The LSE Summer School 2004
Management Programme
MG106 - Organisation and Strategic Management
Seminar 12: Review Session
Management Gurus
Michael Porter: The master strategistBy Morgen Witzel / The Financial Times, August 14 2003
Michael Porter (pictured), became famous in the 1990s as a consultant on competitiveness to business and governments. In the 1980s, however, he wrote several popular and respected books on business strategy, introducing basic tools of strategic thinking such as the "five forces" model and the value chain.
It is for this work on strategy that he is likely to be remembered, and his ideas have had a wide impact. In 1999, Fortune called him the single most important strategist working today, and possibly of all time.
Prof Porter was born in Ann Arbor, Michigan, in 1947. He studied at Princeton and Harvard and joined the faculty at Harvard in 1973. He has also become a highly respected consultant, working with companies such as DuPont and Shell, and the US, Canadian, New Zealand and Swedish governments.
Prof Porter views strategy from the standpoint of economics, and his ideas on how strategy should be implemented are based on an understanding of competition and other economic forces. Strategy is not devised in isolation; a company's options will always be limited by what is going on around it.
His famous "five forces" model shows the constraining impact that competition and environment have on strategy.
The five forces identified by Prof Porter are: the threat of new entrants and the appearance of new competitors; the degree of rivalry among existing competitors in the market; the bargaining power of buyers; the bargaining power of suppliers; and the threat of substitute products or services that could shrink the market.
The strength of each of these forces varies from industry to industry, but taken together they determine long-term profitability. They help to shape the prices companies can charge, the costs they must pay for resources and the level of investment that will be needed to compete.
From the external environment, he turns to the company itself. Companies make products and deliver them to consumers, but they can also add value to the basic product in a variety of ways and through different functions.
Value can be added directly, for example by giving a product new technology features, or indirectly, through measures that allow the company to become more efficient. Prof Porter argues that every product follows a critical path through the company, from its inception to its delivery as a finished article. At every stage along this path there are opportunities to add value. This path he calls the "value chain".
The value chain is crucial, he says, because it demonstrates that the company is more than just the sum of its parts and activities: all activities are connected, and what is done at one stage affects work at other stages.
The company needs to examine its value chain and decide where it can add value most effectively to meet competitive pressures in the industry.
These concepts can be applied to entire sectors and national economies as well as individual companies, and Prof Porter went on to develop his theories of national competitiveness in great detail.
Best-known books: Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: The Free Press, 1980; The Competitive Advantage of Nations, London: Macmillan, 1991.
Warren Bennis: A leader on leadership
By Morgen Witzel / The Financial Times, August 13 2003
Best known for his work on leadership, Warren Bennis (pictured), has also covered subjects such as working in groups, change management and bureaucracy. A prolific writer, he has written or edited 26 books and more than 1,500 articles over the course of 40 years. He twice won the McKinsey Foundation Award for the best book on management and has received many other awards and accolades.
Prof Bennis was born in New York in 1925. He served as an officer in the US Army during the second world war and was decorated for gallantry. After the war he studied economics, psychology and business at Antioch College and MIT. He then taught at several US universities and spent a number of years in university administration. He is currently affiliated with the University of Southern California.
Prof Bennis's earliest academic work was on groups and their dynamics. He believes that groups, and by extension all organisations, can only function effectively in an open atmosphere where people are willing and able to trust each other. He claims conventional, hierarchical organisations stifle trust and encourage internal rivalries and dissent. The old style of "command and control" was, in his view, doomed. A change was on the way: in the future, organisations would be forced to open up and allow more democracy. And democracy would lead to organisational change, as bureaucracies broke down and were replaced by "adhocracies" - flexible, sometimes temporary, organisations that shifted and adapted their form to meet changing needs.
Prof Bennis's first work on leadership grew from these early studies on organisational dynamics. He became interested in the kinds of people who became leaders and how they emerged out of the ordinary mass of employees and managers. This led to a consideration of leadership itself, which he went on to define as "the capacity to create a compelling vision, and to translate it into action and sustain it".
To be successful, a leader must not only be able to create a vision for the organisation, but he or she must also be able to communicate that vision successfully to employees. This in turn requires the "management of self", an understanding of one's own skills and abilities so as to know how to be most effective in preaching the vision.
Finally, a leader needs the ability to generate and maintain trust, "the emotional glue that binds leaders and followers together". To create trust, leaders must be consistent and believable. They should lead from the front by being publicly seen to accept challenges and take responsibility.
Like John Kotter, Prof Bennis believes leadership is not necessarily an inborn skill and can be taught. His preferred method of training leaders is through personal coaching rather than group training. Leaders must be encouraged to learn from other leaders, and at times he seems to suggest a kind of apprenticeship programme for future leaders that would expose them to some of the challenges of leadership and allow them to learn more about themselves before taking over at the top.
