H. Igor AnsofF
|
|
Sullivan, Patrick A
|
by: Patrick A. Sullivan, DBA
|
Table of Content
A – Paradigm or School of Thought
B – The Ansoff Strategic Management School
C – Environment
D – Mission Statement
E – Strategic Information
F – Issue Management
G – Surprise Management
H – Strategic Segmentation
I – Strategic Diagnosis
J – Strategic Transformation Change Management
K – Competitive Posture Analysis
L – Portfolio Optimization
M – Technology Management
N – Societal Strategy
O – Summary
A – Paradigm or School of Thought
B – The Ansoff Strategic Management School
C – Environment
D – Mission Statement
E – Strategic Information
F – Issue Management
G – Surprise Management
H – Strategic Segmentation
I – Strategic Diagnosis
J – Strategic Transformation Change Management
K – Competitive Posture Analysis
L – Portfolio Optimization
M – Technology Management
N – Societal Strategy
O – Summary
|
A- Paradigm or School of Thought
Thomas Kuhn in his Structure of Scientific Revolutions defined a paradigm as the dominant mindset or model of reality of a scientific community. A paradigm must offer a better explanation of phenomena in the real world than any of its competitors and attract the majority of practitioners in the scientific community. The Strategic Management scientific community is in a pre-paradigm state. There are a number of different explanations (Ansoff, Hamel & Prahalad, Mintzberg, etc.) of the strategic behavior phenomena observed in the world today. None of these explanations has attracted the majority of practitioners, and this paper will use the term “School of Thought” to describe an explanation of strategic behavior phenomena that is accepted by a segment of the Strategic Management scientific community. |
Copyright© 1990, H. Igor Ansoff. All Rights Reserved.
|
B – The Strategic Management School of Thought
Igor Ansoff, who died on July 14, 2002, was a genius who developed a unique strategic management school of thought that is a synthesis of his years in industry, the work of several significant predecessors, his own keen insight into the significant variables that are related to successful strategic behavior, and empirical research that supports his theories o and prescriptions. The Ansoff school of thought is environment driven. Effective response to the environment is the key to long run strategic success. Ansoff' s experience with strategic planning in industry resulted in a school of thought that includes three primary dimensions, strategy formulation, management capability design, and management of transformational change. The Strategic Management Overview shows the major elements of the Ansoff strategic management school of thought that will be discussed in this paper.
C– Environment
The term “Environment” as used here includes all the economic, political, sociological, psychological, technological and geophysical forces in the segment of the world in which an organization chooses to operate. An Environment Serving Organization (ESO) is any organization that provides goods and/or services to the environment and consumes resources in the process. ESOs can be business firms, not-for-profit organizations like charities or universities, or governments. There are two primary contingent forces or drivers that define the responses to the environment that are necessary for ESO strategic success. The first of these drivers is Environmental Turbulence, which is a unique feature of the Ansoff school of thought. Ansoff defined Environmental Turbulence in terms of the complexity of the environment, the speed of change relative to possible speed of response, the visibility of the future, and the predictability of the future. There are five levels of environmental turbulence.
Level 1 environments are characterized as “stable”. There is essentially no change and tomorrow will be lust like today, which is just like yesterday.
Level 2 environments are characterized as “expanding”. Change does occur at this level. but it is slow and incremental. fully visible and predictable.
Level 3 environments are characterized as “changing”. Change at this level is fast but still incremental. fully visible and predictable.
Environments at levels 1, 2 and 3 are history driven in that the future will be a logical extension of the historical past and present. Prediction of the future can be accomplished by logical or statistical extrapolation where patterns of past and present events or data can be projected into the future to establish an accurate description of the future environment. Behaviors that have produced success is the past and present will very likely produce success in the future.
Level 4 environments are characterized as ‘discontinuous’. Very fast change is occurring at this level. and the environment is only partially visible and partially predictable. it is still possible to develop predictions of the possible future based on patterns of weak signals from the environment.
Level 5 environments are characterized as “surpriseful” . Change at this level is very fast, not predictable and not visible. Environments at levels 4 and 5 are discontinuous in that the future will be very different from the historical past and present. Scenario type predictions must he based on patterns of weak signals that indicate possible futures. Significant judgment is required to develop these predictions that describe ranges of possibilities rather than accurate descriptions of the future environment. Behaviors that have produced success in the past and present will not produce success in the future. The second category of contingent driver is Success Factors. These are the specific things that must be done to produce success strategies in the future environment. Success factors are related to the kinds of goods and services that are needed in specific sectors of the environment. The success factors in consumer electronics will be very different from the success factors in industrial or military electronics and different strategies will be required for success.
