ING Asks, “What Is Strategy?”

ING— Put ten managers in a room and ask them to define their company’s strategy in a sentence and you’d get ten different responses. This is not usually for any lack of understanding as to what their company is doing, but rather due to the interpretation. Most managers struggle to explain to each other what strategy means because what needs to be done is typically expressed in (arbitrary) notions, which are either inconsistent or do not properly explain the strategic direction of a company using real information.

According to the strategic management professor Richard Rumelt at the UCLA Anderson School of Management, strategy starts with identifying changes. How do we improve our existing positions given the dynamics around us? For this, we have to take a position; we have to take a view which in many cases involves taking risks.

Strategic thinking starts with identifying changes around us, which will determine where we have to ‘go’ and what the options are given a changing world. For instance, should a telecom company invest in high-bandwidth opportunities of 3G, or not? Should a company invest in or divest from country X or Y? It’s really about seeking opportunities and identifying threats, and less about individual concepts such as distribution, cost-cutting, etc, which Rumelt calls “doorknob polishing strategies”. Read article.

How Hospitals Cope with Competition

KELLOGG INSIGHT— Businesses generally find competition unwelcome. When facing the possible arrival of a new competitor in their market, many firms work to make the newcomer’s entry more difficult. Cutting prices, investing in more capacity and new technology, and increasing advertising are prime examples of strategic behavior intended to dissuade fresh rivals from entering the market.

Leemore Dafny, assistant professor in the Kellogg School’s Department of Management and Strategy, decided to investigate whether the principle of strategic behavior applies to hospitals and other medical institutions. “The main idea is to examine healthcare providers using general economic theory that incorporates profit maximization,” Dafny explains. “That sounds like an obvious approach, but in an industry in which the product is viewed so differently from products of other industries and the suppliers are mainly nonprofit or government-owned, the objectives are potentially different.” In an analysis reported in the Journal of Economics and Management Strategy, she finds that the behavior of the medical business is not so different after all. Read article.

How One Executive Used a Sabbatical to Fix His Career

THE WALL STREET JOURNAL—One morning in 2005, Daniel H. Marcus awoke in a pitch-black hotel room. The executive-pay consultant knew he needed to see a corporate client, his third in three days in three far-flung cities. But for several minutes, he didn’t know where he was or who awaited him.
“That doesn’t bode well for my work,” Mr. Marcus thought to himself. His memory lapse proved a blessing in disguise. With constant travel and 60-hour weeks pushing him close to burnout, the veteran partner at Mercer, a major human-resource consultant, decided he needed a sabbatical.

Mr. Marcus pursued an elaborate self-improvement scheme and sharpened his professional focus during an eight-month break, which ended in November 2006. “I’m a better consultant today because I bring a more balanced perspective to my work,” he says. The 51-year-old adviser now toils about 40 hours a week for Semler Brossy Consulting Group in Los Angeles.

A sabbatical can enhance your career, especially if you acquire valuable skills, experience and insights. Extended breaks allow for personal goals, such as travel, study or research. A look at Mr. Marcus’s playbook offers helpful moves to follow — and missteps to avoid. Read article.

The Rise and Fall of the Shopping Mall

THE ECONOMIST—One reason for the malls’ problems is that the suburbs have changed … The suburbs are becoming much more racially mixed while the cities fill up with hip, affluent whites. As a result, suburban malls no longer provide a refuge from diversity.

So many malls have died or are dying that a new hobby has appeared: amateur shopping-mall history. Like many esoteric pursuits, this has been facilitated by the internet. Websites collect pictures of weedy car parks and empty food courts and try to explain how once-thriving shopping centres began to spiral downward. Some of the recollections are faintly ironic or gloating. Yet the strongest note is anguish. Implausibly, these online histories reveal the deep emotional connections that people can establish with malls. Read article.

CEOs on Strategy and Social Issues

MCKINSEY QUARTERLY—Chief executives have increasingly incorporated environmental, social, and governance issues into core strategies, McKinsey research shows.

These CEOs are responding to increasing pressure from employees and consumers, but some also see opportunities to gain a competitive advantage and address global problems.

CEOs view globalization as the key development reshaping the contract between business and society. They identify talent constraints, poor public governance, and climate change as the issues most critical for their companies to address.

Competing strategic priorities and the failure of financial markets to recognize the importance of implementing a strategic approach to societal issues are among the barriers to change. Read article.

The Falling-Down Professions

THE NEW YORK TIMES—You can’t say law firms aren’t trying. At the Chicago office of Perkins Coie, partners recently unveiled a “happiness committee,” offering candy apples and milkshakes to brighten the long and wearying days of its lawyers. Perhaps this will serve as an example to other firms, which studies show lose, on average, nearly a fifth of their associates in any given year, in an industry in which about 20 percent of lawyers over all will suffer depression at some point in their careers. Read article.

China Acting to Halt Price Increases

INTERNATIONAL HERALD TRIBUNE—Prime Minister Wen Jiabao responded Wednesday to growing public anxiety about inflation by announcing that China would freeze energy prices in the near term, even as international crude oil futures have topped $100 a barrel.

The move to hold down prices came as inflation hit an 11-year high in China. A recent nationwide public opinion survey found that “rising prices of consumer goods” ranked as the top public concern, followed by income inequality and corruption. Read article.

Higher Growth, But For Whom?

INTERNATIONAL HERALD TRIBUNE—This week, Noah Barkin of Reuters writes about the dark side of Germany’s recent growth spurt. Angela Merkel’s reforms as chancellor – mainly in the tax system and in labor markets – have led to higher incomes, but not for everyone. Wage-earners apparently haven’t been invited to the party, perhaps making Germany one more example of a growing trend: globalization reducing inequality between countries, but increasing inequality within countries. Read post.

Deal making in 2007: Is the M&A boom over?

MCKINSEY QUARTERLY—A wrap-up of 2007 M&A activity finds that the volume of mergers and acquisitions reached new heights during the year but then fell precipitously after the subprime-lending crisis made credit tighter. Nonetheless, suggestions that the M&A boom has met its demise may be premature.

Most of the decline in M&A since August was concentrated in private-equity deals; corporate acquisitions continued apace. In a market characterized by tighter credit and a heightened appreciation of risk, this M&A boom will continue only if the more fundamental forces behind it, such as the surging activity of acquirers in emerging markets and increasing cross-border activity, continue as well.

Furthermore, deal makers largely continued to exert greater discipline in M&A, as evidenced by metrics for the value that deals created and by the smaller number of acquirers overpaying for acquisitions. Read article.

Housing Slump? What Housing Slump?

ARCHITECTURAL RECORD—The High Line, the Manhattan elevated railway that’s undergoing conversion from industrial artifact to public green space, is the work of a trifecta of design-world giants, including architect Diller Scofidio + Renfro, landscape studio Field Operations, and the lighting design firm L’Observatoire. The park also has cast stylish ripples. Since a June 2005 rezoning, the surrounding neighborhood has boomed with upscale condominiums conceived by Lindy Roy, Della Valle Bernheimer, and Neil Denari.

Thanks to the local real estate market’s defiance of a downward national trend, developers and architects continue to announce new condo projects that are changing the neighborhood as dramatically as the High Line’s own transformation. Although these buildings are clearly intended for the privileged few, they include features inspired by the future public amenity, such as contextual material choices and fenestration patterns as well as large swaths of plants. Read article.

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