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The organisation I have chosen for analysis and evaluation of strategic change is one the most formidable organisations of the 21st century, Apple Inc. The status of the organisation since its release of the iPod in 2000 has continued to grow in such a way that at the beginning of Apple's presentation of the iPad, there was a slide showing an image of God delivering its commandments, paired by a quote from The Wall Street Journal: "Last time there was this much excitement about a tablet, it had some commandments written on it." This comparison of Steve Jobs, Apple's prominent leader, to God, although a touch arrogant, powerfully captures the essence of the event. The period of change I am going to concentrate specifically on is the transition under Jobs on his return in 1997 up until the present.
Apple has earned a strong reputation for beauty, simplicity and quality over the years, but unfortunately the simplicity part got away from Apple in the early 1990s. By releasing too many complex products into the market in an attempt to battle the IBM PC and thereby scaring customers away. Change was required as O'Grady (2008) explains that Apple was "haemorrhaging money, market share and lacked leadership" and it is almost a miracle that Apple did not file for bankruptcy in 1996. Dobson, Starkey and Richards (2004) explains that "triggers for change are many and various". Reasons could include a shift in the external environment such as 9/11 or a competitor releasing new technology that changes the whole complexion of the technology market.
Our main understanding of change is that it can be done in either of two ways: incrementally or radically. Radical change is described as the need to sweep away the past to leave the stage clear for the new and radically different (Dobson, Starkey and Richards, 2004). Usually undertaken as a result of the organisation's situation in the present market or in the likely event of predicted failure on the organisation's behalf. In a usual process of radical change, the top managers are usually replaced mainly for fresh ideas, and to give the organisation a new direction. An organisation going through the process of radical change to its strategy, is according to Dobson, Starkey and Richards (2004) taking "quantum leaps" in strategy, where it intends from the outset to make a clean break from it's past and previous strategies. When change is managed incrementally, it is done in a series of gradual steps. An incremental approach is favoured amongst its supporters due to the perception that the strategy process is too complex to be completely overhauled. The success of incrementalism depends on the management's ability to create: awareness; understanding; acceptance; and commitment to implement the change or changes in strategy effectively.
Dobson, Starkey and Richards (2004) consider the differences between these two fundamental forms of change where the incremental view focuses on the processes going on and the interactive nature the organisation is managed their organisation to generate communication and commitment. Conversely, radical change focuses on the actual content of strategic change. From the outset in 1997, it looks like the process of change underwent at Apple was radical. For starters the CEO Gil Amelio was ousted by the board of directors and replaced was replaced with Jobs as the interim CEO. Jobs immediately started removing all unprofitable products from Apple's portfolio such as the Newton, which had been costing the firm $500million and reduced the dozens of Mac's that apple to just four. So the next question we have to ask ourself, is why, instead or incremental changes did radical changes take place and if a radical approach to change was however the best option for Apple.
Tushman, Newman & Romanelli (1986) believe most companies do not make the "painful, discontinuous, system-wide shifts straight away, and only when the incremental changes fail to take effect such measures are introduced. Instead of talking about radical or incremental changes, they referred to change as either "converging" or "frame-breaking". The former which takes up similarities with incremental changes and the latter with radical. "Frame-breaking" change can be identified with the following five features: reformed mission and core values; altered power and status; reorganisation; revised interaction patterns; and new executives. The reasons why change should be implemented all at once in comparison to incremental stages is the possibility of potential resistance from groups of employees and the more an organisation dwells on a big change the more riskier the proposition looks. However, even though frame-breaking change is required, Tushman, Newman & Romanelli believe that such change is postponed up until a beckoning financial crisis casts over the organisation and there is nowhere else to turn.
Baden-Fuller & Stopford describe change as "rejuvenation". It involves four different stages to not necessary change the organisation but to reinvigorate the processes involved in the organisation. The first stage is to galvanise, where the top team is dedicated to renewal and where every part of the organisation is scrutinised and changed accordingly. The second part of rejuvenation is to simplify, where all unnecessary and complex aspects of the organisation are cut. This can also eliminate causes of resistance to change and it sends a signal to all stakeholders that changes are on the way. "Build" is the third aspect, where new capabilities developed, but resources are limited due to possible financial constraints. The final stage of "rejuvenation" is leverage; once momentum has been achieved, it is key to maintain it and stretch advantages that arise. From the outlook, rejuvenation appears to be a mixture of radical and incremental changes. For example is the early simplifying stages, cutting may have to be radical, whereas in the "building" stages, progress is achieved in smaller initiatives, because resources available to the organisation are limited and risks are distributed across many areas. An effective top team must have a real understanding of the functions, so that it understands what is technically possible and what is required by all stakeholders, which Jobs had due to his previous tenure. Baden-Fuller & Stopford agree with Tusham, Newman & Romanelli that financial results seem to be the most common trigger for change, an in the case of Apple is what formulate the boardroom coup to oust Amelio.
