Strategy

Strategy 1, 2, 3!!

© 2011, Eugene Chang

Some say strategy is…


big & scary [Too complex to get one’s head around]!

Picture from Monsters, Inc, Disney / Pixar ! © 2011, Eugene Chang

soft & flu!y Others!

[Too nebulous to get one’s hands around] !

Picture from Monsters, Inc, Disney / Pixar ! © 2011, Eugene Chang

But the reality is…


“Nobody really knows what strategy is.”

- The Economist !


Why is Strategy Important? 1!


“Because our natural reaction to challenges are inappropriate.”

- Osama El-Kadi!Business Strategy & Negotiation Consultant!

“Without a strategy, time and resources are easily wasted on

piecemeal, disparate activities…”

- Donald C. Hambrick and James W. Fredrickson!“Are you sure you have a strategy?”, Academy of Management Services 2001, Vol. 15, No. 4!


Strategy provides a firm advantage over its competitors.

What strategy does: it helps a firm… !

•  Define its market and systematically pursue its goals !

•  Figure out the best course of action to advance its position relative to the competition!

•  unify the organization behind shared objectives!

•  coordinate the various activities in a coherent manner!

•  stay focused and on-target!(“what not to do” as much as “what to do”)!

•  Keep the “Big Picture” in mind !


We hear these statements from CEOs all the time…


“Our strategy is to be the low-cost provider.” !

“We’re pursuing a global strategy.” !

“The company’s strategy is to integrate a set of !regional acquisitions.” !

“Our strategy is to provide unrivaled !customer service.” !

“Our strategic intent is to always be the firstmover.”!

“Our strategy is to move from defense !to industrial applications.” !

- Donald C. Hambrick and James W. Fredrickson!“Are you sure you have a strategy?”, Academy of Management Services 2001, Vol. 15, No. 4!


None of these declarations is a!

STRATEGY!

Smart CEO’s know not to reveal their real strategy with the public !(keeping the language vague and completely useless!)!


Myth Busted: Best-Practice is actually !

ANTI-STRATEGY •  Operational Effectiveness is not strategy !

•  Constant improvement in operational effectiveness is necessary, but not sufficient !

•  OE Competition raises the bar for everyone but leads to relative improvement for no one !

•  Strategic positioning means performing different activities from rivals’ or performing similar activities in a different way !

•  A company can only outperform rivals only if it can establish a difference that it can preserve!

Michael E. Potter, “What Is Strategy?”, HBR 1996!


So what is!

STRATEGY? 2!© 2011, Eugene Chang

different uses of the word !

STRATEGY

CORPORATE!

BRAND!BUSINESS UNIT!

MARKETING!OPERATIONAL!

PRODUCT!

MARKET ENTRY!MILITARY!

More…!

Which one?!© 2011, Eugene Chang

“Business” Strategy By Hierachy !

Corporate Strategy!• Which businesses should we be in? • How does being in these businesses create synergy and/or add

competitive advantage to the corporation as a whole?!

BUSINSS!UNIT #1!

• Finance !• HR!• Operations !• R&D!• Marketing!• SALES !• IT!

BUSINSS!UNIT #2!

• Finance !• HR!• Operations !• R&D!• Marketing!• SALES!• IT!

• Corporate Planning !• Legal + M&A !•  IT!

Corporate HQ !(Diversified)!

Business Unit Strategy!• How can we compete successfully in a particular marketplace?

(e.g. pizza, safety boots, dental services)

Functional Strategy!• How can each functional department in the BU do its part to

meet the company’s objectives? • Includes marketing strategies, HR strategies, supply-chain

strategies, new product development strategies…

SBU* Strategy !• How can the SBU help the organization achieve its objectives?

(may include dimensions beyond the scope of a single BU – e.g. IT Strategy)

* Strategic Business Unit – Many companies feel that a functional organizational structure is not an e"cient way to organize activities so they have reengineered according to processes of SBUs. SBUs are treated as an internal profit center by corporate HQ, usually responsible for its own budgeting, hiring decisions, price setting, etc.


Good Definitions Describing!

STRATEGY

What unique Advantage can we get and sustain over time.!

- Michael Porter!

the direction and scope of an organization over the long-term: which achieves advantage… through its configuration of resources… to meet the needs of markets and to fulfill stakeholder expectations. !

