Introduction
Purpose: to create competitive advantage that generates superior, sustainable financial returns
Strategy is a firm’s answer to: Where should we compete &How should we compete
Strategy consists of choices. Developing a good strategy is not easy. The right set of choices is not
obvious, as they are made in a context of uncertainty and executed using finite resources
A successful strategy demonstrates consistency: With the realities of the external environment;
With regard to internal activities; With respect to longer term dynamics in the industry and
organization
Big questions: What is our aspiration? What is our reality? What are our objectives? What is our
strategy? What is our plan? 6Is: Information; Insight; Ideas; Implications; Imperatives; Implements
Decision Science: Frame; Alternatives; Evaluation; Plan/ Consulting: Define & Solve Problem
Sustainable competitive advantage
Reeves: In order to stay on top, or even just to tread water and stay still, you need to constantly
reimagine your business
McKinsey: cycle. The conclusion? Winners change their business mix, year after year. Laggards sit
still
McGarth: The presumption of stability creates all the wrong reflexes. It allows for inertia and power
to build up along the lines of an existing business model. It allows people to fall into routines and
habits of mind. It creates the conditions for turf wars and organisational rigidity. It inhibits
innovation. It tends to foster the denial reaction rather than proactive design of a strategic next step
Decision quality
Decision = a choice between two or more alternatives that involves an irrevocable allocation of
resources; Strategic decision = important in terms of the actions taken, the resources committed, or
the precedents set
Outcome= function (Chance & Decision); Individual outcomes are not guaranteed, but the
probability of a good outcome for each decision is improved, and overall the outcomes of a set of
decisions will be better, if a good process is followed
Conditions for the reliability of intuition
Cognitive laziness: defines a limited mental focus when it comes to processing the information you
receive; Availability Heuristic: We judge the likelihood of something based on how easily an example
or case comes to mind ... but Availability ≠ Probability;
Causes of Mistakes & Misses: Well-intentioned behaviour (Unaware, Biological discomfort,
Heuristics, Cognitive biases, Noise, Probability innumeracy), Social Influences, Self-serving behaviour
(Malice)( Bounded ethically, Motivational Biases)
1.Stable, linear environment 2. Numerous learning opportunities 3. Swift feedback
Instinct: Behaviour based on innate patterns=Reacting; Intuition: Drawing from existing patterns=
Feelings; Insight: Generating new patterns=Realising
Mindsets
Sustainable competitive advantage can be achieved? No, frequently refresh strategy for transient
competitive advantage; Decision quality should be judged on the outcome? No, decision quality
should be judged on the decision making process; Our intuition when deciding is reliable? No, our
intuition is unreliable for strategic decision making=Frequently refresh strategy by following a
proven, data-driven process to reliably make high quality strategic decisions
Decisions are the only means to change the performance of their firm (Howard & Abbas, 2016)
Bounded rationality=
“Satisfice” (Simon, 1955)=
Heuristics / intuition=
Cognitive biases (Tversky & Kahneman, 1974)=
Distinct types of overconfidence= 1. Thinking that you are better than you are & 2. Excessive faith
that you know the truth
Impact of Overestimation: Hubris leads to overinvestment (Roll, 1986)and might also lead to
underinvestment(Heaton, 2002); Underestimate project risk, so less likely to postpone the decision,
more willing to, and quicker to, undertake risky projects (Gervais et al., 2002, 2011; Goel & Thakor,
2008); Innovate more, but opposite findings on ROI; More likely to pioneer, but less likely to achieve
success (Simon and Houghton, 2003); Develop a vision that is appealing and
motivating to followers = Overestimation and overprecision are uncorrelated and are causal drivers
of firm performance
Vertical Integration: The market is too risky and unreliable—it "fails”; Companies in adjacent stages
of the industry chain have more market power than companies in your stage; Integration would
create or exploit market power by raising barriers to entry or allowing price discrimination across
customer segments; The market is young and the company must forward integrate to develop a
market, or the market is declining and independents are pulling out of adjacent stages; Do not
vertically integrate unless absolutely necessary. This strategy is too expensive, risky, and difficult to
reverse.
