WHY YOUR STRATEGY STINKS<br />Richard Farr<br />Brian Wood<br />Telos Solutions<br />Life Convention, Edinburgh: November ...
Introductions<br />Brian Wood<br />Actuary<br />CEO, Telos Solutions<br />Former CEO of 2 lifecos<br />‘Blue Ocean Strateg...
What is Strategy?<br />3<br />Why your Strategy Stinks Farr & Wood<br />
Examples of great strategy<br />(not FS)<br />4<br />Why your Strategy Stinks Farr & Wood<br />
Four attributes of great strategy:<br />1. Future orientation<br />2. Customer intimacy<br />4. Delivery<br />3. Different...
Strategy in Business<br /><ul><li>Established in the 1950’s and 1960’s
Need for common objectives
Origins in military strategy (zero-sum assumption)
Later theories focussed on numbers
Competitor review
Current industry conditions
Current customers
More time spent analysing than observing and thinking</li></ul>6<br />Why your Strategy Stinks Farr & Wood<br />
Classic strategy theory (Porter et al)<br />Analyse the market boundaries, plotting value against cost<br />Choose the opt...
The classic strategy development process<br />Optimise your position in current market structure<br />Analyse data on curr...
Customer wants “more for less”, “more for less”, “more for less”
A slow death spiral</li></ul>8<br />Why your Strategy Stinks Farr & Wood<br />
“McKinsey takes an overall, independent, and fact-based view of a client’s performance. We rely on facts because they prov...
So: this is why your strategy probably stinks<br />1. Future orientation<br />2. Customer intimacy<br />3. Differ-entiatio...
What makes a perfect strategy?<br />11<br />Why your Strategy Stinks Farr & Wood<br /><ul><li> A new market with NO compet...
Violence
Complex graphics
Tricky controls</li></ul>Nintendo<br />12<br />Why your Strategy Stinks Farr & Wood<br />
Unexplored customers:<br />Older females.<br />Observation:<br />They like games!<br />13<br />Why your Strategy Stinks Fa...
Nintendo Wii: strong differentiation<br />14<br />Why your Strategy Stinks Farr & Wood<br />
Market for Nintendo Wii:<br />Everyone<br /><ul><li>Simple physical games
Simulations
Sociable
Intuitive controls</li></ul>15<br />Why your Strategy Stinks Farr & Wood<br />
Impact on Nintendo<br />Low-cost graphics<br />Low-cost controls<br />Low-cost game development<br />Production cost of Pl...
Competitor World View<br />Our World View<br />The area to expand<br />Source of poor strategy<br />FALSE<br />17<br />Why...
Nintendo used ‘Blue Ocean’ tools<br />RED OCEAN<br />Existing markets<br />Fierce competition<br />Cost-plus pricing<br />...
Video games: “As-Is” strategy canvas<br />19<br />Why your Strategy Stinks Farr & Wood<br />
Current customers:where do we add cost/pain but no value?<br />20<br />Why your Strategy Stinks Farr & Wood<br />
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Why Your Strategy Stinks

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Presentation delivered by Richard Farr and Brian Wood to the Actuaril Profession Life Convention, 27th November 2009

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Why Your Strategy Stinks

  1. 1. WHY YOUR STRATEGY STINKS<br />Richard Farr<br />Brian Wood<br />Telos Solutions<br />Life Convention, Edinburgh: November 2009<br />
  2. 2. Introductions<br />Brian Wood<br />Actuary<br />CEO, Telos Solutions<br />Former CEO of 2 lifecos<br />‘Blue Ocean Strategy’ licensed practitioner<br />Co-author of “Beat the Pensions Crisis”<br />Richard Farr<br />Marketing specialist<br />Business Development Director, Telos<br />Former director of AIFA and Association of Mortgage Intermediaries<br />Extensive experience in building societies and mortgages sector<br />2<br />Why your Strategy Stinks Farr & Wood<br />
  3. 3. What is Strategy?<br />3<br />Why your Strategy Stinks Farr & Wood<br />
  4. 4. Examples of great strategy<br />(not FS)<br />4<br />Why your Strategy Stinks Farr & Wood<br />
  5. 5. Four attributes of great strategy:<br />1. Future orientation<br />2. Customer intimacy<br />4. Delivery<br />3. Differentiation<br />5<br />Why your Strategy Stinks Farr & Wood<br />
