Customer Reviews
Simple rules instead of positioning and core competencies?!?
Harvard Business Review article, published in the January 2001 issue, by Kathleen Eisenhardt, Professor of Strategy and Organization at Stanford University, and Donald Sull, Assistant Professor at Harvard Business School.
The authors start the article with describing the success story of Internet portal Yahoo! Some critize Yahoo for lacking a strategy altogether, but according to the authors Yahoo follows 'strategy as simple rules'. Strategy as simple rules and its underlying logic of pursuing opportunities are harder to see than traditional approaches. The authors compare the logic, steps, source of advantage, risks and performance goals between Michael Porter's positioning school, Hamel & Prahalad's competence/resource-based management, and 'strategy as simple rules', which works best in rapidly changing, ambiguous markets. "Managers using this strategy pick a small number of strategically significant processes and craft a few simple rules to guide them. The key strategic processes should place the company where the flow of opportunities is swiftest and deepest." The authors provide a useful table summarizing the types of simple rules for the different aspects of seizing opportunities (how-to, boundary, priority, timing, and exit rules). It is important that managers use the right number of rules, which should be between two and seven. Too few rules can result in ineffective execution of innovative ideas, too many rules can keep organization from competing effectively in turbulent markets. So where do these rules come from? In most cases, they grow out of experiences, especially mistakes. The authors use Yahoo!, Cisco, and Enron as examples.
I had mixed feelings about the previous three HBR articles I read by Eisenhardt. However, I was looking forward to this article since the authors take on one the most daunting tasks in the field of strategic management: complementing Michael Porter's positioning school and Gary Hamel & C.K. Prahalad's competence/resource-based management with a third possible approach to strategy. In my opinion the authors did not succeed and I will explain my reasoning: (1) Porter's frameworks should not be seen as static since they evolve continuously (see Michael Porter (1996), 'What is Strategy?').; (2) Hamel & Prahalad's core competencies approach provides adequate room to capture opportunities. In fact, they challenge companies to take opportunities which are in line with their competencies and resources. And this is where I see the usefulness of Eisenhardt & Sull's 'simple rules'. The 'simple rules' can be used as an tool to support and strenghten strategies. In particular, explaining and communicating the strategies - with its rules! - throughout the organization. The table summarizing the different types of rules is especially useful for this approach. The article is written in simple US-English. This article uses the more user-friendly .pdf format.
This article should be read in conjuction with Michael Porter's classics 'Competitive Strategy' (1980) and 'Competitive Advantage' (1985), plus Gary Hamel & C.K. Prahalad's monumental bestseller 'Competing for the Future' (1994). For fans of downloadable articles, I recommend the following Harvard Business Review articles: Michael Porter (1979), 'How Competitive Forces Shape Strategy'; Michael Porter (1996), 'What is Strategy?'; Gary Hamel & C.K. Prahalad (1990), 'The Core Competence of the Corporation'.