Corporate Strategy: About the overall scope of the organisation and how value is added to the
constituent businesses
Scope: Market Expansion & Vertical Horizontal Integration
Portfolio Matrices: BCG (Market growth vs Market Share) Stars; ?; Cash Cows; Dogs; McKinsey (SBU
Strength vs long-term Market attractiveness) analysed by market size and market share
Corporate Parenting: Portfolio Manager (Small Office Size, Focus Downwards, investing &
intervening); Synergy Manager (Large Office size; Focus Across, facilitating cooperation); Partner
Developer (Large Office Size; Focus Downwards; providing parental capabilities)
Strategic planning: Strong planning influence on strategic direction from corporate centre with
relatively relaxed performance accountability for Bus (Planning influences: Corporate Centre & BU
Accountability Low)
Strategic control: More consensual development of the strategic plan and moderate levels of BU
accountability (Planning influences Mid & BU Accountability Mid)
Financial control: BUs set their own strategic plans, after some negotiation with the corporate
centre, then held strictly accountable for the results (Planning influences: Business Unit& BU
Accountability High)
Resources & Capabilities
Resource-based view: Firms have different resources and capabilities; difficult to copy; Competitive
advantage arises from capabilities (how we do things); What are resources and capabilities
(Resources – what we have (nouns) &Capabilities – what we do (verbs)/ ways in which (tangible,
intangible) resources are deployed)
Strategic Capabilities: Capabilities are needed to survive and thrive; Need to be at least at threshold
level (minimum level to meet customer requirements); “ticket to play”; Dynamic, e.g., based on
competitor activity ; Distinctive capabilities; Capabilities that are required for competitive
advantage; Competitive advantage (and potential for sustainable competitive advantage) if VRIO;
Sustainable advantage is more often found in the way capabilities are linked and integrated
(especially historically and culturally): Interdependence!
VRIO: Competitive disadvantage; (V) Competitive Parity; (VR) Temporary CA; (VRI) Unused CA;
(VRIO) Sustainable CA
Barney’s Sustainable CA: A firm has competitive advantage when it has a value-creating strategy
that its rivals do not have; It is a sustained competitive advantage when rivals are unable to
duplicate the benefits of this strategy; Sustained competitive advantage does not refer to the period
of calendar time of competitive advantage • Thus, sustained competitive advantage does not imply
that it will “last forever”; Competitive advantage is sustained if it still exists after efforts to duplicate
the advantage have ceased; Possibilities for sustained competitive advantage if its rests on
distinctive capabilities that are VRIO
Trends & Challenges
Global growth shifts: Globalisation; Emerging Markets; Nationalisation
Accelerating industry disruption: Disruptive Innovation; Blockchain; Platform
Economy; Ecosystems
New societal deal: Terrorism; Youth unemployment; Lack of Trust
Macro Challenges: Climate change and biodiversity loss; Poverty and income
equality; Population growth and urbanization; Geopolitical tensions and war
Persistent Top Performers
Resetting mental models: Avoiding the mindsets of complacency (advantage
and performance will persist) and inevitability (today’s models and practices
are underpinned by some immutable logic)
Adopting new business metrics: Commonly used metrics in business
(growth, market share, and profitability) only indicate what has happened in
the past; forward-looking metrics that assess the company’s fitness for the
future are needed (“freshness” of its revenue mix (the share of sales from
offerings based on recent innovations) or its vitality (the capacity to reinvent
the business and grow sustainably) Embracing a multidimensional approach
to strategy: Run the current business in the short term (by exploiting
existing niches and optimizing operations) and reinventing it for the long
term (by exploring new possibilities and developing a pipeline of future bets)
Reinventing organizational capabilities: New organizational characteristics,
including a diversity of backgrounds and ways of thinking, an environment
that encourages both challenge and collaboration, and the ability to
accelerate the company’s rate of learning (by breaking down hierarchies and
integrating technologies to act on new data rapidly)
Shareholder Model: Dominant in publicly-quoted companies; shareholders
have priority regarding wealth generated by company, as opposed to
employees; shareholder interest is assumed to be largely financial;
