Category Archives: Organization

Blue Ocean Strategy

The concept of Blue Ocean Strategy was presented by W. Chan Kim and Renée Mauborgne, professors at INSEAD, in an article published in Harvard Business Review in 2004 and more thoroughly in their book Blue Ocean Strategy published in 2005.

Here’s a video they made, briefly explaining what it is all about:

In short, they argue that the global market place of the 21st Century consists of red and blue oceans. Red oceans represent the known market place (meaning all current industries, companies etc.). Much in line with how Porter (as presented in chapter 2) describes the market, here industry boundaries are defined and accepted, and the competitive rules of the game are known. As such, an organization’s strategy in a red ocean is all about how to outperform its competitors, with the overall aim of increasing market share. Kim and Mauborgne argue that these oceans quickly get crowded, which in turn means that the prospects for profits and growth are reduced. To sustain themselves in the marketplace, practitioners of red ocean strategy hence focus on creating competitive advantage, most often by analysing what their competitors do and then aim to do it better. Here, seizing a larger market share is understood as a zero-sum game, in which one organization’s seizure is accomplished at the expense of another. Following the logic presented in chapter 2, cost and value are seen as trade-offs, and the organization hence has to choose either a cost or differentiation position. The only way to win is to “attack and kill” others, hence, the term “red oceans”.

Blue oceans, to the contrary, describe the unknown market place (meaning any industry, company, product line etc. that does not already exist). A market place void of competition, because there simply are no competitors. In such a market, demand is shaped and created by the supplier and no competitive rules are yet set, which means, according to Kim and Mauborgne, that there are lots of opportunities for growth and profit. Why? Because this market is without given boundaries or industry structure, allowing the organization (the supplier) to set the rules.  As such, Kim and Mauborgne take, what they call, a reconstructionist view. That is, they argue that structure and market boundaries only exist in the minds of management (they are constructions, not “God-given”), and are hence open to reconstruction. The idea is that by acknowledging the construction of the market, and hence not allowing oneself to be limited by that construction, but rather reconstruct it, organizations can tap into undiscovered demand.

How? Well, Kim and Mauborgne argue that this can be done by shifting focus from supply to demand, from solely focusing on competition to a focus on innovation. In order to do so, organizations must pursue the otherwise conceived as mutually exclusive strategies of differentiation and low-cost simultaneously. In doing so, competition is rendered irrelevant, because the organization expands the demand side, rather than the supply side. Which in turn allows the organization to play a non–zero-sum game, with high profit possibilities.

Though popular, the concept has received a fair share of criticism. For instance, in Holt and Cameron’s book Cultural Strategy (2010), it is argued that while Kim and Mauborgne present the concept as new, many of its elements have been presented and covered elsewhere (e.g. the theory of Six Sigma). In addition, the case study on which the blue ocean theory is based has been problematized (both method and selection), as has Kim and Mauborgne’s failure to address strategic communication as a vital part of an organization’s success with innovation (see e.g. herehere, here and here. In short, though we find the name and the idea catchy (which also explains its popularity), we do not think it is entirely novel, nor do we think that it is developed enough to stand alone.

Models of budgeting

Return on investment (ROI) seems to be the mare of the strategic communicator. With financial executives constantly concerned that they are not getting enough bottom-line bang for the communicative buck, the burden of proof is often on the communications professional. Whilst the insecurity of what might be lost by not communicating can sometimes warrant expenditures in the here-and-now, harder evidence is usually needed to secure long-term funding.

The problem, then, is one of effect. It is often difficult to prove the (economic) effect of specific communication initiatives, but it is possible to establish a general connection between expenditures and profitability at the level of the over-all communication strategy. Let us look at this general connection before considering the available models for actually determining the right level of expenditures and, hence, establishing the communication budget.

customer equity

The marketing management scholars Roland T. Rust, Katherine N. Lemon and Valerie A. Zeithaml (2004) argue that there is a connection between a firm’s spending on and economic return from marketing efforts at the strategic level. They prove the point by looking at customer equity relative to expenditure, showing that an increase in the over-all budget will also increase each customer’s lifetime value. Thus, they argue that to get a general idea of the ROI of marketing communications, we should not only look at increased sales, but take such issues as brand perception and brand loyalty into account as well. They apply the model to a set of empirical cases, proving that increased spending resulted in increased customer equity in each case.