D– Mission Statement
Mission statements should be structured to provide a clear statement of the reason that an organization exists. Every ESO has an implied contract with the society in which it operates in order for the society to permit it to exist, and the mission statement should state the fundamental basis for that contract. Mission statements should also be clear and inspiring so all stakeholders in an ESO will understand what the ESO should be doing and motivated to make a positive contribution to those outcomes. For strategic purposes, the mission statement should also provide a clear and understandable definition of the segment of the overall environment in which the ESO would be willing to provide goods and/or services.
E– Strategic Information
Strategic information must be available for an ESO to structure a successful response to the environments in which it will be operating. For strategic purposes, strategic information must provide definitions of the expected future Environmental Turbulence and the expected future Success Factors. Ansoff proposed that strategic information passes through four filters as it moves from the environment to action in an ESO.
The first of these is the scanning filter that defines how much of the environment will be scanned, how far in the future the scanning will be directed, and the forecasting methodology used to develop strategic information. The scanning filter is usually structured by general management and its configuration depends very much on the mindset of the top managers. If the top managers assume that the future environment will be history driven (Environmental Turbulence levels 1, 2 or 3), scanning will be limited to existing markets and will be based on extrapolative forecasts projected as far into the future as the accuracy of data will permit. If the top managers assume that the future environment will be discontinuous (Environmental Turbulence levels 3 or 4), scanning will include the full range of the environment defined by the mission statement and will be based on signals gathered from the environment as far in the future as required to initiate a timely response in rapidly changing environments.
The second is the information filter that determines how data are stored and distributed to managers for strategic decisions. If the environment is assumed to be history driven, performance data will be accumulated in pre-determined categories and compared with budgets or targets. Extrapolative forecasting routines might be available. Managers will have access to the data using pre-programmed routines. If the environment is assumed on the discontinuous. qualitative information from the environment will be collected and stored in databases that are structured to enable managers to develop patterns ot signals that can be used to define possible future environments.
The third is the mentality filter that determines how managers will interpret available information. Managers with mindsets that are not open to discontinuities in the environment will not see relevant patterns or, if they do see them, will ignore signals that indicate changes. These managers are suffering from Strategic Myopia. the inability to see changes in the environment. Managers with mindsets that are open to change will be able to see signal patterns that indicate possible changes in the future environment.
The fourth and last filter is the power filter that determines whether or not correctly gathered. Stored and interpreted signal patterns result in the necessary changes in the E50. If the managers who are open to discontinuities in the environment do not have a strong power position, the ESO will not make necessary changes even when they are properly identified.
F– Issue Management
Signals from the environment may indicate trends, threats or opportunities. Trends are the accumulations of events that trigger changes in the level of Environmental Turbulence. Threats and opportunities are singular events that result in Strategic Issues. Discontinuous environments are characterized by high levels of uncertainty that preclude absolute accuracy in planning. These environments generate fast moving issues that must be resolved before the next regular planning cycle. History driven environments can generate periodic discontinuities that must be addressed even though the extrapolative planning system is adequate to” deal with trends. In either event. a Strategic Issue Management system is necessary to assure that issues do not become strategic surprises because they were not identified and acted on in a timely manner. Strategic Issue Management includes identification of issues in the flow of Strategic Information, assessment of impact and urgency, and assignment to appropriate action. Issues with low impact can be placed in a dead file. Issues with high impact move to the urgency assessment step. Issues that are moving very slowly can be classified as postponable and placed on a list for periodic review and reclassification when necessary. Issues that are moving more rapidly but slow enough to be included in the next regular planning cycle are classified as delayable and placed on an action list for the planning cycle. Issues that are moving so rapidly that they require action before the next planning cycle are classified as urgent and a project team is assigned to deal with the issue.
G– Surprise Management
Environments at turbulence level 5 are not predictable or visible and are characterized by Strategic Surprises. A strategic surprise occurs when an issue is moving very feet and is not identified until the time to impact is shorter than the time required for response. Strategic Surprise Management requires development of a contingency plan to identity and respond to surprises. Information is gathered by all elements of an BSO and relayed to a central location for analysis and action. Actions are delegated back to the decentralized elements for implementation. Top management effort is split among three essential tasks. The first is to maintain morale in the BSO to avoid the panic that can be associated with a potential survival crisis. The second is to maintain the ESO operations. The third is to respond to the strategic surprise. Surprise Management Systems should be exercised, and people trained as necessary to be sure that they will function when required.
