Competing on the edge: • ImprovisationThe ability to survive • Co-adaptationchange and re-inventa firm constantly overtime • Experimentation • Regeneration • Time pacing
FUNDAMENTALS OF COMPETING ON THE EDGE 1.UNCONTROLLED 2.INEFFICIENT 3.PRO-ACTIVE 4.CONTINOUS 5.DIVERSE
Core conceptsWhere do you want to go? How do you get there?THREE CORE CONCEPTS:EDGE OF CHAOSEDGE OF TIMETIME PACING
MANAGING CHANGE LEADINGREACTION ANTICIPATION CHANGE CONTINGENCY BEING AHEAD OFTAKING DEFENSE PLANNING. THE GAME
CHANGE IS DIFFICULTBUT RESISTANCE TOCHANGE IS FATAL.1.The future is toounpredictable to plan thus However , Managers cannotmanagers cannot plan wait for the future to unfoldeffectively.2.There is fiercecompetition in most high However, they cannot focusvelocity industries. only on change
Edge of chaos- An organization is only partially structured.-The natural state between order and chaos, a compromise between structure and surprise.-An intermediate zone should be maintained where the system is most vibrant, surprising and flexible.
Edge of time-Thinking simultaneously about multiple time horizons.-The challenge is to balance on the edge of the past the present and the future.-The intermediate zone where managers look backward to the past and forward into the future while concentrating on today.
Time pacing.-Change is triggered by passage of time rather than occurrence of events.- Creating an internal rhythm that drives the momentum for change.-Systems evolve most effectively by shedding off what was useful in the past and adopting what will be useful in the future.
Cont’d• Variation is enhanced, making evolution more effective (filling the inefficiency during the process)• Keep what works and adopt what will be useful in future• Slower and more gradual change process• Stretches managerial thinking across a longer time frame• The key is to remain at the edge of time (where past and future are still connected)
How Organizations Change Complexity theory• Change is the marriage of two processes Evolutionary theoryComplexity Theory• Adaptation is most effective in systems that are only partiallyconnected (not too structured)• Quicker change process that happens as managers adapt tocurrent situations• The key is to stay poised on edge of chaos
Grow Adapt Change Variation through successiveNatural selection Acting on inherited generations over time
Competing on the Edge | Intellectual Roots• Competing on the edge is based on the fundamentals of changeand the elements that affect: - adaptive behavior - evolutionary change and - origins of speed Assumption 1: Marketplace is in a constant flux • Competitions come and go • Market changes (emerge, close, shrink, collide and grow)
Assumption 2:Firms are composed of numerous parts• Links of parts together at the edges of chaos and time formscomplex adaptive system Complex Adaptive System: 1. Made up of multiple agents (people or companies) 2. Agents must differ from each other 3. Exhibits COMPLEX behavior (behavior that is orderly enough to ensure stability but also full of flexibility) – Think Jazz band ! 4. Behaviors are ADAPTIVE 5. Behaviors are EMERGENT
What does this mean?• The organization has the ability to adjust to obstacle togetherwithout an established ‘leader’
GOAL of Competing on the edge strategy Flexibility Adaptation to Ability to locate the current change & constantly changing evolution over time sources of advantage Resilience in the face of setbacks
Poised on the Edges at 3M How did the managers do it? CHAOS • Scientists : Allowed to spend 15% of their time on anything • Business run with lots of freedom & loose planning • Grants for external projects • Allowing change to happen will flexibility • This is pursuing edge of chaos
The other elements in their structure.. Structure Past Future• Sophisticated • Rooted on edge • Acceleration of financial of time their R&D controls & • Routinely projects• Sophisticated recombine past • Ensure every information techonologies 3M business systems • Eg. can reinvent Mircoreplication itself periodically
Cont’d• 25% of sales • Constantly • 38th of dividend must be from finding new increase products less products • 9% of sales than 4 years old • Their strategy: increase focuses on• Sets the rhythm • 3M coating of change technologies & continuously• Past > present > innovations reinvent itself future • Edges of chaos & time
Conclusion Where do you want to go? How are you going to get there?
An Introduction…• An alliance is not necessarily a merger or acquisition. It can also be an agreement between businesses to work collectively to achieve their objectives (mutually common or different).• Either way, a good business alliance can give a firm Collaborative Advantage.• What to consider when establishing an alliance? – Not just cost minimisation, improved funding, better productivity… – Human factors are also important! Barriers to effective use of relationships is social, not strategic factors Distinctions between organisational classes can interfere with adaptive capability -Kanter-
3 Fundamental Aspects of a Business AllianceAlliances should Alliances should not Alliances cannot beprovide continuity. It be just an exchange restricted by strictshould provide new of resources and rules. It should provideopportunities rather skills. That’s not an interpersonalthan being one-off alliance, more of just connections and a supplier-consumer encourage change & relationship development.
