DMEL chapter 13

FOLLOWING THE ANALYSIS-DECISION-ACTION CYCLE IN CASE ANALYSIS

In Chapter 1 we defined strategic management as the analyses, decisions, and actions that organizations undertake to create and sustain competitive advantages. It is no accident that we chose that sequence of words because it corresponds to the sequence of events that typically occurs in the strategic management process. In case analysis, as in the real world, this cycle of events can provide a useful framework. First, an analysis of the case in terms of the business environment and current events is needed. To make such an analysis, the case background must be considered. Next, based on that analysis, decisions must be made. This may involve formulating a strategy, choosing between difficult options, moving forward aggressively, or retreating from a bad situation. There are many possible decisions, depending on the case situation. Finally, action is required. Once decisions are made and plans are set, the action begins. The recommended action steps and the consequences of implementing these actions are the final stage. Each of the previous 12 chapters of this book includes techniques and information that may be useful in a case analysis. However, not all of the issues presented will be important in every case. As noted earlier, one of the challenges of case analysis is to identify the most critical points and sort through material that may be ambiguous or seem unimportant. In this section we draw on the material presented in each of the 12 chapters to show how it informs the case analysis process. The ideas are linked sequentially and in terms of an overarching strategic perspective. One of your jobs when conducting case analysis is to see how the parts of a case fit together and how the insights from the study of strategy can help you understand the case situation. 1. Analyzing organizational goals and objectives. A company's vision, mission, and objectives keep organization members focused on a common purpose. They also influence how an organization deploys its resources, relates to its stakeholders, and matches its short-term objectives with its long-term goals. The goals may even impact how a company formulates and implements strategies. When exploring issues of goals and objectives, you might ask: • Has the company developed short-term objectives that are inconsistent with its longterm mission? If so, how can management realign its vision, mission, and objectives? • Has the company considered all of its stakeholders equally in making critical decisions? If not, should the views of all stakeholders be treated the same or are some stakeholders more important than others? • Is the company being faced with an issue that conflicts with one of its longstanding policies? If so, how should it compare its existing policies to the potential new situation 2. Analyzing the external environment. The business environment has two components. The general environment consists of demographic, sociocultural, political/legal, technological, economic, and global conditions. The competitive environment includes rivals, suppliers, customers, and other factors that may directly affect a company's success. Strategic managers must monitor the environment to identify opportunities and threats that may have an impact on performance. When investigating a firm's external environment, you might ask: • Does the company follow trends and events in the general environment? If not, how can these influences be made part of the company's strategic analysis process? • Is the company effectively scanning and monitoring the competitive environment? If so, how is it using the competitive intelligence it is gathering to enhance its competitive advantage? • Has the company correctly analyzed the impact of the competitive forces in its industry on profitability? If so, how can it improve its competitive position relative to these forces? 3. Analyzing the internal environment. A firm's internal environment consists of its resources and other value-adding capabilities. Value-chain analysis and a resourcebased approach to analysis can be used to identify a company's strengths and weaknesses and determine how they are contributing to its competitive advantages. Evaluating firm performance can also help make meaningful comparisons with competitors. When researching a company's internal analysis, you might ask: • Does the company know how the various components of its value chain are adding value to the firm? If not, what internal analysis is needed to determine its strengths and weakness? • Has the company accurately analyzed the source and vitality of its resources? If so, is it deploying its resources in a way that contributes to competitive advantages? • Is the company's financial performance as good as or better than that of its close competitors? If so, has it balanced its financial success with the performance criteria of other stakeholders such as customers and employees? 4. Assessing a firm's intellectual assets. Human capital is a major resource in today's knowledge economy. As a result, attracting, developing, and retaining talented workers is a key strategic challenge. Other assets such as patents and trademarks are also critical. How companies leverage their intellectual assets through social networks and strategic alliances, and how technology is used to manage knowledge, may be a major influence on a firm's competitive advantage. When analyzing a firm's intellectual assets, you might ask: • Does the company have underutilized human capital? If so, what steps are needed to develop and leverage its intellectual assets? • Is the company missing opportunities to forge strategic alliances? If so, how can it use its social capital to network more effectively? • Has the company developed knowledge-management systems that capture what it learns? If not, what technologies can it employ to retain new knowledge? 5. Formulating business-level strategies. Firms use the competitive strategies of differentiation, focus, and overall cost leadership as a basis for overcoming the five competitive forces and developing sustainable competitive advantages. Combinations of these strategies may work best in some competitive environments. Additionally, an industry's life cycle is an important contingency that may affect a company's choice of business-level strategies. When assessing business-level strategies, you might ask: • Has the company chosen the correct competitive strategy given its industry environment and competitive situation? If not, how should it use its strengths and resources to improve its performance? • Does the company use combination strategies effectively? If so, what capabilities can it cultivate to further enhance profitability? • Is the company using a strategy that is appropriate for the industry life cycle in which it is competing? If not, how can it realign itself to match its efforts to the current stage of industry growth? 