Strategic Change - Revolution


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Strategic Change - Revolution

  1. 1. Strategic Renewal- Revolution•Discontinuous nature of renewal is the reference point.•Any significant change with significant strategic impact will be resisted by organizations .•Firms and Employees have a strong preference to stability.•Over time processes and cognitive maps get formalized and rigid structures emerge.
  2. 2. Strategic Renewal- Revolution•Relative Stability is required for efficient functioning but very often creates a structure which is unwilling or unable to change when even it is required immediately.•To make the necessary changes , series of small incremental changes will not produce the required directional change and the magnitude of change.•A sudden pressure and a radical move is necessary to meet the challenges coming mostly from outside.•A coordinated attack on processes , cognitive maps and culture of the organization must be directed across the organization.
  3. 3. Strategic Renewal- RevolutionPunctuated Equilibrium Theory Revolutionary changesnot voluntary but dictated by environmental events at a crisis point
  4. 4. Strategic Renewal- Revolution Environmental Reasons Rigidity Factorsfor Revolution-Technology -Cultural-Regulatory -Political-New Entrant -Investment lock in- Buyers/Suppliers Power -Competence lock in-Political -Systems lock in-Recession - Stake Holder lock in
  5. 5. Business Process ReengineeringBPR is one of the most commonly used management techniques toimplement revolutionary change process.The idea of re-engineering was first propounded in an article in HarvardBusiness Review in 1990 by Michael Hammer , then a professor ofcomputer science at MIT. The method was popularly referred to asbusiness process re-engineering (BPR), and was based on anexamination of the way information technology was affecting businessprocesses.“The literature on re-engineering employs the term processes.Sometimes it is a synonym for activities. Sometimes it refers to activitiesor sets of activities that cut across organisational units. In any case,however, the essential notion is the same—both strategic andoperational issues are best understood at the activity level.”Michael Porter
  6. 6. Business Process Reengineering Conventional Design Vs. BPR Design-Specialization of labour -Cross functional perspective-Economies of scale -Organized around Outcomes-Tasks defined narrowly -Users of the process outputs-Departmental allocation perform the process-Management by departmental -Info/Report processing byhierarchy producers of data-Roots in industrial revolutionera -Geo Teams integrated around-Lack integration process-Poor utilization of IT -Linked parallel activities-Siloed vision -Info captured at data source-No overall goal -Decision tree at the process-Departmental objectives point-Accountability issue -Monitor and measure cycle-Underutilize skilled labour times
  7. 7. Business Process ReengineeringBusiness Process Reengineering involves the radical redesign of core businessprocesses to achieve dramatic improvements in productivity, cycle times and quality.In Business Process Reengineering, companies start with a blank sheet of paper andrethink existing processes to deliver more value to the customer. They typically adopta new value system that places increased emphasis on customer needs. Companiesreduce organizational layers and eliminate unproductive activities in two key areas.First, they redesign functional organizations into cross-functional teams. Second,they use technology to improve data dissemination and decision making.(Bain 2011)
  8. 8. Business Process ReengineeringFuture•BPR as a management idea progressed into BPM (Business Process Management)with heavy usage of Information technology . New tools designed to add theanalytical dimension which BPR lacked in the early phases. Modelling , Simulation ,Data Analysis are core elements of BPM•BPR still used by Management Consulting firms like Bain ,Mckinsey and BostonConsulting , supported by analytical tools.Common UsesReduce costs and cycle time. Business Process Reengineering reduces costs andcycle times by eliminating unproductive activities and the employees who performthem. Reorganization by teams decreases the need for management layers,accelerates information flows, and eliminates the errors and rework caused bymultiple handoffs;Improve quality. Business Process Reengineering improves quality by reducing thefragmentation of work and establishing clear ownership of processes. Workers gainresponsibility for their output and can measure their performance based on promptfeedback.
