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EMBA 7 “THE UTILISATION OF SYSTEMS METHODOLOGY TO GIVE DIRECTION TO STRATEGY FORMULATION WITHIN HIGHLY COMPLEX ENVIRONMENTS”
PRESENTED TO THE GRADUATE SCHOOL OF BUSINESS UNIVERSITY OF CAPE TOWN
IN PARTIAL FULFILLMENT OF THE EXECUTIVE MBA BY
VINAY SOMERA FOR ASSOCIATE PROFESSOR TOM RYAN
CONFIDENTIAL
i
Student no: SMRVIN001 Date issued: 01 March 2007
PLAGIARISM DECLARATION
I know that plagiarism is wrong. Plagiarism is to use another’s work and to
pretend that it is one’s own.
I have used the Portable MBA convention for citation and referencing. Each
significant contribution to, and quotation in, this assignment from the work, or
works, of other people has been attributed, and has been cited and referenced.
This assignment is my own work.
I have not allowed, and will not allow, anyone to copy my work with the intention
of passing it off as his or her own work.
SIGNATURES: VINAY SOMERA
ii
ACKNOWLEDGEMENTS Two roads diverged in a wood, and I – I took the one less traveled by, And that has made all the difference. Robert Frost This road could not have been traveled upon without the sacrifice made by my
wife Sadhana, my children, Shreya, Pryaska and Ruhan. This paper is dedicated
to them for their support and tolerance in allowing me the time to devote to the
EMBA.
This road would not have been traveled upon had it not been for the insistence of
Dirk Theuninck the former Operations Executive Refining. He mentioned that I
would thank him in the end, and I can now appreciate the wisdom behind his
words.
This road would have been impassable had it not been for the support of my
company Impala Platinum Limited. The forthright contributions of the
management team were crucial to ensure real learning took place. I am indebted
to my colleagues, Marguerite Du Preez, Mahendra Boodhram and Louise
Grobbelaar who were always prepared to assist whenever I needed help.
The journey through the EMBA with its increasing levels of chaos, complexity
and abstraction inspired by Tom Ryan was attenuated through the multiple
perspectives brought by a great group of classmates.
Finally, my thanks to the EMBA academic team, Ailsa Stewart-Smith and in
particular, Tom Ryan for a truly life changing course design.
iii
ABSTRACT The situation sets the context for this paper by identifying the business
environment as one of exponentially increasing complexity where the pathways
of emerging futures are less predictable than at any time in the past.
Implats is described as a well managed platinum mining and refining company
that is producing huge profits on the back of an extended commodity boom
inspired by the same lack of predictability described above. The price driven
profit euphoria combined with the sale of certain company assets has resulted in
Implats returning excess cash to shareholders at unprecedented levels causing
the share price to rocket as investors happily await the next round of dividends.
Strategy in this environment is focused on the core platinum mining model with
innovation restricted to increasing the efficiency and reducing the cost of the
operations. The underlying premise is that the future will be the same as the
past. The current business model however, is increasingly coming under threat.
Apart from having a limited mine lifespan in the lease area, the mining costs are
increasing as the resource gets progressively deeper, the Zimbabwean
investment thought to represent the future of the company is subject to huge
political uncertainty and the toll refining business is increasingly subject to
competition from new entrants. Management is coming under pressure from
multiple stakeholders each with a different worldview. Government is trying to
manage the resource depletion to ensure long term country sustainability via
interventionist legislation. The context for moral renewal and environmental
sustainability changes the managerial strategic playing field while shareholders
pressurize management into managing for maximization of short term returns.
The high level concern makes a claim that the current strategy formulation
process lacks the variety of perspective to attenuate the emerging environmental
complexity resulting in limited evolution of corporate strategy. In order to
iv
establish the validity of this claim, the current strategy formulation process within
the company was investigated via unstructured interviews with those involved
and those uninvolved in the process. An emergent sense of unease was
revealed that we should be doing more to ensure the relevance of the company
in the future. The interviews highlighted that the current strategy formulation process could be
regarded as elitist harnessing only a tiny portion of the organizations creative
energy, with strategic planning the order of the day resulting in the curse of
incrementalism. The excellent performance of the company has engendered a
sense of complacency reducing any impetus to stretch the company beyond its
current shareholder and core competency focus. Concern was expressed about
the level of cash returned to shareholders in relation to the future sustainability of
the company. While there are employees within the company straining against
the bit of strategic dogma, there are no processes that allow them a voice into
strategy formulation. Information flow down the ranks is constrained which further
exacerbates the concern. The interviews therefore confirmed the validity of the
high level concern.
Interrogating the problem formulated through the four paradigm lenses to ensure
critical systems thinking and correct problem formulation led to a change in the
core variable to ‘requirements for sustainable strategy formulation’.
Thus the dissertation aims to address the research question of how the mindset
driving strategy formulation could be changed such that the devolution of a new
management model designed to ensure sustainability in an age of chaos is
facilitated.
The creative holism approach incorporating the structuralist and interpretive
paradigms, its associated metaphors and grounded theory as the research
method of choice was utilized to draw out the answer. Several systems
methodologies including complexity theory, soft systems methodology, critical
v
systems heuristics, system dynamics and cybernetics found relevance in
formulating the answer.
What was first crucially identified is that a mindset change at the strategy
formulation level needs to occur to strategize into an unknowable future. What
worked in the past will not work in a future of exponentially increasing complexity.
The role of the company is evolving away from the dominant shareholder wealth
maximization model towards a model based on sustainability and multiple
stakeholder goals. The rationale for existence of the company in this new
paradigm has to recognize the symbiotic interaction between wealth
maximization of the company with prosperity of the nation. The role of the leader
is to sense and recognize the emerging patterns of change and position the
company accordingly. Increased mindfulness is core to the new paradigm and
imbuing the company with a new set of lenses to view things differently is
required to the change in strategy formulation process towards inspiring
innovation and creativity essential to maintain relevance in an evolving world.
The second part of the answer looks at how this knowledge can be made
actionable. It answers the unwritten question “How can you create continuous
renewal within a company?” The answer revolves around people being
recognized as the company’s key competency in this age of surplus capital and
scarce skills. The actionable model recommends a new leadership style where
the role of the chief executive is about setting a purpose for the firm, defining the
core process by which value could be created and importantly developing and
nurturing people so that they could fulfill their potential. It suggests empowering
employees to unlock their innovative and creative abilities by changing the
structure of strategy formulation via increased interdependence, enhanced
horizontal communication flows and a new culture of trust. Additionally, the
model recommends the creation of a strategy and scenario planning section
within the confines of the company structure.
vi
A small win is then identified that illustrated that the core behavioural loop of the
actionable model was found to work as envisaged during an actual intervention
exercise observed by the author within the company. This served to corroborate
the efficacy of the answer devised.
The relevance of the concern is established by highlighting the increase in
complexity of the environment against the low levels of diversity of the current
strategy formulation process. This suggests that the lack of requisite variety to
cope with the huge variety of the environment has lead to a strategic focus that is
too narrowly defined to ensure the long term sustainability of the company.
Utility is evidenced through the development of a model that unlocks creativity
and innovation from employees and ultimately facilitates organizational learning
so important in ensuring corporate renewal. The utility of the answer is
corroborated by the effectiveness of the small win as detailed in the report.
Validity is established by proving that the research is credible, dependable,
transferable and confirmable. The wide variety of methodologies employed, the
range of sources consulted, the interrogation through various paradigmatic
lenses and the data, method and theory triangulation employed to ensure
sufficient breadth and depth of the report also guarantee its validity.
The final part of the evaluation involves assessing the findings through the ethics
inspired lenses of utilitarianism, justice, fairness, rights and caring to confirm the
ethicality of the findings.
The dissertation ends with a review of the core learning by the author during the
process and a critique of the dissertation. The dissertation proposes a new model
of strategy formulation that could be interpreted as being idealistic, contrary to
the current wealth creation models, giving too much attention to other
stakeholder perspectives and almost heretical in respect of some of the changes
suggested. It is however one that will intuitively makes sense to the visionary
leader and will start to come into its own as existing paradigms are shown to fail.
vii
TABLE OF CONTENTS
PLAGIARISM DECLARATION .............................................................................i
ACKNOWLEDGEMENTS ....................................................................................ii
ABSTRACT .........................................................................................................iii
TABLE OF CONTENTS .....................................................................................vii
SECTION A: INTRODUCTION............................................................................1
CHAPTER 1: FOCUS OF THIS RESEARCH ..................................................1 CHAPTER 2 : LAYOUT OF THIS PAPER...................................................7
SECTION B: THE SITUATION..........................................................................10
CHAPTER 3: THE INCREASING LEVELS OF COMPLEXITY IN THE PLATINUM INDUSTRY ..................................................................................10
3.1 BUSINESS ENVIRONMENT CONTEXT ....................................................10 3.2 IMPALA PLATINUM LTD: A COMPANY OVERVIEW...............................12 3.3 THE CURRENT IMPLATS STRATEGY FORMULATION PROCESS .......17 3.4 SURFACING ADDITIONAL PERSPECTIVES ON THE PROBLEM SITUATION .............................................................................................................18 3.5 SUMMARY AND CONCLUSION ................................................................27
SECTION C: THE CONCERN...........................................................................29
CHAPTER 4: PRACTICAL PROBLEM FORMULATION..............................29 4.1 High level concern.....................................................................................29 4.2 THE INTERVIEW PROCESS......................................................................33 4.3 UNINTENDED CONSEQUENCE................................................................34 4.4 CONCERNS EMANATING FROM THE INTERVIEW PROCESS ..............34 4.5 EVALUATION OF THE INTERVIEW RESULTS USING HOBEKE’S DOMAINS OF WORK AND THE VIABLE SYSTEM MODEL AS DIAGNOSTIC TOOLS ....................................................................................................................45 4.6 POTENTIAL COST OF NOT CORRECTING THE CONCERN ..................48 4.7 THE CONCERN EXPRESSED ...................................................................49 4.8 PRACTICAL PROBLEM FORMULATION ................................................49
CHAPTER 5 : ENSURING THAT THE CORRECT PROBLEM WAS FORMULATED ...............................................................................................54
5.1 CONTEXT ...................................................................................................54 5.2 PARADIGM ANALYSIS TO ENSURE COMPLIANCE WITH MITROFF ...57 5.3 SUMMARISED MITROFF ANALYSIS ENCOMPASSING ALL THE PARADIGMS ..........................................................................................................57 5.4 REVISED PROBLEM FORMULATION ......................................................59 5.5 CONCLUSION ............................................................................................60
viii
SECTION D: QUESTION ..................................................................................61
CHAPTER 6: RESEARCH QUESTION FORMULATION..............................61 CHAPTER 7: FORMULATING THE RESEARCH PROBLEM ......................64
SECTION E: THE ANSWER .............................................................................67
CHAPTER 8: BACKGROUND TO THE ANSWER........................................67 CHAPTER 9: THE CONCEPTUAL MODEL..................................................71 CHAPTER 10: THE ACTIONABLE MODEL .................................................77 CHAPTER 11: A SMALL WIN.......................................................................82
SECTION F: RATIONALE.................................................................................84
CHAPTER 12 : DESIGNING THE RESEARCH FRAMEWORK..................84 12.1 APPROACH FOLLOWED. .........................................................................85 12.2 MODE OF THINKING .................................................................................87 12.3 PLURALITY OF SYSTEM APPROACHES – CREATIVE HOLISM ...........88 12.4 MITROFF ANALYSIS .................................................................................95 12.5 RESEARCH METHODS (adapted from EMBA module 6 course notes)96 12.6 TRIANGULATION....................................................................................100
CHAPTER 13: RESEARCH FRAMEWORK APPLIED ...............................101 CHAPTER 14: LITERATURE REVIEW UNDERPINNING THE ANSWER .106
14.1 CONCEPTUAL ANSWER.........................................................................107 14.2 ACTIONABLE ANSWER ..........................................................................119
CHAPTER 15: SUPPORT FOR CONTINUOUS ORGANISATIONAL RENEWAL - LEARNING FROM THE PAST ................................................130
SECTION G: EVALUATION............................................................................131
CHAPTER 16: EVALUATION......................................................................131 16.1 RELEVANCE ............................................................................................131 16.2 UTILITY .....................................................................................................132 16.3 VALIDITY ..................................................................................................134 16.4 ETHICS .....................................................................................................137
CHAPTER 17: KEY LEARNING FROM THE EMBA...................................141 CHAPTER 18: CRITIQUE OF THIS DISSERTATION.........................................145
SECTION H: REFERENCES...........................................................................148
CHAPTER 19: REFERENCES ....................................................................148 APPENDIX ONE : 4 D DEFINITIONS..........................................................154 APPENDIX TWO (Interview questions and results of the interview process including grounded theory data coding) ....................................166 APPENDIX THREE – INTER-RELATIONSHIP DIAGRAPHS AND CAUSAL LOOP DIAGRAMS........................................................................................185 APPENDIX FOUR: SCENARIO PLANNING PROCESS.............................191
ix
APPENDIX FIVE: DETAILED PARADIGM ANALYSIS ..............................196 APPENDIX SIX: VALIDATION OF THE INTERVIEW RESULTS................208 APPENDIX SEVEN: ADDITIONAL LENSES SUPPORTING THE ANSWER......................................................................................................................217
LIST OF FIGURES Figure 1: Value creation diagram .....................................................................2
Figure 2: The management context..................................................................3
Figure 3: The intervention level of this research document (adapted from EMBA course notes)...........................................................................................4
Figure 4: Recursion level of the system in focus............................................5
Figure 5: The research process........................................................................6
Figure 6: The dissertation layout......................................................................7
Figure 7: Strategy – environment matrix .......................................................11
Figure 8: Implats group structure...................................................................13
Figure 9: Implats FY06 financial performance (adapted from the FY06 annual report)....................................................................................................15
Figure 10: Behaviour over time graph explaining the SA governments concern..............................................................................................................23
Figure 11: Platinum supply and demand statistics (adapted from Johnson Matthey Platinum 2006 interim review) ...........................................................24
Figure 12: Platinum demand by region..........................................................25
Figure 13: Stakeholder analysis matrix – adapted from Savage .................26
Figure 14: Rich picture depicting the situation .............................................27
Figure 15: Behaviour over time graph of the core variable..........................30
Figure 16: Summary diagram of the high level concern ..............................31
Figure 17: Drivers and restrainers of strategy formulation process ...........35
Figure 18: Concern force field analysis .........................................................36
Figure 19: Current Implats strategy formulation canvas..............................40
Figure 20: Initial concern CLD ........................................................................44
Figure 21: The Hobeke Work System lens.....................................................46
Figure 22: A Viable systems model depiction of the interview results .......47
x
Figure 23: Behaviour over time CLD of the concern .....................................53
Figure 24: The Creative Holism model (adapted from Jackson 2003).........55
Figure 25: Revised practical problem CLD.....................................................59
Figure 26: Mitroff’s four perspectives on any problem. ................................61
Figure 27: Revised drivers and restrainers of strategy formulation process............................................................................................................................67
Figure 28: Conceptual answer CLD.................................................................76
Figure 29: Actionable model answer CLD ......................................................80
Figure 30: Post intervention strategy formulation canvas............................81
Figure 31: CLD loop extracted from actionable model depicting area of influence of small win.......................................................................................82
Figure 32: Potential research framework.......................................................85
Figure 33: Procedural steps of grounded theory ...........................................98
Figure 34: Dissertation research framework constructed...........................101
Figure 35: Stacey’s creativity web.................................................................106
Figure 36: Platinum counters price movements (2007)..............................116
Figure 37: Scenario planning matrix ............................................................123
Figure 38: Concern ID.....................................................................................185
Figure 39: Revised concern CLD...................................................................186
Figure 40: Conceptual answer ID ..................................................................187
Figure 41: Conceptual answer CLD...............................................................188
Figure 42: Actionable answer ID....................................................................189
Figure 43: Actionable answer CLD................................................................190
Figure 44: Environmental stakeholder CATWOE.........................................205
Figure 45: Critical systems heuristics applied to the answer.....................207
Figure 46: Behaviour profiles in the creative zone at the edge of chaos...220
Figure 47: CLD of IRS formation....................................................................224
1
SECTION A: INTRODUCTION
CHAPTER 1: FOCUS OF THIS RESEARCH The goal of this research report is to add value at the strategic level to a highly
successful platinum major. It assumes that the primary readers (apart from the
examiners) will be the management level responsible for plotting the strategic
course of the company. Booth et al (2003) suggests that a report of this nature
must look at what the readers know and don’t know, what is accepted and what
they question. It then attempts to answer the questions in a way that lets the
readers see how the claim solves their problems and ultimately furthers the best
interest of the company.
With the company carrying the cost of the studies on the author’s behalf, it is
critical that the outcomes of the process add equivalent value to the company at
the practical level. This is the dilemma faced in this dissertation i.e. to walk the
line between practical relevance to business managers and academic relevance
to the examiners.
This paper examines a Platinum major mining company using various system
tools and insights gained to date via the EMBA process. The process has been
emergent that is to say that the process has been allowed to take its own
direction as new information and knowledge come to hand. The methods used
can be influenced by the problem owners in the area of concern (interpretive
paradigm) and the stakeholders (emancipatory paradigm) which are common to
mode two research (Gibbons et al – 1994). The author is a senior manager within
the company under investigation (Impala Platinum LTD) and hence most of
learning has been specific to the company.
Value creation for a business organization occurs when a company’s distinctive
competencies overlap with a broad social need as per the diagram below.
2
Figure 1: Value creation diagram
Meeting this need creates wealth for the company as well as value for the
consumers. The only continuity in this entire process is change. The broad
market is continually evolving, customer needs are changing, and the company’s
competencies are being constantly eroded by competition, technology and
threatening obsolescence. In this situation, an organization can only remain
viable if it can continue to evolve its distinctive competencies in line with the
changing business environment to avoid obsolescence of the company itself
The context within which this research has been carried out is primarily at level
five and six of Hobeke’s (1994) domains of work as represented in figure 21 on
page 46, which is the overlap of the value systems and innovation domains of
work. The broad social need in this instance refers specifically to the needs of the
country and government in terms of macro-economic objectives.
CONTINUAL EROSION OF DISTINCTIVE COMPETENCY
DISTINCTIVE COMPETENCIES BROAD SOCIAL NEED
VALUE CREATED ------ COMPANY WEALTH
CONTINUALLY CHANGING
FIG 1 : Value creation diagram
3
Figure 2: The management context So in terms of the management context diagram above, the paper is biased
towards the interaction between management, the political environment, the
physical systems environment, the socio – techno system and the primary
organizational systems. It is also noted to be firmly rooted within the normative
level of management. The cybernetic view as expressed by Stafford Beer’s
Viable Systems Model (VSM) as reflected in figure 22 would indicate that this
work resides at the levels four and five which is the development and policy
levels.
Management
Techno – personal
system
Socio-techno system
Political systems
Physical systems
Technology system
Primary organisationalsystems
Secondary organisational systems
Individual actors and their systems
The context of management
4
Figure 3: The intervention level of this research document (adapted from EMBA course notes) The system in focus for the purposes of this dissertation is Impala Platinum
Limited situated at recursion level one. At recursion level zero is the wider group
of platinum producing and refining companies as well as global consumers and
recyclers of the metal. At recursion level two resides all the Implats subsidiaries
and operational divisions.
Normative management
Strategic management
Operational management
Policy
Intelligence
Control
Spiritual
Value systems
Innovation
Efficiency
Time horizon
PROFIT
SOLVENCY
New value potential
Development
Viability
VSM
Hobeke’sDomains of management
Levels of management
Reference variables
Intervention level of this paper
5
Figure 4: Recursion level of the system in focus The paper has been written utilizing the square framework which progressively
narrows down the area of research until a practical problem can be identified and
solved utilizing the models developed. The model has been created at a high
level of abstraction before moving down into potential practical applications .This
is supported by Checkland (1981) via the Soft Systems Methodology which
argues against narrowing down the area of research too soon.
Overall platinum industry
Impala Platinum Ltd
Various Implats operational units
Recursion Level zero
Recursion Level one
Recursion Level twoSystem in focus
6
Figure 5: The research process A major focus of this dissertation is on the different mental models stakeholders
and role players have and bring to every situation. The values and experiences
that colour their every interaction are referred to as their particular worldview.
Jackson (2003) advises that if you intervene or manage purposeful systems, then
resistance to change of entrenched worldviews become critical. If the only
change that can take place occurs within the context of an existing worldview,
then first order learning is achieved. If however the mental model itself can be
changed, then second order learning is possible, and this is the purpose of the
dissertation. My worldview has been changed via the EMBA, and I am attempting
to effect a change to the prevailing strategy formulation worldview of my
company via this piece of research.
Topic
ConcernSituationSituation
Practical Problem
Research Question
Research ProblemResearch answer
Actionable Knowledge
Stage one
Stage two
The Research Process
Narrowed down to
Explains
Incurs costs in a
Helps to solve
Leads to
Motivates
Defines
Finds
Results in a
SituationSituation -background & contextConcernConcern –
why it is a concern and need attention
Rationale & appendicesRationale & appendices – validates the answer
Question Question – How it flows from the concern & how a plausible answer will deal with the concern
AnswerAnswer – how it answer the question and deals with the concern
Adapted from EMBA course notes
7
CHAPTER 2 : LAYOUT OF THIS PAPER
SECTION CHAPTER TOPIC A - Introduction 1
2 Focus of this research Structure of this paper
B - Situation 3 The increasing levels of complexity in the platinum industry
C - Concern 4 5
Practical problem formulated Ensuring that the correct problem was formulated
D - Question 6 7
Research question formulated Formulating the research problem
E - Answer 8 9 10 11
Background to the answer The conceptual model – phase one answer The actionable model – phase two answer A small win
F - Rationale 12 13 14 15
Designing the research framework Research framework applied Literature review underpinning the answer Support for continuous organizational renewal – learning from the past
G - Evaluation 16 17 18
Evaluation Key learning from the EMBA Critique of this dissertation
H - References 19 References Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6 Appendix 7
4 –D Definitions Results of the interview process and data coding ID’s and CLD’s constructed Scenario planning process Detailed paradigm analysis Validation of the interview results The Ralph Stacey complexity lens, The Gary Hamel strategy lens and organizational learning from Implats past corporate renewal.
Figure 6: The dissertation layout
8
The situation draws the boundaries for this research document. It sets out the
background and context for the dissertation as well as teasing out multiple
stakeholder perspectives that apply.
The high level concern located within the context of the situation highlights the
author’s personal perspective on the relevance of the current strategy formulation
process. Additional evidence is then sought via detailed interviews with various
role players within and without the Implats corporate setup. The concern
elaborates on why it is a concern as well as the consequences of not dealing with
it, before the practical problem causing the concern is developed. To ensure
critical thinking, the practical problem is tested utilizing paradigm analyses and
Mitroff’s E3 error framework.
The section on the question describes the evolution of a single question such
that an answer to the question will solve the practical problem and alleviates the
concern. The research problem formulated highlights what is not currently known
to answer the question.
The answer then details the mindset change required to strategize into an
uncertain future as a conceptual answer before detailing a practical model that
will ensure the relevance of the company going forward. A small win is then
described that provides evidence that the answer does work within the corporate
environment.
The rationale outlines the available choices for constructing a research
framework before explaining the framework developed guided by the question
raised. The rationale further details the theoretical underpin provided for the
answer by the results of the literature review and finally details a historical case
study of a corporate regeneration process successfully carried out by the
company 12 years ago.
9
The evaluation section argues for the relevance, the utility, the validity and the
ethics of the research. The author’s personal development through the EMBA
process is reflected upon and the dissertation is critiqued for its potential
strengths and weaknesses and future applicability.
10
SECTION B: THE SITUATION
CHAPTER 3: THE INCREASING LEVELS OF COMPLEXITY IN THE PLATINUM INDUSTRY
This chapter describes the business environment within which Implats operates
in and draws a boundary wherein the area of concern is located. The intent of
this chapter is to highlight the increasing level of complexity in the contextual
environment that those responsible for strategy formulation within the company
need to attenuate via the strategy formulation process. The chapter utilizes the
three lenses inherent in the triple bottom line namely the environmental, the
social and the economic lenses to evaluate the current PGM business
environment. Soft systems methodology is utilized to tease out various
stakeholder perspectives on the problem situation.
3.1 BUSINESS ENVIRONMENT CONTEXT
The universally accepted view of the current environment in which businesses
operate in is one of exponentially increasing complexity. Latterly, an increasing
number of management scholars have begun to classify the environment as one
of chaos and have began investigating ways of operating in the chaos dominant
environment such that the ‘relative calmness’ of ‘the edge of chaos’ is obtained.
Jackson (2003) argues that change is a product of our era. To remain viable an
organization must respond to an environment that is constantly shifting at an
increasing rate. The rate of technological innovation is only rivaled by the rate of
technological obsolescence. Governmental regulations and legislation designed
to bring a semblance of stability to the world invariably have the opposite effect.
Customer needs are evolving in step with technological changes and competition
has become quintessentially global. Social norms and values are transforming
and the looming spectre of global warming and ‘holes in the ozone layer’ ensure
11
that the focus of management teams has to shift towards to wider context of
sustainability as well as new opportunities afforded by the changing business
environment.
Figure 7: Strategy – environment matrix
In this environment of escalating change and huge diversity, management teams
often turn to consultants to help reduce some of the complexity in the
environment or break it down into manageable chunks such that it can be
analysed as the prelude for developing relatively simple solutions. This is
classical reductionist thinking. Jackson (2003) claims that invariably the simple
solutions inspired by reductionism fail because they are not holistic enough due
to the fact that they concentrate on the parts of the organization rather than on
the whole. The consequence of this is the crucial interactions between the parts
are ignored. Wheatley (2006) confirms that this turbulent world makes a mockery
STRATEGY/ENVIRONMENT MATRIX
Knowable environment
Known environmentChaos
Complex environment
Cause and effect relations repeatable, perceivable and predictable
Legitimate best practice
Standard operating procedures
Process re-engineering
Sense – categorise - respond
Cause and effect are separated over time and space
Analytical/reductionist
Scenario planning
Systems thinking
Sense – analyse - respond
No cause and effect relationships perceivable
Stability focused interventions
Enactment tools
Crisis management
Act – sense - respond
Cause and effect are only knowable in retrospect and do not repeat
Pattern management
Perspective filters
Complex adaptive systems
Probe - sense - respond
Adapted from Cynefin – David Snowden
12
of our plans and predictions such that we need a new worldview to navigate
these chaotic times. Unfortunately, the tendency for management is to use old
maps and habits to make sense of the increasing complexity leading to focus on
the wrong areas and blindness to significant developments. Rosenhead (1998)
claims that given the effective unknowability of the future, the assumption of
management that their job is to decide where the organization is going, becomes
a dangerous delusion.
The goal of strategy in this context is to ensure sufficient managerial resource
variety such the attendant complexity of the environment is attenuated to the
extent that the environmental context can be shifted to the knowable environment
or at the very least, to the edge of chaos.
3.2 IMPALA PLATINUM LTD: A COMPANY OVERVIEW.
Impala Platinum Ltd (Implats) the second biggest producer of platinum in the
world today at two million ounces refined platinum employs a staff of
approximately 31 500 people. The company’s platinum mines are based in land
leased from the Bafokeng who in return recently converted their royalty payments
into a 13.4% stake in Implats which gives them access to Implats assets beyond
the lease area. Impala is resource constrained in that its current mines only have
a forty year lifespan. The largest producer in the world namely Anglo Platinum
controls the bulk of the prime reserves of platinum in South Africa.
The Implats platinum resource from the lease area (regarded by investors as the
jewel in the crown) is getting progressively deeper as the resource is steadily
depleted. The problem faced by management is that the associated costs of
mining at progressively deeper levels are increasing rapidly. Additionally, the
current mine resource in the lease area only has a forty year lifespan. This is
essentially the biggest challenge faced by the company at the current time. Not
having access to the prime deposits meant that the company has had to innovate
13
in many areas related to improving its cost and efficiencies of mining and refining
of precious metals to the extent that the company is recognized as an industry
leader in this regard. The spin-off from the above is that the focus of
management has remained firmly entrenched in the added value domain
functioning at levels one, two and three of Hobeke’s (1994) domains of work.
.
Figure 8: Implats group structure
Apart from the problem raised above, the platinum output from the company’s
own mines at 1.1 million ounces per annum was also insufficient to fill the two
million ounce productive capacity of the operations. A situation if left untouched
would result in very high unit operating costs (i.e. you incur the full capital cost of
operating the entire plant, but only use a portion of the plant). In the early
nineties, the company found itself close to bankruptcy. The company embarked
on a corporate renewal program called ‘FIXCO’ embodied by the internally
famous slogan ‘one team one vision’ to rescue the fortunes of the then ailing
company. Resulting from the initiative and in an effort to solve the joint problems
IMPLATS
Mine to marketoperations
Impala refiningservices
Strategicholdings
Impala platinum
Marula platinum
Zimplats
Mimosa
Toll refining
Concentrateofftake
AquariusPlatinumLimited
AquariusPlatinum
SA
Two rivers
14
of a limited resource base and unused capacity, Implats in 1998, created a toll
refining vehicle called Impala Refining Services (IRS) and also invested heavily
in the Great Dyke ore body in Zimbabwe
The creation of IRS has been wildly successful to the extent that the division
currently contributes 900 000 ounces to the company’s two million ounce refined
capacity. This has been achieved by setting up joint ventures with junior mining
companies who do not have the expertise or capital to process the mined metal.
IRS has furthermore developed its autocatalyst recycle business to the extent
that it is one of the largest recyclers of platinum from spent autocatalysts in the
world. The catalyst recycling field is a dynamic, fluid environment, where the only
continuity is change itself. Strategically the potential growth in the overall catalyst
recycle market (both autocatalyst and industrial catalyst) is a potential risk to ex-
mine supply in terms of its ounce replacement potential. This therefore has to be
the recipient of visionary practice characterized by innovation at level three, four
and five as per Hobeke’s (1994) domains of work theory.
The investment in the Great Dyke platinum resource in Zimbabwe provides
Implats with ex-mine growth and longevity beyond the lifespan of the South
African operations and is essentially an investment for the future, albeit an
investment under threat due to the chaotic and highly uncertain political
environment in Zimbabwe. Apart from the lack of guarantee of tenure, an
emergent threat to the Zimbabwean investment has been the interest shown by
Chinese and Russian companies in the resource as well as the keenness shown
by the Zimbabwean government to deal with the Chinese.
The problem of operating in countries with repressive governments is one of the
most complex problems that businesses like Implats face. It represents the
conflict that arises from the corporate existential and systemic perspectives
(Mitroff 1998). For Implats, dealing strategically within the complexity and chaos
that is current day Zimbabwe is underscored by the fact that the ore body is vital
15
for the longevity of the company. From a systemic perspective however, the
issue confronting the company is whether or not the actions in the small context
hold in the large? Does the need for long term survival of the company offset the
ethical dilemma of operating in a country with a repressive government? This
adds to the complexity of the contextual environment as experienced first hand
by the incumbent Implats CEO David Brown when he was questioned about the
ethics of operating in Zimbabwe during a Moneyweb interview (16th February
2007).
The past 5 years has witnessed a commodity boom unlike any seen in the
industrial age fuelled by the growth and subsequent demand for resources from
the Chinese and to a lesser extent the Indian economies. Prices of precious and
base metals have soared to unprecedented levels and Implats with its high
efficiency and low cost business model has reaped the benefits, producing
exponential increases in profits year on year.
Implats financials FY 2006
RmSales 17,500.2Cost of sales 10,185.2Gross profit 7,315.0Tax 2,616.2Net profit 4,345.4
employees cost 3,163.3Dividends paid 5,467.9 Figure 9: Implats FY06 financial performance (adapted from the FY06 annual report) The half year profits from the 2007 financial year actually exceeded the full year
profits for the previous year indicated above.
The company returned 5.5 billion rand to shareholders during the previous
financial year continuing on a tradition of returning money to shareholders over
the past few years. The current payment included a once off special dividend of
3.6 billion rand from the sale of the company’s stake in Lonplats. The noteworthy
16
point here is that in selling of an asset (to help gain credits towards the
government’s 26% BEE target), the company has not found a replacement
investment for the proceeds of the sale, choosing rather to return the money to
shareholders who have made spectacular returns from their investments both
from dividends and capital growth.
In keeping with the requirements of the King II code on integrated sustainability
reporting, the recommendations of the global reporting initiative (GRI) as well as
maintaining its existence on the social responsibility index (SRI), Implats
produces a Corporate Responsibility Report integrating the principles of the
triple-bottom-line. The dominant focus of the company in this regard is meeting
all legislated targets with respect to employment equity, black economic
empowerment, emission levels etc, thereby supporting the company’s ambition
to be a good corporate citizen.
