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Igor Ansoff: Strategic Management

Igor Ansoff was the pre-eminent thinker who codified the way we consider business strategy. Other strategic thinkers have since either followed him or reacted against him. His first major book, Corporate Strategy, laid the groundwork for the discipline and set the direction for Ansoff’s whole academic career.

Igor Ansoff

Brief Biography

Ansoff lived a long life, that encompassed three continents (if you include his conception in Japan). He was born to a Russian mother and US diplomat father in 1918, in Vladivostock, as Russia was becoming the Soviet Union. When the family returned to the United States, he was educated in New York, studying physics and mechanical engineering, before serving in the 1939-1945 war. On his return, he took a service scholarship and completed a PhD in applied mathematics at Brown University, in 1948.

His first job was at the Rand Corporation, where he used his mathematics to contribute to operations research and strategic management, but he became frustrated with the lack of application of his work and also by his inability to truly excel as a mathematician. Seeking a new direction, he moved to Lockheed, first as a long-range planner, then leading acquisitions and diversification, and finally, taking a senior management role, where he learned how to manage people. He was successful in leading a profitable division, but wanted something else from his life, so he deliberately left Lockheed and sought an academic role.

A series of academic appointments followed, first at Carnegie-Mellon University (from 1963), where he wrote his seminal book, Corporate Strategy, then to found the Graduate School of Management at Vanderbilt University (from 1969). Here, he published the paper: ‘The Concept of Strategic Management‘ that led people to refer to Ansoff as the ‘father of strategic management’. Finding the distractions of running a school not to his taste, Ansoff moved to Europe in 1975, to join the European Institute for Advanced Studies in Management, in Brussels. Here, he wrote the book that was to address the need to incorporate strategic thinking into day-to-day implementation, Strategic Management, 1n 1979. He saw this as his most important work.

Ansoff’s final academic post was back in the US, when he joined the US International University in 1983. Here he wrote the follow up to Strategic Management in 1984: Implanting Strategic Management. He retired from academic life in 2000, becoming a distinguished emeritus professor, and died in 2002.

Ansoff’s Ideas

At the heart of Ansoff’s thinking was the idea that strategic planning could be approached in a rigorous way, using a variety of practical tools. Most notable of these tools is his 2×2 matrix, now best known as The Ansoff Matrix. This first appeared in a paper in 1957, while he was at Lockheed. The matrix offers a simple tool for assessing four growth strategies.

Ansoff Matrix

Ansoff introduced many new concepts, two of which have become management commonplaces. The first is the much over-used and often misunderstood concept of synergy: that by bringing together the right components and integrating them effectively, the final result is more valuable than the sum of its parts – ‘2 + 2 = 5’ in Ansoff’s memorably simple explanation. The second is the concept of ‘gap analysis’. This is the idea of determining where you want to get to, understanding where you are, and then identifying what it will take to bridge the gap.

The problem that Ansoff found was that his focus on rationality and his extensive kit of strategic thinking and decision-making tools were leading managers into what he called ‘paralysis by analysis’ – another coinage that has become commonplace. This led him to focus his efforts on understanding why this was happening and how to overcome it. In so doing, he effectively became his own most ardent critic. This led him from Corporate Strategy to Strategic Management – an understanding of how people behaved strategically. This was quite a theoretical analysis, synthesising ideas from many fields. So his 1979 Implanting Corporate Management put the focus on practical ‘how-to-do-it’ techniques.

His later research sought to underpin many of his hypotheses with strong empirical evidence. Ansoff always stayed close to working business leaders and his students were able to conduct detailed research into what Ansoff called his ‘Strategic Success Hypothesis’.  This asserted that a business could optimise its returns by matching strategic activities to its changing environment, and by developing internal structures and capabilities to support its strategy. In this way, he anticipated the McKinsey 7S model, in much the same way as Ansoff anticipated a lot of our modern understanding of strategic management.

Pocketbooks you may enjoy include:

The Strategy Pocketbook

 

 

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On Competition: Five Forces

On a high shelf in my study are the books I rarely refer to.  Some turned out to be a disappointment after I bought them, but some, however, are old friends.  It’s just that I no longer need to refer to them much.

