What is Strategy?

Handelshøyskolen BI Stavanger STR3600

September 4th 2012

My intention:Help you get an overview of

‘Strategic Management’

What is Strategy?

There were six men of Hindustan,to learning much inclined,Who went to see an elephant,though all of them were blind,That each by observationmight satisfy his mind.

The first approached the elephant,and happening to fallAgainst his broad and sturdy side,at once began to bawl,"This mystery of an elephantis very like a wall."

The second, feeling of the tusk,cried, "Ho, what have we here,So very round and smooth and sharp?To me 'tis mighty clear,This wonder of an elephantis very like a spear."

The third approached the elephant,and happening to takeThe squirming trunk within his hands,thus boldly up and spake,"I see," quoth he,"the elephant is very like a snake."

The fourth reached out an eager hand,and felt above the knee,"What this most wondrous beastis like is very plain" said he,"'Tis clear enough the elephantis very like a tree."

The fifth who chanced to touch the earsaid, "E'en the blindest manCan tell what this resembles most;deny the fact who can;This marvel of an elephantis very like a fan."

The sixth no sooner had begunabout the beast to grope,Than seizing on the swinging tailthat fell within his scope;"I see," said he, "the elephantis very like a rope."

So six blind men of Hindustandisputed loud and long,Each in his own opinionexceeding stiff and strong;Though each was partly in the right,they all were in the wrong!

Mintzberg, et.al. (1998) Strategy Safari

“Nobody really knows what strategy is”

The Economist, in Markides, 2004

The 10 Schools of Strategic Management

Mintzberg, et.al. (1998) Strategy Safari

A different animal altogether:

Strategy Execution

“13”

Strategic Management +

Change Management =

”It doesn’t matter where you want to go, if the organization doesn’t go with you”

Let us go back in time

Boston Consulting Group 1965

"Bruce called a staff meeting for a Saturday morning in the fall of 1965. He explained that to survive, much less grow, in a competitive landscape occupied by hundreds of larger and better-known consulting firms, we needed a distinctive identity. He had concluded that we shouldn’t fight the competitive battle as generalists, but should instead stake out a special area of expertise. "He asked what we thought that specialty should be. Many suggestions were offered, but in each case we were able to identify several other firms that already had strong credentials in that particular area. The discussion began to stall. Then Bruce asked a momentous question: ‘What about business strategy?’ I objected: ‘That’s too vague. Most executives won’t know what we’re talking about.’ Bruce replied, ‘That’s the beauty of it. We’ll define it.“

http://www.bcg.com/this_is_bcg/bcg_history/bcg_history_1963.html

A Timeline on Strategic Management*

1950 1960 1970 1980

TQM

BCG StrategyKnowledge workers

Positioning

Transformational leadership

Concept of strategy

Porter’s 5 FCorporate Strategy

BCG Matrix

PESTEL

PLC

Scenarios

SWOT

1980 1985

Six Sigma

”In search of Excellence”

7 S

Value Chain

Resource-based view

VRIO

TQM (2)

Lean

Balanced Scorecard

Strategic intent

Knowledge company

Crafting strategy

1990 1995

BPR Networks

Disruptive innovation

Core Competences

BSC (2)

Learning organizations

Mass custimization

Positive psychology

Strategymaking as serious play

Disruptive technologies

Intellectucal capital

Employee engagement

Strategy safari

HR-championCompetitive

advantage through people

Sears case

Strategy asrevolution

Ongoing dynamic prosess

Rise and fall of strategic planning

2000 2005

Strategy maps

BusinessEQ

NPS

Blue Ocean StrategyThe Long

TailStratey Index

Human Sigma

Management Innovation(2)

Office of Strategy

Management

Deep Discount str.

Gallup path

Knowledge-based theory of

the firm

Execution

Crowd-sourcing

Say your strategy?

Business Models

Business Model Canvas

Strategic Imagination

Three-boxesApproach

StrategyCanvas

2010 2015

Strategy Tools for the Next Generation

Future Back Migration Mapping

InnovationPyramid

Holistic Innovation

Model

Innovator’s DNA

Why wait for the future? Innovators dream of what can be…..

