Strategy As Simple Rules (Yahoo) - Essay Example

?STRATEGY AS SIMPLE RULES Introduction The presence of competitors brings about competition, and the presence of competition provokes the need for a competitive advantage to be designed in order to survive the competition that any company is presented with. Different companies have thus used different forms of market scope technicalities to devise strategies, all of which can be boiled down to just one word, which is strategy (Hammer and Champy, 2005). Major local and multinational companies have been distinguished from each other, based on the strategies they use in their corporate operations and organization. In the case of Yahoo! as a case study, a lot can be said about the company’s identity in terms of its strategic management options and principles. Studies have actually showed that a lot of Yahoo!’s success since its establishment in 1994 can be attributed to the type of strategy that the company uses. In the option of Eisenhardt and Sull (2007), Yahoo! uses what is referred to as strategy as simple rules. The ideal behind this model of strategic management is to make good use of one’s opportunities on the market rather than pin one’s self to stringent book principles on strategies (Turner, 2002). In this essay therefore, four key areas or aspects of strategy as simple rules are outlined from the Yahoo! perspective. The first key point touches on zeroing in on key processes whiles the second key point is on simple rules for unpredictable markets. The third key point will elaborate the subject of what simple rules are not whiles the last key point delves into knowing when to change. The essay will be concluded with a summary and recommendation for Yahoo!’s implementation. Zeroing in on key Processes Most often than not, there has been a confusion to equalize strategy as simple rules with a corporate atmosphere where no strategies or processes exist at all. But it has been said that the absence of strategy is a recipe for chaos in any corporate management regime as strategies form the bedrock of corporate culture and for that matter organizational climate (Gunn, 2005). Strategy as simple rules therefore does not in any way endorse such chaotic environments where there are no strategies or processes to make the corporate agenda functional. What strategy as simple rules rather does for managers is that it helps them “pick a small number of strategically significant processes and craft a few simple rules to guide it” (Eisenhardt and Sull, 2007, p. 10). In effect, to zero in on key processes means to use processes as a means to get to the end, which has to do with the setting of rules. Even with this, the processes that will be picked must not be judged from its quantitative basis but on how quality and significant they are to achieving the corporate dream. Quite significantly, a number of companies including Yahoo! has zeroed in on key processes to ensure the creation of competitive advantage for themselves. At Yahoo! for instance, it is reported of how managers zeroed in on key processes by giving emphasis to branding and product innovation, where a four-point product innovation rule was set (Eisenhardt and Sull, 2007). Normally, the advantage with this approach have having fewer but highly significant processes to deal with is that it helps the company to keep focus of its strategic processes so as to ensure closer monitoring of these processes (Hammer and Champy, 2005). The realistic success that Yahoo! recorded when it introduced its four product innovation rules and gave much room for its developers to operate was that this product innovation that was not backed with many processes led to the creation of a new sport page, which had over 100,000 hits in only 48 hours (Eisenhardt and Sull, 2007). This is indeed a justification on the need to always find a means to zero in on key processes. Simple Rules for Unpredictable Markets Strategy as simple rules may have worked in several instances but its propagators insist that the need to constantly identify the best circumstances under which strategy as simple rules will work best is a compulsory feature of the phenomenon. One of the circumstances that would possibly have to be looked at is the nature of market on which the strategy as simple rules is being applied. Studies have showed that applying the same logic of strategy on all types of markets may be a recipe for market failure (Bargh, Scott and Smith, 1996). This is because different markets respond to different strategies differently. As far as unpredictable markets are concerned, there are a number of ways that simple rules constructed after zeroing in on key processes would have to be used. For unpredictable markets, much of the attention with rules would have to be kept simple so that the main focus of corporate structuring can be on the manager or facilitators of the rules (Turner, 2002). In light of the above, Eisenhardt and Sull (2007) identify five broad categories of simple rules. Each of these categories tries to set basis for which simple rules may be applicable to unpredictable markets. For example using how-to rules helps managers to identify what makes their process standout from other processes. A typical example of this is Akamani’s rule that provides that all questions and interrogations from customers must be answered on the very first call to the front desk. Eisenhardt and Sull (2007) also identifies the boundary rules, which provides that in an unpredictable market, managers only identify opportunities that can be pursued and live out on those that are out of their reach of realization. This is indeed synonymous to prioritizing one’s opportunities to make the best out of the lot (Bailey, 2003). The third category of simple rule is priority rules, which according to Eisenhardt and Sull (2007) help managers to rank their accepted opportunities. This category will be differentiated from the second with the understanding that, the second one does not lead to the identification of only accepted opportuinities but as many opportunities that are available as possible. Eisenhardt and Sull (2007) note that a typical example of the priority rules is what is in use at Intel for allocating manufacturing capacities. The forth category of simple rules that may applied in an unpredictable market has to do with timing rules, which as the name applies forces managers to tune themselves with the pace of emerging opportunities. Finally, there is exit rule, which is a timer rule for letting managers know when to say ‘stop’ to an old process. What Simple Rules are Not Indeed reading from the preliminary opinions shared by Eisenhardt and Sull (2007) in their article, one may be quick to conclude that the writers are promoting a chaotic business environment that is free from all strategies and kick against the need to have orderly competitive advantage. But the key point on ‘what simple rules are not’ erases all such thoughts by clearly distinguishing strategy as simple rules from the absence of strategies all together. In this, the