strategy slides
TRANSCRIPT
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Objectives1. Improve your skills in
strategic thinking
2. Understand the
8 essential steps in
building a strategy
3. Develop your
understanding of what is
required to make strategy
happen by closing the
strategy to performancegap
4. Analyse of the
Case Study
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One day Alice came to a fork
in the road and saw a
Cheshire Cat in a tree.
Would you tell me which
way I ought to go from here?
asked Alice.
That depends a good deal on
where you want to get to,
said the Cat.
I really dont care where,
replied Alice.
Then it doesnt much matter
which way you go,
said the Cat.Lewis Carroll
Alice in Wonderland (1865)
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Strategy is a
deliberate search for a
plan of action that will
develop a businessscompetitive advantage
and compound it.
Bruce HendersonFounder, Boston Consulting Group
What is Strategy?
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What is the benefit of making
strategic decisions?
Strategic decision-makingis a tool to evaluate and
select opportunities, clarify
existing priorities, andlearn to say no to the
distractions that can blowyou off course
Spain and WishnoffStrategic Insights
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Where are we now?
Where do we want to be?
How will we get there?
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Stage 1: Strategic AnalysisWhere are we now?
Stage 3:
Strategic Implementation
& Continuous ReviewHow will we get there?
Developing Strategy
Stage 2: Strategic Choice
Where do we want to be?
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1. Strategic Analysis
2. Establish Purpose
3. Determine Strategic Elephants
4. Formulate Vision5. Agree Strategic Objectives
6. Define Strategies/Actions
7. Set Measures, Targets, Timesand Responsibilities
8. Implementation
Steps in Building Strategy
Steps
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Strategic Key Issues
What are the key strategic issuesaffecting your organisation?
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The World of Strategy is Changing
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A Lesson from
MicrosoftIBM was more dominant than
any company will ever be in
technology, and yet they
missed a few turns
in the road.
That makes you wake up
every day thinking,
Hmm, lets try to make suretodays not the day we miss
the turn in the road.
Bill Gates, Microsoft
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Advances in Strategy:
Managing the Value Chain
A value system is:
A connected series of
organizations,resources, and
knowledge streams
involved in the
creation and deliveryof value to end
customers.
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Michael Porters FrameworksThe Value Chain
Primary Activities
Inbound Logistics Operations
Outbound Logistics
Marketing and Sales
Service
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Michael Porters FrameworksThe Value Chain
Support Activities
Firm
Infrastructure
Human Resource Management
Technology Development
Procurement
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Porters Value ChainSupport and Primary Activities
Firm
Infrastructure
Human
Resource
Management
Technology
Development
Procurement
Inbound
Logistics
Operations Outbound
Logistics
Marketing
and Sales
Service
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Porters Value Chain
Examine each of the activities in the value chain: If it has value, from the perspective of the
customer, charge for it (i.e., the basis for apricing strategy)
If it does not, investigate to see if it can bemade valuable, again from the perspectiveof the customer, and thus charge for it.
If it cannot be made valuable, can it be
eliminated all together? If it can, do so. If it cannot be eliminated, outsource it.
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Porters Value Chain
Examine how the activities can be linkedtogether (i.e., the chain)
Well linked (or chained) activities aremuch harder for the competition to match;and you will have an advantage, even if acompetitor is better than you in one or two
activities.
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How do supply chainscreate value?
The Lean Machine.We want
value not fat!
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Value Chain Analysis
What is a value chain?
Linked set of custom-value creating activities Vertical in nature (supply chain) Value is anything the customer is willing to pay for
Value Chain Analysis Margins = perceived value (what are customers willing to pay for
the value-add?) Competition (R FQ) establishes worth or value Center of gravity primary value adding activity Margins = Cost of value add (labor & equipment) + Profit + Waste
LumberCost - $.05/lbSell - $.15/lbMargin - $.10
PulpCost - $.15/lbSell - $.30/lbMargin - $.15
PaperCost - $.30/lbSell - $.35/lbMargin - $.05
RetailCost - $.35/lbSell - $.45/lbMargin - $.10
*Note:T
he margins and costs are for demonstration purposes only and do not reflect true industry costs.
Value Chain
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Gary Hamel:
The World's
ReigningStrategy Guru
The Economist
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In a big organization, the only way to change how
managers work is to reinvent the processes that govern
that work.
Management processes such as strategic planning,
capital budgeting, project management, hiring and
promotion, employee assessment, executive
development, internal communications, and knowledge
management are the gears that turn managementprinciples into everyday practices.
They establish the recipes and rituals that govern the
work of managers. While operational innovation focuseson a companys business processes (procurement,
logistics, customer support, and so on), management
innovation targets a companys management processes.
Source: Hamel, G., 2006,THE
WHY
, WHAT
,AND
HO
WOF
MANAGE
MENT
INNOVAT
ION
,Harvard Business Review, Feb 2006, Vol. 84, Issue 2
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Under Andy Grove'sleadership,
Intel has become the
world's largest
chipmaker,the fifth-most-admired
company in America,
and the seventh
most-profitablecompany among the
Fortune 500
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Strategic Inflection PointsWhat happens to a business when a major change takes
place in its competitive environment. introduction of new technologies introduction of a different regulatory environment
simply a change in the customers' values
a change in what customers prefer
Almost always it hits the organisation in such a waythat those of us in senior management are
among the last ones to notice
..But what is common to all of them and what is key is that they
require a fundamental change in business strategy, and that'salmost a definition of a Strategic Inflection Point.
