Mastering Strategic Management. Leading strategically

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Mastering Strategic Management
Chapter 2: Leading Strategically
Mastering Strategic
Management
Chapter 2
Leading Strategically

Add to 15
• In pairs, set out cards face up, numbered 1 to 9
• Take turns, select a card
• Goal select cards which add to 15 (exactly)
• Secondary goal, block your opponent from succeeding!
Identify your
Strategies!

Learning Objectives
• Define vision and mission and distinguish between them
• Understand SMART & be able to write a SMART goal
• Understand the complexities associated with assessing
organizational performance
• Learn each dimensions of balanced scorecards
• Learn what is meant by a ‘triple bottom line’
• Understand the benefits & costs of CEO celebrity status
• Understand how thinking and acting entrepreneurially can
help organizations and individuals
• List and define the five dimensions of an entrepreneurial
orientation

BIG Social Changes
What big social changes have occurred in the last 10-20 yrs
(generally social changes take lot of time to catch on…)
• Cel phones etiquette
• ‘Sins’: Smoking, drinking, social drug use
• Marriage
• Internet
• Informality (no more ‘Mr’!)
Think Business Ops?

Mission Statements
Mission: captures
basic purpose of
company – What
business are we in?
Should be motivating,
stimulating, shared,
and consistent with
the Vision Statement

Mission Statements
• Mission, with Vision statements, seek to answer how
and why organization exists & what role it seeks to play
in society
• Declaration of Organization’s key
• Purpose, Business, Values
• Serves as a ‘strategic compass’
• Sense of direction
• May include basis of competition advantage

Mission Statement – Harley
Davidson
“We fulfill dreams through the experience of
motorcycling, by providing to motorcyclists and to the
general public an expanding line of motorcycles and
branded products and services in selected market
segments.”

Mission Statement – CRA
CRA Mission
To administer tax, benefits, and related programs, and to
ensure compliance on behalf of governments across
Canada, thereby contributing to the ongoing economic
and social well-being of Canadians

Mission Statement - Starbucks
Our mission: to inspire and nurture the human spirit –
one person, one cup and one neighborhood at a time.

More Mission Statements
HBC… best serve the needs of
Canadian consumers through
several highly focused formats,
linked by customer bridges and
enables by common and
integrated support services
Fender (Music) - Our mission to
exceed the expectations of
music enthusiasts worldwide.

Stakeholders
• Organizations also need support from their key
stakeholders, such as employees, owners, suppliers, &
customers, if they are to prosper
• A mission statement should explain to stakeholders
why they should support the organization by making
clear what important role or purpose the organization
plays in society

Mission Statements Might
Consider
• Customers: Who are organization’s customers?
• Products or services: What are the org’s major
products or services?
• Markets: Where does org. compete geographically?
• Technology: How technologically current is org?
• Concern for survival growth, & profitability: Is the
org committed to growth & financial stability?

Mission Statements Might
Consider
• Philosophy: What are the org’s basic beliefs, values,
aspirations, & ethical priorities?
• Self-concept: What is the org’s major competitive
advantage & core competencies?
• Concern for public image: How responsive is the org
to societal & environmental concerns?
• Concern for employees: Does the org consider
employees a valuable asset?

Food for Thought…

The Importance of Vision
• A Mission statement tends to focus on what the
organization is, what it is currently doing / being
• Sometime with a goal of doing it better
• Vision Statements focus on what the organization
aspires to become in the future
• A key tool for inspiring the people in an organization
• Well-constructed visions clearly articulate an organization’s
aspirations and can give an organization an edge over its
rivals

Vision Statements
• In an ideal world, what is your vision for (your) future
• Focus everyone’s attention on same target, as well as
inspiring them to reach it.
• Dr. King -‘I have a dream’
• Expression of what the org aspirations, beliefs &
values
• A clearly defined vision:
• Provides direction
• Determines decisions
• Motivates people

Vision Statements
Alcoa – (Aluminum) to be the
best company in the world, in
the eyes of our customers,
stakeholders, communities and
people
Petro Canada - To be the
leader in the development of
some of the purest base oils
and innovative, superior
products that customers trust
for productivity improvements
around the world.

