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Transcript of "One Company as Corporate Strategy"
1. LIU-IEI-FIL-G--11/00706--SEOne Company as Corporate Strategy A Case Study at Saab AB Jessica Lindeberg & Per Malmlöv Bachelor Thesis - Strategy and Control Tutor: Lisa Melander Department of Management and Engineering Spring 2011 Linköping, Sweden
AbstractThis research project explores the increasingly popular phenomena of companies strivingto harmonize and align their business which is called a "One Company"-vision. Theproject is carried out on behalf of the global IT and management consultancy company,Logica. It is a case study at Saab AB, the Swedish aerospace-and defense-company,regarding corporate strategy. In this research project, the concept of parenting style isrelated as one important ingredient of One Company and it is considered to be thestarting point for implementation of strategy. Implementation of strategy is furtherillustrated with the help of a tentative model. This model puts strategy in the center of theorganization and then intends to align the whole company through strategic congruenceand integrated control in order to implement the chosen strategy. If the wholeorganization is not committed, it will be very difficult to complete the journey to becomeOne Company.The purpose of this research project is to develop a perspective of a One Company conceptand to investigate the implementation of this concept at Saab AB. To further explain thepurpose and to deepen the understanding of the One Company concept, the followingresearch questions have been addressed: How does Saab AB, a large Swedish multi-business organization, strive to become One Company? What are (if any) the critical success factors in Saab's journey to become One Saab? What are (if any) the areas of improvement for Saab, according to the developed perspective of the One Company concept?In order to accomplish the purpose, interviews have been performed with corporate levelmanagement. Moreover, gaps have been filled with empirical findings from a dissertationthat investigated Saab's competitive advantage in relation to strategic congruence andintegrated control.The results show that for Saab AB, the One Company vision started as a market initiativeto create a common brand for what used to be a conglomerate. The One Saab strategy hasled to many changes for Saab AB, regarding organizational structure, work methods andfollow-up processes. It has affected all business areas and all functions. Human Resourceand Finance are functions that have already been harmonized. Current changes concernconsolidation of IT and implementation of a global management system. The globalmanagement system was launched this year (2011) and it will lead to many more changeswithin the company before it is fully implemented. This system will help bring thecompany closer to become One Saab.The conclusion is that Saab AB has come a long way but today it is a synergic corporationand not yet One Company, as the concept is described in this thesis.
AcknowledgementsIt has been an incredible journey, in the field of strategy, to write this thesis. However, theend result would not be what it is today, without the help and support from severalpeople.We are very grateful to Mikko Lareva, management consultant at Logica, for yourpatience, pedagogical skills and your sacrifice of time.We would also like to thank Sofia Smedshammar, Head of Business Intelligence at LogicaSweden, for the sponsorship of this research project.Moreover, we would like to take the opportunity to thank all our respondents:Mats Hultin, CIO at Saab ABMats Ran, Head of Application & Business Integration at Saab ABSunil Joshi, Head of Group Quality & Environment at Saab ABThank you for your time and commitment!Thanks to Fredrik Thuresson, Business Development Manager at Logica, for giving usaccess to relevant interviewees at Saab AB.Furthermore, we appreciate the valuable feedback we have received from Martin Hjelm,Change Leader at Saab Aeronautics. Your thoughts have increased the value of thisresearch project. Thank you!Thank you Erik Nilsson, PhD, at Linköping University for your generous help, supportand indispensible insights!Last, but certainly not least, thanks to Lisa Melander, PhD at Linköping University, for agreat job and commitment in the mentoring of us in our work with this thesis.Norrköping, June 2011SwedenJessica LindebergPer Malmlöv
Content1 Introduction ........................................................................................... 1 1.1 Background ........................................................................................................... 1 1.2 Problem Discussion .............................................................................................. 2 1.3 Purpose and Research Questions ......................................................................... 42 Methodology ........................................................................................... 5 2.1 Scientific Approach .............................................................................................. 5 2.2 Methodological Approach .................................................................................... 6 2.3 Case Study ............................................................................................................ 6 2.4 Interviews ............................................................................................................. 7 2.5 Choice of Case Company and Respondents ......................................................... 8 2.6 Implementation and Road Map for the Study ..................................................... 8 2.7 Reliability ............................................................................................................. 9 2.8 Validity ................................................................................................................. 9 2.9 Target Audience.................................................................................................. 103 Components of the One Company Concept ............................................ 11 3.1 Presentation of the Components and their Interrelations .................................. 11 3.2 Corporate Strategy and Parenting Advantage ..................................................... 12 3.3 Parenting Style .................................................................................................... 16 3.4 Business Strategy and Strategic Congruence ...................................................... 19 3.5 Balanced and Integrated Control ....................................................................... 22 3.6 Implementation of Strategy ............................................................................... 234 One Company - A Tentative Model ........................................................ 295 Saab's Journey to Become One Company ............................................. 35 5.1 Introduction of Saab........................................................................................... 35 5.2 The Strategy Process at Saab .............................................................................. 37 5.3 One Saab - from Market Initiative to Harmonization........................................ 39
5.4 Cost Savings – a Driving Force .......................................................................... 39 5.5 Corporate Influence and Evaluation of Business Areas ...................................... 41 5.6 Critical Success Factors and Quest for Synergies............................................... 42 5.7 New Corporate Structure – Key to Harmonization ........................................... 43 5.8 Major Changes in the IT-environment............................................................... 44 5.9 A Common Business Management System ........................................................ 45 5.10 Saab's Management Control Systems ................................................................ 476 Analysis of Saab from a One Company Perspective ............................. 49 6.1 Parenting Advantage .......................................................................................... 49 6.2 Translation of Strategy ....................................................................................... 53 6.3 Strategic Congruence ......................................................................................... 54 6.4 Empower Employees for Execution of Strategy ................................................. 55 6.5 Integrated Control .............................................................................................. 56 6.6 Application of the Tentative Model on Saab ...................................................... 606 Conclusion ............................................................................................ 617 Reflections and Further Research ........................................................ 63Appendix A – Interview Questions .............................................................. 67Appendix B – Example of Strategy Map ...................................................... 71Appendix C – Biografen ............................................................................... 73
FiguresFigure 3-1 The Relationships among four Typologies of Corporate Strategy ..................... 14Figure 3-2 Parenting Styles ................................................................................................. 17Figure 3-3 The Relationships among Three Typologies of Business Strategy .................... 19Figure 3-4 Nilsson and Rapp's Model ................................................................................. 21Figure 3-5 Framework for Strategy Implementation ......................................................... 24Figure 3-6 The Performance Pyramid ................................................................................ 24Figure 3-7 The Strategy-Focused Organization ................................................................. 26Figure 4-1 A One Company Perspective on Parenting Styles ............................................. 30Figure 4-2 A One Company Perspective on Nilsson and Rapps Model ............................. 31Figure 4-3 A Tentative Model for Illustrating a One Company Perspective ...................... 32Figure 5-1 Saab's Strategic Priorities.................................................................................. 36Figure 6-1 Application of the Tentative Model on Saab .................................................... 60TablesTable 3-1 Value Creation Types ........................................................................................... 15Table 3-2 Parent Company Characteristics ......................................................................... 16Table 3-3 Parenting Style Characteristics ...........................................................................18Table 6-1 Saab's Value Creating Activities ......................................................................... 50Table 6-2 Saab's Parenting Style Characteristics ................................................................ 51
