Portfolio Analysis: Igniting a long-term spirit in a short-term world (XXVI). But first PIMS.
Today´s subject was about the comparative example of using the BCG, the GE-McKinsey, the Shell Directional Policy and the ADL Matrixes; but we switched a bit and decided to show you the meaning of PIMS.
This post is based on a paper written by Wind, Mahajan, and Swire about an empirical comparison of standardized portfolio models (1). Find it in the bibliography below. So let´s start:
Building 4 matrixes for one company.
This study was elaborated by the latter researchers using a company from the list of Fortune Magazine 500.The data utilized was taken from a database called PIMS (Profit Impact of Markets Strategy), which at the time of this example, was “THE” database for industries´ factors. Before proceeding with our comparative example, I need to write about the PIMS project, so we may perhaps push the explanation of the example for the next publication.
The PIMS Project. Believe it or not, the PIMS (Profit Impact of Markets Strategy) project source of data began as an idea by Schoeffler and Associates at the end of the 1960s (2). With time it progressed to the Strategic Planning Institute (SPI). This move enabled considerable expansion of the original database. In 1977, over 1,000 SBUs were contained in the PIMS database. At that time the PIMS was associated with research addressing relationships between market structure, market strategies, and business performance. The PIMS of the seventies offered several reports, but the most publicized use of the PIMS data was a regression model named PAR ROI which contained 37 independent variables and predicted 80 percent of the variable Return on Investment (ROI).
PIMS was funded by subscription from corporations. The subscribers submitted data for strategic business units (SBUs) of their choice and were given access to research findings and to statistics with which they can conduct their own research (3). For the year 1987 the PIMS research database contained 2,600 unique SBU businesses data from more than 400 firms, grouped under 6 categories for a period from 1973 to 1985.
I am sharing the PIMS project history because half of my readers are from developing economies and other emerging post-conflict countries, which in their war contexts couldn’t and/or have not dedicated resources to install a Design Based Research project to gather Industry reliable data like the PIMS initiative. Most private corporations in developing economies do not trust enough to share their streams of sensitive information publicly, not even to universities, in consequence these economies are navigating without genuine or accountable respective SBUs´ industries data that can help managers to create a local reliable SBU portfolio analysis. For our publication today, we will share the general PIMS Categories of Research as they were conceived 40 years ago. If you wish to dig deeper into the PIMS project, please visit all the bibliography that I will share with you today. There are countries that have not started yet to conceive a PIMS initiative, not even in the government & by law as it is required in the USA. There are countries in which not even the industry association is able to get 1% of the PIMS data from corporations. That is why in developing economies the necessity to create DBR for gathering data is a duty that has been forgotten. It is a mortal sin to force developing economies to use the Business Intelligence most sophisticated software’s powered with Artificial Intelligence, if our countries do not have the American tradition of forty years of PIMS data. It is like forcing me to make the Olympic Biles triple twisting double back, if I am just starting the rehabilitation process to gain the strength of my foot muscles, in order to walk without a crutch after a 5th metatarsal fracture.
Table 1 A Six-Stream Categorization of PIMS-Based Research (3)
|Type of Research||Focus||Orientation||Contributing Disciplines|
|Stream 1||Influences on business unit profitability||Mostly practitioner||Marketing|
|Stream 2||Factors affecting market share, market share stability, and marketing strategies||Theory development||Marketing, Industrial Organization, Economics and Financial theory|
|Stream 3||Integration of PIMS and portfolio analysis matrices approaches||Theory testing||Business Policy or Corporate Strategy, Strategic Management|
|Stream 4||Contextual factors moderating the strategy performance linkage||Theory testing||Organization theory and Business Policy or Corporate Strategy|
|Stream 5||Situational factors affecting strategy formulation||Theory Development||Industrial Organization, Economics, and Business Policy or Corporate Strategy|
|Stream 6||Empirical derivation of strategic typologies||Theory Development||Strategic management and Corporate Strategy.|
Developing economies can´t embrace the NAIQIs powered methods if they have not done their DBR homework to at least have a similar PIMS project in their countries. In the USA, it took decades of researcher´s stamina and dedication, to arrive to a PIMS, which even with limitations, it helped the strategic management, industrial organization, marketing, economics, and organization theorists to find relationships of cause and effect for the context of SBUs of that time. The Strategic Planning Institute moved the waves of its time by offering an inventory of strategy research stirred by the PIMS project.
