Management Vs Strategic Management

I often wonder if there is a difference between management and strategic management. I think, there is a subtle difference between the two. Whilst both aim to improve an organization's performance. Strategic management aims to align the organization on a carefully chosen path. If successful, this path yields better than expected performance. Else, results in doomsday.

Quotable Quotes: "I am deaf to the word NO"

Another famous quotes from Dhirubhai Ambani. Something that personally moved me. If words can change your life than these are the words that are capable of changing one's life.

Following the power of simple words, Dhirubhai raised his profile in business circles. Every time he was told that he could not do something, he took it as a personal challenge and set himself to achieve that very thing.

Quotable Quotes: " I don't believe in meeting timelines, I believe in beating the timelines."

I first came across this quote whilst casually reading about Dhirubhai Ambani. One man who made a fortune like no else within one life span. An amazing story of rise of a man from rags to riches. Anyways, I draw a lot of strength from this quote in my day to day life. I like the fact the there are people out there who like to continuously challenge status quo and are on a continuous improvement path.

I think the biggest thing to learn from something like that is never to compare oneself with others. But set high standards for yourself and aim to improve on your own standard year on year.

Management control system

In the 1995 HBR article "Control in the age of empowerment" - Simons argues that management control systems are broadly classified into 4 categories and all these categories need to work in work to ensure organization's growth. These categories are Belief systems, Boundary Systems, Diagnostic systems and Interactive systems.

Belief systems explain organizational values. For example, integrity, customer service etc. One implementation of belief system is where upon joining a company an employee is given training on organizational values and failing to hold those values will result in dire consequences.

Boundary Systems explains organizational boundary. For example, not dealing with money laundering etc. Essentially, these systems cover what an organization would not do. This ensures that such message has been explained to everyone in the organization and people are expected to behave accordingly. One example is Enron where boundary systems collapsed miserly. In the movie "The smartest guys in the room" - it was explained that Enron wanted to make money at any cost. Hence, people were behaving in irrational manner such as bringing California power grid down in the middle of the day resulting in many people being stuck in lifts etc.

Diagnostic systems are essentially the performance management systems and more metric driven. These systems help track how organization is tracking on its set objectives. Balanced Scorecard, management dashboard are all example of diagnostic systems.

Interactive systems are concerned with ongoing improvement i.e. ensuring that strategy remains relevant in continuously changing world.

Book Review: One Page Project Manager

Though the title suggests that the topic of book is overall project management. However, this book is mainly about building a project status report that is presented on a one page and has all the project information i.e. scope, time, cost, resources etc.

This book provides interesting and novel concept for project communication management. I think if not for anyone else, this kind of report can help me get a handle on the projects easily.

The only restriction I have from using the books concept with large audience is that audience may not find this format easily palpable. Hence, may add training burden on the project.

Manager as a resource integrator

Recently, I kept asking myself what is a manager's role? Upon introspection and multiple readings, I have been able to firm up my opinion that a Manager is in fact a resource integrator. Though different jobs have different resources and require quite different integration skills but almost all managers mainly act as resource integrator in their day to day lives.

However, the way a manager integrates resources highlights manager's job effectiveness. In my opinion, there exists 3 kind of managers. First, who just integrate resources to achieve desired results. Nothing more, nothing less. Such managers fall in "MANAGE" buckets.

Second, who integrate resources with the aim to gain optimum utilization. These managers fall in "OPTIMIZE" bucket.

Lastly, their exists managers who aim to improve the overall efficiency. These managers fall in "IMPROVE" bucket.

I think, based upon one's management experience and type of project/task - a manager can fall in any of these categories. Imagine a project manager managing multiple projects - where he might fall in "IMPROVE" bucket for one project but would fall in "MANAGE" bucket for another project.

