American Eagle Outfitters has shown strength among teens at a time when hipster Abercrombie & Fitch is struggling (see this WSJ article for details). The company credited their “Don’t Ask Why” collection in part for its 3% increase in revenue. They referred to the collection a cost-effective “testing lab” to spot trends. By experimenting with new fabrics, washes and styles, they believe they can gauge which styles are gaining favor and add them to the regular collection. American Eagle said the process was key to turning around the company’s tops business, which is now one of the best-performing segments. For example, one of the trends is to abandon the logo covered clothing that was popular in the 1990s. For class, this might make a discussion of dynamic capabilities much more tangible than the academic literature has so far achieved. How do they do it? Does this confer an advantage? If so, to what extent is it sustainable? Of course, this is also an opportunity to bring research into the classroom. For example, one might have students discuss whether this example looks more like Eisenhardt & Martin’s view or dynamic capabilities or those of Teece, Helfat, Peteraf, Winter or others (even Coff had something to say about this ;-).
David Kryscynski (Dr. K) has provided an excellent series of online videos to supplement your course or to help move portions of it online. These are very well produced and may allow you to spend class time on more experiential activities found elsewhere on this site. Below is the video on Porter’s generic strategies but I have provided links to all of the available videos below and listed others that you can gain access to through Wiley. Dr. K’s newest collection can be found on his free web page at LearnStrategy.org.
In this video, Henry Mintzberg presents the story behind the classic Honda B case. That is, when Honda tried to enter the traditional US motorcycle market with large machines but ran into implementation problems that pushed it toward introducing small bikes through non-traditional distribution channels. As a result of their pivots, they were able to create a new market for smaller bikes in the US. This was a startling contrast to the “A” case which implied that the strategy was intentional from the start.
This interview with the founders of Justin.tv and Twitch presents an example of how founders shift their strategy in the face of feedback from customers, and emerging opportunities. They started Justin.tv to broadcast their lives, but soon discovered that people really wanted to watch gaming. This interview describes how they pivoted. In a strategy class, this illustrates intended vs. emergent strategies as well as the need for entrepreneurs to pivot off of initial ideas. There is also an interesting discussion of how technology has helped to make gaming and poker into competitive sports. You may think these guys are crazy, but Amazon paid $1 Billion for Twitch. The video goes on (@ 19 min) to discuss their involvement with Y-Combinator which provided seed capital. Warning: around 13:45 there is discussion of mature content that some students may find inappropriate.
Contributed by Susana Velez-Castrillon
A useful way to introduce the topic of leadership is to understand how leaders differ from managers. The “Vision Thing” exercise is designed to help students distinguish the activities of leaders and managers in a fun and engaging manner. The exercise involves creating a three-tiered hierarchical structure. One person is the CEO, another is the manager, and a third is the employee. The CEO prepares a vision statement in advance and works with the manager to determine how to translate the vision to a tangible “product” using the toy construction set. The manager then guides the employee on building the “product.” The process is iterative in nature—the manager can communicate with the CEO and employee as often as necessary. But there is a finite amount of time available to implement the vision. Once the exercise is complete the team comes together to examine how close the team came to implementing the CEO’s vision. The learning objectives are:
To understand the distinct, yet complementary roles of leaders and managers
To appreciate the challenges involved in articulating a vision
To learn the difference between a vision and a strategy
This Onion video illustrates some … um … interesting strategies one might apply in job interviews. While the strategies portrayed are entertaining, there is a key point hidden behind the humor: Analyzing a company’s strategy might help students ask questions that set them apart from other job candidates. Here is a 6-step “listicle” by Google’s HR executive on how to prepare for an interview. Getting a job could be turned into a class exercise that helps students see how the strategy content might be useful right away (as opposed to waiting until they are CEOs). For any case, consider a range of recruiter questions that convey a deeper understanding of a company’s strategy. For example, a good question for Apple might reveal an understanding of the nature and extent of their competitive advantage as well as strategic challenges: “How does Apple’s culture of creative product design extend to less creative jobs like sales and service?” or “How does Apple create a sense of urgency among employees to respond to rivals like Samsung?” Many of the key strategy frameworks can be applied to generate such probing questions:
5 forces/Industry analysis might help you understand the market position & efforts to increase buyer switching costs. This might include marketing or operations efforts to get closer to customers (customer intimacy). Probing questions along these lines convey that you understand strategic issues in the industry.
