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ORGANIZATIONAL IMPACT OF MANAGEMENT THEORIES Randall L. Schultz University of Iowa Management theories range from fads to those that become part of the repertoire of decision making. This research classifies management theories and proposes a "Beaufort-type" scale to measure organizational impact. March, 2006

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ORGANIZATIONAL IMPACT OF MANAGEMENT THEORIES

Randall L. Schultz

University of Iowa

Management theories range from fads to those that become part of the

repertoire of decision making. This research classifies management

theories and proposes a "Beaufort-type" scale to measure organizational

impact.

March, 2006

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MANAGEMENT THEORIES

One seemingly sure way to write a best selling book is to come up with a new diet

or a new management theory. The routine for management theories is straightforward:

take an idea—however small—write a book, visit the talk shows, count the royalties. As

a preliminary matter to developing a new scale for measuring the impact of such

“theories” of management, we collect most of these theories over the past four decades.

USE OF MANAGEMENT THEORIES

Our primary question is: Are any of these theories actually used in corporations?

The nature of use is subtle. Take the theory of “core competency,” proposed by Hamel

and Pralahad (1990). Is the theory used if an organization talks about it, perhaps often,

and perhaps in meetings as a matter of course? Is the theory used if it becomes a part of

reports that state the firm’s core competence? Or should we demand something more than

that to consider a theory to be “used,” such as the possible fact that some or all decisions

are made with reference to core competence?

Even then, such “use” of the theory may make no difference to the actual

decisions. What, then, does this mean? This hierarchy of use parallels the hierarchy of

use observed in the implementation of models and systems in organizations (cf. Schultz,

Ginzberg and Lucas, 1984), where measures of use range from no use at all to change

without use—a situation where the very fact that the model or system was introduced to

the organization in some way accounts for a change in decision making, but not the

model or system itself.

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IMPACT OF MANAGEMENT THEORIES

Equally important is the question of impact: If a theory is used, did it

make any difference in performance? Like use, the nature of impact is varied.

There can be impact without change, change without impact, change with

impact, positive impact and negative impact. How can these types of impact

(and the types of use) be sorted out? We propose a simple scale that embodies

both use and impact so that the usefulness and consequences of all of these

popular—and not so popular—management theories can be judged for what

they are supposed to be: ways of improving organizational effectiveness.

LIMITATIONS OF EXISTING MEASURES OF USE

Most existing measures of use are of limited practicality, primarily because they

must be parameterized for each type of innovation and each organization. Consider the

most common way of looking at use in organizations: innovation and adoption.

ADOPTION

There is a vast literature on adoption that generally takes as its starting point the

influential book of Rogers (1995), the first edition of which was published in 1962. The

suggestion of Rogers was that innovation in organizations followed a five stage process,

viz.

1. Agenda-Setting

2. Matching

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3. Redefining/Restructuring

4. Clarifying

5. Routinizing

This process begins with agenda-setting, conceived of as in continual operation with

action triggered by performance gaps between actual and desired states or goals.

Organizations scan the environment looking for new ideas—innovations—that could help

close the performance gaps. Matching is essentially a feasibility check and, according to

Rogers, this may result in termination of the idea if there seem to be too many problems

with fit. Although Rogers does not discuss this, it is implied that there would be some if

not considerable discussion about the innovation (i.e., talking about it in groups).

The first two stages are considered as an initiation process and the next three

stages as the implementation process. So, in this view, implementation only begins after

“talk” about fit. Redefining/restructuring implies that either the innovation or the

organization is changed so that the fit is improved. This concept is similar to the concept

of “organizational validity” used in the implementation research literature to show a pre-

condition for implementation (Schultz and Slevin, 1975a). The clarifying stage would

then occur (if the implementation proceeded), and here Rogers says that the innovation is

“put into more widespread use” (Rogers, 1975, p. 399). Since Rogers does not discuss

management innovations or theories per se, the nature of this use is not elaborated. But,

importantly, the innovation is linked with the question of who will be affected by the

implementation, especially the individual (“Will it affect me?”). This concept also finds

support in implementation research which has found that the single most important factor

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is personal stake or what the innovation will do for the individual adopter (Schultz and

Slevin, 1975b).

