Slides99 Strategy & Organization


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  • Slides99 Strategy & Organization

    1. 1. Young Executive Programme 99 I NTRODUCTION TO S TRATEGY presented by Julien PITTON 2nd November
    2. 2. <ul><li>T HINKING vs P LANNING </li></ul><ul><li>S TRATEGY & M ANAGEMENT </li></ul><ul><li>L EADERSHIP & I NTENT </li></ul><ul><li>B USINESS S TRATEGY </li></ul><ul><li>T O C OMPETE </li></ul><ul><li>T O O RGANISE </li></ul><ul><li>A DVANTAGE & C HANGE </li></ul><ul><li>G LOBALISATION </li></ul>W HY S TRATEGY ?
    3. 3. W HY S TRATEGY ?
    4. 4. INVESTMENT BANKING: THE INVESTOR POINT OF VIEW <ul><li>BANKERS are Investors : </li></ul><ul><ul><li>Corporate Banking </li></ul></ul><ul><ul><li>Equity Capital Markets hard underwriting </li></ul></ul><ul><ul><li>Asset Management </li></ul></ul><ul><li>BANKERS are “SELLERS”: </li></ul><ul><ul><li>Fund Managers: Loans secondary markets </li></ul></ul><ul><ul><li>Fund Managers: IPO/Convertibles/Brokerage </li></ul></ul><ul><ul><li>Fund Managers: Mergers & Acquisitions </li></ul></ul>BANKERS INVESTORS
    5. 5. THE FUND MANAGERS : What are there looking at !?! <ul><li>What does the business do and what is the vision (including mission statement)? </li></ul><ul><li>What are the main profit drivers in the business? </li></ul><ul><li>How is the business doing . What is the recent track record? </li></ul><ul><li>What is the strategy in terms of technologies, products, markets and the delivery of shareholder value? </li></ul><ul><li>How will the product and market strategies be realised ? </li></ul><ul><li>What is the financial strategy and according to what financial criteria is the business managed and controlled? </li></ul>FUND MANAGERS (1)
    6. 6. THE FUND MANAGERS : What are there looking at !?! <ul><li>What are the key management and reporting structures? </li></ul><ul><li>How does the company compare against its domestic and international peer groups , in terms of products and market penetration as well as financial structure and performance? </li></ul><ul><li>What is the outlook and what are the key internal and external factors that might effect the business in the future? </li></ul><ul><li>Why should an investor buy this company’s shares? </li></ul>FUND MANAGERS (2)
    7. 7. THE FUND MANAGERS : What are there looking at !?! FUND MANAGERS (3) VERY Important Fairly Important Quality of Management Track Record and EPS Growth Quality of Earnings Corporate Strategy Relative Price Product/Brand Strengths Quality of Accounting and Disclosure Practices Communication with Investors Balance Sheet Market Share Industry Prospects Net Asset Backing Level of Borrowing Relative Yield Research Coverage Dividend Record 0 10 20 30 40 50 60 70 80 90 100 93 91 93 86 63 96 79 79 76 74 77 37 37 21 32 21
    9. 9. Strategy & Management <ul><li>SUCCEEDING </li></ul><ul><li>VALUE </li></ul><ul><li>COMPETITION </li></ul>Strategy is about finding a way to succeed and then doing it.
    10. 10. <ul><li>INTENT </li></ul><ul><li>COMPETITIVE ADVANTAGE </li></ul><ul><li>SCOPE </li></ul>Strategy & Management What we will not do” is at least as important as “what we will do”
    11. 11. Strategy & Management “ Frontier” Lower Cost Differentiate Moving [A] to the frontier (“ operational excellence ”) vs taking[B] a position (“ strategic choice ”) [A] [B] You cannot be all things to all people
    12. 12. <ul><li>RESOURCES </li></ul><ul><li>CAPABILITIES </li></ul><ul><li>POSITION </li></ul>Strategy & Management Capabilities : Ability to acquire and deploy resources to solve classes of problems and create value !
    13. 13. <ul><li>CHOOSING </li></ul><ul><li>CREATING </li></ul><ul><li>KEEPING </li></ul>Strategy & Management You succeed only if you get to keep some of the value created
    14. 14. <ul><li>DEMAND </li></ul><ul><li>GROWTH </li></ul><ul><li>COST OF INPUTS </li></ul><ul><li>TECHNOLOGY - P&D </li></ul>Strategy & Management Ingredients in the PIE In trying for a bigger piece, you could reduce the size of the total pie !