Years ago, when I was asked to develop a seminar on business strategy, three of them were my constant companion as as I thought through and planned the session.  And the first model I thought of back then features at the start of Chapter 1 of one of those books, Michael Porter’s ‘On Competition’.  This is, by the way, a hefty hardback (lovely to use).

I’ve been re-reading parts of it in preparation for a new seminar: ‘the Three Hour MBA’.

Michael Porter

Michael PorterThe same model appears in the delightfully neat ‘Strategy Pocketbook’ by Neil Russell-Jones.  In it, Jones describes Porter as ‘one of the most influential strategic thinkers and writers’ and his classic book ‘Competitive Strategy’ is required reading on just about every MBA course.

 

Porter’s Five Forces

Not surprisingly, Michael Porter starts his book (which collects a dozen or so of his best articles) with the model that bears his name: Porter’s Five Forces.

Porter's Five Forces that govern competition

Porter analyses the basis of the power behind each of these five forces, and the barriers to entry of new players or substitute products.  The model forms a basis for developing a strategy that positions your company and influences the forces around it.

Three Strategies

Porter suggests three generic business strategies to position your company to take advantage of your competitive environment.

Porter's Three Generic Business Strategies

Systems Thinking

Perhaps Porter’s model is showing its age.  In the 1980s, the world seemed a simpler place.  Now, we understand far better, how inter-connected things are.  Suppliers are dealing directly with customers and business are making ever-more complex alliances.  How does access to capital (the last couple of years worth of headline news) affect competitive forces, and what about other resources, like people and energy?  And what are the affects the forces of social responsibility and regulation?

So here’s the deal

Porter’s Five Forces is an entry level strategy tool.  It is a valuable insight into the workings of a competitive market and a great starting place.  But do consider the lessons of Richard Rumelt, who argues that a good strategy starts from a robust understanding of the situation, with which this model can help, but needs much more in addition.

Some Management Pocketbooks you might like.

The Strategy Pocketbook

Neil Russell-Jones’ Strategy Pocketbook is stuffed full of handy tips and strategy planning tools, including Porter’s Five Forces and a ‘competitive intensity’ tool that is based on it.  It also has lots of other valuable tools and models.

 

Also take a look at:

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What makes good business strategy?

The world of company strategy development is fertile ground for those of us who like management models.  The options range from simple – nay simplistic, to byzantine complexity.

However, I would argue that few of these strategic tools can ever determine a strategy for your business – what the best tools can do is give you insights into the strategic context, or help you explore the potential consequences of a possible strategic decision.

Good Strategy / Bad Strategy

In a new book, Professor Richard Rumelt of the UCLA Anderson School of Management, describes what he terms ‘bad strategy’.  He has been articulating his ideas for several years now, and you can get a five minute introduction to his ideas from the short video interview from 2008, below.

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Professor Rumelt’s ideas are simple and compelling – indeed, one of his key points is that a good strategy is, itself, simple and compelling.

A Good Strategy

In Good Strategy/Bad Strategy: The difference and why it matters, Rumelt argues that a good strategy:

  • is based on a robust diagnosis of the situation and the problem to be solved
  • offers a simple solution to a problem – ‘simple’ meaning no more complex than it needs to be: not simplistic
  • follows a clear policy framework that provides constraints for the strategy
  • allows participants to co-ordinate their actions and to create a focused outcome

A Bad Strategy

A bad strategy, on the other hand,

  • fails to address the real problem
  • sets goals but makes no attempt to articulate how to achieve them
  • has a vast array of objectives with little prioritisation
  • hides poor analysis inside jargon, buzzwords and superficial analysis

You can hear Professor Rumelt for yourself or read his article ‘The Perils of Bad Strategy’.

[youtube=http://www.youtube.com/watch?v=o4QICxDvTjw]

Good Tools

With Professor Rumelt’s warnings ringing in our ears, we need to understand some of the tools we can use to inform our robust diagnosis and clear solutions.  We’ll start taking a look at these next week…

In the meantime,

Some Management Pocketbooks you might like.

The Strategy Pocketbook

Neil Russell-Jones’ Strategy Pocketbook is stuffed full of handy tips and strategy planning tools.

Also take a look at:

The Business Planning Pocketbook

The Nurturing Innovation Pocketbook

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