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  • 1. Current Thinking on Strategic Planning and Implementation Cap Gemini Ernst & Young July 2001
  • 2. We’re trying to answer two questions • How do global, multi-business line companies develop strategy? – Focused on the role of the corporate centre in helping companies make, communicate and implement strategies. • What is the latest thinking on how these companies should develop strategy? – What does “good” look like? – Best practice? – Useful approaches? It is intended to foster discussion about how to address the key It is intended to foster discussion about how to address the key challenges. challenges. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab -2-
  • 3. Document structure • Corporate Strategic Planning?: – Why Do It? – How Does It Happen? – What Does It Look Like? – What Are Some of the Pitfalls? • Evolving Ideas on What “Good” Looks Like • Implementing Strategic Intent • Company Examples • Implications for Global, Multi-business Companies Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab -3-
  • 4. Corporate Strategic Planning • Why Do It? • How Does It Happen? • What Does It Look Like? • What Are Some of the Pitfalls?
  • 5. Why have a corporate strategic planning function? • To be the custodian of the overall best interests of the corporation: – Maximise the overall performance of the business portfolio – Manage trade-offs across the business – Tee-up investment/resource-allocation choices and decisions • To set the “boundaries” of the company: – What’s in the portfolio – Manage merger and acquisition activity • To steer and influence “strategy making”: – Influence managers in the business unit – Determine key mechanisms (planning procedures, hurdle rates, control processes, organisational processes) – Develop culture in which business units propose and implement strategy. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab -5-
  • 6. How does it happen? Formal Strategic Formal Strategic Planning Process Planning Process Opportunistic Opportunistic Process Process And/Or • Set calendar • One-off event or process • Links corporate and BU strategic plans • Possibly triggered by internal or external changes • Linked to planning and budgeting cycle • Could be managed internally, or draw on external help • May or may not be linked to planning and budgeting Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab -6-
  • 7. What does it look like? It’s very Varied It’s very Varied Centre very involved Centre very involved in BU strategies in BU strategies Centre very detached Centre very detached Elaborate planning Elaborate planning systems systems No planning systems No planning systems Strategic discussions Strategic discussions very structured and very structured and formal formal Strategy discussions Strategy discussions ad hoc and informal ad hoc and informal Centre initiates and Centre initiates and executes acquisitions executes acquisitions Centre reacts to BU Centre reacts to BU acquisition proposals acquisition proposals etc Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab -7-
  • 8. What are the pitfalls? Pitfall Pitfall Habits of Mind Habits of Mind Barons Barons Interference Interference Exercise in Cleverness Exercise in Cleverness Bureaucracy Bureaucracy Hockey-sticks Hockey-sticks Lip Service Lip Service Control Games Control Games Moving the Goalposts Moving the Goalposts “Yes, Chairman” “Yes, Chairman” Strategy and Inaction Strategy and Inaction Definition Definition •• Tunnel vision, blindspots, or enthusiasms about the right strategy Tunnel vision, blindspots, or enthusiasms about the right strategy •• Senior group executives fight to build up their own territories with little regard for the Senior group executives fight to build up their own territories with little regard for the corporate interest corporate interest •• Corporate influence over business unit strategies seen as arbitrary, unpredictable, Corporate influence over business unit strategies seen as arbitrary, unpredictable, indiscriminate or uninformed indiscriminate or uninformed •• Fall into an adversarial mode in which corporate and business levels try to score Fall into an adversarial mode in which corporate and business levels try to score points off each other points off each other •• Seen as a planning exercise, a repetitive annual event that adds little value Seen as a planning exercise, a repetitive annual event that adds little value •• Over-optimistic projections which reduce the value, and credibility of planning and Over-optimistic projections which reduce the value, and credibility of planning and control control •• Disconnect between strategic goals and what really influences promotion and Disconnect between strategic goals and what really influences promotion and financial rewards—people pay lip-service to the strategy financial rewards—people pay lip-service to the strategy •• Control objectives can become ends in themselves and gamesmanship to meet Control objectives can become ends in themselves and gamesmanship to meet defined targets can damage long term business health defined targets can damage long term business health •• Shifting strategic objectives Shifting strategic objectives •• Studies arrive at conclusions that already enjoyed wide support in the business Studies arrive at conclusions that already enjoyed wide support in the business •• Communication and consensus-building is not an integral part of the strategic Communication and consensus-building is not an integral part of the strategic decision making process decision making process Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab -8-
