Strategy Design Innovation: How to create business success using a systematic toolbox, 6th Edition

Michael Jünger | Robert G. Wittmann | Matthias P. Reuter | Norbert Alexy
STRATEGY
INNOVATION
How to
How to
create business
create business
success using
success using
a systematic
a systematic
toolbox
toolbox

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Also available as
Also available as
a PRINT edition
a PRINT edition
ISBN 978-3-96557-135-8
ISBN 978-3-96557-135-8

How to
How to
create business
create business
success using
success using
a systematic
a systematic
toolbox
toolbox
STRATEGY
INNOVATION
Michael Jünger | Robert G. Wittmann | Matthias P. Reuter | Norbert Alexy

OVERVIEW CHART: The Strategy Design Toolbox
OVERVIEW PLATFORM: orientate & connect
DETAIL PLATFORM: analyze & create
Perspective 1:
Creating
Orientation
What is our vision
and mission?
What are our values?
What is our promise
to stakeholders?
Perspective 2:
Understanding
Developments
Which dynamics
shape the environment?
What drives the
rules of the game?
How do markets
develop?
Perspective 3:
Reflecting
Positions
What is key to be a
competitive player?
Which opportunities
threats are relevant?
Which strengths and
weaknesses are relevant?
Perspective 4:
Designing
Advantages
How do we satisfy
customers?
How do we address
market segments?
Which activities
create our offer?
Perspective 5:
Engaging
People

How can we develop
an innovative team?
How can we establish
powerful partnerships?
How can we use the
power of networks?
Perspective 6:
Realizing
Value
How can we develop
the organization?
What is the roadmap
for implementation?
How much money
do we need?
Perspective 7:
Navigating
Success
How can we capture
financial value?
How can we con
trol
our objectives?
How can we
manage risks?
1.1
1.2
1.3
2.1
2.2
2.3 3.3
3.1
3.2
4.1
4.2
4.3
5.1
5.2
5.3
6.1
6.2
6.3
7.1
7.2
7.3
What are our
objectives?
What are possible
scenarios?
How can we improve
our position?
Which key resources
do we need?
How can we manage
promoters/opponents?
How can we
win investors?
How can we learn
get out of thinking boxes?
1.4 2.4 3.4 4.4 5.4 6.4 7.4

INTRODUCTION 07
Dynamics in the business world
and the approach of the book 13

Strategy Design Innovation –
introducing the entire model 19
Strategy Design 21
Strategy Design Toolbox 22
Strategy Design Modelling 23
Strategy Design Innovation 24
The Strategy Design Toolbox:
asking entrepreneurial questions
and creating answers 25
Creating Orientation 29
What is our vision and our mission? 32
What are our values? 39
What is our promise to stakeholders? 44
What are our objectives? 50
1
2
2.1
2.2
2.3
2.4
3
3.1
3.1.1
3.1.2
3.1.3
3.1.4
TABLE OF
CONTENT
PERSPECTIVE 1

4
3.2
3.2.1
3.2.2
3.2.3
3.2.4
3.3
3.3.1
3.3.2
3.3.3
3.3.4
3.4
3.4.1
3.4.2
3.4.3
3.4.4
Understanding Developments 57
Which dynamics shape the environment? 60
What drives the rules of the game? 66
How do markets develop? 73
What are possible scenarios? 77
Reflecting Positions 81
What is key to be a competitive player? 84
Which opportunities and threats are relevant? 89
Which strengths and weaknesses are relevant? 93
How can we improve our position? 97
Designing Advantages 103
How do we satisfy customers? 106
How do we address market segments? 120
Which activities create our offer? 126
Which key resources do we need? 131
PERSPECTIVE 2
PERSPECTIVE 3
PERSPECTIVE 4

5

Engaging People 135
How can we develop an innovative team? 138
How can we establish powerful partnerships? 142
How can we use the power of networks? 146
How can we manage promoters and opponents? 152
Realizing Value 155
How can we develop the organization? 158
What is the roadmap for implementation? 163
How much money do we need? 172
How can we win investors? 177
Navigating Success 181
How can we capture financial value? 184
How can we control our objectives? 193
How can we manage risks? 199
How can we learn and get out of thinking boxes? 203
3.5
3.5.1
3.5.2
3.5.3
3.5.4
3.6
3.6.1
3.6.2
3.6.3
3.6.4
3.7
3.7.1
3.7.2
3.7.3
3.7.4
PERSPECTIVE 5
PERSPECTIVE 6
PERSPECTIVE 7

6
Strategy Design Modelling – creating
powerful ideas for competitive advantage 209
Using strategy design patterns 211
Proof of concept and field test 219
Further supporting principles 221
Strategy Design – developing a consistent picture 227
A visionary approach – Value Proposition Design (VPD) 229
A holistic approach – Business Model Canvas (BMC) 233
A sustainable approach – Strategy Design Booklet (SDB) 237
Summary and outlook 241
References 245
Index of keywords 252
About the authors 255
4
4.1
4.2
4.3
5
5.1
5.2
5.3
6

Introduction | 8
DEAR READER,
Welcome to our revised edition of
'Strategy Design
Innovation'!
It looks like the title caught your attention and encour-
aged you to read on. Let us now try to justify this atten-
tion and to keep it high, without wasting time …
The authors of this book will use this introduction for
the following purposes:
General situation and the authors' intention
The world that surrounds us is subject to continual
change. On the one hand, there is impressive progress,
e.g. in the medical sector, telecommunication, digitaliza-
tion or in mobility. On the other hand, there is increasing
complexity and uncertainty due to escalating disputes,
political conflicts, global warming and migration.
In our perception this increasing complexity is a huge
challenge to anyone who needs to create, analyze and
develop business strategies, because they need to
cope with all these changes in their environment. And,
as we learned from Michael Porter: 'Strategy is the act
of aligning a company and its environment.' With this
book, it is our intention to provide orientation and guid-
ance to better achieve this goal, in rough times. With
the revised 6th
edition, we are again sharpening the
content.
Main objectives of the book
What is in scope, what is out of scope? Our main objec-
tive is not to just present a comprehensive overview of
today‘s strategic methodologies, tools and processes.
Our main objective is rather to offer a flexible and effec-
tive system and tools that enable and help readers to
design and innovate effective strategies.
1
2
3
4
5
6
explain the general situation
and the authors‘ intention,
outline our main objectives,
list the respective target
groups,
introduce ourselves, briefly,
adress words of thanks
to those who supported us,
describe the intended
and expected benefits.

Introduction | 9
This is what led us to the title 'Strategy Design
Innovation'. Key points are
ɻ
to offer a flexible and effective system and model
in the shape of a workbook, based on the authors‘
ample experience of 1000+ business cases and
driven by a problem-solving attitude.
ɻ to offer and describe a scalable system, appli
cable to global corporations, SMEs and start-ups.
ɻ
to use selected established methods and tools
from various sources, as well as methods and
tools recently developed and combine them,

adding new insights.
ɻ to use established terms, wherever possible,
to ensure fast and effective communication,

understandable around the world.
ɻ
to use a structure allowing to read and proceed
page by page, but also to jump from topic to topic,
connecting insights.
ɻ
to strive for continuous improvement and
develop
ment both of this workbook (from edition
to edition), using all kinds of sources, including

feedback from our readers.
Target groups of the book
Here are seven questions you can use to check
whether this book will offer value to you and to your
personal management challenges:
ɻ Are you striving to create orientation for your
entrepreneurial team?
ɻ Do you see a need to understand the developments
of volatility, uncertainty, complexity and ambiguity in
your business environment?
ɻ Are you challenged by innovative competitors
threatening your strategic position?
ɻ Do you feel the need to create tangible advantages
for your customers in order to win the
competitive
game?
ɻ Are you trying to do your best to engage people
inside and outside your company?
ɻ Are you searching for a smart way of implementing
your business concepts?
ɻ Do you intend to set up a targeted navigation
system
for your journey toward success?

Introduction | 10
In terms of 'groups of people with common interests',
we primarily think of the following ones:
ɻ Entrepreneurs: people who need to innovate
their
businesses, in a challenging environment
ɻ
Intrapreneurs: executives and managers who are

responsible for developing their business units
with a clear strategic fit, in a global environment
ɻ Consultants: experts who support managers
on their way towards success
ɻ Founders and start-up-teams: people who drive

innovation and launch new businesses
ɻ
Investors: enablers who need to analyze the poten-
tial for value creation of a specific strategy design
ɻ Students, graduates, practitioners and MBAs:
people
who are preparing for their future roles
in business
Generally speaking
People who are interested in designing
and innovating business strategies.
About the authors
The authors mission and interest over the past 25 years
concentrated on the question of how to create, analyze
and develop innovative and successful business strat-
egies, in all kinds of organizations, from small to large
and global, both profit and non-profit organizations.
Our mission and interest in short: how to create
success
ful business by practising 'Strategy Design
Innovation', as we call it in this book.
Which areas do we come from?
ɻ
from various responsibilities: strategic and

operational business, teaching at universities
and business academies, consulting, designing
and running workshops, start-up coaching etc.
ɻ
from different roles: entrepreneurs, intrapreneurs,
university professors in the field of Business

Administration, managers and lecturers in global

corporate academies, independent consultants etc.
If you want to know more about the authors, please,
take a look at the profiles, at the end of this book.