Being the second largest platinum producer, Implats has been involved in
exploration of major and prime long term deposits. This has meant that many
smaller deposits have slipped below the radar of Implats and the other platinum
majors. The result of this lack of focus, allied with governments ‘use it or lose it
policy’ and ironically supported by Implats creation of its toll refining vehicle has
resulted in a stampede of Canadian and Australian companies (with BEE links)
securing and exploiting these deposits. The plethora of new ventures coming to
the fore especially in the current metal price regime has resulted in a burgeoning
impetus for new smelting and refining capacity as the minor platinum companies
try to reduce their reliance on what they perceive as onerous refining terms
quoted by the platinum majors (primarily Implats). A major strategic development
supporting this alliance view is the impending completion of the first phase of
Heraeus AG’s (German based platinum refiner) new PGM refinery located in Port
Elizabeth.
17
3.3 THE CURRENT IMPLATS STRATEGY FORMULATION PROCESS
Implats strategy formulation is vested at the highest levels within the company
namely the executive committee (EXCO) and the Implats board. Strategy and
strategy formulation is primarily the role of the CEO and the executive
management with the board serving as oversight and the ultimate body
approving strategy. The executive committee is made up of the five company
executive directors and the senior most managers from each operating division.
This committee meets once a month to review the company’s performance
against its strategic plan. The full board meets routinely each quarter unless
special board meetings are called. There is an annual special board meeting
dedicated entirely to strategy. This board meeting is preceded by board papers
detailing the company’s performance against its strategic plan and new strategic
issues for discussion. Strategy consultants and inputs from merchant banks are
considered in this forum. No obvious employee involvement is sought and neither
is there any evidence of consideration for views from the lower managerial levels.
From a Viable Systems Model (VSM) perspective, the only variety attenuation
that seems to be prevalent is from the various consultants and merchant bank
inputs, for the rest, senior management are seemingly content to limit their
exposure only to the field of platinum mining and refining and maximizing the
return on equity.
The current Implats strategy is focused entirely on increasing the platinum
resource base by securing PGM deposits on a global scale thereby increasing
the longevity of the core mining and refining strategy to at least a 100 year
lifespan. The strategic focus is also heavily geared towards operational
effectiveness or maximizing the efficiency of the operations such that the
company maintains its positioning as one of the lowest cost operators in the
industry. Opportunistic initiatives are considered on an ad-hoc basis in relation to
increasing the overall resource base, with no opportunities for diversification
passing through the strategic screen into full operation in recent times.
18
3.4 SURFACING ADDITIONAL PERSPECTIVES ON THE PROBLEM SITUATION Aspects of Soft Systems Methodology are used to surface the differing
worldviews of various stakeholders in relation to their potential to amplify the
variety that Implats management has to deal with via strategic consideration
within the company. The stakeholders have been adapted from the stakeholder
identification process described in Chapter 5. The interpretive paradigm adapted
from Jackson (2003) is the dominant paradigm used to reveal different
perspectives on the problem situation. The intention is to highlight the multiple
worldviews that need to be considered in any strategy formulation process.
Environmental stakeholder perspective
(Soft systems methodology was utilized to draw out the various perspectives as
depicted in appendix 5, figure 44).
The unsustainable rate of the global resource consumption and impending crash
of civilization based on the rate of depletion of natural resources and destruction
of ecosystems is rapidly becoming a self fulfilling prophecy. The Earths
biodiversity is in severe decline as confirmed by the ‘Global Millennium
Ecosystem Assessment’ which estimated that approximately 60% of the earth’s
natural resources have been depleted or degraded.
Global warming is the term given to describe the consequences of the escalating
demand for energy. The increased emission of greenhouse gases (carbon
dioxide, methane and nitrous oxide) traps solar radiation and prevent it from
leaving the earths atmosphere. The global response has been to develop the
Kyoto protocol which sets greenhouse gas emission reduction targets to be
achieved by 2012. Further, the protocol also allows for market mechanisms to
help countries achieve their targets. An example of this is the clean development
mechanism which allows countries without targets to generate and trade carbon
credits by undertaking emission reduction projects ultimately supporting
19
technology transfer and integration of sustainable development principles in
operations globally.
The environmental complexity compounds the challenges of leadership.
Ultimately there will be no company to sustain if civilization collapses. Is this a
strategic issue for the company? The question is a vexing one. Environmental
chaos is however as rich in potential for disaster as for new possibilities. In
producing the prince of green metals (Platinum), Implats has potential
opportunities to expand its focus into the business of environmental
sustainability. Therefore the state of the planet is an important consideration that
needs to underpin all inputs into strategy formulation.
The new business morality
The impetus for moral renewal in business practices post the WorldCom and
Enron scandals is beginning to impact on the way we do business across the
globe and has to impact on the strategic drivers of the company. Public outrage
at the above scandals and disapproval with executive pay levels highlight the
current negative perceptions about corporates. Without a doubt, the Sarbanes-
Oxley Act and locally the King reports on corporate governance have changed
the face of corporate governance, financial disclosure and the practice of public
accounting. Ghosal (2005) states that the underlying premise upon which greater
corporate governance principles are based is society’s view that management
left to itself is evil and society’s primary task is to prevent the exploitation of
people by companies. The context of moral renewal embodied by the above
mentioned act and report is a golden thread that has to run through the strategic
decision making processes of any company. Indeed the rights of shareholders
are brought into stark focus when viewed through the lenses of other concerned
stakeholders and the rationale for existence of the business is the ultimate
offshoot of the moral renewal process. Strategy formulation therefore has to take
cognizance of the changing moral context of business.
20
This then leads into the next perspective which details the increasing complexity
brought about by increasing shareholder activism.
Financial Shareholder Perspective
Over the past decade, investors have switched to the platinum counters as a
source of exceptional capital growth and dividend returns. Implats in particular
due to its high dividend payout policy has attracted a class of shareholder that
thrives on dividends. The institutional fund manager in particular has an
obligation to extract maximum value from their portfolio on an annual basis.
Following on the world wide trend, Kok (2006) notes that shareholder activism
has picked up in South Africa with the large fund managers like Allan Gray and
Coronation becoming increasingly involved in management and strategic issues
at the board level. The longevity of the company from their perspective ranks
below the need for short term financial gains hence the effectiveness of the
company’s management is undermined. Shareholders are transient, with
massive changes in shareholdings noted on a daily basis. Monks (2001)
mentions that “many different people are shareholders and they have very
different interests. Arbitrageurs own the stock for seconds; do we run the
company for them?” The threat posed by a decreasing share price is the fact that
the company becomes vulnerable to hostile takeovers with potential asset
stripping consequences.
The new company management will find it difficult to change its strategic
direction without tacit approval from shareholders. As an example, a Merrill
Lynch analyst made the following observation in an earning review report (15
February 2007), “Implats is cash flush and debt free and the dividend declared is
in our view disappointing.” Management might want to use the cash generated to
fund long term acquisitions, but the view of the large funds carry weight,
especially in light of the fact that they have the power to agitate for the removal of
21
management teams that do not perform to their expectation. Implats recently
had first hand experience of this power of shareholders. During its negotiations
with African Platinum, a large hedge fund called North Sound Capital who owned
20% of the company in question successfully agitated for the removal of the
chairman and a director of African Platinum because they were not managing the
company in the strategic direction the shareholder required.
The South African government perspective:
South Africa needs an economic growth rate of more than 6% to make inroads
into unemployment and reduce the poverty that is blighting our society.
Government’s developmental policies including black economic empowerment
are geared towards ensuring that the previously disadvantaged become
significant consumers as soon as possible. This will lead to exponential
increases in resource consumption and unless well managed, rapid erosion of
the natural resource base and ultimately unsustainability of the country.
The current South African macro-economic situation is characterized by high
levels of unemployment exacerbated by the high unit labour costs, a chronic
deficiency of skills and the inflexible labour laws leading to increasing
mechanization and reduction in labour numbers (especially in the mining
industry). The education level of the vast majority of the population is extremely
poor and hence meaningful growth and development is constrained.
Government views resource utilization as strongly influenced by capitalist
economics which encourages high levels of resource exploitation in order to
maximize profits in the short term. This then results in unsustainable resource
use as each company tries to make as much money as they can as quickly as
possible (this is especially true in the current uncertain mineral rights
environment). The increased demand and use of the country’s resource base
without planning for the consequences, lead to over-exploitation and depletion to
22
the extent that over the long term the country will be devoid of natural resources
without any replacement revenue generating potential. Changes in macro-
economic policy are then required to ensure sustainable and productive
utilization of the resource base.
The government is therefore caught in the horns of a dilemma. On the one hand
it wants to maximize the revenue stream from its primary mining activities while
encouraging increasing levels of black ownership of mining entities. On the other
hand it needs to manage the use of the national resource base in a manner that
will continue to deliver value to the country over the long term. It is a truism to
state that South Africa without its significant resource base is severely
handicapped, and Roux (2005) states that “Developing countries that rely heavily
on primary commodities as a major source of income are unlikely to share in the
benefits of economic globalization. They therefore need to change the entire
structure of their economies and focus more on the production of manufactured
goods and services that the world wants to buy.”
At the forefront of government thinking is that mining involves the realization of a
wasting asset and the mine has little or no residual value. Royalty based taxes
and potential severance taxes envisaged can have a disastrous effect on the
profitability of mines but are non negotiable from a government perspective. A
severance tax essentially is compensation to the state for the finite natural
resources that are mined. It is extremely difficult for companies to commit to
highly capital intensive exploration and mining under these conditions of mass
uncertainty.
The concept of a severance tax may be ameliorated by government’s intent to
move its focus away from primary winning of metal to the downstream
beneficiation and utilization in manufacturing. The green paper which has been
the precursor to the new precious metal bill as well as the recently released
royalty bill highlights the intentions of government in the areas of taxation,
23
royalties, beneficiation, mineral rights, black economic empowerment and rate of
resource usage.
Figure 10: Behaviour over time graph explaining the SA governments concern
The legislature has pronounced its vision to have 26% of all mining assets in the
hands of historically disadvantaged South Africans by the year 2015. South
Africa's new minerals legislation, introduced in May 2004, abolished private
ownership of mineral rights, placing them under the custodianship of the State.
The level of complexity increases even further.
Global Platinum consumer’s perspective: The global market for Platinum is out of balance in terms of the supply/demand
equation, with demand outstripping supply. The platinum price reached a record
high above $1400 per ounce recently and is expected to consolidate above the
$1000 per ounce level over the longer term underpinned by a supply-demand
deficit.
Behaviour over time graph – Increasing level of Government desperation as a function of resource depletion
Time
BehaviourLevel of desperation
Level of resource remaining
24
Platinum supply and demand
Supply 000 ounces
South Africa 5,430Russia 895North America 365Others 310
Total 7,000
Demand 000 ounces
Autocatalyst -gross 4,380Less - recycled 830Net autocatalyst 3,550Jewellery 1,740Industrial 1,760Investment -30
Total 7,020 Figure 11: Platinum supply and demand statistics (adapted from Johnson Matthey Platinum 2006 interim review)
Platinum demand finds expression in the autocatalyst coating industry, in the
jewellery industry, in industrial catalysts, in computers and other high technology
industries. Crucially, platinum fuel cells are regarded as a primary source of
green energy production in a world looking beyond petroleum energy. The
primary demand for platinum from a geographic perspective predominates in the
first world, technologically advanced countries.
25
0 1 2 3 4 5 6 7
Demand million oz
1
Reg
ion
Pt demand by region
EuropeJapanUSAChinaOthers
Figure 12: Platinum demand by region South African platinum producers are the dominant suppliers onto the worlds
markets accounting for almost eighty percent of the platinum supplied to the
worlds market. The balance comes primarily from reserves in Zimbabwe and
Russia, two countries subject to huge uncertainty in terms of supply stability.
Thus any developments in South Africa have a magnified impact on the price and
global perceptions.
The supply-demand comparison indicates clearly the supply deficit that currently
exists from mine sources. Demand is being met by the recycled component
(currently estimated to be above 800 000 ounces and growing).
Platinum demand is being driven by tightening emissions control legislation as
the world attempts to control the escalation of greenhouse gases in the
atmosphere. South African legislation designed to control the mining, supply and
ownership of platinum coupled with Zimbabwean legislation intended to
nationalize large portions of the industry puts additional pressure on the supply
side equation. These factors unfortunately also increase the search for
substitutes to platinum which is the single biggest threat to the industry.
26
The value of platinum allied to the fact that it is never used up in any application,
but rather becomes de-activated, has led to a massive recycling industry being
spawned. The primary sources of feed for recycling of platinum come from spent
autocatalysts and spent industrial catalysts. The current recycle component will
become a threat to future mine supply as it continues to escalate. Significantly
this becomes a ‘mine on wheels’ located squarely within the control of the
biggest consumers of the metals. The above further exacerbates the complexity
that management is exposed to.
Figure 13: Stakeholder analysis matrix – adapted from Savage Looking at the potential of each stakeholder for cooperation and threat (figure 13
above), the ‘collaborate’ strategy is indicated in all but one case, yet each
stakeholder has different goals that are almost mutually exclusive. Thus the
complexity that strategy formulation is exposed to increases even further.
Type 1 Type 4
Type 2 Type 3
Supportive strategy:
INVOLVE
Mixed blessing strategy:
COLLABORATE
Marginal strategy:
MONITOR
Nonsupportivestrategy:
DEFEND
Stakeholder Analysis (Savage)
High
Low High
Low
Stakeholders potential for threat
Stakeholders potential for cooperation
GovernmentGovernmentShareholdersShareholders
EnvironmentalEnvironmental
WatchdogsWatchdogs
CustomersCustomers
27
Figure 14: Rich picture depicting the situation
3.5 SUMMARY AND CONCLUSION
The situation above describes an environment rapidly increasing complexity
within which management is seeking the stability of sticking to the knitting
supported by high metal prices and a hope that the future will be more of the
Factors impacting on management strategy formulation
Increased govt desperation as resouces are depleted leading to new laws to control exploitation
Global warming and resource depletion put the future at risk
No incentive for the company to change current core competency focus –record profits
Conflicting aims of govt and company
Implats mines have limited lifespan –longevity under threat
Is this a concern to the company?
Increasing complexity if environment
Increased managerial complexity leading to more focus on control to alleviate uncertainty
Even greater focus on core competency
Shareholder focussed on short term gains – dividend flow – prepared to fight management to attain their goals
Acting in concert they can change management or drop share price
Increasing threat of takeover
Increasing international concerns over supply stability
Increasing complexity
Govt trying to fight unemployment
Govt drive for beneficiation
Employees have no voice into strategy
Deteriorating relationship
Greater moral renewal focus
28
same. With the sustainability and longevity of the business model under threat
and increasing divergence of shareholder views regarding strategic direction it
remains to be seen whether the current strategy formulation model can sustain
the company into the future. Importantly the situation also highlights the fact that
the company has a proven track record of innovation and corporate renewal
when it had its back to the wall.
29
SECTION C: THE CONCERN
CHAPTER 4: PRACTICAL PROBLEM FORMULATION
The concern first crystallizes the emerging strands of complexity from the
situation above into its potential impacts on the company as an explanation for
the high level concern. The chapter then focuses on the current strategy
formulation process followed by Implats as per the results of the interview
process carried out to verify the concern. The current strategic processes within
the company is examined via several lenses afforded by systems thinking
methodologies before finally assessing whether the current strategic processes
and inputs into strategy formulation are sufficient in relation to the increasingly
complex environment.
4.1 High level concern The claim made at the outset is that the current strategy formulation process
lacks the variety of input and perspective essential to attenuate rapidly increasing
levels of complexity in the contextual environment. This leads to emergent
company strategies that become progressively more myopic and focused on core
competencies in tandem with increasing complexity of the environment as
evidenced by the continued strategic focus remaining exclusively on increasing
the resource base of the company. It has to be acknowledged that this strategy
does extend the life of the company to the extent that additional ore bodies can
be located at financial returns on investment in excess of 40% within a high metal
price regime.
30
Figure 15: Behaviour over time graph of the core variable
However longevity in this strategic sphere is subject to the law of diminishing
returns, as the resource base is severely limited. The concern recognizes the fact
that the innovation by Implats to create IRS and investing in the Zimbabwean
great dyke is no longer sufficient to guarantee the long term future of the
company and keep ahead of the competition. This is compounded by the
increasing costs associated with platinum mining at deeper levels within the
lease area. It is also clear that continuous innovation is required in order to
maintain competitive advantage and distinctive competency at a level that will
ensure Implats satisfies the requirements for ‘a living company’ as espoused by
Arie De Geus.
The factors impacting on the concern can be encapsulated in a CLD loop
extracted from Somera (2006, position paper 7.4).
Behaviour over time graph – Evolution of corporate strategy in relation to increasing complexity of the environment
Time
Level of complexity
Level of environmental complexity
Evolution of corporate strategy
Core variable
31
Figure 16: Summary diagram of the high level concern
An explanation of the figure above shows that the rate of resource depletion and
the lack of revenue replacement projects increase government’s desire for all
mineral rights to vest in the state. Their position is that mineral rights are part of
the nation’s endowment and private hoarding is a barrier to entry to potential
investors and small scale miners thereby inhibiting a vibrant junior black
empowered mining sector.
The concern is that valuation of mining companies by international investors is
via its future (blue sky) potential which depends on an ongoing flow of new
projects derived from such mineral holdings. Private holdings provide security of
tenure that attracts investment in exploration, mining and marketing. Mineral
rights held as part of long term mining plans foster stability in supply/demand
fundamentals. In response, the major companies are holding back on crucial
capital investments required to sustain the supply of platinum over the longer
term. This leads to international supply concerns manifesting in the form of
increasing metal prices.
Level of governmentintervention
Level of metalprices
Level of International competition
Level of Industry
sustainability
+
+
+
-
32
The long term supply concerns combined with escalating metal prices results in a
shift in the world view towards minimization of their exposure to the complexity of
the platinum market dynamics. This can be achieved by maximizing the
efficiency of their processes to use less platinum, speeding up the search for
replacement materials and increasing the funding into research for alternative
technologies. Ultimately this puts the long term sustainability of companies like
Implats at risk. The future of platinum supply is inextricably linked to the long
term sustainability of the planet due to its emission reduction, alternative energy
and green technological applications. Companies like Implats need to sustain its
attractiveness in this regard to ensure long term market sustainability. The
concern is that none of this seemingly makes its way into the strategy formulation
process.
The emerging uncertainty surrounding the sustainability of platinum mining
companies results in intervention by international companies to take-over and
control strategic ore bodies to guarantee long term supply. Additionally,
international governmental intervention viewing platinum as a strategic resource
will increasingly control the movement of platinum and its associated metals in
the form of spent catalysts for recycling. This effectively gives them control over a
rapidly increasing ‘mine on wheels’. This can lead into further South African
government intervention to protect the nation’s endowment thereby resulting in a
reinforcing loop. Government is already asking questions of the industry centered
on export of un-beneficiated product. They claim that the industry merely serves
as a raw material supply source to the industrialized nations.
The existing strategy formulation worldview has lost its relevance in the age of
chaos and the old maps do not engender a capacity to understand the shifts in
the contextual environment. The claim made by the high level concern emanates
from the authors personal perspective arrived at via interpretation of the available
33
data. Personal interpretation is necessary, but not sufficient to establish the
validity of the claim; hence it was felt that more was evidence was necessary.
4.2 THE INTERVIEW PROCESS In order to verify the validity of this claim, it was necessary to investigate the
current strategy formulation process within Implats. Grounded theory was initially
chosen as a research method for the answer phase of this report. Given the
iterative nature of the ‘SQUARE’ process, a large chunk of the data was more
relevant to the concern raised and hence the methodology found application in
both the problem identification and solution generation stages. Strauss and
Corbin (1990) have explained grounded theory as one that is inductively derived
from the study of phenomenon it represents; beginning with an area of study
what is relevant to that area is allowed to emerge. Unstructured interviews were
chosen as the primary means of data generation. Interviews were arranged with
12 people in all ranging from executive and non-executive Implats directors, the
incoming Implats CEO, senior Implats managers, Junior Implats managers, the
CEO of Aquarius platinum and a consultant utilized by the company.
The draft interview questions, data coding and affinity diagram are attached in
appendix two. The inter-relationship diagraph (ID) and the causal loop diagram
(CLD) are developed in appendix three. The outcomes from the data generation
and coding process are represented using various methods to develop a richer
insight into the concern and the subsequent practical and research problems.
These included behaviour over time (BOT) diagrams, force field analyses, and a
strategy canvas. The drivers and restrainers thus identified were developed into
a CLD explaining the development of the core variable. A Viable Systems Model
(VSM) was developed as a diagnostic tool to help identify potential shortcomings
of the current strategy formulation process. Finally the various interactions are
reviewed using a systems practioners framework developed by Hobeke (1994) to
assess the level at which the strategy formulation process is based.
34
4.3 UNINTENDED CONSEQUENCE
During the first interview carried out, it became apparent that the core area of
research (i.e. inputs into strategy formulation) were irrelevant unless one had
some insight into the existential and systemic knowledge relating to the company
as proposed by Mitroff (1998). The iterative nature of the process means that
research is never static and as new knowledge emerges, so it is necessary to
review what went before.
The questions that needed to be answered simultaneously related to the
changing definition of strategy in keeping with the times, but more fundamentally
related to the rationale for existence of the company in relation to the broader
national and international contexts. Thus the boundaries of the interview were
expanded and the answers to the expanded interview questions gains increasing
prominence during the answer phase of this research report.
4.4 CONCERNS EMANATING FROM THE INTERVIEW PROCESS
Level of tickBox mentality
Level of creativeEmployee
involvement
Quality of Management
Team and people
History of Innovative
action
Evolution of Corporate strategy
Level ofShareholder value
creation
Level of focus On core
competency
Level of complexityIn environment
Restrainers Drivers
Level of strategicInformation flow
Level of complacency
Level of factorsinhibitingstretch
35
Figure 17: Drivers and restrainers of strategy formulation process
Figure 17 above represents all the drivers and restrainers affecting the core
variable identified during the interview process. It does not represent any
significant relationships, but rather highlights which factors need to be minimized
and those that need to be expanded to affect a meaningful change to the
concern. The interrelationships are built loop by loop below.
Feedback from the interview process revealed that resource companies like
Implats have been caught off-guard by the size of the Chinese boom. Implats
needs accurate leading indicators to plan new production. Typically sinking a
shaft implies a massive capital investment as well as a significant time lag before
first production can be achieved. In this age of escalating complexity these
leading indicators assume greater significance. Apart from the commodity boom,
most of the other environmental changes could be seen coming and yet there
has been little evidence of strategizing around them. It is becoming increasingly
apparent that metal beneficiation legislation is in the pipeline and yet the
company response is to increase its focus on our core competencies namely
efficient mining and refining of precious metals almost ignoring the signals in the
environment. The net feeling is that there is a deficiency in our strategy
formulation process based on this evidence.
Level of focus On core
competency
Level of complexityIn environment
36
Figure 18: Concern force field analysis
With the focus on core competencies, Implats strategy is focused on being the
most efficient producer of platinum looking to grow through organic and
acquisitive routes. The concern is that as you moved further away from the
executive, the views on what the company’s core strategy is becomes
fragmented to the extent that a portion of the lower managerial ranks professed
to not knowing what the strategy entailed. Linked to the above was the
emergence of the view that people are the key component of strategy formulation
and implementation and the strategy formulation process followed over the
recent past allied to a more conservative leadership style unwittingly suppressed
the voice of the employees in relation to strategic focus. It is imperative that the
New high potential CEO
High quality management and people
History of strategic innovation
Growth and capacity stratcom
Increasing momentum for strategic change of direction
Poor information dissemination
Increasing volatility in environment
Focus on core competency
Shareholder dominant focus
Tick box mentality
Narrow strategic focus
Non involvement of staff
No blank page strategy discussions
Failure of relationships
Force field analysis – deficiency in strategy formulation
Strategy formulation deficiency
Level of creativeEmployee
involvement
Level of focus On core
competency
_
37
potential of our people be unlocked going forward such that we are all pulling in
the same direction and the current silo mentality that prevails is eradicated.
Other concerns noted were the conservative strategic culture that seems to have
taken root and exacerbated by the absence/suppression of mavericks and out of
the box thinkers. Contrary to the accepted wisdom was the emergence of a view
that corporate regeneration was a periodic rather than continuous process and
must be followed by a period of consolidation/incrementalism. Supporting this
assertion was the view than stretching the organization could only be sustained
for a short period before it became uncomfortable to manage. It was noted that
lack of people capacity or incorrect utilization of the people resource inhibited
stretch. The mindset described above is a cause for concern as it flies in the face
of perceived strategic requirements in the age of exponentially increasing
complexity.
Level of creativeEmployee
involvement
Level of factorsinhibitingstretch
+
Level of focus On core
competency
Level of complacency
Level of factorsinhibitingstretch
+
+
38
Additionally an emergent concept was that an air of complacency had crept into
the strategic makeup of the company resulting in a reduced motivation for
regeneration. The high metal prices and exchanges rates of the last few years
had ensured that the company delivered stunning results. These results however
were not as a result of any strategic shift although it was magnified by the
operational efficiency of the company. The resultant comfort zone created was
actually holding back the need to stretch the company.
Limited stretch within the company further dampens the evolution of corporate
strategy. The interviews highlighted that opportunistic strategies are considered
only to the extent of adding to the resource base although the emergent view
from the operational management levels are that the company has missed more
opportunities recently than it has exploited due to an increasingly conservative
risk profile. Decisions taken are not communicated to employees who without
communication of the same form their own opinions. The company’s failure to
invest in diversification into nickel via a resource based in Madagascar was
frequently held up as an example.
There were a number of references to the era of Steve Kearney (the Implats
CEO of a decade ago) and the apparent success of the strategic makeup of the
Level of evolution Of corporate
strategy
Level of strategicInformation flow
Level of factorsinhibitingstretch
_
_
+
39
company at that time. The view expressed was that it does provide an
opportunity to the incumbent management team to learn from what worked well
at that time. The late Steve Kearney initiated a corporate regeneration program
called FIXCO that was ultimately responsible for placing the company in its
current position of economic strength.
The inputs to strategy formulation are very limited especially in relation to the
increasing complexity of the environment. The general consensus on what
should be included in your strategic input makeup included expert external
opinion, financial opinion from merchant banks, canvassing internal ideas,
demand/supply fundamentals, competitor analysis, intuition, market research,
due diligence studies, attending conferences and disseminating information,
networking on a global scale, SWOT analyses, and scenario plans mapping
possible futures. The problem is that the strategy formulation levels are not
availing themselves of these rich sources of information.
There is gathering momentum from within the company for a change in the
strategy formulation process and indeed a change to the thrust of the strategy to
Level of tickBox mentality
Level of evolution Of corporate
strategy
Level of strategicInformation flow
Level of complacency
_
+_
40
the extent that blank page strategy sessions are being called for. The increasing
feeling within the company is that the strategic focus may be too narrow and is
not geared to overall sustainability of the company and the limited strategic
information flows merely exacerbate the complacent attitude of the company.
Figure 19: Current Implats strategy formulation canvas One of the manifestations of the increasing level of frustration has been the
formation of the growth and capacity committee designed to pull together all the
various growth projects into a coordinated environment. This was an initiative
from the senior managerial ranks stemming from a perceived lack of control and
coordination of diverse projects within the company.
High
Low
Current strategy canvas of Implats
Information dissemination
Secrecy
Total staff involvement
Conservative risk culture
Broad strategic focus
Innovation & creativity
Strategic timeframe
Relationships maintenance
Shareholder focus
Diversity of perspectives
41
One of the key outcomes from the process was the recognition of the failure of
strategic information dissemination within the company. While information flow
seems to be transparent at the executive level, it gets progressively more
constrained as it flows down the ranks to the extent that little or no information
reports to the junior levels. Now given the generally accepted fact that
information is the lifeblood of any company, the lack of information at the lower
levels effectively removes them as a rich source of strategic input.
Additionally, it was felt that revolutionary ideas and alternate perspectives need
strong argument to get them off first base and that there is no forum in the
company to air these views. It was noted that the level of lip service towards
alternative views reduced the validity of strategic information in these areas. The
need for having a department specifically geared towards strategic information,
coordination and implementation was strongly mooted. While top down and
bottom up strategic inputs were commonly expressed the emergent view was
that bottom up will not work because there is not coordinated forum to ensure it is
expressed at the executive level.
Level ofShareholder value
creation
Level of tickBox mentality
Level of evolution Of corporate
strategy
42
The rationale for existence of a company according to the results of the survey
was dominated by the profit motive and the corresponding view that ‘the
business of business was business.’ While there was strong backing noted for
the rights of other stakeholders in relation to their claim on the business the
actions of the company in recent times especially in relation to the vast amounts
of cash returned to shareholders established the primacy of shareholder rights.
This contrasted with the common response that management needs to act for the
benefit of the company as a whole and in doing so the shareholders will be
rewarded by means of sustainability of the company. The triple bottom line and
the increased social agenda as well as legislation is slowly taking root within the
corporate mindset, however there is still a degree of tick-box mentality that needs
to work its way out of the system. The concern is that this normative value is not
rooted as one of the prime drivers of the organization. There is greater corporate
responsibility in terms of the South African private sector shouldering some of the
social obligation essential to transforming our new democracy. Yet there is a
‘disconnect’ between macro-level commitment and how we translate that into
individual action. This may sound strange given the glossy Corporate
Responsibility Report described in the situation as well as the clear evidence of
the company meeting the legislated requirements within this sphere of the
business. The concern is exactly the fact that all actions are geared towards
meeting legislated requirements and hence the culture of meeting minimum
targets sets in.
A large amount of controversy and dissenting views remains within the corporate
structure in relation to the billions of rands that Implats has returned to
shareholders in recent times. Some of the rationale for this action was that South
African investors have a strong culture of dividend expectation while others
pointed to the fact that the money generated must be returned if you did not have
acceptable competing investments lined up. A common view within the company
was that value was actually destroyed by not investing in sustainable projects
that would enhance the life of Implats and furthermore the inability to invest in
43
diversification during a commodity boom was a sad indictment against the
conservative strategic culture.
The likes of Amplats and Lonmin are catching up to Implats from a strategic
perspective and it was also noted that the smaller players in the industry were
creating momentum for establishing new smelting capacity. Add the fact that
Heraeus AG with the support of Mvelephanda are putting the finishing touches to
phase one of their new PGM refinery in South Africa, it becomes fairly clear that
Implats needs a strategic regeneration to stay ahead of the game. Inhibiting the
requisite levels of innovation within the company as expressed by the
interviewees was an increasingly conservative risk profile, an increasing fear of
failure, fear of speaking out strongly against the dominant views, expectation that
the commodity boom will continue indefinitely, don’t rock the boat mentality and
the inability to look beyond high margin business
On the positive side the company has a proven record of innovation when we
have had our backs to the wall to the extent that it is recognized as being the
premier platinum company at the current time by investors. The innovation
introduced during the early nineties including the world first molecular recognition
technology, the best platinum refinery in the world, the launch of the toll refining
business which also resulted in lowering of barriers to entry of junior mining
History of Innovative
action
Quality of Management
Team & people
44
companies and innovative utilization of technical and financial mechanisms to
grow the toll business has sustained the company till the present time. Allied to
the above is the fact that the company still has a core of highly skilled and proud
managers who are entirely dedicated to improving the company’s performance at
every chance.
Figure 20: Initial concern CLD
The above results paint a fairly negative picture of the company with a lot of
emergent frustrations captured via the data collection process. The alternative
view that has to be recognized is that this is probably one of the best run
companies listed on the Johannesburg stock exchange as evidenced by the
share price reached during November 2006 (R1490 per share). Whatever the
Level of focus onShareholder value
creation
Level of tickBox mentality
History of Innovative
action
Level of creativeEmployee
involvement
Level of focus On core
competency
Quality of Management
Team & people
Level of evolution Of corporate
strategy
Level of complexityIn environment
Level of strategicInformation flow
Level of complacency
Level of factorsinhibitingstretch
+
+
_
_
+
+
_
+
+
+
+
+
+
+
+
+
+
_
45
shortcomings that have been identified by the interview process, the company is
run extremely successfully and by choice on the current path by a highly skilled
executive team who do recognize the alternatives but choose to keep the current
status quo.
To conclude this section, Ghosal and Bartlett (1998) cautions management of
highly successful companies not to fall into the trap described below. “Yesterday’s winning formula quickly becomes today’s conventional wisdom, and
without vigilance, can eventually ossify into tomorrow’s sacred cow – an
unquestionable and unchangeable dogma that locks everyone into doing things
“the company way”. While a variety of past factors, internal and external, have
typically contributed to a company’s current profits, growth, and competitiveness,
managers of the well-performing company often ascribe the success to their own
decisions and actions. To support and protect their successful management
processes, they create structures, systems, and staff groups to help monitor
activities and keep them aligned with the decisions that ensured the company’s
current success. This growing internal preoccupation is often accompanied by
an external complacency and, at times, arrogance as those inside the company
starts underestimating competitors and treating customers as their captives.”
