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1, 2, 3!!
© 2011, Eugene Chang
Some say strategy is…
© 2011, Eugene Chang
big & scary
[Too complex to get one’s head around]!
Picture from Monsters, Inc, Disney / Pixar!
© 2011, Eugene Chang
soft & ﬂu!y
[Too nebulous to get one’s hands around]!
Picture from Monsters, Inc, Disney / Pixar!
© 2011, Eugene Chang
Eugene Chang .But the reality is… © 2011.
Eugene Chang .” .“Nobody really knows what strategy is.The Economist! © 2011.
1! © 2011. Eugene Chang Why is Strategy Important? .
time and resources are easily wasted on piecemeal.” Business Strategy & Negotiation Consultant! - Osama El-Kadi! “Without a strategy. Hambrick and James W. disparate activities…” - Donald C. 4! © 2011. 15. Fredrickson! “Are you sure you have a strategy?”. Eugene Chang .“Because our natural reaction to challenges are inappropriate. Academy of Management Services 2001. No. Vol.
Strategy provides a ﬁrm advantage over its competitors. Eugene Chang . What strategy does: it helps a firm…! • • • • • • Define its market and systematically pursue its goals! Figure out the best course of action to advance its position relative to the competition! unify the organization behind shared objectives! coordinate the various activities in a coherent manner! stay focused and on-target! (“what not to do” as much as “what to do”)! Keep the “Big Picture” in mind! © 2011.
Eugene Chang .We hear these statements from CEOs all the time… © 2011.
“Our strategy is to be the low-cost provider. Fredrickson! © 2011.”! “Our strategy is to provide unrivaled ! customer service. 4! - Donald C. Vol.”! “We’re pursuing a global strategy.”! “Our strategy is to move from defense! to industrial applications. 15. No. Hambrick and James W. Academy of Management Services 2001.”! “Our strategic intent is to always be the firstmover. Eugene Chang .”! “Are you sure you have a strategy?”.”! “The company’s strategy is to integrate a set of! regional acquisitions.
None of these declarations is a! STRATEGY! Smart CEO’s know not to reveal their real strategy with the public! (keeping the language vague and completely useless!)! © 2011. Eugene Chang .
HBR 1996! © 2011. “What Is Strategy?”. but not sufficient! • OE Competition raises the bar for everyone but leads to relative improvement for no one! • Strategic positioning means performing different activities from rivals’ or performing similar activities in a different way! • A company can only outperform rivals only if it can establish a difference that it can preserve! Michael E.Myth Busted: Best-Practice is actually! ANTI-STRATEGY • Operational Effectiveness is not strategy! • Constant improvement in operational effectiveness is necessary. Eugene Chang . Potter.
Eugene Chang So what is! STRATEGY? .2! © 2011.
BRAND! BUSINESS UNIT! MILITARY! MARKET ENTRY! different uses of the word! STRATEGY OPERATIONAL! CORPORATE! More…! MARKETING! Which one?! PRODUCT! © 2011. Eugene Chang .
dental services) Functional Strategy! • How can each functional department in the BU do its part to meet the company’s objectives? • Includes marketing strategies. safety boots. Eugene Chang . © 2011. SBUs are treated as an internal proﬁt center by corporate HQ. hiring decisions. etc.“Business” Strategy By Hierachy! Corporate HQ! (Diversified)! • Corporate Planning! • Legal + M&A! • IT! Corporate Strategy! • Which businesses should we be in? • How does being in these businesses create synergy and/or add competitive advantage to the corporation as a whole?! Business Unit Strategy! • How can we compete successfully in a particular marketplace? (e. supply-chain strategies. price setting. IT Strategy) BUSINSS! UNIT #1! BUSINSS! UNIT #2! • Finance! • HR! • Operations! • R&D! • Marketing! • SALES! • IT! • Finance! • HR! • Operations! • R&D! • Marketing! • SALES! • IT! * Strategic Business Unit – Many companies feel that a functional organizational structure is not an e"cient way to organize activities so they have reengineered according to processes of SBUs. usually responsible for its own budgeting.g. pizza. new product development strategies… SBU* Strategy! • How can the SBU help the organization achieve its objectives? (may include dimensions beyond the scope of a single BU – e. HR strategies.g.
Michael Porter! A framework within which decisions are made which establish the nature and direction of the business.! the direction and scope of an organization over the long-term: which achieves advantage… through its configuration of resources… to meet the needs of markets and to fulfill stakeholder expectations.What unique Advantage can we get and sustain over time.Tregoe and Zimmerman! Good Definitions Describing! STRATEGY A systematic process for achieving longterm goals.Osama El-Kadi! © 2011.! . Eugene Chang .! .! .Johnson and Scholes! .
