The Strategic View - All Comments

re: Sudoku, chess and real life - analytics and planning versus guessing

Anonymous-HPBLOGCS — Tue, 19 Aug 2008 16:03:28 GMT

Not sure what "CAPEX" is -- please explain

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re: The Strategy – How?

Eugeny Brychkov — Wed, 16 Jul 2008 17:12:52 GMT

Paul,

may I kindly ask you to contact me via email: eugeny dot brychkov at hp dot com? Thank you!

Eugeny

re: HP and IBM: mission possible?

Alan S Michaels — Tue, 15 Jul 2008 20:39:42 GMT

Eugeny,

1. There are probably frameworks for cooperation by giants like HP and IBM, but mostly it's a centralized coordination team at each company with dotted lines to their respective business units and legal departments

2. They can share tangible and intangible components of their success via horizontal organizations designed to leverage business unit success (and best practices) across the organization. IBM is big in leveraging horizontal structures to leverage ideas and processes across the organization.

3. HP and IBM cooperation may or may not lead to an increased rate of consolidation. Either way, consolidations will continue for years to come, for a long list of reasons, as IT firms around the world configure their value chains for competing globally.

Cheers,

Alan S. Michaels

co-founder www.ecompetitors.com

re: The Strategy – How?

Paul — Tue, 15 Jul 2008 14:07:07 GMT

Hi Eugeny

Thanks for your response. Theories of competitive dynamics and indeed evolution do not tell you what evolves. They only let you know what has evolved in context and in hindsight. We can see how it has come but not where it is going.

I ll split the arguement into 2 degrees.

Arguement 1: There is a dynamic in evolution space that is independent of the evolving entities. Entities do not seek to evolve. They do so in seach of dynamic equilibrium. But dynamic equilibrium of what?

Arguement 2: This thing that actually evolves is the same thing that seems to evolve in all evolving entities. Competition for resources as a resource allocation mechanism seems to rely on the evolution of "something" that can convey an advantage to its beholder. The caveat is that that "something" tends to be different for different evolving entities, or is it??

I have been hard at work trying to re-educate attention to the fact that biological evolution is the ultimate test bed for strategy development. Its a mega simulation for the selection of search strategies. It doesnt search every available combination of search space. This would be practically impossible. There seem to be rules that govern how this search is carried out in real time. Rules that constrain the serach potential.

Our current theories of competitive dynamics is incomplete because we do not know what evolves, how and why. Its been centuries since Darwin and there is still no explicit algorithm that describes biological evolution.

The answer lies in the reason why mankind evolved to be the top predator. The ability for abstract thinking required a dramatic shift in conscious awareness or else?? Same for religion, beliefs, values etc.

For relevance, most firms competing today are engaged in a search for advantage. This forces them to evolve (seek) and each step constrains the space of future searches just like in biological evolution.

I want to go into further details Eugeny but i think i can make more sense if you visit the url pasted above. There is a private forum that discusses such matters in great detail (hope this is not marketing in any form).

Thanks

Paul

re: HP and IBM: mission possible?

Eugeny Brychkov — Wed, 09 Jul 2008 19:02:16 GMT

Alan,

great post – thank you so much! May I ask you some questions please:

do legal frameworks allow cooperation between giants like HP and IBM?
in case of success, how they can share tangible and intangible components of this success?
will such cooperation cause even more so undesirable industry consolidation which can lead to decreased bargaining power (i.e. disadvantaged) buyers/customers?

I personally do not like term «maximization of profits». From mathematical and accounting point of view profits are revenues less expenses; maximization of revenues means that customers may be forced to pay unreasonably high prices, minimization of expenses means unreasonably low payments to suppliers (of raw materials, workforce, etc). It is great that we have marketplaces (with their advantages and disadvantages, strengths and weaknesses) so that this profit maximization is constrained. However, as we saw these days, newly available information can substantially shake the market…

Eugeny

re: The Strategy – How?

Eugeny Brychkov — Wed, 09 Jul 2008 18:38:15 GMT

Thank you very much Paul,

absolutely agree – there’re no theories which describe and explain everything, by design theories are frameworks which have limits simply because they are simplifications of the real life.

I assume you are talking about sociological development, not about biological because biology and medicine to the good extent identified how organisms are born, how they live, and what cause their death.

