The Strategic Management Beast

The Blind Men and the Elephant

by John Godfrey Saxe (1816 – 1887)





It was six men of Indostan
To learning much inclined,
Who went to see the Elephant
(Though all of them were blind)
That each by observation
Might satisfy his mind.


The First approached the Elephant
And, happening to fall
Against his broad and sturdy side,
At once began to brawl:
“God bless me, but the Elephant
Is very like a wall.”


The Second, feeling of the tusk,
Cried, “Ho! What have we here
So very round and smooth and sharp?
To me ’tis mighty clear
This wonder of an Elephant
Is very like a spear!”


The Third approached the animal
And happening to take
The squirming trunk within his hands,
Thus boldly up he spake:
“I see,” quoth he, “The Elephant
Is very like a snake!”

The Fourth reached out an eager hand,
And felt around the knee,
“What most the wondrous beast is like
Is mighty plain,” quoth he;
“‘Tis clear enough the Elephant
Is very like a tree!”


The Fifth, who chanced to touch the ear,
Said, “E’en the blindest man
Can tell what this resembles most;
Deny the fact who can,
This marvel of an elephant
Is very like a fan!”


The Sixth no sooner had begun
About the beast to grope
Then, seizing on the swinging tail
That fell within his scope,
“I see,” quoth he, “the Elephant
Is very like a rope!”


And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right,
And all were in the wrong!

Comments (11)

  1. The Editor

    Moral

    So oft in theologic wars,
    The disputants, I ween,
    Rail on in utter ignorance
    Of what each other mean,
    And prate about an Elephant
    Not one of them has seen!
    [ibid.]

    What is true for religion is also quite common in management. The word ‘strategy’ has been around for a long time.
    It is considered to be the high point of managerial activity, and managers use the word both freely and fondly.

    “Like butchers, the academics and consultants chop up reality for their own convenience […] Managers
    can allow themselves no such luxuries. They can use it only if it remains intact as a living being.”
    (Ahlstrand, Lampel, and Mintzberg, 1998)

  2. The Editor (Post author)

    We’ll be Run by Morons Pretty Soon!

    “You look at the active value of the companies that you buy the stocks in. And it becomes a little more complex, but basically you look for a company that is cheap and the reason that they’re really cheap. And the major reason is often and usually very poor management.”

    “So in a sense, it’s like an arbitrage. You go in, you buy a lot of stock in the company, and you then try to make changes at the company. […] We’re trying to get them to change the structure of the company. We think the board is very poor, and we’re trying to change what happens. The thing about corporate America is that most people in America don’t realize how poorly most of our companies are run in this country. With many exceptions. And when you get inside the companies, you realize it. The real reason is, there’s no accountability, there’s no corporate democracy. And I’ve been saying that, proselytizing it, writing about it. And the reason that we can make so much money when we go into one of these companies is – I’m not even a manager. I never took a course in management and I wouldn’t profess to really know much – but I don’t micromanage. I put in a very good manager. They cut the heck out of cost, but they changed the structure of the companies. And this is the problem in America today, in my opinion:
    That we are basically under-managed. We can’t compete, because the best and the brightest don’t get to be at the top of the corporate ladder. And I, I have a sort of a metaphor that’s a little facetious, but not completely: I call it anti-Darwinian. And that means a guy goes to college and he’s the guy who gets to be the CEO. And he’s the kind of guy that was the president of the fraternity. Now all these presidents of fraternities aren’t bad guys, but basically, the normal guy that I remembered at college was always there at the fraternity of the eating club. And he’s always there to be there, if you have a bad day, you walk over to the club. And you’re feeling bad, your girlfriend left you, you did bad on a test score, or whatever. And you go over there, he’s always there. He buys you a drink, and you sit around with him. He commiserates with you. You play a little pool, or whatever. And he tells you whatever it is, yeah, my girl left me, yeah well, they’re all no good, usual conversation back and forth. And what would happen would be you liked the guy, you can’t help but like him. You used to wonder a little bit, when the hell did he ever do any work? But you know, he was always there for you. And he never made many waves. He would never said anything too obtrusive or he never showed too much intelligence. But he was a good guy. He goes, that same guy, out into corporate America. And he’s politically, he’s astute. He knows how to get along with people. And it’s he never really rocks the boat. He never comes up with any great ideas. He’s not a threat to his superior. And as a result, he moves up the ladder because in corporate America, there’s really very little accountability. So he moves up that ladder.”

    “There’s a good show “How to Succeed in Business” that was out many years ago – that sort of sums it up. If a genius has an idea in corporate America, they give him an idea to resign.”

