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Stewardship vs. Entrepreneurship
• Stewards polish grandma’s silver – they buff up the assets and capabilities they inherited from entrepreneurs long retired or dead.
• entrepreneurial heroes – innovators - are obsessed with creating new wealth.
Stewards conserve. Entrepreneurs create
Hamel 1999
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Jack Welch CEO of GE 1981-1999
• “As we develop our strategies, I want general managers talking to general managers, not planners talking to planners”
• “A company can boost productivity by restructuring, removing bureaucracy, and downsizing, but it cannot sustain high productivity without cultural change”
• Wants GE known not as “lean and mean’, but ‘lean and agile’.
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In a Nonlinear World only Nonlinear Ideas will Create New Wealth
“I used to spend most of my time worrying about the how – how we did things, how we operated, how efficient we were.”
“Now I spend much of my time worrying about the what – what opportunities to pursue, what partnerships to form, what technologies to back, what experiments to start.”
A CEO in Hamel 2000
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Mission/Vision/Strategy (I)
• Mission:- Why the firm is in business
• Vision:- Where the firm will be in 5 years
• Strategy:- How the firm will get there
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Mission/Vision/Strategy (II)
• MissionHealing the wounded of contemporary society
• Vision:- Where the firm will be in 5 yearsChain of hospitals serving the poor
• Strategy:- How the firm will get thereRecruit team, raise money and build hospitals
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Create a Mission & Develop a Vision
• The mission is a written expression of what the owners stands for and believe in and how the company will reflect those values and beliefs.
• Mission emphasizes:– "What business are we in?”– “Why we’re here” and – “Where we are going.”
• Vision is based on this mission.
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Linking Vision to Strategy
Vision
Skills Strategy Structure
Staff
Style
Systems
Shared Values
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McKinsey 7 “S” Model
Strategy
Staff
Structure
Skills
Style
Systems
SharedValues
Waterman 1982
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Cockpit View
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Aligned Strategy
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Innovation
The Tool of the Entrepreneur
Drucker 1986
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Opportunity Roadmap
Entrepreneurship
Exploitation of Opportunities
Innovation
Evaluation of Opportunities
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Innovation
Innovation is the process that endows a recognised Opportunity
with the capacity to add-valueto an already existent
invention, product, process, or service
and at a ‘price’ a customer will pay
Gillin/ /Drucker
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Adapted from Patel 2005
Function of Strategy of Innovationis to Deliver Results
Founding state is data, information & opportunity recognition– with intervention of analysis & screening, opportunity
recognition is transformed into a state of knowledge– with intervention of non-linear experience, knowledge
is transformed into intuition– with intervention of wisdom & heart, intuition is
transformed into state of innovation– with intervention of strategy and action, innovation is
transformed into results
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Corporate Innovation
“Innovation requires us to systematically identify changes that have already occurred in a business – in demographics, in values, in technology or science – and then to look at them as opportunities.”“It also requires something that is more difficult for existing companies to do: to abandon rather than defend tomorrow.”
Drucker Inc. 1996
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Strategic Thinking
GAP
No change in strategies
Realistic strategy
Linear Strategy?
Trial concepts
% of Acheivement
Societal Learning
Organisation Learning
Vision2025
Now 2025
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Net New
Internal
Growth in
Earnings From
New Products
Net New Earnings
Growth from
Innovation
Partnering etc
Net new
Earnings Growth
from Innovative
Improvements
Target growth/ earnings
CurrentGrowth gap
Internal growth
M & A’s
Continuous improvement
Ear
nin
gs
Time
Closing the growth gap
Growth and Strategic Innovation
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No ChangeDiscontinuous Change (Breakpoint)
Continuous ChangeSporadic Change (Turning Points)
Status Quo
Agents Dominate
Change Agents
Dominate
Resistance Force
Strong
Weak
Weak Strong
Change Force Strebel 1992
Innovation Change Arena
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Discontinuous
Opportunities
Create new
markets
and new products
Discontinuous opportunities: The source of radical innovation...
