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Archive for April 2014

Strategies for Adaptation and Survival in SMEs – MBA Lecture

•Strategies for Adaptation and Survival in SMEs
•The Practitioner Perspective
•Steve Herman
•11 April 2014
•Agenda
•Take home messages
•Making sense of the strategy world
•Some other views of adaptation and survival
•What happens strategy setting in real life?
•The strategy pyramid (and the Pyramid Principle)
•Summary
•Questions
•Take home messages
•Depending on the attributes of the problem, some strategies are suitable for solving it and others are not
•Cash is King
•Avoid analysis paralysis
•The budget MUST reflect the strategy

 

•“Enlightened trial and error outperforms the planning of flawless intellects.” David Kelley
•Firms by size
•Some 4.5 million business in the UK
•Large – (250+ employees)?
•6000
•Medium – (50-249 employees)?
•26000
•Small (0-49 employees)?
•99.3%
•90% of these have < 10 employees and most have 1-4
•Making sense of the strategy world
•Strategic planning school (Chandler, 1962, Ansoff, 1965, 1979, Cyert amd March, 1963)
•Competitive strategy view (Porter, 1980)
•Strategy process school (Miles and Snow, 1978, Mintzberg, 1998,1994, Peters and Waterman, 1982)
•Resource based view (Prahalad and Hamel, 1990, Barney, 1997)
•Classical Strategy
•Success lies in the decisions made by individual entrepreneurs and managers, including their ability to bring about the changes demanded by their strategic choices (Child, 1972).
•Firms survive or die in relation to their fit within the marketplace and the more fit/adaptable firms must be better at scanning the market for signals and then interpreting what is going on and adapting over time to change.
•Issues with ‘classic’ strategy
•Neo-classically bound and equilibrium based
•Linear rather than iterative

 

•Typologies abound in strategy theories
•Organisational ecology
•It is selection rather than adaptation that accounts for long-term population-level changes in the diversity of firms – Hannan and Freeman (1977, 1989)
•Competition causes firms that become unsuited to the environment to be replaced by firms more compatible with the changed circumstances – Carroll and Hannan, (1990)
• Most firms are relatively structurally inert (an enduring inability to change patterns of behaviour and control in the face of changing circumstances) and this hinders adaptation particularly when the environment changes

 

•Organisational ecology emphasises ‘evolutionary dynamics that favor structurally inert organizations. Inertia is not only a survival-enhancing feature, but also a by-product of prior success and a consequence of selection.’ Dobrev et al., (2006)
•Evolutionary Economics
•Emphasises specific notions of inheritance, variation and selection mechanisms
•In contrast with neoclassical theories, the focus is on non-equilibrium and cumulative processes
•In contrast with organisational ecology, evolutionary economics assumes adaptability can be a positive source of increased survivorship
•At the same time acknowledges stability and inertia as an integral part of the story of industrial change
•Evo-devo??

 

•EVOlutionary concepts and DEVelopmental concepts
•Evo-Devo looks at the way the mechanisms of development have been influenced by evolutionary forces.
•Different firms may be working with similar sets of routines material but have very different regulatory mechanisms for these routines simply as the result of the effort of progressively expressing routine behaviours (through dispositions to act and/or actual behaviour) over the lifetime of the firm
•Helps explain why two firms with similar external features, delivering similar products or services in a similar competitive environment, can behave so differently when that environment changes, if their core processes have been arrived at through different interchanges between their capacities and dispositions and their lifetime interaction with their environment
•What’s strategy like outside?

 

•The average lifespan of an S&P 500 company has fallen from 67 years in the 1920s to just 15 years now
•By 2020, more than three-quarters of the S&P 500 will be companies that we have not heard of yet (Richard Foster)
•Business failure rates
•Moving from a scale economy to a semantic economy, where the knowledge you own is not nearly as important as that which you can access
•The digital revolution, big data and cloud supercomputing
•Bayseian v frequentist inference
•Strategy Pyramid
•Strategy Pyramid – 2
•AIMS –  big, long-term end-result or achievement
•OBJECTIVES AND GOALS  – Goals are specific things to be accomplished in a given period of time
•STRATEGY – how to achieve the goals; the plan of to achieve the results.

 

•TACTICS –the specific devices or actions taken to achieve the strategy with named responsibilities
•INHIBITORS – those things, typically money, people and other resources but also experience and knowledge that get in the way of executing the tactics that make up the strategy
•The planning process is an iteration round the system so that everything eventually aligns and the tactics and strategies are executable and match the goals and work towards the Aims
•The Pyramid Principle
•Mantra
•Revenue is vanity
•Profit is sanity
•Cash is King
•Summary
•Use Pyramid  as spine off which to hang evolving strategies (some won’t work)
•Use the Pyramid Principle to structure the logic of your case
•Avoid analysis paralysis
•Cash is King
•The budget MUST reflect the strategic plan
•.

QUESTIONS?

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