Creating and Implementing

a Strategy

Worku Mekonnen (PhD)

 Strategy
• A strategy is analogous to a map.

• An effective strategy must be a top down

process. The process starts with the creation
of an enterprise-wide strategic plan. From this
plan, the Strategic Business Unit and
functional strategic plans are created.
 The Strategic Planning Process
• Strategic planning is akin to putting together a large
mosaic or puzzle. Each piece or part represents
information and data. The result is a clear picture of
what’s happening in the external environment that
positively or negatively impacts the organization.

• A strategic planning process can be expeditious, easy

to understand, and easy to use. The following 10 tasks,
regardless of whether you are in enterprise-wide, SBU,
or functional strategic planning, will help the
company’s management team develop a strategy.
 The Strategic Planning Process
1. Conduct current situation analysis
2. Determine planning horizon
3. Conduct environmental scan
4. Identify key success factors
5. Complete gap analysis
6. Create vision
7. Develop business strategy
8. Create balanced scorecard
9. Identify tactics and initiatives
10. Execute strategy
 Task 1: Conduct Current Situation
Analysis
• You must recognize where you are before you
determine your direction. Situation analysis
creates a tangible baseline of performance.

• This baseline is identified by studying trends of

financial performance (ROI, profit margins),
operational performance (cycle times,
productivity, etc.), and stakeholder perceptions
(employee or customer perceptions).
 Task 2: Determine Planning Horizon
• A planning horizon projects how the organization will
be planning its course. Most organizations have a
planning cycle of between three and eight years.
• Experience suggests there are five critical variables to
consider when determining the planning horizon:
1. Volatility/predictability of the market
2. Product/service life cycles
3. Size of organization
4. Rate of technological innovation
5. Capital intensity of the industry
 Determine Planning Horizon
• The more volatile the external
environment the shorter the
planning horizon. This is because
highly volatile and unpredictable
environments have a greater
forecasting margin of error.
• The longer the product/service
life cycle, the longer the
planning horizon. If your
organization has very long
product/service life cycles, then
you have more time available to
respond to changes in the
market.
• The larger the size of the organization,
the longer the planning horizon. This is
because redirecting the efforts of many
rather than a few employees requires
considerably more time.
• The faster the rate of technological
innovation, the shorter the planning
horizon.
• The greater the capital intensity of the
industry, the longer the planning horizon.
An excellent example is the utilities
industry. The amount of money it takes
in just bricks and mortar to produce
power is measured in years. Just think
about how long it takes to build a nuclear
power plant.
 Task 3: Conduct Environmental Scan
• Environmental scanning is the process of
assessing present and future conditions in the
external environment that affect
organizational performance.

• An environmental scan will identify and

prioritize the opportunities and threats in the
environment. This information is a critical
input to developing vision and strategy
 Task 4: Identify Key Success Factors
(KSF)
• A key success factor describes those things at
which an organization must excel to be
successful in the marketplace.

• KSF are identified as an outgrowth of the

environmental scan and are important
because they are a critical input in developing
business strategy.
 Common examples of KSF are as
follows:
• Strong technical support
• Reliability
• Small product lines
• Low cost provider
• Strong sales function
• Innovation
• State of the art technology

Key success factors are easily identified via the following three steps:

1. Identify the most successful industry competitors.

2. Compare the most successful companies to average and below
average performers; determine specifically what separates those
organizations that “walk on water” from those “treading water.”
3. Determine what part of the value chain (e.g., R&D, Sales,
Marketing) is most strategic for each of the industry leaders.
 Task 5: Complete Gap Analysis
• A good strategy requires merging external
environmental data with a thorough
understanding of an organization’s internal
strengths and weaknesses.

• A performance gap analysis is a technique that

can be used to identify the strengths and more
importantly the weaknesses of an organization.
When completing a performance gap analysis, it
is not unusual to generate a long list of
performance gaps or weaknesses.
 Gap Analysis
• The following list of strengths and gaps help streamline analysis for a large manufacturing plant. Plant-wide
strengths are noted along with plant-wide technology, organization, and process performance gaps.

• Plant-Wide Strengths:

• Enterprise Resource Managing RP system up and running

• Several new products from other plants are successfully integrated
• Suffocation reactor technology state of the art
• No safety accidents
• Employees are committed to success of the plant, have pride in their
• Strong leadership team

• Plant-Wide Performance Gaps

• Too much of manufacturing process still manual (e.g., only one

• automated drum filler)
• Limited confidence in data integrity (many employees keep a
• shadow system)
• Limited use of metrics to drive the business
• Limited internal capability for non-technical training
 Task 6: Create Vision
• To envision or not to envision? The strategic planning
process can be an exercise in frustration, if time and effort
is invested in areas that provide little value-added.

• A key decision point is to determine whether a vision

statement is needed.

• Be careful not to develop visions exclusively by the senior

management team. Although this may be the logical
starting place, the vision should be communicated to
stakeholders throughout the organization and time should
be spent in soliciting feedback so the vision can be made
attractive to optimize stakeholder buy-in.
 Task 7: Develop Business Strategy
• Creating a strategy is challenging because it requires the assimilation of all
the data identified in the previous six steps. Specifically, the key inputs are
corporate mandates, the key success factors, the most critical external
opportunities and threats, the most strategic performance gaps, and
organizational strengths.

• developing a strategy is much more of an art than a science. No formula is

appropriate for every organization. When working with our clients, we
generally follow these steps:

- Determine the strategic focus of the organization

– Create a strategy to either exploit organizational strengths and
– take advantage of opportunities in the market, or address weaknesses and
respond to threats from competitors
– Identify the assumptions underlying each strategy
– Make sure the culture is aligned with the strategy
A well-designed strategy should also adhere to these guidelines:

• Strategies should not be in conflict with each other

• Lower level strategies should support higher level strategies (e.g.
departmental strategies should support plant-wide (corporate
strategies)
• Strategies must be consistent with internal policies, styles of
management, philosophy/values, and operating procedures
• Resources and capital to see the strategy through to successful
implementation must be sufficient.
• Risks must be identified and evaluated before pursuing a strategy
 Task 8: Create Corporate
Scorecard
• To understand the corporate scorecard
concept, we suggest the reader think of the
scorecard as the gauges on a car’s dashboard.

• One must have constant readings relative to

fuel consumption, alternator, oil pressure, and
water temperature. Multiple gauges are also
needed to determine the performance of an
organization.
 A well-designed corporate
scorecard should:
• Cascade from the business strategy
• Balance internal/external focus and
quantitative/qualitative metrics
• Contain leading, trailing, and trending measures
• Focus on results and activities
• Not be overly complex or burdensome
• Change as needed over time to respond to
environment
 Task 9: Identify Strategic Objectives
and Initiatives
• How will the organization implement its
strategy? The difference between an objective
and an initiative is subtle.
• An objective refers to a general course of
action, such as enhancing sales competency.
An initiative is a time-bounded project such as
redesigning a process or installing a computer
system.
• Objective 1: Improve safety/environmental
performance
• lnitiatives/tactics:
– Create hazardous waste policy
– Install in-line monitoring equipment
– Create fire brigade
– Implement zero release program
– Purchase ethylene oxide removal equipment
 Task 10: Execute Strategy
• Most strategies are executed over a period of
several years. Changes in the environment
require ongoing review. The creation of
contingency plans guard against the effects of
unplanned events which negatively impact
business.

• During the environmental scanning process, the

key variables that impact organizational
performance were identified.