Great leaders, says Prof Bennis, have three common features: ambition, competence and integrity. All three are essential; not least integrity, without which ambition and competence can ultimately lead both leader and organisation into dangerous waters.
Best-known books: On Becoming a Leader, Reading, MA: Addison-Wesley, 1989; Warren Bennis and Bert Nanus, Leaders, New York: Harper & Bros, 1985.
Hamel and Prahalad: Partners in introspection
By Morgen Witzel / The Financial Times, August 11 2003
Gary Hamel and C.K. Prahalad were among the highest-profile academics writing about business in the 1990s, producing landmark articles for Harvard Business Review and a best-selling book, Competing for the Future. Since ending their collaboration, both men have produced important solo works. Fortune magazine has called Hamel "the leading strategy expert in business today", and Prahalad is regarded as one of the primary theorists on global business.
Prahalad was born in 1941 in Coimbatore, India. He trained as an engineer and worked for Union Carbide, the US chemicals group, before attending the Indian Institute of Management and then obtaining his doctorate from Harvard in 1975. Since 1978 he has taught strategy and international business at the University of Michigan. His first big work was a study of strategic imperatives for global corporations, where he insisted that, although it is possible for companies to develop global reach, they will never be able to dispense entirely with adapting to local cultures.
Hamel was born in Michigan in 1954 and attended the University of Michigan, where he first met Prahalad; he took his PhD in 1990. He has also been a member of faculty at London Business School. His collaboration with Prahalad resulted in the development of influential concepts such as strategic intent and core competencies, which are now part of mainstream business thinking.
In Competing for the Future, Hamel and Prahalad took issue with the current view of strategy, which focused largely on competitive pressures. Businesses competed with the primary goal of winning market share from opponents and were guided in their strategic planning and decision-making by what competitors were doing or might do. Hamel and Prahalad argued that this was misguided. Rather than look at competitors, businesses ought to focus on their own strengths and on what their customers wanted. Aligning capabilities with the needs of customers was, they said, the key to competitive success.
Core competencies are sometimes defined as unique skills or attributes: "what a company is good at". In fact the concept is more complex. Core competencies are not what a company values about itself; they are what customers value about the company. Any definition must begin with the customer's point of view; any attribute that cannot be seen to be desired by the customer is not a core competency.
Core competencies provide a set of strategic principles: if managers understand their core competencies, they have a framework from which to build a competitive strategy that will satisfy customers and achieve corporate goals. Core competencies are difficult to imitate, allowing each company's strategy to be unique.
Strategic intent, the second influential concept to emerge from Hamel and Prahalad's work, is the idea that senior managers should promote their strategic vision until it infuses the entire business. Challenge and motivation are important aspects of this; people have to believe in the vision to the point where they are ready to meet the challenge of making it reality. Hamel and Prahalad highlight the importance of "strategy as stretch"; ideally a strategy should challenge people to do their utmost.
Hamel and Prahalad take the focus of competitive strategy away from the environment and instead examine the organisation itself. Businesses succeed because of what they are, not what their competitors are. In a later work, Leading the Revolution, Hamel urged companies to innovate and be revolutionary, turning themselves into "relentless innovators" constantly seeking to exceed customer demands and thus staying ahead of competitors.
Best-known books: Gary Hamel, Leading the Revolution, New York: McGraw-Hill, 2001; Gary Hamel and C.K. Prahalad, Competing for the Future, Boston, MA: Harvard Business School Press, 1994.
Rosabeth Moss Kanter: Dance teacher to the giants
By Morgen Witzel / The Financial Times, August 10 2003
Rosabeth Moss Kanter, one of the few women to achieve international status as a management guru, came to prominence in the 1980s with her call to large companies, particularly US companies, to undertake reform or face extinction. Her two main works, The Change Masters and When Giants Learn to Dance, were bestsellers. They have also had a strong, positive impact on the world of business. In the 1990s, many large companies followed her ideas and restructured to become more flexible. Managers at companies such as International Business Machines credit Kanter as the influence that helped them to change.
Ms Kanter, who was born in Cleveland, Ohio, in 1943, studied sociology at Bryn Mawr and the University of Michigan and has taught at Yale, Brandeis and Harvard. She has been based at Harvard since 1986 and, among other duties, was editor of Harvard Business Review from 1989 to 1992. An active supporter of women in management, she is a founding committee member of the International Women's Forum.
