MANAGING STRATEGY PROCESSES IN EMERGENT INDUSTRIES
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1 MANAGING STRATEGY PROCESSES IN EMERGENT INDUSTRIES
2 Managing Strategy Processes in Emergent Industries The Case of Media Firms Johan Roos and Georg von Krogh with Peggy Simcic Brønn ~ MACMILLAN Business
3 Johan Roos and Georg von Krogh 1996 Softcover reprint of the hardcover 1st edition 1996 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1996 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world ISBN ISBN (ebook) DOI / A catalogue record for this book is available from the British Library Typeset by EXPO Holdings, Malaysia
4 Contents List of Figures vii List of Tables ix Preface xi 1 The Context 1 Vanishing Boundaries and New Rules 1 Strategy Processes in Media Firms 4 Rethinking the process of strategy development 4 Strategy as an ordinary activity 5 Understanding the New Media Landscape 8 The Meaning of the Term 'Media' 11 Understanding Two Key Concepts 13 2 Coping with the Unfolding Media Landscape - I 19 Understanding the Nature of Change Forces 19 The change forces 20 Resistance forces 28 Understanding Emerging Distinctions 30 Understanding New Language Games 34 3 Coping with the Unfolding Media Landscape - II 39 Understanding the Emerging Value Creation 40 Understanding the Potential Customer 43 The Business System: Understanding Alternative Ways of Doing Business 49 Current Newspaper Business System and Customised Newspage Business System 50 Conclusion 53 4 Language and Conversation as Part of the Strategic Process 55 Strategy Processes as a Series of Conversations 55 Strategic conversation fields 57 Scaleable conversations 58 Tensions in the Strategic Conversation Field 60 Driving forces for strategic conversation 60 Counter forces to strategic conversations 62 v
5 vi Contents Other counter forces Plotting barriers and drivers 5 Developing the Strategy Process through Conversation Management Practising Conversation Management Inclusion in strategic conversations Energising strategic conversations The role of questioning A Three-Phase Process Establishing the tension field Balancing the tension field Sustaining strategic conversations Conclusion Appendix A: Introduction to Cases Appendix B: Asker and Bt11rums Budstikke Uy John Anderson, ]r 102 Appendix C: Drammens Tidende - Buskeruds Blad Uy Pierre de Billot 124 AppendixD: Cliche Gra.fisk a.s. U]John HaraldAadne 150 Index 177
6 List of Figures l.i Alternative paths of development Mapping the media industry using Porter's Five Competitive Forces model 9 I.3 Coping with the unfolding media landscape I 0 2.I The change scenarios of the media industry 3I 2.2 Example of a distinction tree for the new media industry 33 3.I The three dimensions of the media industry 4I 3.2 The business system model The generic business system for a media product Business system for a traditional newspaper Business system for a customised newspage 53 4.I Strategic conversation field Change in language Vertical and horizontal conversation barriers Counter forces to legitimising conversations Conversation and strategy processes Three-phase process Putting strategy on the agenda Change ofworldview in the traditional newspaper industry 9I Appendix figures A.1 Overview of action research 96 B.1 Asker og Br.erums Budstikke 's circulation I 07 B.2 Key financial figures I07 B.3 Strategic framework 115 C.I Operating income for the OT-BB group C.2 Operations overview C.3 Newspaper reading in the region of Buskerud I28 C.4 OT-BB/ W!rdens Gang I993 I29 C.5 OT-BB/ Fremtiden I993 I29 O.I The value creation chain in the graphic arts industry I Competitive forces in the traditional reprographics segment I vii
7 viii List of Figures 0.3 Old and new organisational structure D.4 The strategy development process at Cliche Grafisk 0.5 Strategic options for Cliche Grafisk 0.6 The two metaphors
8 List of Tables 2.1 Change forces Resistance forces Questions for the energiser Building blocks for strategic conversations Key managerial issues in balancing the tension field Key managerial issues in sustaining strategy conversations 91 Appendix tables B.1 Schibsted's and Orkla's stake in major Norwegian newspapers D.1 Some of the largest competitors in the reprographics segment in Oslo D.2 Key figures for Cliche Grafisk D.3 Examples of strengths and weaknesses ix
9 Preface This book is about how managers work with strategy 'hands on'. The context is a two-year action research project in media companies - one reprographics firm and two newspapers - all of whom were experiencing significant changes. We begin by exploring the business context of our study, addressing such questions as: What is going on in the 'new media' industry? How can we understand such an emerging industry? What are the really important dimensions we need to grasp? Based on this contextual understanding we had thought to make this a book on organisational processes involved in making a company advance its strategy thinking and strategy processes. However, during the interaction with the three firms under study, one aspect surfaced as particularly important for making a strategy process a learning processconversations. Therefore we discuss strategy processes here in terms of natural tensions between strategic and operational conversations in the management team. Emphasis is on language and the ability to stimulate conversations that move away from operational issues and toward strategic ones, thus enabling managers to learn how to be alert to change, a prerequisite for succeeding in such a fluid environment as the media industry. The potential to develop strategic processes exists in many companies: the ability to discuss the future rather than day-today operational issues, involving middle managers rather than only top management, making the process challenging and stimulating and not burdensome and boring, and making the process a continuous learning vehicle as opposed to a 'last year plus' exercise. To a varying extent, this is what we also saw in the three companies that inspired this book- the possibilities were there but the firms needed guidance in finding their way forward, particularly in articulating a future-oriented strategy. As action researchers, we were earnestly involved in helping the management teams of the three companies understand and improve their strategy processes. We would like to acknowledge the vital assistance of John Harald Aadne, John Andersen, Jr and Pierre de Billot xi
10 xii Preface throughout this research project. As ethnographers (covered in Appendix A), they spent considerable time in 'their' respective companies observing and interacting with people on all levels. The outcome of their efforts are what is called 'thick descriptions', which have been converted into the three cases included in this book (Appendices B, C and D). Mr Aadne also played a co-ordinating role throughout the production of this project. In addition, we thank Ms Branka Rogulic for her contribution to the first part of the book as well as Bent C. Reichardt for his efforts. The research project was primarily funded by the Norwegian Research Council (Norges Forskningsnid) through the Norwegian Institute for the Graphics Arts Industries. We gratefully acknowledge this support. We are also grateful for the support of Hochschule St Gallen (HSG) and the International Institute for Management Development (IMD) in finalising the project. Finally, we are very grateful to our co-author, Ms Peggy Simcic Bnzsnn, for her willingness to help us finalise this project and make the content even more accessible to a wider audience in a much shorter time than we could have done alone. Switzerland johan Roos GEORG VON KROGH
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