Strategic Thinking Chapter 1
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Kelly
Bettina
Nick
Rachel
Tam
Outline
Mutually Destructive Competition
 Industrial Extinction
 Tyranny of Theory
 Win-Win Situation for All
 Creating Value for People
 New Moral Contract
 Building Shared Destiny Relationships
 Conclusion

Rocks and Hard Places
Dominant Theory and Practice
 Distributing value to Shareholders
 Industrial Extinction

A New Manifesto for
Management
Contradictory practices
 No fear of diversity
 Microsoft, ABB, 3M

Systems
Geneen’s Monkey
 Ford’s Assembly line
 Famous last words of the “System”

The Tyranny of Theory
Win-Loose
 Porter’s theory of
strategy
 Value appropriation
 Static efficiency

Companies exist
because markets fail
 Control
Society vs. Company
New Management Philosophy
Win-Win
 Value creation
 Dynamic efficiency
 Markets as
organizational
economies

Society and
Company
Shift in Thinking
Win-Loose
 Porter’s theory of
strategy
Win-Win
 Value creation
 Dynamic efficiency
 Value appropriation
 Static efficiency

Companies exist
because markets fail
 Control
Society vs. Company

Markets as
organizational
economies
Society and
Company
Quotes

Profit in business comes from repeat customers,
customers that boast about your project or service,
and that bring friends with them.
W. Edwards Deming

In the business world the rearview mirror is always
clearer then the windshield Warren Buffett

We succeed in enterprises which demand the
positive qualities we possess, but we excel in
those which can also make use of our defects.
Alexis de Tocqueville
Profitability in a Global Context
http://www.youtube.com/watch?v=NM_F3C8rCEQ
Recent Survey
Gary Hamel, Visiting Professor of Strategic
and International Management at the
London Business School:
Looking twenty years out into the
future, what one characteristic—
principle, practice, or structural
feature—of the “modern” industrial
organization will appear to be the
most antiquated or anachronistic?
From HBR Online – 4 Oct 2007
Some of the Responses


"Rigid hierarchical system would be the most
antiquated. Almost flat & flexible organizational
structure, based on the roles one performs,
will be the rule in coming years. This will allow
greater interaction and innovation within newage organizations."
"Quite simply, centralized command and
control. While used by most companies as the
fundamental organizational structure, it in
itself has become the chief impediment
keeping organizations from adapting to newer
more flexible structures required to grow and
compete globally. Quite a paradox!!"
Responses – Cont.


"Shareholder Value Fundamentalism [will
appear anachronistic in the future].
Organizations will balance human values and
not focus just on economic value."
"The management principle (and tangible
structural artifacts) that views organizational
change as a periodic event and which seeks
constancy and stability. This principle holds
that organizations should be designed based
on the mental paradigm that stability is the
norm and desired end state. Today, all
structures, systems, processes, programs, and
people strategies are based on a stability
mindset."
Motorola Collaboration
Motorola, Inc. and Macrovision Announces Analog Copy Protection Technology Agreement
Wed Oct 3 05:27:00 EDT 2007
Motorola, Inc. and Macrovision Corporation announced a renewed agreement to make Macrovision's
analog copy protection (ACP) technology available in Motorola's portfolio of set-tops. This
collaboration facilitates seamless mobility and the accelerated adoption of new devices and
services in the digital home.
Verizon Wireless And Motorola, Inc. Announces Launch of MOTORIZR Z6tv
Fri Sep 28 17:30:00 EDT 2007
Motorola, Inc.: Verizon Wireless and Motorola, Inc. announced the launch of the MOTORIZR Z6tv on
October 5. MOTORIZR Z6tv comes with a slider design and is equipped with V CAST Mobile TV,
V CAST Music and Video.The MOTORIZR Z6tv provides 24-hour access to broadcast-quality
full-length TV shows through V CAST Mobile TV from Verizon Wireless.
Infineon Technologies AG Signs Agreement with Motorola, Inc. to Develop 3G Radio Frequency
Chip
Wed Sep 26 18:26:00 EDT 2007
Motorola, Inc.: Infineon Technologies AG (Infineon) announced that it has signed an agreement with
Motorola, Inc. to develop a new multi-mode, single-chip 3G radio frequency (RF) transceiver
based on Infineon's SMARTi UE chip. The RF transceiver is a core component in a mobile phone
or other mobile cellular device. Its primary function is to send and receive digital data over the air.
As consumers continue to demand more multimedia functionality from their mobile devices, the
RF plays a key role in delivering the data speed and signaling needed to support mobile content
and services.
Latest News
NEW YORK, Oct 3 (Reuters) - Motorola Inc.
(MOT.N: Quote, Profile , Research) said
on Wednesday it took $221 million in
charges for job cuts in the first half of 2007,
according to a regulatory filing.
Motorola said the severance costs came from
cutting about 4,100 jobs.
Job cuts will result in a net pre-tax charge of
around $83 million in the third quarter, the
company said in its filing with the U.S.
Securities and Exchange Commission
5 Year Stock Prices
Motorola, Nokia and Sony
Companies as Value Creators
3M and ABB




Focused on value
creation
Continuous innovation
People systems
Encouraged new ideas
Westinghouse and Norton
 Zero-sum
 Dog-eat-dog
 Bought and sold businesses
 Value appropriation
 Employees, suppliers and
customers are seen and dealt
with the same
 Thought of company is market
terms
 People acted alone as if in
market
Example
Enron Video
Different Beliefs = Different Results
Norton and Westinghouse became
victims of their own strategy
 Employees were scared to fail
 As a result, they did not create anything
new

