What is strategy?

- Presentation Transcript
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Nobody really knows what strategy is.

The Economist 10/08/09 Marc Sniukas 2.

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Nobody really knows what a strategy is or how to develop a good one.

Costas Markides, Professor London Business School 10/08/09 Marc Sniukas 3. What is Strategy? A (very) brief introduction. 4. Why do we need a strategy? o Without a strategy, we fill our time with what we want, or what we think the boss wants, or by reacting. o Without a strategy, time and resources are easily wasted on piecemeal, disparate activities. 10/08/09 Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 Marc Sniukas 5. Five Definitions o Strategy as o a consciously and purposefully developed plan ; o a ploy to outmaneuver a competitor; o a pattern in a stream of actions, whether intended or not; o a position defined either with respect to a competitor, in the context of a number of competitors, or with respect to markets; and as o a perspective , i.e. a certain mindset of how to perceive the world. Mintzberg, H. (1987). "The Strategy Concept I: Five Ps For Strategy." California Management Review 30(1) Fall: 11-24. 10/08/09 Marc Sniukas 6. Mintzbergs 10 Schools o Being unsatisfied with the strategy discussion, Henry Mintzberg, professor at McGill University Canda, set out to structure the literature and thinking on strategy. He discovered 10 different schools of thought on strategy, arguing that every one of them describes a specific part of strategy. o Just like the blind men describe the elephant. 10/08/09 Marc Sniukas 7. Mintzbergs 10 Schools o Prescriptive o Design

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Planning Positioning Descriptive Configuration Cognitive Cultural Entrepreneurial Environmental Learning Power

Marc Sniukas 10/08/09 8. Mintzbergs 10 Schools : The 3 Prescriptive ones o Design School o Strategy as a process of conception o achieving the essential fit between internal strengths & weaknesses and external opportunities & threats o '70s 10/08/09 Marc Sniukas 9. Mintzbergs 10 Schools : The 3 Prescriptive ones o Planning School o Strategy as a formal process o takes on most of the design schools assumptions o Process: Formal, Decomposable, Steps o supported by checklists and formal techniques o Igor Ansoff o mid '70s 10/08/09 Marc Sniukas 10. Mintzbergs 10 Schools : The 3 Prescriptive ones o PositioningSchool o Strategy as an analytical process o generic positions selected through formalized analyses of industry situations o Michael Porter o '80s 10/08/09 Marc Sniukas 11. Mintzbergs 10 Schools : The 7 Descriptives ones o Configuration School o Strategy as a process of transformation o process varies according to company configuration 10/08/09 Marc Sniukas

12. Mintzbergs 10 Schools : The 7 Descriptives ones o Cognitive School o Strategy as a mental process and creative interpretations 10/08/09 Marc Sniukas 13. Mintzbergs 10 Schools : The 7 Descriptives ones o Cultural School o Strategy as a social process rooted in the companys culture o focuses on common interest & integration 10/08/09 Marc Sniukas 14. Mintzbergs 10 Schools : The 7 Descriptives ones o Entrepreneurial School o Strategy as a visionary process o Intuition o The leader is central 10/08/09 Marc Sniukas 15. Mintzbergs 10 Schools : The 7 Descriptives ones o Environmental School o Strategy as a reactive process o influenced by the demands of the environment 10/08/09 Marc Sniukas 16. Mintzbergs 10 Schools : The 7 Descriptives ones o Learning School o Strategy as an emergent process o Organisational Learning o formulation & implementation interwine 10/08/09 Marc Sniukas 17. Mintzbergs 10 Schools : The 7 Descriptives ones o Power School o Strategy as a process of negotiation o Micro vs Macro, i.e. company vs individual interests o political o focuses on personal interest 10/08/09 Marc Sniukas 18. Dimensions of Strategy Process, Content, Context 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 19. Strategy Process 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004