A Strategic Inflection Point is that which causes you to
make a fundamental change in business strategy.
Nothing less is sufficient.
Source: Andrew S. Grove (1998) Chairman of the Board, Intel Corporation
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Inflection Curve
Inflection Point
Business rises to new
heights
Keeping Your Strategic Eyes on the Radar
When to transform?
Strategic InflectionPointswhat happens to abusiness when a major change
takes place in its competitiveenvironment.
An event that changes the way we think and act.
Andy Grove, Founder of Intel
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Strategic Analysis
Scan Environment:
PESTel
SOAR
Stakeholder Analysis
Competitor Analysis
SustainableCompetitiveAdvantage
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Forces Governing
Competition in an Organisation
The IndustryBargainingPower of
Suppliers
Bargaining
Power of
Customers
Threat of
New Entrants
Threat ofSubstitute
Products or
Services
Jockeying forPosition
Among Current
Competitors
Porter 1985
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Porters Five Forces
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Strategy: The direction and scope of the company
over the long term.
Structure: The basic organization of the company, its
departments, reporting lines, areas of expertise, and
responsibility (and how they inter-relate).
Systems: Formal and informal procedures that
govern everyday activity, covering everything from
management information systems, through to the
systems at the point of contact with the customer
(retail systems, call centre systems, online systems, etc).
The Hard Ss
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Skills: The capabilities and competencies that exist
within the company. What it does best.
Shared values: The values and beliefs of the
company. Ultimately they guide employees towards
'valued' behaviour.
Staff: The company's people resources and how
they are developed, trained, and motivated.
Style: The leadership approach of top management
and the company's overall operating approach.
The Soft Ss
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Who are yourStakeholders
and yourCompetitors?
Who are yourStakeholders
and yourCompetitors?Who are those
agencies or people thatcould impact on your
business?
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Simply rates a stakeholders power or interest
Some stakeholders may have the power either to block
or advance the growth of the organisation / entity
Some stakeholders may be interested in what you
are doing, others may not care.
A powerful stakeholder with only a small or negligiblestake in your project probably isnt going to waste
his/her or your time but would like to keep abreast of
progress.
Mapping Your Stakeholders
- P
ower v Interest Method
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Stakeholder
Power /
Potential
Low Stake
/ Importance
High Stake
/ Importance
High Influence
/ Power
Keep Satisfied -Useful for decision
and opinion
formulation,brokering: mitigate
impacts.
Manage Closely
Most critical
stakeholder group:collaborate with
closely.
Low Influence
/ Power
Monitor (minimaleffort) - Least prioritystakeholder group:
monitor or ignore.
Keep Informed -Important stakeholder
group, in need of
empowerment: involve,
build capacity and
secure interests.
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Low Stake
/ Importance
High Stake
/ Importance
High
Influence
/ Power
Keep Satisfied Manage Closely
Low
Influence
/ Power
Monitor (minimal
effort)
Keep Informed
StakeholderPower / Potential
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Built to Last
The Importanceof Vision
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The Questions to ask.. Does the Vision provide a beacon for guiding the
kinds of adaptation and change required forcontinual growth?
Does the Vision describe a future that is moreattractive than the present?
Will the Vision challenge you?
Can the Vision serve as the basis to formulatestrategy that can be acted on?
Will the Vision serve as a framework to keepdecision making in context?
Lipton,M. Chair of the Organisational Change Management Program
Milano Graduate School.
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A Useful Rule of Thumb
If you cant communicatethe Vision to someone in
five minutes or less and
get a reaction that
signifies bothunderstanding and
interest, you are not yet
done with this phase of
the transformationalchange process
Kotter 2007
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The Group Challenge..discuss:
1.How can we build a strategic organization?
2.How can we make rule-breaking innovation a
systemic capability?
3.How can we give everyone the chance to be
an innovator?
4.How can we create work environments that
inspire individuals to give their very best of
themselvesthat truly inspire human
beings?
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What must wedo to execute
the strategies?
What are the
priorities?
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Turning Great Strategy into
Great PerformanceCompanies typically realise only
about 60% of their strategies
potential value because ofdefects and breakdowns
in planning and execution
Mankins and Steele
Harvard Business Review July 2005
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Closing the Strategy-to-Performance Gap
1. Keep it simple, make it concrete
2. Debate assumptions, not forcasts
3. Use a rigorous framework, speak a commonlanguage
4. Discuss resource deployments early
5. Clearly identify priorities; track real-timeperformance; build into meeting agenda
6. Continually monitor performance
7. Reward and develop execution capabilities
7Rules
Harvard Business Review:TurningGreat Strategy into Great Performance (2005) Mankins and Steele
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We have aStrategic Plan .
Its called
DoingThings
Herb Kelleher
SouthwestAirlines
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Project Teams
and Project Tasks
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Reviewing your
learning
Harvard Business Review:
Turning Great Strategy into
Great Performance (2005)Mankins and Steele
Tomorrows Managing
Organisational Change and
Transformation Session
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Pulling it all together.
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