Current Trends in Strategic ManagementSlide 2Slide 4Slide 5The Need to Redesign OrganizationsEmerging Organizational FormsNew Models of Leadership: What Competencies do Top Managers Need?The Current Best-SellerWhat is complexity theory?Complex Adaptive SystemKey Result AreasEmergenceAgent-Based SearchPatchesComplexity as MetaphorInterpretationCase: Jack WelchCase: AESConclusionCurrent Trends in Strategic ManagementCurrent Trends in Strategic Management•The New Economy•New Directions in Strategic Thinking•Redesigning the Organization•New Modes of LeadershipOUTLINEThe Turbulent 21st CenturyThe Turbulent 21st CenturyCollapse of New Economy•Dot.com bubble bursts•TMT recessionCollapse of New Economy•Dot.com bubble bursts•TMT recessionCorporate Scandals• Enron, WorldCom, Parmalat• Jack Welch’s retirement package Corporate Scandals• Enron, WorldCom, Parmalat• Jack Welch’s retirement package War• Invasion of Afghanistan & Iraq•Civil wars in Congo, Liberia, Sudan, Somalia War• Invasion of Afghanistan & Iraq•Civil wars in Congo, Liberia, Sudan, Somalia Age of DisbeliefAge of DisbeliefThe Curse of Terrorism• Sept. 11, 2001•Suicide bombings in Israel, Iraq, Saudi Arabia, Turkey, AfghanistanThe Curse of Terrorism• Sept. 11, 2001•Suicide bombings in Israel, Iraq, Saudi Arabia, Turkey, AfghanistanFear of Disease•SARS, Mad Cow, Bird FluFear of Disease•SARS, Mad Cow, Bird FluUnstable CurrenciesUS$ declines by >50% against Euro 2002-04 Unstable CurrenciesUS$ declines by >50% against Euro 2002-04 Decline of Multilateralism•Collapse of Doha round• Trade wars between US, EU, China•Weakening of UNInternationalcompetition intensifies• China as Workshop of the World• Outsourcing to LDCsKey Trends of the 1990s:•Quest for shareholder value•Adjusting to increased turbulence & more intense competitionInfluential Strategy Concepts:•Modern financial analysis —shareholder value, economic profit, option theory•Core competences and intangible assets•Dynamically competitive markets —“hypercompetition”•Competitive advantage through alliances, networks, and standardsMajor Themes of Business Strategy:•Cost cutting—squeezing overhead, business process re- engineering, increasing labor productivity•Outsourcing/refocusing/ divestment•Performance management and incentive alignment Directions in Strategic Management Practice—Trends of the 1990s Directions in Strategic Management Practice—Trends of the 1990sFuture Sources of ProfitLimits of downsizing/cost cuttingWhere are future sources of profit?TechnologyContinued advances in ICTForces Shaping Company Strategies 2001-04Concepts & Theories•Resources & capabilities as basis for competitive advantage•Knowledge-based theory of the firm•Option theory•Complexity theoryThe Business Environment•Uncertainty•Stalling of economic liberalization•Intense competitionDemands of society•Social & environmental responsibility•Ethics & fairness•Quest for meaningSTRATEGY•Multiple competitive advantages/multiple capabilities•Innovation / New Product Development / New Business Development•Alliances & networksMANAGEMENT SYSTEMS• Knowledge management (incl. best-practice transfer)• Redesigning incentive systems• Rethinking performance management• Capturing human creativityEmerging Developments ORGANIZATION STRUCTURE• Reconciling flexibility & integration• Modular structures• Multidimensional structures• Informal organization & self-organizationThe Need to Redesign OrganizationsThe Need to Redesign OrganizationsTHE PAST THE FUTUREEmphasis on control Emphasis on co-ordinationDecisions located centrallyDecisions located where relevant knowledge existsSimple structures,unified line of commandMultidimensional structuresDiffused authority, but clear responsibilitiesSingle performance goalMultiple performance goalsOrganization by design Self organizationEmerging Organizational FormsEmerging Organizational FormsProcess-based Organizing around business processesorganizations Organizing around corporate processes - entrepreneurial process - competence building process - renewal processFrom unitary to parallel Separate coordination structures forstructures different processes. E.g. 3M’s productdevelopment structure; separate structures for TQM and change managementProject-based organization E.g. engineering cos., consulting firms, alsomanufacturing cos. e.g. OticonNetwork and virtual E.g. electronics in Silicon Valley, clothingorganization and packaging equipment in ItalyOrganizing for capability Shifting emphasis of organizationdevelopment design from control to coordinationTHE REQUIRED COMPETENCIES OF BUSINESS LEADERS• business literacy• creativity• cross-cultural effectiveness• empathy• flexibility• proactivity• problem-solving• relation-building• teamwork• vision THE LEADERSHIP NEEDS OF ORGANIZATIONSThe ability to:• build confidence• build enthusiasm• cooperate• deliver results• form networks• influence others• use informationNew Models of Leadership:What Competencies do Top Managers Need?New Models of Leadership:What Competencies do Top Managers Need?The Current Best-Seller•Raynor, The Strategy Paradox•Corporate manages uncertainty (5+ year timeframe), divisions manage commitments/deliverables•Corporate must create “strategic options” rather than growth options–“Strategic Flexibility”•identify scenarios, build capabilities, manage portfolios of options•the ability to pursue alternative strategies that could be useful, depending on how key uncertainties are resolved •the most appropriate exposure to strategic risk and opportunity –A strategic option is an option on an element of an alternative strategy that might or might not be implemented, not simply an option on further investment in a new business that might or might not succeed.What is complexity theory? •Based on an agent…an ant in a colony, an electron in an atom, a worker in a company...•A complex system is defined as any network of interacting agents (or processes or elements) that exhibits a dynamic aggregate behavior as a result of the individual activities of its agents. •An agent in such a system is adaptive if its actions can be given a value (performance, utility, payoff, fitness etc.) and the agent behaves so as to increase this value over time.Complex Adaptive