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Recommended Reading - Strategy

 

Managing across Borders: New Organizational Responses How To Make Experience Your Company's Best Teacher
Learning to lead at Toyota Why Focused Strategies May Be Wrong For Emerging Markets
Building Better Boards Making The Most Of Foreign Factories
The Perils of the Imitation Age Building Effective R&D Capabilities Abroad
Sharpening the Intangibles Edge What Is Strategy?
Capitalizing on Capabilities Green And Competitive: Ending The Stalemate
Creativity Is Not Enough Discovery-Driven Planning
Strategy and the Internet Changing The Role Of Top Management: Beyond Systems To People
Strategy Under Uncertainty Changing the Role of Top Management: Beyond Structure to Processes
Strategy And The New Economics Of Information Disruptive Technologies: Catching the Wave
Unleashing Organizational Energy What Is A Global Manager?
Managing across Borders: New Strategic Requirements Inside Unilever: The Evolving Transnational Company
The Balanced Scorecard - Measures That Drive Performance    
       

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Managing across Borders: New Organizational Responses by Bartlett, Christopher A and Ghoshal, Sumantra , Sloan Management Review, Fall 1987, pp. 43-53.  

Geographic management allows global companies to sense, analyze, and respond to the needs of different national markets. Business management capabilities with global product respon­sibilities help MNCs achieve global efficiency and integration. These managers can facilitate manufacturing rationalization, product standardi­zation, and low-cost global sourcing. Functional management capabilities are needed to builds and transfers core competencies across a global organization.  

Three simplifying assumptions block organizational development. There is a widespread, often implicit assump­tion that roles of different organizational units are uniform and symmetrical. Internal interunit relationships are assumed to be clear and unambiguous. One of cor­porate management's principal tasks is to institu­tionalize clearly understood mechanisms for deci­sion making and to implement simple means of exercising control.

Successful global companies do not treat different businesses, functions, and subsidiaries similarly. They systematically differentiate tasks and responsibilities. Instead of seeking organizational clarity by basing relation­ships on dependence or independence, they build and manage interdependence among the different units of the companies. And instead of consider­ing control their key task, they search for complex mechanisms to coordinate and co-opt the differentiated and interdependent organiza­tional units into sharing a vision of the company's strategic tasks.

Independent units risk being attacked one-by-one by competitors whose coordinated global approach gives them two important strategic advantages – the ability to integrate research, manufacturing, and other scale efficient operations, and the opportunity to cross subsidize the losses from battles in one market with profits generated in other markets. On the other hand, foreign operations totally dependent on a central unit must deal with problems reaching beyond the loss of local market responsiveness.

It is not easy to change relationships of dependence or independence that have been built up over a long time. But some companies have done this by changing the basis of the relationships among product, functional, and geographic management groups.  From relations based on dependence or independence, they have moved to relations based on formidable levels of explicit, genuine interdependence. In essence, they have made integration and collaboration self-enforcing by making it necessary for each group to cooperate in order to achieve its own interests.

A unit with strategic leadership responsibility must be given freedom to work in an entrepreneurial fashion. But it must also be strongly supported by headquarters.  For this unit, operating controls may be light and quite routine, but coordination of information and resource flows to and from the unit may still require intensive involvement from senior management.  In contrast, units with implementation responsibility might be managed through tight operating controls, with standardized systems used to handle much of the coordination. Because the tasks are more routine, the use of scarce coordinating resources can be minimized.

Developing multidimensional perspectives and capabilities does not mean that product, functional and geographic management must have the same level of influence on all key decisions.  Different groups have different roles for different activities and these roles are likely to change from time to time. The ability to manage these multidimensional aspects in a flexible manner is the hallmark of a transnational company.

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Learning to lead at Toyota by  Spear, Steven J., Harvard Business Review, May2004, pp. 78-86.

Many companies have tried to copy the Toyota Production System (TPS) – but without success. Part of the reason is that imitators fail to recognize the underlying principles of TPS. This article explains how Toyota makes new managers familiar with TPS principles.  Spear describes the training of a talented young American selected for a high-level position at one of Toyota’s US plants.  There are four basic lessons for any company wishing to train its managers to apply Toyota’s system.

