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Viable Business Strategies

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Strategy development (which is a process) should include the collective and diverse experiences of people at all levels of the organisation. By introducing systems thinking to strategic …

Strategy development (which is a process) should include the collective and diverse experiences of people at all levels of the organisation. By introducing systems thinking to strategic
frameworks, strategy becomes a continuous, dynamic, learning conversation that involves the complex interplay of all the strategic variables in a business.
Marius Ungerer, resident associate professor in Strategic Management on the MBA programme of the University of Stellenbosch Business School (USB) presented Viable Business Strategies, a book that he has co-authored, at USB-ED's latest We Read For You Session.

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  • 1. Viable Business Strategies: A Fieldbook forTITLE: eg. MarketingLeadersby Ungerer, Pretorius & HerholdtSubtitle/Description:We Read For You – February 2011Eg. Online MarketingPresented by Prof Marius UngererFaculty Name: eg. Godfrey Parkin Date: 11 - 02 - 11 Date: 10/02/2011
  • 2. Published by Knowres Publishing (Pty) Ltd P O Box 3954 Randburg 2125 Republic of South Africa Tel: (011) 880-8540 Fax: (011) 880-8700/9829 E-mail: cia@knowres.co.za Website: www.kr.co.za Should you wish to purchase a copy, the book can be ordered from The LittleBig Bookstore. Contact Vivian at: books@littlebig.co.za. Alternatively order forms will be available in the morning. M Ungerer, USB Strategic Management ... This is the third updated version Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.2 Viable Business Strategies. Johannesburg: Knowres.
  • 3. Target audience M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.3 Viable Business Strategies. Johannesburg: Knowres.
  • 4. Notes to 3rd edition • Reactions on how to solve the financial crisis of 2008/2009 produced no real, innovative solutions – just more of the same. Most of the proposals aimed at solving the dilemmas caused by the crisis can be reduced to two basic solutions, – the first being more rules, better rules and new rules, to control those now being identified as having been primarily responsible. – The second response centres around an adaption of an old solution used in the past when things went wrong, namely to fix the incentives. • The reality is that in a free-market system with democratic practices it is not possible to control complex adaptive systems – not with rules or with incentives. • Winston Churchill once said: “It is not enough that we do our best; sometimes we need to do what’s required.” • We need to seek solutions at a higher level of complexity. M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.4 Viable Business Strategies. Johannesburg: Knowres.
  • 5. Notes to 3rd edition … • Principles to guide practices for sustainable longer-term performance: – Normative governance – Contextual sensitivity – Democratised workplaces – Personal relations as the new currency – Individual energy as the scarce resource M Ungerer, USB Strategic ManagementStrategy, as the act of producing greater certainty for stakeholders at a particular point intime, is necessary but not sufficient for organisational survival. We need leaders whodisplay both the moral will and the moral skill to lead us into an uncertain future (wherethere are few guarantees), with the necessary wisdom. Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. 5 Viable Business Strategies. Johannesburg: Knowres.
  • 6. The logic of the book M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.6 Viable Business Strategies. Johannesburg: Knowres.
  • 7. Strategy is a systemic process M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.7 Viable Business Strategies. Johannesburg: Knowres.
  • 8. How is Strategy defined? Chapter 1 • Organisational strategy is the collaborative and conscious behaviour people in organisations exhibit in an effort to ensure  Integration of sustainable organisational survival. the views of Porter, Hamel and Minzberg. • If we track organisational strategy over time, we can identify the  Primarily a main strategic choices that has been made to ensure a viable process- future. orientation to strategy. • Viability is dependent on an organisation’s ability to compete and  Strategy is assert itself in a competitive business environment and to meet rather multiple stakeholder expectations something you do than something you • Strategy is therefore the collective, emerging pattern of behaviour have – aligned an organisation consciously exhibits over time to ensure its survival by to Strategy-as- differentiating itself in unique ways. Practise view • Strategy-making is an organic emergent learning process of people relating on a shared future in a specific context which they have the M Ungerer, USB Strategic Management power to influence. • The central goal of strategy in a free market environment should be to achieve sustainable, superior long-term returns on investment. Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.8 Viable Business Strategies. Johannesburg: Knowres.
  • 9. A new metaphor for strategy Chapter 1 (1) Landscape as Context (External Topography) (2) Landscape as underlying Structure (Internal Topography) The challenge for organisational leadership is to create a strategic landscape where natural human energy is optimally (3) Landscape as Structuring utilised. (Process) M Ungerer, USB Strategic Management The landscape provides the context for strategy, but its structure is constantly being changed by people’s strategic structuring activities. Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. 9 Viable Business Strategies. Johannesburg: Knowres.Sources: 1.Viable Business Strategies: A systemic People-Centric Approach by Ungerer, Pretorius & Herholdt, 2007.