Recruiting: Importance of integrating new employees

HBR May'09 article about "Recruiting in Good and Bad times" captured my imagination and helped me further firm up the need to integrate new employees. I have always believed that as a hiring manager your job does not end upon candidate selection. In fact, once the new employee joins the organization, as the hiring manager - one must ensure that the candidate is adequately integrated within the organization i.e. the candidate understands the culture, norms and processes of the organization. Therefore, hiring managers must take special interest to ensure candidate feel adequately informed for smooth integration.

Management Lesson from Lincoln

What can we learn about Management from Political Leaders? Well that was the topic an article published in April'09 Harvard Business Review (HBR). Though most of the articles in HBR add a new dimension to managerial thought process but this one in particular stood out for me. This article claimed that there was a lot to learn from historical leaders whose tenure in political office is of extreme importance.

When talking of historical leaders, Abraham Lincoln really stands out. We all have heard about the motivation stories about Lincoln. Such stories go like, he lost 8 elections, failed in business twice, his fiancee died, he even had a nervous breakdown yet he overcame all such setbacks to become President of United States. And what a great president and leader he was. For that, only he had the courage to free the slaves. He also did many other things but abolishing slavery stands out as his key achievement.

Interestingly, I thought the article would go into similar motivational discussion. But, to my surprise the article did not touch upon motivation but highlighted that Lincoln had high level of emotional intelligence. He had a lot of control on his emotions and displayed empathy with people around him. Such was his self-awareness that he had appointed his political enemies to highly visible government positions because he deemed that the country needed such persons talent. Overall, I found it as an eye opener that one can learn so much about management from political leaders.

Virtual Integration in Service Industry

The idea of virtual integration is not new but something that has certainly caught the attention of management world is the way DELL has used virtual integration to create sustainable competitive advantage.

Historically, it was believed that a firm can capture majority of market value by using backward or vertical integration. Reliance India limited is a good example of a company that has effectively used backward integration. In essence, the point is that all part of value chain should be owned by 1 company to take maximum advantage.

However, DELL has proved that a firm can gain similar advantage as compared to backward integrated firms by strategically aligning all parties in a value chain such all these parties together are integrated. Hence the concept of virtual integration. Michael Dell has said in multiple interviews that his company's power comes from virtual integration that allows Dell and its partners to work together as a combined force.

With DELL as a test case, it is evident that virtual integration is a plausible strategy. However, after researching several scholarly journals etc. I have come to believe that all examples of virtual integration come from manufacturing or manufacturing related companies i.e. companies that are selling tangible products.

The question that I ask is can the same concept be applied to service industry. Can a financial service company leverage the concept of virtual integration ? - This is my current focus of research. Will publish my findings in the coming weeks/months.

Book Review: Six Thinking Hats

For many years I have known the concept of Six Thinking Hats. But did not know how to really use it in practice and what is the practical value of such a concept. Well, on one of the days whilst strolling along nearby bookstore I came across this book. So, I thought of giving it a go. Apart from being reasonably priced this book is an easy read and gives a lot of cues that we can use to structure different meetings.

Central theme of the book is to leverage the concept of parallel thinking. Specially in a meeting context, Idea is to have everyone present in the meeting to focus their thinking in one direction to reduce arguments. With that central theme set, this book uses hats to identify a certain type of thinking. Following is the summary of hats and their thinking types

* White - Just facts please
* Black - List all risks and dangers
* Red - List all emotions
* Green - List exploratory ideas
* Yellow - List all the positives
* Blue - Everything else. Including the meeting context

Book also says that meetings should start and end with Blue hat. Remaining hats can be used based upon the meeting context. Also, the idea is to allocate time for a certain type of thinking and encourage everyone to restrict their thinking to that type only. For example, when asked about red hat opinion people should mention their emotions only without any justification such as "I think this idea will not work". That's it .. no need to justify why the idea would not work.

Once all the thoughts are put on board or paper - team present at the meeting can easily prioritize to create plan go forward.

This book does give some examples where the Six Thinking Hats approach delivered great results for many companies. I haven't been a part of a meeting where this approach was used. But after reading the book I am encouraged to be a part of such meeting.

