3 receipts and a framework for strategies development

3.5 receipts and one frameworkfor strategy development

Daniel GRUIA

The art of improvement

Why we need strategies?

• They focus the organization– Gives coherence to the actions

• Resource alignment– All resources are dedicated towards the fulfillment

of the strategic goals. • To gather support from the stakeholders

– Creates alignment between organization and stakeholders.

– Communicate to stakeholders the direction of organization evolution.

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An useful definition of strategy

The ultimate set of goals and means to be supported by all

the other goals and means

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The Framework

• EXPRESS• DEFINE

– Decompose• Qualitative• Quantitative

– Metrics– KPIs

• IMPLEMENTDaniel GRUIA 4

Express

Define

Implement

3.5 recipes for your inspiration

A.Vision based strategy

B.Innovation vs. copying

C.The core competencies

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THE VISION BASED STRATEGY

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The Vision based strategy

• Implements the management vision• Based on “clairvoyance” (info + experience +

intuition + …)• Risky if vision is not accepted by stakeholders.• Failure if vision is not shared by the organization• Well done, inspires, creates emotional bonds –

motivates.

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The two levels

1. Strategic – General level. Describes generic goals and means

◦ Vision◦ Mission◦ Principles◦ Directions and metrics

2. Operational – Describes concrete actions for strategy implementations.

◦ KPIs (balanced scorecard)◦ Business Plans◦ Resources◦ Project plans

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The Vision

• The ultimate goal of the strategy• Justification is not needed• Details not needed (it is generic)• No need to be measurable• Have to be shared by the organization

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Moses vision: Land of milk and honey

Express

Mission

• The step towards the fulfillment of the vision

• Explains how vision should be fulfilled• The part of the vision that depends on the

organization

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Moses mission: Everybody reaches the promise land in forty years

Express

The principles

• A set of constraints that describe the organizational values

• They describe the cultural environment in which the mission is done

• Express ethic rules (what is acceptable or not)– An extreme rule: Everything is acceptable

• “…in love and war..” • “The goal excuses the means” (Machiavelli)

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Moses principles: The ten commandments

Express

Mission decomposition – qualitative components

• Which are the actions compatible with the organization principles?

• Brings the mission into concrete action. What is to be done.

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Moses qualitative* components:- What means “everybody”:

• Every useful person• All the believers

- What means “the promised land”:• At the end of the desert• Enough grass for all hoards

* Imaginary measures – not reflected by Biblical texts

Define

Mission decomposition – quantitative components

• The measurements of the quantitative elements• Shows what counts in the mission description

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Moses quantitative measures:- What means “everybody”:

• Useful person –person below 40 years old• The believers – people with at least 7 prays per week

- What means “promised land”:• End of the desert – km pre day, oasis per week• Enough grass – Number of sheep or goats which can

be sustained by 1 ha of land

Define

Metrics(Useful person)

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Theme Example

What is to be measured Number of people below 40 yrs old

Unit of measure Number, percent

Measurement signification Shows the health of the population Shows the regenerative capacity, once arrived at destinationShows enslavement culture (the ones below 40 years were born free into desert an not into slavery)

Measurement place At the tent of each family

How is measured Reporting by the head of the family to the priests

Measurement cycle Semestrial

Control over the results Partial. The values are depending on seasonal diseases and density of predators

Actions needed for measurement implementation

Priests trainingFamily awareness

Define

Measurement types – the legend

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PROCESSRESOURCESOUTPUT(RESULT)

OUTCOME(EFFECT)

donkeys, sheep, chariots, people, grains, beleif

1 oasis/week;10 newborns/month10 deceased/month

Refreshing the population in 40 years.

Arrived at destination with the useful ones and beleivers

Outcome orientation

Define

PROCESSRESOURCESOUTPUT(RESULT)

OUTCOME(EFFECT)

Measurement types – nowadays

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500 more computers

10 documents online per day;

10% more online users.

Waiting in line reduced with 5%;7% increase in customer satisfactionOutcome orientation

Define

Business plan

The goal is to convince about the usefulness of the project (ROI, social) and to obtain the resources.

• WHY? – Which strategic indicators are addressed by the project? – Are there any seemful projects already implemented?

• WHAT?– Which is the activity done during the project? – Which are the major deliverables?

• WHO?– Who needs the project. To whom is the project useful?– Who will implement the project?– Which is the impact over the organization (structure, management etc)?

• WHEN?– When the project will be finalized? Generic steps of the project.

• HOW?– How will the project be done?– What resources are needed?– Which is the return on investment- ROI?Daniel GRUIA 17

Implement

Resources

• Human, financial, time, experience, image etc• Needs trade-offs (i.e. a shorter time for

implementation goes into more resources needed or lower quality delivered)

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There’s no such thing as a free meal!

