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Long Range Planning

40/1 February 2007

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Charles Baden-Fuller Editorial

Organising Effectively

Our opening issue of 2007 carries on the theme identified in the Special Issue of December 2006: Strategising and Organising. Christoph Lechner and Steven Floyd examine why new initiatives often fail in organisations and what can be done to improve the situation. They point out that learning is critical to improving performance, but the learning involved in exploratory initiatives is different from traditional organisational learning and needs careful nurturing and development.

Abraham Carmeli also looks at how organisations learn and how they can improve their dismal record of not learning much from failures, as noted in the Special Issue of June 2005 on Organizational Failure. He argues that organisations need to work hard to improve their social infrastructure (social capital) permitting greater levels of trust between individuals and groups. This is vital if learning from failure is to take place effectively.

Planning Effectively

Jacques Verville and his colleagues examine how organisations can acquire their complex IT systems more effectively. Enterprise Resource Planning (ERP) systems offer great opportunities to business, but they are very costly and many firms do not buy correctly. Using evidence drawn from successes and failures, the authors trace a pathway to better planning and integration in this area.

Peter Brews and Devavrat Purohit take up the issue of planning for the future in a wider context. Using data on planning successes and failures, they argue that the more uncertain the environment, the more difficult it is to plan effectively but the greater the need for some kind of effective planning. In uncertain situations firms need to learn generative planning, and the authors use the experience of GE to explain how such planning can work in practice.

Finally, Han Smit and Lenos Trigeorgis provide a simple but comprehensive account of how to undertake options analysis for technology investment decisions. Such situations often require firms to look ahead several years, to situations where the future is uncertain and where traditional discounted cash flow analysis is likely to be misleading. The authors explain why a real options approach improves our understanding of such situations, and using worked examples they give a clear guide for those with limited technical ability on how to undertake the necessary calculations.

LRP: An Evolving Journal

This volume marks the 40th year of LRP, and we have reason to celebrate. In the last year we obtained the twin accolade of high visibility (more than 180,000 downloads of LRP articles in the last year) and strong academic recognition (we were ranked in the top 30 journals in the world in the field of management, ahead of rivals such as Sloan Management Review, according to the widely recognised Thompson ISI scores). This could not have been achieved without the help of many people, especially the readers and the authors. But there are others too. I would like to thank the reviewers of the past year for their help in shaping and selecting the articles that appear in the journal; the board and the publishers Elsevier for their unstinting encouragement. Special thanks are owed to retiring Senior Editor Henk Volberda (who will remain on the board) and to the retiring Associate Editors: Siah Hwee Ang, Simone Ferriani and Jing Zhang. We will shortly be announcing a new structure for LRP that will involve Associate Editors and an expanded editorial board.

 

Christoph Lechner and Steven W. Floyd Searching, Processing, Codifying and Practicing - Key Learning Activities in Exploratory Initiatives christoph.lechner@unisg.ch

One study estimates that only 3 per cent of new product development projects go on to produce commercial successes. Here, the authors point the finger of blame on managers’ lack of investment in four key learning activities: searching, processing, codifying and practising. Looking at 41 exploratory initiatives in three insurance firms (of which 16 were adjudged successes), this article offers a clear exposition of the importance of these activities. They offer a clear comparison between two similar cases e both attempt novel webselling methods which linked insurance and used-car sales e to show how one was developed and tested in Australia, and then successfully rolled out across the Asian market, while the other, a failure, was dropped after 18 months, as a good example of ‘how not to do it’. The authors offer advice both for those managers actually running exploratory initiatives e in terms of being thorough, imaginative and tenacious e as well as for those sponsoring such projects at senior level, as to how to ensure they achieve best learning outcomes by effective support in terms of shaping, staffing, guiding and reviewing.