H– Strategic Segmentation
The most frequently used unit for analysis is “industry”. The Ansoff School of Thought considers industry to lack the accuracy required for strategic analysis. Most industries include areas with widely differing levels of Environmental Turbulence, and an average response formulated for the industry will probably not be adequate for any of the areas. Strategic Segmentation is a process that can be used to divide the future environment into distinct areas with differing growth, profitability and risk (turbulence) prospects, and differing success factors. It provides an outside in, environment focused approach to identify areas that must be managed differently.
Strategic Segmentation begins by identifying the different needs that could exist in the future environment that the ESO is willing to serve. A properly structured Mission Statement will help define the boundaries of this future environment Bach of the needs is then coupled with a technology that could he available to serve the need. Each of the need technology couplets is then divided into the geographic areas and customer types where the need exists, and the technology could he used. A final dimension is the distribution system that could be used.
This process usually results in a large number of Strategic Business Areas (SBAs). The final step is to consolidate potential SBAs into groups that are different in terms of growth. profitability, risk and success factors. This final grouping then provides a complete list of SBAs for further analysis. If the segmentation is done at the Mission Statement level. it will identity SBAs that are not currently being served by the ESO. Some of these may be more attractive than any of the SBAs that are currently being served.
Igor Ansoff, who died on July 14, 2002, was a genius who developed a unique strategic management school of thought that is a synthesis of his years in industry, the work of several significant predecessors, his own keen insight into the significant variables that are related to successful strategic behavior, and empirical research that supports his theories o and prescriptions. The Ansoff school of thought is environment driven. Effective response to the environment is the key to long run strategic success. Ansoff' s experience with strategic planning in industry resulted in a school of thought that includes three primary dimensions, strategy formulation, management capability design, and management of transformational change. The Strategic Management Overview shows the major elements of the Ansoff strategic management school of thought that will be discussed in this paper.
C– Environment
The term “Environment” as used here includes all the economic, political, sociological, psychological, technological and geophysical forces in the segment of the world in which an organization chooses to operate. An Environment Serving Organization (ESO) is any organization that provides goods and/or services to the environment and consumes resources in the process. ESOs can be business firms, not-for-profit organizations like charities or universities, or governments. There are two primary contingent forces or drivers that define the responses to the environment that are necessary for ESO strategic success. The first of these drivers is Environmental Turbulence, which is a unique feature of the Ansoff school of thought. Ansoff defined Environmental Turbulence in terms of the complexity of the environment, the speed of change relative to possible speed of response, the visibility of the future, and the predictability of the future. There are five levels of environmental turbulence.
Level 1 environments are characterized as “stable”. There is essentially no change and tomorrow will be lust like today, which is just like yesterday.
Level 2 environments are characterized as “expanding”. Change does occur at this level. but it is slow and incremental. fully visible and predictable.
Level 3 environments are characterized as “changing”. Change at this level is fast but still incremental. fully visible and predictable.
Environments at levels 1, 2 and 3 are history driven in that the future will be a logical extension of the historical past and present. Prediction of the future can be accomplished by logical or statistical extrapolation where patterns of past and present events or data can be projected into the future to establish an accurate description of the future environment. Behaviors that have produced success is the past and present will very likely produce success in the future.
Level 4 environments are characterized as ‘discontinuous’. Very fast change is occurring at this level. and the environment is only partially visible and partially predictable. it is still possible to develop predictions of the possible future based on patterns of weak signals from the environment.
Level 5 environments are characterized as “surpriseful” . Change at this level is very fast, not predictable and not visible. Environments at levels 4 and 5 are discontinuous in that the future will be very different from the historical past and present. Scenario type predictions must he based on patterns of weak signals that indicate possible futures. Significant judgment is required to develop these predictions that describe ranges of possibilities rather than accurate descriptions of the future environment. Behaviors that have produced success in the past and present will not produce success in the future. The second category of contingent driver is Success Factors. These are the specific things that must be done to produce success strategies in the future environment. Success factors are related to the kinds of goods and services that are needed in specific sectors of the environment. The success factors in consumer electronics will be very different from the success factors in industrial or military electronics and different strategies will be required for success.
D– Mission Statement
Mission statements should be structured to provide a clear statement of the reason that an organization exists. Every ESO has an implied contract with the society in which it operates in order for the society to permit it to exist, and the mission statement should state the fundamental basis for that contract. Mission statements should also be clear and inspiring so all stakeholders in an ESO will understand what the ESO should be doing and motivated to make a positive contribution to those outcomes. For strategic purposes, the mission statement should also provide a clear and understandable definition of the segment of the overall environment in which the ESO would be willing to provide goods and/or services.
