What is Strategy? andelshøyskolen BI Stavanger STR3600 September 4 th 2012
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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
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