Online Serialisation - Journal of Business Strategy serialised Clean Business Cuisine from 2004 to 2006. The Journal of Business Strategy is one of 17 in Emerald's Management First 'Strategy' collection. Written for senior managers, the Journal of Business Strategy provides in-depth articles that help the reader develop successful business strategies. Each issue focuses on the practical applications of business theory, covering a host of topics in areas such as strategy, business development, global branding, forecasting, and competitive intelligence). Columnists are respected thought leaders who comment on topics from marketing and governance to performance measurement. At last, for the reader who does not want to be seen with a little red book about cooking, this online serialisation serves the same function as a brown paper wrapper.
Whether to centralise or decentralise is a perennial strategic choice. Sometimes managers follow centralisation theories that lead them to standardise, seek economies of scale and eliminate duplication. At other times, managers decentralise in order to motivate local management, respond rapidly to changing customer needs or eliminate wasteful bureaucracy. Yet centralisation and decentralisation are not opposites, as the following tale illustrates.
There is no right or wrong choice in centralising or decentralising. Often the choice is a reaction against the status quo. Many businesses successfully use ‘pendulum management’, i.e. repeating sequences of centralisation followed by decentralisation, in order to achieve near equilibrium over the long-term. The most costly mistakes are made by managers who think there are scientific answers to this choice.
Technology can be a competitive advantage or an uncompetitive disadvantage. Sometimes it’s just a problem. The difficulty is discerning the benefits of the technology from the features of the technology. Salesmen “sell the sizzle, not the sausage”. Some folk want the jazziest toys around. Yet, without simple emotional enthusiasm for using technology to beat the competition, few advances would occur. How far should enthusiasm be allowed to influence choice?
It is difficult to remove emotion from many decisions, including ones about technology. Managers need to be enthusiastic about technology’s potential, otherwise they won’t spot opportunities for improvement. However, returns-on-investment are frequently unclear. Many technologies benefit customers, but customers may not pay more, buy more or be more loyal. Businesses have to deploy some technologies just to maintain competitive position. Managers should make technology investment decisions based on customer benefits and business needs.
Carrots and sticks – the fundamental tools of motivation? Well, sort of. Businesses want to establish ways of working that often treat people as inputs to a system. People want procedures that recognise their human behaviours, desires and aspirations. Once ways of working are established, businesses often find it difficult to get people to change working habits. Sometimes businesses need to implement change rapidly, for example in the face of an aggressive new competitor. Groups also define our identity – where we fit and what is expected of us. Which tools should businesses use in such circumstances – carrots, sticks or, is there a third way, trout???
Human beings, in the roles they assume individually and collectively, are the ultimate causal factor in business. We assume risk in order to develop rewards by playing ‘roles’. When things go well, the roles are working in harmony. The contrary implication is simple – when things go wrong, we have only ourselves to blame. Our misunderstanding, miscommunication, or worse, our own misconduct causes the failure. Understanding ourselves, both as individuals and organisational folk, is where we need to start in order to understand business success.
Quality is a slippery concept, but crucial to competitive advantage. From the many sects of quality, two broad schools emerge. The first school is based around detailed measurement and process, e.g. Six Sigma or ISO9000. The second school is based around culture and resolve, for instance the philosophy of Total Quality Management. Quality is everywhere and nowhere. That’s where it’s at. You can’t deconstruct it from the whole – like the grains of sand that make a beach – nor can you always convert the non-believer.
Quality is key (you know it when you see it), but it surely isn’t free. Too much separation of quality as a distinct process or characteristic can divert people from the fact that quality is an intrinsic part of all work. Quality is greater than the sum of the activities. Quality is a total, pervasive characteristic, and therefore quality not just resists direct management, but can be destroyed by direct management. Don’t let quality become separated from real work.
How can managers decide what information they need? Too much information can be as bad as too little. One popular business model distinguishes information that validates assumptions from information that assesses decisions from information that measures success factors. Too many managers are scribes, recording what happened; too few are seers, thinking of the questions they need to answer. Managers are in most danger when they lack the knowledge of what they need to know.
Organisations react to mistakes. A typical reaction is to collect information that would have prevented the mistake. Over time, quantities of information based on old assumptions, decisions and success factors overwhelm managers. Amidst the information deluge, managers need to spot new anomalies in old patterns and discern new patterns in old anomalies. The business challenge is to incorporate dynamic anomaly and pattern recognition into structured management information systems.
A franchise is a special privilege to deal with a special group or territory, but subject to specific obligations. Businesses compete organically on product differentiation or better service. Businesses compete acquisitively on access to finance or merger skills. Successful franchising leverages itself on the structure of the organisation by thinking about how a proper ‘constitution’ among the stakeholders benefits everyone. Franchising allows the organisation to reuse, repackage and replicate itself through pre-defined packets of rights and obligations, thus growing more easily. In successful franchising, the franchisor ensures that the franchisee benefits though, as a certain Alm once said, “advice ain’t easy if it’s free”.
