Theories of Strategy and Competition
If you don’t have enemies in life you have never stood up for anything.
Sir Winston Churchill (1874-1965).
Politician, army officer, writer.
As we develop the core themes of this book, we encounter ambiguity, cynicism, positive thinking and, on occasion, despair, both from the author and the academic debates which are presented. We examine simple and complex theories of strategic management and find them both wanting. Worse still, exciting tools for ‘doing’ strategy will be discussed but will often be exposed as mere packaging, i.e. as constituting no more than the appellation of labels to age-old techniques for dealing with age-old problems.
Indeed, it will be shown that many such tools – so-called business solutions – tend to become part of the larger management problem. As Senge (2006) noted in a rigorous critique of the large majority of management fashions and fads, the solutions offered generally attack the symptoms of organizational sickness, not the causes, thus producing short-term benefits but inflicting longer-term organizational malaise and trauma.
The prime beneficiaries of this, and some would argue the primary source of the problem, are the companies of the management consultancy profession who annually create the ‘next big (managerial) thing’, focusing primarily on organizational structure and processes but paying little attention to the cultural dimensions of organizational transformation and change (Egan, 1995; Kotter, 1995, 2012).
In this chapter, we address the two most challenging phenomena facing organizations in capitalist markets and global economics: strategy and competition. As in warfare, the two are inextricably linked, the one driving the other in an iterative process and with wearisome persistence. The problem with understanding this dynamic is partly a function of the proliferation of books on the topic which have obscured rather than clarified the core issues. As Pettigrew and Whipp (1993) observed in ground-breaking, longitudinal research undertaken at Warwick University in the UK:
The concepts of competition and strategy have become diluted with familiarity. No positive correlation has emerged between understanding and the volume of print on these subjects.
In the chapters of the book which follow, we endeavour to make sense of this literature, cutting a swathe through the chaff to examine a broad range of core debates surrounding the discipline/subject/topic universe of strategic management, marketing, brand management, organizational behaviour and economics.
Before this, however, the book must be ‘placed’ in the sense that any discussion of management science must make clear its conceptual foundations and declare its philosophical perspective. This is achieved here by examining two seminal contributions to the literature which have challenged and classified theoretical approaches to the nature of strategy (Whittington, 1993) and competition (Pettigrew and Whipp, 1993). Each is considered in turn, providing a framework within which to assess recent research and provide practical examples.
Pursuing optimal solutions to strategic management challenges gives a sustainable competitive advantage to companies prepared to ‘break the mould’ of organizational norms. Furthermore, advantages over and above simple cost reductions will have accrued to those firms seeking better solutions and making the appropriate capital investments. For example, a corollary of JIT adoption is zero-defect quality since the cost of downtime in continuous process manufacturing systems will far outweigh the cost of carrying ‘safety levels’ of excess inventory. Firms employing JIT processes reduce complexity and error potential by using far fewer suppliers who, in turn, are given partnership status and longer-term contracts. When combined with the adoption of flexible manufacturing systems (robotics) to solve the production trade-off, the implementation of JIT inventory systems and their associated quality enhancements provide formidably competitive commercial organizations. In discussing the ‘manufacturing advantage’ accruing to such companies, Slack et al. (2016) illustrate the combined impact of the ‘better’ solutions outlined above:
Those companies who have attempted the difficult task of separating the benefits which come directly from investment in technology and those which come from methodology and better managerial understanding have reported some surprising results. Paradoxically, capital investment often makes it necessary to consider the organization of the operation as a whole, which in turn prompts improvement which is independent of the technology for which it is preparing the way.
Consequently, organizational advantage begets organizational advantage. Phase one is a willingness to do something different, to seek better solutions which, as a corollary, triggers phase two, an organizational learning process. The concept of ‘organizational learning’ is a powerful one (which we return to in Chapter Eleven, A Strategic Perspective on Managing Change), particularly if we are willing to accept that the Darwinian doctrine of natural selection applies to organizational life.
It would be tempting here to dig deeper into organizational behaviour concepts to explain why “doing the right things” is a seemingly impossible task, at least in the medium to long term. However, marketing ‘facts of life’, “the invisible hand of the market” as originally described by Adam Smith, will ultimately determine a company’s fate. Consider the story of the fall from grace of IBM in the early 1990s or, more recently, the ongoing lacklustre performance of the once-mighty GE (Economist, 2017, November 18th). But recall that this book has the overriding goal of guiding companies towards achieving competitive success in complex markets.
With this observation, our focus now shifts away from companies and towards global markets, market dynamics, information requirements and what constitutes the foundations of the Intelligent Company, i.e. a commercial organization which beats the odds and outperforms its rivals in the markets it chooses to serve.
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