Coordinating Growth Initiatives in Multi-Unit Firms

Long Range Planning 43 (2010) 6e32

http://www.elsevier.com/locate/lrp

Coordinating Growth Initiatives in Multi-Unit Firms Christoph Lechner and Markus Kreutzer

Realising corporate growth remains a challenging task for most firms. In this paper, we examine how multi-unit corporations can effectively coordinate the evolution of their growth initiatives. Based upon research on coordination, we identify four ideal modes that corporations can adopt as a means to dealing with their growth ambitions. We label these four: agenda-setting, context-setting, directing and self-organising. We show how these coordination modes represent different options for corporate management and have different implications for the role split between top managers and managers on subsequent levels. We illustrate them by using primary and secondary data from 51 corporations based in Europe, North America and Asia. Each mode is connected with particular managerial challenges and is most effective in combination with specific context factors. Practitioners can use these insights to deliberately apply an appropriate coordination mode for their growth initiatives. Ó 2009 Elsevier Ltd. All rights reserved.

Introduction Most large, multi-unit corporations are well aware of the necessity to generate corporate growth.1 If they are unable to evolve beyond their current status quo, they risk a string of negative effects. Failure to implement economies of scale could lead to competitive disadvantages; they could lose or fail to attract key employees; investment in new technologies might over-stretch their resources; and they could experience problems in raising and keeping sufficient capital as they offer less upside potential than others.2 As a consequence, many multi-unit corporations tackle this challenge by launching growth initiatives. These proactive undertakings have the goal of generating additional sales and, so they hope, additional profits.3 They range from scaling up the core business to moving into adjacent areas, developing new products or entering new markets. They may have catchy names, such as ‘Gearing up’ (MunichRe), ‘Fit4more’ (Siemens), ‘Single Currency’ (Credit Suisse) or ‘Imagination Breakthroughs’ (GE). Unfortunately, more often than desired, these growth initiatives produce disappointing results.4 Sometimes, reasons for this stem from external market conditions. For example, demand potential 0024-6301/$ - see front matter Ó 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.lrp.2009.10.002

may be over-estimated, unforeseen market fluctuations occur across the business cycle, competitors react faster than previously expected, or new technologies come with insurmountable problems. In addition, internal coordination problems may arise and impede the necessary progress of these initiatives. Top managers (i.e. corporate managers) and middle managers (i.e. business unit managers) may follow heterogeneous agendas. Open or covert acts of resistance may emerge due to various micro-political coalitions across units. Entrenched values and socially embedded norms might lead to a lack of consensus and support.5 Obviously, the more coordination problems arise, the more such multi-unit corporations will be exposed to difficulties in managing their initiatives and likely to fail to generate corporate growth.

How can multi-unit corporations effectively coordinate the evolution of their growth initiatives? Although existing research has mainly focused on the pros and cons of different growth strategies in terms of internal growth, alliance or acquisitions, and has outlined optimal growth paths, it does not provide sufficient guidelines on how to deal effectively with coordination problems.6 We therefore raise a single question in this paper: How can multi-unit corporations effectively coordinate the evolution of their growth initiatives? Of course, this question has several nuances that we need to examine. First, it requires an outline of the potential range of different coordination modes. We will show that depending on the targets of coordination (in terms of process and content coordination), four distinct ideal coordination modes can be identified. Second, it requires an elaboration of the necessary role split between top managers and those at subordinate levels to coordinate various units. Often, these roles are ill-defined, leading to ambiguity and inter-role conflicts. Finally, it suggests that we need to consider particular challenges associated with each coordination mode and explore the impact of contingency factors on their effectiveness. With this paper, we offer four contributions. First, and most important, we propose a coherent framework and identify four ideal coordination modes with which multi-unit corporations can pursue their growth ambitions. This approach stresses the possibility of multiple coordination paths, the central idea of this paper. Second, we shed light on the behavioural consequences for top management and lower managerial levels in growth settings by detailing interaction at and between each level. Third, while previous research has mostly examined strategic initiatives in a broad, undifferentiated manner, our study focuses on one particular type, namely growth initiatives. This concentration allows us to generate specific, accurate insights of this crucial empirical phenomenon. Alongside others, such as cost-cutting, synergy or customer-focus initiatives, growth initiatives can be considered as the spearheads of future sources of revenue and profit. Fourth, we contribute to the increasingly popular view of strategy process scholars who argue that the performance implications of all strategy modes depend on context situations and cannot be adequately assessed without considering these influences. Claims about the general superiority of any particular strategy mode neglect the complexity of these phenomena, thus oversimplifying causal relationships and biasing managerial recommendations.

Alongside others, such as cost-cutting, synergy or customer-focus initiatives, growth initiatives can be considered as the spearheads of future sources of revenue and profit Long Range Planning, vol 43

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Strategic initiatives and coordination Strategic initiatives have been recognised as central building blocks of theory and practice of strategic management.7 They are a principle means by which multi-unit organisations achieve adaptation to environmental changes. They are deliberate efforts by firms to create or appropriate economic value from the environment, and serve as linking pins between internal organisational events and external market developments.8 Initiatives have characteristics that impose high demands on the capabilities of corporations. In contrast to minor projects, they require significant investment, have a strong impact on rivalry and competitive advantages, are non-reversible, contain substantial risk, influence organisational design, processes and behaviour and, finally, significantly impact shareholders and corporate performance. Put differently, strategic initiatives are at the forefront of efforts to alter existing resource configurations and change established practices. They are not part of the activities related to running the ongoing established business, but quite the opposite: they deal with changing the status quo and significantly expanding the scale and scope of an organisation. Previous research on strategic initiatives has focused mainly on corporate entrepreneurship and strategic renewal.9 Studies have examined their evolution and the means by which they confirm or alter corporate strategies. Often embedded in evolutionary theory, research has explored the role of variation, selection and retention of initiatives during strategic renewal.10 As a result, the role of structural, strategic and social contexts has been shown to be central in facilitating or hindering their development.11 Research has also examined processes impeding the development of initiatives in large established multi-unit firms. It was shown that core rigidities in the form of existent skills and technical systems, administrative systems, and values and norms constrain and tie them back to established practices.12 Coordinating growth initiatives: a conceptual framework The concept of ‘coordination’ has a long history in management studies. It can be traced back to the early work of Fayol (1916) and Barnard (1938), and the work of Lawrence, Lorsch and Thompson in the 1960s, who conceptualised organisations as systems of purposefully coordinated actions.13 Coordination can be defined as the integration of different parts of an organisation to accomplish a collective set of tasks.14 This is considered as necessary to balance the effects of specialisation in organisations consisting of multiple units.

Coordination can be defined as the integration of different parts of an organisation to accomplish a collective set of tasks From its beginning, research on coordination was serious about the existence of heterogeneous interests and objectives among the different units of an organisation. It acknowledged the problems of these interactions, as each unit would follow its particular interests, reflecting the reasons for which it had been created. Coordination was perceived as the only integrating device for the achievement of collective tasks despite these problems. It was argued that organisations need to use coordination mechanisms to effectively link and integrate their heterogeneous parts. Coordination was expected to become more challenging for organisations over time: the larger a corporation, the stronger the structural separation between its parts, the more complex the interdependencies among them, and the larger the uncertainty with regards to the collective tasks.15 As many of these attributes apply to modern multi-unit corporations striving for corporate growth, we have to expect that the demands on effective coordination are substantial in this context. Conceptualising the coordination of growth initiatives, it is helpful to differentiate between targets of coordination and mechanisms of coordination. With regard to the former, we propose the distinction between process and content coordination.16 8

Coordinating Growth Initiatives in Multi-Unit Firms

Process coordination is concerned with the extent to which top management steers growth initiatives in terms of rules, procedures, instructions or feedback cycles. It can range from low to high. When process steering is high, top management strongly influences the means to achieve desired ends by specifying the appropriate behaviours and processes in which business unit managers must engage. This may include monitoring the extent to which growth initiatives follow established processes, systems and guidelines. Content coordination, on the other hand, is concerned with the determination of the substance and objective of growth initiatives; it can range from low to high as well. At high levels, top management will explicitly prescribe what needs to be done and outline all necessary details. It might set the growth topics and direct managers to develop and drive these undertakings in a coherent manner. Conversely, at low levels of content steering, top management would delegate these decisions to subordinate managerial levels. Building upon this distinction, we propose a framework for coordinating growth initiatives in multi-unit corporations. It consists of four ideal modes: agenda-setting, context-setting, directing, and self-organising (see Figure 1). Each mode reflects a specific pattern of content and process coordination. Their mastery may be interpreted as a corporation’s capability to effectively pursue growth initiatives across its multiple units. It is important to note that while the framework encompasses static positions, it also has a dynamic element. For instance, a firm with a predominant mode of context-setting might critically evaluate its effectiveness and try to switch modes. With regard to mechanisms of coordination, each mode can be characterised by three key elements, namely centralisation, formalisation and informal social relations.17 These coordination mechanisms direct attention and integrate key resources, independent functions and units in multi-unit corporations. Centralisation of decision-making reflects the locus of authority and decision-making; formalisation captures the degree to which rules, procedures, instructions and communications are written down in manuals and are established through standard routines. Along with these well-established formal coordination mechanisms, the informal coordination mechanism in the form of informal social relations deals with the extent of personal linkages, closeness and connectedness between top and lower management levels.18

Formalisation captures the degree to which rules, procedures, instructions and communications are written down in manuals and are established through standard routines In the following section, we outline each coordination mode by specifying its essence, describing its degree of centralisation, formalisation and informal social relations, presenting a mini-case for illustration, discussing major challenges of each mode, and debating its suitability for context situations.