Implement

Project plan

• Deducted from the business-plan (sometimes is included in it)

• Useful for guiding of the execution and control over the project.

• Focused by project management

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Implement

Vision based strategy

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VisionMission

Express

Decompose Metrics

35%

50

3

Project 1

Project 2

Project 3

Project 4

KPI

ImplementDefine

OperationalStrategic

COPYING OR INNOVATING?

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Copying or innovating?

There are only two possibilities to create value:• Copying (to deliver the same types of products/services as

other organizations or in the same way as other organizations)– Copying processes

• Best Practices

– Copying services or products• Standardization, Commoditization

• Innovation (to deliver new types of products/services or in new ways, different than all other organizations)– Protecting the innovation results

• Patents, Copyrights, Intellectual propriety, Commercial Secrets, Non-disclosure

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Express

Copying…

Industry Analysis – What do I want to become? (ToBe KPI)– Top of the industry– Industry averages– Own history

• Best practices – What the good ones are doing good?– From own industry – hard because of innovation protection– From other industries i.e.:

• “Pay per use” from telco industry applied into rent-a-car industry• Credit risk analysis methods transferred from banking in other industries with high

values of receivables.

• Where is the organization?– Compare own KPIs with ToBe KPIs

• Close the gap– Develop projects to implement best practices– Develop projects to bring your KPIs to ToBe KPIs

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Express

Define

Implement

Define

… and innovation

• Most often improving the performances reached by copying– i.e. auto industry:

• Japan vs USA (see Tyota)• Ford in 1900’s

• Sometimes creating from the scratch– Jobs & Wosniac,YouTube, Facebook, 3M

• (Some) Innovation conditions• Talent based economy• Learning organization culture• Trial-and-error Daniel GRUIA 24

Innovation vs. Exploitation?

Conditions:• Separate in different spaces

– In the same organization• Monocentric• Polycentric

– In different organizations• Own Innovation• Outsourced Innovation

• Separation in different times?– Mobile infrastructure generations

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They hardly coexist in the same space

Separation in different spacesMonocentric

Headquarter

Branch

Branch

BranchBranch

Branch

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Innovation created in headquarter is spread to the branches

Separation in different spaces Polycentric

Branch

Branch

BranchBranch

Branch

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Each branch manages its own innovation sources

Separation into different organizations, Own innovation

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Core Business= Exploiting

Stable, Lower Risk

New Business= Innovation, Higher Risk, Easy to kill

Separation into different organizations, Own innovation

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Core Business =New Business

Separation into different organizations, Own innovation

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Regular Army

Special Forces

Panasonic

Technics

Separation into different organizations, Outsourced innovation

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Core Business= Exploiting

Stable, Lower Risk

Innovation ”Producer”

Knowledge transfer

Architect -» ConstructorPR -» BeneficiaryDesigner-» Developer

Core BusinessCore Business=

ExploitingStable, Lower Risk

Separation into different organizations, Outsourced innovation - risk

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Core Business

Core Business n

Innovation ”Producer”

Knowledge transfer

Architect -» ConstructorPR -» BeneficiaryDesigner-» Developer

Copying Based Strategy

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Decompose Metrics

35%

50

3

Project 1

Project 2

Project 3

Project 4

KPI

A

B12

3 10%

15%25%

3050

100

Best practices

Competition or different industry

Copying

Organization

Industry (i.e.)

Express ImplementDefine

OperationalStrategic

Decompose

Innovation Based Strategy

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New Ideas

Organization

Express ImplementDefine

12

3 10%

15%25%

3050

100

New Ideas

New Ideas

New Ideas

“…Where nobody has gone before“

New Ideas

Metrics KPI

35%

50

3

Project 1

Project 2

Project 3

Project 4

OperationalStrategic

Talent Is Here

CORE COMPETENCIES STRATEGY

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Core Competencies Strategy

Honda = Engines

Volvo = Safety

Google=Search

• Provides potential access to a high variety of markets– How do we use our knowledge to create products?

• Significant contribution to the high value of the final product, perceived by the client. – Has utility for customers?

• Hard to imitate by competitors– What do we know to to better than anybody else?– How do we protect our position?

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Core competencies… an area of specialized expertise which is the result of harmonization of complex activities linked with work

and technology.Hamel & Prahald, HBR, 1990

Core competencies as Foundation

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Competency 1 Competency 2 Competency 3 Competency 4

Base product 2

Base product 1

Business 1 Business 2 Business 3 Business 4

1 2 3 4 5 6 7 8 9 10 11 12

Produse finale

http://www.quickmba.com/strategy/core-competencies/

Protection and development of the core competencies

1. Develop– Continuous improvement– Mergers & Acquisitions

2. Keep– HR Management

• Recognize, Nurture and Keep the talents– Knowledge Management

• Extract the knowledge into documents and systems.

