INTRODUCTION.
There is really no Japanese magic in conducting business. Many Japanese companies year after year manage to increase their market share and to create wealth, despite their disadvantages they achieve this task since they have a breed of natural or instinctive strategists, who perhaps never took a course or read a book on strategies, but has an intuitive understanding of what the basic elements of the strategic process are.
In both Japan and the West this race is being displaced by rational and methodical strategic and financial planners. The promoters of audacious and ambitious strategies are displaced, branded as losers, while the distinctions are given to those who are more prepared to work within the system, therefore those who tend to stand out are the analysts and innovators.
As planning processes have flourished, strategic thinking has withered. If the strategist's mind is so opposed to the corporate culture, how can an already institutionalized company regain its ability to conceive and execute creative financial strategies? The answer to which the author arrived involved the formation within the corporation of a group of young people (“Samurais”) who, on the one hand, would act as authentic strategists, unleashing their imagination and business sense to produce bold and innovative ideas, and therefore the other would serve as executive-level analysts testing, directing, and prioritizing ideas and providing high-level assistance.
This solution could not be adapted to the circumstance of the typical North American or European company; And although there is no secret formula to invent a good strategy, there are certain specific concepts and approaches that can help anyone develop excellent tactical ideas.
AUTHOR INFORMATION
Kenichi Ohmae was born on the island of Kyushu in 1943; He currently resides in Yokohama with his wife and children.
As a senior management consultant, writer, and speaker, he has been described as the "Lord of Strategy" in his native Japan, where he presides over the offices of Mc KINSEY & COMPANY, an international consulting firm.
Some of the most famous Japanese corporations regularly request your help in establishing competition strategies; Its accessory is also in strong demand from North American and European multinational companies.
PART No. 1
CHAP 1: Analysis the starting point.
Analysis is the starting point for strategic thinking. When faced with problems or situations that seem to constitute a whole, the strategic thinker divides them into their constituent parts, to discover their meaning and reassembles them to maximize their advantages, using non-linear thinking.
The approach to the best possible solution can only come from a combination of rational analysis and an imaginative reintegration of the different portions in the new model, through the use of non-linear brain power.
The first stage of strategic thinking is to pinpoint the critical point in the situation.
The approach of a problem should be oriented to obtain a possible solution, in this way the objective analysis can supplant emotional discussions. If the right questions are asked towards a solution, and the appropriate analyzes are carried out, the final answer is most likely the same and a well-defined verdict will be more easily reached. When problems are poorly defined or misunderstood, the mind accurately.
The method strategists frequently use in the abstraction process includes:
• Employ means of specifying the ways in which a company is at a disadvantage compared to its rivals.
• Classify these points into concrete phenomena
• Group them through a common denominator.
• Each group is examined as a unit (abstraction).
• Determine the specific focus and specify the action.
As rare are people who possess the instinctive power to detect critical points; The problem or issue can be divided into one or more sub-issues, this process is repeated several times until each individual issue is manageable on a human level and critical points can be detected (this process is very similar to the methods used in computer programming and decision trees)
When a company has problems these are reflected in the reduction of profits (or the potential for future profits); If the severity of the symptoms is recognized, the top management of the company will want to prove what is the cause of the problem. For this, a profit diagram may be used.
No proper business strategy can be formulated if it is based only on fragmentary insights or analysis; The most reliable formula for success is to complement the analytical method with the mental elasticity called strategic thinking.
Chapter 2: Four routes to competitive advantage.
Strategies are about competitive advantage, this is what distinguishes it from other types of planning.
Corporate strategy involves the attempt to alter the strengths of the company in relation to those of its competitors in the most effective way to obtain a sustainable advantage over them.
There are basically four ways to strengthen a company's position compared to its rivals:
• Competing wisely: this consists of identifying the key success factors of the industry or business in question, and then making an injection of concentrated resources in the area where the company has the greatest opportunity to gain a strategic advantage.
• Relative superiority: consists of using the technology, the profitability of the sales force, etc., of its products that do not compete directly with the objectives of the competitors, or use any other difference in assets between the company and its rivals.
• Aggressive initiative: it consists of challenging or questioning the accepted assumptions that govern the way of doing business in the industry or the market, with a view to changing the rules of the game and obtaining a competitive advantage.