    15. 15. <ul><li>ISSUES </li></ul><ul><li>INSTITUTIONS </li></ul><ul><li>INTERESTS </li></ul><ul><li>INFORMATION </li></ul>Strategy & Management Non-Market Issues: The 4 I’s Affect the size of the PIE and/or Affect its division?
    16. 16. <ul><li>PEOPLE </li></ul><ul><li>FEATURES </li></ul><ul><ul><li>ARCHITECTURE </li></ul></ul><ul><ul><li>PROCESSES & PROCEDURES </li></ul></ul><ul><ul><li>CULTURE, VALUES AND ASSUMPTIONS </li></ul></ul>Strategy & Management Culture: Set of beliefs that we share about why we are doing this!
    17. 17. Determinants of Performance Strategy Resources Capabilities Position Environment PIE Competitors Customers Suppliers Complementors Government Social ... Organisation People Features Activities PERFORMANCE Strategy & Management
    18. 18. General Management <ul><li>UNDERSTAND </li></ul><ul><li>the basis for current performance </li></ul><ul><li>IDENTIFY threats & opportunities </li></ul><ul><li>DEVELOP/SELECT </li></ul><ul><li>a strategy to meet these goals </li></ul><ul><li>IMPLEMENT IT </li></ul>Strategy & Management
    19. 19. General Management <ul><li>ADAPT to changes </li></ul><ul><li>DEVELOP new capabilities </li></ul><ul><li>SHAPE the environments </li></ul>Performance is the result of the fit between the actions and the strategic context in which they are taken. Strategy & Management
    20. 20. <ul><li>CHOICES </li></ul><ul><li>S.C.A. RENEWAL </li></ul><ul><li>GOALS </li></ul>General Management Strategy & Management The choices a firm makes about how it acquires and deploys its assets are the main way in which it influences its performance. This is what the firm ultimately controls!
    21. 21. <ul><li>STYLE </li></ul><ul><ul><li>“ Captain of the ship” </li></ul></ul><ul><ul><li>to which extent strategy is “top down” </li></ul></ul><ul><ul><li>is strategy within organisations is really planned at all, </li></ul></ul>General Management Strategy & Management In small firms, the ultimate responsibility for strategy typically rests with the senior general management. The “top down” view can be of only limited applicability to a multi-business enterprise.
    22. 22. Perspectives <ul><li>STRATEGY PROCESS IS COMPLEX </li></ul><ul><li>“ L OWER ” MANAGEMENT MATTERS! </li></ul><ul><li>LUCK MATTERS! </li></ul>Strategy & Management A declaration by top management that the firm will change does not make change happen.
    23. 23. Conclusion <ul><li>An exceptional rate of return cannot be earned by the average firm . </li></ul><ul><li>The competitive interaction quickly dissipates any profits. </li></ul><ul><li>In final analysis, people make the difference. </li></ul>Strategy & Management
    24. 24. THINKING vs PLANNING
    25. 25. <ul><li>Strategic planning strategic thinking. </li></ul><ul><li>Strategic thinking is about synthesis. </li></ul><ul><li>Planning represents a calculating style of management, not a committing style </li></ul>Thinking vs Planning Life is larger than our categories. Real strategic change requires inventing new categories, not rearranging old ones.
    26. 26. <ul><li>For strategic planning, the grand fallacy is this : </li></ul><ul><li>because analysis encompasses synthesis, strategic planning is strategy making. </li></ul><ul><li>This rests on 3 fallacious assumptions : </li></ul><ul><ul><li>prediction is possible </li></ul></ul><ul><ul><li>strategist can be detached from the subjects of their analysis </li></ul></ul><ul><ul><li>strategy making process can be formalised </li></ul></ul>Thinking vs Planning
    27. 27. <ul><li>O PERATIONAL E FFECTIVENESS </li></ul><ul><li>Performing similar activities better than rivals perform them. </li></ul><ul><li>It includes but is not limited to efficiency . </li></ul><ul><li>S TRATEGIC P OSITIONING </li></ul><ul><li>Performing different activities from rivals or performing similar activities in different ways. </li></ul>Thinking vs Planning
    28. 28. <ul><li>TRADEOFFS </li></ul><ul><li>MORE IMPLIES LESS </li></ul>Thinking vs Planning No tradeoffs means no need for choice, no need for strategy. Any good idea could and would be quickly imitated. Performance would once again depend wholly on operational effectiveness.
