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Success through strategy (roger hicks sept 2006)

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a presentation on how to think about strategy design for a graduate level management course for technology professionals

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Success through strategy (roger hicks sept 2006)

  1. 1. Success Through Strategy By: Roger Hicks Prepared for: OGI/OHSU Capstone Class September 2006 roger.hicks@comcast.net
  2. 2. Take a Strategic Viewpoint “Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances” Sun Tzu c. 490 BC, (Chinese military strategist) Roger Hicks Consulting, 2006 Strategies for Start-ups 2
  3. 3. Agenda  Purpose of strategy  Development of strategy  Results of strategy Roger Hicks Consulting, 2006 Strategies for Start-ups 3
  4. 4. The Reason For Business Strategies Businesses develop strategies in order to quickly realize their vision of the future. Roger Hicks Consulting, 2006 Strategies for Start-ups 4
  5. 5. What is Strategy ? A strategy is a deliberate choice of WHAT should be done to deal with an opportunity or threat in order to move in a direction that will increase the chances of success in accomplishing a desired outcome. Tactics are HOW a strategy gets implemented. Roger Hicks Consulting, 2006 Strategies for Start-ups 5
  6. 6. Why Worry About Strategy ?  All these subjects need to be addressed and defined at some point in the development of a successful enterprise.  All the pieces should fit together in a coherent plan to guide actions. Without clear communication of strategies the tactics will have nothing to draw them in the right direction. Roger Hicks Consulting, 2006 Strategies for Start-ups 6
  7. 7. Increase Success ! - brand equity - market share - profitability growth - etc. Low % - market size and growth - technology fit - management - financial - planning - supply - etc. High % Reduce Risks ? Probability The Impact of Strategic Choices Ideal Opportunity Disaster Threat The purpose of strategy in a business is to: • Reduce the risk of failure • Increase the chances of capturing profitable opportunities • Realize wealth and success faster Roger Hicks Consulting, 2006 Strategies for Start-ups 7
  8. 8. The Strategy Imperative Companies without an integrated set of strategies to address market forces, technology shifts and key business functions are doomed to fail. New ventures rarely have well defined strategies but as the business evolves the choices made by management to attain success results in a definite set of strategies that can be clearly stated and followed. Roger Hicks Consulting, 2006 Strategies for Start-ups 8
  9. 9. Overview Purpose of strategy  Development of strategy  Results of strategy  Roger Hicks Consulting, 2006 Strategies for Start-ups 9
  10. 10. Strategy Development Problems and Opportunities Situation Assessment Implementation and Measurement Identification of Strategic Alternatives Selection of Strategic Factors Roger Hicks Consulting, 2006 Strategies for Start-ups 10
  11. 11. Deliberate Decisions Are Necessary  Strategies are a result of serious decisions  Choose between attractive alternatives  Results in a definitive course of action  Cannot go back without massive penalties  Decisions determine what will not be done vs. what will be done Decisions without effective implementation are worse than no decision at all. choices Strategy is ‘real’ when …“You make a consequential choice … or fail to make a consequential choice.” Burgleman (Stanford) Roger Hicks Consulting, 2006 Strategies for Start-ups 11
  12. 12. Define the Opportunity Space  Who   Select the type or category of customer to serve What   WHAT Select the kind of customer activities and needs to address How  Select a product and service solution to deliver value WHO HOW Roger Hicks Consulting, 2006 A market space definition is essential to the development of successful strategies. Strategies for Start-ups 12
  13. 13. Strategies To Change the Opportunity Space Increased Capability Upgrade Connect (users spend more for performance and luxury) (users see more possibilities when things work together) Enable New Uses Expand Established Uses Assist Replace (users need incentives to switch user paradigms) (users invest to save on cost of ownership) Better Value Firms can impact the rate of market growth and overall size with growth strategies Roger Hicks Consulting, 2006 Strategies for Start-ups 13
