Strategy as Simple Rules - Case Study Example

"Strategy as Simple Rules," by Kathleen M. Eisendhardt & Donald N. Sull With the emergence of thousands of entrepreneurs all over the world, a myriad of market brands, a host of multifarious services and the formulation of hundreds of novel business approaches and "not-so-tried-and-tested" entrepreneurial strategies, in essence, the write-up advocated a single and a simple must do or an intense have to imperative so that firms can survive in the cutthroat world of business and sustain themselves in the long term. It simply says that to grow in size (physically and financially) and for a business organisation to develop into a more significant undertaking, it must strive to be and have to be different. Succinctly, it is quite easy to be different, the question is, how can one be different In its opening paragraphs, Yahoo was cited as a classic example of young companies which doesn't seem to have a clear-cut and a well-defined business strategy, nonetheless triumphed and is currently enjoying tremendous success over its antagonists in the midst of extreme competition and contentions, overnight mimics and replicas and customers who doesn't or wouldn't pay a single centavo of its services. Basically, the authors were right in concluding that Yahoo can be viewed as a phenomenon considering that it succeeded in the absence of a sound industry structure or huge capitalization, that what its owners had was a tandem of a great idea and a computer. Primarily, Yahoo describes itself as a "leading global Internet communications, commerce and media company" and because of this, has cleverly managed to stay out of the fray as gigantic conglomerates such as Google and Microsoft fight each other over everything from search dominance to giving a platform for next generation web development. It isn't very clear though whether Yahoo's manner of positioning itself in the industry is just incidental or a deliberate strategy. However, as noted by experts, the company has discovered what could become a very sensible way to compete with a vast number of big and capable players - target multiple areas like music, search and e-commerce, without vexing a major competitor. As one senior director of information technology at Wharton intimated, "There is a lot to be said for positioning yourself in a way that you are not encroaching on Microsoft's turf Google is on Microsoft's radar right now like no other company" (Whitehouse, 2005) But what makes Yahoo different Or what is it doing to make itself different Perhaps one reason Yahoo doesn't get the attention (and ire) of Google is that it is not easy to sort out and pigeonhole. Yes, it contends with Google in the search division, but it has a multitude of other services and assets like the Hot Jobs (an employment site), the Yahoo 360 (blogging and community site) and a shopping network highlighting big and small merchants. Apparently, this media firm's basic objective is to "provide users and advertisers with richer and more relevant experiences....Yahoo reaches 73% of all Internet users in the U.S. in any given month, which speaks to the breadth of the product suite. Yahoo reaches more people in more ways than any other company on the web." But looking closely, Yahoo's success shouldn't merely be attributed to the fact that it rested on simple rules as its founding strategy or operated on a "hands-on" environment. It is simply because Yahoo was an idea whose time has come. Yahoo's creators saw a need which was turned into an opportunity. Its creation or emergence coincided with what millions of people needed at the moment. What they did was like "striking while the iron is hot" and seized the moment. When the authors wrote "The new economy's most profound strategic implication is that companies must capture unanticipated, fleeting opportunities in order to succeed," (Eisendhardt & Sull, 2001, p. 108), they weren't actually talking of a fresh entrepreneurial gospel. They were just talking of a trait or an entrepreneurial spirit that is certainly intrinsic not only of 21st century business but also in the days of old. Obviously, Yahoo is close to perfecting this entrepreneurial trait. If one is observant enough, even several decades ago, only businessmen who can spot opportunities camouflaged sometimes as adversities and those who took the risk of "seizing the moment" were the ones who had high probabilities of succeeding and making it to the top. Those who always want to "play it safe," those whose vision were too focused or concentrated on the very-far future and are always basing their moves on the basis of how much profit will be garnered were the ones who usually lagged behind and were the ones who never grew. The authors though were very innovative to the point of being wacky when they prescribed that businessmen, "rather than responding to a complicated world with elaborate strategies, they should craft a handful of simple rules. Rather than avoiding uncertainty, they should jump in." This kind of "simple business creativity" epitomizes the core of the Yahoo strategy and reflects what kind of leaders Yahoo helmsmen are. These are the kind of leaders who will identify and recognise productive areas of confusion and uncertainty that exist and are currently present in today's society; they will unpretentiously disclose that they do not have all the answers but are just too willing to learn, and certainly have the potential and the ability to "act differently, think differently, and seek