Strategy Development –
Key Concepts
Sep 2008

“In peace prepare for war, in war prepare for peace.
The art of war is of vital importance to the state.”
512 BC

“The following overview aims at giving an understanding of
the nature of strategy development and to guide and inspire
the practical application by presenting key frameworks,
concepts and issues that are particular relevant to start‐up
companies.”
Benjamin Teeuwsen

Structure
1. What is Strategy?
2. Strategic Analysis
3. Strategy Development
4. Strategy Implementation

1. What is Strategy?

Carl von Clausewitz
“Tactics is the art of using troops in battle;
strategy is the art of using battles to win wars.”

Helmuth Karl Bernhard
Graf von Moltke
“Strategy is the practical adaptation of the
means placed at a general's disposal to the
attainment of the object in view.”

Michael E Porter
“Competitive strategy is about being different.
It means deliberately choosing a different set of
activities to deliver a unique mix of value.”
Porter (1996:64)

Subhash C Jain
„Strategy in a firm is a pattern of major objectives,
purposes, or goals ...
... and essential policies and plans for
achieving those goals...
..., stated in such way as to define ...
...what business the company is in or is to be in
and the kind of company it is or is to be.“
(Jain 2004 p. 9)

Marketing Strategy
Marketing strategy deals essentially with the interplay of three forces:
– the customer, the competition, and the corporation (strategic three Cs)
Characteristics of good marketing strategy:
– A clear market definition
– A good match between corporate strengths and the needs of the market;
– Superior performance in the key success factors of the business
Based on the interplay of the three Cs, strategy requires three decisions:
− Where to compete (market, segments, …)?
− How to compete (means for competing)?
− When to compete (timing)?
(Jain 2004)

Put differently …
Strategy development is a question‐based process:
– Where are we now?
– Where would we like to go?
– How do we get there?
(Peter Edelmann, Senior Executive President Voith Turbo)

2. Strategic Analysis

PESTEL Analysis
What are the key issues we face in our business?
Political Environment Economical Environment
Social Environment Technological Environment
Environmental Environment Legal Environment

Example issues
Political environment Economical environment
• ecological/environmental issues • home economy situation
• current legislation home market • home economy trends
• future legislation • overseas economies and trends
• European/international legislation • general taxation issues
• regulatory bodies and processes • taxation specific to product/services
• government policies • seasonality/weather issues
• government term and change • market and trade cycles
• trading policies • specific industry factors
• funding, grants and initiatives • market routes and distribution trends
• home market lobbying/pressure groups • customer/end‐user drivers
• international pressure groups • interest and exchange rates
• wars and conflict • international trade/monetary issues
www.businessballs.com

SWOT
FIT matters:
Internal strength and weaknesses need to match
with external opportunities and risks (Kenneth Andrews)
Weaknesses
Strength Opportunities
Risks
Task: Keeping findings descriptive ; Investigating both internal AND external issues

Example issues
Strength Weaknesses
• Advantages of proposition? • Disadvantages of proposition?
• Capabilities? • Gaps in capabilities?
• Competitive advantages? • Lack of competitive strength?
• USP's (unique selling points)? • Reputation, presence and reach?
• Resources, Assets, People? • Financials?
• Experience, knowledge, data? • Own known vulnerabilities?
• Financial reserves, likely returns? • Timescales, deadlines and pressures?
• Marketing ‐ reach, distribution, awareness? • Cash flow, start‐up cash‐drain?
• Innovative aspects? • Continuity, supply chain robustness?
• Location and geographical? • Effects on core activities, distraction?
• Price, value, quality? • Reliability of data, plan predictability?
• Accreditations, qualifications, certifications? • Morale, commitment, leadership?
• Processes, systems, IT, communications? • Accreditations, etc?
• Cultural, attitudinal, behavioural? • Processes and systems, etc?
• Management cover, succession? • Management cover, succession?
www.businessballs.com

Example issues
Opportunities Threats
• Market developments? • Political effects?
• Competitors' vulnerabilities? • Legislative effects?
• Industry or lifestyle trends? • Environmental effects?
• Technology development and innovation? • IT developments?
• Global influences? • Competitor intentions ‐ various?
• New markets, vertical, horizontal? • Market demand?
• Niche target markets? • New technologies, services, ideas?
• Geographical, export, import? • Vital contracts and partners?
• New USP's? • Sustaining internal capabilities?
• Tactics ‐ surprise, major contracts, etc? • Obstacles faced?
• Business and product development? • Insurmountable weaknesses?
• Information and research? • Loss of key staff?
• Partnerships, agencies, distribution? • Sustainable financial backing?
• Volumes, production, economies? • Economy ‐ home, abroad?
• Seasonal, weather, fashion influences? • Seasonality, weather effects?
www.businessballs.com

Competitor Intelligence
• Who are your key competitors?
• How do they perform?
• What are there strengths and weaknesses?
• What could be there strategy?
• How could all of this impact your business?

