Business Strategy Development - Key Concepts

7/28/2019 Business Strategy Development - Key Concepts

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Strategy Development

KeyConceptsSep2008


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In peace prepare for war, in war prepare for peace.

The art of war is of vital importance to the state.

512 BC


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Thefollowingoverviewaimsatgivinganunderstandingof

thenatureofstrategydevelopmentandtoguideandinspire

thepractical

application

by

presenting

key

frameworks,

conceptsandissuesthatareparticularrelevanttostartup

companies.BenjaminTeeuwsen


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Structure

1. Whatis

Strategy?

2. StrategicAnalysis

3. StrategyDevelopment

4. StrategyImplementation


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CarlvonClausewitz

Tacticsistheartofusingtroopsinbattle;

strategy

is

the

art

of

using

battles

to

win

wars.


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HelmuthKarlBernhard

Grafvon

Moltke

Strategyisthepracticaladaptationofthe

meansplacedatageneral'sdisposaltothe

attainmentof

the

object

in

view.


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MichaelEPorter

Competitivestrategyisaboutbeingdifferent.Itmeansdeliberatelychoosingadifferentsetof

activitiesto

deliver

aunique

mix

of

value.

Porter(1996:64)


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Subhash CJain

Strategyinafirmisapatternofmajorobjectives,

purposes,orgoals ......andessentialpoliciesandplans for

achievingthosegoals......,statedinsuchwayastodefine...

...whatbusinessthecompanyis inoristobeinandthe kindofcompanyitisoristobe.

(Jain2004

p.

9)


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MarketingStrategy

Marketingstrategydealsessentiallywiththeinterplayofthreeforces:

thecustomer,thecompetition,andthecorporation(strategicthreeCs)

Characteristicsofgoodmarketingstrategy:

Aclearmarketdefinition

Agood

match

between

corporate

strengths and

the

needs of

the

market;

Superiorperformanceinthekeysuccessfactorsofthebusiness

BasedontheinterplayofthethreeCs,strategyrequiresthreedecisions:

Where

to

compete

(market,

segments,

)?

Howtocompete(meansforcompeting)?

Whentocompete(timing)?

(Jain2004)


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Putdifferently

Strategydevelopmentisaquestionbased process:

Wherearewenow?

Wherewould

we

like

to

go?

Howdowegetthere?

(PeterEdelmann,SeniorExecutivePresidentVoith Turbo)


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2.

Strategic

Analysis


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PESTELAnalysis

EconomicalEnvironment

EnvironmentalEnvironment LegalEnvironment

SocialEnvironment TechnologicalEnvironment

What are the key issues we face in our business?

PoliticalEnvironment


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Politicalenvironment

ecological/environmentalissues

currentlegislationhomemarket

futurelegislation

European/internationallegislation

regulatorybodiesandprocesses

governmentpolicies

governmenttermandchange

tradingpolicies

funding,grantsandinitiatives

home

market

lobbying/pressure

groups

internationalpressuregroups

warsandconflict

Economicalenvironment

homeeconomy

situation

homeeconomytrends

overseaseconomiesandtrends

generaltaxationissues

taxationspecifictoproduct/services

seasonality/weatherissues

marketandtradecycles

specificindustryfactors

marketroutesanddistributiontrends

customer/end

user

drivers

interestandexchangerates

internationaltrade/monetaryissues

Exampleissues

www.businessballs.com


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SWOT

Strength Opportunities

Weaknesses

Risks

FITmatters:Internalstrengthandweaknessesneedtomatch

withexternalopportunitiesandrisks (KennethAndrews)

Task: Keeping findings descriptive ; Investigating both internal AND external issues


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Exampleissues

Strength

Advantagesof

proposition?

Capabilities?

Competitiveadvantages?

USP's(uniquesellingpoints)?

Resources,Assets,People?

Experience,knowledge,data?

Financialreserves,likelyreturns?

Marketing reach,distribution,awareness?

Innovativeaspects?

Location

and

geographical?

Price,value,quality?

