HELSINKI UNIVERSITY OF TECHNOLOGY
DEPARTMENT OF INDUSTRIAL ENGINEERING AND MANAGEMENT
INSTITUTE OF STRATEGY AND INTERNATIONAL BUSINESS
TU-91.155 Special Study in Business Strategy and
International Business
Management of Emerging Strategic Issues
in Finnish Growth-Companies
Hughes, Benjamin
60756R
TUO
ABSTRACT ..................................................................................................... 4
1
INTRODUCTION ...................................................................................... 5
1.1
Background............................................................................................................................... 5
1.2
Research Problem .................................................................................................................... 7
1.3
Objectives of the Investigation ................................................................................................ 8
1.4
Scope of the Investigation ........................................................................................................ 8
1.5
Research Methods .................................................................................................................. 11
1.5.1
Interviews ............................................................................................................................ 11
1.5.2
Dynamicity versus Turbulence ............................................................................................ 12
1.5.3
An Integrative Framework for Strategy-Making Processes................................................. 13
1.5.4
Recognition of Issue Characteristics ................................................................................... 14
1.6
2
2.1
Structure of the Study ............................................................................................................ 15
RESULTS ............................................................................................... 15
Strategic Issue Management Processes in the Companies .................................................. 16
2.2
The Categories ........................................................................................................................ 19
2.2.1
Large and profitable companies (appendices 7.2 and 7.3)................................................... 19
2.2.2
Small and profitable companies (appendices 7.4 and 7.5)................................................... 20
2.2.3
Small unprofitable companies (7.6 and 7.7) ........................................................................ 21
2.2.4
Large unprofitable companies (appendices 7.8 and 7.9) ..................................................... 21
2.2.5
Extremely fast-growing companies (appendices 7.10 and 7.11) ......................................... 22
2.3
Data Comparison ................................................................................................................... 23
2.3.1
Large Companies versus Small Companies ........................................................................ 23
2.3.2
Unprofitable Companies versus Profitable Companies ....................................................... 23
2.3.3
Dynamicity versus Turbulence ............................................................................................ 24
2.3.4
An Integrative Framework for Strategy-Making Processes................................................. 25
2.4
Strategic Issues Faced by the Companies ............................................................................. 25
2.5
Recognition of Issue Characteristics in Companies ............................................................ 28
3
CONCLUSIONS ..................................................................................... 29
4
STRENGTHS AND WEAKNESSES OF THE STUDY ........................... 31
5
SUMMARY AND DISCUSSION ............................................................. 34
5.1
Topics for Further Research ................................................................................................. 35
5.2
Advice for the Implementation of Further Research .......................................................... 36
2
6
REFERENCES ....................................................................................... 38
7
APPENDICES ........................................................................................ 40
7.1
Interview structure................................................................................................................. 40
7.2
Interview Notes: Company A ................................................................................................ 41
7.3
Interview Notes: Company B ................................................................................................ 43
7.4
Interview Notes: Company C ................................................................................................ 45
7.5
Interview Notes: Company D ................................................................................................ 47
7.6
Interview Notes: Company E ................................................................................................ 49
7.7
Interview Notes: Company F ................................................................................................ 52
7.8
Interview Notes: Company G ................................................................................................ 54
7.9
Interview Notes: Company H ................................................................................................ 57
7.10
Interview Notes: Company I ................................................................................................. 59
7.11
Interview Notes: Company J ................................................................................................. 61
3
Abstract
This study was conducted as part of the MESI (Management of Emerging Strategic
Issues) project for the Institute of Strategy and International Business. The purpose
was to explore the field of strategic issue management in Finnish growth companies
and provide a platform for further research. Ten representatives of Finnish growth
companies were interviewed and strategic processes and issues faced by the
companies were discussed. The companies were chosen from five different categories
to help ensure that the sample of case-companies was diverse enough.
The case-companies used strategic processes of varied dynamicity and operated in
environments of varying turbulence. Mostly an annual or semi-annual strategic
planning cycle was used with a few days of strategy planning and then monitoring
during the rest of the year. Most representatives had a clear view of how they would
like to develop their strategic process. The problems they recognized most often
related to not having enough time to discuss strategic issues fundamentally enough
and to communicating the strategy throughout the organization.
The issues faced by the case-companies were diverse, ranging from investments and
divestments to organizational re-structuring. Most of them were however either
related to or caused by the company’s growth. Some aspects of the issues were
difficult to discuss in retrospect, for example the phases how the issue progressed may
not be remembered clearly even after just a few months. The strategic issue
management system characteristics defined earlier in the MESI-project had some
relevance in the growth-company context, although a different kind of study may be
better suited for more thorough investigation.
The study provides a good general description of strategic issue management
processes in Finnish growth companies and what kind of issues these companies face.
Many ideas are identified that will be of use to other researcher interested in the field.
Also, based on the study, several topics for further research have been suggested.
4
1 Introduction
This study has been conducted as part of the MESI (Management of
Emerging Strategic Issues)-project for the Institute of Strategy and
International Business at the Helsinki University of Technology. The study
satisfies the requirements for completing the course TU-91.155: Special Study
in Business Strategy and International Business.
1.1 Background
Most companies, at some point in their life, face a situation where they have
to formulate a business-strategy or make a strategic decision. The processes
through which these actions take place have been thoroughly researched by
the likes of Ansoff, Dutton, Fredrickson etc. The processes used to deal with
strategy are diverse: Some companies have very formal ones and hold
strategic planning meetings periodically, while others use a more dynamic and
disorganized approach. The use and effectiveness of these strategyprocesses depend on many factors, such as the size of the company and the
turbulence of the business-environment among other things. The strategic
process that suits one company may not work for another.
A strategic issue is defined by Ansoff (1980) as a forthcoming development,
either inside or outside of the organization, which is likely to have an important
impact on the ability of the enterprise to meet its objectives. The MESIresearch project focuses its research on the way companies deal with
emerging strategic issues, in other words, issues which emerge outside of the
formal strategy process. For example: a sudden development in the businessenvironment may necessitate a strategic decision immediately. The way these
issues are processed is the primary focus of the MESI-project.
So far the MESI-project has produced three scientific articles, which have
been published at 24th, 25th and 26th annual international conferences of the
Strategic Management Society. The first article, titled “Strategic Issue
5
Management through Corporate Strategic Agenda” (Kajanto et al. 2004)
studies the strategic issue management practices of world-leading firms and
evaluates them with some relevant management research. A framework is
formulated in which the corporate strategic agenda is divided into elements,
which ease the understanding of the strategic issue management process.
Also, a framework regarding the analysis of issues and implementation of
actions is developed, which eases the categorization of different kinds of
uncertainty and implementation difficulties relating to the issues.
The second article, titled “Determinants of Strategic Issue Management
System Performance” (Kajanto et al. 2005) defines certain characteristics of a
strategic issue management process and then formulates several hypotheses
regarding them. These hypotheses are then tested in a comprehensive
sample of strategic issues faced by a global information and communications
technology company. Several strong correlations are found between certain
characteristics of the process and the rightness of strategic decisions made
and the impact of the decision.
The third article, titled “Saturation in a Strategic Issue Management System:
A Longitudinal Analysis” (Kajanto et al. 2006) is a longitudinal study of the
strategic issue management system of a world-leading technology company.
The novel concept of saturation of the system was put forward and four
determinants affecting the capacity of the system were identified.
Until now, this research project has worked with four large case-companies,
specifically Nokia, Vaisala, Sanoma-WSOY and Posti. In order to broaden the
scope of the project, we will investigate the management of emerging
strategic issues in Finnish growth companies. This will give us an idea of how
issues are managed in firms which are in their growth-phase. This territory is
relatively unknown and thus the study could provide some ground-breaking
information on how growth companies handle their strategic decision-making.
The purpose of the study is to provide a general description of the field and
facilitate further research. This is important so that in the future, possible
6
similarities and differences between growth-companies and the larger casecompanies can be investigated.
1.2 Research Problem
This study will be an explorative one, with the focus of gaining as much new
information as possible. Room must be left for possible unknowns, which may
appear in the course of the study. This is why the research question should be
broad and facilitate flexibility within the study itself. We will define the main
research question as the following:
How do Finnish growth companies deal with the strategic issues they face?
To clarify this, we will define some sub-questions, which together will help
solve the research-problem.
1. What kind of processes do growth companies use to define their
strategy and make strategic decisions?
2. Which persons/groups in the company deal with the issues?
3. What is the opinion of growth company executives themselves on the
functionality of their current strategic processes?
4. What kind of strategic issues do the companies face?
Since the field of this investigation is relatively unknown, it should be mapped
out clearly to provide a platform for further research. Answering the research
question and the sub-questions should provide a good general view of the
research-field, easing the way to perform more exact studies in the future.
These studies can be aimed at developing a framework or looking for
correlations between some aspects of strategic issue management and
performance in growth-companies.
7
1.3 Objectives of the Investigation
In order to answer the aforementioned research-questions, we will define
certain objectives for this investigation. The main objective is:

Describe this relatively new field of research and facilitate further
research.
In order to attain this, the following sub-objectives must be completed in the
following order.
1.
Interview representatives from ten different growth-companies.
2.
Discuss at least one strategic issue that each company has faced
3.
Gain a general perspective on how they deal with strategy
4.
Analyze the information gained and look for significant patterns or
anomalies
5.
Find topics for further research in this field
1.4 Scope of the Investigation
In order to gain knowledge in the field of issue management in Finland, I need
to collect data on how strategic decisions are made in actual companies
themselves. Thus I will select ten Finnish case companies, which will then be
examined. The companies in question will represent five different categories,
defined by me, with two companies from each. The categories chosen are the
following:

Small companies, which are profitable

Large companies, which are profitable

Small companies, which are not profitable

Large companies, which are not profitable

Companies, which have grown at an extremely fast rate
8
I will define the concepts “large”, “small”, “profitable” and “extremely fast” later
on. I chose these categories based on the idea that the size of the company
may affect how strategic issues are dealt with, and on the idea that a
profitable company may be dealing with strategic issues differently than an
unprofitable one. The last category, companies growing extremely fast, was
chosen to see whether some particular traits are visible in them as their
growth-rate is so exceptional. Further justifications can be found in the list
below.
To find relevant companies for this study, I used the “Voitto+” database, which
has been provided by the Finnish company Asiakastieto. The database
contains the financial statements of over 90 000 Finnish companies and
groups. It was selected because it was easily accessible and free to use.
Before selecting the case-companies, I narrowed down the field by posing
certain criteria for them:

Companies were only eligible if their net-sales had grown by over 20%
in the previous year.
o The objective was, after all to examine Finnish growth
companies, so some criteria for growth had to be established.

Companies were only eligible, if they had more than 20 employees.
o This was considered relevant, so that the small “garage”companies would not be included, as they can easily achieve
the growth-rate defined.
o Companies with more than 20 employees are likely to be large
enough to focus some attention to strategy and need some kind
of strategic issue management system.

