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Why Your Strategy Stinks

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Presentation delivered by Richard Farr and Brian Wood to the Actuaril Profession Life Convention, 27th November 2009

Presentation delivered by Richard Farr and Brian Wood to the Actuaril Profession Life Convention, 27th November 2009

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  • 1. WHY YOUR STRATEGY STINKS
    Richard Farr
    Brian Wood
    Telos Solutions
    Life Convention, Edinburgh: November 2009
  • 2. Introductions
    Brian Wood
    Actuary
    CEO, Telos Solutions
    Former CEO of 2 lifecos
    ‘Blue Ocean Strategy’ licensed practitioner
    Co-author of “Beat the Pensions Crisis”
    Richard Farr
    Marketing specialist
    Business Development Director, Telos
    Former director of AIFA and Association of Mortgage Intermediaries
    Extensive experience in building societies and mortgages sector
    2
    Why your Strategy Stinks Farr & Wood
  • 3. What is Strategy?
    3
    Why your Strategy Stinks Farr & Wood
  • 4. Examples of great strategy
    (not FS)
    4
    Why your Strategy Stinks Farr & Wood
  • 5. Four attributes of great strategy:
    1. Future orientation
    2. Customer intimacy
    4. Delivery
    3. Differentiation
    5
    Why your Strategy Stinks Farr & Wood
  • 6. Strategy in Business
    • Established in the 1950’s and 1960’s
    • 7. Need for common objectives
    • 8. Origins in military strategy (zero-sum assumption)
    • 9. Later theories focussed on numbers
    • 10. Competitor review
    • 11. Current industry conditions
    • 12. Current customers
    • 13. More time spent analysing than observing and thinking
    6
    Why your Strategy Stinks Farr & Wood
  • 14. Classic strategy theory (Porter et al)
    Analyse the market boundaries, plotting value against cost
    Choose the optimum position along the high value/ high cost to low value/ low cost spectrum
    There are no other choices
    Assumes the market is inherently static – innovation changes it slowly
    7
    Why your Strategy Stinks Farr & Wood
  • 15. The classic strategy development process
    Optimise your position in current market structure
    Analyse data on current customers
    Allow for some emerging trends
    Analyse data on your competitors
    • Finer and finer segmentation of existing markets
    • 16. Customer wants “more for less”, “more for less”, “more for less”
    • 17. A slow death spiral
    8
    Why your Strategy Stinks Farr & Wood
  • 18. “McKinsey takes an overall, independent, and fact-based view of a client’s performance. We rely on facts because they provide clarity and align people.”
    “When a BCG consultant walks through your door, he or she will be thinking about two things: the competition you face and new ways for you to win.”
    “Bain work with top management to beat their competitors and generate substantial, lasting financial impact ... we dig deep into the numbers, as the basis for creating solutions.”
    “Booz Allen are experts in understanding industry structure and dynamics and in boiling it down to the insights that are most relevant to our clients’ situations.”
    Major strategy firms ...
    9
    Why your Strategy Stinks Farr & Wood
  • 19. So: this is why your strategy probably stinks
    1. Future orientation
    2. Customer intimacy
    3. Differ-entiation
    4. Delivery
    10
    Why your Strategy Stinks Farr & Wood
  • 20. What makes a perfect strategy?
    11
    Why your Strategy Stinks Farr & Wood
    • A new market with NO competition
    1. Future orientation
    • Products that customers want to pay for
    2. Customer intimacy
    • Costs reduced to lowest possible level
    3. Differ-entiation
    • Capable of being delivered
    4. Delivery
    • Refreshed on a regular basis
  • Market for video games
    (Xbox, PlayStation):
    Young males:
    Nintendo
    12
    Why your Strategy Stinks Farr & Wood
  • 24. Unexplored customers:
    Older females.
    Observation:
    They like games!
    13
    Why your Strategy Stinks Farr & Wood
  • 25. Nintendo Wii: strong differentiation
    14
    Why your Strategy Stinks Farr & Wood
  • 26. Market for Nintendo Wii:
    Everyone
    15
    Why your Strategy Stinks Farr & Wood
  • 30. Impact on Nintendo
    Low-cost graphics
    Low-cost controls
    Low-cost game development
    Production cost of Playstation: $800