One Company as Corporate Strategy – A Case Study at Saab AB 1 IntroductionThe first chapter gives a short historical introduction to the field of corporate strategyand a background to this particular research project. The concept of One Company isbriefly described by scholars and management consultants. The purpose is thenpresented as well as the relevant research questions.1.1 BackgroundToday, corporate strategy is characterized by a quest for harmonization and alignment formany companies. However, according to Goold, Campbell and Alexander (1994), thenature of thinking about corporate strategy has changed over the last decades. The 1950swas marked by an overload at corporate centers. This led to great enthusiasm fordecentralization and corporate strategies were to a large extent influenced bydivisionalisation. In the 1960s there was a quest for growth. Skills in general managementwere promoted and companies searched for synergies among their businesses. Thediversification continued and related multi-business companies were created as well asconglomerates. Companies in the 1970s were struggling with resource allocationproblems which led to adaptation of portfolio planning, lead by the Boston ConsultingGroup and other consulting firms. Skepticism increased during the 1980s regardingresults achieved by diversified firms. Companies were showing poor performance in spiteof large efforts to diversify and this resulted in that numerous businesses wererestructured. The new thing was to "stick to the knitting" and many companies adoptedvalue based planning. The 1990s was a return to core business, core competence andshared resources. The latter part of the 1990s and the beginning of 21st century weremarked by parenting advantage and portfolio management to maximize value creation.The quest for harmonization and alignment often take the shape of strategies, visions,approaches or initiatives named something like "One Xyz", where Xyz is the name of thecompany. Various conferences address the subject, for instance, in November this year(2011) there is a conference that gives some insight into what it takes to reach a vision ofbecoming One Company (The Business Controller, 2011). Even though explicitlyaddressed in an industrial context, there is no single academic theory today, whichdescribes the One Company approach in a coherent way.Saab AB (from now on simply referred to as Saab) is a company that used to be aconglomerate. However, Saab has changed its focus towards core competence and thecompany also has an outspoken vision to become One Company. This thesis aims todescribe a perspective of the One Company concept and study the progress of Saab'sjourney to become One Saab. 1
One Company as Corporate Strategy – A Case Study at Saab ABPrevious research at Saab, on a similar subject, has been performed by Ph.D. Erik B.Nilsson at Linköping University. He completed and presented his dissertation "Strategy,Control and Competitive Advantage – A longitudinal study of Saab AB" as recent as oneyear ago (Nilsson, 2010). This thesis is supplemented with his empirical material, whereour study falls short, as the empirical material of this bachelor thesis naturally could notbe as comprehensive as a dissertation.1.2 Problem DiscussionIncreased globalization has affected the formation of companies. Acquisitions, mergersand thus the formation of large multi-business companies have increased (Goold et al.,1994). However, there is a risk that multi-business firms become astray and lose corefocus, their "raison d'être". In order to stay competitive, and not become too divers, it isimportant for multi-business companies to have uniform strategy and control (Nilsson &Rapp, 2005). In short, many companies strive for harmonization and alignment simplybecause they have to. According to Goold et al. (1994), it is no longer sufficient to run amulti-business organization without adding value from the corporate center. It is evenless sufficient to avoid releasing synergy potential. This quest for harmonization is thus areaction to the business environment of today and necessary to sustain or increasecompetitive advantage and efficiency.Even though the concept of One Company is rarely discussed in academic literature it isdescribed in a master program syllabus, Uppsala Executive MBA (Uppsala University,2011). In this syllabus it is an approach for companies to develop uniform strategies,controls and routines throughout the organization. In the syllabus, the author describeshow, in an increased global environment, the functional orientation of management hasbeen replaced with a process view approach. This affects companies' management controlsystems to a large extent which in turn leads to new and changed requirements regardinginformation technology and information systems.Moreover, the syllabus explains that there are many opportunities with new technologybut that it also creates new control issues (Uppsala University, 2011). In this time ofinformation overload, management attention is scarce and it is very important for controlsystems to sort and prioritize in order to only present the essentials. Management controlsystems require a close connection with strategic issues. Within this lies also anopportunity to make a clearer connection from corporate strategy all the way down tooperational strategy (Uppsala University, 2011). This line of thought is acknowledged bythe global consulting firm Accenture (2010), who claims that "the impact of the OneCompany concept on IT is huge". This huge impact has great relevance for this researchproject since it is done with sponsorship from Logica, a business and technology servicecompany which delivers business consulting, systems integration and outsourcing acrossall industries and business functions (Logica, 2011). Accenture has another explanationand continues to explain the benefits of One Company: 2
One Company as Corporate Strategy – A Case Study at Saab AB "One Company will translate into brand experience, compliance, collaboration in the supply chain, innovation across borders and the integration of sales channels." (Accenture, 2010:8) "For companies which are actually One Company, it is possible to organize the development, administration and particularly the clustering of competences optimally and irrespective of location." (Accenture, 2010:7)The lack of scientific writings on the One Company Concept has awakened our interest tomake an attempt to fill this gap. One Company is an expression used at consulting firmssuch as Logica and Accenture. The expression is according to Accenture claimed to beused by many CEOs of multinational companies, for instance Shell, Philips, Unilever,TNT, Océ, and Siemens. The term is also used by our case company Saab. It is argued, inthis thesis that the One Company concept found in the business world, has severalcounterparts in the academic world but that it is addressed by other terms.There is a risk of confusion between concepts when discussing One Company. Forinstance, it could be argued that One Company is one of Mintzberg's five P's; perspective(Mintzberg, 1987). By that approach, it would be tempting to categorize companies as OneCompany if they have achieved a sense of being one entity with business units tiedtogether by a common brand. Mintzberg (1987) argues that strategy can be seen as acollective belief rather than a plan, based on a position of how you look at the outsideworld. However, we perceive this comprehension too narrow and not how we want toexplain the concept.The starting point of our perspective was that it requires consistent strategies anduniform control for an organization to be One Company. During the writing process theseterms have been developed and to some extent replaced with new terminology which ispresented in the tentative model of this thesis. This thesis will make a humble attempt todescribe the One Company concept by collecting and contrasting theories which capturethe phenomena of harmonization and alignment. 3
One Company as Corporate Strategy – A Case Study at Saab AB1.3 Purpose and Research QuestionsThe purpose of this thesis is to develop a perspective of a One Company concept and toinvestigate the implementation of this concept at Saab.To further explain the purpose and to deepen the understanding of the One Companyconcept, we address the following research questions: How does Saab, a large Swedish multi-business organization, strive to become One Company? What are (if any) the critical success factors in Saab's journey to become One Saab? What are (if any) the areas of improvement for Saab, according to the suggested perspective of the One Company concept? 4
One Company as Corporate Strategy – A Case Study at Saab AB2 MethodologyThis chapter describes how the research project has been carried out. We give anaccount on our choice of scientific methodology, our methodological approach, how wehave collected data and our actual implementation of methodology. Moreover, wereflect on our choice of case company and respondents. The reader can also find adiscussion of reliability and validity in this chapter.2.1 Scientific ApproachStudies in the philosophical field mainly use a positivistic or a hermeneutic approach toscience. Thurén (1991) argues that in contrast to the hermeneutic theory of knowledge,positivism claims there is an absolute truth and knowledge. To attain absolute truth, thesolution according to positivism is to clear away what you previously thought you knew.As this thesis will study corporate management, which is a subject where no absolutetruth exists, we have chosen the hermeneutic theory of knowledge as our scientificapproach.The hermeneutic theory of knowledge argues that absolute truth does not exist (Nyström,2007). Truth is something that is subjective and it is different depending on who isinterpreting reality. This means that research cannot strive to achieve objectiveknowledge. The hermeneutic approach is instead focused on interpreting andunderstanding reality (Nyström, 2007). Hermeneutics is often used in studies wherehuman thoughts, feelings and opinions are of interest. As a result, one often fails toprovide any quantifiable data and the researcher is instead doing different interpretationsand explanations of reality. Because of this, hermeneutics is widely used in social scienceand all science where interactions between people are studied. According to Alvesson andSköldberg (2008), the science in the field of hermeneutics is carried out in a spiral whereinterpretation leads to new knowledge which will give a new perspective in the nextiteration of interpretation. The object of interpretation is not "facts" or "data" but insteada text. Results then emerge from the text through this process of interpretation. Werealize that both our respondents and the authors of this thesis are part of thishermeneutical spiral. First, the respondents have interpreted their own work andprogress in realizing the vision of One Saab, then they have interpreted our questions, andfinally, we have interpreted their answers. It all comes down to that we cannot say it is anobjective truth, but it is still our interpretation. 5
