Strategic Management - Innovation as an Important Tool for Business - Essay Example

STRATEGIC MANAGEMENT By Location Strategic management Innovation O’Brien and Shennan p. 3) define innovation as the idea translation process into a product or service that is able to create value for the targeted consumers that are willing to pay for the same. Innovation requires the application of information deliberately, imagination with the aim of satisfying a specific need that the customer base might be having. Duin (2006, p. 14) suggest that organisations that fail to apply innovation as part of their operational strategy risk losing their market share because a competitive market requires that a business focuses on developing new products and services as per the needs of the market. Innovation is an important tool for businesses that is born out of some factors such as globalization and outsourcing as these two tend to push the need for an organisation to become more effective and efficient in their operations. In essence, organisations require innovative processes in order for them to cut down on production costs while making sure that they deliver quality products that would make them to be distinguished within the market they operate in. According to Kelloir (2007, p. 180), one factor that drives innovation for a business is the expectations that consumers have because they are known to yearn for products that can help make life easy for them. An example of this would be the need for consumers to bank conveniently without having to go physically to the bank, which facilitated the e-banking options that makes them to access their money at the click of a mouse button through the internet. With this, customers will go for service providers that provide these services despite the cost implications that this service might attract because they are willing to spend more in order for them to be satisfied. One fact that product and service producers understand is that consumers cannot settle for less if they know that they can go somewhere else and find what they want making innovation and being entrepreneurial to be part of their firm’s. When it comes to the various approaches to innovation for entrepreneurs, Garner (2009, n.p) asserts that they understand that this aspect is what makes them unique within their markets by making it to be a priority. For one, some entrepreneurs can view innovation from a strategic point view by asserting that this can hold the future success of their organisations. However, some entrepreneurs when asked say that they find it hard to integrate innovation to be part of the strategic priorities that they have because of the cost implications that this process may attract for their businesses. Other entrepreneurs may find innovation to be a matter of priority but might do not state it as part of the organisation’s objectives, which should be the most advisable approach. On the contrary, Herzog (2011, p. 58) intimates that entrepreneurs can also view innovation to be part of their corporate culture in which an organisation might strive to do so through the recruiting of individuals that are likely to bring new ideas and concepts to the company. Another approach can be that of working with agencies that are not linked to the organisation in any way who are also able to bring on board new ideas that a business might need to sustain its performance in a market. In order for this to be achieved, corporates tend to use the staff rewarding system where those that offer innovation solutions that a company can use receive rewards, which encourages them to be more innovative (Khosrow-Pour 2004, p. 363). In essence, a high percentage of entrepreneurs are likely to apply this approach because the results are guaranteed and it helps in encouraging employees to innovate more. The implication of this is that entrepreneurs tend to the apply the approach of building an innovation culture as an avenue for fostering business growth in order for them to become market leaders. However, it is important for a business to ascertain the most cost effective approach that can be used when seeking to implement innovation as a strategy such as the Jugaad approach. In essence, Jugaad is a word in Hindi that describes the developing of effective solutions through limited resources in order to overcome the challenges being faced (Baumer, Kreutter & Messner 2012, p. 47). This approach is being used by entrepreneurs to foster growth within the emerging markets that they target that include Africa, Brazil, India, and China because these regions are known to have limited resources at their disposal. The art of Jugaad requires that entrepreneurs develop products and services that are affordable to the markets that they target and that are sustainable in order for these companies to remain in business. In essence, this is the same concept that has seen cell phone manufacturers excel in India because of the developing of cell phones that are affordable hence tapping into to this lucrative market. Innovation tends to have a number of limitations as much as it can serve as a effective tool that can help a business to gain competitive advantage over rivals because it is expensive and time-consuming (Krozer 2008, p. 127). Further, an entrepreneur is required to conduct extensive research in the market that they operate in so that they are able to ascertain what the customer needs are before they can begin the process of product development. The process of gathering the data can take time and might also influence an entrepreneur to invest immense resources in order for the research process to have an impact on the direction that the business seeks to go making to have its fair share of limitations. In summary, innovation and taking of the entrepreneurial approach as part of the development and implementation of a company’s strategy is quite important because it helps in edging out competition for a business. Further, innovation can be costly to a business but the returns are high because the product and services developed are able to influence customer satisfaction and brand loyalty because they were developed as per the needs that the market presented. Lastly, it is important that that entrepreneurs ascertain the best approach to use when applying the innovation strategy because what might work for one company might not work for another. 