STRATEGIC

MANGEMENT
Strategic Control, Continuous Improvement and
E-business

Indra Prasad Joshi

1
 Tracks a strategy as it is
implemented, detects problems
or changes in its underlying
premises, and makes necessary
Whatadjustments.
is Strategic
Control? 2
Questions Involved in Assessing a Strategy’s Success

1. Are we moving in the proper direction?

Are our assumptions about major trends
and changes correct? Should we adjust
or abort the strategy?

2. How are we performing? Are objectives

and schedules being met? Are costs,
revenues, and cash flows matching
projections? Do we need to make 3
operational changes?
 1. Strategic surveillance

2. Premise control

3. Special alert control

4. Implementation con
Four Types of Strategic
Time 1
Control
Strategy formation
Time 2
Strategy implementatio
4
Time 3
 Definitions of Strategic Controls
• Premise Control - Designed to check systematically and
continuously whether premises on which the strategy is based are
still valid
• Implementation Control - Designed to assess whether the overall
strategy should be changed in light of the results associated with the
incremental actions that implement the overall strategy
• Strategic Surveillance - Designed to monitor a broad range of
events inside and outside the firm that are likely to affect the course
its strategy
• Special Alert Control - Thorough, and often rapid, reconsideration
of the firm’s strategy because of a sudden, unexpected event 5
Characteristics of Strategic Controls
Types of Strategic Control
Basic Premise Implement Strategic Special
Characteristics Control ation Surveillanc Alert
Planning Control Potential
e Occurrence
Control of
Key strategic recognizable
Objects of premises threats and
thrusts and but unlikely
control and opportunitie
milestones events
projections s
Degree of
focusing High High Low High
Data
acquisition:
Medium High Low High
Formalization
Centralization Low Medium Low High
Use with:

Environmental Yes Seldom Yes Yes

factors
Industry
factors Yes Seldom Yes Yes
Strategy-
specific No Yes Seldom Yes
factors
Company-
6
specific No Yes Seldom Seldom
factors
 Systems that guide, monitor, &
evaluate progress in meeting
short-term objectives, providing
post-action evaluation and
What areover
control Operational
short periods.
Controls? 7
 Establishing Effective Operational Control Systems

1.
1. Set
Set standards
standards of
of
performance
performance

Steps
Steps 2.
involved 2. Measure
Measure actual
actual
involved performance
in performance
in post
post
action
action
control 3.
3. Identify
Identify
control
systems deviations
deviations from
from
systems
standards
standards set
set

4.
4. Initiate
Initiate 8
corrective
corrective action
action
 Types of Operational
Control Systems

Budgets

Key success
Schedules factors
9
1. Profit and loss budgets: Monitor sales
and expense categories on a monthly or
more frequent basis

2. Capital budgets: Show timing of

specific expenditures for plant,
equipment, machinery, inventories, and
other capital items

3. Cash flow budgets: Forecast receipt

Types of Budgets
and disbursement of cash during the
budget period
10
Key Success Factors at IBM’s Lotus Notes Division

Key Success
Measurable Performance Indicator
Factor
1. Product a. Performance data versus
quality specification
b. Percentage of product returns
c. Number of customer complaints
2. Customer a. Delivery cycle in days
service b. Percentage of orders shipped
complete
c. Field service delays

11
Key Success Factors at IBM’s Lotus Notes Division Contd….

Key Success
Measurable Performance Indicator
Factor
3. Employee a. Trends in employee attitude
morale survey
b. Absenteeism versus plan
c. Employee turnover trends
4. a. Number of firms competing
Competition directly
b. Number of new products
introduced
c. Percentage of bids awarded
versus standard

12
 EXAMPLES OF STRATEGIC CONTROL
IMPLEMENTATION CONTROL AT DAYS INN
 When Days Inn pioneered the budget segment of the lodging
industry, its strategy placed primary emphasis on company-
owned facilities and it insisted on maintaining a roughly 3-to-1
company owned/franchise ratio. This ratio ensured the parent
company’s total control over standards, rates, and so forth.
As other firms moved into the budget segment. Days Inn
saw the need to expand rapidly throughout the United States
and, therefore, reversed its conservative franchise posture.
This reversal would rapidly accelerate its ability to open new
locations. Longtime executive, concerned about potential loss
of control over local standards, instituted implementation
controls requiring both franchise evaluation and annual
milestone reviews. Two years into the program. Days Inn
executives were convinced that a high franchise-to-company13
ratio was manageable, and so they accelerated the growth of
franchising by doubling the franchise sales department.
 EXAMPLES OF STRATEGIC CONTROL
Contd...