Introduction | 11
Words of thanks to those who supported us
We would like to express our gratitude and say a spe-
cial word of thanks to all those who have contributed
to the development of 'Strategy Design Innovation': most
of all to our customers as well as their partners and
employees (workshop participants) with whom we had
the pleasure to work on more than 1000 cases over
the last 25 years. Second, to our colleagues who have

always been available for a fruitful exchange of ideas
and a discussion of the strategic issues. And – last but
not least – to our students who were among the first
to get to know these concepts, to work with them, chal-
lenge them and provide feedback.
Finally, we are grateful to those who decided not only
to study our Strategy Design Innovation model and
Strategy Design Toolbox, but also to implement it in their
real-life business environment, where they practise and
share it with their colleagues, partners and customers.
Intended and expected benefits of this book
Since the main objective is to offer a flexible and effec-
tive system and model that enables and helps readers
to practise Strategy Design Innovation, the main benefits
we provide will be:
ɻ You will acquire (and/or enhance) the ability to
design and innovate (business) strategies along
with the process of Strategy Design Innovation
ɻ You will learn to do so by following a guided
procedure, in combination with a toolbox called

Strategy Design Toolbox
ɻ You will apply business model patterns and test
the results in the agile process of Strategy Design
Modelling
ɻ These approaches will give you security, reliabil-
ity and flexibility, in your Strategy Design Projects.
Our practical experience shows that there is unfortu-
nately no guarantee that a Strategy Design will be suc-
cessful, but there is a very high probability to get things
right, if you follow this path, because

Introduction | 12
ɻ You will have done the maximum to systemati-
cally include whoever and whatever it takes to
design and innovate your strategy.
ɻ You will have done this based on a model that
did fulfil expectations in so many cases and
circumstances.
ɻ You will have done the maximum to systemati-
cally avoid traps and errors.
Please, come, apply and see for yourself!
Michael Jünger
Robert G. Wittmann
Matthias P. Reuter
Norbert Alexy
Augsburg, January 2024

Chapter 1
DYNAMICS IN THE
BUSINESS WORLD
AND THE APPROACH
OF THE BOOK

Chapter 1 | 14
Executives are facing considerable new challenges in a
so-called VUCA world, where volatility, uncertainty, com-
plexity and ambiguity set the future pace of competition.
In such an environment executives need to understand
how to make use of short-lived opportunities, quickly
and decisively. The acronym VUCA was originally in-
troduced by the U.S. Army War College to describe the
dynamics and the strategic impact of today's multilateral
world. The elements of VUCA pinpoint the strategic sig-
nificance of foresight and insight, as well as the insight
into the behavior of stakeholders, groups and individuals,
outside and inside organizations. The following elements
represent the context in which organizations in the field
of business view their current and future state:
ɻ V Volatility: addresses the nature of change
and the dynamics of those forces and catalysts
causing the change. Forces of change are of-
ten found in new technologies, regulations and
trends. This creates new competition, substitutes
and shortened life cycles. As a consequence,
external change may be faster than the organiza-
tion's ability to respond.
ɻ U Uncertainty: describes the lack of predicta-
bility and the prospects for sudden surprise. The
uncertainty of decision-makers about the durability
of business models, the use of technologies and
changing customer needs is increasingly rising.
Forecasts and experiences from the past are losing
their validity and relevance. Here the leadership
challenge is the requirement to develop a sense of
awareness and the ability to anticipate and inter-
pret issues and events effectively.
On the challenges in a VUCA world, Bob Johansen
(2013) has highlighted:
GOOD TO KNOW
Business in the VUCA world is a
different game than it has been.

Chapter 1 | 15
ɻ C Complexity: indicates the variety of forces
influencing an organization and its ability to sur-
vive. Multiplex issues and missing understanding
of cause-and-effect chains may lead to confusion.
Leaders may be lacking the time to reflect and
think through these complexities. They end up act-
ing too quickly or getting stuck in analytic paralysis.
And, consequently, they may be acting too late.
ɻ A Ambiguity: addresses the haziness of real-
ity and the resulting potential for misreads and
confusion. In the digital age information spreads
rapidly and is growing exponentially. This makes
orientation difficult. The more sources, the more
complex the overall picture of an issue becomes.
Leaders may not understand the significance of a
trend or an event and may respond in an ineffec-
tive way. Therefore, the focus is more on the 'why'
and 'how' rather than the 'what'.
Bob Johansen (2012) points out that in an uncertain world
there is urgent need for a future paradigm of
leadership,
turning the original VUCA idea on its head:
ɻ The threats of volatility can be countered by a
clear vision to think ahead to the future and ena-
ble navigation in turbulent times.
ɻ Uncertainty can be countered by a deep and solid
understanding of the developments in the busi-
ness environment using the ability to listen, to
look, to perceive and to understand what makes
the environment tick.
ɻ Complexity can be countered by clarity and the
ability to think in networks and systemic cause-
and-effect patterns.
ɻ Ambiguity can be countered by agility, the ability to
communicate, to share paradigms for better un-
derstanding, to exploit short-lived opportunities.
Being agile means remaining flexible and able to
act in the face of future changes.

Chapter 1 | 16
Abidi / Joshi (2015) draw the conclusion that there is a
need for resilient leadership skills, comprising engage-
ment themes in planning, knowledge management, im-
pact models, recovery systems and perception systems
for behavioural and systemic failure detection.
Rita G. McGrath (2013) shows that some of the traditional

paradigms of strategic business development no longer
continue to exist. A set of future paradigms has to be
developed to keep the strategy moving as fast as the
VUCA world requires. In these future-oriented para-
digms the understanding of competitive advantages
has to recognize that advantages are not sustainable,
but transient, on rather short notice. Because of this
need for agility the approaches of strategy and inno-
vation – formerly separate disciplines – now have to
be interlinked. The understanding of market attractive-
ness and the relevant competition are shifting from the
traditional industry focus to competitive 'arenas'. This
is where the real threats and opportunities happen
between industries, caused by functional substitution
rather than by product substitution and by competitive
business models. The rules of the game are becoming
more important than compelling product offers.
Table 1.1 lists the changing paradigms for leadership. It
shows that the future paradigms from the VUCA world
have considerable influence on the way companies have
to manage strategy and innovation in their competitive
arenas. The approach of Strategy Design Innovation is
inspired by these future paradigms.

Chapter 1 | 17
Table 1.1 Volatility, uncertainty, complexity and ambiguity create a VUCA world – changing the paradigms for leadership.
Aspect of Strategy Design Traditional paradigm Future paradigm
Idea of competitive advantage Presumption of relative stability in
industry competition – competitive
advantages can be sustainable
Uncertainty, volatility, complexity and
ambiguity lead to transient competitive
advantages
Relation between strategy and inno-
vation
Two separate disciplines:
finding favorable positions in a well
defined industry by strategy and
creating new business by innovation
Combining strategy and innovation into
one discipline in order to keep pace with
the speed of markets
Emphasis on strategy Focus on analyzing industries and
achieving sustainable competitive
advantage
Focus on transient competitive advan-
tages by exploiting short lived opportu-
nities with speed and decisiveness
Competition Competition within the industry
and its forces matters most
Competition in arenas of market seg-
ments, offers and geographical location,
as well as between industries
Customer advantages Advantages created
by product economics
Advantages created by customer ori-
ented solutions and lock-in approaches
Further reading:
Abidi, S. / Joshi, M.: The VUCA company, How Indian Companies have faced Volatility, Uncertainty, Complexity Ambiguity, Mumbay 2015.
McGrath, R.G.: The end of competitive advantage: how to keep your strategy moving as fast as your business, Boston 2013.
Johansen. B.: Leaders Make the Future: Ten New Leadership Skills for an Uncertain World, San Francisco 2012.
Hax, A. / Wilde, D.: The Delta Project: Discovering New Sources of Profitability in a Networked Economy, New York 2011.

Chapter 1 | 18
Picture:
Adobe
Stock
|
Corona
Borealis
Ever
given
grounding
3D
illustration.
ɻ On March 23rd
, 2021 the 'Ever Given,' a 400-me-
ter-long and 59-meter-wide container ship owned
by Evergreen, became unable to maneuver in the
wake of a sandstorm, it ran aground and blocked
the Suez Canal for a week.
ɻ This led to traffic jam of hundreds of ships (up
to 422) unable to pass the canal.
ɻ The nearly 200-kilometer-long Suez Canal is
one of the world's most important trade routes.
ɻ Every year almost 19.000 ships (more then
50 per day) pass through the canal carrying a
total of more than one billion tons of cargo.
ɻ The traffic jam caused delays in global trade and
supply chains from Asia for electronic compo-
nents such as semiconductors, chemical precur-
sors etc.
ɻ Because oil tankers were among the blocked
ships, the price of oil increased during this period
due to supply concerns.
ɻ What did this mean for the global economy and
for individual companies? How would this affect
your leadership approach?
Volatility: The block in international
supply chains led to production risks
and financial losses
Uncertainty: The unclear duration
of the blockade led to uncertainty in

customer supply and to financial risks
Complexity: High dependencies
for companies with purely global
supply chains and lack of (local)
alternatives
Ambiguity: In a tense market
environment, even minor
announcements caused
confusing situations and
irrational price changes for
production factors
The Suez Canal blockage and its impact
on global trade
Sources: faz.net, acc. April 3rd
, 2021. tagesschau.de, acc. March 24th
, 2021.
Case Study And
Real-life application

Chapter 2
STRATEGY DESIGN
INNOVATION –
INTRODUCING
THE ENTIRE MODEL

Chapter 2 | 20
INTRODUCTION
TO CHAPTER 2
In chapter 2 we will introduce the entire
model of Strategy Design Innovation
providing the basic definitions of
ɻ Strategy Design,
ɻ the Strategy Design Toolbox,
ɻ Strategy Design Modelling and
ɻ Strategy Design Innovation.

