Vision

A vision articulates a view of what the organisation wants to achieve or the future it is aiming for. Vision is “big picture” thinking that helps people feel what the organisation is trying to do. It tends to be enduring and often is short. For instance, the Ford Motor Company’s vision when established by Henry Ford was “To make the automobile accessible to every American” and Starbucks successfully drove its strategy with the vision: “2000 stores by the year 2000”.

Good visions generally adhere to five principles. They are:

• Brief (not long-winded “hero sandwiches of good intentions”, as Peter Drucker said)
• True to the particular organisation’s identity and focus
• Easily understandable to all employees
• Inspirational, and
• Verifiable so that progress and ultimately success can be determined.

Mission

Mission statements should also adhere to the tenets above but there is a subtle but important difference between a mission and a vision. The root of the word vision is the Latin vide (to see) whereas mission’s root means “to send”. Consequently, a mission is not so much a goal or a picture of where you want to get to in the future, but rather a philosophy, or way of moving towards the vision in the present. Organisations can therefore have both a vision and a mission. For example, LEGO’s vision is “Inventing the future of play”, while its mission is to “Inspire and develop the builders of tomorrow”. Other classic missions include: Walt Disney’s “To make people happy” and Tesco’s “Every little helps”.

Core values

Organisations often list a number of core values, beliefs or principles that guide their decision-making. Previously derided for being bland and generic, organisations are now striving to make these more specific, more interesting and hence more useful from the point of view of encapsulating a corporate identity that can drive a strategy (see Figure 1.1).

Organisational values need to be enduring and so a question should always be asked: would these values change if external situations changed? If the answer is “yes” then they are not core values.

Objectives

Strategic objectives are precise measurable outcomes of a strategy. They might be sales, profits, share price, consumer satisfaction scores and so on, depending on what is central to the organisation’s purpose. In the case of Greyston Bakery, objectives would be broader based than the ones mentioned and would probably include social and environmental objectives as well.

Strategy statements

An increasing number of organisations now publish strategy statements that seek to capture what the organisation is, what it seeks to accomplish and who it seeks to serve. These statements will contain the elements listed above and also mention the scope of the organisation’s activities and the particular advantage it offers. Strategy statements should be concise in nature, some suggest less than 35 words, so that they are memorable. It is a good test of a strategy statement to count how long it is and whether it contains all the elements mentioned so far: vision, mission, core values and objectives. It may also contain an indication of the scope of the organisation and why it has, or will have, a clear advantage over competitors in achieving its aims. For instance, Coke’s scope is clear in its vision “To refresh the world” and its advantage is its scale of operations. Done well, a strategy statement can provide a useful guide to managers in their decision-making, and give confidence to employees and external stakeholders, such as investors. Done badly, a poor strategy statement might cause questions to be asked of top management competence.

Organisations may choose to articulate their purpose through one of these vehicles, or in a multiplicity of interlocking ways, like LEGO (see Figure 1.2), whose vision, mission and values clearly influence recent strategic decisions.

External dependent stakeholders

Important external dependent stakeholders have the following relations: (1) economic (lenders, customers, suppliers, competitors, distributors) where stakeholders can influence the value creation process; (2) advisory (non-executive directors, consultants, gurus, business schools, lawyers, accountants) and (3) socio-political (local authorities, unions).

1. Economic relations with the organisation can be influenced by lenders, who can withdraw funds if an organisation acts in ways that they do not approve of. Or it may be that organisations are unable to secure loans for strategies that do not fit with the lenders’ views. Substantial customers and suppliers can influence the organisation through the withdrawal of orders and supplies or the imposition of less attractive terms and conditions, such as payment terms. Competitors can influence the organisation through their actions as well as public statements of intent. For instance, Airbus Industries made public the amount of resources it put into its new super-jumbo aircraft and the contracts it has been awarding for this purpose. This “signalling” is clearly intended to influence its major competitor, Boeing, into reconsidering whether it really wants to compete head on with such a commitment of resources.

2. Advisory relations influence the organisation by providing ideas and solutions to problems. Non-executive directors perform an important role in having sufficient senior experience to comment on the affairs of the organisation but have no management say in the day-to-day running of the organisation. Their semi-independent status is an important characteristic to ensure impartiality, and so they should not have a commercial or other interest in the organisation beyond drawing a modest remuneration for their time. A key issue, however, is that the organisation chooses who to appoint.

    Around 90% of Britain’s top companies now employ outside consultants to advise them on strategy (a percentage that is typical throughout the Western world). These consultants are part of an industry now worth some $40bn worldwide. The executives who pull strings are also increasingly from consulting backgrounds. For instance, the alumni of McKinsey’s include the heads of America’s Boeing, IBM, Levi-Strauss and American Express; France’s Bull; Germany’s BMW; and in the UK, Asda, HSBC, Jones Lang LaSalle, Vodafone, the Confederation of British Industry and the Foreign Secretary in the UK’s Government. With their connections, consultants are able to collect impressive data and are well placed to tell organisations which companies are doing best. They perform an important role as creators and disseminators of information and, in particular, are associated with communicating “best practice”. This message is both pervasive and persuasive, although it generally relies on clients fearing being left behind in the competitive race rather than staying ahead. Many companies worry about the amount they use consultants and so we provide some guidance about whether you use them too much in Figure 1.6. The way that consultants look at strategic problems thus also influences the way their clients see the world. For example, McKinsey’s philosophy – “Everything can be measured, and what gets measured gets managed” – tends to place the emphasis on certain “hard” generic characteristics and generally leads to less of a focus on the unique “softer”, more distinctive, or less tangible, aspects of an organisation’s competitive advantage.⁷

3. Socio-political relations can have influence at the local level through different types of business and planning regulation. Unions can influence the organisation through organising employee action.

