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Strategic Management

GM 105
Dr. Lindle Hatton

CANOE THEORY

Think of your organization as a long canoe


The canoe has a destination
Everyone in the canoe has a seat and paddle
Everyone is expected to paddle
Those who wont paddle have to get out of the
canoe
Those who prevent others from paddling have
to re-adjust or get out of the canoe
There are no passengers in the canoe
The canoe theory understands crisis
The canoe theory says you have the right to be
happy

CANOE THEORY

BUILT TO LAST
Preserve the Core

Stimulate Progress

GOOD TO GREAT

Level 5 Leadership
First WhoThen What
Confront the Brutal Facts
The Hedgehog Concept
A Culture of Discipline
Technology Accelerators
The Flywheel and The Doom Loop

Private versus Public


Organizations

Purpose
Goals
Financing
Decision-Making
Key Stakeholders

Strategic Management
Versus
Strategic Planning

Features of Successful
Strategic Management

Has support of organizations executive


officer.
Is user friendly.
Is participatory, not left to planners.
Is flexible.
Leads to resources decisions.
Engages and motivates all staff.
Is fresh and continuous, not static and stale.

Features (Continued)

Is Proactive
Not a Quick Fix
Part of Quality Management
Payoffs Increase over Time

Lessons Learned About


Strategic Planning

Plans must be tailored to


organization.
No one size fits all.
Time to complete takes longer
expect 50% more than planned.
Process needs a shepherd.
Visionaries needed at beginning and
detail types thereafter.

Why Managers Dont Plan

Time Consuming
High Demands
Not Rewarded
Executives Dont Support It
Too Risky

Strategic Management
Model

Scanning

Strategy Formulation

Where do we want to be?

Strategy Implementation

Where are we now?

How do we get there?

Measurement/Performance

How do we measure our progress?

Strategic Management
Model

Strategy Formulation

Where do we want to be?


Vision
Mission
Values
Goals
Objectives

VISION
Vision without Action is a Daydream
Action without Vision is a Nightmare

Not Optional
Stretch 30+ Years
8-10 Words in length
Future State
Brief and Memorable

VISION (Continued)

Inspiring and Challenging


Descriptive of the Ideal

Vision Examples

Light the Fire Within


A Safer Future for All Communities
See the Mountains Breathe
Freely
To Be the Happiest Place on Earth
To Be the Worlds Best Quick Service
Restaurant

Vision Levels of People

Some people never see it. (Wanderers)


Some people see it but never pursue it on
their own. (Followers)
Some people see it and pursue it.
(Achievers)
Some people see it and pursue it and
help others see it. (Leaders)
John Maxwell, Developing The Leader
Within You, 1993.

VISION EXERCISE

Mission Statement
In the absence of a clearly defined
direction one is forced to
concentrate on confusion that will
ultimately consume you.

MISSION

What is our purpose?


Describes current state
Timeline is 3-5 Years
Builds on our distinctive
competencies
Tends to focus on Core Business
30-35 Words in length

Mission Examples

To Lead All Communities in Disaster


Preparedness, Mitigation, and Recovery by
Maximizing Assistance and Support.
Caltrans Improves Mobility Across
California.
To produce superior financial returns for
our shareholders as we serve our
customers with the highest quality
transportation, logistics, and e-commerce.

MISSION EXERCISE

Corporate Governance

What is it?
Codes of Governance
Role of the Board of Directors
Role of Top Management Team
Executive Compensation

Corporate Governance

System by which a firms owners


control its affairs.
Does it work?

Codes of Governance

The Cadbury Code: 1992


Sarbanes-Oxley Act: 2002
Public Company Accounting Oversight Board
Triple bottom line
Four major issues:

Ownership structure and influence


Fianacial Stakeholder rights and relations
Financial transparency and information disclosure
Board structure and processes (audit)

Role of the Board of


Directors

Monitor
Evaluate and influence
Initiate and determine
Organization of Board

Insiders versus outsiders


CEO/chair position

Committees Effectiveness

Role of Top Management


Team

Who is the TMT?


Executive Leadership and Strategic Vision

Articulates strategic vision for corporation


Sets the model for others to identify and
follow
Communicates high performance standards
and builds confidence in followers abilities to
meet standards

Managing strategic planning process

Executive Compensation

Incentive alignment
Executive Ownership
Incentive compensation

Salary
Bonus
Stock Options
LT Bonus

VALUES

Guiding Principles
Help establish Culture
Part of Preserving the Core
Core Ideology

Value Examples

CHP PRIDE
HP WAY
J & J Credo
Build the Spirit of the Place

Ethical Awareness Model

Organizational Ethics
Individual Ethics
Personal Values

VALUES EXERCISE

Strategic Management
Model

Scanning:

Where are we now?