Chapter 2 | 21
2.1 Strategy Design
Here is the definition of Strategy Design:
A STRATEGY DESIGN IS
1. a consistent set of measures
2. aligning a company and its
environment,
3. with the overriding goal of creating
value for all stakeholders
4. in a balanced way.
1
'Set' means more than just one measure and
'
consistent' means that all measures must be

aligned in a common strategic direction.
2
Aligning a company and its environment according
to Michael E. Porter's (1986) definition of strategy.
3
It is our conviction that the purpose of any strategy
must be: to create value for all stakeholders.
4
The term 'balanced' applies to points 1, 2 and 3.
It means that the different parts should be held in
a relatively acceptable equilibrium.
We use the word 'Design' to underline that the process
of creating a strategy is based on the methodology of
Design Thinking.
The concept of Strategy Design replaces the traditional
concept of a Business Plan or a Business Strategy.
Strategy Design
ELSE
iF
WORK
$

Chapter 2 | 22
2.2 Strategy Design Toolbox
Here is the definition of the Strategy Design Toolbox
The Strategy Design Toolbox is a framework
ɻ of seven perspectives
ɻ with four methods each
ɻ
allowing to ask strategic questions and to find answers.
Table 2.1 The Strategy Design Toolbox and its two platforms.
As shown in Table 2.1, the 'seven perspec-
tives' give a holistic overview of all the rele-
vant aspects of Strategy Design. This is what
we call the 'Overview Platform'. It helps to
find orientation and to connect the answers
in a consistent way.
The four strategic questions per perspective
and the associated methods allow to
find answers. This is what we call the
'Detail Platform'. It helps to analyze prob-
lems and to create solutions for Strategy
Design.
OVERVIEW PLATFORM: orientate connect
DETAIL PLATFORM: analyze create
Perspective 1:
Creating
Orientation
What is our vision
and mission?
What is our promise
to stakeholders?
Perspective 2:
Understanding
Developments
Which dynamics
What drives the
rules of the game?
How do markets
develop?
Perspective 3:
Reflecting
Positions
What is key to be a
competitive player?
Which opportunities
Which strengths and
Perspective 4:
Designing
Advantages
How do we satisfy
customers?
How do we address
market segments?
Which activities
create our offer?
Perspective 5:
Engaging
People
How can we develop
an innovative team?
How can we use the
power of networks?
Perspective 6:
Realizing
Value
How can we develop
the organization?
What is the roadmap
for implementation?
How much money
do we need?
Perspective 7:
Navigating
Success
How can we capture
financial value?
How can we control
our objectives?
How can we
manage risks?
1.1
1.2
1.3
2.1
2.2
2.3 3.3
3.1
3.2
4.1
4.2
4.3
5.1
5.2
5.3
6.1
6.2
6.3
7.1
7.2
7.3
What are our
objectives?
What are possible
scenarios?
How can we improve
our position?
Which key resources
do we need?
How can we manage
How can we
win investors?
How can we learn
1.4 2.4 3.4 4.4 5.4 6.4 7.4

Chapter 2 | 23
2.3 Strategy Design Modelling
Here is the definition of Strategy Design Modelling:
Strategy Design Modelling is the process of applying
the Strategy Design Toolbox to concrete strategic cases.
Strategy Design Modelling can be done using two
different approaches:
1
A linear process allows working from top to
bottom
and from left to right of the Strategy
Design Toolbox.
Example: If you intend to analyze, develop and validate a new
business idea, it makes sense to opt for the linear approach.
2
A flexible and networked process allows jumping from
perspective to perspective and from tool to tool.
Example: If you want to analyze an existing business and validate it
reacting e.g. to critical incidents in the environment, it makes sense to
opt for the flexible and networked approach.
Table 2.2
The Strategy Design Toolbox and the main approaches
for Strategy Design Modelling.
Perspective 1:
Creating
Orientation
What is our vision
and mission?
What is our promise
to stakeholders?
Perspective 2:
Understanding
Developments
Which dynamics
What drives the
rules of the game?
How do markets
develop?
Perspective 3:
Reflecting
Positions
What is key to be a
competitive player?
Which opportunities
Which strengths and
Perspective 4:
Designing
Advantages
How do we satisfy
customers?
How do we address
market segments?
Which activities
create our offer?
Perspective 5:
Engaging
People
How can we develop
an innovative team?
How can we use the
power of networks?
Perspective 6:
Realizing
Value
How can we develop
the organization?
What is the roadmap
for implementation?
How much money
do we need?
Perspective 7:
Navigating
Success
How can we capture
financial value?
How can we control
our objectives?
How can we
manage risks?
1.1
1.2
1.3
2.1
2.2
2.3 3.3
3.1
3.2
4.1
4.2
4.3
5.1
5.2
5.3
6.1
6.2
6.3
7.1
7.2
7.3
What are our
objectives?
What are possible
scenarios?
How can we improve
our position?
Which key resources
do we need?
How can we manage
How can we
win investors?
How can we learn
1.4 2.4 3.4 4.4 5.4 6.4 7.4
Perspective 1:
Creating
Orientation
What is our vision
and mission?
What is our promise
to stakeholders?
Perspective 2:
Understanding
Developments
Which dynamics
What drives the
rules of the game?
How do markets
develop?
Perspective 3:
Reflecting
Positions
What is key to be a
competitive player?
Which opportunities
Which strengths and
Perspective 4:
Designing
Advantages
How do we satisfy
customers?
How do we address
market segments?
Which activities
create our offer?
Perspective 5:
Engaging
People
How can we develop
an innovative team?
How can we use the
power of networks?
Perspective 6:
Realizing
Value
How can we develop
the organization?
What is the roadmap
for implementation?
How much money
do we need?
Perspective 7:
Navigating
Success
How can we capture
financial value?
How can we control
our objectives?
How can we
manage risks?
1.1
1.2
1.3
2.1
2.2
2.3 3.3
3.1
3.2
4.1
4.2
4.3
5.1
5.2
5.3
6.1
6.2
6.3
7.1
7.2
7.3
What are our
objectives?
What are possible
scenarios?
How can we improve
our position?
Which key resources
do we need?
How can we manage
How can we
win investors?
How can we learn
1.4 2.4 3.4 4.4 5.4 6.4 7.4
1
2
3
4
5
6

Chapter 2 | 24
2.4 Strategy Design Innovation
Here is the definition of Strategy Design Innovation:
Strategy Design Innovation is
ɻ
a continuous strategic adaption and
improvement process,
ɻ pushing a Strategy Design to the next
higher level.
Strategy Design Innovation takes into account
the experience
ɻ both from the current implementation
of a given Strategy Design
ɻ
and from new developments and influences
ɻ so that innovation takes place whenever this
is required or reasonable – not just when a
revision cycle is over (e.g. one fiscal year).
The result will be that
ɻ the Strategy Design never grows old or obsolete
ɻ innovation will not lag behind, because it is now
part of the strategic process.
Strategy Design
ELSE
iF
WORK
$
Strategy Design
ELSE
iF
WORK
$
Strategy Design
ELSE
iF
WORK
$
Strategy Design
ELSE
iF
WORK
$
Strategy Design
ELSE
iF
WORK
$
Strategy Design
ELSE
iF
WORK
$
Innovation

Chapter 3
THE STRATEGY
DESIGN TOOLBOX –
ASKING ENTREPRENEURIAL
QUESTIONS AND
CREATING ANSWERS

Chapter 3 | 26
INTRODUCTION
TO CHAPTER 3
In chapter 3 the details of the Strategy Design Toolbox
are outlined.
Table 3.1 gives the overview on the architecture of the

Strategy Design Toolbox.
ɻ
The 'seven perspectives' give a holistic overview
of all the relevant aspects of Strategy Design on
the 'Overview Platform'. It helps to find orientation
and to connect the answers in a consistent way.
ɻ
The four strategic questions per perspective and
the associated methods allow to find answers on
the 'Detail Platform'. It helps to analyze problems
and to create solutions for Strategy Design.
Table 3.1
The Strategy Design Toolbox as a two-dimensional tableau.

