Analysis of Strategy as Revolution Article by Hamel - Coursework Example

Business Strategy Introduction The article produced by Hamel under the Strategy as Revolution wasfirst published in 1996 through the Harvard Business Review. It has been little over a decade since the article was published and it seems that the lessons as well as the principles given by Hamel (1996) are still being repeated in the context of strategy. The ten principles outlined by Hamel touch quite a few different topics and theoretical issues which deal with the ideas of strategy and making the right plans for businesses. Strategy and Revolution The first and perhaps most important point made by Hamel (1996) is the idea that strategy does not need to come from the board room since innovative ideas can be used from anywhere in the company. In essence, what Hamel wants companies to do is to see strategy as a fluid process where no good idea is left unexplored. Further, this notion also ties in with the idea of employee empowerment that is supposed to motivate employees to make their own decisions and help guide the company towards success. This was certainly shown to be true by Burlingham (2003) who reported on the strategy at the best small company in America (Zingerman’s Community of Businesses) and discussed how employee empowerment, democratization of the strategy making process and allowing individuals to work on projects close to their heart can lead a company towards success. The Zingerman’s Community of Businesses works with a strategy of getting the best entrepreneurs in the country together to create products, market them and then sell them in order to bring greater revenues to the company. As discussed by House (2006), their culture generates an environment which is conducive to change and revolutions. Creating a Revolt through Strategy In a truly democratic manner, anyone within the company who has a good idea can start making a product and then use the company resources to start selling it. Not only does the company make the employees a part of the strategic direction it is taking, it also shifts its own strategy to match the ideas of the employees. In this manner the projects the employees work on become a part of the strategic path taken by the company as recommended by Gardiner (2005). Throughout the history of the firm, it has been able to adapt its strategy because it had a strategy based on principles that are outlined by Hamel (1996) which is obvious from the manner in which it operates. Additionally, as advised by Hamel (1996) a principle of strategy is to make changes and to create revolutions. The article mentions Jack Welch of GE as a revolutionary leader but the explanation of what Welch did in terms of changing the strategy at GE best comes from his own words. Welch (2005) reports that the company was quite unwilling to change itself but he implemented a strategy which took GE out of every business it was in except where it held the number one or number two position in the industry. This allowed GE to keep a focus on its core competencies and move out of businesses such as home appliance sales which were losing the company massive amounts of money. The Impact of Strategy on GE In terms of strategy, GE moved like a small company which functioned as a meritocracy. Each business idea which came to GE was debated and evaluated in terms of the strategic direction of the firm. Further, Welch (2005) notes that the strategy of the company also focused on the ideas of differentiation where only the best employees of the company were retained and those who could not deal with the new vision had to be let go of the company. Theoretically, change management is linked quite closely to strategic management and Welch (2005) discusses this idea by saying that GE had to be dragged into the digital age with the use of information systems. While management systems were already in place, the underpinnings of the system had to be created and Welch certainly did his part in promoting ideas that led towards strategic changes in the company. Having a strategy which made the company flexible and adaptable allowed GE to behave like a small company while having all the resources of a large organization. Strategic planning at a company like GE is more than setting targets and looking for ways to achieve them because it becomes a way to create the vision of the company. For GE, the vision is to be the market leader in the businesses it is involved in and a great part of the strategic planning is based on managing the human resources of the company. At GE, well structured and meaningful training clases, proper recruitment drives and extensive reward management policies for the insiders are all necessary when strategic planning for human resources comes into play (Welch, 2005). The strategic planning at GE also includes the termination and promotion of employees since only those who prove their worth can climb the corporate ladders. All employees at the company are categorized in to three broad criteria. GE heavily rewards the top 20%, manages and empowers the middle 70% to make the better performers, while the bottom 10% are asked to leave every year. Even if these decisions are difficult, they are a part of the strategic management of the human resources of the company (Welch, 2005). The Weakness This also brings us to a weakness of the article since it focuses tremendously on the idea of empowerment and using democratic tools to guide the strategic planning process but it does not explain the differences between long term strategic planning and the management of sudden shifts in strategy