Strategic Competitiveness Modern and Traditional

Strategic Competitiveness

Modern and Traditional Management & Strategic Competitiveness in the 21st Century

In order to stay afloat and also to conduct business successfully in the era of constant change, a firm must follow the modern practices of the strategic management. The companies that still stick to the traditional mindset when it comes to their management practices; they in fact are managing by hope. The hope that if they still stick with to the stick-and-carrot approach for managing employees they will keep on delivering results. They hope that the concept of having assembly line operation will still work for them. They have hopes that external environmental conditions will eventually become favorable after a short period of flux. The organizations that adhere to the status quo don't blaze the trail rather they become mere followers, as they don't have the culture to encourage new ideas, fresh thinking and experimentation. Such organization can do nothing to empower their employees rather they stifle them with routines. However, in the changing external environmental conditions, the boundaries getting blurred and globalization taking greater hold of world economy, organization can no more afford to have a narrow and traditional approach to management. In developed and modern organizations successful strategies come out as a result of modern strategic management process and participation by the employees having a shared vision.

In order to truly understand the importance of modern management and strategic management process we will now look at some of the important concepts and theories of the strategic management such as Resource-based view and knowledge-based view of the firm. These theories provide a framework for organizations to achieve a competitive advantage over others. The important point here is that these theories in the end support modern outlook to management rather than the traditional one and can only be implemented successfully if organization values flexibility, speed, innovation, integration and the capability to learn from constantly changing conditions.

Resource based theory of competitive advantage implies that resources and capabilities are the primary source of superior strategic performance for a firm. If a firm wants to establish a sustainable competitive advantage then the use of strategic resources in an effective and inimitable manner is essential. A competitive advantage can only be sustainable if the advantage cannot be imitated or copied easily by others in the industry. Hence the resource and its use should be hard to copy and unique to one's business. The resources that can be utilized for strategic advantage include physical, reputational, organizational, financial, intellectual & human and technological resources.

Process execution is one of the main sources of competitive advantage for a firm. "Process Execution refers to a firm's capacity and its abilities to produce the elements of differentiation, low cost and quick response that customers value" (Miller 1998, p.159). Long-term success of an organization can only happen if managers can improve their processes and do it better than the competitors. So, the capabilities of a firm and the internal resources it has can gain a firm a competitive edge according to this resource-based view of the firm. However, in order to truly utilize this advantage manager should make an effort in developing interlocking systems that work better than all the competitors in the industry for example for an airline to attain core advantage flight operation, route management and ticketing process should be done efficiently and better than all the competitors in the airline industry to achieve cost advantage. The processes can be even larger than one mentioned in the example here and the success of the process depends on successfully interlocking all the activities resulting in a unified process. Any competitor cannot easily copy this unified process with interlocking activities.

Knowledge based theory is based on a number of assumption. Two important assumptions are: "Knowledge is created by human beings and to be efficient in knowledge creation and storage, individuals need to specialize (Simon, 1991: 127) and Producing a good or service typically requires the application of many types of knowledge (Kogut and Zander, 1992)" (Grant, abstract). So, according to these assumptions, a firm can attain its competitive edge if it is capable of using the knowledge of its workforce to produce better goods and services. Also we must consider the difference between Tacit knowledge and Explicit Knowledge. Latter is easy to transfer and disseminate while in case of former which is more related to skills, know-how and contextual knowledge, the process of transfer may be slow as well as hard to implement. So, knowledge transfer is crucial in achieving an edge and to do that management must consider factors that encourage and discourage it.

Knowledge-based view of the firm supports a learning organization where organization members have this feeling of ownership and authority and where egalitarianism, openness, encouragement to taking risks and making mistakes is a norm. Such organizations usually have a performance-based reward system, education and development opportunities are available for employees, external knowledge is also considered an important source of input while integrating internal knowledge and external information and most importantly status quo is challenged by all and sundry.

In this knowledge-based view of the firm acquiring knowledge or having knowledge is not enough. It is like a strategy is made but could not be implemented. Having or acquiring knowledge is therefore of no use without its proper implementation. Only modern management and leadership can juggle this important aspect of knowledge and its implementation. Here not implementation of every new discovery or acquired knowledge can be considered rather only meaningful and relevant ideas can be pursued for implementation. Management therefore must strike a balance between complete abandon or freedom and tight controls. The managers must keep themselves vigilant to support people with winning ideas to benefit most from them while controlling projects based on less promising ideas and encouraging open discussions regarding the pros and cons of each project.

