StrategyProf

Sep 29

Strategy needs to deliver performance today, but it won’t do so tomorrow if it is not in sync with the broad changes taking place in the environment. I rely on many sources for information about the future – from McKinsey to THE FUTURIST, and this is the most recent post from that latter resource. How does your strategy fit with this future? Is the trend your strategy’s friend? It had better be!

The OUTLOOK 2011 report from THE FUTURIST magazine examines the key trends in technology, the environment, the economy, international relations, etc., in order to paint a full and credible portrait of our likely future. The magazine has released the top ten forecasts from Outlook 2011, plus more than 300 forecasts from previous reports, on the World Future Society’s Web site.

http://www.wfs.org/Forecasts_From_The_Futurist_Magazine

Here are the top ten forecasts from Outlook 2011:

1. Physicists could become the leading economic forecasters of tomorrow. Unlike mainstream economists, who rely on averages, econophysicists study complex systems, feedback loops, cascading effects, irrational decision making, and other destabilizing influences, which may help them to foresee economic upheavals.

2. Environmentalists may embrace genetically modified crops as a carbon-reduction technology. Like nuclear power, genetically modified crops have long been the bane of environmentalists, but Stewart Brand, author of Whole Earth Discipline, argues that there are myriad benefits to them as C02 sinks.

3. Search engines will soon include spoken results, not just text. Television broadcasts and other recordings could be compiled and converted using programs developed by the Fraunhofer Institute for Intelligent Analysis.

4. Will there be garbage wars in the future? Trash producers in the developed world will ship much more of their debris to repositories in developing countries. This will inspire protests in the receiving lands. Beyond 2025 or so, the developing countries will close their repositories to foreign waste, forcing producers to develop more waste-to-energy and recycling technologies.

5. The notion of class time as separate from non-class time will vanish. The Net generation uses technologies both for socializing and for working and learning, so their approach to tasks is less about competing and more about working as teams. In this way, social networking is already facilitating collaborative forms of learning outside of classrooms and beyond formal class schedules.

6. The future is crowded with PhDs. The number of doctorate degrees awarded in the United States has risen for six straight years, reaching record 48,802 in 2008, according to the National Science Foundation’s Survey of Earned Doctorates. One-third of these degrees (33.1%) went to temporary visa holders, up from 23.3% in 1998.

7. Cities in developed countries could learn sustainability from so-called slums in the developing world. Dwellers of “slums,” favelas, and ghettos have learned to use and reuse resources and commodities more efficiently than their wealthier counterparts. The neighborhoods are high-density and walkable, mixing commercial and residential areas rather than segregating these functions. In many of these informal cities, participants play a role in communal commercial endeavors such as growing food or raising livestock.

8. Cooperatively owned smart cars and roads will replace dumb, individual gas guzzlers. With 800 million cars on the planet to serve 7.8 billion people, personal transportation is a dominant force in our lives. But the emergence of car-sharing and bike-sharing schemes in urban areas in both the United States and Europe have established alternative models and markets for fractional or on-demand mobility, says MIT’s Ryan C.C. Chin. He and his fellow engineers with the MIT Media Lab have designed a car system that could serve as a model for future cities.

9. Fighting the global threat of climate change could unite countries— or inflame rivalries. Nations with more sophisticated environmental monitoring systems could use data to their advantage, perhaps weakening an enemy by failing to warn it of an oncoming storm or other catastrophe. They could also fudge their own, or their rivals’, carbon output numbers to manipulate International legislation says forecaster Roger Howard.

10. We may not be able to move mountains with our minds, but robots will await our mental commands. Brain-based control of conventional keyboards, allowing individuals to type without physically touching the keys, has been demonstrated at the universities of Wisconsin and Michigan. In the near future, brain e-mailing and tweeting will become far more common, say experts. A group of undergraduates at Northeastern University demonstrated in June that they could steer a robot via thought.

All of these forecasts plus dozens more were included in the report that scanned the best writing and research from THE FUTURIST magazine over the course of the previous year. The 2011 Outlook report was released as part of the November-December 2010 issue of THE FUTURIST magazine, available on October 1, 2010.