     There's no substitute for direct observation.  
     Proposed changes should always be structured as experiments.  
     Workers and managers should experiment as frequently as possible.  
     Managers should coach, not fix the problem.

Instead of going through cursory walk-throughs, orientations, and introductions as incoming fast-track executives at most companies might, the executive in this story learned TPS the long, hard way--by practicing it. This is how Toyota trains any new employee, regardless of rank or function. This article is a sequel to the author’s 1999 article on the Toyota Production System.

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Building Better Boards  by Nadler, David A. .Harvard Business Review, May2004, pp. 102-111,

Boards must be able to add value without meddling and make CEOs more effective but not all-powerful. A board can do that if it functions as a high-performance team, one that is competent, coordinated, collegial, and focused on an unambiguous goal. There are limits to how much good governance can be imposed from the outside.

The board must conduct regular self-assessments. As a first step, the directors and the CEO should agree on which of the board models best fits the company: passive, certifying, engaged, intervening, or operating. The directors and the CEO should then analyze which business tasks are most important and allot sufficient time and resources to them. Next, the board should assess each director's strengths to ensure that the group as a whole possesses the skills necessary to do its work. Directors must exert more influence over meeting agendas and ensure they have the right information at the right time and in the right format to perform their duties. Finally, the board needs to foster an engaged culture characterized by candor and a willingness to challenge.

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The Perils of the Imitation Age by Bonabeau, Eric. Harvard Business Review, Jun2004, pp. 45-54.

 Imitation exerts enormous influence over contemporary society. The influence of imitation has grown as the avenues by which people imitate have multiplied. In consumer purchases, financial markets, and corporate strategy, what others do matters more to us than the facts. When there's too much information, imitation becomes a convenient heuristic.

Imitation has its virtues, but it also promotes instability and unpredictability. That's because, it can swell a single opinion into a mass movement or catapult the smallest player to the forefront of a market.

Businesses that understand how imitation works can be better prepared by accounting for it in their forecasts and risk-management plans, by becoming more sensitive to unexpectedly changing circumstances, and by avoiding mindless imitation of other companies' moves. In some instances, they may even be able to use the tools of imitation to capture new business.

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Sharpening the Intangibles Edge by Lev, Baruch , Harvard Business Review, Jun2004, pp.109-116.

Today, intangible assets generate most of a company's growth and shareholder value. Yet extensive research indicates that investors systematically misprice the shares of intangibles-intensive enterprises. While, overpricing wastes capital, underpricing raises the cost of capital. So companies must generate better information about investments in intangibles, and disclose at least some of that data to the capital markets.

Getting at that information is easier said than done, however. There are no markets generating visible prices for intellectual capital, brands, or human capital to assist investors in correctly valuing intangibles-intensive companies. And current accounting practices lump funds spent on intangibles with general expenses, so that investors and executives don't even know how much is being invested in them, let alone what a return on those investments might be.

At the very least, companies should separate the amounts spent on intangibles and disclose them to the markets. Executives should also start thinking of intangibles not as costs but as assets, so that they are recognized as investments whose returns are identified and monitored.

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Capitalizing on Capabilities by Ulrich, Dave; Smallwood, Norm. Harvard Business Review, Jun2004, pp.119-127. 

By making the most of organizational capabilities  we can dramatically improve the company's market value. The authors identify 11 intangible assets that well-managed companies tend to have: talent, speed, shared mind-set and coherent brand identity, accountability, collaboration, learning, leadership, customer connectivity, strategic unity, innovation, and efficiency. Such companies typically excel in only three of these capabilities while maintaining acceptable performance by industry standards in the other areas. Organizations that fall below the norm in any of the 11 are likely candidates for dysfunction and competitive disadvantage.

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Creativity Is Not Enough by Theodore Levitt

Creativity is often touted as a miraculous road to organizational growth and affluence. But new ideas can hinder rather than help a company if they are put forward irresponsibly.

Too often, the creative types who generate a proliferation of ideas confuse creativity with practical innovation. They usually pepper their managers with intriguing but short memoranda that lack details about what is at stake or how the new ideas should be implemented. They pass off onto others the responsibility for getting down to brass tacks.