6. Formulating corporate-level strategies. Large firms often own and manage portfolios of businesses. Corporate strategies address methods for achieving synergies among these businesses. Related and unrelated diversification techniques are alternative approaches to deciding which business should be added to or removed from a portfolio. Companies can diversify by means of mergers, acquisitions, joint vent strategic alliances, and internal development. When analyzing corporate-level strategies, you might ask: • Is the company competing in the right businesses given the opportunities and threats that are present in the environment? If not, how can it realign its diversification strategy to achieve competitive advantages? • Is the corporation managing its portfolio of businesses in a way that creates synergies among the businesses? If so, what additional business should it consider adding to its portfolio? • Are the motives of the top corporate executives who are pushing diversification strategies appropriate? If not, what action can be taken to curb their activities or align them with the best interests of all stakeholders? 7. Formulating international-level strategies. Foreign markets provide both opportunities and potential dangers for companies that want to expand globally. To decide which entry strategy is most appropriate, companies have to evaluate the trade-offs between two factors that firms face when entering foreign markets: cost reduction and local adaptation. To achieve competitive advantages, firms will typically choose one of three strategies: global, multidomestic, or transnational. When evaluating international-level strategies, you might ask: • Is the company's entry into an international marketplace threatened by the actions of local competitors? If so, how can cultural differences be minimized to give the firm a better chance of succeeding? • Has the company made the appropriate choices between cost reduction and local adaptation to foreign markets? If not, how can it adjust its strategy to achieve competitive advantages? • Can the company improve its effectiveness by embracing one international strategy over another? If so, how should it choose between a global, multidomestic, or transnational strategy? 8. Formulating entrepreneurial strategies. New ventures add jobs and create new wealth. To do so, they must identify opportunities that will be viable in the marketplace as well as gather resources and assemble an entrepreneurial team to enact the opportunity. New entrants often evoke a strong competitive response from incumbent firms in a given marketplace. When examining the role of strategic thinking on the success of entrepreneurial ventures and the role of competitive dynamics, you might ask: • Is the company engaged in an ongoing process of opportunity recognition? If not, how can it enhance its ability to recognize opportunities? • Do the entrepreneurs who are launching new ventures have vision, dedication and drive, and a commitment to excellence? If so, how have these affected the performance and dedication of other employees involved in the venture? • Have strategic principles been used in the process of developing strategies to pursue the entrepreneurial opportunity? If not, how can the venture apply tools such as five-forces analysis and value-chain analysis to improve its competitive position and performance? 9. Achieving effective strategic control. Strategic controls enable a firm to implement strategies effectively. Informational controls involve comparing performance to stated goals and scanning, monitoring, and being responsive to the environment. Behavioral controls emerge from a company's culture, reward systems, and organizational boundaries. When assessing the impact of strategic controls on implementation, you might ask: • Is the company employing the appropriate informational control systems? If not, how can it implement a more interactive approach to enhance learning and minimize response times? • Does the company have a strong and effective culture? If not, what steps can it take to align its values and rewards system with its goals and objectives? • Has the company implemented control systems that match its strategies? If so, what additional steps can be taken to improve performance? 10. Creating effective organizational designs. Organizational designs that align with competitive strategies can enhance performance. As companies grow and change, their structures must also evolve to meet new demands. In today's economy, firm boundaries must be flexible and permeable to facilitate smoother interactions with external parties such as customers, suppliers, and alliance partners. New forms of organizing are becoming more common. When evaluating the role of organizational structure on strategy implementation, you might ask: • Has the company implemented organizational structures that are suited to the type of business it is in? If not, how can it alter the design in ways that enhance its competitiveness? • Is the company employing boundaryless organizational designs where appropriate? If so, how are senior managers maintaining control of lower-level employees? • Does the company use outsourcing to achieve the best possible results? If not, what criteria should it use to decide which functions can be outsourced? 11. Creating a learning organization and an ethical organization. Strong leadership is essential for achieving competitive advantages. Two leadership roles are especially important. The first is creating a learning organization by harnessing talent and encouraging the development of new knowledge. Second, leaders play a vital role in motivating employees to excellence and inspiring ethical behavior. When exploring the impact of effective strategic leadership, you might ask: • Do company leaders promote excellence as part of the overall culture? If so, how has this influenced the performance of the firm and the individuals in it? • Is the company committed to being a learning organization? If not, what can it do to capitalize on the individual and collective talents of organizational members? • Have company leaders exhibited an ethical attitude in their own behavior? If not, how has their behavior influenced the actions of other employees? 12. Fostering corporate entrepreneurship. Many firms continually seek new growth opportunities and avenues for strategic renewal. In some corporations, autonomous work units such as business incubators and new venture groups are used to focus corporate venturing activities. In other corporate settings, product champions and other firm members provide companies with the impetus to expand into new areas. When investigating the impact of entrepreneurship on strategic effectiveness, you might ask: • Has the company resolved the dilemmas associated with managing innovation? If so, is it effectively defining and pacing its innovation efforts? • Has the company developed autonomous work units that have the freedom to bring forth new product ideas? If so, has it used product champions to implement new venture initiatives? • Does the company have an entrepreneurial orientation? If not, what can it do to encourage entrepreneurial attitudes in the strategic behavior of its organizational members? - We close this chapter with Strategy Spotlight 13.5—an example of how the College of Business and Economics at Towson University went about conducting a "live" business case competition across all of the strategic management sections. The "Description" and "Case Competition Checklist" includes many of the elements of the analysis-decision-action cycle in case analysis that we have discussed.