Stakeholder Analysis
• Think of all of your stakeholder groups:
– What do they expect from your company?

3. Strategy
Development

Point of view
• Developing good strategies:
– Having managers understanding ‘the benefit of having a well‐
articulated, stable purpose, and the importance of discovering,
understanding, documenting, and exploiting insights about how to
create more value than other competitors do’
– Universal objectives (profitability, costs, turnover, sales, quality, etc. )
define what a company must do to survive –
but do not automatically suggest unique strategies nor provide
direction
– The essence of why an organization exists does provide guidance to
achieve these universal objectives
(Campbell 1997 p 42)

What business are we in and why?
• Vision
– long‐term, encouraging, aspiration for the future
• Mission
– purpose of the business
• Values
– attitudes, behaviours, character of organization
to guide actions like an internal compass

Planning Processes
• Processes of developing good strategies are ‘much more messy,
experimental, iterative; and driven from the bottom up’ than
many planning processes suggest
• Besides, if there were one best way – everyone could use it
• However processes and frameworks do provide structure, help
to systematize the basis and context for decision taking and
document results along the way
(Campbell 1997 p 46)
“A good plan is not a neat document put in a folder after print – a good plan – that is a
piece of paper, which has been crumpled up a hundred times, thrown into the corner, but
taken again to get changed, modified, extended …” (Robert Grant, Lecturer UOW)

Generic Strategies
Competitive Advantage
Differentiation Lower Cost
Broad Target
Differentiation
Differentiation Cost Leadership
Cost Leadership
Competitive Scope
Narrow Target
Focus
Niche Market Efficiency
(Porter 1985)

Core Marketing Strategies
Operational Product Customer
Excellence Leadership Intimacy
Strategic Sharpen distribution Nurture ideas, translate Provide solutions and
systems and provide them into products, and help customers run their
Direction no‐hassle service market them skillfully business
Organizational Has strong, central Acts in an ad hoc, Pushes empowerment
authority and a finite organic, loosely knit, and close to customer
Arrangement level of empowerment ever‐changing way contact
Systems Maintain standard Reward individuals´ Measure the cost of
operating procedures innovative capacity and providing service and of
Support new product success maintaining custome
loyalty
Corporate Acts predictably and Experiments and thinks Is flexible and thinks
believes „one size fits „out‐of‐the‐box“ „have it your way“
Culture all“
(Pearcy, Wiersema 1995)

Market Strategies
Current Markets New Markets
Current Products
Market Penetration Market Development
New Products
Product Development Diversification
(Ansoff)

How can we best compete?
• Which customers and markets will we target?
• What is the value proposition that distinguishes us?
• What key processes give us competitive advantage?
• What are the human capital capabilities required to
excel at these key processes?
• What are the technology enablers required for the
strategy?
(Kaplan 2008)

Key Success Drivers
• What factors are especially important
to perform superior in our industry?

Defining Strategic Business Units
“An SBU is composed of a product or product lines having
identifiable independence from other products or product lines
in terms of competition, prices, substitutability of product,
style/quality and impact of product withdrawal.”
(Jain 2004 p. 18)
- unique business mission, independent of other SBU’s
- clearly definable set of competitors
- able to carry out integrative planning relatively independently of other SBU’s
-large enough to justify senior management attention but small enough to serve a
useful focus for resource allocation
(Jain 2004)

Defining SBUs – Targeting Market Segments
Customer Groups
4. Dimension:
Level of Distribution
Technologies
Customer Functions

Targeting: Which segments to go for?
• Identifiability
− Ability to identify and measure the relevant characteristics
• Size
− Sufficient number of buyers
• Stability
− Needs or factors do not change too rapidly
• Accessibility
− Ability to reach target segment in economical way
• Responsiveness
− Segment responds homogeneously to a specific marketing mix
‐> Meaningful ‐> Actionable ‐> Financially attractive
(Schiffman et al. 2005)

Business Model
Customer Benefits Configuration Company Boundaries
Cutomer Interface Core Strategy Strategic Resources Value Network
Fulfillment & Support Business Mission Core Competencies Suppliers
Information & Insight Product/Market Scope Strategic Assets Partners
Relashionship Dynamics Basis for Differentiation Core Processes Coalitions
Pricing Structure
Efficient / Fit / Profit Boosters (1)
(1) Increasing Returns, Competitor Lock‐Out, Strategic Economies, Strategic Flexibility
(Gary Hamel 2002)