In this classic HBR article from 1963, Levitt emphasizes that the person with a great new idea must recognize that managers are already bombarded with problems. He must act responsibly by including in the proposal at least a minimal indication of the costs, risks, manpower, and time the idea may involve.

Conformity and rigidity are necessary for corporations to function. Indeed, the purpose of an organization is to achieve the order and conformity necessary to do a particular job. Otherwise there would be chaos and decay. But even then, large companies do have important attributes that actually facilitate innovation. For one thing, big businesses distribute risk, making it safer for individuals to break new ground. For another, bigness and group decision making function as stabilizers. Stability encourages people to risk presenting ideas that might rock the boat.

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Strategy and the Internet by Michael E. Porter

Many dot-coms have violated nearly every precept of good strategy. Instead of focusing on profits, they have chased customers indiscriminately through discounting, channel incentives, and advertising. Instead of delivering value that earns an attractive price from customers, they have pursued indirect revenues such as advertising and click-through fees. Instead of making trade-offs, they have rushed to offer every conceivable product or service.

Porter argues that the Internet rarely nullifies traditional sources of competitive advantage in an industry; it often makes them even more valuable. And as all companies embrace Internet technology, the Internet itself will be neutralized as a source of advantage. Competitive advantages will continue to result from traditional strengths such a unique products, proprietary content, and distinctive physical activities. Internet technology may be able to fortify those advantages, but it is unlikely to supplant them.

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Strategy Under Uncertainty by Hugh Courtney, Jane Kirkland, and Patrick Viguerie

The traditional approach to strategy assumes that by applying a set of powerful analytic tools, executives can predict the future of any business accurately enough to allow them to choose a clear strategic direction. But what happens when the environment is very uncertain? The authors argue that uncertainty requires a new way of thinking about strategy. All too often, executives take a binary view: either they underestimate uncertainty and come up with very accurate forecasts or they overestimate it, abandon all analysis, and go with their gut instinct.

The authors draw a crucial distinction among four discrete levels of uncertainty that any company might face. They then explain how a set of generic strategies-shaping the market, adapting to it, or reserving the right to play at a later time-can be used in each of the four levels. And they illustrate how these strategies can be implemented through a combination of three basic types of actions: big bets, options, and no-regrets moves.

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Strategy And The New Economics Of Information by Philip B. Evans and Thomas S. Wurster

We are in the midst of a fundamental shift in the economics of information, a shift that will precipitate changes in the structure of entire industries and in the ways companies compete. This shift is made possible by the widespread adoption of Internet technologies, but it is less about technology and more about a new behavior reaching critical mass. Millions of people are communicating at home and at work in an explosion of connectivity that threatens to undermine the established value chains for businesses in many sectors of the economy.

The authors present a conceptual framework for understanding the relationship of information to the physical components of the value chain and how the Internet's ability to separate the two will lead to the reconfiguration of the value proposition in many industries. In any business where the physical value chain has been compromised for the sake of delivering information, there will be an opportunity to create a separate information business and a need to streamline the physical one. Executives must keep examining the potential to deconstruct their businesses to see the real value of what they have. If they do not, someone else will.

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In our personal life, experience is often the best teacher. Not so in corporate life. After a major event- a product failure, a downsizing crisis, or a merger, many companies stumble along, oblivious to the lessons of the past. Mistakes get repeated.

A useful tool in this context is the learning history, a written narrative of a company's recent critical event, nearly all of it presented in two columns. In one column, relevant episodes are described by the people who took part in them, were affected by them, or observed them. In the other, learning historians - trained outsiders and knowledgeable insiders- identify recurrent themes in the narrative, pose questions, and raise "undiscussable" issues. The learning history forms the basis for group discussions, both for those involved in the event and for others who also might learn from it. This tool based on the ancient practice of community story telling can build trust, raise important issues and transfer knowledge from one part of a company to another.