E– Strategic Information
Strategic information must be available for an ESO to structure a successful response to the environments in which it will be operating. For strategic purposes, strategic information must provide definitions of the expected future Environmental Turbulence and the expected future Success Factors. Ansoff proposed that strategic information passes through four filters as it moves from the environment to action in an ESO.
The first of these is the scanning filter that defines how much of the environment will be scanned, how far in the future the scanning will be directed, and the forecasting methodology used to develop strategic information. The scanning filter is usually structured by general management and its configuration depends very much on the mindset of the top managers. If the top managers assume that the future environment will be history driven (Environmental Turbulence levels 1, 2 or 3), scanning will be limited to existing markets and will be based on extrapolative forecasts projected as far into the future as the accuracy of data will permit. If the top managers assume that the future environment will be discontinuous (Environmental Turbulence levels 3 or 4), scanning will include the full range of the environment defined by the mission statement and will be based on signals gathered from the environment as far in the future as required to initiate a timely response in rapidly changing environments.
The second is the information filter that determines how data are stored and distributed to managers for strategic decisions. If the environment is assumed to be history driven, performance data will be accumulated in pre-determined categories and compared with budgets or targets. Extrapolative forecasting routines might be available. Managers will have access to the data using pre-programmed routines. If the environment is assumed on the discontinuous. qualitative information from the environment will be collected and stored in databases that are structured to enable managers to develop patterns ot signals that can be used to define possible future environments.
The third is the mentality filter that determines how managers will interpret available information. Managers with mindsets that are not open to discontinuities in the environment will not see relevant patterns or, if they do see them, will ignore signals that indicate changes. These managers are suffering from Strategic Myopia. the inability to see changes in the environment. Managers with mindsets that are open to change will be able to see signal patterns that indicate possible changes in the future environment.
The fourth and last filter is the power filter that determines whether or not correctly gathered. Stored and interpreted signal patterns result in the necessary changes in the E50. If the managers who are open to discontinuities in the environment do not have a strong power position, the ESO will not make necessary changes even when they are properly identified.
F– Issue Management
Signals from the environment may indicate trends, threats or opportunities. Trends are the accumulations of events that trigger changes in the level of Environmental Turbulence. Threats and opportunities are singular events that result in Strategic Issues. Discontinuous environments are characterized by high levels of uncertainty that preclude absolute accuracy in planning. These environments generate fast moving issues that must be resolved before the next regular planning cycle. History driven environments can generate periodic discontinuities that must be addressed even though the extrapolative planning system is adequate to” deal with trends. In either event. a Strategic Issue Management system is necessary to assure that issues do not become strategic surprises because they were not identified and acted on in a timely manner. Strategic Issue Management includes identification of issues in the flow of Strategic Information, assessment of impact and urgency, and assignment to appropriate action. Issues with low impact can be placed in a dead file. Issues with high impact move to the urgency assessment step. Issues that are moving very slowly can be classified as postponable and placed on a list for periodic review and reclassification when necessary. Issues that are moving more rapidly but slow enough to be included in the next regular planning cycle are classified as delayable and placed on an action list for the planning cycle. Issues that are moving so rapidly that they require action before the next planning cycle are classified as urgent and a project team is assigned to deal with the issue.
G– Surprise Management
Environments at turbulence level 5 are not predictable or visible and are characterized by Strategic Surprises. A strategic surprise occurs when an issue is moving very feet and is not identified until the time to impact is shorter than the time required for response. Strategic Surprise Management requires development of a contingency plan to identity and respond to surprises. Information is gathered by all elements of an BSO and relayed to a central location for analysis and action. Actions are delegated back to the decentralized elements for implementation. Top management effort is split among three essential tasks. The first is to maintain morale in the BSO to avoid the panic that can be associated with a potential survival crisis. The second is to maintain the ESO operations. The third is to respond to the strategic surprise. Surprise Management Systems should be exercised, and people trained as necessary to be sure that they will function when required.
H– Strategic Segmentation
The most frequently used unit for analysis is “industry”. The Ansoff School of Thought considers industry to lack the accuracy required for strategic analysis. Most industries include areas with widely differing levels of Environmental Turbulence, and an average response formulated for the industry will probably not be adequate for any of the areas. Strategic Segmentation is a process that can be used to divide the future environment into distinct areas with differing growth, profitability and risk (turbulence) prospects, and differing success factors. It provides an outside in, environment focused approach to identify areas that must be managed differently.
