Demonetization @India: A Case For Collapse Of Service Management

Demonetization in India has taken people like a storm whether one horded the declared illegal currencies or not. Only the impact has been different. The hoarders have been facing the challenge to get their illegal wealth or black money converted while others are struggling to convert, deposit and withdraw their legally earned money.

I found this to be a very interesting case of a complete collapse of service management. In this blog I am going to cover the very basics concepts of Service Management that were ignored.

For an analogy let us consider a global business enterprise having presence in numerous location within multiple countries globally. Assume that the Managing Director or head of the conglomerate (consider a banking group) takes a decision without consulting anyone. The decision is that within next 12 hours the existing vendors, to whom their IT services including data centre is outsourced to, will be replaced by his/her preferred vendor. So there is no transition time available. What will happen to the customers of this banking group? What will happen to functioning of various business units?

The result of such a decision is obvious – devastation for this banking group; their stock value in no time would be 0. Thus, such a decision would lead to winding of the entire group’s operation.

The scenario in India is somewhat similar – the only difference being that instead of a group of companies it is the Government of India (GoI). In my analogy, the group is listed in a stock exchange and the pain to its customers have an immediate direct impact. In India, the situation is slightly different with GoI being able to manage people’s perception by bringing in nationalistic feelings; But the reality does not evade for long. They have more time to turnaround the decision to show the benefit than our analogy. Unfortunately, this granted time is not everlasting, once the stock value for the government (i.e. the people of India who are supporting this decision as of now and their patience as well as belief in Government) starts to fade, the result for the government could be utter devastation; the other stock value for the government is reflected by the economic health of the country, which for the next couple of quarters is going to take a dive and will directly reflect on Sensex and Nifty, the Indian stock exchanges.

The above para links directly to Strategy Management For Services – What is the value this decision would provide to people of India – Already we have seen the GoI’s claim on value creation has undergone quite a few changes. Thus, despite approx. 2 month I am not able to get the answer to my question ‘what is the value creation from this service?’

Before we dive further let us structure our assumption for the case:

1.       Stakeholders:

a.       GoI - the holding company that controls the majority stake in a believed independent organization RBI (Reservice Bank Of India) and having Income Tax Department as a key internal supplier for driving compliance

b.       RBI – the company that owns the service and facilitates it through its sales partners

c.       Sales Partners - Banks

d.       Customer – The income tax payers of India, payers of service tax and other taxes for related banking operations

e.       User – The people who uses the banking services for currency withdrawal, deposits, payments and transfer

f.        Suppliers – Both internal and external suppliers involved in the overall service provisioning:

·         Supplier for RBI – Printing press, printing ink providers, currency paper provider, logistics and transportation service providers, IT service providers, etc.

·         Supplier for Banks – Business units providing staff for banking operations, suppliers for support staffs, IT service providers, ATM machine - maintenance & support service providers, services providers who load the currency in ATMs, logistics and transportation service providers, etc.

g.       Key resources related to service provisioning: Staff, paper, vehicle and IT systems & applications

2.       Service:

a.       Primary Business Service: RBI provides a Service “money” to people of India through its various partner channels – Banks. This service constitutes of various service packages based on the denomination of the currency. It gets these currencies printed and sends it to banks. Various suppliers, internal or external, are involved in moving the currencies from the printing press to the banks. Banks then decides the ratio in which they would want to distribute the received stock of the currencies to its various branches and ATMs. Again, it too needs to rely on multiple suppliers.

b.       Secondary Business Services: Primary Business Service – ‘Money’ constitutes the core service on which the following Banking services are based on:

                                                               i.      Money Withdrawals:  ATM cash withdrawal and cash over counter

                                                             ii.      Money Exchange: Exchange of demonetized currencies over the counter

                                                           iii.      Money Deposits: Deposits over the counter or through deposit machines and/or ATMs

                                                           iv.      Money Payments: Point of Sales (Credits/Debit card payment), Online payments, payment through online transfers and Bank’s eWallet

                                                             v.      Money Transfers - Online inter/intra bank transfers

                                                           vi.      Others

3.       Change to the Service: GoI’s decision to demonetize 500 and 1000 denomination currency and replace them with new 500 and 2000 ones; Secondary services are impacted as the constituent ones are changed

Strategy Management for Services:

To understand the value creation from the change, we need to understand the Utility & Warranty for the same.