Chapter 3 | 27
Perspective 1:
Creating
Orientation
What is our vision
and mission?
What is our promise
to stakeholders?
Perspective 2:
Understanding
Developments
Which dynamics
What drives the
rules of the game?
How do markets
develop?
Perspective 3:
Reflecting
Positions
What is key to be a
competitive player?
Which opportunities
Which strengths and
Perspective 4:
Designing
Advantages
How do we satisfy
customers?
How do we address
market segments?
Which activities
create our offer?
Perspective 5:
Engaging
People

How can we develop
an innovative team?
How can we use the
power of networks?
Perspective 6:
Realizing
Value
How can we develop
the organization?
What is the roadmap
for implementation?
How much money
do we need?
Perspective 7:
Navigating
Success
How can we capture
financial value?
How can we con
trol
our objectives?
How can we
manage risks?
1.1
1.2
1.3
2.1
2.2
2.3 3.3
3.1
3.2
4.1
4.2
4.3
5.1
5.2
5.3
6.1
6.2
6.3
7.1
7.2
7.3
What are our
objectives?
What are possible
scenarios?
How can we improve
our position?
Which key resources
do we need?
How can we manage
How can we
win investors?
How can we learn
1.4 2.4 3.4 4.4 5.4 6.4 7.4

Chapter 3 | 28
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3.1 Perspective 1
CREATING
ORIENTATION

Chapter 3 | 30
Overview Perspective 1: Orientation
Some 2,000 years ago Lucius Annaeus Seneca accen-
tuated the importance of orientation with the following
statement:
According to Hofmann-Wellenhof / Legat / Wiesner (2012)
the art of navigation uses celestial points of reference
that are based on the observation of the position of the
Sun, the Moon, planets and navigational stars. Such
systems are in use both for terrestrial and for interstellar
navigation. A navigator can determine his distance from a
given point on the rotating earth by referring to a celes-
tial object above that point and by measuring the height
above the observer's horizon. This can be transferred as
an analogy to the journey a business is intended to make.
Creating Orientation focuses the issue of effectiveness,
which means doing the right things according to a certain
point of reference or, in this case, with respect to the or-
ganization's set of targets. Orientation can be created by
answering the following four questions:
What is our vision and mission?
A clear vision creates alignment in a team for driving a busi-
ness toward future success. It should address trendsetting
ideas, convince the organization's stakeholders and create
excitement amongst them for the vision's realization. A vision
is an idea of what a company should look like in the future –
a picture of the company's future. The implementation is
done through the mission. Firms should commit their major
goals and corporate philosophy in a mission statement.
Over the last twenty years the idea of Corporate Social

Responsibility has become an important reference in run-
ning a business. After major compliance scandals since the
YOU MUST KNOW
your destination's port, if you wish
to catch a favorable wind.

Chapter 3 | 31
year 2000, executives perceived that they have to take
more and more responsibility for the behavior on the

collective and on the individual level. So an explicit
set of company values has become an important point
of navigation in an environment where stakeholders'

expectations have to be considered.
What is our promise to stakeholders?
All business is people business. Entrepreneurs have
to take into consideration that the idea of sustainable
stakeholder value creation actually constitutes the
organization's right to exist. So the executive's job is to
manage and shape the relationships with those groups
that have a stake in the organization's activities. It is a
characteristic of innovative Strategy Designs to develop
a higher level of added value for their stakeholders.
What are our objectives?
A company's set of business objectives has to be de-
veloped on four levels: corporate level, business level,
functional level and – if the company is active interna-
tionally – on a regional level. For a distinct orientation
of the organization's management and employees it
is important to create a set of aligned and consistent
objectives and to break it down to clearly allocated re-
sponsibilities on the strategic and operational levels.

Chapter 3 | 32
Perspective 1 – Creating Orientation
SD-T 1.1 What is our vision and mission?
Chapter 3 | 32
3.1.1 What is our vision and our mission?
correction for the use of internal resources and creates
a point of reference for entrepreneurial spirit and the
respective patterns for operational thinking and acting.
The secret of successful visions lies in their vivid use
and reflection in a day-to-day business life.
A vision describes comprehensively what a company
should look like in the future. There is a wide spectrum
of applicable topics, from the material aspects (e.g. tak-
ing an outstanding competitive position in the area of
technology leadership) to the non-tangible aspects
(e.g. living a corporate value of innovativeness).
Lois Elkin (1993) emphasized how important a vision is
for a company:
GOOD TO KNOW
A vision statement tells what we offer our
customers and each other. It describes the
future we wish to create. When a vision is
'lived' by the organization, it gives direction
to everyone within it.
What it does …
Developing an inspiring vision is generally considered
to be the best way to win people to support demanding
goals in the long term. The vision outlines an attractive
perspective of a Strategy Design (SD) future reality. In
the same manner as a compass, it can contribute to
setting the direction for Strategy Design Innovation (SDI)
by creating alignment among all internal and external
players. In this way, visions become an effective means
of motivation and a leadership tool which is a guideline
for the strategy. This improves and provides self-

Chapter 3 | 33
A case study …
Although each firm’s business vision is unique, the
following range of topics is frequently found in these
visions:
ɻ Aspects of the creation of values
(e.g. entertain, inform and inspire people around
the globe, Walt Disney)
ɻ Specific advantages which make the business in-
teresting for specific stakeholders – especially for
customers, employees, partners and investors
(e.g. Provide access to the world’s information in
one click, Google)
ɻ The position in the competitive environment

relative to the market strategy, the technology
and the competences
(e.g. Making the best possible ice cream, in the
nicest possible way, Ben Jerry)
ɻ The model of the organization
(e.g. Remain the most authentic, connected, and
distinctive brand, Audi).
Real-life
application
Table 3.2 outlines the elements of a vision and its

criteria for effectiveness.

Chapter 3 | 34
Chapter 3 | 34
Table 3.2
A clear vision creates alignment that drives business towards
success.
Further reading:
Coenenberg, A.G. / Salfeld, R. / Schultze, W.: Wertorientierte Unterneh-
mensführung – vom Strategieentwurf zur Implementierung, Stuttgart 2015.
Barret, R.: The Values-Driven Organization:
Unleashing Human Potential
for Performance and Profit, London 2013. Kotter, J.P.: Leading Change,
München 2012. Zur Bonsen, M.: Führen mit Visionen: der Weg zum gan-
zheitlichen Management, Wiesbaden 1995.
E
W
N
S
Position Organization
Implementation:
Realizable
Communication:
Concise
Strategy:
Trendsetting
Objective:
Convincing
Values Advantages
A business vision shows the following criteria:
ɻ Trendsetting: The vision takes the function of
the 'North Star' by showing a clear direction. It is
developed on the basis of understanding markets
and it shows how to address customer problems
by value-adding solutions – better than competi-
tors do.
ɻ Convincing: The vision addresses positive values,
is intuitive and credible. It shows the advantages
for the individual organization and for its stake-
holders. Generating enthusiasm is the powerful
result of the vision's potential.
ɻ Realizable: The vision is challenging but not uto-
pian. With the necessary effort and with entrepre-
neurial spirit the vision can be achieved.
ɻ Concise: The vision captures the key message in
just a few words. It is formulated in an attractive
and distinct manner. So it can be easily remem-
bered and communicated.

Chapter 3 | 35
How it works …
Visions often arise from the personal inspirations of
the entrepreneurs themselves. A tremendous oppor-
tunity presents itself when a group 'unwraps' a vision.
The perspective of the future is, in this way, created by
a variety of imaginations about what the future could
look like. Frequently, a visionary force arises in a group
which creates fun and alignment and supports a suc-
cessful implementation.
In order to achieve a convincing vision in the group, it is
possible to conduct an imaginary trip which leads you
through the future of the business. The participants
are guided by questions in order to speak about the
business future as if it were already reality. Such a
journey requires a framework in which the participants
feel well, and where both creativity and intuition are
granted. In this process, metaphors (e.g. sailing ships,
gardens, springs, cathedrals, jewels) are helpful for
visually demonstrating the uniqueness of the vision.
According to Richard Barret (2013) the 'Four Whys' ap-
proach can be used as a heuristic tool to create outlines
for the company's vision and mission – the mission being
a more strategical future oriented approach of a specific
business field. In this matrix there are four search fields
for creativity: looking at the vision and at the mission
from an internal and an external motivational perspec-
tive.
In assignment SD-T 1.1 you will find a framework de-
signed to direct and foster the creativity in your team
with respect to the development of a vision and a mis-
sion. After a phase of creativity, take the results into
consideration and check which of the ideas fit best
with the generic characteristics of a vision, on the one
hand regarding its values, advantages, position, organi-
zation, and on the other hand, with the generic criteria
of trendsetting, convincing, realizable and concise.
Table 3.3 outlines the heuristic architecture of the
'Four Whys' approach.
Assignment SD-T 1.1 invites you to play with this
concept.

Chapter 3 | 36
Internal Motivation External Motivation
Why and how (2)
Internal Vision for the Future
Why do we exist in terms of what our
company promises to be and to achieve
for internal stakeholders in the future?
And how can we implement that?
Why and how (4)
External Vision for the Future
Why do we exist in terms of what our
company promises to be and to achieve
for external stakeholders in the future?
Why and how (1)
Internal Business Purpose
Why do we exist in terms of what our company
does and delivers to internal stakeholders?
Vision
Mission
Why and how (3)
External Business Purpose
Why do we exist in terms of what our company
does and delivers to external stakeholders?
Further reading: Barret, R.: The Values-Driven Organization. Unleashing Human Potential for Performance and Profit, London 2013.
Table 3.3
The ‘Four Whys’ approach specifies an organization's purpose.

Chapter 3 | 37
A case study …
IKEA is a multinational home furnishings company that
presents its concept on furniture for self-assembly and
household goods in its vision and mission:
Vision: Spread all over the world we have a passion
for home furnishing and an inspiring shared vision: to

create a better everyday life for the many people.
Mission: Our business idea supports this vision by

offering a wide range of well-designed, functional
home furnishing products at prices so low that as
many
people as possible will be able to afford them.
In the four search fields of the 'Four Whys' model it
can be found:
ɻ Internal vision: we have passion
ɻ External vision: create a better everyday life,
for all people
ɻ Internal business purpose: supporting a business
idea
ɻ External business purpose: low price, a wide
range of products
Real-life
application
Source: ikea.com, acc. August 26th
, 2021.