Companies were not eligible, if they operated in the fields of retail,
banking, insurance or legal affairs.
o The strategic issues faced by these companies were deemed
not to be relevant to this study, as their business is somewhat
regulated and not strategically dynamic enough.
9
After this, I started setting criteria for the five categories I would divide the
companies into. I decided on the following:

A large company has over 100 employees
o A company of this size probably has several business-units and
therefore faces more diverse strategic issues.

A small company has 20 to 100 employees

A profitable company had a profit-margin of over 5% last year
o The 5% limit is used to avoid companies that are just barely
profitable.

An unprofitable company had a negative profit-margin last year
o Companies with a negative profit-margin might deal with issues
differently than profitable ones

A company that has grown extremely fast has had an increase of at
least 100% in its net-sales last year.
o More than doubling net-sales in the course of one year shows
enough growth to assume it affects the company’s handling of
strategic issues.
Based on these criteria, I found 4-5 companies for each category. This meant
that some companies were redundant, but they negated the risk that some
companies may not want to participate in the investigation.
From the chosen companies, I wished to interview someone well versed in the
strategic process in that company. For some smaller companies, the person
to approach was obvious based on the company’s webpage. I then contacted
him/her directly. In other cases, I contacted the communications responsible
for the company, and asked him/her to relay the request to a relevant person
in the company. This proved to be a very effective way of getting the
interviews.
The interviews themselves will cover the general strategic issue spotting and
decision-making process that a company has, but I will also ask the
10
interviewee to think back to some strategic issue that the company has faced.
We will then discuss this issue. This way, the strategic issues that the casecompanies have faced are also part of the scope of the research.
1.5 Research Methods
Information on the strategic processes that companies use is rarely available
through any publications the company has made, as they tend to focus more
on the content of the strategy. However, I am only interested in the process
leading to the content. Thus the only sensible fashion to gain this information
is by asking about it from representatives from the target-companies.
1.5.1 Interviews
Since the data I seek to collect is quite qualitative in nature, it must be
collected so that it is not biased by any preconceptions I may have about the
field of study. This makes designing a survey or questionnaire very difficult, as
my questions might inadvertently leave something out or force the respondent
to alter his answer. For these reasons I have chosen to collect the data by
conducting semi-structured interviews. I will have some basic questions and
topics, which will be covered during the interviews, but otherwise I will let the
interviewee talk as freely as possible. The basic structure of the interview can
be seen in detail in appendix 7.1. This should facilitate a free flow of
information and not impose any preconceptions on the interviewee.
I will first ask the interviewee general questions about how strategic decisions
are made in the company and who makes them. After establishing the
structure of the process, we will then discuss some strategic issues that the
company has faced in the past. I will try to understand how the issue
developed from start to finish and whether or not it can be considered
successful in retrospect.
11
The companies will have the chance to preview the interview notes and make
omissions, if they decide some information is not suitable for publishing. This
will help them trust me and therefore be more open in the interviews. In this
report I have anonymized the companies and interviewees, and refer to them
only by letters A-J and names such as Mr. Black, Mr. White etc.
The interviews will not be transcribed word for word, but elaborate notes will
be written for the purposes of analysis. I will examine these interviews in a
case analyses fashion, delving deeper into them and comparing separate
cases. This comparison will be qualitative in fashion. No statistical analysis
will be conducted, as no reliable quantitative information will be available.
I will compare the data from different categories so that non-profitable
companies are compared to profitable companies of the same size. Also,
results from companies of different sizes will be compared to one another.
The results from companies, which have grown extremely fast, will be
compared to the remaining 4 groups. This between-category analysis will
reveal differences in the strategic processes in different categories, if there
are any to be found.
1.5.2 Dynamicity versus Turbulence
I will also see how the notion of contingency theory, much researched by the
likes of Burns and Stalker (1961), Child (1972), Lawrence and Lorsch (1967)
Thompson (1967) and Miles and Snow (1978) holds out for these case
companies. According to the theory, dynamic strategic processes are better
suited for more turbulent environments. I will give each company a value for
dynamicity and turbulence, and see how these plot out on a two-dimensional
chart. This will show me whether some clusters are to be seen, which might
indicate that companies operating in a certain kind of environment tend to
have a certain kind of strategic process. To help evaluate these aspects, I will
use two scales defined by Ansoff (1991). The scale for the turbulence a
company experiences in its business-environment is depicted in table 1. In the
12
same text, Ansoff also defined scales for strategic aggressiveness and
organizational responsiveness, both of which I consider to be attributes of
strategic dynamicity. These are depicted in table 2. Based on these two
scales and the interviews, I will assign the turbulence and dynamicity values
to the companies.
Table 1
Complexity
Familiarity of
events
National
Economic
Regional
Technological
Familiar
Extrapolable
Slower than
Rapidity of change response
Visibility of future
Turbulence Level
Recurring
1
Discontinuous
Familiar
Global SocioPolitical
Discontinuous
Novel
Partially
predictable
4
Faster than
response
Unpredicatable
Surprises
5
Comparable
to response
Forecastable
2
Predictable
3
Table 2
Strategic
Stable
Aggressiveness Stable
Based on
Precedents
Reactive
Incremental
Based on
Experience
Anticipatory
Incremental
Based on
Extrapolation
Entrepreneurial
Discontinuous
New
Based on
Observable
Opportunities
Creative
Discontinuous
Novel
Based on
Creativity
Organizational
Stability
Responsiveness Seeking
Rejects
Change
Efficiency
Driven
Adapts to
Change
Market
Driven
Seeks
Familiar
Change
3
Environment
Driven
Seeks Related
Change
Environment
Cheating
Seeks Novel
Change
Level
1
2
4
5
1.5.3 An Integrative Framework for Strategy-Making Processes
I will also classify the companies according to Hart’s (1992) Integrative
Framework for Strategy-Making Processes, which is depicted in table 3. If
companies fall into diverse categories here, it will be interesting to see
whether these categories somehow correlate to the categories I defined in
chapter 1.4.
13
Table 3
Descriptors
Style
Command
(Imperial)
Strategy driven
by leader or
small top team
Symbolic
(Cultural)
Strategy driven
by mission and
a vision of the
future
Rational
(Analytical)
Strategy driven
by formal
structure and
planning
systems
Transactive
(Procedural)
Strategy driven
by internal
process and
mutual
adjustment
Generative
(Organic)
Strategy driven
by
organizational
actors’ initiative
Role of Top
Management
(Commander)
Provide
Direction
(Soldier)
Obey orders
(Coach)
Motivate and
inspire
(Player)
Respond to
challenge
(Boss)
Evaluate and
control
(Subordinate)
Follow the
system
(Facilitator)
Empower and
enable
(Participant)
Learn and
improve
(Sponsor)
Endorse and
support
(Entrepreneur)
Experiment and
take risks
Role of
Organizational
Members
1.5.4 Recognition of Issue Characteristics
I will also try to gain an understanding of how relevant the characteristics of
strategic issue management systems defined by Kajanto et al. (2005) are in
the case-companies. The characteristics defined in the study can be seen in
table 4. Based on the interviews, I will try to evaluate how relevant the
concepts are for the case-companies and this kind of research.
Table 4
Characteristic
Source of issue
Type of uncertainty
Implementation challenge
Value at stake
Number of issues in the meeting
Last item on the agenda
Resourcing
Total number of taskforce members
Share of visiting experts
Team sum of network ties
Organizational power of team members
Decision quality
Decision impact
Explanation
How high in the organization was the issue spotted?
What is the nature of the uncertainty in the issue?
What is the nature of the implementation challenge in
the issue?
What is the perceived value for the company of the
strategic decision?
How many stratgic issues were processed
simultaniously in the meeting where this one was
processed?
Was this issue the last item on the agenda?
How much resources were invested into the issue?
How many members of the organization participated in
the taskforce that processed the issue?
How many of the people in the taskforce were from
outside the organization?
How central were the members of the taskforce in the
organization?
How high was the combined organizational power of the
taskforce?
How correct was the decision?
How high was the actual effect of the decision?
14
1.6 Structure of the Study
The study will be completed during the summer of 2006. During June I will
designate suitable research methods, find suitable case-companies and
design the interview-structure. The interviews will be conducted in July and
the data-analysis and writing of the report will take place in August. I estimate
that completing the study will take approximately 400 hours.
2 Results
The case-companies and persons interviewed can be seen in table 5. For the
purposes of anonymity, the companies are only listed as letters from A to J,
with only a description of their business-field and the position of the
interviewee. The notes for all the interviews can be found in appendices 7.27.11 and the reader is advised to read them in order to gain a better
perspective of the companies examined.
Table 5
Company
A
B
C
D
E
F
G
H
I
J
Business
Equipment for Industry
Chemical Manufacturing
Printing
Consulting Services
Technology Supplier
Technology Supplier
Paints
Stainless Steel and Technology
Logistics Services
Training and Consulting
Position of Interviewee
Head of largest business-unit
CEO
CEO
CEO
CEO
CEO
Head of largest business-unit
Strategy Director
Business-development manager
Head of largest business-unit
15
2.1 Strategic
Issue
Management
Processes
in
the
Companies
The information collected was varied and not all interviewees were as
elaborate in describing their companies’ strategic processes as others. This
resulted in some ambiguity regarding some companies’ strategy processes. In
this chapter I will present the information, which was available from every
company. The findings in this chapter are based on appendices B-K.
The basic information on the strategy-processes of each company is shown in
table 6. In the column “How often is strategy discussed?” the data in the
parentheses means the meetings during which strategy is not actually deeply
discussed every time, but issues can be discussed if need be and the
progress toward strategic goals may be monitored or operative issues
discussed. For example, in the case of company G, the strategy is defined
and updated in an annual meeting, but every month the management group
meets to evaluate the implementation of the strategy. Companies with several
business-units seemed to favor de-centralizing their strategy-process, so that
the business-units had some degree of independence in handling their own
strategic issues. All of the case companies either already had an explicitly
defined strategy, mission and vision, or were currently working on them.
Table 6
Company
A
B
C
D
How often is strategy discussed?
Annual
Once a year + (ten times a year)
(Once a week)
Few times every year (once a
month)
E
F
Annual + on demand
Annual + (every 2 weeks)
G
H
I
Every two months and on demand.
Annual + (separate projects)
On demand
J
Annual + (every month)
Who is responsible for the strategy?
Management group
Management group and board
Mostly the CEO
Management group
Mostly the CEO, but there is discussion
within management group
Management group
Management group
The board of the company
Management group
Management group + extended
management group
16
As can be seen, most of the case-companies still prefer to thoroughly assess
and define their strategy only once every year. Strategic decisions are made
by the companies’ management groups, which do meet more frequently.
These meetings, however, are usually not focused on strategy, but rather on
monitoring the fulfillment of the company’s goals and on operative matters.
This seems to give a rather traditional view of the strategy processes in
Finnish growth companies.
One of the most interesting subjects discussed in the interviews were the
opinions of the interviewees themselves on their strategic processes. This
naturally led to a discussion regarding how they would like to develop their
company’s strategic decision-making process. These aspects of the
interviews have been summed up into table 7. As you can see, only a few
companies report being completely satisfied with their strategic process at the
moment. A common problem seems to be the communication of strategy
throughout the company. Also, some interviewees hoped for more active
discussion regarding strategy and more time to conduct this discussion.
17
Table 7
Company
A
B
C
D
E
F
G
H
I
J
Problems
Communication of strategy is arduous
Communicating the strategic goals
throughout the organization
Unexpected situations arise often. The
owner may accept work-orders even
though there are no resources.
Participants in the meetings should bring
up matters more actively.
Generally very happy with the process,
but sees problems in communicating the
strategy.
Risk of missing something, when
discussing strategy only once a year and
lack of market-analysis.
Currently satisifed.
Informing the entire organization of
strategic decisions
Implementation of decisions and
changes can be arduous.
Possible difficulties in when business
units formulate their own strategy, as
everyone there is so involved in
operative matters.
Development ideas
More active discussion.
No important developments just now.
Better planning ahead and discipline
from the owner as well.
Intends to decentralize the process
further.
A single person should be devoted
entirely to strategic issues
No particular development in mind.
More time should be reserved for
discussion so that more future
scenarios and risks can be better
prepared for.
Strategic work done could be
organized into a matrix-organization
No important developments just now.
More retrospective analysis before
strategy formulation, better clarification
The strategy is not communicated clearly of the strategy and communicating the
enough.
strategy.
Some other miscellaneous matters that came up repeatedly in the interviews
are listed in table 8. I asked the interviewees whether or not their company
has a team or person, whose responsibility it is to in actively seek out
strategic issues from the business-environment. Mostly the response was only
that some employees do it alongside their normal work responsibilities, but no
formal unit exists for this. It also occurred to me that quite a few companies
seemed to be in something of a transitional period or had just gone through
one. For example, company C had just changed its CEO and company F had
recently undergone a significant change in organizational structure. This
transitional phase also meant that quite often the strategic processes in place
were also new, so their efficacy was hard to evaluate.
18
Another interesting variable is the use of outside consultants and how they
were regarded. It would seem that the consultants used by the case
companies have produced varied satisfaction. Mostly consultants were not
used for actual strategic consulting however, but rather to produce data for
strategic decision-making, for example through personnel satisfaction surveys
etc.
Table 8
Company
Has active monitoring?
Transition?
A
Has a specific group for this.
Yes, business-development managers
do this.
Everyone does it alongside their normal
work.
No, but the CTO and CEO do this
alongside their normal work.
Everyone does it alongside their normal
work.
De-centralized, certain persons perform
this as part of their normal work.
Yes
Has used outside
consultants?
Yes, moderately happy
with them.
Yes
Yes.
Yes
No.
No