Internal dependent groups

Internal dependent stakeholders may not have very much influence on top management and organisational purpose as individuals unless they are a particularly valued resource. For instance, they may have particular skills or knowledge, such as research scientists, have a substantial reputation that can move markets, or control a vital customer relationship. A negative example of this was the leaked emails from the University of East Anglia that threw into doubt claims about climate change. Recent research by Angwin and Paroutis⁸ has also shed light on significant C-level executives who are central to many change initiatives in large companies. These Senior Strategy Directors (sometimes called Chief Strategy Officers (CSOs)) deliberately interface between CEO initiatives and different internal interest groups in order to facilitate change among conflicting parties. They also have a boundary-spanning role in linking external stakeholders with multiple internal levels of the organisation, acting as critical links across different social networks. In the words of one CSO: “we are the lubricant in the machine”.⁹

Internal stakeholders often achieve greater power where they can group together to achieve collective bargaining power. In France, for example, surgeons grouped together and came en masse to England as a protest to the Government about their terms and conditions of work in France. Internal stakeholders may also align with an external group, such as a union, when internal grouping is insufficient to exert pressure on employers. In the United Kingdom, the current strike action of the RMT Union is severely disrupting train services in the country, and various strikes in the French airline and air traffic control industries are damaging the reputation of Air France. It is not unusual for external stakeholders to actively seek linkages with internal stakeholders to achieve their aims. For instance, suppliers may link with purchasing officers, or customers with marketing managers, to represent their interests.

Non-dependent groups

Standing above the stakeholders who are dependent on the organisation are non-dependent stakeholders, stakeholders who can influence the organisation but are not themselves dependent on it. These stakeholders include: (1) governmental bodies, which may be at the industry, regional, national and supranational levels; (2) technical organisations; and (3) opinion influencers.

1. Governmental bodies can influence the organisation by setting up regulators to protect interests. For instance, within countries such as the UK, “watchdog” bodies have been set up to represent customer interests. Examples include the Office of Fair Trading (OFT) for protecting the consumer and Ofwat to regulate the price of water supply. More recently, a new body has been set up to monitor the quality of schools, and has been nicknamed “Off-Toff”!¹⁰ More general frameworks have also been used, such as the Citizen’s Charter Initiative in UK public services to raise performance standards on “customer service”. In the US, Congressional legislation has been bolstered. In the wake of the collapse of WorldCom, George Bush set up a Corporate Crime Taskforce and gave extra money to the Department of Justice and the Securities and Exchange Commission to pursue corporate wrongdoers. In 2002, Sarbanes–Oxley legislation was rushed into law in response to the Enron scandal. These rules involve an annual assessment of internal controls over financial reporting and certification by the Chief Financial Officer (CFO) and CEO that the financial statements and accounting practices are accurate. This should remove the “aw, shucks” defence used by lawyers in Bernie Ebbers’ trial (and used by former Enron bosses), claiming that, as a former milkman with no formal training in accounting, he was incapable of spotting fraud. Although the amount of detail required to satisfy this legislation is perceived as extremely onerous for US companies, it does force them to “comply or explain” and there is evidence that investors are demanding such explanations.

    There are also international bodies that monitor standards, such as Transparency International, which publishes a “perceived corruption index” of countries. This sort of information can influence the decisions of organisations to invest abroad and the extent to which they might risk trading in such areas.

2. Technical organisations can influence the organisation where independent credit rating agencies, such as Standard & Poor’s, can directly affect the ability of the organisation to raise funds through the direct costs of borrowing as well as influence on share price. BP Horizon’s oil spill crisis in the Gulf of Mexico caused its credit rating to be downgraded as investors wondered whether the organisation could survive the pressure being put on it by the US Government for massive financial compensation. Other standards agencies may determine appropriate technology standards for a market. For business schools, there are several accreditation agencies, such as the AACSB, AMBA and EQUIS, which exert significant influence on the strategies that can be followed by MBA programmes, for instance, through the promotion and policing of global standards. These can all influence an organisation’s purpose.
3. Opinion influencers can have an impact on the organisation’s purpose by providing the latest ideas and concepts. Here the role of gurus, consultants and business schools is well documented. The power of thinkers such as Clayton Christensen, Sumantra Ghoshal, Gary Hamel, C.K. Prahalad, Michael Porter and David Teece, and ideas such as the Boston Box, Best Practice, Blue Ocean Strategy, Bottom-of-the-Pyramid and the Business Process Reengineering to influence management initiatives is clear to see in both profit and not-for-profit organisations¹¹

