Leading through uncertainty
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Leading through uncertainty
حجم: 820 کیلوبایت
Using integrated solutions as market-shaping/market-driving strategy in oil industry
Part 4
استفاده از "راه حل یکپارچه" به عنوان استراتژی شکل دهنده بازار و هدایت کننده بازار در صنعت نفت
بخش چهارم
The essence of any decision is uncertainty (Drucker, 2002). In strategic planning or any other type of planning, a manger should deal with the concept of “Future” and accompanying with future there is always concept of uncertainty. The high level of uncertainty aftermath of recent downturn and its consequences have made traditional strategy tools unrelated or at least less useful. Here, some of the tools, methods, strategy postures and moves proposed by literature in face of uncertainty, are presented.
Historically, the US Army established and advanced scenario planning and war gaming in 1950s. Later, quantitative techniques, decision trees and probability-based net-present-value calculations have been studied since 1960s. Although these tools are valuable, the challenge of managing uncertainty needs more than just thorough analysis produced by them (Bryan, 2009). Flexibility and its importance are one of the most popular factors that researchers have mentioned in context of uncertainty. Flexibility moves increase internal responsiveness without changing the predictability of external factors and they are identified as flexibility in operation and diversification (Miller, 1992) (Wernerfelt & Karnani, 1987) (Enderwick, 2006) (Lowell & Farrell, 2008).
The other strategy suggested in face of uncertainty is created based on the notion that to the degree that the future is shaped there is no need to predict it (Sarasvathy, 2001 ). Firms may pursue to control environmental contingencies to reduce uncertainties (Cyret and March 1963, Mascarenhas 1982, as cited in Miller, 1992). MacCrimmon and Wehrung (1986) research present that managers are inclined to control uncertainty instead of accepting it as a given limitation. Examples are political activities, achieving market power and forcing competitors into more predicable patterns of behavior (as cited in Miller, 1992). The use of market power to prevent entry of new entrants is the main method suggested by Porter (1980, 1985) to manage uncertainty (Miller, 1992). Making alliance with complementary products’ suppliers, co-opt with rivals, making bold mergers and acquisitions, making alliances and joint ventures, multilateral agreements are some of the strategic moves to bring certainty to the market (Miller, 1992) (Hamel & Prahalad, 1995) (Courtney et al, 1997) (Courtney, 2001). Hamel (1996,1997) proposes “strategy as revolution” in which companies should not play by the rules of the industry, instead they should transform “ the basis of competition in their industry” and brings the examples of IKEA, Dell and Southwest Airlines as rule breakers that are “overturning the industrial order” (as cited in Mintzberg et al, 1998). In addition, he criticizes industry analysis and focusing on direct competitors as path to strategy formation, since due to complexity of new business world identifying business and industry boundaries, and distinguishing competitors from collaborators became very hard (Hamel & Prahalad, 1994). Kim and Mauborgne (2005) introduce blue ocean strategy which suggests a systematic approach to make competition irrelevant. Red ocean strategists concentrate on making competitive advantages usually through analysis of competitors’ way of doing things and struggling to perform it better. Blue ocean strategists believe that boundaries exist in people’s minds so they do not allow existing market structures restrict them. They believe that abundant demand is out there, untouched waiting for them and their job is to create them. In addition, since market structures can be transformed via destroying the value-cost system, consequently the rules of games would be broken as well and competition via old rules becomes irrelevant (Insead , 2005) (Kim & Mauborgne, 2005).
Paradoxically, there are some ideas about favoring and encouraging uncertainty by some groups of business leaders which are in line with controlling and shaping uncertainty. Some entrepreneurs believe that being in an uncertain environment implies that the market could be shaped via their decisions and moves working in cooperation with pre-committed stakeholders and customer-partners (Sarasvathy, 2001 ).
DiMaggio and Powell (1983) state that imitation of pioneers in industry (or follow-the-leader) as other strategic choice for companies facing uncertainty (as cited in Miller 1992). Courtney et al (1997) and Courtney (2001) define adaptation as a strategic posture against uncertainty and one of the adaptors’ methods is to follow a leader (shaper). The other strategy under uncertain condition is avoidance which includes divestment for already active firms and postponement of market entry for not active yet companies (Miller, 1992) (Courtney et al, 1997) (Enderwick, 2006). Highly uncertain conditions –like aftermath of the recession- may cause to form too risk-averse strategies so business leaders should be careful that this would not cause firm to miss out valuable opportunities (Gjetsund et al, 2010).
One of the issues which have been mentioned in forming strategy under uncertainty is insufficiency of standard tools in this area. For example Porter five forces, discounted cash flow and core competency diagnostics could provide “ insight” into strategic opportunities in stable markets they do not offer deep “foresight” into opportunities in uncertain and changing environments. Then, without this foresight, managers cannot outline the future they want to make (Courtney, 2001). Anthony et al (2008) express that in environments with low certainty using financial models and making all discussions on financial projections is waste of time. Furthermore, in establishing analytical priorities, some critical uncertainties cannot be clarified via more research (Bhide, 1994).