    30. 30. Leadership & Intent Leardership is the ability to elicite extraordinary performance from ordinary people
    31. 31. <ul><li>STRATEGIC INTENT </li></ul><ul><li>FOCUS </li></ul><ul><li>MOTIVATION </li></ul><ul><li>ROOM </li></ul><ul><li>SUSTAINING ENTHUSIASM </li></ul><ul><li>CONSISTENTCY </li></ul>Leadership & Intent
    32. 32. <ul><li>STRATEGIC FIT </li></ul><ul><li>LEVERAGING RESOURCES </li></ul><ul><li>FORESEEABLE PATTERN </li></ul>Leadership & Intent The essence of strategy lies in creating tomorrow’s competitive advantages faster than competitors mimic the ones you possess today.
    33. 33. <ul><li>COMPETITIVE INTELLIGENCE </li></ul><ul><li>CREDIBILITY </li></ul><ul><li>MILESTONES </li></ul>Leadership & Intent Competitive suicide - pursuing both differentiation and cost - is exactly what many competitors strive for.
    34. 34. <ul><li>Strategic intent assures consistency in resource allocation over the long term. </li></ul><ul><li>Clearly articulated corporate challenges focus the efforts of individuals in the medium term. </li></ul><ul><li>Competitive innovation helps reduce competitive risk </li></ul>Leadership & Intent
    36. 36. <ul><li>RELATIONSHIPS </li></ul><ul><li>CHOICE OF ACTIONS </li></ul><ul><ul><li>VISION </li></ul></ul><ul><ul><ul><li>MISSION </li></ul></ul></ul><ul><ul><ul><ul><li>VALUES </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>PURPOSE </li></ul></ul></ul></ul></ul>Business Strategy Useful complements to strategy but generally different from and very imperfect substitutes for strategy.
    37. 37. <ul><li>GOALS </li></ul><ul><li>SCOPE </li></ul><ul><li>COMPETITIVE ADVANTAGE </li></ul><ul><li>LOGIC </li></ul>Business Strategy Strategy contains the core argument for why and how the firm will succeed.
    38. 38. <ul><li>CONSISTENCY </li></ul><ul><li>CONSONANCE </li></ul><ul><li>ADVANTAGE </li></ul><ul><li>FEASIBILITY </li></ul>Business Strategy Four broad criteria for evaluating strategy are: A strategy that fails to meet one or more of these criteria is strongly suspect.
    39. 39. <ul><li>COMMUNICATING </li></ul><ul><ul><li>CLARITY </li></ul></ul><ul><ul><li>CO-ORDINATION </li></ul></ul><ul><ul><li>INCENTIVES </li></ul></ul><ul><ul><li>EFFICIENCY </li></ul></ul>Business Strategy Top management may believe that its strategy is so “unique” that every competitor would copy it, if only they knew it!
    40. 40. <ul><li>MISSION </li></ul><ul><li>VISION </li></ul><ul><li>VALUES </li></ul>Business Strategy A vision is not always necessary for strategy It is never sufficient
    41. 41. Business Strategy
    42. 42. TO COMPETE!
    43. 43. <ul><li>OPERATIONAL EXCELLENCE </li></ul><ul><li>CUSTOMER INTIMACY </li></ul><ul><li>PRODUCT LEADERSHIP </li></ul><ul><li>OPERATIONAL FLEXIBILITY </li></ul>To Compete ! Less focused companies must do far more than simply tweak existing processes to gain this advantage.
    44. 44. ` <ul><li>BUSINESS PROCESSES. </li></ul><ul><li>O PERATIONAL E FFECTIVENESS </li></ul><ul><li>C OMPETITIVE A DVANTAGE </li></ul><ul><li>THE CEO </li></ul>Competing on Capabilities To Compete ! Strategic advantages built on capabilities are easier to transfer geographically than more traditional competitive advantages.
    45. 45. ` <ul><li>SPEED </li></ul><ul><li>CONSISTENCY </li></ul><ul><li>ACUITY </li></ul><ul><li>AGILITY </li></ul><ul><li>INNOVATIVENESS </li></ul>Competing on Capabilities To Compete ! Capabilities-driven companies conceive the organisation as a gigantic loop that begins with identifying the needs of the customer and ends with satisfying them.
    46. 46. TO ORGANISE
    47. 47. <ul><li>PEOPLE </li></ul><ul><li>ARCHITECTURE </li></ul><ul><li>PROCESSES </li></ul><ul><li>CULTURE </li></ul>To Organise The boundaries of the firm and the nature and intensity of incentives (explicit and implicit, objective and subjective, financial and intrinsic) are major determinants of the location on the frontier.