  • 9. Evolving Ideas on What “Good” Looks Like
  • 10. This section is a “potted history” of ideas about “good” strategic management Hamel Hax and Majluf Mintzberg Goold & Campbell 1987 1987 1988 1988 1989 1989 1990 1990 1991 1991 1992 1992 1993 1993 1994 1994 1995 1995 Markides Gratton Kaplan & Norton 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 T H E Structure Structure and roles. and roles. Formalised Formalised planning planning process. process. A “looser” A “looser” role for role for strategic strategic planning. planning. How to How to operationalise operationalise strategy. strategy. Be creative. Be creative. Be different. Be different. “People” “People” focus. focus. M E S Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 10 -
  • 11. GOOLD & CAMPBELL Goold and Campbell tried to describe the best role for the corporate centre • How the centre should add value to the businesses. • What sort of relationship it should have with business unit managers. • How it should manage the process for making strategic decisions. But they found no “ right answer”—no single, universal to good strategic But they found no “ right answer”—no single, universal to good strategic management. management. Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 11 -
  • 12. GOOLD & CAMPBELL Instead they found different—but valid—strategic management styles Framework to Describe Strategic Management Styles High Centralised Planning Influence Planning Influence 8 different strategic management styles Strategic planning Strategic venturing • Strategic control Financial programming Holding company Financial control Flexible Strategic Tight Strategic Degree to which centre shapes strategies • Strategic programming Measure of top-down involvement • About input to decision Low Tight Financial Control Influence Control Influence • • • Targets the centre agrees with BUs How centre reacts to results About outputs of decisions Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 12 -
  • 13. GOOLD & CAMPBELL The three most common styles were “strategic planning”, “strategic control” and “financial control” Strategic Strategic Management Management Style Style Strategic Planning Strategic Planning •• •• The centre: The centre: – Establishes extensive planning – Establishes extensive planning – – Management Management Approach Approach – – •• •• Company Examples •• Company Examples •• Strategic Control Strategic Control process. process. Makes major contributions to Makes major contributions to strategic thinking. strategic thinking. May have a corporate strategy May have a corporate strategy guiding BUs. guiding BUs. Less attention devoted to Less attention devoted to control targets. control targets. •• •• •• •• •• BOC BOC BP BP Financial Control Financial Control A variation on the Strategic •• A variation on the Strategic Planning style. Planning style. Centre prefers to leave Centre prefers to leave initiative in development of •• initiative in development of plans to BU managers. plans to BU managers. Centre “checks quality” of Centre “checks quality” of plans, rather than provides plans, rather than provides direction. direction. Targets set for strategic Targets set for strategic objectives (e.g. market objectives (e.g. market share) as well as financial share) as well as financial performance. performance. Centre’s influence Centre’s influence exercised mainly through exercised mainly through budgeting process. budgeting process. Broad strategic direction Broad strategic direction left to the business units. left to the business units. Cadbury Schweppes Cadbury Schweppes •• •• BTR BTR GEC GEC •• Courtaulds Courtaulds ICI ICI Hanson Trust Hanson Trust Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 13 -
  • 14. GOOLD & CAMPBELL Successful companies matched their strategic management style to the business circumstances Characteristics of Companies with Characteristics of Companies with successful decision-making successful decision-making process process •• Match strategic management style to Match strategic management style to •• •• •• the business circumstances the business circumstances Central managers close enough to Central managers close enough to each business to be able to add each business to be able to add value value A free and open exchange of A free and open exchange of information and views between the information and views between the centre and business units centre and business units Shared commitment, energy and Shared commitment, energy and purpose between all levels of purpose between all levels of management. management. Diagnostic to help making strategic Diagnostic to help making strategic management style to business management style to business circumstances circumstances •• Nature of the business: Nature of the business: – Diversity of the business portfolio, and – Diversity of the business portfolio, and linkages between business units linkages between business units – Size and payback of investments – Size and payback of investments – Stability of the competitive battle facing – Stability of the competitive battle facing the business the business •• Resources in the organisation: Resources in the organisation: – Personality of the Chief Executive – Personality of the Chief Executive – Skills and experience of senior managers – Skills and experience of senior managers – Degree of financial stress on the – Degree of financial stress on the organisation. organisation. Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management styles, of which the above 3 were the most commonly used. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 14 -