Feb 16

Summary: For too many companies, strategy is a high level concept that does not seem to be reflected in the choices, actions, and behaviors of employees, or actual organizational outcomes. Or, when there are negative performance surprises, the strategy is simply discarded in favor of across-the-board cuts. Beyond the need to develop a clear and widely shared and understood strategy, organization leaders can periodically audit whether the organization is walking the strategy talk, or simply talking it. Even under tough economic conditions the strategy should help leaders protect certain activities while cutting back on others. The STAMP tool is a commonsense but powerful lever that leaders can use to convert an irrelevant strategy into one that is relevant and drives performance. Specifically, since your strategy tells you what’s important, then such priorities should be reflected in how you allocate key resources such as Space, Time, Attention, Money, Projects and people (STAMP). In effect, the STAMP audit provides a zero-based budgeting approach to the review and allocation of resources supporting your strategy.

Consider these statements:

“A strategy is, at its core, a guide to behavior. A good strategy drives behaviors that differentiate the company and produce financial success.” Heath, Chip & Dan Heath. 2007. Talking Strategy: Three Straightforward Ways to Make Your Strategy Stick. http://changethis.com/31.01.TalkingStrategy, accessed 12/23/2009.

“The cumulative impact of the allocation of resources by managers at any level has more real-world effect on strategy than any plans developed at headquarters.” Bower, Joseph L. & Clark G. Gilbert. 2007. How Managers’ Every Day Decisions Create — or Destroy — Your Company’s Strategy. Harvard Business Review, February.

“If you want to find out where your company is going to be three to five years from now, don’t look at your stated strategy. Instead look at your project portfolio. That’s where your making your investments, and it’s those investments that determine your firm’s direction.” Cathleen Benko as quoted in Lauren K. Johnson. 2004. Projects and Strategy. Harvard Management Update, June.

“If managerial energy is misdirected or diffused over too many opportunities, even the best strategies stand little change of being implemented and translated into value.” Robert Simons & Antonio Davila. 1998. How High is Your Return on Management? Harvard Business Review, January-February.

While a lot of good thinking goes into strategizing, why is it that so many strategies remain inert? That is, why don’t they seem to translate into financial success? Beyond the observation that some strategies might not be good ones, there is much greater evidence to suggest that strategies don’t have an impact simply because they aren’t adequately resourced. Regardless of whether the resource pool is a fixed pie or an expandable one, it is critical to give the strategy a chance by allocating the resources to it that it has ostensibly earned via the time and energy invested by the board, top team, and others in its development.

Over the decades a number of different resource allocation frameworks have been introduced. Exemplars include the BCG matrix and the GE-McKinsey 9-box matrix. At the core of many such tools is the notion that the allocation of money is first and foremost in the pecking order of critical resources to be allocated, or that once the relative cash-need or cash-supplier position has been determined then all the other relevant resources will flow according to the dictates of that position.

Sure, most managers will admit that strategies require more resources than simply cash to be implemented, so what can they do? This is where the STAMP audit comes in. The STAMP audit was developed based on extensive work with organizations on how to quickly and simply identify the gaps between strategy formulation and implementation. Let’s look at the tool and each piece of the tool in turn.

The STAMP Audit

STAMP is an acronym for the key resources that typically support strategy implementation. These are Space (physical or virtual), Time (your time and that of other employees), Attention (the information you and your employees’ attend to inside and outside the organization), Money (yes, that is the cash part, but it could also be sources of cash such as debt), Projects and people (think of this as the portfolio of projects and human capital you have deployed).

You can start the audit with any STAMP component; that is, the STAMP acronym does not reflect the priority or importance of one resource over another. If cash is king in your organization, then by all means starting by asking colleagues to show you the money.

Space. Are you allocating physical and virtual space based on what the strategy says is important? This audit component takes a play out of Walmart’s playbook in emphasizing the need for a product to “earn its keep” on Walmart’s shelves. Space is one of a retailer’s most important assets and how well this asset is utilized can lead to either customer and margin erosion or customer retention and margin maximization. According to a recent study funded by Procter & Gamble, when customers cannot find the products they want and need and where they want them, the cost to retailers can represent as much as 40% of intended sales. And when customers cannot find the product they want, 31% will purchase it at a competitor, 15% will delay their purchase, and another 9% won’t purchase the item at all (Corsten, Daniel and Thomas W. Gruen. 2004. Stock-Outs Cause Walkouts. Harvard Busines Review, v.82(5), 26-28). Most of us are familiar with the urban legend where Walmart threatened to remove Barbie from the toy aisle and replace it with dog food unless Mattel shaped up its product quality and logistics support.

