STRATEGIC THINKING

Jim Clawson
University of Virginia

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 STRATEGIC ISSUES
A Strategic Issue is any issue that
significantly influences a person’s, a
work group’s or an organization’s ability
to develop and maintain a competitive
advantage.

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 STRATEGIC DOMAINS

● Organizational
● Work Group or Function
● Individual

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 COMPETITIVE ADVANTAGE
A competitive advantage has three key
characteristics:
1. it provides superior value to customers
2. it is hard to imitate
3. it enhances one’s ability to respond to
changes in the environment.

Adapted from George Day (1994)

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 SOURCES OF
COMPETITIVE ADVANTAGE
● Government subsidy or support
● Established or monopolistic markets
● Product innovation
● Process innovation, Cost efficiencies
● Superior Service
● Human Resource Management

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 Every CEO has to spend an enormous
amount of time shuffling papers. The
question is, how much of your time can
you leave free to think about ideas? To
me the pursuit of ideas is the only thing
that matters. You can always find
capable people to do almost everything
else.”
Michael Eisner, Fortune, December 4, 1989, page 116.

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 Strategy is the art of creating value. It provides
the intellectual frameworks, conceptual models,
and governing ideas that allow a company’s
managers to identify opportunities for bringing
value to customers and for delivering that value
at a profit. In this respect, strategy is the way a
company defines its business and links
together the only resources that really matter in
today’s economy: knowledge and relationships
or an organization’s competencies and
customers.
Normann, R. and Ramirez, R., “From Value Chain to Value Constellation:
Designing Interactive Strategy,” Harvard Business Review, July-August 1993, p.65.

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 “Ten short years.... the one thing that we
have done consistently is to change .... It may
seem easier for our life to remain constant,
but change, really, is the only constant. We
cannot stop it and we cannot escape it. We
can let it destroy us or we can embrace it.
We must embrace it.”

Michael Eisner
Disney 1994 Annual Report

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 WALT DISNEY Productions
● Burning vision
● Immediate flexibility
● Innovative service and technology
● Leading edge products
● Synergism between lines of business
● Learning from each experience
● Strong organizational culture
● Strong, complementary leadership
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 Strategic Mindsets
STRATEGIC FIT
MODEL
Strategic thinking is driven by
the match between current
capabilities and existing
opportunities
Searching for sustainable
advantages
Finding protected niches
Source, Hamel and Prahalad, Strategic Intent, HBR
DARDEN
STRATEGIC INTENT
MODEL
Strategic thinking is driven by
bridging gap between today’s
reality and tomorrow’s vision
Finding ways to leverage
resources
Outpacing competitors in building
new advantages
Making new industry rules
10/23/08 1
 Four Questions that Guide Strategic Choices
WHAT CAN WHAT MIGHT
WE DO? WE DO?
(strengths and (external opportunities
weaknesses) and threats)

STRATEGY

WHAT DO WE WHAT DO OTHERS

WANT TO DO? EXPECT US TO DO?
(organizational and (stakeholder
individual values) expectancies)

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ur Related Questions that Guide Strategic Choi
WHAT CAN WHAT MIGHT
WE DO?new
What HowWEdoDO?
we
(strengths anddo we
capabilities (external
create new
opportunities
weaknesses)
want to develop? possibilities
and threat)?

STRATEGY

WHAT What do we
DO WE How do we partner
WANT TOneedDO?to WHAT DO OTHERS
to build shared
learn to and
(organizational care EXPECT US TO DO?
expectancies?
individualabout?
values) (stakeholder
expectancies)

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 Porter’s Five Forces Model
NEW
ENTRANTS

INDUSTRY
SUPPLIERS BUYERS
COMPETITORS

SUBSTITUTES

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 Porter’s Generic Value Chain

FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT

M
AR
TECHNOLOGY DEVELOPMENT

G
IN
PROCUREMENT

Out- Market- Service

M
Inbound Oper-

AR
bound ing &
Logistics ations

G
Logistics Sales

IN
Adapted from Michael Porter, Competitive Advantage, Free Press, New York, 1985, p. 46

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 GENERAL VALUE CHAIN
Raw
Transport Processing
Materials
Forming

What’s your value chain?

What are the margins in each link? Assembly
Where are your competitive strengths?
Where is your strategic intent? Distribution

Sales
Service

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 Creating Core Capabilities
● The building blocks of corporate strategy are not products
and markets but business processes.
● Competitive success depends upon transforming a
company’s key processes into strategic capabilities
that consistently provide superior value to customers
● Companies create these capabilities by making strategic
investments in a support infrastructure that links together
and transcends traditional functions.
● Capability-based strategies, because they cross functions,
must be championed by senior leadership.
Stalk, Evans, and Shulmand (1992)

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 Broadening the Pond

Every Business is a Growth Business,

Ram Charan and Noel Tichy,
Random House, NY, 1998

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 Defining Growth Trajectories
D C
New
NEEDS

A B
Existing

Existing New
Charan and Tichy CUSTOMERS

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 Defining Growth Trajectories
D C
New