No.
Yes
Yes, have been useful.
Yes, but have been
slightly disappointing
Yes, for certain roles
and they have been
useful.
Yes and they have been
useful.
Yes, but not for strategic
planning. They have
been useful
Yes, and some of them
have been useful.
B
C
D
E
F
G
No
H
No, but this inadequacy has been noted. No
Yes, the corporate business intelligence
unit does this.
Yes
I
The management group does this
alongside their other work.
No
J
Informal.
Yes
2.2 The Categories
In this chapter I will briefly describe the companies and each category, raising
points of interest and difference between them.
2.2.1 Large and profitable companies (appendices 7.2 and 7.3)
The first company in this category, company A, specializes in equipment for
industrial purposes, retailers as well as hotels and restaurants. The company
has international operations. I interviewed the director of the largest business-
19
unit in this company. The second company, B, produces chemicals on
demand and I interviewed the CEO of the company.
Company A seemed to operate in a rather stable environment. Strategy was
defined in an annual strategy seminar and the process seemed quite formal
an inflexible. Still, it seemed to be working well for this company. They also
had a team that monitored the business environment for potential issues and
this information was distributed within the organization.
Company B had recently become independent of their parent company and
made an acquisition of their own. They clearly continued some of the methods
for strategic work learned from their parent and the process seemed well
organized. With the recent acquisition however, there were so many issues to
tend to that there was not a lot of time to discuss and contemplate strategic
issues.
2.2.2 Small and profitable companies (appendices 7.4 and 7.5)
The two companies in this category were companies C and D. One is a
printing company, specializing in printing large advertisements, for example
the ones that can be draped on the sides of buildings. The other offers quality
assurance services for software companies. I interviewed the CEO of both
these companies.
The printing company, C, had encountered some severe turbulence in the
past year. The former CEO had left the company and started his own rival firm
along with one of Company C’s biggest clients. This resulted in the loss of
more clients. Also, the company relocated its premises recently after finally
being able to get out of its previous very expensive rental-contract. According
to the new CEO, he had mostly been tending to issues necessary to keep the
company afloat. He said he was mostly responsible for dealing with strategic
issues, but did discuss them in a weekly meeting with his sales-director and
CFO.
20
The software quality assurance company, D, seemed to have had a more
stable history recently. A few employees had left the company, which had
caused some dismay in the management group, but nothing major. Also, the
growth of the company had necessitated a re-organization of handling
customer-accounts. The CEO had clearly thought a lot about the role of
strategy in the firm and how strategic issues should be dealt with. The
process seemed simultaneously well thought-out and formal, but he also
emphasized that it is flexible and decisions can be made quickly.
2.2.3 Small unprofitable companies (7.6 and 7.7)
Both companies in this category were spin-offs of Nokia, selling technology
products to other companies in the role of suppliers. I interviewed the CEO of
both of these companies. The first company produces telecommunications
technology products and the second supplies global positioning equipment for
projects and companies around the world.
The telecommunications technology company, E, was in the final steps of a
major transition-phase, as it had relocated its production facilities to the FarEast to cut down on production costs. The company had went through hard
times during the information technology downfall in the turn of the millennia,
but seemed to be doing well now. The CEO wished for more attention to
strategic issues.
The GPS-technology company, F, had a rather unique position, as most of its
employees were also owners of the company and they held a weekly meeting
to keep everyone up-to-date. The company seemed to be doing well and the
CEO had a very clear picture of what he expected from the strategic process
in the firm.
2.2.4 Large unprofitable companies (appendices 7.8 and 7.9)
The two companies in this category were both international. The first
produces paints and I was able to interview the director of the company’s
21
largest business-unit. The second specializes in stainless steel and
technology, and I interviewed the company’s strategy director.
The paint company, G, seemed to have a more flexible process, meeting
every two months to discuss strategy. The company also seemed to be
growing and doing extremely well. Both companies in this category wished for
more discussion regarding strategic issues.
The stainless steel company, H, had a very clearly defined and formal
strategy process, which was complemented by projects, which could focus on
solving issues and problems outside of the process. This seemed to function
well, albeit a bit slowly.
2.2.5 Extremely fast-growing companies (appendices 7.10 and 7.11)
The two companies in this category were a company offering logistics
services and a company offering information technology consulting and
training services. I interviewed a director of a business-unit in both these
companies.
The logistics service provider, company I, was family-owned. Because of this,
it was very risk-averse in its strategic choices. It had several business units
and a de-centralized strategy-process for the business-units’ own internal
strategic decisions. The management group made the strategic decisions
regarding the entire group.
The IT consulting and training company, J, seemed to put a fair amount of
emphasis on having a clear strategy. Also, the interviewee stated that the
clarification and communication of the strategy were important. In addition to
an annual strategy meeting, the stride toward strategic goals was evaluated
every month.
22
2.3 Data Comparison
In this chapter I will compare the findings in the previous chapter according to
the research methods described in chapter 1.5.
2.3.1 Large Companies versus Small Companies
I will now raise some of the points of difference and similarity between the
large companies examined and the small companies examined. In general,
large companies were more aware than small companies of the difficulties of
communicating strategy throughout the entire organization. In one interview,
the representative of company E noted that the communication of the strategy
was simple because of their small size: everyone attended weekly meetings
and so everyone knew what was happening in the company. Also, he noted
that most employees were also owners of the company, so they were very
keen to pay attention during these weekly updates.
Another difference was that larger companies seemed to want more time for
the discussion and analysis of their strategy. Smaller companies in general
seemed happier with their strategic process, and did not see as many
development focuses. Also, the interviews gave the impression that in smaller
companies, the responsibility for the strategy lay more with one person,
mostly the CEO, than in larger companies.
Both small and large companies mostly had an annual “strategy seminar” to
discuss and define their strategic fundamentals. Other more frequent
meetings during the year did not delve as deep into the strategic discussion
itself.
2.3.2 Unprofitable Companies versus Profitable Companies
As stated in chapter 4, this division may not have been an effective one after
all. In general, I did not find any marked differences in profitable and
unprofitable companies. Also, many of the companies I had defined as
unprofitable seemed to be doing very well according to the interviewees and
vice versa.
23
2.3.3 Dynamicity versus Turbulence
I will present these findings in their own chapter, because they form a more
logical entity alone. Based on the scales described in chapter 1.5 and the
impression I got from the interviews, I assigned each company a value from
one to five to describe the turbulence of the business-environment the
company operates in. I also assigned a value for the dynamicity of the
company’s strategic process. One was the least dynamic/turbulent and five
the most dynamic/turbulent. I then plotted these values on to a scatter graph
to see how the companies relate to each other. The results can be seen in
figure 1.
Turbulence vs. Dynamicity
6
5
A (Large/Profitable)
B (Large/Profitable)
C (Small/Profitable)
D (Small/Profitable)
E (Small/Unprofitable)
F (Small/Unprofitable)
G (Large/Unprofitable)
H (Large/Unprofitable)
I (Super Growth)
J (Super Growth)
Dynamicity
4
3
2
1
0
0
1
2
3
4
5
6
Turbulence
Figure 1
As you can see, no significant clusters are obvious at first glance in this figure.
However, some facts can be stated. The scattered data-points do seem to be
arranged so that companies in a more turbulent environment tend to have a
more dynamic strategy process. Also, the larger companies in this study have
less dynamic strategic processes than smaller companies. There are no
24
marked differences between profitable and unprofitable companies nor
between the companies that had grown extremely fast and the other
companies.
2.3.4 An Integrative Framework for Strategy-Making Processes
Using Hart’s (1992) framework I tried to classify the case-companies.
However, the classification was not as clear-cut as the framework leads to
believe. All of the companies exhibited traits from several categories and thus
it was not possible to classify them properly. Still, all of the companies
seemed to lie in somewhere in or between the Symbolic- and Rationalcategories.
2.4 Strategic Issues Faced by the Companies
During each interview, I also discussed strategic issues that the casecompany had faced. The amount of issues discussed depended on how much
time there was left in the interview. The interviewee described the issue to me
and we discussed its development from beginning to end. The interviewees
mostly could not remember exactly how the issue had progressed and barely
anyone knew exactly how and by whom an issue had been spotted. In table 9,
I have listed the issues discussed along with a brief commentary on them.
The issues are very diverse, ranging from acquisitions and divestments to
dealing with resignations. As you can see, almost all of the issues were
regarded as a success in retrospect.
In general, companies did not try to think of strategic issues as separate
entities to be decided upon. Rather than seeing an issue starting at a certain
point in time, then developing and ending, they saw their annual cycle
beginning and ending, with some issued within. As an exception, Company H
did manage some issues as projects completely independent of the annual
strategy process. The strategy director of the company remarked however,
that an annual component is always needed for practical reasons, related to
forecasting and book-keeping.
25
The issues discussed by larger companies tended to be on a larger scale,
such as divestments and investments, whereas smaller companies dealt with
smaller issues also as well as go-or-no-go decisions regarding new projects.
For most companies, the issues they had faced were growth-related, or a
result of the company’s growth. This is not surprising considering that growth
companies were the target-group of the interviews. I was somewhat surprised
however that in almost all of the issues discussed, the interviewees felt that
they had done all the analysis that had been possible for that issue, thus
leaving only a fundamental uncertainty that no further investigation could clear
up.
26
Table 9
Company
Issue type
A
Shutting down a factory
B
Acquisition
C
Relocation
D
2 employees left the company
D
Organizational re-structuring
Success
Comments
The decision took far too long,
Yes
as did the implementation.
Company wanted to find growth
Not at the and acquired a company of
moment
similar size.
Company had to relocate fast
Yes
to cut down on costs.
It was unclear how the
management should react.
Several small corrective
actions were taken, but nothing
Yes
major.
Yes
The amount of customers had
grown so that one person could
no longer handle all of them.
E
Relocating production to
cheaper countries
Yes
E
Finding growth
Yes
The market-prices where
eroding fast and the company
had to keep up to retain its
customers. This meant cutting
costs.
Company had to decide
between new products and new
customers and chose new
products.
Yes
The company could not enter
the Danish market on its own,
so instead it found a suitable
partner from Denmark.
E
Entering a new market
F
F
New project
New project
N/A
N/A
G
Divestment
Yes
G
Acquisition
Yes
H
Organizational change and redefinition of strategic vision
Yes
I
Divestment
Yes
J
Organizational re-structuring
Yes
The project abroad alone is
worth 10 times the company's
current budget.
The company wanted to get rid
of its Oil Coating-business as
the risks were too high and
managed to sell it.
The company wanted to get
into the Ukrainian market and
acquired another company
there.
Issue was a separate project,
independent of the strategy
process.
Some analysis was done on
how the profitablity of a
business-unit could be kept up,
but in the end it was sold.
The previous "factory-like"
organization did not work for a
consulting company so they
changed to a more process-like
organization.
27
2.5 Recognition of Issue Characteristics in Companies
I will now evaluate how relevant the characteristics defined in chapter 1.5.4
were in the context of the case-companies. It would seem that they were
varied in relevance and applicability in this study, but the situation could be
improved with some modifications to the research methods.
The source of a certain issue was sometimes not identifiable in the
companies, as there seems to have been a sort of “general awareness” of an
issue throughout the organization for a long time before it was finally
addressed. This concept is relevant however as often the person or group
who spotted the issue could clearly be named. The source would probably be
easier to identify in a study conducted in real-time and not retrospectively.
The interviewees were aware of the uncertainties and implementation
difficulties pertaining to the issues discussed and also understood the way
some of them were fundamental and irremovable. They were able to provide
descriptions of the uncertainty and implementation difficulties, but it was not
possible to categorize their nature exactly.
The amount of issues processed in a meeting was rarely remembered by
interviewees and neither was the prioritization of the agenda. The concept
itself is highly relevant and easily measurable, but would require a real-time
study.
Except for investments and divestments, it was not possible for the
interviewees to accurately evaluate the value at stake in a certain strategic
issue as the issues incorporated many unquantifiable aspects of the firms’
performance.
The amount of resources used for a certain issue seemed like a relevant
concept, except it was difficult to remember, let alone quantify. A real-time
28
following of this would make it possible to get an accurate amount of manhours and resources used.
Usually the taskforce processing the issue was the same as the management
group or board of the company, and thus the amount of taskforce members
were equal to the size o those groups. This characteristic is relevant and
easily measured. The share of visiting members in the taskforce is also
relevant and quantifiable as often the case-companies did practice using
experts from outside the taskforce to gain a better understanding of certain
issues.
In the case of these companies, they issues were always dealt with at the
highest level of the organization, so the centrality and organizational power of
the taskforce was always great. In larger companies, this concept may have
more relevance as the organization has more levels.
The quality and impact of the decisions made could be assessed by the
interviewees, but the objectivity of these assessments is another matter. Also,
most interviewees admitted that the implementation of some issue was not yet
complete or the effects of a decision were yet to bee seen in their entirety. A
more longitudinal analysis of these characteristics would yield better results.
3 Conclusions
Since the study was aimed at describing this relatively new field of research
and not correlating certain attributes with success, no concrete
recommendations can be made about how strategic issues should be dealt
with. The most important recommendations of this study are the topics for
further research.
I will now examine some of the more curious results and ponder the reasons
for these findings.
29