  9. 9. BPR Case Study - IBM credit finances IBM the computers, software and services sold , Processing a finance application usedto take between six days and two weeks from the credit department to the pricing department to anadministrator who wrote out a formal quote letter. When IBM Credit realized actually the process took onlyabout 90-minutes and the rest of the normal processing time was spent with the application sitting on a pileon a specialist’s desk waiting to be looked at, they decided to reengineer the entire process-The four specialists who previously processed the application were replaced by a generalist -- called the dealstructurer -- who processed the application from start to end using templates on a new computer systemwhich provided all the data and tools each specialist commonly used. For unusual cases, the deal structurercan still call on the specialists to provide additional expertise. The specialist and the deal structurer then teamup to develop a customized package as required. This happens only rarely.The results of the reengineering program were:Turnaround time was reduced from a typical 7-days to4-hours. Without any increase in staff numbers, IBM Credit has been able to achieve a hundred folimprovement in productivity it can now handle 100 times the number of credit applications handlesbefore reengineering was undertaken
  10. 10. The Case for Radical Change: Creative Destruction or CrisisPhysical Laws that `under pressure things become fluid ` applies toorganizations , processes and culture .Tension is built up over the period company remains misaligned with themarket dynamics, creates a sense of impending crisisPeople offer less resistance and become open for radical sometimesdifficult changes . Increased cooperation encourages managers toprolong the crisis sense to implement all the changes they require.After the pressure is lifted , organization and processes will be moldedinto a new form to tackle challenges facing the companyCreative destruction through technology innovation or superior businessprocesses require strong leadership to break from the past and get thefirm reborn in every opportunity to be ahead of the competition.
  11. 11. The Case for Radical Change: NokiaFinnish conglomerate turned itself into the world’s leading mobile phonecompany in the 1990s. So Nokia has already been through one(successful) change program, morphing itself into a focused mobilephone producer.•Global market leader in mobile phones - but not smart phones•Still profitable, but revenues under pressure•September 2010: New CEO Stephen Elop•February 2011 - Elop issued the famous “burning platform” memo bluntlyexplaining the serious strategic challenges facing Nokia•Elop outlined results of his strategic review on Feb 11 2011 - making it clearthat Nokia had to undergo a substantial programme of change•Elop announced a strategic partnership with Microsoft in March 2011 to jointlydevelop smart phones using the Windows mobile platform - ditching Nokia’sprevious investment in its homegrown Symbian platform and Meego
  12. 12. The Case for Radical Change• Elop has swept away many elements of Nokia’s previous organisational structure - a significant process of delayering• Elop has refocused the business on market development• Decision-making has been delegated to local/national teams rather than relying on decisions by an highly centralised senior management team (Finland HQ)• Stakeholders are clearer on the executive managements incentive program• The new strategy brings clarity and a sense of direction to Nokia During 2012, Nokia has faced rapid declines in sales February 2012, Nokia was laying off 4000 employees to move manufacturing from Europe and Mexico to Asia March 2012, Nokia anonunced it was laying off 1000 employess from its Salo, Finland factory to focus on software June 2012: 10,000 further job Job cuts amount to a fifth of aall staffBy June 2012, Nokia had lost more than $88bn in market value since Apple introduced the iPhone in 2007
  13. 13. The Case for Radical Change: NokiaThe “burning platform memo”:“We fell behind, we missed big trends, and we lost time. At that time, we thought wewere making the right decisions; but, with the benefit of hindsight, we now findourselves years behind.“There is intense heat coming from our competitors, more rapidly than we everexpected. Apple disrupted the market by redefining the smartphone and attractingdevelopers to a closed, but very powerful ecosystem.”“The Shenzhen region of China is able to produce phones at an unbelievable pace.By some accounts, this ecosystem now produces more than one third of the phonessold globally – taking share from us in emerging markets.”“Our competitors aren’t taking our market share with devices; they are taking ourmarket share with an entire ecosystem.”“We poured gasoline on our own burning platform. I believe we have lackedaccountability and leadership to align and direct the company through thesedisruptive times. We had a series of misses. We haven’t been delivering innovationfast enough. We’re not collaborating internally
  14. 14. The Case for Radical Change:Nokia
  15. 15. Mckinsey 7s FrameworkThe model used byManagement Consultantsto understand how thesefactors are interrelated.Any change planning to beimplemented in one areaand its wider impact for thefirm is clearly considered byusing this model