One Company as Corporate Strategy – A Case Study at Saab AB2.2 Methodological ApproachThere are two main methodological approaches to philosophical science, qualitative andquantitative. The definition of qualitative methodology is, according to Alvesson andSköldberg (2008), not entirely clear. They argue that a common denominator inqualitative methodology is to consider and focus on open and ambiguous empiricalevidence. According to Lundahl and Skärvad (1999), qualitative methodology focuses oninterpretation and understanding. The qualitative methodology is therefore appropriatewhen the scientist aims to describe, analyze and understand the behavior of individuals orgroups of individuals. Since this thesis aims to study the behavior of corporatemanagement and their work with Saab's strategy it is suitable to use a qualitativeapproach.Moreover, the purpose of the qualitative method is to create a deeper knowledge and totry to understand and analyze the subject as a whole (Davidsson & Patel, 1994). With thisthesis, the authors try to understand and describe the concept of One Company and itsimplications for the whole organization. Repstad (1999) has a similar description andholds that the qualitative method is intended to perform a deep analysis. The qualitativemethod can also help in order to see the "big picture" (Lundahl & Skärvad, 1999). Weargue that the qualitative method suits our purpose best, as we are to perform a researchwork to a large extent affected by interpretation and understanding.Finally, Bryman (2002) argues that the other approach, the quantitative method, ingeneral integrates the science standards and practices that characterize positivism. Sincepositivism does not suit the purpose of this thesis, a quantitative approach would not befruitful. Lundahl and Skärvad (1999) also claim that a quantitative method seeks todescribe or identify the cause of a phenomenon. Thus, a quantitative approach could beuseful if we were to investigate the cause of companies' quests to be harmonized, but inthis thesis, the starting point is that companies, especially one particular company; Saab,strives to be harmonized.2.3 Case StudyThis thesis is to some extent a case study; research in this scientific approach refers to astudy in which only one or a few cases are studied in more depth (Lundahl & Skärvad1999). A case can for example be a group, an individual or an event. This study is limitedto Saab, the Swedish defense and security concern, as case company.There may be various reasons as to why people want to conduct a case study. The reasonsmay be to develop theories, hypotheses or to illustrate and exemplify (Lundahl & Skärvad,1999). We have used examples from Saab to illustrate their journey to become One Saab, 6
One Company as Corporate Strategy – A Case Study at Saab ABand to develop a theoretical perspective on One Company. A case study can also beappropriate when the intent of the study is to answer questions containing formulationsof how something happens (Lundahl & Skärvad, 1999). Since our first research questionis an example of this type of question, we find the case study suitable for our purpose.Finally, a case study can use different data collection methods within the same study(Lundahl & Skärvad, 1999). Apart from analyzing secondary sources of information suchas web material, annual reports and a dissertation, we have also performed interviews togather primary data.2.4 InterviewsOne method of data collection we have used in this thesis is interviews. The method isbased on the fact that the researcher enters into a dialogue with a respondent and asksquestions (Davidson & Patel, 1994). According to these authors, it is possible todistinguish between different types of interviews regarding the degree of standardization.The degree of standardization reveals how strict an interviewer follows the predefinedquestionnaire and the internal order of the questions. We have performed semi-standardized interviews, which are characterized by the researcher starting with apredefined questionnaire (Appendix 1). However, the possibility to ask follow-upquestions is available.In interviews with a high degree of structure, the respondent can only choose from a givenset of predetermined alternatives. On the other hand, in interviews where the degree ofstructure is low, the respondent has the opportunity to formulate answers in a more openway (Lundahl & Skärvad, 1999). Even though there existed a structure of what questionsto ask, the degree of structure can be considered low since there were no givenalternatives for answers. We mainly used open-ended questions to get the respondent toshare their knowledge and experience. Moreover, we consciously avoided closedquestions where the respondents could only answer "Yes" or "No".The empirical part of this thesis is mainly based on three interviews which were allrecorded. These recordings have then been transcribed in order to have the possibility toreturn if something is unclear. Two interviews were performed at Saab in Linköping, onewith Mats Hultin, CIO (Chief Information Officer) and one with Mats Ran, Head ofApplication and Business Integration. We have also performed a telephone interview withSunil Joshi, Head of Group Quality & Environment at Saab.Interviews were intended at the business unit level, but respondents on this level chosenot to participate. Thus, the empirical material is limited to corporate level. However,information that was found about business unit level through corporate level interviewsand secondary sources such as web material, annual reports and the dissertation (Nilsson,2010) is presented and analyzed. 7
One Company as Corporate Strategy – A Case Study at Saab ABFurthermore, a more theoretical discussion and interview has been performed andrecorded at Linköping University with PhD Erik B. Nilsson.2.5 Choice of Case Company and RespondentsOne of the authors (Per Malmlöv) is employed by Logica and he works as an IT-consultant for Saab. This is in part why we chose Saab. However, we do not consider thisa problem. Contrarily, it has increased availability of information and helped us to getaccess to corporate level respondents and to achieve an open and frank dialogue.Moreover, it has also helped us to deeper understand the business of the target firm andits current situation.Regarding the choice of respondents, we realize that there may have been other personswith suitable knowledge and experience. Because of our IT-connections at Saab, the firstrespondent we got in touch with was the CIO. Even though the CIO and the otherrespondents are involved in the strategic work, it would have been very interesting to getan interview with, for instance, Jan Germundsson, who is Vice President, GeneralManager Special Operations Aeronautics, Saab. Mr. Germundsson works on the corporatelevel with strategic issues and the organizational change (Westbridge Business Media,2010). Moreover, he will be one of the speakers from Saab at the One Company-conference in November (The Business Controller, 2011). However, the chosenrespondents have been a great source of information and have helped us understandSaab's strategic work. All of the respondents also claim that the One Saab vision affectstheir work every day and every second, which shows they are relevant as sources ofinformation.2.6 Implementation and Road Map for the StudyThe purpose of this thesis was accomplished by performing a qualitative analysis withinterviews as a tool for gathering primary data. This section describes the completeprocess of this study and how it was carried out. We have divided the process for thisstudy into several activities. When the process is described textually it can suggest thatthe study was carried out in a waterfall approach (a sequential way). However, the truth isthat it was more or less an iterative process and the numbers below represent the initialorder of each step. Moreover, these steps were reviewed along the journey of this thesis. 1. A literature study was done to be able to get a hold of the One Company concept and other key issues to be able to formulate a purpose, adequate research questions and interview questions. This literature study became the basis for the presentation of the components of the One Company concept. 8
One Company as Corporate Strategy – A Case Study at Saab AB 2. With the literature study as a starting point, we developed a tentative model of the One Company concept. This model is a combination of the relevant theories and it was the foundation for further analysis of the case company. 3. Semi-standardized interviews have been carried out with key persons of corporate strategy. Interview questions were a foundation for empirical findings. The interviews have helped to illustrate the One Company strategy implementation at Saab. 4. Gaps in the empirical material have been filled with details from the dissertation of Nilsson (2010). His extensive work has given us a deeper understanding of Saab and has supplemented the primary data. 5. The results of the literature review and thus the relevant theories have been presented and contrasted in order to more fully describe the main concept of One Company. The theoretical chapter was completed after the interviews were conducted to strengthen week parts. 6. To reach the purpose and to answer the research questions, we have performed an analysis of Saab as One Company with our tentative model as a starting point.2.7 ReliabilityReliability means if it is possible to repeat the study and still achieve similar results(Bryman & Bell, 2011). It is a term most commonly used in quantitative research, butnevertheless, it is also important in qualitative research. The work method of this thesishas been thoroughly described in order to make it repeatable. Most of the questions, evenif not the follow-up questions, are presented in Appendix 1 in order to be repeatable.However, the purpose of this thesis is to describe a dramatic and on-going journey ofchange for the case company. If the research project were to be repeated, answers wouldprobably show that Saab has reached further in its journey to become One Saab.2.8 ValidityIn order to achieve validity, the purpose of this thesis has been in focus and in the back ofour minds throughout the research project. Concerning qualitative studies, there aremainly two types of validity, internal and external (Bryman & Bell, 2011). Internal validityconcerns the interrelationship between variables and their causality. This is not a problemin this thesis since we describe the history of what has already happened, in Saab'sjourney to become One Saab. However, this is done by the words of the respondents and 9