  14. 14. Prediction vs Control Strategies for Approaching Future Opportunities Ability to Predict What Happens New Venture Businesses are more successful when they focus on control functions where they can influence the market and deal with unexpected opportunities and problems. ? low Transformation Influence Rapid Adaptation Visionary Leadership Comprehensive Planning high high Ability to Control What Happens low Source: Rob Wiltbank, Willamette University Roger Hicks Consulting, 2006 Strategies for Start-ups 14
  15. 15. The Customer Value Curve Competitor C High Value Competitor A Competitor B Low Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 … Factor n Each competitor has a distinctive customer value curve based on its’ choice of the key strategic factors to focus on to achieve success Note: based on principles from “Blue Ocean Strategy” Roger Hicks Consulting, 2006 Strategies for Start-ups 15
  16. 16. How Strategies Effect the Customer Value Curve Value Factors Costs 3. Compelling Story Goals of Actions Transform the logic of the industry and challenge the conventional business models Optimize 2. Divergent Position Add/Delete 1. Focused Effort Positioning Actions Elements of an Effective Strategy Reduce unappreciated factors to a level below the industry standard. Eliminate factors the industry takes for granted and does not pay to support. Capabilities Raise critical factors well above the industry standard. Create desirable new features and functions the industry has not offered before. Note: based on principles from “Blue Ocean Strategy” Roger Hicks Consulting, 2006 Strategies for Start-ups 16
  17. 17. Established Businesses vs. Start-ups? Markets Old Established Firms Old Products New (evolutionary traits) Start-ups New (disruption oriented) Start-ups require a new way of thinking and can be created by established firms wishing to diversify or from entreprenurial activity Roger Hicks Consulting, 2006 Strategies for Start-ups 17
  18. 18. Use an Approach to Fit the Situation Markets Old Old New Fight established competition Win the share game Exploit existing demand forces Products Trade value for cost Focus on low cost OR differentiation Generate uncontested market space Make old competitors irrelevant Stimulate & capture new demand forces Change the price/performance rules Align for lower cost AND differentiation New Many firms try to balance strategies that preserve the core business but also stimulate new growth in order to survive market transitions. Roger Hicks Consulting, 2006 Strategies for Start-ups 18
  19. 19. (degree of leverage from existing competencies) OPERATIONAL RELATEDNESS Organizational Strategies An Organizational Design Framework* Unrelated Partly Related Strongly Related Special Business Units Independent Business Units Complete Spin-Off New Product Business Department New Venture Division Contracting Direct Integration Micro New Ventures Department Nurturing and Contracting Very Important Uncertain Not Very Important STRATEGIC IMPORTANCE (how significant is the action to future success) The strategic importance of an opportunity or activity has a direct relationship to organization implementation. *Source: Designs for Corporate Entrepreneurship in Established Firms by Robert Burgelman Roger Hicks Consulting, 2006 Strategies for Start-ups 19
  20. 20. The Strategy Framework Market Forces Positions Integrated Strategy Framework Products Technology Shifts Processes Strategies must always be evaluated and rebalanced as changes occur. Roger Hicks Consulting, 2006 Strategies for Start-ups Business Functions 20
  21. 21. Market Forces Impact Growth and Uncertainty Market Penetration and Uncertainty High Emerging Established Expanding Market Uncertainty Segment 3 Computing Total Opportunity Growth Rate & Market Penetration Telecom Presentations Segment 2 Segment 4 Television Segment 5 Low Instrumentation Young Market Maturity Segment 1 Old The attractive growth segment may change as competitors take actions and capabilities diffuse into a market over time. Roger Hicks Consulting, 2006 Strategies for Start-ups 21
  22. 22. Market Oriented Positioning Alternatives  Choosing a Market Position Strategy  Win the race • •  Straddle two existing segments • •  • Easily identified market with unique set of requirements that are hard to address EE Test & Measurement – scopes and LA’s by Tektronix vs Agilent (HP) Leadership with the standard platform • •  Customers on the fringes of established markets who are underserved by incumbents Family Vehicles – Minivans & SUV’s by Chrysler, Ford, Toyota Defend a niche •  Waves of investment needed to meet performance and production demands PC Displays – LCD monitors by Samsung vs AUO vs LG Philips Everyone benefits from a common approach that can be adapted to mass markets PC User Interfaces – Operating Systems by Microsoft and Apple and now Google Be No.1 when only the best will do • • Markets with limited alternatives or high emotional drivers support big margins Professional sports, movies, singers, fine art, precious jewelry, designer cloths etc. Competitive forces and customer values drive the choice of an attractive market position Roger Hicks Consulting, 2006 Strategies for Start-ups 22