Finally, in Roger’s scheme, comes routinizing, where the innovation “has become

incorporated into the regular activities of the organization, and the innovation loses its

separate identity” (Rogers, 1975, p. 399). This may or may not imply “use by all,” and

for many innovations from information and decision support systems to management

theories (that involve certain reports and stylized calculations) there would be reason to

believe that they would not lose their separate identity. Indeed, that is one way to

measure their continued use—by looking for the reports, calculations or decisions that

give evidence of the innovation.

LIMITATIONS OF EXISTING MEASURES OF IMPACT

Like measures of use, most existing measures of impact are of limited usefulness,

primarily because they must be parameterized for each type of innovation and each

organization. In addition, there is a “pro-innovation” bias in most research such that the

negative consequences of use are often ignored.

ORGANIZATIONAL CONSEQUENCES

Rogers (1995) ends his book on diffusion of innovations with a chapter on

“organizational consequences,” by which he means “the changes that occur to an

individual or to a social system as a result of the adoption or rejection of an innovation”

(p, 405). This definition does not attempt to separate changes that may be indicators of

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use from changes that may be indicators of performance gains or loss. Rogers points to

one problem with almost all studies of organizational consequences: a pro-innovation

bias that looks for positives from the innovation but not negatives. This problem clearly

needs to be dealt with in any measure of organizational impact.

From the perspective of organizational innovations (and it should be noted that

Rogers does not focus on organizational innovations when he discusses organizational

consequences) Rogers examples of consequences are all related to “performance,” e.g.,

increased production or greater expense (Rogers, 1995, p. 410). Such measures are

clearly part of any change in organizational effectiveness due to an innovation. The

Rogers approach, however, is limited by its inclusion of any change in an organization as

evidence of organizational consequences.

A better approach would be one that separates change as an indicator of use and

change that serves as an indicator of effectiveness. This is because the adoption process

can lead to changes in effectiveness without actual adoption (use) and changes in

behavior that may be indicators of use that are not necessarily followed by changes in

organizational effectiveness. In other words, merely “talking” about a management

theory may improve things but actually using one may not.

ORGANIZATIONAL EFFECTIVENESS

The implementation literature has long focused on organizational effectiveness as

the appropriate measure of organizational impact (Schultz and Slevin, 1979). In addition,

one definition of implementation separates use from effectiveness by arguing that

implementation is changed decision making and successful implementation is improved

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decision making (Schultz and Henry, 1981). This view allows “organizational

consequences” to fall into the two logical groups of indicators of use and indicators of

organizational effectiveness.

Performance

A more straightforward indicator of organizational effectiveness—and one that

applies particularly to management theories—is performance.

In the information systems literature, the main impact measure of model use has

been performance. Depending on the nature of the model, performance could refer to an

individual decision maker’s performance (Schultz, Ginzberg and Lucas, 1984; Lucas,

Ginzberg and Schultz, 1990) or an organization-wide measure of performance such as

profit.

“Good” Performance. To most managers and shareholders, good performance

means good financial performance, although other measures of success such rates of

technology development or new product success may also be meaningful. So any

management theory that improves performance would be considered as having led to

good performance.

“Bad” Performance. But the use of management theories doesn’t necessarily lead

to good performance and businesses are all to aware of theories and plans leading

nowhere or, worse, to declines in performance. We must consider, then, bad performance

as a possible outcome of the use of a management theory that has had an impact, in this

case a poor one.

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MEASURING THE IMPACT OF A THEORY

What is really interesting about a management theory is whether it has had an

impact on anything. Did it change the way decisions are made? Did it improve

performance? Did it simply lead to improvements without actually being “used?” These

questions suggest that a common scale of “force” of impact could be useful. Particularly

useful would be a scale that uses levels of force that are apparent to any observer. A

model of such a scale is the Beaufort scale for wind.

THE BEAUFORT SCALE

Although it takes his name, Admiral Francis Beaufort of the British Royal Navy

did not originate the “Beaufort Scale.” Attempts to measure wind force with a descriptive

scale were made many hundreds of years before Beaufort came up with his version in

1805. Not surprisingly, Beaufort scale points (13 at first, 12 later on) that ranged from

“calm” to “storm” were based on nautical observation of the wind by its effect on the

sails of a frigate. Thus, by 1838, the Royal Navy was using scale points that ranged from

Calm (0) to Hurricane (12) with descriptors such as Beaufort 1 (Light Air) “Just

sufficient to give steerage way” and Beaufort 11 (Storm) “With which she would be

reduced to storm staysails.”