Strategic Integration

I think there is a no set formula to have a successful strategy. For an organization to grow it need to bring many elements together that I call as DNA.

These elements are broadly classified as Positioning elements and Execution elements. Within those elements there exists some synergies that an organization can leverage to create a sustainable competitive position.

Looking at many successful organizations around there does not seem to be anything exceptional in what they do. But the fact that whatever they do .. is done so smoothly day-in day-out that the ability to execute on desired strategy consistently becomes their strength. Few examples that stand out are Wal-mart and Dell. Walmart sell cheap products by having large warehouse type sale outlet within a community of certain size and usually out of city location. Yet other companies find it so difficult to replicate or better this model. Because the strength is not in model but the company's ability to deliver consistently on a certain model.

This notion of delivering consistently requires an organization to strategically integration all its resources such that they are aligned to deliver desired strategic position. For example, if company aims to be innovative then its organization and incentive structure must encourage innovation. Additionally, necessary resources should be provided to support such innovation. This is just one basic example where multiple elements of strategy need to come together to deliver on organization's strategy.


Reference: Fuchs, P.H., Mifflin, K.E., Miller, D. & Whitney, J.O. 2000, ‘Strategic integration: Competing in the Age of Capabilities’, California Management Review, vol. 24, no. 3, pp. 118–147.

Does luck play a factor in an organization's success?

Though not adequately supported but it does appear that some organization just got lucky by being at the right place and at the right time. Such organization's may not have a well defined strategy, at least initially, but over a period of time have built a significant scale that allows such organizations to remain ahead in their respective industry segment.

One such organization is a well known heavy machinery producer that received extensive support from Allied forces during World War II to build a worldwide support network for their machinery.

There are many articles that support this view that many organizations did not have a strategy but they just got lucky.

I am not sure how much truth is there in this claim. But something worth exploring.

Strategic Innovation: What can we learn from Dell?

Undoubtedly, DELL computers is probably the most written about organization in the past decade or so. Amongst many studies, Strategic Innovation is identified as key attribute to Dell's success. So the question arise what is strategic innovation?

A bit of history before we tackle the topic of strategic innovation. According to Michael Porter there are only 2 organizational strategies within a defined market segment i.e. Cost Leadership and Service Differentiation. Meaning an organization can either sell its product at cheapest price. Hence, it becomes cost leader in its industry segment (Think Walmart). Or an organization offers a service differentiation that does not have a close substitute (think Apple ipod).

What a strategic innovator does is it uses its strategy to increase the size of market segment in such a way the it gets both cost advantage and service differentiation. This is exactly what DELL did. It aligned every small piece of its strategy in such way that its strategy increased the size of PC market and its strategy gave Dell a cost advantage over its competitors whilst maintaining its service differentiation.

In essence, the point here that innovation is not only attributed to physical tangible products such as ipod but also attributed to strategy. As with Dell's case, its strategy in itself is an innovation.

Lean Principle: Wait = Waste

There are many principles that we can learn from Lean way of thinking. This idea is mastered by Toyota. Many other manufacturing firms have been trying hard to replicate these principles to match Toyota's success.

Lean principles build on the philosophy of removing waste from the system by using various simplified processes. From manufacturing perspective, it is comparatively easier to see the waste such as carrying too much inventory.

From service perspective, it is comparatively difficult to see the waste. Hence, organizations struggle to effectively implement Lean principles in a service oriented business. One way to implement Lean principles for a service business is to look at avenues where people wait for other people/processes before they can proceed with their tasks. Hence, wait equals waste for a service business.

VRIO Analysis: Competitive Advantage

Do you have a resource that is of competitive advantage? Meaning something that competitors cannot match.

VRIO Analysis is a good tool that helps us establish whether a resource is of competitive advantage or not.

V stands for valuable. First question to ask if the resource is valuable. If we own something that nobody wants then probability is that resource is not valuable.

R stands for rare. Rarity provides competitive advantage. Aircraft engine technology is example of rarity.