    Production cost of Wii: $150
    Wii sales overtook Xbox and Playstation combined in 2008
    Nintendo now worth more than Sony
    16
    Why your Strategy Stinks Farr & Wood
  • 31. Competitor World View
    Our World View
    The area to expand
    Source of poor strategy
    FALSE
    17
    Why your Strategy Stinks Farr & Wood
  • 32. Nintendo used ‘Blue Ocean’ tools
    RED OCEAN
    Existing markets
    Fierce competition
    Cost-plus pricing
    High legacy costs
    Thin margins
    BLUE OCEAN
    Uncontested market space
    Competition is irrelevant
    Market pricing
    Low costs
    High margins
    18
    Why your Strategy Stinks Farr & Wood
  • 33. Video games: “As-Is” strategy canvas
    19
    Why your Strategy Stinks Farr & Wood
  • 34. Current customers:where do we add cost/pain but no value?
    20
    Why your Strategy Stinks Farr & Wood
  • 35. You have many more non-customers than customers
    Current customers are already served by you - and your competitors
    Everyone is a customer somewhere – so you can observe what they need/ like
    If the further reaches are too scary, dip your toe in by observing the “Soon-to-be”
    Now
    Soon-to-be
    Refusing
    Unexplored
    Observing non-customers
    21
    Why your Strategy Stinks Farr & Wood
  • 36. Observe non-customer needs: Six paths
    6
    Industries that offer an alternative
    Other strategic groups
    Chain of buyers
    Complementary products & services
    Functional and emotional appeal
    Time
    22
    Why your Strategy Stinks Farr & Wood
  • 37. Construct a new Canvas based on value
    Raise
    What factors should be raised well beyond industry standard?
    Create
    What factors that the industry has never offered should be created?
    Eliminate
    What factors that the industry has taken for granted should be eliminated?
    Reduce
    What factors should be reduced well beyond industry standard?
    23
    Why your Strategy Stinks Farr & Wood
  • 38. Nintendo Wii: strong differentiation
    24
    Why your Strategy Stinks Farr & Wood
  • 39. A simpler example
    • John Lasseter, animator
    • 40. Left Disney as he could not convince them as to the power of CGA
    • 41. Joined Lucas Films Computer Graphics Group
    • 42. Co Founded Pixar with Steve Jobs
    • 43. Sold Pixar to Disney in 2006 for $7.4bn
    • 44. Head of Pixar and Disney Movie Studios
    25
    Why your Strategy Stinks Farr & Wood
  • 45. John's view on strategy
    26
    Why your Strategy Stinks Farr & Wood
  • 46. Four attributes of great strategy:
    1. Future orientation
    2. Customer intimacy
    4. Delivery
    3. Differentiation
    27
    Why your Strategy Stinks Farr & Wood
  • 47. Strategy and Deliveryare completely different disciplines
    Strategy is about creating a coherent direction that customers can relate to.
    Operations is about the nitty-gritty of internal process, expertise, people, costs.
    Success requires both – no point having a strategy that you can’t implement.
    28
    Why your Strategy Stinks Farr & Wood
  • 48. The delivery gap
    Strategy thinking is:
    outside-in
    risk-taking
    conceptual
    Operations thinking is:
    inside-out
    risk-avoiding
    tangible
    So a natural gap tends to exist in most organisations
    29
    Why your Strategy Stinks Farr & Wood
  • 49. Closing the gap
    Convert the strategy into operational terms
    tangibles: what will it look/feel/sound like?
    Explicitly manage the continuous flow between strategy and operations
    always messy
    Start with a ‘top-slice’ exercise to evaluate:
    costs
    timescales
    risks
    30
    Why your Strategy Stinks Farr & Wood
  • 50. 31
    Why your Strategy Stinks Farr & Wood
  • 51. The full strategy development process
    Integrate with delivery
    Construct new strategy canvas
    Engage with non-customers
    Existing customer pain-points
    “As-is” Strategy
    Canvas
    32
    Why your Strategy Stinks Farr & Wood
  • 52. The acid tests
    Are you offering something different and special to potential customers?
    vs
    Will people pay a fair “market price” for what you offer?
    Can your costs be low enough so that you generate a profit?
    Can you deliver it?
    33
    Why your Strategy Stinks Farr & Wood
  • 53. References and links
    34
    Why your Strategy Stinks Farr & Wood

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