shareholder can vote for the board of directors according to the numbers of
their shares, while exerting directly influence through trading of shares/ (+)
Higher Rates of Return; Reduced Risk; Increased Innovation & Stewardship (-
) Diluted Attention; Vulnerable minority; Shareholders; Short Terminism
Stakeholder Model: Principle that wealth is created by a variety of
stakeholders, all deserve a portion; not just shareholders have stake in
future of business; management needs to attend to multiple stakeholders;
Shareholders in Stakeholder model often take larger stakes in companies
than in pure shareholder model, and hold stakes for longer/ (+) Long-term
Horizon; Less reckless risk-taking; Better management; (-) Weaker Decision-
making; Uneconomic investments; reduced innovation / Stakeholder
groups: Economic; Regulatory; Technological; Community / society; Internal
Differences based on: Time Horizon; Risk Appetite; Return Expectations
Principal-Agent Model: conflict of interests & priorities that arise when one
person takes action on behalf of another person. Relevant to showcase the
importance of knowledgeable principals, effective monitoring & aligned
incentives
Knowledge imbalance: Agents typically know more than principals about
what can/should be done (presumably been hired for this); Monitoring
limits: very difficult for principals to monitor closely performance of agents;
Misaligned incentives: Unless incentives are closely aligned to principals’
interests, agents are liable to pursue other objectives that reward them
better (Bonus Schemes)
Board Strength
Characteristics: Devil’s advocate – the devil is in the details; Compliance
specialist – procedure is important; Network – provide resources and open
doors; Specialist – knowledge about the industry/business; Active – candid,
transparent, and thoughtfully ruthless
Long term focus: Strategic clarity – avoid quarter discussions focus on the
future; Demonstrated leadership: finance, talent, strategy
Strategy & Society
Moral – “do the right thing”; sustainability – environmental / community
stewardship; License to operate – tacit / explicit permission; Reputation –
strengthen brand / avoidance of damage
It can be source of opportunity, innovation, and competitive advantage
“The most important thing a firm can do for society is contribute to a
prosperous economy”
Healthy society <-> Successful firms: Creates: Expanding demand for
business; Depends on: Job creation; Wealth and innovation vs A productive
workforce; Efficient utilization of resources; Good government and
regulation
Purpose: Why do we exist? Has an outward focus; Addresses a fundamental
need; Is motivational and unifying Values: What do we hold dear? Are
timeless non-negotiable principles; Have intrinsic value to the people inside
the organisation; Serve as a moral compass Vision: What do we seek to
become? Defines what we want to be known for; Presents a vivid
description of the desired future; acts as a North Star = matter because they
define hat we aspire to become and they direct our strategy
Strategic Groups: Organisations within the same industry with similar
strategic characteristics, competing on similar bases. Characteristics are
different from those in other strategic groups in the same industry
(Example: Low-cost airlines)
Knowing the strategic group helps to: Know your competitors & Know your
customers
Market Segments: A group of customers with similar needs; different from
needs in other parts of the market Segmentation should reflect an
organisation’s strategy
Industry Lifecycle= unknown decrease during lifecycle
Development: Low rivalry; High Differentiation; Innovation Key (Need for
Insight & foresight Demand creation Standards setting)
Growth: Low rivalry; High growth; weak buyers; low entry barriers; growth
ability key (Need for Opportunity identification; Speed; Agility)
Shake out: Increasing Rivalry; lower growth; some exits; marginal & financial
strength key
Maturity: Stronger buyers; Low growth; standard products; higher entry
barriers; Market share & Cost Key (Need for Real options investing)
Decline: Extreme rivalry; typically many exits & price competition; cost &
commitment key
XXXX
Uncertainty
Acronyms used to explain challenges found in strategic environment; influence strategic approach to take
PCU: Pace; Complexity; Uncertainty BANI: Brittle; Anxious; Non-linear; Incomprehensible VUCA: Volatile; Uncertainty;
Complexity; Ambiguity
1: We tend to assume that the broad trends of the past will continue linearly into the future. 2: We typically underestimate
the likelihood of (supposedly) outlying events.3: We often find it difficult to imagine extreme events actually happening.