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Core competencies and focus are popular mantras in the west. Managers in the West have dismantled many conglomerates assembled in the 1960s and 1970s. But large, diversified business groups continue to dominate many emerging markets. Consultants and foreign investors are increasingly pressuring groups to conform to Western practice by reducing the scope of their business activities. But the authors argue that this advice may be wrong. Companies must adapt their strategies to fit their institutional context: a country's product, capital, and labor markets; its regulatory system; and its mechanisms for enforcing contracts. Unlike advanced economies, emerging markets suffer from weak institutions in all or most of these areas. Conglomerates can add value by imitating the functions of several institutions that are present only in advanced economies.

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Many companies do not tap the full potential of their foreign factories. They try to derive benefits only from tariff and trade concessions, cheap labor, capital subsidies, and reduced logistics costs. As a result foreign factories are given a limited range of work, responsibilities, and resources. But there are companies that expect much more from their foreign factories and, as a result, get much more. They use them to get closer to their customers and suppliers, to attract skilled and talented employees, and to create centers of expertise for the entire company. The author points out that managers must consider manufacturing as a major source of competitive advantage, not just a way of cutting costs or getting around regulatory barriers.

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In the past, companies kept most of their R&D activities in their home country. They thought it important to have R&D close to where strategic decisions were being made. But today many companies choose to establish R&D networks in foreign countries in order to tap the knowledge there or to customise products for those markets rapidly.

 

Adopting a global approach means linking R&D strategy to a company's overall business strategy. Companies must determine whether an R&D site's primary objective is to augment the expertise that the home base has to offer or to exploit that knowledge for use in the foreign country. That determination affects the choice of location and staff. For example, to augment the home base laboratory, a company would want to be near a foreign university. To exploit the home base laboratory, it would need to be near large markets and manufacturing facilities. Leaders of these R&D set ups must combine the qualities of good scientist and good manager, know how to integrate the new site with existing sites, understand technology trends, and be good at gaining access to foreign scientific communities.

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What Is Strategy? by Michael E. Porter

 

Today's dynamic markets and technologies have called into question the sustainability of competitive advantage. Under pressure to improve productivity, quality, and speed, managers have embraced tools such as TQM, benchmarking, and reengineering. Dramatic operational improvements have resulted, but rarely have these gains translated into sustainable profitability.

 

Porter explains how efforts to improve operational efficiency have led to the rise of mutually destructive competitive battles that erode profitability. Operational effectiveness, although necessary for superior performance, is not sufficient, because its techniques are easy to imitate. In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match.

 

Porter traces the economic basis of competitive advantage down to the level of the specific activities a company performs. He shows how making trade-offs among activities is critical to the sustainability of a strategy.

 

Whereas managers often focus on individual components of success such as core competencies or critical resources, Porter shows how managing fit across all of a company's activities enhances both competitive advantage and sustainability.

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Green And Competitive: Ending The Stalemate by Michael E. Porter And Claas Van Der Linde

The prevailing view is that there is an inherent and fixed trade-off: ecology versus the economy. On one side are the social benefits that arise from environmental standards. On the other side are the private costs to industry of prevention and cleanup that lead to higher prices and reduced industrial competitiveness. The authors argue that this is a static view. Companies are constantly finding innovative solutions in response to pressures of all sorts-from competitors, from customers, from regulators. The authors emphasise that tougher environmental standards can actually enhance competitiveness by pushing companies to use resources more productively.

 

Today managers and regulators focus on the actual costs of eliminating or treating pollution. To end the stalemate, they should focus instead on the enormous opportunity costs of pollution- wasted resources, wasted effort, and diminished product value to the customer. Managers must start to recognize environmental improvement as an economic and competitive opportunity, not as an irritant or a compliance issue.

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Discovery-Driven Planning by Rita Gunther Mcgrath and Ian C. Macmillan

Discovery-driven planning is a practical tool that is useful in planning for new ventures, which are often undertaken with several assumptions. But assumptions about the unknown are often wrong. New ventures inevitably experience deviations, often huge ones from their original targets. Indeed, new ventures frequently require fundamental redirection from time to time. The authors offer managers a tool that highlights potentially dangerous implicit assumptions. Discovery-driven planning converts assumptions into knowledge as a new venture unfolds, forces managers to articulate what they don't know, provides a discipline to help them address the make-or-break unknowns before making major resource commitments.