Other social influencers

In addition to these three main groups of non-shareholding movers and shakers, there are a number of less categorisable opinion influencers that good strategists should not ignore. These include campaigners for broader social issues, such as fighting poverty in Africa. High-profile media stars like Bob Geldof and Bono have organised events, such as Band Aid and Live 8, which propel issues onto the public stage. Through tireless campaigning, Geldof among others is attempting to influence the banks of the First World to rescind African debt. Underlying such campaigns is a strong view of what is right and ethical behaviour for companies. While it is by no means clear that everyone agrees on what is “right” and “ethical” behaviour, as the world consists of very diverse cultural norms and beliefs, there are mounting pressures for socially and environmentally responsible behaviours to be viewed as synonymous with good management and embedded in an organisation’s strategy. This “corporate social responsibility” (CSR) point of view is gaining ground and echoes the achievements of Greyston Bakery mentioned at the beginning of the chapter. There is growing evidence of organisations now producing CSR documents and altering their purpose as a consequence of a backlash from, for instance, consumers disapproving of the use of child labour.

CSR focuses on the embeddedness of the organisation in a wider set of social conditions and recognises that business affects society as well as depending on a set of social conditions, such as quality of workforce, government regulation, etc., to be able to operate and compete. Michael Porter suggests that, at the generic AQ: Not listed in Glossary"?> (or highest) level, business has little effect on broad social issues. He gives the example that despite a laudable donation from a US software organisation in aid of the HIV/AIDs pandemic in Africa, there is little impact either way in this sort of action. However, in terms of focusing on the value chain or operating AQ: Not listed in Glossary"?> level, the day-to-day processes, of the organisation, he perceives substantial impact in the way that an organisation might modify its operations to mitigate harm and improve sustainability. He also perceives overlooked value at the competitive AQ: Not listed in Glossary"?> level, where the organisation’s philanthropic efforts can create social change while improving the environment for long-term corporate success. In his view, for organisations to be effective and socially responsible, they need to move beyond generalised concepts of good citizenship and set strategic priorities for philanthropy.¹²

1-1 Tesla: Electric Dreams

Any environmental analysis of the strategic environment facing the automobile industry performed over the past two decades would have identified the threat of an over-reliance on fossil fuel powered vehicles and the opportunities for vehicles powered by alternative forms of energy. And yet, auto companies have been slow to take up these opportunities.

Elon Musk is not the only person to argue that the inertia is the result of a lack of willingness on the part of established companies in the industry to move away from their reliance on fossil fuels. But Musk did something different about it. He built an auto company that only made electric vehicles.

Born in South Africa, Musk moved to Canada (where his mother was born) when he was 18 years old. He studied at Queens University in Ontario, then transferred to the University of Pennsylvania, where he received a degree in physics and a degree in economics. In 1995, Musk moved to California to begin a PhD in applied physics and materials science at Stanford University, but he left the programme after just two days to pursue his entrepreneurial ideas.

One of these ideas grew into PayPal, the electronic payments company, and by 2002 when this was sold to eBay for US$1.5 billion in stock, Musk became that company’s largest shareholder, owning 11.7%. The sale gave Musk the financial clout to pursue loftier ambitions.

Musk is variously described as a business magnate, management guru, engineer and inventor and has, at various points in his career, been all of these things simultaneously. At his three largest corporate initiatives since PayPal – Tesla, Solar City and SpaceX (see Live Case 1-5) – he is at once co-founder, CEO or Chairman, and Product Architect or Chief Technology Officer (CTO). He has stated that the goals of SolarCity, Tesla and SpaceX revolve around his vision to change the world and humanity. And his grand ambitions include reducing global warming through sustainable energy, and reducing the risk of human extinction by making life multi-planetary.

Elon Musk was ranked the 94th wealthiest person in the world in 2017, with an estimated net worth of $13.9 billion. In 2016, Musk was ranked 21st on Forbes’ list of the World’s Most Powerful People. In 2015, he starred in The Simpsons as himself (i.e. an archetypal business revolutionary/mad scientist). Mr Burns confuses him with Henry Ford. Since the death of Steve Jobs, Musk has become the first name that comes to mind for many people when they think of maverick movers and shakers in the world of technology and business.

Tesla Motors was incorporated in July 2003 by Martin Eberhard and Marc Tarpenning. The company was named after the maverick inventor Nikola Tesla, who had an ongoing battle with Thomas Edison for dominance in the early years of electricity research and commercialisation (which the more corporate-friendly Edison won), and whose original ideas about alternating current (AV) influenced the development of Tesla vehicles.

Musk partnered with Eberhard and Tarpenning to raise funds for expansion and the commercialisation of their first car in 2004 and joined Tesla’s Board of Directors as its Chairman. Musk took an increasingly active role within the company and oversaw the design of an electric sports car called the Roadster. The Roadster hit the market in 2008, the same year as the Global Financial Crisis, and the same year that Musk assumed full leadership of the company as CEO and Product Architect, which he retains to this day. As of the end of 2016, Musk owns about 28.9 million Tesla shares, or 22% of the company.

