Posts filed under ‘Strategic Management’
Myths and Fallacies in Strategic Management — Part I
| Nicolai Foss |
Here is the beginning of what may become a regularly occurring post on http://www.organizationsandmarkets.com: An identification of common myths, mistakes, fallacies, non sequiturs, etc. in the strategic management field (I am sure my co-blogger will be happy to participate). Most of them have been picked up from conversations with colleagues, from listening to presentations in seminars and at the Strategic Management Society Meeting, and so on. Most relate to the resource-based view (i.e., Wernerfelt, Barney, Rumelt, Peteraf, etc.). OK, here goes: (more…)
The SWOT Model May Be Wrong
| Nicolai Foss |
One of the basic, indeed foundational, frameworks of strategic management, the SWOT model, may be fundamentally flawed. The “model” advises managers to align their Strengths of their company to the Opportunities of the environment, while simultaneously safeguarding the company’s Weaknesses from the Threats of the environment.
This very basic idea — it is only in B Schools that it is called a “model” — is no doubt the most universally used planning tool in companies and is often used in the public sector. Students (and, one suspects, managers) love it on account of its extreme simplicity. Many textbooks are written on a SWOT formula: The first part deals with the external environment — i.e., industry analysis — and the second part then deals with the firm level, i.e., competitive advantage. I myself have always used the SWOT framework intensively in my strategic management teaching, and I have endorsed countless student papers and theses that argued that resource-based and industry analysis approaches are, after all, consistent because they can be aligned under the SWOT umbrella.
A recent paper by Richard Makadok of Emory University, “The Competence/ Collusion Puzzle and the Four Theories of Profit: Why Good Resources Go to Bad Industries,” suggests that the SWOT framework (at least in its usual interpretation) gets it wrong. How can something so simple, even trivial, as the SWOT framework be wrong? (more…)
Market-Based Management
| Peter Klein |
I first heard the term “market-based management” (MBM) in 1994 or 1995, attatched to the now-defunct Program on Social and Organizational Learning at George Mason University. The theory was described in a few papers (one example here) and, as I recall, a monograph. My impression was that the principles of MBM were unobjectionable, but unremarkable: strong mission, values, and culture statements combined with decentralized decision-making and incentive compensation. The main innovation seemed to be the addition of an “Austrian” gloss (e.g., “Taylorism suffers from a fatal conceit….”).
This weekend’s Wall Street Journal profiles Koch Industries’s Charles Koch, who not only practices market-based management but actually trademarked the term. Writer Stephen Moore notes, somewhat delicately: “Some of the ideas that undergird Market Based Management seem fairly commonsensical to me, and I’m not entirely sold on the notion that this program somehow represents a seismic breakaway from what is taught at Harvard Business School.” Indeed, the idea that organizations can sometimes exploit “market-like incentives” would hardly surprise Chester Barnard, Alfred Chandler, or Oliver Williamson, let alone Alfred P. Sloan.
A more fundamental problem is that while decentralization provides benefits (more effective use of specific knowledge, conservation of central managers’ time, and so on) it also brings costs (agency problems, rent-seeking, coordination failure, etc.). To my knowledge the MBM literature has yet to identify or analyze the relevant tradeoffs. Jensen and Meckling’s (underappreciated) 1992 paper represents one attempt to grapple with these problems; this recent Foss-Foss-Klein paper suggests a slightly different approach. In short, all organizations represent a blend of market and hierarchy. The trick is to find the appropriate mix. Simply describing the virtues of “market” doesn’t get us very far.
We Got a Contract, We Got a Contract!!
| Nicolai Foss |
Peter and I have been working for some time on an idea for a book volume, entitled The Theory of the Firm: Emergence, Synthesis, Challenges, and New Directions.
There are several textbooks that present or make extensive use of the theory of the firm (e.g., Paul Milgrom and John Roberts, Economics, Organization, and Management; George Hendrikse, Economics and Management of Organizations; James Brickley, Clifford W. Smith, and William Zimmerman, Managerial Economics and Organizational Architecture; etc.). There are also lots of readers and reference collections (e.g., Louis Putterman, The Economic Nature of the Firm and Jay Barney and William Ouchi, Organizational Economics).
There is no need for yet another textbook or reader/reference collection. What the literature lacks, however, is a critical synthesis of the various streams in the theory of the firm, one that places these streams in a historical and methodological context, discusses the various controversies that have stimulated internal development in the theory of the firm, and assesses the many critiques that have been leveled at the theory by scholars in sociology, psychology and management.
Peter and I think we can write such a book. Luckily, Cambridge University Press agrees with us, and will offer a contract. (more…)
Copenhagen Conference on Strategic Management 2006
| Nicolai Foss |
In addition to being a Professor at the Copenhagen Business School, I am also the Director of CBS' Center for Strategic Management and Globalization. The Center arranges the Copenhagen Conference on Strategic Management 2006 on 12-14 December. These dates should be particularly convenient for those who cannot make the Strategic Management Society conference in Vienna about 1½ month earlier, for example because of teaching commitments.
The first CCSM was held last year and was a great success. We want to make the CCSM 2006 into an even bigger success. Among the confirmed speakers are Jay Barney, Rich Makadok, and Rich Bettis.
Here is the conference homepage. Submit a paper!!
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