Introduction to Strategic Management

1. Strategic Management
GM 105
Dr. Lindle Hatton

2. CANOE THEORY
 Think of your organization as a long canoe
 The canoe has a destination
 Everyone in the canoe has a seat and paddle
 Everyone is expected to paddle
 Those who won’t paddle have to get out of the
canoe
 Those who prevent others from paddling have
to re-adjust or get out of the canoe
 There are no passengers in the canoe
 The canoe theory understands crisis
 The canoe theory says you have the right to be
happy

3. CANOE THEORY

4. BUILT TO LAST
Preserve the Core
Stimulate Progress

5. GOOD TO GREAT
Level 5 Leadership
First Who…Then What
Confront the Brutal Facts
The Hedgehog Concept
A Culture of Discipline
Technology Accelerators
The Flywheel and The Doom Loop

6. Private versus Public
Organizations
Purpose
Goals
Financing
Decision-Making
Key Stakeholders

7. Strategic Management
Versus
Strategic Planning

8. Features of Successful
Strategic Management
 Has support of organization’s executive
officer.
 Is user friendly.
 Is participatory, not left to planners.
 Is flexible.
 Leads to resources decisions.
 Engages and motivates all staff.
 Is fresh and continuous, not static and stale.

9. Features (Continued)
Is Proactive
Not a Quick Fix
Part of Quality Management
Payoffs Increase over Time

10. Lessons Learned About
Strategic Planning
Plans must be tailored to organization.
No one size ‘fits’ all.
Time to complete takes longer – expect
50% more than planned.
Process needs a shepherd.
Visionaries needed at beginning and
detail types thereafter.

11. Why Managers Don’t Plan
Time Consuming
High Demands
Not Rewarded
Executives Don’t Support It
Too Risky

12. Strategic Management Model
Scanning
 Where are we now?
Strategy Formulation
 Where do we want to be?
Strategy Implementation
 How do we get there?
Measurement/Performance
 How do we measure our progress?

13. Strategic Management Model
Strategy Formulation
Where do we want to be?
Vision
Mission
Values
Goals
Objectives

14. VISION
Vision without Action is a Daydream
Action without Vision is a Nightmare
Not Optional
Stretch – 30+ Years
8-10 Words in length
Future State
Brief and Memorable

15. VISION (Continued)
Inspiring and Challenging
Descriptive of the Ideal

16. Vision Examples
“Light the Fire Within”
“A Safer Future for All Communities”
“See the Mountains – Breathe Freely”
To Be the Happiest Place on Earth
To Be the World’s Best Quick Service
Restaurant

17. Vision Levels of People
 Some people never see it. (Wanderers)
 Some people see it but never pursue it on
their own. (Followers)
 Some people see it and pursue it. (Achievers)
 Some people see it and pursue it and help
others see it. (Leaders)
John Maxwell, Developing The Leader
Within You, 1993.

18. VISION EXERCISE

19. Mission Statement
In the absence of a clearly defined
direction one is forced to concentrate
on confusion that will ultimately
consume you.

20. MISSION
What is our purpose?
Describes current state
Timeline is 3-5 Years
Builds on our distinctive competencies
Tends to focus on Core Business
30-35 Words in length

21. Mission Examples
 “To Lead All Communities in Disaster
Preparedness, Mitigation, and Recovery by
Maximizing Assistance and Support.”
 “Caltrans Improves Mobility Across California.”
 To produce superior financial returns for our
shareholders as we serve our customers with
the highest quality transportation, logistics,
and e-commerce.

22. MISSION EXERCISE

23. Corporate Governance
What is it?
Codes of Governance
Role of the Board of Directors
Role of Top Management Team
Executive Compensation

24. Corporate Governance
System by which a firm’s owners control
its affairs.
Does it work?

25. Codes of Governance
 The Cadbury Code: 1992
 Sarbanes-Oxley Act: 2002
 Public Company Accounting Oversight Board
 “Triple bottom line”
 Four major issues:
 Ownership structure and influence
 Fianacial Stakeholder rights and relations
 Financial transparency and information disclosure
 Board structure and processes (audit)

26. Role of the Board of Directors
Monitor
Evaluate and influence
Initiate and determine
Organization of Board
Insiders versus outsiders
CEO/chair position
Committees’ Effectiveness

27. Role of Top Management Team
 Who is the TMT?
 Executive Leadership and Strategic Vision
 Articulates strategic vision for corporation
 Sets the model for others to identify and follow
 Communicates high performance standards and
builds confidence in followers’ abilities to meet
standards
 Managing strategic planning process

28. Executive Compensation
Incentive alignment
Executive Ownership
Incentive compensation
Salary
Bonus
Stock Options
LT Bonus