Analysis of coordination modes Agenda-setting mode This mode is characterised by a strong degree of content coordination. Top management prescribes the topics of all growth initiatives and presents unit managers with an umbrella concept indicating inspirational overall objectives and directions. This concept might be related to a single vision or outline some key issues that need to be addressed. Long Range Planning, vol 43

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Figure 1. Modes of coordinating growth initiatives

Centralisation: Decisions regarding the subject of initiatives and input of crucial resources are made by top management. For these issues, top management takes the responsibility and tightly steers the organisation. Preparing these decisions, corporate managers often direct their time and attention to gathering a broad range of information from consultants, industry experts, universities, trend researchers, market research agencies and middle managers. Off-site meetings are a typical venue for such exchanges to take place. Regular trips with sales personnel or personal experimentation with single units of new technologies also lead to novel insights. Combined with their experience, this knowledge enables top management to identify and prescribe growth initiatives with a high degree of fit to both the external marketplace and the inner workings of the organisation. Formalisation: Top management is quite passive in its specification of rules, procedures or instructions on how growth initiatives need to be pursued. It restricts its activities to connecting key people in the organisation and helping growth initiatives overcome emerging obstacles. While 10

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objectives for each of these initiatives are set at the top, the process of execution is deliberately left to subordinate managers. This also extends to the use of financial resources. Although the budget for each initiative has either to be financed by business units or alternatively centrally allocated, the managers responsible for the implementation of each growth initiative can use their available resources in a discretionary manner. Informal social relations: This mode operates with a low to medium degree of social connectedness and closeness between upper and lower management levels. Informal relations play a role mainly during the definition of growth initiatives e a phase in which select middle managers are asked for their opinion. During the execution, top management infrequently engages in informal exchanges, as it is interested in receiving feedback about their progress, delays or emerging challenges. Mini case study: Helvetia Helvetia, a European life and non-life insurance firm with close to 5000 employees, operates in six European countries. Historically and due to divergent national regulations, the group operates in a decentralised manner with a small corporate centre responsible for six geographically formed business units. In order to generate significant growth, top management devised a set of initiatives necessary to achieve growth rates above 5 per cent across its units. Preparing for this endeavour, top management invested considerable time examining emerging megatrends in its markets, such as the ageing population (i.e., low birth rates and growing numbers of people above 60) and its consequences for the insurance industry. Executives attended and sponsored conferences (World Ageing Conference), listened to university researchers and specialised consultants, and debated with pension funds as well as residential home corporations. Top management then defined seven initiatives as compulsory for each of its geographical business units. It estimated the necessary investment for all undertakings and created a financial pool available to each initiative as needed. The undertakings were related to product groups, client segments and functional undertakings along the value chain. One initiative, for example, set a revenue target of 300 million euros and was focused on developing and marketing innovative, unit-linked life insurance products across all European markets. Expectations for revenues in each market differed, but it was assumed that demand would pick up in each country. Obviously, not all business unit managers were equally enthusiastic about this approach due to the particular situations in their regional markets. Some fully supported the initiative from the outset, while others gradually rolled out their actions. To get all initiative teams going across Europe was therefore a time-consuming process involving long debates across managerial levels. One of the main problems was finding the right people. Many key employees had already line responsibilities taking their full attention. Only after the corporate centre exerted persistent pressure and additionally hired qualified people were the growth initiatives satisfactorily staffed and able to move ahead. Responsibility was fully delegated to the individual teams. Top management restrained from active involvement and intervened only upon request (for example, when teams reported internal obstacles beyond their zone of influence). Managerial challenges Corporations applying the agenda-setting mode often find themselves struggling with two issues. The first is concerned with the difficulty in defining topics that are either too abstract and general, or too specific and narrow. On the one hand, if the former happens, misunderstanding and secondguessing of the actual objectives of top management are logical risks. As the agenda provides only vague guidelines, middle managers receive and interpret ambiguous signals. This in turn, causes frustration and raises the suspicion that top management lives in an ‘ivory tower’ too far removed from the ongoing business and without the necessary sensitivity to market developments. On the other hand, if agenda-setting is too narrow and detailed, top management may micro-manage some business units and fail to meet the individual needs of other units. Thus, finding the right balance between these extremes is critical. Long Range Planning, vol 43

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Corporations applying the agenda-setting mode often face the difficulty of defining topics that are either too abstract and general, or too specific and narrow

A diversified food company pursued an innovative approach. It formed groups heterogeneously composed in terms of hierarchical level, age and unit, to discuss and respond to ideas proposed by top management. These groups then acted as ‘resonating bodies,’ debating the proposals internally and within the social networks of their members, and subsequently passing their feedback unfiltered to the top. Only after this process did top management choose its agenda topics and push them through the organisation in the form of corporate initiatives. Similarly (returning to the case of Helvetia), top management diligently clarified up-front in all of its European markets the potential for a unit-linked growth initiative and the expected support in all regional units. The fact that the initiative rapidly led to positive results in some subsidiaries later on confirmed this diligent approach. Other units drew on this newly gained experience and thereby reduced their risk. The second challenge refers to the fact that top management is prone to fall into the trap of overloading the organisation with too many and too narrowly synchronised initiatives. This overkill not only deters the organisation from its ongoing business, but also decreases commitment and interest for each new wave. For the most part, this situation is aggravated through the establishment of specialised staff departments on the corporate level that often have no other duties than pursuing corporate initiatives. Business unit managers, in contrast, have to oversee their ongoing business and thus have limited time to devote to additional initiatives. At Helvetia, this led to several rounds of discussion between top managers and business unit heads about the appropriate number of growth initiatives. While top management argued that some more might be achievable, some unit heads complained about the additional work load produced by corporate staff departments. Only after several rounds of exchange could an appropriate number for all parties be found. It is a tricky issue to evaluate whether there is an overload of initiatives in an organisation, or whether complaints are just ‘natural’ events and part of the game, as one executive recalled. Our findings show, however, that these complaints are often well-grounded. Top management underestimates the demands of running ongoing business operations in conjunction with pursuing a plethora of corporate entrepreneurship activities. Driven by capital markets or personal ambitions, top management often takes the efficient functioning of established processes as given, and overlooks the demands of serving customers in time or running factories and supply-chains. This attitude has the additional negative side effect of leading to a burn-out of excellent managers at subordinate levels, as they have to bear the double burden of being responsible for their line duties as well as for corporate initiatives. Although top management is intellectually aware of the issue, few draw conclusions as to the cause and act accordingly. An interesting approach to soften this dilemma is conducted by the glassmaker Schott. A new wave of corporate initiatives starts only when concrete results of the prior wave have been achieved. This provides the organisation with sufficient time to ‘digest’ the efforts associated with these undertakings and prepare for new tasks. Periods of stress are followed by periods of consolidation. One executive remarked: ‘You need to build in some breathing space in your growth programmes; we deliberately decided to significantly reduce the amount of growth projects in order to buy some time, only to revive the topic at some later point in a lighter version when the organisation was ready’ (Figure 2). Suitability of coordination mode The agenda-setting mode of coordination is effective in organisations whose single business units have been unable to generate growth on a stand-alone base. Here, a coherent, top-down agenda 12

Coordinating Growth Initiatives in Multi-Unit Firms

Figure 2. Managerial challenges in coordination modes

infuses impetus into the organisation. It prescribes a clear objective for each unit and explicitly outlines growth paths. As the execution of these objectives is conducted by business unit managers who know how to adapt these corporate concepts to their local needs, they have less opportunity to excuse themselves from taking appropriate actions.

The agenda-setting mode of coordination is effective in organisations whose single business units have been unable to generate growth on a stand-alone base

Agenda-setting is also effective in situations of high competitive rivalry with clearly definable competitors.19 In such situations, coherence of actions is crucial in order to counter competitive attacks on single units. For example, dominant corporations in the Austrian insurance market aggressively attacked Helvetia in order to force corporate management to sell its country unit. However, by pursuing growth initiatives in its life business, Helvetia’s Austrian managers were directed towards an emerging opportunity they had not sufficiently exploited. In addition, Helvetia transferred relevant knowledge and expertise for this initiative into Austria and was able to reduce its operating costs by outsourcing parts of the Austrian operations to other countries, thereby achieving economies of scale. Further, agenda-setting is more effective in industries characterised by low environmental turbulence.20 If environmental conditions rapidly change across the units of an organisation, it is quite risky to focus all energy on a coherent set of growth objectives, as no one can be sure about future developments. Top managers might waste resources and energy and even force the organisation into a deadlock that only later becomes visible. Decreasing variety might not be the best way to go. On the contrary, under such circumstances, business units might be better suited by having the right to define and execute their perceived growth potentials, as these might fit much better to their local needs than would a streamlined corporate agenda. On the other hand, in less volatile environments, if a broad consensus about future trends can be achieved, the agenda-setting mode helps a multi-unit organisation to jointly move in one direction (Figure 3). Long Range Planning, vol 43

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Figure 3. Context factors and effectiveness of coordination modes

Context-setting mode In the context-setting mode, the crafting of growth initiatives is transferred from top managers to managers on lower levels. In contrast to agenda-setting, these managers now generate the content of new initiatives, while top management subsequently scrutinises their proposals. Centralisation: This mode requires that middle and lower-level managers with entrepreneurial mindsets do not permanently postpone or delay decisions, but take responsibility and pursue initiatives with a pattern of clear, coherent decisions. Due to the decentralisation of decision-making, top management itself is not proposing growth initiatives. Its role is to provide a favourable context so that these ideas can flourish and successfully compete in the marketplace. It basically assumes that anywhere in the organisation valuable ideas can emerge, which are considered ‘precious flowers’ that need to be nurtured and sheltered so that they can mature and develop. What is needed is to give them voice, resources and support, and then to guide them carefully along their developmental path.21