2. Management of strategic change Kazmi (2008, p. 320) defines strategic change management as the process of managing change in a systemic and structured manner with the aim of meeting the organisation’s goals and objectives . Over the years, businesses have come to realize that change is an essential component that allows businesses to thrive within competitive business environments. The beauty of strategic change management is that it allows business managers to carefully make the changes required in their organisations, which also makes the process to be responsible. For one, managers should understand that in order for them to implement change effectively, it is important for them to change the organisational culture before implementing anything (Thomas 2005, p. 3). Organisational culture refers to a set of values, way of thinking, beliefs and understanding that members of an organisation share, which can be taught new members because it is perceived to be correct as defined by Inceoglu (2002, p. 16). In most cases, the process of implementing change by managers tends to be met by resistances because of the discomfort that the process tends to attract to the employees that were used to doing things in a particular way. Based on this, the change management approach that managers use tends to vary across individuals and organisations base on the uniqueness of the project or the situation that the organisation is going through. An example of a business that has successfully implemented strategic change management is British Airways where it sought to reduce its inefficiency by restructuring the entire organisation in 1981 (Syrett 2008, p. 2). The chairman of the organisation began to systematically implement change and started by reducing its human capital, which was a change management strategy that the chairman supported diligently. As a requirement, the process of change management requires that a manager communicates with other stakeholders on which direction an organisation should be heading and also defend the decisions they make effectively. The British Airways chairman applied this strategy that ensured that the intended approach succeeded at brining the desired organisational results. One limitation that strategic change management attracts to an organisation is if the plan implemented fails to meet purpose if it was poorly developed (Resch 2011, 15). Therefore, a strategy can be implemented by a company through a manager but this does not guarantee its success because it can also fail despite the plan having been proven effective initially. As much as a plan is proven to be risk free, it is has the potential of bringing down a company making it to be a risk taking process in which some pitfalls are unavailable. Strategic change management can be done in at least two frameworks in which organisations through their respective managers can choose as a strategy that can be used in bringing change and growth to an organisation. One model that can be applied in brining change to an organisation is one by Lewin that was developed by psychologist Kurt Lewin in 1950s. Lewin’s model is a three stage model that recognizes that people prefer to work within certain safety zones. The first stage is the unfreezing, which requires that mangers apply motivation strategies to unfreeze the resistance to change that they might behaving (Liu, Akram & Bouguettaya 2011, p. 89). Transition is the second stage where a company has to go through a transition period once the change has been initiated, meaning that adequate leadership is required at this stage. The third stage in this model is the refreezing in which a company refreezes so as to operate under the new guidelines implemented as the company becomes more stable. The other applicable framework for strategic change management is the 8 step change model developed by John Kotter that asserts that leaders should be able to convince employees in order for them to accept the process of change with ease. According to Cameron & Green (2012, p. 126,) the eight steps in this framework require that a managers increases the urgency for change, create a team that will be dedicated to the change that is being implemented and then the managers create the vision that employees should have for change. The fourth step is that of managers communicating the need for change while the fifth step requires that managers empower their employees with the required skills for the change to be applied and sustained. The other three steps are managers creating short term goals for the employees, being persistent and lastly making sure that the change implemented is permanent that will ensure that the change applied remains within the organisation for a long time (Batemen 2012, n.p). The advantage that this model has is that it helps to prepare the employees for the change and also helps them to accept the change process with ease. To summarize, managers should approach strategic change management by having the key factors in mind that are likely to make the process to be successful. For one, mangers should choose an approach that better suits their organisations and that they are comfortable with in order for them to attain the results that they desire for their organisations. Change should also be implemented out of the need to do so because when it is brought without having a clear reason as to why it should be implemented then it is likely to fail. Kotter’s and Lewin’s model for bringing change to an organisation are applicable approaches in the process of managing strategic change in an organisation. 