Almost all of the strategic issues examined were considered a success
in retrospect by the interviewee. Obviously, the conclusion cannot be
drawn that Finnish growth companies tend to make the correct
decisions regarding almost all of their strategic decisions. Most likely
correct decisions are simply remembered better than incorrect ones,
so when I asked an interviewee to think back to an issue, he only
remembered successfully resolved issues. This could also relate to the
fact that most of the issues seemed to have been analyzed thoroughly.
After having spent more time analyzing the issue, the interviewee is
more likely to remember it. Better analysis will probably also lead to
better decisions. Another possibility is choice supportive bias, which
means the interviewees tend to remember their past choices as better
than they actually were.

The strategic issues faced by the companies were mostly caused by
growth or related to attaining more growth. This shows that at least the
target companies were indeed growth companies and thus chosen
correctly.

The fact that larger companies are more aware of the problems of
communicating strategy throughout the organization is naturally due to
the fact that communicating strategy throughout a larger organization
is more arduous.

The responsibility for strategy seemed to lie mostly with the CEO in
smaller companies. This is probably due to the fact that smaller
companies have fewer resources to use for strategy, so a large team
cannot be convened every time a strategic issue has to be discussed.
Also, in smaller companies the CEO can be aware of almost
everything happening in the company. This is not possible in larger
companies, hence the responsibility is dispersed.

The companies in this study have mostly settled for a combination of
an annual strategic meeting and immediate meetings if necessary.
This seems to provide the necessary amount of flexibility to deal with
emerging issues while simultaneously not tying up resources and
manpower unnecessarily. Kajanto et al. (2006) suggested that the
30
issue management process may become saturated by too many
simultaneous issues and activities, lessening its sensitivity to new
issues as well as impairing its ability to process current issues. In this
study it seemed that the companies did not face issues with such
intensity that their process ever seemed saturated by strategic issues
alone, but operational issues were restricting the time spent on
strategic issues. In this sense the notion of saturation seemed
applicable to the case-companies also. A few of the representatives
expressed this in their developmental ideas, wishing for more time to
discuss strategic issues.

The de-centralization of handling strategic issues in the case of having
several business-units seems like a very effective choice. The
management group does not need to constantly concern itself with
strategic issues specific to some business-units, but can concentrate
on the management of the entire portfolio.

As the interviewee from Company H stated, strategic processes based
solely on issue management will be troublesome, as they do need an
annual component for practical reasons, such as reporting to investors

The comparison of turbulence and dynamicity seems to indicate that
the strategy processes of larger companies are less dynamic than
those of smaller companies. This is only logical as larger companies
need to take more things into account and mobilize more people in
order to deal with an issue.

It would seem that companies operating in a more turbulent
environment tend to use a more dynamic strategic process. Since
companies mostly cannot influence the turbulence of their businessenvironment, the dynamicity may be adopted in order to deal with the
turbulent environment. However, it is also possible that the turbulence
and dynamicity are caused by a third unknown variable.
4 Strengths and Weaknesses of the Study
31
First, let us examine how the objectives of this research have been fulfilled.
The main objective was defined as:

Describe this relatively new field of research and facilitate further
research.
This objective has been fulfilled, as this study provide a general view of the
management of strategic issues in Finnish growth companies. This should
ease any further research into the field. To better evaluate the
accomplishment of this objective, let us examine the sub-objectives.

Interview representatives from ten different growth-companies.
o This was done

Discuss at least one strategic issue that each company has faced
o This was done. In many cases, there was time to discuss
several issues.

Gain a general perspective on how they deal with strategy
o This was done through questions on the general strategic
process

Analyze the information gained and look for significant patterns or
anomalies
o Within-category and cross-category comparisons were made

Find topics for further research in this field
o Several topics have been suggested in chapter 5.1
Thus it can be concluded that the objectives of the study have been
completed successfully.
In retrospect, some major flaws can be found in the methodology of the study.
First of all, the Voitto+ database was perhaps not the most suitable for
choosing the case-companies, as it only shows the performance of any
chosen company in the previous year. This is not optimal for monitoring the
long-time growth of the company. Thus some of the companies included in
32
the study may not actually be growth-companies as such, but have only
happened to grow 20% during the previous year. Also, the database has
some ambiguities in separating parent companies from subsidiaries. For
example, company J was mistakenly chosen for an interview on the basis that
its subsidiary had attained the necessary growth-rate, although the parent
company had not.
Another flaw lies in the division of the case-companies according to
profitability. Especially for small companies, the profit margin may be quite
volatile and change substantially from one year to another. This means there
is no reason to assume that profitable companies somehow deal with their
strategic issues differently than non-profitable ones. In other words, this
aspect does not really divide the case companies into categories, as was
intended.
The information gained should be reliable, as all the interviewees were highranking members of their organization and well-versed in the strategyprocesses of their companies. However, only one person was interviewed
from each company. This means the data may be biased by the interviewees
own misconceptions, either conscious or unconscious. One way to remedy
this would be to interview several people from each company. Also, the
reliability of the values I gave the companies for turbulence and dynamicity is
improved by the use of Ansoff’s (1991) frameworks, but still, they are largely
intuitive and therefore somewhat unreliable.
Another reliability issue is the memory of the interviewees. I realized during
the study that discussing issues in retrospect is almost completely pointless.
People simply do not remember accurately how an issue developed. Nor was
it possible for them to accurately estimate how much resources were
allocated to a certain issue or how much the decision was worth to the
company.
The study also has some notable merits however. For example, it was not at
all a trivial task to get high-level members of companies to give an hour of
33
their time for an interview in the middle of summer, when presumably they
would like to be on holiday. I approached this problem in a very effective
fashion: I first contacted the communications responsible of the company, and
asked them to find a suitable person for me to interview. I found that the
request has a lot more credibility when coming from inside the company, and
the actual interviewee is more likely not to ignore it. I think this approach was
the primary reason I succeeded in getting all ten interviews from such highranking people.
I was not able to keep to the original schedule of the study (see chapter 1.6).
This was entirely due to the busy schedules of some interviewees. I
conducted my last interview as late as in the middle of September, which
resulted in the actual report being postponed by one month.
One of the most difficult parts of this study was the analysis of qualitative
data. After the interviews were done, I was struck with the task of trying to find
meaningful, comparable information from the interview-notes. In retrospect,
the research question was far too broad and unspecified. With a clearer
picture of what was expected from this study, more specific questions could
have been asked, which would have resulted in much more comparable
information. In other words, the main fault took place in the design-phase of
the study in June.
5 Summary and Discussion
This was a study of ten Finnish growth companies and it was conducted by
interviewing a representative from each of these companies. The research
problem was to describe the management of emerging strategic issues in
Finnish growth companies. Interviews were chosen as the research method
because of the nature of the information on strategic processes. The case
companies were chosen from a database of Finnish companies with certain
criteria described in chapter 1.4.
34
Most of the case-companies use a combination of an annual strategy meeting
to define the strategy and then more frequent meetings to assess it and deal
with issues requiring immediate attention. Still, the concept of an issue does
not seem entirely relevant to most of them, and the annual strategic panning
cycle seems to be functioning well for them. Most of the problems
encountered by the case-companies related to not having enough time to
discuss issues and to communicating the strategy.
Since there is very little research in the field of strategic issue management in
growth companies, and none at all in Finnish growth companies, it is difficult
to link this study to any previous research and discuss it. All of the articles
related use such a different perspective and context that comparison is
pointless. However, hopefully this study will provide a platform fo some further
research.
5.1 Topics for Further Research

Company representatives can be given a diary which is filled
out every time they deal with an issue. This would facilitate better realtime following of issues, which in turn could result in better and much
more accurate issue analysis.

