Strategic Thinking

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Strategic Thinking

  1. 1. Charlottesville Venture Group May 18, 2004 A Framework For Strategic Thinking Planning Doing Learning Strategic Management Thinking
  2. 2. A Framework for Strategic Thinking The Art of Business <ul><li>Business is more an Art than Science. </li></ul><ul><li>Market competition demonstrates characteristics of both art and science. Owing to the vagaries of human behavior and the countless other intangible factors which contribute to it, there is far more to the conduct of market competition than can be explained by science…We thus conclude that the conduct of it is ultimately an art, an activity of human creativity and intuition powered by the human will. </li></ul>
  3. 3. A Framework for Strategic Thinking The Art of Business <ul><li>We call the artist an entrepreneur </li></ul><ul><li>Crafting Strategy is an exercise in Entrepreneurship </li></ul><ul><li>A Definition of an Entrepreneur </li></ul><ul><li>“ The art of business requires the intuitive ability to grasp the essence of a unique market situation, the creative ability to devise a practical solution, and the strength of purpose and skill to execute the act.” </li></ul><ul><li>Warfighting. </li></ul>
  4. 4. A Framework for Strategic Thinking The Art of Business Seeking new strategic opportunities Collection of hard data (the scientific skills) Collection of soft data (the perceptual skills) Accumulation of facts and evaluation of probabilities Accumulation of uncertainties and ambiguities Use of analytical models to define the opportunities Use of intuition to define the opportunities Unique interpretation of the strategic opportunity The Rational The Intuitive Making choices about the future on inadequate information
  5. 5. A Framework for Strategic Thinking The Art of Business <ul><li>Strategic Management is a complex process, much like putting together a jigsaw puzzle </li></ul><ul><ul><li>But with missing pieces </li></ul></ul><ul><ul><li>And with extra, irrelevant pieces </li></ul></ul><ul><ul><li>Involves many people </li></ul></ul><ul><ul><li>The situation is very dynamic </li></ul></ul>
  6. 6. A Framework for Strategic Thinking The Role of Strategy <ul><li>Sustained superior performances should be the goal of every business </li></ul><ul><li>How is sustained superior performance attained? </li></ul>
  7. 7. A Framework for Strategic Thinking The Role of Strategy Strategy Effective Ineffective Execution Excellent Poor Long Term Success Maybe successful For a while Success Unlikely Failure A combination of effective strategies and excellent execution
  8. 8. <ul><li>Behind every successful company, there is a strategy – A Business Concept </li></ul><ul><ul><li>There is an underlying logic, even if clear only in retrospect. </li></ul></ul><ul><ul><li>Can be developed by formal analysis, trial and error, intuition or pure luck. </li></ul></ul>A Framework for Strategic Thinking The Role of Strategy
  9. 9. A Framework for Strategic Thinking The Role of Strategy Industry Dominant Traditional Strategic Competitor Competitor Innovator US Airlines American Delta, United, Northwest Southwest Car Rental Hertz Avis, Europcar, National Enterprise TV Networks NBC CBS, ABC CNN Earth Moving Caterpillar John Deere, Case Komatsu Steel US Steel Bethlehem, Inland Nucor Coffee Maxwell House Folger’s, Nescafe Starbucks Photocopier Xerox IBM, Kodak Canon Computer IBM DEC, NCR Microsoft Sloan Mgmt Review Spring 1999
  10. 10. A Framework for Strategic Thinking The Role of Strategy ROI % Market Share Rank
  11. 11. A Framework for Strategic Thinking What are you deeply passionate about? What can you be the best in the world at? What drives your economic engine? From Good to Great, By Jim Collins BHAG The Hedgehog Concept