Chapter 3 | 38
Assignment SD-T 1.1
Internal Motivation External Motivation
Why (2) Internal Vision for the Future Why (4) External Vision for the Future
Why (1) Internal Business Purpose
Vision
Mission Why (3) External Business Purpose
Here you can work out your ideas about
your organization's vision and mission.

SD-T 1.2 What are our values?
Chapter 3 | 39
3.1.2 What are our values?
This idea was also a guiding principle when the role
model of the honorable merchant ('Ehrbarer Kauf-
mann') emerged in the medieval times in Europe. Günter
Ogger (1979) refers in that context to the Fuggerei in
Augsburg, a social housing estate built by Jakob Fugger,
'The Rich', in the year 1521 as a donation for poor indi-
gent inhabitants of the City of Augsburg (Germany). The
fact that this housing estate nowadays is still in place
after half a millennium may be taken as a proof for the
assumption that ideas of that kind can unfold long-term
impact. In recent years the idea of value based norma-
tive management has been discussed under the head-
line of Corporate Social Responsibility (CSR).
According to Schneider / Schmidpeter (2012) this con-
cept comprises all aspects of normative sustainability
management, such as an organization's voluntary con-
tribution to social, ecologic and economic objectives.
Although the concept of Corporate Social Responsi-
bility has been a matter of critical scientific discussion,
Michael E. Porter (2011) points out that diminished trust
in business is causing political leaders to set policies
that sap economic growth. So business is caught in a
vicious circle creating a need for the redefinition of the
purpose of business. He states that businesses have
Collins / Porra (1996) highlight in Harvard Business

Review about the need of values for companies’
success:
GOOD TO KNOW
Companies that enjoy enduring suc-
cess have core values and a core
purpose that remain fixed while their
business strategies and practices end-
lessly adapt to a changing world.
What it does
The strategic question 'What are our values?' can be
traced back as far as the authors in ancient Greece.

Aristotle pinpoints in his book 'Politeia' the
basic ques-
tion of responsible and sustainable economic behavior:
'It is obvious that the actions of domestic economy should
be targeted to a higher degree to the requirements of

people than to inanimate property and more to the deve
lopment of virtue than to the accumulation of estate.'

Chapter 3 | 40
rarely
approached societal issues from a value per-
spective but have treated them as peripheral matters.
This has obscured the connections between economic
and social concerns. According to Porter's idea the
purpose of a corporation must be redefined around the
concept of Shared Value in order to unleash a wave of
innovation and growth. Shared Value focuses on the
connection between societal and economic progress.
It enhances the competitiveness of a company while
simultaneously advancing the economic and the social
conditions in the communities in which it operates.
Following that approach Alexy / Wittmann (2012)

pinpoint in this context that future-oriented and mature
management approaches can create a reconciliation for
the apparent dilemma between the ambition to create
economic success and the aspiration to act in social and
ecologic responsibility.
Michael E. Porter (2011) shows that three ways can be
taken into consideration when searching for comple-
mentary overlaps: reconceiving products and markets,
redefining productivity in the entire value chain and
enabling local cluster development. So according to
Porter's concept real social entrepreneurship should
be measured by its ability to create Shared Value, and,
as a differentiation to the concept of Corporate Social
Responsibility, not only to achieve social benefit. CSR
becomes much more attractive and easier to justify, if it
can be profitable business, at the same time.
How it works …
But how can the aspects of normative value-based
management be developed as a starting point in Per-
spective 1 – Creating Orientation? Laloux (2014) trans-
fers Wilber's (2006) generic Integral Theory model to
the field of value-based organizational development.
According to that model the values of an organization
determine the corporate culture and behavior. Wilber's
four quadrant model, applied to value based man-
agement, means that we should look at the following
aspects when creating a powerful set of corporate
principles:
People's mindsets and beliefs
ɻ People's behaviors
ɻ The organization's culture
ɻ The organization's structures,
processes and practices

Chapter 3 | 41
Table 3.4
Integral Theory is a starting point for the development of corporate values and accordingly
for consistent behavior, on the individual and on the collective level.
Further reading: Laloux, F.: Reinventing Organizations. A Guide to Creating
Organizations Inspired by the Next Stage in Human Consciousness, Brussels
2014. Wilber, K.: Excerpt C: The way we are in this together. Intersubjectivity
and Interobjectivity in the Holonic Cosmos, kenwilber.com 2006.
Interior-Individual
(intentional)
What are the personal
basic values and beliefs I
stand for?
Exterior-Individual
(behavioral)
What is important
concerning my personal
way of behaving?
Interior-Collective
(cultural)
What are the
basic values and beliefs
our organizational culture
stands for?
Exterior-Collective
(social)
What is important
concerning our organizati-
on´s way of behaving?
Interior Exterior
Collective
Individual

Chapter 3 | 42
So a matrix is established for the dimensions 'interior' /
'exterior' and 'individual' / 'collective'. This matrix can
be used to detect and discuss values and to make them
explicit as guiding corporate principles.
Table 3.4 contains the idea of Integral Theory.
Assignment SD-T 1.2 invites you to create your

organization's specific set of values.
A case study …
Hyatt Hotels are one of the leading global hospitality
companies guided by its purpose – to care for people
so they can be their best.
Purpose: We care for people so they can be their best.
Vision: A world of understanding and care.
Mission: To deliver distinctive experiences for our
guests.
Values: Empathy, experimentation, inclusion, integrity,
respect, and wellbeing are our shared core values.
Real-life
application
The values of Hyatt can be assigned to the Integral
Theory model as follows:
ɻ Intentional: creativity
ɻ Behavioral: integrity
ɻ Cultural: respect, fun
ɻ Social: respect, humility
Source: hyatt.com, acc. October 5th
, 2021.

Chapter 3 | 43
Interior Exterior
What are the personal basic values
and beliefs I stand for?
What is important concerning
my personal way of behaving?
What are the basic values and beliefs our
organizational culture stands for?
Individual
Collective
What is important concerning our
organization´s way of behaving?
Assignment SD-T 1.2
Here you can work out your ideas
about your organization's values.

SD-T 1.3 What is our promise to stakeholders?
Chapter 3 | 44
3.1.3 What is our promise to stakeholders?
zation's activities. Business focuses on how customers,
complementors, suppliers, employees, financiers, the
society, the government and, indirectly, competitors
interact and create value. For entrepreneurs the task
is to know how these relationships work and how they
can be shaped strategically. Entrepreneurs have to
concentrate on creating and sustaining value for those
stakeholders that are key for the survival. This princi-
ple is true for any kind of organization, no matter what
overall purpose or direction the particular business
has set. Several developments lead to fundamentally
new conditions and challenges in the relations with key
stakeholders:
Customers have always been taken as stakeholders
with the highest importance. In nowadays' hyper com-
petition in saturated markets it is no longer that simple
to just offer superior quality or low prices to create
customer advantages. Outpacing strategies must cre-
ate segment specific bundles of benefits and customer
advantages around price, quality, service and speed.
Organizations have to create new and dispruptive rules
for the bilateral relation with their customers.
Freudenreich / Lüdecke-Freund / Schaltegger (2020)
state about the stakeholder theory:
GOOD TO KNOW
Stakeholder theory, as a complemen-
tary perspective, asks, […] with and for
whom value is being created.
What it does
According to Freeman / Harrison / Wicks (2007) four
main trends changed traditional approaches to man-
agement: the liberalization of markets, the emergence
of environmentalism and social values, the liberal-
ization of political institutions and the explosion of
information technology. How to cope with these chal-
lenges? Managing for Stakeholders (MFS) is, according
to Freeman / Harrison / Wicks the key management
approach for an organization's survival, reputation and
success. Stakeholders in this model are defined as 'any
group or individual who can affect or is affected by the
achievement of an organization's purpose'. The basic
idea is that business can be understood as a set of rela-
tionships among groups that have a stake in an organi-

Chapter 3 | 45
Suppliers, traditionally perceived as ‘just somebody to
buy stuff from’, have to be understood from a new per-
spective, as certification standard liability aspects have
become key success factors over the last years with
reference to the idea of Total Supply Chain Manage-
ment. Nobody can accept materials or services from a
supplier who creates the offers in an environmentally
dangerous or in a socially questionable way. The qual-
ity of the value chain is questioned backward and liabil-
ity does not stop at the point of sale. So the traditional
value chain has mutated into a responsibility chain.
Complementors, a rather new category of players,
are those players who add value to one's own offer,
but without necessarily having an initial contract with
this organization. Specifically in digital business models
and open innovation approaches complementors take
over an important and ambiguous role of 'coopetition':
cooperation in a common value creation approach on
the one hand, and potential competition on the other
hand. Entrepreneurs need to balance this ambiguity, for
example when creating platform strategies for techno-
logical lock-in strategies.
Employees need to be given challenging assignments,
training skills and comprising perspectives in order to
create their individual potential for employability, flex-
ibility and market value. Enabling employees who are
different from each other in terms of race, gender, sex-
ual orientation, age, education and culture, has become
a new and challenging task for Managers, and diversity
is considered to be a key enabler for the innovativeness
of an organization.
Financiers – external investors and shareholders –
have changed their relationship to organizations they
could invest in after the scandals of Enron, Tyco and
WorldCom at the beginning of the new millennium.
The scandals have created a deep skepticism and, as
a
consequence, tough legislation requires companies
to prove, more and more, that all of their strategies,
processes and actions can be qualified as compliant. In
addition, transparency rules have made the financial
markets more competitive, thus creating new chal-
lenges for companies to get the buy-in of financiers.