    48. 48. Trade-off Initiative Co-operation More entrepreneurial More co-operative To Organise
    49. 49. Disaggregated Firm Initiative Co-operation Market/entrepreneurial Firm Classic Bureaucracy To Organise
    50. 50. Organisational Learning <ul><li>VARIATION </li></ul><ul><li>SELECTION </li></ul><ul><li>RETENTION </li></ul>To Organise There exists a trade-off between devoting resources to long term learning benefits and short-term operating efficiency benefits
    51. 51. Behavioural Objectives of Design Architecture Processes/Routines Culture (Capability-based) Sustainable Competitive Advantage Initiative Co-operation Learning To Organise
    52. 52. Dynamics <ul><li>I DENTIFY THE S TRATEGY </li></ul>Scope (Capability- based) Sustainable Competitive Advantage Goals & Basis for Profitability I MPLEMENT A S TRATEGY Architecture Processes / Routines Culture I NITIATIVE C O-OPERATION L EARNING D RIVES Implies & Drives Implies & Drives R ESOURCES C APABILITIES P OSITION To Organise D RIVES
    53. 53. ADVANTAGE & CHANGE
    54. 54. Strategic Dissonance <ul><li>Aligning corporate strategy and strategic action is a key top management responsibility . </li></ul><ul><li>Inevitably, strategic actions will begin to lead or lag strategic intent . </li></ul><ul><li>Dissonance is strategic when it signals impending industry or corporate transformation . </li></ul>Advantage & Change The most fundamental and least readily visible source of strategic dissonance derives from the divergence between the changing basis of competition in the industry and the firm’s distinctive competencies, the latter becoming less relevant for competitive advantage.
    55. 55. <ul><li>Strategic dissonance signals a strategic inflection point . </li></ul><ul><li>These changes create a “valley of death” for the incumbents because they materially affect their profitable growth trajectories . </li></ul><ul><li>How to tell signal from noise ? </li></ul>Strategic Dissonance Advantage & Change When spring comes, snow melts first at the periphery!
    56. 56. Strategic Dissonance Advantage & Change GROWTH TIME S TRATEGIC I NFLEXION P OINT “ SIP” C OMPETITIVE A DVANTAGE P ERIOD “ CAP”
    57. 57. <ul><li>DENIAL </li></ul><ul><li>ESCAPE OR DIVERSION </li></ul><ul><li>ACCEPTANCE </li></ul><ul><li>PERTINENT ACTION </li></ul>Strategic Dissonance: Don’t dismiss it Advantage & Change Diversion often involves major acquisitions unrelated to the core business that faces a SIP.
    59. 59. <ul><li>Being able to develop and implement an effective global strategy is the acid test of a well managed company. </li></ul><ul><li>GLOBAL STRATEGY or </li></ul><ul><li>“ MULTILOCAL STRATEGY” </li></ul>Globalisation How global is their industry and how global should their business strategy be?
    60. 60. <ul><li>Global strategy levers </li></ul><ul><li>Market participation </li></ul><ul><li>Products/services </li></ul><ul><li>Location of value adding activities </li></ul><ul><li>Marketing </li></ul><ul><li>Competitive moves </li></ul>Globalisation A business that has a fully globalised strategy would make maximum use of each of the five global strategy levers.
    61. 61. <ul><li>THE CORE STRATEGY </li></ul><ul><li>DEVELOPING </li></ul><ul><li>INTERNATIONALISING </li></ul><ul><li>GLOBALISING </li></ul>Globalisation Briefly, a multilocal strategy treats competition in each country or region on a stand alone basis, while a global strategy takes an integrated approach across countries and regions.
    62. 62. Benefits and Costs of Globalisation Global Organisation Factors Industry Globalisation Drivers Global Strategy Levers The Globalisation Triangle Globalisation
    64. 64. <ul><li>Countries need to be selected in terms of their potential contribution to globalisation benefits also . </li></ul><ul><li>The ideal is a standardised core product that requires a minimum of local adaptation. </li></ul><ul><li>The value chain is broken up, and each activity may be conducted in a different country. </li></ul>Market participation Products & services Activity location In multilocal In a global Countries are selected on the basis of their stand-alone potential in terms of revenues and profits . The products and services offered in each country are tailored to local needs . All or most of the value chain is reproduced in every country . Globalisation
    66. 66. STRATEGY