Anderson_PPT03.pptx

Organization Design: Creating Strategic and Agile Organizations

Donald L. Anderson

Chapter 3

Strategy

Why Strategy Is Important For Organization Design

Strategic clarity and agreement are required for effective design

Different strategies require different designs

Organization design can be a strategic advantage

Organization design can facilitate strategy execution

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LO 3-1: What strategy is important for organization design

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What is Strategy?

Strategy is a

Plan

Ploy

Pattern

Position

Perspective

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Plan: A planning activity that occurs before actions take place

Ploy: A threat of a proposed move

Pattern: May develop in the absence of intentions

Position: Defined in relationship to other competitors

Perspective: A worldview or a company’s internal identity

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Sustainable Competitive Advantage

“Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price.” (Porter, 1985).

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Activity Systems and Strategic Tradeoffs

Two key principles:

Strategy rests on unique activities

Strategy requires tradeoffs

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LO 3-2: Definition of strategy and types of generic strategies

Sustainable advantage comes from organizing a series of activities into a system that is difficult for competitors to copy

A strategic position is not sustainable without tradeoffs

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Activity Systems and Strategic Tradeoffs

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Types of Strategy

Porter’s Generic Strategies:

Cost Leadership: Operating at a lower cost than competitors

Differentiation: Gaining advantage by offering something unique

Focus: Targeting a specific market niche or customer type

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LO 3-3: Key concepts in strategy

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Porter’s Generic Strategies

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Treacy and Wiersema’s Value Disciplines

Operational Excellence:

Product Leadership

Customer Intimacy

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Operational Excellence: Providing customers with reliable products or services at competitive prices and delivered with minimal difficult or inconvenience

Product Leadership: Offering customers leading-edge products and services that consistently enhance the customer’s use or application of the product

Customer Intimacy: Segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches

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Treacy and Wiersema’s Value Disciplines

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Miles and Snow’s Strategy Typology

Defenders

Presume a narrow and relatively stable market

Seek to improve efficiency of their operations

Prospectors

Sees a flexible and dynamic environment

Defines their market broadly

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LO 3-4: New perspectives on strategy that are important for a design practitioner to know

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Miles and Snow’s Strategy Typology

Analyzers

Seek growth in depth of market penetration and through product development

Find right mix of new and existing products and customers

Reactors

See the need for change

Unable to take necessary actions to adapt successfully

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Global Strategies

Multinational organization

Global organization

Transnational organization

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Stuck in the Middle

Porter: “The firm failing to develop its strategy in at least one of the three directions—a firm that is ‘stuck in the middle’—is in an extremely poor strategy situation”

Treacy and Wiersema: “Not choosing means ending up in a middle…steering a rudderless ship, with no clear way to resolve conflicts or set priorities”

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Porter’s Five Forces Model

Threat of new entrants

Bargaining power of buyers

Bargaining power of suppliers

Threat of substitute products or services

Rivalry among existing competitors

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Porter’s Five Forces Model

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Core Competencies

A core competency should pass three tests:

Provides potential access to a wide variety of markets

Makes a significant contribution to the perceived customer benefits of the end product

Difficult for competitors to imitate

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Blue Ocean Strategies and the Strategy Canvas

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Tests of Strategy Formulation

Principles of Strategy (Markides, 2004)

Strategy must decide on a few parameters

Strategy must put all our choices together to create a reinforcing mosaic

Strategy must achieve fit without losing flexibility

Strategy needs to be supported by the appropriate organizational context

No strategy remains unique forever

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Elements of a Strategy

Arenas: where will we be active?

Vehicles: how will we get there?

Differentiators: how will we win in the marketplace?

Staging: what will be our speed and sequence of moves?

Economic logic: how will we obtain our returns?

(Hambrich & Frederickson, 2001)

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Questions to Ask to Test Strategy

Does your strategy fit with what’s going on in the environment?

Does your strategy exploit your key resources?

Will your envisioned differentiators be sustainable?

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Are the elements of your strategy internally consistent?

Do you have enough resources to pursue this strategy?

Is your strategy implementable?

(Hambrick & Fredrickson, 2001)

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Questions to Ask to Test Strategy