7-S Alignment

My wife recently worked as a nurse at a local residence/care facility for handicapped individuals. After learning about the McKinsey 7-S model, I realized that this organization was misaligned in a lot of ways with their overall strategy.

Strategy

Provide high quality care and high quality of life for the most number of patients.

Structure

The organization has a relatively flat structure with two owners, 6-8 administrators, a director of nursing, nurses, and "habilitation techs" (who provided for non-nursing patient needs). While this flat structure would seem to be beneficial to the company with few levels in between nursing staff and the owners, the owners tend to micromanage instead of allowing administrators or the director of nursing to make decisions based on what they encountered on a day to day basis.

Systems

Incentive systems- Wages are somewhat competitive, but on the lower end, making it difficult to attract employees with a broad level of experience with patient care.

Human Resources/Hiring- For nurses, they hire a lot of recent graduates, often with little work experience. For the habilitation techs (HTs), they often hire high school graduates with little to no college or vocational training. Many of the HTs do not even speak English well, making patient care and coordination with nursing staff difficult at best. Because of high turnover, it is difficult for them to find experienced nurses to train new nursing staff. Thus, training is inconsistent and unstructured leading to a lower quality of patient care. As they add more patients, instead of hiring more staff, they just add to the already heavy workload of nursing staff.

Shared Values (Superordinate Goals)

The ultimate goal of most employees is to provide high quality care for each patient, which is consistent with the strategy outlined above of providing great care for the most number of patients.

Skills

As mentioned above under hiring systems, some of the staff lack the experience and/or training to provide the kind of care that the institution requires.

Style

While some of the managers are highly capable and good and motivating and training employees, the owners tend to micromanage, thus making the manager ineffective at accomplishing their goals.

Staff

Most of the staff see this as a temporary job, with very few long-term employees. Staff are therefore not motivated to try to improve the system or help patients reach long-term goals.

Hewlett-Packard Hedgehog Concept

Hewlett-Packard (HP) announced last August that it was planning on exiting the PC market, possible moving towards an increased emphasis in software development. Their new CEO, however, has stated that HP will continue to be primarily a PC hardware company. The hedgehog concept from Good to Great can be applied to this strategy decision.

What can we be the very best at?

Hewlett-Packard has spent years developing its products to meet its customer's expectations. While they are not the best in terms of hardware quality, they seem to be trying to be the very best at producing quality products for the low-end, price sensitive market. According to HP CEO Meg Whitman, their strategy is "to remain the largest provider of IT infrastructure, software, services and solutions for individuals of all size."

What can we be passionate about?

When asked about HP's hardware division, Meg Whitman said, "That's the core of who we are and we should stand up and be proud of that. We're a proud hardware company and we want to stand tall with you... Everything else we do builds and amplifies that opportunity." Certainly, HP feels like their core competency lies in the hardware division. Its other divisions such as software are meant to strengthen its core business of hardware production.

What drives your economic engine?

The third aspect of the Hedgehog concepts relates strongly to the concept of profit pools. HP has several different profit pools including software, PC hardware, printers, warranties, etc. According to their CEO, "Infrastructure is the core of HP's DNA... with 70 percent of HP revenue coming from servers, printers, storage, PCs and workstations."

JC Penny

JC Penny recently announced that instead of having massive sales discounts, they would move towards an everyday low-price strategy. This seems to apply to Porter's competitive advantage framework.

JC Penny traditionally has had a broad customer focus and a product differentiation strategy through its private label brands. With a lower everyday pricing model, it will shift towards a low cost, broad market strategy. This strategy seems to have some advantages and disadvantages. Its advantages are that it can appeal to the price-sensitive groups by not making them wait for the huge discount sales. On the other hand, if they drop some of their private label brands because of lower sales prices, they may lose customers who feel that JC Penny represents value and quality. Also, price-sensitive shopper who get exciting about huge 50% off sales may be turned away from JC Penny because there is not as much perceived value in the everyday low prices.

Apple iBooks

Apple recently announced that it intends to compete with the textbook industry by selling electronic copies of books at a low cost to K-12 schools. I was thinking about how Porter's Five Forces applies to this decision.

Threat of new competition

I would say the threat of new competition would be high. It does not seem that the potential for high profit margins in this segment would invite other technology companies to join in. It seems like Amazon would be well-suited to compete in this market with its Kindle. Apple may be able to create high barriers to entry through programs to get iPads into school districts nationwide. If schools invest large amounts of money into purchasing iPads, the cost to switch to another platform could potentially limit the viability of new entrants in the market.

Threat of substitute products

The physical textbooks are the current competition to electronic textbooks. However, the cost of making a physical textbook is significantly higher than a digital copy, so the electronic copies could sell for much cheaper. The Kindle has a lot of eBooks currently, but does not market them to the K-12 schools. Amazon is probably the best suited to come up with a substitute product.

Bargaining power of customers (K-12 school districts)

In this case, the schools seem like they would have limited buyer power because of budget restraints. Physical textbooks are an enormous expense for school districts, so electronic versions would come much cheaper, but still at a healthy profit margin for Apple.

Bargaining power of suppliers

In this case, the suppliers are the textbook writers and publishing companies. Apple may have a difficult time purchasing copyrights for textbooks. The limited number of textbook publishing companies may give the suppliers a great deal of power, but Apple certainly has sufficient capital to overcome any barriers with suppliers.

Rivalries

If Apple is able to effectively flood the K-12 schools with iPads, the first-mover advantage could definitely give them a favorable position. However, when Apple introduced the iPad, competitors were quick to come up with their own tablet. These same companies could come up with similar e-Books that could create a fierce rivalry in this market.