1、er characterized as a cavalry. To illustrate how these drivers create the kind of uncertainty that makes flexibility valuable, consider two in detail: regulation and technology. REGULATION Most financial services executives view many aspects of regulation as an impediment to the success of the indus
2、try. Barriers between markets and restrictions on product offerings stifle innovation and growth. However, the consequences of changes in regulation can be highly unpredictable. For example, in the 1980s the U.S. government deregulated deposit interest rates and increased deposit insurance. This res
3、ulted in fierce competition for consumer accounts, resulting in a dramatic fall in the net interest spread on funds. Consequently, many thrifts found themselves with too thin a cushion to absorb losses from real estate loans, which contributed at least in part to the savings and loan crisis. 6 Like
4、financial services, the communications industry is characterized by big-money bets in the face of tremendous technology, market, and regulatory uncertainty. An examination of how some of the worlds leading communications companies have come to cope with and exploit this uncertainty yielded the found
5、ations of the Strategic Flexibility framework presented in this report.i To determine the defining characteristics of strategically flexible organizations, we compared the management practices of diversified firms coping with high levels of uncertainty with those of similarly diversified firms compe
6、ting in comparatively stable industries. The primary insight of that work was that diversification strategies can create much-needed strategic flexibility if they are implemented appropriately. In the communications industry, this meant diversifying into new lines of business that were seen as poten
7、tially but not necessarily critical elements of future product market strategies. For example, BCE, a US$20 billion Canadian communications firm, has operating units in local, long distance, and wireless tele- phony, satellite television, television broadcasting, newspaper publishing, Internet porta
8、ls, and Internet access to name only the consumer side of its activities. BCE acquired these assets over a 15-year period, and has for the most part run them as autono- mous business units. However, as technology and markets have matured, the firm has begun to explore significant convergence product
9、 offerings. For example, in early 2001, the firm launched an effort to develop and deploy the ComboBox: a set-top box designed to integrate the Internet, satellite television, comput- ers, and TVs with new types of interactive media content and com- merce opportunities. The diversity of BCEs operati
10、ng divisions created strategic flexibility by affording the company real options on convergence- driven product and service offerings. By acquiring the requisite operating assets early in the game, BCE was able to lock up needed access. By operating these divisions as independent units, it was able
11、to delay its integration efforts until favorable outcomes were more likely. Each new operating division, then, represented the right, but not the obligation, to make further investments in cross- divisional cooperation and integration. A distinguishing characteristic of this kind of flexibility-driv
12、en diversification one that we see in the diversification initiatives of many financial services companies is that a portfolio of operating units will have a particular structure: there will tend to be a cluster of fairly tightly integrated operating divisions (or related divisions), as well as a nu
13、mber of otherwise quite independent divisions (or unrelated divisions). Combining diversification strategies in this way is something that earlier research had suggested should be avoided.ii However, in industries characterized by high degrees of uncertainty, these combination, or hybrid, diversific
14、ation strategies are actually associated with superior capital market returns.iii This suggests that investors are not blind to the value that flexibility- driven diversification can create. STRATEGIC FLEXIBILITY FRAMEWORK The genesis of the STRATEGIC FLEXIBILITY FRAMEWORK The genesis of the 6 iTo o
15、btain a copy of the report entitled “Strategic Flexibility in the Communications Industry: Coping with uncertainty in a world of billion-dollar bets” , register at research and download a free copy. Alternatively, contact the studys author, Michael Raynor, at mraynor. iiEach type of diversification
16、(related, unrelated, or vertical) is seen to require a specific set of administrative systems to be managed effectively. These administrative arrangements are thought to be fundamentally incompatible that is, a firm cannot have in place both systems appropriate to a related diversification strategy
17、and systems appropriate to an unrelated diversification strategy. Consequently, combining diversification strategies means that some part of the diversified firms portfolio will be subject to an administrative mismatch, and will therefore suffer a performance penalty. See Hoskisson, R. E. and M. A.
18、Hitt (1994). “Downscoping: How to Tame the Diversified Firm” . New York, Oxford University Press. iiiRaynor, M. E. (2000). Hidden in Plain Sight: Hybrid Diversification, Economic Performance, and “Real Options” in Corporate Strategy. “Winning Strategies in a Deconstructing World” . R. Bresser, D. He
19、uskel, M. Hitt and R. Nixon. London, John Wiley “Bests Aggregates ”Bests Review Magazine”, July 1996 ( NB: 1995 data used here as 1990 source was unavailable.) LEGENDDIVERSIFIEDMONOLINE 10 The strategic challenge for the newly dominant diversified players is to exploit synergies among their various businesses. Focused players must ensure that sticking to their knitting remains a competitive strategy as the landscape shifts. This is especially true as scope-based competitors continue to expand th