29. VALUES
Guiding Principles
Help establish Culture
Part of Preserving the Core
Core Ideology

30. Value Examples
CHP PRIDE
HP WAY
J & J Credo
“Build the Spirit of the Place”

31. Ethical Awareness Model
Organizational Ethics
Individual Ethics
Personal Values

32. VALUES EXERCISE

33. Strategic Management Model
Scanning:
Where are we now?
Macro Analysis (STEP, PESTEL, ETC.)
Industry Analysis – Competitive
Intelligence
SWOT Analysis
Internal versus
External Elements

34. Why Scan?
 To know your position in the environment
 To respond effectively to constant change
 To see the organization as a whole
 To avoid surprises
 To survive
 To lay the foundation for strategic issues

35. SCANNING:
Key Environmental Variables
Macro Environment: STEP, PESTEL
Task Environment: Industry
Internal Environment: Focal
Organization

36. Socio-Cultural Variables
Lifestyle Changes
Career Expectations
Regional Shifts in Population
Life Expectancies
More women in workforce
Greater concern for fitness
Postponement of family formation
Increase in temporary workers

37. Technological Variables
Total Federal Spending for R&D
Total Industry Spending for R&D
Focus of Technological Efforts
Patent Protection
Wireless Communications
Nanotechnology
Productivity Improvements
Genetic engineering

38. Economic Variables
 GDP Trends
 Interest Rates
 Money Supply
 Inflation Rates
 Unemployment Levels
 Wage/Price Controls
 Energy Availability & Cost
 Disposable & Discretionary Income

39. Political-Legal Variables
Antitrust Regulations
Tort Reform
Environmental Protection Laws
Taxation at local, state, federal levels
Hiring and Promotion Laws
Americans Disabilities Act of 1990
Sarbanes-Oxley Act of 2002

40. Demographic Variables
Aging Population
Rising affluence
Changes in Ethnic Composition
Geographic distribution of population
Disparities in income levels

41. Global Variables
Increasing Global Trade
Currency Exchange Rates
Emergence of Indian and Chinese
Economies
Trade agreements (NAFTA, EU, ASEAN)
Creation WTO

42. STEP EXERCISE
Socio-Cultural
Technological
Economic
Politico-Legal

43. Industry Analysis
6 Forces Analysis
Industry Competitors
Suppliers/Vendors
Customers/Clients
Potential New Entrants
Substitutes
Other Stakeholders
Role of Complementors

44. New Entrants and Entry Barriers
 Absolute cost advantages
 Access to inputs
 Government policy
 Economies of scale
 Capital requirements
 Brand identity
 Switching costs
 Access to distribution
 Proprietary products

45. Buyer Power (Channel and End
Consumer)
Buyer volume and information
Brand identity
Price sensitivity
Threat of backward integration
Product differentiation
Substitutes

46. Supplier Power
Supplier concentration
Differentiation of inputs
Switching costs
Threat of forward integration
Cost relative to total purchases in
industry

47. Substitutes
Switching costs
Buyer inclination to substitute
Variety of substitutes
Price-performance tradeoff of
substitutes
Necessity for product or service

48. Degree of Rivalry
 Exit barriers
 Industry concentration
 Fixed costs
 Industry growth
 Intermittent overcapacity
 Switching costs
 Brand identity
 Diversity of rivals
 Corporate stakes

49. Other Stakeholders
Employees
Unions
Government
Trade and Professional Associations
Other Direct Influencers

50. Role of Complementors
Number of complements
Relative value added
Difficulty of engaging complements
Buyer perception of complements
Complement exclusivity
Tend to increase profits by increasing
demand for an industry’s products

51. 6 FORCES EXERCISE

52. Competitive Profile Analysis
Identify Key Competitive Factors
Identify key Competitors

53. COMPETITIVE PROFILE
EXERCISE

54. Industry Foresight
Customer
Needs
Unarticulated
Articulated
Customer
Served Unserved Types

55. Internal Environment
Internal Profile Analysis
SWOT Analysis

56. Internal Profile Analysis
Identify Key Core Functions
Identify Key Measures for Core
Functions
Build Matrix

57. SWOT Analysis
Internal Environment
Strengths
Weaknesses
External Environment
Opportunities
Threats

58. SWOT EXERCISE

59. Strategic Management Model
Strategy Formulation
Where do we want to be?
Vision
Mission
Values
Goals
Objectives

60. GOAL
Supports the Mission
Deals with One Issue or Item of Focus
Reflects a primary activity or strategic
direction
Describes the “To Be” State
“BHAG”
Encompasses a long period, i.e. at least
3 years

61. Goal Examples
 Achieve excellence in the delivery of disaster
recovery and mitigation programs.
 Professionally develop our employees as a
reflection of DAD’s key attributes and values.
 Increase the supply of housing, especially
affordable housing.
 Become a model for customer service.
 To provide benefits in correct amounts and
issued in a timely manner.

