Competitive Analysis Techniques

JWI 540, Strategy, Week4 Summary, 7/29/12

(I) Strategy is the killer idea, a "big aha", that gives sustainable competitive advantage. 

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Strategy is a winning value proposition, a product or service that customers want more than other options out there. Strategy is all about execution - small companies have an advantage here. Strategy is an approximate course of action that you revisit and redefine according to shifting market conditions.

Strategy has to feel fluid and alive !

Five Key Questions of Strategy are
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What does the competitive landscape - the playing field look like ?
What is competition up to - your rivals ?
What are you up to - what have you done lately ?
What is around the corner - what keeps us up at night ?
What is your winning move ?

Academic Complexity - number crunching & data analysis - takes time and money
Details & Scenarios tie you up in knots.

No academic textbooks or consultants are needed

What you require are:
a team of engaged employees who can dream big, debate intensely, emerge with a dynamic game plan. Then it is time to implement. 

In a small company it is much easier to communicate strategy and ignite a contagious intensity. Small companies like power boats can adjust direction quickly than corporate ocean liners - hire faster, make decisions with fewere bureaucratic hurdles, see their mistakes and fix them faster than hulking competitors

(II)   Robust competition is a good thing
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For society and for individual competitors.
When competition is weak, managers become internally focused on their organization, spending time on things that customers don't care about. Tough competitors keep the pressure on a company to drive down costs and come up with new ways to win and keep customers.

Face the competition - Assess the competitive landscape
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Understand different types of competitors and know what to look for
Compete against a particular rival, spot competitors that you may not know exist

(1) Traditional competitors - These are the ones a firm typically watches and tries to know everything about "what they are having for breakfast (Welch, 2005)". Before I took this class this is about the level of thinking I had about competition.
(2) Latent Competitors - The firm should watch for competitors who could enter its industry from a different part of the value chain; need to be keen about signals such entrants could send before they move in and react defensively as well as offensively as needed to protect customers.
(3) Oblique competitors - They enter the market from an unrelated field, quickly deploying new technology or exploiting emerging consumer preference. They attack with little warning and damage the firm's competitive position. They are hard to predict and compete against. Best move is to recognize and react, never underestimating the capability of competition.


(III) There are several different competitive analyses techniques that managers can use to gain insights into what their competitors are doing or are planning to do. 

 Each of these techniques has its strengths and shortcomings.

(1) "Perceived Value" mapping  - Focus firm's efforts on creating value that the customer wants
(2) "Critical Dimensions" analysis - Identify critical differentiating factors, figure out how competitors provide value and where the firm stands
(3) SWOT - Analyze Strengths, Weaknesses, Opportunities, Threats of the firm and the competitors
(4) Five forces model - Michael Porter's famous framework for evaluating the firm's industry structure according to effects on rivalry, threat to entry, supplier power, buyer power, threat of subsitutes. Sixth force from Complementors exists - these are players who don't compete with the firm but provide complementary products and services.
(5) PESTEL analysis - Tool to analyze market growth or decline, using Political, Economic, Sociocultural, Technological, Environmental, Legal context
(6) Benchmarking -  Quantitative & Qualitative metrics that allow comparison of firm's performance to that of competitors
Planned store openings, same-store sales, plant capacity; intangible assets like IP, employee talent, customer loyalty, reputation
(7) Strategy testing - Look for situations when the strategy will be violated
https://www.mckinseyquarterly.com/How_we_do_it_Strategic_tests_from_four_senior_executives_2712
"Strategic testing from Senior Executives, McKinsey, 2011", gives thought provoking insights
fact check - is strategy rooted in facts? is it unrealistic? is it undifferentiated ? does it drive financial shareholder value ? is the firm getting too excited about a market that is too small in size ? is this "power point engineering" rather than something grounded on facts ? is strategy sustainable ? have you considered why the firm might fail ?
(11) Value Curve - Consolidate competitors into a single value curve (key success factors on X axis; Performance rating on Y axis; join the dots) Visually plot how major firms compete, examine their assumptions and use this to predict their moves.