• Degrees of strategic freedom: it consists of achieving success in the competitive struggle through the deployment of innovations, even in cases of intense competition within the same branch or sector.
Cap # 3: Focus on the key factors.
If we dedicate them to allocating resources in the same way as our competitors, we will never gain any advantage.
The strategist has two approaches, the first consists of sectioning the market with the greatest possible degree of imagination, to identify its key segments; The second lies in discovering that you distinguish successful companies from those that are not by analyzing the difference between the two.
However, the identification of the FCEs is not enough; the strategist must have the courage to bet and accept the implicit risks, this position is the narrow passage through which the company must pass if it wishes to acquire superiority in the demanding field of competitive business, especially in a frontal competition.
Ch. 4: Build a relative superiority:
Despite the fact that few production lines are the same, it should be possible for any company to compare its products and those of its competitors, in order to identify the unique characteristics of its products on which an increase in its share of the market could be based. market. One way to achieve this is to use reverse engineering, analyzing the differences in order to establish where a certain relative advantage could be achieved, in price or in costs.
One of the biggest hurdles for a company trying to compete with established giants, aside from the prodigious sales efforts such giants can deploy, is primary support.
Chap. 5: Search for aggressive initiatives:
The weapons of the strategist are tactical thinking, consistency, and coherence, with these and with a relevant management group, the strategist is about to devise a method to clear up the confusion and open the bottleneck that has led the company to current difficulties.
To break the stagnation the strategist must take very drastic measures, the first step is to postulate that the company must have reached its current state of stagnation by sticking to what was initially the key to success for a given product or market, then conducts a thorough analysis to see if FCEs have held up in reality, defying industry common sense; the results of this kind of shift in the direction of strategic thinking can be spectacular
Cap N º 6 Taking advantage of the strategic degrees of freedom.
The concept of degrees of strategic freedom is related to the freedom to carry out strategic movements that exist with respect to an FCE
To take advantage of the strategic degrees of freedom you must:
• Select critical points (objective function).
• Determine the relevant action or cases to achieve the objective function.
• Fight on multiple fronts.
• Predict the movements that competitors can make.
• Segment the market by user objective.
Cap No. 7: Secrets of strategic vision.
Company executives can suffer from tunnel-type strategic vision; In other words, the stronger the pressures and the more necessary and urgent a range of vision is, the greater the danger that your mental vision will narrow. This seems to happen especially to the businessman obsessed with the idea of success who sees everything in terms of success or failure; the all or nothing is a fallacy, strategic thinking must break that limited visual field, for this it must be supported by the daily use of the imagination, and by constant training in the logical processes of thought and planning.
The true intellectual strategist can respond flexibly to changes in the situation facing the company.
In formulating the strategy, one of the dangers is perfectionism; There is no point in trying to come up with the perfect strategy if a strategy that is marginally superior, capable of taking advantage of opportunities, would suffice. Nor should one fall into the perfectionist observation for all the details since it leads to the compulsion to analyze and the fear of making sure that it is what must be done, being suspicious of all the definitive answers.
Paradoxically, that manager who has managed to free himself from perfectionism will have to put it into practice in another sense; but if the strategic thinker can generate an awareness of what would be an ideal state of business, even if it is currently unattainable, obstacles will be released.
In short, strategic thinking is a matter of attitude; the secret is to make people think: what can we do? Instead of what can't we do?
PART No. 2: "Developing effective strategies."
Chapter 8: Strategic triangle.
When developing any business strategy, the three main participants should be taken into account:
• The corporation
• The client
• The competition
The task of the strategist is to achieve superior performance, relative to the competition in the business FCE; at the same time you must be sure that your strategy adequately combines the strengths of the corporation with the needs of a clearly defined market; this combination must be stronger than rivals.
It is obvious to a company made up of different businesses that sell to different groups of customers that it will have to deal with more than one strategy framework and that more than one strategy will have to be developed. For this reason, strategic planning units are developed that have total freedom of operations in front of the three participants.
To create the strategic planning units, the strategist needs a broad perspective to be able to contemplate the competition in its entirety and must avoid any problem in the definition of said units.
Cap 9: customer-based strategies.
• Segmentation by objectives: the market is divided according to the different ways in which different customers use the product; The effort lies in determining whether the different subgroups in fact pursue objectives that are different enough from each other for the corporation to offer differentiated products or services.