The Roadster was a modest success with sales of about 2,500 vehicles to 31 countries in 2008. But since then, with the follow-up four-door Model S sedan launched in 2012 (which has become the World’s 2nd best-selling electric vehicle), the Model X SUV and investments in new production plants and infrastructure such as a network of charging stations across the US and Canada, Tesla’s production and revenues (although not its profits) have risen steadily (see Figure 1.8).

Being so deeply involved in the development of Tesla and its products has led to Musk lashing out at those who don’t share his vision. He took the BBC television show Top Gear to court in 2008 for “libel” and “malicious falsehood” in relation to host Jeremy Clarkson’s review of the Model S. The courts found in Top Gear’s favour in the libel case and the falsehood claims were also struck out, with the presiding judge describing Tesla’s malicious falsehood claim as “gravely deficient”. And, in early 2013, Musk berated the New York Times across social media for a less-than-favourable review of Tesla’s charger network.

Perhaps realising the limits of this testiness and Tesla’s maverick stance, Musk and his company have adopted softer positions more recently, partnering with traditional auto companies Daimler and Toyota to produce electric powertrain systems for their vehicles and Panasonic to produce batteries. It has even teamed up with accommodation provider Airbnb to provide Tesla chargers at their properties. And, perhaps most dramatically, Musk has recently offered to make all of Tesla’s innovations available to any individual or organisation with good intentions to advance his aims for the development of sustainable energy.

What the future holds for Tesla remains uncertain. Can Musk grow the company’s market share and increase profitability? Will electric cars prove to be just a fad? Will the established auto companies gradually nibble away at Tesla’s innovations and incorporate them into their own business models? Will the company’s willingness to share their knowledge erode any advantage they have?

But no matter what the answers to these questions turn out to be, there can be no doubt that Musk has done his best to shake up the automobile industry and point it in a new direction.

1-3 LEGO: The Power of “Clutch Power”

In 2017, LEGO was named the world’s most powerful brand (ahead of Disney, Apple and Visa) by the global valuation consultancy Brand Finance. This topped off what has been a remarkable rise for the Danish-based company, following becoming the world’s largest and most profitable toy company in 2014. In addition to these financial achievements, its social capital had risen so high that it could release what critics termed a 90-minute commercial called The LEGO Movie and charge people money to watch it.

The director of the movie, Chris McKay, was upfront about this: “It’s ultimately a 90-minute toy commercial when you take a step back and look at it,” he explained. “But LEGO’s one of those brands that people don’t have a negative feeling about.” In fact, The LEGO Movie was more than just a toy commercial. Films have subtly promoted toys before (think of the real toys that are the stars of the Toy Story series, for example), but The LEGO Movie was remarkable in that it was not just an ad for its toys but the philosophy and vision of the company that made them as well.

And people lapped it up: it was the UK box office’s highest-grossing film of the year and it spiked demand to the extent that there were shortages of the actual toy the following Christmas. There can be no doubting the power the LEGO brick now. Yet just over a decade earlier the company nearly went out of business. What happened?

In 1916, a Danish carpenter, Ole Kirk Christiansen, started a small workshop in Billund Denmark. The shop burned down and when it was rebuilt Christiansen turned part of the new premises into a shop for the toys he had started making. He came up with the name LEGO, from the Danish phrase leg godt, meaning “play well” and by the 1930s, Ole was known for his LEGO pull-along toys made from birch wood.

In 1947, Ole was visiting a toy fair when he saw a plastic moulding machine. Ole bought one and used it to press plastic versions of his wooden toys. Later, in conversation with his son Godtfred, he had a different idea: making a system of plastic bricks would enable kids to experiment and design their own toys – and the possibilities could be endless.

The initial bricks made by Ole were great for stacking, but they had room for improvement. The solution was what came to be called “clutch power”. This was the aim and the result of the patented studs and tubes design that Ole and Godtfred developed. A system that enabled bricks to be easily but firmly stuck together, pulled apart and then stuck together again. The LEGO system of play was born and continues to this day. (In fact, bricks made in 1955 still work with bricks you can buy today.)

The simple idea of clutch power is at the heart of LEGO’s success. According to Jon Sutton, editor of The Psychologist, LEGO has such intrinsic appeal, for both creative children and adults, because it “represents both order and chaos. You can follow the instructions step by step, or you can go off-piste and create pretty much anything you can imagine.” It’s the combination of both of those possibilities that give LEGO its appeal. And while the LEGO system did not catch on quickly initially, when the company went international in the late 1970s it found that the market was global. LEGO experienced fantastic growth from 1978 until 2003. And then it crashed.

Initially LEGO executives couldn’t see what had gone wrong. But loyal LEGO customers could. LEGO had incorporated different themes into their toys since the 1980s, but over time the toys became more about the theme than the clutch power of the brick. By the 1990s, lured into following other plastic toy companies like Mattel, LEGO toys contained less and less interchangeable bricks and more moulded structures that could not be re-imagined into different forms by the kids (and, increasingly, adults) that bought them. LEGO had forgotten the importance of clutch power. LEGO’s loyal customers had not. And they would show LEGO what they needed to do in their reaction to a new LEGO product.

