STRATEGY

DEVELOPMENT

Key Concepts and Frameworks

Chiligum Strategies
2012

In peace prepare for war, in war prepare

for peace. The art of war is of vital
importance to the state. (512 BC)

strategies,
that make a difference.
www.chiligum.com

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2.
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4.

what about strategy?

strategic analysis
strategy development
strategy implementation

If one does not know to which port one

is sailing, no wind is favorable.
(Lucius Annaeus Seneca)

Foto:

What about
Strategy?

Carl von Clausewitz (1780-1831)

Tactics is the art of using troops

in battle; strategy is the art of
using battles to win wars.

Helmuth Karl Bernhard

Graf von Moltke (1800 - 1891)
Strategy is the practical adaptation
of the means placed at a general's
disposal to the attainment of the
object in view.

Competitive strategy is about being

different. It means deliberately choosing
a different set of activities to deliver
a unique mix of value.
Michael Porter (1996:64)
Foto:
photo: Allesandra
Fratu

Kenneth R Andrews (1916-2005)

the pattern of objectives, purposes
or goals and major policies and plans
for achieving these goals stated in
such a way as to define what business
the company is or is to be in and the
kind of company it is or is to be.

Kenichi Ohmae (* 1943)

Strategy essentially deals with the
interplay of three forces:
Customer, Corporation, Competition.
Good strategy is characterized through

Clear market definition

Good match between corporate strengths
and needs of the market
Superior performance in the key success
factors of the business

(in: Jain 2004)

Peter Edelmann
Strategy Development is a questionbased process:
Where are we now? Where do we like
to go? How do we get there?
Peter Edelmann, Senior Executive
President Voith Turbo

Strategic
Analysis

Mental Models
Mental Models are deeply ingrained
assumptions, generalizations, or even
pictures or images that influence how
we understand the world and how we
take action. Very often, we are not
consciously aware of our mental
models or the effects they have on
our behaviour.

Senge P (1992:8)

PESTEL Analysis
What are the key issues, that impact your business?

Political
Environment

Economical
Environment

Social
Environment

Technological
Environment

Environmental
Environment

Legal
Environment

SWOT Analysis (Andrews)

FIT matters! Task, to match internal strength and weaknesses
with external opportunities and risks

STRENGTH

OPPORTUNITIES

WEAKNESSES

RISKS

Keep findings descriptive; Investigate both internal AND external issues

Ohmahe - Key Success Drivers

What factors and drivers are

especially important to perform
superior in your industry?

Ohmahe (K 1982)

Market Orientation / Behavioral View

Market orientation is the
organizationwide generation of market
intelligence pertaining to current
and future customer needs,
dissemination of the intelligence
across departments, and
organizationwide responsiveness to
it.

Kohli, Jaworski (1990:6)

Market Orientation / Cultural View

Market orientation it the
organization culture that most
effectively and efficient creates the
necessary behaviours for the creation
of superior value for buyers and,
thus, continuous superior performance
for the business.

Narver, Slater (1990:21)

Competitor Intelligence
Who are your key competitors?
How do they perform?
What are there strengths and weaknesses?
What could be their strategy?
How could all of this impact your
business?

Strategy
Development

Purpose and Culture

Vision

long-term, encouraging, aspiration for the

future

Mission

purpose of the business

Values

attitudes, behaviours, character of

organization to guide actions like an
internal compass

Purpose and Value

Strategy development requires to
understand the benefit of having a
well-articulated, stable purpose, and
the importance of discovering,
understanding, documenting, and
exploiting insights about how to
create more value than other
competitors do

Campbell (1997 p 42)

Point of View
Universal objectives (profitability,
costs, turnover, sales, quality, etc. )
define what a company must do to survive
However do not automatically suggest
unique strategies nor provide any
direction
The essence of why an organization exists
does provide guidance to achieve these
universal objectives

Campbell (1997 p 42)

Planning Processes
Processes of developing good strategies
aremuch more messy, experimental,
iterative; and driven from
the bottom up than many planning
processes suggest
Besides, if there were one best way,
everyone would use it
However, processes and frameworks do
provide structure, help to systematize the
basis and context for decision taking and
document results along the way

Campbell (1997 p 46)

Generic Strategies

Narrow Target Broad Target

Competitive Scope

Competitive Advantage
Differentiation

Lower Cost

DIFFERENTIATION

COST
LEADERSHIP

Niche Market

FOCUS

Porter (1985)