Due to the decentralisation of decision-making in the context-setting mode, top management itself is not proposing growth initiatives Formalisation: This mode operates with a high degree of formalisation, as top management vigilantly supervises the generation and execution of initiatives by relying on pre-defined procedures and processes. Activities related to monitoring, reviewing and coaching initiatives require substantial investment of top management’s time and attention. Elaborate stage-gate processes, with periodic feedback and reporting sessions in which top management is heavily involved, are frequently used. Other process tools include handbooks on project management, project scorecards, key financial metrics, reporting manuals and best practice support. This mode culminates, at some firms, in skilful and fine-grained metrics covering the whole life-cycle of growth initiatives, with specific designs for screening, categorising and prioritising initiatives. Business-specific known rules of thumb are also frequently applied in this mode. They serve as guideposts for initiative teams and capture industry-specific knowledge accumulated over time. 14

Coordinating Growth Initiatives in Multi-Unit Firms

Informal social relations: Due to the roles of top managers as coaches and advisors, informal social relations are important for this mode. The better the connections between top and middle managers, the more open and transparent the exchange becomes. Even ‘unpleasant’ developments might be discussed when trust and close social ties exist across managerial levels. This requires, however, that top management resist the temptation to micro-manage growth initiatives, as this might undermine the entrepreneurial behaviour of middle managers. Mini case study: Hu¨gli Hu¨gli is an international food producer (soups, sauces, antipasti, desserts, etc.), operating in nine European countries. Having gone through a painful turnaround in the mid-nineties, the corporation had restored its balance sheet and was operating well in its core markets in eight European countries. Because generating growth was considered the primary challenge for the future, top management asked all its middle managers to identify a wide range of significant growth initiatives. Each proposal would be evaluated on criteria such as Net Present Value (NPV), risk to execute, investment needs and sustainability. In several workshops, 28 ideas were proposed, giving rise to lively debate. These ideas were subsequently jointly evaluated over several rounds of discussion and analysis until consensus among participants was reached. The five initiatives considered most promising were complemented with a business plan and transferred from ‘concept’ to ‘execution’ stage. During this process, Hu¨gli equipped its middle managers with tools on business planning, financial spreadsheets for NPV calculation and risk analysis, and project flow charts. Managers were trained to use these tools alongside experienced executives, who participated and contributed their insights. These executives also served as sounding boards for the members of the subsequent initiative teams, normally formed around the idea-generator. During the execution stage, initiative teams applied several rules of thumb as practised by the corporation: for example, decisions about splitting up sales teams (when a certain revenue target is hit) or capacity utilisation (each new dry-technology food factory is assumed to require about 80 per cent capacity utilisation to reach a break-even point). Growth initiatives were formally discussed and regularly examined at the top management meetings. Obviously, more time was devoted to less well-performing initiatives, while other initiatives asked for further instructions and possible extensions. An initiative geared toward replicating the ‘Tupperware’ marketing and sales concept, in terms of ‘food parties’ with the embedded sales of Italian, Russian, Thai, and French food, repeatedly failed to reach pre-set milestones and was discontinued. Other initiatives, for example the entry into the market for salad dressings, which extended the existing technology capabilities of the corporation, were scaled up and multiplied. Each of these initiatives had one or several ‘champions’ who gathered around them a team of like-minded people and used their good connections inside the organisation for informal feedback and exchange. Managerial challenges Several lessons can be learned from corporations applying this mode. The first managerial challenge of context-setting is related to the timely termination of growth initiatives with disappointing results. Although managers do not expect all growth initiatives to be successful, they nevertheless struggle to end them quickly or to end them at all. We found corporations with surprisingly broad consensus about weak initiatives that continued to exist as the ‘pet projects’ of some executives, or because no one wanted to publicly detail their dismal results. Our results indicate, however, that in growth contexts the ability to ‘fail fast’ is crucial in order to avoid the well-known phenomenon of throwing good money after bad. The sooner an organisation accepts having entered a dead end, the more quickly it can pull back and probe alternative directions. More precisely, failing faster than the competition allows an organisation to learn from its experiences and plan for the future. At Hu¨gli, executives apply the implicit concept of a two-time grace period. If a new venture is not performing as expected, it gets two chances to reverse its fortunes. After that, the experiment will be terminated. Long Range Planning, vol 43

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In growth contexts, the ability to ‘fail fast’ is crucial in order to avoid the well-known phenomenon of throwing good money after bad

Other firms are applying similar mechanisms, as outlined by a vice president of an insurance corporation: ‘For big initiatives e both new and classic ones with a high risk potential e we have incorporated the idea of the ‘‘rip cord.’’ In the run-up, we discuss with the responsible team when and where risky situations of the initiative might emerge. The defined milestones are points at which we stop the growth initiative when it does not meet the pre-set demands. And we achieve agreement over the milestones in advance. This is not at all meant to be negative, but we have learned that we should examine our investments with a bit more reservation. In the past, we invested too many emotions and feelings in the investments.’ Resisting the temptation to delay milestones over and over again is demanding, as new initiatives are often planned quite aggressively with overly ambitious objectives. If initiatives lag, it becomes quite difficult to assess whether they are just behind target or whether the delay is due to substantially false assumptions made at the outset. Second, it is interesting to note that truly ground-breaking initiatives, pointing an organisation in a new direction, rarely prosper and survive in the context-setting mode. As the case of Hu¨gli demonstrates, all growth initiatives were more or less in line with the general thrust and history of the corporation. They expanded the technology, product and market portfolio of the corporation in a gradual, evolutionary, but not revolutionary manner. Growing the core and areas adjacent to the core was the result - radical ideas were only shortly debated and subsequently rejected. One explanation might be that experienced middle managers are well aware of the obvious risks of entering uncharted waters. They act quite pragmatically and prefer more familiar growth initiatives with a higher probability of success. At Hu¨gli, they preferred to move into related areas such as salad dressings, but were reluctant to enter more distant food markets based on related technologies and production methods only. Suitability of coordination mode Empirical studies have shown us repeatedly that the further new businesses are away from the existing core, the higher their likelihood of failure.22 Thus, growth initiatives in the core, which are induced by a context-setting mode, seem to be more successful. However, this incremental approach is problematic if fundamental market changes endanger established businesses. One executive remarked: ‘We excel in rotating the small wheels within the wheelwork of the enterprise; that is essential and important (.), but does not suffice always. What we need now to sustain competitive advantage, is something like a Neil Armstrong: it might be a small step for him, but a giant leap for mankind, that is, our company.’ Only by such moves into unfamiliar areas with higher expected market potential can growth bolster the shrinking market in the core business. Some firms deliberately try to counteract such incremental tendencies. Intel, for example, has established the willingness of managers to take more risks as a core value with relevance for incentives. The CEO of Intel Germany explained: ‘One of our six firm values is risk-taking - or more exactly ‘informed’ risk-taking. We now encourage all employees - not only those managers at the highest ranks - to act entrepreneurially and to take technological and economic risks, as we are convinced that we will not survive otherwise in our highly competitive market.’ Another way to counter this incremental tendency is to systematically incorporate external ideas. Companies such as SAP and ABB apply a set of mechanisms such as trend scouts, internet portals, focused industry forums, customer advisory groups, open innovation circles, and so on. SAP, for example, received more than 1000 ideas from component suppliers and universities in 18 months, the most promising of which were presented to top management and partly realised. ABB conducted themed meetings at regular intervals with customer advisory boards. For example, for one topic, 16

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‘alternative energy sources and their applications,’ it conducted a string of panel discussions and technical workshops.

‘‘We now encourage all employees - not only those managers at the highest ranks - to act entrepreneurially and to take technological and economic risks’’ However, external ideas can only be a supplement. Multi-unit firms seeking to effectively apply the context-setting mode should aim to reap the benefits from substantial collaboration and ideation at lower organisational levels. Building on this internal variation, top managers provide channels through which growth ideas can be considered and funded. These processes for selecting growth initiatives, allocating funds and tracking success levels have to be clear and transparent to ensure the motivation, buy-in and commitment of all employees. Research on procedural justice tells us that employees considered it unfair when a decision process was corrupted, even when the outcome of that decision process was in their favour. On the other hand, they could accept a negative decision if they perceived the process as fair and just.23 At Hu¨gli, the predefined selection and evaluation criteria, in combination with open and transparent discussions between middle and top managers, also made sure that the managers who had proposed the 23 rejected ideas accepted the decision despite initial disappointment. Directing mode In the directing mode, top management becomes the sole generator and mastermind of growth initiatives. It pursues them in a top-down driven process, giving lower managerial levels detailed directives to achieve a timely execution. Centralisation: All major stages of decision-making are under full control of top management. This includes searching for, analysing, deciding on and acting on information. Although top management may ask others for their opinion, this happens on a case-by-case basis and is not binding. Subordinate managers receive detailed guidelines regarding growth initiatives. They are staffed onto these undertakings, as top management carefully selects the composition of all relevant management teams working on these initiatives. Chosen managers are either fully removed from their current positions or are expected to contribute to growth initiatives in addition to their ongoing line responsibilities. Formalisation: Detailed prescriptions are given to middle- and lower-level managers, with instructions to execute them accordingly. Like the context-setting mode, the directing mode applies elaborate methodologies for planning actions and measuring progress. Reporting is highly formalised and frequently conducted with the use of templates and regular steering committee meetings in which top management participates. Performance targets are set in advance and closely monitored. With the help of numerous meetings, milestones are continuously checked and counteractions are launched as soon as deviations are detected. Incentives and promotion prospects are closely tied to the fulfilment of tasks delegated by top management.

