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Strategy 1-2-3. A practical guide defining the purpose and goals of strategy, the process of creating "good strategy" and how to build in execution to win the war on superior performance......

Strategy 1-2-3. A practical guide defining the purpose and goals of strategy, the process of creating "good strategy" and how to build in execution to win the war on superior performance for your organization.

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  • 1. Strategy 1, 2, 3!!© 2011, Eugene Chang
  • 2. Some say strategy is… © 2011, Eugene Chang
  • 3. big & scary[Too complex to get one’s head around]! Picture from Monsters, Inc, Disney / Pixar! © 2011, Eugene Chang
  • 4. soft & flu!yOthers! [Too nebulous to get one’s hands around]! Picture from Monsters, Inc, Disney / Pixar! © 2011, Eugene Chang
  • 5. But the reality is… © 2011, Eugene Chang
  • 6. “Nobody really knows what strategy is.” - The Economist! © 2011, Eugene Chang
  • 7. 1!© 2011, Eugene Chang Why is Strategy Important?
  • 8. “Because our natural reaction to challenges are inappropriate.” - Osama El-Kadi! Business Strategy & Negotiation Consultant!“Without a strategy, time and resources are easily wasted on piecemeal, disparate activities…” - Donald C. Hambrick and James W. Fredrickson! “Are you sure you have a strategy?”, Academy of Management Services 2001, Vol. 15, No. 4! © 2011, Eugene Chang
  • 9. Strategy provides a firmadvantage over its competitors. What strategy does: it helps a firm…! •  Define its market and systematically pursue its goals! •  Figure out the best course of action to advance its position relative to the competition! •  unify the organization behind shared objectives! •  coordinate the various activities in a coherent manner! •  stay focused and on-target! (“what not to do” as much as “what to do”)! •  Keep the “Big Picture” in mind! © 2011, Eugene Chang
  • 10. We hear these statementsfrom CEOs all the time… © 2011, Eugene Chang
  • 11. “Our strategy is to be the low-cost provider.”! “We’re pursuing a global strategy.”! “The company’s strategy is to integrate a set of! regional acquisitions.”! “Our strategy is to provide unrivaled ! customer service.”!“Our strategic intent is to always be the firstmover.”! “Our strategy is to move from defense! to industrial applications.”! - Donald C. Hambrick and James W. Fredrickson! “Are you sure you have a strategy?”, Academy of Management Services 2001, Vol. 15, No. 4! © 2011, Eugene Chang
  • 12. None of these declarations is a! STRATEGY!Smart CEO’s know not to reveal their real strategy with the public! (keeping the language vague and completely useless!)! © 2011, Eugene Chang
  • 13. Myth Busted: Best-Practice is actually! ANTI-STRATEGY •  Operational Effectiveness is not strategy! •  Constant improvement in operational effectiveness is necessary, but not sufficient! •  OE Competition raises the bar for everyone but leads to relative improvement for no one! •  Strategic positioning means performing different activities from rivals’ or performing similar activities in a different way! •  A company can only outperform rivals only if it can establish a difference that it can preserve! Michael E. Potter, “What Is Strategy?”, HBR 1996! © 2011, Eugene Chang
  • 14. 2!© 2011, Eugene Chang So what is! STRATEGY?