Levels Of Uncertainty: Clear enough future (Single forecast precise enough for determining strategy; traditional strategy tool
kit); Alternate Futures (Few discrete outcomes that define future; Decision analyses, Option valuation models, game theory);
Range of Futures (range of possible outcomes but no natural scenarios; tech forecasting, scenarios); True ambiguity (no
basis for forecast; analogies; non-linear dynamic models)
Strategic Postures: 1. Shape the Future (Play leadership role in establishing how industry operates e.g. setting standards,
creating demand); 2. Adapt to Future (Win through speed, agility & flexibility in recognizing opportunities in existing
markets); 3. Reserve right to play (invest sufficient to stay in the game but avoid premature commitments)
Portfolio of Actions: No-regrets moves 1,2,3 (strategic decision that have positive payoffs in every scenario); Options 3
(Decisions that yield a significant positive payoff in some outcomes and a small negative in others); Big Bets 1 (Focused
strategies with positive payoffs in one or more scenarios but a negative effect in others); Best firms pursue “no regrets” AND
supplement “shaping bets” with “real options” that allow quick course correction
Scientific decision making
Only scientific if rigorous analysis; What is needed? Strategic possibility → a happy story of success → defines WTP & HTW →
is internally consistent → not yet proven → more than one of them & “Only as good as the best idea” so we need lots of
great ideas; 1. Frame a choice (What are we deciding?); 2. Generate possibilities (What could we do? Inside-out vs Outside-
in); 3.Specify conditions (What needs to be true?); 4. Identify barriers (What conditions are vulnerable?); 5.Design tests (How
do we test these barriers?); 6.Conduct the tests (Are these barriers real?); 7.Make your choice (What should we do?)
Scenarios: A range of possibilities for the future – not predictions/ framework for recognizing and adapting to change over
time – ahead of time. Goal: position for success across a range of possible futures.
Cascade of Choices
What are our goals and aspirations? Becoming concrete about how success is measured. What exactly does the company or
leadership want to achieve, and over what time period?
Where will we play? In which markets will we focus, where we know there are sufficient ideal customers for our current and
future offerings. This could be segments of a market, industries or geographic markets. Important: What are the markets
and customers we are choosing not to have as a focus?
How will we win in chosen markets? What aspects of our business will enable us to get customers to purchase from us?
What is it about our offering that has sufficient perceived value, and how will we convince new customers? What will we
choose not to do? [Note: This is often where companies can find new ways to innovate]
What capabilities must be in place? How will we configure? How will we set up the business in order to achieve success?
Which structures, assets, networks, processes, KPIs and management frameworks will be used to track success?
What management systems are required? Systems, structures, & measures required to support our choices
External Analysis: Need for vigilance (complexity & Volatility) = Vigilant companies before better than vulnerable, neurotic,
or focused; PESTLE: Usually outside the control of the firm; considered as threats or opportunities; Macro-economical
factors can differ per continent, country or even region, so normally a PESTEL analysis done per country = strategic radar
screen; Industry Analysis: Determine the underlying factors and total strength of each force; Assess recent and expected
future changes for each force; Assess the overall industry structure and attractiveness; Determine how to position your
business in relation to the five forces
Internationalization
Drivers: Government Drivers (trade policies, technical standards, host government policies); Market Drivers (similar
customer needs, global customers, transferable marketing); Cost Drivers (scale economies; country-specific differences;
favourable logistics); Competitive Drivers (Interdependence between countries; competitors’ global strategies)
AAA considerations: Aggregation – economies of scale through standardization of regional or global operations; Adaptation
– books revenue and market share by maximizing firm’s local relevance; Arbitrage – exploit differences between markets by
strategic location of parts of the supply chain
Build
Build: Internal development: a firm undertakes on its own to create value by recombining existing capabilities or developing
new ones; Internal exploratory environment: an independent space where teams can experiment with new ideas, resources,
and business models
Advantages: Knowledge and learning; Spreading investment over time ; No availability constraints; Strategic independence;
Culture management / Risks: Over-reliance on internal growth can make your company slow to acquire the new resources