“The strategist's goal is not to find a niche within the existing industry space but to create new space that is

uniquely suited to the company's own strengths - space that is off the map.”

1989; “Strategic Intent”; Gary Hamel & C.K. Prahalad

“Competing in overcrowded industries is no way to sustain high performance.

The real opportunity is to create blue oceans of uncontested market space”.

2004 (+15) “Blue Ocean Strategy” Kim & Mauborgne

“In strategic thinking, we have learned that there is no such thing as a mature industry: there is only an

industry to which imagination has yet to be applied”

- Steven Denning, 2010

Industry structure drives competition and profitability;

….not whether an industry is emerging or mature, high tech or low tech, regulated or unregulated.

- Michael Porter, 2008

Blank

Some of the key assumptions in traditionalstrategy analysis can be outlined as follows:

1. Strategy is about positioning a business in a given industry structure (Porter, 1980, 1985)

2. The focus of strategy tools and analysis is existing industries(SCP in Microeconomics)

3. The primary focus of strategic analysis is the business unit

4. Strategic outcomes can be explained on the basis of economic analysis

5. Strategy is the result of an analytical process; execution of strategy is an organizational process

Prahalad & Hamel, 1994

Bartlett & Ghoshal (2002)

Strategic Planning (Michael Porter)

Strategic Innovation(Gary Hamel)

Analytical Creative

Logical and linear Disruptive

Expect the future to be much like the present

Expect the future to be dynamic and different

Developing existing business model Developing alternativ (new) business model

Focus on improving performance Focus on new realities

Technology & product-driven Customer-driven

Following traditions, rules and mental models

Breaking traditions, rules and mental models

Adapted from Lybecker, 2007

The Positiong perspective

(external)

The Resource-based perspective

(internal)

Blue Ocean Strategy-

perspective

Discount strategy perspective

Compete in existing market space

Compete by developing strong

resources

Create uncontested market space

Compete in hypercompetitive

market space

Beat the competitors through

a strong position

Resources should be Valuable, Rare, Non-

imirable and exploited by the

organization (VRIO)

Make the competition

irrelevant

Own value creation while destroying value for others

Exploit existing demand

Utilize strenghts in resource profile

Create and capture new demand

Both supply push and demand pull

Low cost ORDifferentation

Leverage resources Create uncontested value

Craft the strategy with disruptive

effect

The Four Strategic Perspectives; Andersen, Froholdt & Poulfelt

Innovator

Blue OceanRed Ocean

Imitator The Strategy system; Andersen, Froholdt & Poulfelt

Poulfelt & Holst-Mikkelsen

Commitment

Action

Purpose

ResultsExecution

Three keys to succesfull strategy execution

Strategic AnalysisIdea Follow-up & ControlStrategic ChoiceStrategy ExecutionStrategic Planning

The Strategy Process

Strategic AnalysisIdea Follow-up & ControlStrategic ChoiceStrategy ExecutionStrategic Planning

Business idea

Value proposition

Strategic Intent

VisionMission

Values

Unleash Human Imagination

What’s our dream?

Aligment with the rest of the organization

Connect: Strategy;Metrics;Training and development

Performance reviews

Rewards & bonuses

World-class alignment

”I know and understand our strategy”

”I am enthusiastic about our strategy”

”Every day, I make our strategy happen”

BSCCommuni-cations strategy

Execution

Be defined by industry or blow up the industry’s borders?

Clear choice of what we want to be and do

Clear choice of what we don’t want to be and do

InvestmentsLong-termGoals

Align:OrganizationCultureRewards People

Radical business model innovation

Imagine if…Scenarios Options

Uniqe Industry Position

Business plan: Long-term goals and plans

BSC Strategy maps

ExternalPorter 5FPESTELBCG MatrixMarket & customer analysis”faster horses”

InternalFinancials SWOTVRIO (CC)7 SValue chainBEQNPSHuman SigmaEmployee &Customer EngagementInnovation CultureGPTW

Different ways of running the strategy process

High involvment

InternalExternal

Low Involvement

High involvment

InternalExternal

Low Involvement

I: CEO & McKinsey

team

II: CEO, Strategy

director & McKinsey

team

III: Management & McKinsey

team

VI: Several project teams

VII: Everybody involved

VIII: Project

teams; with customers &

Partners

IV: CEO Alone

V: One project team

”Is there a correlation between involvement and effect of execution?”