One Company as Corporate Strategy – A Case Study at Saab ABwe realize that the respondents' experience and personal opinions may color the results.To accommodate this problem, we have conducted three separate interviews.Moreover, there is the issue of external validity, which concerns if generalizations can bemade (Bryman & Bell, 2011). The journey to become One Company may look completelydifferent at another company. Despite this, the work method a company may use in orderto reorganize and try to become One Company can be similar to the one described withthe illustration of the tentative model which is presented in Chapter 4.2.9 Target AudienceThe target audience for this thesis is Saab and Logica specifically, but also anyoneinterested in corporate strategy in general and in One Company in particular. Moreover,the target for this study is also other students in business administration. 10
One Company as Corporate Strategy – A Case Study at Saab AB3 Components of the One Company ConceptIn this part, the chosen theories are presented and developed. The typology of parentingadvantage and parenting style is introduced. After this, two important terms areintroduced; strategic congruence and integrated control. Finally, strategyimplementation is discussed.3.1 Presentation of the Components and their InterrelationsThis study is limited to three main theories which help describe the One Companyconcept. The reader should know that this thesis is not to be considered as a completedefinition of the concept of One Company. A scientific contribution of this thesis is tocontrast several theories (Rienecker & Jorgensen, 2009). The chosen theories all addressthe One Company concept but in differing terminology.As a starting point, a suggestion came from Mikko Lareva at Logica to use "Corporate-Level Strategy – Creating Value in the Multi-business Company" by Goold, et al. (1994).These authors focus on the corporate level and do not investigate in detail the role of thebusiness unit. This is why theory about business level strategy needs to be included.In the search for an update of the parenting framework which is introduced by Goold etal. (1994), an article, by Swedish author Fredrik Nilsson, was found: "Parenting stylesand value creation: a management control approach" (Nilsson, 2000). As the literaturesearch continued, at the library and in article data bases such as EBSCO Host, for theconcept "One Company", the importance of the two terms strategic congruence andintegrated control was revealed. These terms, coined by the same Fredrik Nilsson, formerprofessor at Linköping University (and presently at Uppsala University), are developedand discussed in the book Understanding Competitive Advantage – the Importance ofStrategic Congruence and Integrated Control (Nilsson and Rapp, 2005). This book is thesecond main source of this research project since the typology has great relevance to theOne Company approach. As mentioned earlier, the concept of "One Company approach"is used at Uppsala University (2011). Still, there are no scientific articles which describethis approach and it has not been found in academic literature at Linköping University.However, the authors of this thesis suggest that the concept is in part studied here as well.The concept of One Company is studied in dissertations by Anjou (2008) and Nilsson(2010) from the perspective of Fredrik Nilsson's terms "strategic congruence" and"integrated control". In this thesis it is argued that in order to be One Company thereneeds to be strategic congruence and integrated control, even if these are not the onlyrequirements. The main interest of the Linköping studies is that they focus on strategy onall levels in the company; corporate, business unit and functional level, which is notcommon. However, the functional level is not included in this research project and there 11
One Company as Corporate Strategy – A Case Study at Saab ABare specific reasons for this. Primarily, the functional level and its impact on the conceptof One Company were not considered beforehand; this relation has been establishedduring the study. Contrarily, the starting point for the One Company concept was thecorporate level and its influence on the business level. Secondly, to get a complete pictureof the functional level required an extensive foundation built on more interviews thanthere was time for in this bachelor level thesis. However, the business unit level isincluded to a limited extent. Porter (1980; 1987) focuses on the business unit level, buthas a rather narrow typology with only two alternatives for generic business strategy.Nilsson and Rapp's (2005) tentative model builds on Porter's typology, but this model isonly a tool, and a starting point for the discussion of strategic congruence and integratedcontrol. In the model by Nilsson and Rapp (2005), it is not the business strategy itselfthat is in focus, but how it relates to and is congruent with corporate level strategy whichis important in this research project.The important relationship between corporate and business strategy also implies thatstrategy must have a large role in organizations; it must be put in the center. The thirdmain theory addresses this. In The Strategy-Focused Organization (Kaplan & Norton,2001) strategy is in focus but this theory also emphasizes the role of the BalancedScorecard. This concept is presented in section 3.5, and from now on referred to as theBSC. However, in this research project their model is interpreted as one way ofimplementing strategy, not necessarily with the BSC in focus, but more with the BSC asone possible tool. In order to measure implementation of strategy and illustrate how acompany strives to become One Company, several maturity models were presented by thementor at Logica. Some of the models were too IT-related to be used in this business-related research project and the choice thus became the Strategy-Focused Organizationby Kaplan and Norton (2001) since it is more focused on strategy and managementcontrol.These theories are components of the One Company concept and they will be furtherexplained in the following sections.3.2 Corporate Strategy and Parenting AdvantageAnthony and Govindarajan (2007) describe generic corporate strategies as a continuumwith single industry firms at one end of the spectrum and unrelated diversified firms atthe other end. This implies that related diversified firms are in the middle of thespectrum. The authors continue by explaining that many companies do not fit neatly intoone of these three classes, however, most companies can be classified along thecontinuum. To sum up, this is a rather wide description of corporate strategy.Another definition of corporate strategy is given by Prahalad and Hamel (1996). Theysuggest two terms: portfolio of businesses and portfolio of competences (Prahalad andHamel, 1996). These authors also coined the term core competence which has been 12
One Company as Corporate Strategy – A Case Study at Saab ABground-breaking in the understanding of corporate strategy (Prahalad & Hamel, 1990).Anthony and Govindarajan (2007) define core competence as what a firm excels at andwhat adds significant value for customers. Prahalad and Hamel (1990), claim that thereare at least three tests that can be applied to identify core competences in a company.First, a core competence provides potential access to a wide variety of markets. Second, acore competence should make a significant contribution to the perceived customerbenefits of the end products. Finally, a core competence should be difficult forcompetitors to imitate. On the contrary, Prahalad and Hamel (1990), suggest that acompany that compiles a list of 20 to 30 capabilities has probably not produced a list ofcore competencies. Moreover, strategy can be described as a matching of a firm's corecompetence with industry opportunities (Anthony and Govindarajan, 2007).A third definition of corporate strategy is the typology of Porter. This typology forcorporate strategy consists of portfolio management, restructuring, transfer of skills andactivity-sharing (Porter, 1987). Two of these terms, portfolio management and activity-sharing are used in the tentative model of Nilsson and Rapp (2005). The terms are relatedto the One Company concept, which is shown later in this thesis.A fourth typology of corporate strategy is the one by Goold et al. (1994). These authorsclaim that few multi-business companies have a clear answer to the question: "What isyour corporate strategy?" For most companies, corporate strategy is only the sum ofdivision strategies, in addition to some broad objectives and a companywide statement ofmission. In other words, Goold et al. (1994) claim that corporate level strategies often areunderdeveloped and that focus in the planning process is within business strategy. If thisis the case, the authors argue that multi-business companies consist of units that could bestand-alone companies.Moreover, Goold et al. (1994), continue to explain that the core competence conceptimplies that businesses are related if they have common technical or operating know-how.Porter (1996) expanded the thoughts of core competence and fit in the article "What isStrategy?" He coins the activity mapping system and argues for the importance of fitamong activities. However, this discussion was only held at the business unit level, whichis not enough. Prahalad and Hamel (1990) question how many senior executives discussthe crucial distinction between competitive strategy at the level of a business andcompetitive strategy at the level of an entire company. This distinction between strategieson different levels is thus important and Goold et al. (1994) argue that their parentingframework can help to create a competitive corporate strategy.These typologies of corporate strategy can be put together along a continuum whichshows increased synergy potential and increased diversification degree. Figure 3-1visualizes this continuum and relates the typologies to each other. 13
One Company as Corporate Strategy – A Case Study at Saab ABFigure 3-1 The Relationships among four Typologies of Corporate Strategy(Source: Nilsson & Rapp, 2005, modified)According to Goold et al. (1994), corporate strategy should guide corporate leveldecisions, just as business strategy should guide business level decisions. Moreover,Goold et al. (1994) claim that two questions are central in corporate level decisions: 1. In what business should the company invest its resources; either through ownership, minority holdings, joint ventures or alliances? 2. How should the parent company influence and relate to the business under its control?The parenting framework focuses on the competences of the parent organization and onthe value created from the relationship between the parent and its businesses (Goold etal., 1994). This strategic fit is to match core skills, expertise and resources of the parentwith necessary improvements of the business unit (Moore & Birtwistle, 2005). However,if there is no fit, the parent could also destroy value. If the parent can create value itmakes sense to develop corporate-level strategies. Goold et al. (1994), continue to explainthat by finding out how value is created or destroyed, a corporate strategist can considerwhat changes that might improve fit.According to Goold et al. (1994), there are four kinds of value creation that a corporateparent can produce. Moore and Birtwistle (2005) have further explained the four typeswhich are presented in Table 3-1. 14