 

Abraham Carmeli Social Capital, Psychological Safety and Learning Behaviours from Failures in Organisations carmelia@mail.biu.ac.il

All organisations are capable of making mistakes, but some are more capable than others of learning from them. This paper explores failure-based learning behaviours in organisations, examining the role of social capital in their development. The author argues that social capital builds psychological safety because if members of an organisation enjoy good interpersonal relationships, they believe that they work in a safe environment that will not embarrass, reject or punish them for speaking up. The author based his research on a questionnaire survey of members of 33 companies operating across a variety of industries in Israel. The results showed that when people feel psychologically safe, learning from failures is enabled. The author conducted supplementary research through case study analyses to identify how organisations can develop and facilitate such learning processes. Three key practices were identified: internal studies of organisational failures; implementation of a flexible work structure that allowed management rapidly to redeploy staff into different tasks; and frequent meetings of top management to exchange ideas about the market, tasks and capabilities. The paper concludes by saying that these social capitalrelated practices can result in enhanced organisational sensitivity, high responsiveness to customers’ needs, increased awareness of external and internal cues and knowledge sharing and creation.

 

Jacques Verville, Ramaraj Palanisamy, Christine Bernadas and Alannah Halingten ERP Acquisition Planning: A Critical Dimension for Making the Right Choice jverville@tamiu.edu

Replace your company’s piecemeal information systems with an integrated ERP package, and you’re taking a substantial gamble. It’s expensive, it’s time-consuming e and if things don’t go according to plan there’s a high risk of widespread corporate disruption, or worse. Yet if the overhaul goes smoothly, ERP can be short for Enterprise. Resource Planning e can bring great competitive advantage, in the shape of a streamlined, efficient business operation. Companies are increasingly taking the plunge, despite the risks; but how can they improve their chances of a successful ERP implementation? Basing their conclusions on several in-depth case studies of organisations that have gone through the process of choosing and buying an ERP system, the authors identify thorough pre-purchase planning as the key to a smooth transition. From building a well-rounded acquisition team, through the processes of establishing exactly what kind of system the company needs and what packages in the marketplace will fit that bill, they examine the whole planning process. Ultimately, they conclude, although the pre-acquisition groundwork may be unglamorous and tedious, it is crucial for any organisation keen to invest in an ERP solution that genuinely meets all its needs.

 

Peter Brews and Devavrat Purohit Strategic Planning in Unstable Environments peter_brews@unc.edu

Environments are not getting more stable or any easier to compete in. Companies therefore have to adjust their planning to cope with the shifting parameters of their business environment. This paper considers how environmental instability impacts on companies’ strategic planning. It uses data from a multinational survey of 886 companies to show that as environmental instability increases, so does planning e or as the authors put it, when the going gets tough, the tough go planning. The authors consider the four dimensions of planning: generative, transactive, symbolic and rational. They find that a range of planning behaviours is required when environmental instability increases, and that planning dimensions serve different purposes. Planning that encourages innovation (generative) and planning that facilitates ongoing adaptation and incremental adjustment (transactive) are the behaviours most strongly associated with environmental instability. These dimensions also display the strongest performance effects. The other two planning dimensions e symbolic and rational e are more strongly associated with company size than with environmental instability; though they might provide structure and stability as companies grow. The authors consider the case study of recent changes implemented at one of the world’s best-managed companies, General Electric of the US. This underscores the primacy of generative planning as environmental instability grows. The paper offers a number of implications for managers: it confirms planning as an important mechanism to deal with environmental instability; and it gives insight to the type of planning most relied upon in unstable contexts.

 

Han T.J. Smit and Lenos Trigeorgis Strategic Options and Games in Analyzing Dynamic Technology Investments jsmit@few.eur.nl

Sometimes the tools at a manager’s disposal are inadequate for the job. In particular, high-stakes multi-stage investment decisions under uncertainty are difficult to analyse based on standard quantitative approaches. This article describes a method to analyse strategic options in a dynamic competitive environment. It proposes integrating real options with basic principles from game theory and strategic management. It therefore shows how executives can analyse and assess investment decisions under uncertainty, whether under a proprietary setting or under different types of competitive structures. The authors start with simple one-stage investment decisions under uncertainty e first when proprietary and then under competition e and then extend the analysis to two-stage investment games, first with no competition, then with competition in the last stage only or in both stages. The combined framework of the real options and games approach can help managers decide, for example, whether and when it is appropriate to grow a company locally or globally on its own, or when it should participate in a network or strategic alliance. The authors use instructive quantitive examples and detailed illustrations and refer to recent concrete competitive situations: the European auction of telecom licences in 2000 and 2001; and the evolution of the Korean mobile market. The paper also provides a summary for managers of lessons from using games in real options analysis.

 

This issue is available in full on-line at www.sciencedirect.com

 
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