  • 15. HAX AND MAJLUF Hax and Majluf focused on the process to develop a strategic plan They outlined two Major Cycles in the Strategic Planning Process They outlined two Major Cycles in the Strategic Planning Process Strategic & Operational Strategic & Operational Budgeting Budgeting Strategic Formulation Strategic Formulation Corporate Corporate Business Business Functional Functional Source: A.C. Hax, N.S. Majluf: “The Strategy Concept and Process, A Pragmatic Approach,” 1996. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 15 -
  • 16. HAX AND MAJLUF They prescribed the whole strategic planning process through to detailed budgets Planning Planning Perspectives Perspectives Internal Scrutiny Corporate Corporate Strategy Strategy Strategic and Strategic and Operational Budgeting Operational Budgeting Strategy Formulation Strategy Formulation Environmental Scan • • Resource Allocation and Portfolio Management • Corporate Strategic Thrusts and Performance Objectives Horizontal Strategy and Vertical Integration Revisited Budgeting guidelines Budgeting Consolidation and Approval Mission Business Business Strategy Strategy Internal Scrutiny Functional Functional Strategy Strategy Internal Scrutiny Environmental Scan Business Budgeting Environmental Scan Functional Budgeting Proposed Strategy, Programs, and Budgets Proposed Strategy, Programs, and Budgets Source: A.C. Hax, N.S. Majluf: “The Strategy Concept and Process, A Pragmatic Approach”, 1996. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 16 -
  • 17. HAX & MAJLUF In this view, “good” strategic management involves following a disciplined process • Same process regardless of the company’s business circumstances • Strong focus on rational dimension, and data-driven approach • Although prescriptive, probably reflects key elements of many strategic management processes: – Strategy cycle feeding in to planning and budgeting cycle – Top-down and bottom-up iterations – Corporate, business and functional dimension to strategy making and planning and budgeting. Source: Michael Goold and Andrew Campbell, “Strategies and Styles,” 1987. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 17 -
  • 18. MINTZBERG Mintzberg puts forward a very different view about “good” strategy making and “good” strategic planning Deliberate Deliberate Strategy Strategy Emergent Emergent Strategy Strategy •• Realisation of the strategy Realisation of the strategy •• •• •• •• •• The strategy is identified from The strategy is identified from matches the intended course of matches the intended course of action action Planned strategy Planned strategy Strategy developed in a Strategy developed in a formalised process formalised process Essence of strategy formulation = Essence of strategy formulation = analysis analysis Provides the organisation with a Provides the organisation with a sense of purposeful direction. sense of purposeful direction. patterns of consistencies patterns of consistencies deserved in past behaviour -deserved in past behaviour despite, or in the absence of, despite, or in the absence of, intention intention •• Strategy develops inadvertently: Strategy develops inadvertently: –Without conscious intention of senior –Without conscious intention of senior management management –Often through a process of learning –Often through a process of learning •• Synthesis of past and current Synthesis of past and current behaviour behaviour •• Essence of strategy formulation = Essence of strategy formulation = creative act of synthesising creative act of synthesising experiences into a novel strategy. experiences into a novel strategy. Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 18 -
  • 19. MINTZBERG For Mintzberg, successful strategy making is looser, messier, and more creative than “conventional” planning • Strategy making needs to function beyond the boxes: – Understand the difference between strategic planning and thinking Search all those strategic planning diagrams, all those interconnected boxes that supposedly give you strategies, and nowhere will you find a single one that explains the creative act of synthesising experiences into novel strategies – Strategic thinking involves intuition and creativity. • Strategies often cannot be developed on schedule and immaculately conceived: – Must be free to appear at any time and at any place in the organisation – Typically through messy processes at informal learning – By people at various levels who are deeply involved with the specific issues at large. Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 19 -
