Quick takes

Citation

(2000), "Quick takes", Strategy & Leadership, Vol. 28 No. 1. https://doi.org/10.1108/sl.2000.26128aae.001

Quick takes

"Quick Takes" presents the key points and action steps contained in each of the feature articles. Catherine Gorrell prepares these summaries.

Page 4Spiral dynamics: the layers of human values in strategyChristopher C. Cowan and Natasha Todorovic

Values matter. Even the best corporate strategies go awry because leaders fail to factor in the values of their enterprise. It is people – from the board room to the factory floor – who must understand and implement the strategy. That can only happen when the strategy fits their values. Conducting a value audit provides key information about what strategic paths can be successfully taken. Leaders who understand their company's and their personal values build lasting results.

To effectively do a values audit, three layers of values must be considered:

1. 1.

   Surface values are the openly stated, moral positions and behavioral rules that express what matters. They separate right from wrong and stack priorities. They are evidenced in artifacts, events, observable activities, behaviors and objects, "the numbers," benchmarks, mission statements, best practices, dress codes, and so forth.

2. 2.

   Hidden values are the ideas, beliefs, attitudes, norms, trends (conscious or unconscious, stated or implicit), the "smell of the place," the unwritten rules. They are easy to miss and often cause acquisition deals fall short of their promise due to difficulties in melding the organizations involved.

3. 3.

   Deep values are the underlying source of all other values. They represent the worldviews and value systems thinking that explain why people think and act as they do. Because they are so deeply imbedded, these values are rarely considered when doing strategy work. Deep values evolve and shift in focus as external circumstances and internal states change.

The spiral dynamics theory contains eight zones of deep values. Each zone represents its own reality. One of the zones, labeled deep valuesGreen, represents "sacrifice self now, to obtain now for self and others." Inner peace, a balanced life, equality, and contributing to a common good are important in this value system. If this deep value is identified as prevalent in the organization, it can be leveraged as part of a business strategy of social responsibility.

To help today's organizations achieve success tomorrow, strategists will need to recognize shifts in deep values. To serve strategy, all layers of values must be tracked across employee groups, companies, industries, governments, and societies. Meeting the future requires fluency with all value levels and all deep value systems.

Page 12Pattern thinking: a strategic shortcutAdrian J. Slywotzky and David J. Morrison

Speed drives businesses. It is as relevant to the rate of delivering service and parts as it is to analyzing the marketplace and crafting exploitation strategies. It is still true that a successful strategy can give a company a competitive advantage, but a given strategy's "shelf life" has shortened from decades to a few years due to the speed of change. Consequently, companies need to reinvent themselves regularly. But how to do so? The number of strategy options is proliferating, while the window for seizing any one opportunity has narrowed.

Pattern recognition. Great managers have the ability to anticipate how and why their strategic landscape is changing, connect symptoms to causes, and then create strategies that lead to significant, sustained value growth. Research of over 200 companies in 40 industries has yielded 30 strategy patterns to date, and more are anticipated.

The patterns can be organized according to incidence and type. Type (which expresses the primary areas of the pattern's impact) is divided into seven discrete categories: mega patterns, value chain patterns, customer patterns, channel patterns, product patterns, knowledge patterns, and organizational patterns.

Applying pattern thinking. All the patterns can be learned, and each has its own implications for responses that managers can take. Every pattern has a smart response, sometimes several. Certain types of countermoves crop up frequently, across a range of patterns. The article contains several case studies with in-depth descriptions of actual strategic actions taken.

The early payoff. Strategic pattern recognition is helpful in many different situations – in large and small companies, in divisions, and in entrepreneurial start-ups. It is also useful for investors, star employees, suppliers, and customers. One does not become an expert overnight; but movement along the learning curve is quick, and mastery of the basic patterns can lead to dramatic performance.

Patterns develop over time and out of plain sight until several variables drop into place and set new patterns in motion. These shifts weaken the existing supplier-to-customer structure of an industry and create the potential for new business designs. Forward-looking managers can recognize and track the leading indicators of strategic patterns to anticipate the next wave of value growth. Chance favors the prepared mind.

Page 18Satisfaction, sacrifice, surprise: three small steps create one giant leap into the experience economyB. Joseph Pine II and James H. Gilmore

In an increasingly turbulent competitive environment, a critical platform upon which to build business strategy is an understanding of the emerging experience economy. To prosper, companies have to move beyond goods and services (which are rapidly becoming commodities, distinguished only by price) to offer staged experiences and guided transformations. This can be described as the progression of economic value. Customizing a good turns it into a service, customizing a service turns it into an experience, and customizing an experience turns it into a transformation. Therefore, the first step is to mass customize goods and services. But determining exactly what to customize is no easy task. The 3-S Model points the way.

