Analyzing a Case Using “IDEAS IN ACTION”
By Santiago Ibarreche· and Linda M. Samaz
Introduction
In this chapter we want to present a methodology for case analysis and interpretation. The analysis of cases is a tool that helps in the understanding of businesses and organizations management. The scheme that is presented here is based on a paradigm designed and used by Dr. Santiago Ibarreche.[i] This scheme has been successfully used in the classroom to explain the process of strategic management. It also has been used in businesses and organizations of all sizes and shapes in guiding the process of strategic management. This chapter explains the paradigm and presents students and instructors with a series of questions for each point that may or may not apply in all occasions but, at least, it would make the analysis process more orderly and focused.
The Scheme of “IDEAS IN ACTION”
The scheme “IDEAS IN ACTION” is based on three stages of strategic management. The first stage is environmental scanning, the second is strategy formulation and matching, and the third is strategy implementation, evaluation and control. Each of the three stages corresponds to each of the words forming the phrase “IDEAS IN ACTION”
The word “IDEAS” represents environmental scanning. The process for environmental scanning consists of five sub-processes; each represented by one of the letters of the word “IDEAS”. These sub-processes are:
Identify what is relevant,
Define parameters,
Examine Expectations,
Analyze trends, and
Synthesize features of internal and external environment.
Define parameters,
Examine Expectations,
Analyze trends, and
Synthesize features of internal and external environment.
The word “IN” represents the strategy formulation stage. The process of strategy formulation has two sub-processes; each represented by one letter of the word “IN”. These sub-processes are:
Identify ideas for strategies, and
Nurture strategies with creativity and innovation.
Nurture strategies with creativity and innovation.
The third stage is the key for success in strategic management. It is putting the ideas into action. To implement strategies we use six sub-processes. Each one corresponds to a letter in the word “ACTION”. These sub-processes are:
Analyze options for strategy implementation and potential scenarios,
Change structures to fit the proposed strategy,
Train people to create capacity and capability to act,
Implement strategies according to the environment,
Organize for learning and establish controls, and remember to verify that
Nothing is as permanent as change.
Change structures to fit the proposed strategy,
Train people to create capacity and capability to act,
Implement strategies according to the environment,
Organize for learning and establish controls, and remember to verify that
Nothing is as permanent as change.
To apply this scheme to the analysis of business cases, it is necessary to follow the decision making process. Each stage includes several elements of strategy. In the following sections we will have a brief explanation of each sub-process followed by a series of questions to help in the application of the concept.
Identify what is relevant
Defining three basic concepts is important to begin the process. These concepts are the purpose of the case, the issues of the case and the actors of the case. Each of these elements will allow better understanding of the context in which the case develops.
To define the purpose of the case is important to define the mission of the organization, may it be implicitly or explicitly included in the case. In some cases the mission is not expressed as such but through the reading of the case the main elements of a mission statement appear.
The issues of the case may involve a variety of topics. To define these issues, it is useful to list environmental aspects. These aspects may include internal or external environmental issues. When defining external issues it is important to define the degree of control or influence that the actors of the case had to be able to modify them. In the case of internal issues, it is important to define what are the elements of the issue in question, its consequences, and potential reason for having that circumstance as an issue.
In defining the actors it is important to understand the relationship between the different people participating, be it internally or externally in the organization. A good way to have a broad picture of the actors is by creating an organization chart or a diagram that shows the existing relationships.
Some questions applicable to the sub-process “Identify what is relevant” are:
· Is it clear the purpose of the case?
· Is there a mission statement or statement of purpose for the organization under analysis?
· Does the mission statement specify clearly the commitment with different stakeholders?
· Is the mission statement implemented?
· Is it clear what were the external circumstances during the period of the case? If, not, does information exist that could complement the information on the case?
· How important are the economic aspects of the environment? Is information available that could help define the economic variables?
· How important are the cultural or demographic aspects in the case? Is information available that could help define the cultural and demographic variables?
· How important are the technological aspects of the environment? Is information available that could help define the technological variables?
· How important are the political and legal aspects of the environment? Is information available that could help define the political and legal variables?
· How is the industry organized? What is the level of competition? Who are the main competitors of the business under analysis?
· Who are the main actors of the case? What is their role in the organization and in the case? What is the relationship between the different actors?
