The new strategy introduced in 2006 indicated the ambition to concentrate on customer focused development and production efficiency, in parallel, and as expressed by one senior manager: “It is becoming a blue ocean strategy, we are finding new oceans where no one is” (referring to the efforts to develop and find new applications for paper and packaging where other materials, and other industries, have had the monopoly). In real terms this has entailed a new view of the customer to also include second customers, brand owners and even the third: retailers. Product development has moved beyond new offerings of new paper qualities (which up until 2005, for example, featured lower-grammage/m2, technical performance and runnability) to a broader concept of innovation of products and service solutions in co-operation with external partners: second customers and others.
Given the new strategy, the issues of a seemingly dual approach, combining ‘cost leadership’ with that of ‘differentiation’ were identified. In Papers II to IV, the findings of the continued empirical inquiry until the beginning of 2011 are presented.
Building on the initial themes and challenges, the continued study contrasts differences and similarities between the years, capturing the interviewees’ experiences and reflections on the journey. This resulted in a proposed landscape for strategic change along with ways and mechanisms for managing and measuring the same.
Paper IV takes into account the first three years by use of quantitative methods to illustrate the strategic change through the semantic development from 2001 to 2010.
5.3.1 Paper II. Challenging the Strategy Paradigm within the Paper
Inspired by Frambach et al. (2003), and using Billerud’s own references to ‘cost’ and
‘differentiation’, Porter’s classification of strategies (Porter, 1985; Porter, 1996) sets the frame. Secondly, Kim and Mauborgne’s (2005) concept of ‘blue oceans’, defying Porter’s choice between cost leadership and differentiation (also referred to by members of the management team in Billerud), serves as a divide or merging intention between the two. Thirdly, activities and capabilities enabled and desired in order to combine the intended world class process efficiency with customer focused development are listed. These are inspired by the suggested scope of ambidextrous organisations – and the characteristics of exploitative and explorative businesses (O'Reilly & Tushman, 2004; Tushman & OReilly, 1996).
Figure 5.4. A conceptual framework of strategic change: A proposed landscape derived from Paper II.
Positioning competing paradigms in strategy and management on the same map naturally simplifies the respective theories. For example, equating a strategy of ‘cost’
(Porter, 1985) with what O’Reilly and Tushman (2004) refer to as an ‘exploitative business’, and ‘differentiation’ to ‘explorative’ may be questioned as these are not necessarily the same thing. However, the point here is to illustrate guiding notions in theory from the perspective of practice conceiving the empirically experienced differences in strategic intents, and the consequences for realising and managing the intended move, from one end towards the other, from cost towards differentiation or aiming to combine both. In an attempt to describe the inherent nature of the two
BLUE OCEAN Simultaneous pursuit of differentiation and low cost Strategic intent
Cost - Profit Competitor orientation
Strategic intent Innovation-Growth Customer
orientation Measuring:
Milestones, Growth Measuring:
Margins, Productivity
Critical tasks:
Operations,Efficiency, Incremental innovation
Critical tasks:
Adaptability, New products, Breakthrough innovation
Entrepreneurial competence Operational
competence Formal
organisational structure
Adaptive organisational structure
Culture of Risk taking, Speed, Flexibility Culture of Efficiency, Low risk, Quality
Linked core activities and capabilities
Linked core activities and capabilities
COST Comparable value at lower cost
DIFFERENTIATION
Greater value at higher average unit price
competing and merging strategic intents, as perceived from practice, the differences in orientation, competence, culture, etc., are illustrated to indicate the potential challenges of linking ‘customer orientation’ and ‘innovation’ (from the perspective of
‘differentiation’) when originating from the perspective of ‘cost’. In this particular case it is thus suggested that these associations between cost and exploitative characteristics, differentiation and explorative characteristics, are relevant. Hence, while the framework does not allow for smooth logic, it does allow for illustrating the duality and the intention on an aggregated level (i.e. the core activities and capabilities, culture, structure, etc., are plotted as a group representing cost and differentiation respectively, and are not plotted in any hierarchy).
The proposed framework challenges the impossible in Porter’s (1996) view, but confirms the view of Kim and Mauborgne (2005) who discard the fundamental tenet of conventional strategy that a trade-off is needed – albeit not explicated by them as in the proposed framework in Figure 5.4. At the same time, the journey in practice emphasises the notions of ambidexterity: the ability to exploit and explore at the same time (O'Reilly & Tushman, 2004). In the words of one senior manager: “This learning process we have entered is so multifaceted. It’s about everything from our
administrative systems to how we communicate, how we should be organised, our control system and performance measures, about incentives for sales people; all this is part of the journey that we are on. And what may seem very logical on the surface, and heading the same direction that we are, is not trivial”. Given the suggested prerequisites (illustrated in the framework) for enabling a dual strategy, the challenge is, if not impossible as suggested by Porter (1996), at the least a cognitive one. It hinges on cognitive barriers, a ‘dual mind-set’ and the dichotomy of knowing and doing (Normann, 2001; O'Reilly & Tushman, 2004; Pfeffer & Sutton, 2000).