  • 10. DEFINITION OF SCENARIO PLANNINGWhat is scenario planning? Chapter 2 Scenario planning is a tool or technique designed to raise decision maker awareness of the range of possible futures and prepare companies for shifts in the business environment. • It is a group process which encourages: – Knowledge exchange; and Scenario planning in a nutshell – Development of mutual deeper Description The creation and exploration of coherent and credible alternative understanding of central issues stories/pictures of the futures important to the future of your Time 5 to 20+ years business. horison Qualitative (e.g. current political, • It’s about identifying trends, discontinuities and Nature of economic, social, technological inputs and industry trends, future patterns that may influence and define future uncertainties) business opportunities. • Stories of the future describing a range of • Scenario work is a counterbalance from what M Ungerer, USB Strategic Management alternative outcomes we learned from the past and offers learning Nature of • Qualitative, complex end opportunity from a future perspective – useful outputs states in developing viable road maps for long-range • Plausible outcomes planning. • Subjective interpretation/ analysis Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. Viable Business Strategies. Johannesburg: Knowres.
  • 11. Scenario development process Chapter 2 Step 1: Demarcation of the context. This is done to determine the focus of the process. Step 2: External environment analysis. During this phase the team gathers information (or commission somebody to do this on their behalf) related to the environment in which the organisation operates. The information includes the macro, market and industry environments. Step 3: Identify the key issues to be addressed in the scenario’s given the external environmental analyses Step 4a: Identify the DRIVING FORCES in the environment Step 4b: Identify the UNCERTAINTIES in the environment Step 4c:Identify the CERTAINTIES in the environment Step 4d: Identify the OVERRIDING KEY DRIVERS M Ungerer, USB Strategic Management Step 4e: Identify the critical 2 KEY DRIVERS Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.11 Viable Business Strategies. Johannesburg: Knowres.
  • 12. Chapter 2 Step 5: PLOTthe 2 key drivers and determine Possible scenarios Step 6: Populate the identified scenarios. Step 7: Test the scenarios for consistency and relevance. Step 8: Using completed scenarios as learning tools Step 9: STRATEGIC POSITIONING Implications Step 10: SCENARIO DEVELOPMENT: The strategic implications M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.12 Viable Business Strategies. Johannesburg: Knowres.
  • 13. Ten different approaches to Creating NEW Market Space Chapter 3 In the home loans industry Bond Originators worldwide moved into the space between the estate agent and the bank on the premise of providing value added services to home buyers. Sony’s Walkman combined the acoustics and the “cool” image of a hi-fi with the lower price and convenience • Six new ways to thinking about markets of a radio, creating the portable stereo market! New users are joggers - Look across alternative industries and commuters - Look across strategic groups within industries MacDonalds targets the - Look across a chain of buyers whole family, bringing theinfluencing power of children - Look across complementary products and service offerings into play and make that partof their offering by including gifts to entice the whole - Looking across functional or emotional appeal to buyers family into buying from them - Look across time Shell, BP and Engen, through their retail dealerships, opened on site convenience stores to extend their offering to customers on the move. Swatch watches turned a functional timekeeping machine into a M Ungerer, USB Strategic Management fashion accessory. Customers now use their Swatch to communicate their shifting moods and to complement their different “looks” and roles. CNN created the first real-time twenty-four-hour news service based on the trend of globalisation Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. Viable Business Strategies. Johannesburg: Knowres.
  • 14. Ten different approaches to Creating NEW Market Space Chapter 3 # 7 Digital space is a new opportunity that is available for the connected. # 8 Creating Market Space through excellence in customer service quality # 9 Creating market space through Customer Empowerment or Giving Customers Control. # 10 Creating Market space through Choke Points
  • 15. Efficacy of strategic control points vary Chapter 3An example of a hierarchy of control points, based on efficacy - but thiswill vary from industry to industry Profit Inde Strategic Control Point Example(s) Protecting x From most powerful…. Power High 10 Own the standard Microsoft, 1. Owning the standard (I.e. Oracle Microsoft) 9 Manage the value chain Intel, Coke 2. Managing the value stream/or critical points in 8 String of superdominant Coke, positions internationally the value stream 3. String of superdominant 7 Own the customer relationship GE, EDS positions (I.e. Coke) Medium 6 Brand, copyright Countless 4. Owning the customer relationship (EDS & GE) 5 Two-year product Intel development lead 5. Brand & copyright (Nike) Low 4 One-year product Few 6. 2 Year plus product development lead development leads (Intel) 7. Commodities with 20% plus 3 Commodity with 10 to 20 Nucor, SW Air percent cost advantage cost advantage (Southwest Airlines) None 2 Commodity with cost parity Countless 8. First mover advantages ….to least. 1 Commodity with cost disadvantage Countless (Adrian Slywotsky)
  • 16. The logic of the book M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.16 Viable Business Strategies. Johannesburg: Knowres.
  • 17. Reinforcing loops at the core of Growth Engines M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.17 Viable Business Strategies. Johannesburg: Knowres.
  • 18. The concept of a Strategic Architecture – Chapter 4 the Strategist as an Architect • The strategic architecture serves as an integrating framework and view of the total strategic landscape, as the firm sees it at a specific point in time. • The strategic architecture determines a firm’s strategic behaviour (thus its competitiveness and also its success), but again that will change and be influenced as we carry out our intent in the living present (p.143). Strategic structure/architecture determines strategic behaviour M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.18 Viable Business Strategies. Johannesburg: Knowres.
