A Primer for Analysts & Consultants Evolution of Strategy Download the entire document at: www.gazhoo.com

Inside-Out Strategy Schools Context Outside-In Strategy Schools Download the entire document at: www.gazhoo.com

The evolution of strategy and management thinking has been driven by the changing political, economic, and technological environment. Evolution of Strategy Timeline Economic Era Scientific Management Government Regulation Marketing and Diversification Strategy and Social Change Competitive Challenge and Restructuring Globalization e Events/Developments Mechanization Ongoing Shift to Service Economy Great Depression World War II Govt.Controls European Common Market “ Stagflation” Asia, Latin America boom Regulation Conglomerate Acquisitions Japanese and German Competitiveness Bretton Woods Deregulation End of Cold War ENIAC Computer Technology Transistors Jet Engines Mainframes PCs Fiber Optics Internet WWW 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s Prominent Companies GE (Market Segmentation) Tennessee Valley Authority (Government-run Company) Coca-Cola (Global Presence) Procter & Gamble (Brands) McDonald’s (Franchising) ITT (Portfolio Planning) Toyota (Lean Production) Volvo (Teams) Benetton (Supplier Networks) GE (Boundary-less Org.) Microsoft (Knowledge Assets) Management Thinkers F. Taylor (Scientific Management E. Mayo (Human Relations - Hawthorne Experiments) H. Markowitz (Portfolio Analysis) T. Levitt (Marketing Myopia) Cyert & March (Behavioral Theory of the Firm) M. Porter (Competitive Strategy) M. Porter (Competitive Advantage) Prahalad & Hamel (Core Competence) H. Fayol (Executive Management A. Maslow (Hierarchy of Needs) P Drucker (Practice of Management A.Chandler (Strategy and Structure) H. Mintzberg (against Strategic Planning) Peters & Waterman (In Search of Excellence Time-Based Competi-tion C.Christensen (Disruptive Technologies) P. Senge (Learning Organi-zation) Source: Adopted from Harvard Business Review (supplement to September - October 1997 issue)

The evolution of strategy is best illustrated by reference to the history of General Electric (GE). History of Strategy at GE 1960s 1970s 1980s 1990s Decentralization Individual operating businesses of “a size that a man could get his arms around” Strategic Planning for all businesses done at the corporate centre Heavy emphasis on training general managers SBUs Smaller number of operating businesses Each now responsible for their strategic planning Central function was focused on portfolio planning (allocation of resources between SBUs) led to GE-screen (early growth/share matrix) GE became a diversified business, actively acquiring and divesting Sectors 6 sectors created Corporate centre took more control over corporate planning In response to Japan, international arena was given more emphasis CEO Jack Welch restructured and downsized significantly (“Neutron Jack”) Boundaryless Company Suppliers are drawn into the business processes Globalization of all aspects of the businesses Only run businesses that are number 1 or 2 in their global markets Focus on organizational knowledge Major quality programs Late 90s: wholehearted embrace of eCommerce Download the entire document at: www.gazhoo.com Creation of Strategic Business Units (1969) Consolidation of 43 SBUs into 6 sectors (1977) Strategic refocus (1988)

Individual operating businesses of “a size that a man could get his arms around”

Strategic Planning for all businesses done at the corporate centre

Heavy emphasis on training general managers

Smaller number of operating businesses

Each now responsible for their strategic planning

Central function was focused on portfolio planning (allocation of resources between SBUs)

led to GE-screen (early growth/share matrix)

GE became a diversified business, actively acquiring and divesting

6 sectors created

Corporate centre took more control over corporate planning

In response to Japan, international arena was given more emphasis

CEO Jack Welch restructured and downsized significantly (“Neutron Jack”)

Suppliers are drawn into the business processes

Globalization of all aspects of the businesses

Only run businesses that are number 1 or 2 in their global markets

Focus on organizational knowledge

Major quality programs

Late 90s: wholehearted embrace of eCommerce

Porter’s Value Chain Analysis The Generic Value Chain Margin Margin Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales Service Primary Activities Support Activities Source: Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance ; The Free Press, New York; p. 37 Download the entire document at: www.gazhoo.com

Inside-Out Strategy Schools The Criticism of Strategic Planning (Mintzberg) Value Chain Analysis The Reengineering School (Hammer/Champy) Core Competencies/Strategic Intent (Prahalad/Hamel) Strategy as Execution/Integrated Strategy Context Outside-In Strategy Schools Download the entire document at: www.gazhoo.com

Inside-Out Strategy Schools

The Criticism of Strategic Planning (Mintzberg)

Value Chain Analysis

The Reengineering School (Hammer/Champy)

Core Competencies/Strategic Intent (Prahalad/Hamel)

Strategy as Execution/Integrated Strategy

Strategy continues to evolve. The need for Growth and eCommerce is s shifting strategy to focus on Innovation and Venturing Networks. Evolution of Strategy Formulation Late 1990’s ~ 2000 Innovation, Venturing and and Value Networks Strategic Intent Strategy as Stretch Competing on Competence/Capabilities Industry Structure Differentiation vs Cost Market Share / Market Dominance Various authors 1990s 1980s 1970s Ghoshal Prahalad/ Hamel Porter Growth Share Matrix/ Experience Curve

Evolution of Strategy Formulation