Strategic Segmentation begins by identifying the different needs that could exist in the future environment that the ESO is willing to serve. A properly structured Mission Statement will help define the boundaries of this future environment Bach of the needs is then coupled with a technology that could he available to serve the need. Each of the need technology couplets is then divided into the geographic areas and customer types where the need exists, and the technology could he used. A final dimension is the distribution system that could be used.
This process usually results in a large number of Strategic Business Areas (SBAs). The final step is to consolidate potential SBAs into groups that are different in terms of growth. profitability, risk and success factors. This final grouping then provides a complete list of SBAs for further analysis. If the segmentation is done at the Mission Statement level. it will identity SBAs that are not currently being served by the ESO. Some of these may be more attractive than any of the SBAs that are currently being served.
I– Strategic Diagnosis
Each SBA will then he analyzed to determine the appropriate strategic posture for the ESO. The first of these analyses should be a Strategic Diagnosis, which is based on the Ansoff Strategic Success Paradigm.
The Strategic Success Paradigm was first stated as the Strategic Success Hypothesis in 1976 in From Strategic Planning to Strategic Management. The hypothesis was further elaborated in 1979 in Strategic Management, and again in 1984 in implanting Strategic Management. The Strategic Success Hypothesis stated that optimum performance will be realized when Strategic Aggressiveness and General Management Capability Responsiveness are aligned with the Environmental Turbulence. This alignment is shown in the following table:
Each SBA will then he analyzed to determine the appropriate strategic posture for the ESO. The first of these analyses should be a Strategic Diagnosis, which is based on the Ansoff Strategic Success Paradigm.
The Strategic Success Paradigm was first stated as the Strategic Success Hypothesis in 1976 in From Strategic Planning to Strategic Management. The hypothesis was further elaborated in 1979 in Strategic Management, and again in 1984 in implanting Strategic Management. The Strategic Success Hypothesis stated that optimum performance will be realized when Strategic Aggressiveness and General Management Capability Responsiveness are aligned with the Environmental Turbulence. This alignment is shown in the following table:
Empirical support for the Strategic Success Hypothesis was provided by a series of doctoral dissertations at United States International University (now Alliant International University) in San Diego, California. At this time. there have been 945 ESO/SBU observations of different BSO types in different countries where alignment of the three variables was related to better performance. This extensive empirical support led Ansoff to change the name from Strategic Success Hypothesis to Strategic Success Paradigm, recognizing the limitations associated with the use of the term paradigm that were stated at the beginning of this paper. General Management Capability Responsiveness includes dimensions of both General Managers and the supporting organization as shown in the following table:
Strategic Diagnosis is the procedure that is used to operationalize the Strategic Success Paradigm. The first step is to diagnose the expected future Environmental Turbulence in the SBA. This will establish the Strategic Aggressiveness and General Management Capability Responsiveness required tor optimum performance. The next step is to diagnose the existing Strategic Aggressiveness and General Capability Responsiveness in the ESO. The third step is to identify the gaps between the expected future Environmental Turbulence and the existing Strategic Aggressiveness and General Management Capability Responsiveness. The gaps that must be closed will then provide the basis for planning the changes that must take place for the ESO to realize optimum performance in the future.
J– Strategic Transformation Change Management
When action is taken to close gaps in General Management Capability Responsiveness to support required changes in Strategic Aggressiveness, significant changes in behavior are required. These changes will produce resistance to change.
Resistance to Change will be behavioral when changes in climate are necessary and systemic when changes in competence and capacity are required. These changes will produce resistance to change.
Resistance to Change will be behavioral when changes in climate are necessary and systemic when changes in competence and capacity are required. Symptoms of resistance include change projects that do not meet objectives and do not complete within budget and the target time schedule. The basic strategies that can be used to manage resistance to change are shown in the following table:
When action is taken to close gaps in General Management Capability Responsiveness to support required changes in Strategic Aggressiveness, significant changes in behavior are required. These changes will produce resistance to change.
Resistance to Change will be behavioral when changes in climate are necessary and systemic when changes in competence and capacity are required. These changes will produce resistance to change.
Resistance to Change will be behavioral when changes in climate are necessary and systemic when changes in competence and capacity are required. Symptoms of resistance include change projects that do not meet objectives and do not complete within budget and the target time schedule. The basic strategies that can be used to manage resistance to change are shown in the following table:
Coercive change management and adaptive change management are lust what the names imply. Crisis change management can be used only when there is a survival crisis that is perceived by the entire organization.