(IV) Constantly seek competitive intelligence about your rivals
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Learn from a variety of sources and monitor your competitors
Learn about their strategies, their limitations, their investments
Include latent or oblique competitors to the extent you're able to identify them
Understand their motives, anticipate their actions, accurately predict their reactions to your moves.

References
Christensen, C. M. (1997). The innovator’s dilemma. Boston, MA: Harvard Business School Publishing.

 Dr DP

Differentiate to build a great organization

JWI 520, People Management, Week4 Summary, 7/28/12
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This week I learned why differentiation of employees is important and how this concept helps to drive businesses continually to higher performance. I have a better understanding about the differences and similarities in ABC and 20-70-10 frameworks.

Here are my key takeaways.

(1) "Business is good, it is the engine of good", Jack Welch, video (Corporations are people)
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Businesses are all about people - to hire, design and create new products, create life saving drugs to extend life's joys.
Capitalism is all about building great organizations.
You are always trying to get more competitive, better.
The goal is to constantly upgrade the organization and become truly competitive.

(2) Differentiation 20-70-10
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Leads to more competitive enterprises on earth.
Constantly upgrades the organization to be leaner, faster, more creative, more excited, more energetic and fun.
It is fair, creates competitive enterprises and helps come out of recessions stronger than you went in

In an organization you want to be constantly raising the bar through differentiation - no one should ever be surprised about where they stand.
If you are doing appraisal system right, it is rigorous & performance based - employees will know what they need to do.

Good appraisal system is rigorous - keeps and motivates your best, asks your weakest to move on.
Easier to accept if based on systematic, impartial process rather than subjective, political considerations.
Treating everybody the same does not work.

(2a) Bottom 10% - coach them out
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Figure out who your weakest player is - then make a decision if you want to keep them or not.
These are the small group of people who either don't hit the numbers or don't have the values needed by the firm.
In a good system you coach them out and get them replaced with somebody better.

If you find yourself in the wrong job and in the wrong organization, move on.
Thank god it happened and go find a more rewarding job.

(2b) Middle 70% - motivate this heart and soul of the firm
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need this group to carry out the direction that leadership wants
there is always a chance to get in top 20% - always show them the run way ie how to improve
energize this group - keep them excited, send them to courses
treat them as people on the move

(2c) Top 20% - love them; care for them; disproportionately reward them
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(3) What many CEOs get wrong - under valuing the role of HR
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(4) When is people change required
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(i) To let go of C players
(ii) when there is a change in the business environment & industry
(iii) when there is a big organizational change
(iv) M&A
(v) when the business is underperforming
(vi) leaders relentlessly upgrade their teams (Welch, 2005)

(5) Change the line up
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Motivate the middle 70 & transfer, demote, terminate people who underperform

(6) When an employee is not performing satisfactorily
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Try coaching and training to provide the competencies needed to do the job
If there is no improvement, then terminate the position
Ensure there are no surprises; no humiliation (Jack Welch's two rules for letting go)Buld up his self confidence
- Build up employee's self confidence & coach him
- Let employee know there is a good job for him out there where his skills are a better match
- Help employee find that job
- enable soft landing wherever employee goes

(7) Honesty without brutality (Jim Collins, Good to Great)
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Practice rigor without ruthlessness.
Powerful forces work against successful people changes.
Make a special effort to act on what you know to be the truth, even when truth is unpopular.
Find in yourself the courage and discipline to implement the decisions you make and not back down.

(8) The difference between A,B,C & 20-70-10 frameworks
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When time to perform is short, ABC framework can work better in some situations
When time to perform is longer, especially in steady state operation of a large company with a culture of candor, 20-70-10 can work better

Dr DP

"A Players" & "A Positions"

JWI 520, People Management, Week3 Summary, 7/21/12

This week I learned how to differentiate employees, take strategic talent inventory and staff right positions with right players.

1. Be clear about the basis of competition
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What is the unique competitive advantage you are going after ? - is it through the offering of the lowest cost, highest value or a unique differentiation ?
To execute the strategy, what makes sense? - managing through "A players" or "A positions"?

2. Determine Strategic capabilities needed
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What skills and talents are needed to deliver the competitive advantage and win in the marketplace?

