What is Strategy? BI Norwegian Business School STR3600

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Opening slides for STR3600 Strategic Management at BI Stavanger september 2012.

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What is Strategy? BI Norwegian Business School STR3600

  1. 1. What is Strategy?Handelshøyskolen BI Stavanger STR3600 September 4th 2012
  2. 2. My intention:Help you get an overview of ‘Strategic Management’
  3. 3. What is Strategy?
  4. 4. There were six men of Hindustan, The fourth reached out an eager hand,to learning much inclined, and felt above the knee,Who went to see an elephant, "What this most wondrous beastthough all of them were blind, is like is very plain" said he,That each by observation "Tis clear enough the elephantmight satisfy his mind. is very like a tree."The first approached the elephant, The fifth who chanced to touch the earand happening to fall said, "Een the blindest manAgainst his broad and sturdy side, Can tell what this resembles most;at once began to bawl, deny the fact who can;"This mystery of an elephant This marvel of an elephant is very like a fan."is very like a wall." The sixth no sooner had begunThe second, feeling of the tusk, about the beast to grope,cried, "Ho, what have we here, Than seizing on the swinging tailSo very round and smooth and sharp? that fell within his scope;To me tis mighty clear, "I see," said he, "the elephantThis wonder of an elephant is very like a rope."is very like a spear." So six blind men of HindustanThe third approached the elephant, disputed loud and long,and happening to take Each in his own opinionThe squirming trunk within his hands, exceeding stiff and strong;thus boldly up and spake, Though each was partly in the right,"I see," quoth he, they all were in the wrong!"the elephant is very like a snake." Mintzberg, et.al. (1998) Strategy Safari
  5. 5. “Nobody really knows what strategy is” The Economist, in Markides, 2004
  6. 6. The 10 Schools of Strategic Management Mintzberg, et.al. (1998) Strategy Safari
  7. 7. A different animal altogether: Strategy Execution
  8. 8. “13”
  9. 9. Strategic Management + Change Management =
  10. 10. ”It doesn’t matter where you want to go, if the organization doesn’t go with you”
  11. 11. Let us go back in time
  12. 12. Boston Consulting Group 1965
  13. 13. "Bruce called a staff meeting for a Saturday morning in thefall of 1965. He explained that to survive, much less grow, in acompetitive landscape occupied by hundreds of larger andbetter-known consulting firms, we needed a distinctiveidentity. He had concluded that we shouldn’t fight thecompetitive battle as generalists, but should instead stake outa special area of expertise. "He asked what we thought thatspecialty should be. Many suggestions were offered, but ineach case we were able to identify several other firms thatalready had strong credentials in that particular area. Thediscussion began to stall. Then Bruce asked a momentous question: ‘What aboutbusiness strategy?’ I objected: ‘That’s too vague. Mostexecutives won’t know what we’re talking about.’ Brucereplied, ‘That’s the beauty of it. We’ll define it.“ http://www.bcg.com/this_is_bcg/bcg_history/bcg_history_1963.html
  14. 14. A Timeline on Strategic Management*
  15. 15. SWOT Positioning BCG Matrix PLC Concept of PESTEL strategy Corporate Scenarios Porter’s 5 F TQM Strategy1950 1960 1970 1980 Knowledge Transformational BCG Strategy leadership workers
  16. 16. Lean Value Crafting Chain strategy Balanced 7S VRIO Scorecard Resource- Knowledge Strategic Six Sigma company intent based view1980 1985 ”In search of TQM (2) Excellence”
  17. 17. Strategy as revolution Mass StrategyEmployee custimization safariengagement Rise and fall of strategic Learning planning HR-organizations Competitive champion advantage Core through people Disruptive Ongoing dynamic prosessCompetences innovation Disruptive Intellectucal Strategymaking BPR Networks as serious play technologies capital1990 1995 Positive BSC (2) psychology Sears case
  18. 18. Human Sigma Office of Strategy Management Execution BusinessEQ Blue Ocean Crowd- Strategy sourcing Knowledge-based theory of The Long Management the firm Tail Innovation(2) Strategy Stratey Deep Say your NPS maps Index Discount str. strategy?2000 2005 Gallup Strategy Strategic Three-boxes Business path Canvas Imagination Approach Models Business Model Canvas
  19. 19. Strategy Tools for the Next Holistic Innovation Generation Model Innovation Pyramid2010 2015 Future Back Migration MappingInnovator’s DNA
  20. 20. Why wait for the future?Innovators dream of what can be…..
