The company operating in a turbulent environment needs a working strategy mechanism rather than a detailed road map for a road when the environment is fast changing, and topography is unknown Ansoff’s strategic success formula states that for optimum return on investment, both the aggressiveness of the firm’s strategy and its capabilities must match the turbulence of the environment.

1. How to create sustainable Competitive
Advantage using Strategy Mechanism?
Petri Laulajainen, Sr Partner
PSL Consulting

2. Strategic dilemma
• Most companies and organizations know their
businesses, and the strategies required for
success. However many struggle to translate the
theory into action that will enable the strategy to
be successfully implemented and sustained
• Many companies repeatedly fail to transfer the
strategic choices in operational actions, and to
truly motivate their people to work with
enthusiasm, all together, towards the corporate
aims.

3. Gap between theory and reality
• A study of 200 companies in the Times 1000,
80% of directors said they had the right
strategies but only 14% thought they were
implementing them well. 86 % had problems
in transferring their intension into reality!
(Why do only one third of UK companies achieve strategic success? - I Cobbold & G
Lawrie, 2GC Ltd., May 2001.)

4. Survival of the fittest?
• Charles Darwin wrote a book on natural selection: Survival of
the fittest, it turns out, is all about adapting to a changing
environment and new competitive realities.
• Business environments are changing faster than ever before,
new technologies are emerging constantly at an increasing
velocity, and industries are shaken by deregulations, mergers,
and new entrants.
• Some companies are able to adapt to these changing
environments, others are not.

5. Strategic Innovation
How to create Competitive
Advantage?

6. Strategic Innovation
• The question is, how a company can achieve ongoing
strategic innovation, leading to competitive
advantage and financial success?
• Besides the ability to sense shifts in their competitive
environment, a crucial component of their success is
their focus on strategy as well as a different view on
strategic management
• Successful companies have recognized that in order
to be successful in the long run in terms of creating
financial value and survival, they will need to achieve
competitive advantage.

7. Competitive Advantage
• Attaining competitive advantage is enabled through
the creation of new markets, superior customer value,
new business models and disruptive innovation.
• Competitive advantage is only sustainable for a limited
period of time, doing this once is not enough; these
companies know that their organization needs to build
the capabilities necessary for ongoing strategic
innovation

8. Defining Strategic innovation
“…those who live by the sword will be shot by those
who don’t.” (Gary Hamel)

9. Strategy Mechanism
Only source for Competitive
Advantage

10. What is Strategy?
A gap between theory and reality.
Strategy of the Future?
Agile Strategy Mechanism is the only
sustainable Competitive Advantage
a company can have!

11. Short term vs. Long Term
• Without a central strategic management
process in place, organisations have a
tendency to rely mainly on financial tools
(budgets) and risk being governed by short-
term financial pressures with little or no focus
on the requirements for longterm success

12. Strategic Success
• The most important factor determining the
competitiveness and profitability of
organizations is the extent to which they
match their strategies and capabilities to the
environment in which they operate.
(I. Ansoff/PSL Consulting)

13. Environmental turbulence, and
Capability to react and create
competitive advantage
Turbulence level in E
Business Environment 1 2 3 4 5
Companys strategical S S
Capability to react 1 2 3 4 5
Mechanism
Competitiveness Competitive Advantage
Organisational R
capability to renew R
1 2 3 4 5
N N N
(Adapted from I. Ansoff
P. Laulajainen)

14. Closing the Gap between
theory and reality
• In fast paced industries, companies should
think of strategy as an iterative loop.
1. Making sense of the situation:
• Analysing the Environment
• Analysing internal Resources
2. Making strategic choices,
3. Making things happen,
4. Making revisions, and
5. Creating Strategy Mechanism

15. Strategy Mechanism
• Business environments are changing faster than
ever before, affecting every company. Some
companies are able to adapt to these changing
environments, others are not. The company that
can re-organise resources accordingly, can achieve
competitive advantage, not always the company
with biggest resources.
• A Company, and its operating-mechanism is a
dynamic model, which consists of 4 components;
a subject (S), environment (E), resources (R), and
mechanism (M), which integrates the 3 previous
ones.

16. Strategy Mechanism
Subject
Strategy
Mechanism is
only sustainable
Competitive
MECHANISM Advantage
Environ
Resources
ment
(D.S. Cho)

17. How to create a
Strategy Mechanism?

18. Analysing current situation
• Through the analysis of resources, and by
developing a working strategy mechanism, a
company can focus its actions, and maintain
or even increase the profitability, in a situation
where slower reacting competitors are losing
market shares.

19. Example of Strategy Mechanism
S
Vision and Goals
Shareholders, Board. CEO
E R
Analyse the Analyse Strategy, Analyse your
Environment set objectives Resources
Recompose Develop Recompose
Environment strategy Resources
Create Implement Create
Environment strategies Resources
Sustaining Competitive
Advantage
(D.S. Cho)

20. Four Scenarios in Recomposing
1. To use resource (RA) to change resource (RO)
ex) applying Innovative Management techniques to streamline
decision making processes within the firm
2. To use environment (EA) to change resource (RO)
ex) utilizing alliance partners to develop new products
3. To use resource (RA) to change environment (EO)
ex) using firm technologies to change consumer behaviors
(iPod, Sony Walkman)
4. To use environment (EA) to change environment (EO)
ex) Influencing the government to change the rules of the game
(D.S. Cho)

21. Mechanism of Recomposing - 1
1. Understanding 4 Basic Functions
(+) Addition
ex) acquisition of assets, unrelated diversification, seeking
alternatives
(-) Subtraction
ex) lay-off, closure of departments and factories, spin-off
(x) Multiplication
ex) vertical integration, functional diversification
(/) Division
ex) disintegration of activities, decentralization
(D.S. Cho)

22. Mechanism of Recomposing - 2
2. Decomposing Firm Activities into Units
ex) merger: combination of assets, related and unrelated
activities, know-how, corporate culture, etc.
3. Recomposing the Units with various Functions
ex) outsourcing = f (disintegration of activities, closure of
departments, lay-off, seeking alternatives, etc.)
4. Implementing Improvement Programs to Create New
Environment
(such as reengineering, restructuring, downsizing, benchmarking,JIT, TQM, etc.)
(D.S. Cho)

23. Success formula:
Strategy Mechanism?
• The company operating in a turbulent
environment needs a working strategy
mechanism rather than a detailed road map
for a road when the environment is fast
changing, and topography is unknown
• Ansoff’s strategic success formula states that
for optimum return on investment, both the
aggressiveness of the firm’s strategy and its
capabilities must match the turbulence of the
environment.

24. For more information contact
PSL Consulting:
Mr. Petri Laulajainen
petri.laulajainen@pslc.fi