• Segmentation by customer coverage: it is another way of segmenting the market that comes from the corporation's own circumstances; it generally arises from a balance study between marketing costs and the breadth of market coverage. The corporation's task is to improve the scope of its market coverage, be it geographic or distribution channels, so that its marketing costs provide it with a relative advantage over the competition.
In a fiercely competitive market, the corporation and its competitors will most likely slice the market into very similar parts; Therefore, over an extended period, the effectiveness of a certain initial segmentation will decline, making necessary changes in market segmentation, structural changes, changes in applications, in the customer mix; always keeping an eye on new trends.
chap. 10: Corporation-Based Strategies
• Identification of key functions: these are the functional strengths that are required to compete successfully in a given industry; Maintaining a positive spread across key functional points is vital to maintaining an edge in profit making and market share. For the corporation to be successful, it does not need to maintain clear leadership in all functions; You can gain a decisive advantage in one of the key functions and perhaps you can put yourself in front of the competition in those functions in which for the moment it is only average or even mediocre.
• Functional Strategies: The functional strategies of a corporation should be clearly distinguished from operational improvements and operational programs. In general, functional strategies are related to the decision to produce or buy, with the competition, with the improvement of functional performance, improvement in costs, and with the prevention of errors.
chap. 11 Competitor-based strategies:
Competitor-based strategies can be established by looking at potential sources of differentiation across functions.
Some of the competition-based strategies are:
• The power of an image: Differences in the image of two or more brands result in a markup. When a company is locked into an image, it can be surprised and defeated by a rival.
• Exploitation of tangible advantages: refers to when a company aims to fight based on its real functional strengths.
• Flyweight Tactics: A small company should look for cheaper ways to differentiate itself from its rivals rather than launching into ad campaigns to gain some advantage.
Cap 12: Corporate Strategy:
There are three types of corporations: single product, conglomerate, and diversified. The strategy of a single product company that does not plan to diversify is identical to the strategy of a business unit. Conglomerates and diversified corporations are a very different field; while the conglomerate tries to maximize the benefits for the shareholder through financial measures, and the diversified company goes further trying to maximize the wealth of the corporation by exploiting synergies resulting from the crossing of its strengths between its different businesses. A diversified company that does not have this type of synergy through its different businesses is nothing more than a conglomerate that manages a set of different businesses,A conglomerate is limited to its purpose of making money.
Due to the difficulty for any purchased company to endorse the corporate culture and value system of the acquiring company, many diversified corporations, with many acquired companies among their operating divisions, have over time lost hope of achieving success. unification of the strengths of all your businesses; This lack has caused diversified companies to end up behaving as if they were conglomerates, applying the product portfolio management.
A diversified company has the following units:
• Corporate headquarters
• Strategic sector
• Strategic business units
• Strategic planning units
• Market product segment
During the '70s the conglomerates were transformed into gold diggers (profits); now that these companies have proven their inability to develop attractive businesses in important markets in competition with others who know the business better; the center of interest has been shifting towards the strengths.
The managerial resources that a corporation has goes beyond money, since it also includes people and things; the Japanese believe that streamlined corporate governance is achieved when these three resources are in balance.
These resources are key in the APP to achieve corporate goals.
In conclusion, we can say that a large diversified company must try to establish a leadership position, whether in cost or quality, through synergies that come from shared functional resources.
Part No. 3: Current Strategic Realities
chap. 13 Understanding the economic environment
All the efforts made by the strategist will have no value as long as he does not take into account, in their entirety and with all care, the broad currents of economic changes.
During the 1980s there were five key economic trends:
• Persistence of slow economic growth
• Maturation of the industry market and economic stagnation
• Unequal distribution of economic resources (using labor, land, capital, entrepreneurship, materials and technology as resources).
• Increasing international complexities (force the company to become a global company)
• Irreversible inflation (problems with depreciation)
Since the future cannot be predicted, developing a strategic response must begin with the present; considering:
o Demand for replacement
o International posting
o New economic order
o Accelerated life cycle
chap. 14 Managing strategic change
In addition to the broad economic trends discussed above, the significant changes currently in the global industry structure will influence the chances of success for most business strategies.
All of these changes are not yet fully understood; some remain unknown to the majority of managers; an awareness of these events can add a vital dimension of realism to the strategist's thinking and provide a global perspective to his planning task.