- Johnson and Scholes!

A framework within which decisions are made which establish the nature and direction of the business. !

- Tregoe and Zimmerman!

A systematic process for achieving long-term goals.!

- Osama El-Kadi!


You can think of Strategy as being made up of!

FIVE ELEMENTS (And you need all 5 for a comprehensive strategy)

Donald C. Hambrick and James W. Fredrickson, “Are you sure you have a strategy?”, !Academy of Management Services 2001, Vol. 15, No. 4!



A clear idea of how profits above the

cost of capital will be generated!

Best combination of differentiating dimensions from competitors to attract customers (and suppliers) to support your business!

•  Resource constraints!•  Urgency (window of opp)!•  Credibility (to attract other

stakeholders)!•  Need for early wins!

The means by which arenas are entered matters greatly and should not be viewed as a mere implementation detail or done in afterthought!

The most fundamental of choices - A result of deep analysis and should not be one of broad generalities!

Arena!

Vehicles!

Differentiators!

Staging!

Economic Logic!

The Five Major Elements of Strategy!

“The key is in achieving a robust, reinforced consistency among the elements of the strategy itself.” !

A peek inside the strategy black box!


ensure these 5 elements are!

COHERENT and REINFORCING


The strength is in the whole and not individual choices !


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Tools ≠ Strategy !Provide diff perspectives !


Branding questions like ‘who we are’ and ‘why do we exist’!

Goal Setting!

“Figure 1 leaves out feedback arrows and other indications that great strategists are iterative, loop thinkers. The key is not in following a sequential process, but rather in achieving a robust, reinforced consistency among the elements of the strategy itself.”

Putting in place the input & output of the strategy “sequence”!


Diagram Adapted from Javier Gimeno and Fares Boulos, INSEAD STRATEGY Notes!

STRATEGY PROCESS!

Strategy !

Company!Analysis !

Industry!Analysis !

Testing the strategy!

Goal!Setting!

Mission & Values!

Strategy is an iterative process!


Mintzberg, H. (1987, July–August). Crafting strategy. Harvard Business Review, pp. 66–75.!Diagram from Principles of Management by Carpenter, Bauer and Erdogan, Mar 2009.!

Strategic plans can easily be undermined!

Experience will corroborate that even a rational, well-constructed strategic plan rarely is realized exactly as laid out on paper. Many factors can derail the plan – from competitors undermining what was envisioned to poor execution. Mintzberg summarized his findings in the powerful diagram above, a reminder that real life requires strategy to be continually worked on and interacts in real-time with the operating environment.


What then is!

GOOD STRATEGY? 3!



Don’t forget the political dimension!!


A simply way to view Strategy

HBR Blog Article “Strategy on One Page” by Anthony Tjan, Jun 1, 2011. The Strategy Tree introduced to the author by Mats Lederhausen, formerly worldwide head of strategy for McDonalds’s!

It answers the questions “why”, “what”, “who”, “how” !

important!Reminder!

A Strategy Tree Example (HBR)!


Uniqueness alone is insufficient; good strategy !

has to provide a sustainable advantage.

The business environment is constantly changing so Good Strategy !

has to be flexible, but not reactive.

Reiterating: All it five elements !

has to be cohesive and reinforcing.

Designed to meet some objectives, it should

be inherently measurable.

And for ease of communication !

be clear to describe.


Good strategy [should also incorporate]!

the continuous and ongoing managing of all !

phases of the strategic process [including execution],

which ensures that the organization is responding to the

dynamic and changing needs of the business !

environment in which it operates. !

-  Adapted from Stuart Sugar!VP of Planning and Strategy at Maritz Canada Inc.!


Who then is!

Responsible for Strategy? 4!


TOP-DOWN APPROACH!The view that strategy is formulated by the Executive Team (or the “planning department”) in a top-down fashion is generally recognized as obsolete but still widely in practice.!

Benefits:!•  trained strategic thinkers at the top!•  Able to see/exploit inter-unit

synergies !•  Easier to define and meet corporate

objectives!•  Faster to develop, easier to

coordinate!

The traditional view of strategy planning & execution!

Diagram Adapted from Gavriel Shaw!

Desired Future State of

organization !