Eugene Chang . Vol.You can think of Strategy as being made up of! FIVE ELEMENTS (And you need all 5 for a comprehensive strategy) Donald C. No. Fredrickson. “Are you sure you have a strategy?”. 15. Hambrick and James W. 4! © 2011. ! Academy of Management Services 2001.
Fredrickson. reinforced consistency among the elements of the strategy itself. Eugene Chang . No.”! Donald C. 4! © 2011. “Are you sure you have a strategy?”.A result of deep analysis and should not be one of broad generalities! Staging! Vehicles! A clear idea of how profits above the cost of capital will be generated! Economic Logic! The means by which arenas are entered matters greatly and should not be viewed as a mere implementation detail or done in afterthought! Differentiators! Best combination of differentiating dimensions from competitors to attract customers (and suppliers) to support your business! “The key is in achieving a robust. ! Academy of Management Services 2001. 15. Vol. Hambrick and James W.The Five Major Elements of Strategy! • Resource constraints! • Urgency (window of opp)! • Credibility (to attract other stakeholders)! • Need for early wins! A peek inside the strategy black box! Arena! The most fundamental of choices .
“Are you sure you have a strategy?”. 4! © 2011. No. Vol.ensure these 5 elements are! COHERENT and REINFORCING The strength is in the whole and not individual choices ! Donald C. ! Academy of Management Services 2001. Fredrickson. 15. Hambrick and James W. Eugene Chang .
“Are you sure you have a strategy?”. Fredrickson. ! Academy of Management Services 2001.” Branding questions like ‘who we are’ and ‘why do we exist’! Goal Setting! Donald C. Hambrick and James W. 15. The key is not in following a sequential process. Eugene Chang . Vol. No.Putting in place the input & output of the strategy “sequence”! Tools Provide diff perspectives! ≠ Strategy! "! #! $! %! “Figure 1 leaves out feedback arrows and other indications that great strategists are iterative. 4! © 2011. loop thinkers. but rather in achieving a robust. reinforced consistency among the elements of the strategy itself.
Eugene Chang .Strategy is an iterative process! Mission & Values! Goal! Setting! Industry! Analysis! Testing the strategy! STRATEGY PROCESS! Strategy! Company! Analysis! Diagram Adapted from Javier Gimeno and Fares Boulos. INSEAD STRATEGY Notes! © 2011.
(1987. well-constructed strategic plan rarely is realized exactly as laid out on paper. Harvard Business Review.! Diagram from Principles of Management by Carpenter. H. Bauer and Erdogan. July–August). Crafting strategy. Mar 2009. Eugene Chang . pp. 66–75. Many factors can derail the plan – from competitors undermining what was envisioned to poor execution. Mintzberg. Mintzberg summarized his ﬁndings in the powerful diagram above. a reminder that real life requires strategy to be continually worked on and interacts in real-time with the operating environment.! © 2011.Strategic plans can easily be undermined! Experience will corroborate that even a rational.
3! © 2011. Eugene Chang What then is! GOOD STRATEGY? .
! Academy of Management Services 2001. “Are you sure you have a strategy?”. Eugene Chang . Vol. 4! © 2011. No. Fredrickson. Hambrick and James W. 15.Don’t forget the political dimension!! Donald C.
Eugene Chang . Jun 1. 2011. formerly worldwide head of strategy for McDonalds’s! © 2011.A simply way to view Strategy It answers the questions “why”. “who”. “what”. “how”! A Strategy Tree Example (HBR)! important! Reminder! HBR Blog Article “Strategy on One Page” by Anthony Tjan. The Strategy Tree introduced to the author by Mats Lederhausen.
good strategy! has to provide a sustainable advantage. Designed to meet some objectives. The business environment is constantly changing so Good Strategy ! has to be ﬂexible. it should be inherently measurable. but not reactive. And for ease of communication! be clear to describe. Eugene Chang .Uniqueness alone is insufficient. Reiterating: All it five elements! has to be cohesive and reinforcing. © 2011.
Eugene Chang .! Good strategy [should also incorporate]! phases of the strategic process [including execution]. which ensures that the organization is responding to the - Adapted from Stuart Sugar! VP of Planning and Strategy at Maritz Canada Inc.the continuous and ongoing managing of all ! dynamic and changing needs of the business ! environment in which it operates.! © 2011.
4! © 2011. Eugene Chang Who then is! Responsible for Strategy? .