3. Corporate culture Buono and Bowditch (2003, n.p) define corporate culture as the company’s beliefs, values, taboos, myths, symbols, and rituals that are developed over time. It can either be written through a mission statement of a company, understood or spoken that helps in the governing of an organisation in terms of how the company owners and employees feel and act within the same. A company’s corporate culture plays an important role as it helps in determining the way the business will perform and how effective it can be able to achieve its organisational goals and objectives (Miroshnik & Basu 2014, p. 15). Corporate culture is important because it helps in minimizing instances where employees perform their duties as individuals in order for them to meet their own needs without factoring that success should be organisational and not individual. A healthy corporate culture influences employee retention especially when an organisation values its employees by rewarding for their efforts (Jackson, Schuler & Warner 2012, p. 354). An example of this would be to reward an individual for their efforts and having the reward being named after the person that was first received the award. The issuing of employee rewards can be done through an award giving ceremony, which influences employees to feel appreciated and valued by their company by making it to be a usual activity. A healthy corporate culture also increases productivity within an organisation because it tends to boost their morale, which in turn makes the financial aspect of an organisation to be healthy through increased profits (Pastorino & Doyle-Potillo 2010, p. 583). Additionally, a healthy corporate culture influences employees to develop quality goods and services especially if an organisation provides an atmosphere that is conducive and acceptable to the employees. According to Cummings & Worlye (2014, p. 563), an existing corporate culture makes it hard for change to be implemented within an organisation meaning that it tends to be resistant to change and difficult to control. The implication of this is that a corporate culture that is dysfunctional can lead to grave outcomes especially when the organisations members refuse to change it. Companies that have a strong corporate cultures tend to foster innovativeness, influence their productivity levels and also creates a sense of ownership for their employees and their customers. A strong culture also makes their employees and the management team to be aware of what is required of them by an organisation making them to act as per the stated core values. Another advantage attached to a company having a strong corporate culture is that it helps an organisation to achieve competitive advantage through its unique way of doing things (Corgel, Sturman & Verma 2011, n.p). One organisation that has succeeded through its unique corporate culture is SouthWest Airlines, which applies the employee centric culture approach. The employee centric approach applied by South West Airlines requires that the employees are motivated enough that they are bale to interact with the customers as required without the management team being around to supervise them. Therefore, the strong culture that this airline has influences employees to act in the best interest of customers because their needs have met and that their work environment is conducive enough for them to be productive. In essence, an employee centric culture allows an organisation to focus on the needs of their employees and addressing them in order for them to be more productive and active at work. As much as a strong corporate culture has advantages to an organisation, it also attracts disadvantages. One disadvantage is that strong corporate cultures lack diversity because the employees and the management share similar goals and objectives that cannot be changed easily. It also does not allow employees to give divergent opinions that can help in solving other foreseen challenges for an organisation. The implication of this is that strong corporate cultures do not provide conducive environments that can allow employees to be innovative for the good of the companies they work. Additionally, this culture also paves way of abuse because employees have the freedom and autonomy to do as they please, to which they can abuse this privilege by failing to deliver as required and also because there might be a lack of central authority (Grffin 2012, p. 585). As it emerges, a strong culture is important for an organisation because it allows every individual within the organisation to be aware of what the organisational goals are in order for them to align their efforts to the same. Moreover, changing an existing corporate culture is difficult because it is not easy to convince people within an organisation that the way they have been doing things has not been working and should be changed. The moving from certain comforts in order for a business to perform as it should be done by first convincing the organisation members why the corporate culture has to be changed in order for the process to yield desired results. For instance, Home Depot Company used to have decentralized culture that the organization members were used where decision making was based on ‘gut feeling’ instead of them utilizing the available data. In 2000, when Robert Nardelli was made the new CEO, this strong culture that was not productive was the first thing that he sought to change within the organization, which was met by resistance. Nardelli wanted to create a centralized decision making function that was initially left to individual stores to make in which many employees left the company because of these changes. Nardelli’s initiative attracted impressive financial results, but it was still criticized because the people within the organization were used to a strong culture that had to be replaced with new values, which was challenging to employees. On the contrary, corporate culture has limitations that include the lack of diversity, which makes it difficult to people to give ideas that can help in influencing competitive advantage for a company. Despite these challenges, a strong corporate culture is needful because it helps itself to identify its values and beliefs that team members should align themselves with. 4. The role of power and politics in an organisation’s strategic development Power and politics within a business setting asserts that organisations tend to have problem solving, rewards and socio-technical