More Vision Statements
• Microsoft - Create experiences that combine the
magic of software with the power of Internet services
across a world of devices
• Pepsi - PepsiCo’s responsibility is to continually
improve all aspects of the world in which we operate –
environment, social, economic – creating a better
tomorrow than today
• Google - To develop a perfect search engine
• Amazon - to be earth's most customer centric
company; to build a place where people can come to
find and discover anything they might want to buy
online

More Vision Statements
• FedEx - Leading the way
• Walt Disney - We create happiness by providing the
finest in entertainment for people of all ages,
everywhere.
• eBay – to provide a global online marketplace where
practically anyone can trade practically anything,
enabling economic opportunity around the world

Vision Statements – Whose?
• To be the happiest place on earth
• We build Gr-r-reat brands and make the world a little
happier by bringing our best to you
• The world on time
• To be the number one athletic company in the world
• A computer on every desk and in every home; all
running Microsoft software
• The world’s best quick service restaurant
• …exists to share the love of Jesus Christ, meet human
needs and be a transforming influence in the
communities of our world

Characteristics of Strategic
Vision
A roadmap of a company’s future
• Future technology-product-customer focus
• Geographic and product markets to pursue
• Capabilities to be developed
• Kind of company management is trying to create

Ing Direct’s Advice
(now Tangerine Bank)
When creating Mission and Vision statements:
• Advocate for somebody
• Make it next to impossible, but with milestones to note
progress
• It’s the journey that inspires; the horizon should always be just
out of reach
• Make it poetry
• Music to hear & read, sticky & difficult to walk away from
• Bring it down from the mountain
• It’s Leadership…
• Takes Quality Time to develop

Statements (V&M) Fail when…
• The walk doesn’t match the talk
• Irrelevance - created in a vacuum
• Not the Holy Grail - ‘Flavour of the month’
• Everything to Everybody
• An ideal future not ground in present realities
• Or just poorly written…
• Volvo - By creating value for our customers, we create value
for our shareholders. We use our expertise to create transport-
related products and services of superior quality, safety and
environmental care for demanding customers in selected
segments

V & M - Nuts & Bolts
If you are tasked with creating:
• Hold the Pen (firmly!)
• 1st step – Know yourself & your key strategies…
• Who are we? Who do we want to be? BHAGs
• 2nd step – Consult, consult, consult…
• 3rd step – Write
• 4th step – Repeat steps 3 & 4
• Finally – put it everywhere!!
• PS [No Risk, No ‘Stickiness’, no use...]

A personal V/M statement
What would your own personal vision/mission statement
look like?
• Try and draft up a couple of bullets or sentences that
capture your own goals and aspirations
• Remember – the stronger your self-knowledge and the
clearer your goals, the more likely you are to achieve
them!

Key Takeaways
Organizations need 3 types of aims:
• A vision states what the organization aspires to
become in the future.
• A mission reflects the organization’s past and present
by stating why the organization exists and what role it
plays in society.
• Goals are the more specific aims that orgs pursue to
reach their visions & missions
Best goals are SMART: specific, measurable,
aggressive, realistic, & time-bound.

Key Takeaways
Media exposure can give CEO celebrity status, positive
benefits but CEO must manage potential for increased
public scrutiny
Building an entrepreneurial orientation can be valuable
to orgs & individuals alike in identifying and seizing new
opportunities.
EO - 5 dimensions: (1) autonomy, (2)competitive
aggressiveness, (3) innovativeness, (4) proactive-ness,
and (5) risk taking.

For teaching in two 90-
minute classes/wk,
possible break point

Goals
• A goal is specific if it is explicit rather than vague
• specific goals make it clear how efforts should be directed,
vague goals such as “do your best” leave individuals unsure of
how to proceed
• A goal is measurable to the extent that whether the
goal is achieved can be quantified
• A goal is aggressive if achieving it presents a
significant challenge to the organization (or you!)
• easily achievable goals tend to undermine motivation and
effort

SMART Goals

SMART Goals are
• Specific – Vague goals lead no where. I should go on vacation…
I should loose some weight…. Happy procrastination!
• Measurable – A number… in any relevant unit such as cost,
quantity, age, etc.
• Achievable - It's OK to have "stretch" goals, but must believe
goals are achievable. No belief, no action. BTW, control and
resources (including time) important!
• Relevant - Making sure goal is linked to corporate, work or
personal goals – The big picture
• Time-Bound - Due when? or never? (But, Don’t worry, we’ll talk
about it lots…)

Your Goals
Take just a couple of minutes and write down 2 or 3 personal goals
for this year
• Things that are important to you and that you would like to achieve
this year
• And willing to invest time and effort to make happen
Now, make them SMART goals
• (I covered the T for you already – Time – this year)

Why Bother writing down Your
Goals?
Most people, I would speculate
less than 10%, EVER write
down goals, and probably less
than 5% take the time to
regularly review and update
their lists…
Most people, I would speculate
less than 10%, EVER write
down goals, and probably less
than 5% take the time to
regularly review and update
their lists…

2.2 Assessing Organizational
Perf.
Organizational performance: How well an organization is doing at
reaching its vision, mission, and goals
• A multidimensional concept
• Vital aspect of strategic management
• Assists executives in knowing how well their organizations are
performing

Assessing Org. Performance
Too late….
Implicit Future Orientation….