One Company as Corporate Strategy – A Case Study at Saab ABValue Creation Type DescriptionStand-alone influence How a parent influences the strategies and performance of a business unit if it is perceived as a stand alone business unit.Linkage influence Value creation of the parent by enhancing linkages between and among business units.Functional and services Value creation of the parent by enhancing linkages between and among business units.influenceCorporate development Activities such as buying, creating and selling new businesses, that affect the number of businesses, a parent can create or destroy value.Table 3-1 Value Creation Types(Source: Goold et al., 1994)Goold et al. (1994) argue that to avoid the corporate parent from destroying rather thanadding value, the parents need to have a "feel" for their business. This implies that theparent is aware of the business' critical success factors and that it can judge whether ornot the business is on track and performing well. Goold et al. (1994) suggest to firstexamining these critical success factors to be able to decide where the influence of theparent is positive and where it is negative. The analysis of the critical success factors is animportant base to assess fit.Goold et al. (1994) describe the fit between the characteristics of the parent and thecharacteristics of its businesses. They call this a "Parenting advantage", and define theterm as a fit which creates more value than rival parents could. The authors claim that thecorporate strategy should clarify the company's ability to achieve parenting advantage interms of how and where. This leads them to draw parallels with the concept of businessstrategy and competitive advantage (Porter, 1987). Goold et al. (1994), claim that acompany can have a competitive advantage when it comes to business strategy; byoutperforming its competitors in operational effectiveness, quality or any other aspect.Moreover, a company can also have an advantage through their corporate strategy; aparenting advantage.According to Goold et al. (1994) there are three conditions for a company to attain aparenting advantage: 1. A corporate strategy targeted at parenting opportunities which have not yet been adopted by rivals or is substantially different. 2. More suitable parenting characteristics for realizing parenting opportunities than competitors. 15
One Company as Corporate Strategy – A Case Study at Saab AB 3. A more developed comprehension than competitors of business where its value- creation insights and parenting characteristics are most effective and what unfavorable parenting characteristics that would cause value destruction.Moreover, Goold et al. (1994), present parenting characteristics and place them into fourcategories (Table 3-2). The parent characteristics may create or destroy value for thebusiness units (Moore & Birtwistle, 2005). Parent Company Description Characteristic The rules and models that guide parent managers in order to interpret and Mental maps synthesize information. These serve as a blue-print for management decision- making and explain patterns of behavior. The corporate, parenting These are the mechanisms through which the parent creates value. These structures, systems and dimensions include budgeting and planning, capital approval systems and decision- processes making procedures. Functions, central services The corporate staff departments and central assets that support subsidiary and resources management in the value creation process. The extent to which companies have decentralized by delegating responsibilities and Decentralization contracts authority to business-unit managers; the jurisdiction distinction between the parent and the subsidiary company in relation to decision-making powers and budgetary authority.Table 3-2 Parent Company Characteristics(Source: Goold et al., 1994; Moore & Birtwistle, 2005)3.3 Parenting StyleParenting style is, according to Nilsson (2000), a broader concept than corporatestrategy, since parenting style focuses on the ability of group management to create valueas well as on the design and use of systems for strategic planning and control. Moreover,Nilsson (2000) explains three parenting styles: financial control, strategic planning andstrategic control. The three parenting styles differ in the extent of corporate planninginfluence and corporate control influence (Goold et al., 1994).At one end there is financial control, which has low corporate planning influence, buttight financial control. In the middle there is a mix of control and planning influence inthe strategic planning style. A high level of corporate planning influence and flexiblecontrol influence is what signifies the strategic planning parenting style. The threeparenting styles are presented in Figure 3-2. 16
One Company as Corporate Strategy – A Case Study at Saab ABFigure 3-2 Parenting Styles(Source: Goold et al., 1994)The parenting style strategic planning is based on linkage influence (Goold et al., 1994).Group management is involved in the strategic formulation for the business units andthey create synergies through integration between business units. Follow-up is mainlybased on non-financial measures and a comprehensive corporate scorecard is used.According to Goold et al. (1994), the strategic philosophy of a company with the strategicplanning parenting style is core competence.Financial control is a parenting style based on autonomy or stand-alone influence (Gooldet al., 1994). Stand-alone influence means that most strategic decision-making is done atthe business unit level but there is tight financial control and thus it is very important tofollow up the annual budget. The strategic philosophy is portfolio management since thecompany usually have many and diverse businesses. The corporate center has a strictlyfinancial role and the detail level of information which reaches the corporate center is low(Goold et al., 1994).Strategic control is an attempt to combine the two earlier parenting styles. In thesecorporations, decision-making is decentralized and various planning systems are whatmaintain overall control (Goold et al., 1994). Moreover, there will be clusters of businessunits with high synergy potential as well as low synergy potential. Financial targets are setby the corporate center but strategy is merely reviewed and actions are not coordinated bythe center. It is up to the strategic business units to develop their own strategy and figureout what to do in order to reach the financial targets. This parenting style is used whenthe number of businesses as well as the level of information at the corporate center is 17
One Company as Corporate Strategy – A Case Study at Saab ABmedium. The method used by the corporate center is often a limited corporate scorecard(Goold et al., 1994).A summary of the characteristics for the three parenting styles are presented in Table 3-3. Detail Typical Corporate level ofParenting Strategic Role of Role of Number of Evaluation the 1 Style Philosophy Corporate Center SBUs Businesses Methods informati on in the corporate center Financial. Manage strategy The center aims to against tight Financial Portfolio provide a better financial targets Many diverse Financial Low Control investments set by center. performance. Autonomy SBUs. Center coordinates and reviews strategy. Sets fairly tight financial & Develops Limited Strategic Linkages strategic targets. strategy but Medium Corporate Medium Control Attempts to create coordinated by Scorecard and links between center. Financial businesses to create competitive advantage. Center drives strategy around important potential Concentrates on Comprehensive synergies or implementation Corporate Strategic Core competences. of strategy but Low related Scorecards. High Planning Competence Strongly also assists with Balanced coordinating actions corporate aspects. and creating strategy. linkages between units.Table 3-3 Parenting Style Characteristics(Source: Goold et al., 1994)Anthony and Govindarajan (2007), suggest that strategies can be found at two levels.First there are strategies for the whole organization, in this thesis referred to as corporatestrategies. Secondly, there are strategies for business units within the organization. Thereis a need for consistency in strategies across business units and corporate levels even ifthe strategic choices are different at different hierarchical levels (Anthony andGovindarajan (2007). The business unit level of strategy and its relation to corporate levelstrategy is presented and discussed in the next section.1 SBU means Strategic Business Unit 18
One Company as Corporate Strategy – A Case Study at Saab AB3.4 Business Strategy and Strategic CongruenceThe typology for business strategy has been described by several academic writers. Forinstance, Miles and Snow (1978) discuss business strategy in terms of defender andprospector. Gupta and Govindarajan (1984) refer to the business units' mission asharvest, hold or build. Anthony and Govindarajan (2007) explain these three businessunit missions and adds a fourth: divest. A build mission means that the business unit hasan objective to increase market share. This is to be done even at the expense of short-termearnings and cash flow. A hold mission implies that the business unit is to protect itsmarket share and competitive position. The third business unit mission is harvest; theobjective is to maximize short-term earnings and cash flow. This objective is to be reachedeven if it affects market share negatively. The divest mission means simply to stopperforming, either through slow liquidation or outright sale.Anthony and Govindarajan (2007), claim that in order to accomplish its mission, eachbusiness unit should develop a competitive advantage. Porter (1980) has defined twogeneric competitive advantages: cost leadership and differentiation. Cost leadership canbe achieved through economies of scale and tight cost control. Differentiation on theother hand, is meant to create a greater value for customers by creating something that isperceived as being unique.The relationship among these typologies of business strategy can be shown on acontinuum of increased environmental turbulence and increased importance of productuniqueness (Figure 3-3).Figure 3-3 The Relationships among Three Typologies of Business Strategy(Source: Nilsson & Rapp, 2005) 19