  6. 6. Strategy in Business<br /><ul><li>Established in the 1950’s and 1960’s
  7. 7. Need for common objectives
  8. 8. Origins in military strategy (zero-sum assumption)
  9. 9. Later theories focussed on numbers
  10. 10. Competitor review
  11. 11. Current industry conditions
  12. 12. Current customers
  13. 13. More time spent analysing than observing and thinking</li></ul>6<br />Why your Strategy Stinks Farr & Wood<br />
  14. 14. Classic strategy theory (Porter et al)<br />Analyse the market boundaries, plotting value against cost<br />Choose the optimum position along the high value/ high cost to low value/ low cost spectrum<br />There are no other choices<br />Assumes the market is inherently static – innovation changes it slowly<br />7<br />Why your Strategy Stinks Farr & Wood<br />
  15. 15. The classic strategy development process<br />Optimise your position in current market structure<br />Analyse data on current customers<br />Allow for some emerging trends<br />Analyse data on your competitors<br /><ul><li>Finer and finer segmentation of existing markets
  16. 16. Customer wants “more for less”, “more for less”, “more for less”
  17. 17. A slow death spiral</li></ul>8<br />Why your Strategy Stinks Farr & Wood<br />
  18. 18. “McKinsey takes an overall, independent, and fact-based view of a client’s performance. We rely on facts because they provide clarity and align people.”<br />“When a BCG consultant walks through your door, he or she will be thinking about two things: the competition you face and new ways for you to win.”<br />“Bain work with top management to beat their competitors and generate substantial, lasting financial impact ... we dig deep into the numbers, as the basis for creating solutions.”<br />“Booz Allen are experts in understanding industry structure and dynamics and in boiling it down to the insights that are most relevant to our clients’ situations.”<br />Major strategy firms ...<br />9<br />Why your Strategy Stinks Farr & Wood<br />
  19. 19. So: this is why your strategy probably stinks<br />1. Future orientation<br />2. Customer intimacy<br />3. Differ-entiation<br />4. Delivery<br />10<br />Why your Strategy Stinks Farr & Wood<br />
  20. 20. What makes a perfect strategy?<br />11<br />Why your Strategy Stinks Farr & Wood<br /><ul><li> A new market with NO competition</li></ul>1. Future orientation<br /><ul><li> Products that customers want to pay for</li></ul>2. Customer intimacy<br /><ul><li> Costs reduced to lowest possible level</li></ul>3. Differ-entiation<br /><ul><li> Capable of being delivered</li></ul>4. Delivery<br /><ul><li> Refreshed on a regular basis</li></li></ul><li>Market for video games<br />(Xbox, PlayStation):<br />Young males:<br /><ul><li>Fantasy
  21. 21. Violence
  22. 22. Complex graphics
  23. 23. Tricky controls</li></ul>Nintendo<br />12<br />Why your Strategy Stinks Farr & Wood<br />
  24. 24. Unexplored customers:<br />Older females.<br />Observation:<br />They like games!<br />13<br />Why your Strategy Stinks Farr & Wood<br />
  25. 25. Nintendo Wii: strong differentiation<br />14<br />Why your Strategy Stinks Farr & Wood<br />
  26. 26. Market for Nintendo Wii:<br />Everyone<br /><ul><li>Simple physical games
  27. 27. Simulations
  28. 28. Sociable
  29. 29. Intuitive controls</li></ul>15<br />Why your Strategy Stinks Farr & Wood<br />
  30. 30. Impact on Nintendo<br />Low-cost graphics<br />Low-cost controls<br />Low-cost game development<br />Production cost of Playstation: $800<br />Production cost of Wii: $150<br />Wii sales overtook Xbox and Playstation combined in 2008<br />Nintendo now worth more than Sony<br />16<br />Why your Strategy Stinks Farr & Wood<br />
  31. 31. Competitor World View<br />Our World View<br />The area to expand<br />Source of poor strategy<br />FALSE<br />17<br />Why your Strategy Stinks Farr & Wood<br />
  32. 32. Nintendo used ‘Blue Ocean’ tools<br />RED OCEAN<br />Existing markets<br />Fierce competition<br />Cost-plus pricing<br />High legacy costs<br />Thin margins<br />BLUE OCEAN<br />Uncontested market space<br />Competition is irrelevant<br />Market pricing<br />Low costs<br />High margins<br />18<br />Why your Strategy Stinks Farr & Wood<br />