3. Identify Strategic Positions
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Identify jobs that are strategically critical to the success of the firm
Eliminate jobs that add little or no value
Develop action plans for each strategic position

4. Take a Talent inventory
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What skills and talents exist in the team right now ? Benchmark versus competition. Where are the gaps ?
Work with HR to assure enough top talent
Review strategic talent often and update team as needed

5. Go after "A" Players
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Get the right people on the bus & wrong people off the bus (Jim Collins)

6. Place right people in the right positions
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Invest disproportionately to ensure the right people doing the right things are in right positions (Huselind et al, 2005)
Get C players out of top positions
Then determine where to go and drive the bus forward

Dr DP

How Customer Segmentation fits into Strategy

JWI 540, Strategy, Week3 Summary, 7/21/12
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This week I learned about customer segmentation and how it fits into an overarching strategy.

1. Who will buy what we sell ? (JWI 540, Week3, Lecture1)
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This is the all-important question that we should never lose sight of
- which customer segment to target ? => be clear about going after affluent, cost-sensitive or the most profitable segments
- which products & services to offer them ? => turn offerings to customer solutions rather than just products and services
- how to better satisfy their needs and desires ? => shift from producer perspective to customer-centricity; aim to develop customer relationship for the long term

2. Understand the consumption chain (Macmillan et al, 1997)
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Observe the consumer's demographics, behavior and relationship with industry brands
Alter the consumption chain if it helps the customer (as IKEA did in retail home furnishings)
Look at the life of the product and motivate repeat purchase where possible
Identify Key Performance Indicators (KPI) and segment customers into behavior clusters
Determine impact of clusters on revenue and profit and understand what drives the behaviors

3. Segment customers into behavior clusters using 10 best practices (Derick Jose, 2010)
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 http://www.b-eye-network.com/view/13090
(i) Business Questions: Be clear about the business questions to be answered by segmentation
(ii) Variables: Optimize between too many behavioral dimensions vs too few dimensions
(iii) Isolate key variable:  Evolve a methodology to isolate right behavioral variable
(iv) Cluster technique: Choose the right clustering algorithm & technique
(v) Iteration: iterate, iterate, iterate
(vi) Segment Personas: evolve segment personas to put human faces behind clusters make it real to the business
(vii) Overlay Geo: Overlay Behaviors on to a geospatial map
(viii) Overlay sentiment:  Overlay Behaviors on to Sentiments
(ix) Actionable: evolve the segment actionability framework
(x) Track ROI: track segments with highest impact on ROI & closely monitor segment migration

4. Translate Good segmentation into a winning strategy
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(i) Good segmentation is critical but it is only a starting point
- as it unearths customer needs at a given point in time only; customer preferences evolve over time
- execution is far more important than strategy & segmentation
(ii) Stay vigilant of changes in marketplace to avoid missing market shifts
Use Michael Porter's 5 forces framework to constantly monitor industry dynamics
- internally within the firm and externally with competitors, suppliers, customers, substitutes and new entrants.
(iii) More you understand your customer, the better you will be at
- choosing objectives (what you hope to achieve in a given time period)
- competitive advantage (how you will uniquely compete for the consumer's spending)
- scope (markets, products, channels, geos)

5. IKEA Case Studies (Bartlett et al ,1996; Moon et al 2004)
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Ingvar Kamprad's rags to riches story starting from humble beginnings is an inspiration for all. Driven by core values of simplicity, an indomitable will to translate challenges consistently into opportunities, and an incredible 5:30 AM to midnight work ethic, Ingvar Kamprad built an enduring company and served worldwide customers.  IKEA's entry into US gives us an opportunity to understand the differences between Scandinavian and American customers, and examine the growth strategy.

This class continues to offer tremendous insights into the underpinnings of business strategy. The class discussions are giving more food for thought.

I have resolved to also go beyond the class materials and research outside sources, generate new thought and attempt to create something new. For the push I got from Dr D in this regard, I am grateful.

Dr DP

Strategy, Capabilities & Positions

JWI 520, People Management Week2 Summary    7/15/12

This week I learned about strategy, strategic capabilities and how to differentiate strategic positions.
I understand where strategy belongs in the grand scheme of things - never ahead of people.