The traditional view of strategy planning & execution! Current State of organization! Strategy Formulation! By Executive Team or Strategy Planning Unit! TOP-DOWN APPROACH! The view that strategy is formulated by the Executive Team (or the “planning department”) in a top-down fashion is generally recognized as obsolete but still widely in practice. Eugene Chang . easier to coordinate! Desired Future State of organization! Diagram Adapted from Gavriel Shaw! © 2011.! Benefits:! • trained strategic thinkers at the top! • Able to see/exploit inter-unit synergies! Strategic Implementation! By Management Team! • Easier to define and meet corporate objectives! • Faster to develop.
! .! © 2011.Other views of strategy planning & execution! BOTTOM-UP APPROACH! The “organic” method allows a company to get the entire organization involved in the strategy process.! • Creates individual ownership and ‘buyin’ from employees doing the implementation! • Accountability and trust at all levels! • People in the front-lines are closest to the customer and “in touch” with the business! Hybrid / Iterative Approach! More effective to allow strategy to be initiated and coordinated by the top with ample feedback loops for every level to participate. May risk getting stuck with tactical issues. but it is time consuming and could cause difficulty when assembling all views into one coherent strategy as it bubbles up to the corporate level. Engagement and good communication are key to ensuring fair process. Eugene Chang Planning! Execution! strategy! Blue Ocean Strategy! Perspective (Ch8):! Build execution into strategy using fair process to mobilize the organization.
Eugene Chang So… how do we make Strategy Implementable? .5! © 2011.
Eugene Chang .“Strategy formulation is easy. Bossidy Former CEO. It’s the execution that is the challenge. Allied Signal/Honeywell [We’ve got to build execution into strategy!]! © 2011.” .Lawrence A.
%#! . HBR 2008.-. Martin and Elizabeth Powers. Eugene Chang ./01-! &)(! 76/! 2%3451%6-! 8169+196*! *+(! *&(! “Enablers” Diagram Adapted from “The Secrets To Successful Strategy Execution” by Gary L. Karla L.! © 2011.It doesn’t happen by itself..! “soft” structures (like culture) and formal structures (like HR Policies and performance rewards) are ! used as guides and signposts to help people ! execute the strategy effectively! Enablers! "#$%! &'%(! &'(! )*+. Nielson.
if the organization is not willing to adapt to realize the strategy.The best results occur when mgt acknowledges! that the organization itself needs to change.! © 2011. Eugene Chang . these changes will be more manageable and less drastic. If a company is responsive to its environment and takes a continuous improvement outlook to the strategy process. [at least ! a little]! Organizational change is often necessary to support a change in strategy. it should not waste resources trying to switch strategy. Nevertheless.
Eugene Chang . expecting no organizational change [often disguised as a client’s request to have a strategy tailored to their resource constraints or made “implementable”] ! • get an organization to implement a “brilliant strategy” that has insufficient political/financial support from key stakeholders to make the required changes for the strategy to succeed [often the work of an inexperienced strategist concerned more with the elegance of the plan than the implementation of it] ! • To Force-fit or copy a strategy designed for another organization and adopting it wholesale as the outcome will likely differ or even be detrimental [often the work of a lazy executive concerned more the competition than building the underlying capabilities to transform the company’s future] ! In the case of unavoidable large shifts in strategy! © 2011.It doesn’t make sense to… • “Dumb down” a new strategy for an organization designed to execute the old strategy.
What for & For How Long! (What Timing. Resource Allocation)! How we get there! (Process.TACTICS Linkage?! Where & Which Unique Direction! (Position. Goldratt in his book the “Theory of Constraints” defines Strategy as the answer to ‘what for’ objectives and Tactics an answer to the question ‘How’! © 2011. Purpose)! STRATEGY . Eliyahu M. Actions. Skill)! What about the! When. What Next)! Dr.Who & Why! Objectives. What returns. Eugene Chang .
Feedback/engagement is key.! © 2011.Cascading strategy objectives down level by level…! ORGANIZATIONAL STRUCTURE (FORMAL & INFORMAL) Strategic Plan Business Review PLAN EXECUTE EVALUATE 1 Organization 2 Department / Team Implementation Plan Department / Team Review 3 Individual Performance Plan Performance Review Each level of the organization supporting the strategic objectives of the one above in the hierarchy. Eugene Chang .
Gaining granularity wins the war. ! Military Historian. it was the small unit tactics and the buddies fighting side by side on the beaches [that made the difference]. CFC! I am a big part of strategy! Organizational Structure. A particular strategy may require one to shed or bring on specific skills req. ! and that is consistent throughout history. Policies PLAN EXECUTE EVALUATE Individual Performance Plan Performance Review Translating strategic initiatives into actionable items. monitoring performance and rewarding individual behaviors! [assuming you have the right people in place to work with.! On how the Allies Forces achieved the impossible in WWII:! “Despite all of the complex planning that went into the invasion of Normandy.” ! -Angelo Caravaggio.]! © 2011. Culture. Eugene Chang .