Like the context-setting mode, the directing mode applies elaborate methodologies for planning actions and measuring progress Informal social relations: As these are not overly important for coordinating units, the degree of informal relations is quite low. Instead, an intensive repetition of the main message, broad reporting on recent developments and frequent feedback are considered as key formal means in acquiring Long Range Planning, vol 43

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and maintaining the support of employees. Sometimes, external communication and consulting firms are hired to support top management in its tasks and to maintain momentum. Mini case study: Lufthansa Cargo The top management team of Lufthansa Cargo, a major air cargo transport corporation, centrally determined all growth initiatives across its units. With the help of large staff departments for scheduling, planning and business development, it presented a final ‘game plan’ to its subordinate managers and was deeply involved in the subsequent execution process. At the outset, top management was personally involved in identifying initiative leaders and key members of the initiative teams. The goal was to create teams with complementary skills and, ideally, combinations of employees that had already worked together. Based on explicit profiles from corporate human resources and individual contacts, top management carefully screened potential initiative members and assigned them to teams accordingly. During the execution stage, a dense network of steering committees and project group meetings was established to provide timely feedback. Standardised monitoring procedures and project valuation tools such as the traffic light system (with the dimensions of time, target, budget, team and change progress) produced a cockpit chart of detailed data that could be drilled down to obtain even more precise information for each initiative. Not surprisingly, large controlling departments were installed to gather and analyse these data. Heavy use of formalised implementation techniques steered the process of embedding initiatives into the organisation. For example, the CEO wrote frequent emails to all employees updating them about the status of their growth initiatives. Extensive repetition of the main messages was perceived as key to maintaining the support all employees and secure their commitment. Also, regular information events were conducted and the organisation was equipped with short leaflets and podcasts about the objectives, status and achievements of major initiatives. In order to avoid ambiguity and clarify misunderstandings, communication specialists conducted intra-firm surveys and reported the results back to top management. Overall, a multi-channel communication approach supported the growth impetus. Managerial challenges The directing mode can only work if the interaction between the different management levels is intense and well coordinated. This requires a realistic understanding of temporal lags between management levels. If one level is moving ahead, the chain of command can break down and lead to significant delays in growth ambitions. A banking group experienced such lapses in timing as the board of management, together with a group of around 100 executives and staff employees, set such a fast pace in pursuing growth initiatives that the rest of the organisation fell behind. Subsequently, permanent new targets and objectives were only passively considered, since the organisation did not have the ability to respond. This process led to dismal results, and top management augmented its formal control activities and reassigned several managers on lower levels. However, the connection between the management levels further deteriorated, and the desired positive results were still not reached. The challenge of maintaining the organisational capacity to act and respond accordingly was metaphorically expressed by one executive: ‘When the captain of a large oil tanker has given the command to change the course of the ship, this task is already accomplished for her and she can work on other issues. However, by that time, her first officer might not have even transmitted the order to the machinery people, who in turn have not even heard of the order, and consequently have not changed the rudder . and the boat has not even started to shift.’ Also, corporations applying the directing mode repeatedly encounter the challenge of appropriately funding growth initiatives. Business unit managers, responsible for their units in terms of P&L responsibility, expect top management to finance these multi-unit initiatives with corporate funds. However, these are not always sufficiently available, or top management may expect business managers to contribute their share to the joint undertakings. These conflicting expectations often lead to 18

Coordinating Growth Initiatives in Multi-Unit Firms

substantial debates about the compatibility of centrally-run growth initiatives and business units with their own profit and loss responsibility. In order to smooth this process, Swiss Post (postal service) has established a two-phase financing concept. In the first phase, lasting until ‘proof-ofconcept,’ initiatives are completely funded through budgets on the group level. If effectiveness can be proven, the initiatives are passed over to the business units, who fund them during later roll-outs. This approach reduces the risk of business units being held accountable for ultimately poorly conceived corporate ideas. In return, it forces top management to diligently evaluate which initiatives are truly compelling and worth the investment. Top management has to guard against initiative failure, as this not only burns invested funds but, more important, jeopardises its credibility in choosing such undertakings.

Corporations applying the directing mode repeatedly encounter the challenge of appropriately funding growth initiatives A final managerial challenge is the lagged effect of the directing mode on the quality of middle managers. As crucial decisions on growth initiatives are taken at the top, the influence of middle managers is reduced accordingly. Their entrepreneurial skills are less in demand, and as a consequence, good middle management talents prefer to work directly on the growth initiatives steered by top management and corporate centres. This absorption of entrepreneurial skills to the top of an organisation leads to reduced abilities at the unit level. Such developments are often not desired and do not materialise in the short term, but they are the logical consequence of a directing mode. Suitability of coordination mode Like the agenda-setting mode, the directing mode of coordination is more suited to environments involving less complexity and dynamism. The importance of this fit had to be experienced painfully by a European semiconductor company. Despite fast-changing technology and product cycles, and despite the well-known phenomenon of highly fluctuating market sizes, this organisation applied a directing mode to coordinate the fate of the corporation. Top management strove to set the overall agenda and to prescribe detailed commands for each unit, with little involvement from middle and operational managers. Costs for external consultants and expensive technological equipment skyrocketed, but, unfortunately, most of these initiatives failed. Products came too late to market, new applications were beset by technical problems, and a string of execution problems emerged along the value chain. The directing mode, supervised by a project management office at the corporate level, had severe negative consequences. Finally, the board of directors intervened, replaced several members of the top management team (including the CEO), halted all existing initiatives, abolished the project management office and switched to context-setting. The effectiveness of the directing mode also depends on its fit with the degree of diversification.24 At corporations with less diversified units, top management is able to closely supervise market-, product- or client-related developments. At more diversified firms, top management is less able to deeply delve into market details. Consider the case of Bertelsmann, with its 25 business units (printing, newspapers, internet services, television, radio, music, etc). Well aware that its business-unit managers were much better informed and knowledgeable about their markets than the corporate centre, top management recognised that a mode with a high degree of content coordination was not advisable and instead opted for a context-setting mode. By contrast, at E.ON, a major energy provider, top management had greater success in tightly steering its international growth initiatives, as its units were less diversified and operated in related energy market segments such as gas, coal, water and wind. Long Range Planning, vol 43

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Self-organising mode This approach must sound puzzling for many managers, as it relies on self-organising processes within an organisation and requires the broad involvement of organisational members across hierarchical levels for the achievement of growth ambitions. Centralisation: This mode is characterised by a strong degree of decentralised decision-making. Put differently, top management has confidence in the imagination and discipline of its managers and allows for a generally hands-off process of decision-making. It can actively involve itself in this process, however, but more or less as one voice beside others without having the right to make final decisions. Growth initiatives arise in creative bottom-up processes, often bypassing hierarchical ladders and official lines. Investment decisions follow a (semi-) democratic pattern and lack the rigidity of classical budgeting and investment techniques.

Top management has confidence in the imagination and discipline of its managers and allows for a generally hands-off process of decision-making Formalisation: There are hardly any prescribed procedures and rules for growth initiatives. As formalisation reduces variance through incremental improvements, growth initiatives are free to decide on their individual degree of formalisation. Some might develop such procedures, others not. Top management does not interfere and leaves this question to the specific initiative. Informal social relations: Such relations play a key role in this mode. In the absence of formal coordination mechanisms and incentives, cultural mechanisms such as peer pressure, face-to-face communication, reputation and verbal exchanges prevail and carry considerable weight. Peer pressure especially signals across the organisation that each growth initiative is watched and individual reputations depend on its outcomes. Clearly, this mode requires responsibly acting managers and employees, who are intrinsically motivated and strive to excel professionally. As a consequence, issues related to the selection, training and motivation of managers and professionals are decisive. Mini case study: Gamma Gamma25 is a corporation that applies biochemistry and molecular biology processes to products for pharmaceutical corporations, hospitals and universities. It develops, commercialises and manufactures reagents, supplies, assays and equipment for biological research, primarily serving the molecular biology and research sectors. Researchers and managers have the option of using corporate resources in a far-reaching discretionary manner to stifle or exploit growth opportunities. If one group of professionals sees potential in a new idea, they share their thoughts with their colleagues. If there is consensus, they form a team, tap into the endowment of corporate resources and put the idea into practice. Should the initiative prove futile at any point in time, the team dissolves and its members concentrate their energy and attention on other projects. As the results of successful initiatives generally surpass the losses of failures, teams find sufficient resources to fund their projects. Normally, employees are simultaneously engaged in multiple projects. Professionals ensure that each initiative is crafted with an appropriate mix of expertise and experience. In general, there is competition within the organisation to attract the best people for each new initiative. To enable a dense flow of information, managers and researchers conduct regular ‘brown-bag’ meetings where they share information about ongoing initiatives and discuss their status quo as well as current problems. Formalised tracking methods and process-related performance templates are rare. Such an approach was tried once (on the recommendation of an external consulting firm), but was swiftly abolished by the majority of professionals. 20

Coordinating Growth Initiatives in Multi-Unit Firms

Clearly, this mode requires the careful hiring and nurturing of well-suited professionals. At Gamma, managers alone cannot hire new employees. In general, potential candidates are invited to visit the firm and talk to numerous people. Hiring decisions are then based on discussions among multiple members of the organisation. During this lengthy process, Gamma gains a good understanding of the intellectual and social compatibility of potential hires. The performance of professionals is assessed informally. As one professional remarked: ‘Your reputation in the organisation depends on two points: whether you are working on exciting projects, and what you contribute to reach scientific or market-related breakthroughs. With peer pressure, you can afford to underperform for some time, but not for long. Otherwise, it becomes a rather unpleasant experience for you.’

