Crowdsourced Business                                                                               Presentation Design Se...
PPT Lab (www.pptlab.com) is the only crowdsourced                                             presentation design service....
Contents     Overview                                                                 4     Crucial Situations for Strat...
Contents     Overview     Crucial Situations for Strategic Principle     Constructing a Strategic Principle     Closin...
Strategic principle is a powerful tool companies use to maintain cohesive strategic action, while making decentralized dec...
Here are some examples of companies that have distilled their corporate strategies into strategic principles Strategic Pri...
The strategic principle abides by the 80-100 rule of business 80-100 Rule      The distillation of an organization’s strat...
An effective strategic principle has 3 defining attributes Defining Attributes           A strategic principle should guid...
Contents     Overview     Crucial Situations for Strategic Principle     Constructing a Strategic Principle     Closin...
There are 4 primary situations where having a strategic principle is crucial to success Crucial Situations for Strategic P...
Decentralization is a common situation for                                                                      Decentrali...
Rapid growth is another situation where a                                                                       Decentrali...
Technological change is becoming more and                                                                       Decentrali...
Institutional turmoil includes leadership changes                                                              Decentraliz...
Contents     Overview     Crucial Situations for Strategic Principle     Constructing a Strategic Principle     Closin...
Many successive companies were originally founded upon strategic principles Constructing a Strategic Principle (1 of 3)   ...
Capturing a strategic principle is analogous to capturing the differentiating components of an entity’s genetic code Const...
The process of constructing a strategic principle follows a 4 step process Constructing a Strategic Principle (3 of 3)    ...
Contents     Overview     Crucial Situations for Strategic Principle     Constructing a Strategic Principle     Closin...
Though they may seem similar at first, a strategic principle is different from a mission statement Strategic Principle vs....
A strategic principle should be revisited regularly and updated as needed Closing Thoughts       • Just like a company’s c...
PPT Lab (www.pptlab.com) is the only crowdsourced                                             presentation design service....
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Strategic Principle

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http://pptlab.com/ppt/HBR-Transforming-Corner-Office-Strategy-into-Frontline-Action-21

Strategic principles allow organizations to make decentralized decisions while maintaining cohesive strategic action. This document explains the strategic principle framework, including examples, defining attributes, relevant crucial situations, and an approach to strategic principle development.

Presentation based on the HBR article, "Transforming Corner-Office Strategy into Frontline Action," co-authored by Orit Gadiesh and James Gilbert. This article is on the list of "HBR's Must-Reads on Strategy."

This project will convert the article into an instructional presentation along with slide templates/diagrams for use in our own presentations.

Intro to the article:
Southwest Airlines keeps soaring. Its stock price rose a compounded 21,000% between 1972 and 1992 and leapt 300% between 1995 and 2000.

Why does Southwest succeed while so many other airlines fail? Because it sticks to its powerful strategic principle: "Meet customers' short-haul travel needs at fares competitive with the cost of automobile travel." This pithy, memorable, action-oriented phrase distills Southwest's unique strategy and communicates it throughout the company.

An effective strategic principle lets a company
simultaneously:
*maintain strategic focus,
*empower workers to innovate and take risks,
*seize fleeting opportunities,
*create products and services that meet subtle shifts in customers’ needs.

In today’s rapidly changing world, companies must integrate decentralized decision making with coherent, strategic action. A well-crafted, skillfully implemented strategic principle lets them strike that delicate balance.