you need to survive in a fast-moving environment
Discovery Driven Planning: is a methodology focused on converting assumptions into knowledge in the quickest and lowest
cost fashion; is suited to high-potential projects whose prospects are uncertain at the start; offers a lower-risk way to move
a new venture forward in the face of “what is unknown, uncertain, and not yet obvious to the competition” so that firms can
“learn as much as possible as cheaply as possible”; Based on: Opportunity portfolio framework; Real options “the right, but
not the obligation”; Reverse financials; Explicit assumption testing
Fail fast, fail cheap, learn, and move on: All investments to have high upside potential (if you succeed, it will be worthwhile);
Investment to determine the potential is relatively small; There is a means to stop making further investments (shut options
down); A portfolio approach to investments (expect many to fail); Funding staged and subject to regular review of
investments
Steps: No assumption should go untested; Critical assumptions should be revisited several times; Always be reducing the
assumption : knowledge ratio; In high uncertainty contexts, the only way to plan is to plan to learn; At checkpoints
assumptions will be revealed to be correct or not; The first competitive response should be put in as a checkpoint too; This
approach gives people permission to learn instead of having them feel obliged to justify differences between what was
planned and what the reality is (As the plan unfolds, your assumption ranges should narrow or the project should be shut
down)
Borrow
Borrow: Contract: arm’s length agreements to use existing products or services from third parties; Alliance: ongoing
collaborative partnerships where partners agree to commit resources to work together for a period while retaining strategic
autonomy. Risks: Relying too heavily on licenses, contracts and alliances can make you vulnerable to your partners’ shifting
priorities
Strategic alliances: two or more organisations share resources and activities to pursue a common strategy (Think about
collective success of the networks as well as your organisations’ self-interest)
Types: Equity alliances, e.g. joint venture or Non-equity alliances, e.g. franchising (can be applied on various industries)
Rationale: Scale, Access, Collusive or Complementary Alliance
Franchising = cloning of successful business concept; Potential franchisees want to see that the clone works before
investing; Franchisor likely to have to start own outlets before initiating franchising concept (average 3.5 owned outlets
before franchising); Large initial investments; Takes time to develop concept and achieve first franchise sale
Franchisor: (+) Rapidly lock in a market position; Initial fees and ongoing royalty payments; Require less management than
company-owned; Franchisees are more motivated; Often have good local market knowledge; (-) Dealing with complaints;
Misalignment of interests, e.g. quality; Need to monitor and control; Risk of trust breakdown; Challenges in selecting good
franchisees
Franchisee: (+) Training and support; Brand name, reputation, image; Lesser and more efficient use of capital; Bulk
purchasing and negotiating; Marketing and brand development; New product introductions; (-) Imposition of controls /
method; Restrictive contracts; Initial fee and royalty payment risks; Brand damage risk from other franchisees
Buy
Buy: Acquisition: cases in which a firm purchases at least a controlling interest in another firm to obtain unfettered use of its
resources. Risks: Too many acquisitions within a short period of time can lead to organizational incoherence and
fragmentation;Reasons: Strategic (Extension; Consolidation; Resources and capabilities); Financial (Financial efficiency; Tax
efficiency; Asset stripping or unbundling); Managerial (Personal ambition; Bandwagon effects)
Reasons for bad acquisitions: Focus on what are they going to get versus what they are going to give; If you can see the
value, others will have seen it too – bidding war – overpayment
How to make successful acquisitions:1. Smarter provider of growth capital (In less-developed capital markets; consolidate a
fragmented industry to achieve economies of scale); 2. Better managerial oversight (Provide target with better strategic
direction, organization, and process disciplines; Daimler got it wrong -$36bn, Danaher is getting it right); 3. Transfer (or
share) of valuable skills (Transfer a specific skill, asset, or capability, possibly through deployment of key individuals)
Growth Cube: Geographic Footprint; Segment; Product
1. Core business optimization: Optimization initiatives designed to increase the market impact of the existing
offering (i.e., untapped share of wallet in existing customer segment);Typical measures: increased cross-/up-
selling rate; improved pricing schemes; increased frequency of use (promotions, customer loyalty schemes, etc.)