Macro Analysis (STEP, PESTEL, ETC.)
Industry Analysis Competitive
Intelligence
SWOT Analysis
Internal versus
External Elements

Why Scan?

To know your position in the


environment
To respond effectively to constant
change
To see the organization as a whole
To avoid surprises
To survive
To lay the foundation for strategic issues

SCANNING:
Key Environmental
Macro Environment: STEP, PESTEL
Variables

Task Environment: Industry


Internal Environment: Focal
Organization

Socio-Cultural Variables

Lifestyle Changes
Career Expectations
Regional Shifts in Population
Life Expectancies
More women in workforce
Greater concern for fitness
Postponement of family formation
Increase in temporary workers

Technological Variables

Total Federal Spending for R&D


Total Industry Spending for R&D
Focus of Technological Efforts
Patent Protection
Wireless Communications
Nanotechnology
Productivity Improvements
Genetic engineering

Economic Variables

GDP Trends
Interest Rates
Money Supply
Inflation Rates
Unemployment Levels
Wage/Price Controls
Energy Availability & Cost
Disposable & Discretionary Income

Political-Legal Variables

Antitrust Regulations
Tort Reform
Environmental Protection Laws
Taxation at local, state, federal levels
Hiring and Promotion Laws
Americans Disabilities Act of 1990
Sarbanes-Oxley Act of 2002

Demographic Variables

Aging Population
Rising affluence
Changes in Ethnic Composition
Geographic distribution of
population
Disparities in income levels

Global Variables

Increasing Global Trade


Currency Exchange Rates
Emergence of Indian and Chinese
Economies
Trade agreements (NAFTA, EU,
ASEAN)
Creation WTO

STEP EXERCISE

Socio-Cultural
Technological
Economic
Politico-Legal

Industry Analysis

6 Forces Analysis

Industry Competitors
Suppliers/Vendors
Customers/Clients
Potential New Entrants
Substitutes
Other Stakeholders

Role of Complementors

New Entrants and Entry


Barriers

Absolute cost advantages


Access to inputs
Government policy
Economies of scale
Capital requirements
Brand identity
Switching costs
Access to distribution
Proprietary products

Buyer Power (Channel and


End Consumer)

Buyer volume and information


Brand identity
Price sensitivity
Threat of backward integration
Product differentiation
Substitutes

Supplier Power

Supplier concentration
Differentiation of inputs
Switching costs
Threat of forward integration
Cost relative to total purchases in
industry

Substitutes

Switching costs
Buyer inclination to substitute
Variety of substitutes
Price-performance tradeoff of
substitutes
Necessity for product or service

Degree of Rivalry

Exit barriers
Industry concentration
Fixed costs
Industry growth
Intermittent overcapacity
Switching costs
Brand identity
Diversity of rivals
Corporate stakes

Other Stakeholders

Employees
Unions
Government
Trade and Professional Associations
Other Direct Influencers

Role of Complementors

Number of complements
Relative value added
Difficulty of engaging complements
Buyer perception of complements
Complement exclusivity
Tend to increase profits by increasing
demand for an industrys products

6 FORCES EXERCISE

Competitive Profile
Analysis

Identify Key Competitive Factors


Identify key Competitors

COMPETITIVE PROFILE
EXERCISE

Industry Foresight
Customer
Needs
Unarticulated
Articulated

Customer
Served Unserved

Types

Internal Environment

Internal Profile Analysis


SWOT Analysis

Internal Profile Analysis

Identify Key Core Functions


Identify Key Measures for Core
Functions
Build Matrix

SWOT Analysis

Internal Environment

Strengths
Weaknesses

External Environment

Opportunities
Threats

SWOT EXERCISE

Strategic Management
Model

Strategy Formulation

Where do we want to be?


Vision
Mission
Values
Goals
Objectives

GOAL

Supports the Mission


Deals with One Issue or Item of Focus
Reflects a primary activity or
strategic direction
Describes the To Be State
BHAG
Encompasses a long period, i.e. at
least 3 years

Goal Examples

Achieve excellence in the delivery of


disaster recovery and mitigation programs.
Professionally develop our employees as a
reflection of DADs key attributes and
values.
Increase the supply of housing, especially
affordable housing.
Become a model for customer service.
To provide benefits in correct amounts and
issued in a timely manner.

Goal Statements Litmus


Test

Goal Exercise

OBJECTIVES

Add specificity beyond Goals


Answer the questions

What is to be accomplished?
When?

