Home > Views & Papers > Taoyong SU: NEW CONCEPT OF STRATEGIC MANAGEMENT: LEAN STRATEGY

Taoyong SU: NEW CONCEPT OF STRATEGIC MANAGEMENT: LEAN STRATEGY

Sun, Sep 25, 2016

The fundamental tasks of corporate strategic management: develop visions and missions; coordinate the resources and actions of enterprises to match its environment; keep on creating and acquiring values. Enterprise’s focus of value creation alters along with the environment features of specific times. The tide of industrial revolution since the 19th century till early 20th century has resulted in the great development of production tools, and “capital + efficiency” has ensured the success of enterprises. Even more fierce competition of buyer market has been faced by enterprises as a result of global productivity enhancement since mid-20th century, thus “quality + brand” played a critical role in the enterprise competitions. Then starting from the 21st century, “connection” has become the theme of the internet era: enterprises and consumers are even more closely connected, where enterprises are connected in higher efficiency, and consumers are connected as communities. The contemporary era has witnessed the wide application of big data, accelerated development of mobile internet, and subverting tradition by sharing economy. Or in more specific words, the Internet Age is primarily featured by transparency: internet has not only accelerated the speed of information transmission, but also extended the scope of it, which plays a good supervisory role on personal and organizational behaviors; and secondly digitalization: internet has turned many incredible things into reality, and eased the data collection and analysis; and thirdly platforms: internet has provided stages for individual person and enterprise without qualification threshold, which means far-reaching influence on production and lifestyle; and fourthly anti-popularization: consumers have formed various communities with more diversified demands which provides more opportunities for enterprises.

New business environment requires enterprises to have new strategic logic. Since the earliest theory of strategic planning by Ansoff, competitive positioning strategy by Porter, core capability of enterprise by Hammer et al, and the succeeding dynamic competition, dynamic capability, and Blue Ocean strategic theory, strategic thinking has evolved from static to dynamic, which highlights the environmental impact; however, the process of strategic management has always complied with the original planning and design concept. The fixed pattern of strategic analysis, strategy formulation and implementation still prevails in the teaching materials of strategic management courses at most business schools; this pattern of strategic management is also popular in practices among domestic enterprises, which has consumed a great amount of financial and human resources in large companies, who eventually shelved and forgotten their strategic planning, while the strategic management is almost infeasible for small companies with limited resources. Although the bottom-up Emergent Strategy proposed long time ago by Mintzberg has been proved advantageous by some enterprises in strategic practices, e.g. 3M and Nucor, the bottom-up strategic logic behind it still remains short of theoretical frameworks.

People’s concepts are the result of specific times. Initiation of entrepreneurial theories and the wealth and social effects of entrepreneurial practice have promoted in great scale the acceptance of new thinking by enterprise managers. Harvard Business Review in March 2016 has included an article by Prof. David Collins, who has narrated the “Lean Strategy” on the basis of “Lean Entrepreneurship”. It has combined the setting of strategic targets and margins with the characteristics of new enterprises: trial and error, iteration and flexibility, with an aim to guide new enterprises in using of strategies. This concept is a good reflection of many successful enterprise practices, and also accord with my personal observation and thinking of enterprise strategies over a long period. The recent hotspot MoBike is a good demonstration of lean strategy execution. It is committed to solving the “last one km” harassment in public transportation, an advocator of green travel; it creatively solved the social problem through the market approach. Their original intention is very clear. The question is choosing what kind of business model, the design of bicycles and how to combine the hardware-and-software. MoBike wasn’t a mature design from the very beginning, which has gone through many tests and iterations, to get rid of the solar board basket, and use solid tires and bearing drive, so that it has evolved into the intelligent and simple “mini red bike” with its present business mode familiar to the public. It is foreseeable that MoBike will be upgraded according to the feedback of user experience and operation management experience, including bicycle framework design, partner selection, big data mining, and income channels expansion etc.; however, the core values will remain unchanged.

In fact, the thinking logic of lean strategy can be traced back to Mintzberg’s strategy formation process: intentional strategy and emergent strategy. This way of strategy management is also applicable to large companies by integrating the up-bottom and bottom-up strategy development processes. In short, top design and bottom iteration. Haier Group has been applying this organic combination all long, by removing the intermediate layers and weakening the hierarchical structure. From “Each staff is a SBU” to “Let staff be makers”, Haier has highlighted that the spontaneous actions and feedback of frontline staff are critical to company strategy. The series of global awards and honors achieved by Zhang Ruimin, the CEO of Haier, including Legend in Leadership Award (2016), Global 50 Greatest Leaders (2014), Leadership of Management Thought (2012), and the most famous CEO of China by western media can be attributed to his embracement of new thinking and innovation of management thoughts.

The new technologies, concepts, and business models are coming in thick and fast. People are more and more accustomed to this pace, and the existing enterprises are ever building higher sense of crisis. Such a historical background has got the business elites easier to accept the meaning of “lean” in lean strategy, and thus the traditional strategic planning methods and processes can be effectively complemented in practice. As the words goes by Porras and Hammer 20 years ago: “A real good company knows what shall never be changed, what can be changed freely, what can be sacrificed bountifully, and what shall be cherished forever.” Changing and invariability therein are the very soul of lean strategy.

X Thank you for your interest in Master of Global Management, Tongji University!