Efficiency

Core Marketing Strategies

Operational
Excellence

Product
Leadership

Customer
Intimacy

Strategic
Direction

Sharpen distribution
systems and provide
no-hassle service

Nurture ideas,
translate them into
products, and market
them skillfully

Provide solutions and

help customers run
their business

Organizational
Arrangement

Has strong, central

authority and a finite
level of empowerment

Acts in an ad hoc,
organic, loosely knit,
and ever-changing
way

Pushes empowerment
close to customer
contact

Systems
Support

Maintain standard
operating procedures

Reward individuals
innovative capacity
and new product
success

Measure the cost of

providing service and
of maintaining
customer loyalty

Corporate
Culture

Acts predictably and

believes one size fits
all

Experiments and
thinks out-of-the-box

Is flexible and thinks

have it your way

Tearcy, Wiersema (1995)

Current Markets

New Markets

Current Products

Market
Penetration

Market
Development

New Products

Strategic Moves

Product
Development

Diversification

Ansoff (1965)

Strategic Business Units

An SBU is composed of a product or
product lines having identifiable
independence from other products or
product lines in terms of
competition, prices, substitutability
of product, style/quality and impact
of product withdrawal.

Jain (2004 p. 18)

SBU Characteristics
Unique business mission, independent of
other SBUs
Clearly definable set of competitors
Able to carry out integrative planning
relatively independently of other SBUs
Large enough to justify senior management
attention, but small enough to serve a
useful focus for resource allocation

Jain (2004)

Defining SBUs
Customer Groups

Technologies
Customer Functions

Good Segmentation
Identifiability

Ability to identify + measure relevant

characteristics

Size and Stability

Sufficient number of buyers

Needs or factors do not change too rapidly

Accessibility

Ability to reach target segment in

economical way

Responsiveness

Segment responds homogeneously to

a specific marketing mix
Schiffman et al. (2005)

Ultimate Check

Meaningful
Actionable
Financially attractive

Business Model
Customer Benefits

Configuration

Company Boundaries

Customer
Interface

Core
Strategy

Strategic
Resources

Value
Network

Fulfilment & Support

Business Mission

Core Competencies

Suppliers

Information &
Insight

Product/Market
Scope

Strategic Assets

Partners

Relationship
Dynamics

Basis for
Differentiation

Core Processes

Coalitions

Pricing Structure

Efficient / Fit / Profit Boosters

Hamel G (2002)

Strategy As Simple Rules

To allow quick moves in dynamic markets
Focus on pursue of opportunities by
increasing flexibility in decision taking
Just enough guidance and structure by a
limited set (<10) of simple and unique
rules regarding key processes
Rules mainly experience-based, important
to neither set rules too broad nor too
vague
Challenge to balance long-term perspective
and to adapt rules to changing conditions
Eisenhardt (2001 pp. 108-115)

Types of Rules
How-to rules, guiding execution of key
processes
Boundary rules, limiting range of
opportunities (company scope)
Priority rules, setting priorities for
resource allocation
Timing rules, adapting internal schedules
to the pace of markets
Exit rules, defining criteria to exit
opportunities in the light of
unpredictable developments
Eisenhardt (2001 p. 111)

Innovation and Change

Understanding mental models

Mindsets that influence decision making

Task to make the implicit explicit and to
constantly question and challenge those
long-held believes

Thinking beyond best-practice

necessary but not sufficient, while

leading towards performance barrier
Dream, create, explore, invent, pioneer,
imagine (Hamel G 2002 p. 28)

Changing the rules of the game!

From market driven to market driving by

value proposition AND business system

Bickhoff N 2008, Hamel G 2002, Kumar N 2000, Porter 1996

Strategy Evaluation
Suitability: Is there a sustainable
competitive advantage?
Feasibility: Does firm have the skills,
resources, and commitments?
Internal consistency: Does strategy hang
together?
Vulnerability: What are the risks and
contingencies?
Workability: Can we retain our
flexibility?

