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Strategy as Transformation

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True strategy always changes things - this presentation talks about the nature of strategic change and how that change might be led more effectively.

True strategy always changes things - this presentation talks about the nature of strategic change and how that change might be led more effectively.

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  • 1. 1/30/2015 1 Successful Transforming Strategy “Strategy is the means for making changes that result in sustainable competitive advantage resulting in superior value added for customers and superior returns to shareholders.”
  • 2. Strategy as Transformation
  • 3. Discussion Outline  What we are transforming (a 7-C model)  Transformation of ends and means  Transformation of gaps and risks  Targets for strategic transformation  Financial performance  Structure  Interaction  Industry  Generic strategies  Resources and competencies 1/30/2015 3
  • 4. Discussion Outline  Targets for strategic transformation  Competitors  Diversification  Management  Business model  Creative tensions  46 realities of strategic transformation  Essential outcomes  Structural realities  External forces  Internal forces 1/30/2015 4
  • 5. What we are Transforming – a 7C Model  The Seven Dimensions of Every Organization: 1) Core 2) Culture 3) Context 4) Capability 5) Capacity 6) Competency 7) Customer 1/30/2015 5
  • 6. What we are Transforming – a 7C Model  CORE: the central reason-for-being of the organization:  Its PURPOSE – why the company exists in terms of excellence, discovery, and/or service  Its IDENTITY – how the organization wants to be thought of by other stakeholders – its brand  Its INTENTIONS – what values drive the long run sustainability of the organization and the legacy it will leave1/30/2015
  • 7. What we are Transforming – a 7C Model  CONTEXT: the fundamental operational framework for the organization  Strategy – the comprehensive vision that defines the desired direction and impact of the organization’s operations  Goals – desired/expected organizational end results  Measures – metrics by which successful goal achievement is to be judged in-process and end-of- process  Systems – mechanisms by which decisions are made and actions are carried out  Structure – position descriptions and assignments and interactions between positions  Technology – facilitation of decisions and actions through decision, production, and delivery tools or mechanisms 1/30/2015
  • 8. What we are Transforming – a 7C Model  CAPABILITY: underlying strengths and limitations of the organization  Portfolio management – the range and diversity of products and services to be offered  Process management – the ability to produce desired products and services  Program management – the ability to develop and deliver strategic initiatives  Project management – the ability to develop and deliver tactical initiatives 1/30/2015
  • 9. What we are Transforming – a 7C Model  COMPETENCY: competitively superior expertise in the organization  Distribution of competency: individual, interpersonal and institutional  Drivers of competency: observation, understanding, decision, action  Disciplines of competency – marketing, management, finance, information systems 1/30/2015
  • 10. What we are Transforming – a 7C Model  CAPACITY: the scalability of the organization or its ability to grow w/o damaging the other “C” factors  Value-chain growth capabilities  Strategic arena growth capabilities 1/30/2015
  • 11. 1/30/2015
  • 12. What we are Transforming – a 7C Model  CULTURE: the way people work together:  Their ASPIRATIONS – what people want for and from themselves  Their EXPECTATIONS – what people want from and for others  The ANATOMY of the culture – structural characteristics including reporting and accountability paths, power and control sources and distribution [may be formal AND informal)  The PHYSIOLOGY of the culture – relational characteristics including communication flows, decision flows, influence flows1/30/2015
  • 13. What we are Transforming – a 7C Model  CUSTOMER: the nature and nurturing- desires of those who purchase and/or use our products and services  Product, place, price and promotion preferences  Resource capacities (money, time information)  Alternative or substitute sources of satisfaction  Demographic trends 1/30/2015
  • 14. What we are Transforming – a 7C Model  Observation 1: Much of what we “know” about an organization reflects informed judgments based on incomplete information. Transformation, therefore, is both:  Art and science  Fact and judgment  Analytical and intuitive  Proactive and reactive  Trial and error
  • 15. What we are Transforming – a 7C Model  Observation 2: All organizations are undergoing both planned and unplanned transformation continuously in one or more parts of the organization. The decision to be made is whether that transformation will be systematically observed, understood, decisioned and acted upon purposefully and progressively.
  • 16. What we are Transforming – a 7C Model  Observation 3: Managers of the transformation process are neither  Omniscient – they know things incompletely  Omnipotent – they influence things incompletely  So, effective transformational management requires imagination, risk taking, humility, dependence on others, learning the right lessons from failure and success, persistence and resilience.
  • 17. What we are Transforming – a 7C Model  Observation 4: While change may BEGIN in any of the 7C arenas, it ultimately must work its way through all the arenas in order for the organization to act in a coordinated way that is sustainable. All arenas exist in a mutually interdependent relationship.
