The Concept of Discontinuous Change and Its Rrelevance to Strategic Management - Essay Example

Running Head: Change Change Name Course Lecture Date Abstract Business environments are constantly changing due to shifting Political, Economic, Social, Technological, and Legal and Environmental factors. How well an organizations strategist react to rapid, volatile and discontinuous change impact the survival and the performance of the firm in the long term. In this paper we analyse the concept of discontinuous change and its relevance to strategic management. Secondly, the models used to scan and respond to changes in both the external environment are presented. Thirdly, the role of CEOs in responding effectively to discontinuous changes is presented. Finally, the paper presents examples of business leaders who have ensured their organization’s success by responding appropriately to discontinuous changes. Introduction The business environment today is characterised by rapid, volatile, discontinuous change. Globalization and rapidly changing technology especially in Information Communication technology continue to change the way businesses is conducted even as we speak (Mason, 2006). Most business environments are now characterized by intense rivalry and adopting to change is critical for survival and realization of competitive advantage. Businesses have to constantly adapt to change if they hope to sustain good returns in competitive markets. The rapid change in business environment means that strategic management now plays a more critical role in the success of businesses. While firms have to make decisions, plans and commitments focused on the future the importance of strategic flexibility cannot be ignored. Organizational strategist must constantly scan the external environment for changes that might disrupt their businesses and adopt accordingly. An organization has to fast capitalize on opportunities that arise in the market and respond to threats that might affect its market share. In this paper we analyze the concept of rapid, volatile and discontinuous change and how it impacts on the strategic management process. First, we introduce the concept of change and how it affects business. Secondly, we link the concept of change to strategic management. By use of Rational or Formal model we are able to show how business leaders can be able to react to rapid, volatile and discontinuous change in their industries. 2. The Concept of rapid, volatile, and discontinuous change The last few decades have seen rapid changes in the world in terms of technological development and globalization. Change remains the constant factor in the world and businesses should be aware nothing is bound to stay the same for long. Robbins (2007) asserts; “What seems impossible yesterday is commonplace today, or will be tomorrow” .Change in all facets of life can affect the way firms do their businesses including Political, Economical, Social, Technological and Environmental Changes. The 2007 global financial crisis and its future policy implications are some of the changes in the economic and political environment that affect business strategy development. Changes in the Competitive environment are also another variable in the business environment that organizations have to watch out for. Strategists must remember that competition has gone global and have to watch out for threats to their business by foreign competitors (Christensen and Overdorf, 2000). The entry of new entrants in national markets is one of the discontinuous changes organizational strategist should continue to keenly monitor. According to Robbins et al (2009), rapid, volatile and discontinuous change is an event that disrupts the current direction of the firm and requires a change in the internal firm logic. This change means an organization cannot continue doing business as usual and hope to succeed. Firms have little control over the changes that take place in the business environment and all they have is an opportunity to respond (Christensen and Overdorf, 2000). The introduction of the Mp3 and video mobile music players meant that Sony could not continue to dominate the mobile music market with its Sony Walkman. The new technology was rapidly redefining the mobile music business needing Sony to respond urgently to the emerging threat in a market is had traditionally dominated. How does rapid, volatile, discontinuous change fit with the Strategic Management process? Hanson et al (2011) defines Strategy as a full set of coordinated actions, commitments and decisions with the aim of exploiting opportunities to gain competitive advantage. Change fits into the strategic management process as organizations are forced to change their strategic direction as result of rapid, volatile and discontinuous change. Change is both an opportunity and threat to a firm’s competitive position in the market. Change points the strategic direction that an organization should turn towards. For example, the introduction of touch screen technology in the mobile phone market show most Cell phone manufacturers focus on developing touch screen phones. A decade ago, touch screen phones were unheard of but today they are more than a billion. Similarly, Flat panel TV led a revolution in the TV industry with every manufacturer concentrating on building a less bulky TV. Secondly, responding well to discontinuous change heavily determines a firm’s ability to survive in the changing business environment. Discontinuous change remains a critical factor in the Strategic Planning, Implementation and Evaluation phases of the Strategic Management process as described by Robbins et al (2009). According to Robbins et al (2009) the strategic Management process consists of the following elements Strategic Analysis, Strategic-Direction Setting, Strategy Choice, Strategy implementation and Strategic evaluation. The model used to assess the role, impacts and implications of rapid, volatile, discontinuous change for an organisation Robbins et al (2009) describes the rational model (figure 1) as one of the best ways for businesses to evaluate and react to increasingly complex business environments. Figure 1: The strategic management process: Rational or formal model Source: Source: Robbins, S. P., Bergman, R., Stagg, I. and Coulter, M. 2009. Management, 5th edition, Pearson Education, Australia, p.276 The rationale model outlines nine sequential and iterative steps that an organization can follow to evaluate and react to change in business (Robbins et al, 2009). These steps are: 1. Outline the current organizational vision, Mission and Strategic objectives. 