Collaboration & Driving the Market• Shaping the Market via deconstructionist approach.• Deconstruction of competitors• Accomplished by joint ventures, hostile takeovers, partnerships, mergers, acquisitions…etc.• E.g. – Eliminated direct competition in international telecom – Increase likelihood of competitors exiting & preventing new entrants• Can be done with suppliers, channels…
Types of Alliances Combining core competencies
Collaborating within the Value Net Customer • Retailer • End user Competitors • Wholesaler Complementors • Playstation • Gamecube • Xbox Linux Project • PCs • User-communities • Online-gaming • Magazines, platforms fanzines…etc. • Stand-alone DVD • ISPs player • ModChips Suppliers • Nvidia • Intel • Content rights holders From Martin Koser
Courtship Engagement Setting up HousekeepingChanging within Learning to Collaborate
Courtship• The stage where a suitable partner firm is discovered• Business alliances are more commonly initiated like romantic relationships; from optimistic ambition, feelings or intuition.• It is important for firm’s executives to hit it off at a personal level.• Relationship compatibility is not measured just by numbers and statistics.• Strategic and financial analyses just contribute a level of confidence.
Criteria for partner selection1. Self-Analysis • Important to assess the firm itself: Find out the firm’s resource levels, internal SWOT analysis, objectives…etc. • Calls for a deep evaluation of the industry (their own and the targeted industry). • Focus on a shortlist of potential partners and evaluate them. You wouldn’t want any surprises!
Criteria for partner selection2. Chemistry • Focuses on the personal side of a business alliance • A good understanding between executives creates some goodwill to draw on in times of tension. (can include business & personal interests) • Important to consider cultural, religious, ethnic and regional differences when interacting with another company.
Criteria for partner selection3. Compatibility• Compatibility on financial terms is important• But so too are intangible measures such as: • Historical • Philosophical • Strategic • E.g: common experiences, values and principles and future aspirations
Engagement• The alliance becomes formally institutionalised.• Relationship becomes complicated when stakeholders enter the picture.• The management can follow certain steps to ensure the relationship keeps it balance between personal and institutional: – Meeting the Family – Establishing the Vows
Meeting the Family• Like the executives, the lower-level management and employees should be given the chance to build a good rapport with staff of the potential partners.• Also ensure that other stakeholders approve of the alliance.
• Third party professionals (lawyers, investment bankers) enter the fray to oversee the contracts and legal side.• Must control their role at this stage as these professionals tend to focus more on technical elements and less on operational compatibility. If professionals dominate, this may happen Operational Friendly Professional savvy rules and contracts
1. Incorporate a specific jointThe Vows activityWays to ensure thebest agreement is 2. Include a commitment toestablished expand the relationship 3. Incorporate clear signs of independence for partners.
Setting up Housekeeping• As companies get past the initial set-up, there are bound to be some barriers when the actual alliance is put into practice.• These obstructions include: 1. Problems of Broader Involvement 2. Discovery of differences 3. Respect vs. Resentment
Problems of Broader Involvement• This involves the problems which arise among employees of the partnering firms.• Problems may arise due to: – Insufficient opportunities for staff to create a good working rapport – Employees may have a different perspective about the alliance compared to the executives – Employees may focus on the company that primarily hired them instead of the partner firm – Some staff may oppose the alliance
Discovery of differences Operational and cultural differences start to emerge. These differences can be classified as:• Differences in authority and decision making• Logistical and operational differences• Money related conflicts• Language barriers
Respect vs. Resentment• Resentment from the different groups of employees may arise from: – Stereotyping – Blaming the “outsiders”• Higher-level management should encourage their respective employees to be open and supportive of partner firm’s staff, regardless of background or nationality.• Respecting other’s work will help them feel appreciated and contribute more to the venture.
Learning to Collaborate• Firms have to develop procedures to eliminate organisational and interpersonal disparities to obtain the maximum value of the alliance.• Alliances can achieve 5 levels of integration:
• Involves frequent communication among executives regardingStrategic objectives and company changes • Helps firms move in a complementary direction • Develop plans for joint activities, knowledge transference, firm changes that enables better linkageTactical • Involves appointment of as Alliance managers, Worldwide account directors (WWADs)
• Concerned with providing staff with necessary information, resources and training to do their tasks.Operational • E.g. participating in mutual workshops to formulate common work schemes • Develop personal relationships between the companies • This helps in improved sharing ofInterpersonal resources and information • Prevents small conflicts from growing
• Involves managers acting as teachers as well as learning about the skillsCultural and cultural awareness required to eliminate any differences
The US team leader described his Japanese counterpart as weak, incompetent and completely disinterested in the project. “He never says anything in meetings, he just sits there. Sometimes I think he is asleep. I do my best to drive the project, but nothing happens.“headquarters gave him a weak team; he must always present thingshimself. He can’t rely on his team for any support. We don’t believeanything his people send us, how could we?” Marshall n.d.
Both sides were interpreting the other’s behaviourstrictly in terms of their own corporate and nationalcultural assumptions. Where the Japanese executive was demonstratingconfidence and support for his team the Americanssaw passivity and disinterest. In trying to correct that perceived problem theAmerican executive unintentionally convinced theJapanese that the American team members were notup to the task at hand – anything that did not comefrom the American executive himself could not betrusted Marshall n.d.
Changing within• An alliance will produce changes which were unexpected at the start of the collaboration.• Manager should exchange ideas in order to garner the full value from the partnership.Empowerment of Relationship Managers• Managers must be able to adapt their firm’s methods accordingly to venture-specific tasks• E.g. Northern Telecom gives independence to its managers in Turkey and China branches to alter the working procedures.
Changing withinInfrastructure for Learning• Companies discover that strong communication and exchange of ideas across departments lead to increased productivity.• This leads to internal modifications to allow more teamwork across departments and the exchange of information and ideas.