The new context of strategic planning is not agility and fearlessness. On the contrary, all the premises that originated the PIMS project were not philosophically conceived for being faster, but for doing the right thing based on data evidence. The PIMS has of course many limitations. But these databases are important for the sake of the industries. When new technologies arise if countries do not know where they are standing in terms of internal and external critical factors, that is why we have lost the compass during the last 20 years. The NAIQIs (Nanotechnology, Artificial Intelligence, Quantum Supremacy and the Internet) have become the center of our universe, and we are using everything around to fill the gadgets that we have created using NAIQIs. The portfolio analysis techniques that we have shared during this saga, were elaborated by the premises of doing corporate strategy without NAIQIs when our SBUs were the motivation for strategic planning. Nowadays, the NAIQIs are the motivation of corporate strategy, and without noticing, each of the business owners is rushing and running faster to embrace the digital giga-economy as a replacement for our activities. We are trying to insert everything we do in the NAIQI powered devices, particularly in our mobiles or smartphones. And that doesn´t make any sense to us.
The no-sense is so hilarious that in 20 years hand made industries have been barred, particularly those related to architecture design; artistic intensity: music, painting, literary production, reading, theater; artisan manufacturing as sewing; to financing and currency (with cryptos); and now we want to insert our instruction and education inside our mobiles too.
In one phrase: we are not working for the continuous improvement of the industries putting people at the core, but we have shifted it to make everything with our Smartphone, putting cost reduction at the core. Anyhow, we will stop here because of our max limit of words per article, but next Friday, the first thing we will share with you is the comparison of the portfolio models that were created using PIMS data of that time.
Why to choose John Williams´ theme for the movie Schindler’s list? John Williams is one of the most recognized American concert composers and conductors who has dedicated his life to design and create the most iconic film scores of all time (4). Born before the WWII, Williams has gathered decades of experience in orchestrating pieces of music much better than the modern synthesizer. Throughout his extensive career Williams created some of the most memorable music in movie history, including the scores and iconic theme songs for nine of the Star Wars films (1977, 1980, 1983, 1999, 2002, 2005, 2015, 2017, and 2019) and the first three Harry Potter films (2001, 2002, and 2004). He also composed themes for several TV programs and for the 1984, 1988, 1996, and 2002 Olympic Games. Williams received has received many honors and awards for his work. He was nominated for more than 50 Academy Awards and won 5: for his adaptation of the musical Fiddler on the Roof (1971), for Jaws (1975), for the first Star Wars (1977), for E.T. The Extra-Terrestrial (1982), and for Schindler’s List (1993). He was also the recipient of Emmy Awards and more than 20 Grammy Awards, in between other lists of honors.
Schindler´s list song that we shared last week wake up our feelings. Feelings of sweetness, sadness, and a huge solitude of hope. Itzhak Perlman’s violin solos are always amazing.
Song for today. Today we have chosen a classical from composer Johann Pachelbel in the hands of George Winston, with his variations of the Pachelbel´s Canon (1982). We also have chosen the version of Ensemble Arpabaleno. And finally, the same musical work was conducted by RTVE (Adrian leaper) Orquesta Sinfonica Navidad (2008). Which do you like the most?
Blessings and see you again next week. Enjoy your weekend. Thank you for reading to me.
Sources of reference utilized today:
- Wind, Yoram; Mahajan, V.; Swire, D. An empirical Comparison of Standardized Portfolio Models. Journal of Marketing, Vol 47 Spring 1983. Pp 89-99
- Anderson, Carl and Paine, Frank. PIMS: a reexamination Academy of Management Review – July 1978
- Ramanujam, V. and Venkatraman, N. An Inventory and Critique of Strategy Research Using the PIMS Database. Academy of Management Review, 1984, Vol. 9, No. 1, 138-151
Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY. Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated.
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