Chapter 8 - Strategy change Flashcards
What is strategic change
Refer to creating a new type of alignment between the firm and the environment.
Strategic change is differnet to operational change. Operational change refer to the constant day to day adjustments that we do to be more efficient WITHIN the current broader alignment.
Strategic changes affect the business model and the configuration
what is the issue of strategic change
The issue of strategic alignment is that a firm want to always be in harmony with the environment. This includes making strategic changes oN TIME. We are considering threats and opportunities in the environment, and we naturally want to make sure that we are aligned with them.
The issue is that there are multiple ways of doing this alignment. First of all, there are differnet areas of alignment, and there is the magnitude and pacing of it.
In this chapter, we only care about the nature of the changes as an abstract topic. For instance “how does the firm use strategic changes to align itself with the environment”.
The general core issue is about evoluation vs revolution. There are certainly cases where both are deemed useful. For instance, in the case of new techonology, revoluaiton can be necessary. At least it allows the reset that might be beneficial.
However, revoluation comes at a cost. It is highly disruptive, creates a new business model entirely, will probably change a lot of employees and culture as well. Therefore, it is not surpiring that revolution is a tool that is in demand whenever the organization has built up inertia and struggle to improve. the usual suspects include: Psychological resistance to change, cultural resistance to change, political resistance to change, etc.
Then there are the obvious pressures to force revolution: Rivals moving fast, opportunities with firs-tmover advantages, etc.
Then there is the aspect of evolution. Evolution is largely based on the biological evolution, and typically relate how we grow stronger through continuous adaptation to the environment. organizational learning is broiught up as a basis for this demand. In order to build a culture, a foundation and a competence, we need to allow evolution. Starting from scratch with big revolutionary moves will make this difficult.
is this chapter about the strategic changes?
No, it is about the overall process of how strategic changes can be used to keep the firm in sync with its surroundings.
elaborate on the goal of strategic alignment
Keep a close fit between the firm and its environment.
We must understand the direction that the environment moves in, and use whats called “strategic renewal” to make the firm follow suit.
what factors do we include in strategic change?
Areas of strategic alignment
Magnitude of change
Pace of change
elaborate on areas of strategic alignment
The most general distinction is made between the business model, and the organizational system.
Business model is the basic foundation of how a firm makes money.
organizational system is how the organization is built, and consist of sub parts:
1) Organizational structure
2) Organizational processes
3) organizational culture
elaborate on organizational system
Recall the 3 parts: structure, processes and culture.
structure can be regarded as the anatomy of the organization.
Processes is the way the differnet units interact with each other.
Culture is about the world view of the group. Sub cultures are a big part of this.
The organizational structure is essentially the division of labour. differentiating of tasks.
Processes is the arrangements, procedures and routines used to control and coordinate the various people and units within the organization.
elaborate on the demand for revolutionary change processes
Revolution is a process where radical changes takes placewtihin a short period of time.
We discard previous things, and make new ones.
In general, we can say that the demand for revolution is biggest when the firm no longer grow from smaller steps (evolution). We are often talking about rigidity of an organization.
- Psychological resistance to change
- Cultural resistance to change
- Political resistance to change
- Investment lock-in
- Competence lock-in
We also have factors like:
- Competitive pressure
- Regulatory pressure
- First mover advantage
These factors create a demand for revolutionary changes.
elaborate on the demand for evolutionary change processes
Evolution is a constant stream of moderate changes that gradually accumulates over a longer period of time. Each change is small in itself, but the total CAN become large. Evolution is about modifying, mutating, making changes along the way. Try something out, keep some remove some.
Some mutations are beneficial, some are not. We usually try to keep the ones that are beneficial and remove those that are not.
The concept of learning is especially important. Learning takes time, and cannot be done through rapid revolution.
It is also important to understand that radical changes through revolution require power. Usually, this power is not concentrated around a core of indiviudsals that makes this possible. Therefore, it can be quite difficult to actually assemble all the people required to make the revolutionary changes.
when do we ideally use revolution and evolution?
Revolution create discontinuity in the alignment process.
Evolution ensure continuity in the alignemnt process.
So, in a way, it is about whether the alignment process is going good or not
elaborate on the perspectives
1) Discontinuous alignment perspective.
2) Continuous alignment perspective.
Discontinuous alignment perpsective claim that “real strategic alignment” can only be achieved through radical change. evolutionary change is just a supporting role. Revolution is required.
Continuous alignment perspective look at revolition as a fall-back to if all else fail.
elaborate on the discontinuous alignment perspective
The motivaiton behind it is that organizations and people are naturally reluctant to change. Therefore, large pushes are necessary.
The discontinuous alignment perspective look at the ideal as having a period of stability, but once there is a mismatch between the environment and the firm, something needs to happen. And the view is really that stability cause us to be so reulctant to change, that small nudges are not enough. It is necessary to enforce big changes.
elaborate on the continuous alignment perspective
The motivation behind it is that radical changes are not healthy. They indicate a strong obsession with the short term. If we are interested in the long term, radical changes is not the way to go.
They argue, that radical changes cause a huge demand for stability afterwards. This stability is not as efficient as constant evolution.
key aspect to make this perspective work, is that the entire organization must be interested in learning. Everyone has the focus on the long term.