Key concepts and takeaways for me this week are:

0. People first, Strategy second (Welch, JWI 540 W2 video)
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If you get the people right, the game is over
the team that fields the best players wins

1. Competitive Strategy - How will a firm compete (Becker et al, 2009)
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What is your secret sauce ?
Deliberately choosing a different innovative set of strategic activities & capabilities to deliver a unique mix of value.
Identify how you compete differently from your competitors and where your competitive advantage is located.

2. Strategic capabilities - what must a firm do exceptionally well to win
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- is the capability an important source of the value proposition you offer to customers ?
- is the capability relatively unique among your firm's close competitors?
- if close competitors rely on a similar capability, is your firm heads and shoulder above the competition in execution of that capability ?
- if close competitors rely on a similar capability, does your firm execute on par with industry standards or well enough to remain profitable?

3. Strategic positions - "A" jobs critical to deliver value proposition
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- they have the greatest strategic impact on capabilities.
- there is high level of performance variability in these positions
- needs disproportionate investment

Awareness of these concepts completely changes the way I view my workplace.
I have gained confidence to better drive myself and my organization to win.

Dr DP

Strategic Competitive Advantage

JWI 540 Strategy Week2 Summary     7/15/12
Jack Welch Management Institute

The following are my key takeaways this week.

1. Vital Leadership skill to develop
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Identify and target high-growth industries & exit stagnant or declining industries

2. Growth is the best option - Energize the whole place
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Growth takes care of a number of issues - better jobs, more jobs, more returns for employees and shareholders, give back to communities
If you see a good deal, pounce on it - grow organically or through M&A

3. Michael Porter's 5 Forces framework
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Rivals: How large are your competitors? many or few? how mature are they in the space ? in what ways are you better or different ?
Suppliers: Supply chain suppliers large and too few ? many small players predominate ? which critical types of goods most scarce ?
Customers: fragmented? dominant buying group ? switching costs ?
Substitutes: indirect competition
New Entrants: be on lookout for new competitors who might steal your customers

4. Determine your source of competitive advantage - your company's identity
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Assets: What do we have that rival don't have ?
Capabilities: What can we do that our rivals can't?

Use your capabilities and assets in a way that
(a) creates value (b) is distinctive and unique (c) is difficult or impossible to imitate

Relentless innovation is critical to stay ahead of competition and sustain competitive advantage

5. To make customers stick, shift from transaction model to a long term relationship model
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- service the hell out of them with incredible experiences
- shift from short term product focus to longer term sustained productivity focus
- leverage the balance sheet to support the customer
- share know-how
- excite user communities

I find these principles to work at multiple levels - at an individual career level, at my business unit level and at my corporate level.

Dr DP

How to Make Great People Decisions

JWI 520, People Management, 7/8/12 - Week1 Summary
Jack Welch Management Institute

There are several great concepts I have learned in this class.  My top takeaways are shown below.

I. Ultimate Goal is Happiness - People Decisions are Critical to get there
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High performing organizations provide employment, generate returns and make society better. A great company full of great people broadens horizons, gives hope for a better future and happiness. People decisions are the highest challenge and biggest opportunity for personal and organizational success. The basic tasks are Finding, Recruiting, Hiring, Promoting, Retaining the very best people for the job.

II. To Master People Management
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- Assess existing lineup of strategic talent
- Select, Develop, Promote, Manage the right people
- put right players in right places; get wrong people off the bus
- practice differentiation (Welch, 2005, Chapter3)
- Evaluate, Reward, Promote, Develop, Motivate people

III. Use a disciplined Approach to Hiring  (Fernandez-Araoz, 2007; Welch, 2005)
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- Approach this as the most important assignment
- Analyze work challenges at hand
- Identify organizational needs & key competencies needed in the person

- Don't limit yourself to just people looking for a job
- Go beyond your business unit or organization to find the talent you need.
- Identify target companies and individuals with potential (even if they may not be looking for a change)
- Interview them, check in-depth and secure references from people you trust