Porter’s theory limitation is about its field of application: competition. Life is not only about competition – it is also (at least) about cooperation, and you are right saying that it is incomplete to describe the reality and explain the past.

I am not an expert in the field, however let me raise some points:

we think that mankind is most influential predator because we do not know more influential type of predators;
mankind evolved because of ability of abstract thinking and developed communication skills;
mankind have developed frameworks they live and conform (e.g. values, beliefs, religions);
mankind think «why me» but ape (or any other creature) may think «why not me!?».

Question to you: why do you think theories of evolution are incomplete and can not «explain why things are the way they are»?

re: The Strategy – How?

maestropaul — Tue, 08 Jul 2008 12:16:13 GMT

Eugeny, Alan

Your posts are commendably informative. However, i would like to offer another view here and hopefully strike a chord.

One issue i have always wondered about is why Michael Porters Competitive theory is never used to explain the full theory of Evolution and its operator, natural selection in Organism space.

If the theory is the best description of competitive dynamics that we have then it should prescribe biological evolution in detail (using corresponding analogies) and explain why things are the way they are.

My guess is that it doesnt. Not because the theory isnt sound but rather bacause it is incomplete. For instance, any theory of competitive dynamics that doesnt explain why mankind evolved as the most influencial predator on the planet is incomplete.

Until there is a succession of thorough-bred understanding of how biological development occurs within the natural world we would only be able to guess about the tenets of organizational development.

Paul

re: HP and IBM: mission possible?

Alan S Michaels — Mon, 07 Jul 2008 14:33:19 GMT

And, my conclusion, based on the above, is that there are many opportunities for IBM and HP to be great partners because most of their businesses do NOT compete directly.

IBM middleware running on HP hardware is a good example for both firms to continue cooperating together. In some measure, CIOs of global companies that depend on both firms will require that IBM and HP work more closely together. Interestingly, by working more closely together, all other competitors are at a greater disadvantage.

The major hurdle for both firms working more closely together is probably the fact that both firms have lots of people focused on beating the other; while they have fewer people charged with working together.

IBM has a long history of co-opetition with firms like Microsoft and Oracle; and Sam Palmisano has set the stage for out-of-the box thinking at all levels. My guess is that HP's history and culture (including EDS) is just more used to hearing "beat IBM" - although Mark Hurd's background and actions seem perfectly aligned with maximizing profit - and not promoting pricing wars.

Significantly, even where the two companies compete directly they are relatively good competitors because they strategically do not compete on price; and IBM has been fairly clear through its annual report and other communications that it will not compete on price, but rather on differentiation through innovation.

The one area that I see little room for cooperation between the two firms is the next generation data center. In our global market research of the top 10,000 global industries - the next generation data center marketplace is one of the most exciting battles between IBM and HP. To research geeks like me - it's better than watching the Olympics. Let the games continue!

Cheers,

Alan S. Michaels, co-founder: www.eCompetitors.com

re: HP and IBM: mission possible?

Alan S Michaels — Sun, 06 Jul 2008 01:18:41 GMT

Hello Eugeny,

To add to your observations, in our research:

IBM competes in 625 lines of business.

HP (including EDS) competes in 326 lines of business.

IBM & HP compete head-to-head in 175 lines of business.

Cheers,

Alan S. Michaels

co-founder: www.eCompetitors.com

Re: Quality as a Value

Michelle Malay Carter — Wed, 14 Nov 2007 19:37:00 GMT

Eugeny, You're right. Cross functional alignment along with explicit cross functional accountabilities and authorities is another key piece of organization design. With HR roles, for example, it should be clarified if the HR person has advisory authority, monitoring authority, auditing authority or prescribing authority. Each has a different definition and carries a different level of authority. When these issues are explicit up front, manager A knows exactly his accountability and authority when HR person B interacts with him. Regards, Michelle

Re: The Strategy – How?

Eugeny Brychkov — Wed, 14 Nov 2007 18:18:00 GMT

Alan,

thank you very much for your reviews and replies. I am delighted that we both learned something from the article and through our dialogue.

Eugeny

Re: The Strategy – How?