  • 20. MINTZBERG He saw five roles for strategic planners Role Role Specifics Specifics •• Codify --clarify and express --the strategies in terms sufficiently clear to Codify clarify and express the strategies in terms sufficiently clear to Communication & Control Communication & Control •• •• •• make them fully operational. make them fully operational. Elaborate them into sub-strategies, ad hoc programmes, and action Elaborate them into sub-strategies, ad hoc programmes, and action plans. plans. Convert them --e.g. consider their effects on budgets and performance Convert them e.g. consider their effects on budgets and performance controls. controls. Communicate strategic intentions --via programmes, schedules, budgets Communicate strategic intentions via programmes, schedules, budgets Control pursuit of them Control pursuit of them Gain support of influential outsiders Gain support of influential outsiders Finding Strategy Finding Strategy •• •• •• Help managers find fledgling strategies: Help managers find fledgling strategies: Find patterns Find patterns Discover new ways of doing or perceiving things Discover new ways of doing or perceiving things Strategic Planning Strategic Planning •• •• Analysis Analysis •• Analyse specific issues Analyse specific issues •• Provide simple, alternative conceptual interpretations of the world Provide simple, alternative conceptual interpretations of the world Catalyst Catalyst •• •• Encourage managers to think about the future in creative ways Encourage managers to think about the future in creative ways Get others to question conventional wisdom, and help people out of Get others to question conventional wisdom, and help people out of conceptual ruts. conceptual ruts. Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 20 -
  • 21. KAPLAN & NORTON Kaplan and Norton—in the 90s—shifted the focus to operationalising the strategy • Kaplan and Norton, like others, linked shareholder value creation to strategy to tangible measurable performance at a grass roots level • Their unique insight was to balance the financial perspective against a customer perspective, an internal business perspective, and an innovation and growth perspective • Power of approach is in integration: – Links strategy to shareholder value creation through an integrated set of specific objectives with clearly-defined measures – Enables strategic goals to be translated into achievable, measurable objectives throughout an organisation. Source: Robert S Kaplan and David P Norton, “The Balanced Scorecard, Translating Strategy Into Action”, 1996. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 21 -
  • 22. KAPLAN & NORTON In 2001, Kaplan and Norton broadened the role of the Scorecard to encompass mobilising and engaging people • The new scorecard has a stronger mobilisation focus: – Provides a mechanism for integrating the efforts of the whole organisation, involving all employees in the strategy discussion – Provides continuous feedback or the effectiveness of the strategy – Mobilises change through executive leadership • The most important broadening of the role is in the concept of the strategy map: – Provides the primary basis for conceptionalising how the strategy works – Maps all the underlying dynamics through which strategy drives performance • The strategy map is a visual tool to link the scorecard’s financial perspective with new, broader customer, internal and learning and growth perspectives: • Customer perspective - defines the customer value proposition that will deliver the financial performance – Internal perspective - outlines how internal operations and innovation will create customer value – Learning and growth perspectives show how to develop internal capabilities that the internal processes need. Source: Robert S Kaplan and David P Norton, “The Strategy-Focused Organisation: How Balanced Scorecard companies thrive in the new business environment.” Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 22 -
  • 23. HAMEL Hamel’s most recent view is “good” strategy making is about “information” and “revolution” Key themes: • Today’s business environment is in an ‘age of revolution’ • The status quo is doomed - the only chance for survival is innovation: – Business concept innovation – Innovation that changes the bases of competition in an industry • Call to create permanent revolution: – Continually challenge, refresh and overturn prevailing mindsets in an industry. Too influenced by the dot.com bubble? Too influenced by the dot.com bubble? Source: Gary Hamel, “Leading the Revolution”, 2000. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 23 -
  • 24. MARKIDES Markides’ view is also about innovation—“good” strategy making is about thinking and being different Key themes: • Companies need to continually explore new opportunities for strategic innovation • Strategy innovation is about exploiting unique strategic positions. To do this companies need to answer some basic questions: – What business are we in? – Who are our customers? What will we offer them? – How will we do this efficiently? – What kind of organisation do we need to support our choices? • Unusual success in business derives from doing unusual things • The essence of strategy and competitive advantage is not doing the same things as your successful competitors, but doing it differently. Source: Constantinos Markides. “All the Right Moves”, 2000. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 24 -