Several people from the management group of a company can be
interviewed about the same issue to see if there are differences in the
perceptions. This would be good validation for the research method of
interviewing in this field.

Interviewees can be asked to quantify some aspects of their business:
dynamicity, turbulence, strategic activity etc, to facilitate quantitative
research. The strategic issue characteristics mentioned in chapter
1.5.3 could be used for this, but this must be done in close and realtime co-operation with the company, as the relevance and applicability
35
of these concepts is not self-evident and also deteriorates quickly after
an issue has been dealt with.

The performance of these and other companies could be observed so
that correlations might be found between certain traits in the strategy
process and a firm’s performance.

Interviewing could be continued with more companies in order to
develop a framework based on the characteristics of this study and
literature regarding the subject.

Similar issues from the four companies actively involved in the study
and growth companies could be compared to find differences.

Growth-companies could be divided up according to which stage of
growth they are in. After this a framework could be developed to
investigate what kind of issues companies mostly face in each stage.
This could also lead to some recommendations on how issues in each
stage should be dealt with.

A group discussion between representatives of different companies in
business environments of varying turbulence could be organized and
monitored to see how they discuss the functionality of certain methods
in certain environments.
5.2 Advice for the Implementation of Further Research

The method I used to get the interviews was effective and I recommend it
to any other researchers conducting interviews. It is worth approaching
suitable interviewees via the company’s communications-responsible. He
or she will be able to direct your request to the correct person within the
company.
36

If intending to discuss issues with the interviewees, you should inform
them beforehand and ask them to think of some suitable issues to discuss.
Some interviewees had trouble coming up with interesting issues there on
the spot. Also, it might be worth asking them to think of successful and
unsuccessful issues, otherwise the discussions always seem to regard
only successful ones.
37
6 References
Ansoff HI. 1980. Strategic Issue Management: Strategic Management
Journal 1(2): 131-148
Ansoff HI. 1991. Strategic Management in a Historical Perspective:
International Review of Strategic Management
Burns T. and G.M. Stalker 1961: The Management of Innovation: London
Tavistock Publications
Child 1972: Organization Structure and Strategies of Control: A
Replication of the Aston Study: Administrative Science Quarterly
17(2): p. 163
Hart 1992. An Integrative Framework for Strategy-Making Processes:
The Academy of Management Review 1(2): 131-148
Kajanto et al. 2004. Strategic Issue Management through Corporate
Strategic Agenda: 24th Annual International Conference of the
Strategic Management Society
Kajanto et al. 2005. Determinants of Strategic Issue Management System
Performance: 26th Annual International Conference of the
Strategic Management Society
Kajanto et al. 2006. Saturation in a Strategic Issue Management System:
A Longitudinal Analysis: 26th Annual International Conference of
the Strategic Management Society
38
Lawrence, P., J. Lorsch. 1967. Differentiation and integration in complex
organizations: Administrative Science Quarterly 12: 1-47
Lawrence, P., J. Lorsch. 1967. Differentiation and integration in complex
organizations: Administrative Science Quarterly 12: 1-47
Miles, R. H. & Snow, C. C. 1978. Organizational Strategy, Structure and
Process. New York: McGraw-Hill Book Co.
Thompson J. D. 1967 Organizations in action: Social Science Bases of
Administrative Theory: McGraw-Hill
39
7 Appendices
7.1 Interview structure







Does the company have an explicitly defined strategy, mission or
vision?
Does the company have a group dedicated to strategic matters,
defining strategy and making strategic decisions? Who is responsible
for strategy?
How often is strategy addressed and strategic decisions made? Is the
process calendar-based or more dynamic
How was this process adopted? Was it formally defined or did it just
evolve through more informal channels?
Do other members of the organization ever join this group to make
decisions? Do they ever use outside consultants?
How are issues usually spotted? Does the company actively monitor its
business-environment? Does the company have its own informationteam to do this?
How strategically informed are the other members in the organization?
Do strategic decisions really affect members everywhere in the
organization?
After this I ask the interviewee to think back to some strategic issues and we
then go through the following questions for each of them:





