Abstract
There is some evidence that shows how the competitiveness of American firms has lost ground to other competitors in the market, part of which may correspond to the absence of strategies that involve investment in managerial talent in organizations. Grounded on the idea that Michael Porter's point of view of operational effectiveness is wrong and contradicts its own definition of strategy, the literature review-based paper analyzes different strategies to observe if they ponder talent or investment in managerial competencies in their implementation. As a result, it was found that most strategies do not involve human talent in the application which may be one of the major causes to the lack of American competitiveness; results of the study can be useful for scholars and managers to rethink and redesign their strategies to include dimensions that focus on human talent involvement.
Keywords: Strategy, Competitiveness, Talent, Operation Effectiveness.
Acknowledge: For a clear understanding of this paper, when the term talent is used, it will refer to people.
(“American organizational competitiveness and the lack of talent in designing operational strategies”, XXIII Spring Wind Conference, Budapest, Hungary, 2020)
Introduction
Competitiveness is a cause of success or failure of the organizations; a correct strategy is the key to support the achievements and defend the interests of the firms. Nevertheless, the American industry seems to be losing the fight in competitiveness during the last decades as it will be illustrated with the following arguments. Several causes have been explored in order to find the reasons that have led to the weakening of US international competitiveness compared to other developed countries; for instance, quality, which has been for decades one of the competitive pillars in the world, has been under consideration by American consumers who have agreed on its decrease; also, efforts to upgrade quality were done through implementing programs such as cost of quality calculation, interfunctional teams, reliability engineering, or statistical quality control, without success, mainly because many companies don’t know how to compete on quality (Garvin, 1987). Equally, according to Kevin B. Hendricks and Vinod R. Singhal (1997), some management consultancy firms argued that the total quality management programs, adopted in American organizations, have shown a weak response in terms of effectiveness; similarly, the increase in complexity and uncertainty of the US regulatory environment has been seen as one the current causes for competitiveness decrease (Globerman, 2014); additionally, Pisano and Shih, (2009), argue that US after decades of being on the top of innovation, has shown a decrease in trade balance in high-technology products. An excess of outsourcing is another reason for losing competitiveness since it has caused a decrease in research investment, what brought along a loss of knowledge, skilled people, and a proper management of the supply chain for manufacturing in all sectors of the American industry (Karmarkar, 2004); also, studies have demonstrated that the lack of concern in human talent may be a major cause for the debacle in competitiveness; in fact, Blank (2016), states that one of the main reasons is the decrease in innovation and research due to the lack of worker skills and education; similarly, a study conducted on 5,713 Harvard Business School alumni during April and May of 2019 reinforces that the current competitive weakness is largely based on political dysfunction that ignores investment in infrastructure and education to facilitate the migration of talents to the United States (Porter, et al., December 2019).
On the other hand, it is important to underscore that strategies play an important role on global competitiveness; for instance, innovation has expanded the problem and has pushed organizations to align their strategies, otherwise they may soon disappear (D’Aveni, 2015); consequently, competition needs an appropriate strategy to face new challenges; It is how, in an effort to gain efficiency and get sustainability in the market, some organizations implement different strategies and struggle to make them as unique and complex as much as they can for competitors.
Nevertheless, the purpose of the paper is to test that one of the main reasons for organizations to fail and to lose competitiveness has to do with the lack of involvement of managerial talent when implementing strategies.
Porter’s strategy definition and operational effectiveness
For Porter (1979) (2008), the key to succeed in the market is competition; understanding the five forces of the market helps comprehend the current situation of the organization and obtain information to compete over time. Such forces govern industrial competition and threaten the stability of the incumbents; hence, corporations must evaluate their objectives and resources to be able to defend themselves from them and reshape them for their own benefits.
A globalized world provides other challenges to compete, it is how Porter’s strategy starts considering value to redefine the strategy as a way for competing on positioning. Subsequently, Porter (1996) states that a successful strategy is based on the creation of a unique and valuable position, involving a distinct set of activities which goes further than the solely operational effectiveness. He states that operational effectiveness is not a strategy since it refers to a number of practices a company does and permits it to be more efficient than competitors by performing similar activities in a better way than rivals while Strategic positioning has to do with completing different activities from rivals’ or similar activities in different ways. In other words, Porter assumes that the operational effectiveness, that responds to internal managerial practices executed by talent, is neither effective nor relevant for the strategy, what is not an appropriate appraisal since it should be treated as a crucial complement to strategy (Sadun, et al., 2017).
That position turns to be contradictory with his argument as it is talent the one who must know how to deal with the five forces of the market to obtain benefits for the firm. It may look like an irresponsible act to disregard managerial talent as a positive contribution to the strategy, it is a fact that there are some adjustments to be done in the managerial performance to reach effectiveness, but that cannot be the reason to belittle the importance of the of managerial talent; instead, according to Sadun, Bloom, and Van Reenen, organizations should invest in talent to improve managerial competencies.