VRINE/Internal analysis might help identify key resources to leverage (e.g., Apple example above). If culture is a critical resource, one might ask questions about how they develop and maintain it.
STAR framework might help to identify levers to develop and maintain a valuable culture or, for example, coordination across units (e.g., MicroTech negotiation). Thus, one could probe into hiring, reward systems, structure, and processes to understand how they achieve these capabilities.
“Four C” framework might be useful if alliances are a key component of the firm’s strategy (outsourcing, R&D, etc.). How do they find partners with congruent goals? How do they managing the changing relationship over time? End game?
here are lots of cases, exercises, & simulations dealing with making strategic decisions, but few that deal with execution. Since implementation is a major hurdle for achieving a successful strategy, this can leave an important gap in the traditional strategy course. Bill Judge created this simulation dealing with strategy execution of an organization-wide strategic change. The product, developed in partnership with Harvard Business Publishing, is a single-player, online simulation that can be played over the internet or in the classroom. The student plays the role of a change agent trying to convince other managers to adopt the proposed green strategy. There are social networks embedded among them that are only revealed as stakeholders are interviewed (one of the 18 “levers” in the game). They, in turn, convince others based on their social ties. The simulation allows you to “play” in four scenarios that alter the change agent’s power (CEO vs. R&D director) and urgency (an opportunity to expand vs. the risk of losing the firm’s largest customer). This is a good vehicle to introduce notions of power and influence, human capital, readiness for change, leadership challenges, dynamic capabilities, balancing financial and social imperatives, and the organization and environment interface. The cost of the simulation is nominal if you are playing it within an academic institution (about the cost of 4 HBS cases). If you would like to explore this further, please click here and check it out. You can check out how it works since there is a video and preview available. If you have comments, questions, or suggestions, please email Bill Judge here.
Of course entrepreneurs need to anticipate when to pivot off of their initial plans (same applies to larger firms but it’s harder). This silly video drives home the need to pivot lest you run up against a wall. You might then follow up with some examples of first movers who had the business model almost right but failed to pivot (firms like MySpace, LinkedIn, AOL, Yahoo).
Individuals and firms have different tolerances for risk. This video certainly captures fearlessness (and maybe stupidity). This might lead to a nice discussion on how such different attitudes might affect competition (for example between small and large firms). It also might seed a discussion of how decisions are made or human capital.
When GE acquired NBC, there was much doubt that they could create value with the highly unrelated acquisition. This very funny video of Letterman delivering a fruit basket to GE headquarters illustrates the cultural differences (see especially the GE handshake ;-). However, business segment data reveal that NBC’s operating margin was doubled and revenue was up 60% after GE’s ownership. Did they actually make money? Maybe. It took them 10 years to accomplish this (and everything tanked the 1st 5 years) — a time factor that may reduce the value created by as much as $3 billion depending on their initial assumptions. This can be used to demonstrate hard numbers behind the acquisition integration process (spreadsheet available on request).
Having a paper fight in class can really shake things up. It also allows you to demonstrate some simple competitive dynamics principles in a very short exercise. I use this with evening, executive and BBA students — generally on the first day of class to shake things up and introduce the topic.
Another great Dilbert cartoon turned to video. Often strategy takes the shape of continual reorganizations. If you find this to be of use, you might check out Nickerson and Zenger’s article on being efficiently fickle. This explores how organizations may oscillate between discrete choices (such as centralization/decentralization, make/buy, hiring, etc.) because the “optimum” middle point is unstable.
Here is another demonstration of the power of teamwork and organization to defeat a bigger foe. The message is simple but how many firms can really coordinate effectively? This can be used to focus on coordination of any type (alliances, etc.)
This clip is an interview to Sergio Marchionne, CEO of FIAT and Chrysler, from “60 minutes.” Marchionne explains the process of transforming the struggling company into a profitable contender in the world market. This helps to introduce topics such as merger integration, alliances, strategy implementation, and turnaround strategy. There has been some buzz about Chrysler having an IPO. This adds an important stakeholder component since the main barrier to the IPO is disagreement on the purchase price for shares owned by the autoworker healthcare trust (42% of outstanding shares).
You may have followed the debate about HBR’s policy prohibiting professors from linking suggested HBR readings to their own library’s paid subscriptions (see Joshua Gans’ blog posts on this and his Financial Times article on HBR and their journal list). I have increasingly used McKinsey Quarterly which makes their articles available for free (you need to register but that’s free). Here are some HBR alternatives that seem to work well (often by authors you know well):