· What is the organization structure and main strategies of the case?
· Who play what, when do they play it, and how do they play?
Define parameters
The purpose of this sub-process is to determine the relative importance of the issues. The emphasis is in developing measures that help in the understanding of the actions. Parameters have two basic elements, relevance and congruence. The first element, relevance, deals with measuring what is important to measure. The second element, congruence, deals with measuring well what is measured.
In this section it is important to define hierarchies and to evaluate the relative importance of individual issues and the interaction that exists among them. The process includes defining the issues in terms of their magnitude. It deals with subjective and objective measures that help the perception of the issues.
Measuring deals with perception and with interpretation. Therefore the questions that should be made deal with both aspects. Perception can be biased through the sources of information, the base of knowledge, the value system, the organization internal and external knowledge, and personal biases. The interpretation depends on the capacity to analyze and mainly the capacity to make inference and deduction.
Some questions applicable to the sub-process “Define parameters” are:
· What are the main events in the case?
· Who are the actors and what is their role?
· What actions were taken? Is there a logical sequence of events? What are the milestones and what type of information exists about them?
· Is the information in the case relevant? Are there alternative sources of information?
· What are the main measures in economics, technology, demographic and cultural, and political and legal aspects of the case?
· What are the measures for operational aspects (such as marketing, finance, manufacturing, service, information systems, accounting etc.)?
· Are these measures relevant and congruent?
· What type of analytic tools can be used in the case?
· How can the time of the case affect the analysis?
· What events were occurring outside the organization that could affect the perception of the actors of the case?
· What things happened after the case time that could affect the analysis? (For example, changes in technology or economic conditions that did not exist at the time of the case), How could these things change the type of decision makings or the strategies selected by the actors of the case during the time that it happened?
Examine Expectations
Each one of the actors in a business situation has different expectations. This aspect is vital in understanding the specifics of a case. People act according to their expectations. A problem is defined in philosophical terms as a deviation from what is expected. The examination of expectations addresses problems and situations that changed or can be forecasted to change.
In some cases expectations are based on hypothesis that are invalid; in other cases there are based on the wrong sources of information; lastly, they may be based on subjective interpretations of information that may not be realistic. On either case, the analysis of trends should be made in the more objective form possible. Expectations of the different actors come from different perceptions of reality. The purpose of this sub-process is to define relevant gaps between implicit or explicit expectations and actual situations.
Some questions applicable to the sub-process “Examine Expectations” are:
· What did the actors in the case expect regarding the economics and what was the economic condition at the time of the case?
· What did the actors expect regarding cultural issues (customs, mores, behaviors, social reactions, rituals, etc.) at what conditions did they find at the time of the case?
· What did the actors in the case expect regarding technological changes and what did they find at the time of the case?
· Were there changes in the political or legal environment that the actors in the case did not expect? If they expected these changes, was there a difference in the impact they considered?
· What did the actors of the case expect regarding competition? Was the reality of competition what they expected? What were the gaps that existed regarding barriers to entry and exit, substitutes, rivalry among competitors, bargaining power of supplier or customers, and external factors affecting competition in the industry?
· What changes occurred in the leadership of the organization? Did people expect the changes? What were the elements of resistance that affected the situation of the organization at the time of the case?
· What expectations were unclear in the case? What assumptions do you make for the analysis? What is the basis for those assumptions?
Analyze trends
Observing one point in time yields a limited picture. Trends signify a direction and in many ways a more accurate picture of any situation.
Trends have to be analyzed in two dimensions, direction and strength. The analysis of the direction is in terms of constancy of change. In other words, looking at the permanence of the trend or its change of direction. The strength of the trend is given by the relative magnitude of the change. The trends that must be analyzed are those phenomena that affect the external and internal environment.
Traditionally there are five aspects that are included in the external environment; they are the economy, the technology, the politics and legal aspects, the demographic and cultural aspects, and the competitive aspects. In the internal environment it is recommended to look at trends in terms of people, size of the organization, general policies, financial situation, and implementation practices.
Some questions applicable to the sub-process “Analyze Trends” are:
· What are the main changes in the external environments that affect the situation of the case? Were those changes sudden? How long took it to complete the change?
· What are the main tools that could be used to define the strength of these trends? Which of the main elements of the case has the greatest change? How do different changes affect the performance of the actors in the case?
