Thinking Learning Doing Planning

Charlottesville Venture Group May 18, 2004

A Framework for Strategic Thinking
The Art of Business
Business is more an Art than Science. Market competition demonstrates characteristics of both art and science. Owing to the vagaries of human behavior and the countless other intangible factors which contribute to it, there is far more to the conduct of market competition than can be explained by science… We thus conclude that the conduct of it is ultimately an art, an activity of human creativity and intuition powered by the human will.
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A Framework for Strategic Thinking
We call the artist an entrepreneur Crafting Strategy is an exercise in Entrepreneurship A Definition of an Entrepreneur
“The art of business requires the intuitive ability to grasp the essence of a unique market situation, the creative ability to devise a practical solution, and the strength of purpose and skill to execute the act.”
Warfighting.

The Art of Business

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A Framework for Strategic Thinking
The Art of Business
Collection of hard data (the scientific skills) Seeking new strategic opportunities

The Rational

Collection of soft data (the perceptual skills)

The Intuitive

Accumulation of facts and evaluation of probabilities

Accumulation of uncertainties and ambiguities Use of intuition to define the opportunities

Use of analytical models to define the opportunities

Unique interpretation of the strategic opportunity

Making choices about the future on inadequate information

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A Framework for Strategic Thinking
The Art of Business 
Strategic Management is a complex process, much like putting together a jigsaw puzzle
   

But with missing pieces And with extra, irrelevant pieces Involves many people The situation is very dynamic

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A Framework for Strategic Thinking
The Role of Strategy

Sustained superior performances should be the goal of every business How is sustained superior performance attained?

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A Framework for Strategic Thinking
The Role of Strategy A combination of effective strategies
and excellent execution
Strategy
Effective Excellent
Long Term Success

Ineffective
Success Unlikely

Execution
Poor
Maybe successful For a while Failure

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A Framework for Strategic Thinking
The Role of Strategy

Behind every successful company, there is a strategy – A Business Concept

There is an underlying logic, even if clear only in retrospect. Can be developed by formal analysis, trial and error, intuition or pure luck.

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A Framework for Strategic Thinking
The Role of Strategy
Industry US Airlines Car Rental TV Networks Earth Moving Steel Coffee Photocopier Computer Dominant Competitor American Hertz NBC Caterpillar US Steel Maxwell House Xerox IBM Traditional Strategic Competitor Innovator Delta, United, Northwest Southwest Avis, Europcar, National Enterprise CBS, ABC CNN John Deere, Case Komatsu Bethlehem, Inland Nucor Folger’s, Nescafe Starbucks IBM, Kodak Canon DEC, NCR Microsoft Sloan Mgmt Review Spring 1999

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A Framework for Strategic Thinking
The Role of Strategy
35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% #5 #4 #3 #2 #1

ROI %

Market Share Rank
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A Framework for Strategic Thinking The Hedgehog Concept to Great, From Good
By Jim Collins

What are you deeply passionate about?

What can you be the best in the world at?

BHAG
What drives your economic engine?

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A Framework for Strategic Thinking

Passion The Hedgehog Concept
1. 2. 3.

Pick a good business for your organization Select an appropriate direction (Vision) Develop a Competitive Advantage Become excellent in the skills that are critical for success


1.

Excellence Economic Engine
1. 2.

Have a valid Economic Model Have an appropriate capital structure
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A Framework for Strategic Thinking
Pick a Good BusinessMedian Industry Mean
Construction Services Manufacturing Wholesale Trade Retail Trade Transportation & Utilities Agriculture, Forestry Mining Finance, Ins. & Real Est. Total Average 24.9% 24.1% 16.0% 15.2% 14.0% 12.7% 10.1% 8.7% 7.9% 14.3%
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Low 11.1% -12.9% -8.4% 4.5% 4.1% 0.7% 6.5% -0.3% -2.2% -12.9%

High 29.0% 101.5% 33.7% 28.1% 20.9% 29.0% 14.7% 16.3% 20.2% 101.5%
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23.1% 11.0% 15.4% 14.5% 14.9% 10.7% 10.6% 4.1% 8.8%

2001 BizStats.com

A Framework for Strategic Thinking
Pick a Good 1926-1999 1965-2000 Business
General Market: Comparison Companies: $415 $955 +130% $56 $93 +66% $471 +741%
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Good to Great Cumulative35 years Returns Stock 73 years

Visionary $6,356 Companies: + 1,432%

Built to Last Good to Great
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A Framework for Strategic Thinking
Pick a Good Business
Be Clarity of Purpose Haveclear about.

  

who the customers are. What their needs are. What value you add in meeting those needs. What skills are required to add that value.

Articulated in the Mission Statement.
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A Framework for Strategic Thinking
How do you apply these steps to
your situation?  Confront the brutal facts of your situation

Ask yourself the tough questions Be willing to make major changes

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A Framework for Strategic Thinking
How do you apply these steps to “It may be your situation? hard for an egg

Change

To turn into a bird: it would be a jolly sight harder for it to learn to fly while remaining an egg. We are like eggs at present. and you cannot go on indefinitely Being just an ordinary decent egg. We must be hatched or go bad.”

--C.S. Lewis
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A Framework for Strategic Thinking
How do you apply these steps to
your situation?
In The Box Of Mediocrity
Poor trying to become good

Soaring

Faltering

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A Framework for Strategic Thinking
How do you apply these steps to Finding the Starting Point

your situation?  Is the business meeting your revenue goals?
Are revenues growing, flat or declining?
 

Is the business profitable? Is the business adequately capitalized? What is the story behind the financials
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A Framework for Strategic Thinking
How do you apply these steps to Finding the Starting Point
your situation?  Is there clarity of purpose?  Is the direction realistic?  Does the business have a competitive advantage?  Does the business have distinctive competency in the skills critical for success?

The four wheels must all be pumped up
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