20. Strategy Process 10/08/09 Marc Sniukas Strategy Process Strategist Strategy Organization Following Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 21. Strategy Formation 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 22. Realized Strategy Strategy Formation Activities 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 23. Strategy Content 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 24. Strategy Context 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 25. Strategic Tensions 10/08/09 Marc Sniukas Dimension Topic Tension Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 26. o Setting Strategy o A great strategy has pieces, but they form a coherent whole! 10/08/09 Marc Sniukas 27. Putting strategy in its place Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 o Strategic Analysis o Industry Analysis o Customer/marketplace trends o Customer activity cycle o Environment forecast o Competitor analysis o Assessment of internal strengths, weaknesses, resources, culture o Stakeholders o Mission o Fundamental purpose o Values o Vision o Objectives o Specific targets, short & long term Strategy! The central integrated, externally oriented concept of how we will achieve our objectives
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Supporting Organizational Arrangements Structure Process Symbols Rewards People Activities Functional policies

Its not about the sequence. The robustness of the whole is key ! 10/08/09 Marc Sniukas 28. The five major elements of strategy Economic Logic 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 Arenas Staging Differentiators Vehicles 29. The five major elements of strategy Where will we be active? How will we get there? How will we win in the market place? What will be our speed and sequence of moves? How will we obtain our returns? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 Economic Logic Arenas Staging Differentiators Vehicles 30. The five major elements of strategy o Strategy is an integrated set of choices. o Arenas Where will we be active? o Vehicles How will we get there? o Differentiators How will we win in the market place? o Staging What will be our speed and sequence of moves? o Economic Logic How will we obtain our returns? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 31. The five major elements of strategy o Arenas: Where will we be active? o With how much emphasis ? o Which product categories ? o Which market segments ? o Which geographic areas ? o Which core technologies ? o Which value-creating stages ? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 1 32. The five major elements of strategy o Vehicles: How will we get there? o The means for attaining the needed presence in the identified arenas o Internal development ? o Joint ventures / alliances ? o Licensing / franchising ? o Acquisitions ? o Which channels ? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 2

33. The five major elements of strategy o Differentiators: How will we win? o The reasons that customers will choose us o Image ? o Customization ? o Price ? o Styling ? o Product reliability ? o Anything else ? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 3 34. The five major elements of strategy o Staging: What will be our speed & sequence of moves? o Driven by availability of resources, urgency, need for credibility and need for early wins o Speed of expansion ? o Sequence of initiatives ? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 4 35. The five major elements of strategy o Economic Logic: How will we obtain our returns? o How profits will be generated, above the firms cost of capital. o Lowest costs through scale advantages ? o Lowest costs through scope and replication advantages ? o Premium prices due to unmatchable service ? o Premium prices due to proprietary features ? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 5 36. The five major elements of strategy o Economic Logic: How will we obtain our returns? o What generates cash ? o What decides your margins ? o What generates market share growth ? o How fast do sales turn into cash ? o What numbers / ratios tell us were successful ? o What are our underlying core capabilities ? 10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 5

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Testing the Quality of Your Strategy

10/08/09 Marc Sniukas 38. Some key evaluation criteria Does your strategy fit within whats going on in the environment? Does your strategy exploit your key resources & capabilities? Is your strategy implementable? Do you have enough resources to pursue this strategy? Are the elements of your strategy internally consistent? Will your envisioned differentiation be sustainable? 10/08/09 Marc Sniukas 39. Some key evaluation criteria o Does your strategy exploit your key resources & capabilities? With your particular mix of resources, does this strategy give you a good head start on competitors? Can you pursue this strategy more economically than competitors? o Will your envisioned differentiation be sustainable? Will competitors have difficulty matching you? If not, does your strategy explicitly include a ceaseless regimen of innovation & opportunity creation? o Are the elements of your strategy internally consistent? Have you made choices of arenas, vehicles, differentiators, and staging, and economic logic? Do they all fit and mutually reinforce each other? o Do you have enough resources to pursue this strategy? Do you have the money, managerial time & talent, & other capabilities to do all you envision? Are you sure youre not spreading your resources too thinly, only to be left with a collection of feeble positions? o Is your strategy implementable? Will your key constituencies allow you to pursue this strategy? Can your organization make it through the transition? Are you & your management team able & willing to lead the changes? o Do you have enough resources to pursue this strategy? Do you have the money, managerial time & talent, & other capabilities to do all you envision? Are you sure youre not spreading your resources too thinly, only to be left with a collection of feeble positions? 10/08/09 Marc Sniukas 40. Putting strategy in its place o Strategic Analysis o Industry Analysis o Customer/marketplace trends o Customer activity cycle o Environment forecast o Competitor analysis o Assessment of internal strengths, weaknesses, resources, culture o Mission o Fundamental purpose o Values o Vision o Objectives o Specific targets, short & long term