inspiration from different sources" (White, 1997, p. 2) compared to leaders of the past. On how rules (simple as they may be) are created, it was very pragmatic of the authors to disclose that "While it's appealing to think that they arise from clever thinking, they rarely do. More often, they grow out of experience, especially mistakes" (Eisendhardt & Sull, 2001, p. 113). How very true, nevertheless, this platitude is true not only in the business world but life in general. Most of people's values, their perceptions and their belief systems have been formed not from what has been taught to them or handed to them from earlier generations but from the many mistakes they have committed in their lives. Such value system that each one possess has been generated from the manifold experiences that each one has gone through in one's daily existence. Finally, the article provided notable insight on how business in today's world must be viewed and how people in leadership positions must deal with change and the exceedingly volatile and highly erratic business scenario -- "In stable markets, managers can rely on complicated strategies built on detailed predictions of the future. But in complicated, fast-moving markets where significant growth and wealth creation can occur, unpredictability reigns. It makes sense to follow the lead of entrepreneurs and underdogs-seize opportunities in the here and now with a handful of rules and a few key processes. In other words, when business becomes complicated, strategy should be simple" (Eisendhardt & Sull, 2001, p. 116). "Leading Change is About Mitigating Losses and Maximising Gains" Companies on the brink of losing their presence in a specific industry or their leadership among their peers in the sector they belong to are usually experiencing the onslaught of problems all occurring at the same time or maybe one at a time but coming in series and coming on fast. These dilemmas can involve finances, the company's organisational structure or keeping up with competition. When these predicaments occur and start eating up the company's resources and slowly killing its name, the one holding the reigns can either commence implementing change within the organisation for it to survive or let the firm die a natural death never to rise up again. A truism in today's business and corporate world is dealing with change -- big and small. When change is carried out properly and managed well, the credibility of the company is enhanced and profits go soaring. However, when handled badly, credibility and morale of everyone concerned are considerably challenged, most of the times damaged, which results to negative consequences for the firm and for everyone who belongs to the organisation. A good case to illustrate this point is what transpired within the airlines industry in 2001-2003. The airline sector was anticipated to fritter away more than US$5 billion, aside from the fact that it was already losing US$7.7 billion in 2001. With this development, United Airlines has filed for bankruptcy protection and most of its prime competitors are likewise wobbling on the thresholds of ruin. During those very shaky times, many airlines were merely sweating it out, hoping against hope that a robust turnaround will revive back their most profitable customers-business travelers. As most were staggering on the brink of total surrender, a few of the airline companies were searching for fresh value-added services to attract the dwindling pool of business travelers who gave about 40% of their revenue. Early that year, Lufthansa became the very first airline to provide for in-flight email and internet access from Boeing. Following suit were the Scandinavian Airline System (SAS), British Airways and Japan Airlines which adopted the real-time, broadband service known as Connexion. While many of the airline outfits were investing in basic business processes or merely cutting down costs, these imaginative airline companies thought of ground-breaking ideas and forged ahead with an innovative service to create incremental revenue and enhance customer loyalty. They were aware and have acknowledged the fact that innovation is a major vehicle that can spell long term success. These executives believed that when confronted with a bleak industry position, innovating is so much better than waiting. But how does a leader really instigate change so that it can allay financial damage and take full advantage of the benefits obtained from positive transformation How does one implement it properly and handle everything concomitant to it with aplomb and considerable success First, CEOs, company presidents, corporate honchos must bear in mind that long-term structural changes have four aspects to it - scale, this is the idea that the change will affect all or most of the organization; magnitude, this entails considerable modifications of the status quo; duration, this means that implementing change can sometimes last for months, if not years; and strategic importance. The most vital thing to keep in mind though is that companies will collect the rewards only when change transpires at the level of the individual employee. Basically, a lot of company leaders are aware of this but worry about it. Most CEOs involved or are in the process of executing change within their firms have apprehensions on how the work force will react, they are worried how they can gather their teams to work together and how they will really lead these people. Further, they also are concerned about hanging on to