2010 Israel Strategy Conference

Citation

Grossberg, K.A. (2011), "2010 Israel Strategy Conference", Strategy & Leadership, Vol. 39 No. 3. https://doi.org/10.1108/sl.2011.26139cac.001

2010 Israel Strategy Conference

Article Type: Conference reports From: Strategy & Leadership, Volume 39, Issue 3

“How firms manage the shift between strategic archetypes” by Howard H. Yu, was the best-paper prize winner at the 4th Israel Strategy Conference held at the Technion in Haifa, Israel in December. A veteran of Citibank’s operation in Hong Kong, Yu is no stranger to the tugs and pulls of real management, and his intriguing academic thesis has genuine significance for practitioners. The paper describes a comparative field study of Taiwan’s PC industry. Tracing the strategic evolution of six leading firms, Yu found that their transformations followed different paths because of the different change mechanisms upon which top management relied at different times. He compared the efficacy of three disparate mechanisms. One lesser-known process, termed “deep dive,” was shown to allow top management to induce changes in the informal organization ahead of changes in formal structures, and thereby ensure undistorted experimentation with a new strategy before making irrevocable choices. This reverses the sequence of change that Yu found was often posited in the organizational design literature.

Yu traced the evolution of several of these companies from the initial stage of being a key component supplier for other manufacturers of branded IT products, to the second stage of contract manufacturer of devices, on to the third and final stage of becoming manufacturers of their own brand of products. One of the companies studied, DigiKey, remained a key component manufacturer throughout the period of the research (roughly 2000-2008), others like AlphaLink, MicroTek (and Acer, which was not one of the companies included in the theoretical sample) have evolved to become their own brand manufacturers – though not at the same pace. Some companies – PalCom, Aplex (later acquired by Flextronics) and Q-Max – remained contract manufacturers throughout the period.

According to Yu:

“The shifting discourse in strategic management, while producing important insights about how and why major changes occur, has left two perennial questions unresolved. The first one is whether organizational transformation is punctuated, episodic, and discontinuous … or continuous, gradual, and incremental … This contrast has been suggested to be merely a difference in the perspective of observers … From a distance, the flow of events looks like ‘repetitive action, routine, and inertia dotted with 3 occasional episodes of revolutionary change.’ Close up, small and ongoing adjustments are ‘capable of altering structure and strategy’ … But that explanation remains incomplete: not all small changes lead to transformation; many end up reinforcing the current interdependencies. What makes some variations so special that they ultimately alter the course of the corporate history while most others do not?

“The second question concerns whether top-down or bottom-up is the better approach to strategy-making. Some research suggests that, in a turbulent environment, the active involvement of a strong CEO in driving strategic change is critical … Business historians have documented instances where top management ‘micro-managed’ business development to ensure the correct implementation of its original vision.... Yet most process researchers emphasize a bottom-up model, focusing on the actions of lower-level managers as champions of change …

“Because top management in a large, complex corporation cannot possibly have enough specific knowledge to evaluate every single project, it must leave the actual content of product-market strategies to others … and can only recognize (ex-post) the occurrence of fortuitous events that have set the firm on a successful course … When we observe a CEO intervening in the firm’s day-to-day operations, a puzzling question thus arises: Might it be egotistical meddling that blocks unforeseen learning and prevents the correct strategy from emerging, or could it be purposive intervention that overcomes organizational inertia and promotes long-term adaptation?

“To adequately answer these two questions, one needs to understand how ideas coalesce into organized actions and then amount to strategic changes in a sequence of events, activities, and stages that unfold over time … Only by tracing the chain of causation inside organizations can we know in detail why different forces catalyze or halt transformations. Unfortunately, syntheses of historical causation have fallen into disfavor among mainstream strategy researchers, being seen as posing an apparently intractable problem. Large sample databases often contain only high-level variables, such as R&D-to-sales ratio or executive turnover rate, which are just proximate factors rather than ultimate explanations … In-depth process studies, on the other hand, tend to focus on change mechanisms that can be claimed as ‘novel’ … The resulting literature thus appears disjointed, with each ‘school of thought’ continually producing incremental evidence fitting neatly with its own theories. We know little, however, about the boundary conditions, the underlying commonalities, and the relative efficacy among competing change mechanisms.

“This study attempts to address these shortcomings. I examine the strategic evolution of six leading companies in Taiwan’s PC industry through a longitudinal, comparative analysis, and can thereby elaborate theoretical linkages among pre-existing theories and develop new ones … All sample firms were industry leaders (not ephemeral start-ups): three were among the largest motherboard makers worldwide, and the others were among the largest suppliers of laptop computers. Together, they constituted more than 50% of global shipment volume … The choice of a single industry eliminates many environmental variables that have plagued early comparative studies … Meanwhile, the weight of evidence provided by a comparative study of multiple firms over a long period avoids the danger of over-generalizing from one company or just misinterpreting a single successful episode. Rather than canvassing all possible product-market strategies, I focus on overall transformation of the organizational form or archetype in which the firm’s strategy was embodied, the kind of strategic change most frequently brought up by executives during my interviews. Despite their similar intents for change in response to external pressures, firms exhibited varying degrees of movement between the prominent archetypes that characterized the industry. I offer a process explanation for this historical variation …

“To summarize this paper in one sentence: Strategic change followed different courses for established firms because of different change mechanisms upon which top management relied, not because of the different market insights possessed by idiosyncratic leaders. This implies that a firm can fundamentally modify its decision processes, administrative mechanics, and value systems through proactive actions of its top leaders – if they manage with the right process. The central theoretical contribution is an integrated perspective of three disparate mechanisms that have been studied only separately (or omitted) in the prior literature: 1) incumbent leadership launching an upheaval; 2) lower-level managers engaging in entrepreneurial actions; and 3) top management intervening in the form of a ‘deep dive,’ that is, immersing itself in the decision environment to gain a fuller understanding. The paper further elaborates that third, relatively undiscussed mechanism, identifying when and why top leaders must define the actual content of a strategic initiative (rather than leave it to others) and safeguard its implementation at the operational level. By expressing the long-term vision in immediate organizational actions, top management can create an environment that is particularly conducive to ad-hoc problem solving, barring the firm from reflexively repeating its existing performance repertoire. It is possible to induce changes in the informal organization before institutionalizing new behaviours through formal structures of the firm – reversing the sequence of change often posited in the organizational design literature. In so doing, top management sets the firm to engage in extensive experimentation before making irrevocable choices or resorting to a revolution, with its risks.”

(An electronic copy of Howard Yu’s paper, “Leopards sometimes change their spots: how firms manage a shift between strategic archetypes,” is available at: http://ssrn.com/abstract=1733430) He is a recent graduate of Harvard Business School’s doctoral program.

Kenneth Alan GrossbergProfessor of marketing and strategy at Waseda Business School, Waseda University, Tokyo, Japan and the founding director of the Waseda Marketing Forum (kengross@waseda.jp).