Dunphy & Stace (1993) developed a matrix to show an understanding of the relationship between style of change management and the nature of change (see appendix). Their research indicates that, for companies that have undergone large-scale environmental change, the directive/coercive style of leadership is the most likely to be successful for transformational change at the corporate level. When identifying Steve Jobs in terms of the Dunphy/Stace matrix he would fit in between a collaborative and consultative style of change management, as he tried to bring in an open culture within the organisation to encourage team-working. Dunphy & Stace (1993) conclude by saying that if the change program is to be successful, consultative practices at the business unit level must be present in order to win commitment at that level to aid the implementation of change. Dunphy & Stace (1993) contend that different circumstances demand different styles of change leadership and an organisation operating in a turbulent and unpredictable environments may have to make radical change a necessity. The general consensus is that change tends to be more easily implemented in smaller organisations than larger, complex ones, where there is a larger gulf between top management and the market place, as well as staff lower down in the hierarchy with good ideas. When the onus was on Jobs to successfully manage the change process, I believe he succeeded and to achieve what he has at Apple when the odds are against you to manage change in a large, complex organisation is truly great.
The key to assessing the effectiveness of strategic leadership is to first formulate what is meant by a "leader". There is much debate on whether there is a clear difference between "managing" and organisation to "leading" an organisation. So my first task is to clarify if Steve Jobs, is in fact a leader, a manager or has the characteristics of both. Dobson, Starkey and Richards (2004) attempts to clarify the difference as management traditionally concerned with performance, and the organisation's ability to accomplish it's goals. Whereas, in terms of leadership, an individual is concerned with the organisation's "mission and culture". But surely the traits of an effective leader is how they can integrate both "leadership" and "management" techniques, to create an organisation with a mission and culture to accomplish its set goals.
Mintzberg (1973) provides a framework into the ten major roles in the management process. They are divided in three sub-sections: interpersonal roles; informational roles; and decisional roles.
As we can see already, Mintzberg has a contrasting opinion on what identifies a manager and a leader, where he believes that a manager could be a leader, as well as other roles such as a figurehead and a liaser. Secondly, under informational roles, a manager can either be a monitor, dissemintor or a spokesperson. The last four manager's roles come under the category of "decisional" roles. Those managers that are considered as "entrepreneur" and a "disturbance handler", according to Dobson, Starkey and Richards, 2004, have a particularly important affect on the change process. A manager who has the characteristics of an entrepreneur acts as an initiator and designer of change, exploiting all possible opportunities and solving non-urgent problems. The final two manager roles are "resource allocator" and "negotiator"
Ireland & Hitt (1999) define strategic leadership as a person's ability to anticipate, envision, maintain flexibility, think strategically and work with others to initiate changes that will create a viable future for the organisation. Their work is based on six components of "effective strategic leadership". The first of the six is "determining the firm's purpose or vision" whereby the organisation will develop a long term vision of the firm's strategic intent, say for example, the next five to ten years and what organisation it wants to be perceived as. The second is "exploiting and maintaining core competencies", where the resources and capabilities that provide the organisation with a competitive advantage over its rivals must be continually developed to stay ahead of their competitors. Ireland & Hitt, thirdly claim that an organisation needs to "develop human capital" whereby the knowledge and skills of the entire workforce are a capital resource, which require constant development via training and education programmes. "Sustaining an effective organisational culture " is the fourth aspect where there is an attempt to influence the way the organisation operates through a complex set of ideologies, symbols and core values shared throughout the firm. The penultimate component of Ireland & Hitt's framework is based upon "emphasising ethical practices". The processes undertaken in the organisation, become more effective when strategies are based on ethical practices. The final element of the framework is "establishing organisational controls" which are formal, information-based procedures used by managers to maintain or alter patterns in organisational activities. Such organisational controls enable strategic leaders to build credibility, demonstrate the value of strategies to stakeholders and promote and support strategic change.
Do we judge "effective strategic leadership" on bottom line results. The New York Times reported that Apple made a loss of $161million, which was part of a total $1.045billion loss for 199, the year Jobs returned to Apple. However, it was reported in the first quarter of 2010 profits were a staggering $3.1billion. On the basis of profit alone, we can say they have been "effectively" lead through the change process. Another basis of measurement, could be its market share in the "MP3 player" market, which was the first of Jobs's brainchild back at the helm. According to Businessweek.com, in 2006, with it's variations of the iPod (Shuffle, Nano and Video), Apple had 76.5% of the MP3 market share based on sales. The Harvard Business Review article Wednesday 27th January 2010, questions what the world would be like it Apple stopped at the first generation iPod. Its willingness to step out and enter into new categories, is perceived as an important lesson for all companies.
Dobson, Starkey and Richards (2004) described the major faults of leadership are the "failure to set goals and setting goals that enjoy only superficial acceptance" Steve Jobs had a mission to make everyone feel valued within the organisation hence changing the organisational hierarchy from a tall to a very flat structure. He believed in doing so, this would increase communication and togetherness across multiple departments.
