Abstract
In the early 1990s, DSM went through its third wave of organizational decentralization, called Concern 2000, with the overall theme to ‘decentralize, unless…’. Thus, the question arose whether business strategy could also be decentralized. At the same time, the company wanted to install a better system of performance measurement. A first proposal to do so came from McKinsey, the consulting firm hired to assist with Concern 2000: it amounted to a ‘shareholder value’ approach. When the company had rejected this approach, it installed an internal working group to develop an alternative system. Building on the marketing concepts of IMPACT and a suggestion by Jeannet to adopt a ‘strategic dialogue’, this group developed a home-grown system of business strategy development and performance measurement: the Business Strategy Dialogues.
I regard the Business Strategy Dialogues (BSDs) as one of the strongest cohesive factors within DSM. BSDs offer a joint language and frame of reference. As they were increasingly developed and refined within DSM, they provided discipline and rigor. They allowed the abandonment of the yearly planning cycle, giving us time for proper execution. In many other companies, the strategy process is too fragmented and driven only by superficial, directional statements
—Peter Elverding, interview, 2013.
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Notes
- 1.
The remaining 31 % was sold off by the Dutch State in 1996.
- 2.
“Beursnotering dwingt DSM tot scherper kiezen,” Het Financieele Dagblad, 13 December 1990: 11.
- 3.
Nawoord van de Raad van Bestuur bij Strategie DSM 2000, Extra Edition Management Letter, October 1990. This quote and the following ones were translated by the authors from Dutch.
- 4.
For the description in this chapter how BSDs grew out of the Concern 2000 project on performance measurement, the authors are indebted to Prof. Dr. Mariëlle Heijltjes who documented this process in her case studies, “Performance measurement at DSM: Linking the company’s long term strategy with its short term actions” and “An Alternative Proposal to Performance Measurement” (1996).
- 5.
See “DSM: chemie en polymeren (1930–2000)” on http://www.chemelot.nl/ (accessed 1 Dec 2014).
- 6.
Based largely on “Performance measurement at DSM: Linking the company’s long term strategy with its short term actions” (Heijltjes 1996).
- 7.
This shareholder value approach had just been published in the now well-known book Valuation: Measuring and Managing the Value of Companies by T. E. Copeland, T. M. Koller and J. Murrin (NY, 1990).
- 8.
It was revived a number of years later when Boston Consulting Group proposed using a Cash-Flow Return on Investment (CFROI) which DSM adopted for a decade until a new CFO (Rolf-Dieter Schwalb) decided to return to the more traditional financial measures like Return on Capital Employed (ROCE).
- 9.
His Ph.D. dissertation dealt with Corporate Social Responsibility and Corporate Social Reporting (Maatschappelijke Verantwoordelijkheid en Maatschappelijke Berichtgeving van Ondernemingen, Leiden, Stenfert Kroese, 1981), which perfectly matched DSM’s convictions about People-Planet-Profit and Sustainability. In the dissertation an indicator-approach to Corporate Social Reporting was proposed.
- 10.
Although there is no direct translation of the term chaebols in English, the essence is a conglomerate of businesses in Korea, usually owned by a single family.
- 11.
- 12.
Michael Porter was professor at Harvard Business School. His book Competitive Strategy (NY: The Free Press, 1980) was the leading textbook at the time on applying Industrial Economics to Business Strategy.
- 13.
See P. van Cayseele and H. Schreuder, “Strategische Groepen: Een Overzicht van Het Onderzoek,” Maandblad voor Accountancy en Bedrijfseconomie, Vol. 63, No. 11, 1989.
- 14.
Again, there is a link to the strategy literature, in particular on the ‘resource-based view of strategy, dynamic capabilities and business models.’ See: S. Douma and H. Schreuder, Economic Approaches to Organizations, Chapters 9–12, 5th edition (London: Pearson, 2013).
- 15.
What did happen occasionally was that two people would take turns at fulfilling these two roles. We use only the male gender in the text, because the first generations of facilitators and challengers were indeed all male.
- 16.
The Business unit ASP consisted of three products: ABS, SMA and PC (Polycarbonate).
- 17.
It was not unusual that this follow-through was less than seamless for businesses, which just came out of intense discussions and were glad that their strategic mission had been approved. Later, the BSD was to be finalized by the Strategic Value Contract, which also served as a very useful device to summarize the main elements of the BSD (see Chap. 7).
- 18.
The average frequency within DSM turned out to be every 3 years or so.
- 19.
See also De Rooij (2007: 139–140). De Rooij explains the decision to acquire external ABS-technology by the fact that DSM wanted to diversify fast and needed “large plants,” which had been proven externally on a large scale. As will become apparent in the main text later, the Japanese technology was to become sub-scale quite rapidly despite the best efforts of DSM Research to improve the process.
- 20.
With this strategy the business obtained a longer ‘lease on life’ but it also recognized that life would, in the end, probably be limited. However, the strategy was implemented successfully and eventually led to an even further cost reduction of more than Dfl 30 million. In 1999, one of the main competitors in the ABS business—BASF—made an offer to acquire the business, which DSM accepted.
- 21.
Minutes of the 24th meeting of the Managing Board, held 2 June 1992. Translated by the authors.
References
Copeland, T.E., T.M. Koller and J. Murrin, Valuation: Measuring and Managing the Value of Companies, NY: John Wiley, 1990
Douma, S. and H. Schreuder, Economic Approaches to Organizations, 5th edition (London: Pearson, 2013).
Heijltjes, M., “Performance measurement at DSM: Linking the company’s long term strategy with its short term actions” and “An Alternative Proposal to Performance Measurement” Case studies, University of Maastricht, 1996.
Porter, M., Competitive Strategy, NY: The Free Press, 1980
Schreuder, H., Maatschappelijke Verantwoordelijkheid en Maatschappelijke Berichtgeving van Ondernemingen, Leiden, Stenfert Kroese, 1981
Schreuder, H., “Strategic Monitoring at a Chemical Company,” Long Range Planning, Vol. 28, No. 6, 1995: 69–77.
Van Cayseele, P. and H. Schreuder, “Strategische Groepen: Een Overzicht van Het Onderzoek,” Maandblad voor Accountancy en Bedrijfseconomie, Vol. 63, No. 11, 1989.
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Jeannet, JP., Schreuder, H. (2015). Developing Business Strategy Dialogues at DSM. In: From Coal to Biotech. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-46299-7_5
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