  12. 12. A Framework for Strategic Thinking The Hedgehog Concept <ul><li>Passion </li></ul><ul><ul><li>Pick a good business for your organization </li></ul></ul><ul><ul><li>Select an appropriate direction (Vision) </li></ul></ul><ul><ul><li>Develop a Competitive Advantage </li></ul></ul><ul><li>Excellence </li></ul><ul><ul><li>Become excellent in the skills that are critical for success </li></ul></ul><ul><li>Economic Engine </li></ul><ul><ul><li>Have a valid Economic Model </li></ul></ul><ul><ul><li>Have an appropriate capital structure </li></ul></ul>
  13. 13. A Framework for Strategic Thinking Pick a Good Business 2001 BizStats.com 101.5% -12.9% 14.3% Total Average 20.2% -2.2% 8.8% 7.9% Finance, Ins. & Real Est. 16.3% -0.3% 4.1% 8.7% Mining 14.7% 6.5% 10.6% 10.1% Agriculture, Forestry 29.0% 0.7% 10.7% 12.7% Transportation & Utilities 20.9% 4.1% 14.9% 14.0% Retail Trade 28.1% 4.5% 14.5% 15.2% Wholesale Trade 33.7% -8.4% 15.4% 16.0% Manufacturing 101.5% -12.9% 11.0% 24.1% Services 29.0% 11.1% 23.1% 24.9% Construction High Low Median Mean Industry
  14. 14. A Framework for Strategic Thinking Pick a Good Business Good to Great Cumulative Stock Returns <ul><li> 1926-1999 1965-2000 </li></ul><ul><li>73 years 35 years </li></ul><ul><li>General Market : $415 $56 </li></ul><ul><li>Comparison $955 $93 </li></ul><ul><li>Companies: +130% +66% </li></ul><ul><li>Visionary $6,356 $471 </li></ul><ul><li>Companies: + 1,432% +741% </li></ul><ul><li>Built to Last Good to Great </li></ul>
  15. 15. A Framework for Strategic Thinking Pick a Good Business Have Clarity of Purpose <ul><li>Be clear about. </li></ul><ul><ul><li>who the customers are. </li></ul></ul><ul><ul><li>What their needs are. </li></ul></ul><ul><ul><li>What value you add in meeting those needs. </li></ul></ul><ul><ul><li>What skills are required to add that value. </li></ul></ul><ul><li>Articulated in the Mission Statement. </li></ul>
  16. 16. A Framework for Strategic Thinking H ow do you apply these steps to your situation? <ul><li>Confront the brutal facts of your situation </li></ul><ul><li>Ask yourself the tough questions </li></ul><ul><li>Be willing to make major changes </li></ul>
  17. 17. A Framework for Strategic Thinking How do you apply these steps to your situation? C hange <ul><li>“ It may be hard for an egg </li></ul><ul><li>To turn into a bird: </li></ul><ul><li>it would be a jolly sight harder </li></ul><ul><li>for it to learn to fly </li></ul><ul><li>while remaining an egg. </li></ul><ul><li>We are like eggs at present. </li></ul><ul><li>and you cannot go on indefinitely </li></ul><ul><li>Being just an ordinary decent egg. </li></ul><ul><li>We must be hatched or go bad.” </li></ul><ul><li>--C.S. Lewis </li></ul>
  18. 18. A Framework for Strategic Thinking H ow do you apply these steps to your situation? In The Box Of Mediocrity Poor trying to become good Soaring Faltering Where are you?
  19. 19. A Framework for Strategic Thinking H ow do you apply these steps to your situation? <ul><li>Finding the Starting Point </li></ul><ul><li>Is the business meeting your revenue goals? </li></ul><ul><ul><li>Are revenues growing, flat or declining? </li></ul></ul><ul><li>Is the business profitable? </li></ul><ul><li>Is the business adequately capitalized? </li></ul><ul><li>What is the story </li></ul><ul><li>behind the financials </li></ul>
  20. 20. A Framework for Strategic Thinking H ow do you apply these steps to your situation? <ul><li>Finding the Starting Point </li></ul><ul><li>Is there clarity of purpose? </li></ul><ul><li>Is the direction realistic? </li></ul><ul><li>Does the business have a competitive advantage? </li></ul><ul><li>Does the business have distinctive competency in the skills critical for success? </li></ul><ul><ul><li>The four wheels must all be pumped up </li></ul></ul>

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