Response
ap
Le
NEEDS

tum
a n
A u B
Q
Existing

$XB
Global
Push Past
Your
Share

Existing New
Charan and Tichy CUSTOMERS

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 Organization Charters
● Mission Statement
● Vision Statement
● Values Statement
● Strategy
● Operating Goals
● Leadership

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 ORGANIZATION CHARTERS

LEADERSHIP
Strategy
Mission Vision
Goals

Values

1. Mission Statement 4. Strategy

2. Vision Statement 5. Operating Goals and Milestones
3. Values Statement 6. Leadership

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 PROBLEM LEADERSHIP
LEADERSHIP ACTIVITY Questions Answers
Problem Solving Old New

Problem Finding New Old

Problem Creating New New

Adapted from Pathfinding by Harold Leavitt, 1995

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 SECOM, KK
● Technological innovation
● Fast customer response
● Leading edge synergies
● Investing in core capabilities
● BUT reinventing the future?

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 Indirect Influence
on Outcomes

Environ- Leader- Design Culture Results

ment ship Decisions

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 Competitive Advantage Through People
● Employment Security ● Self-Managed Teams
● Selectivity in Recruiting ● Training and Skill Development
● High Wages ● Cross Utilization and Training
● Incentive Pay ● Symbolic Egalitarianism
● Employee Ownership ● Wage Compression
● Information Sharing ● Promotion from Within
● Participation and
Empowerment

Jeffrey Pfeffer, Producing sustainable competitive advantage through the effective management of
people, Competitive Advantage through People, HBS Press, 1994, (AME, 1995, V. 9. N. 1

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 FMC ABERDEEN
● Leadership’s indirect influence on
outcomes
● Importance of interaction of all design
elements
● Human Resource Management as a
competitive weapon
● Importance of strong, consistent
leadership in culture building
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 Leading Strategic Change
is choosing to influence others to
alter their long-term competitive
capabilities willingly.

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 There are always two parties, the
party of the past and the party of
the future; the establishment and
the movement.
Ralph Waldo Emerson.

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 In the traditional planning process,
outcomes are likely to cluster around
senior managers’ prejudices; the gap
between recommendations and pre-
existing predilections is likely to be
low.
Hamel

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 Khrushchev, once criticizing Stalin, was
asked, “You were there. Why didn’t you
stop it?”
Khrushchev angrily asked, “Who said
that?” And then he ordered the man shot.
As they were taking him out, he said,
“Wait! Now you know!”

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 Strategy as Revolution

● Rule Makers
● Rule Takers
● Rule Breakers

Strategy as Revolution, Gary Hamel, HBR July-August, 1996,

96405, p. 69

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 Strategy as Revolution
● Planning isn’t strategic.
● Strategy making must be subversive.
● The Bottleneck is at the top of the bottle.
● Revolutionaries exist in every company.
● Strategy making must be democratic.
● Change is not the problem, engagement is.
● Anyone can be a strategy activist.
● Perspective is worth 50 IQ points.
● Top down and Bottom up are not alternatives.
● You can’t see the end from the beginning.

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 Revolutionizing Strategy
● Radically improving the value equation
● Separating form and function
● Achieving Joy of Use
● Pushing the bounds of universality
● Striving for individuality
● Increasing accessibility
● Re-scaling Industries
● Compressing the Supply Chain
● Driving Convergence
Strategy as Revolution, Gary Hamel, HBR July-August, 1996, 96405, p. 69
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 Strategy is revolution; everything else is
tactics.
In industry after industry the terrain is
changing so fast that experience is irrelevant
and even dangerous.
The objective is not to get people to support change
but to give them responsibility for engendering
change, some control over their destiny.
Hamel

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 Who Should Be Involved in
Democratic Strategy Making?

● People geographically on the periphery

● Newcomers
● Young people

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 Change the Rules
The future is not the result of choices
among alternative paths offered in the
present -- it is a place that is created --
created first in the mind and will; created
next in the activity.

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 One must care more for one’s
community than for one’s position in
the hierarchy.
Top down process achieves unity of
purpose, Bottom’s up can achieve diversity,
but we need to balance the two so we need
deep diagonal slices in the strategy making
process.
Hamel

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 To invite new voices into the strategy making
process, to encourage new perspectives, to
start new conversations that span
organizational boundaries, and then to help
synthesize unconventional options into a
point of view about corporate direction, those
are the challenges for senior executives who
believe that strategy must be a revolution.
Hamel

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 Democratic Strategy Making
● Look for potential discontinuities
● Define and elaborate core
competencies
● Ferret out corporate orthodoxies
● Search for unconventional options

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 CHICAGO PARK DISTRICT
● Immense historical momentum
● Big Bang Approach
● Consistency of mission and strategy
● New, strong leadership
● Value of Information Technology
● Decentralizing the process
● Responding to the End User

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 STRATEGIC THINKING
● Systems Perspective (Interconnections)
● Focus on Intent (Vision and Capabilities)
● Intelligent Opportunism (What’s there?)
● Thinking in Time (Past, present, future)
● Hypothesis driven (If A, then B?)

Adapted from Jeanne Liedtka, Elements of Strategic Thinking

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 CONCLUSION
● What’s your charter?
● What competitive advantage will
achieve your charter?
● Are you internally consistent?
● Nurture your revolutionaries.
● Create problems that build the future.

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