STRATEGIC SURVELLIANCE AT CITICORP

 Citicorp has been pursuing an aggressive product

development strategy intended to achieve an annual
earnings growth 15 per cent while it becomes an
institution capable of supplying clients with any kind
of financial service anywhere in the world. A major
obstacle to the achievement of this earnings growth
is Citicorp’s exposure to default because of its
extensive earlier loans to troubled Third World
countries. Citicorp is sensitive to the wide variety of
predictions about impending Third World defaults.
14
 EXAMPLES OF STRATEGIC CONTROL
Contd...
Citicorp’s long-range plan assumes an annual 10
per cent default on its Third World loans over any
five-year period. Yet it maintains active strategic
surveillance control by having each of its
international branches monitor daily announcements
from key governments and from inside contacts for
signs of changes in a host country’s financial
environment. When that surveillance detects a
potential problem, management attempts to adjust
Citicorp’s posture. For example, when Peru’s former
president, Alan Garcia, stated that his country would
not pay interest on its debt as scheduled. Citicorp
raised its annual default charge to 20 per cent 15
of its
$ 100 million Peruvian exposure.
 EXAMPLES OF STRATEGIC CONTROL
Contd...
 SPECIAL ALTERT CONTROL AT UNITED AIRLINES
The sudden impact of an airline crash can be devastating to a
major airline. United Airlines has made elaborate preparations to
deal with this contingency. Its executive vice president, James M.
Guyette, heads a crisis team that is permanently prepared do
respond. Members of the team carry beepers and are always on
call. If United’s Chicago headquarters receives word that a plane
has crashed, for example, they can be in a “war room” within an
hour to direct the response. Beds are set up nearby so team
members can catch a few winks; while they sleep, alternates take
their places.
Members of the team have been carefully screened through
simulated crisis drills. “The point is to weed out those who don’t
hold up well under stress,” says Guyette. Although the team was
established to handle flight disasters, it has since assumed an
expanded role. The crisis team was activated when American
16
Airlines launched a fare war. And according to Guyette, “We’re
brainstorming about how we would be affected by everything from
a competitor who had a serious problem to a crisis involving a
hijacking or taking a United employee hostage.”
 KMART GETS SOME BAD NEWS BY BENCHMARKING INDUSTY
SUCCESS FACTOS AGAINST A KEY RIVAL - 1995
Key Success Factor Kmart Wal-Mart
to Benchmark
Core customer Over 55; more than Under 44K, $ 40 income
$20 k income and no and kids at home
kids at home
Sales/square foot $ 185 $ 379
Shopper visits/year 15 times per year 32 times per year
Loyal to the chain 19 per cent of Kmart 46 per cent of Wal-
customers Mart customers
Location 36 per cent of 49 per cent of Wal
Americans find their Mart customers drive
newest Kmart past a Kmart to go to
inconvenient compared Wal-Mart
to other stores
17
 MonitoringObjecti
and Evaluating
Forecas
Performance Deviations
ve, t
Current Current
Key Success Assum Perfor
Perfor Deviati Analysis
Cost control:
Factors ption, mance
mance on
Ratio of or at This Are we moving too fast,
indirect Budget Time or is there more
+3
overhead cost 10% 15% 12% unnecessary overhead
(ahead)
to direct field than was originally
and labor thought?
costs
Gross profit 39% 40% 40% 0%

Customer
service: 2.5 3.2 2.7 +0.5 Can this progress be
Installation days days days (ahead) maintained?
cycle in days
Why are we behind
Ratio of
-0.6 here? How can we
service to
3.2 2.7 2.1 (behind maintain the
sales
) installation-cycle
personnel
Product progress?
quality: -0.1% 18
Why are we behind
here? What are the
Percentage of 1.0% 2.0% 2.1% (behind
ramifications for other
products )
operations?
returned
Monitoring and Evaluating Performance Deviations (concluded)
Objective, Forecast
Key Success Assumptio Performan
Current
Current
Performan Analysis
Factors n, or
Budget
ce at This
Time
ce
Deviation

Product -12%
performance Why are we behind
versus
100% 92% 80% (behin here?
specification d)

