7.- Topic G: Strategic Change
7.-Topic G: Strategic Change
Issues of Strategic Change
“A careful review of the strategy content literature reveals that the essential quality of a strategy is its originality since originality allows a firm to outperform its rivals. Originality can take the form of a first-mover advantage, a unique position in the market, a unique bundle of resources, or a unique dynamic capability” (Gibbert, 2010). Strategic changes are aimed at developing a new sort of alignment — a new fit between the basic set up of the company and the features of the environment. While functional modifications are essential to keep up the company and organisational systems, strategic changes are aimed at renewing them. Some areas of the company’s business system and a corporate system could be maintained, but some will need to be changed for the company to remain competitive and up-to-date. This practice of continuously enacting strategic modifications to stay in harmony with outside conditions is known as ‘strategic renewal’. We talk about strategic change when basic alterations are made to the company system or the organisational system (de Wit, 2010).
Siemens is a German-based multinational in the electronics and electrical engineering industry. While the German market barometer rose slightly over 25% from October 1 to September 30, 1999, Siemens’ stock surged over 90%. This is true for the capital market bubble, which burst spectacularly as expected and nor can Siemens escape these effects and their resulting pressures. During the second quarter of 2001, however, ”dark clouds gathered over the global economy”. The most important reasons were the world economy declined in the aftermath of September 11 (Gibbert, 2004).
The project studied at the Siemens firm called the ‘Top Plus Program,’ searched to enhance business excellence by concentrating on the three so-called ‘Top Plus Fields: productivity, innovation, and growth. Siemens made great progress in the three top fields. In the case of the first Top Plus field, productivity, the firm had generally realized productivity gains of between three and four percent a year before the program was imagined. Since the execution of the Top Plus Program, the business gathered productivity gains totalled almost 40 percent. Concerning of the second Top Plus field, innovation, the business also made significant progress. From the early 1990s, Siemens enrolled an average of 3000 inventions each year and in 2002 the number had increased to over 8000 each year. Concerning the third Top Plus area, growth, the Business saw new orders rising from 20bn Euro to almost 60bn Euro (Gibbert, 2004).
Perspectives of Strategic Change
There are two strategies that managers might follow in the execution of strategic change. These are discontinuous renewal perspective or continuous renewal perspective.
According to supporters of this “discontinuous renewal perspective” strategic change is hard and meets significant resistance. In general, the more important difference is, the more severe the shock will be. Supporters of this view argue that organisations and people show a natural reluctance to change. The stability of a company will be usually high if these components form a cohesive and consistent arrangement. For strategic changes indeed occur, measures must be revolutionary and comprehensive. However, supporters of this discontinuous renewal perspective emphasise the period of chaos which shouldn’t take a long time. Hence, the long-term pattern of strategic renewal is not gradual, but episodic. However, a misalignment between the company and its environment develops over a more extended interval, resulting in a mounting feeling of impending crisis. Radical change could be proactively pursued to gain a competitive quality, or even to change the rules of the game in the factory in which the company is competing. Periods of relative stability are interrupted by instability times, during which radical changes happen in the firm (de Wit, 2010). Siemens has applied “discontinuous renewal perspective” according to the following project “Top Plus Program”. It began by delineating industry boundaries, especially the bounds of this electrical engineering and electronics sector, and for Siemens to operate within these limits. Siemens concentrated on two essential measurements when defining business boundaries: clients, and competitors. The most necessary of these dimensions was the clients. Siemens had created a more sophisticated approach known as images of the Future to specify industry boundaries using the clients’ dimension pictures of their future was comprehensive studies demonstrating Siemens’ visions of their five vital corporate areas (Information and Communications, Automation and Control, Power, Transportation Systems, and Medical Solutions) (Gibbert, 2004).
Opposite to discontinuous alignment, the view of “continuous renewal perspective” is significantly more lasting in orientation. Three organisational attributes are essential for maintaining a steady rate of change. To start with all the workers within the business ought to be dedicated to improving continually. Second, everybody in the firm must be motivated to learn continuously. Individuals within the corporation must continuously update their knowledge base. Thirdly, everybody in the business must be moved to adapt continually. Continuous modification of external fluid and change internal realignment pursued. These three characteristics of an evolutionary company — a constant improvement, adaptation, and learning — have in common that everybody in the business is involved (de Wit, 2010).
Resolution of Paradox
Revolution is an alteration which needs rapid and significant strategic but also the culture shift. This change might be in circumstances in which the strategy has been so bounded by the present culture, even when environmental or competitive pressures may call for a fundamental shift. Handling such change is Very Likely to involve: Clear strategic direction, combining economic and symbolic levers, an outside perspective, Multiple styles of change management, Working with the existing culture and Monitoring change (Johnson, 2008). The starting point of the Siemens project “Top Plus Program” was revolutionary because they concentrate on five key company areas (Information and Communications, Automation and Control, Power, Transportation Systems, and Medical Solutions).