HOW TO GET THE MOST FROM CASE ANALYSIS

One of the reasons case analysis is so enriching as a learning tool is that it draws on many resources and skills besides just what is in the textbook. This is especially true in the study of strategy. Why? Because strategic management itself is a highly integrative task that draws on many areas of specialization at several levels, from the individual to the whole of society. Therefore, to get the most out of case analysis, expand your horizons beyond the concepts in this text and seek insights from your own reservoir of knowledge. Here are some tips for how to do that: • Keep an open mind. Like any good discussion, a case analysis discussion often evokes strong opinions and high emotions. But it's the variety of perspectives that makes case analysis so valuable: Many viewpoints usually lead to a more complete analysis. Therefore, avoid letting an emotional response to another person's style or opinion keep you from hearing what he or she has to say. Once you evaluate what is said, you may disagree with it or dismiss it as faulty. But unless you keep an open mind in the first place, you may miss the importance of the other person's contribution. Also, people often place a higher value on the opinions of those they consider to be good listeners. • Take a stand for what you believe. Although it is vital to keep an open mind, it is also important to state your views proactively. Don't try to figure out what your friends or the instructor wants to hear. Analyze the case from the perspective of your own background and belief system. For example, perhaps you feel that a decision is unethical or that the managers in a case have misinterpreted the facts. Don't be afraid to assert that in the discussion. For one thing, when a person takes a strong stand, it often encourages others to evaluate the issues more closely. This can lead to a more thorough investigation and a more meaningful class discussion. • Draw on your personal experience. You may have experiences from work or as a customer that shed light on some of the issues in a case. Even though one of the purposes of case analysis is to apply the analytical tools from this text, you may be able to add to the discussion by drawing on your outside experiences and background. Of course, you need to guard against carrying that to extremes. In other words, don't think that your perspective is the only viewpoint that matters! Simply recognize that firsthand experience usually represents a welcome contribution to the overall quality of case discussions. • Participate and persuade. Have you heard the phrase "Vote early . . . and often"? Among loyal members of certain political parties, it has become rather a joke. Why? Because a democratic system is built on the concept of one person, one vote. Even though some voters may want to vote often enough to get their candidate elected, doing so is against the law. Not so in a case discussion. People who are persuasive and speak their mind can often influence the views of others. But to do so, you have to be prepared and convincing. Being persuasive is more than being loud or longwinded. It involves understanding all sides of an argument and being able to overcome objections to your own point of view. These efforts can make a case discussion more lively. And they parallel what happens in the real world; in business, people frequently share their opinions and attempt to persuade others to see things their way. • Be concise and to the point. In the previous point, we encouraged you to speak up and "sell" your ideas to others in a case discussion. But you must be clear about what you are selling. Make your arguments in a way that is explicit and direct. Zero in on the most important points. Be brief. Don't try to make a lot of points at once by jumping around between topics. Avoid trying to explain the whole case situation at once. Remember, other students usually resent classmates who go on and on, take up a lot of "airtime," or repeat themselves unnecessarily. The best way to avoid this is to stay focused and be specific. • Think out of the box. It's OK to be a little provocative; sometimes that is the consequence of taking a stand on issues. But it may be equally important to be imaginative and creative when making a recommendation or determining how to implement a solution. Albert Einstein once stated, "Imagination is more important than knowledge." The reason is that managing strategically requires more than memorizing concepts. Strategic management insights must be applied to each case differently—just knowing the principles is not enough. Imagination and out-of-the-box thinking help to apply strategic knowledge in novel and unique ways. • Learn from the insights of others. Before you make up your mind about a case, hear what other students have to say. Get a second opinion, and a third, and so forth. Of course, in a situation where you have to put your analysis in writing, you may not be able to learn from others ahead of time. But in a case discussion, observe how various students attack the issues and engage in problem solving. Such observation skills also may be a key to finding answers within the case. For example, people tend to believe authority figures, so they would place a higher value on what a company president says. In some cases, however, the statements of middle managers may represent a point of view that is even more helpful for finding a solution to the problems presented by the case. • Apply insights from other case analyses. Throughout the text, we have used examples of actual businesses to illustrate strategy concepts. The aim has been to show you how firms think about and deal with business problems. During the course, you may be asked to conduct several case analyses as part of the learning experience. Once you have performed a few case analyses, you will see how the concepts from the text apply in real-life business situations. Incorporate the insights learned from the text examples and your own previous case discussions into each new case that you analyze. • Critically analyze your own performance. Performance appraisals are a standard part of many workplace situations. They are used to determine promotions, raises, and work assignments. In some organizations, everyone from the top executive down is subject to such reviews. Even in situations where the owner or CEO is not evaluated by others, top executives often find it useful to ask themselves regularly, Am I being effective? The same can be applied to your performance in a case analysis situation. Ask yourself, Were my comments insightful? Did I make a good contribution? How might I improve next time? Use the same criteria on yourself that you use to evaluate others. What grade would you give yourself? This technique not only will make you more fair in your assessment of others but also will indicate how your own performance can improve. • Conduct outside research. Many times, you can enhance your understanding of a case situation by investigating sources outside the case materials. For example, you may want to study an industry more closely or research a company's close competitors. Recent moves such as mergers and acquisitions or product introductions may be reported in the business press. The company itself may provide useful information on its website or in its annual reports. Such information can usually spur additional discussion and enrich the case analysis. (Caution: It is best to check with your instructor in advance to be sure this kind of additional research is encouraged. Bringing in outside research may conflict with the instructor's learning objectives.) - Several of the points suggested for how to get the most out of case analysis apply only to an open discussion of a case, like that in a classroom setting. Exhibit 13.3 provides some additional guidelines for preparing a written case analysis.