Utility:

1.       Performance is associated with the performance of the tasks related to the desired outcomes. So, let us see what the desired outcomes of demonetization was and way it itself underwent a change:

a.       End to black money: This was one of the initially projected outcomes. GoI projected that black money would not come back to the system and will eventually lead to de-burdening RBI – This outcome has not been realized as more that 97% of the demonetized currency has come back to the system.

b.       End to fake currency: This was another initially projected outcome. This seems to be realized to a significant extent.  Only thing to be seen is what percentage of fake currency has been accepted in banks by mistake. One of the key attributes of the new denomination has been the extremely less probability of it getting duplicated. But already fake currencies of the new denomination has started surfacing and agencies are trying to investigate the same.

c.       End to corruption: This was another initially projected outcome. Initially it did curb corruption since money was not there in the system. Eventually instead of eliminating corruption, it has given another opportunity to many individuals to build black money. Tax inspectors have got an opportunity to earn in return for giving clearance to tax evaders; Bankers and many others have taken commission to convert black into white; etc.

Only hope that remains here is that with digital economy the corruption would reduce. This realization can be evident only in a longer run. Another, potential gain would be in terms of income tax and indirect taxes. These could be major gains for this initiative. This again would be evident only in next few quarters but degree of realization and attributing it to such a gain would be extremely difficult to quantify and would always be questionable.

d.       Making India a digital economy: Initially this was not one of the expected outcomes. But as digital payments surged and benefits from projected outcomes diminishing, GoI started projecting it as an expected outcome. Significant push has been made to promote this (probably as a face saving gesture). There is a significant surge in digital transactions, but coming quarters would tell if this would sustain. Primary reason for this surge is lack of liquidity in the market.

2.       Undesired outcomes:

a.       Pain to customer and end users: Businesses and people have faced significant difficulty in withdrawing their hard-earned money. Many sectors and villages are far from having the capability to be digital and this has had a major impact.

b.       Economy is affected and this is going to reflect in GDP as well as IIP besides the stock values of various companies in coming weeks. Banks’ credit business has taken a hit; Manufacturing is affected due to poor demand and in many cases production is impacted as multitude of things were based on cash economy; etc.

3.       Are there any constraints removed due to this change? Yes, a higher denomination currency is introduced thus the need for the same is addressed. But at the same time a new constraint of unavailability of 1000 denomination is introduced besides the liquidity of lower denomination notes which is critical for using the higher one.

Thus, I am of the perspective that the change in service overall does have some utility but not a considerable one; Most of the desired outcomes are not achieved or offsets have happened due to undesired outcomes.

Warranty:

1.       Available when required? – So far availability of the changed service is an area of concern since it has not been available enough since:

a.       Replacement currencies are unavailable to the bank

b.       Withdrawals are restricted

c.       Though ATM recalibration is complete to certain extent but this was not well planned for

d.       Availability of the currency in the ATM

Though the availability situation has improved, but overall the answer to this remains as “NO”.

2.       Can handle the required load (capacity) – The systems still do not have the sufficient capacity to address the needs of the users:

a.       Sufficient new currency is not available to the banks

b.       Printing press do not have the capacity to meet the demand and no stock was planned for (printed) based on the demand that would come-up post demonetization

c.       Insufficient capacity to route the currency stock to banks, to bank’s branches and fill the ATMs

My answer to this question remains as “NO”.

3.       Continuity issues addressed? – There was no continuity of services post demonetization; Users have suffered considerably.

My answer to this question is “NO”.

4.       Security requirements addressed? – There is no direct security implication to the changed service. But the push for the outcome for digitization has some security concerns as host of people who have moved to digitization are not conscious or aware of the security implications that their device may expose them to. In a country where netizens are victims of many online frauds, exposing them (and many who have never even tried internet banking) to digital world directly (without any sort of awareness campaign) is a risky proposition.

My answer is “MAYBE” (since depending on the perspective the answer would be different)

Thus, I am of the perspective that the change in service does not provide the desired warranty and more so most of the warranty parameters are -ve.

Value Creation – Thus, the changed service has not created any value for the customers/users (citizens).

Nationalist feeling is the only thing which has created the perceived value till now; only time will tell whether the perceived value becomes a real value (utility and warranty is achieved) or the patience of the customers and users gives away.