Strategy Formulation!

By Executive Team or Strategy

Planning Unit !

Strategic Implementation!By Management

Team !

Current State of organization!


BOTTOM-UP APPROACH !The “organic” method allows a company to get the entire organization involved in the strategy process. but it is time consuming and could cause difficulty when assembling all views into one coherent strategy as it bubbles up to the corporate level. May risk getting stuck with tactical issues.!

•  Creates individual ownership and ‘buy-in’ from employees doing the implementation !

•  Accountability and trust at all levels !•  People in the front-lines are closest

to the customer and “in touch” with the business !

Hybrid / Iterative Approach!More effective to allow strategy to be initiated and coordinated by the top with ample feedback loops for every level to participate. Engagement and good communication are key to ensuring fair process.!

Blue Ocean Strategy!Perspective (Ch8):!

Build execution into strategy using fair process to mobilize

the organization.!

Other views of strategy planning & execution!

Planning!

Execution!

strategy!


So… how do we make Strategy Implementable? 5!


“Strategy formulation is easy. It’s the execution that is the challenge.”

- Lawrence A. Bossidy Former CEO, Allied Signal/Honeywell

[We’ve got to build execution into strategy!] !


“soft” structures (like culture) and formal structures (like HR Policies and performance rewards) are !

used as guides and signposts to help people !execute the strategy effectively !

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Enablers!

It doesn’t happen by itself.!

“Enablers” Diagram Adapted from “The Secrets To Successful Strategy Execution” by Gary L. Nielson, Karla L. Martin and Elizabeth Powers, HBR 2008.!


The best results occur when mgt acknowledges!

that the organization itself needs to change.

Organizational change is often necessary to support a change in strategy. If a company is responsive to its environment and takes a continuous improvement outlook to the strategy process, these changes will be more manageable and less drastic. Nevertheless, if the organization is not willing to adapt to realize the strategy, it should not waste resources trying to switch strategy.!

[at least ! a little]!


It doesn’t make sense to… •  “Dumb down” a new strategy for an organization designed

to execute the old strategy, expecting no organizational change [often disguised as a client’s request to have a strategy tailored to their resource constraints or made “implementable”] !

•  get an organization to implement a “brilliant strategy” that has insufficient political/financial support from key stakeholders to make the required changes for the strategy to succeed [often the work of an inexperienced strategist concerned more with the elegance of the plan than the implementation of it] !

•  To Force-fit or copy a strategy designed for another organization and adopting it wholesale as the outcome will likely differ or even be detrimental [often the work of a lazy executive concerned more the competition than building the underlying capabilities to transform the company’s future] !

In the case of unavoidable large shifts in strategy!


STRATEGY - TACTICS Linkage? !

Where & Which Unique Direction !(Position, Resource Allocation)!

How we get there!(Process, Actions, Skill)!

Who & Why!Objectives, Purpose)!

When, What for & For How Long!(What Timing, What returns, What Next)!

What about the!

Dr. Eliyahu M. Goldratt in his book the “Theory of Constraints” defines Strategy as the answer to ‘what for’ objectives and Tactics an answer to the question ‘How’!


ORGANIZATIONAL STRUCTURE (FORMAL & INFORMAL)

Business Review

Department /Team Review

Performance Review

Organization

Implementation Plan Department /

Team 2

Performance Plan Individual

3

Strategic Plan

1

PLAN EXECUTE EVALUATE

Cascading strategy objectives down level by level…!

Each level of the organization supporting the strategic objectives of the one above in the hierarchy. Feedback/engagement is key. !


Performance Review

Performance Plan Individual

On how the Allies Forces achieved the impossible in WWII:!

“Despite all of the complex planning that went into the invasion of Normandy, it was the small unit tactics and the buddies fighting

side by side on the beaches [that made the difference], !and that is consistent throughout history.” !

-Angelo Caravaggio, !Military Historian, CFC!

PLAN EXECUTE EVALUATE

Organizational Structure, Culture, Policies

Translating strategic initiatives into actionable items, monitoring performance and rewarding individual behaviors !

[assuming you have the right people in place to work with. A particular strategy may require one to shed or bring on specific skills req.] !

Gaining granularity wins the war.!

I am a big part of strategy!


The balanced score card is a useful tool to help organizations link strategy to performance measurement !