USEFUL DECISION-MAKING TECHNIQUES IN CASE ANALYSIS

The demands on today's business leaders require them to perform a wide variety of functions. The success of their organizations often depends on how they as individuals—and as part of groups—meet the challenges and deliver on promises. In this section we address three different techniques that can help managers make better decisions and, in turn, enable their organizations to achieve higher performance. First, we discuss integrative thinking, a technique that helps managers make better decisions through the resolution of competing demands on resources, multiple contingencies, and diverse opportunities. Second, we address the concept of "asking heretical questions." These are questions that challenge conventional wisdom and may even seem odd or unusual—but they can often lead to valuable innovations. Third, we introduce two approaches to decision making that involve the effective use of conflict in the decision-making process. These are devil's advocacy and dialectical inquiry. Integrative Thinking - How does a leader make good strategic decisions in the face of multiple contingencies and diverse opportunities? A study by Roger L. Martin reveals that executives who have a capability known as integrative thinking are among the most effective leaders. In his book The Opposable Mind, Martin contends that people who can consider two conflicting ideas simultaneously, without dismissing one of the ideas or becoming discouraged about reconciling them, often make the best problem solvers because of their ability to creatively synthesize the opposing thoughts. In explaining the source of his title, Martin quotes F. Scott Fitzgerald, who observed, "The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function. One should, for example, be able to see that things are hopeless yet be determined to make them otherwise."10 In contrast to conventional thinking, which tends to focus on making choices between competing ideas from a limited set of alternatives, integrative thinking is the process by which people reconcile opposing thoughts to identify creative solutions that provide them with more options and new alternatives. Exhibit 13.4 outlines the four stages of the integrative thinking and deciding process. Martin uses the admittedly simple example of deciding where to go on vacation to illustrate the stages: • Salience. Take stock of what features of the decision you consider relevant and important. For example: Where will you go? What will you see? Where will you stay? What will it cost? Is it safe? Other features may be less important, but try to think of everything that may matter. • Causality. Make a mental map of the causal relationships between the features, that is, how the various features are related to one another. For example, is it worth it to invite friends to share expenses? Will an exotic destination be less safe? • Architecture. Use the mental map to arrange a sequence of decisions that will lead to a specific outcome. For example, will you make the hotel and flight arrangements first, or focus on which sightseeing tours are available? No particular decision path is right or wrong, but considering multiple options simultaneously may lead to a better decision. • Resolution. Make your selection. For example, choose which destination, which flight, and so forth. Your final resolution is linked to how you evaluated the first three stages; if you are dissatisfied with your choices, the dotted arrows in the diagram (Exhibit 13.4) suggest you can go back through the process and revisit your assumptions. - Applied to business, an integrative thinking approach enables decision makers to consider situations not as forced trade-offs—either decrease costs or invest more; either satisfy shareholders or please the community—but as a method for synthesizing opposing ideas into a creative solution. The key is to think in terms of "both-and" rather than "either-or." "Integrative thinking," says Martin, "shows us that there's a way to integrate the advantages of one solution without canceling out the advantages of an alternative solution."11 Although Martin found that integrative thinking comes naturally to some people, he also believes it can be taught. But it may be difficult to learn, in part because it requires people to unlearn old patterns and become aware of how they think. For executives willing to take a deep look at their habits of thought, integrative thinking can be developed into a valuable skill. Strategy Spotlight 13.3 tells how Red Hat Inc. cofounder Bob Young made his company a market leader by using integrative thinking to resolve a major problem in the domain of open-source software. Asking Heretical Questions - In his recent book The Big Pivot, Andrew Winston introduced the concept of heretical innovation to help address the challenges associated with environmental sustainability in today's world.12 He describes the need to pursue a deeper level of innovation that challenges longheld beliefs about how things work. Central to addressing these challenges is the need to pose "heretical questions"—those that challenge conventional wisdom. Typically, they may make us uncomfortable or may seem odd (or even impossible)—but they often become the means of coming up with major innovations. Although the context of Winston's discussion was environmental sustainability, we believe that his ideas have useful implications for major challenges faced by today's managers in a wide range of firms and industries. Heretical questions can address issues that are both small and large—from redesigning a single process or product to rethinking the whole business model. One must not discount the value of the approach in considering small matters. After all, the vast majority of people in a company don't have the mandate to rethink strategy. However, anyone in an organization can ask disruptive questions that profoundly change one aspect of a business. What makes this heretical is how deeply it challenges the conventional wisdom. Consider the fascinating story of UPS's "no left turns," a classic tale in the sustainability world that has become rather well known. The catchy phrase became a rallying cry for mapping out new delivery routes that avoided crossing traffic and idling at stoplights. UPS is saving time, money, and energy—about 85 million miles and 8 million gallons of fuel annually. Also, take the example of dyeing clothing—a tremendously water-intensive process. Somebody at adidas asked a heretical question: Could we dye clothes with no water? The answer was yes. However, the company needed to partner with a small Thailand-based company, Yeh Group. The DryDye process adidas is now piloting uses heat and pressure to force pigment into the fibers. The process uses no water and also cuts energy and chemical use by 50 percent! Finally, in 