  • 18. Strategic Transformation of Ends and Means  By its very nature, effective strategy is about deep and wide change – change that seeks to transform an entire organization.  These transformations can be in what, where, how, for whom, and/or when an organization acts.
  • 19. Strategic Transformation of Ends and Means SAME ENDS (Markets) NEW ENDS (Markets) SAME MEANS (Methods) Tuning the organization Turning the organization NEW MEANS (Methods) Tempering the organization Transforming the organization • Tuning = incremental improvements in current markets and methods • Turning = seeking significant changes in what we market and who we market to • Tempering = seeking significant changes in how we operate, manage, market, finance, ... • Transforming = seeking significant changes in both markets and methods at the same time
  • 20. Strategic Transformation of Gaps and Risks  Strategy manages the risks that occur because of the gaps.  We cannot (and would not choose to) eliminate the risks  There is a clear and positive relationship between risks and return  There is a real difference, however, between taking a risk, and taking a chance.  Risks can, and strategically should be, managed.
  • 21. Strategic Transformation of Gaps and Risks Possible gaps The risk involves … Strategy can help manage the gap by … Intention vs Execution … the potential gap between what we intend to do and what we actually do • Identifying crucial execution points • Providing standards to judge the quality of execution Information vs Reality … the potential gap between perceptions and truth • Encouraging a wider scope of investigation • Encourages honest questioning Corporation vs Customer … the potential gap between corporate and customer interests • Focuses attention on customer issues • Asks the organization to focus on value added for the customer
  • 22. Strategic Transformation of Gaps and Risks Possible gaps The risk involves … Strategy can help manage the gap by … Investment vs Return … the potential gap between time and resources spent and rewards received • Identifies high priority resources and key timing issues • Establishes targets for return on investment Corporation vs Competition … the potential gap between perception vs realities of competitor and the competitive environment • Encourages a high respect for competitor capabilities • Anticipates multiple sources of competitive pressure Objectives vs Outcomes … the potential gap between goals and achievements • Encourages thoughtful goal establishment • Continuous comparison of goals vs accomplishments
  • 23. Targets for Strategic Transformation - Financial  Transforming strategy generates superior financial performance  It allows an organization to obtain financial returns greater than its cost of capital  It allows financial returns ( and reinvestment potential) greater than those of competitors  It allows a company to achieve superior financial returns that are sustainable in the long run
  • 24. Targets for Strategic Transformation - Structure  Transforming strategy fosters a Six-F Firm  FAST: designed and operated to reduce process times and optimize reaction and pro- action speeds  FOCUSED: built round core activities to which all other business units are truly related  FLEXIBLE: willing and able to change whenever change is called for, and whatever needs changing  FLAT: less hierarchic structure, with a broad span of control, and with authority given to expertise  FRIENDLY: collaborative, trusting and relaxed both inside and outside the organization  FUTURED: because it is well equipped for the best method of prediction: making the future happen the way you want.
  • 25. Targets for Strategic Transformation - Interaction  Transforming strategy fosters an organization-wide strategic planning interaction and communication  The process encourages thinking about tomorrow in proactive and creative ways throughout the organization  The process encourages establishing objectives throughout the organization  The process encourages participation and collaboration throughout the organization  The process encourages questioning and reflection throughout the organization  The process encourages complexity and flexibility in thinking throughout the organization
  • 26. Targets for Strategic Transformation - Industry  Transforming strategy focuses on choosing an attractive industry  Competition comes primarily from rival firms in the same industry  Industries exhibit life-style stages (that can be challenged, but with difficulty)  Every industry has attractive and unattractive segments, niches that can be reached through an effective business model
  • 27. Targets for Strategic Transformation – Generic Strategies  Transforming strategy examines generic strategies thoughtfully  Cost control is essential for any strategy – but a simple lower price strategy is unsustainable over time  Differentiation works when the difference is visible and valuable to buyers, financially attractive for both the company and the customer, and sustainable against competitors  It is possible to balance value and costs in a unique business model – but this requires expertise in both conceiving and executing strategy.