I stands for immitable. Only variability and rarity does not provide competitive advantage. A resource must be difficult to immitate otherwise competitors can easily immitate our resource and we will loose our competitive advantage. For example, in drug industry patents provide protection for few years but after that anyone can copy the drug formula and provide the same drug to the market.

O stands for organization. Suitable organization is needed to support a valuable, rare and difficult to immitate resource to ensure maximum benefit utilization of such resource.

Traditionally, in agriculture/manufacturing economies a piece of land was considered of competitive advantage. It is probably the easiest way to explain VRIO principle (Imagine the advantage of owning land on new york's 5th Avenue or London's Oxford Street).

However, in service oriented economies, organization structure can itself be of competitive advantage. For example, Virgin corporation has a customer centric organization structure that is valuable, rare and difficult to immitate. Hence is of competitive advantage in itself.

VRIO analysis brings us back to the notion of strategy being "Fit". That is having every component of the organization aligned to deliver its value proposition. The closer the organization's components fit to deliver value the higher organization's competitive advantage.

Ethical Dilemma? Try Newpaper Test

Ever faced an ethical dilemma or a tough decision ?

One way to manage such tough decisions is to use Newspaper Test. Yes - it means that you should not do anything that you would not like to have printed on the front page of newspaper.

What is Strategy?

We all have heard about strategy. Every organization has various strategies i.e. operations strategy, management strategy, HR strategy etc.

Recent management literature challenges this notion of having multiple strategies within the organization and suggests that at its core an organization should have only 1 strategy that should be closely aligned to deliver its core objectives.

That leads to the questions of difference between objectives and strategy. Objective defines what an organization wants to achieve. For example, An organization's objective can be defined as "Achieve 10% return on invested capital in next 1 year with 97% certainty".

Strategy defines how organization will achieve those objectives. A well defined strategy answers three questions i.e. "Who is the customer? What does he value? and How organization is delivering that value?". For example, strategy for a local Mexican cuisine is "provide local household (within 10 km radius), family oriented setting to enjoy the pleasure of Mexican meal or beverages in a relaxed environment".

Once the organization answers those big questions then such questions further percolate down within organization levels where individual departments are aligned to deliver strategically defined value proposition. In essence, strategy has multiple levels where each lower level's organizational strategy is tightly aligned to deliver the value proposition of higher level strategy. For example, extending the strategy of Mexican cuisine - we can say that beverage department can have a strategy to sell freshly made frozen margaritas. In this case, beverage department's strategy builds on top organizational strategy i.e. selling frozen margarita which is a Mexican beverage.

Book Review : "The art of Happiness at work."

This book provides Dalai Lama's perspective on happiness at work. According to the book, workers can be divided into 3 categories based upon how they view their work i.e. job, career and calling.

People who view their work as a job. For such people, work brings financial benefits. These people do not worry much about job title or type of work as long as work brings sufficient income.

People who view their work as a career. For such people work means advancement. Their identity is tightly linked to their job title and they seek a higher job title at all times.

People who view their work as a calling. For such people, work and personal life is interlinked. If they could then they would work without any reward. These people see their work in bigger context and understand the impact of their work on society.

This book encourages people to find the type of work where one sees the work as calling and is intrinsically motivated to do such work. Working in such area will provide tremendous happiness.

Further, the book suggests that people can be happy even if they view their work as a job or career. But in such case one must realize that happiness is temporary.

Book Review: "The Polyester Prince: The Rise of Dhirubhai Ambani"

This book is an unauthorized biography of Indian business tycoon Dhirubhai Ambani (DB Ambani).Dhirubhai Ambani founded Reliance industries limited, one of India’s largest organization by market capitalization. Ambani started his business in 1969 with a capital of $500 and his fortune, at the time of his death, in 2002 was worth $6 billion. This book offers some insight into how he achieved this phenomenal growth.

There are 3 key messages in this book one for individual entrepreneurs and two for organizations in general.