Adjacent
Opportunities
Exploit current assets
and capabilities
Status QuoGrow marketshare and profit(expansion, not new business development)
Adjacent
Opportunities
Increase primary
market demand
Existing products/Technology
New products/Technology
ExistingMarkets
NewMarkets
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… which create disproportionate wealth relative to adjacent opportunities
0
50
100
Type of newBusiness
launch
Revenues Profits
61%
39%
38%
62%
14%
86%Adjacentopportunities
Discontinuousopportunities
Source: Chan & Mauborgne (1997)
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Innovation
Radical
• An entirely new set of performance features
• Improvements in known performance features of 5X or more
• A significant (30%+) reduction in cost
Leifer et al.
New Product Function
• The introduction of a new good;
• The introduction of a new method of production;
• The opening of a new market;• The conquest of a new source
of supply of new materials;• The carrying out of a new
organisation of any industry. Schumpeter
.
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Beyond Continuous Improvement
NonlinearInnovation
BusinessConcept
Innovation
ContinuousImprovement
BusinessProcess
Engineering
Rad
ical
Incr
emen
tal
Component System
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Business Concept Innovation
• Not strictly about competitive strategy,
• Not a way of positioning against competitors,
• But of going around them.
• It’s based on avoidance not attack.
• What is not different is not strategy
• No longer between products or services
• It’s between competing business concepts
Hamel
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The Business Concept
• Customer interface – fulfillment and support,
relationship dynamics, pricing structure
• Core strategy – business mission, product/market scope,
basis for differentiation
• Strategic resources – core competencies, strategic assets,
core processes
• Value network – suppliers, partners, and coalitionsHamel
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Automobile Industry
ENTREPRENEUR BUSINESS CONCEPT
1904 Rolls Royce ‘Cachet of Royalty’
1908 Ford Mass produced, Owner maintained
1905 Crapo Durant Professionally managed, Integrated, GM
1899 Agnelli Fiat, Staff cars for military
1960-80 Japanese Comfort, style, fuel economy, service
1980-90 Companies World Car, global efficiencies
2000 ? ? ? Environmentally friendly
Drucker
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Innovation strategies that focus on management
• Scientific management (time & motion studies)• Cost accounting and variance analysis• Commercial research laboratories• ROI analysis & capital budgeting• Brand management• Large-scale project management• Divisionalisation• Leadership development• Industry consortia• Radical decentralisation• Formalised strategic analysis• Employee-driven problem solving
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The adaptable corporation?
• Most companies are far better at executing their current activities than at adapting to long-term changes in the business environment. Very few can do both well.
• Managers face an unending competition for money, people, and time to address the need to perform in the short term and the equally vital need to invest in the long run.
• Is it possible to do both well or is there an inevitable trade-off between executing and adapting
Beinhocker 2006
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Executing versus adapting
• “Loose - Tight” organisationIn Search of Excellence - Peters & Waterman (1982)
• “Creativity” versus “Control”Built to Last - Collins & Porras (1997)
• “Operating” versus “Innovating”Creative Destruction - Foster & Kaplan (2001)
• “Ambidextrous” organizationWinning through Innovation - Tushman & O’Reilly (2002)
• “Exploration” versus “Exploitation”Exploration and exploitation in organizational learning - March (1991)
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Why is adapting and performing well so hard?
The demands of execution create deep barriers to adaptability and these barriers affect every organization
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Barriers to adaptability
• People - mental models become more rigid and more locked in and more adverse to novelty as we gain experience
• Structure - highly independent systems can sometimes become so complicated that they go into gridlock and change becomes impossible
• Resources - companies acquire and maintain the resources required to perform its existing business. They may not have the resources required for a new opportunity.
