Strategy Grand Tour

Strategy Grand Tour Stefano Mastrogiacomo 04.2007

What does strategy mean ? Etymology quot;art of a generalquot; from Fr. stratégie, from Gk. strategia quot;office or command of a general,quot; from strategos quot;general,quot; from stratos quot;multitude, army, expedition quot; Based on the Online Etymology Dictionary. Douglas Harper, Historian. 22 May. 2007.

What does strategy mean today ? A plan, method, or series of maneuvers or stratagems for obtaining a specific goal or result. Based on the Random House Unabridged Dictionary, © Random House, Inc. 2006. http://www.flickr.com/photos/11937586@N00/397343251/

Strategy is about dealing with a possible future … and this is a matter of perspective… http://www.flickr.com/photos/jim-murphy/202064590/

Some people think the future is predictable. Success is matter of destiny. http://www.flickr.com/photos/76329469@N00/312637677/

Some other think the future is chaotic and unpredictable. Success is a pure matter of chance. http://www.flickr.com/photos/29cm/487919076/

We think (and we’re not the only ones) that the future is invented and created every day. And there are great tools for that.

Today’s Agenda To have a better understanding on how to make right assumptions about the future in order to gain a competitive advantage.

Defining Corporate Strategy

“the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration of resources within a changing environment and to fulfill stakeholders expectations” Exploring Corporate Strategy, Johnson and Scholes, 2002

A simple strategic journey

Winners and losers

Vocabulary Resources/Core capabilites Vision/Goals Strategy/Plan Point B Environment/ Decisions Circumstances Point A Competitors time now the future

Different approaches, different tools, different purposes rivalry alignment processes A D1 strategy as… B C D2 E co-creation free rider environment x learning process xx x xx x technology cognition manipulation

Strategy as rivalry

Michael Porter

Elements of industry structure

Productivity frontier

Value chain

Activity systems

Example: US automotive industry (70’-80’)

Strategy as alignment processes A D1 B C D2 E

Robert Kaplan and David Norton

The need for focus Ok Here Here CEOs Managers Staff

Strategy-Focused Organization principles 2. TRANSLATE STRATEGY TO 1. Mobilize CHANGE THROUGH OPERATIONAL TERMS EXECUTIVE LEADERSHIP 2.1 Strategy map developed 1.1 Top leadership committed 2.2 Balanced Scorecard created 1.2 Case for change clearly articulated 2.3 Targets established 1.3 Leadership engaged 2.4 Initiatives rationalized 1.4 Vision and strategy clarified 2.5 Accountability assigned 1.5 New way of managing understood 1.6 Program manager identified STRATEGY- FOCUSED 5. GOVERN TO MAKE STRATEGY A 3. ALIGN THE Organization Organization CONTINUAL PROCESS TO THE STRATEGY BEST PRACTICES 5.1 BSC reporting system established 3.1 Corporate role defined 5.2 Strategic review meetings conducted 3.2 Corporate – SBUs aligned 5.3 Planning, budgeting, and strategy integrated 3.3 SBU – Support units aligned 5.4 HR and IT planning linked to strategy 3.4 SBU – External Partners aligned 5.5 Process management linked to strategy 3.5 SBU – Board of directors aligned 4. MOTIVATE TO 5.6 Knowledge sharing linked to strategy MAKE STRATEGY 5.7 Strategic Management Office EVERYONE’S JOB established 4.1 Strategic awareness created 4.2 Personal goals aligned 4.3 Personal incentives aligned 4.4 Competency development aligned Balanced Scorecard Collaborative • bscol.com