  • 25. GRATTON And Gratton’s perspective is that “good” strategy making is about capturing the emotional commitment of people Key themes: • A company’s capacity to perform is dependent on its ability to: – Capture the emotional commitment of its members, and – Integrate this commitment into complex modem of co-operation and collaboration • Gratton proposes humanistic and action-orientated view of organisations: – Humanistic : corporations are social entities that provide meaning and purpose for people – Action-orientated : Companies exist not for the development of their employees, but to perform business tasks and deliver on business goals – Companies that successfully bridge those two ideas can enhance organisational performance • Gratton provides a six-step management process to link the nature and aspiration of human beings with the performance of the organisation. Source: Lynda Gratin, “Living Strategies: Putting People at the Heart of Corporate Purpose”, 2000 Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 25 -
  • 26. So, “good” strategy making (from corporate view) is about . . . Emerging Themes .. .. .. horses for courses (specific to each horses for courses (specific to each company) company) .. .. .. following a disciplined, formal process following a disciplined, formal process .. .. .. “between the boxes” stuff (creativity, “between the boxes” stuff (creativity, learning) learning) .. .. .. operationalising the strategy operationalising the strategy Situational Strategic Situational Strategic Management Styles Management Styles A Formal Process A Formal Process Fresh Creative Fresh Creative Thinking/Ideas Thinking/Ideas Operationalising the Operationalising the Strategy Strategy .. .. .. mobilisation mobilisation .. .. .. innovation innovation Being Different Being Different .. .. .. revolution revolution Buy-in and Mobilisation Buy-in and Mobilisation .. .. .. being different, being unusual being different, being unusual .. .. .. capturing the emotional commitment of capturing the emotional commitment of people people Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 26 -
  • 27. Implementing Strategic Intent • Mintzberg’s Three Step Operation • Balanced Scorecard • Business Management Process
  • 28. STRATEGIC IMPLEMENTATION Having decided one’s strategy, implementing strategic intent is essential for operational reality to follow • The tools to develop an appropriate organisational strategy for change are well proven However many businesses fail to deliver the strategy they develop • Usually the fundamental business management process is at fault – the bridge between strategy and operation is not functioning A powerful business strategy needs to be matched by a powerful delivery mechanism in order to turn vision into reality Strategy • Operational Engine Various models exist to ensure the machinery between strategy and operational engine are effective: High Unfulfilled vision Power of Strategy • Turning Vision into Reality Challenging vision c Pa e No vision Pedestrian vision – Mintzberg’s three step operation – Balanced scorecard Low – Business management process. Low Power of Delivery Method High To exploit an organisation’s capability and potential, the power of its strategy To exploit an organisation’s capability and potential, the power of its strategy needs to be matched by the power of its delivery mechanism and pace of needs to be matched by the power of its delivery mechanism and pace of implementation. implementation. Source: Alan Meeking, Business Strategy Review, Winter 1994. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 28 -
  • 29. STRATEGIC IMPLEMENTATION: MINTZBERG’S THREE STEP OPERATION Strategic planning must be differentiated from strategic thinking Strategic Planning Overview What is Strategic Planning? What is Strategic Planning? Strategic Planning Issues Strategic Planning Issues •• Many companies have a problem with Many companies have a problem with •• Strategic planning is defined as “the Strategic planning is defined as “the the actual planning system. It often the actual planning system. It often breaks down because of faulty breaks down because of faulty preparation and implementation preparation and implementation process by which an organisation process by which an organisation envisions its future and develops the envisions its future and develops the necessary procedures and operations to necessary procedures and operations to achieve the future… it requires the clear achieve the future… it requires the clear setting of goals and objectives which setting of goals and objectives which provide the organisation with its core provide the organisation with its core priorities and a set of guidelines for priorities and a set of guidelines for virtually all day-to-day managerial virtually all day-to-day managerial decisions” decisions” – Line managers not involved – Line managers not involved – Business units not designed correctly – Business units not designed correctly – Action steps not defined in detail – Action steps not defined in detail – Strategic plans not integrated with other – Strategic plans not integrated with other organisational controls