3. Protect– Patents– NDAs– Security

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Implement

Continuous Improvement (Deming Cycle)

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Actual Level of Performance

PLAN

DO

ACT

CHECK

Time

Per

form

ance

Core Competencies Strategy

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Express

Decompose Metrics

35%

50

3

Project 1

Project 2

Project 3

Project 4

KPI

ImplementDefine

OperationalStrategic

Deming cycle over core competencies

DevelopKeepProtect

PLAN

DO

ACT

CHECK

HPV vs HVLC Positioning

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High Volume, Low Cost (HVLC)

Hig

h P

erce

ived

Val

ue(H

PV

)

Cost advantage

Differentiation advantage (niche players)

Michael Porter

Express

Value chain

• A framework showing where is the value added

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Raw Materials

R&D OperationsMarketing

& SalesAfter-Sales

Express

Different positions along a classic value chain

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“The best spring water”“Special selected Coffee beans”

“Think different”“An innovative way”“The most advanced technologies”

“The same receipt in last 300 years”“Overnight delivery”“Available 24/7””Organize the world’s information ”

“I’m loving it”“Always Coca-Cola”“Just do it!”“Probably the best beer in the world”“Connecting people with their passion”

“Money-back guarantee”“Free revisions during guarantee time”

Raw Materials

R&D OperationsMarketing

& SalesAfter-Sales

Express

Care este maturitatea organizaţiei?

Level Human ChapterKnowledge

ProcessCulture Infrastructure

OPERATE Individual Personal Me Personal Computer

CONSOLIDATE Functional Groups DepartmentOur Group against

The Rest of the Organization

Functional Systems

INTEGRATE Whole Organization Organization All of Us Enterprise Systems

OPTIMISE Whole OrganizationExtended

OrganizationOur Partners and Us

Extended Enterprise Systems

INNOVATE Dynamic Networks Situational Matrix Adaptive Groups Adaptive Systems

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The Business Intelligence Competency Center: A SAS® Approach

CONCLUSION

The strategy is expressing and defining the direction of change. The projects are following, without replacing it:

1. EXPRESS

2. DEFINE

3. IMPLEMENT

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“And you’ll remember this…”

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Licensed under ”Creative Commons”

WAKE UP IN POST-INDUSTRIAL ERA!

Now, that you have a classic strategy plan…

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Classical assumptions

• Average lifespan of companies: 30 years• There is time to develop strategies:

– Short-term (i.e. 1 year)– Medium term (i.e. 2-5 years)– Long term (i.e. 5-10 years)

• The most important resource is human resource• Compete locally• Internet is a market• Globalization means “west” going “east”

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Post-Industrial wave (the third?)

• Average lifespan of companies: 10 years• There is no time to develop strategies.

– High speed change in the business environment– The change is mostly unpredictable– The environment complexity is skyrocketing

• The most important resource is talent• Compete everywhere• Internet is a branding tool• Globalization means “east” and “west” mixing and

influencing but not meltingDaniel GRUIA 49

Lifecycles influences culture

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Business lifecycle

Growth Maturity DeclineStart-up

Size

Maturity DeclineGrowth Maturity DeclineStart-up Growth Maturity DeclineStart-up Growth Maturity DeclineStart-up Growth Maturity DeclineStart-up Growth Maturity DeclineStart-up

’70s

’00s

Lifespan of companies: 10 years

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Cultural and behavioral environment is changing

Increased bargain power of the individual employeeCompanies have to be attractive

Loyalty redefinedPersonal optimization of risk – i.e. permanent search for new job

At least three working places during employment lifeAt least three working environments (cultural, network etc)

Turbulent Times Forever Environment surprises

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Question: how to chose among divergent and complex business opportunities!!!

Volcanos Earthquake

Turbulent Times ForeverPolitical surprises

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Terrorism v2Revolutions & Riots

Turbulent Times ForeverEconomic surprises

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Bubbles

cash.gov bubble

Turbulent Times ForeverDisruptive Technologies

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Cloud computing

Mobile computing

Human genome

Google glasses

Ele

ctric

car

s

Fue

l cel

ls

Content manipulation

• Deep dive• Understand• Standard procedures• Control• Trained people• Old shaky ocean• Grow

• Speed surfing• Speed• Improvisation• Risk• Talented people• Free Blue ocean• Blow-up

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Old company New company

Mean time between surprises is less than mean time between decisions!!!

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Jazz is the new classic!