Is franchising a serious way to make money, or just a pyramid scheme? All types of organisation benefit from thinking about ways of turning regular operations into ‘franchises’. Too often businesses fail to define the rights and obligations implicit in their operations, i.e. their internal franchises. Too often businesses try to expand through command-and-control, without considering how they could grow via a more federal structure. By looking at all operations as franchises, the ‘constitution’ of the business can be made clearer and more effective. For instance, “you, the customer complaints department, have the right to act in the best interest of the customer, subject to keeping us informed in a structured way and…” The efficiency and effectiveness of franchise structures, when well-defined, is compelling. Thoughtful business people struggling to grow should ponder how all or part of their business constitutes a franchise.
There is no right way to formulate strategy. Researchers have failed to show consistent correlations between formal strategic processes and business performance. It may be right to have no formal strategy at all. You can have it either way – and strategists frequently do. Some strategists are evangelical about top-down or bottom-up strategies, secret or open strategies, consultation or action. Strategy formulation can even develop too much momentum, leading to the “opportunity guilt” in the following story, when prescriptive strategic processes meet the opportunities of the real world.
People undertake strategic planning because it helps them to deal with the future. The success of most strategic exercises can only be assessed by how much they help people feel better about their ability to manage future uncertainty. Research has shown that people ‘plan’ in order to provide some certainty about the future, to develop consensus about the future or to gain commitment to a programme of action. Probabilities about future events are not objective. People’s perceptions determine the probabilities. If people feel that they have a good strategy, then they do. Nobody can tell if it will be successful.
In an increasingly risk-averse and socially concerned environment, organisations must pay greater attention to governance. In addition, regulators, activists and lawyers also pay greater attention to how organisations conduct themselves, and the appearance of governance. Paradoxically, greater specification of how organisations must conduct themselves can frequently lead to situations where ethical conduct is against the law. The most corrupt regimes and bureaucracies are often the most ethical, on paper. One might muse that corruption and bureaucracy are positively correlated. Further, one might observe that the inability of organisations to make decisions without recourse to experts in various areas of regulation, for instance human resources or procurement or health & safety, leads to more likelihood that organisations will get things wrong. But do principles pay? Is it true that “the people you help on your way up are slightly less likely to knife you on your way down”?
Modern societal constraints are increasingly complex. Organisations complain vociferously about the amount of ‘red tape’ and governments repeatedly break promises to “reduce the burden of legislation”. Standards, ethical guidelines and certifications only add to the burden. In some ways the only sane response to the situation is to note that “if you can’t do anything right, then do the right thing”. It may be rational to rely more on basic human societal behaviours such as ‘tit-for-tat’, then to attempt to comply with a library of legislation. A strong set of principles can often provide guidance when the complexity of regulations leads to situations where “life is too short” to make a decision in line with the rules. So perhaps we turn full circle to the point where a strong set of organisational ethics, duly followed in preference to the law, is an appropriate response to over-regulation intended to reduce ethical violations.
“I know that half the money I spend on advertising is wasted. My only trouble is that I don’t know which half.” Ironically this remark has been attributed half-and-half to either Lord Leverhulme or John Wanamaker. Despite tremendous amounts of quantitative and qualitative analysis, no one actually knows what succeeds in sales, marketing or public relations. Complex buyer behaviour is, well, complex. You have to mix art and science, combining the ecumenical and the secular.
Tolstoy’s Anna Karenina begins with the famous sentence “Happy families are all alike; every unhappy family is unhappy in its own way.” A bit like sales and marketing. When it goes well, a large number of activities come together successfully – good products, good messages, good people, right place, right time, etc. When it goes poorly, it’s easy to criticise specific elements. Skeptical enquiry is required to analyse complex buyer behaviour. Managers need to adopt a portfolio approach not just for their product and service lines, but also for the methods they employ to sell them.
Business people sometimes feel insulted to be compared with gamblers. But while the retail gambler out for a good time at the track or casino is, on average, a loser, to be compared with the professional gambler is a compliment. The professional gambler works hard at his or her portfolio of wagers, seeks out information and knows how to hedge bets and take arbitrage opportunities. One of the great difficulties in management theory is that it is often geared towards a deterministic, mechanistic view of the world, although most business decisions are in effect gambles in a stochastic, probabilistic universe.
In many ways, the gambling analogy helps people realise when they are bound to lose. Without inside information or immense skill (as opposed to a lucky streak) or powerful friends … perhaps you shouldn’t be in the game. Even if you stay in the game, if you intend to win you need to find a way to take control of some or part of the game. Of course, owning the gambling house is often the best way to be on to a sure thing.