Demand Management: Demand management has completely failed. The extent of impact of demonetization on demand is well beyond RBI and the banks. Following are some of the key demands that went unaddressed:

1.       Demand for new currency notes

2.       Demand for printing paper

3.       Demand for ink (for printing currency notes)

4.       Demand for ink (for marking on fingers) – temporary as the decision to mark the fingers was rolled back but it did trigger some corrective measures by the concerned manufacturing company

5.       Demand for logistics & manpower related to transporting notes from printing press to RBI

6.       Demand for logistics & manpower related to transporting notes from RBI to Banks

7.       Demand for logistics & manpower related to transporting notes from Banks to their Branches

8.       Demand for logistics & manpower related to calibrating ATM machines

9.       Demand for logistics & manpower related to loading ATM machines

10.   Demand for human resources at bank’s branches to:

a.       Exchange demonetized currency notes

b.       Deposit demonetized currency notes

c.       Teller counter (currency withdrawal)

11.   Demand for new POS machines

12.   Demand for bandwidth:

a.       Telecom providers for POS transaction

b.       App/infra layers of banks to handle quantum of transactions – Transfer to eWallets; Transfer to other accounts, POS transaction and online transactions

c.       App/infra layers of eWallet companies to handle quantum of eWallet transactions

d.       Telecom providers’ data bandwidth for eWallet transaction

Since the change came as a major surprise for the stakeholders, they were not prepared to handle the surge in demand. There was no time to take any demand management related corrective actions or have the forecast/inputs for capacity management to manage the capacity specific demands. This thus also led to the failure of Capacity Management process as well as Availability Management process. All aspects related to having the services available was missed, resulting in a significant downtime for the service.

The situation became a self-created disaster with no Service Continuity Management process in place to handle the same. The service levels gave way to the ones that never existed. Timelines were committed to the customers but never really achieved. Normalized services still elude them.

Change Management and Release & Deployment Mgmt: All fundamentals of the two processes were completely forgotten. Even in case of strategic changes concerned stakeholders are involved to ensure that the release and hence the change is successful. But unfortunately, GoI and RBI completely forgot the key to a successful change –concerned teams including its suppliers/partners and ones that supports the entire value chain enabling constituting and delivering the service.

Since the entire approach was reactive, the proactive part to eliminate incidents and to create the proactive service delivery environment has been completely overlooked so far.

Thus, I see demonetization as a classic example of complete collapse of the principles of service management.

Note: Concepts of ITIL® has been extrapolated to Service Management. 

6 ‘I’s Of Strategic Decision Making

Strategic Decision Making is a continuous process. There are various models for strategy generation (My Strategy Generation Model). But still a question that bothers us is - "How do we formulate and decide a strategy?"

I propose the following model for Strategic Decision Making. I prefer to refer to as "6I's of Strategic Decision Making"

My 6 I's are:

1. Identification of problem: During this stage the problem for which the strategic decision has to be made is identified. he output of this stage would be the problem statement.
   
   
2. Information processing: This is the stage where data gathering is done and information is processed. Referring to my model of strategy generation, this is the Strategic Assessment stage/phase. We analyze all external and internal factors, conduct appreciative enquiry and arrive at various objectives.
   
   
3. Identification of options: The identified objectives will act as an input for identifying various options. From IT strategy perspective this would be the second phase of my strategy generation model, SITP Planning Process (rather even the 4th and 5th Is are related to it).
   Otherwise for identifying any strategic option, the objectives will be analyzed to identify the various ways or options by which it can be accomplished. The focus should be on identifying as many options that may be possible.
   
   
4. Isolating a choice: After identifying various available options, the best one needs to be identified. There are various qualitative and quantitative techniques that may be used to isolate the choice. These methods would be discussed in my next post.This would also give measurable targets for the strategy or objectives.
   
   
5. Implementation: After the choice has been identified/isolated, the implementation plan has to be formulated. Mintzberg's Plan and Pattern will act as an catalyst for formulating the Implementation plan. Thereafter, steps for implementation of the plan is performed, which would include allocation of required resources. Thus, resources and capabilities of the organization will enable in eventual implementation.
   
   
6. Improvement via feedback: This is the feedback mechanism. Whether the implementation is inline with identified measurable targets or not is determined with regular feedback, gaps and corrective actions identified and implemented. Eventually when the required target is achieved, it would mean that the strategic decision has been able to successfully resolve the IT/business strategic problem.