Never forget the Four Reasons Why Great people decisions are so hard (Fernandez Araoz, 2007, page 82)
- Statistical Odds: exceptional performers are limited in number
- Difficult Assessments: Assessment errors, unique jobs, changing jobs, intangible traits, inaccessible candidates
- Psychological Biases: Procrastination, overrating capability, Snap judgments, Branding, Evaluating people in absolute terms, Seeking confirmatory info, Saving face, sticking with familiar, emotional anchoring, Herding (Fernandez-Araoz, 2007)
- Wrong Incentives: Candidate circumstances, Political pressures

- Test for Jack Welch's metrics IIM 4E P (integrity, intelligence, maturity; energy, energize, edge, execute, passion)
- For Senior positions check additionally for ACSR (Authenticity, foresee around Corners, tendency to want to be Surrounded by smarter people, outsized Resilience)
- Measure them accurately & Predict Performance

- Avoid hiring traps (Welch & Welch, Podcast, JWI 520 Week1):
Too good to be True Trap, Over-Reliance on Branded people, Familiarity Trap, Dead end job, Lacks Emotional Intelligence

- Discuss with colleagues and modify to decide on hiring & promotion
- Agonize over the final decision as it could disrupt people's lives

- If you make a hiring mistake, have the emotional strength to admit it
- Act Decisively to deal with consequences

IV. Bear in mind John Gottman's Predictors for Marriage Success
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Four Horsemen Emotions: (i) Defensiveness (ii) Stonewalling (iii) Criticism (iv) Contempt - most important factor driving failure

I can feel the powerful transformation in my thinking about people decisions.
Dr DP

Strategy to Win

JWI 540 Strategy, Week1 Summary, 7/8/12
Jack Welch Management Institute

There are numerous concepts I have learned in this class in a very short time.

1. What Winning Means - This is the Destination
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Customers get superior products, services & also post-sales relationship
Employees get job security, better rewards
Communities benefit from employees giving back
Shareholders get short term commitments and long term vision
Shareholder value increases as an outcome of implementation of successful strategies

2. Choices for Competitive Positioning
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Differentiate with Highest value (premium price), Lowest Cost, Unique differentiation or Service

3. Linkages
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Customer Need, Demand, Strategy & Competitive Advantage, Distribution Channel, Sales as the beginning of a Customer Relationship, Post Sales Service, Customer Delight

4. What is Strategy?
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It is the CEO's view of how the firm will compete to win in the marketplace. Jack Welch's 5 slides framework is used to spell out and implement the business strategy - which can also be strengthened by strategy diamond (Carpeter & Sanders, 2007). Corporate Strategy spells out which businesses the firm will compete in, how ownership by the corporate parent adds value to business, how diversification helps each line of business (LOB) compete better.

5. Jack Welch's 5 slides Framework offers a practical way to spell out strategy
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Clarifies Playing Field, Competitors, You, what's around corner, Winning Move

6. Jack Welch's 3 steps for Strategy Implementation
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Find the big Aha, Put right people in right positions to implement like hell, Relentlessly seek and improve best practices

7. Go beyond defense and play offense to win (Dr D)
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Plan desired strategic behavior  (possess some unique skills & core competencies, make some contribution, apply some process better than anyone else), Execute brilliant offensive competitive maneuver, seize competitive advantage & Thrive


The fantastic training and coaching I am privileged to receive in this class empowers me to take a hard look at my current business unit strategy and see how it fits into the larger corporate strategy.

Dr DP

10 Traps to Avoid in People Decisions

People Management, 7/6/12
Jack Welch Management Institute

Fernandez Araoz (2007) identifies ten emotional biases & traps that could affect judgments, feelings and behaviors and ultimately sabotage people decisions. Higher the stakes, and more senior the appointment, the stronger these forces may be. I understand clearly the need to guard against arbitrariness when it comes to making great people decisions. As these are extremely important for the organization's success and my own career success, I discuss all of them below and rating my own risks to fall into them along with defense tactics I will carry forward into the future.

(1) Procrastination - This is the status quo trap; Waiting until a crisis blows up and then making people decisions
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My Risk: High; I do have a tendency to fall into this trap due to intertia and have to often remind myself to act before a full blown crisis erupts and forces a people decision.
Defense : Envision the competencies needed for the job situation and be open to the right people. Never be satisfied with the quality of the team and relentlessly improve the team (Welch, 2005)

(2) Overrating capability - believing hired people are more capable than they actually are; assuming people can change quickly, confusing motivation for capacity & competence.
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My Risk: Low. I usually go through meticulous checks and balances before trusting people with assignments.
Defense: Test for competence, skills, attributes, experience. Verify capability before trusting and deciding.