Accreditations,qualifications,certifications?

Processes,systems,IT,communications?

Cultural,attitudinal,behavioural?

Managementcover,

succession?

Weaknesses

Disadvantagesof

proposition?

Gapsincapabilities?

Lackofcompetitivestrength?

Reputation,presenceandreach?

Financials?

Ownknownvulnerabilities?

Timescales,deadlinesandpressures?

Cashflow,startupcashdrain?

Continuity,supplychainrobustness?

Effects

on

core

activities,

distraction?

Reliabilityofdata,planpredictability?

Morale,commitment,leadership?

Accreditations,etc?

Processesandsystems,etc?

Managementcover,

succession?



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Exampleissues

Opportunities

Marketdevelopments?

Competitors'vulnerabilities?

Industryorlifestyletrends?

Technologydevelopmentandinnovation?

Globalinfluences?

Newmarkets,vertical,horizontal?

Nichetargetmarkets?

Geographical,export,import?

NewUSP's?

Tactics

surprise,

major

contracts,

etc?

Businessandproductdevelopment?

Informationandresearch?

Partnerships,agencies,distribution?

Volumes,production,economies?

Seasonal,weather,

fashion

influences?

Threats

Politicaleffects?

Legislativeeffects?

Environmentaleffects?

ITdevelopments?

Competitorintentions various?

Marketdemand?

Newtechnologies,services,ideas?

Vitalcontractsandpartners?

Sustaininginternalcapabilities?

Obstacles

faced?

Insurmountableweaknesses?

Lossofkeystaff?

Sustainablefinancialbacking?

Economy home,abroad?

Seasonality,weather

effects?



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StakeholderAnalysis

Thinkofallofyourstakeholdergroups:

Whatdo

they

expect

from

your

company?


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3.Strategy

Development


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Pointofview

Developinggoodstrategies:

Havingmanagersunderstandingthebenefitofhavingawellarticulated,stablepurpose,andtheimportanceofdiscovering,

understanding,documenting,andexploitinginsightsabouthowto

create

more

value

than

other

competitors

do

Universalobjectives(profitability,costs,turnover,sales,quality,etc.)definewhatacompanymustdotosurvive

butdonotautomaticallysuggestuniquestrategiesnorprovide

direction

Theessenceofwhyanorganizationexistsdoes provideguidancetoachieve theseuniversalobjectives

(Campbell 1997 p 42)


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Whatbusinessareweinandwhy?

Vision longterm,encouraging,aspirationforthefuture

Mission

purposeofthebusiness

Values

attitudes,behaviours,characteroforganizationtoguideactionslikeaninternalcompass


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PlanningProcesses

Processesofdevelopinggoodstrategiesaremuchmoremessy,

experimental,iterative;

and

driven

from

the

bottom

upthan

manyplanningprocessessuggest

Besides,iftherewereonebestway everyonecoulduseit

Howeverprocessesandframeworksdoprovidestructure,helptosystematizethebasisandcontextfordecisiontakingand

document

results

along

the

way (Campbell 1997 p 46)

A good plan is not a neat document put in a folder after print a good plan that is a

piece of paper, which has been crumpled up a hundred times, thrown into the corner, buttaken again to get changed, modified, extended (Robert Grant, Lecturer UOW)


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GenericStrategies

CompetitiveAdvantage

CostLeadershipDifferentiation

Differentiation LowerCost

Narrow

Targ

et

BroadT

arget

Competit

iveScope

Focus

(Porter 1985)

Niche Market Efficiency

Cost LeadershipDifferentiation


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Operational

Excellence

Product

Leadership

Customer

Intimacy

Strategic

Direction

Sharpendistribution

systemsandprovide

nohassleservice

Nurtureideas,translate

themintoproducts,and

marketthemskillfully

Providesolutionsand

helpcustomersruntheir

business

Organizational

Arrangement

Hasstrong,

central

authorityandafinite

levelofempowerment

Actsin

an

ad

hoc,

organic,looselyknit,and

everchangingway

Pushesempowerment

closetocustomer

contact

Systems

Support

Maintainstandard

operatingprocedures

Rewardindividuals

innovativecapacity

and

newproductsuccess

Measurethecostof

providingservice

and

of

maintainingcustome

loyalty

Corporate

Culture

Actspredictablyand

believesonesizefits

all

Experimentsandthinks

outofthebox

Isflexibleandthinks

haveityourway

(Pearcy,Wiersema 1995)

