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What is Strategy?
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What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Mar 27, 2015

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Page 1: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

What is Strategy?

Page 2: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

“Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you.”

“It is also the art of finding ways to cooperate, even when others are motivated by self-interest, not benevolence. It is the art of convincing others, and even yourself, to do what you say. It is the art of interpreting and revealing information. It is the art of putting yourself in others shoes so as to predict and influence what they will do.”The Art of Strategy, Dixit and Nalebuff, W.W. Norton, 2008.

Page 3: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Strategy

Strategy is planning that allows you to delight your customers.

Strategy is about getting customers and keeping them.– Drucker: “The purpose of a business is to

create a customer.” Product first, not profits

Page 4: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Strategy

The process of strategy includes:– Analysis– Formulation– Implementation

Page 5: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Strategic Planning and Analysis

Planning how to delight customers requires these steps:– Scanning the overall environment– Scanning and researching the industry

environment– Researching direct competitors– Researching your organization's skills and

resources– Analyzing current strategy– And, most important, knowing what will delight

your customers before they know it

Page 6: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

“The Five Competitive Forces That Shape Strategy,” Michael Porter, Harvard Business Review, January 2008.

Page 7: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Before the Internet

Michael Porter wrote the initial model for the Five Forces in 1979.

He wrote “What Is Strategy” for HBR in 1996, his seminal book Competitive Strategy in 1981, and Competitive Advantage in1985.

Before the Internet (BTI)– Before Google– Before Napster, iTunes, and the iPod, iPhone, and

iPad– Before craigslist.com

He didn’t consider how to compete with free.

Page 8: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Before Behavior Economics

Porter made his major contributions to strategy theory before behavioral economics research.

BE research has shown that people do not make rational decisions (emotions dominate) and that markets are not rational.

That success is more often the result of luck (randomness) than carefully planned strategy.

Delighting customers with awesome products is the key now, not having barriers to entry.

Page 9: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Randomness

People are not wired to understand randomness.

We are wired to see patterns and causality; can’t accept randomness.

Can’t plan for luck. But can be nimble and take advantage of

lucky breaks.

Page 10: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Operational Effectiveness Is Not Strategy

Concentration on core competencies and competitive positioning via benchmarking can lead companies down the path toward mutually destructive competition.

Companies must distinguish between operational effectiveness and strategy and not confuse them.

“What is Strategy,” Michael Porter, Harvard Business Review, November 1996, Reprint # 96608

Page 11: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Operational Effectiveness Is Not Strategy

Operational effectiveness is necessary to compete but not sufficient to win.

A company can outperform others and win only if it can establish a difference that it can sustain – a differential competitive advantage.– In the past barriers to entry were the primary

competitive advantage.– Now, it's better products and service.

Operational effectiveness means doing things better than competitors, strategic positioning means doing things different from competitors and having better products and service.

Page 12: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Strategy Rests On Unique Activities

The essence of strategy is choosing to perform activities differently than rivals do.

Strategic positions can be based on customers’ needs, customers’ accessibility, or the variety of a company’s products or services.

Porter’s concept of fit is no longer valid. Change is happening too fast.

Remember, “structure follows strategy”

Page 13: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Generic Strategies

There are three generic (primary) strategies:– Differentiation– Focus (niche marketing)– Cost leadership

These definitions characterize strategic positions at the simplest and broadest levels.

Page 14: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Secondary Strategies Within the three basic strategies, there are

several secondary strategies:– Defense: Block competition to avoid losing

market share.– Offense: Attack competition head on.– Flanker Brand: Establish new position.– Fighting Brand: Create a new brand to compete

with competitive new brand.– Guerrilla Marketing: Force competition to

respond with small resources.– Ambush Marketing

Page 15: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Profitable Niche Measurable, sizable, reachable Niche strategy advantages:

– Flexible, can adapt to new needs, small range of needs.

– Efficient for promotion, distribution.– Reduces competitive pressure.– With few competitors, can be highly profitable.

Page 16: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Niche strategy disadvantages:– Few economies of scale– Success breeds competition. When new

competitors enter the niche, strategy must change.

To thrive in most businesses, must be #1, #2, or get out (find a new niche).– Get out in the long tail.

Innovate with new products.

Page 17: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Differentiate By Benefits Sought By Consumers

Grocery buying segments1 Location - 39.0%2 Price - 30.2%3 Service - 12.1%4 Selection - 9.5%5 Quality - 4.4%

Page 18: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

A Sustainable Strategic Position Requires Trade-offs

Tradeoffs are essential to strategy. They create the need for choice and purposefully limit what a company offers.– Remembering that a valuable position will

attract copycats. Can’t be all things to all people. Be best at

doing a few things.– Then expand on those core competencies.

Apple Google Amazon

Page 19: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Determining Strategy

To determine strategy, answer the following questions:– Which of our products/services are the most

distinctive?– Which of our products/services are the most

profitable?– Which of our customers are the most satisfied?– Which customers, channels, or purchase occasions

are most profitable?– Which of the activities in our value chain are the

most different and effective. – How can we make everything better? Now!

Page 20: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Profit is Important

Profit is the key to a successful strategy, not growth.

Compromises and inconsistencies in the pursuit of growth will erode the competitive advantage a company.

Keep an eye on profitable growth.

Page 21: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Potential Traps

Meaningless differentiation Getting greedy Groupthink

– Alfred Sloan Throwing money at a problem Lack of commitment Innovation stagnation

Page 22: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Perceptual Problems

“All the kids are above average…” Jim Collins lists five basic management

perceptual mistakes that lead to five stages of decline:– Stage 1: Hubris Born of Success– Stage 2: Undisciplined pursuit of more– Stage 3: Denial of risk and peril– Stage 4: Grasping for Salvation– Stage 5: Capitulation to Irrelevance or Death

Jim Collins, How the Mighty Fall, Harper Collins, NY 2009.

Page 23: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

The Role of Top Management

The role of top management in an organization is:– Defining an organization’s position and

strategy– Making trade-offs– Forging fit among activities– Building an innovation machine

And strategy may have to change along with major structural changes in an industry -- flexibility is vitally important.

Page 24: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

Organizations Must have a visionary, meaningful mission

statement. Must have a clear and simple strategy. Must define how to delight customers. Must be committed to strategic moves and

signal commitment to competitors. Must continually innovate.

Page 25: What is Strategy?. Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. It is also the.

The Strategy Focused Organization *

Mission:“Why we exist”

Core Values:“What we believe in”

Vision: “What we want to be”

Strategy: “Our game plan (how to win)”

Goals For Implementing Strategy (Metrics):“What we need to do”

OUTCOMES

SatisfiedShareholders

DelightedCustomers

EffectiveProcess

Motivated andPreparedWorkforce

* The Strategy Focused Organization, Robert Kaplan, David Notron, Harvard Business School Press, 2001