More relevant to our current task is the version of the Beaufort scale for reckoning

wind force on land since that does not require sailing experience—especially in a frigate!

Any dictionary would have a table showing the Beaufort Scale. My old Webster’s New

Collegiate Dictionary (1960) has the definition shown in Table 1. The first thing to be

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-------------------------------

Insert Table 1 about here.

-------------------------------

noticed is that the scale has 12 points, each with a name, although some of the names are

the same, e.g., two levels of “Strong” wind. Next, miles per hour have been estimated for

the various levels of force. While this is exceedingly useful with modern anemometers, it

is less useful to a casual observer who is simply out in the wind. The final column is what

is so special about the Beaufort scale and why it provides a prototype for a scale of

organizational impact. It can be seen that the descriptions are so universal almost any

person would observe the same physical phenomena. The descriptions are so rich and

evocative—yet at the same time simply stated—that the picture they form is one that can

be easily recognized. More importantly, almost any observer would see the same thing

and thus arrive at the same level of wind force. This is what a good scale should do:

measure with accuracy independent of the observer.

THE ORGANIZATIONAL IMPACT SCALE

The Organizational Impact Scale is shown in Table 2.

-------------------------------

Insert Table 2 about here.

-------------------------------

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This scale is currently being tested with data from corporations that have experience with

one or more—usually many—of the management theories and tools given in Table 3.

-------------------------------

Insert Table 3 about here.

-------------------------------

We have also expanded the scope of the study to include marketing theories and tools as

shown in Table 4.

-------------------------------

Insert Table 4 about here.

-------------------------------

We report the theories and tools under consideration here to invite comment on errors of

omission or commission.

CONCLUSION

This paper provides background and a preliminary scale for measuring the impact

of management theories on organizations modeled after a simple, but robust, weather

scale. We also provide the theories and tools under consideration. The empirical results

will be available in a revision to this paper.

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Table 1

The Beaufort Scale

Beaufort

number Name Miles per hour Description

0 Calm Less than 1 Calm; smoke rises vertically.

1 Light 1-3 Direction of wind shown by smoke, but

not by wind vanes.

2 Light 4-7 Wind felt on face, leaves rustle, ordinary

vane moved by wind.

3 Gentle 8-12 Leaves and small twigs in constant

motion; wind extends light flag.

4 Moderate 13-18 Raises dust and loose paper; small

branches are moved.

5 Fresh 19-24 Small trees in leaf begin to sway; crested

wavelets form on inland waters.

6 Strong 25-31 Large branches in motion; telegraph wires

whistle; umbrellas used with difficulty.

7 Strong 32-38 Whole trees in motion; inconvenience felt

in walking against wind.

8 Gale 39-46 Breaks twigs off trees; generally impedes

progress.

9 Gale 47-54 Slight structural damage occurs; chimney

pots and stales removed.

10 Whole gale 55-63 Trees uprooted; considerable structural

damage occurs.

11 Whole gale 64-75

Very rarely experienced inland;

accompanied by widespread damage.

12 Hurricane Above 75 Devastation occurs.

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Table 2

The Organizational Impact Scale

Impact number Description

1 Talked about

No impact

2 Talked about

Small impact

3 Talked about

Large impact

4 Reports prepared

No impact

5 Reports prepared

Small impact

6 Reports prepared

Large impact

7 Some decisions made with

No impact

8 Some decisions made with

Small impact

9 Some decisions made with

Large impact

10 All decisions made with

No impact

11 All decisions made with

Small impact

12 All decisions made with

Large impact

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Table 3

Management Theories and Tools1

Decade Initiators Theories and

Tools

Current

Status

Brief Description Resource

60s W. Edwards

Deming

Statistical

quality control

A method for

achieving quality

control in

manufacturing

processes by

measuring

variations in

manufacturing

output and setting

control limits.

W. Edwards Deming,

“Some Remark on

Recent Advances in

the statistical control

of quality in Japan,”

The Indian Journal of

Statistics, Series

B,Vol.28, 1966

60s Peter

Drucker

MBO -

management

by objectives

A method of

management

whereby the action

of analysis,

direction and

control are focused

on the end result.