due to changes in the market. While the value of long term strategy cannot be denied by businesses, it is clear that the majority are more focused on short term strategy rather than looking to emerge as leaders after a few years of tough battles. Even though a focus on short term planning can spell disaster for business many companies refuse to make long term plans (Irani, 2006). Is Strategic Planning Ever Used? In essence, it does seem that strategic planning is losing its value as a concept since the world is getting to a point where business and volatility is synonymous (Meredith & Mantel,1995). Further, the present financial evaluations such as stock analysis reports and even mutual fund outlooks often use short term results rather than examine the long term business strategy of the company. A company focusing on short term results could end up with better valuations than a company which is looking towards establishing itself and creating a strategy to deal with the competition. Even for people working within a company, bonuses, promotions and even perks could also be linked to performance and value generation within a short period. The focus on the short term therefore seems quite reasonable. In fact, a recent survey of 400 finance managers shows that the vast majority would reduce spending on research and development, marketing, maintenance, and even recruiting if they fell short of funds to meet short-term earning goals. More than half of those surveyed said that they would postpone any new projects even if this postponement means sacrificing value creation for the company (Graham et. al., 2005). While Hamel (1996) pushes the idea of strategic thinking and creating revolutions, the managers of many large companies are merely trying to brave the next storm coming their way. No Strategy, Big Risks More recently, business stalwarts such as Warren Buffett, the highly respected CEO of Berkshire Hathaway addressed the issue of a lack of strategic planning in a letter to the shareowners by asking management teams to place their focus on long-term planning and not worry about quarterly earnings (Krehmeyer et. al., 2006). This was picked up as an idea by companies such as Coca-Cola, Gillette, and even The Washington Post Company who have stopped giving out any quarterly earnings guidance and have now opted to present annual projections of earnings. Hamel (1996) would certainly see this as a good move since it allows companies to focus on the long term rather than short term steps which keep business as usual. Volkswagen can be used as a good example of how long term goals can be turned into realities with strategic planning and meeting medium term targets. The company set itself a practical goal to overtake Toyota to become the third largest automobile manufacturer in the world while making the brand more recognizable. The plan was initiated with the purchase of a Swedish truck manufacturer i.e. Scania, which added heavy trucks that were missing from the Volkswagen portfolio (Daft, 2000). Further, to enter the luxury car market, Volkswagen took up Rolls Royce and created a V8 powered Volkswagen in order to compete with the likes of Mercedes-Benz and BMW. While these long term goals took years to complete, the idea of improving product quality and create design innovations was more of a medium term goal. This goal came from the moves made by the competition and the trends of the market which guided Volkswagen towards understanding what the people wanted (Daft, 2000). Conclusion Hamel would have certainly been proud of such practical implementations of his principles since these goals allowed Volkswagen to remain competitive and grow in an industry which is famous for competition. In conclusion, it is easy to say that the principles are certainly applicable and show us that strategy is certainly not dead even when businesses are faced with uncertainty and volatility. In fact, if anything these principles given by Hamel (1996) can help companies come out of uncertainty and come to a point where they know where they need to be and how they can get there. Personal Comments I found the article extremely interesting since it gives several practical examples of how businesses can benefit from strategic planning. An interesting idea which came to me while writing the paper was that a lack of strategic planning and a lack of vision is perhaps what have landed the economy in the current crisis. Had the subprime mortgage lenders fully seen the risks involved or even had plans on what to do if they have massive defaults, we might not be in a position where billions of dollars need to be poured into the economy to prevent a total and complete collapse. Works Cited Burlingham, B. 2003, ‘The Coolest Small Company in America’, Inc., vol. 25, no. 1, pp. 64-72. Daft, R. 2000, Management, Dryden Press. Gardiner, P. 2005, Project Management - A strategic planning approach, Palgrave. Graham, J., Harvey, C. and Rajgopal, S. 2005 ‘The Economic Implications of Corporate Financial Reporting’, Journal of Accounting and Economics, vol. 40, no. 1, pp. 3–73. Hamel, G. 1996, ‘Strategy as Revolution’, Harvard Business Review, July-August. House, R. 2004, Culture, Leadership, and Organizations, SAGE Publications. Irani, J. 2006, `The Focus on short-term results in business is a disaster’, Initiatives of Change International, [Online] Available at: http://www.iofc.org/en/abt/newsroom/888.html Krehmeyer, D. et. al. 2006. Breaking the short term cycle. CFA Institute. Meredith, J. & Mantel, S. 1995, Project Management: A Managerial Approach, Wiley. Welch, J. 2005. Winning. HarperCollins. Read More