systems, but there are political structures as well that are focused on the distribution of authority as suggested by Furze et al (2012, p. 150). This implies that individuals that yearn for power within can be able to secure within a business setting because it is permitted. Organisations have political structures that help individuals to build careers while people express their interests and motives that are likely to push them to the next level that they desire. Power refers to the ability for an individual to have something done as per their liking either through physical or human resources and making them aide in the achievement of the organisational goals. Power exists in six types that include informative, coercive, legitimate, reward, expert, referent power. Steve Jobs, the former Apple Inc CEO is considered to have at least these six types of power, which made him to be a powerful entrepreneur and business person. As the head of Apple Inc, he was entitled to have unquestioned and legitimate power and he also had expert power because he was an expert at developing products that people did not think were possible to create among the list of the other powers. Employees at Apple Inc had to work hard in order for them to win Job’s approval because the type of power he had led him to command a lot of power that led the company to be one of the leading companies in technology in the world. He had the ability to persuade and influence his employees towards results, which was later called ‘reality distortion filed’. Organisational politics on the other hand, refers to the behind the scenes efforts that focus on selling of ideas in order for one increase power, influence an organisation to go a particular way or achieving of other objectives (Robbins 2009, p. 358). Power and politics play a significant role in an organisations’ strategic development process as this can help in producing innovative approaches that can foster an organisation to go towards the direction of success (Schriesheim & Neider 2006, p. 22). According to John Gardner, power can be the force that decodes one’s intent to reality and plays a role in sustaining it, which can also be a leaders capacity to achieve greatness. Power can be used as a tool for overcoming resistance and requires the continuous application of efforts to ensure that priority decision is enforced and is not challenged by the organisation members (Daft 2009, p. 426). When relating power and politics, organisational politics can be the use of power, which is a source of energy that can be used in managing relationships within an organisation. Power On the other hand, also tends to control the outcomes of situations because those that have more power within an organisation tend to have a lot of influence on the decision making functions in the same. Another role that power and politics have in the process of strategic development of an organisation is that they help in creating effective leadership (McManus 2006, p. 144). In some quarters power can be used as a tool that can allows individuals to achieve personal satisfaction because of the attribute of being in control while others use the power at their disposal to enhance their abilities to facilitate the organisational tasks. People that use power in order for them to achieve personal satisfaction do so in an attempt to be personally mature, which might in turn compromise their ethical positions because this puts the organisation’s effectiveness at a risk. Before a leader can implement any strategic decision, it is important for them to understand the political dynamics that come to play because these tend to shape the negotiation and mediation aspects. Power can either be autocratic, bureaucratic, technocratic, of through direct democracy, representative democracy or through codetermination (Wood-Harper, Wood & Jayarantna 2013, p. 71). So is it important to understand which power dynamics are at play within the organisation and ascertain whether they need that type of power to achieve what they want, which can also be part of a strategic development for a business. In summary, power can help in the resolving of conflicts as much as politics tends to influence conflict in terms of people brining forth their personal interests that can either help them or their organisations. On the contrary, effective politics requires the maintaining of relationships in order for managers and organisations to achieve desired results by managing employees to contribute to the process, intimating that politics is not necessarily a bad approach. In most cases, power issues tend to arise as a rise of the available resources being scarce influencing individuals to apply tactical approaches that would allow them to amass these resources for themselves. In the process people tend to form alliances with individuals that share the same ideas that can help them to achieve these resources through behaviors such as bargaining, negotiation and resolving interests that attract conflict. However, research has proven that organisations where politics and power struggles take centre stage are less committed to the organisation and its objectives. Power and politics should not be used as divisive tools but should be used to help leaders to facilitate the effective completion of organisational tasks through the authority given to them for the god of the same. 5. The contribution of the five forces framework in establishing the bases for competitive advantage Chasen & Putnam (2012, p. 89) define the Five forces framework is an analytical tool that was developed by Michael E Porter in 1979 for assessing and evaluating the strengths and position of a business organisation within the markets that they target. The basis of the theory is on a business being able to determine the competitive intensity of a business and also the attractiveness of the market. The advantage that this framework presents is that it allows a business to ascertain where its strengthens are and also identifies the strengths that lie in the markets that the company seeks to venture into (Baugh 2008, p. 32). For a business, the use of the five forces model helps a