Thomas Bieger - An Introduction to Management Studies

Bieger, Heer, Kuster, Tuckermann

St. Gallen, July 2021

[13] On was founded in 2010 to revolutionize running experience. The idea was radical: soft landings followed by explosive push-offs ( on-running.com). The three company founders were united by their love of running. Former professional athlete, three-time duathlon world champion, and multiple Ironman winner Olivier Bernhard came up with the idea of developing running shoes for the perfect running experience, along with Swiss ETH engineer David Allemann and HSG graduate Caspar Coppetti. They were driven by the mission “to develop a product range characterized by Swiss engineering” ( on-running.com). Their running shoes are based on a proprietary, patented technology, so-called cloud technology.

The founding team is strongly cohesive, as company outsiders soon realize. It positions its innovative product in a global growth market (running shoes) estimated to have a volume of USD 20 billion per year (Müller, 2015). In doing so, the company pursues its growth strategy through penetrating the European market and through accessing new geographical markets overseas, beginning with a branch in Portland, Oregon (USA). Other target markets include Australia, Latin America, and Asia. To expand its product range, On launched its first clothing collection in 2016. The aim, as with its shoes, was to offer clothes that do not follow fashion and change every season. Despite this expansion, however, the focus has remained on shoes (Iseli, 2017).

On is headquartered in Zurich-West. Indirect distribution is handled by its subsidiaries, which in turn supply specialist retailers. End customers are served by independent specialist stores in the respective countries. On gears its pricing toward achieving premium positioning in its target markets. For example, its shoes are slightly cheaper in the USA than in Switzerland.

On’s business processes are strongly oriented toward outsourcing and long-term cooperation. Design and development are based largely at the Zurich headquarters. Its shoes are produced by selected partner companies in Vietnam while logistics are handled and scaled by partner companies. On strongly emphasizes ongoing performance innovation. Thus, after developing its original model (“Cloud”), the company soon developed new products, including “Cloudflash,” its fastest shoe ever. In order to cater to new trends, On has [14] also developed specialized trail running shoes and benefits from sneakers becoming everyday shoes.

On’s culture is sporty and creative. The company has no fixed offices and maintains contacts at sporting events. The founders are actively involved in employee meetings (Ruschmann, 2018). On cultivates its stakeholders foremost through personal contacts. Staff must fit the company culture and are addressed personally by the founders at employee meetings (see above). Staff and founders maintain personal contact with purchasers (i.e., specialist retailers) across the world. One example is jointly organized running events such as “Run to Switzerland.” Organized in London, this event involved Londoners jogging together to the Swiss embassy. Other important stakeholders include manufacturers in Vietnam, which are carefully selected and required to meet high quality standards. On also boasts prominent shareholders including Roger Federer. However, the three founders still have unrestricted control over the company (Ruschmann, 2018).

In terms of the St. Gallen Management Model (SGMM), On can be described as follows (for an overview of the SGMM’s task perspective, see Figure 1-1):

– Environmental spheres: Technological, economic and social environments are relevant, for example, to developing purchasing power in the target countries and to keeping pace with the trend toward running.

– Stakeholders: The main focus is on employees, end customers (runners), and direct customers (retailers). Other important stakeholder groups include service partners (for production and logistics) and financial backers (shareholders).

– [15] Interaction issues: The company’s interactions with other actors (e.g., production partners in Vietnam) involve key issues such as ongoing innovation.

– Business processes: Disruption and differentiation occur along the entire value chain — from product through production to marketing, sales, and organizational form. Key processes: structuring the value creation process through product development and involving production partners; outsourcing production and logistics; distribution (i.e., imports and market development by subsidiaries); retailing via existing specialist dealer networks.

– Structuring forces: Organizational value creation is structured by various ”forces” such as governance, strategy, structure, and culture. In a start-up, corporate governance is typically not yet well defined. At On, it is based mainly on a strong founding team with a clear purpose. On’s strategy focuses on innovative running shoes and directly related products such as clothes; growth is achieved through market penetration, market development, and product range expansion. On is a flat and lean organization whose structure corresponds to the value chain. Its culture is innovative and sporty.

– Development modes: Continuous optimization and further development based, among others, on consistent internationalization (due to the small home market Switzerland), as well as on the scalability of systems and processes.

This case study was developed without the involvement of On using generally available sources. It introduces and illustrates the interrelationships within the St. Gallen Management Model.

– [16] On was founded in 2010 in Zurich.

– Approx. 1000 employees from 50 countries (ca. 40 % based in Zurich; another 5000 staff in outsourced production and logistics).

– International focus, only 5 % of sales in Switzerland; the largest markets are the USA, Germany, Japan, UK, Switzerland, Austria, and China.

– On is one of the fastest growing sports brands in the world; average revenue growth of 85 % per year since 2010.

A. What key tasks does On’s management face in the growth phase described above?

B. Create a system that describes On’s dependencies on environmental spheres and stakeholders (i.e., how these forces impact the company).

[17] Management is an action-oriented science. It deals with the organization and design of purpose-oriented socio-technical systems. Its strong practical relevance means that management science interfaces with a wide variety of disciplines (e.g., economics, law, sociology, psychology, ethics, engineering, and computer science). The term “management” derives from Latin manus (hand) and agere (to lead). Ultimately, “management” is about goal-oriented leadership. At the same time, “the management” means a community of managers in an organization.

Organizations are embedded in a diverse environment and face the demands of different stakeholders. They also involve division of labor and functionally differentiated value creation. Managers must (1) optimally configure short- and long-term organizational value creation in the face of a constantly changing environment and (2) critically question their own managerial activities in the process. To do so, they need an integrative approach (see Section 1.4 1.4 Integrative Management [28] The St. Gallen tradition has consistently understood management as integrative. Integrative management can be defined as the design and steering of an organization as a purpose-oriented socio-technical system that consciously and responsibly handles significant force fields and conflicting goals (Bieger et al., 2021). These force fields and conflicting goals include the different perspectives of the individual corporate functions, but also different stakeholder expectations, or the deliberation between short-term, operational, and long-term strategic views, and, in particular, an integrated execution of all management tasks (analysis, planning, control). Management models, as simplified representations of a complex reality, are intended to support managers in performing these tasks. ).