The generic point here is that Walmart could make more money selling a product with high demand and return purchasers than it could selling one that was inferior in terms of net profitability (margins + inventory turn). You do not have to be a retailer to apply this notion of how you allocate space in your firm.

Space can also relate to how work gets done. For instance, Eli Lilly acquired Sphinx pharmaceuticals for its combinatorial chemistry technology, and Lilly’s strategy then required its chemists accept, learn, and apply the new technology. To overcome organizational inertia against such a change Lilly eliminating in-house screening space for its scientists and instead forced them to conduct this onsite at the Sphinx location.

Given the increasing presence of most firms on Web, the space component needs to encompass the virtual, as well as the physical world. [Need example].

Time. Not simply time management, but managing your time.

Attention. Time and attention are related, but not identical, components of a stamp audit. Cyril Bouquet’s research on managerial attention and how international SBU can earn attention from the parent company.

Money. Basically, are we funding what is important to our future? Traditional BCG and GE/McKinsey matrices. SABMiller defunding Miller lite. Intel’s resource allocation gap even after the strategy had been changed.

In the post-economic downturn environment, incremental and game-changing advancements are viewed by many CEOs as more important than ever. At the same time, pressure to cut costs demands that business leaders instill discipline around R&D endeavors.

That’s a challenge that Bill Hickey, CEO of Sealed Air, takes personally. In 2008, when his $4.6 billion packaging company responded to the economic downturn with a 5 percent across-the-board cost reduction, he exempted R&D from the cuts. “The CEO has to [be a] champion of innovation,” he explained. “I made the decision to keep the innovation budget intact. My management team looked around and said, ‘Everyone is giving some. Why not R&D?’ I said, ‘Because that’s where the future will be.’” Leveraging Leadership to Improve Innovation. 2010. Chief Executive, January: p. 65.

Projects (and People). Two related pieces – projects and people. BCG’s work on projects is a great resource here. Who gets the people?

In addition to defending investment in innovation, CEOs must also provide air cover to the mavericks who often drive it. “Organizational white cells typically attack these people,” said Hickey. “Part of the CEO role is providing protection for people who are different, but who can be valuable contributors. We file about 200 patents a year and I can attribute a good 15 percent of those to the six or seven mavericks in our organization.” Leveraging Leadership to Improve Innovation. 2010. Chief Executive, January: p. 65.

NEXT STEPS

The STAMP tool is meant to be simple, flexible, and intuitive. More importantly we have seen how it quickly transforms an irrelevant and inert strategy into a relevant and active one.

STAMP also plays well with others. If your organization already has a balanced scorecard in place, the STAMP framework provides an expeditious vehicle for assessing the degree to which the scorecard is being followed or violated. As a result, while the remedies aren’t always easy or painless to apply, you will have a clear and coherent plan to start really walking your strategy talk.

I’d love to have examples of STAMP connects and disconnects – so please share yours!

http://research3.bus.wisc.edu/course/view.php?id=139/

Feb 04

Fixed to Flexible – The Ebook

Jan 05

This is a festive and fun excerpt from a WSJ article published over a decade ago – still ties in well with strategy! Enjoy – mc

Lech Baczek’s life took a shift in 1992, when a villager returned from Germany with a piece of plastic kitsch later identified in legal briefs as “Gnome Fisherman.”

It was a garden statue of a type Mr. Baczek, a crystal artisan, had never seen. Lying in the dust at his feet, the garish object, with its leering gaze and tiny wooden fishing pole, yielded a vision for Mr. Baczek. He saw ranks of identical garden gnomes marching from Poland to the German border. He saw Polish gnomes welcomed by a hungry German populace. He saw an end to the hard life his tiny agricultural community offered its people.

“Sure, I would rather work with glass — it doesn’t smell as bad,” Mr. Baczek says. “But I could see this was my future.”