‘Your reputation in the organisation depends on two points: whether you are working on exciting projects, and what you contribute to reach scientific or market-related breakthroughs’ Managerial challenges The self-organising mode can only work if there is a majority of managers and employees who are willing to expend extra effort, are strongly intrinsically motivated, and are able to invest corporate funds in a responsible manner. Otherwise, this approach can degenerate into a situation where noone assumes responsibility, and the organisation has no mechanism in place to ensure it. Thus, issues related to selecting, nurturing and motivating professionals are decisive for this mode. For instance, Gamma screens all its applicants through a process of about 15e20 interviews plus stays at its offices and labs lasting for several days. Candidates who receive negative evaluations from as few as two professionals cannot be hired. Those who make it become members of the ‘club’ and can develop their business in a discretionary manner with their colleagues. A further challenge for this mode is the tendency to disperse corporate resources across a multitude of small initiatives, with insufficient impact on the organisation. This behaviour dissipates the energy of organisational members and leads to unfocused diffusion of resources. Corporations following this mode cannot install strong process coordination, since this would erode the desired motivation and dedication of their professionals. Our results show that firms often try to handle this challenge by applying informal coordination mechanisms. Regular discussions, meetings and presentations create transparency and provide detailed feedback. In positive cases, this is associated with increased appreciation of colleagues and executives; otherwise, peer pressure mounts, leading to the more or less voluntary departure of non-fitting employees. At Gamma, there is strong consensus about the contribution of single professionals and managers. Word-of-mouth quickly spreads both positive and negative developments within single initiatives. Consequently, it appears that mechanisms related to social networks are much more effective than more formalised procedures in corporations applying this mode. Suitability of coordination mode In highly turbulent environments, the self-organising mode seems to be a good fit. In these market environments, customers’ preferences and competitors’ moves are unpredictable and evolve quickly. Firms are therefore well-advised to build on the market knowledge of their employees to track and respond to changing client needs and to take advantage of fast-changing market opportunities.26 Doing so can foster employee creativity and entrepreneurial spirit, and increase the internal variety and flexibility to match the external variety in the market. Interview partners argued that the more managers were allowed to actively shape and participate in the course of growth Long Range Planning, vol 43

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initiatives, the stronger their intrinsic motivation. Thus, firms in fast-evolving high-tech industries such as biotechnology or software development can benefit from this coordination mode.

Firms in fast-evolving high-tech industries such as biotechnology or software development can benefit from this coordination mode The self-organising mode is also effective in organisations bolstered by organisational slack. Organisational slack represents the difference between the resources of an organisation and the various demands made on it by its regular business.27 It is considered to be a prerequisite for creative and explorative behaviour as it reduces scarcity problems and provides the means to explore novel approaches. Multi-unit firms with limited slack applied modes with more formal coordination mechanisms more frequently than firms with a larger amount of slack. The self-organising mode might be too risky a choice in situations of scarcity. It makes it difficult to realise synergies and avoid inconsistency and duplicated efforts, and may finally threaten the survival of the organisation. In the absence of process coordination, decisions on limited resource distribution might also be perceived as serving only the hidden interests of influential actors and coalitions and making ‘old-boy’ networks more permanent.28 This, in turn, may severely undermine the credibility of the whole growth undertaking and may lead to the departure of talented people.

Discussion Research on corporate growth is burgeoning, yet our understanding of managerial approaches necessary for realising growth ambitions remains limited. This paper has elaborated four distinct modes of coordinating growth initiatives in multi-unit corporations. They represent cohesive patterns of managerial thinking and acting and can be understood as a core element of the overall strategy-making capability of an organisation. Each mode differs in the degree to which the content and process targets are coordinated, consists of a unique combination of both formal and informal coordination mechanisms, has particular challenges, and is most effective under specific context settings. Theoretical implications This study has several theoretical implications. First, ours is one of the few studies that examine the asked-for combination of both formal (impersonal) and informal (personal) coordination mechanisms.29 While prior studies have analysed the role of single mostly formal coordination mechanisms and their influence on outcome variables such as exploitative versus exploratory innovation, their co-existence and interaction is still a largely unresolved issue in the literature that has only recently been modelled.30 With our study, we contribute to the precise understanding of the joint influence of two formal coordination mechanisms (centralisation and formalisation) and one informal coordination mechanism (informal social relations) on steering growth initiatives. Previous research has debated a natural substitution effect of impersonal by personal mechanisms and vice versa.31 However, our study does not support such an effect. Each mode is characterised by a specific configuration of both impersonal and personal coordination mechanisms. It seems that these devices have complementary roles, interactively enabling the effectiveness of a coordination mode. Formalisation, for example, does not simply produce inertial forces and a focus towards exploitation, but can be beneficially combined with the other mechanisms in the form of a context-setting or directing mode.32 In addition, consistent with recent research on social networks and embeddedness, the concept of informal social relations has a multi-dimensional character, opening itself to dimensions such as centrality, density, weak ties, strong ties, etc. More 22

Coordinating Growth Initiatives in Multi-Unit Firms

research is needed to get a better understanding about the effects of various social relations in the context of growth. Second, with regard to longitudinal adaptations of coordination modes, our findings confirm the notion of path-dependency and stability in large, established organisations. Mostly, corporations relied on the same coordination mode that they had applied in the past. This adherence to established practices is in line with research on strategic renewal dealing with the interplay between the forces of progress and inertia.33 Our research extends this line of thought by showing that not just the underlying business operations but even the coordination modes related to growth initiatives themselves are prone to inertial forces. Although growth initiatives sometimes triggered profound changes in an organisation and acted in this regard as core elements of strategic renewal, the chosen coordination modes were rather stable over time. Whether or not this tendency is positive or negative depends on the fit between mode and context factors. It proved negative when the applied modes were not in line with key context factors and corporations struggled to make the necessary adaptations in their coordinating mode due to inertial forces. However, when this was not the case, coordination modes acted as repeatable, semi-automatic routines and actually enabled and supported strategic transformations.34

Not just the underlying business operations but the coordination modes related to growth initiatives themselves are prone to inertial forces Third, it has been argued that organisations pursuing tasks with a high degree of uncertainty face severe coordination problems when using impersonal coordination mechanisms in the form of centralisation and formalisation. These firms are expected to increasingly rely on personal, informal mechanisms in order to receive early warning signals and crucial implicit information.35 Our research shows, however, that this is not necessarily the case. Most corporations applied the same type of coordination mode for all their growth initiatives, regardless of the degree of task uncertainty associated with any particular undertaking. For example, initiatives exploring new markets were coordinated in the same way as initiatives purely extending the core. One reason explaining this finding might be that corporations treat the topic of corporate growth as a coherent, comprehensive managerial challenge, and are either unable or unwilling to fine-tune their growth considerations. Inability to fine-tune might be explained by the high degree of sophistication necessary for such subtle nuances. Lack of will might be caused by mental models deliberately reducing complexity in order to enable the functioning of such multi-faceted processes. The larger the number of growth initiatives pursued concomitantly within a multi-unit organisation, the more relevant this becomes, with some corporations operating up to 30 such undertakings. Future empirical research might analyse whether firms that are able to simultaneously apply several coordination modes adapted to the task characteristics of the respective growth initiatives are more successful than others. Fourth, we also contribute to the literature on strategy-making.36 Here, some scholars have intensely debated the superiority of one type of strategy-making over others. Their quest for a best generalised approach under varying conditions has led to the emergence of theoretical camps fighting against each other. Just consider the ‘emergent-versus-planning’ debate as such a prominent example.37 However, reflecting more recent work on strategy-making,38 our findings suggest that the search for any general optimal mode might be futile, as the effectiveness of each mode is significantly influenced by a range of context factors. Therefore, research needs to acknowledge the complexity of such phenomena and intensify its search for robust combinations of multiple Long Range Planning, vol 43

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strategy-making modes with external and internal factors. Accepting the existence of multiple strategy-making modes and analysing their effectiveness under varying context conditions might end normative debates on ‘one size fits all’, enlarge our theoretical repertoire, and enable us to derive more meaningful implications for practice by grounding them in empirical research results. A largescale, cross-sectional survey would be a logical next step to test the effectiveness of the four coordination modes in the specific internal and external context settings proposed in this paper.

Accepting the existence of multiple strategy-making modes and analysing their effectiveness under varying context conditions might end normative debates on ‘one size fits all’ Finally, our findings also enrich research on corporate strategy. Although this research has for many years been dominated by quantitative studies examining the effects of various kinds of diversification, one research stream has focused on the interaction of corporate centres with their business units, and their performance effects.39 A dominant question has been how, if at all, corporate centres can add value beyond the stand-alone values of their individual business units. The concept of ‘parenting advantage’ elaborates possibilities for value creation by the corporate parent. Our study shows that the selection and execution of an appropriate coordination mode might be one such avenue through which corporate managers can create parenting advantage. By building up specific skills, they can offer capabilities that single business units may lack. The pursuit of growth initiatives or other kinds of initiatives across multi-unit corporations might be labelled a second order capability, as it is concerned with the reconfiguration of existing resource endowments of organisations. Clearly, the advantages it confers need to be large enough to balance or even overcome the costs associated with running multi-unit structures. Managerial implications Our findings highlight at least five implications for executives (for a summary, see Figure 4). First, in choosing a coordination mode, executives should thoroughly examine potential context factors.