Chapter 3 | 46
Society expects from a local company to be a good cit-
izen in a new quality: not just obeying the law, donating
for charities or sponsoring, but taking responsibility in a
virtual and global world.
Governments are no longer monolithic entities but
highly differentiated systems creating policy regula-
tions, product liabilities, anti-trust legislation, tax reg-
ulations, social policy and constraints and space for
national and international economic growth.
Competitors create global and local competition at the
same time. Non-domestic competitors, with a different
cultural and institutional background and with the fi-
nancial backing of their governments, emerge with high
speed and considerable disruptive power.
Indirect stakeholders, such as consumer advocates,
environmentalists and other special interest groups
and the media take over important roles. They may
have high interest in the activities of the company and,
at the same time, they may
create considerable impact
on an organization's development by
influencing their
network of promotors and opponents.
Table 3.5 outlines stakeholder relations.

Chapter 3 | 47
Stakeholder relationship
I need I offer
Customer
Competitor
COMPANY
Comple-
mentors
Suppliers
Managers
Employees
External
Investors
Sharehol-
ders
Society
Goverment
Table 3.5
The executive's job is to manage the relationships among groups that have a stake in the organization's activities.
Further reading: Freeman, R. E. / Harrison, J. S. / Wicks, A. C.: Managing for Stakeholders – Survival, Reputation and Success, New York 2007.

Chapter 3 | 48
How it works
Freeman / Harrison / Wicks (2007) pinpoint some funda-
mental techniques for effective stakeholder manage-
ment and its application in the real world of business:
Understanding stakeholders in depth. Helpful questions:
ɻ Interests
What are the stakeholder's main interests?
How do we affect these interests?
How are we affected by these interests?
ɻ Networks
Who are the groups and individuals
who can affect this stakeholder?
Who are the stakeholder's stakeholders?
ɻ Paradigms
What does this group think about us?
What assumptions are they making?
What assumptions do we make about them?
ɻ Coopetition
What are natural coalitions that could occur?
Where are joint interests? What are the
major points of conflict? What might cause
a stakeholder to engage in a behavior that is
either more cooperative or more competitive?
Mapping stakeholder relations. The relationships
between one's own company and specific stakehold-
ers must be evaluated according to the mission and
strategy of the organization on the one hand and the
interests of the stakeholders on the other. Based on
the outlined questions, Jünger / Wittmann (2021) have
developed the STIEM model to understand these

relationships and to enable proactive stakeholder
management. The STIEM model is published for the
first time in this book.
Assignement SD-T 1.3 invites you to work out STIEM
about your organization's stakeholder relations.

Chapter 3 | 49
Assignment SD-T 1.3
Stakeholder Mapping using the STIEM Model
by Jünger/Wittmann (2021)
Stakeholder Typology Influence Expectations Measures
Who is the specific
individual stake-
holder or stakeholder
group?
Is the stakeholder
internal or external to
the organization?
How strong is the in-
fluence of the respec-
tive stakeholder to
the organization; and
how likely can the or-
ganization influence
the stakeholder?
What are the bilat-
eral expectations
and offers between
stakeholders and the
organization?
How does manage-
ment cope with the
specific stakeholder
and what strategy
and measures does it
pursue?

SD-T 1.4 What are our objectives?
Chapter 3 | 50
3.1.4 What are our objectives?
What it does
Effectiveness is defined as 'Doing the right things'. A
clear strategic orientation about what to do and what
to avoid is crucial, as Table 3.6 illustrates.
In order to be effective, managers need to define a

consistent set of objectives at four strategic levels:
ɻ The level of Corporate Strategy
In a multi-business corporation management at
this level acts in the role of an investor. For the
long-term survival, executives need to constantly
develop a corporate portfolio of offer-market
combinations. This portfolio is organized in sepa-
rate business units with entrepreneurial respon-
sibility. A business unit in this context means that
most larger organizations are engaged in several
business, industries and markets. Each business
within such an organization is referred to as a
‘strategic business unit (SBU)’. As outlined in chap-
ter 3.1.3, managers need to define a set of cor-
porate objectives for Stakeholder Value
Creation
(e.g. Customer Satisfaction or Return on Capital
Employed). In addition, corporate
objectives need
to address the synergies that can be realized be-
tween the organization's various business units
and functions. Globally operating companies of-
ten also take the regions in which they operate as
a synergy criterion.

According to Ricky W. Griffin (2014) there are
mainly three strategic options on a corporate
level: (1) single-product strategy, (2) related

diversification, (3) unrelated diversification.

With a single-product strategy a company offers
only one product or product line. This strategy
leads to a risk if the product fails. Based on the
understanding of the business and opportunities
of an industry, the related diversification adds
complementary offerings, while the unrelated
diversification adds new, or unrelated products
or markets. There is no direct fit with the existing
business of the company.
Further reading: Griffin, R.W.: Fundamentals of Management,
Mason 2014, pp. 73-75.

Chapter 3 | 51
ɻ The level of Business Unit Strategy
At this level management is in the role of the
entrepreneur, being responsible for the business
unit's strategic and operational success. The set
of objectives has to address the aspects of com-
petitiveness (e.g. Relative Market Share or Market
Position), long-term profit potential (e.g. Company
Growth Rates in relation to Market Growth Rates
or Business Values of investment opportunities),
profit (e.g. Economic Value Added, Return on Capi-
tal Employed) and cash (e.g. Free Cash Flow, Cash
Conversion Rates). Baum / Coenenberg / Günther
(2007) point out that objectives on the level of the
business unit may be conflicting because of their
different perspectives in time: from the long term
perspective of profit potential over the period-ori-
ented perspective of profit down to the short-
term perspective of cash flow. Investing in a new
market, for example, increases the profit potential
of the future, but at the same time, reduces the
year's profit and cash flow. Balancing these target
conflicts is one of the challenging strategic tasks.
A case study …
Examples on the strategic options within the
corporate-level perspective:
ɻ Single-product strategy: PayPal focusses
on
payment processing of medium and small
amounts, for example, in buying and selling in
online commerce. Global and highly specialized.
ɻ Related diversification: The Spanish o2 mother
company Telefónica has taken over the mobile
communications provider E-Plus. The merger

created synergies and Germany's largest mobile
communications provider.
ɻ Unrelated diversification: Spin-off of Siemens
Healthineers according to less fit and less synergy
effects within an EAD-strategy (EAD-strategy of
Siemens: Electrification, Automation and Digitiza-
tion as portfolio criteria). As a result, an independ-
ent stock exchange listing takes place since 2018.
Real-life
application

Chapter 3 | 52
ɻ The level of Functional Strategy
Leaders at the functional level are responsible for
effectively and efficiently implementing a busi-
ness unit's strategy. Accordingly, they need to
focus on measures contributing to their business
unit's success. Here, the set of functional objec-
tives needs to be broken down from the overall
business unit's set of objectives in an aligned and
balanced way. Examples for functional metrics
are Time to Market measuring the efficiency of
the RD function, Relative Competitive Sales
Growth for the marketing function, or Capacity
Utilization for the manufacturing function.
Table 3.6 outlines the core questions on the different

corporate management levels.

Chapter 3 | 53
In which businesses will the
organization compete?
How does a firm compete in its businesses
(to achieve competitive advantages)?
How to implement strategy in each functional area of
an organization like Marketing, Finance, HR, IT etc.?
Table 3.6
A company's set of objectives has to be developed at different levels. The alignment
between corporate, business and functional objectives is key for success.
Further reading: Griffin, R.W.: Fundamentals of Management, Mason 2014.
Johnson, G. et al.: Exploring Strategy, New York 2013.
Corporate-level
strategy
Business-level
strategy
Functional-level
strategy

Chapter 3 | 54
How it works
The process of finding and fixing objectives on the four
corporate management levels requires a professional
process of communication and bargaining in two di-
mensions:
ɻ firstly, applying a top-down and bottom-up com-
munication approach aligning the corporate, the
business unit and the functional level,
ɻ secondly, an outside-in (from region to headquar-
ters) and inside-out (from headquarters to region)
communication approach.
Communicating and bargaining in these two dimensions
is the best way for finding challenging and at the same
time realistic business objective agreements aligning all
corporate management levels.
When defining objectives it is important to formulate
them according to the 'SMART' approach: objectives
need to be Specific, Measurable, Actively controllable,
Realistic and Terminated.
Here is an example for a SMART objective that is in the
responsibility of a business unit's entrepreneur:
Increasing profitability (Specific) in terms of Return on
Capital Employed (Measurable) for Business Unit X
(Actively controllable according to the entrepreneur's
responsibility) from 10% to 12% (assumed to be Realistic)
until the end of the current fiscal year (Terminated).
Assignment SD-T 1.4. invites you to work out your or-
ganization's SMART objectives at the different levels.