2010, Kimberly-Clark, the $21 billion firm that is behind such brands as Kleenex and Scott, questioned the simple assumption that toilet paper rolls must have cardboard tubes to hold their shape. It created the Scott Naturals Tube-Free line, which offers this household staple in the familiar cylindrical shape. But it comes with no cardboard core—just a hole the same size. It's been very successful—a key part of the now $100 million Scott Naturals brand. While this product may not save the world, if it became the industry standard, we could eliminate 17 billion tubes that are used in the United States every year and save fuel by shipping lighter rolls. This is a good example of heretical thinking. After all, the product doesn't incrementally use less cardboard—it uses none. The concept of accepting failure and aiming for deep, heretical innovation is difficult for most organizations to embrace. Ed Catmull, the former president and cofounder of animation pioneer Pixar, claims that when you are doing something new, you are by definition doing something you don't know very well, and that means mistakes. However, if you don't encourage mistakes, he says, you won't encourage anything new: "We're very conscientious about making it so that mistakes really aren't thought of as bad . . . they're just learning." Conflict-Inducing Techniques - Next we address some techniques often used to improve case analyses that involve the constructive use of conflict. In the classroom—as well as in the business world—you will frequently be analyzing cases or solving problems in groups. While the word conflict often has a negative connotation (e.g., rude behavior, personal affronts), it can be very helpful in arriving at better solutions to cases. It can provide an effective means for new insights as well as for rigorously questioning and analyzing assumptions and strategic alternatives. In fact, if you don't have constructive conflict, you may get only consensus. When this happens, decisions tend to be based on compromise rather than collaboration. - In your organizational behavior classes, you probably learned the concept of "groupthink."13 Groupthink, a term coined by Irving Janis after he conducted numerous studies on executive decision making, is a condition in which group members strive to reach agreement or consensus without realistically considering other viable alternatives. In effect, group norms bolster morale at the expense of critical thinking, and decision making is impaired.14 Many of us have probably been "victims" of groupthink at one time or another in our life. We may be confronted with situations when social pressure, politics, or "not wanting to stand out" may prevent us from voicing our concerns about a chosen course of action. Nevertheless, decision making in groups is a common practice in the management of many businesses. Most companies, especially large ones, rely on input from various top managers to provide valuable information and experience from their specialty area as well as their unique perspectives. Organizations need to develop cultures and reward systems that encourage people to express their perspectives and create open dialogues. Constructive conflict can be very helpful in that it emphasizes the need for managers to consider other people's perspectives and not simply become a strong advocate for positions that they may prefer. Chapter 11 emphasized the importance of empowering individuals at all levels to participate in decision-making processes. After all, many of us have experienced situations where there is not a perfect correlation between one's rank and the viability of one's ideas! In terms of this course, case analysis involves a type of decision making that is often conducted in groups. Strategy Spotlight 13.4 provides guidelines for making team-based approaches to case analysis more effective. - Clearly, understanding how to work in groups and the potential problems associated with group decision processes can benefit the case analysis process. Therefore, let's first look at some of the symptoms of groupthink and suggest ways of preventing it. Then we will suggest some conflict-inducing decision-making techniques—devil's advocacy and dialectical inquiry—that can help to prevent groupthink and lead to better decisions. Symptoms of Groupthink and How to Prevent It Irving Janis identified several symptoms of groupthink, including: • An illusion of invulnerability. This reassures people about possible dangers and leads to overoptimism and failure to heed warnings of danger. • A belief in the inherent morality of the group. Because individuals think that what they are doing is right, they tend to ignore ethical or moral consequences of their decisions. • Stereotyped views of members of opposing groups. Members of other groups are viewed as weak or not intelligent. • The application of pressure to members who express doubts about the group's shared illusions or question the validity of arguments proposed. • The practice of self-censorship. Members keep silent about their opposing views and downplay to themselves the value of their perspectives. • An illusion of unanimity. People assume that judgments expressed by members are shared by all. • The appointment of mindguards. People sometimes appoint themselves as mindguards to protect the group from adverse information that might break the climate of consensus (or agreement) - Clearly, groupthink is an undesirable and negative phenomenon that can lead to poor decisions. Irving Janis considers it to be a key contributor to such faulty decisions as the failure to prepare for the attack on Pearl Harbor, the escalation of the Vietnam conflict, and the failure to prepare for the consequences of the Iraqi invasion. Many of the same sorts of flawed decision making occur in business organizations. Janis has provided several suggestions for preventing groupthink that can be used as valuable guides in decision making and problem solving: • Leaders must encourage group members to address their concerns and objectives. • When higher-level managers assign a problem for a group to solve, they should adopt an impartial stance and not mention their preferences. • Before a group reaches its final decision, the leader should encourage members to discuss their deliberations with trusted associates and then report the perspectives back to the group. • The group should invite outside experts and encourage them to challenge the group's viewpoints and positions. • The group should divide into subgroups, meet at various times under different chairpersons, and then get together to resolve differences. • After reaching a preliminary agreement, the group should hold a "second chance" meeting that provides members a forum to express any remaining concerns and rethink the issue prior to making a final decision. - Using Conflict to Improve Decision