Indeed it was. Founded in a backyard shed a short time later, Mr. Baczek’s company, P.W. Westimex, has grown by leaps, producing about 140,000 gnomes annually — featuring 300 different designs — at four factories. And while Germans buy most of his output, Mr. Baczek is exporting gnomes to six countries, including, most recently, the U.S.

Other Poles shared Mr. Baczek’s vision. The German state of Bavaria may have a century of manufacturing tradition, a lively domestic market and a culture that glorifies garden gnomes in performance art and permanent exhibitions, but its days of primacy in the garden-gnome trade are numbered. As the Poles can easily undercut the Germans on price, Nowa Sol is now widely seen as the garden-gnome capital, where 40 factories help feed hundreds of thousands of cheesy dwarfs to throngs of German sentimentalists.

Accordingly, a fierce trade war has erupted in recent years along Germany’s border with Poland. The average trip across the Polish border from Germany entails an hours-long wait at the checkpoint. Judging by the sheer number of gnome-yards in Polish border towns, a fair number of those in line are coming to indulge their passion for plastic gewgaws. German officials estimate that several million Polish gnomes have taken up residence in their country. And more are crossing the border all the time.

While his son scours Europe for design ideas, Mr. Baczek has turned over sales and accounting duties to his daughter-in-law, Sylvie. Ms. Baczek is something of a mogul in this impoverished agricultural community, with her twin Mercedes-Benz sedans and snappy designer clothes.

Inside the factory, in an atmosphere made dim by the relentless spraying of lead-based paint, Ms. Baczek waves a hand at her latest achievement — ranks of polyester garden gnomes, done up in red Santa suits, each bearing a gold box inscribed “YEAR 2000.”

“The Millennium Gnome,” Ms. Baczek says with pride. “It’s my first copyrighted design.”

While many of the festive dwarfs will no doubt brighten countless German gardens, a good number are destined for department stores in France, Ms. Baczek says. Unfortunately, the Polish appetite for them remains undeveloped. “Polish people do not buy garden gnomes,” Ms. Baczek says with a sniff. “They prefer to spend their money on food.”

The profusion of Polish manufacturers has driven down the price of gnomes. While some German manufacturers continue to charge $100 or more for a handpainted one, a Polish version can be had for $10. “I have never seen a German gnome, so I can’t say which is better,” says Thomasz Barkas, a border merchant, as he stands knee-deep in little people. Referring to the fact that they are slathered in lead paint, he observes: “I can say that putting a Polish gnome in your living room could be bad for your health.”

Not that many Germans seem to care. At a market stall near the Polish border town of Trzebiel, Steffi and Ranier Thomas, a couple from Hamburg, argue quietly over a line of figurines. “She thinks they’re funny. I think they’re kitsch,” Mr. Thomas says. He relents, however, and agrees to a single purchase. “We’re not interested in German gnomes, they’re much too expensive,” Mrs. Thomas says. “It’s not like we’re buying a kitchen appliance.”

Not every German manufacturer has fiddled while the market melts down. Some companies have abandoned their own plastic items, aiming instead for the upscale with ceramic statues. Others have filed copyright lawsuits, some of which they have won, and have thereby persuaded German border guards to seize shipments of Polish knockoffs and to impose gnome quotas on tourists. When Mr. Baczek and his colleagues began producing identical copies of “Gnome Fisherman” by the truckload, many of them ended up in a German shredder at the border.

Spotting a copyright-infringing gnome can be tricky. Joseph Dieterle, a German customs official, says that while he never intends to own a gnome, he was forced to bone up on the subtleties of their design. “Our job is to spot counterfeits, so we became gnome experts,” Mr. Dieterle says. He has hired consultants, and helpful German gnome makers have provided the guards with full-color design dossiers, making the task easier.

But wily Nowa Sol manufacturers became expert at altering German designs just enough to pass muster with customs. In the case of “Gnome Fisherman,” for example, Mr. Baczek simply exchanged the statue’s face with that of another. Other manufacturers substituted a wheelbarrow for the fishing pole.