At this time, the problem (and the solution) was manifest in a new LEGO toy called Mindstorms. LEGO Mindstorms toys came with a brick programmed to convert a built toy into a robot that could then move in the ways that LEGO’s program instructed it too. Many LEGO fans (particularly young adults) bought Mindstorms products, but then they hacked the LEGO program and reprogrammed the software to do different things. Recall that this was in keeping with the original LEGO clutch power philosophy: you could stay true to the original integrity of the instructions or you could go “off-piste”. But LEGO appeared to have forgotten this and, worried that the hackers were messing with their intellectual property, began to engage legal advice and have serious, stern-faced discussions about what could be done to protect the company from these external threats.

Fortunately, before they went too far down this path, LEGO rediscovered their identity.

A LEGO executive explains how it unfolded in a documentary film called LEGO: The Brickumentary:

For us this was a great opportunity, because we saw a great potential of combining LEGO and computers. LEGO had in mind that they would develop it, and then kids would play with it in the prescribed way, and they had as an audience children, their standard, traditional audience. But it really sort of captured the imagination of people of all ages … Then there was someone who liked LEGO who was at Stanford and was like, “Hmm, this brick, I could hack that open and reverse engineer it.” And they were opening up the Mindstorms. They were writing new software for it. Within three months, a thousand hackers were working on it. And this was rather a shock for them. LEGO’s response was pretty much like, “What is this?” They’re taking apart what we created. I mean, we put this together, so it shouldn’t be taken apart. That’s our secret. There was a lot of questions in our leadership. We could either take the aggressive and protective and controlling route, and the other route would be to say well, this is, uh, interesting. In most companies, and also in a very traditional way of innovating, it was kept super-secret. It’s like closed walls, sign on the “X,” and we couldn’t say anything. We had a lot of internal discussions with our lawyers, top management was involved. [But Chief Executive and Ole’s grandson] Kjeld [Christiansen] had to stand up and say, “But I want this. We’re a company who makes things that people can create with.” When a company starts to deal with users, and discovers that it can get ideas from users, that’s Mindstorms. That’s the new way of saying, you will [interact with your community] and you will get from them useful ideas. We need to be aware that 99.99% of the smartest people in the world don’t work for us.

Mindstorms was the turning point where LEGO rediscovered what made it successful. Rather than resisting creative ideas from its customers, it embraced and then encouraged and facilitated their development. Mindstorms hacking became a community movement. LEGO took advantage in the growth of interactivity the internet has allowed to cheer on and capture the enthusiasm and great ideas from its fans. It has now launched Kickstarter-style “LEGO Ideas” websites (e.g. www.ideas.lego.com; www.cuusoo.com) where people can propose new sets and innovations that will be considered for production if it can create enough interest among other LEGO fans.

This interactivity did not damage the company: it made it stronger. It has made users feel they are both attached to the LEGO family and its success and independent creative thinkers, and enabling these two things together has engendered even greater loyalty. Moreover, it has led to the production of a number of cool new series generated by fans such as LEGO Architecture and the LEGO Bird project.

The rediscovery of its mojo is now reflected in how the pieces of the company’s identity statement slot together: LEGO’s Values are: Imagination/free play, Learning, Fun, Quality, Caring, and Creativity; its Mission, to “Inspire and develop the builders of tomorrow”; its Vision “Inventing the future of play”; and LEGO describes its culture as about being “purpose driven”, “systemic creativity”, “action-ability” and “succeeding together”, all joined together by a keystone brick: that says “clutch power”.

In 2017, 70 years after Ole Christiansen bought that plastic moulder, LEGO fans were eagerly awaiting the release of a new LEGO movie: a sequel, of sorts, called The LEGO Batman Movie.

The choice of LEGO Batman – the least heroic of super heroes – as the main character for its next film shows, according to some commentators, that LEGO has learnt its lesson: it doesn’t take itself too seriously or see itself too rigidly any more. Early reports had toy stores around the globe stocking up for the consequences.

1-4 The NHS: Merry Men and Virgins

As a means of demonstrating how students of strategy, like management consultants or any other stakeholders, can bring assumptions based on their own experience to bear on problems that may require a different mindset, we often use a little exercise based on Robin Hood and his merry men. Robin has a problem, which is described below. The question we pose to students is: Robin has hired you as a management consultant; what would you advise him to do?

Robin Hood’s revolt against the Sheriff of Nottingham began as a personal dispute. But Robin knew that he could do little to exact his revenge without the help of others. So, he set out to find allies – men with similar grievances that he could unite under a common cause. He did not have to look very hard, and as he looked back on the first year of his operation he was still surprised at how quickly he had gathered around him able men who shared his personal hatred of the Sheriff and his overlord – the brutal Prince John, who ruled, unjustly in Robin’s eyes, in the absence of Richard the Lionheart.

There had been little structure or routine to the establishment of the band of merry men that had emerged. Robin asked few questions of his charges and their motives and only required that they trusted his ultimate decision-making authority and gave their all in pursuit of what had become their motto: “Rob from the rich and give to the poor.” Under Robin’s rule, a simple structure had evolved, with particular tasks delegated to those who Robin saw as his most able lieutenants, such as Will Scarlett, Little John and Friar Tuck.