منابعی که با رنگ آبی مشخص شده اند قابل دریافت می باشند.
References:
Bhide, A. (1994). How Entrepreneurs Craft Strategies That Work? HARVARD BUSINESS REVIEW March-April 1994, 150-161.
Courtney et al. (1997). Strategy Under Uncertanity . Harvard Business Review, 66-79.
Courtney, H. (2001, November). Making the most of the uncertainty. Retrieved 2011, from McKinzey Quarterly: http://www.mckinseyquarterly.com/Making_the_most_of_uncertainty_1128
Drucker. (2002). Innovation and Entrepreneurship Practice and Principles. New York: HarperCollins.
Gjetsund et al. (2010). Strategic Planning in an Age of Uncertainty. Retrieved 2011, from Accenture: http://www.accenture.com/us-en/Pages/insight-strategic-planning.aspx
Hamel, G., & Prahalad, C. (1994). Competing for the Future. Boston: HBS Press.
Hamel, G., & Prahalad, C. K. (1995). Thinking differently. Business Quarterly, 22-35.
Insead . (2005). Alumni/Newsletter/. Retrieved 2011, from Insead The Business School: http://www.insead.edu/alumni/newsletter/February2005/Interview.pdf
Kim, C., & Mauborgne, R. (2005). Blue Ocean Strategy How to Create Uncontested Market Space and Make the Competition Irrelevant . Boston: Harvard Business School Publishing Corporation.
Lowell, B., & Farrell, D. (2008). Leading through uncertainty. Retrieved 2011, from McKinsey Quarterly-McKinsey & Company: http://www.mckinseyquarterly.com/Leading_through_uncertainty_2263
Miller, K. (1992). A Framework for Integrated Risk Management in International Business. Journal of International Business Studies, 311-332.
Mintzberg et al. (1998). Strategy Safari: A Guided Tour Trough the Wilds of Strategic Management", Bruce Ahlstrand, and Joseph Lampel, 1998. New York: The Free Press.
Sarasvathy, S. (2001 ). What makes entrepreneurs entrepreneurial? Harvard Business Review.
Wernerfelt, B., & Karnani, A. (1987). COMPETITIVE STRATEGY UNDER UNCERTAINTY. Strategic Management Journal, 187-1 94.
Using integrated solutions as market-shaping/market-driving strategy in oil industry
Part 2
استفاده از "راه حل یکپارچه" به عنوان استراتژی شکل دهنده بازار و هدایت کننده بازار در صنعت نفت
بخش دوم
In this report literature review has two main branches; strategy-related literature and marketing-related literature. In strategy-related part, uncertainty and its importance in new era are discussed while incompetency of traditional strategy making approaches are criticized and new approaches of strategy making more suitable for highly uncertain environments –including market-shaping strategy- are presented. Since this study is not about any particular and specific company the discussions about strategy can be considered as “a dialogue to build prepared minds”. In marketing-related part literature concerning to the objectives of this study are reviewed; CRM in B2B context, service-dominant logic and last but not least orientation to market with focus on market-driving approach which can be said is to review market-shaping strategy from marketing point of view. The other important point of literature review in this report is to prepare the minds of readers that: “The world has changed so should the way of thinking about it”
Strategy has its roots in military, the word strategy stems from the Greek term “Strategia” which means “generalship” (Grant, 2010). Though, the Greeks were not the first originators of the strategy concept and it was Sun Tzu who portrayed the essentials of strategy in his great work “The Art of War” in 500BC. His book is considered as the first text on strategy in which he portrayed the essentials of strategy in ten principles (Grant, 2010) (Krause, 2004).
As Mintzberg states, the concept of strategy cannot be described in a single definition and he proposes five definitions (Mintzberg (a), 1987). Strategy schools are divided into two main branches from the “approach to strategy making” point of view, rational school; the followers of this school –which is also called prescriptive or design school- believe in formal planning and rational decisions of the organizations’ mangers (Mintzberg et al, 1998). Their main objective is to clarify how strategies should be formulated. The other branch is process school- which is also called behavioral or incremental school- based on the creators of this school strategy making is a process in which companies –specifically managers and people involved in strategy making- learn from the feedback of their decisions and their success or failure and it is more like a gradual trial and error course. In a more detailed study Mintzberg introduced ten schools of thought in a comprehensive manner (Mintzberg et al, 1998).
References:
Grant, R. (2010). Strategy. Chichester: John Wiley & Sons.
Krause, D. (2004). The Art of War for Executives . London: Nicholas Brealey.
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