Peter F. Drucker, The

Practice of

Management, 1955.

70s Kaoru

Ishikawa

Fishbone

analysis

diagram

A tool that visually

displays the many

potential causes for

a specific problem

or effect

Kaoru Ishikawa,

What is Total Quality

Control? The

Japanese Way, 1985.

70s Laurence J.

Peter

The Peter

principle

A theory that

employees within a

hierarchical

organization

advance to beyond

highest level of

competence to and

thus occupy

positions where

they are

incompetent.

Laurence J. Peter,

The Peter Principle:

Why Things Always

Go Wrong, 1969.

70s Tom Peters

and Richard

Waterman

Excellence

theory

A theory that

directs the

organization

leaders to identify

the factors

common to

excellent

companies through

empirical research

and use them to

achieve similar

excellence.

Tom Peters and

Richard Waterman,

In Search of

Excellence, 1982.

1 Prepared by Liming Zhu.

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80s Robert

Camp

Benchmarking The art of learning

from companies

that perform

certain tasks better

than others in areas

such as quality,

speed and cost.

Robert C. Camp, Benchmarking: The

Search for Industry

Best Practices that

Lead to Superior

Performance, 1989.

80s W.F. Cascio Downsizing A method of

organizational

restructuring that

involves the

removal of one or

more hierarchical

levels from the

organization and a

pushing of

decision-making

downward in the

organization.

Cascio, W.F.,

Downsizing: What

Do We Know? What

Have We Learned?

1993.

80s Eliyahu M.

Goldratt

Theory of

constraints

Managing within

limits of

performance with

respect to a goal,

thus implying

management can

be made both

simpler and more

effective by

providing

managers with a

few specific areas

on which to focus.

Eliyahu M. Goldratt,

Theory of

Constraints, 1999.

80s Gary Hamel

and C. K.

Prahalad

Core

competency

An organization’s

capacity of doing

better than its

competitors. It

shows three

characteristics:

potential access to

a wide variety of

markets;

increasing

perceived customer

benefits; and

difficulty for

competitors to

imitate.

Gary Hamel and C.

K. Pralahad, “The

Core Competence of

the Corporation,”

Harvard Business

Review, 1990.

80s Kaoru

Ishikawa

and A.V

Feigenbaum

Total quality

management

A management

strategy to focus on

quality in all

organizational

processes. Quality

assurance through

statistical methods

is a key

Kaoru Ishikawa,

What is Total Quality

Control? The

Japanese Way, 1985;

A.V. Feigenbaum,

Total Quality

Control, 1986.

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component. TQM

aims to do things

right the first time,

rather than fix

problems after they

emerge or get

worse.

80s John Kotter Leadership The strategic input

and utilization of

the human capital

within the

organization,

especially focusing

on developing

potential leadership

of individual.

John. P. Kotter,

Power and Influence:

Beyond Formal

Authority, 1985.

80s Constantinos

Markides

Strategy

dynamics

A way of

understanding how

strategic actions

occur by

recognizing that

strategic planning

and

implementation are

dynamic and

interactive

processes.

C. Markides, “A

Dynamic View of

Strategy,” Sloan

Management Review,

1999.

80s McKinsey &

Company

7-S framework

for business

success

The business

success depends on

seven factors of

strategy, structure,

systems, style,

skills, staff and

shared values.

Tom Peters, Robert

Waterman and J.R.

Phillip, Business

Horizons, 1980.

80s Motorola

Corp.

Six sigma (6Σ) A quality

management

program to achieve

a “six sigma” level

of quality. It targets

the total number of

quality failures or

customer

dissatisfaction

happening beyond

the sixth sigma of

likelihood in a

normal distribution

of customers, i.e.,

fewer than four in

one million

customers

complain about the

products or service

they received.

Matt Barney and

Tom McCarty, The

New Six Sigma, A

Leader's Guide to

Achieving Rapid

Business

Improvement and

Sustainable Results,

2003.

80s William G.

Ouchi

Theory Z The theory that

assumes employees

William G. Ouchi,

Theory Z: How

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are motivated by

the self-

actualization need

and expect to be

more involved in

managing the

company, so

increasing

productivity

through employee

loyalty.

