An historical study identifies

An historical study identifies management bases of evolutionary transformational strategic change.

Very few companies have demonstrated the ability to both make transformational strategic changes while maintaining high levels of profitability. Such change usually follows a major downturn or crisis. A research study identified and traced the management processes over four decades in three UK firms that had achieved such transformations. The researchers identified ‘traditions’ that gave rise to such transformation, traditions that developed over time. They were not introduced by any one executive or written into documents or plans; they became part of the ‘DNA’ of the businesses. One of the companies was the retailer, Tesco.

A tradition of alternative coalitions

The companies had created parallel coalitions of senior executives. The first group, typically the more senior, focused on reinforcing current capabilities, current strengths and current successes. The second group, usually younger but still senior, actively looked to develop new strategies and new capabilities. This parallel system came to be an accepted part of how the company operated. It was encouraged and eventually institutionalised. For instance, the original Tesco model was to ‘pile it high and sell it cheap’, which founder Jack Cohen perpetuated through a personal command and control management style. None the less, an alternative coalition around Ian MacLaurin and his team of operation sorientated managers developed in the 1960s that began to pursue more modern retail practices, introducing Tesco to a corporate model of management control. This alternative coalition took charge in the 1980s and 1990s and, in turn, there developed a new alternative coalition around Terry Leahy who developed the next stage of Tesco’s strategy built around multiple segmented retail offerings. Leahy himself then took over in the 1990s through to 2011.

A tradition of constructive contestation

The development of alternative coalitions frequently originated in the context of significant conflict. At Tesco such conflict could be traced to boardroom battles between family members in the Cohen era and then between the two coalitions of managers in the 1960s and 1970s. Over time, however, such conflicts became less intense and more respectful, evolving into ‘constructive contestation’. This was not just a matter of senior executives advocating different points of view. Such contestation became culturally embedded; for example, if managers wanted to progress in the firm it was expected that they would ‘fight their corner’ in meetings with senior executives.

The tradition of exploiting ‘happy accidents’

The two traditions of alternative coalitions and constructive contestation meant that new ideas continually surfaced. In turn this meant that the companies were well positioned to turn problems into opportunities. The researchers called these ‘happy accidents’, unanticipated circumstances or events which the alternative coalition used to develop new strategies. For example, the economic downturn in the early 1990s hit Tesco, with its less established and younger customer portfolio. Puzzled why the business was not maintaining its recent levels of success, the CEO of that time, David Malpas, spent a day visiting competitors’ stores in the company of the up-and-coming Terry Leahy. This exposed him to Leahy’s views that Tesco had lost sight of its customers and needed to rethink its customer proposition. In turn this led to Leahy’s elevation, the launch of multiple retail formats, a significantly reduced size of headquarters staff, streamlined management layers and international expansion.

Questions

1 How do the ‘traditions’ relate to the explanations of evolutionary strategic change and, in particular, the concept of organisational ambidexterity?

2 If the ‘traditions’ took decades to develop, is it possible for executives to manage their introduction into organisations? How?

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