  33. 33. Video games: “As-Is” strategy canvas<br />19<br />Why your Strategy Stinks Farr & Wood<br />
  34. 34. Current customers:where do we add cost/pain but no value?<br />20<br />Why your Strategy Stinks Farr & Wood<br />
  35. 35. You have many more non-customers than customers<br />Current customers are already served by you - and your competitors<br />Everyone is a customer somewhere – so you can observe what they need/ like<br />If the further reaches are too scary, dip your toe in by observing the “Soon-to-be”<br />Now<br />Soon-to-be<br />Refusing<br />Unexplored<br />Observing non-customers<br />21<br />Why your Strategy Stinks Farr & Wood<br />
  36. 36. Observe non-customer needs: Six paths<br />6<br />Industries that offer an alternative<br />Other strategic groups<br />Chain of buyers<br />Complementary products & services<br />Functional and emotional appeal<br />Time<br />22<br />Why your Strategy Stinks Farr & Wood<br />
  37. 37. Construct a new Canvas based on value<br />Raise<br />What factors should be raised well beyond industry standard?<br />Create<br />What factors that the industry has never offered should be created?<br />Eliminate<br />What factors that the industry has taken for granted should be eliminated?<br />Reduce<br />What factors should be reduced well beyond industry standard?<br />23<br />Why your Strategy Stinks Farr & Wood<br />
  38. 38. Nintendo Wii: strong differentiation<br />24<br />Why your Strategy Stinks Farr & Wood<br />
  39. 39. A simpler example<br /><ul><li>John Lasseter, animator
  40. 40. Left Disney as he could not convince them as to the power of CGA
  41. 41. Joined Lucas Films Computer Graphics Group
  42. 42. Co Founded Pixar with Steve Jobs
  43. 43. Sold Pixar to Disney in 2006 for $7.4bn
  44. 44. Head of Pixar and Disney Movie Studios</li></ul>25<br />Why your Strategy Stinks Farr & Wood<br />
  45. 45. John&apos;s view on strategy<br />26<br />Why your Strategy Stinks Farr & Wood<br />
  46. 46. Four attributes of great strategy:<br />1. Future orientation<br />2. Customer intimacy<br />4. Delivery<br />3. Differentiation<br />27<br />Why your Strategy Stinks Farr & Wood<br />
  47. 47. Strategy and Deliveryare completely different disciplines<br />Strategy is about creating a coherent direction that customers can relate to.<br />Operations is about the nitty-gritty of internal process, expertise, people, costs.<br />Success requires both – no point having a strategy that you can’t implement.<br />28<br />Why your Strategy Stinks Farr & Wood<br />
  48. 48. The delivery gap<br />Strategy thinking is:<br />outside-in<br />risk-taking<br />conceptual<br />Operations thinking is:<br />inside-out<br />risk-avoiding<br />tangible<br />So a natural gap tends to exist in most organisations<br />29<br />Why your Strategy Stinks Farr & Wood<br />
  49. 49. Closing the gap<br />Convert the strategy into operational terms<br />tangibles: what will it look/feel/sound like?<br />Explicitly manage the continuous flow between strategy and operations<br />always messy<br />Start with a ‘top-slice’ exercise to evaluate:<br />costs<br />timescales<br />risks<br />30<br />Why your Strategy Stinks Farr & Wood<br />
  50. 50. 31<br />Why your Strategy Stinks Farr & Wood<br />
  51. 51. The full strategy development process<br />Integrate with delivery<br />Construct new strategy canvas<br />Engage with non-customers<br />Existing customer pain-points<br />“As-is” Strategy<br />Canvas<br />32<br />Why your Strategy Stinks Farr & Wood<br />
  52. 52. The acid tests<br />Are you offering something different and special to potential customers?<br />vs<br />Will people pay a fair “market price” for what you offer?<br />Can your costs be low enough so that you generate a profit?<br />Can you deliver it?<br />33<br />Why your Strategy Stinks Farr & Wood<br />
  53. 53. References and links<br />34<br />Why your Strategy Stinks Farr & Wood<br />

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