American

Management Can

Meet the Japanese

Challenge, 1981.

80s Toyota

Motor Corp.

Just-in-time

inventory

system

An inventory

system in which

suppliers deliver

parts just at the

time they are

needed by the

buying

organization to use

in its production

process. Used

properly, such a

system holds

inventory, storage,

and warehousing

costs to a

minimum.

Yasuhiro Monden,

Toyota Production

System: An

Integrated Approach

to Just-In-Time,

1993.

90s Michael

Hammer

Reengineering The concept that

the firm should be

redesign and

restructure into a

series of processes

rather than separate

functional units.

Michael Hammer,

James A. Champy,

Reengineering the

Corporation: A

Manifesto for

Business Revolution,

1993

90s Robert

Kaplan and

David

Norton

Balanced

scorecard

The management

tool which helps

managers at all

levels monitor

results in their key

areas. It broadens

the scope of the

measures to

include four areas:

financial

performance,

customer

knowledge,

internal business

processes and

learning and

growth.

Kaplan, Robert and

David Norton, “The

Balanced Scorecard -

Measures that Drive

Performance,”

Harvard Business

Review, 1992.

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Table 4

Marketing Theories and Tools2

Decade Initiators Concepts and

Tools

Current

Status

Brief Description Resource

60s Igor Ansoff Product-

market

expansion

matrix

A model to search

for growth

opportunities by

investigating four

combinations of

product and

market: current

products in current

markets, current

products in new

markets, new

products in current

markets and new

products in new

markets.

Igor Ansoff,

“Strategies for

Diversification,”

Harvard Business

Review, 1957.

60s Boston

Consulting

Group

Experience

curve effect

The relationship

between

experience and

efficiency. The

more often a task is

performed, the

lower will be the

associated cost.

Boston Consulting

Group, “Perspectives

on Experience,”

1968.

60s Robert D.

Buzzell

PIMS study

(Profit Impact

of Market

Strategy)

A study which

indicates that a

company’s

profitability has a

positive correlation

with its market

share.

Robert D. Buzzell,

Product Profitability

Measurement and

Merchandising

Decisions, 1965.

70s Derek F.

Abell

Five patterns

of target

market

selection

A model used to

evaluate different

market segments

by considering five

patterns of target

markets: single-

segment

concentration,

selective

specialization,

product

specialization,

market

specialization and

full market

coverage.

Derek F.Abell,

Defining the

Business: The

Starting Point of

Strategic Planning,

1980.

2 Prepared by Liming Zhu.

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70s Arthur D.

Little

(company)

Industry

maturity/comp

etitive position

matrix

A strategic model

(like GE) used for

product portfolio

analysis. Its scope

involves two

factors: company’s

competitive

position and stage

of industry

maturity.

Peter Patel and

Michael Younger, “A

Frame of Reference

for Strategy

Development,” Long

Range Planning,

April 1978.

70s Boston

Consulting

Group

Growth-share

matrix

A strategic model

used to help decide

what priority

should be given in

the product

portfolio of a

business unit. The

matrix consists of

four cells, each

representing a

different business

type with various

combinations of

growth rate and

relative market

share: stars, cash

cows, dogs and

question marks.

Bruce D. Henderson,

“the Product

Portfolio,” BCG

Publications, January

1970.

70s Peter Doyle Product life

cycles

A theory that the

sales of all

products which

have limited life

pass through

distinct four stages:

introduction,

growth, maturity

and decline.

Various marketing

strategies are

required in each

stage.

Peter Doyle, “The

Realities of the

Product Life Cycle,”

Quarterly Review of

Marketing, 1976.

70s General

Electric and

McKinsey

& Company

GE/McKinsey

Matrix

A strategic model

used for product

portfolio analysis,

similar to BCG but

more advanced. It

categorizes

business units

according to

industry

attractiveness and

competitive

strength by using a

matrix. Each

product or brand is

mapped in this

Philip Kotler,

Marketing

Management,2000

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industry

attractiveness/busi

ness strength

space.

70s Paul E.

Green and

Yoram

Wind

Conjoint

analysis

A method for

exploring the

utility values that

consumers attach

to various levels of

a product’s

attributes.

Marketers can

identify the most

appealing offer and

the estimated

market share and

profit.