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Strategic Principle

  1. 1. Crowdsourced Business Presentation Design ServiceStrategic PrincipleTransforming Corner-Office Strategyinto Frontline ActionStrategic principles allow organizations to make decentralized decisions whilemaintaining cohesive strategic action. This document explains the strategic principleframework, including examples, defining attributes, relevant crucial situations, andan approach to strategic principle development. February 25, 2013ORIGINAL PROJECT DETAILShttp://pptlab.com/ppt/HBR-Transforming-Corner-Office-Strategy-into-Frontline-Action-21
  2. 2. PPT Lab (www.pptlab.com) is the only crowdsourced presentation design service. Get consulting-quality presentations at a fraction of the cost!www.PPTLab.comsupport@pptlab.com Each month, we will create well over 50 slides of for our members. As a member, you will drive what business slides we create by submitting your own presentation projects to our team. All presentations will be created by a team of management consultants and follow the Consulting Presentation Framework.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 2
  3. 3. Contents  Overview 4  Crucial Situations for Strategic Principle 9  Constructing a Strategic Principle 15  Closing Thoughts 19PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 3
  4. 4. Contents  Overview  Crucial Situations for Strategic Principle  Constructing a Strategic Principle  Closing ThoughtsPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 4
  5. 5. Strategic principle is a powerful tool companies use to maintain cohesive strategic action, while making decentralized decisions Executive Summary THE PROBLEM THE SOLUTION  A challenge that confronts every company—small  Companies that have successfully balanced or large—is how to give employees clear strategic decentralized decision making and strategic action direction, but also inspire flexibility and risk taking have each employed a strategic principle  Within an organization, it is difficult to achieve both  A strategic principle is a memorable and decentralized decision making and cohesive actionable phrase that distills a company’s strategic action THIS IS A PARTIAL PREVIEW corporate strategy into its unique essence and communicates it throughout the organization You can download the full document strategic principle is analogous to the rules of  A at http://PPTLab.com. PPT Lab is a crowdsourced presentation design service. engagement used in military battle – E.g., Admiral Lord Nelson’s crews in Britain’s 18th-century wars against the French were guided by the principle: whatever you do, get alongside an enemy ship – This was due to the fleet’s advantage in one- on-one battle and the impracticality of controlling the full fleet through flag signalsSource: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 5
  6. 6. Here are some examples of companies that have distilled their corporate strategies into strategic principles Strategic Principle Examples COMPANY STRATEGIC PRINCIPLE Dell • “Be direct.” eBay • “Focus on trading communities.” THIS IS •A PARTIAL or number two in every industry in which we “Be number one PREVIEW General Electric compete, or get out.” You can download the full document at http://PPTLab.com. PPT Lab is a crowdsourced presentation design at fares competitive • “Meet customers’ short-haul travel needs service. Southwest Airlines with the cost of automobile travel.” Vanguard • “Unmatchable value for the investor-owner.” Wal-Mart • “Low prices, every day.”Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 6
  7. 7. The strategic principle abides by the 80-100 rule of business 80-100 Rule The distillation of an organization’s strategy into a pithy and prescriptive phrase is important because a great business strategy is of little use unless people understand it well enough to apply it—both to anticipated decisions and unforeseen opportunities. The essence of why a strategic principle is useful can be explained by the 80-100 rule of business, which states: THIS IS A PARTIAL PREVIEW You are better with a strategy that is 80% right and 100% implemented than one that You can download the full document at http://PPTLab.com. is 100% right, but doesn’t drive consistent action throughout the company. PPT Lab is a crowdsourced presentation design service. A strategic principle helps an organization balance the ratio between correct strategic decision and strategy implementation.Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 7
  8. 8. An effective strategic principle has 3 defining attributes Defining Attributes A strategic principle should guide a company’s allocation of resources (e.g. capital, time, management’s attention, labor, brand)—but more specifically, an effective strategic principle achieves the following: 1 THIS IS A PARTIAL PREVIEW It forces trade-offs between competing resource demands. You can download the full document at http://PPTLab.com. 2 PPT Lab is a crowdsourced presentation design service. It tests the strategic soundness of a particular action. 3 It sets clear boundaries within which employees must operate while granting them freedom to experiment within those constraints.Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 8
  9. 9. Contents  Overview  Crucial Situations for Strategic Principle  Constructing a Strategic Principle  Closing ThoughtsPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 9
  10. 10. There are 4 primary situations where having a strategic principle is crucial to success Crucial Situations for Strategic Principle Today, companies face 4 situations—oftentimes simultaneously—that make a strategic principle crucial to success: THIS IS A PARTIAL PREVIEW Decentralization Rapid Growth You can download the full document at http://PPTLab.com. PPT Lab is a crowdsourced presentation design service. Strategic Principle Technological Change Institutional TurmoilSource: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 10
