Strategic Management

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Strategic Management

• Macmillan and Tampoe
• OUP

2
Case Examples

• Nolan, Norton Company, Inc. 1985-87

3
The reasons for choosing Nolan, Norton

• Nolan, Norton was a small privately owned
  company providing professional services. This is
  a fast growing category of enterprise.
• Nolan, Norton had a clear vision and values and
  had been extremely successful for a number of
  years.
• Changes in the external environment forced Nolan,
  Norton to change
• The strategy process was openly conducted and
  the interests of different stakeholder groups
  became apparent
• A clear strategic choice was made leading to the
  sale of Nolan, Norton to Peat Marwick.

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Nolan, Nortons Origins

• Founded in 1975 by Dick Nolan and Dave Norton
• Subchapter S corporation (i.e. privately owned)
• Management consultants specialising in deriving
  business benefit from information technology
• Clients mostly large multi-national,
  multi-divisional companies.
• Rapid growth between 1975 and 1982.

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Nolan, Nortons Business Purpose

• Intellectual leadership in the management of
  information technology Write the Book.
• Practical methods for applying these ideas in
  practice
• Bridge the gap between managers and information
  technology and IT people.

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Nolan, Nortons Internal Structure

• One firm with coherent and extendible
  framework of ideas
• Three organisational dimensions
• Geography
• Client
• Practice
• Three levels of staff
• Consultants
• Managers
• Principals
• 2 owners with high proportion of profit
  distributed to staff

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Nolan, Nortons Management Processes

• Professional ideas shared and transmitted using
  common pictures and diagrams.
• Marketing focused on creating and sustaining
  relationships with key individuals
• Assignments executed by joint client/consultant
  teams
• Consultants assigned to projects to optimise
  client service, consultant development and
  profitability.

8

People and Culture in Nolan, Norton

• Complementary skills of founders
• Dick Nolan - Inspirational leader
• Dave Norton - Top-flight management consultant
  and organised manager
• Staff - IT professionals taking a career risk
• Values
• Hard work
• Client commitment
• Leading edge ideas from research and university
  contacts
• Heavy investment in staff development

9
External Strategic Issues in 1985

• Arrival of mini-computers
• Loss of control of central IT departments
• Fragmentation of IT spend in clients
• Increasing business impact of IT on company
  strategy caused leading strategy consultants to
  become competitors of Nolan, Norton.
• Nolan, Nortons assignments addressing wider
  issues and becoming much larger.

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Internal Strategic Issues in 1985

• Limits to growth of founder-managed structure
• Founders aspirations important - equity
  realisation.
• Mismatch between resources and opportunities

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Question 1 What were the alternative options to
selling out?

• Option A Building strategic alliances with major
  partners in each separate major market.
• Advantages
• NNC can focus on its strengths in developing
  ideas and methods
• Rapid deployment in separate markets
• Provides ample resources
• Combines global and local identities
• Disadvantages
• Handling multiple relationships difficult and
  time-consuming
• Hard to control overall quality and identity

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Question 1 What were the alternative options to
selling out?

• Option B Continue independently and develop a
  new range of services related to IT-enabled
  business change.
• Advantages
• NNC builds on its strengths in developing ideas
  and methods
• Appeals to staff who are interested in doing new
  things
• Disadvantages
• NNC lacks some of the necessary skills
• Moving into direct competition with much larger
  and capable competitors

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Question 1 What were the alternative options to
selling out?
Option C Extend specialisation in the management
of IT Advantages NNC builds on its strengths
in developing ideas and methods Competing in a
relatively small market in which NNC is a
respected player Exploits NNC staffs technical
skills Disadvantages Does not appeal to many
staff wishing to extend themselves away from
their technical roots.
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Question 2 Views of Stakeholder Groups?

• Founders Unwilling to weather another recession
• Looking to realise equity
• Keen to carry Principals with them
• Principals Sale offer chance of payouts/earnouts
  (a quasi-capital gain)
• Staff Peat Marwick offers stability and
  security but less fun.
• Danger of loss of identity in larger firm

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Question 3 Saatchi and Saatchi instead of Peat
Marwick?

• Peat Marwick and SS had dramatically different
  cultures - NNC opinions divided on which was
  preferable.
• SS offered NNC more independence but did not
  resolve the resource issue
• SS in fact hit difficult times soon afterwards
  from which Nolan, Norton would inevitably have
  suffered.

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Question 4 How could Peat Marwick have made
their acquisition more successful?

• Peat Marwick could have left Nolan, Norton to
  continue as an independent unit retaining its
  historical centralised organisation and
  independent marketing.
• Peat Marwick would have received
• Nolan, Norton profits
• Entry into large non-audit clients
• Staff development by transferring/seconding IT
  consultants into Nolan, Norton
• The simultaneous much larger merger of Peat
  Marwick with Thomson McLintock was unfortunate to
  the success of the Nolan, Norton acquisition.