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Changing The Role Of Top Management: Beyond Systems To People by Christopher A. Bartlett Sumantra Ghoshal

In the post war years, planning and control systems enabled companies to grow and helped managers deal with sprawling enterprises. But this strategy-structure-systems doctrine  is increasingly losing relevance.

 

Systems can control employees but they also inhibit creativity and initiative. Today the challenge for top-level managers is to engage the knowledge and skills of each person in the organization in order to create what the authors call an individualized corporation.

 

Senior executives must spend much of their time coaching their management teams. The direct personal contact that top-level managers maintain with others not only keeps those at the top apprised of the real issues and challenges their businesses face but also gives them the opportunity to shape frontline managers' responses to those issues.

 

Top-level managers must not direct and correct middle and frontline managers. Instead they must create an environment in which individuals monitor themselves. The assumption is that given the same information, incentives, and authority to act, frontline managers will reach the same decisions that top-level managers would have reached.

 

Systems, no matter how sophisticated, can never replace the richness of close personal communication and contact between top-level and frontline managers.

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Changing the Role of Top Management: Beyond Structure to Processes by Sumantra Ghoshal Christopher A. Bartlett

The hierarchical organization based on the strategy-structure-systems doctrine of management no longer delivers competitive results. A top-down structure gives managers tight control and allows companies to grow. But it also fragments resources and creates a vertical organization that prevents small units from sharing their strengths with one another. Structural fixes, such as skunk works, alliances, and acquisitions, have also not solved the problem.
 

The authors emphasize that management must promote three core organizational processes: frontline entrepreneurship, competence building, and renewal. Companies should encourage bottom-up initiatives from operating units, which are closest to customers. Managers must balance discipline and support to create a self disciplined organization. Similarly, managers must trust operating units with creating competencies and limit their own role to seeing that those strengths are shared throughout the company.
 

In addition to providing direction, managers must sometimes disrupt organizational equilibrium-for example, by stretching the company with increasingly challenging goals.  They must create an environment that asks employees to challenge conventional wisdom.

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Disruptive Technologies: Catching the Wave by Joseph L. Bower and Clayton M. Christensen

 

Many leading companies lose their market leadership when technologies or markets change. Why is it that established companies invest aggressively- and successfully- in the technologies necessary to retain their current customers but then fail to make the technological investments that customers of the future will demand?

 

Most established companies are consistently ahead of their industries in developing and commercializing new technologies as long as those technologies address the next-generation-performance needs of their customers. However, an industry's leaders are rarely in the forefront of commercializing new technologies that do not initially meet the functional demands of mainstream customers and appeal only to small or emerging markets.

 

To remain at the top of their industries, managers must first be able to spot the technologies that fall into this category. Managers must protect them from the processes and incentives that are geared to serving mainstream customers. And the only way to do that is to create organizations that are completely independent of the mainstream business.

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What Is A Global Manager? by Christopher A. Bartlett and Sumantra Ghoshal

To compete around the world, a company needs three strategic capabilities: global-scale efficiency, local responsiveness, and the ability to leverage learning worldwide. No single "global" manager can build these capabilities. Rather, groups of specialized managers must integrate assets, resources, and people in diverse operating units.

 

Bartlett and Ghoshal identify three types of global managers. They also illustrate the responsibilities each position involves through a close look at the careers of successful executives.

 

The first type is the global business or product-division manager who must build worldwide efficiency and competitiveness. These managers recognize cross-border opportunities and risks as well as link activities and capabilities around the world.

 

The second is the country manager who is responsible for understanding and interpreting local markets, building local resources and capabilities, and contributing inputs to the development of global strategy.

 

Finally, there are worldwide functional specialists. To transfer expertise from one unit to another and leverage learning, these managers must scan the company for good ideas and best practices, transfer them across units, and champion innovations with worldwide applications.

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Unilever, the Anglo-Dutch multinational with operations in some 75 countries, is one of the world’s leading transnationals. In this article, Unliver co-chairman, Floris A Maljers provides an inside look at Unilever's evolution. Through all the changes, many based on trial and error, the company has maintained two consistent practices: developing high-quality managers and linking decentralized units through the "Unileverization" of those managers.

