George Yip on strategic transformation

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George Yip is Professor of Strategic and International Management at London Business School and the Lead Fellow of the Advanced Institute for Management Research (AIM). His research interests include: global strategy; global customer management; global corporate governance; international competitiveness; and strategic transformation.

George Yip An internationally recognised thought-leader, Professor Yip's book, Total Global Strategy (Prentice Hall, 1992), was selected as one of the best business books published in the US in 1992. It has been published in ten languages, and updated as Total Global Strategy II (2003).

Professor Yip talked to Des Dearlove about AIM and the research projects he is involved with.

Let me begin by asking you about AIM. What is the purpose of the initiative?

The big idea behind AIM is to increase the contribution of management research in the UK. There are two main goals to that: one is to support UK management practice. The other is to increase the capacity to do more cross-functional research.

What has AIM done to make that happen?

A big problem with management research in the UK is that most senior academics haven't had enough time to do research. So one thing AIM has done is to give them time and other resources to be able to do research.

The second thing is that academic research has become increasingly narrow and specialised, so what AIM has done is to pull together people from different disciplines, different subjects and get them to work together.

One of the projects you are working on - with Gerry Johnson, Professor of Strategic Management at the University of Strathclyde Graduate School of Business - is called Successful Strategic Transformers. Tell me about that.

We are trying to explain why some exceptional companies are able to strategically transform themselves without going through the trauma of poor financial performance.

It is far more unusual for companies that remain successful to change themselves at the same time

You see, it's quite common for companies to transform themselves after they've had a crisis -- after they've had a dip in performance. But it is far more unusual for companies that remain successful to change themselves at the same time.

There are also plenty of companies that maintain superior performance over a long period, say 20 years, without transforming themselves. That's not so interesting, either, because basically it usually indicates that their environment hasn't changed and they haven't needed to adapt.

What we are interested in are those companies that have changed because their environments have changed but have managed to do so while maintaining superior performance over 20 years.

What sorts of questions will this help to answer?

What do companies have to do to create a capability for successful strategic transformation without the need for a crisis? That's the central question.

So it's reacting before they reach crisis point?

It's anticipating rather than reacting.

Can you give me an example of a Successful Strategic Transformer among UK companies?

Cadbury Schweppes and Tesco are good examples.

So how do you identify these companies?

It's actually a three-stage research study. The first stage was to look at all public companies in the UK and compare their financial performance by industry sector, against everyone else in the sector including their international peers, and using multiple measures of performance – not just profits, but multiple measures. From that we got a list of about 30 companies which have this sort of steady superior financial performance.

The second stage was to see which ones also made a strategic transformation. That left us with just nine companies. So if you look at the several hundred British companies we started with, we've got it down to nine that have both superior long term financial performance and have also made a strategic transformation.

What's the third stage?

With the third stage we're trying to understand how some of these companies have been able to make the transformation.

How are you defining transformation exactly? Moving from one business model to another, or a shift in product lines, or focus or what?

Actually it's multiple measures. There isn't a single measure of transformation. What we're looking for is multiple changes to the business model; it could be a change in customer markets, or geography, for example.

And, again, one preliminary finding is that we see this transformation as two-dimensional. One is a change in the strategy content – what the company does. And the other one is a change in the organisational mindset -- how the company thinks of itself.

This research is ongoing, I know, but what have you discovered so far?

Well I can tell you who some of the superior financial performers are.

In telecoms, there's Vodafone, for example, which also transformed itself. In restaurant and pubs, Greene King had superior performance but did not transform itself, while Whitbread had superior performance and did transform itself.

In food we found that Cadbury Schweppes had superior performance and transformed itself, while Unilever didn't have quite as good financial performance and didn't transform itself as much either.

That's an interesting comparison – to look at why Cadbury did better than Unilever.

That's right. As part of our research we're going to go into those sorts of paired comparisons. So one pair we're looking at is Tesco versus Sainsbury. What we're finding with the third stage, how companies make the transformation, is that a lot of it goes way back into history.

Tesco, for example, has shown itself to be a better performer and to be better able to transform itself. This difference seems to go back to the founding of the two companies. Tesco was a company that was founded in conflict and, as a result, has been willing to challenge the conventional wisdom and change things. Whereas Sainsbury's is a company that was founded in family consensus and I think that's been their difficulty actually, breaking with consensus.

When will you have the results of that work?

We're about half way through the research. We're starting to write some papers on the early stages -- on the financial performance and on the strategic transformations, for example, so we will have some papers out on that in the next six months.

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About the authors

Des Dearlove is a long-term contributor and columnist for The Times and a contributing editor to Strategy+Business. Stuart Crainer is a contributing editor to Strategy+Business and executive editor of Business Strategy Review. [more]

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