It should be noted that strategic decision making is a cyclic process. Also, it may be possible that a strategic decision making for a new problem has to be initiated when one for the other is already at any stage of 6I. In such a situation we can find parallel implementation of 6I.

My 6Is of decision making can easily be related to the PDCA or Deming Cycle. Also, it should be observed that the problem statement referred to in this post is more of the business or IT issue or need that is in hand for which a strategic decision has to be made.

IT Strategy Generation: Preparing For Execution

My model for strategy generation is in extension to the OGC's model. My model consists of following phases/stages:

Strategic Assessment:
We analyze the internal and external factors. We are conducting a SWOT analysis to identify our Strengths, Weakness, Opportunities and Threats. But at the same time the model focuses on SOAR. Thus, Weaknesses and Threats through analyzed and acting as an input to the assertive enquiry, yet there is not a major focus on the findings. These finding are more from the perspective of 'keeping an eye on'. This ensure that the benefits of SOAR is being realized along with not missing the concern areas during assessment and strategy formulation.

Based on the assertive enquiry, analysis of external & internal factors and the business strategy itself, the objectives are established.

Measurement and success criteria for measuring the successful implementation of these objectives are determined for each objective identified.

Strategic IT Planning Process:
This is the stage during which Strategic IT Plan (SITP) is prepared. This is based on the Mintzberg's 5 Ps of Strategy. OGCs model refers to only 4 Ps, but I have included the 5th P (Ploy) as well, since IT can act as a major enabler or creator of a Ploy.

Eventualy the SITP is prepared, which has all the required details about the IT Strategy. This acts as an input to Service Portfolio process of ITIL V3 as well.

Tackling Roadblocks During IT Implementation

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Many IT implementation projects that organizations undertake get delayed. Some fail to meet the required objectives. No effort is made to identify the reasons behind the success or failure or delay of such engagements. This book unravels the rationale behind successful implementation as well as decodes the principle reasons for failure of IT projects. It covers detailed identification of key roadblocks faced during IT implementation projects. Consulting experience across a broad spectrum of industries is used to describe each of the roadblocks. The book has been written in four parts.

First part provides an introduction to the case on which the second part is based, along with the basic explanation of roadblocks and concerned parties.

In the second part, the book focuses on the case of a management institute along with relevant sample cases from various industries covering consulting, software and related IT/process implementation projects. These cases have been used to cite various roadblocks and the way they were addressed.

Third part has two case studies – one of a premier management institute for whom the ERP implementation was done and other of a Government organization for which a Personal Information System was implemented.

The fourth part provides an Ideal Implementation Model, which can be used as a base to implement any IT or consulting engagement across any industry. This part addresses key aspects like:

• Qualities of a good consultant
• How to constitute a consultant or development team
• Way a consultant can gain faith of the sponsor
• Issues related to implementation
• Sponsors should do to ensure a successful IT implementation and,
• He organizational change to ensure the same

This book is an attempt to unravel the rationale behind successful implementation as well as decode the principle reasons for failure of IT projects.

Strategic Management & ITIL

Previous posts have helped us in understanding Strategic Management.

We know that Strategic Management helps in shaping or defining the organizational strategy. Today business is dependent on IT. So the actual translation of organizational strategy into business benefits for any organization will happen only when its IT is able to support the same. This is where Service Strategy phase of ITIL V3 becomes important. Thus, there is a very strong link between Strategic Management and ITIL.

Strategic Thinking

Strategic thinking means asking, "Are we doing the right thing?" It requires three things:

• Purpose or end--a strategic thinker is trying to do something.
• Understanding the environment, particularly of the opponent, or opposing forces, affecting and/or blocking achievement of these ends.
• Creativity in developing effective responses to the opponent or opposing forces.

Successful Strategic Planning - Benefits

Some of the benefits of a successful strategic planning are:

• Leads to action
• Builds a shared vision that is values-based
• Is an inclusive, participatory process in which board and staff take on a shared ownership
• Accepts accountability to the community
• Is externally focused and sensitive to the organization's environment
• Is based on quality data
• Requires an openness to questioning the status quo
• Is a key part of effective management

Review of Strategy

You must keep the strategy under constant review, as part of the continuous task of monitoring organisational performance. You should consider:

• Is our 'vision' for the organisation still valid? Does our view of the desired future for the organisation match the pressures on us, the way our business is developing, and the changes that have taken place – and are likely to take place – in our business environment?
• Are the themes of our strategy still appropriate? Do we need to consider additional themes which should be added to the agenda for change, because of changed business circumstances, new technologies, pressures from the environment or changes in corporate capabilities? Are any of our strategic themes no longer relevant to the organisational agenda for change?
• What progress are we making in our strategic themes, and do we need to re-prioritize or replan to ensure that the rate of change meets our business requirements?