Strategy Map example Maximize return on assets Financial Manage Profitable Leverage asset operation costs growth base Customer Residential, Commercial, Industrial Socially Innovative Reliable Supplier Competitive responsible solutions energy supply stability price energy sources Internal Optimize Core Business Continued Public Support Customer Service Excellence Business Growth Capitalize on Seamless Optimize Proactively build deregulation cross-group asset & manage opportunities delivery of utilization relationships services Use alliances & Trading joint- opportunities Develop Ensure reliable Continued ventures Max Returns innovative service cost on resource service management Effective allocation offerings Understand customer drivers of Enterprise- Communication service customer value wide risk and education processes Cross-group management programs R&D Learning & Growth World-class Ensure market-driven Industry leading leadership skill development employee satisfaction effectiveness © 2005 Balanced Scorecard Collaborative • bscol.com

Balanced Scorecard example Targets Measures (D=Drivers) Objectives Initiatives FY03 FY04 FY05 Financial • Maximize returns • ROCE 14% 14.5% 15% • Profitable growth • Revenue growth 6% 8% 12% • Leverage asset base • Asset utilization rate 80% 85% 90% • Manage operating costs • Operating costs / customer $150 $140 $125 • Industry leading customer loyalty • Customer satisfaction rating 80% 85% 90% • Customer loyalty program Customer Optimize Core Business • Optimize core utilization • % revenue from deregulated products/services 5% 7% 10% • Telecom infrastructure development • % trading revenue 10% 12% 15% • Trading risk assessment (work support) • Max. return on resource allocation • Revenue from new services $500M $550M $600M • % customers served through alliances and joint ventures 10% 20% 25% • Continued cost management • NPV product/service pipeline $500M $550M $600M • Enterprise-wide risk management • % R&D projects meeting protocol gates (D) 90% 95% 100% • Research alliance program • Customer/partner satisfaction (5 point scale) 4.0 4.5 4.5 • Preventative maintenance Continued Public Support • Proactively manage relationships • Reliability index 90/100 92/100 95/100 • Ensure reliable service • Communication/education coverage (%) 100% 100% 100% • Community outreach program Internal • Communicate/educate customers • % communication/education plans executed (D) 80% 85% 90% • Promised delivery % 90% 95% 97% • Cross-selling marketing program Customer Service Excellence • Seamless cross-group delivery • New product uptake rate 20% 25% 30% • Service dispatch automation • Understand customer drivers • On-time market research projects (D) 90% 95% 100% • Effective customer services • Customer satisfaction rating – C.S. Center (see above) 85% 89% 95% • CIS upgrade • Problem resolution cycle time – Customer Service Center (D) 6hr 4hr 3hr • Call center software integration Business Growth • Capitalize on deregulation opportunities • % rated capacity attained 80% 85% 90% • Optimize trading opportunities • Fossil maintenance benchmark • Develop innovative services • Employee productivity improvement 2% 3% 4% • Use alliances and joint ventures • Leverage cross-group R&D • % cost reduction 4% 5% 6% • Shared service benchmark/outsourcing • Cost of disruption vs. plan +/-15% +/-10% +/-5% initiative • Time to recovery (D) 8 hr 4 hr 2 hr • ERP implementation • Ensure market-driven skill • Strategic skill coverage ratio 65% 75% 85% • Competency profiling Learning & • Hours in strategic skills training (D) 10 12 15 Growth • Industry leading employee satisfaction • Employee satisfaction rating (5 point scale) 3.0 4.0 4.5 • Performance compensation link • World-class leadership effectiveness • Leadership effectiveness rating (upward appraisal―5 point 4.0 4.5 4.5 • Leadership training program scale) © 2005 Balanced Scorecard Collaborative • bscol.com

Examples

Strategy as learning and as an emergent process

Henry Mintzberg

Emergent strategy

And also Peter Senge (learning organization)

Strategy in a networked society

Arnoldo Hax and Dean Wilde

Strategic Options System lock-in Total Best customer Product solutions Total customer solutions System lock-in Best product Competition for the Competition around the control Competition based on of the ecosystem determinants customer « interaction product ’s economic system » attributes Complementors lock-in competitor lock-out Redefining customer ’s Low cost or mere experience differentiation Proprietary standard

Example

Strategy as a free rider experience x xx x xx x

Kim and Mauborgne

Kim and Mauborgne “The only way to beat the competition is to stop trying to beat the competition”

Red and blue ocean strategies Blue Ocean Strategy Red Ocean Strategy Compete in existing market space. Create uncontested market space. Beat the competition. Make the competition irrelevant. Exploit existing demand. Create and capture new demand. Make the value/cost trade-off. Break the value/cost trade-off. Align the whole system of a company’s Align the whole system of a activities with its strategic choice of company’s activities in pursuit of differentiation or low cost differentiation and low cost.