What was the issue?
Where did the issue come from, who spotted it and how?
Who made the final decision regarding the issue?
Was there uncertainty relating to the issue? Was analysis conducted to
negate this uncertainty? Was the analysis successful?
Were there any implementation difficulties?
Finally, I ask the interviewee whether he sees good and bad sides to the way
they handle strategic issues and how he would like to develop the process.
40
7.2 Interview Notes: Company A
Company A produces equipment for retailers, heavy industry as well as hotels
and restaurants. I interviewed Mr. Blue, the head of the retail-department,
which accounts for 52% of the total sales for the group. In a sense, Company
A is in a transition phase as it has only recently introduced a more customeroriented business-perspective instead of the old product-oriented one. The
implementation of this change is still unfinished.
According to Mr. Blue, Company A has an annual 2-3 day meeting concerning
the strategy for the group. The top 6-7 people from the management of
Company A attend this meeting, although mostly the decisions to be made
have been prepared by the CEO and possibly some other person. In these
cases the group only approves the decision and no real conversation takes
place. Mr. Blue says that only Finns participate in this meeting. He considers
this unsatisfactory since it is a multinational company after all.
Company A has its own information team that actively monitors newspapers
etc. for news regarding the business-field, which the company operates in.
Any news is then forwarded to relevant people, who may need to take the
developments into account. If these developments are significant, an
immediate strategic decision is usually made. Mr. Blue is of the opinion that
more discussion regarding strategic decisions should take place. At the
moment, there is no real deep discussion regarding the company’s strategic
direction. Also, Mr. Blue would like more immediate strategy meetings to be
held during the year if the situation warrants it.
We examined a strategic issue that Mr. Blue remembered that Company A
had faced earlier that year. The issue regarded a factory in Sweden.
Company A has several similar factories in the Nordic companies, all of which
are profitable, but do have excess capacity. It was noted that shutting down
the Swedish plant would be sensible. However, the local staff was adamantly
against this decision. This issue was noticed years ago already and it came
up every time a new member joined the upper-management team, as it was
obvious that there was no reason to keep the factory. According to Mr. Blue,
the actual decision took several years to make: far too long.
The uncertainty in this issue related to the way customers would react to
closing the factory. A few customers were interviewed to grasp the effects, but
basically the decision was made very intuitively, without a lot of analysis. As it
turned out, only a few customers changed their supplier as a result of this
decision, and even they reverted back within a few months. The
implementation difficulties in this issue became apparent as the shutting down
was delayed. Even though the plant was officially shut down, it was still
actively producing after several months! According to Mr. Blue, the only way
to make sure it really was shut down was to go there in person.
41
Company A has used outside consultants in their strategy meetings on
occasion. They have seemed competent, but have not provided any “magic
solution” or such. Regarding the effects of strategic decisions on the rest of
the organization, Mr. Blue says that properly implementing a strategy through
the various channels of the organization demands a lot of work and patience.
Company A has encountered this when trying to shift its focus from selling
products to selling maintenance services. One way this was helped was by
training the maintenance team to become more sales and service minded.
Mr. Blue would like to see more active conversation regarding the strategic
decisions that are made in the firm. A more deep-minded discussion would
also be better than the current fashion of merely approving the CEOs
decisions. Also, it would be good if the strategy group had representatives
from several countries.
42
7.3 Interview Notes: Company B
Company B is a Finnish company specializing in agrochemicals. They broke
off from their parent company in 2004. They provide production services, so
they are suppliers for certain companies, among others their parent company.
They do not have products as such, but their products are their skills and
production abilities. The company has gone through some major strategic
changes in its past responding to environmental change, for example the fall
of the Soviet Union. At the moment the majority ownership lies with the
company 3i. The management of Company B is the minority owner. Company
B just recently acquired a British chemical company of about the same size as
itself. I asked Mr. Brown how independent their strategic process was when
they were a part of the parent company and he responded that their strategic
growth goals were defined by the parent company, but they could themselves
decided how this strategy should be implemented. Company B has an
explicitly defined strategy, mission and vision. Because of the recent
acquisition, they are currently re-defining their values.
In the spring, the board and management team conduct a strategy review.
The three business-units of the company have profit and loss responsibility
and define their own strategy in their own management group and marketing
group. However, the main strategic pathway and growth objective has been
defined by the company’s strategic review. In the autumn, the company
defines its business-plan and long-range plan. Important strategic decisions
are made by the board of the company, which meets ten times every year.
They sometimes use outside consultants to monitor and analyse markets and
competitors. According to Mr. Brown they have been useful.
I asked Mr. Brown, whether they have a specific person or team, whose job it
is to monitor the business-environment for developments. He said that there is
a business-development manager in every business-unit whose role it is to
monitor their customers, and competitors’ financial results are followed by an
outsourced business intelligence system. They also partake in a neutral
competitor comparison. They do not however have any “active espionage” of
competing companies.
I asked Mr. Brown, how strategically aware the people in their organization
are and whether strategic decisions really affect the way people work. He
responded that probably most of the people simply com to work every day
and think nothing more of it. The company does communicate its strategy
throughout the organization however.
I also asked him whether or not he sees good and bad sides to the strategy
process. He said he sees potential difficulties in communicating goals and
programs throughout the organization now that they have acquired a
company from another country and culture. He does not feel any
developments are important just now, but rather it is important to insure the
stabilization of operating in two countries.
43
We then discussed the strategic issue relating to the recent acquisition. The
new owners wanted growth so this had to be found. Mr. Brown played a large
part in spotting the possibility of an acquisition and getting the issue started.
He took the idea to the board and management group of the company and
they conducted some analysis regarding it. After this, it felt like the correct
decision. They encountered some implementation difficulties and Mr. Brown
described the acquisition as a very arduous one.
44
7.4 Interview Notes: Company C
Company C is a printing company that prints advertisements for companies.
Among others they print the advertisements that can be placed on the walls of
buildings. The field is very capital-intensive in relation to the size of the
companies operating in it, since high-quality printing equipment is so
expensive. The trouble is that there a lot of “garage-operations” which
produce low-quality printing very cheaply. This lowers prices in the field in
general. Company C currently employs only 19 people, even though at some
point they had over 30 employees. The company has faced some severe
turbulence recently, as their former CEO resigned and founded his own
competing company taking with him some clients and a few employees. Also,
demand is very uneven, which often forces employees to work overtime. This
results in higher wages through overtime compensations as well as stress for
the employees.
With such a small company, even the use of the word strategy seems a bit
grandiose, since mostly it is related to operative issues. There are no fancy
work-groups and their functionality would be questionable since there is
generally quite a low level of education in the organization. However, they are
now trying out a system where they have a three-person team that meets
once a week and discusses the company’s finances, sales and the general
situation. The CEO has prepared an agenda for these meetings, which always
has three parts: Finance, Sales and Other things. Sometimes a fourth person
from within the company can participate in the meetings if specific information
regarding some aspect of operations is needed. The CEO feels that all
participants in this meeting should bring up matters more actively, instead of
just waiting for someone to ask them. In addition to this the company has a
board with the owners on it, which advises the company. The company does
try to actively monitor changes in the competitive environment, but they don’t
have a specific team to do it, but rather everyone works on their own. The
field in Finland is so small that information travels very quickly.
For a long time the company lacked several very basic tools and procedures
for running business operations. Since the new CEO came, he has started to
implement procedures which address this lack. For example, the weekly
strategy-meeting practice has only been implemented recently. The CEO is
also working on defining an explicit strategy and mission. At the moment
however, the rest of the organization is quite ignorant when it comes to
strategy, although the individuals in the company are competent at what they
do. This is why implementing any strategy takes a lot of ground-work and skill.
Communication to the rest of the organization has to be simple and easy-tograsp without foreign and fancy words. So the first task is to shape the
organization so that it is susceptible to strategic-thinking. Another problem in
implementing strategy is the fact that the main owner of the company,
although an energetic personality, is not very good at operating in a very
systematic and methodical approach. For example, he may accept a workorder from a client although no resources are available to complete it.
45
Communicating the strategies to lower levels of the organization can be
difficult if the upper-levels aren’t in agreement with each other. Also, to deal
with the demand-spikes, the CEO would like to create some channel which
could be used for extra-labour. Before the new CEO came, there were no
regular meetings regarding sales, no reporting on sales and the sales-people
were not given the company’s budget. The new CEO has tried to remedy
these deficiencies. Also, the sales-force has been far too passive, waiting for
customers to approach them rather than selling to them actively.
According to the CEO, there is currently some kind of elimination process in
the printing-field as several other companies are battling for their existence. It
is difficult for companies to get the required substantial investments into a
small business with a bad price-situation. At the moment, the price-level is
unrealistically low and probably no-one in the field can make a decent profit.
According to the CEO, there are usually no real implementation difficulties in
such a small company. Anything related to machinery or money is easily
implemented, but when you have to deal with people, possibly firing them,
then things might get difficult.
We were intending to discuss the issue of their former CEO resigning and
founding his own company, however, the current CEO was not working for the
company at the time so he didn’t have any specific details. The former CEO
also took with him the head of sales and his wife, a sales-chief, who together
with Company C’s largest single client founded their own company. This
resulted in the loss of other clients also.
We also discussed the issue of when the company relocated its premises in
May. The company had been forced to take on these premises along with an
extremely pricey rental agreement as part of an acquisition. This problem had
been noticed and the contract terminated even before the current CEO started
working for the company. As soon as the contract ended they found their new
premises in northern Helsinki. The relocation itself was difficult to implement,
as the search for new premises was started rather late. Also, moving the
equipment had to be planned carefully so that the break in production would
be as short as possible.
All in all, Mr. Yellow is happy with the practice of meeting once a week to
examine the company’s situation. This helps them examine problematic
situations in the future before they’re upon the company. However, still there
are several situations when an order has to be produced for the next day, but
there are no resources available. The only way to avoid them is to examine
the production schedule well in advance. Also, unexpected work orders have
to be avoided; a fact that even the main owner will have to learn to live by.
46
7.5 Interview Notes: Company D
Company D is a consulting services company, which has 40 employees. Mr.
Black has been the CEO of the company since the beginning of 2006.
Company D was founded in 2002 and the founders are still the owners.
Company D has explicitly defined a strategy, a vision and a mission, which
have been communicated to the entire organization. However, Mr. Black
points out that the level of detail of the communication depends on the
organizational level. The management group tries its best to keep all strategic
decisions in line with the explicitly defined strategy. According to Mr. Black,
sometimes decisions are compromises and negotiation skills may be
important in strategic decisions, but still at Company D there is relatively little
organizational playing.
Mr. Black describes the strategy process so that the board first translates the
expectations of the share-holders into managerial goals for the management
group, which then formulates a strategy to reach those goals. The board then
approves or dismisses this strategy. The same applies for strategic decisions.
There are 5 members on the board and 8 in the management group, some of
which are the same. The company also has an advisory board which consists
of people completely independent of the company. The management group
includes a representative from each of the company’s functions and also from
each of the company’s customer-segments, as Company D does not have a
separate sales-manager. According to Mr. Black, outside-consultants have
not been used during his time in the company, but he does consider them to
be useful. Also, members from inside the organization can join the
management group meetings if their expertise is needed. The management
group meets once a week to discuss operative matters, once a month to
discuss how the company is progressing toward strategic goals and a few
times every year to assess and define the strategy itself. Also, if necessary,
the management group can deal with issues immediately. Mr. Black says he
has strived toward the strategy not being a separate entity, but rather a tool
with which the company is run. According to Mr. Black, the previous
management and founders had done a good job in defining the foundations
for the purpose and strategy of the company. The meeting process in place
now was largely defined by Mr. Black when he joined the company, although
the weekly meetings were already in place.
Mr. Black says that the company does not have anyone actively monitoring
the business-environment full-time, but the technology manager and he
himself do monitor changes and developments in the business-environment.
The information found is conveyed as part of normal reporting. In addition to
this, a competitive intelligence-report is written every 3 months. According to
Mr. Black, the company operates in a relatively stable environment.
According to Mr. Black, the strategy is understood differently at different levels
in the organization. The management group understands the strategy fully,
but on lower levels of the organization, the level of understanding is also
47
lower. According to Mr. Black, communicating the strategy is difficult, as one
must always give employees a context in their daily work in which to see the
strategy. Otherwise it can easily be regarded as management-hogwash.
I asked Mr. Black to think back to some strategic issues the company had
faced that he remembered particularly well. The first issue we discussed
happened in the beginning of 2006, when two employees left the company.
According to Mr. Black, they were bought off by other companies with a lot of
money. In addition to replacing these people in customer-projects, decisions
had to be made about whether something should be done in general about
people leaving. Mr. Black says he made it very clear that all decisions
regarding this should be made based on data, not intuition. This way the
matter was easier to approach. Several small corrective procedures were
taken, but nothing major. Before making any decisions, the reasons for the