Strategy! The central integrated, externally oriented concept of how we will achieve our objectives
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Supporting Organizational Arrangements Structure Process Symbols Rewards People Activities Functional policies

10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 41. What drives competition in the industry? Porters Five Forces Suppliers Potential Entrants Buyers Substitutes The Industry Threat of new entrants Bargaining power of customers / buyers The threat of substitue products Bargaining power of suppliers Competition within the industry An industry = the group of companies producing products fulfilling the same customer needs. 10/08/09 Marc Sniukas 42. What drives competition in the industry? Porters Five Forces 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 43. Anything else? 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 44. Lets move from the industry to the business! Suppliers Potential Entrants Buyers Substitutes The Industry 10/08/09 Marc Sniukas 45. Industries, Markets and Businesses 10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 46. Business System, Model & the value chain o A business system is the chain of activities through which a product is developed, produced and delivered to its end-customers. o A business model describes the way a company has selected to exploit its capabilities, relative to the industry characteristics. o The value chain is the chain of activities through which a product is developed, produced and delivered to it end-customers, when done by one company . Adapted from Prof. Xavier Gilbert & Jim Pulcrano, IMD 10/08/09 Marc Sniukas 47.
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Analyzing your companys value chain

10/08/09 Marc Sniukas 48. The Activity System Value Chain

An activity system is an integrated set of value creation processes leading to the supply of product and/ or service offerings. This activity system is frequently referred to as the value chain . (Porter, 1985)

10/08/09 Marc Sniukas Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 49. The Activity System Primary and Support Activities Primary Activities Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Procurement Technology Development HRM Firm Infrastructure Support Activities Activities associated with receiving, storing, and disseminating inputs Activities associated with transforming inputs into final products Collecting, storing, and physically distributing products/ services to buyers Providing a means by which buyers can purchase the product Providing service to enhance or maintain the value of products Purchasing of inputs to facilitate all other activities The improvement of technologies throughout the firm Activities associated with the management of personnel All general activities that support the entire value chain 10/08/09 Marc Sniukas Following Strategy: Process, Content, Context 3rd edition De Wit & Meyer Thomson Learning 2004 50. o Implementing Strategies o Building a Strategy-Focused-Organization o The Balanced Scorecard o Strategy Maps 10/08/09 Marc Sniukas 51. Putting strategy in its place o Strategic Analysis o Industry Analysis o Customer/marketplace trends o Customer activity cycle o Environment forecast o Competitor analysis o Assessment of internal strengths, weaknesses, resources, culture o Mission o Fundamental purpose o Values o Vision o Objectives o Specific targets, short & long term Strategy! The central integrated, externally oriented concept of how we will achieve our objectives
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Supporting Organizational Arrangements Structure Processes Symbols

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Rewards People Activities Functional policies

10/08/09 Marc Sniukas Are you sure you have a strategy? Donald C. Hambrick and James W. Frederickson Academy of Management Executive 2001 Vol. 15 No. 4 52. Aligning & Focusing Resources on Strategy Business Units Executive Team Information Technology Balanced Scorecard Human Resources Budget & Capital Investments Strategy Adapted from The Strategy-Focused-Organization Robert Kaplan and David Norton Harvard Business School Press 2001 10/08/09 Marc Sniukas 53. The Principles of a Strategy-Focused-Organization Balanced Scorecard Strategy Mobilize Change through Executive Leadership Mobilization Governance Process Strategic Management System Make Strategy a Continual Process Linking Budgets and Strategies Analytics and Information Systems Strategic Learning Translate the Strategy to Operational Terms Strategy Maps Balanced Scorecard Align the Organization to Strategy Corporate Roles Business Unit Synergies Shared Service Synergies Make Strategy Everyones Everyday Job Strategic Awareness Personal Scorecards Balanced Paychecks 10/08/09 Marc Sniukas Adapted from The Strategy-Focused-Organization Robert Kaplan and David Norton Harvard Business School Press 2001 54. Learning & Growth Perspective Internal Perspective Customer Perspective Organizational Capital Information Capital Human Capital o Operations Management o Supply o Production o Distribution o Risk Mgmt o Customer Management o Selection o Acquisition o Retention o Growth o Innovation o Opportunity ID o R&D Portfolio o Design/Develop o Launch o Regulatory & Social o Environment o Safety & Health o Employment o Community Customer Value Proposition Price Quality Availability Selection Functionality Brand Partnership Service Product / Service Attributes Relationship Image Culture