Jain (2004)

Strategy
Implementation

Predicting rain does not count

building arks does. (anonymous)

Strategy Maps
To visualize cause-effect relationships
among key drivers
To support strategy alignment and to
facilitate strategy communication
Each perspective supports the execution on
the next level
Strategy Maps link to Balanced Score Card
Generic maps provide guidance to develop
unique maps tailored to company
Best applied at various levels (corporate,
SBU, department)
Kaplan, Norton (1996, 2004, 2008)

Strategy Map
Increase ROI
Financial
Perspective

Increase revenues in
existing segments
and markets

Grow revenues in new

products and services

Grow High-Value
Customer Relationships

Accelerate Product
Innovation

Be a leader in quality
and reliability

Provide valued service,

applications expertise,
and support

Introduce innovative,
high-performance
products and solutions

Improve supply chain

efficiency and effectiveness

Optimize customer
profitability

Excel at technology,
product development
and life cycle
management

Improve productivity
Improve Operating
Quality and Efficiency

Customer
Perspective

Process
Perspective

Improve quality, cost,

and flexibility of
operating processes

Learning
and Growth
Perspective

Expand channels
offerings, and markets
Build and maintain strong
customer relationships

Identify next-generation
market opportunities

Create a high-Performance Culture

Expand and build
Enable and require
Develop leadership and
strategic skills, capabilities,
continuous
learning and
execution-driven culture
and expertise
sharing of knowledge

Kaplan, Norton (2008)

Balanced Score Card

Performance measuring system to include
and quantify intangible assets
Customer perspective, internal processes
and learning as building blocks
Financial performance as ultimate
indicator
Companies vision and mission stand above
providing overall direction
You cannot manage, what you cannot
measure.

Balanced Score Card

Set global goals

What do you generally aim at?

Define measures

How will you measure your results?

Set targets

What specific goals related to your

measures you like to achieve in a certain
time frame?

Plan initiatives

What actions will take place to meet your

goals?

There are three kind of companies,

those that make things happen,
those that watch things happen
and those that wonder what happened.
(anonymous)

Many thx to my readers,

a thousand thx to my teachers!
Any question or suggestion?!
Looking forward!
Benjamin Teeuwsen
benjamin@chiligum.com
www.chiligum.com

must reads - click here!

Andrews K R (1987) The Concepts of Corporate Strategy Richard D

Unwin, Homewood
Bickhoff N (2008) Quintessenz des strategischen Managements
Was Sie wirklich wissen mssen, um im Wettbewerb zu berleben
Springer-Verlag, Berlin
Campbell A, Alexander M (1997) Whats Wrong with Strategy? HBR
Nov-Dec,
pp. 42-51
Eisenhardt K M, Sull D N (2001) Strategy as Simple Rules HBR
Jan-Mar, pp. 107-116
Hamel G (2002) Leading the Revolution Harvard Business School
Press, Boston USA
Jain S C (2004 7th ed.) Marketing: Planning and Strategy
Thomson, Ohio USA
Kaplan R S, Norton D P (2008) Mastering the Management System
HBR, Jan,
pp. 63-77
Kaplan R S, Norton D P (2004) Strategy Maps Boston
Kaplan R S, Norton D P (1996) The Balanced Scorecard Boston

References

Kohli A K, Jaworski B J (1990) Market Orientation: The

Construct, Research Propositions, and Managerial Implications
Journal of Marketing, Vol. 54, No. 2,
pp. 1-18
Kumar N, Scheer L, Kotler P (2000) From Market Drive to Market
Driving European Management Journal Vol. 18 No. 2, pp. 129142
Narver J C, Slater S. F. (1990) The effect of a market
orientation on business profitability Journal of Marketing,
Vol. 54, No. 4, pp. 20-36
Porter M E (1996) What is Strategy? Harvard Business Review,
No. 6, Nov-Dec,
pp. 61-78
Porter M E (1985) Competitive Advantage Free Press, New York
Schiffman L et al. (2005) Consumer Behaviour Pearson Education
Australia,
Frenchs Forest NSW
Senge P M (1990) The Fifth Discipline: The Art and Practice of
the learning Organization Currency Doubleday
Treacy M, Weirsema F (1995) The Discipline of Market Leaders:
Choose Your Customers, Narrow Your Focus, Dominate Your
Market Perseus Books, Cambridge
References

Further Concepts
Blue Ocean Strategies (Kim, Mauborgne )
Sustainable Competive Advantage
Systems Thinking
Core Competencies (Hamel, Prahalad)
Strategic Intent (Hamel, Prahalad)
Distinctive Capabilities (Day)
Five Forces (Porter)
Value Chain (Porter)
Resource-based view (Barney, Clark)
Portfolio Analysis (BCG, McKinsey, etc.)
Product Lifecycle, Industry Lifecycle
Six Sigma (Pande, Neuman, Cavanagh)
Total Quality Management