4.5 EVALUATION OF THE INTERVIEW RESULTS USING HOBEKE’S DOMAINS OF WORK AND THE VIABLE SYSTEM MODEL AS DIAGNOSTIC TOOLS The major consequence of the stratospheric growth experienced by Implats over
the preceding five years has been narrowing of the company focus onto control
mechanisms to bed down the growth.
46
Process level
Time Span
Domain Transformation process
One 1 day to 3 months
Added value
Efficiency
Two 3 months to 1 year
Added value
Efficacy – using right means to fulfill clients needs
Three 1 to 2 years
Added value
Effectivity – Why are we doing what we are doing
Four 2 to 5 years
Innovation Transforming the signals in the changing value systems of stakeholders into alternatives
Five 5 to 10 years
Innovation Sensing the changing value systems to create conditions for introduction of new markets
Six 10 to 20 years
Value systems
Maintenance of debate between appreciative systems to sustain innovative activities
Seven 20 to 50 years
Value systems
Creating & sustaining a shared future with diverse value systems
Eight > 50 years Spiritual Activities have a universal component with impact on future generations
Figure 21: The Hobeke Work System lens An unintended consequence of this control focus (Level three of Beer’s VSM)
has been the reduced emphasis on the intelligence and policy functions so
critical in ensuring that the innovation domain as characterized by Hobeke (1994)
and reflected in Figure 21 above, delivers on its goals namely creating the rules
of the game for the next decade and delivering on innovative growth ideas.
Implats management has remained firmly entrenched in the added value domain
functioning at levels one, two and three. This has ensured that efficiency has
remained the over-riding concern. Strategy in this situation has been done at
process level three in the form of continuous improvement and therefore is only
geared to the short term time horizon. This is borne out by the fact that a
dominant aspect of the current strategy is focused on being the lowest cost and
most efficient platinum producer in the field.
47
Figure 22: A Viable systems model depiction of the interview results Stafford Beers viable systems model clearly highlights the shortcomings of the
current strategy formulation process as per the evidence from the interviews
carried out. It indicates that silo mentality has stealthily been allowed to creep in
as a result of limited strategic information flow filtering to the operational units. It
also highlights the failure of bottom up information flow resulting in the process
becoming one of dictation from the top with limited understanding at the
implementation level.
A major failing identified by the VSM is the almost the fact that the intelligence
function has been allowed to lapse in its entirety from an internal company
perspective. The major contributors to intelligence at the policy level have been
from sources outside the company.
Customers
Local communities
Merchant banks
EnvironmentalAgencies
Government
NGO’s
Suppliers
Competitors
Recyclers
End users
Researchers
Consultants
Advisors
R&D
Universities
PolicyImplats board
Strategy oversight & approval
IntelligenceMarket research
No strategic research section
ControlEXCO – Strategy
initiation
Mines & smelter
Refineries
IRS
Zimbabwean operations
Audit
Ops exec
Ops exec
COO
CEO
Limited bottom up flow
1
3
2
4
5
External experts
Strategy advisors
Financial projections
48
Finally the VSM also highlights and questions the fact that strategy if initiated at
the EXCO level of the company. While this committee contains the executive
directorate including the CEO, its primary focus is operational control and hence
almost by default implies that strategy initiated at this level will be operationally
focused. This is exactly what is happening in the current frame within the Implats
structure.
Porter (1996) states that operational effectiveness is not strategy. Operational
effectiveness is a necessary but not a sufficient condition for superior company
performance. Strategic positioning is also required to ensure the company
continues to outperform its rivals.
4.6 POTENTIAL COST OF NOT CORRECTING THE CONCERN
David Brown the incoming CEO of Implats encapsulated the overall cost of not
revising the status quo when during the interview session he stated ‘We do not
want to become irrelevant in this space, how we continue to maintain our
relevance in the business environment and community is a critical part of future
strategy.’
Projecting a continuation of the current concern unchanged into the future means
that ultimately the lifespan of Implats as a company is inextricably linked to the
reserves of platinum that it can secure. These reserves are few are far in
between and hence the sustainability of the company is under threat both from
the point of view of the resource availability as well as the potential for
substitution of PGM’s in their current applications. The impact of this will be most
significant on the South African economy and the communities that are reliant on
the continued existence of the company. Exacerbating the emergent
sustainability issues are emergent behavioural problems that have manifested
within the company. These include demotivation of staff, increasing levels of silo
mentality, non transparent strategic information flow and a concerning level of
49
complacency. While the company will continue to perform well in terms of its
stated goals of being the most efficient and low cost producer, its long term
sustainability comes increasingly under threat.
4.7 THE CONCERN EXPRESSED
The concern as laid out above substantiates the reasons for choosing this
particular topic for study in the dissertation. I am studying the strategy formulation
process within Implats in relation to the increasing complexity of the environment
because I want to establish the drivers and restrainers to strategy and the
strategy formulation process and understand the interaction between them to
help improve the process of strategy formulation such that the company and the
management team can be better placed to plot a course through these
increasingly turbulent times.
4.8 PRACTICAL PROBLEM FORMULATION
The core variable causing the concern has been identified as “the lack of
evolution of the corporate strategy” within the context of increasing volatility in the
business environment. Within this situation there exists a practical problem that
explains the behaviour and is in essence a hypothesis of what is driving the
behaviour that is causing the concern. This has been captured in a CLD in the
preceding sections and highlighted below.
The practical problem formulation now looks for the key variables that can be
used to explain the reasons for the concern. In this context the operational
definition alludes to the key drivers and restrainers that affect strategy evolution.
It answers the question of how can I change the behaviour causing the concern.
The definition of a driver is an increase in the driver moves the behaviour in the
direction you want it to go. A definition of a restrainer is the opposite to the
50
definition of a driver. The functional definition would then refer to the
consequences of the change. In tandem the operational and functional definitions
will bring you down the ladder of abstraction.
Booth et al (2003) explain that a practical problem is caused by some condition in
the world that incurs costs in this instance to the company. You solve the
practical problem by doing something that eliminates the causes that leads to
costs being incurred.
The representation of the concern CLD as a behaviour over time graph clearly
identifies three key areas that is driving the behaviour causing the concern.
These three core behavioural loops combine to make up the practical problem to
be solved in this paper.
The first is a reinforcing loop where the increasing complexity in the environment
results in the tried and trusted managerial paradigms not working anymore. The
strategic response of the company is to fixate on habit and that which is known
hence an increased focus on the core competencies of the company is applied in
an attempt to attenuate some of the complexity. This spins off into a sustained
focus on the drivers of shareholder value (i.e. reducing costs and improving
efficiencies) resulting in higher profits per ounce of metal and increased dividend
Level of complexity in environment
Focus on core competencies
Focus on shareholder value creation
+
+
+
51
payments to shareholders. This behavioural loop alienates other stakeholder
perspectives resulting in an increase in the levels of complexity that managers
have to cope with. Additionally any potential changes to the model will meet with
strong resistance from an increasingly powerful shareholder constituency. There
has to be a different management model more suited to functioning strategically
in this environment of increasing complexity.
This leads into the second behavioural loop where the focus on core
competencies at the expense of all other factors creates a sense of complacency
within the company. The operational focus is predicated on the future being
exactly the same as the current situation. This complacency is exacerbated by
the huge profits generated in the high price and exchange rate regime reducing
any impetus for a change in strategic focus. The complacent attitude sustains a
tick box mentality where alternate perspectives are only catered for to the extent
that managers are forced to do so. Environmental laws, employment equity
regulations and beneficiation are accommodated to the minimal extent of the law.
The net effect of this mindset is a reduced emphasis on strategic information flow
down the ranks. The extent of employee involvement only encompasses the
operational efficiency domain and hence there is no need to communicate
anything that detracts from this, further exacerbating the level of complacency.
Level of complacency
Level of tick box mentality
Level of strategic information flow
_
+
+
52
The above then leads into the third key area contributing to the limited evolution
of corporate strategy. The poor strategic information flow when combined with
the complacent mindset and the limited involvement of employees leads to
reduced incentive to stretch the company beyond its comfort zone. The company
is viewed as a success in the current environment and there is no impetus to
move beyond the current focus on mining and refining. Ultimately the need for
corporate renewal and regeneration is overlooked resulting in a stagnant
strategic focus.
Level of strategic information flow
Level of factors inhibiting stretch
Level of evolution of corporate strategy
_
+
53
Figure 23: Behaviour over time CLD of the concern
The practical problem is what you are experiencing in real life in the company.
The net effect of the three key behavioural aspects identified above reinforce the
reasons behind the limited strategic evolution of the company in spite of
increasing environmental volatility. The strategy formulation process is resistant
to change hence the increased focus on what is known i.e. the shareholder value
creation model. The company is not utilizing all its resources in the strategy
formulation process. The success of the company is actually a disincentive to
stretch the company beyond its comfort zone of core competencies. These then
are the practical problems that have to be resolved through the course of the
dissertation.
Level of complexity in environment
Focus on core competencies
Focus on shareholder value creation
Level of complacency
Level of tick box mentality
Level of strategic information flow
Level of creative employee involvement
Level of factors inhibiting stretch
Level of evolution of corporate strategy
Quality of management team
History of innovation
+
+
+
+
+
+
_
_
_
_
++
+
++
+
54
CHAPTER 5 : ENSURING THAT THE CORRECT PROBLEM WAS FORMULATED
5.1 CONTEXT During module six of the EMBA, two conceptual methodological models were
developed to interrogate the practical problem formulation from multiple
perspectives/paradigms thereby ensuring that that the correct question is
answered.
The obvious question that arises at this point is whether the current problem
formulation process is sufficiently rigorous from an academic perspective and
does it contain a multitude of perspectives to form the foundation for a valid,
relevant and useful answer. Clearly the process is hostage to the assumptions
made by the author and it has to be challenged at this early stage to ensure that
we are not answering the wrong question precisely (Mitroff, 1998). Linked to this
process is the boundary formulation process. If there is insufficient variety or
perspectives considered in the problem formulated, then it is more than likely that
the boundaries have been too narrowly drawn.
The abbreviated model of systems thinking developed by the author (Somera,
position paper 7.6, 2006) adapted from Jackson (2003) is represented in Figure
24 below.
55
Figure 24: The Creative Holism model (adapted from Jackson 2003)
The model utilises paradigm analysis and distributing the various methodologies
across the four dominant paradigms. The meta-methodology created advocates
analyzing the problem from multiple perspectives/paradigms as represented by
the different metaphors. The key to the process of utilizing the meta-methodology above to critique the
initial problem formulation lies in the incorporation of the second model
developed during module six based on Mitroff’s (1998) problem structuring
process. The Mitroff analysis complements the meta-methodology by forcing the
revaluation of the initial perspective via a systemically and ethically desirable
framework incorporating five overarching questions. Applying the Mitroff problem
structuring model rigorously should theoretically widen the scope of the process
such that the final problem has given consideration to all stakeholders.
PARTICIPANTS COMPLEXITY
SYSTEMS COMPLEXITY
UNITARY PLURALIST COERCIVE
SIMPLE
COMPLEX
HARD SYSTEMS THINKING
SYSTEM DYNAMICSORGANISATIONAL CYBERNETICSCOMPLEXITY THEORY
Increasing divergence of values
Increasing complexity of systems
SOFT SYSTEMS APPROACHES
EMANCIPATORY SYSTEMS THINKING
POSTMODERN SYSTEMS THINKING
FunctionalistMachine metaphor
StructuralistOrganism metaphorBrain metaphorFlux & transformation
InterpretiveCultural metaphorPolitical metaphor
EmancipatoryPsychic prisonInstruments of domination
PostmodernCarnival metaphor
56
To assist in the process of viewing the initial problem formulation through the
lenses afforded by the various paradigms and metaphors, it was necessary to
also identify the various worldviews of the problem situation. Each worldview is
relevant to a particular set of stakeholders and embodied in a specific root
definition. A CATWOE is constructed for each root definition to ensure that the
essence of each world view is captured.
The process entailed the identification of the relevant stakeholders and
constructing a root definition for each stakeholder. Borrowed from Soft Systems
Methodology, the root definition via the CATWOE helps explore the possibilities
for change in the problem situation. The problem as formulated is then assessed
via each paradigm with its associated metaphors from the mindset of the relevant
stakeholders to ensure compliance with Mitroff. One stakeholder analysis is
presented below. The full analysis is detailed in Appendix 5.
MANAGEMENT
Customers Implats, shareholders, society, employees,
government
Actors CEO, Executive directors, Implats board, senior
management
Transformation process
Formulating, implementing and maintaining the most
effective strategy to ensure the company continues to
perform at its peak
World view Profit maximization and attractiveness to shareholders
as measured by the share price
Owners Shareholders, government
Environmental
constraints
Current economic model that considers wealth
maximization as key. Emerging social legislation
bringing forward rights of other stakeholders. Potential
threat of takeover.
57
Root Definition: Senior managerial levels of Implats who formulate and implement the most
effective strategy such the investments of shareholders and other stakeholders
are secured within the framework of the current economic culture and social
fabric.
5.2 PARADIGM ANALYSIS TO ENSURE COMPLIANCE WITH MITROFF The detailed paradigmatic analysis is summarized in appendix 5.
5.3 SUMMARISED MITROFF ANALYSIS ENCOMPASSING ALL THE PARADIGMS Pick the right stakeholders: All the relevant stakeholders as well as their differing mindsets have been
identified. The analysis has revealed that the contribution of the incoming CEO
needs to be highlighted in terms of understanding the problem formulated as well
as driving the solution to the problem. What is highlighted is the opportunity to
investigate the actions of the new CEO in relation to strategy formulation as a
piece of actionable knowledge.
The analysis has also highlighted the fact that the community, government and
employee roles need to be given more prominence. The role of employees both
as strategic facilitators and inheritors of the fruits of strategy are not highlighted.
Additionally the formulation needs to acknowledge that the shareholder model
and the core competency model are not inherently wrong. Indeed it has a proven
track record and work brilliantly in the correct environment.
Expand your options: The analysis has revealed that existential and systemic knowledge/perspectives
are not highlighted enough for the initial problem formulation to be considered as
being balanced. While this does come through in the situation, it loses its way
into the initial problem formulated. In this context the rationale for existence of the
company and its role within the broader social and global context needs to me
integrated into the strategy formulation mindset.
58
Phrase the problem correctly: The problem formulation highlights the current functionalist mindset that prevails
within the company as shown by the focus on core competencies and
shareholder dominant mindset. It however does not strongly highlight the
emancipatory and interpretive perspectives in terms of the manner in which the
current behaviour is supporting the consumerist culture and actually detracting
from long term company survival. Additionally the successes of the past need to
come through the process more strongly in terms of corporate learning and tools
that the incumbent CEO can use to solve the current problem.
Expand the problem boundaries: The analysis revealed that the problem boundaries needed to be expanded in
various areas. The first is to align the initial actions taken by the new CEO in
relation to the problem formulated and the solution suggested along the lines of a
small win. Moving the boundary from evolution of corporate strategy towards a
sustainable corporate strategy that emphasizes the sustainability and survival of
the company over the long term is indicated.
Sustainability comes through strongly in the topic and hence the boundary needs
to be expanded to include overall sustainability of the broader community of
which the organization is a part.
Be prepared to manage paradox: The paradoxical question emerging from this analysis is ‘what is the rationale for
existence of the firm?’ Is it to create riches for shareholders at the expense of the
long term survival of the company or is it to look after the survival of the company
without express consideration to the rights of shareholders.
Additionally the importance of employees who contribute human capital needs to
be highlighted against the current preoccupation with shareholders who
contribute financial capital.
59
Furthermore, the analysis highlights the debate that is high on the agenda of
government as it relates to merely mining and exporting the refined metal
compared to adding value to the metal before exporting. There are both ethical
and technical perspectives on this question. Does the company have to dilute it
focus on operating as efficiently as possible at the lowest end of the cost curve to
consider metal beneficiation which is not an area of core competence, but is vital
for the country?
5.4 REVISED PROBLEM FORMULATION
The initial practical problem was revealed through the four paradigm analysis as
being comprehensively formulated with the exception of a few additional views
that needed incorporation into the problem situation. The revised problem
formulation is indicated in figure 25 below, with the changes reflected in purple.
Figure 25: Revised practical problem CLD
Level ofShareholder value
focus
Level of considerationOf alternateperspectives
History of Innovative
action
Level of creativeEmployee
involvement
Level of focus On core
competency
Quality of Management
Team & people
sustainability of corporate
strategy
Level of complexityIn environment
Level of strategicInformation flow
Level of complacency
Level of factorsinhibitingstretch
Potential ofNew CEO
+
+
+ +
+
_
_
_
+
+
+
__
_+
+
+
_
+
+
60
The core variable has changed via the paradigm analysis into the level of
sustainable corporate strategy. The change reflects a change in mindset toward
those factors that would affect the level of sustainable corporate strategy and
ultimately the long term survival of the company. The revised problem
formulation basically has the same drivers and restrainers as the initial problem
formulated with a few differences. It highlights the lack of consideration of
alternate perspectives as affecting the level of sustainability of the company.
Alternate perspectives in this regard include the paradoxical questions raised for
example ‘the rationale for existence of a company?’
In addition the revised formulation highlights the significance of the quality of
people in the organization in relation to their untapped creativity and the lessons
learnt from past innovations in the company. The problem is that this has been
lost into the morass of complacency and core competencies. The loss of focus
on employees in favour of shareholders has been highlighted. As an input into
the potential answer, the role of the incoming CEO becomes vital in unlocking
this dilemma. The danger is that the energy of the incoming CEO could become
mired in the inertia caused by huge current profit margins enjoyed by the PGM
industry. The sustainability perspective is highlighted from the perspective of the
company, the nation and indeed the globe.
5.5 CONCLUSION
The company therefore seems to have an unsustainable corporate strategy in
relation to the increasing complexity of the environment. Over and above the
behavioural aspects identified in the initial problem formulation, the limited
alternative perspectives considered, the lack of corporate learning and increasing
confusion as to the evolving role of companies in the world, the limited focus on
employees, the evolving role of the new leader are all encapsulated in the need
for a new model of management to function in this environment.
61
SECTION D: QUESTION
CHAPTER 6: RESEARCH QUESTION FORMULATION
This section is concerned with formulating a single question such that the answer
to the question will deal with the concern as explained by the practical problem.
Mitroff (1998) promotes that, “if we cannot define a problem so that it leads to
ethical actions that benefit humankind, then we either have not defined it, or are
unable to define the problem properly.
The process followed in translating the practical problem into a single research
question utilizes Mitroff’s (1998) four perspectives of any problem as represented
in figure 26 below to assess the practical problem CLD.
Figure 26: Mitroff’s four perspectives on any problem.
Scientific/TechnicalHow/why are things the way they are?
Interpersonal/SocialHow do we relate to others
SystemicWhat’s our place in the broader context of the world?
ExistentialWhy am I here? what is my purpose?
MitroffMitroff’’ss four perspectives on any problemfour perspectives on any problem
62
From a scientific/technical perspective, having identified the key drivers and
restrainers that currently affect sustainable strategy formulation, one notes that in
the main they are located in the added value domain of work as described by
Hobeke (1994). The strategy debate as described by the narrow focus on core
competencies is taking pace at the overlap of the added value and innovation
domains of work. Linked to the above claim is the understanding from Hobeke
that strategy formulation in order to be effective in highly complex environments
needs to be based at the overlap between the innovation and value systems
domains (EMBA lecture – module six). The prime question in this regard relates
to how the formulation process could be moved onto the desired level.
From an interpersonal/social perspective, the claim is that the current process of
strategy formulation does not take into account all the competing perspectives
and hence is fundamentally flawed at the outset. The lack of use of resources
already in the company’s possession namely its people, its history of innovation,
critical information flow etc all come through strongly via this perspective.
Questions from this perspective look at how strategy formulation can include all
competing perspectives or worldviews.
From an existential perspective questions need to explore the rationale for
existence of a firm. Armour (1999) defines wealth as whatever empowers a
community to supply goods and services and whatever it is that provides
sustenance which can assure and sustain civility. Furthermore, riches are
defined as that which empowers individuals, groups and corporations and is the
source of competition among them for power. Wealth in this sense is something
natural which would reasonably be converted into individual personal utility.
Riches in this sense are a response to something gone wrong. The purpose of
the firm balancing between wealth and riches need to be explored. Should the
sustainability of the company be the ultimate aim of strategy rather than
satisfaction of shareholders by high dividend payments? How can employees be
63
more effectively challenged to join in the strategic processes? What is the
balance between shareholders and other stakeholders?
The systemic perspective looks at the relevance of the company in the broader
context of the world, the past and also the future. Again it is linked to the concept
of long lived companies and calls into question how we maintain our relevance in
the age of chaos. Appreciative systems defined by Hobeke (1994) as systems of
values various stakeholders have is grounded in this systemic perspective.
Hobeke further defines ‘mutually satisfactory relations’ which point to the
maintenance of relations as the desired outcome of the debate between the
exponents of different appreciative systems. Appreciative systems tap
continuously into the intertwined strands of ongoing events and ideas to feed the
strategic debate. Questions in this mindset relate to how the company can
synthesize all the information and goals of various stakeholders in order to attain
a state of strategic stability within the instability of chaos. What are the new
competencies required of management in order to be able to function effectively
in this evolving business environment.
By a process of synthesis, the core objectives from the various perspectives can
be distilled to “utilizing all available resources and multiple perspectives into
strategy formulation such that successful business sustainability is achieved for
the benefit of all.”
Therefore the question to be answered in this document is the following:
“How can systems thinking methodology be utilized to change the mindset
driving the strategy formulation process within Implats such that the
sustainability of the company is enhanced in an age of increasing chaos
via a new management model?”
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CHAPTER 7: FORMULATING THE RESEARCH PROBLEM Booth et al (2003) describes practical and research problems as having the same
basic structure, which is a situation or condition and undesirable consequences
or costs of that condition. Unlike the practical problem, the research problem is
motivated not by palpable unhappiness but by incomplete knowledge or flawed
understanding. You solve it not by changing the world, but by understanding it
better (Booth page 59). So essentially the research problem is what don’t you
know to solve the problem, it is a question of ignorance and is based in the
abstract world.
The important point of note in this instance is that readers will judge the
significance of the problem by its cost to them; hence the problem must be
framed from their point of view. The primary readers of this thesis (apart from the
examiners) will be the senior management of the company. The affected but not
involved from a CSH (Critical Systems Heuristics) perspective will be the
shareholders, external stakeholders and even the employees. Therefore the
research problem has to be justified in light of the cost to the company from a
senior management perspective in order to prove its significance.
Now given the practical problem and the research question subsequently evolved
there from, the research problem that can be defined has four specific areas of
coverage as described below.
1] I need to understand system methodologies that facilitate strategy formulation
to help underpin sustainability of the company over the long term horizon. Not
clearly understood at this stage are the types of leadership and mental models
that at a deep and tacit level would stimulate enhanced understanding of the
emerging patterns of business in the current high speed environment. The
changing rationale for existence of companies in line with the changes in the
environment is something that needs clarification. Taking this concept to its
65
extreme, one realizes that the concept of strategy itself may also be evolving in
step with environmental changes and understanding these changes is important
to unlocking the research answer.
2] What is not understood at this stage of the process is how the increasing
complexity of the environment can be attenuated by strategy formulation, or if
this is indeed possible. Is the current business process relevant in this age of
chaos and what are the emergent managerial mindsets required to operate in
this environment.
3] The research problem further suggests that an increased understanding of the
linkages between the potential of employees, strategic information flow,
competing strategic perspectives and other factors identified in the practical
problem will contribute towards defining a model for sustainable strategy
formulation. Research is required to surface a model of management that is
sufficiently flexible to allow the combination of the above factors into a viable
business proposition that can adapt to any changes within the internal and
external environments of the company. What is the role of a leader in this model
and how it can be developed to encourage innovation and creativity needs to be
researched.
4] The overarching theory that needs to be developed is the use of experience
and organizational learning in relation to informing strategy and leadership to
help the company succeed in the modern environment. Linked to this is the lack
of understanding of the concept of continuous organizational renewal within the
context of today’s fast paced world.
The ultimate outcomes of the research project is to assist the senior
management team realize that the current state of our strategy formulation is
unsustainable. This is achieved by first helping them understand why the current
world state renders the current process ineffective, followed by a description of
66
the consequences of inaction and finally in the next phase (the answer phase)
helping develop an alternative view that can be practically shown to work in a
chaotic environment.
Thus I am studying systems methodologies and various strategy formulation
methods as it relates to the increasing complexity of the environment because I
want to find a model informing strategy formulation that can be applied to all
environmental situations to help the Implats management team develop sufficient
variety to sense, understand and action change to the extent that the long term
sustainability of the company is facilitated without compromising the sustainability
of the external environment.
67
SECTION E: THE ANSWER
CHAPTER 8: BACKGROUND TO THE ANSWER The answer begins with the drivers and restrainers of strategy formulation as
identified in the concern and practical problem formulations, and looks at how an
intervention could be made to decrease the effectiveness of the restrainers and
increase the effectiveness of the drivers.
Figure 27: Revised drivers and restrainers of strategy formulation process
What changes/interventions can be achieved such that the achieved behavioural
change is to move the dominance of the one causal loop onto the other causal
loop? The answer CLD will be an adapted version of the concern CLD and is
essentially what can be changed to cause this dynamic to improve.
Level of complacency
Level of creativeEmployee
involvement
Quality of Management
Team and people
History of Innovative
action
New highPotential CEO
Sustainable Corporate strategy
Level ofShareholder value
creation
Level of focus On core
competency
Level of complexityIn environment
Restrainers Drivers
Level of strategicInformation flow
Level of competingperspectives
Level of factorsinhibitingstretch
68
The drivers of the change relate to the operational definition while the
consequences of the change relate to the functional definition. The relationship
between the functional definition of the driver and the operational definition of the
driven is the basis of causality.
Ackoff (1978) argues that "Causal inferences require the establishment of more
than associations. That is, one change causes another only if the first can be
shown to be either necessary or sufficient for the other. In general it is not easy
to establish necessity or sufficiency, but difficult or not, it is required before we
can justifiably assume a causal connection."
Ghosal (2005) argues contrary to the concept of causal relationships as a prime
mode of inquiry claiming that this works in natural sciences where the ideas of
the researcher do not affect the items under observation. He postulates that we
need to take into account human intentionality (the ability of the subjects of the
research to learn from the past, to adapt their behaviour and to act toward their
benefit) to understand the nature of the phenomena being studied. Tom Ryan
(GSB Associate professor) during an informal discussion proposed that
intentionality is part of the systemic causal model, hence convergence of these
two schools of inquiry can be argued.
The answer walks the middle line between both these views and draws on
aspects of each to formulate a theory answering the question and addressing the
concern. The grounded theory approach has been used to collect data by means
of a literature search, reflective observation of world events, practical observation
and informal discussions within the company.
At this level of intervention, the problems to be solved are all behavioural in
aspect. Changing behaviours does not lend itself to right and wrong answers as
commonly sought within the reductionist mindset, but a gradual mindset evolution
achieved by a process of emergence. The theory evolved below is based on a
69
combination of learning from systems methodologies and draws on concepts
from the work of Sumantra Ghosal and Christopher Bartlett (1998) as
summarized in ‘The Individualized Corporation’.
The answer uses the main points identified in the practical problem formulation
as its key leverage points in the answer formulation. The eventual theory is
formulated on two levels. The first is a high level behavioural model that looks at
the level of existential and systemic behaviour that the company needs to
develop into its strategy formulation process. Before a management model
informing strategy formulation can be developed, we first need to answer the
question of “what new competencies and mindset are required of managers in
this world of increasing complexity as it specifically relates to the unique South
African context?”
The high level model recognizes the fact that the company is a complex adaptive
system functioning as a subsystem of the South African economy which is itself a
complex adaptive system. Broad system thinking concepts and specific soft
systems methodology suggests that moving up a level of abstraction helps
reduce the complexity and allows functional solutions to surface by a process of
emergence. The conceptual model suggests the behavioural changes that need
to be driven by the strategy formulators such that the company mindset is aligned
to the complexity of the environment. Without the change to the behavioural
dynamic no enduring strategic change is possible.
The second phase of the solution moves down the level of abstraction into the
actionable domain and suggests a practical mechanism whereby Implats can
maintain itself as a learning organization thereby tapping into the entrepreneurial
potential of its people. This second phase of the answer is developed as a
practical model that can be applied to solve the practical problem. Arygris (1996)
states that ‘actionable knowledge informs us how to create or produce what we
claim has high external validity. A generalization is actionable if it informs the
70
user how to create it in settings beyond those in which it was first created.’
Actionable knowledge must specify a sequence of behaviours required to
achieve the intended goal. These actions must be clarified to explain causality as
functions may involve several variables.
Senge (1992) stated that ‘the art of systems thinking lies in seeing through
complexity to the underlying structures generating or inhibiting change’. It means
organizing complexity into a coherent story that illuminates the cause of
problems and how it can be remedied in sustainable ways. This philosophy
guided the author in the process of finding a solution.
The simplest expression of the intent of this two stage model is encapsulated by
Jaworski and Scharmer (2000), who state “The new leadership attitude for this
age involves asking what are the emerging patterns (sensing), what is our role
and focus as we participate in bringing forth this new world (purpose)? And how
can we better execute and capitalize on these opportunities? (Actionable
knowledge – phase two of the answer).
71
CHAPTER 9: THE CONCEPTUAL MODEL PHASE ONE ANSWER
The rapid pace of change in the business environment requires an organizational
capability to sense and respond flexibly to change. As a consequence, the
challenge for management becomes how to be highly sensitive to emerging
changes. To achieve this management needs to be able to increase its level of
mindfulness, an awareness of change. This is akin to meditative practice,
seeking the stillness within to be able to sense change. Argyris (1999) calls it
becoming more aware of the deep source from which behaviour, innovation and
change emanate.
A mindful mindset allows new leadership capabilities to emerge. The business
world has evolved from stable to dynamic patterns and the task of the leader is to
sense and recognize emerging patterns and to position the organization to
develop capacity to seize on emerging opportunities. Stacey (1996) suggests
that control is only a very short term phenomenon, and spontaneous adaptation
to circumstances through self organization is the way through which long term
development and strategic direction will emerge. The new leadership
competency needs to understand and develop this mindset.
Level of mindfulness
+New leadership capabilities
72
The common human response in the face of uncertainty is to focus on what is
known, the exact problem plaguing Implats at the moment. “The more things
change, the more things stay the same”. This is especially true in a conservative
and staid mining environment; hence it requires a strong leader with the requisite
capabilities to achieve the paradigm shift across the management band to help
position the company to thrive strategically on uncertainty.
Thus the first loop of the conceptual solution results in the desirable outcome of
allowing the company to sense changes in the environment to be able to respond
strategically and quickly. It answers the question of what leadership behaviour
and mental models are required to formulate strategy in the age of chaos.
Level of mindfulness
Level of resistance To paradigm
shift_
+New leadership capabilities
Level of mindfulness
Level of resistance To paradigm
shift_
+
+
New leadership capabilities
SensingSensing
73
The new leadership competencies in the current age and within this new South
African democracy are predisposed towards softer, value based processes.
Social networks, partnerships, positive intentionality contribute to an acceptance
of varying perspectives on the role of business. Recognition of competing
perspectives requires that companies utilize their value creation potential in
partnership with the state and other agencies to create value for overall society.
Executive too wrapped up in operational performance, chasing the bottom line
miss the signals of change and their consequences as well as its potential.
There is an emerging concept of symbiosis between business and society, the
answer accepts that business needs to understand its role beyond merely
creating riches for shareholders hence the view that companies exist to add
value to all stakeholders dominates in this report. This view is supported by the
results of the interview process where the common response was that the
company should exist to serve all stakeholders rather than just shareholders.
Ghosal (2005) observes that economic growth has come at a great cost to
Level of recognitionOf alternative
role of company
Level of mindfulness
Level of resistance To paradigm
shift
Level of acceptance Of other perspectives
_
+
+
+
+
New leadership capabilities
SensingSensing
74
society through short term thinking of corporations, he further exhorts companies
not to squander their potential to serve as a force for good in society.
Handy (1999) states that corporations not only have citizens, they are citizens.
They have rights in the societies in which they operate in, but they also have
responsibilities which law and custom impose on them. Few companies are
embracing the challenge of corporate citizenship wholeheartedly. It is unthinkable
in a society as challenged from a community perspective as South Africa is, that
big business will be able to focus exclusively on profits for shareholders. The
pragmatic view is that the company cannot win a legislative fight with government
and therefore needs to embrace the goals of community in a partnership with the
state. This does not mean that you agree with everything the government wants,
but rather have a tolerant and inclusive mindset aiming towards win-win
solutions.