We have identified that the episode of change undertaken at Apple was the reappointment of Steve Jobs as chief Executive officer. The aspect of Apple's strategy which was subject to failure was that its key resources and core competencies that were instilled in the organisation was being underutilised. This all changed once Steve Jobs came back into the helm. Apple is considered to be an innovator in a way that they create products and applications that their customers had not previously considered (The Economist, 2009)
Hamel & Prahalad (1990) provide the definition of core competencies as "the collective learning in the organisation, especially how to coordinate diverse production skills and integrate multiple streams of technology". Dobson, Starkey and Richards (2004) also consider competence as the most current concept in strategy. Core competence is considered a source of competitive advantage. The resource based view argues that competitive advantage arise from firm-specific resources. Barney (1991) suggests that for resources to provide a competitive advantage, they must be rare/scarce, difficult to imitate, non-substitutable and appropriable by the firm.
Hamel & Prahalad concur that to fully utilise the underlying ideas that provide an organisation the capacity to leverage it's resources to the maximum, "strategic intent" is required. Strategic intent is defined by a "corporate obsession sustained over time and shared by the entire organisation" Having strategic intent provides aspiration for the organisation, and you convert that aspiration into leverage through the idea of core competence. Strategic intent could take the form of a strong mission/vision statement to give a clear indication to its various stakeholders what it intends to do and how it plans of going about this objective or objectives.
Hamel & Prahalad believe that core competence is derived form the roots of the organisation and viewed as the basis of development and growth. Core competencies can aid the development of core products, hence adding value to the end product. There is a danger of what the organisation becomes good at becomes irrelevant and then due to the struggle of getting to the place where competitive advantage existed over its rivals, the organisation is reluctant to change its strategy. Therefore a core competence would have then turned into a core rigidity, which is a competence that is extremely hard to get rid off or very hard to reposition the organisation in terms of expertise.
An organisation that focuses purely on refining existing competences may become strategically vulnerable as these become too specific to a particular context. If change occurs an organisation can find it hard to respond. This is captured by Leonard-Barton's (1992) notion of "core rigidities" whereby over time core competence can become dysfunctional to performance. There needs to be a shifts in competence and knowledge during periods of discontinuous change. Where rigidities comes into the furore, is in the example of HP in the research carried out by Leonard-Barton. The HP 150 project suffered from a lack of knowledge about personal computer design and manufacture. The company has a long history of successful instrument development based on "next-bench" design meaning the engineering designers based their decisions on the needs and skills of their colleagues on the bench next to them. However, such engineers are no representative of personal computer users, therefore traditional sources of information and design feedback were not applicable for the 150 project.
One aspect of core competence that have to undertaken is not the manage business units as separate entities, but to have the right flow of communication and coordination across the corporation that allows the movement of core competencies and resources across various units. Apple, under Jobs was one of the first major technological organisations to change from the traditional tall hierarchy to a very flat organisational structure. Having a very flat organisational structure enables all business units to communicate more thoroughly without having to go through highly bureaucratic process of communication more present in tall organisational structures.Dobson, Starkey and Richards (2004) explain that the concept dynamic capabilities have been developed to capture the importance of firms developing a capacity for change. Eisenhardt & Martin (2007) develop dynamic capabilities much further, indicating that an ability to change can constitute as a core competence. So not only do they believe core competencies and resources can be affected be an episode of change, but dealing with change effectively is in fact a competence in itself. Harreld, O'Reilly & Tushman (2007) describe sustainability will only come to an organisation if it is aligned with capabilities to continually sense how the marketplace is changing and seize these changes through organisational alignment.
If the starting point for corporate imagination is to escape the narrow view of the market you are in, from there we move on to say, how do I think of markets not only as existing products, but as underlying functionality, and underlying bundles of benefits that can be delivered to the customer. Hamel & Prahalad agree that the allocation of competencies is more important than the allocation of capital. Their research focused around "white spaces" where an organisation used existing core competences and utilised them into a new market. This was shown in a matrix (see Appendix) to show the various ways of establishing the core competence. On his return in 1997, Jobs strategy was simply to clean house, and according to O'Grady (2008) he went about it by only entering existing markets that had profit potential. As explained in The Economist (2010) Apple, rather than developing entirely new product categories, it excels at taking existing, half-baked ideas and showing the rest of the world how to do them properly. This allows its rivals to pump money into research and development and then permits Apple to implement is own persona on the market. Apple has done it successfully with the iPod and iPhone is on the way to conquer the e-reader market with it's iPad. For example with the iPhone, it was not the first smartphone available but Apple provided users with mobile internet access and software downloads making them a "mass-market phenomenon" (The Economist, 2010).
Apple have successfully gone through the transition period from near near bankruptcy to an organisation that is highly valued in the hearts of its avid followers, which is evident from my discussion. For the time being they have been able to sustain their success, but errors made pre-1997 should be learnt from, so that Apple do not rest on their laurels of being market leader, and with Steve Jobs presiding over things, it is hard to see them being complacent. My understanding is that managers have moved onto being extremely reactive to external environments. Being reactive to external changes allows the organisation to be more flexible in their approach and easily susceptible to changes and dangers it may face. One quote from Steve Jobs himself 'Innovation distinguishes between a leader and a follower' and this exemplifies that with such innovation displayed, they have become one of the, if not the, most distinguished organisation in the world.