Figure 4. Managerial implications 24

Coordinating Growth Initiatives in Multi-Unit Firms

Too often, firms in our sample were not aware of the powerful consequences of both internal and external context factors for the effectiveness of their growth strategies. The semiconductor firm that failed to recognise the incompatibility between rapid technological and market-related changes and the directing mode is just one example. However, managers should be aware of significant challenges in changing established coordination modes, especially when these are deeply embedded in their organisational repertoire.40 It is problematic to achieve substantial alterations across modes, as the phenomenon of structural inertia applies to the use of coordination modes as well as to the business units they aim to improve. Indeed, it is possible to imagine potential resistance if a corporation switches from a self-organising to a directing mode. Thus, the greater the adjustment to dimensions of a coordination mode, the larger the rigidities related to norms, values or micro-political coalitions likely to be encountered. In accordance with these arguments, mode changes were more successful in the multi-unit firms we observed only if one target (process or content coordination) was changed at one point in time. This was especially the case when a new coordination mode was associated with the ‘tightening’ of one target, as this decreases the amount of autonomy available to managers at lower hierarchical levels.

Managers should be aware of significant challenges in changing established coordination modes Second, executives should resist the temptation to cherry-pick single elements across modes. In order to become effective, each mode requires a consistent fit across its mechanisms. This becomes especially important when growth initiatives encounter barriers during their evolution, with the consequence that top management is tempted to fine-tune its approach. Our findings reveal that firms that eclectically applied elements of various modes performed less well than more consistently behaving firms. For example, top management at Helvetia was quite concerned about the temptation to micro-manage its growth initiatives and to intervene too heavily in its units. As this was not consistent with its agenda-setting mode, it deliberately resisted the temptation and gave middle management sufficient autonomy to advance each undertaking at their sole discretion. Third, management should transparently communicate and explain the implications of its coordination mode within the organisation. In some cases, top management was quite clear about its approach and expressed it by various means to managers across hierarchical levels; in other situations, organisational members second-guessed what top management had in mind and lost precious time in advancing single undertakings. This was especially relevant when a corporation’s general leadership style was not in line with its approach for coordinating growth initiatives. Fourth, executives should recognise the temporal implications of each mode. They should be aware that such processes cannot be completed quickly, but require a substantial impetus and enforcement within the organisation. Executives should deliberately communicate and steer both the beginning and end of each growth episode. Some initiatives experienced a never-ending, parallel ‘second life’ within the ongoing business of the organisation - behaviour which could lead to a loss of attention and commitment. Relevant stakeholders should be informed precisely when growth initiatives have ended and what results have followed. In positive cases, this has to be celebrated, broadly announced and, eventually, additionally incentivised. In negative cases, the causes for the disappointing results need to be analysed and debated, even if this is sometimes unpleasant and painful. Otherwise, the impression will be that the performance of growth initiatives is irrelevant, regardless of initial claims. Top management at Hu¨gli, for example, closely followed up the end of growth initiatives. The failure of the Tupperware initiative was communicated throughout the organisation, led to the re-allocation of physical and human resources, and was completed in the form of a presentation and debate at a joint meeting of managers. Long Range Planning, vol 43

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Executives should deliberately communicate and steer both the beginning and the end of each growth episode Fifth, management should proactively focus its attention on the particular challenges of each mode. For example, we showed that the appropriate definition of growth initiatives is key for agenda-setting. Thus, rather than rushing into the announcement of new initiatives, corporations following this mode should wait for broad feedback from internal and external sources, increase their sensitivity to emerging trends, and define growth initiatives that are neither too general nor too narrow. Again, we showed that the elaborate and intensive monitoring and coaching of growth initiatives is crucial in the context-setting mode. Thus, management should strongly involve itself in this process and not get side-tracked by new upcoming events or ideas. For example, despite a sudden rise in food raw material prices and strong fluctuations of currencies across Europe, Hu¨gli maintained its focus on the chosen growth initiatives, and closely monitored and coached them. In conclusion, this article offers a novel way to look at the problems associated with coordinating growth initiatives in established multi-unit corporations. We urge managers in charge of corporate growth to deliberately apply the modes of agenda-setting, context-setting, directing or self-organising in accordance with their particular context. As the pressure to achieve corporate growth is unlikely to diminish substantially despite interruptions caused by economic crises, the need to successfully advance those initiatives is likely to persist. The mastery of strategy-making skills, such as the ones outlined here, figures prominently in the achievement of strategic renewal and corporate entrepreneurship. We hope this study helps executives reduce the rate of unsatisfactory growth adventures evident in many organisations.

Appendix 1. Research setting & methods Sample The sample consists of 51 corporations, with headquarters predominantly in Europe and North America. They were selected according to the following criteria. First, each company was required to operate as a multi-unit structure. This was necessary in order to explore the interaction between top managers and managers at lower managerial levels. The business units were formed along criteria such as product, client, geography, value chain or matrix-type combinations among them. In general, each of these units had profit and loss responsibility, although the degree of autonomy fluctuated from firm to firm. Second, we selected corporations with major growth ambitions that had been publicly announced, or where we had contacts signalling us such moves were in train. We were not interested in corporations that just extended their revenue numbers by inflation or normal market growth. Instead we took care that these corporations made extra effort to grow substantially in their individual markets. Third, we selected corporations with such growth impetus across multiple industries, including insurance, food, broadcasting and entertainment, chemicals, computer hardware, consulting, pharmaceuticals, publishing and semiconductors. We deliberately chose this industry sector spread in order to allow for the generalisation of our findings. However, we are aware that this setting opens the possibility of confounding effects within specific industries and firms. Finally, based upon desk research and personal contacts, we approached firms that had performed either well or poorly in their growth initiatives. This was necessary to avoid selection biases and enable us to draw insights from both types of experiences. This ‘extreme’ sampling approach is common in qualitative studies striving for generalised findings. Also, as our framework evolved, we approached four corporations that we considered as representative for each coordination mode. We contacted these firms and asked for various data enabling us to generate ‘thick,’ longitudinal descriptions of their growth events. These serve as the basis for the four mini-cases outlined before. 26

Coordinating Growth Initiatives in Multi-Unit Firms

Research methods We relied on three methods. First, based on a literature review, we developed the framework stated above. Thus, we theoretically derived our four modes for coordinating growth initiatives. They were refined over the course of the project. Second, because the subsample firms were particularly interested in our research questions, they cooperated with us fully. This allowed us to conduct multiple interviews and participate in internal meetings. The firms also provided us with detailed information consisting of corporate memos, business plans and other documents. We jointly conducted workshops to validate our findings and provide feedback. Third, we used the remaining 47 firms to confirm our framework, increase the breadth and depth of our insights and explore interesting nuances of growth management. We interviewed one or two senior executives (such as CEOs, COOs, heads of corporate strategy or corporate development, business unit heads, etc.) in each firm. We used semi-structured interviews for data collection, with each in-depth interview lasting between one and three hours. Appendix 2 shows details of the multi-unit firms taking part in our study. The table shows the type of firms we studied (company activity and home country) and the position of each interviewee within the firm. Interviews were tape-recorded, transcribed and returned to the interviewees for confirmation. We analysed all interviews using the qualitative coding software MaxQDA. In doing so, we coded key constructs and compared cases.

Appendix 2. List of interview partners No. Company name Country

Company activity

1.

Helvetia

Switzerland Insurance

2.

Hu¨gli

Switzerland Food

3.

Lufthansa Cargo Germany

Transport & logistics

4.

Gamma

USA

Biotechnology

5. 6. 7.

ABB Adidas Allianz

Switzerland Technology Germany Consumer goods Germany Financial services

8. 9. 10. 11.

AOL BASF Bertelsmann British Petroleum

Internet Chemicals Publishing Oil & gas

12. Clorox 13. Commerzbank 14. Dell

USA Germany Germany United Kingdom USA Germany USA

15. 16. 17. 18. 19.

Germany Germany USA Switzerland Italy

Postal & transport Utilities E-business Food Utilities

Deutsche Post E.ON eBay Emmi Enel

Consumer products Banking IT hardware

Interview partners’ job roles President, CEO, COO, country CEOs, initiative team leaders, etc. President, CEO, COO, country CEOs, initiative team leaders, etc. CEO, Head of Strategy, Head of Controlling, initiative leaders, etc. CEO, VP Research, VP Sales, initiative team leaders, etc. Vice President, Head of Corporate Strategy Head of Global Operations CEO Germany & Head of Group Development & Vice President, Life Former director, Strategic Alliance Group Senior Vice President, Strategic Planning Vice President, Bertelsmann Corporate Network Chief Financial Officer, Germany Head of Strategy Director, Inhouse Consulting Vice President & General Manager, Germany & Austria Director, Business Development Logistics Corporate Development Vice President, Northern Europe Chief Executive Officer Head of Corporate Strategy (continued on next page)

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Appendix 2.(continued ) No. Company name Country

Company activity

Interview partners’ job roles

20. 21. 22. 23.

