Strategic Renewal- Revolution •Discontinuous nature of renewal is the reference point.•Any significant change with significant strategic impact will be resisted by organizations .

•Firms and Employees have a strong preference to stability.

•Over time processes and cognitive maps get formalized and rigid structures emerge.

Strategic Renewal- Revolution

•Relative Stability is required for efficient functioning but very often creates a structure which is unwilling or unable to change when even it is required immediately.

•To make the necessary changes , series of small incremental changes will not produce the required directional change and the magnitude of change.

•A sudden pressure and a radical move is necessary to meet the challenges coming mostly from outside.

•A coordinated attack on processes , cognitive maps and culture of the organization must be directed across the organization.

Strategic Renewal- Revolution

Punctuated EquilibriumTheory

Revolutionary changes not voluntary but dictated by environmental events

at a crisis point

Strategic Renewal- Revolution

Environmental Reasons for Revolution-Technology-Regulatory-New Entrant - Buyers/Suppliers Power-Political-Recession

Rigidity Factors

-Cultural-Political-Investment lock in-Competence lock in-Systems lock in- Stake Holder lock in

Business Process ReengineeringBPR is one of the most commonly used management techniques to implement revolutionary change process.

The idea of re-engineering was first propounded in an article in Harvard Business Review in 1990 by Michael Hammer , then a professor of computer science at MIT. The method was popularly referred to as business process re-engineering (BPR), and was based on an examination of the way information technology was affecting business processes.

“The literature on re-engineering employs the term processes. Sometimes it is a synonym for activities. Sometimes it refers to activities or sets of activities that cut across organisational units. In any case, however, the essential notion is the same—both strategic and operational issues are best understood at the activity level.” Michael Porter

Business Process ReengineeringConventional Design Vs. BPR Design

-Specialization of labour-Economies of scale-Tasks defined narrowly-Departmental allocation -Management by departmental hierarchy-Roots in industrial revolution era-Lack integration-Poor utilization of IT-Siloed vision-No overall goal-Departmental objectives-Accountability issue-Underutilize skilled labour

-Cross functional perspective-Organized around Outcomes-Users of the process outputs perform the process-Info/Report processing by producers of data-Geo Teams integrated around process-Linked parallel activities-Info captured at data source-Decision tree at the process point-Monitor and measure cycle times

Business Process Reengineering

Business Process Reengineering involves the radical redesign of core business processes to achieve dramatic improvements in productivity, cycle times and quality. In Business Process Reengineering, companies start with a blank sheet of paper and rethink existing processes to deliver more value to the customer. They typically adopt a new value system that places increased emphasis on customer needs. Companies reduce organizational layers and eliminate unproductive activities in two key areas. First, they redesign functional organizations into cross-functional teams. Second, they use technology to improve data dissemination and decision making.(Bain 2011)

Business Process ReengineeringFuture•BPR as a management idea progressed into BPM (Business Process Management) with heavy usage of Information technology . New tools designed to add the analytical dimension which BPR lacked in the early phases. Modelling , Simulation , Data Analysis are core elements of BPM•BPR still used by Management Consulting firms like Bain ,Mckinsey and Boston Consulting , supported by analytical tools.

Common UsesReduce costs and cycle time. Business Process Reengineering reduces costs and cycle times by eliminating unproductive activities and the employees who perform them. Reorganization by teams decreases the need for management layers, accelerates information flows, and eliminates the errors and rework caused by multiple handoffs;Improve quality. Business Process Reengineering improves quality by reducing the fragmentation of work and establishing clear ownership of processes. Workers gain responsibility for their output and can measure their performance based on prompt feedback.

BPR Case Study

- IBM credit finances IBM the computers, software and services sold , Processing a finance application usedto take between six days and two weeks from the credit department to the pricing department to anadministrator who wrote out a formal quote letter. When IBM Credit realized actually the process took onlyabout 90-minutes and the rest of the normal processing time was spent with the application sitting on a pileon a specialist’s desk waiting to be looked at, they decided to reengineer the entire process

-The four specialists who previously processed the application were replaced by a generalist -- called the dealstructurer -- who processed the application from start to end using templates on a new computer systemwhich provided all the data and tools each specialist commonly used. For unusual cases, the deal structurercan still call on the specialists to provide additional expertise. The specialist and the deal structurer then teamup to develop a customized package as required. This happens only rarely.

The results of the reengineering program were:Turnaround time was reduced from a typical 7-days to4-hours. Without any increase in staff numbers, IBM Credit has been able to achieve a hundred folimprovement in productivity it can now handle 100 times the number of credit applications handlesbefore reengineering was undertaken

The Case for Radical Change:Creative Destruction or Crisis

Physical Laws that `under pressure things become fluid ` applies to organizations , processes and culture .

Tension is built up over the period company remains misaligned with the market dynamics, creates a sense of impending crisis

People offer less resistance and become open for radical sometimes difficult changes . Increased cooperation encourages managers to prolong the crisis sense to implement all the changes they require.

After the pressure is lifted , organization and processes will be molded into a new form to tackle challenges facing the company

Creative destruction through technology innovation or superior business processes require strong leadership to break from the past and get the firm reborn in every opportunity to be ahead of the competition.

The Case for Radical Change: Nokia

Finnish conglomerate turned itself into the world’s leading mobile phone company in the 1990s. So Nokia has already been through one (successful) change program, morphing itself into a focused mobile phone producer.•Global market leader in mobile phones - but not smart phones•Still profitable, but revenues under pressure•September 2010: New CEO Stephen Elop•February 2011 - Elop issued the famous “burning platform” memo bluntly explaining the serious strategic challenges facing Nokia•Elop outlined results of his strategic review on Feb 11 2011 - making it clear that Nokia had to undergo a substantial programme of change•Elop announced a strategic partnership with Microsoft in March 2011 to jointly develop smart phones using the Windows mobile platform - ditching Nokia’s previous investment in its homegrown Symbian platform and Meego

The Case for Radical Change• Elop has swept away many elements of Nokia’s previous organisational structure -

a significant process of delayering

• Elop has refocused the business on market development

• Decision-making has been delegated to local/national teams rather than relying on decisions by an highly centralised senior management team (Finland HQ)

• Stakeholders are clearer on the executive managements incentive program

• The new strategy brings clarity and a sense of direction to Nokia

During 2012, Nokia has faced rapid declines in salesFebruary 2012, Nokia was laying off 4000 employees to move manufacturing from Europe and Mexico to AsiaMarch 2012, Nokia anonunced it was laying off 1000 employess from its Salo, Finland factory to focus on softwareJune 2012: 10,000 further job Job cuts amount to a fifth of aall staff

By June 2012, Nokia had lost more than $88bn in market value since Apple introduced the iPhone in 2007

The Case for Radical Change: Nokia

The “burning platform memo”:

“We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.“There is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.”“The Shenzhen region of China is able to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally – taking share from us in emerging markets.”“Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.”“We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally

The Case for Radical Change:Nokia

Mckinsey 7s Framework

The model used by Management Consultants to understand how these factors are interrelated.

Any change planning to be implemented in one area and its wider impact for the firm is clearly considered by using this model