    “And so the guy moves along the ladder, and he gets up slowly to the top. And he has three attributes: He’s likable, he’s politically astute, and he’s a survivor. And he knows when he’s threatened. These are the attributes of today’s CEOs for the most part, with exceptions. You know, he doesn’t ruffle feathers, he doesn’t get the board upset. And as he moves up the ladder, he finally gets to be number two to the CEO. Now the CEO has the same same attributes where he doesn’t want to be threatened and is a survivor. So the CEO will never let anybody be number two who’s smarter than he is. By definition, the assistant of the CEO is a little dumber than the CEO. Now this guy now is the assistant, and the board likes him. The CEO eventually retires and they make this guy the new CEO. The fraternity president we’re talking. Now he’s the head guy. And he’ll bring in a number two guy that’s a little dumber than he is, because he doesn’t want to be threatened. So by definition, we’ll be run by morons pretty soon. And we’re not too far from that point right now in our economic history.”

    [Carl Icahn, 2011]

  3. The Editor

    Organisational Capabilities

    Grant (2010) links the resources of a firm with its capabilities in order to become aware of a competitive advantage. He argues that it is important to distinguish between the resources and capabilities of the firm: resources are the productive assets owned by the firm; capabilities are what the firm can do. Individual resources do not confer competitive advantage; they must work together to create organisational capability. It is capability that is the essence of superior performance (Grant 2010, p. 127). Christensen (2012) refers to organisational capabilities as resources, processes, and priorities.

  4. The Editor (Post author)

    Strategy: The tests of Consistency, Consonance, Advantage and Feasibility

    Once several alternative strategies have been developed, the next step is to evaluate them. It is usually helpful to test proposed strategies from a number of perspectives. Richard Rumelt (1995) points out that all proposed strategies could be tested for four types of problem. There is some overlap with the criteria of Johnson and Scholes (2003):

    Consistency

    Firstly, the proposed strategy must not present mutually inconsistent goals and policies. Inconsistency in strategy is not simply a flaw in logic. A key function of strategy is to provide a coherent framework for organisational action. Secondly, the external strategies have to be consistent with (supported by) the various internal aspects of the organization. You must examine all the various functional and internal management strategies employed by the organization and compare them with the external business strategy.

    Consonance

    Are the strategies in agreement with the various external trends (and sets of trends) in the environment? The test aims to evaluate the economic relationships that characterise the business and determine whether or not sufficient value is being created to sustain the demand for the strategy in the long term. To answer this question, you need to look at all the major trends that impact the selected strategy. The major difficulty in evaluating consonance is that most of the critical threats or substitutes that come from the external environment will also threaten the whole industry. Therefore, Porter’s five forces might be a helpful framework here.

    Advantage

    Rumelt’s third test is about competitive advantage or whether the organisation can capture enough of the value it creates. Does the strategy create and/or maintain a competitive advantage from one or more of three sources?

    • superior resources
    • superior skills
    • superior position

    Feasibility

    The test of feasibility of a proposed strategy will consider how well it would work in practice and how difficult it might be to achieve. Is the strategy reasonable in terms of the organization’s capabilities?

    • money and capital
    • management, professional, and technical resources
    • operational performance
    • time span
    • reaction of competition

    In considering the feasibility of a strategy, however, there is a danger of ignoring the challenge of strategic stretch and leverage (Hamel and Prahalad, 1994). Feasibility should therefore also reflect an organisation’s ambition.

  5. The Editor

    The primary goal of resource analysis is not to value a company’s assets but to understand their potential for creating competitive advantage. Selznick (1957) used distinctive competence to describe those things that an organisation does particularly well relative to its competitors. Prahalad and Hamel (1990) coined the term core competences to distinguish those capabilities fundamental to a firm’s strategy and performance. Core competences according to Prahalad and Hamel are those that:

    • make a disproportionate contribution to ultimate customer value, or to the efficiency with which that value is delivered, and
    • provide a basis for entering new markets.

    As Peter Drucker (1974) said in the first edition of “The Five Most Important Questions you will Ever Ask about your Nonprofit Organisation”:

    “The most important aspect of the self-assessment tool is the questions it poses. Answers are important; you need answers because you need action. But the most important thing is to ask these questions.”

    1. What is our mission?
    2. Who is our customer?
    3. What does the customer value?
    4. What are our results?
    5. What is our plan?
  6. The Editor (Post author)

    A Culture for Knowledge Sharing

    One of the criticisms of Nonaka’s earliest articles (1994) is that he did not address the issue of culture for knowledge sharing. In later writings, Nonaka & Takeuchi (1995) introduced the concept of ‘Ba’, a Japanese word which Nonaka et al. described in a more recent article (2000) as “shared context in motion for knowledge creation”. IT has a role to play in knowledge management, but knowledge management is also about the social, tacit, and dynamic nature of knowledge. If culture is about “how work gets done around here”, then encouraging teams and individuals to share their knowledge is part of it.