Beinhocker
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Cognitive Infrastructure:
Organisations do not see opportunities, individuals do
(Kreuger and Brazeal 1984)
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Cognitive Infrastructure:
(Organisations do not see opportunities, individuals do)
Personal Desirability
Perceived SocialNorms
Perceived Self-Efficacy
Perceived Collective Efficacy
Perception of Opportunity
Intentions Action
Perceived Desirability
PerceivedFeasibility
Propensity to Act
Krueger 2003
Exogenous Factors(Personal, Situational
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To build organisational capability,
Large global firms must look beyond structure to
vision, values and processes.Bartlett & Ghoshal
Biological Metaphor
Organisation (Company)
• Formal structure
• Interpersonal relationships and management processes
• Shared vision together with a set of common norms
Biological (Person)
• Anatomy
• Physiology
• Psychology
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Strategy vs. Purpose
Strategy Purpose
Structure Process
Systems People
Chandler Bartlett and Ghosal
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Building Structure in a Managers Mind
“Managers are losing control of their companies because the companies are organisationally incapable of carrying out the sophisticated strategies they have developed.
Strategic thinking has outstripped organisational capabilities.
Some managers have responded to this by trying to manage complexity with complex structures.”
Bartlett & Ghoshal
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The Result
“The matrix seemed ideal as a structure for managing complexity.
In practice it proved almost unmanageable, especially in the international context.
Dual reporting created conflict and confusion, communication channels were jammed and overlapping responsibilities produced turf battles and loss of accountability.
These problems were difficult to solve over barriers of time, language, distance and culture.”
Bartlett & Ghoshal
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Impact of Structure
GM
MfngSales
Prod 2Prod 1Prod 2Prod 1
GM
Prod 2Prod 1
MfngSalesMfngSales
•Pricing decisions
•Resource allocation
•Appropriate skills
•Who does the customer call
•Which decisions are raised to GM level
•How are resources allocated
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Design as particular Organisation
• Entrepreneurial – coordinate by direct supervision, dominated by apex, flexible, dynamic
• Machine – coordination by standardisation of processes, key part
is techno-structure, very formalised
• Professional – operating core of professionals who coordinate
using standardisation of skills, training
• Diversified – set of independent entities (divisions) connected by
loose admin. Structure, key middle line, standardisation of outputs • Innovative – skilled support staff collaborate with others in
organisation - key part, coordination by mutual adjustment, dynamic
• Missionary – members identify with mission, standard norms
• Political – dominated by politics, no key coordination
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Opportunity Focused Organisation
Internal Markets Integration & Resource Allocation Coaches
Top Management
ENTREPRENEURIAL BUSINESS UNITS
PRODUCT Markets
• Flat
• Focused
• Flexible
• Fluid
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Customers/Partners
Frontline Entrepreneurs
Hierarchical Pyramid Entrepreneurial ‘Pyramid’
Administration Finance
CEO
Entrepreneurial Inversion
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Customers/Partners
Top Level Institution Builders
Sen
ior
Lev
elD
evel
opm
ent C
oach
es
Frontline Entrepreneurs
From Inverting the Pyramid…………Toward an Individualized Corporation
Ghoshal & Bartlett
Customers/Partners
Frontline Entrepreneurs
Administration Finance
CEO
Welch at GE
New Organisation Models
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ContactPersons
Contact Persons
NODES
NODES
Spider’s Web
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Change TeamsProject Teams External Customer
TeamsStaff Unit
Internal Customer Team
Core C E OTeam
Business Units
Technology Team
External Relations(Public) Team
Alliance Team
CLUSTER ORGANISATION
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CoreCompetencyNew Companies
2nd Generation Companies
STARBURST ORGANISATION
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TCG (Technical Computer Graphics) Peter Fritz, CEO
TCG-ILED
1992
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Principle
“The critical strategic requirement is not to devise the most ingenious and well coordinated plan but to build the most viable and strategic process;
the key organisational task is not to design the most elegant structure but to capture individual capabilities and motivate the entire organisation to respond cooperatively to a complicated and dynamic environment.”
Bartlett & Ghoshal
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Management's challenge is to cope with the fact that personal drivers will never completely align with business drivers
Business success
Personal “success” vectors
THE HUMAN FACTOR DIMENSION – THE BIG OPPORTUNITY FOR APPROPRIATE ENTREPRENEURIAL STRUCTURES
Invetech 2003