But, as the legend of the merry men spread, so the number of recruits from further afield increased. Some came with a taste for adventure; others with a desire, or need, to live outside of the law. As the band grew larger, what was once but a few tents was turning into an established camp with an increased range of ancillary services attached. More and more men spent more and more time sitting around waiting to be organised and waiting for adventure. The cost of maintaining this organisation was on the rise.

In the meantime, revenue was declining. The rich were becoming more adept at avoiding capture by Robin’s less than nimble organisation and the Sheriff and Prince John were becoming more skilful in anticipating and combating Robin’s raids. Moreover, in response to Robin’s opposition and stirring up of the region’s common folk against them, they had worked hard to shore up their own defences and political alliances, so as to make their overthrow – which had, at one point, been Robin’s driving ambition – increasingly difficult.

As he moved into the second year of his campaign, Robin was confronted with some difficult problems. Was his strategy effective? How should he organise his forces? What did he need to change and what should he seek to retain? One thing was clear, however: he did not know the answers to these problems himself. He would need to consult with others. “Perhaps,” he mused, “I could benefit from hearing more about the latest thinking in these domains.”

Students don’t tend to begin by imagining the particular “macro-context” within which Robin operates before thinking of solutions that would fit with this. Hence, they tend to unthinkingly provide modern answers to Robin’s problems. For example, from a modern management consultant’s perspective, what Robin should do is decentralise, devolve responsibility, empower those beneath him or franchise. However, in Robin’s cultural setting – where his forceful, charismatic, almost divine leadership is the core that holds everything together – such solutions would likely be seen as a sign of weakness, that Robin is losing his “mojo”, or that he is no longer committed to the cause. They would likely leave the organisation in a greater state of malaise than when the consultants came in.

Many believe that a similar overlaying of generic solutions that did not take account of the particular operational context occurred when consultants from the Virgin Group, famous for revamping maturing consumer product and service markets like air and rail travel, cola, vodka and banking, were called in by Government ministers to write a report on Britain’s hospitals at the beginning of the year 2000. In an article in The Sunday Times, the Secretary for Health, Alan Milburn, described Britain’s publicly funded NHS (National Health Service) as “a 1948 system operating in a 21st century world. That is why,” he explained, “I have now asked Sir Richard Branson’s award-winning Virgin Group to advise us on how hospitals can be made consumer friendly. It is about transforming the very culture of the NHS to make it a modern consumer service.” Press releases claimed that the Prime Minister, Tony Blair, would use the report to follow up on accusations made by his Health Secretary of the dire “forces of conservatism” within the NHS and “the gross inefficiencies built into the system”.

The consultants visited nine hospitals and several GPs’ surgeries over a 26-day period and composed a damning report. They wrote of “over-centralisation”, “too much red-tape”, “chaotic booking-arrangements” and “poor management”. They concluded that “the patient is required to fit into the system, rather than the other way around”, and that the “dead hand of bureaucracy seems to stifle imagination and flair”. However, on the up side, they claimed that “most [staff] are probably decent people who just need a little leadership and direction”. The actions they believed should be taken to remedy the situation included the sort of ideas that have become commonplace in many organisations: “empowering workers to be more innovative”, making hospitals more “consumer friendly” and increasing transparency and accountability. (One recommended means of doing this was to allow patient representatives to go behind the scenes and carry out “snap inspections”.) There was also talk of snack trolleys and making hospitals “more fun”.

However, NHS employees were critical of the Virgin report and the Government’s handling of it. Doctors felt they were being blamed for poor public perception of the NHS, which, they argued, was caused by lack of funding. Stephen Thornton, the Chief Executive of the NHS Confederation, accepted that declining standards needed to be addressed but challenged “the Virgin team to show me what they describe as a suffocating bureaucracy. Where on earth do they get ridiculous figures that imply there is one administrator to every two clinical staff?” Of all NHS staff, only 3% were managers/administrators, compared with 44% nurses, 8% doctors and 17% clerical, he said, asking “I wonder how many backup staff it takes Virgin to get one pilot into the air.” In any case, he continued, “many administrative and clerical staff undertake critical patient-related tasks. It is disingenuous to suggest these people hinder rather than help the treatment of patients.” Peter Hawker, Chairman of the British Medical Association’s Consultants’ Committee, similarly suggested that he was “all for improving the services to patients but we need real resources, not an exercise in spin [doctoring]”.

These criticisms sparked a wider debate about the Blair Government’s use of consultants. A survey by the Independent on Sunday showed that it had spent almost a billion pounds hiring private consulting firms in its first three years in office. It was revealed that The Department for Education and its agencies spent almost £10m between 1997 and 1999. In response, Nigel de Gruchy, General Secretary of a prominent teaching union, claimed that “[t]he money could be much better spent. The Government paid Hey McBer consultancies £3m to come up with criteria for what makes a good teacher. We could have told them that for nothing.”

The Department of Health’s spending on consultants in the same period was two and a half times that of Education. According to one source, this could have paid for 2,327 heart bypass operations, 4,421 hip replacements, 737 full cancer treatments, and the wages of 1,133 junior doctors. A spokeswoman for the Unison health union said: “It’s an awful amount of money to spend on consultants, particularly if those consultants are at the expense of money going into front-line care. We generally know what the problems are, the difficulty is getting the Government to listen to the people who are on the ground.”