Ultimately, all of the designs got confused. Knockoffs became amalgams, German in their parts but Polish in their whole. And it wasn’t too long before German manufacturers began to have trouble. This year, the venerable German Gnome house of Zeho, a Bavarian concern, bit the dust after Polish upstarts appropriated more than 20 of its designs.

It is in this cold world that Wilfried Messner operates. His Bavarian factory produces 400,000 gnomes annually — about 20% fewer than it used to, thanks to the Poles. He has no love for the imports.

“Polish gnomes are inferior,” he observes acidly. “They dissolve in the rain.”

Poles, he says, continue to steal his designs. At a trade fair in Cologne, a gaggle of foreign manufacturers approached his booth to request catalogs. “They were very cheeky,” he says. “Instead of buying our gnomes to steal the design, now they just take the catalog.”

But if a war is won by inches, Mr. Messner thinks he may have gained a foot or so recently. He has discovered a factory in Taiwan that makes tiny transistorized gizmos, electric eyes, coupled with dime-size speakers. Some of Mr. Messner’s gnomes now bark like dogs. They whistle. They sing “Happy Birthday” when they sense movement.

Perhaps one day soon, the Poles will co-opt this technology themselves, Mr. Messner says. But perhaps one day soon, Poland will join the European Union and be forced to use proper materials and pay its workers what they would make in Germany. “For now, they can’t copy my technology,” Mr. Messner says. “An earthquake shut the Taiwan factory down.”

Credit: Staff Reporter of The Wall Street Journal. The Gnome Invasion: Cheap Polish Plastic Makes Odd Inroads — Unreasonable Facsimiles Flood Germany’s Big Market For Kitschy Garden Statues
By Christopher Cooper. Wall Street Journal. (Eastern edition). New York, N.Y.: Nov 9, 1999. pg. A.1

Dec 14

This excerpt comes from Heath and Heath’s Talking Strategy PowerPoint and does a great job reinforcing the benefit so a clear strategy (and the strategy diamond):

“Whit Alexander, a co-founder of Cranium—the company that manufactures the hit Cranium board game (sold to Hasbro in 2008) —recalls a time that he called a Chinese manufacturing partner to discuss a concept for a new plastic game piece. The piece would be purple and made of multiple parts that would need to be glued together. The Chinese manufacturer balked. “It’s not CHIFF,” he said. Alexander was astonished. His supplier, halfway across the globe, had just corrected him using Cranium’s own strategic language. And the supplier was absolutely right.

CHIFF is an acronym that stands for “Clever, High-quality, Innovative, Friendly, Fun.” The CHIFF concept defines Cranium’s strategic differentiation in the extremely competitive board-game market. CHIFF informs decisions across the organization—from branding to package design to the content of individual questions. (Example: A suggested question for the game asked how many justices were on the Supreme Court. It was too much like a standard trivia question, insufficiently Clever or Fun to be CHIFF, so it was rewritten: “In which of these sports could the members of the U.S. Supreme Court field a regulation
team, with no justices left on the ‘bench’?”)

The Chinese manufacturer had chastised Alexander for his kludgy idea for a game piece. Glued-together? That’s not particularly “innovative” or “high-quality”; the feel of the piece would be all wrong. The manufacturer came back with a design so smooth and novel that players during a game would hold spare pieces in their hand, turning them over and over just for tactile pleasure. Not only had the manufacturer improved the quality, he had also made a game piece “Fun.” Alexander was impressed.

This is a game-board manufacturing success story. More importantly, though, it is a strategy success story. It’s a strategy success story because the executives of Cranium developed a way to communicate a crucial element of the company’s strategy—its differentiation— in a useful, comprehensible way. “CHIFF” is simply a very clear, very actionable statement of strategic differentiation. Cranium employees, suppliers, and channel partners all use CHIFF to make hundreds of on-the-ground decisions that defend Cranium’s competitive differentiation.

Let’s face it: there is no clearer proof that a strategy has been communicated properly than when a manufacturing supplier, in another country, with a different native language, uses it to correct (rightly) the founder of the company.

Nov 16

Welcome!

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The site is maintained by me, Mason Carpenter, for the practical strategy professor — those of you who want to take your strategy course to the next level.  Gerry Sanders and I authored a new Prentice-Hall strategy textbook with that objective, Strategic Management: A Dynamic Perspective, and this blog is aimed to provide teaching resources to help you be a star teacher in the strategy classroom, undergrad, MBA, and Exec!  Best wishes with your teaching! 