  • 28. Targets for Strategic Transformation – Resources and Competencies  Transforming strategy recognizes the importance of resources and competencies  Resource uniqueness, durability and competency in deployment are a crucial part of every strategy  Competencies …  … especially are embedded in the talents and attitudes of personnel  … can also be embedded in organizational systems  … can become liabilities if they lead to core rigidities leading to strategic momentum and/or inertia
  • 29. Targets for Strategic Transformation - Competitors  Transforming strategy seeks to outsmart, out perform and/or out maneuver competitors  Competitive advantage is always temporary – so we must be prepared to adopt, act on and abandon strategies rapidly  The advantage is found in fast thinking an innovative, agile action  The key capabilities become speed, creativity and action- implementation
  • 30. Targets for Strategic Transformation - Diversification  Transforming strategy considers judicious diversification  Competencies can be transferable  There are limits to the expandability of a core business model  Diversification leads to strategic complexity – different firms have different abilities to manage such complexity
  • 31. Targets for Strategic Transformation - Management  Transforming strategy encourages us to see strategic management is a dynamic process Entrepreneurial Initiatives Engineering Initiatives Enterprise Initiatives
  • 32. Targets for Strategic Transformation – Business Model  Transforming strategy seeks to change the current business model  A business model is comprised of:  Financial returns to the business  Value propositions to customers  Character of inputs  How inputs are transformed (including technology)  Character of outputs  Scope  Vertical scope  Horizontal scope  Geographic scope  Nature of customers  How to organize
  • 33. Targets for Strategic Transformation – Creative Tensions  Transforming strategy seeks to balance a variety of creative tensions inherent in successful organizations:  Aiming vs Adapting  Competition vs Cooperation  Dreaming vs Doing  Effectiveness vs Efficiency  Fixed vs Flexible  Incremental vs Innovative Change  Individuality vs Integration  Intuition vs Investigation  Kapturing vs Keeping vs Killing
  • 34. Targets for Strategic Transformation – Creative Tensions  Transforming strategy seeks to balance a variety of creative tensions inherent in successful organizations:  Managing vs Marketing  Navigating vs Negotiating  Owning vs Outsourcing  Opportunity vs Obstacle  Performance vs Promise  Past vs Present vs Possibilities  Retrenchment vs Refinement vs Refocus vs Regeneration  Systematic vs Serendipitous
  • 35. Targets for Strategic Transformation – Creative Tensions  Transforming strategy seeks to balance a variety of creative tensions inherent in successful organizations:  Today vs Tomorrow  Usual vs Unusual  Value Invested vs Value Added vs Value Returned  Work vs Working vs Workers
  • 36. 46 Realities of Strategic Transformation Essential Outcomes • Effectiveness • Efficiency • Efficacy • Elasticity • Energy • Emergence Structural Realities • Purposefulness • Wholeness • Openness • Transformation • Interrelatedness • Control External Forces • Transience • Novelty • Diversity • Uncertainty • Complexity • Dependency Internal Forces • Conflict • Conformity • Momentum • Inertia • Gravity • Entropy
  • 37. 1/30/2015 38 46 Realities of Strategic Transformation Essential Outcomes • Effectiveness • Efficiency • Efficacy • Elasticity • Energy • Emergence Effectiveness Operational and strategic achievement Efficiency Operational and strategic economy Efficacy Operational and strategic impact Elasticity Operational and strategic flexibility Energy Operational and strategic momentum Emergence Operational and strategic learning
  • 38. 1/30/2015 39 46 Realities of Strategic Transformation Structural Realties • Purposefulness • Wholeness • Openness • Transformation • Interrelatedness • Control Purposefulness Systems are dominated by intentions Wholeness Systems achieve aggregate results Openness Systems have permeable boundaries Transformation Systems process resources Interrelatedness Systems have connected parts Control Systems seek to be regulated
  • 39. 1/30/2015 40 46 Realities of Strategic Transformation Transience Impermanence is found in relationships Novelty History provides little guidance Diversity Consensus is challenging Uncertainty Causes-effects are less predictable Complexity Interrelationships are hard to map Dependency Problems-symptoms are interconnected External Forces • Transience • Novelty • Diversity • Uncertainty • Complexity • Dependency
  • 40. 1/30/2015 41 46 Realities of Strategic Transformation Internal Forces • Conflict • Conformity • Momentum • Inertia • Gravity • Entropy Conflict Tendency to focus on differences Conformity Tendency to focus on similarities Momentum Tendency to continue the past Inertia Tendency to resist change Gravity Tendency to lower performance standards Entropy Tendency to loose direction and energy
  • 41. 1/30/2015 42 46 Realities of Strategic Transformation  Transforming strategy honestly confronts 46 realities: Essential Outcomes • Effectiveness • Efficiency • Efficacy • Elasticity • Energy • Emergence Structural Realities • Purposefulness • Wholeness • Openness • Transformation • Interrelatedness • Control External Forces • Transience • Novelty • Diversity • Uncertainty • Complexity • Dependency Internal Forces • Conflict • Conformity • Momentum • Inertia • Gravity • Entropy