The ensuing media attention has led to increasing scrutiny of the way in which management consultants are used in the UK and similar scrutiny has been applied in many countries around the world as to how much consultants can cost, and the value they can bring. And it is increasingly the case that popular culture, in the form of TV shows like House of Lies, has poked fun at organisations’ overreliance on consultants. The Robin Hood exercise and the NHS example can help you to understand why.

1-5 SpaceX: Falcon Rising

Elon Musk was introduced in the first case in this chapter which outlined how he and his company, Tesla, have sought to shake up the auto industry. As mentioned in that case, another key component in Musk’s vision and strategy for making human life more sustainable is his company SpaceX. It is SpaceX that is aiming to reduce the risk of human extinction by making life multi-planetary. But in advance of that aim, it is seeking to change space exploration more generally and that requires making space travel itself more sustainable by creating renewed interest in space exploration, making it more accessible and more cost effective.

Most commentators would agree that in the past two decades, since the decline of the “space race” between the Soviet Union and the United States and the reduction of the Space Shuttle programme, the space industry has lost its impetus. In the United States, the demise of the Soviet state made it harder for successive governments to “sell” to taxpayers the incredible costs associated with growing the space programme. The reduction in the perceived threats associated with not staying in front has diminished the sense of urgency and the space programme does not engender the same levels of national interest and pride that it did in its heyday. But where others saw an industry in decline, Musk saw a unique set of opportunities.

Musk, like many modern inventors, had been an enthusiast of space exploration since he was a child and when he moved to the United States was disappointed to find that interest and funding for NASA and space exploration generally was waning. He conceptualised a project he called Mars Oasis to enable the growth of plants on Mars as a way of rejuvenating interest in the value of space exploration and part of his earlier stated aims with regard to advancing the sustainability of human life.

In 2001, at an early stage of the project, Musk went to buy rockets from Russia, thinking (perhaps naively) that he might be able to secure some good deals as that country’s space programme was still struggling after the disintegration of the Soviet state; but getting the cheap rockets he wanted proved more difficult than he had hoped and he had to return empty handed.

On the flight home, a disappointed Musk started to sketch out an alternative plan. As far-fetched as it sounded at first, perhaps he could build the rockets he needed himself?

He knew that if he started with the smallest and simplest orbital rocket needed for putting simple payloads (e.g. satellites) into space the raw materials would only cost a fraction (about 3% according to Musk’s calculations) of buying rockets on the open market.

Moreover, more complex state-of-the-art rocket ships not only came at greater expense, they came with greater risks: for a new company like the one Musk was envisaging, an early failure could lead in bankruptcy, terminally damage the image of his brand and enable the naysayers to claim that they were right.

Musk also knew that the decline in the space industry was having a knock-on effect on all of the contractors that helped build the parts that went into rockets for NASA. They were struggling and they and other expertise based in the southern United States could perhaps be vertically integrated into a very cost-effective new company too. Local governments keen to improve the economies and employment prospects in their region would also be interested in helping out, he imagined.

And whatever waning interest there might be for more advanced space exploration, there was certainly no decline in demand for increased global communications and the satellites that facilitated this.

By taking advantage of these opportunities and adopting a modular production approach used in software engineering, Musk estimated that he could cut the cost per launch cost by a factor of 10, sell payload delivery to customers at well under what was being charged by the market leaders, and still enjoy a 70% gross margin.

The recognition of these opportunities eventually became the company named SpaceX, which was incorporated and launched in 2002 after Musk hired renowned rocket engineer Tom Mueller (SpaceX’s CTO of Propulsion).

Its first spacecraft, the Falcon 1, launched in 2006. By 2013, SpaceX had over 40 launches on its manifest and had earned approximately $4 billion in contract revenue. By 2016, SpaceX was launching eight rockets a year for commercial and government customers. Even NASA, which once held a monopoly in space flight in the USA, was now hiring SpaceX to deliver some of its payloads into space.

While there have been some setbacks (most notably a Falcon 9 rocket exploding after lift-off in 2015), SpaceX has already achieved many goals. Falcon 1, Flight 4, became the first privately funded liquid-fuelled rocket to reach orbit in 2008. SpaceX became the first privately funded company to successfully launch, orbit and recover a spacecraft (2010); the first private company to send a spacecraft to the International Space Station (2012); and the first organisation ever to successfully land an orbital rocket’s first stage for reuse (on land in 2015; and on an ocean platform in 2016).

The company has grown from 160 employees in 2005 to nearly 5,000 by 2016 and having established SpaceX as a low-cost space delivery company, Musk is starting to firm up plans for the second and grander set of objectives relating to interplanetary travel and colonisation.