There are at least seven major changes that fall into this category:
• From the domain of labor to the domain of capital (as a result of aspects such as production technology, automation, production centers operated by robots and numerical controls)
• From multinationals to multilocals (all corporations that used to install their operations in places where they could get cheap labor and directed their managerial attention to reducing variable costs; now they are concentrating their operations in fewer places and where they count with large enough local markets; as a consequence developing countries will lag behind).
• The game of changing from fixed costs to variable costs (industries whose costs were traditionally fixed, such as cement, textiles, plastics and petrochemicals; now they are becoming variable-cost industries due to the increase in the cost of their raw materials and energy).
• From steel to electronics (there is a gradual shift from the industry to the electronics industry as a basis for prosperity, this is observed and noticed in the USA and Japan with the industries related to computers and communications).
• Changes in the definition of business units (as electronic content for many different products increases, the clear delineation between different businesses begins to fade).
• Changes in financial management from international to local (the sixth major structural change that will affect operating operations during the 1980s is the decentralization of financial management in Japan due to the disparities in the nominal exchange rate).
• From systems to human beings (the last change that the strategist must take into account is the modification in the corporate value system and the identity of the corporation. Japanese companies consider their people as members, not as simple employees, promoting a common value system).
The result of the sum of these seven changes is the signal that many management theories, concepts and frameworks are becoming obsolete or are unable to adapt to dynamic changes; For example, the concern for having good businesses is not enough to sustain growth, one must be concerned about creating new businesses.
chap. 15: Japan myths and realities.
The true differences between the Japanese and Western business systems are best analyzed by classifying them into four headings:
• The concept of a corporation is fundamentally different in Japan:
Before World War II Japan copied its corporate systems from accidental ones. After the war there was practically nothing with which to start a corporation; some engineers (trained to create tanks, planes, and ships) joined a handful of managers from prewar capitalist companies (Zaibatsu) to start small factories that produced basic necessities. These companies took on trained workers, but they lacked the money to pay their salaries and, therefore, most of them were paid with food; something that in those days was more important. In a way, these embryonic companies looked more like communities than corporations. Very soon, some of these communes began to achieve success; but their future looked uncertain until the Korean war broke out,they made a profit that they quickly invested, the workers became wage earners, and the Japanese deposited their savings in banks, which in turn, lent liberally to corporations that wished to invest to continue growing. Most of these companies retained the original inhabitants of the commune as founding heroes, and this type of small-town activity has remained almost intact to this day. Only from this historical perspective can it be understood that the important point is that the "Japanese System," with its lifetime employment, seniority promotions, and complacent unions, is a consequence of post-war community growth, not of some strategy.the workers became wage earners and the Japanese deposited their savings in the banks, which in turn, loaned liberally to corporations that wished to invest to continue growing. Most of these companies retained the original inhabitants of the commune as founding heroes, and this type of small-town activity has remained almost intact to this day. Only from this historical perspective can it be understood that the important point is that the "Japanese System," with its lifetime employment, seniority promotions, and complacent unions, is a consequence of post-war community growth, not of some strategy.the workers became wage earners and the Japanese deposited their savings in the banks, which in turn, loaned liberally to corporations that wished to invest to continue growing. Most of these companies retained the original inhabitants of the commune as founding heroes, and this type of small-town activity has remained almost intact to this day. Only from this historical perspective can it be understood that the important point is that the "Japanese System," with its lifetime employment, seniority promotions, and complacent unions, is a consequence of post-war community growth, not of some strategy.they loaned liberally to corporations that wanted to invest to keep growing. Most of these companies retained the original inhabitants of the commune as founding heroes, and this type of small-town activity has remained almost intact to this day. Only from this historical perspective can it be understood that the important point is that the "Japanese System," with its lifetime employment, seniority promotions, and complacent unions, is a consequence of post-war community growth, not of some strategy.they loaned liberally to corporations that wanted to invest to keep growing. Most of these companies retained the original inhabitants of the commune as founding heroes, and this type of small-town activity has remained almost intact to this day. Only from this historical perspective can it be understood that the important point is that the "Japanese System," with its lifetime employment, seniority promotions, and complacent unions, is a consequence of post-war community growth, not of some strategy.Only from this historical perspective can it be understood that the important point is that the "Japanese System," with its lifetime employment, seniority promotions, and compliant unions, is a consequence of post-war community growth, and not of some strategy.Only from this historical perspective can it be understood that the important point is that the "Japanese System," with its lifetime employment, seniority promotions, and compliant unions, is a consequence of post-war community growth, and not of some strategy.