Performance Metrics
• A performance measure is a metric along which
organizations can be gauged.
• Examines - profits, stock price, and sales
• Performance referents or benchmarks enable us to
assess how well org. is doing compared to others or
itself over time
• Suppose, for example, that a firm has a profit margin of 20
percent in 2012. This sounds great on the surface, until you
find out the firm’s profit margin was 35% in 2011, or that
industry average profit margin was 40%

6 Blind Men &
the Elephant

Financial Ratio Analysis
• Five types of financial ratios
• Short-term solvency or liquidity
• Long-term solvency measures
• Asset management (or turnover)
• Profitability
• Market value
• Meaningful ratio analysis must include
• Analysis of how ratios change over time
• How ratios are interrelated

The Balanced Scorecard
(BSC)
An approach to assessing performance that targets
managers’ attention on four areas:
1. Financial – “How do we look to shareholders?”
2. Customer – “How do customers see us?”
3. Internal business process – “What must we excel at?”
4. Learning and growth – “Are we continuing to improve
and create value?”
Helps managers resist temptation to fixate on financial
measures,& instead monitor a diverse set of important
measures

BSC Sample Metrics
• Time
• Quality
• Performance and service
• Cost
Customer
Perspective

BSC Sample Metrics
• Processes
• Cycle time
• Quality
• Employee skills
• Productivity
• Decisions
• Actions
• Coordination
• Resources and
capabilities
Customer
Perspective
Internal Business
Perspective

BSC Sample Metrics
• Introduction of new
products and services
• Greater value for
customers
• Increased operating
efficiencies
Customer
Perspective
Internal Business
Perspective
Innovation &
Learning Perspective

BSC Sample Metrics
• Profitability
• Growth
• Shareholder value
• Increased market share
• Reduced operating
expenses
• Higher asset turnover
Customer
Perspective
Internal Business
Perspective
Innovation &
Learning Perspective
Financial
Perspective

2.3 The CEO as Celebrity
• Advantages
• Serves as an intangible asset for the CEO’s firm - may
increase opportunities available to the firm
• Hiring or developing a celebrity CEO may increase stock
price, enhance a firm’s image, and improve the morale of
employees and other stakeholders
• Disadvantages
• Magnifies any gaps between actual and expected firm
performance
• Faces larger and more lasting reputation erosion if their
performance and behavior is inconsistent with their celebrity
image

Types of CEOs

2.4 Entrepreneurial Orientation
• Processes, practices,& decision-making styles of
organizations that act entrepreneurially
• An organization’s level of EO - five dimensions:
• Autonomy
• Competitive aggressiveness
• Innovativeness
• Pro-activeness
• Risk taking

EO - Autonomy
• The degree that individuals or teams have freedom to
develop entrepreneurial ideas & see it to completion.
• In high autonomy, people have independence required
to bring a new idea to fruition, unfettered by the
shackles of corporate bureaucracy.

EO – Competitive
Aggressiveness
• Competitive aggressiveness is the tendency to
intensely and directly challenge competitors rather than
trying to avoid them.
• Aggressive moves can include price-cutting &
increasing spending on marketing, quality, & production
capacity.

EO - Innovativeness
• Innovativeness is the level of org. creativity and
experimentation.
• Some innovations build on existing skills to create
incremental improvements, while radical innovations
require brand-new skills and may make existing skills
obsolete.

EO - Innovativeness
• Either way, innovativeness is aimed at developing new
products, services, & processes.
• Those organizations that are successful in their
innovation efforts tend to enjoy stronger performance
than those that do not

EO - Autonomy
• Proactiveness is the focus on anticipating and acting
on future needs rather than only reacting
• Proactive org. adopt an opportunity-seeking
perspective. Such organizations act in advance of
shifting market demand and are often either the first to
enter new markets or “fast followers” that improve on
the initial efforts of first movers.

EO – Risk Taking
• Risk taking refers to the tendency to engage in bold
rather than cautious actions.
• Starbucks, for example, made a risky move in 2009
when it introduced a new instant coffee called VIA
Ready Brew.

Increasing Entrepreneurial
Orientation
• Org systems & policies must reflect 5 dimensions of
EO.
• Org’s compensation systems will encourage or discourage
taking sensible risks, which must be rewarded, regardless of
whether the risks pay off
• Corporate debt levels will influence EO
• Performance measures implicitly signal what is important
• Higher levels of autonomy tend to increase employee
satisfaction & reduce turnover.
• Innovativeness can be gauged by tracking # of new products
or services developed in the last year, & # of patents the firm
has obtained

Key Takeaways
Organizational performance is a multidimensional
concept, and wise managers rely on multiple measures
of performance when gauging the success or failure of
their organizations.
The balanced scorecard helps executives understand,
monitor & manage org. across a 4 dimensions –
The triple bottom line provides another tool to help
executives focus on performance targets beyond profits
alone; this approach stresses the importance of social &
environmental outcomes.

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