Nov 16

You may have recently received an email inviting you and your students to participate in a live webcast featuring Rusty Rueff, CEO of SNOCAPa major new player in the rapidly evolving world of digital music (from the founder of Napster). We hope that you and/or your students were able to view the live broadcast, and that it provided you with a fascinating look inside the mind of a leader in one of the most dynamic industries of this generationthe music industry. If you were unable to watch the live interview, or would like access to it for future use in the classroom, we are pleased to announce that the recorded webcast is now available for viewing at your convenience.Click on the URL below to access the archived interview: SNOCAP

WHAT CAN YOU EXPECT? *A nationally broadcasted, 60-minute interview where students are immersed into the strategic thinking of an innovative and entrepreneurial leader in an industry they know and lovedigital music. *Moderated by Ingrid Vanderveldt, host of CNBC’s “American Made,” SNOCAP CEO Rusty Rueff shares insights and answers real students’ questions about SNOCAP’s management strategies and their impact on the digital music marketplace.Inspire your students with a whole new way of looking at dynamic strategy! Please contact me should you have questions or need any additional information.

Oct 01

[The original article is found on Economist.com, but it is a great tie to dynamic strategy] 

Google has agreed to buy YouTube, a popular website where users provide the content, for $1.65 billion. Now the world’s leading search engine needs to work out how to make it pay

INTERNET years, like dog years, act to speed up the ageing process. Google, founded in 1998, is now considered to be something of an elder statesman. Perhaps the firm hopes to enliven itself by its decision on Monday October 9th to use a whopping $1.65 billion of its own shares to buy YouTube, a website that lets users post home-made video clips for others to share and watch. The latter has been in business for a mere 19 months.

The world’s biggest web-search engine has probably splashed out on something worthwhile. The website is young, but it matters more that its user are mostly young people, who increasingly neglect television and other traditional media channels and instead seek entertainment online. Advertisers are hoping to reach this audience now and secure it for the future. And ads are the means by which Google hopes to rake in big revenues.

YouTube is big for a baby. It serves up 100m videos every day, making it one of the world’s most visited websites. The firm, which employs some 65 people, has not made a profit to date. But the growing popularity of social-networking sites, where users can exchange videos and photos and make connections with other people, has already convinced some old media firms to grab a share of the online crowds. Rupert Murdoch’s News Corporation paid $580m for MySpace in 2005. The media mogul stole a march on many of his competitors by recognising early on that a website with user-generated content is valuable for reaching young consumers. Mr Murdoch even roped in Google, already an expert in the field, in a lucrative deal to sell ad space. And rumours abound of bids for Bebo, Facebook and others, which offer similar services. Yahoo!, one of Google’s biggest rivals, apparently thwarted in its own ambition to acquire YouTube, reportedly wants the latter.

But it is unclear how the business will mature. Most agree that there is plenty of money to be made from YouTube, but no one is quite sure how. Putting advertising alongside video clips or other content provided by users may pose problems. YouTube has refused to insert adverts that cannot be skipped at the beginning of clips as that risks annoying or driving away users. And the content of sites like YouTube varies. Advertisers would not want their products flagged alongside anything off-colour or embarrassing. YouTube and its rivals have cast around for more sophisticated ways to present advertising for some time but without finding an answer.

What users may like about YouTube is that it breaks the rules. Google has promised that YouTube will continue to operate as a separate business. But it may chose not to continue carrying the huge number of music and television clips that breach copyright, as wealthy Google would make a tempting target for the litigious. But if YouTube removes the illegally-copied material its appeal may drop.

Google has made simultaneous deals with big entertainment firms to distribute their content. But, just as with music downloading, the lure of the illicit may be what draws some users. That may explain why the big internet firms have made little headway in this business so far. Google, along with Yahoo! and AOL, have tried to provide sites for user-generated material but those efforts have largely failed. That Google has bought a firm that competes with Google Video, one of its own services, is an unusual admission of weakness by the web giant.