business to ascertain whether a new product or service that is set to be launched in a market will be profitable. The five forces model allows businesses to make informed decisions on whether their entry into a certain market or industry can be profitable to them or whether they should apply more efforts in order for the business to capture their target markets more. The five forces include supplier power where a business determines how easy it can be for suppliers to influence the price within a market while buyer power is the analysis of how the buyers are able to influence a price reduction on the products and services within the market (Sparkes 2008, p. 99). For instance, Apple Inc took over its product service functions and retail distribution by creating the Apple store, which reduced the power that distributors had. The other force within this framework is competitive rivalry, which determines the number of competitors and how to narrow down the rivalry. Apple is a good example of a company that utilizes the Five forces framework because its products never go on sale and also tends to avoid price based competition, which makes the company to avoid low end markets because these markets tend to have price as the main differentiator. The forth force is the threat of substitution in which a business should ascertain the possible alternatives that exist within the market that can allow consumers to switch to them. The last force is the threat of new entrants which should be analyzed especially if the market that they operate in is highly profitable meaning that things such as the economies of scale, patents and government requirements and regulations that can hinder a product from successfully penetrating a market (Martinez & Wolverton 2009, p. 6). Once these factors have been identified, a business should then embark on determining whether the pressures presented are weak, moderate or strong so as to help in the decision making process. Managers should know that when the five forces are producing competitive pressure that is strong then this market is unattractive and not suitable for making any investments and vice versa as intimated by . An ideal market should be one that suppliers and buyers both have low bargaining power, the barriers to entry are high for new market entrants, there is minimal rivalry among sellers and minimal substitutes exist within the same market. Competitive advantage can be achieved by a business if it chooses to go in a direction that will protect it from competitive pressures in order for them to remain competitive in the markets they operate in. Altering the factors that are underlying that influence competitive pressure can help a business to make profits and increase its market share. Five forces model tends to have limitations because it can only be applied in organisations that operate in vast markets meaning that it might not attract the required results for a organisations that work in smaller industries or sectors. On the other hand Porter’s five forces model is static as compared to other competitive frameworks because it applies chronological thinking as inclined by Faarup (2010, p. 113). Based on this, it cannot be a reliable tool especially when a company seeks to evaluate its mid term to short-term goals because it only helps in unearthing details that can be used on the long term. Lastly, conclusions arrived at through the five forces framework can be false as they are usually used in brainstorming ways in which a company can be able to gain competitive advantage. In conclusion, the five forces framework as develop by Kotter can be a contributor towards a company achieving competitive advantage because it helps in making decisions that can move a company towards the direction that its rivals have not ventured into (Rodenberg 2007, p. 24). For example, Rosenbluth International is a company that operated in a highly competitive travel agency industry that have influenced the various stakeholders to adopt digital tools so as to stay ahead of their competition rivals. This threatened the survival of Rosenbluth, but the company opted to implement a web based travel management solution that would make it easy for their consumers to access their services and make bookings. Therefore, Rosenbluth used IT innovations so as to increase its sales volumes and to eliminate the threat of competition to become a leader in customer service, integrated information management and travel technology based on Porter’s five forces framework. From this example, it emerges that Web based applications can be integrated into a company’s systems so as to create excellent customer service, which in turn influences customer loyalty and makes a company to gain competitive advantage over rivals. The five forces model is also an analytical tool that can be used by businesses to gauge the market profitability outlook then make them to choose whether to risk joining the market or not. In order for a company to gain competitive advantage using the analysis of the five forces, they should choose to work in markets that have minimal rivals, many barriers to entry to discourage new market entrants, and have no substitutes or alternatives to the product that they intend to offer. The market should also be one where the buyer and supplier power is low as this two have the ability to increase or decrease product price, which in turn affects the profit margins of a business. Bibliography Bateman, N 2012, The business of nurse management: a toolkit for success, New York, Springer. Baugh, JB 2008, Deregulation and Management Strategies: A case study of Georgia System Operations Corporation, London, Pro-Quest. 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Wood-Harper, AT, Jayaratna, N & Wood, B 2013, Methodologies for developing and managing emerging technology-based information systems information systems methodologies 1998, Sixth International Conference on Information Systems Methodologies : proceedings of the Sixth International Conference of the British Computer Society Information Systems Methodologies Specialist Group, held on 25-27th August 1998, London, Springer. Read More