From individual perspective – Apart from having the vision and hard work – it is the ability to energize masses to have a shared vision that drives individual and organizational growth. Ambani successfully convinced common man i.e. mum and dad investors to put their life savings in reliance shares in return for expected high rate of return. His company had the largest number of shareholders for any company in the world during the 70’s before the privatization of British Telecom. Hence, Ambani is often credited with starting the equity cult in India.

For organizations – this books highlights reliance as a test case for backward integration as a growth strategy. Reliance started off as a company trading in polyester yarn, then it started manufacturing polyester, then it went into petroleum to manufacture DMT (a key ingredient in polyester manufacturing). Backward integration strategy provided almost monopolist control to reliance in polyester market.

Additionally, the book highlights the importance of external factors for an organization growth. In its early years, Reliance realized that the Govt of India was number 1 external factor affecting business growth in India. It employed the strategy of effectively lobbying the government to get favorable support. This govt support coupled with backward integration strategy was the key driver of Reliance growth over the years.

Disclaimer: I do not have any personal opinion against or for Ambani. I read the book to gain management insights into Ambani's growth and have shared the same above.

Does Marketing add value ?

We all have perceptions about marketing. Unless you are a cave man, chances are you come across marketing routinely. So the question is - does marketing add value ?

My early professional career was spent thinking that Marketing meant a department full of well dressed good looking people who knew only 1 thing i.e. talk that only other people in marketing could understand.

As with many other things, my perception about marketing has changed. Now I understand the broader context of marketing and that everyone does marketing. Sending resume to prospective employers is an example of marketing.

From an organization perspective, Marketing helps achieve various objectives such as brand identity, potential market identification etc.

I think Marketing adds most value by identifying potential growth avenues that are mainly achieved through Market Research. Exactly what Apple Computers did with iPod. They identified potential gap in the market i.e. PC users who listens to songs on computer and have a large collection of songs that could not fit easily in available formats at the time. Hence the iPod.

Apple did that by answering a simple questions i.e. Is there a Gap in the market ? And is there a market in the Gap ?

Hence, marketing can add value by helping organization answer this question to promote growth.

Career Advice from Warren Buffett

Question: How do I choose the line of work ?
Buffett's response: Imagine you have enough money that you have everything that you ever wanted and you can buy whatever you want. Then what will you do ?

Management Lesson: Buffett's response echoes intrinsic motivation theory. Intrinsic motivation occurs when people are willing to work without any tangible incentive. It is closely linked to the notion of hobby.

Reference: MBA students from Florida university interviewed Warren Buffett (late 2006). Video available on You Tube.

Manager Add Value

Yes believe it or not - But Managers Add Value. The very reason management exists is because managers add a lot of value to the organization.

I first stumbled across this statement during Corporate Finance class at Australian Graduate School of Management. Where our instructor kept on repeating this statement. After few years of soul searching and extensive management development training, I am finally convinced that managers add a lot of value.

However, many people feel overwhelmed with the concept of value and many times misunderstand what value really means. Is a manager, who is just tracking hours spent by employees on the job is adding any value ? Or what value relationship managers add ? Does the value creation has any link to the remunerations paid to the managers ?

I would argue that management by its very nature exists to add value. The fact that a person has been employed to track employee hour spent on job suggests that such tracking information is important for an organization to assess and improve its value chain.

The challenge for most managers and management employing such managers is to understand that value created by a manager should be adequately rewarded. That brings us to the interesting topic of measuring value. Do we measure value purely in terms of financial figures e.g. revenue increased, costs saved etc or Do we measure value in terms of emotional quotient e.g. displayed empathy, built strong coherent team.

I think it is a mix of both. One can't be achieved without the other. For example, if the manager does not have emotional quotient it is difficult for him to get commitments from his subordinates. Which means that subordinates do not take initiative and are happy to follow directions. That results in organization missing out on performance improvement avenues.

So, coming back to original point. Yes, managers add a lot of value. It is upto the organization to put in relevant systems in place to ensure value created is adequately captured and people creating such value are properly rewarded.