  • 19. Strategic Architecture: The Foundation Chapter 4 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. Viable Business Strategies. Johannesburg: Knowres. 19
  • 20. The Business model: The Growth Engine Chapter 4 • In essence, a business model represents the choices a firm makes on where to compete in which market space, with what products or services, by leveraging resources and capabilities for competitive benefits, to support a defined competitive position. • The cumulative results of a participation, resource and competitive strategy, is stakeholder value based on a profit strategy that benefits investors, employees, communities and regulators. M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. Viable Business Strategies. Johannesburg: Knowres. 20
  • 21. The business model in context Chapter 4 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.21 Viable Business Strategies. Johannesburg: Knowres.
  • 22. The business model: Participative strategy view Chapter 4 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.22 Viable Business Strategies. Johannesburg: Knowres.
  • 23. The business model: Resource strategy perspective Chapter 4 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.23 Viable Business Strategies. Johannesburg: Knowres.
  • 24. Competitive Strategy perspective: Chapter 4The basis for competitive advantage M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. Viable Business Strategies. Johannesburg: Knowres. 24
  • 25. An Activity System or Activity Map: Chapter 4 The basis for competitiveness Source: Michael E. Porter “What is Strategy” Harvard Business Review, Nov-Dec 1966 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.25 Viable Business Strategies. Johannesburg: Knowres.
  • 26. Profit strategy / Profit model Chapter 4 Sell the Box, or … Product M Ungerer, USB Strategic Management … Sell the Whole Solution The Profit Zone Product Options Accessories Financing Services Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.26 Viable Business Strategies. Johannesburg: Knowres.
  • 27. Strategic Architecture: The Foundation Chapter 4 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. Viable Business Strategies. Johannesburg: Knowres. 27
  • 28. Sustainability starts with an ability to articulate the strategy of the firm • “I try for months to get an initiative off the ground, and then it is shut down because ‘it doesn’t fit the strategy.’ •Why didn’t anyone tell me that at the beginning?” •“I don’t know whether I should be pursuing this market opportunity. I get mixed signals from the powers that be.” •“Why are we bidding on this customer’s business again? We lost it last year, and I thought we agreed then not to waste our time chasing the contract!” •“Should I cut the price for this customer? I don’t know if we would be better off winning the M Ungerer, USB Strategic Management deal at a lower price or just losing the business.” Confusion Dis-empowerment Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011. Wait28 Viable Business Strategies. Johannesburg: Knowres.
  • 29. Elements to increase the robustness of a business model Chapter 5 Growth is not a never ending concept – Growth stalls is a reality  Limits to success/growth  Law of entropy  Main reasons for Growth stalls:  Premium position captivity  Innovation breakdown  Premature core abandonment  Guidelines for sustainable growth  Clear articulation of strategy  Solid theory of the business: Environment, mission, Core competencies  Internal and external options to infuse energy  Face the changing trends  Fresh eyes reviews  Business model reinvention  Focus-areas for strategy robustness M Ungerer, USB Strategic Management  Leverage core capabilities/competencies Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.29 Viable Business Strategies. Johannesburg: Knowres.
  • 30. The logic of the book M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.30 Viable Business Strategies. Johannesburg: Knowres.
  • 31. Balancing loops at the core of Strategy Execution 0 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.31 Viable Business Strategies. Johannesburg: Knowres.
  • 32. The strategy execution cycle Chapter 6 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.32 Viable Business Strategies. Johannesburg: Knowres.
  • 33. The Strategy Map as a translation tool Chapter 6 The Strategy Maps consists of: • Strategic Goals • Key Success Indicators • Cause and effect relationships AGREE on M Ungerer, USB Strategic Management and pursue COMMON targets Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.33 Viable Business Strategies. Johannesburg: Knowres.
  • 34. Strategic initiatives to change performance on Chapter 6 Strategic Goals M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.34 Viable Business Strategies. Johannesburg: Knowres.
  • 35. Strategy description on one page Chapter 6 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.35 Viable Business Strategies. Johannesburg: Knowres.
  • 36. Chapter 6Strategic rhythm M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.36 Viable Business Strategies. Johannesburg: Knowres.
  • 37. Chapter 6 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.37 Viable Business Strategies. Johannesburg: Knowres.
  • 38. The logic of the book M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.38 Viable Business Strategies. Johannesburg: Knowres.
  • 39. Stimulating strategic conversations Chapter 7 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.39 Viable Business Strategies. Johannesburg: Knowres.
  • 40. Hosting Strategic Conversations Chapter 7 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.40 Viable Business Strategies. Johannesburg: Knowres.
  • 41. Chapter 7 M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.41 Viable Business Strategies. Johannesburg: Knowres.
  • 42. Strategic success is the result of the choices we make (or not make), and our ability to execute our plans M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.42 Viable Business Strategies. Johannesburg: Knowres.
  • 43. Any Questions and/or Comments? M Ungerer, USB Strategic Management Source: Ungerer, M., Pretorius, M. & Herholdt, J. 2011.43 Viable Business Strategies. Johannesburg: Knowres.

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