Leadership Alignment Teamwork Long-Term Value Expand Revenue Opportunities Enhance Customer Value Increase Asset Utilization Improve Cost Structure Productivity Strategy Growth Strategy 10/08/09 Marc Sniukas Financial Perspective 55. Financial Perspective Long Term Shareholder Value Productivity Strategy Improve Cost Structure Increase Asset Utilization Expand Revenue Opportunities Growth Strategy o Reduce cash expenses o Eliminate defects o Improve yields o Manage capacity from existing assets o Make incremental investments to eliminate bottlenecks o New sources of revenue o New products o New markets o New partners The strategy for growth, profitability, and risk viewed from the perspective of the shareholder . Enhance Customer Value
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Improve profitability Expand relationship with existing customers

10/08/09 Marc Sniukas 56. Customer Perspective Price Quality Availability Selection Functionality Brand Partnership Service Product / Service Attributes Relationship Image Customer Value Proposition The strategy for creating value and differentiation from the perspective of the customer. 10/08/09 Marc Sniukas 57. Customer Perspective Price Quality Availability Selection Functionality Brand Partnership Service Product / Service Attributes Relationship Image Operational Excellence Strategy Differentiator General Requirement Quality & selection in key categories with unbeatable prices. Smart Shopper 10/08/09 Marc Sniukas 58. Customer Perspective Price Quality Availability Selection Functionality Brand Partnership Service Product / Service Attributes Relationship Image Customer Intimacy Strategy Differentiator General Requirement Personal service tailored to produce results for customers and build long-term relationship. Trusted Brand 10/08/09 Marc Sniukas 59. Customer Perspective 10/08/09 Produced by Marc Sniukas Price Quality Availability Selection Functionality Brand Partnership Service Product / Service Attributes Relationship Image Product Leadership Strategy Differentiator General Requirement Unique products and services that push the envelope. The Best Product Marc Sniukas 60. Internal Perspective The strategic priorities for various business processes, which create customer and shareholder satisfaction. Operations Management Processes Customer Management Processes Innovation Processes Regulatory & Social Processes Processes that produce & deliver products & services. Processes that enhance customer value . Processes that create new products & services . Processes that improve communities & the environment.

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Supply Chain Mgmt Operations Efficiency cost reduction, quality & cycle time improvements Capacity Mgmt Production Distribution Risk Mgmt Selection Acquisition Retention Growth Solution Development Customer Service Relationship Mgmt Advisory Services Invention Product Development / Design Speed to Market / Launch Joint Ventures / Partnerships Opportunity ID R&D Portfolio Environment Safety & Health Employment practices Community Social

Achieve Operational Excellence Increase Customer Value Build the Franchise Be a Good Corporate Citizen 10/08/09 Marc Sniukas 61. Strategic Internal Processes 10/08/09 Marc Sniukas Internal Process Strategy Operations Management Processes Customer Management Processes Innovation Processes Operational Excellence o Supply Chain Mgmt o Operations Efficiency o Capacity Mgmt Meet basic requirements Meet basic requirements Customer Intimacy Meet basic requirements
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Solution Development Customer Service Relationship Mgmt Advisory Services

Meet basic requirements Product Leadership Meet basic requirements Meet basic requirements
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Invention Product Development Exploitation