Alan Michaels eCompetitors.com — Wed, 14 Nov 2007 13:10:00 GMT

Eugeny,

I agree fully and enthusiastically with everything you say above until you get to the last paragraph and write: “Industry is an area of organizational activity defined by specific products grouped by the supplier. This means that industries are the set of product or service groups produced by HP.”

Using the above sentences as a working definition of an industry will likely lead to cloudy results because “industries” will be lumped together into HP-centric “industry groups” before they are appropriately analyzed using Porter’s five forces industry model. Using an industry model on an industry group is a waste of time because the beauty and the power and the insights usually gained by using the Porter model will be lost, leaving only the mechanics.

The working definition of an industry that we use at eCompetitors.com to analyze over 9,600 industries that make up most of the global economy is: “One or more products and / or services that are direct substitutes that are sold by one or more businesses to one or more external customers, and where the activities for developing the product or delivering the service are similar.” – Alan S. Michaels

Another definition of an industry, which incorporates your concepts about models and which becomes more obvious the more one uses the Porter model, is: “The right level to perform a Porter five force industry analysis.” The reason this somewhat recursive definition make the most sense is that you have to think about the five forces (competition, new entrants, customers, substitutes, and vendors) to weigh where to draw the industry boundaries to best define it. As HP probably knows better than most, industry boundaries can and do change – especially in IT, media, and life sciences industry sectors.

Cheers, Alan

Re: The Strategy – How?

Eugeny Brychkov — Wed, 14 Nov 2007 09:33:00 GMT

Thank you Alan,

This is very interesting. Corporate strategy defines the scope of the organization based on industries and markets in which it competes (Grant, 2002). Corporate strategy usually relates to choosing the portfolio of businesses and product groups owned or controlled by the organization. Can we say that overall mission, vision and strategic boundary depicted on the figure 1 are the properties of corporate strategy? As you proposed looking inside this big cloud we can see a set of interconnected and overlapping clouds which designate business strategies related to product/service groups, and these clouds defining how businesses compete in particular industry or market.

Concerning Porter: I respect him very much, however sometimes he makes strange and questionable statements (maybe I will write about them in my blog in the future). Every model, even if we think it is the “best one”, has its limitations. When someone tries to put something in order, s/he inevitable has to introduce strategic trade-offs and base “ordering process” on assumptions. And these assumptions present barriers for creative thinking and creative emerging strategy creation. This is not good or bad – this is just a fact. This means we should think beyond the models and use our experience and insight to invent.

When you talk about 221 industries I think we need to clearly define what industry is, because it might not be obvious for everyone. Industry is an area of organizational activity defined by specific products grouped by the supplier. This means that industries are the set of product or service groups produced by HP. And all these industries can be grouped into few ones by their primary features, for HP I believe they should be IT and telecom industries (however as these two converge we can say there's single one now). Another strong outstanding industry HP may be competing in is chemicals (inks, toners), however at this point I am not aware about this HP’s expertise applied to non-IT sector. By the way, this is one of possible directions of HP's strategic extension.

Eugeny

Re: The Strategy – How?

amichaels_at_ecompetitors_com — Wed, 14 Nov 2007 00:01:00 GMT

Eugeny,

I greatly enjoyed reading your post because it’s intelligent, it talks about Michael E. Porter, and it says you are going to look at HP and your competition and industry sector from a strategic point of view.

As a big fan of Michael Porter since his book “Competitive Advantage” in 1995, and as someone who recently reviewed HP from a strategic point of view, I believe there is one concept that you might want to add to your diagram. Specifically, maybe add the concept of corporate strategy. (Perhaps the one cloud you have is the top cloud hiding a series of clouds. Maybe show the top of a second cloud to reflect the concept that each business unit has its own cloud; and perhaps add at a line to reflect that many HP business units share one or more activities with other HP businesses.)

In the Porter-style analysis of HP that we just completed, HP competes in 221 lines of business.

So step one for HP corporate strategy – the how part – should start with identifying the 221 industries in which HP currently competes. Fortunately, it is far easier to do an industry analysis on 221 correctly defined industries than it is to do a fewer number of analyzes on poorly-defined industries.

Without step one, some of your colleagues may incorrectly apply Porter’s Five Forces industry analysis methodology on an industry sector (like IT) or an organizational group (like HP Services) – neither of which will work

Cheers, Alan S. Michaels, co-founder, www.eCompetitors.com