Chapter 3 | 55
Assignment SD-T 1.4
Here you can work out your organization's
SMART objectives at the different levels.
Objectives at
Corporate Level
Objectives at
Business Level
Objectives at
Functional Level

Chapter 3 | 56
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3.2 Perspective 2
UNDERSTANDING
DEVELOPMENTS

Chapter 3 | 58
Overview Perspective 2:
Understanding Developments
Coming back to Seneca's statement on navigation the
Perspective of Understanding Developments underlines
the importance of a solid understanding of what is going
on in the environment: which weather can be expected,
what will be the wind's direction and force, is there a risk
of floating icebergs etc. The following questions arise:
Which dynamics shape the environment?
A range of macro environmental influences can affect an
organization's development, positively or negatively. The
dynamics may come from political, economic, socio-cul-
tural, technological, ecological and legal trends. In order
to detect and evaluate these trends it is important to
zoom out from a detailed perspective to one that allows
to identify relevant dynamics in the macro environment.
These trends typically have already started to unfold
their impact in one or another area so that they can be
detected by appropriate trend scouting instruments.
What drives the rules of the game?
The attractiveness of an industry depends to a con-
siderable degree on the rules of competition and the
players setting the standards for coexistence, cooper-
ation, competition or even for coopetition. It is essential
to analyze and thoroughly understand the relevant
competitive players: current competitors, new entrants
and substitutes, buyers, suppliers, partners and com-
plementors. This analysis is a powerful approach to
understand more about the rules of the game in a cer-
tain industry. Profiling the competitor's potential reac-
tions can help to anticipate strategic moves and to draw
intelligent conclusions for the organization's strategic
direction.

Chapter 3 | 59
Overview Perspective 2:
Understanding Developments
… continued
How do markets develop?
A company's size and its growth dynamics in a certain
market have major impact on the potential to create
value. Being a big player can open up a major oppor-
tunity for improved bargaining power, for sales growth
and for effective cost management. The power to grow
is dependent on the current market size and its ex-
pected growth rate. In order to evaluate that potential
a closer look has to be taken at the market cascade,
comprising the total market, the inaccessible market
segments, the unserved market segments and the
competitive position within a served market. This is a
useful approach to develop assumptions for market
development and, at the same time, to create ideas for
market-based strategies.
What are possible scenarios?
Business people have to develop a visionary under-
standing of what the future may look like. It is neces-
sary to identify influencing forces, future application
fields and living spaces. Pictures of the future can be
outlined in a combined process of analysis and synthe-
sis. The results will act as triggers for an organization's
competitive Strategy Design.

Chapter 3 | 60
Perspective 2 – Understanding Developments
SD-T 2.1 Which dynamics shape the environment?
3.2.1 Which dynamics shape the environment?
entire industry or in a specific market segment. Under-
standing developments at that macro-environmental
level delivers the following key results:
ɻ Identifying dominant trends and their turbulences
in the macro-environment and understanding
how the resulting opportunities and threats will
influence one's own industry and organization.
ɻ Detecting trends in those areas where most peo-
ple – and experts – would not expect them.
How it works
Farmer / Richman (1966) introduced the idea of
macro-environmental analysis. Based on that con-
cept Johnson / Scholes (2002) developed a PESTEL
framework. It distinguishes six main environmental

influences: political, economic, social, technological,
environmental and legal, as shown in Table 3.7.
ɻ Political influences are created by governments,
political parties and international bodies like the
European Commission, the United Nations or the
World Trade Organization when they intervene in
the economy and in markets.
What it does
Looking at the long term perspective of Strategy Design
Innovation, an organization must have a solid under-
standing of those developments that set the scene for
its long-term survival. The focus therefore goes to the
most important factors in the organization's broader
environment. Relevant influences need to be detected
and incorporated in strategic management decisions.
The developments of the macro-environment may have
considerable impact on almost all organizations within
an industry. So from a competitive perspective it is most
important, to discover the core driving forces which can
change the structure and the rules of the game in an
Harald Hungenberg (2011) states on the importance of
the knowledge of the external environment:
GOOD TO KNOW
The external environment of a company
has a high degree of complexity, that must
be mastered in order to derive meaningful
statements for strategy formulation.

Chapter 3 | 61
Table 3.7
A range of macro-environmental influences can affect an organization's development (examples).
Liberalization of regulated markets
Expectations on corporate social responsibility
Regulations for technical securty and testing (e.g. FDA)
Privatization
Government stability
Trade agreements
Labor legislation
Product safety
Corporate liability
Financial backing
Environmental
protections
Sustainability
Urbanization
Aging population
Lobbying initiatives
Inreasing demand
for safety security
Globalization and increasing interdependencies between
national economies
Financial market conditons
Highly skilled low-cost labor
Digital business models
Disruptive competitves rules
GDP trends
Growing eco-awareness
Environmental protection initiatives,
e.g. need for recycling
Secarity of raw materials / recources for industry and
energy production
Eclogical challenges e.g. global warming,
water shortage
Convergence of technologies
Speed of technology transfer
Open innovation in digital networks
New applications
Artificial intelligence
Macro
Environment
Legal
Socio-
cultural
Economic
Political
Techno-
logical
Environ-
mental
Further reading:
Johnson, G. et al.: Exploring Strategy, New York 2013.
Farmer, R.N. / Richman, B. M.: International Business. An Operational Theory, New York 1966.

Chapter 3 | 62
ɻ Economic influences show the developments
that will influence the demand and supply in
the markets for goods and capital. For exam-
ple, consumer spending power is one of the
major factors for the prosperity of an industry.
ɻ Socio-cultural influences characterize the
developments of social standards and moral
concepts as well as the structural dynamics of
the society and its sub-cultural groups or the
development of demographic patterns.
ɻ Technological influences highlight general
trends in technology which may be relevant
to the further development of a company's
overall technology in its value chain and in the
incremental, radical and disruptive approaches
of product related innovation.
ɻ Environmental influences address how
ecological developments are influencing the
opportunities and threats of an organization in
general or in particular market segments.
ɻ Legal influences give insight into the expected
change of regulatory and legislative frame-
works an organization is operating in.
In his book on Strategic Management Richard Lynch
(2021) provides a ‘reminder checklist’ for a PESTEL
analysis. Lynch highlights that it is better to have
less items with high evidence rather than to have a
lengthy ‘laundry list’.
Analyzing the trends and developments of the macro-
environment should not be a one-time exercise, it
should be anchored as a permanent task in Strategy
Design Innovation. The higher the turbulence in the

environmental change, the greater the expected im-
pact on the organization's survival and development.
The important aspect of the turbulence of change
can be assessed by its changeability and predicta-
bility. While the changeability highlights the degree
of likeliness to change, the predictability measures
how such changes can be perceived in advance. The
original concept for the assessment of environmen-
tal turbulence was introduced by Ansoff / McDonnell
(1990). Their approach enables an organization to
understand the potential gap between today's and the
future's state of its environment. Accordingly, environ-
mental turbulence can be divided in five levels:

Chapter 3 | 63
Mature and established industries like metals and min-
ing or regulated markets can often be characterized
as industries with a rather low level of turbulence. On
the other hand, young industries in the area of digital
business are strongly linked to the latest radical and
disruptive technological developments, as its players
are continuously shaping and innovating their business
models. This leads to a higher level of turbulence. So
a high level of turbulence offers both extraordinary
threats to established business models and, at the
same time, considerable opportunities for the develop-
ment of new business models as well as disruptive and
challenging new rules for industry games.
In order to optimize the quality of a PESTEL analysis, we
recommend involving experts with knowledge of vari-
ous environmental perspectives as well as employees
from different functional areas of the organization.
Such a variety of insights will have a positive impact on
the creative potential and the competence for finding
solutions. In addition, a variety of sources can be used
for conducting a PESTEL analysis, many of them free of
charge:
Publications of international organizations (e.g. EU, UNO)
ɻ Publications of government agencies at both

federal and regional level
ɻ Statistics services (e.g. IFO, EUROSTAT)
ɻ Publications of industry organizations and cham-
bers of commerce
ɻ Business branch reports of institutional investors
ɻ Market and opinion research institutes
ɻ News reports, web sites and portals
ɻ Studies conducted by consultancies
Level of
Turbulance Changeability Predictability
1
Repetitive, stable, no major
changes
Recurring
2
Industry is expanding with
slow incremental changes
Forecastable
3
Industry is experiencing
fast incremental changes
Predictable
4
Industry is experiencing
discontinuous change
Partially predictable
5
Industry changes are a com-
plete surprise
Unpredictable
surprises

Chapter 3 | 64
A case study …
To illustrate the significance of the macro-environment,
here is an example of an international textile company
from Asia, which wants to set up a subsidiary in Ger-
many:
Political: The political situation in Germany is stable.
The gorvernment is creating conditions to encourage
investments and innovation. As part of the EU, there are
nevertheless regulations that must be observed, e.g.
regarding sustainability and recyclability.
Economical: The decision to establish a subsidiary
in Germany was made after evaluating alternatives.

Decisive for the company were factors such as the
well-being and purchasing power of the population.
Socio-cultural: Germany stands for values such as
reliability, thoroughness and punctuality. These are
values that play a significant role to provide an excel-
lent customer experience.
Real-life
application
Technological: For the textile company, innovative
production technologies and the possibility of product
sales via digital tools and channels is of great impor-
tance. The level of development of fast internet and
digitization therefore is crucial.
Environmental: Growing eco-awareness is also per-
ceptible in textiles. Labels such as OEKO-TEX®, which
test textiles for harmful substances and health risks,
are therefore important.
Legal: Germany has a complex tax law. It is necessary
to involve experts right from the moment of searching a
location to the regular operation.

