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Navigating Management Challenges in Turbulent Times

Learn to escape the complexity and credibility traps, establish understanding, gain confidence, and focus on core issues in management. This guide covers decision-making dynamics, leadership mastery, and the evolution of business logic in turbulent environments. Source: Harvard Business Review, Systemic Practice and Action Research

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Navigating Management Challenges in Turbulent Times

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  1. Management in turbulent times Prof. Dr. Peter Gomez

  2. We are caught in a trap Trap of complexity Trap of credibility Time for decisions Oversimplification „Saddle decisions“ Neglect of harmful side effects Incompetent / improper leadership Required time Excessive demands lead to Available time Dynamics of decision situation

  3. The complexity trap leads to uncertainty and alienation of society and economy Affluent society Uncertainty and alienation Complicated organizational structures Myriads of offerings

  4. The credibility traps leads to a crisis of confidence Lack of professionalism Crisis of confidence Refusal of responsibility Lack of focus

  5. How to escape the trap? Establishing understanding Gaining confidence

  6. Establishing understanding Societal role of the economy Understanding Simple organizational structures Customer orientation

  7. Gaining confidence Mastering the craft of Leadership Confidence Taking responsibility for the whole Focusing on core issues

  8. Leadership - Focus and energy high Disengagement Purposfulness Focus Procrastination Distraction Energy low high Source: Bruch, H./Goshal, S.: Beware the Busy Manager. Harvard Business Review, February 2002, pp. 62-69

  9. Handling Complexity I

  10. Management Variety Decision situation Variety reduction Variety generation by: by: Traffic lights or Drive on the right Roundabout Handling Complexity II - Traffic example

  11. Management Variety Decision situation Variety reduction Variety generation by: Identification of the rules of play Business logic Environmental dynamics Corporate culture Handling Complexity III - Management in turbulent times

  12. Business Logic I: Model of Systemic Control Source: Schwaninger, M.: Managing Complexity - The Path Toward Intelligent Organizations, Systemic Practice and Action Research, Vol. 13, No. 2, 2000, pp. 207-241

  13. Business Logic II: The Value Pendulum Shareholder Value (90‘s) Management Value (80‘s) Stakeholder Value (00‘s)

  14. Business Logic III: Shareholder Value - Stakeholder Value EMPLOYEES “EMPLOYABILITY" Maximum Shareholder Value CUSTOMER “QUALITY, PRICE, SPEED" GOVERN-MENT “APPRO- PRIATE TAXES" OPTIMIZATION OF SHAREHOLDER VALUE SUPPLIERS "PARTNERSHIP"

  15. CorporateStrategy BusinessStrategy OwnerStrategy ProfitMargin RevenueGrowth Cost of Capital Income Tax Investment Free Cash Flow Dynamization Cash Flow from Operations FCF 30 FCF Profit 25 Investment Working Capital 20 15 10 Depreciation Investment Fixed Assets 5 0 -5 -10 Income Taxes -15 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Present Value/Risk Business Logic IV: Strategies - Value Drivers - Value Creation

  16. Business Logic V: Business Life Cycle

  17. Environmental dynamics: The Innovator‘s Dilemma Product Performance Progress due to sustaining technologies Performance demand at the high end of the market Performance customers can absorb in the core market Performance demand at the low end of the market New products/services due to "disruptive technologies" ("disruptive business models") Disruptive technological innovation Time Source: Christensen, C.M.: The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, Boston 1997

  18. Person Symbol Intrinsic M. System Form Extrinsic M. Efficiency Effectiveness Identity Context Permanent Steep H. Monolyth. Temporary Flat H. Polycentr. Corporate Culture: the Apple Case I Jobs --- Pionieer Phase Creative Chaos Motorbike "Computers to all people" Mission Hierarchy Independent Groups Divisions

  19. Person Symbol Intrinsic M. System Form Extrinsic M. Efficiency Effectiveness Identity Context Permanent Steep H. Monolyth. Temporary Flat H. Polycentr. Corporate Culture: the Apple Case II Jobs --- Pionieer Phase --- Growth Phase Sculley Creative Chaos Motorbike Organization top-down Apple Family "Computers to all people" Mission Close to Markets Cost Management Hierarchy Independent Groups Functional Change Divisions Strengthen the Top

  20. Person Symbol Intrinsic M. System Form Extrinsic M. Efficiency Effectiveness Identity Context Permanent Steep H. Monolyth. Temporary Flat H. Polycentr. Corporate Culture: the Apple Case III Jobs --- Growth Phase --- Pionieer Phase --- Maturity Phase Sculley Spindler Creative Chaos Motorbike Organization top-down Apple Family Clear Objectives Culture of Innovation "Computers to all people" Mission Close to Markets Cost Management Apple Cult Process Organization Hierarchy Independent Groups Functional Change Principle of Subsidiarity Clear Primary Organization Divisions Strengthen the Top Strengthen the Top

  21. Person Symbol Intrinsic M. System Form Extrinsic M. Efficiency Effectiveness Identity Context Permanent Steep H. Monolyth. Temporary Flat H. Polycentr. Corporate Culture: the Apple Case IV Jobs --- Growth Phase --- Pionieer Phase --- Maturity Phase Sculley Spindler ---Transition Phase Jobs II Creative Chaos Motorbike Organization top-down Apple Family Clear Objectives Culture of Innovation Clear Objectives Organization top-down "Computers to all people" Mission Close to Markets Cost Management Apple Cult Process Organization Apple Cult Cost Management Hierarchy Independent Groups Functional Change Principle of Subsidiarity Clear Primary Organization Hierarchy Clear Primary Organization Divisions Strengthen the Top Strengthen the Top Strengthen the Top