One Company as Corporate Strategy – A Case Study at Saab ABNilsson and Rapp (2005) have chosen to focus on Porter's typology of cost leadership anddifferentiation in their tentative model that is presented in Section 3.6. With the help oftheir tentative model and with Porter's typology as a basis for discussion, Nilsson andRapp (2005) define the term strategic congruence. This is consistent corporate, businessand functional strategies at all organizational levels which are appropriate to thecompetitive arena and to overall strategic aims. It is not only important to have fit withinthe company, but it is also important to achieve a fit between the firm's environment andits strategy.Nilsson and Rapp (2005) agree with Goold et al. (1994) that the parent has an ability tocreate value and to play an active role in creating an integrated strategy; to reach strategiccongruence. The parent can help to get strategy accepted throughout the company andpossibly to establish policies and constraints to regulate decisions of all units. In order tohave a competitive advantage there needs to be common business logic within thecompany (Nilsson & Rapp, 2005). Common business logic ensures clarity about whatmechanisms create value; where synergy potential exists between individual businessunits. Strategies at all levels should be based on this common business logic (Nilsson &Rapp, 2005). Common business logic can be found by using or defining a limited numberof critical success factors that are favorable to the creation of a uniform managementstyle.Moreover, Nilsson and Rapp (2005) have developed a tentative model that showspossibilities of fit between strategies on different levels. The model is built on Porter'stypology for both the corporate and business level. Nilsson and Rapp (2005) motivatetheir choice of this typology with that it has been empirically tested, that they areinternally consistent, as well as widely accepted among scholars. However, any chosentypology could have led to similar results and the same discussion of the importance ofstrategic congruence between organizational levels (Nilsson, Erik B., personalcommunication, 2011-05-11). Nilsson and Rapp (2005), suggest that there are twopossibilities for achieving fit with the help of combinations of strategies at the corporateand business level.One is to have a corporate strategy of activity sharing in combination with a businessstrategy of differentiation. Another fit is to have a corporate strategy of portfoliomanagement and a business strategy of cost leadership. Fit in this model means thatthese combinations have strategic congruence as well as integrated control. Fit may alsobe possible within the combination of activity sharing and cost leadership. All thesecombinations are shown in Figure 3-4 on the next page. 20
One Company as Corporate Strategy – A Case Study at Saab ABFigure 3-4 Nilsson and Rapp's Model(Source: Nilsson & Rapp, 2005, simplified)When the environment is turbulent, the combination of activity sharing anddifferentiation is suitable, according to Nilsson and Rapp (2005). Because of a turbulentenvironment, investments become more risky and corporate management needs to have along-term perspective. Moreover, the authors claim that the activity sharing strategyusually involves having a clear core competence in focus (Nilsson & Rapp, 2005). Thiscore competence often leads to great involvement of corporate management in thedevelopment of the business units. Goold et al. (1994) give an example of this when theysuggest that the primary task of corporate management is to co-ordinate activities andmake decisions to realize synergies. Nilsson and Rapp (2005), state that a long-termperspective and close collaboration makes activity sharing and differentiation anappropriate combination. The authors also claim that this close interaction betweencorporate and business-unit management is part of a learning process. This learningprocess can improve day-to-day management of the organization as well as help in thedevelopment of internal structures.The quest for harmonization and alignment in companies' businesses constitutes themutual characteristics of the chosen pieces of theory in the different approaches. Nilssonand Rapp (2005) claims that this is achieved by fit between strategies at corporate andbusiness unit level. This is strategic congruence and Nilsson and Rapp (2005) argue thatthere cannot be strategic fit without integrated control. 21
One Company as Corporate Strategy – A Case Study at Saab AB3.5 Balanced and Integrated ControlThe management control system of a company is a central tool used to formulate andimplement strategies (Nilsson, 2010). By integrated control Nilsson and Rapp (2005)mean that it facilitates a high degree of internal fit between strategies, internal structuresand expected performance of the organization. Integrated control exists when strategicplanning and follow-up at each organizational level are coherent throughout the firm(Nilsson & Rapp, 2005). One way of achieving coherence and internal fit is by using acommon frame of reference to create meaningful communication between different levelswithin the organization. "The purpose of integrated control is to facilitate the exchange of information between different organizational levels and decision-makers concerning strategic, tactical, and operating decisions." (Nilsson & Rapp, 2005:120)Integrated control is intended to help in choosing and implementing strategy. Commonbusiness logic, and thus a uniform set of concepts, is helpful in order to discuss theestablishment of an integrated control system and to show how it can create competitiveadvantage. According to Nilsson and Rapp (2005), there are several dimensions whichhave an impact on the possibility to establish coherent strategic planning and follow-up.Among these dimensions are tight and loose control, monetary and non-monetarycontrol, and the time horizon.Control can either be tight or loose and the corporate level's position on this continuumdepends on synergy potential (Nilsson & Rapp, 2005). The difference between tight andloose control lies within how the management chooses to plan and monitor the businessperformance. According to Anthony and Govindarajan (2007), tight control is exercised ifmanagement monitors the activities of business units frequently. Moreover, goals areoften short-term as well as specific and the follow up is detailed. On the other side, ifmanagement is characterized by limited involvement in day-to-day operations, control isloose (Nilsson & Rapp, 2005). Moreover, if follow-up is less frequent and less detailed,this is also a sign of loose control. Anthony and Govindarajan (2007) continue to explainthat if the budget is more of an instrument of communication and planning than abinding contract there is loose control. Nilsson and Rapp (2005) claim that manycompanies have had tight monetary control earlier, but now control is becoming moreand more flexible or loose. In addition to this, non-monetary information is becomingmore and more important and an essential element of management control.There needs to be a balance between financial and non-financial measures in order toimplement strategy and to measure performance. Nilsson and Rapp (2005) claim thatmanagement control and follow-up based strictly on monetary aspects share littlerelationship with the firm's goals and strategies. Moreover, Nilsson and Rapp (2005) 22
One Company as Corporate Strategy – A Case Study at Saab ABargue that firms who put this into practice will be losing competitiveness. The best knowncontrol model with both non-monetary and monetary measurements is the BalancedScorecard (BSC). This concept was introduced in 1992 by Robert S. Kaplan and David PNorton, and it is widely spread. The BSC is a performance measurement method thatincludes not only traditional financial measures but also qualitative measures such asemployee satisfaction, corporate mission and customer loyalty (Kaplan & Norton, 2001).In Sweden, the BSC method has been popularized by the books of Nils-Göran Olve (e.g.Olve et al., 2004). There are other models than the BSC which emphasize the importanceof non-monetary information, for example the Performance Pyramid (cf. Nilsson & Rapp,2005). An interpretation of this model is presented in the next section. It is not allcompanies that have implemented balanced control. Nilsson and Rapp (2005) claim thatthere are many firms who still today use the planning and follow-up procedures thatwhere criticized in the 1980s and led to models like the BSC. Nilsson and Rapp (2005)argue that this is probably one reason why some firms are unable to formulate andimplement value-creating strategies and therefore loose competitiveness.The dimension of time horizon also relates to synergy potential (Nilsson & Rapp, 2005).At the corporate level, the time horizon tends to be linked to synergy potential as well asthe corporate strategy which is related to this potential. Moreover, according to Nilssonand Rapp (2005) the time horizon is manifested in the design and use of managementcontrol. In short, these authors argue that it will be easier to establish integrated control ifall organizational levels conduct their activities on similar time horizons (Nilsson & Rapp,2005).Next, a way of implementing strategy and tools such as the BSC is introduced with thehelp of Kaplan and Norton's theory of The strategy-focused organization; How balancedscorecard companies thrive in the new business environment from 2001.3.6 Implementation of StrategyAnthony and Govindarajan (2007) mention that there are several tools to implement thedesired strategy. One of these tools is management controls, another is through theorganization's structure, the third is through the organizational culture, and the fourth isby management of human resources (Figure 3-5). 23
One Company as Corporate Strategy – A Case Study at Saab ABFigure 3-5 Framework for Strategy Implementation(Source: Anthony & Govindarajan, 2007)According to Kaplan and Norton (2001) it is important for companies to clarify thecorporate vision in order to be able to implement strategy. Goold et al. (1994) agree andexpand by saying that it is important to understand critical success factors in businesses.This is necessary in order to reduce the risk of causing accidental damage to the businessand to maintain fit and retain value creation. In order to implement strategy to reach thevision, it is important for a company to define critical success factors. At the bottom of theperformance pyramid (Figure 3-6) are the four perspectives that are commonly used inthe BSC. As seen in the figure, the four perspectives are financial performance, customerknowledge, business processes, together with learning and growth.Figure 3-6 The Performance Pyramid(Source: Logica, Linders et al., 2009, modified)The financial perspective reveals facts about the company's history, its past events.Moreover, it reflects how well the firm is doing in creating value for its owners (Nilsson &Rapp, 2005). A company's customers and business processes explain what activities thecompany is involved in right now. According to Nilsson and Rapp (2005), the customerperspective intends to show how relationships are managed and the business process 24