people leaving were investigated through interviews etc. This helped resolve
some of the uncertainty regarding the issue, but still, some fundamental
uncertainty remained. This decision was so small-scale in calibre that the
board did not need to give its blessing to it.
Another issue we discussed was one regarding their organizational structure.
As a small company, Company D only had one person dealing with customeraccounts, but as it grew, the customer-responsible became over-burdened.
Mr. Black says he noticed the issue from reports from the customerresponsible. The solution was to divide the clients into segments and then
appoint one person to care for each segment. These people were members of
the management group. No real analysis was made to assess the effects of
this, but rather analysis and arguments were made to show why the old model
could not continue to function. Also, there were no real implementation
difficulties or change-resistance in this decision.
I asked Mr. Black whether he sees good and bad attributes in their current
strategy process. He stated that, quite frankly, he is rather proud of it, as the
formulation of the strategy is a very clear process. The company also uses the
Kaplan-Norton Balanced Scorecard to implement and monitor the strategy,
which has proved very useful for two reasons: It brings some structure to the
strategy and it is easy to communicate with. Mr. Black is not fully happy with
the way the strategy is communicated, but says that this is always a challenge
since “preaching” strategy is usually more harmful than useful. Mr. Black
intends to decentralize the strategy somewhat so that a certain process or
function would be responsible for a certain strategic goal. Otherwise he is very
happy with the way strategy is defined in his company.
48
7.6 Interview Notes: Company E
Company E is a spin-off of its parent company’s transformer production and
was founded in 1989. Slowly the business grew and after a capital-investment
in 1998, steps were taken to internationalize the company. Also, some
acquisitions were made to increase the product-range and to gain more
customers. Company E is oriented toward the telecommunication industry and
most of its customers operate in this field also. After the collapse of 2001
Company E has had to change its production-palette somewhat toward more
economical countries. Mr. White joined the company in 2002 and his primary
task was to move the production from countries such as the UK and Sweden
to Sri Lanka, Russia etc. Since 2003 he has been the CEO of Company E.
The company has an explicitly defined strategy. Their vision is to be a worldclass supplier of magnetic components and one of the leading suppliers in the
Nordic countries and the UK. They also aim for technology leadership in
certain selected areas and world-wide support for customers. This vision has
been made visible to the entire organization. According to Mr. White, they also
try to keep strategic decisions in line with this. To help communicating the
strategy of the company, a monthly meeting with all employees is held.
Company E faces a relatively turbulent demand: for example, sales can
double from one month to another. Mr. White says that this is inevitable since
they are at the very end of a supply chain. They try to negotiate this
uncertainty by communicating actively with their main customers.
According to Mr. White, he mostly makes the final decisions regarding
strategy. However, the strategy and decisions are discussed within the
management group of six people, including the CEO, the sales-director, the
CFO, the quality director, the product development director, supply chain
manager and business development support director (who basically helps
partners develop their processes). Also, the board of the company has to
approve the strategy. Part of the management group is located in England,
which on the other hand lessens informal conversation regarding strategic
issues, but also helps by giving different perspectives. According to Mr. White,
if sudden issues arise, the management group can address the issue
immediately, but in regard to strategy, the biggest input comes from a yearly
discussion, where the strategic direction of the firm is evaluated. This
discussion usually lasts for a few days. Sometimes outsides consultants may
take part in this discussion, for example to give their expertise on some
technological issues. Mr. White said that before this yearly discussion,
Company E has tried a myriad of different processes for strategy planning, but
this yearly calendar-meeting has proved the most effective.
Company E does not have anyone, whose specific task it is to monitor the
business-environment, but according to Mr. White, everyone does this
alongside their daily work. Naturally, this means that relatively little time is left
for competitive intelligence. Mr. White says that when he has a spare
49
moment, he usually browses through competitors annual reports and some
magazines related to the field.
Mr. White defined two strategic issues Company E has faced. The first was in
2001, when the market-price of their products fell dramatically. They then had
to make a decision about cutting costs, which was done by relocating
production to countries with lower costs. The market-prices of Company E’s
products dropped by half in less than a year, and they were forced to sell at a
very low price to retain key-customers. To stay profitable while prices
dropped, costs had to be cut dramatically. This decision was made by the
board of the company. Some analysis was made about how much investment
was required to stay afloat during the unprofitable period while costs were
being cut by relocating factories to cheaper countries. There were some
implementation difficulties as some factories had to be shut down
simultaneously as others were being started in other countries. This entire
process took approximately 5 years. In retrospect, Mr. White sees this
decision as the correct one, as costs have been cut, but quality has remained
high.
The second issue regarded growth. The company had to make a decision
whether it would try to find new customers or instead broaden the company’s
product scope. After some analysis, the management group observed that the
only way to attract new customers would be to lower prices. They were
reluctant to do this and started to offer new products to current customers a
few years ago. This issue was also noticed, when market-prices were
dropping and the market was not growing. It was seen that growth had to be
found elsewhere. The sales-director decided that offering new products was
more sensible than trying to find new customers. The existing customer-base
was examined to see what kinds of other products are used and this was
compared to the existing know-how in the company. This analysis helped
decide which new products should be offered. The implementation difficulties
in this issue were related to finding a suitable production-partner ready to bear
the costs during the first few years of setting up production.
A third issue Mr. White mentioned was Company E’s analysis of the Danish
market. After much investigation they realized that it simply was not possible
to hold a strong position in Denmark. They managed to procure a partnership
with a Danish company however. Considering that the Nordic countries had
been their “home-market”, Company E’s sales to Denmark were almost nonexistent. This is why the attempt was made to gain access to this market. The
management group suggested that a partnership may be the best approach
considering the costs of founding a subsidiary in Denmark. The board
approved this decision.
I asked Mr. White, whether he already sees good and bad sides to Company
E’s strategy process. He said that he sees room for improvement in making
the process more systematic and regular. He especially mentions the need for
more market-analysis and the risk in only meeting once a year to discuss
strategy. If Mr. White could freely develop Company E’s strategy process, he
would like to see a single person devoted entirely to strategic issues, so that
50
this person would have no other day-to-day concerns. However, at the
moment there are no resources for this. Also, the person should already have
extensive knowledge in the field, which makes it difficult to find a suitable
candidate.
51
7.7 Interview Notes: Company F
Company F is a spin-off company that was founded in 2002. The founders
worked for the parent company concentrating on positioning technology.
Company F has developed positioning technologies for end-users and
operators, both in Finland and abroad. They are mostly sub-contractors in
projects, which can take place anywhere in the world. The majority of the
company is owned by the staff, including Mr. Green, who is the CEO. Mr.
Green himself describes the business-environment as somewhat turbulent,
since the amount of companies operating in the field has been reduced
dramatically. Still, he says that turbulence is mostly only found in end userbased environments, not in their business.
Company F has an explicitly defined strategy, vision and mission, which,
according to Mr. Green, have all been communicated throughout the entire
organization. A management group of five people is responsible for
maintaining and developing the strategy. This group includes Mr. Green, the
chief technical officer, chief financial officer, logistics director as well as the
sales- and marketing director. They meet every second week, but strategic
issues are not discussed every time, only when necessary. Also, every
autumn the management group holds a meeting that focuses on strategy and
they evaluate whether the strategic direction is still correct. Some outsideconsultants have been used in management group meetings, but according to
Mr. Green, although they have all been extremely capable, they may have not
been as useful as expected. Also, members from inside the organization
might participate in management group meetings if their expertise is needed.
The board of the company is made up of some management team members,
so their function is merely to approve the management team’s strategy. Mr.
Green himself describes Company F’s strategy as a “directional-strategy”, in
other words they have a certain strategic direction and try to keep everything
they do and all strategic decisions in line with this direction. Still, Mr. Green
does admit that customers do often influence strategy and so called “follow
the money” decisions are made. Company F’s strategy is very alive and it is
constantly updated.
According to Mr. Green, the communication of the strategy to the entire
organization is simplified by the small size of the company. Every week, a
meeting is held with all of the staff present. Every other week the theme of this
meeting is the customers and every other week the theme is the product
situation. This makes everything very transparent and also helps everyone
understand their role in the company’s strategy. Mr. Green points out that the
strategic processes in use by Company F now are mostly inherited from their
parent company and refitted for a thinner organization.
Monitoring the business-environment is quite de-centralized. Feedback from
customers is actively monitored by the customer-relations team, competitive
52
intelligence is practiced (mainly) by the sales and marketing director and the
Chief Technical Officer monitors the technological developments in the field.
I asked Mr. Green to think back to some strategic issues Company F has
recently faced. For example, Company F now has the possibility of
participating in a major project in Africa, and they are evaluating whether it is
worth the risk. The project is worth ten times Company F’s current sales. The
issue started when the prime in the project contacted Company F. According
to Mr. Green, Company F is quite prudent when evaluating projects and does
try to minimize unnecessary risks. Mr. Green says possible implementation
difficulties may relate to software development, as well as the actual logistics
of transporting products to Africa and integrating them with other products.
Mr. Green also mentioned tetra-positioning having produced several issues.
For example, Company F has to provide some sort of customer-support for a
network in Dubai. According to Mr. Green, they have already made some
scenarios of how this situation may develop. Implementation difficulties may
arise from the customer’s internal conflicts. Mr. Green emphasizes the role of
trust in partner-projects such as these.
I asked Mr. Green, whether he sees good and bad sides to the strategic
processes they use now and also how he would like to develop them.
According to Mr. Green, strategy is only a tool for him, and functions well in
the role he has hoped for. He would not like to change or develop anything in
particular.
53
7.8 Interview Notes: Company G
Company G is owned 100% by its parent company and had net sales of about
550 million euros last year. Company G basically operates in two fields of
business: industrial paints and decorative paints. Mr. Beige is head of the
industrial paints department. In this field, Company G is the market-leader in
the Nordic and Baltic countries and in Russia. Company G also has an
explicitly defined strategy and vision, and they try to keep all of their strategic
decisions in line with these. Also, other people in the organization are actively
informed about the strategy and vision, but according to Mr. Beige, there is
still some ignorance at the lower levels of the organization. Although all levels
of the organization are informed about the strategy, it is only natural that since
the lower levels have less impact on its implementation, they care less about
it.
Company G has two management teams: an operative one and a group
management team, which has representatives from each function in the
organization. The teams meet six times each year and the company’s strategy
and strategic decisions are discussed at every meeting and with the parent
company, which approves the decisions. Extra meetings are also held if
necessary. According to Mr. Beige, the decisions made are usually quite
unanimous, and there usually isn’t any need to make compromises. This
strategy process was originally designed by the director of the group. Smaller
scale strategic decisions are also made based on and during daily
conversations between colleagues. There is a lot of interactive discussion
between the parent company and Company G regarding Company G’s
strategy, and Mr. Beige sees this discussion as very useful. Company G has a
somewhat different strategy in different markets. For example, Russia is such
a dynamic business-environment that it produces more issues than the
relatively stable environment in the Nordic countries, where Company G has a
more defensive strategy. Mr. Beige also pointed out that Company G has an
“East Board”, which specializes in the more dynamic markets in the east.
Other members of the organization (e.g. from product development) might
attend the meetings of the management groups if some expertise is needed
on a specific subject. Also, consultants from outside the organization are used
in some specific functions such as customer- and employee satisfactionquestionnaires. Mr. Beige is of the opinion that these outside-consultants
have been useful.
Company G does not have a specific information- or business intelligenceunit, which systematically monitors changes in the business-environment
looking for emerging issues. According to Mr. Beige this inadequacy has been
noted. At the moment this monitoring of the environment for the purposes of
strategy is done in the separate business-units themselves.
54
I asked Mr. Beige to think back to three strategic issues that he remembers
especially well. He mentioned the fact that Company G recently divested from
its Oil Coating-business. Also, Company G has made some acquisitions,
which may be interesting issues to discuss.
First we spoke of the divestment from the Oil Coating-business. The industrial
paint division used to consist of three parts: wood-industry paints, metalindustry paints and oil coating paints. The decision was made to sell the oil
coating department, since Company G had a very small market share in this
business-field and had very few customers. Thus the customer’s buying
power was too great and the risks too high. Also, the Oil Coating department
had no synergies with the wood-industry and metal-industry departments,
since they were distributor-based business-models, whereas the Oil coating
business was not. This is why the decision started to take form slowly among
the upper management. According to Mr. Beige, insufficient analysis was
carried out before this decision as the decrease in the profit margin after the
divestment was somewhat surprising to some. In retrospect, Mr. Beige
considers the decision to have been the right one, even though it has had a
negative effect on profitability this first year. There were no substantial
implementation difficulties, and there were multiple buyer candidates
interested. Also, the buyer agreed to continue the employment of the staff, so
no lay-offs were necessary. On the other hand, the buyer was only too happy
to keep the expertise of the staff, so both parties benefited. The Oil Coatings
resulted in 10% of the sales for the industrial paints department, but
strategically, the divestment was even more important.
Next we spoke of the acquisition of a Ukrainian company. Company G wanted
to enter the market in the Ukraine by acquiring a strong brand with a youthful
approach to marketing. A company specializing in water-thinned paints was
found, and it had very similar thoughts and values as Company G. Entering
the Ukrainian market was a natural step, since it is such a clear extension to
