Miles and Snow’s typology Miles and Snow’s Strategy Typology Another strategy typology

Miles and Snow’s typology
Miles and Snow’s Strategy TypologyAnother strategy typology was developed from the study of business strategies by Raymond Miles and Charles Snow.46 The Miles and Snow typology is based on the idea that managers seek to formulate strategies that will be congruent with the external environment. Organizations strive for a fit among internal organization characteristics, strategy, and the external environment. The four strategies that can be developed are the prospector, the defender, the analyzer, and the reactor.Prospector. The prospector strategy is to innovate, take risks, seek out new opportunities, and grow. This strategy is suited to a dynamic, growing environment, where creativity to separate the organization from competitors is more important than efficiency. Nike, which innovates in both products and internal processes, exemplifies the prospector strategy. For example, the company introduced a new line of shoes based on designs that can be produced using recycled materials and limited amounts of toxic chemical-based glues.47 Companies such as Uber and Facebook also use a prospector strategy.Another company that uses a prospector strategy is the Cadillac division of General Motors. Since its beginning over a century ago, Cadillac has been a leader in technological and design breakthroughs. In the early 1900s, it put a fixed roof on the Model H and became the first company to build a car with a totally enclosed cabin. The company also invented the electric starter, introduced the industry’s first thermostatically regulated heating, ventilation and air conditioning system, invented magnetic ride control, and was the first to integrate a global positioning satellite (GPS) system. Although Cadillac is not the strong leader it once was, managers continue to encourage people to pursue any technology or refinement that can enhance the brand’s status. “Innovation isn’t just what we do; it’s coded in our DNA,” states the Cadillac website.48Defender. The defender strategy is almost the opposite of the prospector. Rather than taking risks and seeking out new opportunities, the defender strategy is concerned with stability or even retrenchment. This strategy seeks to hold on to current customers, but it neither innovates nor seeks to grow. The defender is concerned primarily with internal efficiency and control to produce reliable, high-quality products for steady customers. This strategy can be successful when the organization exists in a declining industry or a stable environment. Paramount Pictures has been using a defender strategy for several years.49 Paramount turns out a steady stream of reliable hits but few blockbusters. Managers shun risk and sometimes turn down potentially high-profile films to keep a lid on costs. This has enabled the company to remain highly profitable while other studios have low returns or actually lose money.Analyzer. The analyzer tries to maintain a stable business while innovating on the periphery. It seems to lie midway between the prospector and the defender. Some products will be targeted at stable environments in which an efficiency strategy designed to keep current customers is used. Others will be targeted at new, more dynamic environments, where growth is possible. The analyzer attempts to balance efficient production for current product or service lines with the creative development of new product lines. Amazon.com provides an example. The company’s current strategy is to defend its core business of selling books and other physical goods over the Internet, but also to build businesses in multiple other areas, including a digital book service, new book content publishing, music and video streaming, games, and consumer electronics. Amazon is also exploring a limited brick-and-mortar presence with physical stores as part of its analyzer strategy.50BRIEFCASEAs an organization manager, keep these guidelines in mind: Design the organization to support the firm’s competitive strategy. With a low-cost leadership or defender strategy, select design characteristics associated with an efficiency orientation. For a differentiation or prospector strategy, on the other hand, choose characteristics that encourage learning, innovation, and adaptation. Use a balanced mixture of characteristics for an analyzer strategy.Reactor. The reactor strategy is not really a strategy at all. Rather, reactors respond to environmental threats and opportunities in an ad hoc fashion. With a reactor strategy, top management has not defined a long-range plan or given the organization an explicit mission or goal, so the organization takes whatever actions seem to meet immediate needs. Although the reactor strategy can sometimes be successful, it can also lead to failed companies. Some large, once highly successful companies, such as Blockbuster, have all but disappeared because managers failed to adopt a strategy consistent with consumer trends. In March 2019, there was only one video rental store left for the once ubiquitous video and game rental chain. What remains of the Blockbuster organization is now owned by Dish Network. The Miles and Snow typology has been