· What are the main changes in the organization? What is the trend that each case follows? What can be inferred from those changes?
· What consequences are there for the internal and external changes and their interaction?
Synthesize features of internal and external environment
Too much information about a situation can be, and normally is, overwhelming. The main importance of this sub-process is to identify the essence of the events related in the case. There are several forms to do this. One that is recommended by several authors is the analysis of three aspects of the environment and the definition of issues depending on the degree of control that the actors have. The three levels of environment are the external, sometimes called societal, environment, the competitive, also known as industry, environment, and the internal or task environment. The level of control that most actors have is the lowest in the societal environment and the highest in the task environment.
Changes and trends in the societal and business environments imply either opportunities or threats to the organization. Changes and trends in the task environment represent either strengths or weaknesses. A summary of each of these four aspects is essential to summarize the case elements.
Some questions applicable to the sub-process “Synthesize features of the external and internal environment” are:
· What are the main changes or trends in the economic, technological, social and demographic, political and legal, and competitive environment? Which of these changes or trends represent opportunities or threats? Which of these opportunities or threats have the greatest impact?
· What is the relative importance of each opportunity? What is the relative importance of each threat?
· What are the main changes and trends in the organization regarding the structure, policies, leadership, and operations? Which of these changes or trends are strengths of the organization? Which represent weaknesses? What is the hierarchy of strengths? What is the hierarchy of weaknesses?
Identify ideas for strategies
Once we have knowledge of the main facts about the internal and external environments, it is necessary to match them so that strategies to achieve goals could be formulated. At this stage in the analysis the sources of information for new strategies are diverse. One main source is the previous experiences of the organization. If the organization is new or if they have had no previous similar situations there are alternative sources of ideas. Some of these sources of ideas are the theory that applies to the situation, benchmarking against other companies, either on the same industry or on different industry with similar issues, and innovation through the creation of new strategies.
Each of the sources of ideas has its limitations and it is advisable to generate several alternative ideas. In some cases the purpose of the case is to design strategies for the specific situation narrated in the case. In other cases the purpose of the analysis is to judge the quality of the strategies formulated and their implementation. In either case, the analysis of alternatives is fundamental to judging the strategy formulation process.
Some questions applicable to the sub-process “Identify Ideas for strategies” are:
· What is the experience of the organization in similar circumstances? Which strategies worked? Which did not work? Why? What basic elements of strategy appear to be the most important?
· Is there a match between the proposed or implemented strategies and the features of the environment? What elements of the internal or external environment could cause problems for implementing the strategies?
· What have other companies in the same industries do? What is the common thread in the decision making process?
· What other companies inside or outside the industry have similar situations and what did they do about these situations?
· What are the basic elements of structure in the decision making? Which of these elements can be modified? How would it be after changing element of the structure of decisions?
· What are the basic elements of order that could be change? Are there some steps that could be eliminated or amplified? Which are the potential benefits of these changes?
· What are the basic changes in relationship with other businesses or functional areas in the organization? Which are the potential changes resulting from modifying the applications of strategies/
· What could be the reaction of the receiving end of strategic changes? How could this reaction affect the outcome of strategies? What are the main behaviors that could indicate resistance to change or opposition to new strategies or implementation processes?
Nurture strategies with creativity and innovation
Once there are general strategies, the next step is to fortify them and adapt them to the specific features of the organization. To do this, there are several tools that can help. The first aspect is to see at the potential changes of each strategy or general idea and to start adding content and detail. Some of the techniques used are those included in the lateral thinking processes[ii]. The general purpose of this sub-process is to make a comparison of the different strategies formulated in the previous sub-process and nurture them to be able to be implemented in the organization’s environment. This sub-process is very important in defining specific alternatives for strategy implementation, which is the next phase in the process.
The creative process includes three main processes and two support processes for innovation. The three main processes of innovation are the change of structure, the change of order, and the change of relationship or application. The two supporting processes are the change of level of analysis and the change of point of view. Some of the following questions explain these processes.
Some questions applicable to the sub-process “Nurture Strategies with Creativity and Innovation” are:
· What are the main elements of the strategies formulated? Can there be changes that make it easier for implementation? Are there alternative ways of doing the tasks required by the strategy?
· What is the general effect of the strategies implemented? Which strategies can be better analyzed in detail?