Strategy as Simple Rules
• Approach to allow quick moves in dynamic markets by
increasing managers‘ flexibility in decision taking
• Puts focus on growth and pursue of opportunities
• Provides just enough guidance and structure by a limited set
(<10) of simple and unique rules regarding key processes
• Rules mainly based on experience (first‐hand or second‐hand)
• Important to not set rules too broad (no specific focus) or
vague (not easy to follow)
• Challenge to balance strategy consistency (long‐term
perspective) and need to adapt rules to changing conditions
(Eisenhardt 2001 pp. 108-115)

Types of Rules
• How‐to rules
– guiding execution of key processes
• Boundary rules
– limiting range of opportunities (company scope)
• Priority rules
– setting priorities for resource allocation (ranking opportunities)
• Timing rules
– adapting internal schedules (e.g. NPD) to the pace of markets
• Exit rules
– defining criteria to exit opportunities in the light of unpredictable
developments
(Eisenhardt 2001 p. 111)

Innovation & Change
• Understanding mental models
– Managers’ mindsets (industry dogmas) that influence the interpretation
of situations (sense‐making) and as such decision making
– Task to make the implicit explicit and to constantly question and
challenge those long‐held believes
• Thinking beyond best‐practice
– process‐reengineering, TQM, etc. necessary but not sufficient and lead
towards performance barrier
– ‚Dream, create, explore, invent, pioneer, imagine …‘ (Hamel G 2002 p. 28)
• Changing the rules of the game!
– From market driven to market driving by innovating regarding value
proposition AND business system
(Bickhoff N 2008, Hamel G 2002, Kumar N 2000, Porter 1996)

Strategy Evaluation
• Suitability: Is there a sustainable competitive advantage?
• Validity: Are assumptions realistic?
• Feasibility: Does firm have the skills, resources, and
commitments?
• Internal consistency: Does strategy hang together?
• Vulnerability: What are the risks and contingencies?
• Workability: Can we retain our flexibility?
• Timing: What is the appropriate time horizon?
(Jain 2004)

4. Strategy
Implementation

Strategy Maps
• To visualize strategy and cause‐effect relationships among
strategic objectives
• Each perspective helps to execute the one above
• Best applied at various levels (corporate, SBU, …)
• Strategy Maps support strategy alignment
• Visual representation of the linked components facilitates
strategy communication
• Maps link to Balanced Score Card (performance metrics)
• Generic maps provide guidance to develop unique maps
tailored to company
(Kaplan, Norton 1996, 2004, 2008)

Generic Strategy Map (reduced)
Increase return on capital
Increase revenues in
Financial Grow revenues in new
Improve productivity existing segments
Perspective products and services
and markets
Improve Operating Grow High‐Value Accelerate Product
Quality and Efficiency Customer Relationships Innovation
Provide valued service, Introduce innovative,
Customer Be a leader in quality
applications expertise, high‐performance
Perspective and reliability
and support products and solutions
Optimize customer Excel at technology,
Improve supply chain
Process profitability product development
efficiency and effectiveness
Perspective and life cycle
Expand channels
management
Improve quality, cost, offerings, and markets
and flexibility of Identify next‐generation
Build and maintain strong
operating processes market opportunities
customer relationships
Learning Create a high‐Performance Culture
and Growth Expand and build
Develop leadership and Enable and require
Perspective strategic skills, capabilities,
execution‐driven culture continuous learning and
and expertise sharing of knowledge
(Kaplan, Norton 2008)

Generic Strategy Map (detailled)
(Kaplan, Norton 2004)
Productivity Strategy Long‐Term Growth Strategy
Shareholder Value
Financial Improve Cost Increase Asset Expand Revenue Enhance
Perspective Structure Utilization Opportunities Customer Value
Customer Value Proposition
Price Quality Availability Selection Functionality Service Partnership Brand
Customer
Perspective Product / Service Attributes Relationship Image
Operations Management Customer Management Innovation Processes Regulatory and Social
Processes Processes Processes
• Supply • Selection • Opportunity • Environment
• Production • Acquisition • R & D Portfolio • Safety and Health
• Distribution • Retention • Design/Develop • Employment
Internal • Launch • Community
• Risk Management • Growth
Perspective
Human Capital
Learning and
Growth Information Capital
Perspective
Culture Leadership Organization Capital Alignment Leadership

Balanced Score Card
• Performance measuring system to quantify also intangible
assets
• Customer perspective, internal processes and learning as
building blocks
• Financial performance as ultimate indicator
• Companies vision and mission stand above providing overall
direction
• „You cannot manage, what you cannot measure.“

Balanced Score Card
Vision and Mission
Objectives Measures Targets Initiatives
Financial
Perspective
Customer
Perspective
Process
Perspective
Learning and
Growth
Perspective

Balanced Score Card
1) Set global goals
− What do you generally aim at?
2) Define measures
− How will you measure your results?
3) Set targets
− Specific goals related to your measures you like to achieve
in a certain time frame
4) Plan initiatives
− What actions will take place to meet your goals?