When Billerud emphasised the concepts of market and customer orientation and new product development in 2004, one of the challenges identified in the initial stages of the research was that of a dominant perspective: a strong production orientated culture. In the continued research inquiry the term ‘back-selling’ surfaced, connected to approaching customers’ customers; a deeply rooted taboo which in turn was challenged by management. Managing what was described as the ring fight between a
‘productivity focus’ versus a ‘customer-sales focus’ – representing the two different fields in the framework – created a need for another approach and timeframe for implementation than the ones initially foreseen: “…in the beginning we thought we had a plan, an action plan. But it was not like that. You need to develop that by yourself. You need to have the competence” (Senior Manager). In summarising decisions, actions and events in Billerud over the years, an approach to implementing emerged which was far from linear and sequential, or as efficient as had been foreseen (Paper II, chapter 4).
The empirical findings were further interpreted based on the proposed framework in an attempt to explain Billerud’s emerging iterative implementation and learning approach for enabling strategic change. An illustration is put forward (Paper II, Figure 2) that leans on suggestions by Homburg and Pflesser (2000). It acknowledges a cultural view of market orientation, and Brown et al.’s (1989) notions on ‘situated cognition and cultures for learning’. Based on Brown et al.’s constructs of ‘concept’,
‘activity’ and ‘tool’, it is suggested in Paper II that one can view strategy as a tool (concept) – in this particular case in relation to customer orientation and innovation.
The tool can only be fully developed and understood through implementation (real work activity) in turn influenced by, and influencing the organisation’s culture/s (culture).
In conclusion, two propositions are put forward for future research and practical guidance for managers when formulating and implementing strategic change:
Proposition 1: For an organisation going through strategic change, a prerequisite to enable a transition is understanding the assumptions behind different strategic intents and the link between a chosen strategy and critical core activities, capabilities and culture.
Proposition 2: Strategic change is enabled through an iterative and probing approach between formulation and implementation that considers knowledge and learning of new concepts, activity and culture as being situated.
Based on the Billerud case study results, the first proposition suggests that conceiving a move towards increased ‘customer orientation’ and ‘innovation’ on a more granular level would facilitate a transition. However, since this may not enable a transition in itself the second proposition suggests that conceiving also requires doing, implying that these are inherently intertwined. This is in line with the processual paradigm of strategy (see e.g. Whittington, 1997). In the case of Billerud, it is argued that the strategic change (i.e. as illustrated in the framework in Figure 5.4) was not conceived at the outset, hence the identified challenges (Paper I), but was enabled through an iterative and probing approach that brought to the surface processual and cultural aspects of strategy formulation and implementation. Beyond the structural changes of the organisation, the following enabled the emergent change over the years:
management’s support for risk-taking, identified flexibility in the production process for test drives of new materials, and developing the concept of innovation. Given the identified cognitive challenge, and emerging process of strategic change, the role of language in providing new meaning to concepts, tasks and capabilities is highlighted as an area of interest for continued research.
Reflecting on the findings with the management team
Further food for thought was gained by discussing the propositions and related issues with three members of the senior management team during a feedback session towards the end of the empirical inquiry.
The members found it easy to agree with the first proposition but underlined that this is not always the case in forethought. Much analysis had preceded the revision and development of the strategy in 2006, but the different assumptions and relationships between the strategic intentions and the company’s cultures (existing and desired) had not been conceived for example. This manifested itself in the ring fight between a
‘productivity focus’ and a ‘customer-sales focus’. This indicates that underlying assumptions of existing and intended strategies and particularly cultural aspects are not given parameters that are accounted for in strategy development and implementation processes but rather emerge.
The second proposition was found to be the most interesting but perceived as difficult to grasp. While knowledge and learning may be identified as situated in retrospect, having emerged over time, the managerial balancing act of the implied iterative approach put the light on paradoxes on many levels. In the discussion, the members reflected on ‘how to make strategy and culture go hand in hand’, the differences between ‘plans and practice’, exemplifying how consultant models might be good for intellectual exercise but hard to implement whilst at the same time arguing the perceived demand for clear plans and structures from the organisation. An interesting comment made by the members of the managing team was how limited time is set off for reflection. A comment which was repeated more than once.
The reflections from Billerud’s management team led to a further analysis of the tensions and issues in relation to the meaning of dual strategies and managerial consequence of strategic change. The results are presented in Paper III.
Dealing with duality over time 5.4
In the literature, a seemingly conflicting development of strategy and organisational renewal (in practice) is often framed as the strategy and management of paradox or ambidexterity. This means a rejection of the traditional trade-offs suggested in strategy, but not of the ability to explore and exploit at the same time (See e.g.;Magnusson & Martini, 2008; March, 1991; O'Reilly & Tushman, 2004; Sarkees
& Hulland, 2009; Smith et al., 2010). Reflecting on the empirical findings in relation to the literature raised questions on dealing with duality and paradoxes over time, and the potential differences between paradoxes on the strategic and organisation level and on solutions beyond the (organisation) structural solutions, which are predominately suggested in the literature (O'Reilly & Tushman, 2004).
5.4.1 Paper III. The Road to Paradoxical Strategy: Lessons from