2. Portfolio expansion: Development and marketing of new product / service offering to increase share of wallet
in existing customer segment; Typical measures: product variations (increasing sales volumes and/or prices);
extended value chain coverage via product adoption and/or innovation; inorganic backward / forward integration
3. Customer segment expansion: New positioning of existing offering to attract new customer segments (within
the current geographic footprint); Typical measures: marketing innovation (e.g., product / brand positioning);
application transfer / diffusion (i.e. existing solution matched to new problem / unmet demand via systematic
white space screening)
4. Business expansion: Development and marketing of new product / service offering for new customer segments
within the current geographic footprint; Typical measures: product / service or business model innovation
(inexisting industry); entry into new business area (building on internal or external knowledge capital)
5. Geographic expansion: Marketing of existing product / service offering to the existing customer segment in
new geographies; Typical measures: establishment of local sales & distribution presence (build or partner
approach); build-up of local production / supply facilities
6. Geographic portfolio expansion: Development and marketing of new product / service offering that is localized
to the targeted new geography; Typical measures:localized self-made product variation, adaptation or
innovation; local-content offering from co-development/JV production
7. Geographic customer segment expansion: New positioning of existing product / service offering to attract new
customer segments in a new geography; Typical measures: localized marketing strategy; application transfer /
diffusion (i.e. existing solution matched to specific local problem / unmet demand via systematic white space
screening)
8. Geographic business expansion: Development and marketing of new product / service offerings for new
customer segments in a new geography; Typical measures: localized product variations (local content via co-
development/JV production, new product functionality / design); geography-specific product / service / business
model innovation
Gap & Burning Platform
Desired performance: Stakeholder expectations + Market outlook+ Strategic diagnosis
Projected performance: Current strategy + Strategic diagnosis
Gap = desired – projected (Understand the Gap to focus on who to fill it)
Strategy-to-performance gap: Companies typically only realise 63% of their strategy’s promised value/Why?
1. Performance Tracking: Rarely (<15%) track performance against long-term plans. As a result, top managers
can’t easily know whether the projections that underlie their capital-investment and portfolio-strategy decisions
are in any way predictive of actual performance. More important, they risk embedding the same disconnect
between results and forecasts in their future investment decisions. 2. Venetian blinds effect: Dislocated
resource allocation (tragedy development and resource allocation become decoupled) leads to businesses that
destroy shareholder value staying in the portfolio too long
3. Value is lost in translation: Strategies are approved but poorly communicated. The translation of strategy into
specific actions and resource plans is impossible. Lower levels in the organization don’t know what they need to
do. Consequently, the expected results never materialize 4. Invisible Bottlenecks: Performance bottlenecks are
frequently invisible to top management. They have no way of knowing whether critical actions were carried out
as expected, resources were deployed on schedule, competitors responded as anticipated, and so on 5. Fosters a
culture of underperformance: First, unrealistic plans create the expectation throughout the organization that
plans simply will not be fulfilled. Then, as the expectation becomes experience, it becomes the norm that
performance commitments won’t be kept. No real consequences to not achieving the goals.
Porter
Strategy is the creation of a unique and valuable position, involving a different set of activities: operational effectiveness is not
strategy & the essence of strategy is choosing what not to do
Efforts to grow risk blurring uniqueness, creating compromises, reducing fit, and undermining competitive advantage
The growth imperative can be hazardous to strategy
A strategic position is not sustainable unless there are trade-offs with other positions
Differentiation arises from both the choice of activities and how they are performed - otherwise, a strategy is nothing more than a
marketing slogan that will not withstand competition
Generic Strategies: Competitive advantage through: Differentiation – allows a premium to be charged & Cost – compete by offering
lower price
Focus – breadth of customers / needs served & Risk of being stuck in the middle (being all things to all people)
