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Getting to Strategic

Alignment

Dr. Christopher A. Walker

Oslo, Norway

18 March 2014

Question

What do businesses have in common

with chess players, military leaders,

diplomats, and football coaches?

Answer

Their success depends on being

strategic!

What do we mean by

“Strategic”?

• The term “strategic” relates to a general &

longer term plan to achieve a goal

• The word Strategy is derived from the Greek

phrase that means “Art of the General”

• Strategy is the “roadmap” for success that

bridges the gap:

• From where we are

• To where we want to go

How is strategy a roadmap

to goal attainment?

• Strategy comprises all the actions

undertaken to achieve an organization’s

goals. Including:

1. Setting direction for the organization

2. Allocating resources

3. Providing clarity, thereby reducing ambiguity

4. Making decisions

5. Integrating and aligning all the organizational

activities

So, strategy is about…

• Creating alternatives to choose from

that will aid in goal achievement

– It is a journey that adapts to the context

– It requires alignment and re-alignment of

effort when the external and internal

environments change

About those

alternatives… • There are only so many strategic initiatives

an organization can undertake. Why?

– Organizations have finite resources

• Time

• People

• Financial

• Individual & organizational capabilities

– Given the limits, trying to do too much is

a recipe for failure

So, what must organizations

do to succeed?

Reduce uncertainty about the future…

• We must have a better understanding

of the challenges in the environment

– Strategy bets on future success by:

• Leveraging organizational strengths (internal)

against the opportunities/threats (external)

But, the future is

unpredictable

Those who choose to live by the

crystal ball are doomed to die of

eating broken glass.

Leading firms that failed

to predict the future?

• Olivetti (1908, typewriter maker) created first desk

top personal computer (1964)

– Out of computers by 1995; now office equipment maker

• Motorola (1928, radio & TV equipment)

– Sold radio & TV business to Panasonic

– First cell phone (1984); cell IP sold to Google (2011)

• Polaroid (1937) premier photographic equipment

– Bankrupt in 2001. Reorganized and, in 2010, released

digital camera to compete with cell phone cameras

• Aliweb (1993) the first successful search engine

– Google or Bing them: They no longer exists

Why is the future

unpredictable?

• It has a range of potential outcomes

• It is subject to uncontrollable randomness

• It has constraints

• It requires individual decisions affected by a

number of factors and people

Such variability means the future is not

inevitable, no matter how well planned

This leaves us with

three basic realities…

1. The only certainty about the future is

that it is uncertain.

1. Past success does not guarantee

future success.

2. Uncertainty needs to be reduced

What can be done to

reduce uncertainty?

• For organizations, it is simple: Conduct

a formal strategic analysis to better

enable organizational success

• How?

– By gathering data on what is important:

• Internal environment

• External environment

Why is environmental analysis

critical to the development of

strategies?

1. The analysis is the framework for organizing the data gained from both the internal and external environments

1. It provides a current perspective

1. It helps organizations understand the challenges they face NOW and what they need to meet them

1. It provides the means to draw conclusions about the organization’s situation and its implications for creating strategy

What do we mean by a

formal strategic analysis?

• SWOT Analysis – Strengths, Weaknesses,

Opportunities, Threats (Internal & External

Environments)

• Five Forces – Industry, competition, suppliers,

buyers, and substitutes

• P.E.S.T. – Political, Economic, Sociological,

Technological

• Value Chain – Internal processes

• Kepner-Tregoe Analysis – Competitive forces

• BCG Matrix – Learning curve

A common favorite of

business executives?

• SWOT Analysis (Strengths, Weaknesses,

Opportunities, Threats) Looks at the three

questions essential to strategy development:

1. What are the internal organizational capabilities

the organization possesses?

2. What are the challenges of the external

environment?

3. How might the alignment between the internal

capabilities and the external challenges suggest

plans for actions (strategies) to capitalize on the

opportunities?

SWOT analysis

SWOT Analysis

Internal Analysis

Strengths Weaknesses

External Analysis

Opportunities Threats

A principle value of

SWOT?

• It’s simple

– It is not about creating complex lists of

alternatives that must be researched

extensively

– It is about the identification of relevant

issues that enable conclusions to be

drawn that aid the development of

strategies to achieve organizational goals

What is the aim of

SWOT analysis?

1. To identify and organize important

internal and external factors

2. To provide a clearer understanding of what

is necessary for success

3. To analyze issues that have led to past

failure

4. To provide clarity of the operating context

5. To help decision makers make better

choices

What SWOT looks for:

Strengths • Internal characteristics of an organization

or team that are positive attributes which

improve the potential for success

– Examples of strengths:

• Organizational reputation

• Employee educational levels

• Specialized skills

• Organizational culture

What SWOT looks for:

Weaknesses • Internal characteristics that create a

disadvantage by reducing the organization’s

ability to attain goals

– Examples of weaknesses:

• Management decision-making

• Lack of necessary employee skills

• High employee turnover

• Aging, out-of-date technology

What SWOT looks for:

Opportunities

• Attractive external factors that an

organization has the ability to take

advantage of through effective strategies

– Examples of opportunities:

• New geographic markets

• Rising demand

• New technologies

What SWOT looks for:

Threats

• Uncontrollable external elements in the

environment that arise and jeopardize

the viability of an organization

– Examples of threats:

• Slow economic growth

• Governmental upheaval

• Terrorism

The benefits of SWOT

analysis? 1. Better understanding of the competitive

environment/situation

2. Anticipate different futures

3. Offer evidence for need to change or adapt

4. Identify organizational capabilities

5. Help set goals & objectives

6. Help develop strategies and tactics

7. Enable alignment of strengths with opportunities

and help offset threats

What are the limitations

of SWOT Analysis?