like budgeting organisational controls like budgeting – Objectives not defined properly by top – Objectives not defined properly by top management management •• It is a structured process that organises It is a structured process that organises and co-ordinates activities of managers and co-ordinates activities of managers who do the planning. who do the planning. •• However, the “how to do it” in practice However, the “how to do it” in practice varies significantly between companies varies significantly between companies – there is no one “right” solution. – there is no one “right” solution. What is Strategic Thinking? What is Strategic Thinking? •• This is the creation of new business This is the creation of new business strategies in either a formal or informal strategies in either a formal or informal setting. setting. Source: “The Fall and Rise of Strategic Planning”, Henry Mintzberg, HBR, Jan-Feb 1994. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 29 -
  • 30. STRATEGIC IMPLEMENTATION: MINTZBERG’S THREE STEP OPERATION Strategic planning can be used to programme and operationalise a company’s strategies in three steps Codification Codification •• Elaboration Elaboration Strategies must be clarified and Strategies must be clarified and expressed in terms sufficiently clear to expressed in terms sufficiently clear to render them formally operational, so render them formally operational, so their consequences can be worked out their consequences can be worked out in detail in detail •• •• Care and attention to detail is essential Care and attention to detail is essential so as not to lose nuance and subtlety so as not to lose nuance and subtlety •• E.g. Build four new factories and hire E.g. Build four new factories and hire 200 new workers. 200 new workers. •• E.g. A broad vision like “capturing the E.g. A broad vision like “capturing the market for a new technology” is very market for a new technology” is very different from a specific plan to different from a specific plan to “increase market share to 35%, “increase market share to 35%, focusing on the high end”. focusing on the high end”. •• Conversion Conversion Co-ordination of strategy and Co-ordination of strategy and formalisation into an operational formalisation into an operational plan. plan. Codified strategies need to be broken Codified strategies need to be broken down into substrategies and adhoc down into substrategies and adhoc programs as well as overall action programs as well as overall action plans specifying what must be done to plans specifying what must be done to realise each strategy realise each strategy •• Consider the effects of changes on the Consider the effects of changes on the organisation’s operations e.g effects on organisation’s operations e.g effects on budgets and performance controls budgets and performance controls •• Objectives need to be restated and Objectives need to be restated and budgets reworked, policies and budgets reworked, policies and standard operating procedures standard operating procedures reconsidered to take into account the reconsidered to take into account the consequences of the specific changes. consequences of the specific changes. Programing of strategy in this way will also gain the tangible as well as Programing of strategy in this way will also gain the tangible as well as moral support of influential outsiders such as financiers, suppliers and moral support of influential outsiders such as financiers, suppliers and governmental agencies. governmental agencies. Source: “The Fall and Rise of Strategic Planning”, Henry Mintzberg, HBR, Jan-Feb 1994. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 30 -
  • 31. STRATEGIC IMPLEMENTATION: BALANCED SCORECARD The balanced scorecard facilitates the development of strategic planning through to an operational plan • The four management processes on the scorecard separately, and in combination, contribute to the linking of long-term strategic objectives with short-term actions. Managing Strategy: Four Processes Translating the vision • Clarifying the vision • Gaining consensus Communicating and linking • Communicating and educating • Setting goals • Linking rewards to performance measures Balanced Scorecard Feedback and learning • Articulating the shared vision • Supplying strategic feedback • Facilitating strategy review and learning Business planning • Setting targets • Aligning strategic initiatives • Allocating resources • Establishing milestones Source: “Using the Balanced Scorecard as a Strategic Management System”, Kaplan and Norton, HBR, Jan-Feb 1996. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 31 -