widely used, and researchers have tested its validity in a variety of organizations, including hospitals, colleges, banking institutions, industrial products companies, and life insurance firms. In general, researchers have found strong support for the effectiveness of this typology for organization managers in real-world situations.51 The ability of managers to devise and maintain a clear competitive strategy is considered one of the defining factors in an organization’s success, but many man-agers struggle with this crucial responsibility.2.3c How Strategies Affect Organization DesignChoice of strategy affects internal organization characteristics. Organization design characteristics need to support the firm’s competitive approach. For example, a company wanting to grow and invent new products looks and “feels” different from a company that is focused on maintaining market share for long-established products in a stable industry. Exhibit 2.7 summarizes organization design characteristics associated with the Porter and Miles and Snow strategies. With a low-cost leadership strategy, managers take a primarily mechanistic, efficiency approach to organization design, whereas a differentiation strategy calls for a more organic, learning approach. Recall from Chapter 1 that mechanistic organizations designed for efficiency have different characteristics from organic organizations designed for learning. A low-cost leadership strategy (efficiency) is associated with strong, centralized authority and tight control, standard operating procedures, and emphasis on efficient procurement and distribution systems. Employees generally perform routine tasks under close supervision and control and are not empowered to make decisions or take action on their own. A differentiation strategy, on the other hand, requires that employees be constantly experimenting and learning. Structure is fluid and flexible, with strong horizontal coordination.
Empowered employees work directly with customers and are rewarded for creativity and risk-taking. The organization values research, creativity, and innovativeness over efficiency and standard procedures. The prospector strategy requires characteristics similar to a differentiationstrategy, and the defender strategy takes an efficiency approach similar to low-cost leadership. Because the analyzer strategy attempts to balance efficiency for stable product lines with flexibility and learning for new products, it is associated with a mix of characteristics, as listed in Exhibit 2.7. With a reactor strategy, managers have left the organization with no direction and no clear approach to design.2.3d Other Contingency Factors Affecting Organization DesignStrategy is one important factor that affects organization design. Ultimately, however, organization design is a result of numerous contingencies, which will be discussedthroughout this book. The emphasis given to efficiency and control (mechanistic) versus learning and flexibility (organic) is determined by the contingencies of strategy, environment, size and life cycle, technology, and organizational culture. The organization is designed to “fit” the contingency factors, as illustrated in Exhibit 2.8. In a stable environment, for example, the organization can have a traditional mechanistic structure that emphasizes vertical control, efficiency, specialization, standard procedures, and centralized decision making. However, a rap-idly changing environment may call for a more flexible, organic structure, with strong horizontal coordination and collaboration through teams or other mechanisms. Environment will be discussed in detail in Chapter 4 and Chapter 5. In terms of size and life cycle, young, small organizations are generally informal and have little division of labor, few rules and regulations, and ad hoc budgeting and performance systems. Large organizations such as Coca-Cola, Samsung, or General Electric, on the other hand, have an extensive division of labor, numerous rules and regulations, and standard procedures and systems for budgeting, control, rewards, and innovation. Size and stages of the life cycle will be dis-cussed in Chapter 10.Design must also fit the workflow technology of the organization. Forexample, with mass production technology, such as a traditional automobile assembly line, the organization functions best by emphasizing efficiency, formalization, specialization, centralized decision making, and tight control. An e-business, on the other hand, would need to be more informal and flexible. Technology’s impact on design will be discussed in detail in Chapter 8 and Chapter 9. A final contingency that affects organization design is corporate culture. An organizational culture that values teamwork, collaboration, creativity, and open communication, for example, would not function well with a tight, vertical structure and strict rules and regulations. The role of culture is discussed in Chapter 11.One responsibility of managers is to design organizations that fit the contingency factors of strategy, environment, size and life cycle, technology, and culture. Finding the right fit leads to organizational effectiveness, whereas a poor fit can lead to decline or even the demise of the organization.