Managed resistance change management was developed by Ansoff. It uses all of the time available for the change and will be somewhere between coercive and adaptive. This method begins with careful advance preparation for the change including development of a pro-change power base. The change is executed in a series of modular projects. each of which includes a planning and execution phase. Wherever possible. capability changes are implemented before the associated strategy changes. While the change is in progress, other features include involvement oi those who will be responsible for the changed functions, action to deal with residual resistance, and institutionalization of the changes. There is empirical support for this method.
K– Competitive Posture Analysis
One of the primary dimensions of the Ansoff school of thought is strategy formulation. Competitive Posture Analysis provides a process for formulation of strategy that will be responsive to the success factors in discontinuous environments (Environmental Turbulence levels 4 and 5). Range estimates of Future SBA Attractiveness and Future Competitive Position are developed on a scale of 1 to 10 to plot a Region of Uncertainty on a Competitive Posture matrix. The first step in estimating Future SBA Attractiveness is to state the ESOs relative priorities for growth, profitability and risk in terms of threats and opportunities. The SBA is then scanned to develop estimates of future growth, profitability and risk prospects. SBA Attractiveness is the sum of the growth, profitability and risk prospects weighted by the relative priority for each.
Competitive Position is calculated by determining how well the ESOs strategy, functional management capability and strategic investment will satisfy the future requirements in the SBA. Two values are calculated for Competitive Position. Extrapolated Competitive Position is the competitive position the ESO will have with no changes in strategy. functional management capability and strategic investment. Desired Competitive Position is the competitive position that the BSO would like to have in the SBA and may require changes in strategy, functional management capability and strategic investment. There may be both behavioral and systemic resistance to these changes and they need to be considered when developing the Strategic Transformation Change Management plan.
Strategy is a combination of the Growth Thrust, Market Position, Market Differentiation and Product Differentiation sub-strategies. Functional Management Capability is a combination of the values for the General Management. Marketing. Production, finance. R&D and other essential functions to support future success strategies in the SBA. Strategic investment includes all of the costs associated with gap closure, and new technology, product and market development, and is plotted on a marginal curve from Critical Mass, the minimum strategic investment required to break-even in the SBA, to Optimum Mass, the point of diminishing marginal returns.
By using range estimates, the size and location of the Region of Uncertainty is plotted by using the most optimistic and most pessimistic values for SBA Attractiveness and the most responsive and least responsive values for Future Competitive Position. Decision alternatives that are available include immediate action to enter an SBA. maintain or improve position or divest or wait to develop better information or start a gradual entry.
L– Portfolio Optimization
After a Strategic Diagnosis and Competitive Posture Analysis have been completed for each SBA identified in the Strategic Segmentation, the final step in the process is optimization of the strategic portfolio to determine which combination of SBAs will best satisfy the objectives of the BSO within the constraint of available funds for strategic investment. The three dimensions of Portfolio Optimization are Scope, Coherence and Diversity.
Portfolio Scope can be selected by developing a Life Cycle Portfolio Balance to plot the near and long-term position of each SBA on the Demand, Technology, Product Life Cycle curve. It is important to avoid a portfolio that has all SBAs at the same position of the life cycle curve. Portfolio strategy should assure an orderly transition from emergence to growth, maturity and decline so new SBAs will be developed to provide the growth and profitability that are possible in the growth phase to finance SBAs in emergence and replace losses in growth and profitability for SBAs in maturity and decline.
Portfolio Coherence analyses the Functional, Strategy and Management synergies possible with different combinations of SBAs. Synergy is very important in highly competitive environments.
Portfolio Diversity analyzes the exposure of the SBAs to risk and opportunity and assures that the strategic portfolio does not exceed the risk propensity of ESO top management. Selection of the best strategic portfolio is a function of Top Management in diversified ESOs.