Strategic canvas 5 - high value curve performance 3 - medium 1 - low 2 3 1 8 te te te te bu bu bu bu … tri tri i i ttr ttr at at a a

by Alex Osterwalder

Other examples

Strategy as co-creation with customers

C.K. Prahalad

Collaboration as co-creation of value discovering and creating new opportunities shared destiny sharing and and co-creation creating prerequisites for collaboration of value knowledge shared practices sharing and co-innovation information (transaction data) collaboration with suppliers, key customers, partners arm’s-length traditional relationship business approach Joint goals; market-based, improved joint development; joint leverage of transaction business competencies driven; across processes; co-management business unit across legal of the enhanced boundaries network boundaries collaboration intensity

Strategy as environmental configuration

Chris Anderson

Example http://www.longtail.com/the_long_tail/2007/05/a_wall_street_a.html

Other examples

Strategy as cognition

http://www.flickr.com/photos/theimagegroup/369496139/

Ackermann, Eden, Finn, Bryson, …

Four Barriers to Strategy Execution The Vision Barrier Only 5% of the workforce understand the strategy The People Barrier The Management Barrier 9 of 10 companies Only 25% of managers have 85% of executive teams incentives linked to overall spend less than one hour fail to execute strategy strategy month discussing strategy The Resource Barrier 60% of organizations do not link budgets to strategy © 2005 Balanced Scorecard Collaborative • bscol.com