You must keep all these levels of strategy and planning under constant review:

• The strategic 'vision'.
• The route chosen towards the vision (the 'themes' of the strategy).
• The detailed plans for implementation.

Strategic Decisions

What constitutes a 'strategic' decision? 

A decision is likely to be strategic rather than tactical or operational if:

• The decision has major financial or other resource implications – for example, on staffing or equipment.

• The decision will involve a significant amount of change in the organisation.

• The decision will affect the whole organisation or a large part of it.

• The decision constrains or commits the organisation in significant respects for a long period of time.

• The decision will have a major impact outside the organisation – for example, on customers or other bodies.

• The decision entails significant risks to the business.

• The decision will involve major changes in the business of the organisation, such as the products or services it offers.

• The decision is related to other important decision areas, and raises issues of complexity and 'cross-cutting' interactions.

• It will be difficult or impossible to reverse the consequences of the decision.

If the organisation has to take a strategic decision unexpectedly, the decision will be taken and the strategy updated in parallel. A strategy is a guide to action, not a straitjacket; you should remain open to the need for changes in strategy when the business requires them.

Principles of Strategic Management

The strategic issues facing the organisation and its response to them will call on the organisation's skills in strategic management – its ability to recognise and deal successfully with strategic issues. In the public sector, these will include:

• Addressing the needs of the citizen, not the convenience of the organisation
• Greater efficiency and value for money
• Improved and innovative service delivery to the public
• Joined-up policy making
• Increased communication with customers and partners
• Greater local-central government coordination
• Improved performance and the implementation of Public Service Agreements
• Realisation of the government's e-government strategy (an enabling framework of key principles such as interoperability and supporting technical standards)

Although the strategy process may incorporate timetabled events which fit in to the wider management processes – such as the cycles of financial planning in the public sector – strategic management is a continuous process. Managers at all levels in the organisation may need to make decisions on business issues at any time, and some of these decisions could be regarded as 'strategic' – even though they may not appear so at the time. Any business-focused strategy must be flexible enough to accommodate the demands of continuous change.

Stakeholders in Strategic Management

Key Stakeholders are:

• Senior executives and business managers - they need to seek out opportunities for new ways of working that will help the organisation to realize the agenda for change in the public sector; they also need to be aware of the implications of realignment if the strategic direction is changed.
• Senior management responsible for reviewing and redefining the requirements for delivery of core services, and for acquiring the means to deliver them.
• Staff responsible for developing and reviewing the business strategy in their organisations; they need to appreciate the wider business context partners and other stakeholders affected by the strategy.

Effective Strategic Management

Characteristics of effective strategic management include:

• A clear business strategy and vision for the future.
• A strategic direction endorsed by senior managers, taking account of partners and other stakeholders.
• A mechanism for accountability (to the citizen in meeting their expectations, as well as to the centre in meeting policy targets).
• A framework for governance at several levels (government-wide down to internal reporting arrangements) that ensures you can coordinate everything (multiple goals) even when there are competing priorities and different goals.
• The ability to exploit opportunities and respond to external change (turbulence) by taking ongoing strategic decisions.
• A coherent framework for managing risk – whether it is balancing the risks and rewards of a business direction, coping with the uncertainties of project risk or ensuring business continuity.

Importance Of Strategic Management

Organisation need to be able to respond effectively to challenges – both problems and opportunities – as they arise. For example, the citizen has increasing expectations of service standards and availability. In response, organisations are working towards an outward-focused view of the way services should be provided - a fundamental shift from the traditional focus on internal concerns. At the same time, major opportunities for improvement may arise from developments such as new information and communications technologies, and the availability of additional financial resources such as the Invest to Save Budget. In many cases the response to the problem or opportunity will:

• Require the continuous attention of senior management.
• Affect most or the entire organisation.
• Have long term implications.
• Require substantial resources.
• Be interconnected with other issues and developments.