M– Technology Management
Technology is the application of scientific knowledge to produce goods and services that are in general use in the environment. Management of technology is essential for ESOs to provide the new products and services that are required to satisfy changing needs in the environment. The key to success in technologically intensive environments is to select a technology strategy and the supporting technological capability that will be responsive to the technological turbulence in the environment and have a synergistic relationship with the Environmental Turbulence. Strategic Aggressiveness. General Management Capability Responsiveness success triplet. Stable technologies have long technology life cycles with ten significant product innovations that satisfy the demands in the environment. The internal combustion engine is a good example of a stable technology. Fertile technologies have relatively long technology life cycles but lend themselves to many significant product innovations that satisfy the demands in the environment. The silicon dioxide integrated processor ls a good example of a fertile technology. Turbulent technologies have very short. single product life cycles that satisfy the demands in the environment. Genetic medicines are good examples of turbulent technologies? Offensive technology strategies are first to market with products based on revolutionary technological innovations. Defensive strategies are second to market with products based on revolutionary technological innovations. Offensive and defensive strategies are appropriate for turbulent technologies and are usually employed during the emergence stage of the technology life cycle. Imitative strategies use the dominant technology or product design to enter the market during the growth or maturity phases of the technology life cycle. Technological capabilities are on a continuum from R oriented, where basic research is required tor the development of revolutionary technological innovations, to D oriented, where more engineering is required to develop products based on the dominant technology.
N– Societal Strategy
Environments that are subject to intense government regulation that can either facilitate or hinder ESO performance require proactive societal strategy. There is empirical support for the prescription that ESOs must have an aggressiveness of societal strategy and a responsiveness of management capability that are responsive to the turbulence of the regulatory environment.
Societal strategy begins with an analysis of the aspirations of powerful stakeholders in the environment. The ESO must decide whether or not to establish objectives that will be responsive to those aspirations. The next step is to determine the impact of laws and regulations that might result from stakeholder aspirations. Proactive societal strategies must then be developed to counter the actions of powerful stakeholders whose aspirations are not served by the ESO and to influence laws and regulations to minimize any negative impact on the ESO.
O– Summary
Many people have heard of Igor Ansoff, but few are really aware of the scope and richness of his school of Strategic Management thought. When Ansoff's work is cited by others, his 1965 Corporate Strategy is the dominant reference. Corporate Strategy represents Ansoff's early thinking and is a strategic planning book that deals only with strategy formulation. This paper provides a very brief summary of this multidimensional school of thought that includes strategy formulation, management capability design and management of transformational change. The Ansoff School of Strategic Management Thought is also unique in that it provides not only prescriptions for what needs to be done, but research-based methods for accomplishing the required strategic action. The most comprehensive reference available for the Ansoff school is Implanting Strategic Management. A very excellent Japanese translation of this work is available.
Patrick A. Sullivan, DBA
Principal, The Ansoff Associates
Managed resistance change management was developed by Ansoff. It uses all of the time available for the change and will be somewhere between coercive and adaptive. This method begins with careful advance preparation for the change including development of a pro-change power base. The change is executed in a series of modular projects. each of which includes a planning and execution phase. Wherever possible. capability changes are implemented before the associated strategy changes. While the change is in progress, other features include involvement oi those who will be responsible for the changed functions, action to deal with residual resistance, and institutionalization of the changes. There is empirical support for this method.
K– Competitive Posture Analysis
One of the primary dimensions of the Ansoff school of thought is strategy formulation. Competitive Posture Analysis provides a process for formulation of strategy that will be responsive to the success factors in discontinuous environments (Environmental Turbulence levels 4 and 5). Range estimates of Future SBA Attractiveness and Future Competitive Position are developed on a scale of 1 to 10 to plot a Region of Uncertainty on a Competitive Posture matrix. The first step in estimating Future SBA Attractiveness is to state the ESOs relative priorities for growth, profitability and risk in terms of threats and opportunities. The SBA is then scanned to develop estimates of future growth, profitability and risk prospects. SBA Attractiveness is the sum of the growth, profitability and risk prospects weighted by the relative priority for each.
Competitive Position is calculated by determining how well the ESOs strategy, functional management capability and strategic investment will satisfy the future requirements in the SBA. Two values are calculated for Competitive Position. Extrapolated Competitive Position is the competitive position the ESO will have with no changes in strategy. functional management capability and strategic investment. Desired Competitive Position is the competitive position that the BSO would like to have in the SBA and may require changes in strategy, functional management capability and strategic investment. There may be both behavioral and systemic resistance to these changes and they need to be considered when developing the Strategic Transformation Change Management plan.
Strategy is a combination of the Growth Thrust, Market Position, Market Differentiation and Product Differentiation sub-strategies. Functional Management Capability is a combination of the values for the General Management. Marketing. Production, finance. R&D and other essential functions to support future success strategies in the SBA. Strategic investment includes all of the costs associated with gap closure, and new technology, product and market development, and is plotted on a marginal curve from Critical Mass, the minimum strategic investment required to break-even in the SBA, to Optimum Mass, the point of diminishing marginal returns.