Telecommunications Professional service firm Financial services Telecommunications

Vice President, Strategy & Product Management Vice Director Managing Director, GE Capital Europe Vice President, Global Strategy & Business Development Director, Strategic Initiatives Senior Vice President Corporate Development Head of Division, Corporate Strategy & Risk Management & CEO Division Corporate Development Corporate Vice President, Strategy, M&A

Ericsson Ernst & Young GE Capital GN Netcom

Sweden USA USA USA

24. Hewlett Packard USA IT 25. Hilti Liechtenstein Construction 26. Holcim Switzerland Raw materials (cement and aggregates) 27. HypoVereinsbank Germany Banking 28. Infineon Germany Semiconductors Technologies 29. Intel USA Semiconductors 30. ISS Australia Software 31. IWC Switzerland Watches (Richemont) 32. Kuoni Switzerland Travel & tourism 33. Lego Denmark Toy manufacturer 34. Liberty Global USA Media & entertainment 35. Linde Germany Gas & chemicals 36. Medela Switzerland Medical devices 37. Microsoft USA Software 38. Novartis Switzerland Pharmaceuticals 39. O2 United Telecommunications Kingdom 40. OC Oerlikon Lichtenstein Technology & coatings 41. Pfizer USA Pharmaceuticals 42. Phonak Switzerland Hearing systems 43. ProSiebenSat1 Germany Media 44. Samsung South Korea Electronics 45. SAP Germany Software 46. Schott Germany Industry (glass) 47. Swiss Post Switzerland Postal 48. SES USA Telecommunications (satellite) 49. Siemens Germany Technology 50. Sunrise Switzerland Telecommunications 51. Telenor Norway Telecommunications

Chief Executive Officer, Germany Corporate Business Development Chief Operating Officer Head, Strategic Development Director, Global Strategy Managing Director, Strategy Head of Linde Homecare; Linde Gas Chief Executive Officer Director of Corporate Strategy Head of Strategy, Pharma & VP Sales Vice President, Corporate Strategy & Consulting Chief Executive Officer (Coating) Vice President, Sales Chief Executive Officer Head of Business Development Global Strategist Vice President, Research Head of Strategy Vice President & Head of Corporate Development Chief Financial Officer Vice President & Head of Group Strategy Chief Executive Officer Head of Strategy

References 1. G. Bhardwaj, J. C. Camillus and D. A. Hounshell, Continual corporate entrepreneurial search for longterm growth, Management Science 52(2), 248e261 (2006); E. Penrose, The Theory of the Growth of the Firm (3rd edn), Oxford University Press, Oxford (1995); S. Raisch, Balanced structures: designing organisations for profitable growth, Long Range Planning 41(5), 483e508 (2008); S. Raisch and G. von Krogh, Navigating a path to smart growth, MIT Sloan Management Review 48(3), 65e72 (2007); R. C. Wolcott and M. J. Lippitz, The four models of corporate entrepreneurship, MIT Sloan Management Review 49(1), 75e82 (2007); S. A. Zahra (ed.), Corporate Entrepreneurship and Growth, An Elgar Reference Collection, Cheltenham, UK, Northampton, MA, USA (2005). 2. M. Goold, The growth imperative, Long Range Planning 32(1), 127e129 (1999). 28

Coordinating Growth Initiatives in Multi-Unit Firms

3. This definition is consistent with C. Lechner and S. W. Floyd, Searching, processing, codifying and practising e key learning activities in exploratory initiatives, Long Range Planning 40(1), 9e29 (2007). 4. In a study on explorative initiatives, about 60 per cent of all initiatives did not reach satisfactory results (op. cit. 3). This corresponds with other studies showing similar results for strategic initiatives such as J. H. Burgers, F. A. J. Van Den Bosch and H. W. Volberda, Why new business development projects fail: coping with the differences of technological versus market knowledge, Long Range Planning 41(1), 55e73 (2008); R. G. McGrath, Exploratory learning, innovative capacity, and managerial oversight, Academy of Management Journal 44(1), 118e131 (2001); R. G. McGrath, I. C. MacMillan and S. Venkataraman, Defining and developing competence e a strategic process paradigm, Strategic Management Journal 16(4), 251e275 (1995); M. S. Olsen, D. van Bever and S. Verry, When growth stalls, Harvard Business Review 86(3), 50e61 (2008). 5. D. Leonard-Barton, Core capabilities and core rigidities e a paradox in managing new product development, Strategic Management Journal 13(Special Issue S1), 111e125 (1992). 6. For an analysis of the different growth mechanisms, see for example J. H. Dyer, P. Kale and H. Singh, When to ally and when to acquire, Harvard Business Review 82(7e8), 108e115 (2004); M. Treacy, Double-digit Growth: How Great Companies Achieve it - no Matter What, Penguin Group, New York (2003). L. Wang and E. J. Zajac, Alliance or acquisition? A dyadic perspective on interfirm resource combinations, Strategic Management Journal 28(13), 1291e1317 (2007). Other studies analysed companies’ optimal growth rates based on well-established research on the sustainable growth model. A recent analysis of Fortune Global 500 companies, for example, shows that firms should stay in a certain growth corridor between their minimum and maximum growth rate to outperform their competitors S. Raisch and G. von Krogh, Navigating a path to smart growth, MIT Sloan Management Review 48(3), 65e72 (2007). 7. R. Nag, D. C. Hambrick and M. J. Chen, What is strategic management, really? Inductive derivation of a consensus definition of the field, Strategic Management Journal 28(9), 935e955 (2007). 8. S. Ghoshal and C. A. Bartlett, Linking organizational context and managerial action - the dimensions of quality of management, Strategic Management Journal 15(Special Issue S1), 91e112 (1994). 9. For the significance of strategic initiatives in research on corporate entrepreneurship and strategic renewal in particular, see, for example J. Birkinshaw, Entrepreneurship in multinational corporations: the characteristics of subsidiary initiatives, Strategic Management Journal 18(3), 207e229 (1997); J. L. Bower, Managing the Resource Allocation Process, Harvard University, Boston (1970); R. A. Burgelman, A model of the interaction of strategic behavior, corporate context, and the concept of strategy, Academy of Management Review 8(1), 61e70 (1983); S. W. Floyd and P. J. Lane, Strategizing throughout the organization: managing role conflict in strategic renewal, Academy of Management Review 25(1), 154e177 (2000); M. W. Wielemaker, H. W. Volberda, T. Elfring and C. Baden-Fuller, The conditioning and knowledge-creating view: managing strategic initiatives in large firms, in A. M. Pettigrew, H. Thomas and R. Whittington (eds.), Handbook of Strategy and Management vol. 1, Sage Publications, London, Thousand Oaks, New Delhi, 164e190 (2002); S. A. Zahra, A. P. Nielsen and W. C. Bogner, Corporate entrepreneurship, knowledge, and competence development, Entrepreneurship Theory and Practice 23(3), 169e189 (1999). 10. R. A. Burgelman, Intraorganizational ecology of strategy making and organizational adaptation: theory and field research, Organization Science 2(3), 239e262 (1991); R. A. Burgelman, Fading memories - a process theory of strategic business exit in dynamic environments, Administrative Science Quarterly 39(1), 24e56 (1994); R. A. Burgelman, Strategy is Destiny. How Strategy-making Shapes a Company’s Future, The Free Press, New York (2002); B. S. Chakravarthy, G. Mu¨ller-Stewens, P. Lorange and C. Lechner, Defining the contours of the strategy process field, in B. S. Chakravarthy, G. Mu¨ller-Stewens, P. Lorange and C. Lechner (eds.), Strategy Process. Shaping the Contours of the Field vol. 1, Blackwell Publishing, Malden, 1e17 (2003); B. Lovas and S. Ghoshal, Strategy as guided evolution, Strategic Management Journal 21(9), 875e896 (2000). 11. See the Bower-Burgelman process model of strategy-making for the role of the structural and strategic context J. L. Bower, Managing the Resource Allocation Process, Harvard University, Boston (1970); R. A. Burgelman, A process model of internal corporate venturing in the diversified major firm, Administrative Science Quarterly 28(2), 223e244 (1983). For the social context as an important third internal selection mechanism, see K. Marx and C. Lechner, The role of the social context for strategy making: examining the impact of embeddedness on the performance of strategic initiatives, in: S. W. Floyd, J. Roos, C. D. Jacobs and F. W. Kellermans (eds.), Innovating Strategy Process: 135e148 (2005). 12. Op. cit. 5.