Five competitive forces
1. Entry of competitors. How easy or difficult is it for new entrants to start competing, which barriers exist?
2. Threat of substitutes. How easily can a product or service be substituted?
3. Bargaining power of buyers. How strong is the position of buyers? Can they work together?
4. Bargaining power of suppliers. How strong is the position of sellers? How many are there?
5. Rivalry among the existing players. How much competition is there between existing players?
A sixth force? An organisation is your complementor if it enhances your business attractiveness to customers or suppliers
Implications: Reveal why industry profitability is what it is; Provide a baseline for assessing firm’s strengths and weaknesses
Mintzberg
Pattern in a stream of decisions
Strategy resolves the big issues so that people can get on with the little details. The problem with this, of course, is that
eventually situations change -- environments destabilize, niches disappear, opportunities open up. Then all that is constructive
and effective about an established strategy becomes a liability
Perspective: The way the organisation does things. An inside-out approach, based on adapting past strategies, with an
appreciation of culture. Ploy: A specific manoeuvre to outwit and disrupt the competition. The emphasis is on the threat of
being disruptive. Plan: Overall direction and a course of action. The ‘design school’ of strategy sees this as a formal top-down
structured process. Position: Particular products and services in particular markets. Linked to Michael Porter. An outside-in
approach to strategy. Pattern: Following a consistent behaviour over time. For example, a low- cost strategy. We refer to
intended, realised (deliberate) or unrealised (abandoned), or emergent strategies
Deliberate strategy: top down approach to strategic planning that emphasize on achieving an intended business objective; arises
from conscious, thoughtful, and organized action on the part of a business and its leadership; data-analysis based
Consider a Deliberate Strategy If a company has reached a certain level of maturity and stability, at which point it can shift away
from survival toward growth
Emergent strategy: process of identifying unforeseen outcomes from the execution of strategy and then learning to incorporate
those unexpected outcomes into future corporate plans by taking a bottom up approach to management
Consider an Emergent Strategy If if the future is uncertain, and it isn’t clear what the right long-term strategy should be
Intended Strategy: the strategy that an organization hopes to execute; Realized: strategy that an organization actually follows;
Unrealized: abandoned parts of the intended strategy
Failure to Face the Problem: A strategy is an approach to overcoming obstacles. If you fail to identify and analyze the obstacles,
you don’t have a strategy. Mistaking goals for strategy: Setting goals without a supporting strategy can mislead the
organization. Rumelt cites a military general who may justly ask his troupes for “one last push,” but the goal still needs to be
supported by a clearly defined strategy. A good strategy will create the conditions that will make the “push” effective and
worthy of the effort required. Bad strategic objectives: A long list of goals and projects cobbled together at a planning session,
or a set of ideas that no one has a clue about what to do or how to get there, are signs of bad strategic objectives. Good strategic
objectives, in contrast, focus energy on a very few high impact objectives. And they build a bridge between the obstacles being
solved for by the strategy, and the needed action. Fluff: Rumelt defines Fluff as a “restatement of the obvious, combined with
generous sprinkling of buzzwords that masquerade as expertise designed to mask the absence of thought.” An example of
“fluff” from a retail bank states: “Our fundamental strategy is one of customer-centric intermediation.”
Rumelt
Strategy as a cohesive response to an important challenge; a coherent set of analyses, concepts, policies, arguments, and actions
that respond to a high-stakes challenge ; doing strategy is figuring out how to advance the organization’s interests
Good Strategy: Needs to identify the challenge to respond to/design a way to respond; Kernel of good strategy contains: a
diagnosis: answers: What’s going on here? Simplifies the complexity of reality, Provides a judgment about the meaning of facts,
Often uses a metaphor or analogy, Suggests a domain of action; guiding policy: Answers: What should we do / not do?An overall
approach chosen to cope with or overcome the obstacles identified in the diagnosis, Directs and restrains without being specific,
Says something about how, Uses sources of advantage; and coherent actions: Answers: How should we do it? Dictates how the
guiding policy will be carried out; The use of resources, policies, and manoeuvres that are undertaken should be coordinated
and support each other
Bad Strategy: Fluff. Gibberish masquerading as strategic concepts or arguments. Big words. Esoteric concepts. Illusion of high-
level thinking; Failure to face the challenge. Fails to define the challenge. Without a defined challenge, cannot evaluate or
improve a strategy; Mistaking goals for strategy. Statements of desire rather than plans for overcoming obstacles; Bad strategic
objectives. Fail to address critical issues. Are impractical.