Strategic Management Process

PART - III

Organizational analysis can also be thought of as fourfold. How is the firm organized? What is the structure of the organization, who reports to whom, how are the tasks defined, divided and integrated? How do the management systems work, the processes that determine how the organization gets things done from day to day – for example, information systems, capital budgeting systems, performance measurement systems, quality systems? What do organizational members believe in, what are they trying to achieve, what motivates them, what do they value? What is the culture of the organization? What are the basic beliefs of organizational members? Do they have a shared set of beliefs about how to proceed, about where they are going, about how they should behave? 

We know, thanks to Peters and Waterman’s In Search of Excellence, that the basic values, assumptions and ideologies (systems of belief) which guide and fashion behavior in organizations have a crucial role to play in business success (or failure). What resources does the organization have at its disposal – for example, capital, technology, and people?

Management’s role is to try to ‘fit’ the analysis of externalities and internalities, to balance the organization’s strengths and weaknesses in the light of environmental opportunities and threats. A concept that bridges internal and external analyses is that of stakeholders, the key groups whose legitimate interests have to be borne in mind when taking strategic decisions. These can be internal groups, such as managers themselves and employees, or the owners of the firm, shareholders. They can also be external groups: the stock market if it is a quoted company, banks, consumers, the government.

Senior management’s task is to try and align the various interest groups in arriving at its chosen strategy in the light of the creation of an appropriate strategic vision for the organization. Increasingly important here is the issue of corporate responsibility, how the organization defines and acts upon its sense of responsibility to its stakeholders. The broad responsibility to society at large is important here in, for example, such areas as ‘green’ (ecological) issues. Sometimes the various interest groups may be at odds with each other and management will have to perform a delicate political balancing act between them.

Having chosen a strategy, there is the issue of implementation. Very few schemes go totally (or even approximately) according to plan. The business environment changes, new issues emerge – green ones, for example. Some demand to be taken on board so that in many, perhaps the majority, of cases emergent strategy asserts itself to the extent that the realized strategy differs markedly from the chosen/planned strategy. In time, the realized strategy becomes a part of the firm’s strategic history . . . and the strategy process continues.

Strategic Management Process

PART - II

If change is the order of the day, then two issues need to be addressed: environmental (external) analysis and organizational (internal) analysis (This is the ideal way of proceeding. In practice, managers may adopt only a partial solution and analyze only external or internal factors.). For a change of strategy to work there must be alignment between internal capability and external opportunity.

This is described as ‘strategic fit’. The ideal situation is where there is a fit between the environments, a business need arising out of that environment that is strongly felt by a firm that has the sense of purpose (mission) and a management system that enables it to respond to this need with a coherent and practicable strategy. The potential to act in this way depends upon managerial judgments, managerial skill to exploit windows of opportunity and management ability to motivate other employees to support and commit themselves to the firm’s new strategic objectives. 

The analysis of the environment can be segmented into four interactive elements. There is the issue of the firm’s general environment, the broad environment comprising a mix of general factors such as social and political issues. Then there is the firm’s operating environment, its more specific industry/business environment. What kind of industry is the firm competing in? What ‘forces’ make up its ‘industry structure’? Having examined its business environment, the issue then arises: how is the firm to compete in its industry? What is to be the unique source of its competitive positioning that will give it an edge over its competitors? Will it go for a broad market position, competing on a variety of fronts, or will it look for niches? Will it compete on the basis of cost or on the basis of added value, differentiating its products and charging a premium? What is the range of options that managers have to choose from? How are they to prioritize between these options? Does the company have strategic vision, a strong sense of mission, a ‘reason for being’ that distinguishes it from others? If change is necessary, what is to be the firm’s direction for development? Having identified the major forces affecting its environment, how is the firm to approach the future?

(Cont...)

Strategic Management Process

PART - I

If a firm chooses a particular strategic direction and it works in the way that very successful firms like IBM or, on a smaller scale, Body Shop have, the fact that it is successful does not mean that the choice of strategy was optimal and that it was the best. There might have been another strategic decision that could have led to even greater success. Conversely, if a firm makes a choice that leads to disaster, this does not necessarily mean that it could have made a better choice (though, with better decision making, it hopefully could have averted the disaster). The environmental conditions in its industry might have been such that this was the best choice, but that no choice, given its size or history, or the power of its competitors, could have changed its fate.