Chapter 3 | 65
Macro
Environment
Legal Social
Economic
Political
Techno-
logical
Eco-
logical
Assignment SD-T 2.1
Here you can work out your ideas about the dynamics
in your organization's macro environment.

SD-T 2.2 What drives the rules of the game?
Chapter 3 | 66
3.2.2 What drives the rules of the game?
According to Michael E. Porter (1986), however, it is not
enough to watch and understand existing competitors
only. With the Five-Forces model he defines competi-
tion beyond the rivalry between existing competitors.
Looking at competition from the perspective of a total
supply chain, the power of buyers and the power of
suppliers have to be taken into consideration addition-
ally. Cooperation between buyers, for example, may
have considerable impact on one's own bargaining
power. Specifically the threat of buyer's for backward
integration along the industry value chain or, vice versa,
the supplier's potential for forward integration, could be
disruptive to one's own position in the market.
In addition, the threat of entry has to be examined. Here,
barriers to entry may be positive, preventing new play-
ers from entering the market – if you are already there.
On the other hand, barriers to entry may also be bar-
riers to exit. So, what if an industry is declining in a sit-
uation where the players are running big investments?
Price wars could be a strategic answer to the declining
industry, reducing profitability. According to Michael E.
Porter, the most disruptive competitive force, however,
is the threat of substitution. Products could be substi-
We begin this section with a quote from Hill / Schilling /
Jones (2015):
GOOD TO KNOW
Once the boundaries of an industry have
been identified, managers face the task
of analyzing competitive forces within the
industry in order to identify opportunities
and threats.
What it does
According to Rainer Michaeli (2006), understanding the
rules of the competitive industry game requires solid ac-
tivities in the field of Business Intelligence. This approach
focuses on collecting information about the competitor's
current strategy, the potential directions of attack, un-
derlying strategic assumptions and, last but not least,
the competitor's strengths and weaknesses. Based
on that knowledge, the competitor's potential reaction
can be profiled, describing probable steps for strategic
moves and scenarios for the strongest and most disrup-
tive attacks. The approach is shown in Table 3.8.

Chapter 3 | 67
tuted, for example, by offering the respective functions
of a product with an alternative business model. The
sharing economy approach, for example, substitutes
the need for products partially. Looking at the dis-
ruptive power of digital business models, Amazon, for
example, created completely new rules for the indus-
try game in the market for books. This example may
illustrate the magnitude of the competitive threat from
substitution.
Table 3.9 illustrates Porter's Five-Forces
model. For each of the forces you will find descriptors
that may have an influence on the attractiveness of an
industry.
So the Five-Forces model can be used as a framework
to understand strategic implications for individual firms
within an industry.

Chapter 3 | 68
Table 3.8
Profiling a competitor's potential reactions can help to anticipate strategic moves.
Reaction profile of the competitor
Is the competitor satisfied with his
current situation?
Which probable steps or strategic
changes will the competitor take?
Where is the competitor ready to attack?
What will cause the strongest and most
effective reaction of the competitor?
Goals for the
future
at all levels
for all functions
Assumptions
about oneself and
about the sector
Abilities
competitive strengths
and weaknesses
Current strategy
direction of attack
in a competitive
enviroment
Further reading:
Michaeli, R.: Competitive Intelligence, Strategische Wettbewerbsvorteile erzielen durch systematische Konkurrenz-, Markt- und Technologieanalysen, Berlin 2006.
Porter M. E.: Competitive Strategy, New York 1986.

Chapter 3 | 69
Table 3.9
Porter’s Five-Forces model describes an industry's attractiveness (examples).
The threat of entry
Capital requirement of entry
Access to distribution channels
Knowledge, experience, patents
Competitive rivalry
Competitors are of equal size
Market growth rates
High fixed costs
Addition of extra capacity is in
large increments
Undifferentiated products
and services
High exit barriers
The power of suppliers
Concentration of suppliers
‘Switching costs’ from one
supplier to another are high
Brand of the supplier is powerful
Possibility of the supplier
integrating forward
Supplier’s customers are highly
fragmented
The power of buyers
The threat of substitutes
Product-for-product substitution
Substitution of need
Generic substitution
Concentration of buyers
Supplying industry comprises a large
number of small operators
Existing alternative sources of supply
Component or material cost is a high
percentage of total cost
Cost of switching a supplier is low or
involves little risk
Further reading:
Porter M. E.: Competitive Strategy, New York 1986.

Chapter 3 | 70
How it works
Assignment SD-T 2.2 gives you a framework to per-
form an industry analysis using Porter's Five-Forces
model. Detect the relevant players and define your
approach for carrying out a survey. Which rules are
set by the players? Which descriptors can outline the
attractiveness of the industry you are in? How do these
descriptors interact – positively or negatively? How will
the threat of substituting products, or, what is more, the
customer's need change the industry game?
Put yourself into the mindset of one of your competi-
tors: What could attack or even destroy your current
Strategy Design?

Chapter 3 | 71
A case study …
A brief analysis of Porter's Five-Forces for Amazon.
Founded by Jeff Bezos in 1994 and operating as an
online bookstore from the garage of his house, Amazon
has taken an almost unique development. Today, Am-
azon is a globally dominant platform with a diversified
business model spanning across e-commerce, digital
streaming, cloud services, logistics/delivery, web ser-
vices and digital assistants.
ɻ Competitive rivalry (strong force): Amazon op-
erates in highly competitive markets with compet-
itors like Alibaba and Walmart (in e-commerce),
Netflix and Apple TV+ (in digital streaming) and
DHL, UPS and FedEx (in logistics/delivery).
ɻ Threat of entry (weak force): Due to the strong
brand image, massive market presence and ex-
isting economies of scale, it is difficult for new
companies to step in and get established. Nev-
ertheless, smaller companies and startups have
the opportunity to position themselves in market
niches with innovative offerings.
ɻ Power of customers (moderate force): The high
product quality as well as the outstanding cus-
tomer experience bind customers to Amazon's
offerings, leading to high customer loyalty and
thus few switching intentions.
ɻ Threat of substitutes (weak force): Other plat-
forms with similar offerings might be substitutes
for Amazon. Due to its strong brand image, quality
in products, processes and the infrastructure it
has built up, Amazon protects itself from substi-
tution.
ɻ Power of suppliers (weak force): Due to its size,
Amazon creates a high cost pressure on the en-
tire supply chain. In addition, Amazon manages to
reduce its dependence on suppliers through its
own products, solutions and brands (e.g. Amazon
Basics).
Good to know: In his article on guidelines for applying
Porter’s Five-Forces framework, Michael E. Dobbs (2014)
provides complementary templates to apply the Five-
Forces model.
Real-life
application

Chapter 3 | 72
Assignment SD-T 2.2
Here you can work out your organization's
competitive situation and the rules of the game.
The threat of entry
Competitive rivalry
The power of suppliers The power of buyers
The threat of substitutes

SD-T 2.3 How do markets develop?
Chapter 3 | 73
3.2.3 How do markets develop?
What it does
The Relative Market Share (RMS) measures the size of
a company in relation to its biggest competitor in the
market. RMS is an important descriptor of profitability,
since an organization's size has considerable impact on
its economic power. Generally speaking, the bigger the
organization …
ɻ … the better the (technological) lock-in,
ɻ … the more sales,
ɻ … the higher the bargaining power,
ɻ … the lower the cost per unit
ɻ … and eventually, the higher the profit margins.
Having this relation in mind, companies strive for prof-
itable growth opportunities. The Market Cascades is an
heuristic approach for analyzing the potential size of
a market, for deriving assumptions about its develop-
ment. And, in addition, it is an instrument to create ideas
for strategic moves.
How it works
According to a company's mission, assumptions for
the total market are discussed. Finding out appropriate
segmentation criteria can help a lot to operationalize
the size. However, not the entire total market may be
accessible. Reasons could be legal constraints, economic
barriers or buyer's preference for national manufactur-
ers. So in this step the assumptions for inaccessibility are
discussed and fixed. In a next step, the segments not being
served by any player in the market are deducted, resulting
in the serviced market. Reasons for the difference could be
a general lack of profitability or a lack of suitable products.
Only in a monopoly the sales volume of one's own enter-
prise would be equal to the serviced market. So in the next
step the sales volume of all competitors is deducted.
Having moved down the Market Cascade, all the relevant
assumptions are obvious. Now it is time to move back and
climb up the Market Cascade, putting questions, such as:
ɻ What can we do to increase our sales volume
against our competitors?
ɻ What can we do to serve markets being unserved now?
ɻ What can we do to get access to inaccessible markets?
Table 3.10 outlines the concept of the Market Cascade.
Assignment SD-T 2.3 helps you discussing the relevant
assumptions and deriving possible measures for devel-
oping the potentials of your markets.

SD-T 2.3 How do markets develop?
Chapter 3 | 74
Table 3.10
Market size and an organization's position can be derived from the market cascade.
Further reading: Wittmann R. G. / Reuter M. P.: Strategic Planning –
How to deliver maximum value through effective business strategy, London 2012.
Market potential
(total market)
Inaccessible market
Sales potential
(realizable market)
Unserved market
(all players)
Market volume
Serviced market
(all players)
Unserved market
(own enterprise)
Sales volume
(own enterprise)
Potential
Potential

Strategy Design Innovation: How to create business success using a systematic toolbox, 6th Edition

Strategy Design Innovation: How to create business success using a systematic toolbox, 6th Edition

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