Strategic Management

1. Strategic Management Macmillan and Tampoe OUP (c) Macmillan & Tampoe 2001

2. Case Examples Nolan, Norton & Company, Inc. 1985-87 (c) Macmillan & Tampoe 2001

3. The reasons for choosing Nolan, Norton • Nolan, Norton was a small privately owned company providing professional services. This is a fast growing category of enterprise. • Nolan, Norton had a clear vision and values and had been extremely successful for a number of years. • Changes in the external environment forced Nolan, Norton to change • The strategy process was openly conducted and the interests of different stakeholder groups became apparent • A clear strategic choice was made leading to the sale of Nolan, Norton to Peat Marwick. (c) Macmillan & Tampoe 2001

4. Nolan, Norton’s Origins • Founded in 1975 by Dick Nolan and Dave Norton • Subchapter S corporation (i.e. privately owned) • Management consultants specialising in deriving business benefit from information technology • Clients mostly large multi-national, multi-divisional companies. • Rapid growth between 1975 and 1982. (c) Macmillan & Tampoe 2001

5. Nolan, Norton’s Business Purpose • Intellectual leadership in the management of information technology ‘Write the Book’. • Practical methods for applying these ideas in practice • Bridge the gap between managers and information technology and IT people. (c) Macmillan & Tampoe 2001

6. Nolan, Norton’s Internal Structure • ‘One firm’ with coherent and extendible framework of ideas • Three organisational dimensions • Geography • Client • Practice • Three levels of staff • Consultants • Managers • Principals • 2 owners with high proportion of profit distributed to staff (c) Macmillan & Tampoe 2001

7. Nolan, Norton’s Management Processes • Professional ideas shared and transmitted using common pictures and diagrams. • Marketing focused on creating and sustaining relationships with key individuals • Assignments executed by joint client/consultant teams • Consultants assigned to projects to optimise client service, consultant development and profitability. (c) Macmillan & Tampoe 2001

8. People and Culture in Nolan, Norton • Complementary skills of founders • Dick Nolan - Inspirational leader • Dave Norton - Top-flight management consultant and organised manager • Staff - IT professionals taking a career risk • Values • Hard work • Client commitment • Leading edge ideas from research and university contacts • Heavy investment in staff development (c) Macmillan & Tampoe 2001

9. External Strategic Issues in 1985 • Arrival of mini-computers • Loss of control of central IT departments • Fragmentation of IT spend in clients • Increasing business impact of IT on company strategy caused leading strategy consultants to become competitors of Nolan, Norton. • Nolan, Norton’s assignments addressing wider issues and becoming much larger. (c) Macmillan & Tampoe 2001

10. Internal Strategic Issues in 1985 • Limits to growth of founder-managed structure • Founders’ aspirations important - equity realisation. • Mismatch between resources and opportunities (c) Macmillan & Tampoe 2001

11. Question 1 – What were the alternative options to selling out? Option A Building strategic alliances with major partners in each separate major market. Advantages NNC can focus on its strengths in developing ideas and methods Rapid deployment in separate markets Provides ample resources Combines global and local identities Disadvantages Handling multiple relationships difficult and time-consuming Hard to control overall quality and identity (c) Macmillan & Tampoe 2001

12. Question 1 – What were the alternative options to selling out? Option B Continue independently and develop a new range of services related to IT-enabled business change. Advantages NNC builds on its strengths in developing ideas and methods Appeals to staff who are interested in doing new things Disadvantages NNC lacks some of the necessary skills Moving into direct competition with much larger and capable competitors (c) Macmillan & Tampoe 2001

13. Question 1 – What were the alternative options to selling out? Option C Extend specialisation in the management of IT Advantages NNC builds on its strengths in developing ideas and methods Competing in a relatively small market in which NNC is a respected player Exploits NNC staff’s technical skills Disadvantages Does not appeal to many staff wishing to extend themselves away from their technical roots. (c) Macmillan & Tampoe 2001

14. Question 2 – Views of Stakeholder Groups? Founders Unwilling to weather another recession Looking to realise equity Keen to carry Principals with them Principals Sale offer chance of payouts/earnouts (a quasi-capital gain) Staff Peat Marwick offers stability and security but less ‘fun’. Danger of loss of identity in larger firm (c) Macmillan & Tampoe 2001

15. Question 3 – Saatchi and Saatchi instead of Peat Marwick? • Peat Marwick and S&S had dramatically different cultures - NNC opinions divided on which was preferable. • S&S offered NNC more independence but did not resolve the resource issue • S&S in fact hit difficult times soon afterwards from which Nolan, Norton would inevitably have suffered. (c) Macmillan & Tampoe 2001

16. Question 4 – How could Peat Marwick have made their acquisition more successful? • Peat Marwick could have left Nolan, Norton to continue as an independent unit retaining its historical centralised organisation and independent marketing. • Peat Marwick would have received: • Nolan, Norton profits • Entry into large non-audit clients • Staff development by transferring/seconding IT consultants into Nolan, Norton • The simultaneous much larger merger of Peat Marwick with Thomson McLintock was unfortunate to the success of the Nolan, Norton acquisition. (c) Macmillan & Tampoe 2001