Paul E. Green and

Yoram Wind, “New

Ways to Measure

Consumers’

Judgments,” Harvard

business review,

1975.

70s SWOT

analysis

Overall evaluation

of a company’s

strengths,

weaknesses,

opportunities and

threats.

Philip Kotler,

Marketing

Management,2000

70s Michael

Porter

Generic

strategies

Marketing

strategies defined

along two

dimensions: supply

and demand, or

strategic scope and

strategic strength,

including cost

leadership strategy

differentiation

Strategy Market

Segmentation

Strategies

Michael Porter,

Competitive Strategy:

Techniques for

Analyzing Industries

and Competitors,

1980

70s Shell

Chemical

Directional

policy model

A strategic model

like GE used for

product portfolio

analysis. Its two

dimensions cover

the organization’s

competitive

capabilities and

prospects for

profitability.

S.J.Q.Robinson, R.E.

Hichens and

D.P.Wade, “The

Directional Policy

Matrix-Tool for

Strategic Planning,”

Long Range

Planning, June 1978.

80s Derek F.

Abell

Strategic

windows

The concept that

there is a certain

point in time at

which the right

environmental

conditions exist for

a particular

marketing

opportunity.

Derek F. Abell and

John S. Hammond,

Strategic Market

Planning: Problems

and Analytical

Approaches, 1979.

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80s Michael

Porter

Value chain A tool for

identifying ways to

create more

customer value by

synthesizing

business functional

activities.

Michael Porter,

Competitive

Advantage: Creating

and Sustaining

Performance,1980.

80s Michael

Porter

Five forces

analysis

A way of

analyzing

competitive status

and deciding

competitive

strategy from 5

aspects: the

bargaining power

of customers, the

bargaining power

of suppliers, the

threat of new

entrants, the threat

of substitute

products, and the

intensity of

competitive

rivalry.

Michael Porter,

“How Competitive

Forces Shape

Strategy,” Harvard

Business Review,

1979.

80s Al Reis and

Jack Trout

Positioning

theory

A marketing

technique in which

marketers try to

create an image or

identity for a

product, brand or

company.

Al Ries and Jack

Trout, Positioning:

The Battle for Your

Mind, 1981.

90s Cliff

Bowman

The strategy

clock

A way to analyze a

company's

competitive

position in

comparison to the

offerings of

competitors. It

considers

competitive

advantage in

relation to cost

advantage and

differentiation

advantage.

Cliff Bowman and D.

Faulkner,

Competitive and

Corporate Strategy,

1996.

90s Orit

Gadiesh and

James

L.Gilbert

Profit pools A strategy model

with focus on

profit growth, not

revenue growth, by

breaking down the

value chain into

“profit pools,” i.e.,

areas of higher

margins.

Orit Gadiesh and

James L.Gilbet, “A

Fresh Look at

Strategy,” Harvard

Business Review,

1998.

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90s David

Garvin

Eight

dimensions of

quality

Defines quality in

terms of eight

manageable factors

by which

consumers judge

products:

performance,

features, reliability,

conformance,

durability,

serviceability,

aesthetics and

perceived quality.

David Garvin,

Competing on the

Eight Dimensions of

Quality,1987.

90s Rowland T.

Moriart and

Ursula

Moran

The hybrid

grid for

channels

A model to plan

the channel

construction and

illustrate how to

meet the

management tasks

through various

marketing

channels.

Rowland T. Moriarty

and Ursula Moran,

“Marketing Hybrid

Marketing Systems,”

Harvard Business

Review, 1990.

90s Regis

McKenna

Real-time

management

The notion that

companies must

immediately

respond to

consumer demand.

Regis McKenna,

Real-Time

Marketing, 1995.

90s Jeffrey F.

Rayport and

Bernard J.

Jaworski

Competitor

map

A model to

illustrate the

competitive

environment of a

company and its

competitors’

positions.

Jeffrey F. Rayport

and Bernard J.

Jaworski, E-

Commerce, 2001.

90s Adrian

Slywotzky

Value

migration

The concept that

marketers satisfy

customers'

priorities by

shifting value-

creating forces to

find out the new

value of products

or service. Value

migrates between

industries,

companies or

business designs

within a company.

Adrian Slywotzky,

Value Migration:

Stragegies to

Preempt the Markets

of Tomorrow, 1996.