 

Many consider Unilever's managerial recruitment and training policies to be the best in the world. The company has a strong tradition of developing local talent in its subsidiaries. At the same time, the head office also expects managers to gain experience in more than one country or product line. According to Maljers, a matrix is only as good as the people in it. It can only work if everyone in the organization accepts and supports its flexibility.

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The Balanced Scorecard - Measures That Drive Performance by Robert S. Kaplan and David P. Norton

Traditional performance measurement systems are inadequate. A balanced presentation of measures that allow managers to view the company from several perspectives simultaneously is needed.

 

The balanced scorecard includes financial measures that tell the results of actions already taken and three sets of operational measures - customer satisfaction, internal processes, and the organization's ability to learn and improve.

 

Managers can create a balanced scorecard by translating their company's strategy and mission statements into specific goals and measures. To create the part of the scorecard that focuses on the customer perspective, for example, executives can establish general goals for customer performance. These might be to get standard products to market sooner, to improve customers' time-to-market, to become customers' supplier of choice through partnerships, and to develop innovative products tailored to customer needs. Managers can translate these elements of strategy into four specific goals and identify a measure for each.

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Unleashing Organizational Energy by Bruch, Heike and Ghoshal, Sumantra

Leadership is not just about making people happy in the hope that happy people will do the right things. Leadership must ensure that the company's vision and strategy capture people's emotional excitement, engage their intellectual capacities, and produce a sense of urgency for taking action. Companies can be in one of four zones.

Companies in the comfort zone have low animation and a relatively high level of satisfaction. With weak but positive emotions such as calm and contentedness, they lack the vitality, alertness and emotional tension necessary for initiating bold new strategic thrusts or significant change.

Companies in the resignation zone demonstrate weak, negative emotions -- frustration, disappointment, sorrow. People suffer from lethargy and feel emotionally distant from company goals. They lack excitement or hope.

Companies in the aggression zone experience internal tension founded on strong, negative emotions. Tension drives their intensely competitive spirit, which manifests itself in high levels of activity and alertness -- and focused efforts to achieve company goals.

In the passion zone, companies thrive on strong, positive emotions -- joy and pride in the work. Employees' enthusiasm and excitement mean that attention is directed toward shared organizational priorities.

Companies in the comfort zone or the resignation zone operate at low levels of attention, emotion and activity. Companies in the aggression zone or the passion zone display higher levels of focused emotional tension, collective excitement and action taking.

High-energy companies display an urgency that makes them more productive. Being constantly alert allows them to process information and mobilize resources quickly. They strive for larger-than-life goals. Low-energy companies prefer standardization and institutionalization. They try to avoid the surprises, exceptions and risks on which high-energy companies thrive.

Energy is not an unmixed blessing, however, and unless managed wisely, it can degenerate into one of three main pathologies or energy traps. In the Acceleration Trap,  CEOs drive an organization beyond its capabilities. Relentless efforts to accelerate can lead to organizational burnout. Companies that keep adopting major change initiatives without making time for regeneration are susceptible to the acceleration trap. Inertia Trap results when a company's ability to leverage resources is weakened. This trap ensnares victims after too long a stretch of either success or poor performance. When a company faces external threats (or opportunities) at the same time as it confronts internal discord, it may fall into the corrosion trap. Instead of working together to meet external challenges, people channel their energy into internal fights.

Companies that succeed at radical change generally adopt one of two approaches for unleashing and channeling organizational energy. In the "slaying the dragon" strategy they move into the aggression zone by focusing people's attention, emotions and effort on a threat. In the "winning the princess" strategy, they move into the passion zone by building enthusiasm for an exciting vision. On the rare occasions when a company can combine the strong positive and negative emotions of both zones, the results are spectacular. Companies with neither strategy fall victim to an energy trap and decline to mediocrity or to crisis.

Slaying the Dragon involves a clear articulation of an imminent threat, the release of strong, negative emotions and the channeling of those emotions toward overcoming the threat. Threats such as bankruptcy, a dangerous competitor or a disruptive technology require moving employees from the comfort or resignation zone to the aggression zone.