writers note that the fact that there must be simple rules does not mean the rules that will be set for corporate management must be vague, broad and mindless. Rules that are broad are said to be hard to follow to the letter because they provide several options of adherence (Glover, 2004). That is, when a single rule is not kept to a single process, employees and other stakeholders may have several options as to how to fulfill the processes. Therefore, each other person’s opposing opinion or rule becomes right to some extent (Handy, 2008). It is therefore in the right taste that Eisenhardt and Sull (2007) do not approve of rules that are broad. Again, rules are said not to be simple if they are vague. Vague rules could be said to be those kinds of rules that are not linked to any outcomes (Handy, 2008). In effect, when a rule is not made to achieve a specific goal, it cannot be said to be a simple rule. Finally, it is important to note that simple rules are not mindless, and this is according to Eisenhardt and Sull (2007). The writers explain that implicit rules destroy rather than create value. Though this may be truth to some extent, Robson (2004) has also explained that the core building grounds on which innovative rules function is on the grounds of open mindedness in thinking and thus a character of embracing mindless rules. Knowing when to Change Eisenhardt and Sull (2007) opine that changing the rules may have its own merits and demerits. In light of this, Robson (2004) has suggested that as much as it may be important to have the rules changed at certain times, it is always important to understand the times of change. This is because by understanding the times of change, it will help managers to critically understudy prevailing forces on the market at the time of change so that the changes that are made will on their own serve as strategies for simple rules. Using Yahoo! as a case study, it would be noted that even though the company has generally held itself to strategy as simple rules, the company has not followed this principle in an absolute robust manner, preventing it from undertaking key changes in its strategic management styles (Glover, 2004). In effect, it is important to draw a clear distinction between what change in the core strategy is, and what change in internal strategy is. If Yahoo! had changed from the strategy as simple rules entirely, it would have been said that the company had changed its core strategy. But because the company only changes the dynamism from which it approaches the strategy as simple rules principle, it can be said that it is only an internal changes in strategies that is embarked upon. Generally, the time to undertake core strategic changes has been said to be those times when all forms of internal changes in existing strategies have proved to be non-functional (Gunn, 2005). That is, changing core strategies should always come in as a last resort. Summary This essay was dedicated to investigating the viability of strategy as simple rules in today’s competitive business environment when competition in one’s industrial sector does not come only from among companies that are located next door because of globalization (Bailey, 2003). The discussions so far have highlighted the need for key processes to be zeroed down on. This means that the era where companies pinned themselves down to strict management processes must be a thing of the past. Whiles doing this however, the need to realize the time to change a set of existing principles but me noted. For an unpredictable market such as the internet portal market for instance, Yahoo! has known how to play it safe during different climates of the global business economy and this has worked perfectly for the company (Bargh, Scott and Smith, 1996). But to all companies that would want to use strategy as simple rules to the letter, including Yahoo!, the discussion has made it clear that it is important to realize and recognize what rules are not. This is because the use of rules is the backbone to strategy as simple rules and when the right rules are not applied, expected changes will not manifested. Conclusion From the above key points that have been discussed using the opinions and reviews from related works of literature on strategic management and for that matter, strategy as simple rules, it can be concluded that much of the success that is associated with a particular business’s commercial success is dependent largely on how the company is able to customize its strategic principles to suit its identified opportunities. The success of Yahoo! is a perfect case study to reinforce the fact that following strategic principles must not necessarily be according to those flamboyant ones that are written in books and studied at the highest academic levels. Knowing what to do with the opportunities that presented themselves at Yahoo! was the simplest principle that got the company succeeding and becoming a key universal business giant. If the strategy as simple rules has worked well for Yahoo!, there is every certainty that is will work for any other company that is able to identify the best but simplest forms by which it can make use of its market opportunities. Recommendations There are four key recommendations that can be made from the discussion so far and in relation to the conclusion drawn. 1. The identification of strategic processes must always be made by companies before setting out rules that will engage the enactment of their strategies. 2. There should not be a single strategic rule that will be considered omniscient to all market conditions. Rather, each type of market should have its own rules even if the core strategies of the company remain the same. 3. The need to follow a particular strategy in any competitive market must not be because others are using the strategy but that because the strategy meets prevailing opportunities and helps the company to make the best out of those strategies. 4. Strategy as simple rules has worked well for Yahoo! and most other companies but as constantly as possible, there must be internal changes to the core parameters of the strategy. Reference List Bailey J (2003) Job Design and Work Organization. London, Prentice-Hall International Inc. Bargh C, Scott P & Smith D (1996) Governing Universities: Changing the Culture? Buckingham: SRHE Eisenhardt, Kathleen M. and Sull, Donald N (2007) Strategy as Simple Rules. Harvard Business Review. 2001. P. 107-112. Glover H A (2004) Case Study: The Management of Structural Change, MBA Dissertation, University of Derby Gunn B (2005) The paradigm shift in university management. International Journal of Educational Management (9)1, pp28-40. Hammer M & Champy J (2005) Reengineering the Corporation: A Manifesto for Business Revolution. London, Nicholas Brealey Publishing Limited Handy C (2008) Gods of Management. London: Souvenir Press Robson W (2004) Strategic Management and Information Systems. London: Pitman Publishing Turner P (2002) HR Forecasting and Planning. London: Chartered Institute of Personnel & Development Read More