Strategic Management

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Strategic Management

• Macmillan and Tampoe
• OUP

2
Case Examples

• ICL The 1981 Crisis

3
The reasons for choosing ICL

• Example of strategic management in a crisis
• Demonstrates how long standing strategies may
  change discontinuously between two periods of
  relative stability
• Example of importance of individual leadership in
  strategy formulation
• Example of a clear change in strategic intent
• Long enough ago for an objective view with no
  need to hide facts

4
ICLs Origins

• Created in 1968 by merger between ICT and English
  Electric computers
• Government desire that ICL should be UK flagship
  in the strategic computer industry
• One of five significant manufacturers in an
  industry dominated by IBM (see Table C1.1)
• Strong in UK public sector market

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ICL in the 1970s

• Supporting 2 incompatible ranges of computer
• Maintaining full range of services against a much
  larger competitor - IBM
• Increasing importance of packaged software - more
  of it for IBM platform
• Investing heavily in a new range of computers to
  replace both existing ranges
• Change of government in 1979 reduced commitment
  to support industry

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The storm gathers

• Widening gap between development costs and cash
  available from operations
• Aggressive pricing moves by IBM in summer 1980
• By January 1981, ICL possibly about to exceed its
  existing cash facilities by March
• Management Responses
• Discussions with potential partners
• Pressing government for immediate decision on
  support
• Plant closures and manpower reductions

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The crisis breaks - May 1981

• 8 May. Government nominates three new directors
• 10 May. 7½ hour meeting.
• Laidlaw becomes Chairman
• Wilmot becomes chief executive
• 28 May Wilmot presents survival plan
• Further 5200 job cuts (about 20 of employees)
• 50m issue of redeemable preference shares to
  bank
• End July Wilmot presents new strategy

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Wilmots new strategy

• Products Fully networked product line (not just
  mainframes)
• Manufacturing Multiple collaborative agreements
  with suitable partners
• Fujitsu
• Mitel
• Further cost cutting
• Reorganisation, office space reduced, inventory
  and debts reduced

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High Risks- High Stakes November - December 1981

• ICL exposed to a crisis of confidence in four
  different interlocking areas
• If no government support, no Fujitsu
  collaboration
• If no Fujitsu commitment, major shareholders do
  not support the rights issue
• If no rights issue, ICL cannot afford
  redundancies
• If no redundancies, no return to profit and final
  loss of confidence.

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Question 1. What factors contributed to making
ICLs new strategy successful?

• Some important points
• New strategy based on objective and realistic
  assessment of ICLs position in a changing
  industry
• Leadership firm and closely associated with the
  new strategy
• Continuing and effective implementation of the
  strategy over several years
• The crisis ensured that all were committed to the
  new strategy as there was no alternative.

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Question 2. Could the existing management have
achieved the changes?

• Some interesting areas for discussion and
  speculation
• Could they have changed the strategic intent
  which had been created at the time of ICLs
  creation?
• Could they have won the necessary financial
  support?
• Could they have won the necessary internal
  support?
• Could they have envisioned the new strategy?

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Question 3. What are the advantages and
disadvantages of formulating strategy in a
crisis?
Some advantages A crisis focuses attention and
effort from all No time available for shades of
grey so strategy necessarily stark and clear An
opportunity for clear leadership Some
disadvantages Genuine opportunities may be lost
in the heat of the moment Disaster rapidly
ensues of strategy is wrong!
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Question 4. Could consultants have made a
contribution?
NO!
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Question 5. Did the changes of 1980/1 increase
ICLs adaptability?

• See para. 22.6 for the principal characteristics
  of a planned adaptive organization
• Effects of Crisis
• Flexible information systems? No immediate
  change
• Mentoring leadership? Probably
• Effective followers? Yes
• Flexible groupings? Probably
• Highly tuned sensors? Yes - ICL became more
  open
• Flexible minded directors? Yes
• Scanning processes? Yes - more external
  relationships
• Fast implementation capability? Improved
• Understanding of intellectual capital? Probably
  not

On balance the answer would seem to be YES