Because anger, fear, hate or shame are such powerful emotions, slaying the dragon can effectively shock people into action. However, the strategy has its downside. Sometimes, it leads to organizational myopia, with people overly focused on one well-defined threat. Also, the slay-the-dragon strategy rarely leads to major innovations or new growth trajectories. And once the dragon is slain, there may be a rush for the comfort zone.

Winning the Princess relies on strong, positive emotions like excitement and enthusiasm to move people into the passion zone. To engage people's dreams and openness to heroic effort, leaders have to create an object of desire and invoke passion so strong that people will overcome passivity and satisfaction with the status quo.

Slaying the dragon requires high-energy, brave and commanding leadership. Winning the princess needs calm, gentle, inspiring and empathic leaders. Because the former strategy channels aggressive energy into disciplined execution, it requires top-down instructions and meticulous plans. A strategy that unleashes passion, however, needs leaders who create an environment of curiosity, excitement and ownership.

Making people see, believe in and commit to an opportunity is inherently more difficult than getting them to acknowledge a threat. The first and most difficult task in pursuing the winning-the-princess strategy is to define, describe and substantiate the intangible. Leaders fail when the vision remains too abstract. It must be simple, clear, convincing and moving. Second, leaders must embody that vision. Their personal credibility and actions hold the key to attracting and retaining people's commitment. Third, leaders have to balance the often playful activities involved in seeking an intangible future with the comparatively unexciting protection of the ongoing business.

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Managing across Borders: New Strategic Requirements by Bartlett, Christopher A and Ghoshal, Sumantra

Until recently, most worldwide industries presented relatively unidimensional strategic re­quirements. In each industry, a particular set of forces dominated the environment and led to the success of firms that possessed a particular set of corresponding competencies.

Take the consumer electronics industry. In an environment characterized by incrementally changing technologies, falling transportation and communication costs, relatively low tariffs and other protectionist barriers, and increasing homogenization of national markets, huge scale econ­omies progressively increased the importance of global efficiency. The industry gradually assumed the attributes of a classic global industry. Important characteristics like consumer needs, minimum efficient a scale, and context of competitive strategy were defined not by individual national environments, but by the global economy.

Firms like Matsushita were ideally placed to ex­ploit the emerging global-industry demands. Hav­ing expanded internationally much later than their American and European counterparts, they were able to capitalize on highly centralized scale intensive manufacturing and R&D operations, and leverage them through worldwide exports of stan­dardized global products. Such global strategies fit the emerging industry characteristics far better than the more tailored country-by-country approach that companies like Philips and GE had been forced to adopt in an earlier era of high trade barriers, differences in consumer preferences, and pretransistor technological and economic characteristics.

Today, it is more difficult for a firm to succeed with a relatively unidimensional strategic capability that emphasizes only efficiency, or responsiveness, or learning.  To win, it must now achieve all three goals at one time, i.e., global efficiency, national responsiveness, and worldwide learning. These are the characteristics of what the authors call a transnational company.

A company's organizational capability develops over many years and is tied to a number of attributes: a configuration of organizational as­sets and capabilities that are built up over decades; a distribution of managerial responsibilities and influence that cannot be shifted quickly; and an ongoing set of relationships that endure long after any structural change has been made. Collectively, these factors constitute a company's administrative heritage. It can be, at the same time, one of the company's greatest assets-the underlying source of its key competencies-and also one of its most significant liabilities, since it resists change and thereby prevents realignment or broadening of strategic capabilities.

A company's administrative heritage is shaped by many factors. Strong leaders often leave indeli­ble impressions on their organizations. Home country culture and social systems also have significant influences on a company's adminis­trative heritage. For example, the more important roles that owners and bankers play in corporate level decision making in many European compa­nies have led to an internal culture quite different from that of their American counterparts. These com­panies tend to emphasize personal relationships rather than formal structures, and financial con­trols rather than coordination of technical or operational detail. Finally, the internationalization history of a firm also influences its administrative heritage.

The companies that were slow to adapt to the new environment never seemed to recognize the importance of their administrative heritage.

The ability of a company to survive and succeed in today’s turbulent international environment depends on two factors: The fit between its strategic posture and the dominant industry characteristics, and its ability to adapt that posture to the multidimensional task demands shaping the current competitive environment.
 

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