1. Subjectivity is used in the analysis

1. Things get missed and left out

1. It is confined to a point-in-time

perspective

What problems might the

limitations create?

1. Strengths may be overestimated

1. Weaknesses may be discounted

1. Opportunities not understood

1. Threats may be unimaginable

2. One area may be over-emphasized

vs. another

Nonetheless, the benefits of

formal SWOT analysis are BIG

• Strengths identified can be the foundation for strategy

• Weaknesses that impair the pursuit of opportunities can be fixed

• Opportunities best suited to the organizational strengths can be exploited by strategies

• Threats can be recognized and addressed to minimize, but not eliminate risks

Using SWOT is

strategic when…

• It improves the potential for success by

creating better understanding of the

environment

• It ensures all organizational efforts are

consistent with one another

• It helps guide the development of

functional strategies

What do we mean by

Functional Strategy?

• The goal oriented plans and actions of an

organizational function (e.g., department,

team) that helps:

– Maximize resource productivity

– Enable the achievement of goals

Are all functional

strategies the same? • They vary because they are based on

specific responsibilities (e.g., HR, Finance, Security)

• Consequently, they are limited by the

capabilities within each function

• They are non-transferable

– The same function in a different organization

cannot employ the same strategy and expect to

be successful because the context is different

What is the purpose of

Functional Strategy?

• To align the skills and resource

strengths of the smaller function

to the larger one

• To enable success by taking

advantage of opportunities and

offsetting the threats

How do we create

functional strategies?

• Simple answer:

– Carefully & thoughtfully

•There is no exact template

– Because of different organizational goals

and areas in which they compete

•But, there is a self-reinforcing cycle

that is universal across all organizations

• Let’s take a look…

Strategy as a self-reinforcing

cycle

Identifying the context (point in

time)

Evaluating the organizational

environment (SWOT)

Setting goals/objectives

Choosing a strategy/strategies

Performance Analysis (is it working?)

Why is creating functional

strategy hard work?

• Specific decisions must be made that determine:

– What work processes and activities need to be done in the functional area to support the strategy

– How to make sure these processes and activities have the necessary resources

– What the appropriate timelines are for completion

– How to best coordinate with other functions to ensure effective implementation

What questions should a function

ask about their newly created

strategy?

1. Is it aligned – does it support the larger organization’s strategies?

2. Is it flexible – can it accommodate changes in either the internal or external environments?

3. Is it adaptive – can it be adjusted when we see what is working and what is not?

What happens next?

• The chosen strategy needs to be

implemented

– Only upon executing the strategy can it

be determined if it is effective

– If not, is there an alignment problem?

• Work being performed

• Resources

• Timelines

• Coordination

What happens when there are

problems with alignment?

• It impairs performance because:

– Coordination is impossible

– There is a failure to exploit the organizational resources and capabilities

– Goals are difficult to achieve

How to avoid a lack

of alignment?

• There must be effective leadership at

the functional and larger

organizational levels

• Why does this matter so much?

1. Communication engages others

2. Good judgment

3. Handle ambiguity & uncertainty well

4. Establish relationships & involve others

5. Balance risk and manage adversity

6. Properly allocate resources

7. Leverage the skills of others

8. Collaborate well

9. Solve problems

10. Execute strategy to deliver results

Research on leadership in

“best” companies

Is our functional strategy

helping deliver results?

• Performance Effectiveness must be compared to “THE” standard measure for success – Our Goals: – Example: Did the safety awareness program (the

strategy) decrease employee disability claims (the goal)?

• If yes, by how much? • If not, why not?

– If actual performance does not measure up to expectations:

• Is a change needed in the functional strategy? • Is there a need for increased focus on execution?

One final question: What

makes a winning strategy?

• A winning strategy should pass three tests:

1. The Fitness Test

• Does it fit with the external and internal

aspects of our current context?

2. The Competitive Edge Test

• Does it help us achieve a competitive edge?

3. The Performance Test

• Does it improve our organizational

performance?

The benefits of effective

functional strategies are BIG!!

1. Reduced costs (financial and human)

2. Reduced complexity

3. Enhanced operations (improved coordination)

4. Improved response to problems

5. Enhanced adaptation to potential challenges

6. Increased organizational knowledge

7. Reduced RISK

8. Enhanced potential for goal achievement

A final thought

“Tomorrow will arrive and it is always

different. This changes the context we

find ourselves in. So, the strategies that

enabled you to “take the hill” will not

be the same as the strategies necessary

to hold it.”

Peter Drucker

Thank You!

Questions?