  7. The Editor

    Productive Change

    There is the notion that change cannot be managed and made to march to some orderly process: “You deal with change by improving you. And then your time must come” (Mintzberg et al. 1998, pp. 324 – 327). Initiatives may develop deep in the hierarchies of an organisation, from middle managers who act as ‘intrapreneurs’ (Pinchot, 1985). This underpins “tipping point leadership”. Kim and Mauborgne (2005) recommend change managers to address those factors (stakeholders) with disproportionate influence and from there achieve a focused change without massive investment of time and resources. First steps are usually acceptable if they are small, like a workshop to look at the gaps. The “cognitive hurdle“ describes the mindset of the organisation wedded to the status quo (Boojihawan 2010, p. 84). This supports the notion of the contingency approach to management as opposed to management as process (Hosking, 1997).

    However, it is also Hosking (ibid.) who sees networking as a key leadership skill. At the end of the day, the question often present is the one about legitimacy:

    1. Balser and McClusky (2005) conclude that nonprofit effectiveness is about resources and legitimacy. Serving the public trust is perceived as part of effective nonprofit organization management (ibid., p. 313). Legitimacy is derived from stakeholders – e.g. in a public hospital derived from patients.
    2. Mintzberg et al. (1998, p. 182) may be right when they doubt that organizations can change if they apply concepts embedded deep in the heart of the institutions. But some concepts are about legitimacy, and these may function as the boundaries that question the “raison d’être” of an organization.
    3. Support is much better secured when change receivers become change initiators, irrespective of “tipping point leadership”. Becoming change owner can overcome cognitive hurdles (Boojihawan 2010, p. 84).
  8. The Editor (Post author)

    The Surprising Truth about What Motivates Us

    This Animate, adapted from Dan Pink’s talk at the RSA, illustrates the hidden truths behind what really motivates us at home and in the workplace. In fact, capitalism works because people are motivated by autonomy, mastery, and purpose. Profit is important, but it’s not everything.
     

  9. The Editor

    The Learning Organisation

    The management of knowledge is closely connected to the learning organisation, especially tacit knowledge held by individuals (Nonaka and Takeuchi, 1995). Knowledge management is focused on making this tacit knowledge available to others and emphasizes the part played by IT (Mayle and Henry 2010, p. 175). Garvin (1993, p. 84) identifies two characteristics of a learning organisation being important here:

    • Knowing how as practical knowledge which comprises standards of practice and settings of equipment. Organisations with knowhow hold designs, have procedures and methods, skills and experience in the minds and hands of their personnel (Gettier, 1963).
    • Knowing why captures the underlying cause-and-effect relationships. It involves the bigger picture of a company, the learning from mistakes, and the knowledge about processes, to prefer certain practices and avoid others. Knowledge about work processes is a prerequisite for performing work and it has been found that why-knowledge contributes to better quality of work (Lee and Strong, 2003).
  10. The Editor (Post author)

    Productive Change (revisited)

    Kanter’s (1983) famous study has a more personal focus. It is concerned with “those people and organisations adept at the art of anticipating the need for, and of leading productive change”. The qualification of ‘productive‘ change is important. Kanter identified three sets of skills required to manage effectively in integrative, innovation-stimulating environments:

    • Power-skills
    • Ability to manage teams and team environments
    • Understanding how change is designed and constructed in an organisation

     
    This last area can also be seen in terms of organisational capabilities – the ability to change.

  11. The Editor

    Value Creation

    What is the ultimate purpose of a firm? Is it about shareholder wealth creation, or is it about a stakeholder approach that tries to balance interests of as many as possible parties associated around a company? Investors have different views on value creation: EV and EBITDA are common, albeit increasingly criticised, industry yardsticks. Enterprise value (EV) is equivalent to the company’s market capitalisation less any long-term debt. Earnings before interest, tax, depreciation and amortisation (EBITDA) is calculated as revenue minus expenses (excluding tax, interest, depreciation and amortisation).

    Consider Yahoo!, a multipurpose service portal, and retail portal Amazon.com. Comparing the two can be tricky. Retailers’ revenues and expenses differ markedly from those of service providers. Amazon immediately pays out of revenue the cost of merchandise and shipping. Yahoo doesn’t sell merchandise; its revenues come from selling ad space to those who do. The costs of supporting additional content, advertisers and usage are tiny compared to paying for books and CDs. Expect Yahoo! to enjoy a premium valuation over Amazon.

    But simply comparing portal stocks against one another says nothing about their intrinsic value. When there is a major correction in the overall stock market, or simply in the internet sector, portals that appear under-valued relative to peers can be battered just as hard, if not even more. Indeed, the news and sentiment that so heavily impacts portal stocks can wipe out quantitative measures of valuation. With empirical value carrying less weight than in other sectors, internet investors will find that it pays to be cautious.

    Hawawini and Viallet (2011) believe that “the focus should be on making decisions that raise the value of the firm, and in doing so, the firm ultimately creates value for its stakeholders and society as a whole”. This, however, does not automatically derive just from making healthy profits. It is a management decision and a company needs to strive for value creation – wherever they see fit for their stakeholders.


    Economic Value Added (EVA)

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