62. Operations Management Strategies for Achieving Operational Excellence Improve Cash Flow 10/08/09 Marc Sniukas Supply Production Distribution Risk Mgmt o Develop supplier relations o Lower cost of ownership o Just-in-Time delivery o High-quality supply o New ideas from suppliers o Supplier partnerships o Outsource mature nonstrategic services o Improve inventory management o Lower cost of production o Continous process & quality improvements o Process cycle time o Fixed asset utilization o Improve hardware performance o Working capital efficiency o Reduction of asset downtime o Create flexible infrastructure o Simplify where possible o Lower cost to serve o Responsive delivery time o On spec; on Time o Enhance quality o Improve inventory management o Financial risk / high credit rating o Operating risk o Technology risk o Elimination of environmental, safety, & health-threathening incidents 63. Customer Management Strategies for Increasing Customer Value 10/08/09 Marc Sniukas Selection Acquisition Retention Growth o Understand segments & needs o Capture knowledge about customers o Screen unprofitable customers o Target high-value customers o Strategic accounts o Manage the brand o Communicate value proposition o Customize mass marketing o Acquire/convert leads o Develop dealer network o Premium customer service o sole source partnerships o Service excellence o Lifetime customers o Expand, deepen, or redefine relationships with existing customers o Become trusted advisor & consultant o Cross-selling o Solution selling o Partnering/ integrated management o Customer education

Integrate with the customers value chain to deliver solutions 64. Customer Management Strategies for Increasing Customer Value o Empower front-line employees with information they need o Ensure that everyone knows the customer o Make company knowledge available to customers o Strategic Account Management o Increase customer loyalty o Optimize packaging o Redesign order fullfillment o Streamline customer interactions o CRM / integrated mgmt system o Identify, upgrade, or exit unprofitable accounts o Grow & retain high-value customers (HVCs) o Provide premium services to retain HVCs o Broaden the relationship with HVCs o Excel at customer interaction o Best-in-class franchise / distribution teams
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10/08/09 Marc Sniukas 65. Innovation Management Strategies for Building the Franchise 10/08/09 Marc Sniukas Identify Opportunities R&D portfolio mgmt Design & Development Launch o Anticipate customer needs o Identifiy new opportunities o Ensure that ideas flow o Choose & manage mix of projects o Extend products to new applications o collaborate o Manage products through development stages o Reduce development cycle time o Reduce development costs o Reuse what other parts of the company have already learned o Ramp-up time o Production cost, quality, cycle time o Achieve initial sales goals o Reduce time to market 66. Regulatory & Social Strategies for Being a Good Corporate Citizen 10/08/09 Marc Sniukas Environment Safety & Health Employment Community o Energy & resource consumption o Water & air emissions o Solid waste disposal o Product environmental impact o Environmental incidents o Safety incidents o Health o Diversity o Employ the unemployable o Community programs o Aliances with nonprofits o Manage relationships with external, legitimizing stakeholders

Maintain public support 67. Learning & Growth Perspective The priorities to create a climate that supports organizational change, innovation, and growth. Organizational Capital Human Capital Information Capital + + o Skills o Knowledge o Training o Functional Excellence o Leadership skills o Integrated view of the company among employees o Best practice sharing o Systems o Databases o Networks o Infrastructure o Applications o New technology that encourages & aids process improvements o Culture o Leadership o Aligment of personal goals w/ BSC / Strategy o Teamwork o Awareness o understanding of strategy o Readiness o Motivation o morale & satisfaction o employee feedback 10/08/09 Marc Sniukas 68. The Balanced Scorecard Long term Internal Short term If we succeed, how do we look to our shareholders? External To achieve our vision, how must we look to our customers? To satisfy our customers, which processes must we excel? To achieve the strategy, how must the organization learn? 10/08/09 Marc Sniukas 69. Strategy Maps & the Balanced Scorecard 10/08/09 Marc Sniukas Strategy Map Balanced Scorecard Action Plan Perspective Objectives Measurement Target Initiative Budget Financial Profitability ROCE 25% XXX Customer Attract & retain more customers # repeat customers # customers 70% +12% Implement CRM Quality Mgmt XXX XXX Internal Asset Utilization Inventory Turnover 4x Inventory Mgmt XXX Learning & Growth Develop the necessary skills Develop the support system Strategic job readiness Info system availability Y1-70% Y3-90% Y5-100% 100% Staff training XXX XXX 70. o Want more? 10/08/09 Marc Sniukas 71.
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www. sevenprophets .com

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A presentation by Marc Sniukas www.sniukas.com

June 2009 Marc Sniukas