  • 32. STRATEGIC IMPLEMENTATION: BALANCED SCORECARD The balanced scorecard facilitates the development of strategic planning through to an operational plan Communicating and Communicating and Linking Linking Translating the Vision Translating the Vision •• •• Helps managers build a Helps managers build a consensus around the consensus around the organisation’s vision and organisation’s vision and strategy, in order for people to strategy, in order for people to act on becoming “best in act on becoming “best in class”, “number one class”, “number one supplier”. Statements must supplier”. Statements must then be translated into then be translated into operational terms that provide operational terms that provide useful guides to action at the useful guides to action at the local level. •• local level. •• Business Planning Business Planning •• Lets managers communicate Lets managers communicate their strategy up and down their strategy up and down the organisation and links it to the organisation and links it to departmental and individual departmental and individual objectives objectives – E.g An oil company uses the – E.g An oil company uses the Almost all organisations are Almost all organisations are implementing a variety of implementing a variety of change programs. Managers change programs. Managers have difficulty integrating have difficulty integrating diverse initiatives to achieve diverse initiatives to achieve their strategic goals, leading their strategic goals, leading to frequent disappointment to frequent disappointment •• When managers use the When managers use the ambitious goals for balanced ambitious goals for balanced scorecard measures as the scorecard measures as the basis for allocating resources basis for allocating resources and setting priorities, they and setting priorities, they undertake only the initiatives undertake only the initiatives that help achieve their long that help achieve their long term strategies. term strategies. scorecard as the basis of scorecard as the basis of calculating incentive calculating incentive compensation. compensation. Traditionally departments are Traditionally departments are evaluated by their financial evaluated by their financial performance and individual performance and individual incentives are tied to short incentives are tied to short term financial goals term financial goals The scorecard gives The scorecard gives managers a way of ensuring managers a way of ensuring that all levels of the that all levels of the organisation understand the organisation understand the long term strategy. long term strategy. Feedback and Learning Feedback and Learning •• Existing feedback and review Existing feedback and review tends to focus on whether tends to focus on whether company/department/ company/department/ employees have met their employees have met their budgeted goals budgeted goals •• With balanced scorecard a With balanced scorecard a company can monitor short company can monitor short term results from three term results from three additional perspectives – additional perspectives – customers, internal business customers, internal business processes and learning and processes and learning and growth – and evaluate growth – and evaluate strategy strategy •• Strategies can therefore be Strategies can therefore be modified to reflect real-time modified to reflect real-time learning. learning. Source: “Using the Balanced Scorecard as a Strategic Management System”, Kaplan and Norton, HBR, Jan-Feb 1996. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 32 -
  • 33. STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS The business management process is dynamic and is built up in stages The Business Management Process (BMP) Framework 2 Key Performance Key Performance Indicators Indicators Customer and Shareholder Needs 1 3 Strategic Business Objectives Performance Performance Targets Targets 4 6 Structured Review Gap Analysis Gap Analysis 5 Improvement Improvement Initiatives Initiatives 7 Linkage • The business management process is a framework to facilitate operationalisation of an organisation’s strategy • Its elements do not have to be implemented concurrently or in full to start producing an operational benefit and organisational learning • The framework is founded on the premise of Plan-Do-Review – new strategic objectives are set in the light of achievement and experience hence, institutionalising continuous improvement. Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 33 -
  • 34. STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS The seven elements of the business management process allow incremental progress to be achieved and reviewed Business Management Business Management Process Framework Process Framework 1. Strategic Business 1. Strategic Business Objectives Objectives •• 1 2 3 4 5 6 •• Setting objectives based on needs of Setting objectives based on needs of organisation’s primary stakeholders organisation’s primary stakeholders (customers and shareholders) (customers and shareholders) Translating these needs into aalimited Translating these needs into limited number of strategic business number of strategic business objectives to be achieved in aagiven objectives to be achieved in given time period. time period. 2. Key Performance 2. Key Performance Indicators Indicators •• Introducing aabalanced set of KPIs Introducing balanced set of KPIs related directly to the strategic related directly to the strategic business objectives linked top-tobusiness objectives linked top-tobottom throughout the organisation bottom throughout the organisation and derived from the root causes and and derived from the root causes and key drivers of operational and key drivers of operational and financial performance. financial performance. 