgrowth; ;

• To continuously open up To continuously open up new strategic growth opportunitiesnew strategic growth opportunities; ;

• To continuously To continuously capitalise on innovationscapitalise on innovations (e.g. new products and services); (e.g. new products and services);

• To increase efficiency of operations by To increase efficiency of operations by re-using knowledgere-using knowledge; ;

• To increase effectiveness of your business by To increase effectiveness of your business by generating new knowledgegenerating new knowledge; ;

Navigation Success Factors



To To respond quicklyrespond quickly to new market opportunities; to new market opportunities;

To be flexible in To be flexible in networking & partneringnetworking & partnering with diverse, appropriate organisations; with diverse, appropriate organisations;

To generally enhance the use of To generally enhance the use of collaborative networkscollaborative networks (e.g. strategic alliances); (e.g. strategic alliances);

To promote and 'live' To promote and 'live' conservative financial managementconservative financial management; ;

To make effective and efficient To make effective and efficient use of all resourcesuse of all resources (e.g. tangible & intangible); (e.g. tangible & intangible);

To increase To increase mobility and ability of peoplemobility and ability of people to adapt in unprecedented situations; to adapt in unprecedented situations;

To continuously lever and promote To continuously lever and promote human talent and creativityhuman talent and creativity; ;

To work on an To work on an innovative corporate cultureinnovative corporate culture and to break down barriers to change. and to break down barriers to change.

Navigation Success Factors



Next Generation Internet makes Mobile Business possible and brings success to our customers

We build up the Next Generation Internet and connect the quality of the voice with the power of IP.

• End-to-End-Solutions in more than 160 countries

• Broad technology basis and excellent competencies

• Broad range of IP-products, Solutions and Services for carriers and corporate customers

Source: Siemens ICN, 2001

Strategy Orientation: Integrating Innovation into Strategy


Trend- Scouting:- Early warning- Identification of weak signals- Trend-Analysis- Forecasts

Strategy-Formulation: - Formulation of corporate strategies- Coordination of strategic direction of the business units

Innovation-management: - new strategic developments and business models

Business Transformation: - Change Management to transfer the strategies in the different units

Control: - strategic control of the business

Alignment of strategic and innovation planning

.heute Zukunfts-

horizont

Zeit

..© Fraunhofer IAO Stuttgart / IAT Universität Stuttgart

Strategieentwicklung: Strategische Analyse

Marktanalyse

Konkurrenz-analyse Kundenanalyse

Branchenattraktivität und relative Wettbewerbsposition

Branchen-analyse

Technologieanalyse

Erklärungsmodelle technologischer Entwicklungen

Technologieattraktivität und relative technologische Ressourcenstärke

Stand der Technik

Unternehmensanalyse

Relative Stärken und Schwächendes Unternehmens

Bedeutung der Produktentwicklung für das Unternehmen

SWOT-Analyse

Relative Wettbewerbsposition

Bra

nc

he

na

ttra

kti

vit

ät

hoch mittel niedrig

ho

chm

itte

ln

ied

rig

XX

YY

zz

Relative technolog. Ressourcenstärke

Te

ch

no

log

iea

ttra

kti

vit

ät

hoch mittel niedrig

ho

chm

itte

ln

ied

rig

XX

YY

zzEntwicklung derStrategie

Quelle: Bürgel et al., 1996

Source: Siemens ICN, 2001

Strategy Orientation: Integrating Innovation into Strategy


References:

www.knowledgeboard.com www.e-rodeo.com www.symphony-village.com www.thinkcreative.org