  • 15. BRAND! BUSINESS UNIT! MARKET ENTRY!MILITARY! different uses of the word! STRATEGY More…!OPERATIONAL! MARKETING! CORPORATE!Which one?! PRODUCT! © 2011, Eugene Chang
  • 16. “Business” Strategy By Hierachy! Corporate HQ! Corporate Strategy! (Diversified)! • Which businesses should we be in? • How does being in these businesses create synergy and/or add • Corporate Planning! competitive advantage to the corporation as a whole?! • Legal + M&A! •  IT! Business Unit Strategy! • How can we compete successfully in a particular marketplace? (e.g. pizza, safety boots, dental services) BUSINSS! BUSINSS! Functional Strategy! UNIT #1! UNIT #2! • How can each functional department in the BU do its part to meet the company’s objectives? • Finance! • Finance! • Includes marketing strategies, HR strategies, supply-chain • HR! • HR! strategies, new product development strategies… • Operations! • Operations! • R&D! • R&D! • Marketing! • Marketing! SBU* Strategy! • SALES! • SALES! • How can the SBU help the organization achieve its objectives? • IT! • IT! (may include dimensions beyond the scope of a single BU – e.g. IT Strategy)* Strategic Business Unit – Many companies feel that a functional organizational structure is not an e"cient way to organize activities so they have reengineered according to processes of SBUs. SBUs are treated as an internal profit center by corporate HQ, usually responsible for its own budgeting, hiring decisions, price setting, etc. © 2011, Eugene Chang
  • 17. A framework within whichWhat unique Advantage decisions are made whichcan we get and sustain establish the nature andover time.! direction of the business.! - Michael Porter! - Tregoe and Zimmerman! Good Definitions Describing! STRATEGY A systematic process for achieving long- term goals.! the direction and scope of an - Osama El-Kadi! organization over the long-term: which achieves advantage… through its configuration of resources… to meet the needs of markets and to fulfill stakeholder expectations.! - Johnson and Scholes! © 2011, Eugene Chang
  • 18. You can think of Strategy as being made up of! FIVE ELEMENTS (And you need all 5 for a comprehensive strategy)Donald C. Hambrick and James W. Fredrickson, “Are you sure you have a strategy?”, ! Academy of Management Services 2001, Vol. 15, No. 4! © 2011, Eugene Chang
  • 19. The Five Major A peek inside the strategy black box!Elements of Arena! The most fundamental of choices - A result of deep analysis andStrategy! should not be one of broad generalities! Staging! Vehicles!•  Resource constraints! The means by which•  Urgency (window of opp)! arenas are•  Credibility (to attract other entered matters stakeholders)! greatly and•  Need for early wins! should not be viewed as a mere Economic Logic! implementation A clear idea of how detail or done in profits above the afterthought! cost of capital will be generated! Differentiators! Best combination of differentiating dimensions from competitors to attract customers (and suppliers) to support your business! “The key is in achieving a robust, reinforced consistency among the elements of the strategy itself.”! Donald C. Hambrick and James W. Fredrickson, “Are you sure you have a strategy?”, ! Academy of Management Services 2001, Vol. 15, No. 4! © 2011, Eugene Chang
  • 20. ensure these 5 elements are! COHERENT and REINFORCING The strength is in the whole and not individual choices !Donald C. Hambrick and James W. Fredrickson, “Are you sure you have a strategy?”, ! Academy of Management Services 2001, Vol. 15, No. 4! © 2011, Eugene Chang
  • 21. Putting in place the input & output of the strategy “sequence”! Tools ≠ Strategy! Provide diff perspectives!“Figure 1 leaves out feedback arrows and other "! #! indications that great strategists are iterative, loop thinkers. The key is not in following a sequential $! %! process, but rather in achieving a robust, reinforced consistency among the elements of the strategy itself.” GoalBranding Setting!questionslike ‘who weare’ and ‘whydo we exist’! Donald C. Hambrick and James W. Fredrickson, “Are you sure you have a strategy?”, ! Academy of Management Services 2001, Vol. 15, No. 4! © 2011, Eugene Chang