By using range estimates, the size and location of the Region of Uncertainty is plotted by using the most optimistic and most pessimistic values for SBA Attractiveness and the most responsive and least responsive values for Future Competitive Position. Decision alternatives that are available include immediate action to enter an SBA. maintain or improve position or divest or wait to develop better information or start a gradual entry.
L– Portfolio Optimization
After a Strategic Diagnosis and Competitive Posture Analysis have been completed for each SBA identified in the Strategic Segmentation, the final step in the process is optimization of the strategic portfolio to determine which combination of SBAs will best satisfy the objectives of the BSO within the constraint of available funds for strategic investment. The three dimensions of Portfolio Optimization are Scope, Coherence and Diversity.
Portfolio Scope can be selected by developing a Life Cycle Portfolio Balance to plot the near and long-term position of each SBA on the Demand, Technology, Product Life Cycle curve. It is important to avoid a portfolio that has all SBAs at the same position of the life cycle curve. Portfolio strategy should assure an orderly transition from emergence to growth, maturity and decline so new SBAs will be developed to provide the growth and profitability that are possible in the growth phase to finance SBAs in emergence and replace losses in growth and profitability for SBAs in maturity and decline.
Portfolio Coherence analyses the Functional, Strategy and Management synergies possible with different combinations of SBAs. Synergy is very important in highly competitive environments.
Portfolio Diversity analyzes the exposure of the SBAs to risk and opportunity and assures that the strategic portfolio does not exceed the risk propensity of ESO top management. Selection of the best strategic portfolio is a function of Top Management in diversified ESOs.
M– Technology Management
Technology is the application of scientific knowledge to produce goods and services that are in general use in the environment. Management of technology is essential for ESOs to provide the new products and services that are required to satisfy changing needs in the environment. The key to success in technologically intensive environments is to select a technology strategy and the supporting technological capability that will be responsive to the technological turbulence in the environment and have a synergistic relationship with the Environmental Turbulence. Strategic Aggressiveness. General Management Capability Responsiveness success triplet. Stable technologies have long technology life cycles with ten significant product innovations that satisfy the demands in the environment. The internal combustion engine is a good example of a stable technology. Fertile technologies have relatively long technology life cycles but lend themselves to many significant product innovations that satisfy the demands in the environment. The silicon dioxide integrated processor ls a good example of a fertile technology. Turbulent technologies have very short. single product life cycles that satisfy the demands in the environment. Genetic medicines are good examples of turbulent technologies? Offensive technology strategies are first to market with products based on revolutionary technological innovations. Defensive strategies are second to market with products based on revolutionary technological innovations. Offensive and defensive strategies are appropriate for turbulent technologies and are usually employed during the emergence stage of the technology life cycle. Imitative strategies use the dominant technology or product design to enter the market during the growth or maturity phases of the technology life cycle. Technological capabilities are on a continuum from R oriented, where basic research is required tor the development of revolutionary technological innovations, to D oriented, where more engineering is required to develop products based on the dominant technology.
N– Societal Strategy
Environments that are subject to intense government regulation that can either facilitate or hinder ESO performance require proactive societal strategy. There is empirical support for the prescription that ESOs must have an aggressiveness of societal strategy and a responsiveness of management capability that are responsive to the turbulence of the regulatory environment.
Societal strategy begins with an analysis of the aspirations of powerful stakeholders in the environment. The ESO must decide whether or not to establish objectives that will be responsive to those aspirations. The next step is to determine the impact of laws and regulations that might result from stakeholder aspirations. Proactive societal strategies must then be developed to counter the actions of powerful stakeholders whose aspirations are not served by the ESO and to influence laws and regulations to minimize any negative impact on the ESO.
O– Summary
Many people have heard of Igor Ansoff, but few are really aware of the scope and richness of his school of Strategic Management thought. When Ansoff's work is cited by others, his 1965 Corporate Strategy is the dominant reference. Corporate Strategy represents Ansoff's early thinking and is a strategic planning book that deals only with strategy formulation. This paper provides a very brief summary of this multidimensional school of thought that includes strategy formulation, management capability design and management of transformational change. The Ansoff School of Strategic Management Thought is also unique in that it provides not only prescriptions for what needs to be done, but research-based methods for accomplishing the required strategic action. The most comprehensive reference available for the Ansoff school is Implanting Strategic Management. A very excellent Japanese translation of this work is available.
Patrick A. Sullivan, DBA
Principal, The Ansoff Associates