  • 42. Organizational change interventions – creating meaning  Strategy ALWAYS seeks to change things – those changes may be of different degrees:  Change advocacy requires the leader to deal in meaning: what does the change mean, and how do we make it meaningful to each person? Same ends New ends Same means Restoring Retargeting New means Revising Revisioning 1/30/2015 43
  • 43. Organizational change interventions – transformation targets 1/30/2015 44 HEAD HEART WILL HANDS THINKING: Costs vs Benefits DOING: Familiar vs ForeignFEELING: Pleasure vs Pain WILLING: Commitment vs Resistance
  • 44. Organizational change interventions – transformation approaches  Each approach carries its own unique  Change perspectives  Change problems  Change points  Change promoters  Change perils  Change promises 1/30/2015 45
  • 45. Decision-focused change interventions Perspectives • Empirical • Rational Problems • Ill-made decisions • Ill-informed decisions Points • Logic • Information Promotion • Robust information flows • Reasoned decisions Promises • Clear perceptions • Rational priorities and plans Perils • Underestimating the people factor • Managing by the numbers 1/30/2015 46
  • 46. Socially-focused change interventions Perspectives • Psychological • Sociological Problems • Individual insecurity • Relational instability Points • Emotions • Relations Promotions • Psychological affirmation • Social support Promises • Emotional honesty and openness • Individual support • Interpersonal sensitivity Perils • Satisfaction>productivity • Managers ill-fitted to be counselors 1/30/2015 47
  • 47. Learning-focused change interventions Perspectives • Developmental • Instructional Problems • Undeveloped capacities • Weak self concept Points • Skills • Self concept Promotions • Equipping • Encouragement Promises • Enhanced abilities • Energized and expanded self confidence Perils • Unlearning/learning resistance • Individual learning ceilings 1/30/2015 48
  • 48. Economics-focused change interventions Perspectives • Developmental • Instructional Problems • Inadequate resources • Unavailable resources Point • Resources • Distribution systems Promotion • Resource development • Resource distribution Promise • Strategic resource acquisition • Strategic resource allocation Perils • Things >People • Measuring short/long term costs/benefits 1/30/2015 49
  • 49. Politically-focused change interventions Perspectives • Political • Alliances Problems • Low power • Poor negotiation skills Points • Power • Networking Promotions • Power development • Political maneuvering Promises • Power is acquired • Power is appreciated • Power is applied with principle Perils • Unprincipled manipulation • People treated as means rather than ends 1/30/2015 50
  • 50. Entrepreneurially-focused change interventions Perspectives • Innovation • Alliances Problems • Organizational timidity (risk aversion) • Organization bureaucracy Points • Opportunity recognition • Opportunity analysis • Risk management Promotions • Courage and creativity • Removing organizational structural and procedural impediments Promises • Quick on the OUDA Loop • Aggressive opportunism • Lean organizations • Appetite for risk taking Perils • Inadequate discussion and debate about options • Action prized over thinking 1/30/2015 51
  • 51. Bureaucratically-focused change interventions Perspectives • Incremental • Experimental Problems • Lack of experience with change • All-or-nothing mentality • Rush to judgment Points • Phased, limited change • Feedback Promotion • A variety of small adaptations • Growing accumulation of small successes Promises • Identifying small, high- success probability targets of opportunity • Achievable change expectations • Slow, steady progress up the learning curve Perils • Too little change, too late • Assumes evolution will triumph over revolution 1/30/2015 52
  • 52. Value-focused change interventions Perspectives • Inspirational • Emotional Problems • Lack of passion for change • Lack of sustained commitment for change Points • Ideals and values • Motivation Promotion • Charismatic leadership rooted in passionate vision • Compelling devotion to change Promises • Articulation of deeply held values • Alignment of personal values with group causes Perils • Mere cheerleading • Triumph of emotion over substantive development 1/30/2015 53
  • 53. Environmentally-focused change interventions Perspectives • Environmental • Catalytic Problems • Ignorance of environmental realities • Intransigence in the face of environmental pressures Points • Environmental sensitivity • Environmental adaptability Promotion • Environmental awareness and analysis • Early and sustained adaptability Promises • Environmental opportunity perspective • Alignment of personal values with group causes Perils • Inaction because of the desire for more certainty • Reactive rather than proactive responses 1/30/2015 54
  • 54. Organizational change interventions: some observations  Change is occurring somewhere, somehow, in every organization.  Changes occur in different degrees and stages in various places throughout the organization 1/30/2015 55
  • 55. Organizational change interventions: some observations  However, change is also resisted – there are individual, interpersonal and institutional reasons for this resistance  Not all resistance is bad – organizations are designed to bring stability and predictability 1/30/2015 56
  • 56. Organizational change interventions: some observations  Effective change management requires managing the meaning of the change  What the existing state is and what the desired state is  What elements need to be changed to reach the desired state  How and when the changes needed can best be achieved 1/30/2015 57