ABB On Adding Value

ABB’s goals are “to
make economic growth
and improved living
standards a reality for
all nations throughout
the world” and that “we
are, first of all, an
educational institution.”
ABB On Adding Value
Employees were encouraged to take
risks
 Employees had job security
 Shared resources between departments

Managers Should…
•
•
•
•
•
•
•
Avoid status quo
Lead change
Facilitate cooperation
Establish a sense of purpose
Create an environment for entrepreneurs to
be unleashed
Develop people systems
Shift from value appropriation to value
creation
Out With the Old, In With the New
Strategy
Structure
Systems
S
Purpose
Process
People
P
A Win-Win Situation
Managers have opportunity to influence
their employees
 Make them the best they can be
 Employees win, company wins,
economy wins

The Old Way…
Advantage from monopoly over people’s
jobs
 Specialization an asset
 Unwillingness to compromise
 This type of job security unrealistic in
our new economy

The New Way…
Value creation takes more than that
 The company sets the tone

Quote
“Individual commitment to a group effort –
that is what makes a team work, a
company work, a society work, a
civilization work.”
~Vince Lombardi
A New Moral Contract…
Employee responsibility
 Employee mobility
 Enhanced employee value

Motorola Corporate
Responsibility

Corporate responsibility means
harnessing the power of our global
business to benefit people. It also
means doing the right thing in all
aspects of our business, including how
we treat the environment, our
employees, our customers, our partners
and our communities.
Motorola Business Principles
Community support
 Economic opportunities and growth

Motorola University
Every employee required to take 40
hours per year
 Shows their commitment to adding value
to people
 Competitive advantage
 Six sigma

Individual Dignity Entitlement
1.
2.
3.
4.
5.
6.
Do you have a substantive, meaningful job that
contributes to the success of Motorola?
Do you know the on-the-job behaviors and have the
knowledge base to be successful?
Has the training been identified and been made available
to continuously upgrade your skills?
Do you have a personal career plan, and is it exciting,
achievable, and being acted on?
Do you receive candid, positive or negative, feedback at
least every thirty days that is helpful in improving or
achieving your personal career plan?
Is there appropriate sensitivity to your personal
circumstances, gender, and cultural heritage so that such
issues do not detract from your personal career plan?
Quote
“Few things help an individual more than
to place responsibility on him, and to let
him know that you trust him.”
~Booker T. Washington
What the New Contract Is Not…
An excuse not to protect the jobs of
employees
 An act of altruism
 A program to be installed by HR, rather
an entirely different way of thinking

Shared Destiny Relationships
•
•
•
Creating value for internal and external
customers
Stated objective and proven outcome
Successful companies e.g.
Canon: Promoting Bubble-Jet Printer yielded
higher functionality-to-cost ratio
Intel: Creating next generation chips allowing
customers to do new things
McKinsey & Company and Anderson
Consultant: Recruiting the best talent by
giving the promise of employability
Example: Unipart’s
Transformation
•
•
•
•
•
different from “being and doing good to all.”
two-way dependence
making the destiny mutually attractive
“an expansive positive-sum value-creation
perspective”
“… We must create shared destiny
relationships with all our stakeholders:
customers, employees, suppliers,
governments, and the communities in which
we operate. It is not altruism; it is commercial
self-interest.” P.28
A Manifesto for
Reclaiming Managerial
Legitimacy
“value creation for all constituencies”
 more satisfying and more effective

Examples
•
“Environment, Health, and Safety
(EH&S) is a shared responsibility, and
all staff members are responsible and
accountable for our performance. All
staff are expected to understand and
comply with Amgen’s commitment to
EH&S and are encouraged to actively
participate in its continuous
improvement.” –Amgen Inc.’s
Environmental Commitment Statement
Examples – Cont.
•
“Purveying quality coffees means much
more than selecting the finest beans on the
market. Starbucks strongly believes in the
importance of building mutually-beneficial
relationships with coffee farmers and coffee
communities with which we work. The
success of the farmers with whom we do
business is a critical component of our own
success. We are taking an integrated
approach to building relationships with
coffee communities….” –Starbucks’ social
responsibility statement
Conclusion
•
•
•
•
Value Appropriation’s problem: Selfdefeating, get squeezed more and more
into a corner, and value being destroyed
for all components
Value Creation’s power: customer
satisfaction, employee enthusiasm, and
shareholder wealth
Ideas matter
“Get out of the pincer’s grip.” p.31
References
•
•
•
Cusumano, M.A., & Markides, C.C.
(Eds.). (2001). Strategic Thinking for the
Next Economy. San Francisco: JosseyBass A Wiley Company.
http://www.amgen.com/about/environme
ntal_sustainability_commitment_stateme
nt.html
http://www.starbucks.com/aboutus/origin
s.asp
This is a test…
Be afraid
Essay Questions
Do you think the recent agreement
between General Motors and the UAW
union is a reflection of a change in the
relationship between GM and its
employees ? Explain your view. What
might be the motives ?
 Can white collar crime be explained as
an outcome of a strategic focus on value
appropriation ? Explain.

Essay Questions – Cont.
A company director laments: “my best
people always leave first when there is a
threat of job cuts”. What advice might
you give him ?
 Why does dynamic efficiency in
companies have a positive impact on
society ?









Westinghouse and Norton
Zero-sum
Dog-eat-dog
Bought and sold businesses
Value appropriation
Employees, suppliers and customers
are seen and dealt with the same
Thought of company is market
terms (people started acting alone
People acted alone as if in market