CoreMarketingStrategies


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Current Markets NewMarkets

MarketPenetration MarketDevelopment

Product Development Diversification

CurrentProducts

New

Products

(Ansoff)

MarketStrategies


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Howcanwebestcompete?

Whichcustomersandmarketswillwetarget?

Whatisthevaluepropositionthatdistinguishesus?

What

key

processes

give

us

competitive

advantage? Whatarethehumancapitalcapabilitiesrequiredto

excelatthesekeyprocesses?

Whatarethetechnologyenablersrequiredforthestrategy?

(Kaplan 2008)


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KeySuccess Drivers

What factors are especially important

to perform superior inour industry?


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Defining StrategicBusinessUnits

AnSBUiscomposedofaproductorproductlineshavingidentifiableindependencefromotherproductsorproductlinesintermsofcompetition,prices,substitutabilityofproduct,style/qualityandimpactofproductwithdrawal.

(Jain2004p.18)

(Jain 2004)

- unique business mission, independent of other SBUs

- clearly definable set of competitors

- able to carry out integrative planning relatively independently of other SBUs

-large enough to justify senior management attention but small enough to serve a

useful focus for resource allocation


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DefiningSBUs TargetingMarketSegments

CustomerFunctions

4.Dimension:

Levelof

Distribution

CustomerGroups

Technologies


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Targeting:Whichsegmentstogofor?

Identifiability

Ability

to

identify

and

measure

the

relevant

characteristics

Size Sufficientnumberofbuyers

Stability Needsorfactorsdonotchangetoorapidly

Accessibility

Ability

to

reach

target

segment

in

economical

way

Responsiveness Segmentrespondshomogeneouslytoaspecificmarketingmix

(Schiffman et al. 2005)

>Meaningful

>Actionable

>Financially

attractive


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BusinessModel

CutomerInterface

Fulfillment&Support

Information&

Insight

RelashionshipDynamics

PricingStructure

StrategicResources

CoreCompetencies

StrategicAssets

CoreProcesses

ValueNetwork

Suppliers

Partners

Coalitions

CoreStrategy

BusinessMission

Product/MarketScope

BasisforDifferentiation

CustomerBenefits CompanyBoundariesConfiguration

Efficient/Fit/ProfitBoosters(1)

(1)

Increasing

Returns,

Competitor

Lock

Out,

Strategic

Economies,

Strategic

Flexibility

(Gary Hamel 2002)


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TypesofRules

Howtorules

guidingexecution

of

key

processes

Boundaryrules

limitingrangeofopportunities(companyscope)

Priorityrules

settingprioritiesforresourceallocation(rankingopportunities)

Timingrules

adaptinginternal

schedules

(e.g.

NPD)

to

the

pace

of

markets

Exitrules

definingcriteriatoexitopportunitiesinthelightofunpredictable

developments

(Eisenhardt 2001 p. 111)


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Innovation&Change

Understandingmentalmodels

Managers

mindsets

(industry

dogmas)

that

influence

the

interpretation

ofsituations(sensemaking)andassuchdecisionmaking

Tasktomaketheimplicitexplicitandtoconstantlyquestionandchallengethoselongheldbelieves

Thinkingbeyond

best

practice

processreengineering,TQM,etc.necessarybutnotsufficientandleadtowardsperformancebarrier

Dream,create,

explore,

invent,

pioneer,

imagine

(HamelG

2002

p.

28)

Changingtherulesofthegame!