Customer satisfaction. The first step in customizing is to find out what customers really want. The answer has traditionally been found through the use of customer satisfaction surveys. In truth, these surveys measure market satisfaction, not individual customer satisfaction. Resulting efforts target what the average customer wants, which may not be exactly what any one customer wants. Thus, efforts to improve business via improved "customer satisfaction" will inevitably focus on the wrong issues.

Customer sacrifice. The gap between what the customer wants exactly and what the customer settles for is called customer sacrifice. Designing for the average is its root cause. And the attitude of "they won't mind" leads inevitably to operational practices replete with higher costs and offerings containing higher levels of customer sacrifice. Thus, one of the keys to customization is to reduce the level of customer sacrifice.

Customer surprise. Surprise is perhaps the single most important ingredient needed by any provider of goods or services who wishes to begin staging memorable experiences – the step beyond selling commoditized offerings. In the 3-S Model, the goal is to drive up customer satisfaction, to drive down customer sacrifice, and to instigate customer surprise. Companies embracing the 3-S Model must go beyond asking customers "how did we do," and even "what do you want," and begin asking "what do you remember." Surprise programs always ground the company in influencing the next buyer decision. Taking these three steps will help shift any company up the progression of economic value and will propel it into an area of true differentiation.

Page 24Why good management ideas fail: the neglected power of organizational cultureWilliam E. Schneider

As companies strive to leverage new management ideas and leadership practices, there is only a 50/50 chance that the new approach will have a beneficial impact. This is true regardless of the capability, sincerity, or level of effort offered by internal teams and external consultants. Why? The author suggests four fundamental reasons:

1. 1.

   Every organization is basically a living, social organism: a community of people, not machines. The organization's basic character is more powerful than its business processes, financial systems, vision, supply chain, or any other element. While these things have value, they are less important than the fundamental nature of the organization as an organism. Whenever unsuitable change is introduced, the organization, as a living system, will absorb the external blow and then work to "heal" itself by reverting to the way it was.

2. 2.

   Organizational culture is more powerful than anything else. No matter how good a management idea is, it will not work in practice if it does not fit the culture, or "how we do things around here in order to succeed." Interventions such as TQM, empowerment, core competencies, and best practices must be supportive of the core culture or they will wither and die. The author describes four core cultures: control, a military model; collaboration, a family or athletic team model; competence, a university model; and cultivation, a religious model.

3. 3.

   System-focused interventions work; component-centered interventions usually do not. The principles of many component-focused interventions are usually valuable for most businesses to consider. But the practices of these interventions must be carefully matched to the organization's core culture. For example, the practice of empowerment would be anathema to a control culture, but its principles – input into implementation efforts by all employees – would be useful in any organization.

4. 4.

   Interventions clearly tied to business strategy work; interventions not clearly tied to business strategy do not. A clear link between the new idea and the organization's strategy, culture, and leadership is critical to success.

There is no such thing as "one size fits all" in organizational change. When it comes to adding value to an organization, the deciding factors should be these four criteria, not the personal theories of a consultant or manager about the "right way" to lead or operate the business.

Page 30Shareholder value debunkedDavid I. Goldenberg

Shareholder-value proponents claim a new, economically sound way to maximize profits, create wealth, measure performance, and reward executives. That invalid claim is dangerous. Stocks of shareholder-value firms appreciated barely 15 percent as much as another, time-tested strategic-management system.

Shareholder value exploits three of the free-enterprise model's many strong premises: market prices reflect economic value, profit maximization is each business's sole aim, and the market system efficiently processes information. Another key premise, homogeneity, alone refutes the shareholder-value thesis.

Several real-world impossibilities face shareholder value:

• •

  Harsh truths about securities prices. Shareholder-value advocates argue that profits, particularly so-called residual or adjusted profits, determine most of each firm's stock price, and that multiplying an enterprise's stock price by the number of shares outstanding establishes a firm's economic value. Both of these assertions are false.

• •

  The efficiency of financial markets. Although generally more efficient than other markets, financial markets are not efficient enough to value firms or guide them to sustained success. The information those markets need from other sources is imperfect.

• •

  Real-asset investment versus financial speculation. Corporate boards and executives must make and honor commitments lasting decades to invest in real assets. However, the earnings extrapolations of shareholder-value systems and securities analysts seldom extend far enough into the future to meaningfully assist real-asset investment.

• •

  The nonexistent "duty" to maximize profit. Twenty-seven state courts or legislatures have ruled against this duty since the mid-1980s. It is also infeasible to do in practice.

The shareholder-value doctrine is not new, economically sound, or the best way to run a business. Executives attempting to implement a shareholder-value system or just playing buzzword bingo with the jargon promise more than they can deliver and so hazard their reputations, credibility, and personal wealth. They also designate their firms as easy, high-payoff marks for sharpshooters. In essence, shareholder value boils down to a code phrase meaning that speculators and/or executives of a firm think its stock price is too low.