Should contain the SMART


Elements

OBJECTIVES: SMART Model

Specific
Measurable
Aggressive but Attainable
Results-Oriented
Timeframe

Strategic Objective
Examples

By June 30, 2005 achieve 75% rating on


the DAD service index from all
stakeholders.
Increase sales growth 6-8% in the next 5
years. (P&G)
Cut corporate overhead costs by $30
million per year. (Fortune Brands)
Operate 6,000 stores by 2010 up from
3,000 in the year 2000. (Walgreens)
Reduce greenhouse gases by 10 percent
(from a 1990 bast) by 2010. (BP Amoco)

Objectives Litmus Test

Strategic Objective
Exercise

Strategic Management
Model

Strategy Implementation

Everyone is Responsible
Few Guidelines
No Easy 10-Step Checklist to Follow

Strategic Management
Model

Strategy Implementation

Most open-ended part of Strategic


Mgmt
People implement strategies not
Organizations

Strategic Management
Model

Strategy Implementation

How do we get there?


Work Action Plans
GOOMs

Strategy Implementation
Considerations

7-S Framework Strategic Fit


Human Resources
Patience

7-S Framework

Shared Values
Strategy
Structure
Systems
Skills
Style
Staff

Human Resource Rule

Hire Smart
Train Hard
Manage Easy

Parable of the Bamboo


It takes patience and discipline to develop
and empower people; in fact, its like
growing bamboo. Once the seed is planted,
you must water it daily for four years before
the tree breaks ground then it grows 60
feet in 90 days! Executives who nurture
people can get similar resultsHow, you
ask, can such rapid growth be possible? It
results from the miles of roots that develop
in those first four years. Preparing people to
perform is the task of leadership.

Implementation Strategies

GOOMs
Implementation Conference
CEO involvement
Other Strategies?

GOOMs

Goals
Outcomes
Objectives
Measures

Definitions

Goal: Broad, General BHAG


Outcome: Desired end result and
report
performance
Objective: What and When
Measure: A quantified unit that
assesses progress or
achievement

GOOM Example
Goal 1: Achieve excellence in the delivery
of disaster recovery and mitigation.

Outcome: Increased Customer


Satisfaction

Objective 1.1: By June 30, 2005,


achieve 75% rating on the DAD Service
Index from all stakeholders.

Measure: DAD Service Index (DSI)

GOOM Exercise

Work Action Plan Template


Sponsor:
Organization:
n.n

Completion Date

Goal
Outcome

n.n

Objective
Measure
Task Description

Team Lead

Staff Hours

Completion
Date

Plan- Do-Check-Act

Strategic Management
Model

Measurement / Performance

Why do we measure our progress?

Why Measure?
Reactive Reasons
Government Intervention
Fewer Resources and Smaller
Budgets
Increased Demand for
Accountability
Mandated

Why Measure?
Proactive Reasons
Makes us more responsive to public needs
Provides feedback on mission
accomplishment
Creates blueprint for linking budget to
outcomes
Good management and good public policy

Measurement /
Performance

How do we measure our progress?


5 Types of Measures

Input
Output
Outcome
Quality
Efficiency

INPUT Measure
Amount of resources needed to provide a
particular product or service.
Examples:
Number of FTEs or PYs
Number of eligible clients
Number of customers requesting service
Number of applications received
Number of sales orders received

OUTPUT Measure
Amount of products or services provided
Examples:
Percent of highways resurfaced
Number of police reports filed
Number of vaccinations given to schoolage children per year
Number of shafts produced in a single
operating shift

OUTCOME Measure
Reflect the actual results achieved and/or
their impact or benefit.
Examples:
Reduction in incidence of disease
Percentage of discharged patients living
independently
Percent of increase in tourists
Percent of monthly programmed sales
orders filled on time

QUALITY Measure
Reflect the effectiveness in meeting the
expectations of customers and
stakeholders
Examples:
Number of defect reports compared to
number of reports produced
Number of course ratings in highest
category related to total number of
course ratings

EFFICIENCY Measure
Also known as productivity
measures. Reflect the cost of
providing products or services.
Examples:
Output/Input
Output/Time
Output/Cost
Outcome/Cost

Keeping Plans Off The


Shelf

All Staff Meeting


Announce Phases
Review and Assess Plans at Quarterly
Sessions
Sponsors and Team Leads for
Strategic Goals and Strategic
Objectives
Deming Philosophy PDCA

Developing Bench
Strength

Drill Down Application


Sponsors, Team Leads, and Team
Members
Work Action Plan
Project Champion
Leadership Training
Leadership Conference Presentations

Establishing
Organizational
Training Emphasis
Permanence

Certification
Awards & Recognitions
Caught-Ya
Celebrations
Walk the Walk

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