Current strategy has its roots in the strategic history of a firm and its management and employees. Both management and employees has been mentioned here because, though in many cases senior management is the source of strategic decisions, it is the employees at the point of production or delivery of a product or service who are responsible for the actual implementation of a strategy. (Of course, in the final analysis it is management who are ultimately responsible for the performance of employees.) Current strategy is the result of the interaction of intended strategy and emergent strategy. The organization’s actual strategy (its realized strategy) can be the direct result of strategic planning, the deliberate formulation and implementation of a plan. More often it is the outcome of the adaptation of such a plan to emergent issues in the environment. In some cases actual strategy can be very different from the strategy as planned or the firm may not have a very clear plan in the first place. In such cases the strategy can be described as emergent in the sense that strategy emerges from an ongoing series (sometimes described as a pattern or stream) of decisions.

Managers can decide that they are happy with their current strategy. They can take this decision in two ways. In a proactive sense they can scan their environment and the potential for change within their own organization and decide that to carry on doing what they are doing and what they are good at is the best way to face the future. In a less active, and far less satisfactory, way they can proceed on the basis of tradition – ‘This is the way we have always done it. It has worked so far. That’s good enough for us’ – or inertia. Or management may decide that change is necessary. Again this can come about in a variety of ways. They may scan their environment and decide that there are major changes occurring in their business world to which they have to adapt. Or they might decide, through internal analysis, that they have the ability to develop a new way of doing business that will redefine the nature of the business they are in. Another stimulus to change can be the new manager appointed to a senior position who wants to leave his or her mark on the company and changes strategy primarily for this self-centered reason.

(Cont...)

Understanding Strategic Management

Strategic management is a dynamic process of aligning strategies, performance and business results; it is all about people, leadership, technology and processes. Effective combination of these elements helps in providing strategic direction and successful service delivery. It is a continuous activity of setting and maintaining the strategic direction of the organisation and its business, and making decisions on a day-to-day basis to deal with changing circumstances and the challenges of the business environment. In other words strategic management can be defined as the application of strategic thinking to the job of leading an organization. 

As part of strategic thinking about advancing the business, one has to set a course for a particular direction, but subsequent policy drivers (such as new performance targets) or business drivers (such as increased demand for services) could take the organisation in a different direction. There could be implications for accountability when one has to decide whether to take corrective action to get back on course or to go with the new direction. Similarly, there could be implications for governance if relationships between the partners/directors change.

We can say that strategic management means continually asking the question, "Are we doing the right thing?" Strategic management is focused on the future within a context of a changing, but relatively predictable environment. 

Strategic management consists of the following three activities and decisions:

1. Formulation of the future mission of the organization in light of changing external factors such as regulation, competition, technology and customers;

2. Development of a competitive strategy to achieve the mission; and

3. Creation of an organization structure which will deploy resources to successfully carry out its competitive strategy. 

That is, it requires attention to the "big picture" and a willingness to adapt to changing circumstances.

What is 'Strategy'?

The term ‘strategy’ proliferates in discussions of business. Scholars and consultants have provided myriad models and frameworks for analysing strategic choice. The key issue of strategy is a clear sense of an organization’s objectives and a sense of how it will achieve these objectives. It is also important that the organization has a clear sense of its distinctiveness.

For the leading strategy guru, Michael Porter (1996), strategy is about achieving competitive advantage through being different – delivering a unique value added to the customer, having a clear and enactable view of how to position yourself uniquely in your industry, for example, in the ways in which Deccan Airways had positioned itself in the airline industry as a low cost airlines.

To enact a successful strategy requires that there is fit among a company’s activities, that they complement each other, and that they deliver value to the firm and its customers. The Deccan Airways example just mentioned illustrate that industries are fluid. It came to prominence by taking on industry incumbents and developing new value propositions. Also, one must reckon that success is not guaranteed.

While there is much debate on substance, there is agreement that strategy is concerned with the match between a company’s capabilities and its external environment. Analysts disagree on how this may be done. 

John Kay (2000) argues that strategy is no longer about planning or ‘visioning’ – because we are deluded if we think we can predict or, worse, control the future – it is about using careful analysis to understand and influence a company’s position in the market place. 

Another leading strategy guru, Gary Hamel (2000), argues that the best strategy is geared towards radical change and creating a new vision of the future in which you are a leader rather than a follower of trends set by others.

We can say with certainty that: "winning strategy = foresight vision"