Strategic communication, obviously, is not equal to marketing communication, but given the inclusion of indirect effects relating to general brand value, we may assume that Rust, Lemon and Zeithaml’s argument applies to communications efforts more generally. However, we may also assume that the positive effect of increasing communication budgets does not go on indefinitely, but rather takes the shape of an S-curve, where increased spending does not take immediate effect, but where each increase will have a relatively large impact once the budget is of a certain size. If one continues to spend more, however, the return will gradually peter out until one reaches the point at which the ROI of extra spending will be zero or, indeed, negative.

Advertising_Curve

The exact saturation point is likely to be highly contextual and can probably only be located empirically, meaning that budgets should constantly be adjusted as organizational goals, market situations and other contextual factors change the demand for and/or restraints on communications efforts.

In the absence of a reliable and stable measure of the optimal communication budget, organizations have employed various models for establishing workable budgets. The Spanish professor of marketing J. Enrique Bigné (1995) provides a useful review of seven such methods:

  • The arbitrary approach
    • Setting the budget arbitrarily may not sound like the most strategic choice and, indeed, this method is not held in high esteem. However, in situations of great uncertainty it can be the only viable route. In such situations, arbitrary budgeting allows for maximum flexibility and adaptability, but it also means one will have to rely on ‘gut feelings’ rather than strict analysis, and it means effects are difficult to predict, let alone measure.
  •  Affordability
    • Affordability is a slightly more sophisticated model than the arbitrary one in so far as spending is now judged against what the organization can actually afford. However, this means increased conservatism and inflexibility as focusing solely on what is currently affordable does not take into account what might be gained from increased investment in communication. If one only spends what one can afford, one may lose out on growth opportunities, but this may be the only viable route for start-ups and small companies until growth has actually set in.
  • Use of previous year’s budget
    • For established organizations in stable markets, using the previous year’s budget to establish the current one may be an attractive alternative to affordability. One already knows what is needed and that it is affordable. However, the assumption that the present (and future) will be like the past, is constantly proven wrong in today’s communications landscape. Further, the model is not very useful if the organization sets new goals nor when its market situation changes.
  • Percentage of sales
    • The percentage of sales method has long been the most common tool for establishing over-all budgets. This is an easy and reliable method for establishing the budget top-down. It is more flexible than the model of using the previous year’s budget, yet guards against over-spending. Still, the method is quite conservative, especially if the set percentage is based on the sales of the previous year. To allow for a change in strategic goals, one may set the percentage in relation to projected sales, but this incurs the risk of not reaching the new goals.
  • Competitive parity
    • The principle of this method is that one should spend as much on communication as one’s competitors. Rather than setting the budget relative to the previous year’s spending or based on a percentage of (previous or projected) sales, then, this method looks to the environment for an indication of adequate expenditure. Taking the actions of others into account is important, but competitive parity only works if one can find out what competitors are actually spending, if the competitors know what they are doing and if all actors in a market have the same objectives. It is quite unlikely that any, let alone all, of these criteria are ever fulfilled.
  • Share of voice
    • Share of voice also begins with an analysis of what competitors are doing, but sets goals relative, rather than equal to this. The starting point is a decision on how ‘loud’ the organization should be in comparison to other actors in a market, followed by an analysis of what it will take to get the desired share of voice. This method is problematic in two respects; first, share of voice does not equal market share and, second, in today’s media landscape it is increasingly difficult to control who gets to speak how much – and speaking is not the same as being heard. One can no longer ensure a share of voice through paid media exposure. Instead, one has to partake in a process, the costs of which are hard to set – and the effects of which are impossible to predict.
  • Objectives and tasks
    • This leaves us with the objectives and tasks method in which the budget is built bottom-up based on the specific communication tasks deemed to be necessary to reach set objectives. This is in many respects the most sophisticated model as it actually links the return of the communication with the investment needed. Thus, one may use the objectives and tasks method to determine the cost of initiatives aimed at, say, increasing sales and then calculate whether the return is larger than the investment. However, such estimates provide no guarantee that the tasks will actually fulfil the objectives. Further, if all tasks are to yield a return, the model becomes a restriction rather than a help as it limits communication initiatives to those that can be deemed directly profitable. Finally, establishing a full communication budget based on the objectives and tasks model is an extremely laborious process. In sum, this method is the most appropriate for campaigns and other identifiable communication initiatives, but it can hardly stand alone at the level of the communication strategy.