3. Performance Targets 3. Performance Targets •• •• Setting challenging targets against Setting challenging targets against the KPIs as aaspur to achievement the KPIs as spur to achievement and as aafoundation for systematic and as foundation for systematic progress review progress review Targets must be cascaded Targets must be cascaded throughout the organisation, broken throughout the organisation, broken down into sub-targets for shorter down into sub-targets for shorter time windows and communicated time windows and communicated visually. visually. 7 4. Gap Analysis 4. Gap Analysis •• Identifying the performance or Identifying the performance or capability gaps that must be closed capability gaps that must be closed in order to deliver the targeted in order to deliver the targeted performance levels, based on the performance levels, based on the premise that you cannot have aa premise that you cannot have performance target without some performance target without some concept of the means for its delivery. concept of the means for its delivery. 5. Improvement Initiatives 5. Improvement Initiatives •• •• Developing aalimited set of properly Developing limited set of properly planned resources and managed planned resources and managed improvement programs to close the improvement programs to close the gaps in performance or capability gaps in performance or capability Identifying, prioritising merging and Identifying, prioritising merging and rationalising the large number of rationalising the large number of existing initiatives thereby releasing existing initiatives thereby releasing energy, resources and goodwill energy, resources and goodwill across the organisation. across the organisation. 6. Structured Review 6. Structured Review •• •• •• •• •• Implementing structured, Implementing structured, simultaneous and interactive review simultaneous and interactive review of progress against both KPI targets of progress against both KPI targets and improvement initiatives and improvement initiatives KPIs are reviewed at an appropriate KPIs are reviewed at an appropriate frequency frequency Performance information is factual Performance information is factual and is simply presented and is simply presented Focus is an action not on excuses Focus is an action not on excuses 7. Linkage 7. Linkage •• Replicating the basic BMP framework Replicating the basic BMP framework at each review level and connecting at each review level and connecting the organisation top-to-bottom the organisation top-to-bottom through cascaded KPIs and through cascaded KPIs and structured review. structured review. Follow up is well planned and Follow up is well planned and conspicuous. conspicuous. The critical elements of this system are structured review and top-toThe critical elements of this system are structured review and top-tobottom linkage. bottom linkage. Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 34 -
  • 35. STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS Improved performance using the business management process Reasons for BMPs Reasons for BMPs Success Success •• Lack of support from the top. Lack of support from the top. Critical Success Factors Critical Success Factors Business Need t External help in External help in implementation to start the implementation to start the process off and move it to the process off and move it to the point where improvement is point where improvement is self-sustaining. self-sustaining. rk •• n me lve vo In Target the enthusiastic first Target the enthusiastic first wo am •• Effective Leadership of Te Support from the top Support from the top ng n ni tio a r is a Le g a n or •• e Us nd n a MP io tat nd B n me PIs a le mp K I re lt u e Cu ang ch Activities not contributing to Activities not contributing to key business objectives are key business objectives are quickly identified and quickly identified and eliminated, releasing eliminated, releasing resources for more productive resources for more productive use. use. – Staff cynicism – Staff cynicism – Lack of resources – Lack of resources M •• A continuous cycle of A continuous cycle of planning, objective-setting, planning, objective-setting, achievement and review achievement and review drives organisational learning drives organisational learning and continuous improvement and continuous improvement Barriers to change Barriers to change – Managerial frustration – Managerial frustration b lla •• Shortfalls in performance are Shortfalls in performance are promptly and systematically promptly and systematically addressed addressed •• co •• Top-to-bottom attention is Top-to-bottom attention is directed on achieving the directed on achieving the organisation’s key objectives organisation’s key objectives The Pull-Through Effect of KPIs and BMP The Pull-Through Effect of KPIs and BMP ed us y oc teg t-f ra ke st ar ess e ss M sin d si n bu t an nt bu en en me ri v em e ov r d ag pr al me an im on sto ss m ct i l e m Cu oce un ob ng pr s f r vi os d p sol Cr an nd on t a ry a ti en iso ss or em rv ne ag pe ve a n s u f ec t i ef •• Potential Pitfalls Potential Pitfalls “The whole process gives a substantial boost to managerial productivity. Anything up to a 10fold cut in unproductive meeting time is common place” Alan Meekings Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4. Cap Gemini Ernst & Young • Proprietary and Confidential LSLab6.07.01ab - 35 -

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