· What tools of innovation could be used in creating new forms of strategy? Which will be the detailed strategies? What are the alternative strategies and under which circumstances will they be applied?
· What are the measures for following the selected strategies? Are these measures relevant to what is expected of the strategies? Do these measures represent the results that are desired from the strategies?
· What is the plan for implementation of every one of the strategies? Who is responsible for the implementation of each strategy?
Analyze options for strategy implementation and potential scenarios
Once the generic strategies are selected for implementation the implementation process begins. The first sub-process is to analyze potential alternatives. These alternatives include the definition of specifics, the set of measures for follow up, the definition of people accountable, the assignment of resources, and the specification of a time line. In each case the system is based on possible alternatives and contingencies.
The system of goal definition is important for follow up. The system that several authors recommend is called “SMART” system. This system represent five processes each one represented by one of the letter of the word “SMART”.
Specifics
In this process the goals are defined in terms of what is that the organization wants to achieve. Other elements are the time for achieving the goal, the actions (strategies) necessary to achieve the goal, and the alternatives and contingencies for these actions.
In the case analysis it is important to question how well the objectives were defined. Some of the relevant questions for the “specifics” section are:
· What are the accomplishments that the organization wants to achieve?
· What are the strategies that are proposed to accomplish these goals?
· Are the goals and the strategies clearly defined?
The point of this process is to define the elements of measurement applicable to the actions necessary to achieve the goal. These measures should have two attributes, relevance and congruence. Relevance refers to measuring what is important to achieve the goal. Congruence refers using the right measures.
Some of the questions applicable to “accountability” are:
· What are the sources of information that apply to the strategies? Are these sources reliable? Do they represent the yardsticks that better represent performance?
· What are the relative measures in the case? If there are ratios, what is the relevance of these ratios? Is graphic information in the case that indicates trends for performance? Are these graphs relevant for the case?
· How could you improve the information available?
This process refers to the people or organizations responsible for achieving goals. The responsibilities for each actor and the specific accomplishment expected are the main content. Delimitation of responsibilities and team aspects are important in case analysis.
Some of the questions applicable to “accountability” are:
· Who are the players in the case? What is the responsibility of each player? How can the participants in the case be accountable for their actions?
· What is the level of support that the actors receive in their decision making? What is the level of authority that they have? Is the level of authority congruent with the responsibility?
Resources
In this sub-process what is intended is the definition of five types of resources and their assignment to the strategies that are being analyzed. The five types of resources are human resources, physical resources, financial resources, knowledge, and time for execution of the tasks.
Each of these types of resources must be evaluated in terms of availability, accessibility, cost, benefit, and contribution to performance. For each type of resource we recommend to ask the questions mentioned bellow:
Some of the questions applicable to “resources” are:
· How much of this resource is needed to perform well? Is this amount present? How much does it cost? What are the consequences of not having this resource available? How does the existence or lack of this resource affect performance?
· Regarding time, do people in the case have spare time for implementation of the strategies? Do they have for training? How much extra time does the goal require?
Time Line
To be able to follow up performance it is necessary to have a time line of events. In this time line milestones are included. The reason for this time line is to create a reference point and to create a sense of urgency.
Instead of questions we recommend to use one of the control charts used in project management (Gantt charts, CPM, PERT, etc.) for the events in the case.
Change structures to fit the proposed strategy
In this sub-process we recommend to list all the changes necessary for implementing the strategies. There are several structures that should be modified. The changes in structures are changes to the organizational structure, changes to the financial structure, changes to communications, changes to policies and procedures, changes to physical resources, changes to technology, and changes to support systems.
The process for analysis in this point consists in defining changes for each one of the structures mentioned and the verification that those changes took place. Once they are verified, it is important to define the effect of incomplete or inadequate changes and to analyze their effect in the organization and the strategies.
It is important to remember that the structures must follow the requirement of the strategies and not vice versa.
Train people to create capacity and capability to act
In this sub-process the objective is to define if the organization has enough human capital to act. The gaps between what could be the best situation and what really exists must include the definition of training and development needs.
The needs for training and development are defined in terms of necessary changes in aptitudes and attitudes. Regarding aptitudes there are two areas that must be examined. These areas are skills necessary to perform a better job, and knowledge necessary to create added value. Regarding attitudes, it is important to define needed or wanted changes in terms of attitudes toward self, teams, the organization, institutions, and society at large.
