Lecture 15 - Strategic Change PDF

Preview

Summary

Lecture 15 notes for the strategic management module that shows notes for strategic change. All notes have been writen by me after listening back to the lecture slides. I have added diagrams that were a part of the lecturers presentation too for additional context....

Description

Lecture 1 - Strategic Change Strategic Drift

By definition Strategic drift is “the tendency for strategies to develop incrementally on the basis of historical and cultural differences, but fail to keep pace with a changing environment”

Why Does Strategic Drift Happen?    

When business failing to adapt a change to the external environment When a strategy that worked before, doesn’t work anymore (in terms of competitiveness) Complacency sets in – often built on previous success which management assume will continue Senior management deny there is a problem, even when faced with the evidence

The Four Phases of Strategic Drift Phase 1 - Incremental Change In this phase there is little significant change in the external environment. A series of small, incremental changes to strategy enable the business to remain in touch with the external environment. Phase 2 - Strategic Drift Now things are starting to drift apart. The rate of change in the external environment is accelerating and small, incremental changes in strategy are not enough on their own to remain in touch. The business will be losing its competitive advantage.

Phase 3 - Flux This phase is characterised by management indecision. There is now a significant gap between what the market expects and what a business is delivering. Management may have recognised this gap and begun to alter strategy, however there is no decisive improvement. There may be disagreement between the senior management team about how to address what is now significant strategic drift. Phase 4 - Transformational Change or Death The moment of truth. Either management recognise the need for a transformational change in strategic direction, or the business fails. It often takes new, external leadership for this recognition to be made and the relevant strategic change programme implemented. For some businesses, this phase comes too late. Examples of companies who have suffered from Strategic Drift –

Tendency towards strategic drift Building on the familiar – uncertainty of change is met with a tendency to stick to the familiar. Core rigidities – capabilities that are taken for granted and deeply ingrained in routines are difficult to change even when they are no longer suitable. Relationships become shackles – organisations become reluctant to disturb relationships with customers, suppliers or the workforce even if they need to change. Lagged performance effects – the financial performance of the organisation may hold up initially (e.g. due to loyal customers or cost cutting) masking the need for change.

Types of change

Evolution A change in strategy that results in transformation. This is the most challenging type of strategic change since it involves building on and exploiting existing strategic capabilities while also developing new strategic capabilities. In successful organisations, many will see no pressing need for change and there will be a tendency to stick to historic bases of success, so the exploration for new ways of doing things may be limited. Managers and scholars alike have sought to identify ways in which the effective evolution of strategy might occur: how an organisation can change its business model and culture gradually and keep pace with a changing environment, thus avoiding strategic drift.

Adaption Change is gradual, building on or amending what the organisation has been doing in the past and in line with the current business model and organisational culture. This might include changes in product design or methods of production, launches of new products or related diversification.

Revolution

A change that requires rapid and major strategic and cultural change. This could be in circumstances where the strategy has been so bounded by the existing culture that, even when environmental or competitive pressures might require fundamental change, the organisation has failed to respond. This might have occurred over many years, and resulted in circumstances where pressures for change are extreme – for example a takeover threatens the continued existence of a firm.

Reconstruction Rapid change involving a good deal of upheaval in an organisation, but which still does not fundamentally change the culture or the business model. Thus reconstruction might include changes in organisational structure or the introduction of a cost-cutting programme.

Strategic change (by definition) “A restructuring of an organization's business or marketing plan that is typically performed in order to achieve an important objective. For example, a strategic change might include shifts in a corporation's policies, target market, mission or organizational structure”.

Examples – 1. Starbucks to start delivering fresh coffee direct to homes within the UK’s major cities 2. Balfour Beatty (UK’s leading construction company) to roll out autonomous construction sites using robotics, autonomous machinery, and 3D printing...