  23. 23. Market Strategy Question? Is it better to enter a large market with a tenable position or a small market where leadership and predictability is possible? Roger Hicks Consulting, 2006 Strategies for Start-ups 23
  24. 24. The Strategy Framework Market Forces Positions Integrated Strategy Framework Products Technology Shifts Processes Strategies must always be evaluated and rebalanced as changes occur. Roger Hicks Consulting, 2006 Strategies for Start-ups Business Functions 24
  25. 25. The Role of Technology Shifts Technology Adoption Lifecycle ++ $ CRT serving EL Plasma PLCD LED deploying Information Displays AMLCD +$ 0$ DMD making CNT OLED New -$ Age Old Products are the marriage of technology capabilities and customer needs into an application solution that defines a segment of a market. Roger Hicks Consulting, 2006 Strategies for Start-ups 25 Industry Profitability Market adoption stage The investments by government and industry in technology turns into inventions and innovations that are adopted over time and serve to enable and expand market opportunities for businesses to pursue.
  26. 26. Technology Strategy Alternatives  Choosing a Product Technology Strategy  Exclusivity • •  Standardization • •  • Incorporate the necessary technology ingredients into a more valuable proposition Graphics processing and grey-scale LCD monitors for radiological imaging Prototyping • •  Proliferate a fundamental capability that enables profitable adaptations Common pixel formats for digital displays (VGA, XGA, SXGA, UXGA…) Enhancement •  Protect a critical technology with inferior alternatives for specific applications Atomic Layer Deposition process for EL thin-film displays Create new functionality with no obvious demand and evolve using market feedback Stereoscopic 3D displays Leapfrog • • Anticipate the next level of performance/price demands and obsolete the incumbent Digital instruments replacing analog instruments Technology transitions are extremely unpredictable and hard to take advantage of Roger Hicks Consulting, 2006 Strategies for Start-ups 26
  27. 27. Technology Strategy Question As a new entrant into an existing market (with differentiating product capability) is it better to have exclusive technology rights or to proliferate the new technology into the industry? Roger Hicks Consulting, 2006 Strategies for Start-ups 27
  28. 28. The Strategy Framework Market Forces Positions Integrated Strategy Framework Products Technology Shifts Processes Strategies must always be evaluated and rebalanced as changes occur. Roger Hicks Consulting, 2006 Strategies for Start-ups Business Functions 28
  29. 29. The Role of Business Elements How will Each Process and Capability in the Value Chain be Handled ? Improve / Create Outsource Brand promotion Culture Sourcing Customer Relations Product R&D Financing Channels Service HR Services Partnerships Politics Performance Measures Project Management Succession Market Communication Internal Sustain Outsource X Discard Internal Now Later X X X Business process innovations can create differentiated competitive advantages that allow companies to succeed Roger Hicks Consulting, 2006 Strategies for Start-ups 29
  30. 30. Business Process Strategy Alternatives  Choose an Operational Oriented Strategy That Ads Value  Leveraged • •  Vertical • •  • Put in place regulations and standards that create high entry barriers Defend customers and market positions against disruptive innovations Horizontal • •  Own the majority of the value chain and run efficient processes Invest for economies of scale and effective flow of goods and services Protected •  Partners and relationships are encouraged in both directions on value chain Focus on critical competencies that add defensible value for end users Become excellent in one stage of the value chain Broaden the solution to address an ever widening array of customer segments Captive • • Give direction and exert influence over critical stages of the value chain Sustain high value position by gaining respect and support of partners Roger Hicks Consulting, 2006 Strategies for Start-ups 30