None of the existing models, then, are perfect, meaning that most organizations are likely to use a combination of two or more methods – and rightly so. First, some top-down tool for setting the general budget is necessary (e.g. through the percentage of sales methods); second, a bottom-up method of establishing the cost of specific initiatives is also needed (thus, objectives and tasks should be considered); third, taking the communication efforts of competitors into account is also important (meaning some notion of what is needed to gain the desired share of voice is required); fourth, other environmental factors could change the situation rapidly and must constantly be monitored (some degree of arbitrariness, then, must always be accepted).

Culture control

By Sara Louise Muhr

 The notion of culture control was developed in the 1990’s, beginning with Gideon Kunda’s ground-breaking book on how organisations engineer specific cultures in order to control their employees (see also Kunda’s work with John Van Maaanen). This marked a shift in how power was seen and defined in management and organisation theory.

Before, power in organisations had mainly been defined following Weberian or Marxian terms. That is, one had power over someone else if one had control over, for example, resources and capital or if one could flash a title or wield ownership. Partly building on Lukes’ seminal work, Fleming and Spicer (2014) label these forms of power episodic. Episodic forms of power are exercised in ways that allow for the easy identification of the source of power. In other words, you know who your boss is and that the fact that he or she is your boss gives him or her power over you. Or you know who owns the company, who the major stakeholders are or which people have specific knowledge about, for example, a key aspect of the production line, which makes them extremely valuable for the organisation and, hence, a powerful voice in various negotiations.

However, in the beginning of the 1990’s – especially with the increasing acknowledgement and importance of the work of Foucault – management scholars (especially within so-called critical management studies) began to examine how more subtle or invisible forms of power influenced organisations and the people within them. In other words, management scholars began to look at what Fleming and Spicer call systemic forms of power. Systemic forms of power – rather than being visible and identifiable – mobilize institutional, ideological, and discursive resources to influence organizational activity. Fleming and Spicer divide such systemic forms into two specific processes of power: Domination and subjectification.

In processes of domination, power works through the construction of ideological values; that is, by making certain values seem natural and inevitable, thus controlling what is perceived as ‘normal’ behaviour. In an organisational context this means what an ‘ideal employee’ would be and how we are expected to work, dress, negotiate and interact in various organisation. Domination thereby works through a naturalizing process. It makes (organizational) values seem natural, meaning don’t even think about why we act according to these values; we just do it. To exemplify, one could begin to think about how and why ideologies like globalization, industrialization, financialization – or more mundane fashions like flexible work, coaching or team-building – have become unquestioned organisational ‘truths’.