62. Goal Statements Litmus Test

63. Goal Exercise

64. OBJECTIVES
Add specificity beyond Goals
Answer the questions
What is to be accomplished?
When?
Should contain the SMART Elements

65. OBJECTIVES: SMART Model
Specific
Measurable
Aggressive but Attainable
Results-Oriented
Timeframe

66. Strategic Objective Examples
 By June 30, 2005 achieve 75% rating on the
DAD service index from all stakeholders.
 Increase sales growth 6-8% in the next 5
years. (P&G)
 Cut corporate overhead costs by $30 million
per year. (Fortune Brands)
 Operate 6,000 stores by 2010 – up from
3,000 in the year 2000. (Walgreen’s)
 Reduce greenhouse gases by 10 percent
(from a 1990 bast) by 2010. (BP Amoco)

67. Objectives Litmus Test

68. Strategic Objective Exercise

69. Strategic Management Model
Strategy Implementation
Everyone is Responsible
Few Guidelines
No Easy 10-Step Checklist to Follow

70. Strategic Management Model
Strategy Implementation
Most open-ended part of Strategic Mgmt
People implement strategies not
Organizations

71. Strategic Management Model
Strategy Implementation
How do we get there?
Work Action Plans
GOOMs

72. Strategy Implementation
Considerations
7-S Framework – Strategic Fit
Human Resources
Patience

73. 7-S Framework
Shared Values
Strategy
Structure
Systems
Skills
Style
Staff

74. Human Resource Rule
Hire Smart
Train Hard
Manage Easy

75. Parable of the Bamboo
It takes patience and discipline to develop and
empower people; in fact, it’s like growing
bamboo. Once the seed is planted, you must
water it daily for four years before the tree
breaks ground – then it grows 60 feet in 90
days! Executives who nurture people can get
similar results…How, you ask, can such rapid
growth be possible? It results from the miles
of roots that develop in those first four years.
Preparing people to perform is the task of
leadership.

76. Implementation Strategies
GOOMs
Implementation Conference
CEO involvement
Other Strategies?

77. GOOMs
Goals
Outcomes
Objectives
Measures

78. Definitions
Goal: Broad, General BHAG
Outcome: Desired end result and report
performance
Objective: What and When
Measure: A quantified unit that
assesses progress or achievement

79. GOOM Example
Goal 1: Achieve excellence in the delivery of
disaster recovery and mitigation.
Outcome: Increased Customer Satisfaction
Objective 1.1: By June 30, 2005, achieve
75% rating on the DAD Service Index from all
stakeholders.
Measure: DAD Service Index (DSI)

80. GOOM Exercise

81. Work Action Plan Template
Sponsor: Completion Date
Organization:
n.n Goal
Outcome
n.n Objective
Measure
Task Description Team Lead Staff Hours Completion
Date
Plan-
Do-Check-Act

82. Strategic Management Model
Measurement / Performance
Why do we measure our progress?

83. Why Measure?
Reactive Reasons
Government Intervention
Fewer Resources and Smaller Budgets
Increased Demand for Accountability
Mandated

84. Why Measure?
Proactive Reasons
 Makes us more responsive to public needs
 Provides feedback on mission
accomplishment
 Creates blueprint for linking budget to
outcomes
 Good management and good public policy

85. Measurement / Performance
How do we measure our progress?
5 Types of Measures
Input
Output
Outcome
Quality
Efficiency

86. INPUT Measure
Amount of resources needed to provide a
particular product or service.
Examples:
 Number of FTEs or PYs
 Number of eligible clients
 Number of customers requesting service
 Number of applications received
 Number of sales orders received

87. OUTPUT Measure
Amount of products or services provided
Examples:
 Percent of highways resurfaced
 Number of police reports filed
 Number of vaccinations given to school-age
children per year
 Number of shafts produced in a single
operating shift

88. OUTCOME Measure
Reflect the actual results achieved and/or their
impact or benefit.
Examples:
 Reduction in incidence of disease
 Percentage of discharged patients living
independently
 Percent of increase in tourists
 Percent of monthly programmed sales orders
filled on time

89. QUALITY Measure
Reflect the effectiveness in meeting the
expectations of customers and stakeholders
Examples:
 Number of defect reports compared to
number of reports produced
 Number of course ratings in highest category
related to total number of course ratings

90. EFFICIENCY Measure
Also known as productivity measures.
Reflect the cost of providing products or
services.
Examples:
Output/Input
Output/Time
Output/Cost
Outcome/Cost

91. Keeping Plans Off The Shelf
All Staff Meeting
Announce Phases
Review and Assess Plans at Quarterly
Sessions
Sponsors and Team Leads for Strategic
Goals and Strategic Objectives
Deming Philosophy – PDCA

92. Developing Bench Strength
“Drill Down” Application
Sponsors, Team Leads, and Team
Members
Work Action Plan
“Project” Champion
Leadership Training
Leadership Conference Presentations

93. Establishing Organizational
Permanence
Training Emphasis
Certification
Awards & Recognitions
“Caught-Ya”
Celebrations
Walk the Walk

94. NEXT STEP