18% 1% 300% Strategy Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Cras in tortor. Sed posuere erat. Maecenas pulvinar nulla eu magna. Vivamus semper, risus ut egestas pulvinar, lectus ante feugiat quam, sit amet congue odio lacus ac ipsum. Aliquam suscipit, est ut volutpat vulputate, nulla felis pulvinar libero, non ornare libero ipsum tristique tortor. Fusce sed lorem vitae justo feugiat malesuada. Donec aliquet. Vivamus semper eros nec Text diam. Vivamus sem arcu, imperdiet nec, congue ac, scelerisque vel, nulla. Donec et mauris. Integer a nulla vulputate pede consequat euismod. Praesent molestie urna nec leo. Proin eros. Maecenas ac sem nec dui sodales tempus. Maecenas suscipit egestas velit. Suspendisse vel tortor. Proin imperdiet, sem nec aliquet ultrices, nunc est egestas eros, non hendrerit magna eros eget augue. Maecenas sed leo vitae leo faucibus vulputate. Proin dignissim eros at augue. Nam luctus nulla non nibh. Nam at lorem ac mauris laoreet viverra. In placerat consequat nunc. Donec rhoncus nunc ac urna. Integer vestibulum condimentum orci. Fusce velit turpis, malesuada quis, scelerisque ut, eleifend vitae, ipsum. Vestibulum eu erat. Vestibulum justo nisl, tincidunt et, semper vel, tristique quis, eros. Vestibulum tempus, massa vel consectetuer congue, erat magna consequat purus, a facilisis orci nibh vitae purus. Nam tincidunt venenatis ligula. Nunc orci nulla, ornare quis, lobortis viverra, dapibus at, turpis. Suspendisse sit amet nisl at enim tincidunt blandit. Curabitur augue est, suscipit sed, egestas sit amet, vehicula vitae, tellus. Maecenas nec metus vel nisi interdum pellentesque. Development plan Quisque augue felis, commodo a, elementum id, faucibus id, sem. Aenean rutrum enim. Praesent pulvinar dignissim nisl. Cras a nunc. Donec tincidunt odio sit amet lacus. Pellentesque metus tortor, ullamcorper vitae, lobortis vel, euismod in, mi. Ut laoreet, tellus laoreet blandit mollis, massa purus posuere purus, quis molestie ligula massa eu metus. Duis placerat, nulla sit amet ornare interdum, neque nunc mollis leo, vitae porttitor mi orci sit amet neque. Donec at enim. In facilisis tellus gravida ligula. Phasellus ut lorem. Pellentesque ac tortor eget augue suscipit ullamcorper. Aenean eleifend porta orci. Etiam at arcu. Vestibulum lacinia nunc in eros. Suspendisse potenti. Aliquam erat volutpat. Donec gravida. Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Maecenas vel enim et metus semper fringilla. Donec ornare arcu. Maecenas faucibus ligula convallis nibh. Mauris dui quam, congue eu, commodo nec, tristique in, enim. Nulla auctor semper urna. Quisque a elit eu purus iaculis vestibulum. Aliquam dictum risus at odio. Fusce at lorem et elit faucibus placerat. Aenean velit. Proin elit odio, blandit et, scelerisque quis, pulvinar a, dui. Nunc magna dolor, bibendum ut, accumsan congue, tincidunt sit amet, neque. Proin consequat tincidunt lacus. In urna dui, congue nec, tincidunt sit amet, facilisis imperdiet, lorem. Morbi sed nibh. Vivamus vitae dolor. Ut bibendum volutpat mi. Pellentesque quis magna non lectus elementum pretium. Aliquam quis est vitae arcu consequat 12% fringilla. Cras magna risus, placerat eget, egestas consectetuer, ornare vel, felis. Nam ornare justo id orci mattis ultricies. Morbi luctus. Ut pretium odio ac libero. Nunc sollicitudin pharetra lorem. Aenean scelerisque, lacus eget ullamcorper scelerisque, ipsum urna viverra mi, eget viverra quam eros eget velit. Ut Words lacinia feugiat purus. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Etiam nunc nisl, aliquam blandit, luctus id, commodo laoreet, sem. Phasellus sit amet orci ut sapien vulputate pellentesque. Pellentesque dapibus purus et quam. Nam sit amet magna in neque dignissim sodales. Aenean non justo nec magna lobortis volutpat.

Causal maps

Military foundations of strategy

Strategy as persuasion and manipulation

Sun Tzu – The Art of War (~500 BC)

Sun Tzu “if they are strong, avoid them”

any comment ?

Strategy as enemy total destruction

Karl von Clausewitz (~1800)

On war quot;The complete or partial destruction of the enemy must be regarded as the sole object of all engagements.”

Biological foundations

Daniel Dennett

Genotype and phenotype genotype + environment → phenotype

Intentionality The intentionality characteristic of humans is a result of evolutionary processes. Humans have goals and desires and tend to operate in order realize their goals (according to their understanding of the world or their beliefs).

Darwinian creatures Kinds of Minds: Towards an Understanding of Consciousness Daniel C. Dennett

Popperian creatures Kinds of Minds: Towards an Understanding of Consciousness Daniel C. Dennett

Gregorian creatures Kinds of Minds: Towards an Understanding of Consciousness Daniel C. Dennett

Summary

Different approaches, different tools, different purposes rivalry alignment processes A D1 strategy as… B C D2 E co-creation free rider environment x learning process xx x xx x technology cognition manipulation

Quick checklist Identify the strategic issues 1. What’s the problem ? What’s the context ? Select the right method and tools 1. Read reference books 2. Ask questions to experts 3. Use the internet Co-create strategy with all future participants Operationalize: translate concepts into daily activities Monitor execution (measure progress) Update strategic destination if necessary

Thank you www.arvetica.com

Many thanks to Flickr and McMollie Jimurphy Grafixation leonzerider ayalan

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Strategy Grand Tour

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