  11. 11. Decentralization is a common situation for Decentralization Rapid Growth companies across all industries Strategic Principle Technological Institutional Crucial Situation: Decentralization Change Turmoil EXAMPLE(S) OVERVIEW • For General Electric, its long-standing strategic  Decentralization is becoming more common at companies across principle of always being number one or all industries number two in any industry offers a cohesive  Thus, there is a corresponding rising need for a mechanism to rationale for how a conglomerate can create ensure coherent strategic action value but still give individual business units – This is especially true in the case of diversified conglomerates, considerable strategic freedom where strategy is formed in each of the business units, a THIS IS A PARTIAL PREVIEW strategic principle can help executives maintain consistency while giving business unit managers the freedom to tailor their strategies to meet their download the full document at http://PPTLab.com. You can own needs PPT Lab is a crowdsourced presentation design service. As industries mature, it is natural for all successful companies operating within to become decentralized as they enter acquisition mode.Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 11
  12. 12. Rapid growth is another situation where a Decentralization Rapid Growth strategic principle becomes instrumental Strategic Principle Technological Institutional Crucial Situation: Rapid Growth Change Turmoil EXAMPLE(S) OVERVIEW • Southwest Airlines began to grow quickly and it  A strategic principle is crucial when an organization is experiencing may have been tempted to mimic its rivals’ rapid growth ultimately unsuccessful strategies if it had not  During these times, it becomes increasingly the case that less followed its own strategic principle: “Meet experienced managers are forced to make important decisions customers’ short-haul travel needs at fares about issues for which there may be no precedent—this is competitive with the cost of automobile travel.” particularly true for a startup company that is growing rapidly in an established industry THIS IS A PARTIAL PREVIEW have been to tempted, like many • Ebay might  A clear and precise strategic principle can help counteract this other online marketplaces, to diversify into all You can download the full document shortage of experience at sorts of services if it had not followed its http://PPTLab.com. strategic principle: “Focus on trading PPT Lab is a crowdsourced presentation design service. communities” The strategic principle counteracts the shortage of experience facing many young managers that exist in a high growth company.Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 12
  13. 13. Technological change is becoming more and Decentralization Rapid Growth more pervasive in modern industries Strategic Principle Technological Institutional Crucial Situation: Technological Change Change Turmoil EXAMPLE(S) OVERVIEW • For the case of Dell in the late 90s, its mandate  The staggering pace of technological change over the past couple to sell direct to end users helped ensure that decades has been costly for companies that have not employed a the decisions made by frontline managers in strategic principle such circumstances add up to a consistent  Never before in business has there been more uncertainty coupled corporate strategy with so great an emphasis on speed  Oftentimes, the sum of the reactions across the organization ends up defining the company’s strategic course—whetherPARTIAL THIS IS A or not its PREVIEW aligned with the company’s strategic plan  In particular, You can download the full document at http://PPTLab.com. in high-tech industries, managers must react immediately to sudden Lab is a crowdsourced presentation design service. PPT and unexpected developments Technological change is an impact that not only affects the company’s strategic direction, but can significantly impact its operations.Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 13
  14. 14. Institutional turmoil includes leadership changes Decentralization Rapid Growth and other highly political situations Strategic Principle Technological Institutional Crucial Situation: Institutional Turmoil Change Turmoil EXAMPLE(S) OVERVIEW • For Vanguard in 1996, when Jack Brennan  A strategic principle can provide continuity during periods of took over as chairman and CEO, the strategic organizational turmoil transition was seamless, despite some tension  An increasingly common example of institutional turmoil is this era around the leadership transition of short-term CEOs is leadership succession • He maintained the mutual fund’s strategic – A new CEO can bring a new strategy, but not necessarily a new principle, thereby allowing managers to strategic principle THIS IS A PARTIAL PREVIEW their strategic objectives without pursue many of the distractions often associated You can download the full document at http://PPTLab.com. with leadership changes PPT Lab is a crowdsourced presentation design service. It is important to understand that a change to corporate strategy does not mean necessitate a change to strategic principle.Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 14
  15. 15. Contents  Overview  Crucial Situations for Strategic Principle  Constructing a Strategic Principle  Closing ThoughtsPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 15