(3) Snap judgments - using unreliable information and not calculating probabilities accurately; using first impressions, charisma, gossip, second hand information
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My Risk: High. I have made a few bad people decisions biased by favorable first impressions only to realize months down the road the disasters they were causing
Defense: Do not rush important people decisions. Deliberate as much as time will allow. Seek internal as well as external trusted sources for advise.

(4) Branding - Branding mistake is to buy a reputation rather than an individual who embodies the reputation
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My Risk: Very High. I tend to give a lot of weightage to brands such as the schools and organizations candidates have been with before.
Defense: Never forget that past success of candidate does not guarantee future success. Take note of subtle cues such to pick up on overconfidence or arrogance. Cut losses early

(5) Evaluating people in absolute terms - not taking into account circumstances eg. deciding someone is outstanding, or someone is a total loser.
My Risk: Low. With my relatively high level of emotional intelligence, I tend to look at every candidate's unique circumstance. I understand that in people decisions everything is relative to a particular context.
Defense: Do not get too carried away by perceived overachievers. Do not lose faith by perceived under achievers. Develop own view of the candidate's potential for task at hand.

(6) Seeking confirmatory information - ignoring warning signs; not looking at evidence that conflicts conclusions; decisions, investments, negotiations could be sabotaged.
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My Risk: Very High. I sometimes tend to make conclusions from the subconscious and then look for evidence to support the conclusion. I now understand that hiring decisions fail because of this.
Defense: Be disciplined and assess candidates in depth, sifting through both positive and negative impressions to arrive at true qualifications

(7) Saving face - Lying to protect oneself and one's friends, gain an advantage
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My Risk: Low. I believe honesty is the best policy in very practical terms.
Defense: "Say what you do, Do what you say" (Welch, JWI video). Detect lies spoken by candidates ahead and react quickly with corrective actions.

(8) Sticking with familiar - Good fit with comfortable, safe & familiar rather than looking for competence, complementarity of skills, diversity
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My Risk: High; I was not even aware of a trap of this kind exists but I acknowledge its existence now
Defense: Push myself to get into the discomfort zone. Evaluate candidate on own merits. As a manager and leader my job is not be friends with people but to play to people's strengths and get the job done.

(9) Emotional anchoring - failing to see individuals in their own terms; comparing with past ideals; first & last in interviews get more attention than those in middle
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My Risk: Very High. I tend to have ideals in mind rather than paying more attention to the unique qualities of the individuals in front of me
Defense: Celebrate the differences in individuals and play to people's strengths

(10) Herding - Follow majority rather than acting independently; hesitating to express a different view; hide in the middle of the herd
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My Risk: Low. I especially take pride in developing my own view of reality and speaking my mind even if I am the only person in the room to see it that way
Defense: Think independently. Pay attention to whistle blowers and mavericks who think differently. Separate out the whack jobs from real wild ducks that would help the organization. Do not be afraid of failure but learn from it. Do not be lazy or feel you need to agree to the party line to be a team player. Definitely do not endorse a wrong candidate who favorably impressed everyone else. Walk alone if need be (Rabindranath Tagore, first Asian Nobel Laureate in Literature)

This is a very good exercise.
This is a check list I will refer to every time I engage in a people decision process going forward.

Dr. DP

Make Great People Decisions

JWI 520 People Management - Week1, 7/5/12
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Personal Happiness is the ultimate goal of existence
"Happiness is the greatest good" Aristotle
Money, Power, Health, Career Success..should lead to happiness
Great people decisions can enhance Personal relationships and job satisfaction and increase happiness

Great People Decisions, One Person at a Time is a Life Skill
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A most Decisive skill that determines career success & personal happiness

I. Fernández-Aráoz, Great People Decisions, 2007
Chapter 1: A Resource for You
Chapter 2: A Resource for Your Organization
Chapter 3: Why Great People Decisions Are So Hard

Chaper1: A Resource for You
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Great people decisions will help improve competence in hiring and promoting great people for your team.
Assess people's competence and potential to grow
Nothing is more important for you or your organization.
As you progress from unit manager to running the ship to Senior Executive to CEO or Chairman,
people decisions are the highest challenge and biggest opportunity.