  • 22. Strategy is an iterative process! Mission & Values! Goal! Setting! Industry! Analysis! STRATEGY Testing the Company! strategy! PROCESS! Analysis! Strategy!Diagram Adapted from Javier Gimeno and Fares Boulos, INSEAD STRATEGY Notes! © 2011, Eugene Chang
  • 23. Strategic plans can easily be undermined! Experience will corroborate that even a rational, well-constructed strategic plan rarely is realized exactly as laid out on paper. Many factors can derail the plan – from competitors undermining what was envisioned to poor execution. Mintzberg summarized his findings in the powerful diagram above, a reminder that real life requires strategy to be continually worked on and interacts in real-time with the operating environment.Mintzberg, H. (1987, July–August). Crafting strategy. Harvard Business Review, pp. 66–75.! Diagram from Principles of Management by Carpenter, Bauer and Erdogan, Mar 2009.! © 2011, Eugene Chang
  • 24. 3! What then is! GOOD STRATEGY?© 2011, Eugene Chang
  • 25. Don’t forget the political dimension!!Donald C. Hambrick and James W. Fredrickson, “Are you sure you have a strategy?”, ! Academy of Management Services 2001, Vol. 15, No. 4! © 2011, Eugene Chang
  • 26. A simply way to view Strategy It answers the questions “why”, “what”, “who”, “how”! A Strategy Tree Example (HBR)! important! Reminder!HBR Blog Article “Strategy on One Page” by Anthony Tjan, Jun 1, 2011. The Strategy Tree introduced to the author by Mats Lederhausen, formerly worldwide head of strategy for McDonalds’s! © 2011, Eugene Chang
  • 27. Uniqueness alone is insufficient; good strategy!has to provide a sustainable advantage.The business environment is constantly changingso Good Strategy !has to be flexible, but not reactive.Reiterating: All it five elements!has to be cohesive and reinforcing.Designed to meet some objectives, it shouldbe inherently measurable.And for ease of communication!be clear to describe. © 2011, Eugene Chang
  • 28. Good strategy [should also incorporate]! the continuous and ongoing managing of all ! phases of the strategic process [including execution],which ensures that the organization is responding to the dynamic and changing needs of the business ! environment in which it operates.! -  Adapted from Stuart Sugar! VP of Planning and Strategy at Maritz Canada Inc.! © 2011, Eugene Chang
  • 29. 4! Who then is! Responsible for Strategy?© 2011, Eugene Chang
  • 30. The traditional view of strategy planning & execution! Current State of organization! TOP-DOWN APPROACH! The view that strategy is formulated by the Executive Team (or the “planning department”) in a top-down Strategy fashion is generally recognized as Formulation! By Executive Team obsolete but still widely in practice.! or Strategy Planning Unit! Benefits:! •  trained strategic thinkers at the top! •  Able to see/exploit inter-unit synergies! Strategic •  Easier to define and meet corporate Implementation! By Management objectives! Team! •  Faster to develop, easier to coordinate! Desired Future State of organization!Diagram Adapted fromGavriel Shaw! © 2011, Eugene Chang
  • 31. Other views of strategy planning & execution! BOTTOM-UP APPROACH! The “organic” method allows a company to get the entire organization involved Planning! in the strategy process. but it is time consuming and could cause difficulty when assembling all views into one coherent strategy as it bubbles up to Execution! the corporate level. May risk getting stuck with tactical issues.! strategy! •  Creates individual ownership and ‘buy- in’ from employees doing the implementation!Blue Ocean Strategy! •  Accountability and trust at all levels! Perspective (Ch8):!Build execution into •  People in the front-lines are closest strategy using fair to the customer and “in touch” with process to mobilize the business! the organization.! Hybrid / Iterative Approach! More effective to allow strategy to be initiated and coordinated by the top with ample feedback loops for every level to participate. Engagement and good communication are key to ensuring fair process.! © 2011, Eugene Chang
  • 32. 5!© 2011, Eugene Chang So… how do we make Strategy Implementable?