”Yes, absolutely”

- Holst-Mikkelsen & Poulfelt

Can Strategy Be Made Easy?

Where Do We Want to Be in 3 Years ?

How Are We Going to Get There ?

How do we achieve competitive advantage?

Low-cost VS.

DifferentiationVs.

Focus

…or…Deep Discount Strategy

Vs. Radical Business Model Innovation

External Perspective Vs.

Internal Perspective

IncrementalVs.

InnovativeVs.

Radical

AnalysisVs.

Action

AnalysisVs.

Paralysis

What Industry Position Should We Take?

”Succesfull attackers do not try to be better than their bigger rivals. Rather, they actively adopt a different

business model (or strategy) aim to compete by changing the rules of the game in the industry”

C.C. Markides, 2008

How do we want our customers to experience us differently?

Who?What? How?

“The secrets of successful strategies; Winning People’s Emotional Commitment”

Markides, London Business School

The 10 Schools of Strategic Management

Mintzberg, et.al. (1998) Strategy Safari

Prescriptive Schools1. The design school (process of conception) 2. The planning school (formal process3. The positioning school (analytical process)

Descriptive Schools4. The environmental school (reactive process) 5. The cognitive school (mental process) 6. The entrepreneurial school (vision process)7. The power school (process of negotiation)8. The cultural school (collective process) 9. The learning school (emerging process)

Configuration School 10. The configuration school (transformation process)

“Like many organization's, our written strategies quickly became dead documents.”

Art Schneiderman, 1987, "The First Balanced Scorecard“

Can You Say What Your Strategy Is?

Collins & Ruckstad, 2008

NO!!!Ca. 95 %

Kaplan & Norton, 2004

Poulfelt & Holst-Mikkelsen

Commitment

Action

Purpose

ResultsExecution

Three keys to succesfull strategy execution

Balanced Scorecard drives Strategy Execution

3rd Generation BSC:

Focus, Metrics, Alignment, Action

The Strategic Sweet Spot

Collins & Ruckstad, 2008

The strategic sweet spot of a company is where it meets customers’ needs in a way that rivals can’t, given the context in which it competes.

Context (technology, industry

demographics, regulation, and so on)

The Strategic Sweet Spot

Analyzing Strategic Management Cases

3 steps:Analyze RecommendImplement

Core Issue?

A unifying model for strategic management

Adapted from Holst-Mikkelsen & Poulfelt; Lægaard & Vest

Version 0.3

Vision

Mission

Business idea

Strategic Intent

Business model

Culture

Goals ExecutionStrategic

initiatives (max six)

Leadership

External & Internal Analysis

S OW T

Customers

PESTEL F

P 5 F

Market place

NPS

Owner’sAmbi-tions

Financials: Shareprice

P/EProfit

MarginQuick ratioTotal debt

ratioCash flowTotal cash

BEQLeadershipEmployee

engagementCulture

InnovationStrategy

Customer

VRIO

Value Chain (prod-ucers only)

Great Place to

Work

Present needs and wants

Future needs and wants

Purpose?

InnovationMarketing

mix(5 P’s)

Competitor analysis

Strategic options& choice

External & Internal Analysis

Key questions for recommendationFinancial:

Can we afford it?How will it affect our shareprice?

People: Will our people jump with joy?Do we have the people we need?

Leadership: Will our leaders love the challenge?Do we have the leaders we need?

Processes: How will we have to change our processes?

Marketing & sales: How will we have to change our marketing and sales?Will our sales force & partners be proud and excited?

Customers: How will our customers love us for this?

Competition: How will our competitiors respond?

…and finally…

- Is it realistic - Does it give us energy? - How do we make it a great success?

Happy strategyzing