Marketing: +$600 Good progress. Is it

$12,5 $11,50 $12,10
Monthly sales (ahea creating any problems
per employee 00 0 0 to support?
d)
+2
produ Are the products ready?
Expansion of
product line 6 3 5 cts Are the perfect
(ahea standards met?
Employee
d)
(on
morale: target) Looks like a problem!
Absenteeism 2.5% 3.0% 3.0% -8%
(behind Why are we so far
rate 5% 10% 15% ) behind?
Competition:
Turnover rate
New product -3 19
Did we underestimate
timing? What are the
introductions 6 3 6 (behin implications for our
(average d)
number) basic assumptions?
 The Quality Imperative: Concepts Related to TQM

• Viewed as a new organizational culture and way of

thinking
• Foundations of TQM
• Intense focus on customer satisfaction
• Accurate measurement of every critical variable in a
business’s operation
• Continuous improvement of products, services, and processes
• Work relationships based on trust and teamwork 20
1. Define quality and 6. Adopt an error-free
customer value attitude

2. Develop a customer
7. Get the facts first
orientation
8. Encourage all levels
3. Focus on company’s
of employees to
business processes
participate
4. Develop customer 9. Create an
and supplier atmosphere of total
partnerships involvement
10. Strive for
KeyaElements
5. Take of Implementing
preventive TQM
continuous
21
approach
improvement
 The Value Chain Approach to Developing
a Customer Orientation

Inp
External ut
supplier
s External
Function (ultimat
(like production)Outputs e)
custome
r
Seeking:
Other
Quality internal
Efficiency custome
Outputs
Internal ut Responsiveness rs
p (activiti
supplier In
es)
s
(function
22
s)
 Examples: Ways to Enhance Customer Value

Quality Efficiency Responsiveness

Provides Targets Quickly uncovers
Marketin accurate advertising and reacts to
g assessment of campaign at changing market
customer’s customers, using trends
product cost-effective
Minimizes scrap Quickly adapts to
Consistently
preferences to medium
and rework latest demands
Operation produces goods
R&D through high- with production
s matching
engineering production yield flexibility
design
Designs Uses computers Carries out
products that to test feasibility parallel
of idea before
R&D combine product/process
going to more
customer expensive full- designs to speed
demand and scale prototype up overall
production innovation 23
capabilities
 Examples: Ways to Enhance Customer Value
Contd...
Responsivenes
Quality Efficiency
s
Provides Simplifies and Provides
information computerizes information in
Accoun
ting that to decrease “real time” (as
managers in cost of events
other gathering described are
Schedules
functions
Selects Given required inbound
information still happening)
need to make deliveries
vendors for vendor quality,
Purchas decisions efficiently,
ing their ability to negotiates avoiding both
join in an prices to extensive
effective provide good inventories
In response andto
“partnership”
Trains work value
Minimizes stock-outs
strong growth in
force to employee sales, finds
Person turnover large numbers
nel perform
required tasks reducing hiring of employees24
and training and quickly
teaches needed
expenses
skills
 QUALITY IMPROVEMENT PROCESS

Phase Step
PLAN 1. Select Improvement Opportunity
2. Analyze current situation
3. Identify root causes
4. Select and plan solution
DO 5. Implement pilot solution

Check 6. Monitor results and evaluate solution

ACT 7. Standardize
8. Recycle

25
 SELECT IMPROVEMENT OPPORTUNITY

• Generate list of opportunities/problems

• Select important opportunity based on criteria
• Redefine team
• Write problem/opportunity statement
• Summarize project/define road map
• Management review
26
 ANALYZE CURRENT
SITUATION
• Define process to be improved
• Identify process output
• Identify customer/supplier relationships
• Identify customer needs and expectations
• Define performance indicators
• Define supplier specifications
• Flow chart the process
• Collect baseline data
• Identify performance gaps
• Validate problem/opportunity statement
• Management Review 27
 IDENTIFY ROOT CAUSES
• Analyze cause and effect relationships
• Identify potential root causes
• Collect data
• Verify cause and effect and root causes
• Validate/problem/opportunity statement
• Management Review

28
 SELECT AND PLAN
SOLUTION
• Generate list of potential solution
• Select best one based on criteria
• Define revised process
• Revise process output
• Identify expected outcomes
• Revise supplier specifications
• Modify flow charts
• Develop implementation plan
• Identify sequence/timing
• Define resources/controls
• Define responsibility
• Identify pilot activities
• Identify contigency actions 29
• Management Review
Monitor Results and Evaluate Solution
• Monitor results relative to -
• Targets and goals
• Process changes
• Controls
• Evaluation solution
• Management review