  21. 21. “The strategists goal is not to find a niche within the existing industry space but to create new space that is uniquely suited to the companys own strengths - space that is off the map.” 1989; “Strategic Intent”; Gary Hamel & C.K. Prahalad
  22. 22. “Competing in overcrowded industries is no way to sustain high performance.The real opportunity is to create blue oceans of uncontested market space”. 2004 (+15) “Blue Ocean Strategy” Kim & Mauborgne
  23. 23. “In strategic thinking, we have learned that there is no such thing as a mature industry:there is only an industry to which imagination has yet to be applied” - Steven Denning, 2010
  24. 24. Industry structure drives competition and profitability;….not whether an industry is emerging ormature, high tech or low tech, regulated or unregulated. - Michael Porter, 2008
  25. 25. Blank
  26. 26. Some of the key assumptions in traditionalstrategy analysis can be outlined as follows:
  27. 27. 1. Strategy is about positioning a business in a given industry structure (Porter, 1980, 1985)2. The focus of strategy tools and analysis is existing industries(SCP in Microeconomics)3. The primary focus of strategic analysis is the business unit4. Strategic outcomes can be explained on the basis of economic analysis5. Strategy is the result of an analytical process; execution of strategy is an organizational process Prahalad & Hamel, 1994
  28. 28. Bartlett & Ghoshal (2002)
  29. 29. Strategic Planning Strategic Innovation (Michael Porter) (Gary Hamel) Analytical Creative Logical and linear DisruptiveExpect the future to be much like the Expect the future to be dynamic and present different Developing existing business model Developing alternativ (new) business model Focus on improving performance Focus on new realities Technology & product-driven Customer-drivenFollowing traditions, rules and mental Breaking traditions, rules and mental models models Adapted from Lybecker, 2007
  30. 30. The Positiong The Resource-based Blue Ocean Discount strategy perspective perspective Strategy- perspective (external) (internal) perspectiveCompete in existing Compete by Create uncontested Compete in market space developing strong market space hypercompetitive resources market space Beat the Resources should be Make the Own value creationcompetitors through Valuable, Rare, Non- competition while destroying a strong position imirable and irrelevant value for others exploited by the organization (VRIO) Exploit existing Utilize strenghts in Create and capture Both supply push demand resource profile new demand and demand pull Low cost OR Leverage resources Create uncontested Craft the strategy Differentation value with disruptive effect The Four Strategic Perspectives; Andersen, Froholdt & Poulfelt
  31. 31. InnovatorRed Ocean Blue Ocean The Strategy system; Andersen, Imitator Froholdt & Poulfelt
  32. 32. Three keys to succesfull strategy execution Purpose Commitment Execution Results Action Poulfelt & Holst-Mikkelsen
  33. 33. The Strategy ProcessIdea Strategic Analysis Strategic Planning Strategic Choice Strategy ExecutionFollow-up & Contro
  34. 34. Idea Strategic Analysis Strategic Planning Strategic Choice Strategy ExecutionFollow-up & ControBusiness External Radical Be defined ”I know and Aligmentidea Porter 5F business by industry understand with the rest PESTEL model or blow up our strategy” of theValue BCG Matrix innovation the organizationproposition Market & industry’s ”I am customer Imagine if… borders? enthusiastic Connect:Strategic analysis Scenarios about our Strategy;Intent ”faster Options Clear choice strategy” Metrics; horses” of what we Training andVision Uniqe want to be ”Every day, I developmentMission Internal Industry and do make our Financials Position strategy PerformanceValues SWOT Clear choice happen” reviews VRIO (CC) Business of what weUnleash 7S plan: Long- don’t want BSC Rewards &Human Value chain term goals to be and do Communi- bonusesImagination BEQ and plans cations NPS Investments strategyWhat’s our Human Sigma BSC Long-term World-class Employee & Strategy maps Goals Execution alignmentdream?
