Strategy Introduction

What is “strategic”?•Macro

▫Levels of constructs and analysis▫Levels of Management

• Intentional – an optimal strategy creates success vs. accidentally achieving it.

•Related to performance▫Financial performance▫Other forms of criterion

What is Strategy?Business literature is saturated with jargon and “catch phrases”,

many incorporating the word “strategy” in some form.

Here are the fundamental concepts (Know these):•Strategy: A means to an end•Strategic Management: Continuous adjustments to

plans as a result of new information•Strategic Planning: Episodic review or creation of

your strategy plan to create an alignment of plans/assets towards a goal.

•Long Range Planning: Not necessarily strategic planning. Planning for events beyond the quarter or the year.

Back to Strategy- Strategy: A means to an end. “How you get there”

Strategy: A means to an endStrategic Management: Continuous adjustments to plans as a result of new informationStrategic Planning: Episodic review or creation of your strategy plan to create an alignment of plans/assets towards a goal.Long Range Planning: Not necessarily strategic planning. Planning for events beyond the quarter or the year.

Back to Strategy Strategy: A means to an end. “How you get there”

Our ability to identify the “best way” to get from A to B is only as good as our ability to assess points A & B.

Getting from A to BHow to get there requires knowing where both “there” and “here” are.

A: Where we are now (here):• Internal Factors• External Factors

B: Where we want to be in the future (there):• Short term• Long term

If Getting “there” requires a commitment of resources and attention…

And if external factors (as well as internal) are always changing (and they are)….

What value is a strategic plan?Does it work for every company? What are the hazards of planning?

Getting from A to B

Expected Winners in Selected Occupations

-50 -40 -30 -10 0 10 20 30 40 50

Network System and Data Communication Analysts

Personal and Home Care Aides

Home Health Aides

Computer Software Engineers Applications

Veterinary Technologists and Technicians

Personal Financial Advisors

53

51

49

47

41

41

Percentage change for 2006-2016Adapted from: Figure 2-1: Winners and Losers in Selected Occupations: Percentage Change Forecasts for

2006-2016

Expected Losers in Selected Occupations

-50

-41

-41

-40

-40

-36

-36

Photographic processing machine operators

File clerks

Pattern makers

Telephone operators

Photographic processors

Shoe Machine operators and tenders

Textile knitting & weaving machine setters, operators & tenders

Adapted from: Figure 2-1: Winners and Losers in Selected Occupations: Percentage Change Forecasts for 2006-2016

-50 -40 -30 -10 0 10 20 30 40 50Percentage change for 2006-2016

ChangeThe rate of change in society is accelerating.•Of the last 800 life-spans of human

history:▫The first 650 were spent in caves▫Only the last 70 saw communication from one

lifetime to the next.▫Only the last six saw widespread printed word.▫Only the last four saw time measured with

precision.▫Only the last two saw the electric motor.▫Only the current lifetime has seen the

overwhelming majority of material goods we take for granted today.

Winners and Losers in Strategy

•A new way of thinking▫Recognition of SWOTs▫Bourne Identity

•Within and Between Person cognitive synthesis

•Execution, Execution, Execution

Mind Computer Interface TechnologyCNN News

Should this matter to you?

•Who should care about this?•Product Innovation: Entertainment

▫Nintendo, Xbox (Microsoft), Playstation (Sony)

▫Apple, Dell, AMD, Intel, Verizon, Samsung, Motorola

•Other applications▫Flight- Boeing, EADS▫Weapons- Northrup Grumman, Lockheed

12/30/2009- 2 Billion Apps downloaded for the Apple I-phone•What does this mean for…

▫Sprint, ATT▫Verizon (4G towers with no 4G phones)▫New markets for gaming companies▫Requirements of Google’s Android powered

phone

Health Care Reform: The Public Option

What does this mean for…

•Aetna•Assurant•Unicare

•Any firm offering health insurance?•Any firm not offering health insurance?

Strategy Application

Black Disciples- South Side Chicago

Business: Southside Franchise of the “Black Disciples”Industry: Illicit drugs/protection•General Manager: “J.T.”

▫29 years old▫BA-Business University of Chicago▫Previous Job: Office Supplies Sales Rep▫Manages 260 person organization

•20% revenues for 12 sq block territory to the “Board of directors”

2005: Levtit & Dubner “Why do drug dealers still live with their moms”

Business: Southside Franchise of the “Black Disciples”Revenues:Drug Sales

$24,800Dues: $ 5,100Extortionary $

2,100TaxesTotal Monthly

$32,000Revenue

• 2005: Venkatesh & Levitt “Why do drug dealers still live with their moms”

Nonwage Costs:• Wholesale Cost $ 7,400

of Drugs• Board of $

5,000 Directors Fee: • Mercenary $ 1,300 Fighters• Weapons $ 300• Miscellaneous $

2,400 Total Monthly $14,000 non-wage costs

The Black Disciples• “Board of Directors” (20 of them, oversee 120

franchises)• G.M. of the Southside franchise: “J.T.”

• Officers-3:▫ Enforcer: Ensured gang members’ safety▫ Treasurer: Overseas gang’s liquid assets▫ Runner: Manages exchanges between gang &

suppliers

• Foot Soldiers-50-60: Sell product on franchised locations

• Rank and File-200+: seek protection from other gangs, or potential position as foot soldier.

The Black Disciples

Total Net Monthly Income without labor: $ 18,000

J.T. has 260 employees

How much do you think J.T. made?

The Black DisciplesTotal Net Monthly Income without labor: $ 18,000

How much do you think J.T. Made?$8,500/month

Labor expense:$9,500/month

The Black DisciplesAverage hourly for foot soldier: $3.30(officers: $7.00)

Employment Conditions-typical fate in four years of employment:

• No. of times arrested: 5.9• No. of nonfatal wounds or injuries: 2.4

▫ This doesn’t include injuries from gang admonishment for rules violations.

• Chances of being killed: 1 in 4

Why do people work here?

The Black DisciplesTournament Theory: You must prove yourself at

lower level to gain access to next level. Motivation is from lure of future level achievement.

•“Board of Directors”: 20 $500,000+/year

•G.M. “J.T.”: 120 $100,000+/year•Officers: 360 $15-20K/year•Foot Soldiers: 7,500 $6K/year•Rank and File: 24,000 -$250/year

Application of tournament theory

•“ I know it’s not a lot of money but keep doing such a good job and you’ll be a manager soon!”

•“ I know it’s not a lot of money but keep managing well and you’ll be an executive soon!”

•Pyramid Schemes

How the Great Fall