One Company as Corporate Strategy – A Case Study at Saab ABperspective relates to the efficiency of internal business processes. The learning andgrowth perspective should give a hint about the future of the company and whatknowledge is needed to move forward (Anthony and Govindarajan, 2007), as well as showhow the firm manages learning and innovation.These four perspectives are used to measure implementation of strategy. The keyperformance indicators from the operational level should build the critical success factorsfor the company which need to be achieved in order to implement and execute strategy.An implemented strategy will then move the company in the direction of the vision.Kaplan and Norton (2001) emphasize the importance of non-financial measurements,especially in turbulent business environments. Kaplan and Norton (2001) describe thatthere are two sides of strategy implementation and follow-up; one hard side with maps,measures, processes and procedures, and one soft side with leadership, culture andteamwork. The BSC is one way of showing a balance of these two sides.Moreover, according to Kaplan and Norton (2001), managing strategy is in many waysmanaging change. In order to manage strategy, it needs to be put in the center of theorganization; focus needs to be on strategy. Kaplan and Norton (2001) continue toexplain that the BSC can be used as a tool for implementation of strategy and that the useof tools like this result in a more strategy-focused organization. Strategy implementationcan be done in accordance with the five principals of the strategy-focused organizationmodel. When all these principals have been accomplished, the organization hastransformed into a strategy-focused organization and has an ability to execute its strategy(Norton, 2002). The five principals are: 1. Mobilize change through executive leadership 2. Translate strategy into operational terms 3. Align the organization to the strategy 4. Motivate to make strategy everyone's everyday job 5. Govern to make strategy a continual processFigure 3-7 shows the strategy-focused organization's readiness model, which is a usefultool to describe the organization's ability to execute and implement strategy (Brown,2002). As seen in the figure, all five principals can be evaluated on five different levels.The principal may not yet be under consideration; it may be considered but not yetimplemented; it may be acted upon; it may be fully implemented or the organization mayeven be best practice at it (Kaplan & Norton, 2001). 25
One Company as Corporate Strategy – A Case Study at Saab AB The Strategy-Focused OrganizationFigure 3-7 The Strategy-Focused Organization(Source: Kaplan & Norton, 2001)The first principal is to mobilize change through executive leadership; to define a visionand to create a corporate team that truly understands this vision. Kaplan and Norton(2001) describe that it is the executive management who takes the initiative for managinga change. The top leadership team needs to be committed to the change and experience acause for change; a burning platform is to be clearly articulated (Norton, 2006). Then, thewhole leadership team needs to be educated and engaged. After that follows adevelopment of a vision and an outline of a strategy. Usually, the customer plays animportant role in the change process and is a focal point. A change also leads to new rules 26
One Company as Corporate Strategy – A Case Study at Saab ABand roles and the authors claim that it requires integrated, cross-functional behavior toexecute strategy; it leads to understanding a new way of managing the organization(Norton, 2002). This is the starting point, Phase I, for a holistic view on strategy.The next two principals make up Phase II, which consists of design and rollout of thearticulated strategy through translation and alignment (Kaplan & Norton, 2001).The second principal is to translate strategy into operational terms and according toKaplan and Norton (2001) this can be done with the help of a strategy map. According toKaplan and Norton (2000), the key to executing a firm's strategy is to make peopleunderstand the strategy. This includes crucial but obscure processes like how intangibleassets will be converted into tangible outcomes. Kaplan and Norton (2000) argue thatstrategy maps can help organizations to communicate and visualize the strategy and showemployees how their individual work are linked to the overall objectives. This link cancreate a sense of accountability; that people of the organization feel involved and takeresponsibility for their actions in order to accomplish their specific targets. This increasescollaboration and coordination towards the goal of the company. A strategy map usuallyincludes the four perspectives of the BSC; financial, customer, business or internalprocesses, as well as the learning and growth perspective. Moreover, the strategy map is asummary of activities that a company performs in order to reach its targets. Anothermeasurement tool is the BSC. Both these tools are helpful when breaking down thestrategy into targets and initiatives. According to Norton (2006), targets needs to beestablished and initiatives should be rationalized. Once the measures have beendeveloped by top management it needs to be linked to the business units and to thesupport units (Norton, 2002).To align the organization to strategy is the third principal; there needs to be a fit betweenthe strategy and the organization. Preferably, there should also be goal congruence. TheBSC can be used to link corporate goals to business units and support units (Kaplan &Norton, 2001). A corporate role should be defined (Norton, 2006); in other words, aparenting style should be chosen. Moreover, to fully execute the strategy, the leadershipof each business unit needs to get comfortable with the approach (Norton, 2002). To putit differently, the corporate level needs to be aligned with the business units and in turn,the business units need to be aligned with the support units as well as external partners(Norton, 2006). Alignment is also necessary for the board of directors. Kaplan andNorton (2001) continue to explain that when appropriate measures have been articulatedit may lead to restructuring and to shutting down programs that do not impact the chosenmeasures. It requires the management to prioritize among investments.Since strategy is formulated from the top but executed at the bottom of an organization, itis important that everyone understands the strategy and that governance processes arelinked with strategy (Kaplan & Norton, 2001). This is described in the fourth principalwhich is part of Phase III, the last phase, to become a strategy-focused organization. 27
One Company as Corporate Strategy – A Case Study at Saab ABThe fourth principal is very important and may be the most difficult one. In order toexecute the strategy, Kaplan and Norton (2001) suggest educating and empowering all co-workers of the organization about the formulated strategy. It is important for activitiesand behavior to be changed according to the new strategic focus; a new way of managingmust emerge (Norton, 2002). Communication is key and it needs to be comprehensiveand continual as well as preferably personal, since personal communication has thegreatest impact. After strategy awareness is created through communication, personalgoals should be aligned, as well as personal incentives (Norton, 2006). Finally,competency development should be aligned.Finally, the fifth principal states that when a vision is clearly stated; the strategy toachieve it is identified; the strategy has been translated and accepted throughout theorganization; the internal processes should be adjusted accordingly. With the help of theBSC, strategy can be linked with the governance processes of budgeting, reporting,planning and reviews (Norton, 2002). Norton (2002) also claims that sustainable valuecan be achieved by analyzing soft values such as customer profitability, product quality,and employee skills. These and other soft values, such as leadership, culture andteamwork are as important as the hard measures, for instance financial measures ormeasures developed by tools such as strategy maps and the BSC. Once a BSC reportingsystem is established there needs to be frequent strategy review meetings and planning,budgeting and strategy needs to be integrated (Norton, 2006). Norton (2002) alsosuggests that operational management programs can be linked to the BSC to ensurealignment. Moreover, human resources (HR) and IT planning should be linked to strategyas well as knowledge sharing (Norton, 2006).In the next chapter, the five principals have been combined with the parenting typologyfrom Goold et al. (1994) as well as the terms strategic congruence and integrated controlfrom Nilsson and Rapp (2005) in a tentative model. 28
One Company as Corporate Strategy – A Case Study at Saab AB4 One Company - A Tentative ModelThis chapter introduces a tentative model that the authors of this thesis have developed.The model combines all the relevant terms and gives a visual presentation of thecomponents of the One Company concept. Since the One Company concept is somethingnot completely defined in academic literature, this part is a development of aperspective on One Company. This perspective has its base in academic theory and somerequirements have already been presented as components of the One Company concept.The following chapter first includes an explanation of what parenting style is significantfor this research project's perspective of One Company. Afterward, the possible strategicfits are described, which are requirements for One Company. The discussion then resultsin a model which relates the important components. An illustration of these componentsput together is then used as a starting point for analysis of Saab and its journey tobecome One Company, in the next chapter.Goold et al. (1994) claimed that the question "What is your corporate strategy?" mademulti-business companies uncomfortable back in the 90's. A lot has happened since, andmany companies today have a corporate strategy which includes becoming "OneCompany". It is argued in this thesis that a clear parenting advantage is a necessity to beOne Company. Without a parenting advantage the point of being One Company is lost,since it is a concept based on the corporate influence on business units. To influence abusiness unit without a parenting advantage will according to Goold et al. (1994) destroyvalue. Goold et al. (1994) also argue that a "feel" for the business is required and thatparenting characteristics need to fit the business units and that the corporate level mustbe able to seize parenting opportunities.Moreover, One Company is about making strategy emanate from the corporate level. Thisrequires an influence from corporate level over its business units and an organization thatis aligned and harmonized when it comes to processes, tools and work methods. This is toa large extent a completion of the strategy-focused organization model. Moreover, it isimportant that the company as a whole is strategy focused. It is possible to achievestrategic focus in some business units, without having the corporate level define strategiesthroughout the whole corporation. If this is the case, the company is perceived as asynergic corporation in the typology of corporate parenting styles (see Figure 4-1).In a synergic organization, the corporate level is used as a "sounding board", for thebusiness units to address questions to and raise issues in front of. By moving one step tothe right in the figure, thus increasing the financial control and decreasing the corporateplanning influence, there is the holding company. In this scenario, the corporate level hasno influence on business strategy at all. 29