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13. See, for example C. I. Barnard, The Functions of the Executive (Thirtieth Anniversary Edition), Harvard University Press, Cambridge, MA (1938); H. Fayol, Administration industrielle et ge´ne´rale, H. Dunod et E. Pinat Editeurs, Paris (1916); P. R. Lawrence and J. W. Lorsch, Organization and Environment: Managing Differentiation and Integration, Harvard Business School Press, Boston, MA (1967); J. G. March and H. Simon, Organizations, Wiley, New York, NY (1958); J. D. Thompson, Organizations in Action: Social Science Bases of Administrative Theory, McGraw-Hill, New York, NY (1967). 14. A. H. Van de Ven, A. L. Delbaq and R. Koenig Jr., Determinants of coordination modes within organizations, American Sociological Review 41(April), 322e338 (1976). 15. J. D. Thompson, Organizations in Action: Social Science Bases of Administrative Theory, McGraw-Hill, New York, NY, (1967); op. cit. 14. 16. This distinction is consistent with the work of Crowston who differentiated dependencies to be coordinated in goals (content) and activities (process) K. Crowston, A coordination theory approach to organizational process design, Organization Science 8(2), 157e175 (1997); T. W. Malone and K. Crowston, The interdisciplinary study of coordination, ACM Computing Surveys 26(1), 87e119 (1994). 17. In line with previous studies, we distinguish between three generic types of coordination mechanisms: centralisation, formalisation, and informal social relations. J. J. P. Jansen, F. A. J. Van den Bosch and H. W. Volberda, Exploratory innovation, exploitative innovation, and performance: effects of organizational antecedents and environmental moderators, Management Science 52(11), 1661e1674 (2006); J. J. P. Jansen, F. A. J. Van Den Bosch and H. W. Volberda, Exploratory innovation, exploitative innovation, and ambidexterity: the impact of environmental and organizational antecedents, Schmalenbach Business Review 57(October), 351e363 (2005). 18. For the recent focus on informal social relations as another generic type of coordination mechanisms, see, for example L. B. Cardinal, Technology innovation in the pharmaceutical industry: the use of organizational control in managing research and development, Organization Science 12(1), 1e18 (2001); L. B. Cardinal, S. B. Sitkin and C. P. Long, Balancing and rebalancing in the creation and evolution of organizational control, Organization Science 15(4), 411e431 (2004); J. Nahapiet and S. Ghoshal, Social capital, intellectual capital, and the organizational advantage, Academy of Management Review 23(2), 242e266 (1998); W. P. Tsai, Social structure of ‘‘Coopetition’’ within a multiunit organization: coordination, competition, and intraorganizational knowledge sharing, Organization Science 13(2), 179e190 (2002). 19. A high degree of competitive rivalry can often be found in industries characterised by factors such as high fixed costs, chronic overcapacity, low levels of product differentiation, industry growth, barriers to entry and industry concentration. See, for example M. E. Porter, Industry structure and competitive strategy: Keys to profitability, Financial Analysts Journal 36(4), 30e41 (1980); M. E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, Macmillan, New York (1985); W. J. Ferrier, Navigating the competitive landscape: the drivers and consequences of competitive aggressiveness, Academy of Management Journal 44(4), 858e877 (2001). For an overview of competitive dynamics research see, for example K. G. Smith, W. J. Ferrier and H. Ndofor, Competitive dynamics research: critique and future directions, in M. A. Hitt, R. E. Freeman and J. S. Harrison (eds.), The Blackwell Handbook of Strategic Management, Blackwell Publishers Inc., Oxford, 315e361 (2001). 20. Environmental turbulence can be characterised by the simultaneous effects of dynamism and complexity. See, for example G. G. Dess and D. W. Beard, Dimensions of organizational task environments, Administrative Science Quarterly 29(1), 52e73 (1984); T. J. Andersen, Integrating the strategy formation process: An international perspective, European Management Journal 22(3), 263e272 (2004). 21. This mode is similar to what Lovas and Ghoshal have termed ‘‘guided evolution’’. B. Lovas and S. Ghoshal, Strategy as guided evolution, Strategic Management Journal 21(9), 875e896 (2000). 22. See, for example C. Zook and J. Allen, Growth outside the core, Harvard Business Review 81(12), 66e73 (2003); N. Garcı´a-Casarejos, N. Alcalde-Fradejas and M. Espitia-Escuer, Staying close to the core: lessons from studying the costs of unrelated alliances in Spanish banking, Long Range Planning 42(2), 194e215 (2009). 23. W. C. Kim and R. Mauborgne, Fair process: managing in the knowledge economy, Harvard Business Review 75(4), 65e75 (1997). 24. All corporations in our sample operated as multi-business unit structures with a corporate centre. However, the diversification of these businesses differed from firm to firm. 25. Due to confidentiality agreements, we have changed the name of the company. 26. For an article focusing on the flexibility and responsiveness required for coping with extremely turbulent environments, see, for example B. Chakravarthy, A new strategy framework for coping with turbulence, Sloan Management Review 38(2), 69e82 (1997). 30

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27. R. M. Cyert and J. G. March, A Behavioral Theory of the Firm, Prentice-Hall Inc., New Jersey, USA (1963). 28. See A. Keegan and J. R. Turner, The management of innovation in project-based firms, Long Range Planning 35(4), 367e388 (2002) for a similar example of a financial services firm in which a self-organising system of innovation projects resulted in political battles and resource wars. 29. For example, the following studies have called for research combining formal and informal control mechanisms B. J. V. Jaworski, J. V. Stathakopoulos and H. S. Krishnan, Control combinations in marketing conceptual framework and empirical evidence, Journal of Marketing 57(1), 57e69 (1993); L. B. Cardinal, S. B. Sitkin and C. P. Long, Balancing and rebalancing in the creation and evolution of organizational control, Organization Science 15(4), 411e431 (2004). 30. For studies analysing the interaction effect of centralisation, formalisation, and informal social relations on exploitative or exploratory activities, see J. J. P. Jansen, F. A. J. Van Den Bosch and H. W. Volberda, Exploratory innovation, exploitative innovation, and ambidexterity: the impact of environmental and organizational antecedents, Schmalenbach Business Review 57(October), 351e363 (2005); L. B. Cardinal, S. B. Sitkin and C. P. Long, op. cit. 29. 31. A. H. Van de Ven, A. L. Delbaq and R. Koenig Jr., Determinants of coordination modes within organizations, American Sociological Review 41(April), 322e338 (1976). 32. This is in line with the other studies analysing the combined effect of these coordination mechanisms: op. cit. 29. 33. M. M. Crossan and I. Berdrow, Organizational learning and strategic renewal, Strategic Management Journal 24(11), 1087e1105 (2003); J. O. Huff, A. S. Huff and H. Thomas, Strategic renewal and the interaction of cumulative stress and inertia, Strategic Management Journal 13(Special Issue), 55e75 (1992); D. Leonard-Barton, Core capabilities and core rigidities - a paradox in managing new product development, Strategic Management Journal 13(Special Issue S1), 111e125 (1992); H. W. Volberda, C. Baden-Fuller and F. A. J. van den Bosch, Mastering strategic renewal - mobilising renewal journeys in multi-unit firms, Long Range Planning 34(2), 159e178 (2001). 34. G. Schreyo¨gg and M. Kliesch-Eberl, How dynamic can organizational capabilities be? Towards a dual-process model of capability dynamization, Strategic Management Journal 28(9), 913e933 (2007). 35. For research theorising on the influence of task uncertainty on the use of coordination mechanisms, see, for example J. G. March and H. Simon, Organizations, Wiley, New York, NY (1958); J.D. Thompson, op. cit. 15; A. Keegan and J. R. Turner, The management of innovation in project-based firms, Long Range Planning 35(4), 367e388 (2002); and A. H. Van de Ven, A. L. Delbaq and R. Koenig Jr., op. cit. 31; These studies found support for the substitution between alternative coordination mechanisms. This is consistent with research on exploration and exploitation which require different styles of management and organisational arrangements. C. A. O’Reilly and M. L. Tushman, The ambidextrous organization, Harvard Business Review 82(4), 74e81 (2004). 36. For the literature on strategy-making, see, for example R. A. Burgelman, Intraorganizational ecology of strategy making and organizational adaptation: theory and field research, Organization Science 2(3), 239e262 (1991); R. A. Burgelman, Strategy is Destiny. How Strategy-making Shapes a Company’s Future, The Free Press, New York (2002). 37. The ‘‘emergent-versus-planning’’ debate was initiated by Igor Ansoff and Henry Mintzberg regarding the contributions of synoptic, deliberate approaches to strategy-making versus more emergent and incremental methods. I. H. Ansoff, Critique to Henry Mintzberg’s ‘‘the design school: reconsidering the basic premises on strategic management’’, Strategic Management Journal 12(6), 449e461 (1991); H. Mintzberg, The design school: reconsidering the basic premises on strategic management, Strategic Management Journal 11(3), 171e195 (1990); see also H. Mintzberg and J. A. Waters, Of strategies, deliberate and emergent, Strategic Management Journal 6(3), 257e272 (1985). 38. S. L. Hart, An integrative framework for strategy-making processes, Academy of Management Review 17(2), 327e351 (1992); S. L. Hart and C. Banbury, How strategy-making processes can make a difference, Strategic Management Journal 15(4), 251e269 (1994). 39. A. Campbell, M. Goold and M. Alexander, Corporate-strategy - the quest for parenting advantage, Harvard Business Review 73(2), 120e132 (1995); D. J. Collis, D. Young and M. Goold, The size, structure, and performance of corporate headquarters, Strategic Management Journal 28(4), 383e405 (2007); M. Goold, Strategic control in the decentralized firm, Sloan Management Review 32(2), 69e81 (1991); M. Goold and A. Campbell, Brief case - from corporate strategy to parenting advantage, Long Range Planning 24(1), 115e117 (1991); M. Goold and A. Campbell, Parenting in complex structures, Long Range Planning 35(3), 219e243 (2002); M. Goold, A. Campbell and M. Alexander, Corporate-level Strategy. Creating Long Range Planning, vol 43

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Value in the Multibusiness Company, John Wiley & Sons, Inc., New York, (1994); M. Goold, A. Campbell and M. Alexander, Corporate strategy and parenting theory, Long Range Planning 31(2), 308e314 (1998); D. R. Sadtler, Brief case: the long road to parenting advantage, Long Range Planning 26(2), 125e127 (1993). 40. This note of caution is justified by the high failure rates of change initiatives. See, for example M. Beer and N. Nohria, Cracking the code of change, Harvard Business Review 78(3), 133e141 (2000) which reports that 70 per cent of all change initiatives fail.

Biographies Prof. Dr. Christoph Lechner is Chair of Strategic Management, Director of the Institute of Management, and Head of the Excellence Initiative on Responsible Corporate Competitiveness (RoCC) at the University of St Gallen, Switzerland. His research interests are in the area of strategy processes, alliance and network strategy, and corporate competitiveness. Dr. Markus Kreutzer is Senior Lecturer of Strategic Management at the University of St Gallen, Switzerland. His research interests are in the area of strategy process, organisational control and coordination, as well as alliance strategy.

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Coordinating Growth Initiatives in Multi-Unit Firms