Making In addition to the given suggestions, the effective use of conflict can be a means of improving decision making. Although conflict can have negative outcomes, such as ill will, anger, tension, and lowered motivation, both leaders and group members must strive to ensure that it is managed properly and used in a constructive manner. Two conflict-inducing decision-making approaches that have become quite popular are devil's advocacy and dialectical inquiry. Both approaches incorporate conflict into the decision-making process through formalized debate. A group charged with making a decision or solving a problem is divided into two subgroups, and each will be involved in the analysis and solution. With devil's advocacy, one of the groups (or individuals) acts as a critic to the plan. The devil's advocate tries to come up with problems with the proposed alternative and suggest reasons why it should not be adopted. The role of the devil's advocate is to create dissonance. This ensures that the group will take a hard look at its original proposal or alternative. By having a group (or individual) assigned the role of devil's advocate, it becomes clear that such an adversarial stance is legitimized. It brings out criticisms that might otherwise not be made. Some authors have suggested that the use of a devil's advocate can help boards of directors to ensure that decisions are addressed comprehensively and to avoid groupthink.15 And Charles Elson, a director of Sunbeam Corporation, has argued: "Devil's advocates are terrific in any situation because they help you to figure a decision's numerous implications. . . . The better you think out the implications prior to making the decision, the better the decision ultimately turns out to be. That's why a devil's advocate is always a great person, irritating sometimes, but a great person" - As one might expect, there can be some potential problems with using the devil's advocate approach. If one's views are constantly criticized, one may become demoralized. Thus, that person may come up with "safe solutions" in order to minimize embarrassment or personal risk and become less subject to criticism. Additionally, even if the devil's advocate is successful with finding problems with the proposed course of action, there may be no new ideas or counterproposals to take its place. Thus, the approach sometimes may simply focus on what is wrong without suggesting other ideas. Dialectical inquiry attempts to accomplish the goals of the devil's advocate in a more constructive manner. It is a technique whereby a problem is approached from two alternative points of view. The idea is that out of a critique of the opposing perspectives—a thesis and an antithesis—a creative synthesis will occur. Dialectical inquiry involves the following steps: 1. Identify a proposal and the information that was used to derive it. 2. State the underlying assumptions of the proposal. 3. Identify a counterplan (antithesis) that is believed to be feasible, politically viable, and generally credible. However, it rests on assumptions that are opposite to the original proposal. 4. Engage in a debate in which individuals favoring each plan provide their arguments and support. 5. Identify a synthesis which, hopefully, includes the best components of each alternative - There are some potential downsides associated with dialectical inquiry. It can be quite time-consuming and involve a good deal of training. Further, it may result in a series of compromises between the initial proposal and the counterplan. In cases where the original proposal was the best approach, this would be unfortunate. Despite some possible limitations associated with these conflict-inducing decisionmaking techniques, they have many benefits. Both techniques force debate about underlying assumptions, data, and recommendations between subgroups. Such debate tends to prevent the uncritical acceptance of a plan that may seem to be satisfactory after a cursory analysis. The approach serves to tap the knowledge and perspectives of group members and continues until group members agree on both assumptions and recommended actions. Given that both approaches serve to use, rather than minimize or suppress, conflict, higher-quality decisions should result. Exhibit 13.5 briefly summarizes these techniques

HOW TO CONDUCT A CASE ANALYSIS

The process of analyzing strategic management cases involves several steps. In this section we will review the mechanics of preparing a case analysis. Before beginning, there are two things to keep in mind that will clarify your understanding of the process and make the results of the process more meaningful. First, unless you prepare for a case discussion, there is little you can gain from the discussion and even less that you can offer. Effective strategic managers don't enter into problem-solving situations without doing some homework—investigating the situation, analyzing and researching possible solutions, and sometimes gathering the advice of others. Good problem solving often requires that decision makers be immersed in the facts, options, and implications surrounding the problem. In case analysis, this means reading and thoroughly comprehending the case materials before trying to make an analysis. The second point is related to the first. To get the most out of a case analysis, you must place yourself "inside" the case—that is, think like an actual participant in the case situation. However, there are several positions you can take. These are discussed in the following paragraphs: • Strategic decision maker. This is the position of the senior executive responsible for resolving the situation described in the case. It may be the CEO, the business owner, or a strategic manager in a key executive position. • Board of directors. Since the board of directors represents the owners of a corporation, it has a responsibility to step in when a management crisis threatens the company. As a board member, you may be in a unique position to solve problems. • Outside consultant. Either the board or top management may decide to bring in outsiders. Consultants often have an advantage because they can look at a situation objectively. But they also may be at a disadvantage since they have no power to enforce changes - Before beginning the analysis, it may be helpful to envision yourself assuming one of these roles. Then, as you study and analyze the case materials, you can make a diagnosis and recommend solutions in a way that is consistent with your position. Try different perspectives. You may find that your view of the situation changes depending on the role you play. As an outside consultant, for example, it may be easy for you to conclude that certain individuals should be replaced in order to solve a problem presented in the case. However, if you take the role of the CEO who knows the individuals