Finally, ask yourself …
“There are three kind of companies, those that
make things happen, those that watch things
happen – and those that wonder what happened.”
(anonymous)

And consider…
“Predicting rain does not count –
building arks does.”
(anonymous)

Literature
• Andrews K R (1987) ‘The Concepts of Corporate Strategy’ Richard D Unwin, Homewood
• Bickhoff N (2008) ‚Quintessenz des strategischen Managements – Was Sie wirklich
wissen müssen, um im Wettbewerb zu überleben‘ Springer‐Verlag, Berlin
• Campbell A, Alexander M (1997) ‚What’s Wrong with Strategy?’ HBR Nov‐Dec, pp. 42‐51
• Eisenhardt K M, Sull D N (2001) ‚Strategy as Simple Rules‘ HBR Jan‐Mar, pp. 107‐116
• Hamel G (2002) ‘Leading the Revolution’ Harvard Business School Press, Boston USA
• Jain S C (2004 7th ed.) ‘Marketing: Planning and Strategy’ Thomson, Ohio USA
• Kaplan R S, Norton D P (2008) ‘Mastering the Management System’ HBR, Jan, pp. 63‐77
• Kaplan R S, Norton D P (2004) ‘Strategy Maps’ Boston
• Kaplan R S, Norton D P (1996) ‘The Balanced Scorecard’ Boston
• Kumar N, Scheer L, Kotler P (2000) ‚From Market Drive to Market Driving‘ European
Management Journal Vol. 18 No. 2, pp. 129‐142
• Porter M E (1996) ‘What is Strategy?’ Harvard Business Review, No. 6, Nov‐Dec, pp. 61‐78

Literature
• Porter M E (1985) ‘Competitive Advantage’ Free Press, New York
• Schiffman L et al. (2005) ‘Consumer Behaviour’ Pearson Education Australia, Frenchs Forest
NSW
• Treacy M, Weirsema F (1995) ‘The Discipline of Market Leaders: Choose Your Customers,
Narrow Your Focus, Dominate Your Market’ Perseus Books, Cambridge

Further Concepts
• Blue Ocean Strategies (Kim, Mauborgne )
• Core Competencies (Hamel, Prahalad);
• Resource‐based view (Barney, Clark)
• Five Forces (Porter)
• Marktet‐Orientation (Kohli, Jaworski, Narver, Slater, Day)
• Operational Excellence
• Portfolio Analysis
• Product Lifecycle, Industry Lifecycle
• Six Sigma (Pande, Neuman, Cavanagh)
• Strategic Intent (Hamel, Prahalad)
• Sustainable Competive Advantage
• Total Quality Management
• Value Chain (Porter)

Further Readings
• Barney J B, Clark D N (2007) ‘Resource‐Based Theory: Creating and Sustaining Competitive
Advantage’ Oxford University Press
• Day G S (1994) ‘The capabilities of market‐driven organizations’ Journal of Marketing, Vol. 58,
No. 4, pp. 37‐52
• Kim W C, Mauborgne R (2005) ‘Blue Ocean Strategy: How to Create Uncontested Market
Space and Make Competition Irrelevant’ Harvard Business School Press
• Kohli A K, Jaworski B J (1990) ‘Market Orientation: The Construct, Research Propositions, and
Managerial Implications’ Journal of Marketing, Vol. 54, No. 2, pp. 1‐18
• Narver J C, Slater S. F. (1990) ‘The effect of a market orientation on business profitability’
Journal of Marketing, Vol. 54, No. 4, pp. 20‐36
• Senge P M (1990) ‘The Fifth Discipline: The Art and Practice of the learning Organization‘
Currency Doubleday

Further Questions?
• If you could need some advice on how to apply the concepts to
your case, please feel free to drop me a line.
Benjamin Teeuwsen
benjamin@chiligum.com
www.chiligum.com
By the way, I appreciate pretty much any feedback, e.g. if this was helpful and why
or why not – so I know better how to improve this presentation as well as I do enjoy
hearing, when this led to new insights for university studies : ‐ )

www.chiligum.com