Level of focus onCompliance & shareholders
Level of recognitionOf alternative
role of company
Level of mindfulness
Level of resistance To paradigm
shift
Level of acceptance Of other perspectives
+
_
+
+
+
+
New leadership capabilities
SensingSensing
PurposePurpose
_
75
The current economic theory served up by capital markets is that manager’s sole
goal is to serve the interests of shareholders by maximizing the returns from their
investment. This theory has absolved managers of all moral obligations and freed
managers from any sense of responsibility for their actions and is hence rejected
by the author. Embracing the challenge of corporate citizenship means looking
beyond creating wealth for shareholders but rather creating value to the broad
corporate, social and state partnership. Simon (1991) highlights the positive
association between the prosperity of an economy and the role of companies
operating in that economy. He mentions that it is companies rather than markets
that are the creators of wealth contrary to Adam Smith’s assertion.
This second loop of the conceptual answer highlights the new purpose of the
company as raised in the research problem.
Level of focus onCompliance & shareholders
Level of recognitionOf alternative
role of company
Level of acceptanceFor change in Strategy focus
Level of mindfulness
Level of resistance To paradigm
shift
Level of acceptance Of other perspectives
phase two – Actionable knowledge
+
+
+
_
+
+
+
+
New leadership capabilities
SensingSensing
PurposePurpose
_
76
Figure 28: Conceptual answer CLD
Given the fact that corporate prosperity is closely interlinked with economic
stability of the society (in the South African context, it is unthinkable that a
company can maintain long term corporate prosperity within an abyss of social
poverty) it is appropriate that the goal of strategy should be value creation for all
stakeholders. Strategy formulation within the Implats context needs to be geared
towards harnessing the potential of all its employees and interrogating all
sources of information to facilitate the process of mindfulness as well as sensing
and responding to change. Fostering innovation and creativity across the
organization becomes the new strategic focus. This proposed change to strategy
formulation and strategic focus now leads into the third aspect of the research
problem namely actionable knowledge.
77
CHAPTER 10: THE ACTIONABLE MODEL PHASE TWO ANSWER The changes to the behavioural model required by companies like Implats to be
able to function strategically in an environment of rapidly escalating complexity
and increasing levels of social depravation (within the South African context) is
now translated into an actionable model of strategy formulation that will allow the
company to utilize its resources to the fullest extent for the benefit of all
stakeholders. The ultimate impact of this model is to facilitate the process of
continuous organizational renewal by exploiting the potential of producing a
learning organization. Jackson (2003) reflects that “learning requires an
empowered workforce operating under favourable group dynamics that allow
‘double loop learning’ to emerge.” Single loop learning refers to the correction of
deviation from prescribed goals, while double loop learning refers to the changing
of the nature of organizational purpose if these become unattainable due to
organizational shifts.
The actionable model begins with the new leadership style required at the
operational level. Command and control needs to be relinquished in favour of
creating an environment of mutual trust and respect. The role of the leader
revolves around nurturing people and creating the new role of the company.
Employees want to contribute and have their ideas heard and operational
excellence emerges from evolving patterns of employee inputs rather than rigid
management systems. The old adage of focusing on areas of key competency
changes in this model towards organizational capability embodied in the
New company Leadership
styleOrganisationalCapability as
A key competence
+
78
creativity and innovation of its employees as the key competence. Ghosal et al
(1998) describe the ‘Individualized Corporation’ as one in which the “organization
is built around the ideas and initiative of its empowered and energized people.”
Key to linking the concepts of organizational competence and integrated
interdependence is a department geared towards consolidating strategic inputs
and strategy implementation across the company. The solution highlights the
criticality of a centralized strategy department whose prime responsibility is
investigating all facets of environmental, competitor, legislative and business
evolution, scenario planning around these on a continuous basis and keeping the
CEO and the board continually informed on opportunities and threats emerging
there from. Importantly, this was uniformly raised as an area of concern and
deficiency during the data collection process and hence is at the forefront of
managers minds.
Collaborative problem solving, resource sharing and collective implementation
are the core drivers behind integrated interdependence. Underpinning the
outcomes of creating creativity the integrated network of specialists in different
fields are able to quickly and flexibly respond to external stimuli, market trends,
technological changes and political events. This is achieved by not by
OrganisationalCapability as
A key competence
Central strategy& scenario planning
functionality
Level of integratedinterdependence
++
79
coordinative structures, but by cross unit relationships underpinned by a sense of
joint long term survival.
Integrated interdependence can only be achieved through a process of rich
horizontal flows of information via communication channels that distribute
expertise across the organization. This is facilitated via support from a new
empowered leadership style.
One of the biggest pitfalls in this new model is corporate barriers to
organizational learning. Integrated interdependence and mutual targets linked by
open communication are one of the key steps in facilitating continuous
organization learning in a self sustaining loop.
New company Leadership
style
Level of open &horizontally linked
communication
OrganisationalCapability as
A key competence
Level of barriersTo organisational
learning
Central strategy& scenario planning
functionality
Level of integratedinterdependence
_
+
+
+
+
+
+
Level of open &horizontally linked
communicationLevel of barriersTo organisational
learning
Level ofEmpoweredemployees
Culture of mutualTrust & respect
+
+
+
_
80
It is part of human nature to want to excel, to be part of a winning team.
At the broadest level, this can be an overarching ambition that gives more
personal meaning to the company’s long-term objectives than the need to
achieve a high return on equity. Inspired by a new nurturing leadership style,
supported by integrated interdependence and facilitated by rich flows of
horizontal information emerges an empowered employee who is the core part
around which the new organization is built on.
Achieving mutual trust and respect changes the dynamic between people with
diametrically opposed perspectives and at its most basic level it changes the
energy in a relationship into a positive frame. Trust is the glue that binds together
the learning organization. Trust is most easily recognised in the transparency and
openness of management processes as well as tolerance for failure that provides
employees with a sense of involvement and participation in an organization.
Ultimately this sustains the reduction of barriers to organizational learning.
Figure 29: Actionable model answer CLD
New company Leadership
style
Level of open &horizontally linked
communication
OrganisationalCapability as
A key competence
Level of barriersTo organisational
learning
Level ofEmpoweredemployees
Culture of mutualTrust & respect
Central strategy& scenario planning
functionality
Level of integratedinterdependence
Level of innovationAnd creativity
created
_
+
+
+
+
+
+
+
+
_
+
+
+
+
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The ultimate expression of the model as developed to this point is fostering an
environment where creativity and entrepreneurship flourishes. The combination
of the correct strategic culture (mindset) allied with people empowerment
(ownership) facilitated by trust and respect, coordinated by the strategy section
will stimulate creativity within the company. This further reinforces the level of
empowered employees who are allowed freedom to initiate projects and
ultimately sustains the values of the new leader required.
Figure 30: Post intervention strategy formulation canvas
High
Low
EVOLVED STRATEGY CANVAS
Information dissemination
Secrecy
Total staff involvement
Conservative risk culture
Broad strategic focus
Innovation & creativity
Strategic timeframe
Relationships maintenance
Shareholder focus
Diversity of perspectives
New strategy canvas
82
CHAPTER 11: A SMALL WIN Weick (2001) defined a small win as a “concrete implemented outcome of
moderate importance. By itself one small win may seem unimportant. A series of
wins at small but significant tasks however, reveals a pattern of success that may
attract allies, deter opponents and lower resistance to subsequent proposals.
Small wins are controllable opportunities that produce visible results.” Small wins
are important to test your hypothesis. Arygris (1996) mentions that theories in
use that causally explain the actions should be tested in everyday managerial life
for robustness and relevance. Figure 31: CLD loop extracted from actionable model depicting area of influence of small win.
A small win was observed by the author within the company structure that proved
that the above mentioned loop of the phase two answer was entirely effective as
described by the answer.
New company Leadership
style
Level of open &horizontally linked
communication
Level ofEmpoweredemployees
Culture of mutualTrust & respect
+
+
+
83
The situation that evolved was as follows. The newly appointed CEO of Implats
arranged a golf day for the company’s middle to executive management,
associates and important customers. Before the golf he had arranged a strategy
briefing session where he outlined his vision for the future and the course he
expected to put the company onto. This was then followed by detailed
presentations on several major (and previously secret) projects that the company
was working on outside of the public eye. The presentations were open and frank
and the managerial levels were trusted with the information. The CEO then
rounded of with the promise that this was to be the first of regular strategy
discussion sessions with the company managerial structures. After the golf was
over, the majority of the executive team stayed on until late in the evening where
frank discussions continued.
The net result observed from this one event was an upsurge of positive and
reinvigorating energy that began flowing through the management ranks. The
previously excluded levels suddenly began to feel that they were now included
and part of the team. By being given a forum to air their views both in formal and
informal discussions, by being trusted with strategic information and being shown
respect by the executive level, the operational management were showing all the
characteristic signs of empowered employees. Informal discussions with several
of the attendees after the event revealed that they were excited with the potential
of the new style of leadership being displayed and their view of the future was
extremely positive.
The above is a small win and one of many that needs to be achieved if the
answer has to work practically. The positive coming out of this is that the core
reinforcing loop of the answer has been shown to achieve its desired end in a
real life situation.
84
SECTION F: RATIONALE The rationale provides the basis for the answer and describes how the answer is
arrived at. The first part of the section describes the process followed and the
systems methodologies and methods utilized to formulate the answer. The
second part of the rationale explains the research framework constructed and the
meta-methodology utilized in this report. The final part of the rationale explains
the underlying logic of the answer as well as providing additional support for the
position taken by the answer by detailing the literature support as well as
historical precedent for the answer.
CHAPTER 12 : DESIGNING THE RESEARCH FRAMEWORK
The research question developed in chapter six decides the appropriate
paradigm to be utilized in the research. The paradigm utilized consequently
decides the research methodologies that can be used which in turn points to the
data collection and analysis techniques applicable (Associate professor Tom
Ryan - EMBA lectures). If system methodologies from different paradigms are
utilized then this needs to be justified in the research framework constructed.
Figure 32 below details the entire spectrum of research methodologies and
methods available to construct a research framework. A short explanation of the
each component of the research map above follows.
85
Figure 32: Potential research framework
12.1 APPROACH FOLLOWED.
The question that emerges from the description of the level of complexity in
chapter 3 is, ‘what approach is appropriate for highly complex environments as
described?’
The dominant role of business is to make a profit on behalf of its shareholders
and as Milton Friedman has stated, ‘the only legitimate business of business is
business.’
Russel Ackoff in a lecture at Pegasus Communications in 1993 challenged this
view by commenting that this is a quintessential mechanistic view of business
that has not been valid at any time in the history of business. As the environment
increases in complexity, managers of the business find themselves having to
attend to three levels of purpose:
Creative holism
Reductionistapproach
Inductive thinking
Deductive thinking
Functionalist
Interpretive
Emancipatory
Postmodern
Machine
Organism
Brain
Flux &
transformation
Case study
Ethnography
Phenomenology
Grounded
theory
Culture
Political
Psychic
prison
Instrument ofdomination
Carnival
Content
analysis
Hard systems
System dynamics
Organisationalcybernetics
Complexity theory
SAST
Interactive planning
Soft systems methodology
Critical Systems
heuristics
Team syntegrity
Approachfollowed
Mode ofthinking Paradigm Metaphor
Research Methodology Research
method
Interviews
Literaturereviews
Participative observation
Fieldwork
Data collection
VSMSSM
Small winsetc
Structuralist
86
• That of the enterprise itself.
• The business’s parts.
• The larger system of which the business is part.
Chapman (2002) explains that to understand systems thinking, we need to
contrast it with the traditional reductionist approach to tackling complexity. The
essential aspect of the reductionist approach is that complexity is simplified by
dividing a problem into sub-problems or lesser components. The process of sub-
division is continued until the resulting bits are simple enough to be analysed and
understood. The operation of the original complex entity is then reconstructed
from the operation of the components. This mode of simplification is also the
Achilles heel of reductionist thinking. What if essential features of that entity are
embedded not in the components but in their interconnectedness? When you
take a system apart, it loses all it essential properties, for example, the individual
parts of a cars engine has no value unless it is combined into its whole i.e. the
engine. So studying the individual parts has no value unless you understand how
they work together as a whole system.
Systems thinking provide a holistic way of handling complexity via a process of
synthesis as opposed to the classical analytical approach. In direct contrast to
the analysis approach, synthesis first determines the larger system of which the
system under investigation is a part. The second step is to try to understand the
larger system as a whole. The final aspect is to refine our understanding of the
system being investigated by identifying its function within the containing system
of which it is a part.
Systems thinking have an alternative strategy for simplifying complexity, namely
going up a level of abstraction. Higher levels of abstraction lose detail, and it is
the loss of detail that provides the simplification.
Chapman (2002) suggests that since a core systems idea is feedback, both
positive (and self-reinforcing) and negative (self-correcting), complexity can often
87
appear mysterious because of a rich set of feedback loops between the
components. But by retaining the connections and avoiding the tendency to
break things down, systems thinking provide a holistic approach to understanding
and managing complexity.
Systems thinking and reductionist thinking are not competitors according to
Chapman (2002), but are actually complementary and interchangeable
depending on the type of situation one finds oneself within.
Jackson (2003) suggests that being systemic also means looking at problem
situations and knowing how to resolve them from a variety of perspectives.
Critical systems thinking encourage this kind of creativity.
12.2 MODE OF THINKING
Deductive thinking
Deductive thinking is the classical mode of thinking with an academic bias based
on academic rigour. You start off with a theory and test it via a hypothesis
supplemented by observation and data gathering. The ultimate out is to confirm
whether the theory is valid or not.
This is a positivist approach, i.e. facts are there to be found and tested.
Rationality and the scientific mindset predominate. The planning approach to
strategy happens here.
Rigour is provided by objectivity, certainty, methods used, comprehensiveness,
analytical approach and logical framework.
Inductive thinking
With inductive thinking you start with observation. The effectiveness of the
process is enhanced by the richness of the observation. You look for patterns
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emerging from the observation. Essentially it is qualitative rigour that is sought for
in this mode. From the emergent patterns you are subsequently able to come up
with a tentative hypothesis from which you develop your theory.
This is the process of strategy in the current fast paced, chaotic environment.
Rigour is facilitated by using intuition, generating multiple perspectives,
researcher transparency (i.e. researcher needs to disclose his values, position
etc) and system thinking type methods.
12.3 PLURALITY OF SYSTEM APPROACHES – CREATIVE HOLISM (Adapted from Jackson (2003))
TYPE A: IMPROVING GOAL SEEKING AND VIABILITY
Approaches are geared towards reaching predefined goals or building capacity in
those requisite areas such that viability is ensured and goal seeking facilitated via
efficiency and efficacy.
FUNCTIONALIST PARADIGM The functionalist paradigm takes it name from the fact that it wants to ensure that
everything in the system is functioning well so as to promote efficiency,
adaptation and survival.
Machine metaphor: Represents organizations as rational instruments designed to achieve the
purpose of their owners. Involves breaking tasks into parts with rules governing
behaviour of the parts and a hierarchy of authority exercising coordination and
control.
STRUCTURALIST PARADIGM
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Allows one to look below the surface to determine what is happening with the
functioning of the system and to identify the key features that can be manipulated
such that survival of the system is facilitated.
Organism metaphor: Looks at organizations as wholes made up of interrelated parts which function to
ensure the survival of the organization. Survival replaces goal seeking as a
reason for existence. Organisations are open systems that adapt to
environmental disturbances.
Brain metaphor: From cybernetics emphasizes active learning rather than passive adaptability.
Turbulent environments necessitate decentralized control because not all
information necessary to cope with change can be processed at the top of the
organization. The organization must manage single loop learning – correcting
deviations from prescribed goals, but must also be capable of double loop
learning – changing the nature of its purpose if these become unattainable as the
environment shifts.
Flux and transformation metaphor: Concerned with revealing the logics of change that give rise to behaviours seen
on the surface of organizations. This metaphor suggests managers try to
understand the consistent patterns that underlie even the most unpredictable
system.
Types of system approaches:
Hard systems approach
Is positivist in nature and looks at the surface interactions only, for example
mathematical modeling. Hard system approaches depends on the machine
metaphor.
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The next three approaches all embrace a structuralist rather that positivist
epistemology i.e. seeking to and manipulate the mechanisms operating at a
deeper level that give rise to system behaviour.
System dynamics See’s the key to system behaviour as lying in the positive and negative feedback
loops within which important system elements are bound. The variables that exist
in complex systems become causally related in feedback loops that themselves
interact.
Organizational cybernetics (Viable Systems Model) Uses a cybernetic model, the VSM (Viable Systems Model) to manage issues of
complexity by revealing whether organizations obey or flout cybernetic laws.
Organisational cybernetics suggests that complex systems have a recursive
nature and all viable systems exhibit the same organizational characteristics.
The VSM is developed on the platform of Ashby’s law of requisite variety (1956)
which states “only variety can destroy variety.” The environment is of much
greater variety (exhibits more system states) than the operations which in turn
exhibits greater variety than management. The management level, to cope with
the variety needs to attenuate the high variety system and amplify the variety of a
low variety system.
The VSM is made up of five systems as illustrated in figure 21. These elements
are implementation, coordination, operational control, development and policy.
The VSM is also recursive which means the each of the five systems has to be a
VSM as well. Jackson (2003) states that the strength of the VSM is enhanced by
the combination of the machine, brain and organism metaphors that the VSM
uses. “Autonomic management (systems 1, 2 and 3) ensures the optimum use of
resources, system 4 ensures adaptation to the environment and the
institutionalization of learning while system 5 maintains a balance between the
‘inside and now’ and the ‘outside and then’.”
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Complexity theory
Seeks to identify the patterns that exist within chaos and look for points of
leverage that can be exploited to ensure desirable behaviour. Businesses are
not only complex adaptive systems, but are complex evolving systems that can
change the rules of their development as they evolve over time. Complexity
theory is based on the principle of ‘self organisation’, ‘strange attractors’ and ‘the
edge of chaos’. Self organisation refers to the fact that systems will naturally
gravitate to a state of new order (called the edge of chaos) from seeming chaos.
Strange attractors keep the behaviour of an unpredictable system within a
particular pattern, without requiring it to repeat itself exactly - Jackson (2003).
The ‘edge of chaos’ is the narrow transition zone between order and chaos that
is extremely conducive to the emergence of novel patterns of behaviour.
TYPE B: EXPLORING AND CLARIFYING PURPOSE OF STAKEHOLDERS
System approaches here see the main failing of hard systems approaches as
being its inability to deal with pluralism. Different viewpoints about purpose are
given consideration leading to shared commitment via effective and elegant
solutions.
INTERPRETIVE PARADIGM
This paradigm suggest that social systems results from the purposes people
have and these in turn stem from the interpretations they make of the situations
in which they find themselves. The paradigm wants to understand the different
meanings people bring to collaborative activity, looking for overlaps of meaning
giving birth to shared purposeful activity.
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Culture metaphor: People act according to how they see the world and it is through the interactions
between people that organizations take their form. Corporate culture refers to
familiar and persistent ways of seeing and acting in a particular organization.
Political metaphor: Looks at the pursuit and use of power and micro politics of organizational life.
Individuals in organizations can be competitive as well as co-operative, pursuing
different interests that may conflict.
Types of approaches:
Strategic assumption surfacing and testing (SAST)
Focuses on the multiple perspectives and different world views inherent in a
problem situation, articulating a process of thesis, antithesis and synthesis. The
approach has four main stages:
• Group formation – A wide spectrum of individuals who have an interest in
the problem should be involved.
• Assumption surfacing – Uncover the key assumptions on which their
viewpoints are based.
• Dialectical debate – The groups are then brought together and
encouraged to enter into a dialectical debate.
• Synthesis – Designed to achieve a compromise on assumptions from
which a new higher level of strategy can be derived.
Interactive Planning
Seeks stakeholder approval via an idealized design by dissolving the current
mess faced and replacing with a desirable future.
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Soft Systems Methodology (SSM) Enables managers to work with and change the value systems, cultures and
philosophies that exist in organizations. The methodology enables intervention in
ill-structured problem situations where maintenance of relationships is as
important as goal seeking. Developed by Peter Checkland (1981), SSM is a
seven stage process. The first stage is the identification of a problem situation;
the next phase involves expressing this problem as a rich picture. The third stage
is the formulation of root definitions that capture the essence of some relevant
human activity system. This is done in accordance with CATWOE which
represents customers, actors, transformation process, world view, owners and
environmental constraints. These root definitions are then used to construct
conceptual models. In stage five the conceptual modes are compared to the real
world models before systemically desirable and culturally feasible changes are
recommended. The final stage specifies actions needed to improve the problem
situation.
TYPE C: ENSURING FAIRNESS IN SYSTEMS DESIGN AND CONSEQUENCES FLOWING FROM IT.
Focuses on emancipatory systems thinking and considers problem contexts that
have ventured into areas where soft system approaches are threatened by lack
of fairness or by coercion. Allows the disadvantaged to make contributions to
system design via empowerment and emancipation.
EMANCIPATORY PARADIGM
Focuses on oppressed individuals and groups in organizations and society. Is
suspicious of authority and tries to reveal forms of power and domination being
illegitimately employed.
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Psychic prison metaphor: Emphasizes the impact that the negative aspects of organizational life can have
on free development of our thinking. Capitalistic ideology is seen by Marxist
thinkers as preventing people from reaching their full potential.
Instrument of domination metaphor: Fixes attention on the group level and highlight how certain groups are exploited
by other in the company. Example is managers using hierarchy and control of
labour to extract surplus value from the worker to benefit shareholders.
Types of approaches:
Critical system heuristics (CSH) The CSH methodology developed by Ulrich (1983) provides a framework to think
critically about the normative content of decisions and situations and to surface
the underlying boundary judgements, value assumptions and consequences of
the systems design on the affected stakeholders. It seeks full participation of
those affected by systems design who might otherwise not be involved.
The methodology assumes the perspective of affected stakeholders and explores
a framework of 12 boundary questions in the ‘is mode’ i.e. what the current
design reflects and the ‘ought mode’ which is what the design should reflect.
Team syntegrity – Creates a democratic milieu in which outcomes result from
consensus and better argument, rather than power or hierarchy.
TYPE D: PROMOTE DIVERSITY IN PROBLEM RESOLUTION Postmodern thinkers are skeptical by universal guarantees for the success of any
intervention, because the immense complexity and coercion in problem situations
make a lasting solution unlikely. Exception and emotion are seen as the
measures of success.
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POSTMODERN PARADIGM Challenges paradigms in terms of their totalizing attempts to provide
comprehensive explanations of how organizations function. From the
postmodern perspective, organizations are far too complex to understand using
any of the other paradigms. It also insists that we can learn much by bringing
conflict to the surface and claiming a space for disregarded opinions thus
encouraging variety and diversity.
METAPHOR: CARNIVAL At carnival time normal order is suspended and creativity, diversity and
ambivalence is encouraged. This helps us see the fragility of the social order that
is sustained in organizations and to recognize the presence of other voices and
other aspects that are usually suppressed.
12.4 MITROFF ANALYSIS All serious errors of management can be traced to one fundamental flaw, i.e.
solving the wrong problem precisely. Mitroff (1998) challenges organizations and
managers to think critically, to spot the right problems, formulate them correctly
and then implement appropriate solutions to them.
He offers five strategies for avoiding solving the wrong problems precisely:
• Pick the right stakeholders
• Expand your options
• Phrase the problem correctly
• Expand the problem’s boundaries
• Be prepared to manage paradox
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Mitroff (1998) also offers 4 perspectives on any problem i.e. to avoid an E3 error;
an organization must look at problems from more than one of the perspectives
namely:
• Scientific/Technical knowledge concerns how and why things are the way they
are.
• Interpersonal knowledge refers to how we get along with and relate to other
persons, our families, institutions, our society, and all of humankind.
• Existential knowledge concerns the most basic questions everyone must
answer for himself or herself: Why I am here? What is my purpose? What
should I do to lead a satisfying life?
• Systemic knowledge concerns our place in the broader context of the world, as
well as the broadest context of human history and the entire universe. Do our
actions and ideas in the small context hold in the large?
12.5 RESEARCH METHODS (adapted from EMBA module 6 course notes) Case Study The purpose here is to understand one person or situation in great depth, with
the focus on the particular case in its natural setting where the relationship
between the phenomena being studied and its environment is not clear.
Ethnography The purpose of ethnography is to understand how behaviours reflect the culture
of a group. Researchers immerse themselves in the lives of the people they
study and attempt to understand the characteristics of a particular social system
from the perspectives of the people being studied.
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Phenomenological Study
The purpose is to understand an experience from the participant’s point of view
with the focus being a particular phenomenon as it is typically lived and
experienced by human beings.
Content Analysis
To identify the specific characteristics of a body of material, with the focus on any
verbal, visual or behavioural form of communication.
Grounded theory (The research methodology of choice for this report)
Strauss and Corbin (1990) have explained grounded theory as one that is
inductively derived from the study of phenomenon it represents. One does not
begin with a theory, and then prove it. Rather one begins with an area of study
and what is relevant to that area is allowed to emerge.
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Figure 33: Procedural steps of grounded theory The research question in a grounded theory investigation identifies the
phenomenon to be studied. The nature of grounded theory methodology requires
that investigators refine the research question as they generate and analyse the
study data. A truly accurate research question is impossible to ask before
beginning any grounded theory study.
DATA GENERATION The researcher examines and analyses the data gathered using the various
techniques through a system of constant comparison until the investigation
generates a number of hypotheses. The literature is consulted for previously
developed theories that relate to the emerging hypotheses.
Interviews Field notes Journals Participant
observation Literature
Data generation
Data analysis
Concept formation
Level I : Substantive codes Level II : CategorisationLevel III : social-psychological
process identified
Concept development
Reduction sampling Selective review of literature Selective sampling of data
Core variable
Grounded theory
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DATA ANALYSIS: GENERATING THEORY The discovery of a core variable is the goal of grounded theory. The core variable
explicates what is going on in the data and serves as the foundational concept
for theory generation.
CONCEPT FORMATION Grounded theory requires that researchers collect, code and analyse data from
the beginning of the study.
Data coding occurs at 3 levels:
- Level I coding: Requires that grounded theorists look for process, i.e.
they examine the data line by line and identify the processes in the data.
- Level II coding: called categorizing and requires use of the constant
comparative method in the treatment of data.
- Level III coding: Describes basic social psychological processes which
give title to the central themes emerging from the data.
CONCEPT DEVELOPMENT Includes three major steps to expand and define the emerging theory allowing
the core variable to emerge:
- Reduction: Involves comparing clusters of data to see how they could fit
into a broader category of greater scope thereby reducing the
overwhelming number of categories emerging from the research.
- Selective sampling of literature: As the theory begins to be developed, a
literature survey is used to learn what has been previously published. This
helps expand the theory, relate it to other theories and fill in gaps in the
emerging theory.
- Selective sampling of the data: Refers to collection of additional data in
a selective manner to develop and refine the hypotheses and identify the
properties of the main categories.
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EMERGENCE OF THE CORE VARIABLE The core variable refers to a category which accounts for most of the variation in
a pattern of behaviour and which helps integrate other categories that have been
discovered in the data.
CONCEPT MODIFICATION AND INTEGRATION Theoretical coding provides direction in examining data in theoretical rather than
descriptive terms by applying a variety of analytical schemes to data to enhance
their abstraction.
12.6 TRIANGULATION Triangulation as a research approach uses a combination of more than one
research strategy in a single investigation. The purpose of triangulation is to help
researchers confirm findings. Streubert and Carpenter (1998) confirm that
triangulation offers breath and depth to an investigation. A more complete picture
of the phenomenon being studied emerges. Triangulation therefore is a preferred
way to ensure credibility and reliability of qualitative research.
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CHAPTER 13: RESEARCH FRAMEWORK APPLIED THE METAMETHODOLOGY Figure 34: Dissertation research framework constructed
The core of the dissertation is underpinned by the ‘Creative Holism’ approach to
problem solving as advocated by Jackson (2003). Jackson argues that
“managers can become more successful if they possess the capacity to view
their organizations through the lenses offered by the four sociological paradigms
and the various metaphors of organization. They also need the ability to choose
and to use the different system approaches in an informed manner,”
This plurality of system approaches, the methodologies and methods that has
been evolved via this report in relation to the environmental and social situation
into the meta-methodology represented in figure 34 above. The darker colours
Creative holism
Reductionistapproach
Inductive thinking
Deductive thinking
Functionalist
Interpretive
Emancipatory
Postmodern
Machine
Organism
Brain
Flux &
transformation
Case study
Ethnography
Phenomenology
Grounded
theory
Culture
Political
Psychic
prison
Instrument ofdomination
Carnival
Content
analysis
Hard systems
System dynamics
Organisationalcybernetics
Complexity theory
SAST
Interactive planning
Soft systems methodology
Critical Systems
heuristics
Team syntegrity
Approachfollowed
Mode ofthinking Paradigm Metaphor
Research Methodology Research
method
Interviews
Literaturereviews
Participative observation
Fieldwork
Data collection
VSMSSM
Small winsScenarios
Structuralist
Mitroffproblem structuring
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represent the dominant perspective, method or methodology selected. The range
of lighter shades represents the secondary and tertiary application of varying
approaches and paradigms.
Given the behavioural based nature of the problem formulated and the
complexity of the environment, the inductive mode of thinking with its associated
characteristics provide the ideal fit for this research and hence is the mode
selected for this report.
The appropriate paradigm is dependent on the research question. The question
reflects the need to develop a functional strategy formulation model that will allow
Implats to function strategically in the age of chaos while still retaining its
entrepreneurial focus and achieving the broad aims of the South African
government and economy rather than merely enriching its stakeholders.”
The question predicates the existence of a balance between wealth and riches
that will satisfy all competing perspectives and thus extends beyond the bounds
of a single paradigm.
The structuralist and interpretive paradigms were chosen to facilitate the
research. Because the question predicates the existence of a functional and
actionable model that promotes adaptation and survival, the structuralist
paradigm is indicated as the paradigm of choice. The accommodation of the
perspectives of other stakeholders as well as the different meaning they bring to
the activities of the company suggested that the interpretive paradigm needed to
be incorporated as well. The reality is that aspects of the dissertation were
constructed from an emancipatory and postmodern mindset. Now there are
schools of system thinking that reject this. The authors view is that we alternate
between each mindset depending on our personal experiences on the issue at
hand and it is an essential part of human nature to be able to tap into varying
paradigms at will.
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Associated with the paradigms, the organism and brain metaphors were the
primary metaphors utilized. To a lesser extent, the flux and transformation as well
as cultural metaphors found application in the research.
Causal loop diagrams which emerge from system dynamics methodology are
utilized extensively in both the problem formulation and answer stages to
establish the key leverage points for maximizing the potential of any intervention.
The VSM has been used both as a diagnostic tool to surface the concern and
linked to that, as a design tool to help indicate the areas that needed to be
strengthened for the answer phase.
Complexity theory has been used in the situation to classify the state of the
business environment. In this environment it suggests that long term planning is
dangerous as it fixes the organization into routine forms of action thus inhibiting
flexibility. Complexity theory ultimately proposes that while the environment is
unknowable, managers can ensure organizational flexibility and responsiveness
through the creation of conditions that enhance organizational learning and self
organization. The complexity theory model has been used as the foundation of
the answer developed. The ‘Ralph Stacey (1996) lens that elaborates on the use
of complexity theory has been included in appendix seven.
The group formation and assumption surfacing elements of SAST were utilized to
surface the concern via the interview process.
Aspects of SSM including the rich pictures, root definitions and CATWOE were
used extensively in the situation, the concern and problem formulation stages.
SSM found application in helping surface the different stakeholders involved as
well as their particular worldview on the problems under discussion.
CSH has been used to reflect on the problem formulation stage to ensure that
the boundaries were not drawn too narrowly and to ensure that the views of all
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stakeholders came through. The answer was developed within the framework of
the 12 boundary questions (as attached in appendix 5, figure 45) that define CSH
such that the overall solution can be described as deriving value on a wide a
scale as practically possible.
Mitroff’s five strategies for avoiding solving the wrong problem precisely have
been utilized to ensure the correct problem was formulated. In addition the four
perspectives on any problem have been used to frame the research question.
Grounded theory was used to generate the concern through unstructured
interviews. Grounded theory was also used to construct an ideal model for
strategy formulation in complex environments. Affinity diagrams (AD’s) were
subsequently created, grouping concepts in categories which were subsequently
linked via interrelationships diagraph (ID’s). The ID’s helped establish the drivers
and the outcomes of the process that ultimately resulted in the creation of causal
loop diagrams depicting the theoretical models and practical concerns.
For the purposes of this dissertation, data generation was achieved from multiple
sources including:
• Unstructured interviews.
• Informal conversations
• Research carried out during the EMBA modules as recorded in the
position papers.
• Action research learning, small wins and critical incident logs.
• Portfolio’s of work done during the EMBA modules.
• Literature surveys.
• News articles and radio/television interviews of business leaders.
The theoretical model derived as the answer relied primarily on data generated
from the literature reviews.
Data, method and theory triangulation was achieved through the use of multiple
data sources, different methods and multiple theories. The result of the interview
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process was subjected to a high level scrutiny by two senior managers within the
company to ensure a lack of bias thereby solidifying the objectivity (appendix 6).