The deal may put Google in a position to satisfy a growing demand for the delivery of television, film and music over the internet rather than through traditional channels. However, YouTube’s rapid flowering is a reminder that something newer and a little different that appeals to a young audience is never far away. Barriers to entry are low: rivals can emerge with just a good idea and a little money. Google itself, born in a university dorm and funded on its founders’ credit cards a few years ago, serves as a reminder of that.

SOURCE: ECONOMIST.COM

May 01

The Beer Wars

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We open Chapter 6 with a chronicle of the Cola Wars (the market battle between Coke and Pepsi, primarily — by the way there is a nice update on Coke’s strategy getting a new jolt from CEO Neville Isdell in the May 15, 2006, issue of Fortune, pp. 77-78).  However, we have also noticed that our students like to study the dynamics of the beer industry as well. 

If you happen to have similarly-minded students, then you might open up a class discussion of — Change is brewing at Heinekin (Financial Times, May 9, 2006, p. 10 — www.ft.com ).  This article does a great job of laying out the five facets of the strategy diamond, showing the interdependence between formulation and implementation, and reinforcing the role that strategic leadership plays in effective strategy.  The beer story is a relatively easy one for students to get their arms around, since it is a global industry dominated by InBev, SABMiller, Anheuser-Busch, and Heineken. 

The inputs too are basic commodities like water, sugar, etc., and customers are segmented both by the channels (retail, bars and restaurants, and consumer), geography, and perceived beer quality.  Thus, students can talk to the arenas in value chain, geographic, and brand quality terms, the cost versus uniqueness differentiators, vehicles ranging from organic, to acquisition, to alliance-based growth, and different staging approaches (i.e., many brands in a market then moving to another geographic market, or taking the same brand across geographies).  It is interesting too to talk through the overarching economic logic of Heineken and other competitors as students can see how some players are going for a GE strategy — having 1st or 2nd brand in a market — or an overall market share strategy — or both (like Anheuser-Busch in the U.S.).

When we have taught about the beer industry, we have sometimes started with the Beer Indusry in China case by Eugene Salorio (see discussion of it at the BPS Teachign Toolkit). Again, this lets you get at the interesting interaction among the players, and then you can update a particular player like Heinekin using this FT article.  We have also found a nice complement in the A/V resources at www.cantos.com.  This site (must register but it’s free) has streaming video interviews from the beer industry executives at SABMiller, and a couple other beer biggies.  A really intriguing one is on SAB’s expansion strategy in Poland (SABMILLER in Poland: brand driven organic growth”), where it organically launches a new brand using a great resource-based logic.  You can help students see this logic in the staging of this move, show them how it is an example of a corporate resource that SAB seems to be able to leverage across markets, then ask the students to identify other ways they think that competing in Poland helps with SABMiller’s overall economic logic.  You can then again return to the Heineken example as a way to show them how they might think about connecting all the dots. 

Apr 01

As you are probably well aware, Hambrick and Fredrickson’s (2001) strategy diamond  has quickly established itself as a highly potent strategic decision making tool in both classrooms and executive suites around the globe.  Winner of the coveted Academy of Management Executive (AME) Best Paper Award in 2001, and recently christened an AME “classic” by that journal in the Fall 2005 reprint of their “Are you sure you have a strategy?,” this facile framework’s effectiveness is a function of its simplicity and comprehensiveness.  This framework is also integrated throughout our new strategic management text, Strategic Management: A Dynamic Perspective.

We have employed the framework in our teaching since it was first published and are consistently pleased with how well undergrad and graduate students alike can learn to apply it quickly and adeptly.  Just as rewarding is the fact that our students return to us long after completing our courses to tell us how they continue to use the diamond model in their actual work. 
As Hambrick and Fredrickson describe it, “If a business must have a single, unified strategy, then it must necessarily have parts.  What are those parts?  We present a framework for strategy design, arguing that a strategy has five elements, providing answers to five questions – arenas: where will we be active?  vehicles: how will we get there? differentiators: how will we win in the marketplace? staging: what will be our speed and sequence of moves? economic logic: how will we obtain our returns?”
 

Since our text is concerned with dynamic strategy and the strategic leadership challenges of creating and responding to changes, the staging element of the diamond model perfectly signals to students that change is inherent – by design – in all good strategies.