and the challenges they have been facing, you may be reluctant to fire them and will seek another solution instead. The idea of assuming a particular role is similar to the real world in various ways. In your career, you may work in an organization where outside accountants, bankers, lawyers, or other professionals are advising you about how to resolve business situations or improve your practices. Their perspective will be different from yours, but it is useful to understand things from their point of view. Conversely, you may work as a member of the audit team of an accounting firm or the loan committee of a bank. In those situations, it would be helpful if you understood the situation from the perspective of the business leader who must weigh your views against all the other advice that he or she receives. Case analysis can help develop an ability to appreciate such multiple perspectives. One of the most challenging roles to play in business is as a business founder or owner. For small businesses or entrepreneurial start-ups, the founder may wear all hats at once—key decision maker, primary stockholder, and CEO. Hiring an outside consultant may not be an option. However, the issues faced by young firms and established firms are often not that different, especially when it comes to formulating a plan of action. Business plans that entrepreneurial firms use to raise money or propose a business expansion typically revolve around a few key issues that must be addressed no matter what the size or age of the business. Strategy Spotlight 13.2 reviews business planning issues that are most important to consider when evaluating any case, especially from the perspective of the business founder or owner. Next we will review five steps to follow when conducting a strategic management case analysis: becoming familiar with the material, identifying the problems, analyzing the strategic issues using the tools and insights of strategic management, proposing alternative solutions, and making recommendations. Become Familiar with the Material - Written cases often include a lot of material. They may be complex and include detailed financials or long passages. Even so, to understand a case and its implications, you must become familiar with its content. Sometimes key information is not immediately apparent. It may be contained in the footnotes to an exhibit or in an interview with a lower-level employee. In other cases the important points may be difficult to grasp because the subject matter is so unfamiliar. When you approach a strategic case, try the following technique to enhance comprehension: • Read quickly through the case one time to get an overall sense of the material. • Use the initial read-through to assess possible links to strategic concepts. • Read through the case again, in depth. Make written notes as you read. • Evaluate how strategic concepts might inform key decisions or suggest alternative solutions. • After formulating an initial recommendation, thumb through the case again quickly to help assess the consequences of the actions you propose Identify Problems - When conducting case analysis, one of your most important tasks is to identify the problem. Earlier we noted that one of the main reasons to conduct case analysis is to find solutions. But you cannot find a solution unless you know the problem. Another saying you may have heard is "A good diagnosis is half the cure." In other words, once you have determined what the problem is, you are well on your way to identifying a reasonable solution. - Some cases have more than one problem. But the problems are usually related. For a hypothetical example, consider the following: Company A was losing customers to a new competitor. Upon analysis, it was determined that the competitor had a 50 percent faster delivery time even though its product was of lower quality. The managers of company A could not understand why customers would settle for an inferior product. It turns out that no one was marketing to company A's customers that its product was superior. A second problem was that falling sales resulted in cuts in company A's sales force. Thus, there were two related problems: inferior delivery technology and insufficient sales effort. When trying to determine the problem, avoid getting hung up on symptoms. Zero in on the problem. For example, in the company A example, the symptom was losing customers. But the problems were an underfunded, understaffed sales force combined with an outdated delivery technology. Try to see beyond the immediate symptoms to the more fundamental problems. Another tip when preparing a case analysis is to articulate the problem.7 Writing down a problem statement gives you a reference point to turn to as you proceed through the case analysis. This is important because the process of formulating strategies or evaluating implementation methods may lead you away from the initial problem. Make sure your recommendation actually addresses the problems you have identified. One more thing about identifying problems: Sometimes problems are not apparent until after you do the analysis. In some cases the problem will be presented plainly, perhaps in the opening paragraph or on the last page of the case. But in other cases the problem does not emerge until after the issues in the case have been analyzed. We turn next to the subject of strategic case analysis Conduct Strategic Analyses - This textbook has presented numerous analytical tools (e.g., five-forces analysis and valuechain analysis), contingency frameworks (e.g., when to use related rather than unrelated diversification strategies), and other techniques that can be used to evaluate strategic situations. The previous 12 chapters have addressed practices that are common in strategic management, but only so much can be learned by studying the practices and concepts. The best way to understand these methods is to apply them by conducting analyses of specific cases. The first step is to determine which strategic issues are involved. Is there a problem in the company's competitive environment? Or is it an internal problem? If it is internal, does it have to do with organizational structure? Strategic controls? Uses of technology? Or perhaps the company has overworked its employees or underutilized its intellectual capital. Has the company mishandled a merger? Chosen the wrong diversification strategy? Botched a new product introduction? Each of these issues is linked to one or more of the concepts discussed earlier in the text. Determine what strategic issues are associated with the problems you have identified. Remember also that most real-life case situations involve issues that are highly interrelated. Even in cases where there is only one major problem, the strategic processes required to solve it may involve several parts of the organization. Once you have identified