The detailed explanation of triangulation process can be found in the evaluation
chapter under the validity section.
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CHAPTER 14: LITERATURE REVIEW UNDERPINNING THE ANSWER With complexity and complexity theory looming large in the situation and the
concern, the current Implats strategy formulation processes were assessed
through Stacey’s (1996) creativity web required to create spontaneous
adaptation to circumstances as per figure 35 below. The gap identified is what
the answer is trying to fill.
Figure 35: Stacey’s creativity web
Stacey’s Creativity Web
Connectivity and rate of information flow
Degree of power differential
Level of contained anxiety
Watchful anticipation
Intentionality
Good boundaries
Lack of inhibitors
Degree of diversity
Expected creativity web
Current creativity web
Gap identified
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14.1 CONCEPTUAL ANSWER Mindfulness: an awareness of change. The answer recognises that we are living on the edge of chaos. Business models
in the current massively complex, continually changing environment are different
to that which worked in the more stable preceding environment. Mitroff (1998)
states that what has worked well in the past will lead to failure in the future. While
this is a generalization, at its deeper level it suggests that complacency is really
the enemy that needs to be overcome. Thus it is time for great innovation and
creativity to spark ideas for the next revolution.
The minding process is to recognize change as it is occurring. Minding being
aware that that there is a process that precedes a result. If we want to create a
sustainable future for future generation such that they enjoy a quality of life at
least comparable to our own, then business practices will have to recognize that
the profit imperative is no longer the only directive. Rubinstein and Firstenberg
(1999) stress the importance of context and reframing, “A critical component of
minding is the context within which a situation is embedded. In our organizations,
circumstances dictate the value of information, its relevance and truth.”
Reframing or the ability to change contexts and use multiple contexts involves
interpreting the business through new frames opens up possible ventures that
the mind otherwise never considers.
Hamel (1996) observes that pursuing incremental improvement while rivals
reinvent the industry is like fiddling while Rome burns. There is no point in
following the rules if somebody else is reinventing them. He suggests that the
fortifications of industrial oligarchy are crumbling under the weight of
deregulation, technological upheaval, globalization and social change. If the
company is more ruling class than revolutionary then you can either surrender
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the future to revolutionaries or revolutionalise the way your company creates
strategy.
New leadership capabilities
So what are the new leadership capabilities in this dynamic environment? Arthur
et al (1999) maintain that the generative domain of human action incorporating
soft variables of intentions, interpretation and relationships take centre stage.
The quality of managerial awareness as described above is required to unlock
performance. Leaders will have to develop a new cognitive capacity that pays
attention to the intangible sources of knowing. The phenomenology of leadership
at this level describes three different levels of emergence:
- The behavioural level of social reality
- The level of emerging patterns of relationships
- The deep tacit level or source
Arthur et al (1999) further mention that the third level above corresponds to the
blind spot – the place from which a system operates and is akin to people
engaged in generative dialogues that access the full potential of collective
intelligence, which is what the new leader needs to tap into. Nonaka (1991)
mentions that shared context or ‘ba’ as the Japanese call it, does not reside in
individuals minds, but rather from interactions and patterns of relationships
evolving amongst participants. Ultimately the concept of ‘ba’ is about the mental
space people are in, which relates to whether they feel part of the corporate
story. This shared context according to Senge ‘will come from those who have
created together’ and this is the task of the new leader i.e. to create the shared
context. The author recognizes at this stage the difficulty of trying to explain this
concept which is more intuitive than practical reality.
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Recognition of an alternative role of company
Schumpeter (1934) wrote about the continuous process of creative destruction in
which companies exist in continuous state of creative tension with markets where
companies continually create value and markets allow this value to flow to
consumers forcing the companies to create new value as part of their continuous
efforts to remain viable. For this reason, companies are able to combine skills
and resources to create value in a manner that few other institutions can. The
requirement to survive in this context helps the companies combine resources
and most importantly knowledge in a framework that engenders value creation
including knowledge creation and dissemination on a much broader level. In the
South African context this is one of the reasons that more of the load that should
be borne by government is shifting to the private sector.
The alternative argument is the oft quoted Milton Friedman statement that the
role of business is business and the company’s sole social responsibility is
utilizing resources in the most efficient way to maximize its profit, will little regard
to the consequences of their actions. This is the capitalist ideal that has brought
the world to a consumption driven dead-end that threatens the survival of
civilization as we know it. The best example of this is the current situation
regarding global warming. In spite of the threat of a dramatic change to the
climate, the USA which is the highest emitter of greenhouse gases refuses to
sign the Kyoto protocol. Their unstated rationale for this madness is the fact that
the profits of the huge oil companies that dominate the American corporate
landscape will be threatened. The profit motive as a result can be proven to be
totally amoral.
The importance of profitable companies to a country’s development cannot be
underestimated especially in South Africa. The role of the company especially in
our new democracy is one that enjoys vigorous and often dialectical debate.
What is necessary for the country to prosper and what is the role of the company
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in this regard. Simon (1991) highlights the positive association between the
prosperity of an economy and the role of companies operating in that economy.
He mentions that it is companies rather than markets that are the creators of
wealth contrary to Adam Smith’s assertion. He also highlights the positive
relationship between the number of large companies in a country relative to their
GDP and the R&D expenditure of these companies in relation to the labour force
employed.
While correlation does not imply causation, Ghosal (2005) also verifies that the
wealth of nations and the proportion of successful firms in these nations prove
that society and firms to prosper in a mutual symbiotic relationship and there is
no inherent conflict between the economic well being of companies and their
serving as a force for good in societies. Managers are exhorted as custodians of
the company’s well being to escape from the trap of modern capitalist theory
towards an economic and moral alignment of their management practice.
King (2002) confirms this by stating that “with successful companies come
successful economies.” He cautions however that without satisfactory levels of
profitability it is unlikely that investors and other stakeholders will have an
enduring interest in the company.
Level of resistance to changing the Paradigm Mining culture has evolved over the life of the industry and with due cognizance
to the nature of the industry purely along the lines of mechanistic and reductionist
thinking. In fact miners in general are at the very end of reductionist thinkers and
enabling a move towards system thinking and recognizing the company as a
complex adaptive system will be a massive swing away from the norm. A change
in mindset as described above is the prerequisite for this stage of the solution
which argues for looking at the entire spectrum of activities holistically instead of
the traditional breaking down into core components approach. Moving up the
level of abstraction allows the management team to reflect on the issues
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emerging without being bogged down in detail. Again, this is a mindset change
that will be fractionally less difficult that the first concept as it entails learning a
new way of thinking. Organisational learning is a common theme that
predominates in the suggested solution. While this is probably idealistic and most
likely difficult to achieve, without this paradigm shift the company will undoubtedly
continue on what seems to be a dead end street.
Luc Hobeke during a lecture in module six commented that system boundaries
are really an illusion created by ourselves. Utilising the above in describing the
interface between business and society he further mentions that business and
society are so tightly weaved that the boundary is blurred if one can be defined at
all. So in this context any failure on the part of business has an immediate impact
on society and so the well being of society is inextricably linked to the functioning
of business.
The critical change required of the mining industry is a paradigm shift towards a
more engaging and mutually appreciative stance that helps work towards the
broad aims of the country. Industry has the skills and requisite variety to help
government achieve the country goals more efficiently and it is within this
framework that reciprocity from government will emerge such that industry goals
are satisfied. The shift in the world views and value systems towards sustainable
development and triple bottom line underpin this change required.
Recognising other perspectives Systemic learning requires people to work jointly with those who have other
perspectives on an issue. This is the first tangible result of the above steps as
recognizing the existence of perspectives other than the company perspective
opens the door towards a mutually inclusive solution. ‘Churchman’ (1968) in his
book ‘The Systems Approach’ states that “The systems approach begins when
you view the world through the eyes of another person.” Additionally, whatever
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perspective (world view) we hold is based on assumptions that are taken for
granted (Kant). There are multiple world views present in any situation and the
systems approach suggests that “every world view is terribly restricted.”
This does not mean you have to support the other party’s viewpoint, but being
able to view the same situation from the other side helps break down the barriers
caused by a unitary view and removes elements of intractability on your part
caused by different frameworks. Churchman (1968) further elaborates that ‘only
by sweeping in different subjectivities through stakeholder participation can the
restricted nature of any one worldview be overcome.’
Hamel (1996) states that perspective is worth 50 IQ points. It is impossible to
make people smarter, but you can give them a new lens to look at things
differently. There can be no innovation in the creation of strategy without a
change in perspective.
Hobeke (1994) defines ‘generative theories’ which empower their users to
develop a new repertoire of behaviour, to deal with their natural and cultural
environments. At this level of interaction, tolerance of its members for different
cultures, languages and world views is essential for generative interactions, and
implies respect for different world views even if different to your own. Interactions
on this level distinguish between enemy relations and adversarial relations.
Enemy relations which often characterize the interaction between the company
and government lacks the essential ingredient of trust and is typically self
destructive. The recommended relationship at this level is that of adversaries
who have a trusting relationship. Although adversaries have a different world
views and value systems, trust is the glue that helps mutual appreciation as
human beings. The solution as proposed creates a whole concept centered on
creating mutual respect and trust with the other party.
Figure 13 corroborates this diagnosis as the high stakeholder potential for threat
and cooperation according to ‘Savage’ implies a collaborate strategy is indicated.
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One of the paradoxical questions raised during the Mitroff analysis of the
practical problem was the rights of shareholders relative to the rights of
employees. Shareholder capital is a necessary, but insufficient condition to
ensure the success of a company. What is also required is human capital. This
implies that the employee deserves equal focus as the shareholder. This fact
was highlighted by John Roberts (Implats non-executive director) when he said
“maybe we should have returned some of the excess cash to employees, they
are as vital in the strategic setup as shareholders.” It is this kind of diversity of
perspective that will be required to operate in a volatile business environment.
This leads into a discussion of the merits of shareholders rights versus other
stakeholders (especially employees) with respect to corporate strategy
formulation.
Shareholder versus other stakeholder rights Milton Friedman (2002) stated “few trends undermine the very foundations of our
free society as the acceptance by corporate officials of a social responsibility
other than to make as much money for their stockholders as possible.”
This is the dominant theory that drives capital market behaviour today and
managers live by the certainty that their job is to maximize shareholder value.
To change this reality is to risk a backlash from the ‘amorphous market’ (Trevor
Manuel) that ultimately threatens the security of tenure of senior management.
Estes (1996) confirms that the manager is held hostage by the scorekeeping
system whose one clear goal is maximization of the bottom line. Any good that
might be done for society is accidental in the effort to sustain profits.
In essence irrespective of the private beliefs of decision makers, their hands are
tied. Or is it?
Ghosal (2005) takes a contrary stance. He suggests that while shareholders own
a right to the residual cash flows of the company this is not the same as owning
the company. The company being a legal entity has ownership of all its assets
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and liabilities. Furthermore value creation is achieved by a combination of
financial capital from shareholders and human capital from employees, so why is
one contributor favoured in modern capital market theory.
Indeed once the initial share placement has been completed and the capital
collected by the company, further trading in the share does not add to the capital
of the company except from a position of valuing the worth of the company.
King (2002) mentions that the inclusive approach to strategy formulation should
recognize the rights of employees, the community, its customers and suppliers
when developing strategy. There exists a wealth of evidence argues King, that
this inclusive approach is the way to create sustained business success and
steady long term growth in shareowner value.
So what factors support the granting of shareholders almost exclusive focus in
strategy formulation? One theory is that the shareholder carries the greater risk
in that he could potentially diminish or lose his investment totally hence the
company must be managed toward maximizing shareholder returns. Quinn
(1992) postulated that capital can be viewed as a commodity in excess supply,
while human capital through their knowledge, skills and entrepreneurial ability are
more important. Additionally the risk taken on by shareholders is minimized by
the ease with which stockholdings can be sold. Employees on the other hand
cannot find other jobs as easily. Hence they typically invest more in sustaining
the performance of the company and logically should share in the rewards
commensurately.
The ‘agency theory’ which proposes that the interests of managers be aligned
with those of stockholders by granting managers share options reinforces this
shareholder dominant strategic focus at the expense of other stakeholders. The
effectiveness of agency theory has not been conclusively proven and indeed a
large number of the corporate scandals of recent times have had the agency
theory at the root of the problem.
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Moving beyond the compliance mindset To be effective requires a corporate value system that embeds these practices
deep within the corporate ethos-as part of its ‘DNA’ and its everyday activities.
Merely abiding by the law does not constitute good citizenship; it merely
encourages a race to the bottom. Multi national commitments such as the global
compact, OECD guidelines, NEPAD, GRI reporting, the King 11 code on
corporate governance and the Kyoto protocol strive for the greater good.
Business are by definition self serving and we must recognise that an important
raison d’etre of the company is to make a sound return for its owners, but the
companies should do so with the long term in mind. The focus on the long run
will allow a deciphering of the long term macro – trends especially with regards to
sustainability. Executive too wrapped up in operational performance, chasing the
bottom line miss the signals of change and their consequences as well as its
potential. What is the impact of climate change and how should we react? How
does the Kyoto protocol present Implats with opportunities and what are the
threats? How does massive power needs fulfilled by coal based industries impact
on the platinum industry and does this present an opportunity for platinum value
add? Does the fact that the country without its platinum and other resources
could be destitute over the next hundred years, constitute an ethical problem for
current management?
The real problem that management has is that any strategic changes geared
towards ensuring long term sustainability inevitably detracts from short term
gains in the form of dividend payments to shareholders. This increasingly active
stakeholder in companies has the power to significantly affect the managerial
structure as well as management decisions. The fear is that shareholders have
the capacity to significantly affect share prices if they are unhappy with the short
term potential of a company. The company can attest to the ability of
shareholders to affect the share price as indicated in figure 36 below. The
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company announced a buyout of a new junior mining company (Afplats) to
facilitate access to their platinum resource. This effectively meant less money
would be available for dividends. The share price reacted negatively as
shareholders swapped out of Implats into Amplats.
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Figure 36: Platinum counters price movements (2007).
Thus the impact of shareholders and their perception on dividends does translate
meaningfully on the organization and this is further explored below.
The relevance or irrelevance of dividend payments The problem faced by the current management team in terms of shareholder
relish for high dividend payouts is that the history of high dividend payments in
the past has effectively classified the Implats counter as a high cash yield share.
The expectation of shareholders on buying the share is that they will receive
significant cash payouts from the company. The unspoken fear from a
management perspective is that changing this culture of shareholder expectation
will in all probability cause a downward rerating of the share price. It is worthwhile
examining this fear more closely to determine its basis for causality.
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Firer et al (2004) quote an example of De Beers who announced a cut in its final
dividend by 50% in 1982. This resulted in a share price drop of 13% in the
following week. However when it cut its dividend by 30% a decade later, the
share price did not react. Firer et al (2004) further goes on to mention that
research and economic logic suggest that dividend policy does not matter.
There are several theories put forward explaining both the relevance and
irrelevance of dividend payments. The most famous support for the irrelevance of
dividends comes form Modigliani and Miller (1961) who argue that the value of a
firm is unaffected by the dividend distribution and it is rather the earning power
and risks of its assets that was the prime consideration. They further argue that it
is the information content inherent in the dividend distribution that affects the
share price rather than the dividend itself. They also put forward the ‘clientele
effect’ which states that the firm attracts shareholders whose preferences with
respect to payment and stability of dividends correspond to the payment pattern
and stability of the firm itself. Essentially this means that if Implats is currently
attracting investors that value high dividend payouts.
Gordon (1963) and Lintner (1962) are the key proponents of the alternative
theory that suggests that there is a direct relationship between the firm’s market
value and its dividend policy and that shareholders do indeed prefer current
dividends. They use the ‘bird in hand’ argument to support their proposition i.e.
that investors prefer cash in hand as opposed to future capital gains or dividend
payments.
Firer et al (p564-566) proves that in an ideal world paying or retaining the
dividend does not affect the current value of the firm. In the real world however
with the existence of capital gains tax, investors may prefer tax free dividends to
taxable capital gains. However, are dividends really not taxed? The presence of
STC (secondary tax on companies) means that companies have to pay the STC
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upon payment of the dividend and hence this impacts on the value of dividends
paid.
The approach adopted by this paper is biased towards the irrelevance of
dividends paid. The residual dividend theory suggests that the company pay out
any remaining cash to shareholders after considering all projects with a positive
NPV (net present value). While other factors will affect the investment decision,
this policy encourages the company to seriously consider alternative
investments. The possibility does exist that reducing or not paying the dividend
may cause a sell off in the Implats counter over the short term, but in the opinion
of the author the overall effect will be neutral as the company will merely attract
investors who prefer capital gains to replace the dividend hungry investors (the
clientele effect).
Changing the focus of strategy formulation
The classical view on strategy involves searching for an area that is not covered
by competitors and fencing off this area for as long as possible by creating
barriers to entry, barriers to substitution and holding onto the cream of the profit
cycle for as long as possible. The problem with this definition is that it is a win-
lose scenario, with the losers being society in general. Thus one can infer that
the goal sought by classically inspired strategy is value appropriation from
society.
Ghosal (2005) encapsulates the argument simply when he stated, “the tired and
fruitless debate between strategy as a top down process of heroic intentionality
versus strategy as an ex-post rationalization of chance outcomes and bottom-up
explorations dissolves into a new view of strategy of a process of guided
evolution, with managers as guides of the process.”
Bearing in mind the core concern is based on sustainable strategy formulation
and with regard to the argument above, the change in strategic focus
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recommended is a focus towards diversification of the business beyond mining
and refining into added value metal products and diversification towards a
complex of other commodities. Fostering innovation and creativity across the
organization becomes the new strategic focus. Hamel (1996) states that strategic
planning is about programming not discovering. He queries what new
opportunities present itself when you relax the most fundamental beliefs shared
by the industry. It is sad that most companies only exploit the creative energy of
its employees when they make it to the top, by which time they would have
orthodoxy ingrained upon their soul.
The counter argument is that core competency is what drives value creation
within Implats. This however implies a narrowness of vision that ultimately
inhibits sustainability. Dr Khotso Mokhele (Implats non-executive director)
encapsulated the argument perfectly when he mentioned during the interview
process, “Sticking to the core competency model is like throwing your fate up to
the winds and hoping it carries you to where you want to go.”
Any company that is not preparing for the next 15 years is irrelevant. The future
is not in 15 years, it is what you are doing now to make yourself relevant in the
future according to Hamel (1996).
14.2 ACTIONABLE ANSWER New company leadership style The central role of leadership in the new organization will shift from technical
problem solving to adaptive, creative problem solving. The organization will
require leadership that can operate on the edge of chaos by relinquishing
command and control and creating an environment of mutual trust and respect.
Ghosal and Bartlett (1998) state that “where the industrial age model was about
strategy, structure and systems, the new model is about purpose, process and
people. The role of the chief executive is about setting a purpose for the firm,
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defining the core process by which value could be created and importantly
developing and nurturing people so that they could fulfill their potential.”
Furthermore, the leader’s primary role shifts from maintaining control and the
status quo to embedding trust and inspiring change.
Management needs to reflect its respect for the individual in a supportive culture
that is open to questioning from below and tolerant of failure. Within the Implats
framework, in David Brown we have a new CEO that fits into this profile and
hence this could be the start of an exciting phase in the life cycle of the company.
From the interview process, the author noted that there is a new energy for
change sweeping through the company. Employees want to contribute and have
their ideas heard and the new CEO is the conduit for harnessing these energies
and allowing a tree of growth to bloom. Moving the mindset from mining and
refining as a key competence to recognizing the overall organisation’s capability
as a key competence will require that it be driven from the top.
Organisational capability as a key competence
The context within which organizations have to plot a strategic course have
evolved away from efficiency and best use of scarce capital resource to one
where knowledge has become scarce and capital abundant. This then places the
emphasis of strategy clearly upon the human capital of the company. Taking
advantage of this structural shift requires a new organizational behavioural model
that is radically different to that focused on core competencies and efficiency that
was designed for an economic age that has passed.
The ability of a company to survive and succeed in today’s turbulent international
environment depends on two factors: the fit between its strategic posture and the
dominant industry characteristics, and its ability to adapt that posture to the
multidimensional task demands shaping the current competitive environment. To
respond to the complexity, diversity and dynamism of the external environment
and to build the multidimensional strategic postures that are required, Implats
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has to overcome the one-dimensional bias shaped by its mining heritage. The
organization needs to become multidimensional, capable of developing new
strategic competencies while protecting the existing strengths
Central strategy and Scenario planning functionality
One of the big weaknesses in the company that exacerbates its failure to learn in
a complex and dynamic environment is the lack of another core systems concept
which is scenario planning. Interestingly, the ‘drain the lake’ concept borrowed
from the famed ‘Toyota Planning System’ has resonance in explaining the
importance of scenario planning. ‘Drain the lake’ essentially advises that instead
of plotting a course through a lake with rocks under the surface, drain the lake
and expose all the problems and this is exactly what scenario planning does
through stories of potential futures.
Dr Ichak Adizes also give strong support for the validity of scenario planning in
this context. He makes the relationship between change and problems caused
for a company, i.e. change causes problems. Now because change is
accelerating this implies problems are accelerating in the current environment.
The company that comes out ahead is not the one which who slows down
change but rather the company that solves problems faster. Predicting change is
the key to solving problems faster and to be faster than the competition and this
is the prime driver for scenario planning.
Innovation does not mean starting out with a blank page. Good ideas come from
other places and work previously done must be captured and reused. The
section envisaged above will be responsible for coordinating information flows
especially feeding into the concept of an innovation oven raised as the ultimate
outcome of the process.
Scenario planning is a critical aspect of the solution is the model is to work as
designed. The Anglo American scenario team acts as the company’s radar
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system, scanning the future business environment for possible surprises and
pitfalls and generally sensitizing the employees to change. Sunter (1992)
comments that every company has a natural resistance to change as part of the
makeup that makes us human. Scenario planning is there to lower that
resistance by stretching the imagination.
The purpose of scenario planning according to Sunter (1992) is to develop short
stories of potential futures that influence attitudes, improve decision-making and
improve the actual course of events. Scenario planning differs from strategic
planning in that scenarios are short views of possible futures that inculcate a
sense of flexibility in the reader. De Geus (1997) called this a memory of the
future. He expounds a theory that one of the reasons that many companies are
seemingly blind and deaf to what is happening around them is the fact we can
only see what we have already experienced. To receive a signal from the outside
world, it must match some matrix already in the mind, placed there by previous
events. This is where tools for foresight (of which scenario planning is prime)
comes into its own for building memories of the future. Scenario planning
requires managers to abandon the one line approach because it generates a
multitude of possible futures that can develop from the present time. Like
parables, scenarios generate deep insights.
Scenario planning gets you look 20 to thirty years ahead and allow people to
discuss the unthinkable, for example ‘what will happen when the platinum mines
run out?’ Importantly, De Geus (1997) cautions that ‘scenarios must be relevant
as only then will the manager raise his eyes towards the horizon. In this sense,
scenarios are neither a mystery nor a superior way of planning; they are tools for
foresight and discussion whose purpose is not prediction, but a change in the
mindset of the people who use them.’
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SCENARIO PLANNING PROCESS - adapted from Illbury and Sunter (2001)
The creation of many scenario plans or futures based on the contextual
environment will allow for the creation of specific signals that could be utilized by
the organization in terms of monitoring the strategic dynamic at play. Critical to
this management tool is the fact that scenarios need to be created in the areas
you are uncertain about and over which you have no control.
Work Plan
The scenario development work plan is based on the 4 quadrants of the
uncertainty and control matrix as drawn below.
Figure 37: Scenario planning matrix
Utilising the matrix allows the scenario planner to move through its various
layers, formulating and discarding potential occurrences and related scenarios
CERTAINTYUNCERTAINTY
ABSENCE OF CONTROL
2
CONTROL
1
3 4
Rules of the gameA] Key uncertainties
B] Scenarios
Options Decisions
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until the strategic plans based on the selected scenarios are arrived at. Linking
the SWOT analysis to the matrix would place the opportunity and threats
(contextual environment over which we have no control) in the bottom quadrants,
while the strengths and weaknesses (transactional environment over which we
have control) in the upper two quadrants.
The mechanics of the scenario planning process are represented in Appendix
four.
Integrated interdependence
This is borrowed from Ghosal and Bartlett (1998) and is described as an integral
facet in a learning organization. They state that “Interunit relationships can no
longer be framed in terms of independence from one another nor dependence of
one on the other. Instead, the linkages must be defined in terms of
interdependence, not only with the headquarters but also with each other.
Today’s complex and dynamic competitive environment demands collaborative
problem solving, cooperative resource sharing, and collective implementation.
That is why companies need to build their interunit relationship based on
interdependence.”
Womack et al (1996) in ‘Lean thinking’ specifies that to get the process of
integrated interdependence onto the right track several variables need to be
firmly in place, including transparency, aligning people and resources and
working as integrated teams. In lean thinking, transparency in everything is a key
principle. Policy deployment operates as an open process to align people and
resources with improvement tasks. Problem solving is conducted by teams of
employees who historically have not even talked to each other much less treated
each others as equals. If this could be achieved, then the by a process of
emergence, the best solution would be found.
This is central to a company’s ability to develop and diffuse knowledge internally
and to make organizational learning a source of competitive advantage.
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Level of open & horizontal information flows One of the leverage points of the solution and essential to facilitate the concept
of integrated interdependence. The most basic task in creating horizontal
information flows is to create new channels of communication that encourage the
rapid diffusion of strategic knowledge and expertise across the organization. The
most direct way to create such cross-unit linkages is for senior management to
play an active personal role in leading the cross-fertilization process. The
company cannot gain advantage from accumulating islands of information and by
connecting the relevant islands via a strategy department, the benefits of
organizational learning are leveraged.
The areas under investigation in different projects would encompass many
different domains of interest as well as areas of expertise hence individual
expertise in isolated units must be linked in a rich horizontal flow of information
and knowledge that can be used to transfer best practices organizationally.
Level of barriers to organizational Learning The pace of change in the business environment is undermining the relevance of
long-range plans, that often were little more than projections of the past.
Managers are being forced away from defining defensible product-market
positions towards developing the organizational capability to sense and respond
rapidly and flexibly to change. The age of strategic planning is no longer relevant
in today’s fast paced environment. The new age is the era of organizational
learning.
System failure analysis argues strongly for organizational learning as the key
way to handle complexity and its associated lack of predictability and control. The
conclusion is that the missing ingredient is learning, discovering what works by
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way of action, evaluation and reflection. Deming’s PDSA cycle (small wins)
supports this assertion by providing a mechanism to ensure continual learning.
The systems thinking concept itself at the broadest level is underpinned by
organizational learning as a prerequisite. To facilitate a culture of organizational
learning, one needs to recognize the barriers that prevent critical reflection and
learning. Systems failure specifies these as:
- Aversion to failure.
- Desire for uniformity that stifles innovation and variety.
- The incorrect view that command and control is the correct way to
exercise power.
- Lack of feedback.
- Lack of time to do anything other than cope.
- A tradition of secrecy used to stifle feedback and learning.
- Turf wars
The new metaphor requires organizations to embrace uncertainty and chaos and
learn to thrive on it. Employ concurrent perceptions – the past, present and future
and learn the powerful skill of thinking backwards.
Learning will be central if the organization continues to adapt and becomes
capable of dealing with the unplanned and unanticipated, which will be more
prevalent in the future.
Level of empowered employees
The new model is designed around the individual employee as the building block
where the corporation is built around the ‘ideas and initiative of empowered and
energized people.’ The creation of IRS within the Implats stable can be exactly
described upon this blueprint where motivated and empowered senior managers
conceptualized and created a new addition to the Implats business that was
revolutionary for its time and is today one of the foundations of the company.
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The focus of leadership in this model has to shift away from command and
control towards stimulation of entrepreneurship and coordination of activities.
Investment in upgrading the skills of the human capital needs to be a continuous
process in this learning based model.
Linked with the concept of empowered people is the social capital that they bring
to the table that helps develop and maintain business relationships. Identified as
a key weakness during the interview phase, this new paradigm highlights the
maintenance of relationships at a personal level that translates into corporate
relationships over the longer term.
Creating a culture of mutual trust and respect The hardest part of building a learning organization is to create a culture in which
individuals must share information or expertise that was once a major source of
their power, accept responsibility for issues over which they have only limited
control, and propose initiatives and take action in an environment where
performance cannot be measured in traditional terms. Such behaviour cannot
thrive in an organization in which relationships are primarily contractual in nature
and individuals and operating units are motivated to protect their self-interest.
Employees will take the entrepreneurial leap only if they believe that there will be
a strong and supportive pair of hands at the other end to catch them. This further
implies a tolerance for “Well-intentioned failure”.
Mistakes will be made, but if a person is essentially right, the mistakes he makes
are not as serious in the long run as the mistakes management will make if it is
dictatorial and undertakes to tell those under its authority exactly how they must
do their job. Management that is destructively critical when mistakes are made
kill initiative, and it is essential that we have many people with initiative if we are
to grow.
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A culture of mutual respect and trust can be described as a normative value
which demands a strong ethical framework to restore key practices in business
environments that are devoid of these values. This is a strong facet in allowing
one to understand others perspective and calls on a high degree of tolerance.
Tolerance according to ‘Hoebeke’ means that “although you cannot agree with a
certain world view or value, I do not judge their proponents or try to eliminate
them”. Tolerance presupposes that the relation between political adversaries is
an essential element to express my values in new ways of behaving and does
not mean working towards a grey compromise.
Level of innovation and creativity created
Creativity is thought to flourish when you have creative people, creative
processes and creative environments. In many cases in the context of examining
creativity in organizations, it is useful to explicitly distinguish between creativity
and innovation with the term creativity reserved to apply specifically to the
generation of novel ideas by individuals, as a necessary step within the
innovation process. While innovation "begins with creative ideas," creativity by
individuals and teams is a starting point for innovation.
This is the practical outcome of the process and real departmental change within
the company created to continually churn out innovation to continually renew the
company’s strategic position. Implats is at the edge of a vast new opportunity
allowing it to move beyond its core competency mindset. The long term future
cannot be only mining and refining platinum. Platinum and its associated metals
have huge potential to drive the new era of energy production especially with
regard to fuel cell applications and associated carbon credits. This gels with the
South African governments goals in terms of efficient resource utilization. The
answer is not suggesting that the company get into trading carbon credits, but
rather at least investigate whether this new potential source of revenue could be
tapped in some manner.
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The integrated interdependence concept linked with the stated intent of allowing
creativity and innovation to flourish needs to be augmented with a third leg of
R&D spend to unlock the potential of a potential innovation oven. The ultimate
expression of firms creative intent is measured by it’s spending on research and
development. The innovation oven is necessary for the company to sense and
experiment with emerging new opportunities. Ultimately this is the workshop for
producing products and technologies that will embrace a brave new future for the
company. The resources and information emerging from the innovation oven
must be fed back into the learning organisation via the communication structure
to ensure sustainability.
ADDITIONAL LENSES USED TO SUPPORT THE ANSWER The teachings of Ralph Stacey a foremost expert on the relevance of complexity
theory as it applies to management practice and Gary Hamel a noted scholar in
the field of strategy and international management has been used extensively to
frame the work in the dissertation.
The summarized application of their work can be found in Appendix Seven.
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CHAPTER 15: SUPPORT FOR CONTINUOUS ORGANISATIONAL RENEWAL - LEARNING FROM THE PAST
The actionable knowledge subscribes heavily to continuous organizational
learning and organizational renewal as the panacea for strategy formulation in
these complex times. But this is nothing new for the Implats team, as this has
been done before, albeit under very different circumstances. The company found
itself in dire straits about 12 years ago as the high process costs described
above underpinned by inefficient operations, limited by ageing technology,
wracked by conflict with the Bafokeng nation and restricted by low metal price
regimes, Implats found itself close to bankruptcy. Fuelled by desperation a young
and entrepreneurial senior management team took the bold and innovative
decisions required by initiating a process of corporate renewal called ‘FIXCO’
encapsulated in the now internally famous ‘ONE TEAM ONE VISION’ slogan.
The net effect was to harness the loyalty of all the employees and channel them
into the regeneration process by unleashing the creativity inherent at all levels of
the corporate structure.
Appendix seven contains detailed explanations of the actions successfully taken.
The company, at the zenith of its corporate renewal curve from the FIXCO
process now needs to jump curves onto a new growth curve. We have done this
before and there is not reason why the creative juices cannot be unleashed again
by learning from the actions of the past thereby continuing on the cycle of
organizational learning and continuous renewal.
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SECTION G: EVALUATION This final chapter of the dissertation reflects on and evaluates the research
performed in terms of its relevance, its utility, its validity and the ethical
implications of the work.
CHAPTER 16: EVALUATION
16.1 RELEVANCE
Investigates the relationship between the situation and the concern and attempts
to prove that the concern is significant enough to warrant attention.