• For the Japanese businessman organization means people:
The concept of organization is copied from the army, the Japanese copied this concept from Western corporations, but in such a way that since the substance continues to be Japanese (communal). Commonly in the West, if a person turns out to be a great performer and the position is too small for him, he will leave the company or be promoted to a higher position; In this way, a company is never made up of managers who exceed the required qualifications (the well-known Peter principle), it is precisely for this reason that it does not manage to react to environmental changes as successfully as Japanese corporations. The key element seems to be that each corporation should be run in a democratic and humane way, as an organization "of, by and for" people;On the other hand, the experiences of large Japanese companies confirm the good judgment of depending on the contribution and initiative of individuals or groups to achieve improvements, innovations and creative energy, counting on many mechanisms for the development of individual capacities. Another of the key factors of a Japanese organization is the professional trajectory in which each newcomer begins where the action is and very rarely where his mental capacity seems to predestinate him.Another of the key factors of a Japanese organization is the professional trajectory in which each newcomer begins where the action is and very rarely where his mental capacity seems to predestinate him.Another of the key factors of a Japanese organization is the professional trajectory in which each newcomer begins where the action is and very rarely where his mental capacity seems to predestinate him.
• In Japan the government acts as a coach, not a captain:
Japan must import raw materials, add value to them and export them, with which it obtains the necessary profit to be able to buy food abroad and not starve; This thesis is the vital essence of the obsessive nature of the work of the Japanese. A population of 100 million people genuinely dedicated to work represents a monumental victory for the educational system of any country, even when it is not an officially established policy, the government is dedicated to creating a country with a unified system of values.
The educational system emphasizes group harmony, avoids the emergence of heroes and super-workers; The most gifted children are taught to use their intelligence to smooth out interpersonal relationships and to help their slower learning peers - precisely the kind of talent required of a prominent Japanese corporate executive today. On the contrary, Western education is based more on individualism. This insightful coaching role played by the government has been evident from the beginning, through encouraging investment, supporting vital research and development programs, and stimulating industries.
• The central idea of a strategy is to change the battlefield:
Japan managed to change the battlefield of war, going from the field to the commercial one, managing with strategies, much like technology, marketing concepts and capital funds would be done in the West, for example:
- Use highly innovative technology to save resources and compete successfully in the international market Handle marketing cautiously The financing of corporations came from the Japanese government's phobia of foreign capital Japanese always tend to seek new ones battlefields in which to compete without fighting head-to-head with the western giants.
chap. 16: Future Decision Making: Five steps must always be followed in decision making.
• Clear definition of the business domain (mission and objectives)
• Construction of the strategic scenario (the competing forces in the business field must be extrapolated to the future, and a logical hypothesis must be established about the scenario most likely to appear).
• Confrontation against critical options (of all the strategic options only a few can be chosen, once the selection has been made, personnel, technology and money must be deployed with boldness and recklessness).
• A realistic measure of progress (the company's strategy should be developed according to the rate at which it has resources available, rather than becoming saturated).
• Stick to the basics (management must adhere to the basic assumptions that support the original strategic selection as long as they remain valid. But if changing situations demand it, it must be prepared to modify even the direction of the company itself).
chap. 17: Is there a formula for strategic success ?:
The development of a business strategy must apply the same relationship as the formula of Tomas A. Edison to produce a genius invention: "1% inspiration and 99% perspiration."
That part of inspiration is essential so that the strategies are not only stereotypes applied methodologically.
This creative inspiration can be learned when all the necessary personal ingredients (willingness, sensitivity, receptivity) are present by example.
The business strategist must recognize at least three important constraints:
• Reality
• Responsiveness (opportunity)
• Means
Being in tune with the three "Rs" is a necessary precondition, but it is not enough to ignite the spark of creative genius in us; other elements are necessary such as:
• An initial charge (vision, focus, internal strength)
• A directional antenna (sensitive perception)
• Ability to tolerate static (being able to implement the strategy successfully despite resistance).
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