IMPLEMENT PILOT
SOLUTION 30
• Cascade beyond pilot activity
• Develop appropriate training materials
• Monitor results and evaluate solution
• Document entire quality improvement journey
• Management Review

Recycle

• Identify new improvement opportunity

STANDARDIZE 31
• Idea Generation
• Consensus
• Process Definition
• Collecting Data
• Analyzing Cause and Effect
• Analyzing and Displaying Data
• Planning Tools
• Meeting Management Tools
• Benchmarking
• Questionnaires

QUALITY IMPROVEMENT
TOOLS 32
• E-vision: Broadening the view
• E-Volution: Climbing the Ladder
• E-Strategy: Playing with LEGOs
• E-Synchronization: Breaking the Boundaries
• E-Infrastructure: Opening the Hood
• E-Capitalization: Placing Winning Bets
• E-Organization: Rallying the People

E-BUSINESS
TRANSFORMATION 33
THE E-BUSINESS SCOPE COMPASS

Wh
u
oNe
Va l twor
k
e stomer
Cu
e s Firm
me
tio utcom

Collaboratio
nTransactions
om
sh utco

Info n
r

What
n Relat stOsutc
Wh
yO

matio
s
i

Co s
a

n
rm
i o
o

e
us
f

H os o
s

ted n-h
p
n

I
Tra

Host y
ed emotel
R her
H o st e
d An y w 34
e
Where
 WHAT E-BUSINESS IS NOT
 e-Business is Not a Bolt-On to Your Business

 e-Business is Not About Technology

 e-Business is Not the CIO’s Responsibility

 e-Business is Not Tied to a Particular

Department or Functional Area

 e-Business is Not a Middle-Management

Initiative
35
 e-Business is Not a Fixed Target
 THE LADDER: THE EVOLUTIONARY STAGES OF E-
BUSINESS

 Who’ in Charge?

 Who Pays?

 Who’s Affected

 What’s the Integration Level?

36
THE LADDER: THE EVOLUTIONARY
STAGES OF E-BUSINESS

 Who’ in Charge?

 Who Pays?

 Who’s Affected

 What’s the Integration Level?

37
 FINDING YOUR PLACE ON THE LADDER
 Do you Use a Lot of Raw Materials and
Components?

 What fraction of Your Customers is Online, and

How Intense are the Interactions?

 Do you have Multiple Layers of Resellers and

Many Different Types of Channels?

 Do you Spend a Lot of Money on New Product

Development?
38
 Are you a “Knowledge Factory”?
 THE LADDER OF E-BUSINESS INITIATIVES
Revolutionary Reinvent
Initiatives • Value network level
• Real-time end-to-end
• Long-term Integrate integration
• External focus • CEO or startup
• Top-line team leads
Automate • Transformation
outcomes
• Enterprise level
Evolutionary Tight integration
Inform •
Initiatives • Line of business leads
• Revenue outcomes
• Short-term
• Internal focus • Process level
• Bottom-line • Some integration
• E-business team leads
• Effective outcomes

• Activity level
• No integration 39
• Grassroots efforts
• Efficiency outcomes
 THE DUALITY OF E-BUSINESS INITIATIVES
Characteristic Evolutionary Initiatives Revolutionary Initiatives

Objective Stay in business Reinvent your business

Risk-return Low-risk, low-return, short High-risk, high return, long time
profile time horizon for payback horizon for payback
Major risk Execution risk, adoption risk Market risk, technology risk
factors
Outcome ROI, net present value Option value, capital
metrices appreciation, learning payoffs
Financial Cost impact, bottom-line Growth impact, top-line oriented
impact oriented
Impact on core Enhance and improve the Often threaten the core
business core
Capabilities Mostly, available internally Ned to be imported
needed
Business Impacts focussed processes, Systemic impact, typically cuts
processes can be isolated to a business across business units and
impacted unit or process level functional boundaries 40
End-state Integrate into the core Spin-off from the core business
business
 DIMENSIONS OF THE BUSINESS ARCHITECTURE
What we
make
Customers
• Products
(value proposition) What we know and
• Services
own
• Information •
Who we serve Human capital
• Customer Offerings • Structural capital
segments • Relationship capital
• Customer needs