Competing on different scenarios
After Michael Porter theorized his strategy model, different researchers focused their efforts to bring new scenarios to obtain superior value for a strategic competition in the market, and following the same interpretation, most of them keep managerial talent from strategy. For instance, Garvin, (1987), who centers his efforts in competing on quality, designs a conceptual framework to standardize a reliable strategic quality management based in eight dimensions that work as a structure for the reflection of what would be the quality of a product. Undoubtedly, the dimensions - performance, features, reliability, conformance, durability, serviceability, and perceived quality- are all related to a strategy that completely neglects the presence of the talent in the process. Similar to the strategic positioning approach, by disregarding the relevance of talent, this strategic approach contradicts itself, since it is the author himself who appoints managers as the responsible ones for the success of the organization by recommending them to think about consumers’ needs and preferences, as well as, going beyond the production process; he does not suggest a dimension to relate internal managerial processes to the strategy though.
In the same way, in his strategy for competing on innovation, Pisano (2015), completely omits the talent as a managerial talent variable. He supports the success of the strategy on uniqueness to compete by assuming that organizations should have a unique and uncopiable strategy to compete. Despite the complexity of designing an innovation strategy, the author does not advise the necessity of investing in talent when he recommends the three questions on which his strategy lies. Not even managerial competencies are mentioned in the strategy quadrants - routine innovation, disruptive innovation, radical innovation, and architectural innovation-.
An enquiry pops up at this point, is it possible to think of an innovation strategy with no talent involved? It looks like researchers forget the importance of the talent for the organizations to be prepared when disruptive innovations oblige organizations to rethink their strategy for competing on operations. Organizations need to understand that breakthroughs happen rarely, however, when these disruptions occur, traditional operation strategies are put at risk. In this case, a disruptive innovation is more than a simple disruption, it is a process of a successful and sustained evolution of a product or service over time; it is to say that this process can be seen as movement from the fringe to the mainstream that affects the incumbents’ market share and, then, their profitability (Christensen, et al., 2015).
One more question arises now, how do organizations expect success or survive without correct talent investments when the threat of an innovation disruption occurs? The question does not emerge out of the blue, it comes up because of the additive manufacturing disruption. When D’Aveni, (2015), presented a new technology that permitted the creation of printed successive layers of materials to make new products, organizations knew that it was time to review their operations; this disruptive innovation brought a huge amount of concerns and benefits related to environmental, economic, and social implications. The response to this event was the creation of a three-dimensional operation strategy that was the result of asking some questions regarding improvement offerings of tangible products, review of old and new operations processes, and consideration of strategic implications to adapt to the new ecosystem. As it is observed, the operation strategy to compete on innovation focuses on the interest in variables different from managerial competencies, what undresses the possible weakness that would weaken the strategy.
In contrast, some strategic approaches have responded to the concern of incorporating talent as a form of creating unique and complex differences to compete; as a consequence, organizations start adopting new alternatives to lead a strategy for competing on capabilities and resources. At this point, similarities between Collis and Montgomery (1995) and Stalk, Evans and Shulman (1992) can be seen. Nevertheless, while Collis and Montgomery, based on the resource-based competition approach, state that resources must be unique for each company and can be represented in physical assets, intangible assets, or capabilities, Stalk, Evans and Shulman refer merely to capabilities, it is to say, a capabilities-based competition approach to respond to a dynamic business environment.
Because of this enviroment, Stalk, Evans and Shulman argue that a strategy should be understood in a form of movement rather than positioning, which means that organizations should move fast, and quickly adapt to the change customers need; hence, the strategy is not the structure of a company’s products and markets, but the dynamics of its behaviors; subsequently, they should focus their efforts on learning how to integrate the processes successfully to acquire robust capabilities that are difficult to copy by others and can end up in offering high value to their products or services, so as to obtain a steady competitive advantage.
In spite of the different viewpoint of the strategy, Hayes and Pisano (1994), agree that identifying the correct capabilities to create superior value regarding competitiveness is a task of highly responsibility for the leaders. At this point, the need of leaders who help get synergy among resources and competencies is explicitly expressed to obtain a valuable capability. It is notorious how Stalk, Evans and Shulman give talent high value in the strategy; they consider the manager as the champion of the capabilities-based strategy; additionally, when they compare Kmart and Walmart to recreate the strategy, they conclude that although customer satisfaction was the aim for Walmart, the success was the capability for a correct implementation and integration of their processes and strategies, in which the communicative competency of leaders plays a major role. This communicative competency permits to inform objectives and activities effectively to all followers during the implementation process of the strategy in the organization (Kaplan & Norton, 2008).