In February 2017, Elon Musk announced that the company had been contracted by two private individuals to send them in a Dragon spacecraft around the Moon. Provisionally launching in 2018, this will likely become the first instance of lunar tourism, something that has been anticipated for many years, and if it does take place successfully will almost certainly lead to more flights and become another product in SpaceX’s “range”. The research enabled from these manned flights will also contribute to planning for Musk’s grandest goal yet. In September 2016, Musk unveiled the mission architecture for SpaceX’s Interplanetary Transport System programme. This aims to develop spaceflight technology for use in manned interplanetary spaceflight, with the ultimate goal of sustainable human settlements on Mars.

To turn this long-range dream into a reality, Musk the marketer recognises the importance of turning a new generation on to space exploration in the same way that he was turned on as a kid growing up in South Africa. Musk has collaborated with National Geographic in its production of Mars 2033. Part documentary about how we’ll get there, part dramatised impression of the first manned mission, the Mars 2033 television series started screening in late 2016. It features Musk, described in one review of the programme as “our favorite Mars-bound-humanity-game-changer”, heavily: to the point where some critics have labelled the show a long, slow commercial for SpaceX. But whether it is or not, there is no doubt that Musk believes that interplanetary transport will happen, and that his company will be at the forefront of this quest.

Notes

1. 1. For a more detailed discussion of the separation of ownership and the delegation of authority to the agent, refer to the classic paper by Jensen, M. and Meckling, W. (1976) Theory of the firm: managerial behaviour, agency costs, and ownership structure, Journal of Financial Economics, 3: 305–60. The same paper gives details of agency problems but other references building on this include: Amihud, Y. and Lev, B. (1981) Risk reduction as a managerial motive for conglomerate mergers, Bell Journal of Economics, 12: 605–16; Jensen, M. (1986) Agency costs of free cash flow, corporate finance, and takeovers, American Economic Review, 76: 323–9; Shleifer, A. and Vishny, R. (1988) Value maximisation and the acquisition process, Journal of Economic Perspectives, 2: 7–20. For mechanisms to control agency costs, refer again to the Jensen and Meckling (1976) paper, but also look at Fama, E. (1980) Agency problems and the theory of the firm, Journal of Political Economy, 88: 288–307; Tosi, H. L. Jr. and Gomez-Mejia, L.R. (1994) CEO compensation monitoring and firm performance, Academy of Management Journal, 37: 1002–16; Byrd, J., Parrino, R. and Pritsch, G. (1998) Stockholder–manager conflicts and firm value, Financial Analysts Journal, 54: 14–30. An overview of agency in strategic management can be found in Angwin, D. N. (2015) Agency theory perspective, chapter 8 in Jenkins, M., Ambrosini, V. and Collier, N. (2015) Strategic Management: A Multi-perspective Approach, 3rd edn, Palgrave MacMillan.
2. 2. The granting of options also raises accounting questions around how they are to be expensed and what their effect on the profit and loss account may be.
3. 3. For a good discussion of the principal–agent model, read Eisenhardt, K. (1989) Agency theory: an assessment and review, Academy of Management Review, 14(1): 57–74. An overview of agency in strategic management can be found in Angwin, D.N. (2015) Agency theory perspective, chapter 8 in Jenkins, M., Ambrosini, V. and Collier, N. (2015) Strategic Management: A Multi-perspective Approach, 3rd edn, Palgrave MacMillan.
4. 4. Cash might not be paid out if it is held for future as yet unidentified investments, or perhaps if the company is in a cyclical business downturn.
5. 5. German banks were restricted in their ability to reduce their shareholdings because of tax regulations on disposal. These are now being relaxed.
6. 6. Vandevelde, M. (2017) Leading shareholders rebel over Tesco's £3.7bn bid to buy Booker, Financial Times, 28 March.
7. 7. For a critique of the consulting industry, read Micklethwait, J. and Wooldridge, A. (1997) The Witchdoctors. What the Management Gurus Are Saying, Why It Matters and How to Make Sense of It, Mandarin paperbacks; Cummings, S. (2002) Recreating Strategy, Sage.
8. 8. Angwin, D. N. and Paroutis, S. (2009) Connecting up strategy: Are Senior Strategy Directors (SSDs) a missing link? California Management Review, Spring.
9. 9. Ibid.
10. 10. “Toff” is used in English to denote a class divide in general, but may have academic overtones.
11. 11. Cummings, S. and Angwin, D. N. (2004) The future shape of strategy: Lemmings or chimeras? Academy of Management Executive, 18(2): 21–36; Micklethwait, J. and Wooldridge, A. (1997) The Witchdoctors. What the Management Gurus Are Saying, Why It Matters and How to Make Sense of It, Mandarin paperbacks.
12. 12. Porter, M. and Kramer, M. (2002) The competitive advantage of corporate philanthropy, Harvard Business Review, 80(12): 56.
13. 13. For a more detailed discussion of the interaction between agency, agency problem and stewardship, see Angwin, D. N., Stern, P. and Bradley, S. (2004) The target CEO in a hostile takeover: Agency or Stewardship – can the condemned agent be redeemed? Long Range Planning, 37(3): 239–57.
14. 14. Heracleous, L. and Lan, L. L. (2010) The myth of shareholder capitalism. Harvard Business Review, Spring.
15. 15. Rose, J. M. (2007) Corporate directors and social responsibility. Ethics versus shareholder value, Journal of Business Ethics, 73(3), July: 319–31.