Frommarketdriventomarketdrivingbyinnovatingregardingvalue

propositionAND

business

system

(Bickhoff N 2008, Hamel G 2002, Kumar N 2000, Porter 1996)


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StrategyEvaluation

Suitability: Isthereasustainablecompetitiveadvantage?

Validity:Areassumptionsrealistic?

Feasibility: Doesfirmhavetheskills,resources,and

commitments?

Internalconsistency:Doesstrategyhangtogether?

Vulnerability:Whataretherisksandcontingencies?

Workability: Canweretainourflexibility?

Timing:Whatistheappropriatetimehorizon?

(Jain 2004)


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4.Strategy

Implementation


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Strategy Maps

Tovisualizestrategyandcauseeffectrelationshipsamong

strategic

objectives Eachperspectivehelpstoexecutetheoneabove

Bestappliedatvariouslevels(corporate,SBU,)

StrategyMapssupportstrategyalignment

Visualrepresentationofthelinkedcomponentsfacilitates

strategy

communication MapslinktoBalancedScoreCard(performancemetrics)

Genericmapsprovideguidancetodevelopuniquemaps

tailoredto

company

(Kaplan, Norton 1996, 2004, 2008)


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Generic Strategy Map (reduced)

Expandandbuild

strategic

skills,

capabilities,andexpertise

Developleadershipand

executiondriven

culture

Enableandrequire

continuouslearning

and

sharingofknowledge

ImproveOperating

QualityandEfficiency

GrowHighValue

CustomerRelationships

AccelerateProduct

Innovation

Financial

Perspective

Learning

andGrowth

Perspective

Process

Perspective

Customer

Perspective

Increasereturn

on

capital

Increaserevenuesin

existingsegments

andmarkets

Growrevenuesinnew

productsandservicesImproveproductivity

Bealeaderinquality

andreliability

Providevaluedservice,

applicationsexpertise,

andsupport

Introduceinnovative,

highperformance

productsandsolutions

Improvequality,cost,

and

flexibility

ofoperatingprocesses

Improvesupplychain

efficiencyandeffectiveness

Optimizecustomer

profitability

Expandchannels

offerings,andmarkets

Buildand

maintain

strong

customerrelationships

Excelattechnology,

productdevelopment

andlifecycle

management

Identifynextgeneration

marketopportunities

CreateahighPerformanceCulture

(Kaplan, Norton 2008)


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Generic Strategy Map (detailled)

LongTerm

ShareholderValue

Financial

Perspective

Customer

Perspective

Internal

Perspective

Learningand

Growth

Perspective

ProductivityStrategy GrowthStrategy

ImproveCost

Structure

IncreaseAsset

Utilization

Enhance

CustomerValue

ExpandRevenue

Opportunities

Price Quality Availability Selection Functionality Service Partnership Brand

CustomerValue

Proposition

ImageRelationshipProduct/ServiceAttributes

OperationsManagement

Processes

CustomerManagement

Processes

InnovationProcesses RegulatoryandSocial

Processes

Supply

Production

Distribution

RiskManagement

Selection

Acquisition

Retention

Growth

Opportunity

R&DPortfolio

Design/Develop

Launch

Environment

SafetyandHealth

Employment

Community

HumanCapital

InformationCapital

Culture LeadershipOrganizationCapital

Alignment Leadership

(Kaplan,Norton2004)


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Balanced ScoreCard

Performancemeasuring system to quantify alsointangible

assets

Customerperspective,internal processes and learning asbuilding blocks

Financialperformance as ultimate indicator

Companiesvision and mission standabove providing overall

direction You cannot manage,what you cannot measure.


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Balanced ScoreCard

Objectives Measures Targets Initiatives

Financial

Perspective

Customer

Perspective

Process

Perspective

Learningand

Growth

Perspective

Visionand Mission


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Finally,askyourself

Therearethreekindofcompanies,thosethat

makethingshappen,thosethatwatchthings

happen and

those

that

wonder

what

happened.

(anonymous)


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Andconsider

Predictingraindoesnotcount

building

arks

does.