To analyze this aspect, it is important to create an inventory of qualifications and to define the gap between the ideal situation and actual situation. These gaps will define needs for training and development that affect the capacity to act accordingly.
Implement strategies according to the environment
In order to correctly implement strategies in an organization several common sense questions must be answered. These questions respond to what the organization wants to achieve, and how it can be achieved.
Some of the questions that could be relevant to the “implement strategies according to the environment” sub-process are:
· What are the main things that the organization wants to accomplish? Are these accomplishments defined in objectives and goals? Is there a plan of action to achieve these objectives and goals?
· Is there an assignment of authority to the people that have the responsibility to achieve objectives and goals?
· Is there a discipline in the workplace through clear policies and procedures?
· Is there a clear division of functions and areas of responsibility?
· Is there the right leadership in place? Does the leader of the organization or section have a clear and shared vision? Does he/she challenge the process to achieve continuous improvement? Is this leader somebody that enables others to act? Does this leader behave ethically? Does this leader celebrate achievements and recognize people for their achievements?
· Are there any support systems to follow up the actions and produce feedback? Are these support systems evaluated periodically?
· Is there coordination among the different functions? Are there any actions that produce opposite results? Are there any conflicts of authority?
Organize for learning and establish controls
The purpose of this sub-process is to define variations between expectations and performance. This is accomplished by defining gaps through the information and control systems. There are several elements to the strategic evaluation and control systems. The main elements for these systems are the forecasting and variation detection and analysis systems, the information system that includes accounting and functional information systems, the internal control and policies and procedures control systems, and the system for documentation of experiences, which leads to learning. All these systems must have coordination and appropriate processes for feedback.
The main point of strategic control is to define points for learning from experiences. This is achieved through the analysis of gaps and the definition of changes for future implementation. A good control system incorporates the analysis of variations in such a form that it helps define the sources of variation. Once the source of variation are defined the next step in control is to determine if changes are needed and how these changes will be incorporated.
Some of the questions that could be relevant to the “organize for learning and establish controls” sub-process are:
· Is there a forecasting system in the organization? Does the system include external information? Is this system effective in detecting variations? How often is the system reviewed? Does the forecasting system provide and coordinate information from several departments and sources?
· Is the information system reliable? Can it be improved? What would be the benefit of changing the information systems and what will the costs be?
· How are the gaps between expectations and actual performance defined? Who doe the analysis? Who is responsible for defining changes? What is the process for changing operations?
· Are there any internal controls? Do these controls protect the resources of the organization adequately? Are there potential changes for the controls that could produce better information? Is the information provided by the information systems reliable? Is this information accurate? Does the information reflect the changes in the environment?
· Is there any documentation of the changes proposed and implemented? Are the changes incorporated into the training and development system? Is the documentation of changes accessible to those affected by them?
Nothing is as permanent as change
Although we have cover aspects of forward looking and change in several of the previous sections, it is always advisable to look at results of strategic management processes in the light of future accomplishments. For changes are continuous, it is important to evaluate the strategies in the light of their future effect.
Strategies must have several elements to fit a forward-looking organization. These elements are looking at the future in terms of trends constantly, looking at changes inwards and outwards, designing flexibility into the systems, applying the basic elements of environmental scanning in all strategies, and making change part of the daily activities.
Some of the questions that could be relevant to the “nothing is as permanent as change” sub-process are:
· Is there a continuous flow of information regarding future events? Is this process pervasive in the organization?
· Are management systems and strategic management systems flexible to incorporate changes in the environment quickly?
· Is there any flexibility in the systems? Is there any resistance to change? How is the organization reacting to this resistance?
Conclusion
The system presented has being tested in the classroom and in consulting activities with success. We believe that is a good process to guide students and faculty through the difficult art of analyzing cases. Good luck in your endeavors.
· Santiago Ibarreche is Associate Professor of Management at The University of Texas at El Paso
z Linda Sama is Assistant Professor of Management at The University of Texas at El Paso
[i] This scheme has been published in several journal articles in Spanish and a book on the topic is forthcoming.
[ii] One of the main authors in this field is Edward De Bono. Among the recommended reading are “Serious Creativity” Harper Business, 1994, and “Lateral Thinking” Harper Publishing, 1980.