The situation sets the context and draws the boundary for the devolution of the
concern. It highlights the increasing rate of complexity at all levels of the
contextual and transactional environment that the company is exposed to. The
current Implats strategic model focused on operational efficiency and cost
containment is harvesting massive profits in a commodity boom cycle. However
all levels of the business model are increasingly under threat. The mines have a
limited lifespan and are becoming cost inefficient at deeper levels. The future
longevity is based on an investment in the Great Dyke ore body with its attendant
politically inspired complexity. The toll refining arm is attracting increasing levels
of competition. Additional perspectives on the problem situation reveal that
resource depletion with the attendant global warming and climate change is
increasingly impinging on the strategic domain. The impetus for moral renewal in
business practices adds to the complexity. The South African government is
crucially aware the resources are rapidly depleting and has the major mining
houses in their sights via several new laws designed to promote equitable access
and replacement industries to generate sustainability for future generations.
Shareholders require management to focus on the short term and keep the
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dividends flowing while consumers are increasingly concerned with political
instability and high metal prices resulting in increased efforts to find substitute
products.
The high level concern states that the company may not be doing enough to
define itself sustainably in the face of increasing complexity. In order to establish
the validity of this emergent concern, a detailed interview process was carried out
followed by review of the results utilizing system methodologies. The results
indicated that while Implats was by choice focused on its current strategic path,
the overwhelming opinion was that the company was too narrowly focused on
adding shareholder value by improving its core competencies and efficiencies.
The concern emanating from this process was that complacency supported by
poor information flow and the non-involvement of employees in the strategy
making process was inhibiting the impetus for strategic regeneration of the
company and hence limiting the overall sustainability. The concern also pointed
to the fact that the current strategic boundaries were too narrowly drawn and
needed to consider the benefit of all stakeholders.
The relevance of the concern within the boundaries that the situation has drawn
is that the current strategy formulation process does not have the requisite
variety to cope with the huge variety of the environment leading to a strategic
focus that is too narrowly defined to ensure the long term sustainability of the
company.
16.2 UTILITY The utility deals with the plausibility of the answer in terms of answering the
question and dealing with the concern.
The claim made in this section is that the answer sufficiently addresses all
aspects of the question such that the overall concern is alleviated.
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The reasons for this claim are made evident below.
The concern highlights the core variable initially as the lack of evolution of
corporate strategy in the face of increasing complexity of the environment. This is
ultimately changed to the un-sustainability of current corporate strategy and
underlying processes of strategy formulation. Included in the concern is the lack
of creative involvement of employees, limited strategic information flow, limited
corporate learning, complacency and a shareholder dominant focus.
The question raised bases the strategy formulation process firmly within the
context of environmental complexity. It looks at how the current mindset can be
changed such that a new management model of strategy formulation can be
devised that utilizes all the resources of the company by reversing the issues
raised in the concern. The ultimate expression of the question is satisfaction of all
stakeholder goals and sustainability of the company.
The answer develops a model that first allows for a change in the corporate
mindset into a frame that recognizes the role of a company in this environment
as a necessity must shift away from the capitalistic inspired maxim of creating
riches for shareholders without regard to anything else. Acceptance of the
importance of alternative perspectives and the fact that the company can
facilitate sustainability by aligning its strategic focus to competing perspectives is
a prior requisite for the actionable model.
The second phase of the answer proposes a model gives the company a new
lens through which to view strategy creation. A new leadership style that unlocks
the potential of employees in a relationship of mutual trust and respect via the
creation of communication mechanisms that allows innovation and creativity to
emerge and ultimately facilitates organizational learning so necessary to
sustainability in a complex environment. The solution also suggests practical
changes to the structure to maintain the company’s evolution.
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Evidence is provided by the rigour of the data gathering process that proves the
concern. The question evolves directly from the concern and is supplemented by
reputable academic sources. The answer is based on the variables raised in the
question and is linked directly to the concern i.e. the answer CLD is an adapted
version of the concern CLD and reverses the effect of the restrainers identified in
the concern CLD while expanding on the positive aspects identified during the
interview process. Finally, the most importance source of evidence for the utility
of the answer lies in the small win recorded which proves that a significant loop
of the answer works in a real life situation.
The alternative perspective that has to be recognized is the fact that the answer
may be seen to be idealistic especially within the current capital market mindset
(which is a proven wealth creation model) and hence it may not be easy to get
acceptance from the decision-makers for full application of the model.
The warrant that connects the reasons to the claim is based on the fact that there
was sufficient consensus of informed and respected opinion both during the
interview phase and during the literature search (i.e. the answer phase) to
suggest that the answer is the most reliable mechanism for achieving overall
company sustainability in this increasingly complex environment.
16.3 VALIDITY Validity is established by proving the rigour that underpins the research process
and the answer and ensures the ultimate credibility of the research.
The claim made in this section is that the research process followed, as
explained in the rationale is sufficiently rigorous and the author has displayed
adequate diligence in writing the report to ensure the validity of this work.
The reasons supporting the claim and the evidence backing up the reasons are
outlined below.
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The main criteria for supporting the validity of the research findings include
proving the credibility, dependability, transferability and confirmability of the work.
Credibility
Triangulation of data supports credibility. The richness of information sources
and information gathered also helps ensure credibility of the findings.
Data Triangulation Data triangulation involves the use of more than one source of data in a single
investigation. Three types of data triangulation exist namely: time, space and
person.
Data for this study was collected over the two years from critical incident logs,
learning logs, research carried out for position papers and portfolio’s of work
done. The primary source of data emerged from the interview process carried out
as well as literature sources.
The results of the interview process are attached in appendix two. To ensure the
credibility of the findings, the summarized findings were sent to two senior
managers of the organization for their comments as well as confirmation that the
summary findings were a true refection of the interview process. Their comments
are attached in appendix six.
Methods triangulation Grounded theory was the primary method used for this dissertation, with action
research learning as utilized over the last two years of the EMBA used as a
secondary method for the research.
Theory Triangulation Theory triangulation involves the use of multiple theories or lenses to analyse the
same set of data. The emerging information is interrogated through different
lenses until a complete and holistic understanding can be obtained.
Multiple theories, methodologies and lenses were used in this dissertation as
attested to in the rationale chapter. These included Jackson’s creative holism
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and the Sumantra Ghosal lens as the primary contributors as well as the VSM,
the Hobeke lens, SSM, SAST, the Stacey lens, the Hamel lens and CSH.
Dependability
Dependability is established if an investigation emerges with the same findings if
it were to be repeated within the same context and boundaries. Babbie &
Mouton (2001) suggest that establishment of credibility of the work is both
necessary and sufficient to establish dependability. As credibility has been
established, it follows that so to has dependability been established.
Transferability
Transferability as the name suggests refers to the fact that the research findings
need to be applicable to other contexts, situations and even industries. Now none
of the findings generated here is specific to the PGM industry, indeed the answer
generated is can be described as being generic knowledge. This knowledge
developed via the answer CLD will be applicable to all companies working at the
levels of complexity currently witnessed in the business environment.
Confirmability
Confirmability is established by proving that the findings of the research are the
product of the process of inquiry and not the personal bias of the researcher. To
this end a clear audit trail is required to prove the findings.
The results of the interview process are transcribed and documented. The raw
data as well as he coded data are contained in appendix two. The raw data and
the summarized findings were subjected to independent checks by members of
the company senior management to ensure no interpretive bias emerged into the
process. Their comments are contained in appendix six. The literature sources
utilised to formulate the answer are adequately referenced to ensure the
accuracy of the data. The results of the process are therefore confirmable.
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The warrant supporting this claim again is that if you generate sufficient
consensus of informed opinion and if you are able to back up your hypothesis
with extensive corroboration from credible and well respected academic and
management scholars, then the likelihood that the research findings are valid is
guaranteed.
The above process establishes the validity of this dissertation.
16.4 ETHICS Utilitarianism Utilitarianism looks at satisfying the principle of ‘the greatest good for the greatest
number’.
The solution as developed is geared towards the expansion of the boundaries of
the dissertation by ensuring multiple perspectives are drawn in and given serious
consideration. Emerging from the interrogation of the initial concern and problem
formulation via the meta-methodology are recommendations to include the
following additional perspectives:
• The voices of the shareholders as mirrored by the emergence of the need
to consider the benefits of core competencies.
• The voices of the employees in highlighting the need to investigate how
their creative input could be harnessed into long term company strategy.
• Giving consideration to the global context in terms of long term
sustainability of the globe.
• Allowing the state of environment and providing a platform for
environmental consideration in the dissertation.
• Viewing the problem formulation from the point of view of the government
in terms of their goals for the nation.
• Creating a platform whereby the perspective of the community also get an
equal airing.
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This creates a space for the debate between all the different perspectives
ultimately allowing for the emergence of the solution that is for the greatest good
and importantly is the right thing to do.
Arie De Geus (1999) states that “most long-lived companies seemed to have an
innate ability to anticipate the need for change and turn them into new business
thereby continuing on the value creation path into the future”.
Fairness
The model attempts to achieve sustainability and continued competitiveness of
the company by looking at strategy formulation in very complex environments via
a process that gives consideration to all competing perspectives. This ultimately
gels with the global drive towards a sustainable future for all and hence is fair to
the extent that the findings continue to be valid.
Shareholders could be aggrieved that the model proposes a reduction in the
levels of cash paid out in favour of sustainable reinvestment. The balancing
factor however is the expected increase in capital gains that will benefit
shareholders as well as the long term company sustainability.
Justice
The concept of distributive justice is spotlighted in this report as it acknowledges
the pre-eminence of the fact that the corporation has duties towards society that
extend beyond the profit imperative. By extending the boundaries to include the
triple bottom line, corporate governance and ethics are improved to the extent of
its impact on society and the world at large.
Contributive justice criteria suggest that those who put in the effort deserve the
reward. Putting in effort in extending the boundaries allows the various
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stakeholders with different world views the opportunity to work together to
achieve mutually compatible goals thus satisfying the contributive justice criteria.
The model also proposes that employees who contribute their human capital be
given equal treatment in terms of company rewards as is accorded to
shareholders who contribute financial capital. Additionally senior management
are exhorted to unearth the creative contributions of employees into strategy
formulation to help develop a sustainable company.
Rights and duties It can be suggested that the author as a senior member of the company under
consideration has a duty to apply his learning from the EMBA towards the greater
good of the company and hence must suggest mechanisms that can improve the
performance of the company.
Shareholders have a right to maximization of their investment and to continuity of
the profit stream.
Employees have the right to continued employment in a company that is
sustainable beyond the life of its mines and the opportunity to contribute
positively to the sustainability of the company.
Government has a right to ensure that a natural resource located in the country is
handled in a manner that adds the most value to the citizens of the country.
The citizens have a right to employment and a safe working environment which is
satisfied under the rights to welfare criteria, as well as a sustainability of the
community.
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The children have a right to a sustainable future both in terms of a safe and
healthy environment as well as opportunities for gainful employment beyond the
life of natural resources.
Caring
The proposed model is caring as it proposes a sequence of events that firstly
ensure that the dissertation process is not fundamentally flawed from the outset.
The outcome of the process is caring to the extent that it allows for tolerance of
competing and often radically opposed perspectives to allow for the potential
achievement of mutually satisfactory goals. The criteria of caring is also satisfied
by the fact that the rights of employees are uplifted to the same level as
shareholders. Finally the net outcome of Implats evolving into a ‘long lived’
company satisfies the interests of all stakeholders.
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CHAPTER 17: KEY LEARNING FROM THE EMBA
My personal philosophy in life is that nothing happens by accident or luck. You
acquire the right tools as required at the correct time. This has been my
experience with the EMBA. Prior to stumbling across the EMBA syllabus, my
mindset was firmly set against any form of study, to the extent that I told the
‘Operations Executive’ of Implats that I had no interest in doing an MBA when he
recommended that I consider the option. My interest was piqued when I read
through the course content and I realized immediately that this was the exact
syllabus that could bridge my self enforced study hiatus. The pattern was
emerging.
The EMBA process if engaged to its full extent by the student will ensure far
reaching and significant changes in all aspects of life, both professional and
personal. This was the message obtained prior to beginning the EMBA process.
At this point in time, as you reflect on the lessons learnt, the knowledge extracted
and the value gleaned, the realization sets in that the biggest challenge facing
me as I exit the process is the application of the lessons and transfer of the
knowledge such that utility is derived within the national, corporate and personal
environments.
Ulrich (1983) in developing the Critical Systems Heuristics (CSH) adjusted the
three Kantian principles of the ‘world’, ‘man’ and ‘god’ to produce the ‘systems’,
the ‘moral’ and the ‘guarantor’ ideas. The essence of the above is that change
being wrought by the EMBA has to be reinforced by a parallel change process in
the individual. The parallel change that occurred in me involved a maturing
spiritual outlook in my life. What Kant implied and Ulrich concretized is the fact
that people with the ability and more importantly power to make a difference
need to effect changes as measured against the critical standard of ethics,
serving as a force for good and doing what is right for the bigger system. This is
the essence of spirituality. Mitroff (1998) makes the massive claim that
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spirituality is an integral part if not the very essence of management. The
essence of the learning from EMBA has a very strong and tangible bias towards
a new world view. My sense of this world view being driven by EMBA is that it is
more benevolent in global terms and therefore inculcates a strong sense of doing
the right thing for the company and the country. The systems thinking outlook as
driven by EMBA when taken to its extreme levels then challenges the manager to
think in terms of the impact his/her decisions will have in global terms that
exceed the mere profit motive but rather a bias towards the altruistic approach.
Ghosal (2005) concurs, exhorting corporates to serve as a force for good. The
challenge remains in the integration of the profit motive with the altruistic motive.
In this environment of heightened uncertainty and continual change organizations
are required to embrace uncertainty and chaos and learn to thrive on it. The
importance of context and reframing the context within which a situation is
embedded becomes critical. Reframing or the ability to change contexts and use
multiple contexts involves interpreting the business through new frames opens
up possible ventures that the mind otherwise never considers.
Learning will be central if the organization continues to adapt and becomes
capable of dealing with the unplanned and unanticipated, which will be more
prevalent in the future.
The core underlying concept emerging from the EMBA process is that people are
the number one priority in any successful organization. The first step toward
reengaging individuals is to give them a sense of ownership, only then can you
rely on people to be innovative and creative.
Focus, direction, and performance in these companies are achieved not by
retaining tight control over the strategic plans and operating budgets of the
entrepreneurial entities but by embedding a sense of discipline in their ongoing
routines and the everyday behaviours of individuals throughout their respective
organisation. In an environment where people enjoy more freedom, they go
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beyond the need to follow directives and conform to policies; in highly disciplined
organizations they take responsibility for their own actions.
Innovative companies ensure that their various priorities, policies, and practices
are never so tightly defined that they become “off limits” to questioning,
particularly from below. Linked to this is a high tolerance for well-intentioned
failure”. Management that is destructively critical when mistakes are made kill
initiative, and it is essential that we have many people with initiative if we are to
grow.
True empowerment occurs only when it grows out of a reciprocal system of faith.
Those deep in the organisation must have faith in their company and its
leadership, and senior management must have faith in the people in its
organization. Working together, it is this mutually supportive system that allows
the individual organization members to have faith in themselves, which in turn
provides the engine for entrepreneurial initiative that drives the corporate engine.
Even the best and brightest new recruits become wasted assets from the time
they join the company unless their skills are constantly upgraded. One of the
great benefits of this investment in individuals’ development is that in addition to
adding to their value as human assets, such commitments builds strong bonds of
personal loyalty to the organization. Organisational learning is built on continually
upgrading the skills of employees
We now come to almost the second fundamental lesson from the EMBA and that
is communication. In achieving innovation by leveraging knowledge of people,
the glue that puts this all together is constant communication. The channels of
communication are not always formal, but the best communication mechanism is
informal coffee-break chats and story telling. The company’s culture should
encourage this informal communication mechanism. The most basic task in
creating horizontal information flows, therefore, is to create new channels of
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communication that encourage the rapid diffusion of strategic knowledge and
expertise across the organization.
The final lesson from the EMBA that has taken root in my new management
model is the concept of continuous renewal. Ghosal et al (1998) states that
“yesterday’s winning formula quickly becomes today’s conventional wisdom, and
eventually ossify into tomorrow’s sacred cow”. A winning organization is one that
not only follow a process of continuous refinement (moving down the learning
curve), but also by creating a sense of regeneration or the ability to jump to new
learning curves.
The above then is a summary of the key learning from the EMBA, crystallized
into a management model that can be implemented into a practical everyday
corporate environment in the current ‘edge of chaos’ scenario. The model as
developed is applicable to all industries and is almost certain to give the
organization added impetus in terms of growth in very unsettled times.
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CHAPTER 18: CRITIQUE OF THIS DISSERTATION The area of focus involves changing mindsets starting with the top echelons of
management that a change in the way we strategise is necessary to ensure long
term survival of the company. The first difficulty that will be encountered is “why
change something that is working so well.” Where is the incentive for applying a
model that advocates continuous renewal, organisational learning and
harnessing the creativity of employees, when the company without this model is
producing record profits. The solution proposed sounds right intuitively, but
needs application to develop into a tried and trusted model that will gain
acceptance from management. While the dissertation rejects the purest sense of
capitalism as a blueprint for the future, the alternative proposed as the answer
lacks the weight of credibility provided by historical effectiveness. Indeed the
model can be accused of being a ‘very ambitious’ agenda for change.
Overcoming the inertia of management mired in traditional shareholder biased
models can be compared to banging your head on a brick wall. You may have to
bang for a long time to make a crack in the wall.
The second potential problem is that by going against conventional management
practice and accepted business models, you open yourself up for ridicule. This is
a real problem for the author as the findings will be presented to the senior
company management and the danger is that the model could be dismissed as
‘hogwash’. Rosenhead (1998) explaining Stacey mentions that ‘the dynamics of
group think and the possible effects of divergence on promotion or even survival
within the organisation are potent pressures for conformity.’ Yet diversity of
thought is a prerequisite for longer term success. Change is never easy and
often the driver of change is branded a heretic. There is a massive need for a
change in the current paradigm and somebody has to draw the line at some point
and initiate the process. The author is firmly convinced for the growing need for a
change in the prevalent models. As Wheatley (1992) puts it, ‘the first step
required is an act of faith’.
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The concept of complexity theory as it relates to management practice that
underpins this dissertation is still a relatively new field that is finding its way
towards practical relevance. As a result many of the concepts developed in the
conceptual model could be attacked as being in effect motherhood statements
due to their generality and non-specificity. Rosenhead (1998) questions the
evidence relating to the relevance of complexity theory to management by
claiming that evidence adduced to date primarily stems from science and may
not relate to management. The counter to this however is that by metaphor and
analogy, the dissertation helps transfer the lessons from complexity theory to
desired management practice.
Continuing on the theme of potential generality and non-specificity that could be
levelled against the conceptual model, it must be noted that these emanate from
a reductionist perspective which is exactly the mindset that the dissertation is
trying to overcome but is the biggest threat to the relevance of the work. The
model at first glance appears ‘soft’ and lacks concrete outcomes. We understand
it intuitively but may be hesitant to apply due to an apparent lack of ‘hardness’.
What is needed for this to be successfully applied is executive level ‘buy in’. The
operational manager that applies this learning will be reassured when his CEO is
seen to subscribe to this ‘radical’ school of thought. In attempting to achieve a
paradigm shift as per this work, it is impossible to narrow down the focus to one
area only and hence the research is broad based in almost all areas. The
offshoot of this is that there is significant scope for others within the company to
focus on aspects of this model and develop it in more detail. The limitation on the
words in this context was a significant hindrance to enunciating the theory.
The dissertation can be construed as having too much sympathy for other
perspectives especially the government view. The counter to this is the argument
for tolerance proposed by Hobeke (1994) when he said ‘tolerance implies
continuing the debate even though you do not agree with the other viewpoint. It
147
implies an adversarial rather then enemy relationship where trust and respect is
maintained.’ Without this relationship where even though you do not agree with
the alternative perspective, there is sufficient respect in the relationship to
continue the debate is a powerful concept in strategising in unsettled times.
The strength of this work is that it took actual concerns emanating from an
extensive interview process and transformed them into a management model
that will address these concerns. Furthermore the model can be seen to be
working as per the small win identified, and the new CEO has via his observed
management style unconsciously adopted the aspects of the new model without
having seen it. Therefore it is anticipated that there can be significant support for
the findings within the corporate structure.
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APPENDIX ONE : 4 D DEFINITIONS Level of complexity in environment Sense: Constant change, uncertainty, turmoil, state of flux, rules changing, new
practices emerging.
Reference: Global warming
Operational definition: The approach required from corporations in this
environment is substantially different to normal conservative mining mentality and
requires the company to move up the level of abstraction.
Functional definition: The consequence is the situation loses its detail as you
move up the level of abstraction allowing the company to focus on the core
issues.
Quality of management team
Sense: Experienced operators, possessing vision, excellent industry knowledge,
technically very strong, adaptable.
Reference: Competitive advantage
Operational definition: Quality management teams are developed by training,
education, experience, developing skill levels, allowing freedom to make
mistakes and having a supportive culture.
Functional definition: Improving the quality of your management team allows
you to survive and grow as a company even if the overall strategic vision is not
what it should be. History of innovation Sense: creativity, reworking an old idea, regeneration, vision, transformation, Reference: Implats one team one vision corporate regeneration program
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Operational definition: allowing free exchange of ideas/information, providing
incentives for innovative views, greater tolerance, encouraging diversity, greater
risk appetite.
Functional definition: Innovation allows you to continue to adapt to changing
circumstances faster than the opposition. Level of focus on core competency Sense: Mining, smelting, refining, producing primary metals, no value added,
exportation, reliance on existence of natural resource, exploitation. Reference: South African business mentality.
Operational definition: Mining and refining produces the highest margin and
hence is the greatest focus of shareholder value.
Functional definition: Moving away from the ideal of core competence allows
for sustainable growth to be pursued but will result in a drop in margins.
Level of tick box mentality Sense: Government targets, legislation, forced to adhere, doing the minimum to
avoid prosecution, managing by minimum targets.
Reference: Triple bottom line
Operational definition: Being too focused on short term goals and operational
performance and not taking ownership of the corporate responsibility initiative
ensures that you miss the signals of change in the environment at your cost.
Functional definition: Consequences of change here include the development
of joint goals that move away from only developing shareholder value to national
and international goals/value creation.
Level of shareholder value creation Sense: Core competency, improving efficiency, reducing costs, sticking to the
knitting, maximizing earnings per share, realizing value soonest.
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Reference: Focus on core competencies
Operational definition: Shareholder value is created by focusing on the areas
that offer you the maximum competitive advantage now. It however is not
maximized by taking into competing social and environmental goals.
Functional definition: Maximising shareholder value creation engenders focus
on areas of maximum advantage and reinforces the concept of core competency
via improving efficiencies and cost reduction. Does not stimulate creativity nor
looks at long term survival.
Level of creative employee involvement
Sense: Dynamic, flexible, empowered, removal of boundaries, greater
understanding, innovative solutions, openness, supportive environment.
Reference: Advertising agencies
Operational definition: Creating a culture of trust, openness of information flow,
no fear of failure and encouragement of experimentation is critical to developing
creative people.
Functional definition: The consequences are creative input into long term
strategic inputs that unlock the growth potential of the company.
Level of complacency Sense: Resting on your laurels, sense of well being, assuming tomorrow will be
the same, fat cat mentality, no hunger to improve.
Reference: Industry leading companies
Operational definition: Need to bring back the hunger and drive of the company
by a programme of corporate renewal.
Functional definition: The consequence will be a spirit of innovation and
creativity that should stimulate growth.
Level of consideration for other perspectives
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Sense: Local community, stakeholders in the business, provides employees,
affected by emissions, provides environment for business to function.
Reference: community expectations of the company
Operational definition: Ownership of the principles of corporate social
responsibility ensures maximization of community involvement in strategy.
Drawback is that goals are often opposed to shareholder value creation. Functional definition: Open engagement with the community engenders
support for corporate objectives which ultimately leads shared vision and goals.
Level of strategic information flow Sense: Company strategy, corporate direction, secrecy, no dissemination,
information is power culture, no information flow downward
Reference: Poor integration of information flow
Operational definition: Improving communication channels, unlocking
information flow at all levels, encouraging corporate communication.
Functional definition: Consequence will be a motivated and informed
workforce.
Sustainable corporate strategy Sense: Value added, innovation, beneficiation, doing more with your resource,
expanding horizons, green energy source, maximum utility to all.
Reference: Practical applications
Operational definition: The new age that is dawning offers opportunities to
South African companies that need to be exploited to add value to all
stakeholders.
Functional definition: By engaging in value added projects at a practical level
through intensive R&D spend at the outset.
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Mindfulness: an awareness of change.
Sense: rising above the situation, detached observer, seeing the big picture,
watching the different strands evolving into a picture, recognizing change as it
happens.
Reference: enhanced awareness
Operational definition: being aware that there is a process that precedes a
result and noting what the process is important for surviving on the edge of
chaos.
Functional definition: The ability to see the world through the eyes of another
allows one to change context and thereby enhance mindfulness and world vision.
Moving beyond the compliance mindset Sense: Focus beyond the mere achievement of targets, the greater good, utilitarianism, mutual appreciation, tolerance.
Reference: Embracing corporate citizenship
Operational definition: Application of this concept begins by acceptance at the
highest level and driving it through the organization.
Functional definition: For corporate citizenship to be effective requires
wholehearted acceptance by the company and its personnel. Merely meeting the
basic requirements of the law only encourages a race to the bottom.
Level of recognition of alternative role of company
Sense: acceptance at board level, high level ownership, embracing the spirit of
transformation, strong ethics, congruent vision, duty to all stakeholders, company
strengths, used to benefit all.
Reference: Effective Corporate citizenship
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Operational definition: Acceptance that the shareholder model needs to be
modified to draw in other stakeholders. Move past the tick box mentality and
retain an openness to change. How: Consequence is the utilization of the company skills and strengths in a
manner that expands the boundaries of vale add. Critical that board the level are
familiar with the importance of sustainability issues for it to add value to the
company
Level of acceptance of other perspectives Sense: Flexible approach, mutual appreciation, tolerance, looking through
another’s eyes.
Reference: Different world views
Operational definition: Application of this concept again at the appropriate level
would be based on getting the correct mindset in the correct position.
Functional definition: The ability to appreciate another perspective while not
agreeing with it is key to finding solutions in hugely difficult interactions.
Level of symbiosis between company and nation Sense: Mutual benefits, growth strategies, linked prosperity, country benefit,
metal beneficiation, BEE, teamwork, unlocking value, hope.
Reference: Adding value to final metals
Operational definition: No government support will be forthcoming without a
public/private partnership and industry needs to seriously consider accelerating
efforts to achieve goals that suit the country as well as shareholders.
Functional definition: Review company goals and try to establish those which
have benefit to the country at large. Focus efforts on drawing in government into
these areas.
Level of resistance to changing the paradigm
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Sense: Reductionist, compartmentalized, domineering, prescriptive arrogance, I
know best syndrome.
Reference: Current mining based mindset
Operational definition: The approach required at this level of interaction
recognizing the fact that the organization is a complex adaptive system is
diametrically opposite to the current mindset. Functional definition: Changing the paradigm requires buy in from the
executive and a process of education and practice to entrench systems thinking
concepts.
Changing the focus of strategy formulation Sense: Deciphering macro trends, new perspectives, vision, memory of the
future, value creation for all stakeholders, managers as guides in process,
innovation and creativity, drawing employees into the process
Reference: Strategy formulation in complex environments
Operational definition: Open up the process, draw in employees creative ideas,
remove dictatorial element, make process inclusive, look at alternate
perspectives. Change strategic focus, being too focused on short term goals and
operational performance ensures that you miss the signals of change in the
environment at your cost.
Functional definition: Consequence is a flexible and vibrant culture that is
geared towards regeneration.
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New company leadership
Sense: move away from technical leadership, adaptivity is key, creative problem
solving, operating in uncertainty, new perspectives, and vision, people focus,
developing and nurturing
Reference: New leadership competencies
Operational definition: On this edge of chaos the leadership needs to relinquish
command and control. Mutual trust and respect is key, supportive culture,
tolerance to failure.
Functional definition: Consequence is people utilizing their full potential to
achieve purpose of the company.
Level of innovation and creativity
Sense: Dynamic, flexible, empowered, removal of boundaries, greater
understanding, innovative solutions, fostering initiative, supportive environment.
Reference: growing ideas
Operational definition: Creating supportive culture, removing fear of failure,
encouraging risk taking, supporting intuition, and raising mindfulness. Functional definition: Trying to retain market dominance in an increasingly
complex environment requires continuous innovation and regeneration supported
by ideas being developed into new products etc.
Creating a climate of mutual trust and respect
Sense: Intangible, pervasive atmosphere, influencing, shaping, Loyalty,
commitment, Strong ethics, Tolerance, congruent vision, mutual appreciation,
understanding different world views, trust
Reference: Ethos that governs all individual interactions, trust based
relationships
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Operational definition: Through long term staff and team development and
revealing your caring, character and values to those that matter. Laying out your
position and disclosing information upfront are often key mechanism in achieving
this state of understanding. Transparency and openness of management
positions.
Functional definition: Culture translates strategy into tangible results via
teamwork. Teamwork is only achievable if team members trust each other
implicitly.
Level of barriers to organizational learning
Sense: Secrecy, punishment of failure, turf wars, command and control, lack of
time.
Reference: factors stifling innovation
Operational definition: Thrive on uncertainty, improve communication flows,
learn from past, develop staff, acceptance of failure, ability to accept risks.
Functional definition: System failure argues strongly for learning as the key
way to handle complexity and its associated lack of predictability and control.
Creates an adaptable and flexible company that can respond quickly to
environmental changes.
Centralized strategy & Scenario planning section
Sense: New department new perspectives, vision, memory of the future, planned
responses, investigative role, competitor analysis, facilitating innovation,
responding faster to problems.
Reference: predicting change via scenarios and analysis
Operational definition: This concept feeds the strategic intent by giving the
board and the strategic executive scenarios of many possible futures which help
clarify strategic vision.
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Functional definition: Improves the company’s strategic vision and introduces
new perspectives into strategy formulation. Also helps the company management
cope better and faster with change.
Organisational capability as a key competence Sense: plentiful capital, scarce skills, shift away from core competency, multiple
competencies.
Reference: Capability for the new environment Operational definition: unlocking creativity and innovation in employees,
moving beyond key competence, quickness and flexibility, increasing diversity.
Functional definition: Consequence is moving Implats way past its current
mindset that we are a good miner and refiner of platinum.
Often projects fail even before they even start due to the concept of inertia or the
inability to put mechanisms into place to start the project.
Integrated interdependence Sense Combining skills, one goal, shared vision, teamwork, collaborative problem
solving. Co-operation
Reference: Value adding inter-unit relationships
Operational definition: Aligning people and resources, mutual trust and respect,
horizontal communication, creating interdependence, removing barriers and silo
mentality. This needs to become an embedded concept in the daily corporate
environment.
Functional definition: Systemic management demands all units working
together in concert towards a common goal.
Level of empowered employees
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Sense: Systems thinking, team focus, individual employees, harnessing their
creativity, contributions of human capital, motivate employees, entrepreneurship,
cross pollination
Reference: Harnessing the power of people
Operational definition: New leadership style, supportive and creative culture,
investment in upgrading skills, recognition of input from employees, creating a
platform for advancing ideas.
Functional definition: Creation of a core of highly skilled and motivated
employees who are energized to contribute all the energies and innovative ideas
to the benefit of the company.
Developing horizontal information flows Sense: Leveraging knowledge, sharing expertise, individual skills, company
learning, new channels of communication, cross fertilization
Reference: Transfer of best organizational practice
Operational definition: Individual expertise in isolated units must be linked in a
rich horizontal flow of information, by opening up all information channels,
removing the protection of information and encouraging free flow of information
from the top levels.
Functional definition: Only when it develops the ability to transfer, share and
leverage such fragmented knowledge and expertise will the company be able to
exploit the benefits of organizational learning
Creating an innovation oven
Sense: Dynamic, flexible, empowered, removal of boundaries, greater
understanding, innovative solutions, creativity, supportive environment.
Reference: growing ideas
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Operational definition: Unlock the value in the process by creating an
environment where entrepreneurs are encouraged, ideas are nurtured and fear
of failure is absent.
Functional definition: Trying to retain market dominance in an increasingly
complex environment requires continuous innovation and regeneration supported
by ideas being developed into new products etc.