the Russian market. Company G used a “deal-maker”-consultant to examine
the market-place and look for possible candidates. The risks involved in this
particular company were significantly lower than for any other candidate.
According to Mr. Beige, the deal was a perfect match all in all. The contractpapers were so explicit and thorough that legal risks were also accounted for.
There were no real implementation difficulties in the acquisition, as both
parties saw the mutual interest in it. At the time of the acquisition, the acquired
company wasn’t very valuable, but its value in growth-potential in the future is
very great indeed.
The third issue we discussed was focusing strategy so that Company G has a
different strategy for Scandinavia than for the east. Spreading eastward is
logical for growth purposes, but also because western customers want
Company G to be able to serve them in Eastern-Europe as well. According to
Mr. Beige, Eastern-Europe does produce more strategic issues than western
markets, and they also have to be handled faster. For example, according to
Mr. Beige, if one wants to buy property in Russia, the decision has to be made
immediately.
55
I asked Mr. Beige whether or not he sees good and bad sides in the way
Company G deals with strategic issues. He says one good thing is definitely
the way that issues are discussed more than before. He sees room for
improvement in informing the entire organization including sub-levels about
strategic decisions, although he also remarks that this is probably not a
complete success in any company. If Mr. Beige could develop the strategyprocess at Company G in any direction he wished, he would reserve more
time for discussion about the issues, so that future scenarios and risks could
be better prepared for.
56
7.9 Interview Notes: Company H
Company H is an international stainless steel and technology company with a
very long history. They have an explicitly defined vision, mission and strategy.
Mr. Red is responsible for the strategic planning of the company. According to
Mr. Red, the company has moved toward a “one company” principle, trying to
focus on the stainless steel business. I asked him to assess what kind of
attitude the company generally has toward risk and whether it is risk-averse
due to its long history. He replied that the company has actually made some
moderately risky choices in recent years.
Their strategy and strategic decisions are formed by the actual strategic
process as well as separate projects, several of which may be running
simultaneously. In the end, the company’s board is responsible for the
strategy of the company. Before this, the management group discusses
strategy and puts forward a suggestion to the board. In this phase Mr. Red
facilitates the discussion and decisions regarding the strategy. He also
contests and discusses the strategies of separate business-units in order to
consolidate them and make them fit into the entire company’s strategy.
According to Mr. Red however, strategic decisions can be made on different
levels in the organization, depending on how important they are without
informing the board. For example, business-units can make business-unit
specific operative decisions independently. After the value of the decision
reaches a certain monetary threshold, then the decision has to be moved
higher up in the organization. The company has a corporate business
intelligence unit, whose responsibility it is to monitor the markets and
competitors. However, input can come from all units in the organization, not
just this one.
In the beginning of each year, the company defines what is expected of the
strategy and the company’s focus areas. This is conveyed to the businessunits, which then give their own input. By the end of summer, the
management group starts to discuss the various inputs and tries to
consolidate the strategy before presenting it to the board of the company. In
addition to this, some projects may begin or end independently of this
process. In some cases these projects can be related to the company’s
strategy. The company has used outside consultants on occasion, mostly
when some extra expertise or manpower was needed quickly. Mr. Red has
seen them as useful, but notes that it is not a sustainable solution to keep
outside consultants all the time. Mr. Red stated that although the markets of
company H are not as turbulent as, for example Nokia’s, the prices of raw
material are extremely volatile.
I asked Mr. Red, how strategically aware members in their organization are,
and he stated that it is extremely arduous and time consuming to change
something and communicate it throughout the organization. I also asked him
how the Internet has affected their business and he responded that the main
effect is probably in the central business intelligence unit, who are able to
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communicate and find data via the Internet. Also, the availability of newsservices such as Reuters and Bloomberg is a result of the Internet. However,
it has not caused any real change in the way company H conducts their
business, because of the nature of the stainless steel industry.
I asked Mr. Red to think back to some strategic issues that we could discuss,
and he mentioned an organizational change and the definition of a new
strategic vision a few years ago. The trigger for this issue was the arrival of a
new CEO who wanted to understand the organization better. Also, there was
a trend in the industry toward a more customer-oriented mindset, which was
an incentive for change too. The current manner of operating was analyzed
thoroughly and some outside consultants were also used for this analysis.
However, there was still a lot of uncertainty relating to the organizational
change and new vision. The management group, CEO and board all
participated in making this decision. This issue arose as a separate project,
outside the actual annual strategic process. In retrospect, Mr. Red sees the
decision as definitely the correct one.
I asked Mr. Red whether he sees good and bad sides in the way they
currently handle strategic issues and how he would like to see it develop. He
said that the challenges in such a large organization usually relate to
inflexibility. On the management group and board level the company is quite
flexible and dynamic and can move quickly, but the implementation of
decisions and changes can often be arduous. He would like to strengthen the
role of the strategic management of separate functions, such as raw-material
procurement and R & D, so that the strategic work done would be more
matrix-like. Mr. Red also remarked that no strategic process is “the best one
possible” and especially not sustainably so. Thinking that a process is the
best possible one can lead to dangerous strategic inertia. He also remarked
that pure issue management simply does not fit into most companies and an
annual component is needed for practical reasons. For example, financial
accounting and reporting needs to happen at certain intervals or havoc can be
caused. Purely issue-based strategic management simply does not fit into the
current juridical standards and rules.
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7.10 Interview Notes: Company I
Company I produces logistics services in the Baltic Sea region and is mostly a
family-owned company. It has existed for over 100 years from generation to
generation, so naturally there is pressure that the company should also pass
on to the next generation. This affects the way risks that are taken. Since it is
quite small, it tries to function in such specific business-fields where there are
no globally large competitors. It has several business-units that focus on
different businesses, giving it a very diverse service portfolio. Mr. Orange is a
member of the management group of Company I and is responsible for the
railway-logistics business and also the business-development of the
organization. Company I does have an explicitly, albeit loosely defined
strategy. This is an inevitable result of the diversity of their service portfolio, as
different business-units need different business strategies to be successful.
Strategic decisions regarding individual business-units are usually a result of
discussion between the business-unit director and his superior in the
management group of the company. Decisions regarding the entire company
and service portfolio are discussed in the management group and with the
board of the company, which approves the decisions. The management group
does the background work for the decision and also discusses it and then the
CEO presents the case to the board. The process is quite dynamic, and
according to Mr. Orange, the board and management can meet to discuss a
decision very quickly, even within one or two days if needed. Decisions can
also be made quickly if necessary, for example some large investment
decisions have been made as quickly as in a week.
Company I has on occasion used outside consultants for some analysis
functions and according to Mr. Orange they have mostly been useful. Outside
consultants for actual fundamental strategic consulting have not been used for
several years now. Company I does not have an annual strategy-meeting to
discuss the fundamentals of their strategy, but there has been some
discussion of implementing such a practice. The management group does
meet regularly and a variety of issues is discussed, but mostly they are not
related to strategy. Strategic issues arise from business-units and they are
discussed as needed. According to Mr. Orange, there is no real need to
formally discuss the entire strategy of the group even annually, as this does
not, and should not change every year. I asked Mr. Orange whether strategic
decisions actually affect the work done on lower levels of the organization. He
conjectured that it often does not really matter, whether an employee on the
lowest level actually adheres to the strategy, since it basically does not affect
his job. On the other hand he does mention one strategic initiative, which was
to make service more customer-focused, and this was communicated very
well to the entire organization. In this case it was essential that everybody in
the organization understands the strategy. This program is probably still
remembered throughout the organization. According to Mr. Orange, they use
the Kaplan-Norton balanced scorecard to monitor progress to set and
communicate goals.
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Company I does not have a specific group to monitor the businessenvironment, but the management of the company, including the
management group, interacts with customers and thus gets input from them,
and also follows the business environment through trade publications etc.
One issue discussed was the recent divestment of a business unit. When this
business-unit was analyzed to find ways of keeping profitability up while
increasing growth, it was also revealed that this business-unit may not be
suitable for Company I. This was discussed with the board of the company
and the decision was made to sell the unit. According to Mr. Orange, analysis
was completed for the aspects of the issue that eased the uncertainty.
However, there was also some structural uncertainty that could not be
negated by analysis. There were no real implementation difficulties, as most
“internal resistance” was overcome in the discussions with the management
group and board. Also, a buyer for the business-unit was found quickly.
I asked Mr. Orange, whether he’s satisfied with the company’s strategic
processes. He replied that the current process is clear and works well:
Strategic issues are discussed by the management group and the board,
whereas operative issues are left to the business-units themselves. This is
very efficient. The weakness in this may lie in the formulation of strategy for
the individual business-units. The director of a business-unit is mostly tied up
in operative matters and he does not really have anyone else to discuss
strategy with other than his superior. Having only two people discuss strategy
means they might miss something. Mr. Orange did not think developing the
process is a high priority since “if it’s not broken, don’t fix it” – the company
has performed well during recent years. However, he does mention that the
management group previously had a person specifically responsible for
business-development, who could be used for strategic-analysis purposes.
According to him, the re-implementation of this resource might be a
worthwhile development.
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7.11 Interview Notes: Company J
Company J is owned by an investment bank and has annual sales of 19
million euros, of which the Finnish subsidiary produces 12 million. Company J
provides training services for other companies and it is made up of four
different business units. Three of them focus mostly on IT-issues and the last
one focuses on business-development and is managed by Mr. Gray.
Company J has an explicitly defined strategy, mission and vision, which are
all updated every year after a yearly discussion regarding the company’s
strategy. These have been communicated to the entire organization, but
according to Mr. Gray, there are surely still a lot of people who do not know
them. They do try to keep all strategic decisions and project choices in line
with their strategy. The discussion lasts for a few days and involves analyzing
the current situation and setting goals for the next year. This happens during
circa five management group meetings.
Company J’s strategy and strategic decisions are made by the management
group and an extended management group. The management group has six
members: the directors of each business unit, the sales-director and the CEO.
According to Mr. Gray, they have used outside-consultants and a few of them
have been useful. The extended management group includes the basic group
as well as experienced members from the different business units. It operates
in a rather informal manner. The management group meets once a month and
the implementation of the current strategy is evaluated every time by
evaluating the current projects. This process was adopted when the new CEO
started in 2005. He wanted to make the process more participative and
systematic. Before the organizational model was more like that of a factory,
with one person holding the power to make decisions. Also, the company has
a board, which gives input to the company’s strategy and approves it.
According to Mr. Gray, he has used scorecards to try and activate people to
respond to the strategy of the company and strategic decisions. They use the
Kaplan-Norton Balanced Scorecard to set goals and evaluate success in
reaching them. They also use other strategy tools such as the Boston
Consulting Group Matrix.
According to Mr. Gray, the decisions in the management group are made
mostly based on facts, and are not compromises depending on the
argumentation and charisma of the different sides of a discussion. This may
be because the management team has only been together for a year, so they
may still be polite with each other.
Company J does not have an explicit person or unit that monitors the
business-environment actively, but one of the business units does follow
current events. This information is not relayed to the rest of the organization
through any formal channel, but informally everyone knows that information is
available from them.
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I asked Mr. Gray whether he could see good and bad aspects of their current
strategy process. He said that there are three things he would like to develop:
the retrospective analysis before strategy formulation, the clarification of the
strategy once it has been formulated and most importantly, the
communication of the strategy. In practice, Mr. Gray would like to like to focus
the key aspects of the strategy into a few words that would be easy to
communicate.
Mr. Gray defined one issue Company J has faced as the organizational
structure they used to have. The prior, factory-like organizational model
proved difficult, when customers demanded services which involved cooperation between business-units. These were difficult to co-ordinate, not to
mention bill internally. The solution was to move the company a few steps
toward a process-organization. Mostly, the decision was made by the current
CEO, who was then the vice president of the company. The uncertainty
relating to the problem regarded the implementation problems and how fast
benefits could be reaped. However, some employees in the company had
worked in more process-like organizations and knew that the model was
better. Many saw the transformation as difficult and according to Mr. Gray, the
transformation is not yet complete. Mr. Gray himself regards the decision as
the right one, because an organization of this size could not be run in the
previous fashion.
Another issue Mr. Gray mentioned is faced every time Company J considers
providing new products or solutions to companies. The dualistic nature of
consulting and providing other services may contradict each other, as
consulting may reveal that another of Company J’s services may not be
suitable for a company. Also, any new products or services have to be
compatible with Company J’s existing product portfolio. These issues arise
outside the normal strategy process. According to Mr. Gray, a more thorough
analysis would be better before making these decisions. However, he also
says that he has a basic philosophy of ringing 20 of his biggest clients and
asking them whether they have certain kinds of problems, and whether they
already have someone to take care of them. This helps him assess whether
there is a need for a new product.
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