The leadership qualities can play an important part in a knowledge-based view of the firm. The tasks for the leadership here is to provide its employees overall direction in order to effectively tap their true potential. In the absence of a proper direction the open and flexible culture may become counter productive but providing direction in any way does not mean that managers can stifle the creativity and drive of their employees rather effective leadership allows others to inculcate in themselves superior leadership qualities and understanding of the strategic management process so that they them self can figure out the directions and actions which are needed to be taken without actually stifling the drive to acquire new knowledge and experimentation.

Another important model that has been put forward in the realm of strategic management is MOUND (Middle, Out, Up and Down) model (Miller 1998, p.133) The model relies heavily on knowledge-based view of the firm and it goes one step ahead and also emphasizes the culture of empowerment, learning and freedom to experiment and making mistakes. There are many firms that are renowned for allowing their employees the freedom of experimentation, 3M being one of them. According to this model, the managers or workers in the middle cadre of management independently work on a new process or improvement of an old one without the permission and authority of the top management. Once they succeed in their attempt to improvise or innovate they take their project out to the concerned department for implementation. Once the project is successfully implemented the upper management takes notice of the success of the new project and gives their nod of approval for the project and the new process becomes pervasive within the organization.

Considering both resource-based and knowledge based theory, we can emphasize the point that processes that are integrated and unique are hard to copy as compared to other factors such as technology. The process integration has done wonders for a number of organizations in the industry like GE, Motorola and Intel. The means of achieving process integration can be the formulation of cross-functional problem solving teams, bench marking and best practice transfer, TQM & CPR and decentralization of hierarchy and decision-making.

Cross-functional problem solving teams: A Cross-Functional Team is formed when people with varied levels of skills, experience, backgrounds or departments are brought together for discussion and to accomplish a task. The nature of Cross-Functional Teams is sometimes permanent while usually its ad hoc. In such teams people with different breadth and depth of knowledge, skills, and experience share their views and so as a result of this discussion people get to learn from each other's point-of-views. This practice not only enhances interaction and involvement of key organization personnel but they also generate new ideas.

When IRS wanted to change to a new information system they created a Cross-Functional Team with people having expertise in job analysis, organizational development, change management, training, facilities, ergonomics, and industrial psychology that helped them in producing better results. It also showed to employees that they care about the human factor and ergonomics etc. also resulting in higher employee morale.

Benchmarking and best practice transfer: In today's technology driven economy, the success of an organization not only depends on sharing knowledge but also applying it and in order to apply best practices, an organization must first identify superior capabilities and competencies. Then they can transfer them to all the business units and follow through. A best practice of an organization provides it with unique and distinctive competence and cost/benefit impact. Therefore the transfer and sharing of the best practice organization wide becomes necessary for attaining a competitive edge.

Benchmarking attempts to improve business processes by analyzing the top-notch approaches of others and adapting it to one's own organization to achieve a competitive lead. Best practices and benchmarking can give an organization strategic, operational, and financial advantage. Bench marking is an attempt by an organization to look for continuous improvement. Japanese concept of "Kaizen" or continuous improvement also considers benchmarking an important part of its philosophy. Benchmarking can also require management to think out of the box. For example, if someone wants to see the standards for team management in the steel industry they might look for the best practice in the same industry. However, in benchmarking apples can be compared with oranges as a Steel mill looking for team management standards actually looked up to McDonald's management of small teams and they benchmarked their standards. The main concerns in benchmarking therefore are about looking up to "best of the best" and reach that standard and go beyond to become "best in class."

TQM & CPR: Total quality management and core process reengineering are two most important concepts of the modern strategic management. TQM is about making incremental improvements in the processes and their flow is generally from bottom to top while CPR is regarding bringing about radical changes in the process designs and the flow is generally from top to bottom. Both TQM and CPR inculcate a strategic view at the operations level as the improvements in the processes can only be brought about if departments interact with each other. In the absence of this strategic interaction among departments, failed projects could be produced for example technological advancement brought about by the R&D department can be of no use if the firm does not have or cannot acquire the capabilities to produce or implement it. Hence, inter-organizational collaboration is one of the requirements of successful process improvement utilizing organizations resources and capabilities. Furthermore, both TQM and CPR should not be considered as ends instead of means to achieve overall strategic goal. Overall strategy should be the guiding force behind TQM and CPR because without overall strategy managers cannot decide which operations are important. Globe metallurgical Inc. is one company that actually worked on this concept of process improvement and ended up getting Malcolm Baldrige National Quality Award.