and keeping hold of the company's distinct set of values and sense of identity and about generating a culture of dedication, commitment and positive performance. Realistically speaking, no single methodology totally corresponds to every organisation, however, there is a group of ways or means, tools and techniques that can be utilised to diverse situations, guidelines on how leaders can manage change so as to alleviate losses and exploit the benefits. With these methodical, expansive agenda, those in leadership positions can comprehend on what to anticipate, how to deal with their own transformations and how to engage the whole organisational structure in the process. Consider the human side of the process - Change efforts always generate 'people issues.' Some will be promoted, jobs and tasks will be modified, a new set of skills and capabilities will be developed and most employees will succumb to uncertainty and resistance. A prescribed method to dealing with the change must be developed early on and immediately adapted as change moves through the organisation. This calls for massive data collection and analysis, planning and implementation discipline. The approach must be incorporated fully into the program design and decision making to inform and enable strategic direction. For instance, the makers of Rolex have decided that they will no longer employ people who come from other countries and instead take in only workers from Switzerland to fully assure themselves of impeccable Swiss craftmasnhip. Before implementing such policy, they need to conduct a survey among the company's hundreds of employees on how such system will affect them, how it will have bearing on their suppliers, and their clientele who certainly are not all Europeans. They have to strictly consider the feasibility of the plan and how it will have bearing on the lives of the most important factor of production - the workers. Start from the top - Basically change is disturbing to people at all levels of an organisation that when everyone is already confronted with it, all eyes focus on the CEO and the leadership team for support, strength and direction. Those in leadership positions must be the first ones to welcome and adopt the new methods and the new system so as to challenge and motivate everyone else in the firm. Essentially, this guideline simply mandates those in leadership positions to "set the example" before they can expect those below them to commit themselves to whatever change initiative the company will undertake. Every stratum must be considered - As change initiatives progress, they affect all levels of the organisation. The efforts must involve plans for identifying leaders throughout the company and giving responsibility for design and implementation down, this way change flows throughout the organisation. At each layer of the firm, the people who are recognised and trained must align themselves with the firm's vision, prepared to implement their particular missions and objectives and driven to make change take place. For instance, a company that manufactures cosmetics want to affect change in the organisation simply because organic-based cosmetics firms have swiftly sprouted everywhere and the traditional cosmetics companies are slowly losing their grip in the industry. Now, as the change process begins, top management must not only examine those divisions involved in production. They also have to take into consideration the creative department which takes care of product design, the advertising and marketing group whose in charge of the market and how the products are being distributed, and so on and so forth. In short, if change is to take place and if change has to deliver the results desired, then people initiating the change must include everyone in the organisation. Present an official case for Change - People will question to what extent change is needed or whether the firm is really heading in the right direction or whether they will want to commit themselves for change to happen. These people will want answers. It will help a lot if an official case for change is presented or a written vision statement is created since these are helpful opportunities to generate and forge alignment between leadership team and those below. To illustrate, before a company gets serious in the execution of changes, the intent of the initiative needs to be disseminated clearly, if possible, it has to be in writing, so that everyone in the firm will have the chance to really sift through the message and can allow the idea to sink in, that way, everyone will be able to make the decision of whether to participate in such process and can decide to what extent he/she might want to contribute to the whole acitivity. Communicate message - Frequently, people initiating change make the common mistake of presuming that everyone else understands the issues and the different concerns involved, that everyone else feels the necessity for change to take place and everyone else sees the new directions to be implemented as clear as they do. Change programs, for it to succeed, must accentuate and then strengthen the core messages through clear and regular timely advice in a manner that is both practicable and inspirational. Communication must flow in from the bottom and out from the top and should be aimed to provide employees the proper and accurate information at the right time and to solicit their respective inputs and feedback. This guideline simply elucidates the need for a company not to presume