Evolution is a change in strategy which needs the culture shift but through the time. It can be that managers expect the need for transformational change. They could then be in a position of a suggested evolutionary change, with time to reach it. Handling such change is very likely to include: Empowering the organisation, A clear strategic vision, Continual change and a commitment to experimentation about organisational processes throughout the organisation, Stages of transition, Irreversible changes, Sustained top management commitment and Winning hearts and minds (Johnson, 2008). Such evolution Siemens company adopted it and worked on the essential elements to reach success and prosperity. As the Top Plus Program showed a distinctive pointer specialising in focusing on core competencies. A vital task in focusing on core competencies was that of harmonising various technologies. The organisation’s focus on transcending, instead of beating competitors. As the following quote by Siemens’ founder, Werner von Siemens shows: ”A key reason for the blossoming of our factories lies in using our innovations as their basis… This approach has never failed to enable us to be quicker than our competitors. This advantage usually persisted until we managed to get even further ahead by continuous improvement of our innovation” (Gibbert, 2004).
8.- Topic H: Strategy Formation
8.- Topic H: Strategy Formation
Issues of Strategy Formation
‘Strategy is a course of action for achieving an organization’s purpose’. The process in which an accomplished Plan is formed is known as ‘strategy formation’. The process of strategy formation encircles both action and formulation. The procedure for strategic reasoning Can be broken into four general kinds of actions:
1. Identifying — Refers to all Actions leading to a better knowledge of what ought to be problematic.
2. Diagnosing — (1) External evaluation; the action of exploring the dynamics and structure of the environment surrounding the company
(2) An inner evaluation; the action of exploring the capacities and operation of the company.
3. Conceiving — Refers to all Actions that lead to deciding on what course of action ought to be pursued.
4. Realizing — Refers To each of the technical activities performed by the company (de Wit, 2010).
Siemens has been able to apply these actions through implementation her project which is called “Top plus Program”. This project sought to improve business excellence by focusing on productivity, innovation and growth. This project will be discussed in detail in the term “Strategic Change”.
Getting people inside a company to exhibit strategic behaviour requires the exchange of information and thoughts, decision-making processes, communication channels, the allocation of assets and the coordination of activities. Movements in the strategy formation process can change as jobs and duties are divided in different manners. Usually, some actions will be divided amongst members of the best management group, although other activities will likely be pushed farther down to divisional managers, business unit managers, department supervisors, and at times even individuals. Supervisors are accountable for the understanding of strategic choices of interest to the key procedure of their organization. But many companies have staff members engaged in the strategy creation procedure (de Wit, 2010).
The employees in Siemens engage with a company in the process of forming a strategy, which applies to each person in the company from managing board members to trainees. This process let the company benefit from all experiences to improve the performance of the company. There are more than 140.000 employees in Siemens Company who have shares in it, and for this reason, they are more responsible and more related to (Siemens AG, 2014).
In coordinating the plan formation process, need to formalize the mission of actions to the various possible process participants ought to be. The extra plus of formalization is that it provides top management more control within the business, as all significant modifications must be a part of approved programs and the execution of programs is assessed (de Wit, 2010).
Perspectives of Strategy Formation
A differentiation ought to be made between emerging and deliberate strategy. Where accomplished strategies were completely intended, an individual can talk about deliberate strategy. There are lots of notable advantages that ardently pressure organizations to participate in deliberate strategizing:
-Direction: Plans provide organizations a sense of management.
-Commitment: Plans allow early commitment to a strategy.
– Coordination: Plans have the advantage of organising all strategic initiatives within an organisation into one cohesive blueprint.
– Optimization: Plans facilitate optimal resource allocation.
– Programming: Plans are a way for programming all the organizational tasks beforehand. Having comprehensive plans enables organizations to be more run with efficiency and reliability of a system (de Wit, 2010).
Where there aren’t any plans or individuals divert from their programs, but their behaviour remains strategic, it could be stated that the strategy is emergent — slowly shaped through an iterative process of ‘believing’ and ‘doing. Such a way of allowing strategy to emerge has several significant benefits that company also need to consider:
– Opportunism: since the future is unknown and so unpredictable, organisations need to maintain enough mental liberty to capture sudden opportunities as they appear.
– Entrepreneurship: often the best method to learn what works is to allow a variety of people give it a try — tap into the entrepreneurial souls inside the organisation.
– Support: The managers need to understand the internal cultural and political dynamics of the businesses and pragmatically shape plan based on what is achievable, not to what’s ideal.
Every one of these points appears to be the contrary counterpart of the advantages of deliberate strategizing. Deliberateness generates dedication, direction, adjusted programming, although emergence allows for flexibility, opportunism and Continuing learning (de Wit, 2010).