the issues that apply to the case, conduct the analysis. For example, you may need to conduct a five-forces analysis or dissect the company's competitive strategy. Perhaps you need to evaluate whether its resources are rare, valuable, difficult to imitate, or difficult to substitute. Financial analysis may be needed to assess the company's economic prospects. Perhaps the international entry mode needs to be reevaluated because of changing conditions in the host country. Employee empowerment techniques may need to be improved to enhance organizational learning. Whatever the case, all the strategic concepts introduced in the text include insights for assessing their effectiveness. Determining how well a company is doing these things is central to the case analysis process. Financial ratio analysis is one of the primary tools used to conduct case analysis. Appendix 1 to Chapter 13 includes a discussion and examples of the financial ratios that are often used to evaluate a company's performance and financial well-being. Exhibit 13.1 provides a summary of the financial ratios presented in Appendix 1 to this chapter. In this part of the overall strategic analysis process, it is also important to test your own assumptions about the case.8 First, what assumptions are you making about the case materials? It may be that you have interpreted the case content differently than your team members or classmates. Being clear about these assumptions will be important in determining how to analyze the case. Second, what assumptions have you made about the best way to resolve the problems? Ask yourself why you have chosen one type of analysis over another. This process of assumption checking can also help determine if you have gotten to the heart of the problem or are still just dealing with symptoms. As mentioned earlier, sometimes the critical diagnosis in a case can be made only after the analysis is conducted. However, by the end of this stage in the process, you should know the problems and have completed a thorough analysis of them. You can now move to the next step: finding solutions Propose Alternative Solutions - It is important to remember that in strategic management case analysis, there is rarely one right answer or one best way. Even when members of a class or a team agree on what the problem is, they may not agree upon how to solve the problem. Therefore, it is helpful to consider several different solutions. After conducting strategic analysis and identifying the problem, develop a list of options. What are the possible solutions? What are the alternatives? First, generate a list of all the options you can think of without prejudging any one of them. Remember that not all cases call for dramatic decisions or sweeping changes. Some companies just need to make small adjustments. In fact, "Do nothing" may be a reasonable alternative in some cases. Although that is rare, it might be useful to consider what will happen if the company does nothing. This point illustrates the purpose of developing alternatives: to evaluate what will happen if a company chooses one solution over another. Thus, during this step of a case analysis, you will evaluate choices and the implications of those choices. One aspect of any business that is likely to be highlighted in this part of the analysis is strategy implementation. Ask how the choices made will be implemented. It may be that what seems like an obvious choice for solving a problem creates an even bigger problem when implemented. But remember also that no strategy or strategic "fix" is going to work if it cannot be implemented. Once a list of alternatives is generated, ask: • Can the company afford it? How will it affect the bottom line? • Is the solution likely to evoke a competitive response? • Will employees throughout the company accept the changes? What impact will the solution have on morale? • How will the decision affect other stakeholders? Will customers, suppliers, and others buy into it? • How does this solution fit with the company's vision, mission, and objectives? • Will the culture or values of the company be changed by the solution? Is it a positive change? - The point of this step in the case analysis process is to find a solution that both solves the problem and is realistic. A consideration of the implications of various alternative solutions will generally lead you to a final recommendation that is more thoughtful and complete Make Recommendations - The basic aim of case analysis is to find solutions. Your analysis is not complete until you have recommended a course of action. In this step the task is to make a set of recommendations that your analysis supports. Describe exactly what needs to be done. Explain why this course of action will solve the problem. The recommendation should also include suggestions for how best to implement the proposed solution because the recommended actions and their implications for the performance and future of the firm are interrelated. Recall that the solution you propose must solve the problem you identified. This point cannot be overemphasized; too often students make recommendations that treat only symptoms or fail to tackle the central problems in the case. Make a logical argument that shows how the problem led to the analysis and the analysis led to the recommendations you are proposing. Remember, an analysis is not an end in itself; it is useful only if it leads to a solution. The actions you propose should describe the very next steps that the company needs to take. Don't say, for example, "If the company does more market research, then I would recommend the following course of action. . . ." Instead, make conducting the research part of your recommendation. Taking the example a step further, if you also want to suggest subsequent actions that may be different depending on the outcome of the market research, that's OK. But don't make your initial recommendation conditional on actions the company may or may not take. In summary, case analysis can be a very rewarding process but, as you might imagine, it can also be frustrating and challenging. If you follow the steps described, you will address the different elements of a thorough analysis. This approach can give your analysis a solid footing. Then, even if there are differences of opinion about how to interpret the facts, analyze the situation, or solve the problems, you can feel confident that you have not missed any important steps in finding the best course of action. Students are often asked to prepare oral presentations of the information in a case and their analysis of the best remedies. This is frequently assigned as a group project. Or you may be called upon in class to present your ideas about the circumstances or solutions for a case the class is discussing. Exhibit 13.2 provides some tips for preparing an oral case presentation.