Even though, the resource-based competition approaches seem to be very different one from the other, both have something in common, they agree on finding the way to be unique and difficult to imitate by linking talent in the process. It is a fact that outstanding management practices need numeracy and analytical skills, among others, which may put the organizations at risk, yet scientific findings have demonstrated that firms who employ high qualified talent present high management scores (Sadun, et al., 2017).
Some criticism to the strategies
It is fair to say that Michael Porter has opened the gates to consider the scientific study of the strategy as a way to create, standardize and align processes in the organization to compete in the market; however, the great mistake he makes is considering the operational effectiveness as an irrelevant practice for the strategy. In other words, Porter belittles the role of the internal managerial processes in the organization. This has recently been rejected by (Sadun, et al., 2017), who, based on their research, criticized Porter’s viewpoint by arguing that simple managerial practices in the organization are important and not so easy to imitate. Everything depends on the way organizations manage basic duties as setting aims or caring about talent.
Organizations with serious managerial practices have proven to get great and long-lasting performance in terms of productivity, profitability, growth, and longevity. Additionally, researchers state that investment in talent will be the best intervention organizations make as a barrier for the managerial capability to be imitated. Together with this point of view, it is important to say that an inspiring transformational leadership style is also been revealed as a valuable intangible asset for competing in the market (Collis & Montgomery, 1995).
Finally, most strategies are based on uniqueness and complexity to compete, but they do not involve investment in talent to improve their operation effectiveness, what may be seen as a reason for them to fail and subsequently for organizations to lose competitiveness in the market.
Conclusions
Organizations are not led by machines, instead, they respond to practices performed by human talent. When it is talked about managerial process, it implies the intervention of high capabilities to take part in complex processes in and out the organization to bring unique value to compete. Many organizations based their strategies on variables different from managerial competencies, what seems to be contradictory since qualified talent is a valuable resource to invest in.
Porter’s position about operation strategy is completely wrong, especially if it is considered that strategies must be designed, implemented, and performed by people. This position results contradictory even to his five forces strategy, because it is the leader the one who manages the organization and adapts, and reshapes, the forces to obtain organizational benefits.
Although the literature review has shown several competitive strategies, just the resource-based, and the capability-based strategies involve talent as a variable for their implementation. Out of this, it can be inferred that organizations with strategies that do not involve investment in talent to improve their operation effectiveness might be likely to fail and, subsequently, to lose competitiveness in the market.
REFERENCES
Blank, R. M., 2016. What Drives American Competitiveness?. The ANNALS of the American Academy of Political and Social Science, 663(1), pp. 8-30.
Christensen, C. M., Raynor, M. E. & McDonald, R., 2015. One more time: What is disruptive innovation?. Harvard Business Review, Issue December, pp. 44-53.
Collis, D. & Montgomery, C. A., 1995. (1995), "Competing on Resources: Strategy in the 1990s. Harvard Business Review, 73(July-August), pp. 118-128.
D’Aveni, R., 2015. The 3-D revolution. Business Harvard Review, Issue May, pp. 40-49.
Garvin, D., 1987. Competing on the eight dimensions of quality. Business Harvard Review, Issue November-December, pp. 101-109.
Globerman, S., 2014. Regulation and the international competitiveness of US-based companies. Competitiveness Review, 24(5), p. 378–392.
Hayes, R. & Pisano, G., 1994. Beyond World-Class: The New Manufacturing Strategy. Harvard Business Review, Issue January-February, pp. 77-86.
Hendricks, K. B. & Singhal, V. R., 1997. Does Implementing an Effective TQM Program Actually Improve Operating Performance?. Management Science, September, 43(9), pp. 1258-1274.
Kaplan, R. & Norton, D., 2008. Mastering the management system. Harvard Business Review, Issue January, pp. 63-78.
Karmarkar, U., 2004. Will You Survive the Services Revolution?. Harvard Business Review, Issue June, p. 100–107.
Pisano, G., 2015. You need an innovation strategy. Harvard Business Review, Issue June, pp. 44-54.
Pisano, G. P. & Shih, W. C., 2009. Restoring American Competitiveness. Harvard Business Review, Issue July-August 2009, pp. 114-125.
Porter, M. E., 1979. How competitive forces shape strategy. Harvard Business Review, Issue March.
Porter, M. E., 1996. What is strategy?. Harvard Business Review, Issue November-December, pp. 61-78.
Porter, M. E., 2008. The Five Competitive Forces That Shape the Strategy. HBR, Issue January, pp. 79-94.
Porter, M. E. et al., December 2019. A Recovery Squandered: The State of U.S. Competitiveness 2019, Boston: HBS.
Sadun, R., Bloom, N. & Van Reenen, J., 2017. Why do we undervalue competent management?. Business Harvard Review, Issue September-October.
Stalk, G., Evans, P. & Shulman, L., 1992. Competing on Capabilities: The New Rules of Corporate Strategy. Harvard Business Review, Issue March-April.
Comentários