Siemens used “Deliberate Strategy” in establishing the project “Top plus Program” which the company studied it in detail before executing it. This project was practically performed at the beginning of 2002 and realized many successes in many fields raising the company sales to more than 60bn Euro (Gibbert, 2004).
Resolution of Paradox
There’s a paradox of viewpoints on strategy formation: ‘strategic planning perspective’ where some assert that associations need to work hard to create a strategy in an extremely deliberate fashion, by explicitly formulating detailed strategies, and implementing them exactly as Siemens applied on the project of “Top Plus Program”. Second ‘strategic to increment perspective’ people who ardently emphasise evolution over deliberateness, asserting that, newest approaches emerge over the years and associations should ease piecemeal strategy formation procedure. Advocates of this strategic planning perspective assert that strategies must be deliberately planned and implemented. They need to put effort and time to actively inventing an explicit strategy, using all available info and weighing each of the strategic choices. Thus, in the strategic planning perspective, plans are intentionally made. A benefit of strategic planning is that it promotes long-term thinking and dedication. Among the issues of strategic planning is the programs will be based on assumptions regarding the way future events will unfold. The strategy formation process is not about rigidly placing the plan of action beforehand, but about flexibly forming the plan of action by slowly mixing together initiatives into a coherent blueprint of activities (de Wit, 2010).
9.- Topic I: Strategic innovation
9.- Topic I: Strategic innovation
Issues of Strategic Innovation
Strategic innovation is an organisation’s procedure of reinventing or redesigning its firm approach to drive business growth, create value for the corporate and its clients, and create competitive use. This kind of innovation is vital for the firm to adapt to the speed of technology change. Businesses employing strategic innovation don’t necessarily have to adjust the goods and services that they sell to their clients, nor to the technology which supports those products, to be prosperous. Strategic innovation frequently refers to innovation projects which happen at the executive level. Innovating corporate plans could include the following factors: what products will need developed; what markets exactly to compete; what business models to develop; the way to maximize business processes; how to enlarge the clients base; the way to position the organization’s brand regarding target clients; how to make the distribution chain and value chain more efficient; and go-to-market strategy. Although managers direct strategic innovation initiatives, they must cultivate a culture of innovation that promotes collaboration across company teams and functions (TechTarget, 2016).
Well-known examples of businesses that have seen success applying strategic innovation including Siemens in which it deploys their technical experience and the innovative prowess of the employees in the regions where they produce the best value for the business. This targeted allocation of resources that enable them to occupy top positions worldwide in existing tech fields which form the basis for innovation in long-term development areas. Siemens development and research activities aimed at creating innovative, sustainable solutions for their clients and simultaneously protect their competitiveness. For all these reasons, the business focus particularly on strengthening energy supplies which are also economically sustainable; further improving efficiency in the creation of renewable and traditional energy and reducing losses during power transmission; discovering novel solutions for intelligent grids and for the storage of energy from renewable sources together with irregular availability; promoting the efficient use of energy, particularly in building technologies, industry and transport, e.g. through highly efficient drives for manufacturing facilities or to get long-distance and local trains; slowly creating the highly flexible, joined factories of tomorrow utilizing innovative automation and digitalization technology; deploying intelligent analytical systems and the specialized know-how to turn unstructured information into value-adding data, e.g. when supplying services such as preventive maintenance; creating medical imaging technologies, in vitro diagnostics and IT for medical engineering an essential part of results-oriented treatment strategies (Siemens AG, 2017).
Perspectives of Strategic Innovation and Resolution of Paradox
We can deal with strategic innovation through two different viewpoints the first one is through progressive renewal / strategic improvement that’s depending on the idea of progressive improvement of the firm such as enhancing the quality of the goods and improve client value by reducing the prices. The second one is through disrupting renewal/ radical rejuvenation it presents radical changes to the firm, like introduce entirely new inventions.
The company Siemens uses the project of “Top Plus Program” which allows it to be excellent in business through concentration in three main fields which are productivity, innovation, and growth. This “top Plus Program” is considered an application to ” Radical Rejuvenation Perspective” which raised the productivity of the company to 40 % Introducing more than 8,000 inventions yearly from the beginning of 2002, and in the field of growth, the sales of the company raised to approximately 60bn Euro (Gibbert, 2004).
The company Siemens also applied “Strategic improvement Perspectives” through
1- Profit – by offering a range of products, solutions and services that make a difference worldwide.
2- Excellence in business and innovation.
3- closeness from the customers and understand their requirements.
4- Increase the participation of employees in the success of the company.
5- Innovation and increased research and development.
6- Expanding business activities almost to all countries of the world.
7- Manage healthcare separately (Siemens AG, 2014).