  • 33. “Strategy formulation is easy. It’s the execution that is the challenge.” - Lawrence A. Bossidy Former CEO, Allied Signal/Honeywell [We’ve got to build execution into strategy!]! © 2011, Eugene Chang
  • 34. It doesn’t happen by itself.! “soft” structures (like culture) and formal structures (like HR Policies and performance rewards) are ! used as guides and signposts to help people ! execute the strategy effectively! Enablers! "#$%! )*+,-,%#! &%(! .,/01-! &(! &)(! 76/! 2%3451%6-! 8169+196*! *+(! *&(!“Enablers” Diagram Adapted from “The Secrets To Successful Strategy Execution” by Gary L. Nielson, Karla L. Martin and Elizabeth Powers, HBR 2008.! © 2011, Eugene Chang
  • 35. The best results occur when mgt acknowledges! that the organization itself needs to change. [at least ! a little]!Organizational change is often necessary to support a change in strategy. If acompany is responsive to its environment and takes a continuous improvementoutlook to the strategy process, these changes will be more manageable andless drastic. Nevertheless, if the organization is not willing to adapt to realizethe strategy, it should not waste resources trying to switch strategy.! © 2011, Eugene Chang
  • 36. In the case of unavoidable large shifts in strategy! It doesn’t make sense to…•  “Dumb down” a new strategy for an organization designed to execute the old strategy, expecting no organizational change [often disguised as a client’s request to have a strategy tailored to their resource constraints or made “implementable”] !•  get an organization to implement a “brilliant strategy” that has insufficient political/financial support from key stakeholders to make the required changes for the strategy to succeed [often the work of an inexperienced strategist concerned more with the elegance of the plan than the implementation of it] !•  To Force-fit or copy a strategy designed for another organization and adopting it wholesale as the outcome will likely differ or even be detrimental [often the work of a lazy executive concerned more the competition than building the underlying capabilities to transform the company’s future] ! © 2011, Eugene Chang
  • 37. Who & Why! Objectives, Purpose)! What about the! STRATEGY - TACTICS Linkage?!Where & Which Unique Direction! How we get there!(Position, Resource Allocation)! (Process, Actions, Skill)!When, What for & For How Long!(What Timing, What returns, What Next)! Dr. Eliyahu M. Goldratt in his book the “Theory of Constraints” defines Strategy as the answer to ‘what for’ objectives and Tactics an answer to the question ‘How’! © 2011, Eugene Chang
  • 38. Cascading strategy objectives down level by level…! ORGANIZATIONAL STRUCTURE PLAN EXECUTE EVALUATE (FORMAL & INFORMAL) 1 Strategic Business Organization Plan Review 2 Implementation Department / Department / Plan Team Review Team 3 Performance Performance Individual Plan Review Each level of the organization supporting the strategic objectives of the one above in the hierarchy. Feedback/engagement is key.! © 2011, Eugene Chang
  • 39. Gaining granularity wins the war.! On how the Allies Forces achieved the impossible in WWII:! “Despite all of the complex planning that went into the invasion of Normandy, it was the small unit tactics and the buddies fighting side by side on the beaches [that made the difference], ! and that is consistent throughout history.” ! -Angelo Caravaggio, ! Military Historian, CFC! Organizational Structure, PLAN EXECUTE EVALUATEI am a big part Culture, Policies of strategy! Performance Performance Individual Plan Review Translating strategic initiatives into actionable items, monitoring performance and rewarding individual behaviors! [assuming you have the right people in place to work with. A particular strategy may require one to shed or bring on specific skills req.]! © 2011, Eugene Chang
  • 40. From passive document to “marching orders.” The balanced score card is a useful tool to help organizations link strategy to performance measurement ! The original BSC design (1992) moved from the simple 4-quadrant representation to a strategy-mapping concept with a hierarchy of perspectives each informing the next level.! Financial Perspective! The drivers of shareholder value! Customer Perspective! the differentiating value proposition! Internal processes how value is created and sustained! Learning and growth perspective! Role and status of intangible assets defined!Diagram attributed to the Book “Strategy Maps” by Kaplan & Norton! © 2011, Eugene Chang