Resources What we do
• Realization process
Growth • Sourcing process
engine • Operating
processes
How we make Go-to-market
revenues Processes • process
• Customer leverage
• Offering leverage Profit Partners
• Market leverage engine (value network)
• Top-line potential Who we work with
How we make • Suppliers
money • Resellers
• Sources of profits • 41
• Quality of profits Complementors
• Defensibility of
profits
•
 CORE PROCESSES
 New offering realization process-how it
defines, designs, and brings new offerings to
market
 Customer relationships management
process-how it creates and builds relationships
with its customers, and how it interacts with its
customers
 Fulfillment management process-how it
sources its inputs and goes to market with its
products and services
 Human relations management process-how
it attracts, grooms, and retains talent in 42the
organization
• Market sensing process-hot it gathers intelligence from the
market, disseminates this intelligence within the organization,
and acts upon this information.
• Operations management process-how it transforms its inputs
into outputs
• Business development process-how it renews its business and
finds opportunities for growth.
• Strategy development process-how it defines its end-goals,
and the means for achieving the goals.
• Partner management process-how it identifies, selects,
coordinates with, and manages relationships with key partners
and complementors
• Financial management process-how it deploys its financial

CORE PROCESSES
resources and allocates capital within the business.

Contd…. 43
 THE SEAMLESS COMPANY

Integrated Integrated
MarComm channels

g
• Television • Retail stores

tin

Se
ke
• Print • Catalog sales

a
ar

m
• Outdoor • Sales force

le
ss
ss
• Personal sellingle • Internet

sa
m
• Telemarketing Customer

le
a

s
Se

• Internet Relationship
Repository
(CRR)

Seamless service

Unified contact
management• 44
• In-person E-mail
• Live chat
• Telephone
• Voice over
• Fax IP
 THE NET EFFECT ON CHANNELS

Brand Augmentation Channel

interactions in the buying

Augmentation
• Most CPG categories •
Most B2B products
Richness of physical

• Fast food
High • Convenience
• Real estate
• Computer systems
products
• Industrial chemicals
process

Channel Channel
Proliferation Deconstruction
• Most shopping goods• Most low-end
• Books services
Low • Music • Domestic travel
• Office supplies • Personal investing
• Prescription drugs

Low High
45
Intensity of information in the buying
process
 TOWARDS THE SEAMLESS COMPANY
Mail Fax E-mail Web Phone Person
• Establish
need
• Find
sources
• Establish
trust
• Determine
value
• Select
product
• Negotiate
terms
• Transact

• Get service
•
Upgrade/rep 46
eat
 TOWARDS AN ENTITY-CENTRIC INFRASTRUCTURE

Suppliers (direct and

indirect materials)

Supplier-facing Applications
(Intranet and KM)
Employee-facing

(“Buy-side”-SCM and ORM)

Resellers and
Applications

Partner-facing
Applications
Employees

Affiliates
(PRM)
ERP
(Transactions Backbone)

Customer-facing
Applications
(“Sell-side”-CRM and SFA)
47
Customers and Salesforce
 COMPONENT-BASED ARCHITECTURE

Supplier Customer Partner Enterprise

Management ManagementManagement Portal

Cross Applications Industry

Application Specific Specific
Components Components Components

Common Business Objects

Distributed Object Infrastructure 48

Legacy Application Objects
 A VISUAL TOOL FOR EVALUATING E-BUSINESS INITIATIVES

Anticipated payoff

Competitive Scope of
differentiati impact
on

Time
Trainabilit to
y payoff

Adoption
risk
Capabilit 49
y
risk Integrated
risk
 SEVEN ORGANIZATIONAL PROCESSES IN E-BUSINESS
TRANSFORMATION

• Culture Diffusing •
Incentive
• Shared
Catalyzing
s
vision • Rewards
Motivating

Vision and
Strategy
Staffing
Training
•
Educati
• Traits on
• Skills Structuring External- •
izing Mentori
ng
• Partners
•
Organizati • Suppliers 50
on
•
Integratio
n
THE ROLES OF A MATURE E-BUSINESS ORGANIZATION

Enterpris CIO leads CEO, lead

e
Matchmaking role Venturing role
level
Scope of initiative

E-business
organization

Department of
SBU head leads
IT leads
SBU Escalating role
Coordinating role
level
Productivity- Growth-oriented
oriented
externally focused
internally focused 51
Outcome of
initiative