1. Chapter 8 Strategic Change
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

2. © 2014, Cengage Learning EMEA, ISBN 97814082683
Contents
Introduction
The issue of strategic alignment
The paradox of revolution and evolution
Perspectives on strategic change
Managing the paradox of revolution and evolution
Strategic change in international perspective
Readings and Case 8
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

3. © 2014, Cengage Learning EMEA, ISBN 97814082683
Introduction cont.
For a ‘living’ organization, change is a given
Not all change is strategic – much change is ‘fine-tuning’ alterations where changes are directed at increasing the performance of the firm within the confines of the existing system
Strategic changes are directed at creating a new type of alignment between the basic set-up of the firm and the characteristics of the environment
The process of enacting strategic changes to remain in harmony with external conditions is
called ‘strategic alignment’
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

4. The issue of strategic alignment
Many actions constitute a strategic change e.g. a reorganization, a diversification move, a shift in core technology, a business process redesign or a product portfolio reshuffle.
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

5. The issue of strategic alignment
Example of an ongoing strategic renewal process
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

6. The issue of strategic alignment
Areas of strategic alignment
Business model – ‘how a firm makes money’ or ‘the specific configuration of resources, value-adding activities and product/service offerings directed at creating value for customers’
Organizational system – ‘how a firm is organized’ or ‘how the individuals populating a firm have been configured, and relate to one another, with the intention of facilitating the business model’
The business model is supported by the
organizational system
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

7. The issue of strategic alignment
Organizational structure
Refers to the clustering of tasks and people into smaller groups
Organizational processes
Refers to the arrangements, procedures and routines used to control and coordinate the people and units within the organization
Organizational culture
Refers to the worldview and behavioral patterns shared by the members of the same organization
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

8. The issue of strategic alignment
General view of the business model and the organizational system
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

9. The issue of strategic alignment
Detailed view of the components of the organizational system
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

10. The issue of strategic alignment
Organizational structuring criteria
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

11. The issue of strategic alignment
The magnitude of change
The size of change steps is referred to as the magnitude of change.
Scope of change – scope of change is broad when many aspects and parts of the firm are aligned at the same time, or can be narrowly focused on a specific organizational aspect
Amplitude of organizational changes – amplitude of change is high when there is a radical departure from the previous situation
Where a change is comprehensive and
radical, the magnitude of the change
step is large
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

12. The issue of strategic alignment
Example of two alternative change paths
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

13. The issue of strategic alignment
The pace of change
Timing of change – pace of change depends on the moment at which changes are initiated. Timing of change can be intermittent or constant.
Speed of change – pace of change depends on the time span within which changes take place. Speed of change can be high or low.
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

14. The paradox of revolution and evolution
The demand for revolutionary change processes
Revolutionary change is needed where an organization is very rigid so that smaller changes do not bring the firm into movement
Typical sources of organizational rigidity include:
psychological resistance to change
cultural resistance to change
political resistance to change
investment lock-in
competence lock-in
systems lock-in
stakeholder lock-in
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

15. The paradox of revolution and evolution
A radical approach to strategic alignment is often necessary if there is only a short time span available for a large change
Common triggers for revolutionary strategic change are:
competitive pressure
regulatory pressure
first mover advantage
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

16. The paradox of revolution and evolution
The demand for evolutionary change processes
Evolution is a process whereby a constant stream of moderate changes gradually accumulates over a longer period of time. A new business model and/or organizational system can evolve from the old.
Reasons for evolutionary change:
Learning – the process is used where organizational learning is involved as learning is a slow process
Power is too dispersed for revolutionary changes to be imposed upon the firm
Read carefully Exhibit 8.1 China Cosco:
Changing ships?
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

17. The paradox of revolution and evolution
Revolutionary change is necessary to create discontinuity in the alignment process – radical and swift breaks with the past
Evolutionary change is necessary to ensure continuity in the alignment process – moderate and gradual change
The discontinuous alignment perspective
People and organizations are naturally reluctant to change
Continuous change creates an organizational confusion
Long periods of stability are necessary for the proper functioning of firms but to overcome rigidity a big change is necessary
Major changes can be made because of a sudden crisis, e.g. new technology, new government regulations
Read carefully Exhibit 8.2 Change banking for good
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

18. The paradox of revolution and evolution
The continuous alignment perspective
Revolution commonly leads to the need for further revolution at a later stage
Revolutionary change is followed by a yearning for stability
Slower change is more effective – the story of the hare and the tortoise
A preference for revolution reflects an obsession with the short term. Continuous alignment is focused on the long term.
Everyone in the firm must be motivated to continuously learn
Everyone in the firm must be motivated to continuously adapt
Everyone in the firm is involved in evolutionary change – it is not imposed by top management
Read carefully Exhibit 8.3 Nokia faces tough choices
as Siemens shops around NSN
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

19. Managing the paradox of revolution and evolution
Navigating
Over the long term the pattern of environmental change is episodic. Periods of relative stability are interrupted by short and dramatic periods of instability – ‘punctuated equilibrium’.
When the environment is in flux, organizations must align. Strategizing managers must possess a variety of options in dealing with environmental change.
During periods of relative stability, the emphasis should be on evolutionary adaption.
During periods of discontinuous change,
firms need to be able to be revolutionary.
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

20. Managing the paradox of revolution and evolution
Discontinuous alignment versus continuous alignment perspective
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

21. Strategic change in international perspective
Prevalence of mechanistic organizations
In some countries, e.g. English-speaking countries and France, the machine bureaucracy is dominant – clear hierarchical authority relationships, strict differentiation of tasks, formal communication, reporting and decision-making processes. Internal relationships are depersonalized and calculative. In more organic forms of organization, e.g. in Japan and Germany, management and production activities are not strictly separated leading to less top-down decision-making. Internal relationships are based on trust, cooperation and a sense of community.
Machine bureaucracies are more resistant to change and therefore revolutionary change is more common
Clan-like organizations are better able to reorganize around new issues so there is a preference for continuous
alignment
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

22. Strategic change in international perspective
Position of employees
In a mechanistic organization people work for the organization, seen as valuable but expendable. Employers want to minimize their dependence on employees so organizational learning should be captured in formal systems and procedures so employees can be replaced. Employees will not tie themselves too strongly to the organization. More conducive to revolutionary change.
In a clan, people are the organization. Employees’ positions within the organization are more secure, information is more readily shared. Employers can invest in people instead of systems as employees are loyal to the firm. More conducive to continuous change.
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

23. Strategic change in international perspective
Role of top management
In some countries top management is the ‘central processing unit’ of the organization and visible top-down leadership is the norm and strategic change top managers’ responsibility. This leads to a discontinuous alignment perspective.
In other countries management is less direct and less visible. Change comes from within the body of the organization and will be more
evolutionary.
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN

24. Strategic change in international perspective
Time orientation
Cultures that are short-term oriented exhibit a stronger preference for fast radical change, e.g. in most English-speaking countries there are pressures for rapid results due to:
sensitivity to stock prices
bonus systems
stock option plans
frequent job-hopping
In long-term oriented cultures, e.g. Japan, China and South Korea, there is less pressure to achieve short-term results. More emphasis is placed on facilitating long-term change processes due to:
long-term employment relationship
lack of short-term bonus systems
accent on growth not profit
Only to be used with Strategy : An International Perspective 5th edn by Bob de Wit
© 2014, Cengage Learning EMEA, ISBN