  31. 31. Business Process Question? What is better, OK strategies and great implementation or great strategies and OK implementation? Roger Hicks Consulting, 2006 Strategies for Start-ups 31
  32. 32. Overview Purpose of strategy  Development of strategy  Results of strategy  Roger Hicks Consulting, 2006 Strategies for Start-ups 32
  33. 33. Strategy Results In….  Direction  Focus on a distinctive and intentional trajectory  Boundaries  Choices made on positions, products and processes  Priorities  Clear articulation of critical capabilities and actions Roger Hicks Consulting, 2006 Strategies for Start-ups 33
  34. 34. What Indicators Do Provider of Capital Look For?  Market Size – how large can it become?  Technology – uniqueness and protection  People – perceptive, desire, trustworthy  Risks – stages, ability to manage Capital and resources are allocated to business opportunities that have the best chance of creating profitable returns in the least amount of time. Source: Dan Eilers, Vanguard Ventures Roger Hicks Consulting, 2006 Strategies for Start-ups 34
  35. 35. Effect of Strategy on Value What is the value of a good set of strategies? Potential Value Market Value Present Value of Options on Future Growth Economic Value Present Value of Profits from Operations Book Value Value of Assets less Liabilities Decrease of market risk Decrease of technology and implementation risk Strategic actions optimize assets and liabilities Numerous methods are available to find the value of a new venture such as Net Present Value, Venture Capital Method, Options Theory etc. These methods make use of a discount variable to adjust the expected returns which is largely dependent on risk levels associated with the chosen strategies for process, product and position. Roger Hicks Consulting, 2006 Strategies for Start-ups 35
  36. 36. Putting it All Together Growth Driver Market Position Technology Approach Business Processes Assist (channel pref.) Hybrid (best of both) Standardization (set the rules) Leveraged (partners required) Upgrade (better perf.) Leadership (win the race) Exclusivity (protected IP) Vertical (private value chain) Connect (work together) Specialization (own a niche) Enhancements (accessories for all) Protected (regulated market) Replace (lower owner cost) Defacto #1 (be the standard) Prototyping (test the new uses) Horizontal (do one thing well) Phenomenon (mass appeal) Luxury (no compromises) Leapfrog (obsolete the old) Captive (direct value chain) A complete strategy will include key choices that have been made relative to these primary business elements (one possible set of choices is shown as an example) Roger Hicks Consulting, 2006 Strategies for Start-ups 36
  37. 37. Seven Habits for Successful Strategies  Alignment of strategic priorities across the executive team.  Checking validity of assumptions.  Translation of strategy elements into functional operations.  Installing appropriate capabilities in the organization.  Visibility of key performance metrics.  Making adequate resources available when needed.  Rapid adaptation of strategies to changing situations. Roger Hicks Consulting, 2006 Strategies for Start-ups 37
  38. 38. The Elevator Pitch An easy way to remember how to explain a strategy is to just give the ANSWER  Application description   Needs to fulfill   Who is interested in the benefits of the solution Expertise required   How does the product and process bring value to the customer Who cares   What problem do customers want to solve Solution to the problem   What type of user activity is being addressed What resources and abilities come together to produce the solution Results expected  How will success be measured in terms of marketplace position, business capability, technology strengths and financial trajectories. Roger Hicks Consulting, 2006 Strategies for Start-ups 38
  39. 39. Recap        Strategy decides what not how. Strategy reduces risk and increases opportunity. Strategies are interdependent. Strategies evolve to address changing conditions. Strategies determine positions, products and processes. Actions depend on strategies which depend on choices between realistic alternatives. Poor strategy is fatal (eventually) but it’s possible to recover from poor implementation. Roger Hicks Consulting, 2006 Strategies for Start-ups 39
  40. 40. “However beautiful the strategy, you should occasionally look at the results” Winston Churchill Roger Hicks Consulting, 2006 Strategies for Start-ups 40
  41. 41. Thank You ! Roger Hicks Consulting, 2006 Strategies for Start-ups 41

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