Discuss the differences between the theories of organizations
1-4. Discuss the Activi- ties where learning organizations excel
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CHAPTER 1 Basic Concepts of Strategic Management 45
As it takes less and less time for one product, service, or technology to replace another, companies are finding that there is no such thing as a permanent competitive advantage. Many agree with Richard D’Aveni, who says in his book Hypercompetition that any sustainable competitive advantage lies not in doggedly following a centrally managed five-year plan but in stringing together a series of strategic short-term thrusts (as Apple does by cutting into the sales of its own offerings with periodic introductions of new products).31 This means that corporations must develop strategic flexibility—the ability to shift from one dominant strategy to another.32
Strategic flexibility demands a long-term commitment to the development and nurturing of critical resources and capabilities. It also demands that the company become a learning organization—an organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights. Organizational learning is a critical component of competitiveness in a dynamic environment. It is particularly important to innovation and new product development.33 Siemens, a major electronics company, created a global knowledge- sharing network, called ShareNet, in order to quickly spread information technology throughout the firm. Based on its experience with ShareNet, Siemens established PeopleShareNet, a system that serves as a virtual expert marketplace for facilitating the creation of cross-cultural teams composed of members with specific knowledge and competencies.34
Learning organizations are skilled at four main activities:
■■ Solving problems systematically ■■ Experimenting with new approaches ■■ Learning from their own experiences and past history as well as from the experi-
ences of others ■■ Transferring knowledge quickly and efficiently throughout the organization.35
Business historian Alfred Chandler proposes that high-technology industries are defined by “paths of learning” in which organizational strengths derive from learned capabilities.36 According to Chandler, companies spring from an individual entrepreneur’s knowledge, which then evolves into organizational knowledge. This organizational knowledge is composed of three basic strengths: technical skills; func- tional knowledge, such as production and marketing; and managerial expertise. This knowledge leads to new areas in which the company can succeed and creates an entry barrier to new competitors. Chandler believes that once a corporation has built its learning base to the point where it has become a core company in its industry, entrepreneurial startups are rarely able to successfully enter. Thus, organizational knowledge becomes a competitive advantage that is difficult to understand and imitate.
Strategic management is essential for learning organizations to avoid stagnation through continuous self-examination and experimentation. People at all levels, not just top management, participate in strategic management—helping to scan the environ- ment for critical information, suggesting changes to strategies and programs to take advantage of environmental shifts, and working with others to continuously improve work methods, procedures, and evaluation techniques. The Toyota production system is famous for empowering employees to improve. If an employee spots a problem on the line, he/she pulls the cord, which immediately starts a speedy diagnosis. The line continues if the problem can be solved within one minute. If not, the production line is shut down until the problem is solved. At Toyota, they learn from their mistakes as much as they learn from their successes. Improvements are sent to all factories worldwide.37
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46 PART 1 Introduction to Strategic Management and Business Policy
Organizations that are willing to experiment and are able to learn from their expe- riences are more successful than those that are not.38 This was seen in a study of U.S. manufacturers of diagnostic imaging equipment, the most successful firms were those that improved products sold in the United States by incorporating some of what they had learned from their manufacturing and sales experiences in other countries. The less successful firms used their foreign operations primarily as sales outlets, not as important sources of technical knowledge.39 Research also reveals that multidivisional corpora- tions that establish ways to transfer knowledge across divisions are more innovative than other diversified corporations that do not.40
Basic Model of Strategic Management Strategic management consists of four basic elements:
■■ Environmental scanning ■■ Strategy formulation ■■ Strategy implementation ■■ Evaluation and control.