Eugene Chang .From passive document to “marching orders.” The balanced score card is a useful tool to help organizations link strategy to performance measurement ! The original BSC design (1992) moved from the simple 4-quadrant representation to a strategy-mapping concept with a hierarchy of perspectives each informing the next level.! Financial Perspective! The drivers of shareholder value! Customer Perspective! the differentiating value proposition! Internal processes how value is created and sustained! Learning and growth perspective! Role and status of intangible assets defined! Diagram attributed to the Book “Strategy Maps” by Kaplan & Norton! © 2011.
”! Diagram attributed to Shree Phadnis. The Underlying Philosophy: ! "you cannot manage what you cannot measure. and you cannot measure what you cannot describe. Master Blackbelt at KPMG (India)! © 2011. Eugene Chang .Connecting with the Scorecard.
Back to the Big Picture. Strategy is just one important piece in achieving ! superior performance in the marketplace! PERFORMANCE! head! heart! hands! Strategy! Planning + Execution! Culture! Conviction + Motivation Operational Excellence! 1 WHERE! & WHO! 2 WHY! 3 Beyond Best Practice! HOW! People are the “super glue” behind the crucial Strategy-Tactics link! © 2011. Eugene Chang .
Eugene Chang . it is extremely difficult for someone to disrupt it. companies are required to compete as a ! total supply chain and/or ecosystem! Unlike a business model (a closed system).! Once you build an ecosystem. A business ecosystem is a network of companies – the set of positive sum relationships (symbiosis) between actors who work together.Nathalie Magniez ! Your strategy therefore has to build on the strengths of your ecosystem partners as well to strengthen the “platform”! Diagram attributed to Nathalie Magniez! © 2011.! Examples of powerful ecosystems:! • Amazon! • Apple! • Nespresso! • Nintendo! • Microsoft! .Today.
6! © 2011. Eugene Chang So… are there ANY LIMITS? .
it is an invitation to! Change the Rules. ! Authors of Co-opertition! © 2011. Eugene Chang .! “Successful business strategy is about ! actively shaping the game you play.”! - Adam Brandenburger and Barry Nalebuff. not ! just playing the game you find.Don’t just play the game.
Eugene Chang .com! © 2011. www./01! Kim and Mauborgne.blueoceanstrategy.”! Value Innovate! .$"%"! :"! -.BOS: Challenge the norms…! Go where profits and growth are – and where the competition isn’t! “Blue Ocean Strategy is the simultaneous pursuit of differentiation and low cost.
HBR July-August 2010! A Tough Balancing Act! © 2011. ! Loizos Heracleous and Jochen Wirtz. Everything behind the scenes is subject to rigorous cost control.! • SIA fosters both centralized and decentralized innovation! • SIA is both a technology leader and follower! Executing a Duo Objective Strategy is difficult and this is what makes it so valuable.! its service is better than rivals’ and its costs are lower: The airline invests heavily in areas of the business that touch the customer in order to enhance its premium positioning. Singapore Airlines’ Balancing Act. It has so far proved to be a sustainable advantage for SIA. Eugene Chang .Duo-Objective Strategy! Case Example: Singapore Airlines (SIA) ! Singapore Airlines (SIA) successfully executes a “dual strategy” of offering premium service and is a cost leader.
I hope this Presentation has been Useful! Thank you. © 2011. Eugene Chang .
Would love to receive feedback or enter a discussion on this topic. It was a rushed job but it did take some time.0. Where I could. June 2011 . Disclaimers and such: I stumbled upon a great presentation “What is Strategy?” by Marc Sniukas on Slideshare and was inspired to extend his ideas with some of my own learning. I provided references to acknowledge the source.edu Version 1. or I screwed up and couldn’t figure out where that thought penetrating my head originated from – all unintentional.. I believe sharing is the best way to learn. Feel free to drop me a line on LinkedIn. © 2011. As I myself have benefitted from the cranium generosity of others.chang@alumni. Not making any money from this so there are no guarantees extended !!although I have made every reasonable effort to be as accurate as possible. we either came up with the same idea independently. I also liberally borrowed from the Internet (from contributors on Wiki to LinkedIn) to supplement the gaps in my own knowledge and experience as a practicing consultant dealing with the occasional strategy engagement. In my research.This presentation was put together to summarize some of the work floating “out there” to help others who are looking for a practical way to go about thinking and communicating strategy. My apologies if something here sounds like what you’ve come up with but were not acknowledged for it. eugene. Eugene Chang.insead.
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