2. Analyse the External Environment. 3. Identify opportunities and Threats. 4. Analyse the Internal Environment 5. Identify Strengths and Weaknesses 6. Reassess the organization’s vision, Mission and Strategic objectives. 7. Formulate Strategies to achieve new strategic goals. 8. Implement Strategies. 9. Evaluate results. The rational model also indicates how the strategic planning process fits with the change management. The second to fourth steps of the model correspond the Strategic Analysis phase of the Strategic Planning process (Robbins et al, 2009). In this phase the external environment is analysed using tool like PESTLE (Political, Economic, Social, Technological, Legal and Environmental Analysis) and the Porters five forces model which focuses on industry factors Robbins et al (2009). The firms internal Environment is also scanned to assess whether there are enough resources to respond the rapid, volatile and discontinuous change. A SWOT (strengths, Weaknesses, Opportunities and Threats analysis) is one of the most common tools used to perform the internal analysis. How CEOs should respond to discontinuous change? The CEO of the organization is responsible for determining the vision, mission and strategic objectives of his organization. In the Strategy Planning process this is referred to as strategic goal settings (Robbins et al, 2009). The CEO must make the decision that is most beneficial to all stakeholders of the organization. The CEO is also responsible for ensuring that the firm uses it resources to respond to the threat or capitalize on the opportunity presented by the rapid, volatile and discontinuous change. If the organization does not have the available resources it falls on the CEO to organize these resources. According to Sirmon, Hitt and Ireland (2007), if the firm is able to make superior use of resources to respond to the changes then it can realize above average returns. Sirmon, Hitt and Ireland (2007) argue that CEO’s who respond immediately to rapid, volatile and discontinuous changes are more effective at ensuring their organization remain relevant in their industry segment. However, speed of response should not be considered over the adequacy of response. It is better for the CEO to think over the response to change instead of making rushed responses that may later fail. For instance, Samsung responded rapidly to develop its own Smartphone’s after Apple’s breakthrough with the iphone. This rapid response has been faulted as Samsung now has to pay its rival million of dollars in royalties as it used Apple’s proprietary technology in it Smartphones (Duhigg and Lohr, 2012). CEO can also encourage his/her employees to be more creative to come up with appropriate responses to disruptive change (Anand, Oriani and Vassolo, 2010). A creative organization is on the way to becoming the next producer of disruptive change in its industry. A company’s own disruptive change may shelter from the impact of discontinuous changes brought about by its competitors. The CEO is also responsible for early identification and the formulation of proactive strategies to respond to change. Successful and failed responses to rapid, volatile and discontinuous change Google CEO Larry Page is of the leaders of a company that operates in an industry where disruptive changes are frequent. Google ability to survive the dynamic IT industry lies in its ability to monitor and responds to changes that affects its operations. Google realised that IT user were migrating from desktops to handheld devices (Hagiu and Yoffie, 2009). In response Google avails most of its services on small handheld devices. However, Google has continued to lose revenue as most of its search customers switch to mobile advertising (Hagiu and Yoffie, 2009). Despite this Google ability to offer contents on handheld devices means it remain ahead of its search rivals in ad revenue. Similarly, facebook remains one of the most popular social sites because of its wide availability even on small handheld devices. On the other hand, several CEO who fail to make appropriate response to disruptive changes have seen their company fade to oblivion. Several blue Chip US companies have been the victim of rapid, volatile and discontinuous change in their industry. Kodak the dominant player in the film and photography industry is one of the best examples (Onyeiwu, 2003). Kodak failed to react appropriately to the digitalization of film and photography. As a consequence, the companies sales fell drastically and recently the company filed for bankruptcy. Conclusion Failing to notice or respond to discontinuous change may well mean the end of a successful business. However, sometimes discontinuous change is a golden opportunity for organizations to advance their industry position. In both instances, CEO must know change is inevitable and they must prepare and take advantage of impeding changes. CEO must continuously analyze the internal and external environment to be aware of threats and opportunities. However, just noticing changes is not enough in modern business environments. Businesses have to be flexible to adapt to changes. Effective strategic management rests on the ability to adapt strategy to rapid, volatile, discontinuous change. Encouraging creativity among employees also ensures organizations can come up with their own disruptive changes. However, as illustrated by the Samsung prosecution for violation of Apple’s proprietary rights organizations must be cautious not to react too fast without considering the implications of their response. References Anand, J., Oriani, R. & Vassolo, R.S. 2010, "Alliance Activity as a Dynamic Capability in the Face of a Discontinuous Technological Change", Organization Science, vol. 21, no. 6, pp. 1213-1232, 1274-1276. Christensen, C. M., & Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard business review, 78(2), 66-77. Duhigg, C., & Lohr, S. (2012). The patent, used as a sword. The New York Times, 7. Flávio C. Vasconcelos. (2011). Complexity in business environments. Business Research, 64(2), 236-241. Hagiu, A., & Yoffie, D. B. (2009). What's your Google strategy?. Harvard Business Review, 87(4), 74-81. Hanson, D. Hitt, M. A., Ireland, R. 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