  35. 35. Different ways of running the strategy process
  36. 36. High involvmentExternal Internal Low Involvement
  37. 37. High involvment VII: Everybody involved VIII: VI: Several Project project teams teams; with customers & PartnersExternal Internal V: One III: project team Management II: CEO, & McKinsey Strategy team director & I: CEO & McKinsey team IV: CEO McKinsey Alone team Low Involvement
  38. 38. ”Is there a correlation between involvement and effect of execution?” ”Yes, absolutely” - Holst-Mikkelsen & Poulfelt
  39. 39. Can Strategy Be Made Easy?
  40. 40. Where Do We Want to Be in 3 Years ? How Are We Going to Get There ?
  41. 41. How do we achieve competitive advantage?
  42. 42. Low-cost VS.Differentiation Vs. Focus
  43. 43. …or… Deep Discount Strategy Vs.Radical Business Model Innovation
  44. 44. External Perspective Vs.Internal Perspective
  45. 45. Incremental Vs. Innovative Vs. Radical
  46. 46. Analysis Vs.Action
  47. 47. Analysis Vs.Paralysis
  48. 48. What Industry Position Should We Take?
  49. 49. ”Succesfull attackers do not try to be better than their bigger rivals. Rather, they activelyadopt a different business model (or strategy) aim to compete by changing the rules of the game in the industry” C.C. Markides, 2008
  50. 50. How do we want our customers to experience us differently?
  51. 51. Who? What? How? “The secrets of successful strategies;Winning People’s Emotional Commitment” Markides, London Business School
  52. 52. The 10 Schools of Strategic Management Mintzberg, et.al. (1998) Strategy Safari
  53. 53. Prescriptive Schools1. The design school (process of conception)2. The planning school (formal process3. The positioning school (analytical process)Descriptive Schools4. The environmental school (reactive process)5. The cognitive school (mental process)6. The entrepreneurial school (vision process)7. The power school (process of negotiation)8. The cultural school (collective process)9. The learning school (emerging process)Configuration School10. The configuration school (transformation process)
  54. 54. “Like many organizations, our written strategies quickly became dead documents.” Art Schneiderman, 1987, "The First Balanced Scorecard“
  55. 55. Can You Say What Your Strategy Is? Collins & Ruckstad, 2008
  56. 56. NO!!!Ca. 95 % Kaplan & Norton, 2004
  57. 57. Three keys to succesfull strategy execution Purpose Commitment Execution Results Action Poulfelt & Holst-Mikkelsen
  58. 58. Balanced Scorecard drives Strategy Execution
  59. 59. 3rd Generation BSC:Focus, Metrics, Alignment, Action
  60. 60. The Strategic Sweet Spot Collins & Ruckstad, 2008
  61. 61. The strategic sweet spot of a company is where it meets customers’ needs in a way that rivals can’t, given the context in which it competes.
  62. 62. Context (technology, industrydemographics, regulation, and so on) The Strategic Sweet Spot
  63. 63. Analyzing Strategic Management Cases
  64. 64. 3 steps:AnalyzeRecommendImplement
  65. 65. Core Issue?
  66. 66. A unifying model for strategic management Adapted from Holst-Mikkelsen & Poulfelt; Lægaard & Vest Version 0.3
  67. 67. Customers Market place Vision PESTEL F Purpose? Present needs Competitor and wants analysis Mission Future needs and wants Strategic Intent P5F NPS Business idea Strategic External S O Goals initiatives Execution & Internal Analysis W T (max six) Strategic options & choice BEQ LeadershipOwner’s Employee Great engagement Ambi- VRIO Place to Culture Business model tions Innovation Work Strategy CustomerFinancials:Shareprice Value P/E Chain Profit (prod- Culture MarginQuick ratio ucersTotal debt only) ratio Cash flow InnovationTotal cash Marketing mix (5 P’s) Leadership
  68. 68. External& Internal Analysis
  69. 69. Key questions for recommendationFinancial: Can we afford it? How will it affect our shareprice?People: Will our people jump with joy? Do we have the people we need?Leadership: Will our leaders love the challenge? Do we have the leaders we need?Processes: How will we have to change our processes?Marketing & sales: How will we have to change our marketing and sales? Will our sales force & partners be proud and excited?Customers: How will our customers love us for this?Competition: How will our competitiors respond?
  70. 70. …and finally… - Is it realistic - Does it give us energy?- How do we make it a great success?
  71. 71. Happy strategyzing

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