anything; for people in leadership positions not to ever think that everyone thinks the way they do, that everyone is committed as they are and that everyone feels that in order to move forward change is needed. Evaluate cultural backdrop - Companies usually make the mistake of evaluating their organizational culture either too late or not at all. As it is, a thorough diagnosis of its cultural climate can provide a clear assessment of the organisation's readiness for change, bring major problems to the surface, identify potential conflicts and define elements that can spot and control sources of leadership or resistance. The diagnosis identifies the main values, belief system, behaviours and perceptions that must be considered for successful change to take place. They will serve as the foundation for crafting vital change components like the new corporate vision and building the infrastructure programs necessary to prod change. Deal with culture in unequivocal terms - Once culture diagnosis has been interpreted, analysed and understood, people in leadership positions must address it thoroughly like any area in the transformation program. Leadership team must be very clear about the culture and the fundamental conduct and essential performance that will best prop up the new way of doing business and search for ways and opportunities to model and rewards those attitudes and performance. Plan and organise for things unforeseen - No change initiative comes out completely as planned. People react in ways that are usually unexpected, areas of anticipated resistance don't come about and the external environment shifts. Efficiently dealing with change necessitates continuous reevaluation of its effects and the firm's readiness, willingness and capacity to espouse the new system and acclimatise to the next wave of transformation. Assisted by accurate data from the filed and supported by information and reliable decision making processes, change catalysts can then make the necessary adjustments to preserve and sustain impetus and drive results. Address the individual - Change is a traditional excursion and a very personal one. Since people spend most of their waking hours ach week at work and consider their colleagues as a second family, people need to know how their work will change, what is expected of them during the time change is being executed and after the change initiatives have been conducted, how they will be assessed and what success and failure will mean to them and those surrounding them. The ones in leadership positions should be and must be as open and as clear as possible. Everyone will react and respond to what they see and hear aound them and need to be involved in the process. High visible rewards like promotions, recognitions and bonuses must be given as remarkable corroboration for embracing change. Removal of people obstructing the change process will fortify the institution's commitment. As a consequence of three forces - information technology, globalisation and industry consolidation - organisational change has suddenly become a way of life. All firms, from Fortune 500 to the local non-profit agency, currently need better and greater reach. It is necessary for them to be in many places, for them to be aware of regional and ethnic differences and for them to integrate into comprehensible strategies the work and developments occurring in various markets and communities. For those wanting to initiate or are in the process of instigating change, the two forces, globalisation and technology, will eventually grow. However, it is not enough for organisations to just simply implement the changes they want executed. In a global, high-tech world, firms need to be more flexible, inclusive, sensitive and amenable. Aside from being open to the inevitability of change, the need to deal with the complicated flow of information, grasp fresh concepts quickly and spread those notions all throughout the organisation. Leading change in a manner that can ally losses and maximise benefits, the effective leaders set the direction, define and characterise the context in which change has to be implmented, help generate coherence for their respective organisations. Leaders manage the firm's culture, set the boundaries for alliance and partnerships, stimulate sense of autonomy and the sharing of knowledge and ideas and provide meaning to incidents and occurrences that otherwise emerge random and disorganised. Needless to say, the positive qualities that cannot be influenced or controlled by rules are the ones most essential to success. People's notions and sentiments, their commitment to high standards of competence, and their connections of trust with partners are what set apart great organisations from the not-so-great. References / Related Readings Brown, A. & Weiner, E. (1985). Supermanaging: How to harness change for personal and organizational success. New York: Mentor. Eisenhardt, K.M. & Sull, D.N. (2001). "Strategy as simple rules." Harvard Business School. Stokke, R.R., Boyce, T.A., Ralston, W.K., & Wilson, I.H. (1991). Visioning (and preparing for) the future. Technological forecasting and social change, 40, pp. 73-86. White, R. (1997). Seekers and scalers: The future leaders. Training & Development, 51(1) Whitehouse, K. 2005. "Yahoo's Strategy: Stay out of Microsoft's Crosshairs" Article available at www.knowledge@wharton.com Wilson, Ian (1994). Strategic planning isn't dead -- it changed, Long range planning, 27 (4), 12-24. www.internethomealliance.com Read More