One Company as Corporate Strategy – A Case Study at Saab ABFigure 4-1 A One Company Perspective on Parenting Styles(Source: Goold et al., 1994, modified)One Company is about the corporate level setting the game plan rather than autonomousbusiness units acting on their own. The One Company approach is a quest for corecompetence and therefore One Company is positioned as the strategic planning parentingstyle as can be seen in the figure. The main characteristic for strategic planning is that thecorporate level defines strategy, which is to be implemented throughout the wholecorporation. As mentioned earlier, in the strategic planning parenting style, the centerdrives strategy around important potential synergies and competences. The businessunits or business areas concentrate on implementation of strategy and assist withcorporate strategy. The business units are relatively few and related and the corporatescorecard needs to be comprehensive with both non-financial as well as financialmeasurements. The level of information at the corporate center is high.However, strategic planning and parenting value creation is not enough to be OneCompany. The thoughts from Goold et al. (1994), about how the parent imposes value, areimportant but the One Company perspective of this research project is viewed as an evenwider term. Moreover, the thoughts of Goold et al. (1994) can also be fairly unclear. Theparenting framework has an overwhelming focus on the corporate level and pays littleattention to levels below. Therefore it is argued that in order to be One Company, whatNilsson and Rapp (2005) call strategic congruence and integrated control has to beestablished as well. They emphasize that it is important for companies to have a fitbetween strategies at different levels within the organization and that these strategiesmust be harmonized. Nilsson and Rapp (2005) argue that it is also important that themanagement control systems are aligned and harmonized; that there is a fit between 30
One Company as Corporate Strategy – A Case Study at Saab ABmanagement control systems at different levels in the organization. It was showed in theprevious chapter what type of corporate strategy that fits with what business strategy. Theperspective of this thesis suggests that the corporate strategy should be activity-sharing inorder for an organization to be One Company. This is showed by the circle in Figure 4-2.Figure 4-2 A One Company Perspective on Nilsson and Rapps Model(Source: Nilsson & Rapp, 2005, modified)Nilsson and Rapp (2005) present different possibilities or company configurations whichare able to create strategic congruence and integrated control. However, Nilsson andRapp (2005) also have their limitations because their typology is largely based on thethoughts of Porter (1980, 1987).In this thesis, the One Company perspective emphasizes translating and breaking downstrategy into measurable pieces and also making strategy "Everyone's job". Therefore, thestrategy-focused organization model from Norton and Kaplan (2001) fills these gaps andtie Goold et al. (1994) together with Nilsson and Rapp (2005). These connections areillustrated in the tentative model (Figure 4-3). It describes a perspective of One Companyand it functions as a foundation for further discussion and analysis of Saab. To clarify,Saab is analyzed with the help of the five components in the pentagon. All of the fivecomponents are explained further after the figure. Similar to the strategy-focusedorganization's readiness model, the tentative model has five levels for each component. 31
One Company as Corporate Strategy – A Case Study at Saab AB One CompanyFigure 4-3 A Tentative Model for Illustrating a One Company Perspective1. The upper right side of the pentagon is the starting point of our model. The foundationof One Company is value added by the corporate parent. This side in the figure is acombination of parenting advantage from Goold et al. (1994) and of executive leadershipfrom Kaplan and Norton (2001). As presented earlier, strategic planning is the parentingstyle that represents the One Company perspective in this thesis.2. The upper left side is about how well the company manages to translate their strategyinto operational terms. There are several tools for translation of strategy, for instancestrategy maps and the BSC. This is a design issue of the firm's management controlsystem. However, the choice of tool is not essential; it is the end result that matters andthe design should result in integrated management control systems.3. The lower left side represents Nilsson and Rapp's (2005) perspective of strategiccongruence. It is seen as a necessity in order to be able to align the organization; thestrategy must be congruent from corporate- to business- and in the end too operationallevel. 32
One Company as Corporate Strategy – A Case Study at Saab AB4. The bottom is inspired by the strategy-focused organization model, but in the tentativemodel of this thesis it is also seen as an important design tool to create integratedmanagement control systems within the organization. To paraphrase Kaplan and Norton(2001) in the end it is the employees who execute strategy.5. The lower right side represents the use of the management control systems. There mustbe an integrated control within the business which means that there is a fit between themanagement control systems at all levels throughout the organization. This is essential inorder for firms to be One Company and it will help make strategy a continual process.This chapter has introduced the tentative model of this thesis. The model is used in theanalysis of Saab which is presented in Chapter 6. First, the empirical findings arepresented. 33
One Company as Corporate Strategy – A Case Study at Saab AB 34
One Company as Corporate Strategy – A Case Study at Saab AB5 Saab's Journey to Become One Company2In this chapter the case company Saab is presented. First, a short description is given ofthe company and its background; which includes a presentation of the company vision,mission and its strategic priorities. It is also presented how Saab translates the visionand strategy into operational terms. Then, we describe how the One Saab initiativestarted and show how cost savings is an important driving force. Moreover, Saab'scorporate influence is discussed as well as the company's core competence. Saab's neworganizational structure is a very important tool in order to accomplish the vision ofOne Company. This vision has also lead to major changes in IT-environment and theintroduction of a global management system.5.1 Introduction of SaabSaab AB, Svenska Aeroplan Aktiebolaget (in this thesis simply referred to as Saab), wasfounded in 1937. The company was established to meet a need in the domestic militaryaircraft industry in Sweden. Today, Saab serves a global market with high technologyproducts, services and solutions from military defense to civil security. There areoperations on all continents and Saab continuously develop, adapt and improve newtechnologies to meet the changing needs of their customers. The vision of Saab is: "It is a human right to feel safe." (Saab Group, 2010:9)Saab makes this vision possible through systems and solutions that increase security. Thecompany's quest since inception has been to keep society and people safe. The mission ofSaab describes how they work to achieve the vision: "To make people safe by pushingmental and technological boundaries." (Saab Group, 2010:9). The official corecompetence of Saab is described by the words of the CIO: "A lot of what we do, both in airplanes and in services is systems engineering – complex integrated system solutions, business management systems, decision support systems" (CIO)2 Unless otherwise explicitly stated this chapter is based on the following sources of information:Mats Hultin, CIO; Mats Ran, Head of Application & Business Integration; Sunil Joshi, Head ofGroup Quality & Environment; Martin Hjelm, Change Leader at Saab Aeronautics; and Erik B.Nilsson, PhD Linköping University. 35
One Company as Corporate Strategy – A Case Study at Saab ABSince January 1st, 2010, Saab has divided operations into a total of five business areas:Aeronautics, Dynamics, Electronic Defense Systems, Security and Defense Solutions,Support and Services. The division into five business areas was made in order to adapt tonew conditions in the industry and because the global defense industry is undergoing anextensive transformation. The change in organizational structure started as a market-driven initiative and the goal is to create a more market-oriented company that has anincreased focus on customers' future needs and requirements.In 2011, the strategy of Saab is focused on four priorities or long-term strategic goals: 1. Profitable growth- Evaluate current positioning and identify growth opportunities. 2. Performance - Work with efficiencies and continuous improvements. 3. Focused portfolio - Adapt the portfolio to areas with strong competitive advantages and growth opportunities. 4. People - To be an employer of choice in the global market. Our employees are the backbone of our offering and our growth. Figure 5-1 Saab's Strategic Priorities (Source: Saab Group, 2010:11)Saab's plan to achieve long-term profitable growth is to stay focused on establishedmarkets, such as the European countries, South Africa and Australia. Moreover, anintention is to establish a stronger presence in North and South America as well as Asia.Concerning performance, Saab focuses on efficiencies in operations. During the lastthree-year period, Saab's cost base was reduced with SEK 1.5 billion. In order to achievegrowth, investments in the portfolio will be prioritized. These investments imply bothproduct innovation, in addition to renewal and upgrades of existing products. Moreover,the foundation of the strategic goals is the people of the organization and this is visualizedin Figure 5-1. Saab's employees are considered to be the enabler of strategyimplementation. In 2010, the people priority was harmonized; overarching HumanResource (HR) processes were harmonized "to better address business-critical HRrelated issues" (Saab Group, 2010:13) 36


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41 Things In Tech We're Thankful For (Besides You)
Published 6:33 am, Thursday, November 22, 2012
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We're warm in our homes with family and friends – cozied up with a laptop, tablet, or phone right now – and we all have a lot to be thankful for this holiday.
At SAI, we're most thankful for you. Your make us possible.
Thank you.
Jay Yarow: iPhone 5 is fast, and the bigger screen is welcomed
Jay Yarow: Google working on self-driving cars. While I'm not sure it's core to Google's business, I'm happy someone is trying it.
Jay Yarow: My wife and I bought a Prius C this year. It's a perfect little car for us.
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