  22. Management Variety Decision situation Variety reduction Variety generation by: Proactive decisions and measures “Head”:Holistic roadmaps “Hand”:Jiu Jitsu Management “Heart”:Leadership and Accountability The law of requisite variety - Management in turbulent times

  23. “Head” I: The new St. Gallen Management Model

  24. “Head” II: The VIP-Cycle

  25. “Head“ III: Ciba Geigy Vision 2000 (from 1989)

  26. Head IV: The Holcim Strategy House Value Creation Goal ProductFocus GeographicDiversification Local Management -Global Standards Strategy SustainableEnvironmentalPerformance Corporate Social Responsibility PermanentMarketingInnovation Human Resource Excellence Better CostManagement Mindsets Base People Source: Paul Hugentobler (2003):Cement Industry Development, Holcim’s Global Strategy and Operational Roadmap 2003 - 2007, Management Seminar Fall 2003.

  27. Head V: Holcim Perspectives Perspective A global company aims to ... ValueCreation ... create value for the relevant stakeholders like customers, shareholders, employees and society. Strategy ... create competitive products and services in a geographically diversified context. Its success is measured compared to the best of its peers. Mindsets ... align its activites with sustainability, cost consciousness, innovation focus, people‘s development, and social fairness. People ... consider the people as the main drivers of success. It respects, challenges and promotes them.

  28. Head VI: Holcim: The Company Network + Sales Concentration on core products + + Optimization natural resources + - Costs + - Customer satisfaction + EBITDA + + Image + - + + + + Efficiency HVA Price + Leadership and internal communication Portfolio of mature and emerging markets Product and serviceinnovation/differentiation + + Consistent quality / reliability Safe/attractive workplan Global standards + + Motivation,Qualification,Professionality,Teamwork + + + + Geographic diversification Learning environment + + + + + + + People development Production facilities Investments + +

  29. “Head“ VII: Convergence of Media, Computer and Telecom Industries Metcalfe’s Law Moore’s Law Deregulation Conduit (Telecoms) Gilder’s Law Globalisation Electronic distribution platforms New media Digitisation Computing (IT) Content (Media) Financial markets’ interest

  30. Convergence ? Layer Models Cybernetic Laws Strategy Models for Emerging Industries Value Chain/Value System Grove; Bane, Bradley & Collis Brown & Eisenhardt Porter Kelly ? “Head” VIII: Convergence

  31. “Head” IX: Transformation of the IT-Sector 1980 - 1995 Vertical Integration 1980 Horizontal Integration 1995 Sales & Distribution Sales & Distribution Retailer Superstores Dealer Mail-Order ApplicationSoftware ApplicationSoftware Word Perfect Word etc. Operating system Operating system OS/2 UNIX DOS and Windows Mac Computer Computer HewlettPackard Compac etc. Apple Packard Bell IBM Chips Chips Intel Architeture etc. RISCs Sperry Univac Wang IBM DEC Source: Grove, A.S.: Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company. London (Harper Collins) 1997, p. 44

  32. Access PC Radio TV PDA Household Appliance Phone Application SMS Set top box Internet telephony e-mail Communication (application dependent) Transfer (application independent) Packet switching Circuit switching Routing TSAP ATM Wireless Fibre optic Transmission Satellite Cable (Copper, Coax) Packaging Programme Publication Pictures Voice Content Data Words Video Music “Head” X:Towards a new layer model of the converging industries IT Telecom Media

  33. “Hand“ I: Characteristics of High Reliability Organizations (aircraft carriers, nuclear power plants)  Preoccupation with failure•Learn from near misses not from success  Reluctance to simplify•create nuanced pictures of a complex world, don’t follow the dominant logic  Sensitivity to operations•detect latent failures and symptoms  Commitment to resilience •keep errors small, improvise workarounds  Deference to expertise•push decision-making down, do not treat crisis times like normal times Source: Weick, K./ Sutcliffe, K.: Managing the Unexpected: Assuring High Performance in an Age of Complexity. San Francisco (Jossey Bass), 2001

  34. “Hand“ II: Cybernetic Rules (Kelly) Distribute being Control from the bottom up Cultivate increasing returns Grow by chunking Maximize fringes Honor your errors Pursue no optima; have multiple goals Seek persistent disequilibrium Change changes itself Source: Kelly, K.: Out of Control : The New Biology of Machines, Social Systems and the Economic World. Addison Wesley, 1995

  35. “Hand“ III: New Rules for the New Economy (Kelly) Embrace the swarm Increasing returns Plentitude, not scarcity Follow the free Feed the Web first Let go at the top From Places to Spaces No harmony. All flux Relationship tech  Opportunities before efficiencies Source: Kelly, K.: New Rules for the New Economy : 10 Radical Strategies for a Connected World. Penguin Books, 1999

  36. Hand IV: Jiu-Jitsu principle

  37. “Heart“ I: Credibility Professionalism •Master your job, live up to highest performance standards Leadership •High energy, high focus Responsibility •Be accountable

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