Subjectification (the other systemic power process) in a sense builds on domination as this form of power asserts itself when an individual begins to identify him- or herself through one of these naturalized ideologies. It is power over you, as aligning your self-identity to a given (corporate) ideology makes you feel normal. All people have some kind of basic need to belong to a group. Thus ideologies regulate our identities as they (subtlety) influence what we perceive as ‘normal’ behaviour of the group(s) to which we (wish to) belong. This is so both in the general society – how are we supposed to behave as, for example, little girls in the society we grow up in? – and in organisations – how are we supposed to behave as, for example, managers, designers, prison guards, home care aids to fit the professional codex? We have unspoken rules (ideologies) for how to behave in each of these categories and one’s surroundings (parents, friends, co-workers, bosses, subordinates) will most certainly react if one does not fit in. Thus, the expectations as to how we belong to certain identity categories regulate the way we see ourselves as successful (whether at being a mother, a boss, an art-director or a banker). Power as subjectification, then, works through the expectations that society and our organisation sets up, but it is a subtle form of power; as nobody tells us directly what to do, it is us our ‘own free will’ that decides that we want to do it. In this way, both domination and subjectification question what freedom and autonomy mean and in a sense renders both impossible.

To control through organisational culture is to control through domination and subjectification. Most organisations have a set of values and an organisational mission/vision specific to what this organisation stands for. For example, the consulting groups Cowi’s values are ‘integrity’, ‘respect’, ‘independence’, ‘professional capability’ and ‘freedom’. All these values set specific expectations to what kind of person you should be when working at Cowi; not skills or competences, but what you as a person should identify with. Some companies go even further. For example, Newell, a global marketer of various branded consumer goods and commercial products, has a long description of how ‘employees act and feel when they live the Newell Way’. When values like these are repeated over and over again, they may become almost like religions; the ideology, the one truth you live by, the thing that distinguishes you from people working elsewhere. This means that employees have a deep value-based idea about what a typical employee is. Some organisations – like IBM – don’t talk about their employees as working at IBM, but about being an IBM’er. You become one of them, you belong to the culture. Employees in organisations with so-called strong cultures often can’t explicate exactly what it is, but they feel different from people belonging to other organizations and this emotional attachment to the organisation creates a strong tie to the organisation – much stronger than any monetary reward or punishment could create.

This is culture control. The company defines a certain set of values, recruits people who believe in these value, and rewardz those who feel and live the values. Most managers I have talked to admit that when they recruit, they ‘know’ whether they want to hire a person within the first two minutes. This is not because they are good at decoding your competences, it is because they make a cultural match between the organisational culture and your personality. Will you live the values? That is the question.

Culture control, in other words, is when you’re not aware of the fact that you’re being controlled, because you’re being controlled by your own desire to live up to the expectations of a (very carefully crafted) organisational culture (without you knowing that it is very carefully crafted or even that what you are doing when you praise your organisation is acting according to its power games). This is where your freedom (one of Cowi’s values, remember) can be questioned.

Culture control and how it taps into systemic forms of power teaches us that an organisation (or simply a relation between two people) is never power free. What research on culture control has to offer, is the warning to be very careful about how we see (and most of the time uncritically cherish), for example, freedom, flexibility and self-management in organisations. In most contemporary organisations, we see praise of such values, but at the same time high demands of integrity, responsibility and engagement (see the various company values). When organisations both offer their employees freedom and ask them to be responsible, they craft very specific organisational cultures where success is an individual responsibility. I have heard the following phrase so many times: ‘We don’t tell our employees to work this much, but they love their jobs, they love the organisation and we love each other’. This is how organisations – through crafting a culture of commitment or passion or integrity and responsibility – can make employees work until they drop without having to directly tell them to do so. This is the prevalent trend of work-life today (as is unfortunately very clearly indicated by stress-statistics).

Still, we don’t want this freedom taken away from us. We want exciting and challenging jobs, we want to be pushed and developed at work. We don’t want to go back to the ‘old’ power forms of micro management and factory-like time tables for work. In sum, we want culture control. So, how are organisations to conduct culture control responsibly? How are managers to construct exciting organisational cultures, attract the ‘right’ type of employee that fits the organisational values, without turning them in to marionette puppets – or as the standing joke in the consulting business go: high achievers with low self-confidence. How are we to avoid that people work themselves to death or, as many top managers do, regret when they get older that they didn’t spend enough time with friends and family. How can we build exciting organisational cultures in a responsible way? This is one of the most challenging and committing (to remain in the terminology) questions of contemporary research on power in organisations.