Her starting point is that companies are structured in a way that impedes communication and innovation. Innovation, in her view, is the key to success, for individual businesses but also for nations and cultures. The fundamental problem is that most organisations are not used to managing innovation. In the west, innovation has traditionally been the province of individual entrepreneurs. The challenge for companies is to learn how to "create conditions, even inside larger organisations, that make it possible for individuals to get the power to experiment, to create, to develop, to test - to innovate".
The reality in most companies is the opposite, she says: innovation is restricted and slowed.
Communication is the key. Businesses must make the free flow of information and knowledge a priority. If lines of communication are poor, employees at the lower levels feel cut off from the decision-makers at the top. They respond to this feeling of isolation in one of two ways. Either they try to achieve promotion, getting into the upper ranks themselves where they will have access to information and perhaps some influence on the decision-making processes; or they slip into what she calls a "static state", where both motivation and productivity begin to decline.
The solution to this problem is to break down organisational barriers and create a corporate culture where the circulation of knowledge, through both formal and informal channels, is encouraged and stimulated. Ms Kanter emphasises concepts such as employee participation, coalitions and teamwork, all of which can lead to closer contact between the separate elements and individuals that make up the organisation. Co-ordination and co-operation are essential. In the complex environment of modern business, there is no longer any room for the "lone wolf" entrepreneur, as few single individuals have sufficient span of control to manage at the required level of complexity. Instead, she says, we are moving into a "post-entrepreneurial" world where only co-operation will yield any certain success.
The future, says Ms Kanter, will require corporations to achieve more with less. "This constitutes the great corporate balancing act. Cut back and grow. Trim down and build. Accomplish more and do it in new areas, with fewer resources." She accepts the prevailing view that companies need to become "leaner and fitter", but argues strongly against what she sees as the thoughtless slashing of costs and structures without regard for the consequences.
Best-known books: The Change Masters: Innovation for Productivity in the American Corporation,Simon & Schuster, 1983; When Giants Learn to Dance: Mastering the Challenge of Strategy, Management and Careers in the 1990s,Simon & Schuster, 1989
Ikujiro Nonaka: An all-knowing analysis
By Morgen Witzel / The Financial Times, August 7 2003
In the mid-1990s Ikujiro Nonaka, already one of Japan's foremost thinkers on management, won an international reputation for his book The Knowledge-Creating Company.
The book became a worldwide bestseller and won a number of important awards. Ohmae Kenichi, the Japanese writer and consultant, has called it "the most important management book to come out of Japan".
Nonaka, who was born in Tokyo in 1935, took a degree in politics and economics, then spent 10 years with Fuji Electric in Japan before moving into academia. He spent five years at the University of California at Berkeley, then returned to Japan. Since 1981 he has been based at Hitotsubashi University but also holds a professorship at Berkeley.
"Circular" is a word that often appears in Nonaka's work. He takes a holistic view, arguing that in organisations the whole is always greater than the sum of its parts and depicting them not so much as structures but as a series of causal links.
The form of an organisation is defined by the strategic needs of the business, he contends. Strategy in turn is influenced by ability to innovate and create sustainable advantage. Innovation is influenced by ability to create and manage knowledge; and that is directly influenced by organisational form. Successful management, then, requires an ability to understand and control these flows and forces.
The crucial factor, in Nonaka's view, is knowledge and his ideas are now at the heart of current thinking on knowledge management. He argues, using case studies from Japan including those of Sony, Matsushita, Honda, Canon, NEC and Fuji-Xerox, that in order to survive, an organisation must be capable of continuous innovation; and that knowledge is the source from which innovation flows.
He says knowledge and innovation are "not the responsibility of a selected few - a specialist in research and development, strategic planning, or marketing - but that of everyone in the organisation".
Innovation has to come from a deep personal belief and commitment, he says, and he believes that, in the end, "innovation is as much about ideals as about ideas". Creating knowledge and promoting innovation is therefore central to the task of the manager.
Nonaka is sharply critical of Tom Peters, the American management guru who in the 1980s advised companies to get rid of middle- management "dead wood" in order to become more creative and flexible. To Nonaka this is tantamount to ripping the heart out of the organisation: middle managers have a vital role to play not only in creating knowledge but also in holding the organisation together and transmitting knowledge through it.
Drawing a distinction between implicit knowledge - ideas that are formally set down and can be easily learnt - and tacit knowledge - which is innate but which we find hard to express - Nonaka regards the latter as the most important, questioning the western belief that knowledge is best passed on through education and training.
The most valuable knowledge, he says, is not gained from others but is created by ourselves.
Best-known book: Ikujiro Nonaka and Takeuchi Hirotaka, The Knowledge-Creating Company, New York, Oxford University Press, 1995
Joseph Juran: Quality put into practice