From passive document to “marching orders.”

Learning and growth perspective!Role and status of intangible assets defined!

Internal processes how value is created and sustained!

Customer Perspective!the differentiating value proposition!

Financial Perspective!The drivers of shareholder value!

Diagram attributed to the Book “Strategy Maps” by Kaplan & Norton!

The original BSC design (1992) moved from the simple 4-quadrant representation to a strategy-mapping concept with a hierarchy of perspectives each informing the next level. !


Connecting with the Scorecard.

Diagram attributed to Shree Phadnis, Master Blackbelt at KPMG (India)!

The Underlying Philosophy: !"you cannot manage what you cannot measure, and you

cannot measure what you cannot describe.”!


Strategy is just one important piece in achieving !superior performance in the marketplace !

1 2 3

PERFORMANCE!

Back to the Big Picture.

Strategy! Culture! Operational Excellence!

Planning + Execution! Beyond Best

Practice!

Conviction + Motivation

head! heart! hands!

WHERE!WHY! HOW!& WHO!

People are the “super glue” behind the crucial Strategy-Tactics link!


Today, companies are required to compete as a !total supply chain and/or ecosystem!

Your strategy therefore has to build on the strengths of your ecosystem partners as well to strengthen the “platform” !

Unlike a business model (a closed system), A business ecosystem is a network of companies – the set of positive sum relationships (symbiosis) between actors who work together.!

Once you build an ecosystem, it is extremely difficult for someone to disrupt it.!

Examples of powerful ecosystems:!• Amazon!• Apple!• Nespresso!• Nintendo!• Microsoft!

- Nathalie Magniez !

Diagram attributed to Nathalie Magniez! © 2011, Eugene Chang

So… are there ANY LIMITS? 6!


Change the Rules.!Don’t just play the game, it is an invitation to!

“Successful business strategy is about !actively shaping the game you play, not !

just playing the game you find.” !

- Adam Brandenburger and Barry Nalebuff, !Authors of Co-opertition !


BOS: Challenge the norms… !

Kim and Mauborgne, www.blueoceanstrategy.com!

“Blue Ocean Strategy is the simultaneous pursuit of differentiation and low cost.” !

Go where profits and growth are – and where the competition isn’t!

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Value Innovate!


Duo-Objective Strategy!

Case Example: Singapore Airlines (SIA) !

Singapore Airlines (SIA) successfully executes a “dual strategy” of offering premium service and is a cost leader. !

its service is better than rivals’ and its costs are lower: The airline invests heavily in areas of the business that touch the customer in order to enhance its premium positioning. Everything behind the scenes is subject to rigorous cost control. !

•  SIA fosters both centralized and decentralized innovation!

•  SIA is both a technology leader and follower!

Executing a Duo Objective Strategy is difficult and this is what makes it so

valuable. It has so far proved to be a sustainable advantage for SIA. !

A Tough Balancing Act!

Loizos Heracleous and Jochen Wirtz, Singapore Airlines’ Balancing Act, HBR July-August 2010! © 2011, Eugene Chang

Thank you.

I hope this Presentation has been Useful!


© 2011, Eugene Chang, [email protected]

This presentation was put together to summarize some of the work floating “out there” to help others who are looking for a practical way to go about thinking and communicating strategy. As I myself have

benefitted from the cranium generosity of others, I believe sharing is the best way to learn.

Disclaimers and such: I stumbled upon a great presentation “What is Strategy?” by Marc Sniukas on Slideshare and was inspired to extend his ideas with some of my own learning. In my research, I also liberally borrowed from the Internet (from contributors on Wiki to LinkedIn) to supplement the gaps in my own knowledge and experience as a practicing consultant dealing with the occasional strategy engagement. Where I could, I provided references to acknowledge the source. My apologies if something here sounds like what you’ve come up with but were not acknowledged for it; we either came up with the same idea independently, or I screwed up and couldn’t figure out where that thought penetrating my head originated from – all unintentional. It was a rushed job but it did take some time. Not making any money from this so there are no guarantees extended !!although I have made every reasonable effort to be as accurate as possible. Feel free to drop me a line on LinkedIn. Would love to receive feedback or enter a discussion on this topic.

Version 1.0., June 2011

Strategy

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