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APPENDIX TWO (Interview questions and results of the interview process including grounded theory data coding) 2A Interview questions NAME: DATE: HOW WOULD YOU DESCRIBE THE CURRENT BUSINESS ENVIRONMENT
- Increasing mining cost - Depleting resource base - Global warming - SA Govt - Zimbabwe
WHAT IS YOUR PERSONAL UNDERSTANDING OF THE TERM STRATEGY BASED ON THE ABOVE WHAT IS THE CURRENT IMPLATS STRATEGY? ADDITIONALLY WHAT IS DISTINCTIVE ABOUT THIS COMPANY THAT DIFFERENTIATES IT FROM THE REST AND MAKES ITS STRATEGY HARD TO COPY? IS THIS FORMALISED IN A LONG RANGE PLAN OR ARE LARGE PARTS OF IT OPPORTUNISTIC. ARE WE FOCUSED ON MEETING SHORT TERM GOALS? IN THE CURRENT ENVIRONMENT ARE LONG TERM PLANS RELEVANT? IS A BUSINESS PLAN RELEVANT? DESCRIBE THE CURRENT STRATEGY FORMULATION PROCESS WITHIN IMPLATS. WHERE IS STRATEGY FORMULATION VESTED AND HOW DOES THIS BODY DEAL WITH COMPETING INTERESTS/STRATEGIC TRADEOFFS, STRATEGIC POSITIONING, SUSTAINABILITY AND COMPETITIVE ADVANTAGE. WHAT ARE THE INPUTS TO STRATEGY, WHAT ARE THE CURRENT TOOLS UTILISED. HOW IS INFORMATION GATHERED, COLLATED, INTERPRETED AND PRESENTED FOR REVIEW. DESCRIBE STRATEGIC INFORMATION FLOW THROUGH THE COMPANY. IS THERE A LEVEL OF SECRECY, OR IS THEIR UNHINDERED ACCESS TO INFORMATION FLOW. STRATEGY IMPLEMENTATION AND MONITORING.
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FROM A PERSONAL PERSPECTIVE, ARE THERE ANY SHORTCOMINGS IN THE CURRENT STRATEGIC PROCESS FLOW AND HOW WOULD YOU SEE A REDESIGN OF THE PROCESS FLOW EVOLVING. WOULD YOU SAY THAT INCREMENTALISM IS THE ORDER OF THE DAY I.E. IMPROVING EFFICIENCIES/REDUCING COSTS ETC RATHER THAN BOLD NEW INITIATIVES CREATING STRETCH ARE WE DOING ENOUGH AS A COMPANY TO ENSURE LONG TERM SUSTAINABILITY? DIVERSIFICATION/BENEFICIATION/SQUEEZING THE METAL ETC. WHAT IS THE RATIONALE FOR EXISTENCE OF A COMPANY/IMPLATS? DOES THE KING REPORT COME INTO THE EQUATION IS CREATION OF SHAREHOLDER VALUE THE PRIME REASON FOR EXISTENCE? ARE THEIR OTHER COMPETING REASONS FOR EXISTENCE OF A COMPANY? KING REPORT IS VITAL HERE. SHAREHOLDERS ARE TRANSIENT AND CHANGE CONSTANTLY. IF THE COMPANY IS A SEPARATE PERSON, SHOULD STRATEGY NOT BE DIRECTED AT THE SUSTAINABILITY OF THE COMPANY? IS SHAREHOLDER VALUE BEST SERVED BY RETURNING VAST AMOUNTS IN THE FORM OF DIVIDENDS OR SHOULD INVESTMENT IN THE LONG TERM SUSTAINABILITY OF THE COMPANY BETTER SERVE SHAREHOLDER INTERESTS. From a normative perspective how would you classify the monies returned to shareholders (value destruction?) WHAT ARE THE SUSTAINABILITY LEVELS OF THE COMPANY AND DO WE HAVE A PLAN TO SURVIVE BEYOND THE LIFE OF MINE. DOES THIS EVEN FEATURE IN THE STRATEGIC DISCUSSION I.E. ARE WE DISTINCTLY PLATINUM OR DISTINCTLY PLATINUM MINING. OUR CURRENT CORE COMPETENCE IS MINING AND REFINING OF PGM’S. DO WE NEED TO MOVE BEYOND THIS TOWARDS A DIVERSIFICATION OF COMPETENCIES? DO MINING ANALYSTS, SHAREHOLDERS AND EXTERNAL STAKEHOLDERS PLAY A ROLE IN THE STRATEGIC DECISION-MAKING PROCESSES OF THE COMPANY? HOW IS THE FINDINGS OF THE KING REPORT FACTORED INTO STRATEGY ESPECIALLY THE PURPOSE OF A COMPANY AND THE INTEGRATED NATURE OF THE STAKEHOLDER RELATIONSHIPS. WHAT IMPACT DOES THE VIEWS OF THE ABOVE, ESPECIALLY ANALYSTS/INVESTORS PLAY IN CONSIDERATION OF NEW PROJECTS. Is this a limiting factor especially when it comes to creative/higher risk projects? The Ambatovy project comes to mind n this instance. WE ARE ALL PROFESSIONAL MANAGERS AND HENCE APART FROM GUARDING THE INTERESTS OF STAKEHOLDERS, WE INEVITABLY GUARD OUR OWN CAREERS. DOES THIS IN ANY WAY INHIBIT CREATIVITY/RISK TAKING?
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IF I HAVE TO SUGGEST THAT A COMPANY CAN LEARN AND CONTINUOUSLY EVOLVE AND RENEW ITSELF, WHAT DOES THAT CONJURE UP IN YOUR MIND? DO WE HAVE THE CORRECT LEVEL OF PEOPLE RESOURCES AND ARE WE USING THEM TO THEIR FULL EXTENT? IRRELEVANCE AS A PLATINUM PRODUCER 2B IMPLATS STRATEGY FORMULATION – RESULTS OF THE INTERVIEW PROCESS
GROUNDED THEORY – DATA CODING AND CONCEPT DEVELOPMENT
INCREASING VOLATILITY OF THE BUSINESS ENVIRONMENT Change on a global and national level Increasing volatility High metal prices and exchange rates Zimbabwe – totally unpredictable environment Economic supercycle – extended bull run Metal prices encouraging scramble for holding resources Face of industry is changing The landscape becoming far more competitive The global economy is continuing to expand rapidly fuelling an increased requirement for minerals. So I am seeing fairly big changes happening at an increasing rate. Definitely faster and more highly globally connected. Facilitated by ease of travel and IT connectivity enhancing communication. More competitive environment We do not have as much time as before. Changing fast driven by legislation both in a national and global context Over last 10 years I have observed the increasing rate of change, and this is no business schools cliché. The speed of change transactions is increasing. The country and political risks which obviously impact quite significantly on the company’s investments e.g. Zimbabwean risks are very high. I think you need to look at the social / political aspects of what we are talking about.
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Not that great, the stability that is sought is under attack, NGO’s influence in the business environment is increasing, governmental pressure to increase the rate of change etc. Moved from the industrial to information age. Pace of change is exponential Quality of strategic thought at companies is much better than a decade ago level of competence of people is getting better at a quicker rate. FUNDAMENTAL SHIFT IN WORLD ECONOMIES AFFECTING STRATEGY The resource companies were caught unaware by the size of the Chinese boom. We are seeing a fundamental shift in the culture of consumption as well as an increasingly competitive landscape for minerals. The mining industry with its high fixed costs plus long pipelines from initiation of shaft to saleable metal needs leading indicators to strategise into. With the increasing complexity of the environment these leading indicators become less stable and hence strategy also affected. We don’t want to become irrelevant in this space, how we do it important to strategise LEVEL OF COMPANY PREPAREDNESS GIVEN THE EVOLVING ENVIRONMENT Single biggest risk to the business is platinum substitution– we are better prepared but not fully prepared for this risk The South African legislation could have been seen to be coming from a long way off. Others you could have predicted like the increasing emissions legislation due to global warming You could run scenarios I have observed that the strategic bias in this industry is very closed in relation the amounts of free cash generated. I serve and have served on the boards of ISCOR, Mittal Steel, Genbel and Afrox and hence my assertion is with foundation. LACK OF STRATEGIC EVOLUTION? We need to get more involved in looking at applications. It does however create new opportunities which we should be looking at. I now know that any company that is not dynamically revaluating what its doing continuously is looking for trouble. With regard to Implats strategy formulation, we do not seem to have a space for out of the envelope strategy discussions. RESENTMENT OF COLONIAL ECONOMICS!
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There is strong resentment in SA and Zimbabwe towards companies perceived to be exploiting the natural resources and exporting them to the western superpowers without maximizing its revenue potential to the country. It is a ‘Fait Accompli’ that the govt will insist on metal beneficiation. The company will only get into beneficiation when forced into it. We were looking at it 10 years ago, but it fell by the wayside in preference to operational issues. Needs to be strongly driven from the top. PRACTICAL STRATEGY DEFINITIONS The long term planning taking into account all external events, internal capabilities and other extraneous factors to determine the general direction of the company. Identifying opportunities before others and developing/stealing a march on competition in the most lucrative field and married to that all that goes with it Is setting objectives that a company wants to achieve an overarching strategy combined with a roadmap on how we intend to achieve these. What do I want to be when I grow up? Informed planning for the future – Take all the knowledge you have at a particular point in time to devised an informed plan for the future. Is how you compete in your defined business environment? Mapping the future course of the company Strategy has to be long term – your plans for achieving it and targets need to be constantly reviewed/updated. Strategy is taking the short, medium and long term view of the sustainability of the Company – as a going concern whilst at the same time meeting all it’s political and social obligations to ensure that whilst it operates as a responsible corporate citizen it discharges it’s obligations to shareholders as well. Looking forward while taking cognizance of everything. Looking after the long term health of your business by a process of understanding the industry you are in, investigating what is affecting the industry and plotting your future course in a manner that ensures the company stays profitable over the long run. In what business we should be in for what reasons. How do I place the company in the most favourable position to succeed? Tony Trahar used to say the business schools definition was rubbish, strategy revolved around your interaction with the business drivers in the world. Mintzberg said that you are good at what you do and what you are good at becomes your strategy. LEVEL OF UNDERSTANDING OF IMPLATS STRATEGY ACROSS THE RANKS Intent to remain pure platinum play Use of sub-strategies to support long term goal Initially survival strategy – maximize use of resource
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Now it’s to increase resource base – not a structured strategy To be the biggest and best platinum company in the world by growing the company through organic and acquisitive routes. Our platinum reserves are 60 years – need to increase the resource base to 100 years. Recycling is part of the growth strategy - Growth in ounces and shareholder value balanced with social responsibility, especially in RSA context. Strategy is focused on mining as the margins are unparalled. The refineries have a stronger bias towards beneficiation. Being a focused platinum producer – growing the ounces produced. Keeping the door open on Nickel for the time being, looking for synergistic Ni/Pt projects I cannot really see what our strategy is apart from a strong push for growth in ounces and market share. This is only my assessment, not clear what the strategy is. Possibly our strategy is to remain a metals producer – maintaining our operations and expanding where necessary. Definitely no diversification or value added plans. Implats Strategy is to remain a company that is focused on platinum group metals in terms of mining, refining and marketing. I don’t think the Board is averse to any new suggestions – I think within the consensus capacity which we have at the moment and given the current market environment it has chosen strategically to stay where it is. Very focused on being in PGM’s and related metals and being the lowest cost, most efficient producer in that field. Consensus of the board. Distinctiveness is our efficiencies. With the sophisticated investment community we have at the present time, we cannot dictate to them where they should be invested in. We provide them with the best option in terms of platinum. TIMEFRAME OF STRATEGIC FOCUS Generally held view at board level determines long term strategy Degree of opportunism over short term Take IRS as an example no threats when it was created, but we have huge threats now – so we have to continually adapt. This is a solid long term operation based on 30 year mining plans with a degree of opportunism built in. We know where our resources are and what shafts to bring on at what time. Planning a shaft take a long term view of supply/demand fundamental and price fundamentals. Not formalised – almost made up as we go along Your tactics towards achieving the strategy can be changed all the time, but strategy can only be changed over the short and medium term to take into account changes in environment rather than changing the strategy.
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Long range is 5 years – longer than 5 years in this environment is difficult place to be planning for due to the rate of change in the environment. Opportunistic view – requires flexibility and while we have not done too well over the last few years, we are improving By trying to secure reserves that are long term, we definitely have a long term focus, example is the mining charter which is based on a 30 year time horizon. IRS on the other hand is more opportunistic. We have a long term strategic plan that is reviewed annually to make sure that we are consistent with the market environment, shareholder expectations and the Company is proficient for sustainability in the long term. Large degree of opportunism in there. Information gathering on what is out in the market is key. LEVEL OF INCREMENTALISM No we do not have a formalized integrated long term group strategy. We also do not seem to display an opportunistic bias. It was probably incremental growth under Keith Rumble. The company may have been too inward focused of late. You also have not been engaging the state properly. HARKING BACK TO THE SUCCESS OF THE PAST When we had Kearney – he had a map of where we could go. There has been nothing new from there on in. Kearney took time to communicate what was wanted and everybody knew what needed to be done. In Kearney’s time there was sufficient flow of information especially downwards and look at the performance comparisons. One team one vision operational turnaround Looking at FIXCO, people looked at what we had resource wise and skills wise and matched this with what the company needed for long term survival. VIEWS ON CURRENT STRATEGY FORMULATION PROCESS EXCO level analyses long term positioning Strategic view dominated by Exec directors Not much lateral thinking – conservative view dominates Strategy vests with the CEO and the board, and is the prime function of the CEO. Open discussion, expert opinion and consensual decisions are utilized to achieve direction. No idea what the strategy formulation process is. We have a newly formed growth and capacity committee, but this is operational rather than strategic. The board should advise on areas to focus on and the committee should investigate further.
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Not sure that the growth and capacity committee is the correct way to go however, as all the members have demanding full time jobs and hence the focus is diluted. I was recruited in 1992, to a parastatal from UCT direct. Before I accepted the position, I asked why I was being targeted because I lacked the experience etc. The response from the CEO was that he envisioned the VP of the organization that I could be in the long term. This is also a crucial step in strategy formulation namely having a vision. The vision of the Company is to be Distinctly Platinum. The Board gives the overall strategic direction. The Board needs to be aware of all the elements which make the strategy. To that extent, we are very dependent on professionals in the field such as Investment Bankers etc. Generally, if you look at the likes of UBS, Warburg, Morgan Stanley and a few others who have been in the industry for many years, they tend to offer most relevant information in order for the Board to make decisions. Mining is a very different type of business, involves a bit of dreaming of what will emerge out of seeming nothingness, so you have to have a vision of what you want to achieve. Is the task of the executive and informed by expert opinion. While we do not have a formal strategy/scenario planning department, what we do is that a few times a year we have the top experts in the Platinum world give presentations to the board to help inform this decision making body on the reality of what is going on in the PGM environment. CURRENT THOUGHTS ON WHERE STRATEGY FORMULATION SHOULD BE VESTED The board and CEO are the ultimate custodians of strategy, however the CEO’s strategy document presented to the board should be one element of the strategy session. CEO is the prime driver of strategy assisted by the executive directors via the EXCO committee and the Implats board. The board and EXCO formulate strategy. Incremental growth is the order of the day. The board is responsible for overseeing and approving strategic direction, but the process has to be top to bottom and bottom upwards. The executive is the initiator of strategic thought. Strategy is the job of the CEO and is one of the larger inputs into this role. A major portion of this involves staying in contact with customers, shareholders and other stakeholders and the CEO needs to intimately aware of events in this environment. Investor relation is the second most important role of the CEO. Image of the company and its relation to the outside world is really what I am referring to. Strategy is a live thing, it is continuous. Management has the right to bring anything to the board.
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Your strategic vision is your lighthouse and you adapt your strategic course to keep the vision in your sights. EXCO is more operationally driven – should it be the prime strategy initiator – I am not sure. SOME DISSENTING VIEWS ON THE CURRENT STRATEGY FORMULATION PROCESS On a periodic basis, we also need to create the blank space stage. The board will come in with a blank space stage informed from our individual perspectives. The issues that come out of this will be those that shape the long term sustainable future of the company. Sustainability is not an issue that gets discussed at this board. We are not looking at creativity that leads to sustainability. Impala is not looking beyond platinum and in that we may be too narrow minded. We may need a clean sheet view of strategy. You cannot change strategy every year, you set a course and monitor your performance every year. But the emerging view is that we need a review. THE FAILURE OF RELATIONSHIPS Tactically we have been poor in building relationships. SAM set up IRS on the back of solid relationships New relationships that companies have to forge – the shareholder dominant view is a thing of the past CURRENT VIEWS ON WHAT GOES INTO STRATEGY FORMULATION Expert opinion utilized Monitor company used for many years No input from lower down Some competitor analysis Merchant banks utilized – financial bias Market sources – demand fundamentals play an important role in shaping strategy. A lot of strategy is instinctive and intuitive based on the knowledge flow within and without the company; hence the CEO has to remain with his finger on the pulse of the business. Not sure what happens to the information within the Implats structure. Need outside market research Expert external opinion Analysis of other companies Due diligences Attending of conferences Networking is important Being a small company, we do not have people internally dedicated to informing strategy. Views/information are gathered, a lot by myself via networks and other
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people. If something is of sufficient significance to warrant further attention, then a paper is prepared prior to the board meeting for discussion. Set of internal and external future parameters for PGM prices and exchange rates – economic projections etc. Information regarding the future. Networks of knowledge both global and local. In addition to that information generated by the in-house marketing depts. Look at what makes us good – our box of expertise. SWOT – where can I operate in? What is known in the world vs what is unknown? THE GROWTH AND CAPACITY COMMITTEE We have a growth and capacity stratcom. This committee is formulating sub strategies based on the overarching strategy to:
- Increase resource base in RSA. - Continue to increase international – geographic diversity - Utilise IRS in the dual role to tap the significant growth potential in the
recycling market and the mine based environment. - Create optimum capacity to leverage organic and acquisitive growth.
Needed a coordinated view on growth and capacity to match capacity with growth plans. In the early days this used to be knee jerk, no upfront planning. I put up my hand to say that there was no forum to discuss these issues. Next step up beyond 2.3 million ounces. We went to all our operations and associates to ask them what their dreams are. We got the IRS view, mine view plus other blue sky views and modeled this into an integrated plan. It’s getting in experts to investigate. For example in Zimbabwe the biggest problem is electricity, so we got in an expert to investigate the situation and report back. We also take a diversity of views by getting a mix of people in the committee. The problem is that the same people may sit on various committees up the line and hence diversity may be limited. We are still however a dominant PGM mining view STRATEGIC MINDSET OVER TIME Kearney broke the mould in terms of expansive aggressive strategy Moved back into laager more recently Our footprint is changing – buying more equity stakes in companies Our lack of initiative in not taking stakes in companies is under review. In the Mine to concentrate model we would buy a value proposition if it satisfied our internal criteria and offers returns to shareholder. Buying the deposit obviously secures the off take or alternatively the safer option is to secure the off take and build the relationship. LEVEL OF FRUSTRATION
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Strategy formulation based on richness of information available and Persuasive argument rather than facts Revolutionary ideas will need strong lobbying to get into strategic formulation process We need to tell the board what our risk profile should be – we are not looking at scenario plans etc Internal views – very superficial process Internal presentations to EXCO to clarify operational issues RATIONALE FOR NOT HAVING A STRATEGY DEPARTMENT Strategic planning at Implats – outsourced Driven by cost constraints – hence no strategy department at Implats Implats strategy is very simple – no need for complex investigations No in-house department means that opportunities fall by the wayside Impala has cut to the bone with respect to people, however it does allow for a large degree of multiskilling of its people due to this. People are surprised when they realize that I am the engineering department at head office. LEVEL OF TRANSPARENCY OF STRATEGIC INFORMATION FLOW Information flow not deliberately controlled – maybe inadvertent Transparent information flow at EXCO level Information regarded as power culture Information flow is haphazard. Can improve, we are still very secretive when it comes to information flow. On the opposite side however, do we want our strategy to be made evident to Amplats? The growth and capacity committee was actually born out of a sense of frustration in terms of the information flow. We are looking at changing this. People have mines of information – not encouraged to share it Information flow is critical top down and bottom up. I think that this again may not have been happening too well in recent times, but we need to investigate how to change this. I do not want to see too much documented strategic process flow etc, I want an unstructured setup, but we need to have the right communication mechanisms in place to achieve this. Are we workshopping ideas sufficiently in the correct forums? I don’t thing so and these kind of things need to be addressed. Information flow is improving, getting better over the last few years. Mining industry has traditionally been very secretive, over the past decade we have seen better interaction between the various Implats units. The information the Environex distributes has traditionally not been widely distributed according to my knowledge. No information flows at the present time – in relation to group strategy.
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The Company cannot operate in isolation to its employees and therefore it is necessary for the employees to understand what the objectives of the Company are. To achieve this, we have a bi-annual leadership summit where we convey to the employees what the Company plans – apart from feeding them with the results for the preceding half year we tell them the plans for the year ahead. Facilitated through face to face meetings with operational staff. Is a top down process, but is important that the strategic focus is filtered down the ranks. Implats has a well defined strategy that is clearly understood at the executive level, it must as an imperative be disseminated through the ranks. LEVEL OF SUPPORT FOR BOTTOM UP APPROACH Bottom up will not work in the current environment as there is no formal avenue for communication flows. In general however strategy should be top-down. The problem with bottoms up approach is that the fact that inputs flowing upwards will not be handled correctly. My passion is that this company will be better now that I am in, because I will make a difference. What this company needs is the critical perspective of what you bring in about the company. The value from each member of staff needs to be tapped in the same way. Bottom up inputs are more operational than strategic. Strategy has to be both top down and bottom up. Middle management input is invaluable. I think top down is key. I don’t think the lower levels can formulate strategy, they might have valuable insights, but strategy has to be an executive level function. You cannot expect a middle level manager to drive new technology. The guy on the ground cannot follow world trends. LEVEL OF CONTINUOUS IMPLEMENTATION AND MONITORING Ad-hoc implementation and monitoring Annual strategic board where performance against plan is reviewed. Strategic content in relation to context reviewed every few years Aquarius does not have specific strategic board meetings. We do this continuously and informally via constructive discussion. If it is not broken do not fix it Effectively being a mining operation as long as we are on the lower end of the cost curve we have a defensive bias. IDEALISED STRATEGY FORMULATION DESIGN Strategy formulation should be a combination of top down and bottom up. Strategic culture – fairly informal - Do not want formalized processes Concern is something slips through the cracks -Can we marry the two Take a leaf out of Kearney – get key internal numbers. Also monitor from an external viewpoint – take out protectionism
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Use a company like monitor – external monitoring of strategy. Need a lot more competitor analysis. Lot more Market analysis in terms of Impala’s viewpoints Must look at scenario plans. Set objectives that are clearly understood down the line – we all need to know what we are striving for. Immediate short term issues to be resolved with a minimum of fuss – clear the decks for a relaunch of our one team one vision regeneration strategy with one major difference i.e. the introduction of pride into the organization. Collect and summarise confidential information. Personal interactions – networking Inference techniques – weaving together the strands into the conclusions. Forecasting We need to use knowledge to expand our perspectives. It has the potential to take you down very different routes. Create a mechanism where a cut into the organsiation is taken and foster a process where information/perspectives comes from each layer whereby rich perspective is developed that covers the depth. Customers view is critical in developing strategy Board must be properly constructed to get a variety of perspectives such that the individual arenas are well represented. Step back and have a better view of shareholder issues. People development and skill retention is crucial. Customers – need to change view into customer centric approach rather than viewing customers as enemy. Broadening our view – through whose eyes do we look at a situation? My perspective on what should be inputs to strategy:
- Different perspectives from consultants, especially in relation to the remote location from the primary markets.
- Close contact with Govt. - Attending conferences plus increased visibility via presentations at
conferences. - Important is industrial contacts for information gathering. - One and five year plans. - Driven by section dedicated to strategy formulation, implementation and
monitoring. Take Ambatovy as an example. We handled the project badly. Our strategic processes were wrong. We did not think through the behavioural issues. Somebody said it was time to pull the plug, and the actual work had not even been completed. VIEW ON HAVING A STRATEGY DEPARTMENT We need a senior manager in charge of group strategy and research. A small analytical department reporting into the group manager. Our own corporate strategy section that is given credibility and authority via a direct CEO report
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Need to produce 20 to 30 year perspectives of the company and global industry developments. Look at trends, scenarios, do SWOT analyses continuously, assess long term goals in relation to changing environment, competitor analysis etc. The CEO and board needs to direct this section towards areas of interest and this department needs to keep abreast of latest developments and keep the CEO continually informed Amplats and Anglo American have big corporate strategy departments. Look at Xstrata and Rio Tinto, both companies have clear strategies about what they are trying to achieve and are continually informed by their strategy departments. If compared with Amplats for example, we have no strategy department. Maybe we should have one. IMPORTANCE OF PEOPLE IN RELATION TO STRATEGY The most fundamental thing is that it’s all about people. Visible and strategic leadership is required to get the team pulling in one direction. There are so many people bustling with pride – I need to get the people moving in the right direction Executive need time to reflect We need leadership to have vision and set goals and then involve employees in implementation. Should be using the potential of each employee to maximize the benefit to the company. You cannot get better perspectives than from the guy at the coalface. Strategy must include perspectives from all people in the company. I would optimize the talent within the company, there exists a definite gap currently in this regard. I would pool all our people resources into one whole. Eradication of the silo mentality – keeps information tightly locked and prevents free flow of knowledge. If the right opportunity presents itself for diversification, then we will consider it provided we have competent people to oversee the business. People are the key in any strategy. For example, if we want to diversify into property because it offers superior returns, then we would be foolish to consider it if we did not have the key skills on board. So core competency has to play a major role in the area we diversify to ensure longevity. LEVEL OF COMMONALITY IN MINDSET What we have been lacking in recent times are aggressive thinkers to shake the tree. We have been continually focused on operational efficiency not on global strategy issues. We need to introduce the aggressive thinkers. We need some of the mavericks of old who can drive the company onto a different path. We need someone to challenge our paradigms, aggressive thinkers like SAM was.
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The problem with having too much diversity at board level is that it may become dysfunctional. Ego’s also get in the way when you have high powered thinkers on the same board. Speed is also important in relation to strategic decision-making. We can buy or sell a company in less than 60 days at Aquarius, because we have experienced people who have done this many times NEED FOR STRATEGIC REGENERATION Regeneration done periodically followed by period of incrementalism Continuous regeneration is definitely relevant – I think it is a long term venture, but during the process you will have many forces that will impact your business. From a technology perspective you always have to renew yourself. We always have stayed ahead of cost increase we have improved our productivity. We need to continuously have people looking at new ideas, improving ourselves. Challenge is for the culture to change, for the mindset across the company to reflect the need for continuous renewal, but we have the correct people and can make the change. INHIBITION OF STRETCH WITHIN THE COMPANY Human capacity limits stretch Uncomfortable working at the limits of capacity for extended periods Implats may be in a comfort zone – reduced motivation for regeneration. Our strategy is definitively based on incrementalism In many areas we are stretching the organisation a lot beyond the call of duty – make the right tools available for them There are areas we can stretch, however we are not working in a coordinated view. Movement from Implats towards consideration of stretch Stronger push into autocatalyst chemicals – downstream processes. Nickel refining is an opportunity – not necessary to get involved in the mining, especially with Anglo not expanding their nickel refinery. The bad thing is that we have been looking at beneficiation for 10 years and have had many initiatives in this time. Unfortunately there has been no coordination with different people looking at different things using different measurement and decision criteria. There has been no drive from the top and each person has a different area of responsibility. We need coordination, a single department to handle all this. REASONS FOR EXISTENCE OF THE BUSINESS Profit is dominant motive of business, but not the only motive Fundamental shift towards sustainability Business exists to make a profit going forward Impala exists because of a resource on our doorstep Reward all involved stakeholders - To deliver shareholder value is prime reason for existence i.e. wealth creation.
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Alternative view is to produce its final product at the highest efficiency and lowest cost to satisfy market needs. Because it exists to exist - capital exists to grow itself and it goes to places where its growth is maximized and guaranteed. Cannot be contained. Profits – creating benefit to shareholders. This is the common theme that underlies existence of all companies. To make a profit – adding value to shareholders. A company exists because it can offer a service more efficiently and profitably than anybody else. No loss making private company will remain in existence. Implats exists to increase growth in shareholder value. Our behaviour supports that view. CONFLICT BETWEEN COMPANY NEEDS AND SHAREHOLDER NEEDS Fiduciary duty of directors is to the company first Overlap between the two competing ideals– if free cash is used by management to develop impala then hopefully that means a sustainable company ultimately benefiting shareholders Balancing social capital – take decisions as management to ensure long term sustainability of the company – we may take view that ensure sustainability of company that over the long term we improve the returns of shareholders. Emerging reality is that we have a social contract to ensure all stakeholders are involved. We have to get a sample of views from the various categories of stakeholders; however their feelings should help shape strategy and not dictate what strategy should be. While focusing on al stakeholders makes philosophical sense, no company can survive making losses each year. Creating profit has multiple spin-offs in the economy including jobs creation, FDI creating wealth for the country etc. I agree with King II in terms of the company having a separate identity, but surely in adding value to Impala, you are adding value to shareholders. No real conflict between shareholder needs and company needs, Company has a bigger range of stakeholders to hold up in the air of which the shareholder is merely one, albeit important stakeholder. A company should really exist for the benefit of all stakeholders – responsible companies follow the triple bottom line. If you pay adequate attention to the triple bottom line, then the profit line is also supported. INCREASED GOVERNMENT DEMANDS Business required to impinge more on areas traditionally served by Govt No balancing tradeoff seen in terms of tax reduction/govt cooperation LEVEL OF CASH RETURNED TO SHAREHOLDERS We lack vision – seduced by short term profits Company philosophy has to be long term sustainability Strong culture of shareholders wanting dividend payments
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Rands and cents decision – if cannot do better than shareholders can then give it back. No sense in merely investing for diversification/or to be bigger Ensure that our hurdle rates are not too high. Giving money back to shareholders is not the best use of it If you do not know what to do with the cash, give it back We play too much to shareholder tune South Africa has a strong dividend expectation culture As an investor getting all this cash is great, I will invest for this reason. We attract the shareholders that want high dividends. Shareholders however should not dictate where we should go – the management needs to dictate what is best for the company. If no better use can be found for the money, then it must be returned to shareholders. Often is an indictment of the management of the company. The cycle continues in assessing projects for investment i.e. areas of core competence, people availability etc. I believe that we are too focused on the shareholders in terms of our strategy, but recognize that they are a powerful voice. Look at Anglo-American over the last year. Their strategy has almost been in direct response to the shareholder view, not sure it’s been effective though. CONTROVERSY ON DIVIDEND PAYMENTS We do not have a plan B or C Scenario plans around what to do with the cash We know we will continue to generate large amounts of cash – need to have a strong idea of what to do with it. Company can be a refining company beyond mining It does create the impression however that we do not know what to do with the money. It is short term in its outlook, however the attitude to returning money is changing. The general consensus is that we are in a long term commodity boom, and it is a sad indictment that we cannot invest in asset diversification in this boom environment. By the company returning huge amounts of money in the form of dividends and special dividends, we have actually destroyed shareholder value by systematically reducing the ability of the company to invest in projects enhancing its lifespan. Analysts say we have the laziest balance sheet in the country. We keep on returning to shareholders rather than replenishing it. Take your fate and shape it to your will. In this context its prime goal would be to stay in existence for as long as possible. By Implats returning all that money to shareholders, it was actually destroying shareholder value by ensuring that there was no investment in projects to ensure the life of the company.