  16. 16. Many successive companies were originally founded upon strategic principles Constructing a Strategic Principle (1 of 3) Many of the best and most conspicuous examples of strategic principles come from companies that found on them, such as: • eBay • Dell • Vanguard • Southwest Airlines THIS IS A PARTIAL PREVIEW • Wal-Mart You can download the full document at http://PPTLab.com. The founders of these companies adopted a clear guiding principle that summarized the essence of PPT Lab is a crowdsourced presentation design service. what would later grow to a full-blown business strategy. However, in the case of established multinationals, these organizations often need to craft their strategic principles at a critical juncture. The question that arises is, how do you construct a strategic principle when one doesn’t exist?Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 16
  17. 17. Capturing a strategic principle is analogous to capturing the differentiating components of an entity’s genetic code Constructing a Strategic Principle (2 of 3) The strategic principle must isolate and capture the corporate equivalent of the genetic code that differentiates your company from its competitors. THIS IS A PARTIAL PREVIEWstrategic principle is much like Identifying a identifying the 2% of DNA that separates You can download the full document atfrom monkey—or perhaps even more man http://PPTLab.com. PPT Lab is a crowdsourced presentation design service.of DNA difficult and comparable, the 0.1% that differentiates each human beingSource: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 17
  18. 18. The process of constructing a strategic principle follows a 4 step process Constructing a Strategic Principle (3 of 3) Test for Summarize Test for Test for Enduring Differentiation Communicative Power Actionability Nature • Management first needs to • Once the idea has been • Next, test the strategic • Finally, test the strategic ask: how does our expressed in a phrase, test principle for its principle for its ability to company allocate resources to create value in THIS IS A PARTIAL PREVIEW the strategic principle for its enduring nature communicative power promote and guide action • Is it clear, concise, and • Assess whether it exhibits a unique way—one that You can download the full document at http://PPTLab.com. differentiates us from • Does it capture what we intend to do for only the memorable? the 3 attributes of an effective strategic principle: competitors? PPT Lab is a crowdsourced •presentationtodesign service. A sanity check question is: next 3 to 5 years or does it would we feel proud • Forces trade-offs • The first step is to capture a more timeless paint it on the side of a between competing summarize the answer in a essence—the genetic code truck, as Wal-Mart does? resource demands brief phrase that captures of our company’s the essence of the competitive differentiation? • Tests the strategic company’s point of soundness of a differentiation particular action • Sets clear boundaries within which employees must operate while granting freedom to experiment within those constraintsSource: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 18
  19. 19. Contents  Overview  Crucial Situations for Strategic Principle  Constructing a Strategic Principle  Closing ThoughtsPPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 19
  20. 20. Though they may seem similar at first, a strategic principle is different from a mission statement Strategic Principle vs. Mission Statement It is important to note that a Strategic Principle is not a Mission Statement—in fact, there are many differences between the two communication tools MISSION STATEMENT STRATEGIC PRINCIPLE THIS IS A PARTIAL PREVIEW A mission statement informs a company’s A strategic principle drives a company’s vs culture. You can download the full document at http://PPTLab.com. strategy. PPT Lab is a crowdsourced presentation design service. A mission statement is aspirational—it A strategic principle is action-oriented—it vs gives people something to strive for. enables people to do something now. A mission statement is meant to inspire A strategic principle enables frontline frontline workers. vs workers to act quickly by given them explicit guidance to make strategically consistent decisions.Source: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 20
  21. 21. A strategic principle should be revisited regularly and updated as needed Closing Thoughts • Just like a company’s corporate strategy, its strategic principle is not eternal • However, even though the corporate strategy may change, its essence is likely to remain the same • Strategic half-lives are shortening and in general, strategy should be reviewed every quarter and updated every year • While it is recommended to revisit our strategic principle every time we re-examine the corporate strategy, it is likely to change only when there is a significant shift in the basic economics and opportunities of our market THIS IS A by legislation/policy changes, disruptive technology, new (e.g. caused PARTIAL PREVIEW business model) You can download the full document at http://PPTLab.com. • Vanguard takes explicit steps to ensure that the direction provided by its strategic principle remains PPT Lab is a crowdsourced presentation design service. current by employing an internal “devil’s advocacy” process • In this process, managers are divided into groups to critique and defend past decisions and current policiesSource: HBR: Transforming Corner-Office Strategy into Frontline Action, Gadiesh, Gilbert (2001)PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 21
  22. 22. PPT Lab (www.pptlab.com) is the only crowdsourced presentation design service. Get consulting-quality presentations at a fraction of the cost!www.PPTLab.comsupport@pptlab.com Each month, we will create well over 50 slides of for our members. As a member, you will drive what business slides we create by submitting your own presentation projects to our team. All presentations will be created by a team of management consultants and follow the Consulting Presentation Framework.PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 22

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