(anonymous)


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Literature

AndrewsKR(1987)TheConceptsofCorporateStrategyRichardDUnwin,Homewood

Bickhoff N(2008)QuintessenzdesstrategischenManagements WasSiewirklich

wissenmssen,

um

im

Wettbewerb

zu

berleben

Springer

Verlag,

Berlin

CampbellA,AlexanderM(1997)WhatsWrongwithStrategy?HBRNovDec,pp.4251

Eisenhardt KM,Sull DN(2001)StrategyasSimpleRulesHBRJanMar,pp.107116

HamelG

(2002)

Leading

the

Revolution

Harvard

Business

School

Press,

Boston

USA

JainSC(20047thed.)Marketing:PlanningandStrategyThomson,OhioUSA

KaplanRS,NortonDP(2008)MasteringtheManagementSystemHBR,Jan,pp.6377

KaplanRS,NortonDP(2004)StrategyMapsBoston

KaplanRS,NortonDP(1996)TheBalancedScorecardBoston

KumarN,Scheer L,Kotler P(2000)FromMarketDrivetoMarketDrivingEuropeanManagementJournalVol.18No.2,pp.129142

PorterM

E(1996)

What

is

Strategy?

Harvard

Business

Review,

No.

6,

Nov

Dec,

pp.

61

78


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Literature

PorterME(1985)CompetitiveAdvantageFreePress,NewYork

Schiffman Letal.(2005)ConsumerBehaviourPearsonEducationAustralia,FrenchsForest

NSW

Treacy M,Weirsema F(1995)TheDisciplineofMarketLeaders:ChooseYourCustomers,NarrowYourFocus,DominateYourMarketPerseus Books,Cambridge


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FurtherConcepts

BlueOcean Strategies (Kim,Mauborgne )

CoreCompetencies (Hamel,Prahalad);

Resourcebased view (Barney,Clark)

Five Forces (Porter)

MarktetOrientation(Kohli,Jaworski,Narver,Slater,Day)

OperationalExcellence

PortfolioAnalysis

Product Lifecycle,Industry Lifecycle

Six Sigma

(Pande,

Neuman,

Cavanagh) StrategicIntent (Hamel,Prahalad)

Sustainable Competive Advantage

TotalQualityManagement

ValueChain(Porter)


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Further Readings

BarneyJB,ClarkDN(2007)ResourceBasedTheory:CreatingandSustainingCompetitiveAdvantageOxfordUniversityPress

DayG

S(1994)

The

capabilities

of

market

driven

organizations

Journal

of

Marketing,

Vol.

58,

No.4,pp.3752

KimWC,Mauborgne R(2005)BlueOceanStrategy:HowtoCreateUncontestedMarketSpaceandMakeCompetitionIrrelevantHarvardBusinessSchoolPress

Kohli AK,

Jaworski B

J(1990)

Market

Orientation:

The

Construct,

Research

Propositions,

and

ManagerialImplicationsJournalofMarketing,Vol.54,No.2,pp.118

Narver JC,SlaterS.F.(1990)TheeffectofamarketorientationonbusinessprofitabilityJournalofMarketing,Vol.54,No.4,pp.2036

Senge PM(1990)TheFifth Discipline:TheArtand Practiceof the learning OrganizationCurrencyDoubleday


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FurtherQuestions?

Ifyoucouldneedsomeadviceonhowtoapplytheconceptsto

yourcase,pleasefeelfreetodropmealine.

BenjaminTeeuwsen

[email protected]

www.chiligum.com

Bytheway,Iappreciateprettymuchanyfeedback,e.g.ifthiswashelpfulandwhy

orwhynot soIknowbetterhowtoimprovethispresentationaswellasIdoenjoy

hearing,whenthisledtonewinsightsforuniversitystudies: )
mailto:[email protected]?subject=perspectives%20on%20strategy%20development%20--%20key%20conceptshttp://www.chiligum.com/http://www.chiligum.com/mailto:[email protected]?subject=perspectives%20on%20strategy%20development%20--%20key%20concepts


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