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DEBATE AROUND DIVERSIFICATION Our strategic focus is rolling 30 years Need more debate around other investment uses/ beneficiation/ trading etc. Focus is Zimbabwe If we don’t invest there then Chinese/Russians will move in. We have capacity for projects of certain values/returns only Sustainability is related to diversification, from a consultant view I would have to say it’s something we have to consider. Our vision is to be the premier platinum company, the reserves that we have is only 40 years, yet no thought is given to what happens after. If you talk about diversification, we stop at the margins being too low as the first hurdle LEVEL OF EMERGING COMPETITION Gathering impetus for smaller players to consolidate – create new refining capacity. Heraeus opening refinery in SA. Competition not necessarily a bad thing Competition commission not happy with our dominance CONSERVATIVE COMPANY CULTURE We need to be alive to opportunities created by consolidations Aggressive decisions i.e. do we take out companies instead of merely toll refining. Our risk profile is very conservative Corporate culture that has become increasingly conservative. As a company we need to be focusing a lot more on the long term strategy of the company We are in a position now to strategically plan the way forward We are very conservative and have missed more opportunities recently. Our culture is very conservative We do not seem to be proactive, but rather reactive. Also our risk taking ability is conservatively biased, example is Ambatovy, the project was rejected on a pricing model that was lower than the most conservative estimates. The company has taken its fate and put it up to the elements and the wind will take us to a destination where we will be pleased with. FACTORS INHIBITING INNOVATION Fear of putting one neck on the block is holding us back from innovation – we prefer to get lost into the crowd. We need dynamism from the top who look beyond the existing confines of the company. The company only became innovative when we had our backs to the wall. Now when we have the cash resources we do not use it to diversify the company – complacency has crept in – we are making too much money
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Technology is advancing rapidly, yet we sit in the short term only and do not look at a future beyond platinum. Managers have made so much money that they have now become complacent, dot.com millionaires made money from hunger and are investing it in new research to move into new frontiers. My world view is informed by my past and reflects on the learning of each day and therefore change for me is my constant companion. Can never be satisfied with innovation and creativity. The company has a proven record of creativity. One team – one vision was an operational strategy that encouraged innovation through the ranks and reduced the cost of operations significantly. Initative is now stalled, it is time for renewal of the company again. Threats:
- Shift in usage patterns is the dominant threat. - Govt legislation. - Zimbabwe political risk - Protectionism - Social conscience – offshoot can be seen as supporting Mugabe
Single biggest threat is the replacement of platinum in industrial applications. However innovation is phased in, so we would have time to investigate alternatives to move the company beyond PGM mining and refining. Platinum is a vulnerable commodity to substitution by alternative technologies and alternative metals/products. Consequently this industry requires more strategic thinking rather than the complacent mindset we currently exhibit. Opportunities – all downstream possibilities. Logic of beneficiation of raw material is crucial to the country, We have sufficient money to prepare the company for the bad times. This country is a particular sort of country which was seen only as a source of raw materials and no other value was perceived to be added. The crime in the country is a direct result of the choices that were made in the past. The children are paying the price. It is not wise to define yourself unsustainably in this country. Politically we as a board have to report back on our scorecards. Triple bottom line (TBL) is embracing concepts coming out of environmental movement. It’s a slow process, but sustainability of the enterprise is coming to the fore as driven by this measuring tool. Social needs obviously play an important part in the formulation process and increasingly so in latter times, however our efforts in this area are not motivated by altruism, but by business imperative. For example resettlement process of people at out Everest site was necessary because they would be affected by the operations. The fact that good quality housing was afforded to them was a win-win for all parties.
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APPENDIX THREE – INTER-RELATIONSHIP DIAGRAPHS AND CAUSAL LOOP DIAGRAMS CONCERN INTER- RELATIONSHIP DIAGRAPH Figure 38: Concern ID
Creative Employee Involvement
High QualityCEO
History ofInnovation
Level of Tick BoxMentality
Level ofShareholder
Value Creation
Evolution ofCompany Strategy
Focus on CoreCompetency
Complexity inEnvironment
IN
8
OUT
2
IN
8
OUT
2IN
1
OUT
9
IN
1
OUT
9
IN
3
OUT
7
IN
3
OUT
7
IN
6
OUT
4
IN
6
OUT
4
IN
5
OUT
5
IN
5
OUT
5
IN
10
OUT
0
IN
10
OUT
0
IN
8
OUT
2
IN
8
OUT
2
IN
1
OUT
9
IN
1
OUT
9
IN
5
OUT
5
IN
5
OUT
5
Factors inhibiting
stretch
Level ofComplacency
IN
4
OUT
6
IN
4
OUT
6
Level of StrategicInformation FlowIN
4
OUT
6
IN
4
OUT
6
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CONCERN REVISED CAUSAL LOOP DIAGRAM Figure 39: Revised concern CLD
Level ofShareholder value
creation
Level of Consideration of
alternateperspectives
History of Innovative
action
Level of creativeEmployee
involvement
Level of focus On core
competency
Quality of Management
Team & people
Level of sustainability of corporate
strategy
Level of complexityIn environment
Level of strategicInformation flow
Level of complacency
Level of factorsinhibitingstretch
New highPotential CEO
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CONCEPTUAL ANSWER INTER-RELATIONSHIP DIAGRAPH Figure 40: Conceptual answer ID
Level of Symbiosisbetween Company &
Nation
Level of Recognitionof alternative role
Of Company
Level of Acceptanceof other
Perspectives
Move in Mindsetbeyond
Compliance
Level of ResistanceTo Paradigm Shift
Level of Acceptancefor change in
Strategic Focus
Level ofMindfulness
IN
1
OUT
5
IN
1
OUT
5
IN
4
OUT
2
IN
4
OUT
2
IN
3
OUT
3
IN
3
OUT
3
IN
4
OUT
2
IN
4
OUT
2
IN
0
OUT
6
IN
0
OUT
6
IN
3
OUT
3
IN
3
OUT
3
IN
6
OUT
0
IN
6
OUT
0
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CONCEPTUAL ANSWER CAUSAL LOOP DIAGRAM Figure 41: Conceptual answer CLD
Level of focus onCompliance & shareholders
Level of recognitionOf alternative
role of company
Level of acceptanceFor change in Strategy focus
Level of mindfulness
Level of resistance To paradigm
shift
Level of acceptance Of other perspectives
phase two – Actionable knowledge
+
+
+
_
+
+
+
+
New leadership capabilities
SensingSensing
PurposePurpose
_
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ACTIONABLE ANSWER INTER-RELATIONSHIP DIAGRAPH Figure 42: Actionable answer ID
OrganisationalCapability as a
Key competenceBarriers to
Organizational Learning
Culture of Mutual Trust& Respect
Level ofInnovation &
Creativity Created
IntegratedInterdependence
InnovationOven
Horizontal & Open
Communication
Level of EmpoweredEmployees
IN
1
OUT
8
IN
1
OUT
8IN
4
OUT
5
IN
4
OUT
5
IN
6
OUT
3
IN
6
OUT
3
IN
8
OUT
1
IN
8
OUT
1
IN
4
OUT
5
IN
4
OUT
5
IN
9
OUT
0
IN
9
OUT
0
IN
0
OUT
9
IN
0
OUT
9
IN
7
OUT
2
IN
7
OUT
2
IN
4
OUT
5
IN
4
OUT
5
New Company
Leadership Style
Central Strategy &Scenario Planning
Dept
IN
2
OUT
7
IN
2
OUT
7
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ACTIONABLE ANSWER CAUSAL LOOP DIAGRAM Figure 43: Actionable answer CLD
New company Leadership
style
Creation of an Innovation oven
Level of open &horizontally linked
communication
OrganisationalCapability as
A key competence
Level of barriersTo organisational
learning
Level ofEmpoweredemployees
Culture of mutualTrust & respect
Central strategy& scenario planning
functionality
Level of integratedinterdependence
Level of innovationAnd creativity
created
-
+
+
+
+
+
+
+
+
-
+ +
+
+
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APPENDIX FOUR: SCENARIO PLANNING PROCESS Quadrant one: Rules of the game:
Essentially in this quadrant we are confronted with things that we are certain of,
but over which we have no control.
The formulation of the business idea in this quadrant is the first step in the
process. Aligned to the business idea is the rich picture which represents the
transactional and contextual environment.
The rules of the game describe the current environment in which the firm
operates. They represent the certainty of what we currently know of the
contextual environment, for example within the Implats group we know that the
mining charter has firmly become centered as a rule of the game.
In this quadrant you propose and integrate the business idea of the firm taking
into account the known environment. This entails describing how the organization
currently operates within the designated environment, it reflects the current
understanding of the business by the management team and describes why the
organization has been successful.
Articulating a clear business idea relies on the following steps:
• Clearly identifying the offering of the firm that links the firm’s distinctive
competencies with the buyer’s value systems in a unique way that others
find difficult to emulate and realizes sustainable profits for the firm.
• Identifying the distinct and unique competencies that an organization
possesses that make it difficult for others to copy.
• The translation of the business idea and distinctive competencies into
competitive advantage that maximizes profit potential.
• Utilising SWOT and 3E analysis to draw out and test the business idea
and distinctive competencies.
• Reducing the business idea to its essentials.
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The second step is drawing the rich picture to highlight your appreciation of the
current situation. The rich picture entails representing the existing situation in the
transactional environment and the drivers in the contextual environment
graphically, thereby allowing you to develop a holistic view of the environment in
which the firm operates.
Quadrant two: Key Uncertainties /Scenarios Quadrant two is represented by the cross over from certainty into uncertainty and
absence of control. The 2 major deliverables here are first the key uncertainties
over which the organization has no control. The second step is the formulation of
scenarios based on the key uncertainties identified. The scenarios identified,
while having to be plausible also needs to be of a nature that makes the key
decision makers take notice.
Scenario development facilitated by step one and two identified above is
achieved in the following sequence:
Phase one: Developing a scenario framework:
• Construct a graph with level of predictability on the Y-axis and level of
impact on the -X axis. This graph is called scenario structuring space.
• Formulate from the Business idea and rich picture a range of different
uncertainties inherent in the current environment. Select 8 to 10 of these
uncertainties and label them (called UP’s). For each of these uncertainties
(UP’s) generate 2 or 3 likely outcomes (OP’s).
• Arrange the UP’s in order of their increasing impact on the future of the
Implats business.
• Next, keeping the level of impact intact, move the individual UP’s up or
down the predictability axis based on the low or high level of predictability
of its outcomes.
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• The final step is to select the two UP’s at the bottom right hand corner of
the scenario structuring space which will be the 2 highest impact
uncertainties with the lowest level of predictability. These are now your
key uncertainties. For each of the key uncertainties identify the 2 possible
outcomes and plot these onto the scenario matrix. This now give you 4
scenarios. Name each scenario non-judgmentally.
Phase two: Scenario building
• Divide the OP’s generated in phase one equally amongst the 4 scenarios.
• Structure the allocated OP’s per scenario into an inter-relationship
diagram by first determining which are drivers and which are outcomes.
• Look for feedback loops in the structure. Add further links that may
produce plausible feedback loops and add new outcomes until a plausible
story emerges that describes the unfolding of the end state.
• Integrate new insights obtained from other people within the organization
during a presentation of the scenarios to them into the scenario structure.
• Finalise scenario structure and write up in a story form.
Quadrant three: Option generation. The key activities in this quadrant which is defined by uncertainty and a measure
of control, are the development of options based upon the scenarios identified.
As the axes of the quadrant suggest, the development of options allows the
organization a degree of control in what still is a very uncertain environment.
Options are developed from uncertainties outside the firms control, but the option
themselves are actions designed to give the firm control in that particular
environment.
The steps followed to generate options are as follows:
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• For each scenario consider the following question – “in relation to the
specified scenario will the current business idea and the firms distinctive
competencies still derive competitive advantage and still be defensible
against competitive onslaught?”
• If the answer is no, then the firms business idea is weak and the
organization needs to turn its attention to strengthening its internal
competencies. This leads to a review of the capability of the organization
and the generation of capability options.
• If the answer is yes, then the firm’s business idea is robust and the focus
needs to be shifted to exploitation of this competitive advantage by
developing new markets to move into. This essentially leads to the
generation of business portfolio options.
A SWOT analysis on the firm’s distinctive competencies under each scenario is
useful for developing a strategic action plan for each scenario. At the end of this
process, you will have 4 strategic options generated that is one for each
scenario.
Quadrant four: Decisions Taking the organization out of quadrant three into the area of certainty and
control is facilitated by the formulation of strategic plans as developed from the
most important scenario identified and the option developed there from.
It is in this quadrant that the various action plans based on the development of
identified scenarios is located.
The decision is arrived at via the following process:
A] Rate each option against a matrix consisting of four variables:
- Cost benefit analysis
- Culture fit in the organization.
- Strategic fit with the organization
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- Robustness of the option
B] The matrix will have each option on the Y-Axis with the 4 variables on the X-
Axis.
C] Do a pairwise comparison of the options against the 4 variable matrix.
D] Identify which option end at the top or closest to the top under each variable.
This is then your strongest option.
E] In instances where your strongest option was not the best option, determine
what could be learnt from the top option and strengthen your strongest option
with the lessons learnt.
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APPENDIX FIVE: DETAILED PARADIGM ANALYSIS The remainder of the stakeholder identification process and the full paradigm
analysis from chapter 5 are detailed below.
EMPLOYEES
Customers Families, management, other employees
Actors Operational management, individual employees
Transformation process
Utilising the knowledge, skills and labour to ensure the
company operates at maximum efficiency on a daily
basis.
World view Pride in their work and a desire to maximize their
income for the benefit of their families
Owners Senior management, customers
Environmental
constraints
Current operational processes, work policies installed
by senior management
Root Definition: Individuals working within the company contributing their human capital,
motivated by pride in their work and the desire to support their families, utilize
their skills to ensure that the operational processes function at the highest level
of efficiency.
SHAREHOLDERS
Customers Families of shareholders, other stakeholders,
management
Actors Individual shareholders, stockbrokers, unit trust
companies
Transformation process
Investing their own capital in the company with the
expectation of earning a return on their investment and
security of their investment
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World view Companies prime reason for existence is to make
maximum profits
Owners Government, management, stock exchange
Environmental
constraints
Capitalist economy, controlled trading on stock
exchanges, well governed and audited companies
Root Definition: Members of the public who are looking to exploit the existing capitalistic
economic system to maximize the returns on their investment by investing in
companies like Implats who in their view are there to continually maximize profit
levels.
GOVERNMENT
Customers Taxpayers, citizens, communities, companies
Actors Individual government departments, SARS, DTI,
DEAT, treasury.
Transformation process
Governing the use of resources such that the
maximum benefit is derived for the citizens of the
country.
World view
Capitalist economic system looks to plunder the
country of its resource wealth without adding further
value to the metals
Owners Investors, foreign governments, companies
Environmental
constraints
Companies are more efficient that state, Investors do
not like over-regulated economies
Root Definition: National government who walk the tightrope between the requirement of
investors and the needs of the population in relation to controlling the exploitation
of natural resources such the country as a whole gets maximum benefit.
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COMMUNITIES
Customers Local residents and community structures eg schools
and hospitals etc
Actors Ratepayers, Community leaders, local government,
municipalities, environmental agencies
Transformation process
Protecting communities against harmful business
practices and ensuring the relationship with companies
yield sustainable benefits to the community around it.
World view Long term survival and viability of the community.
Owners Companies, central government and the community
itself
Environmental
constraints
Laws laid down by national government, revenue
allocations from treasury, increasing social focus from
companies.
Root Definition: The local community who try to maximize the benefits of the symbiotic interaction
between themselves, business and national government such that the
community structures remain viable over the long run.
FUNCTIONALIST PARADIGM:
The dominant desire within this paradigm is ensuring that the company is
working well enough such that efficiency, adaptability and survival are
maximized. The approach considered in view of the increasing complexity of the
environment are more structuralist in nature i.e. they seek to understand and
manipulate the mechanisms operating at a deeper level that give rise to system
behaviour.
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- Pick the right stakeholders The current problem formulation has correctly identified that the current
management mindset is geared entirely towards efficiency as measured by
profit. It highlights the fact that employees are not playing a major role in the
strategy formulation process. It has to an extent ignored the fact that
shareholders are chasing the profit maximization via focusing on core
competencies and hence the approach taken in the current formulation is
entirely to the shareholders liking and within the current managerial mindset.
The view of society and the role of government are not considered except
when forced to do so by legislation.
- Expand your options The problem formulation is considered from a mindset that the company is
too focused on one aspect of the business and moving beyond the core
competency model should be considered. It however does not consider the
fact that the core competency model may be exactly what is required within
this paradigm and hence the formulation needs to elaborate on the value of
‘sticking to the knitting’. What is missing is greater emphasis on the value
added by the focus on improving efficiency in relation to the company’s long
term survival. The dialectical debate between efficiency and diversification in
relation to long term survival needs to be highlighted. While the initial
formulation does highlight the past success of the company, it neglects the
fact that lessons could be learnt from the past successes and hence this
needs to come through in the problem formulation.
- Phrase the problem correctly Keeping the functionalist mindset on, it has become apparent as mentioned
above that the situation and concern needs to consider the value added to the
company from the core competency ideal. Improving efficiency and efficacy is
within the area of the company that produces 85% of the revenue (Impala
mines – source Implats 2006 annual report) surely adds value to
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shareholders and indeed other stakeholders (employees, the fiscus etc). This
has not come through strongly in the initial situation/concern formulation.
However survival of the company is also strongly indicated by the structuralist
approach within the functionalist paradigm. In this instance the strategic
inputs relating to long term survival need to come through more strongly as
well.
- Expand the problem boundaries Within the functionalist paradigm, the boundaries seem to be already at the
comfort zone of efficacy and efficiency. The analysis has not stressed survival
as a key area so a change in focus to survival of the company is indicated.
- Prepared to manage paradox The initial problem as formulated is dominated by functionalism in its intent,
but the long term survival is affected by developments in the broader
community and indeed the global context which is situated in the
emancipatory paradigm. It is paradoxical therefore that the greater chance of
short term gain lies in improving the company’s performance in this arena, but
this defeats the longer term survival and even emancipatory requirements.
Finding the balance between these two areas is important in the final draft.
INTERPRETIVE PARADIGM:
- Pick the right stakeholders This paradigm is inherently weak in the initial formulation. The mindset/needs
of the employees within the company seemed to have been overlooked and
this needs to be addressed. What is the current culture within the organization
in relation to strategy and how do the employees come into this equation.
- Expand your options
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What is the purpose of the organization. Is it only to make a profit and
maximize returns to shareholders irrespective of other competing options.
The situation/concern formulation does not cover this in any detail and again,
change in the initial formulation is advised.
- Phrase the problem correctly Now with this mindset, the nature of the problem changes. We are no longer
addressing the efficiency of the company, but rather the culture and political
power plays and how they influence strategy. This aspect has been neglected
in the initial formulation and a revision to bring this perspective will add
significant value to the problem.
- Expand the problem boundaries The boundaries have been narrowly drawn in the initial formulation, almost
totally ignoring the interpretive paradigm. Redrawing the boundaries to bring
in the value system, the current culture and use of power in terms of its
influence on the strategic formulation process is indicated.
- Prepared to manage paradox Emphasizing the value and different meaning that people bring to the
equation leads to an emphasis on the political aspects of the organization . It
also leads to a dilution of focus away from the functional areas that are
responsible for most of the profit and shareholder value. This again requires
balancing the requirements of other stakeholders with what is the primary aim
of the company.
EMANCIPATORY PARADIGM:
- Pick the right stakeholders
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The situation ignores the current global situation and the state of the world
from an environmental and human rights perspective. The needs of the
citizens of the country do come through to a large extent, but the broader
global context also needs to be considered. While the long term needs of the
citizens do come through, there is no overt mechanism built into the
situation/concern to address their perspective.
- Expand your options Again this relates back to the purpose of the organization. Do the problems of
the world concern the company, or should it continue to try to make a profit
regardless. The paradoxical nature of this question is highlighted by the
Mitroff analysis. Considering an alternate formulation of this situation/concern
utilizing the CSH model would render an entirely juxtaposed formulation to the
existing one. Some attention to integrating the two options needs to be
considered.
- Phrase the problem correctly The current formulation has included aspects of the needs of the country and
hence does satisfy to some extent the needs of the unrepresented. The issue
is whether this has been done to a sufficiently enabling scale. As discussed
above the answer to this question is no. The problem formulation therefore
would have to be reworked to include a broader slice of the
softer/emancipatory concerns surrounding the issues, specifically the needs
of the national and global communities. This is exactly the context within
which the future of the company is located within and needs further
examination.
- Expand the problem boundaries So from the above analysis, it is apparent that the problem boundaries need
to be expanded into the following areas:
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- More detail on how the country goals and citizen needs come into the
equation.
- Expand the boundary into the global context, examining the current and
potential future state of the world and how the company is located within
this context.
- Prepared to manage paradox Again, the paradox here relates to the reason for existence of the firm. Is its
only goal to render an adequate return to shareholders over the short term or
does a company needs to subscribe to a broader social agenda for existence.
Moving the boundaries of the question to encompass the broader social
agenda on a global scale seems to be a dilution of focus too far away from
the core profit principle, but this paradigm needs to be explored to get an all
encompassing view.
POST MODERN PARADIGM:
- Pick the right stakeholders This paradigm looks at bringing marginalized views to the fore, but also
emphasizes the feeling of doing the right thing. Now the analysis thus far has
leaned heavily towards considering alternate viewpoints and considering what
is right for the community and world at large, so no new stakeholders are
realized from this perspective.
- Expand your options With a post modern lens on, the problem formulation is very different to what
has been conceived to date. This lens suggests that the world situation is too
complex and there are no long lasting solutions, so try to accommodate to the
best of your ability and have fun in the process. The message seems to be
‘don’t take the world so seriously’ as you cannot solve the problems, but the
right thing to do will emerge.
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- Phrase the problem correctly Examining the formulation with the post modern lens, does not suggest that
significant changes can be made to the revised formulation as proposed. This
is entirely from the author’s perspective and could include some skepticism
about the relevance of the post modern lens.
- Expand the problem boundaries So from the above analysis, it does not seem immediately apparent that the
problem boundaries need to be expanded. Trying to expand the boundaries
within the context of the post modern lens in this instance seems to take away
the relevance of the SCQ and hence the author has decided to retain the
status quo.
- Prepared to manage paradox
Creativity, diversity and ambivalence is suggested within this paradigm, The
associated carnival metaphor recommends a suspension of the normal order
and to let things run their course without overt steering. The author’s viewpoint
again is that the associated changes from the other paradigms to some extent
allows for diversity and creativity. The balance sought here is between
allowing this mindset to contribute to the desirable changes without becoming
irrelevant to the target audience of this paper. It must be noted that the
readers within the firm have no systems training and as such the content of
the paper will be difficult enough to digest without complicating it with large
doses of post modernism.
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Figure 44: Environmental stakeholder CATWOE
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Critical Systems Heuristics applied to the answer:
Heuristic questions Is mode Ought mode Who is the actual client of S’s design
Shareholders, Senior management
Shareholders, all employees, local community, environment, local and global citizens, government
What is the actual purpose of S’s design
To maximize shareholder returns
To ensure a sustainable future for the company within a new better world.
What judged by the designs consequences is its built in measure of success
Return on investment, profit per ounce, cost per ounce.
Longevity of the company, involvement and innovation by employees, positive impact on community, partnership with govt.
Who is the decision taker who can change the measure of success
Shareholders and board of directors
The company board of directors advised by employees and other stakeholders.
What conditions of successful planning and implementation of S are controlled by the decision taker
The ROE and dividend targets that companies must meet and the penalties for non-achievement of targets.
The company strategy designed to achieve objectives that are balanced amongst the various competing goals.
What conditions are not controlled by the decision taker i.e. represents an environment to him
The global economic situation, the exchange rate.
Global consumption. The fiscal and taxation environment. The educational environment that produces requisite skills. The impact of global warming.
Who is involved as a planner
Management, analysts and financial consultants.
Company management and employees, consultants, relevant experts, government representatives
Who is involved as an expert, what role does he actually play
Investment analysts and consultants form merchant banks advising on targets within the current financial environment.
Financial, social and environmental consultants, company management advising on the changing nature of the environment as each perceives it.
Where do the involved Meeting of set targets. ROE, employee’s
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Figure 45: Critical systems heuristics applied to the answer
see the guarantee that their planning will be successful
Direct line into company decision takers to effect change of plans.
remuneration and turnover, prosperity of local communities, impact on the environment.
Who among the involved witnesses represents the concerns of the affected? Who is affected without being involved?
Senior management and board of directors. Employees, Government, communities are affected without being involved.
Government and social agencies again represent the community. Shareholders are represented by management, who now also represent environmental and social interests.
Are the affected given an opportunity to emancipate themselves from the experts and take their fate in their own hands
Government can change legislation. The community is able to change the government. Employees can resign. Shareholders have the option to dispose of share or raise grievances at AGM’s
This is achieved via a change in managerial perspective to the extent that all stakeholder goals are given equal weighting.
What world view is actually underlying the design of S.
World view is the maximization of riches.
World view is a sustainable future for our children
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APPENDIX SIX: VALIDATION OF THE INTERVIEW RESULTS The summarized interview results were assessed by Paul Finney (Operations Executive Refining) and Martyn Fox (Manager: Projects Department) Their comments are attached. Martyn Fox – Page 209 Paul Finney – Page 213
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APPENDIX SEVEN: ADDITIONAL LENSES SUPPORTING THE ANSWER
THE RALPH STACEY LENS
In identifying the increasing complexity of the business environment, Stacey
(1996 ) states that ‘Agents within the system (read management) cannot be in
control of the long term, nor can they install specific frameworks to make it
successful, nor can they apply step-by-step analytical reasoning or ideological
controls to attain long term development. They can only do these things in
relation to the short term. Long term development is a spontaneously self-
organising process from which new strategic directions may emerge.
Spontaneous self organization is political interaction and learning in groups.
Stacey describes complexity indicators required to create spontaneous
adaptation to circumstances as:
• Connectivity and Rate of information flow Connectivity refers to the relationships between members of the
organization. Relationships are built on high frequency and quality of
communication.
• Degree of diversity: Increase in diversity promotes change to happen more rapidly. The
greater the diversity the greater the opportunities afforded to explore.
• Lack of inhibitors:
Emergence can be suppressed by those who have power and who feel
threatened by any new ideas in the organization.
• Good boundaries: Essential for emergence to occur. Important for staff to know what they
may not do. Being clear on boundaries aids in the process of creativity.
• Intentionality: Positive intentions generally lead to positive outcomes and it is possible to
influence the direction of emergence although not to control or specify it.
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• Watchful anticipation: Emergence cannot be rushed and requires an expectant waiting and
sensitivity.
• Level of contained anxiety: Change and creativity are inhibited in an environment where the level of
anxiety is too contained.
• Degree of power differential: People with too much power can resist change especially if it’s threatening
to them.
Figure 35: Stacey’s creativity web
Stacey’s Creativity Web
Connectivity and rate of information flow
Degree of power differential
Level of contained anxiety
Watchful anticipation
Intentionality
Good boundaries
Lack of inhibitors
Degree of diversity
Expected creativity web
Current creativity web
Gap identified
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Figure 35 above reflected the gap identified within the Implats strategy
formulation process that needs to be closed by the proposed answer.
Stacey (1996) uses the edge of chaos concept to postulate how learning and self
organization can be promoted in organizations. All complex adaptive systems
can operate in one of three zones, a stable zone, an unstable zone and the edge
of chaos. In the stable zone they ossify (which is what was happening within the
organization until recently), in the unstable zone they disintegrate, but at the
edge of chaos spontaneous processes of self organization occur and innovative
patterns of behaviour emerge. Figure 37 below captures this zone perfectly.
Complexity theory suggests that groups of people are creative only when their
behaviour displays the dynamics of bounded instability. Both stability and
disintegration are inimical to creativity. Creative processes cannot be planned
because long term outcomes are unknowable in the dynamics of bounded
instability.
`OVERCONTROL
CHAOS
CHAOS
STRATEGY
STRUCTURE
SYSTEMS
STYLE
STAFF
SHARED VALUES
SKILLS
META-MISE
PLURALIST
OPPORTUNISTIC
DISCRETIONARY
TRANSFORMATIONAL
INDIVIDUALITY
SOFT HEARTS
MAXIMISEPLANNED
ELITIST
MANDATORY
MANAGERIAL
COLLEGIALITY
STRONG
MINDS
Adapted from Pascale
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Figure 46: Behaviour profiles in the creative zone at the edge of chaos THE GARY HAMEL STRATEGY LENS Hamel offers ten principles that can help a company dramatically increase its
chances of discovering truly revolutionary strategies to continue reinventing itself
in highly complex environments.
1] Strategic planning is not strategic. Strategy making processes tend to be reductionist, based on simple rules and
heuristics, implicitly assuming that the future will be like the present. The
industry’s boundaries are accepted and the decision becomes placement within
those boundaries. Any company that believes that planning can yield strategy will
find itself under the curse of incrementalism.
2] Strategy making must be subversive.
Revolutionaries are subversive, but their goal is enlightenment. If there is to be
any hope of industry revolution, the creators of strategy must cast of industrial
conventions. Rule makers and takers are the industry norm, rule breakers set out
to redefine the industry by challenging convention.
3] The bottleneck is at the top of the bottle.
Senior managers are generally the defenders of strategic orthodoxy. Hamel
states that the organizational pyramid is a pyramid of experience, but experience
is only valuable to the extent that the future will be like the past. Generally the
greatest reverence for industrial dogma is at the top as is the people responsible
for strategy.
4] Revolutionaries exist in every company.
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If you go down and out into the organization, you will find people straining against
the bit of industrial dogma. The problem is that there is no process that lets these
revolutionaries be heard. Hamel challenges corporate leaders to let
revolutionaries have a say in the strategy making process. If you do not let them
challenge you from within then they will do so from without in the marketplace.
5] Change is not a problem, engagement is. The objective is not to get people to support change, but to give them the
responsibility for engendering change. Does your strategy making process
engage the revolutionaries in a dialogue or does it merely dictates what the
strategy will be?
6] Strategy making must be democratic.
Senior management seldom urge employees to get involved in strategy creation.
The company’s top executives know each other so well that they cannot learn
any more from each other. The capacity to think strategically is widely dispersed
in the company. To help revolutionary strategies emerge, senior managers must
supplement the hierarchy of experience with a hierarchy of imagination.
7] Imagination is the scarce commodity in creating the future If you want to build the future, you have to create a monopoly on imagination.
The top people generally have the most to lose. For a company to be strategic,
top management have to give up their hold on creativity and strategy. Its
imagination rather than investment that determines an organisation’s capacity to
be strategic.
8] Perspective is worth 50 IQ points. To create a revolution you have to give an organization a new lens to view. You
cannot make people more clever, but rather a new world view. Become a
merchant of new perspectives. There can be no innovation in the creation of
strategy without a change in perspective.
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9] Top down and bottom up are not alternatives. Thinkers are assumed to be at the top of an organization with doers at the
bottom. In reality, thinkers often lie deep in the company and senior managers
simply control the means of doing. Although revolution does not need to start at
the top, it must be endorsed by the top.
To achieve diversity of perspective and unity of purpose, the strategy making
process must involve a deep diagonal slice of the organization.
10] You cannot see the end from the beginning. A strategy making process that delves deep into discontinuities will come up with
surprises. Senior managers cannot predict where open ended strategy making
processes will lead to, but they cannot ignore the outcomes. Executives should
be less worried about off the wall suggestions that the failure to unearth them. An
open ended and inclusive strategy making process reduces the challenges of
implementation as it engenders ownership.
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SUPPORT FOR CONTINUOUS ORGANISATIONAL RENEWAL - LEARNING FROM THE PAST
Impala’s response to these challenges were to invest heavily in a revolutionary
new refining technology called ‘Molecular recognition technology’, secondly to
create a toll refining vehicle called Impala Refining Services (IRS) and latterly to
invest heavily in the Great Dyke deposit in Zimbabwe which is the second
biggest deposit in the world behind the Bushveld Igneous Complex in South
Africa.
Utilising the Hobeke (1994) lens, one notes that the creation of IRS was as a
result of the fluent interaction between recursion levels one and two, created at
the overlap of the efficiency and innovation domains, woven together at process
level 4 and supported at process level 5 of the innovation domain. To explain this
in practical terms, the inability of Implats mine to fill the process plants led to
inefficiencies within the plants. The mines were producing at full capacity, but the
resources base was not sufficient to produce sufficient ore to allow the mineral
processing plants to operate at full capacity and therefore insufficient precious
metal matte and concentrate was available to meet the efficiency requirements of
the refineries. The net result of the plants operating at non optimal capacity
manifested in the unit costs of production. The high fixed costs spread over a
reduced metal output resulted in the cost of producing one ounce of Platinum to
escalate beyond reasonable levels to the extent that the viability of the operation
was threatened. There was nothing that could be done at either process level
one and two to fix this problem as it was not an issue of mere efficiency or
quality, but transcended both the process levels. In effect, this issue also went
beyond the scope of process level three as it also transcended the continuous
improvement domain and could not be solved by reallocation of resources in
improved ways.
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Figure 47: CLD of IRS formation
The solution was to be found in the innovation domain as expressed by strategic
development and strategic intent resulting in business transformation. The
generic transformation process resulted in the decision to utilize the spare
capacity to process materials that belonged to others and did not emanate from
Implats mines. This strategic change in direction gave birth to Impala Refining
Services a division of Implats focused solely on filling up the processing plants of
Impala such that process efficiencies are maximized, costs therefore reduced
and Implats metal volume output substantially increased. This change in
business direction as conceived in the innovation domain was wildly successful
to the extent that value was created throughout the entire Implats group and all
its customers. Value was created in the following ways:
• The overall processing of all Implats metal was made more efficient.
• Implats was able to position itself down the cost curve.
Pressing companyneed
Best technology
Distinctivecompetency
Innovation inForm of IRS
Competitive terms
Dominant positionIn toll refining
Spare capacity
_
+ +
+
+
_
+
+_
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• Becoming a low cost producer made Implats into an attractive share
for investors.
• Survival of the Implats group was also ensured.
• More metal was made available to the market, thus ensuring continuity
of supply.
• More entrants were facilitated into the PGM industry thereby ensuring
efficient utilization of the country’s resource base.
• Barriers to entry were reduced thereby allowing the proliferation of
BEE entrants into the industry supporting the governments BEE
intentions.