  • 41. Connecting with the Scorecard. The Underlying Philosophy: !"you cannot manage what you cannot measure, and you cannot measure what you cannot describe.”!Diagram attributed to Shree Phadnis, Master Blackbelt at KPMG (India)! © 2011, Eugene Chang
  • 42. Back to the Big Picture. Strategy is just one important piece in achieving ! superior performance in the marketplace! PERFORMANCE! head! heart! hands! Strategy! Culture! Operational Planning + Conviction + Excellence! Execution! Motivation Beyond Best Practice! 1 WHERE! & WHO! 2 WHY! 3 HOW!People are the “super glue” behind the crucial Strategy-Tactics link! © 2011, Eugene Chang
  • 43. Today, companies are required to compete as a ! total supply chain and/or ecosystem! Unlike a business model (a closed system), A business ecosystem is a network of companies – the set of positive sum relationships (symbiosis) between actors who work together.! Once you build an ecosystem, it is extremely difficult for someone to disrupt it.! Examples of powerful ecosystems:! • Amazon! • Apple! • Nespresso! • Nintendo! • Microsoft! - Nathalie Magniez ! Your strategy therefore has to build on the strengths of your ecosystem partners as well to strengthen the “platform”!Diagram attributed to Nathalie Magniez! © 2011, Eugene Chang
  • 44. 6!© 2011, Eugene Chang So… are there ANY LIMITS?
  • 45. Don’t just play the game, it is an invitation to! Change the Rules.! “Successful business strategy is about ! actively shaping the game you play, not ! just playing the game you find.”! - Adam Brandenburger and Barry Nalebuff, ! Authors of Co-opertition! © 2011, Eugene Chang
  • 46. BOS: Challenge the norms…! Go where profits and growth are – and where the competition isn’t! “Blue Ocean Strategy is the simultaneous pursuit of differentiation and low cost.”! Value Innovate! ,$"%"! :"! -./01!Kim and Mauborgne, www.blueoceanstrategy.com! © 2011, Eugene Chang
  • 47. Case Example: Singapore Airlines (SIA) !Duo-ObjectiveStrategy!Singapore Airlines (SIA) successfullyexecutes a “dual strategy” of offeringpremium service and is a cost leader.!its service is better than rivals’ and its costsare lower: The airline invests heavily in areasof the business that touch the customer inorder to enhance its premium positioning.Everything behind the scenes is subject torigorous cost control.! •  SIA fosters both centralized and decentralized innovation! •  SIA is both a technology leader and follower!Executing a Duo Objective Strategy is difficult and this is what makes it sovaluable. It has so far proved to be a sustainable advantage for SIA. ! A Tough Balancing Act! Loizos Heracleous and Jochen Wirtz, Singapore Airlines’ Balancing Act, HBR July-August 2010! © 2011, Eugene Chang
  • 48. I hope this Presentation has been Useful! Thank you. © 2011, Eugene Chang
  • 49. This presentation was put together to summarize some of the work floating “out there” to help others who are looking for a practical way to go about thinking and communicating strategy. As I myself have benefitted from the cranium generosity of others, I believe sharing is the best way to learn. Disclaimers and such: I stumbled upon a great presentation “What is Strategy?” by Marc Sniukas on Slideshare and was inspired to extend his ideas with some of my own learning. In my research, I also liberally borrowed from the Internet (from contributors on Wiki to LinkedIn) to supplement the gaps in my own knowledge and experience as a practicing consultant dealing with the occasional strategy engagement. Where I could, I provided references to acknowledge the source. My apologies if something here sounds like what you’ve come up with but were not acknowledged for it; we either came up with the same idea independently, or I screwed up and couldn’t figure out where that thought penetrating my head originated from – all unintentional. It was a rushed job but it did take some time. Not making any money from this so there are no guarantees extended !!although I have made every reasonable effort to be as accurate as possible. Feel free to drop me a line on LinkedIn. Would love to receive feedback or enter a discussion on this topic.© 2011, Eugene Chang, eugene.chang@alumni.insead.edu Version 1.0., June 2011