High performing organizations provide employment, generate returns and make society better.
A great company full of great people raises the standard of living, raises our sights, broadens horizons and gives hope for a better future.

Why do certain people succeed and others fail ?
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Egon Zehnder, Executive Search Pioneer
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#1 reason for individual success is LUCK!
Successful people are highly intelligent, hard working, prepared, relate well to others.
But most important reason is luck. Lucky to be born into certain families, countries, have unique gifts, attend good schools, get good education, work for good companies, stay healthy.
Lucky to have opportunity for promotions
Zehnder is a natural-born leader: self aware, full of integrity, a man of amazing commitment, initiative and optimism, master at encouraging the heart
HBS MBA, constant development, avid reader, astute reader of people, learns from all characters and situations
Worked 6 days a week, prepared for every single meeting, talking in front of a mirror, recording and reviewing and timing it

Career choices allowed him to jump to the next level - moved from law to business, advertising to executive-search
launched the firm with a unique vision, decided not to go public, created equal partnership, collaboration, compensation  (see Zehnder, HBR, simpler way to pay)
He built a great firm by being personally involved in the hiring of every single consultant for 36 years
Candidates are interviewed by dozens of colleagues, the chairman to ensure they meet exacting global standards and have a cultural fit
Invented his own career and became a master at people decisions


Fernandez-Araoz's framework
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Ability to make Great People Decisions is te most powerful contributor to career success
(1) Genetics - important throughout life
(2) Constant Development Effort- especially critical in early stages, but important throughout life
Ability to learn formally and informally depends on career choice.
Intensely bureaucratic and unprofessional organizations stifle career progress
Good career choices multiply the fruits of your development efforts and lead to outstanding career success
Putting yourself in a hotbed of innovation is better than putting yourself in backwater for long term career success

(3) Good Career Decisions - important in early 20s
(4) Great People Choices - single most important factor in career success

Never underestimate the importance of a commanding physical presence

Center for Creative Leadership, Greensboro, North Carolina
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Successful Executives
- deliver strong organizational performance
- build good relationships with subordinates

Strong organizational performance is a necessary component of personal success

Great people are behind creation and deployment of strategy, great products & services, money in the bank

First Break All the Rules (Marcus Buckingham, Curt Coffman)
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None of us has unlimited potential
Become a master at hiring and promoting the best people

Two key People Decisons:
- First Select Good People.
- Second, assign the right person to the right job ie. Identify what is unique about each person and capitalize on it

Discover what you don't like doing and stop doing it
Delegate
Develop good successors


Wrong people do get into wrong jobs
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1/3rd of CEOs are fired or forced to resign
1/3rd of executives are in lower part of competence curve compared to peers


People puzzle - finding, recruiting, hiring, promoting, retaining the very best people for the job.
Jack Welch spent more than 50% of his time in GE getting the right people in right positions.

Disciplined Approach in Hiring a Person
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Hiring of an Assistant
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Determine what you really need in the person (skills & complementarities job calls for, valued professional partner, improves productivity & quality of life, friend)
Discuss with colleagues and modify
Approach this as the most important assignment
Dont limit yourself to just people looking for a job
Identify target companies and individuals with potential (even if they may not be looking for a change)
Interview them, check in-depth and secure references from people you trust
Agonize over the final decision as it could disrupt people's lives


Optimism Bias
*************
65% of drivers in US rate themselves above average
37% of engineers rate their performance in top 5%

We are not good at Assessing performance & people eg. lying is not easily detected
It is not necessarily just Instinctive
You have to work at it

Human nature is to to make "snap judgements" & indulge in "unconscious biases" about people; we are not humble about what we do not know
"Having the right people in the right place is the job no leader should delegate" Larry Bossidy & Ram Charan
Must have the knowledge as well as the power to make people decisions

John Gottman's Predictors for Marriage Success
***********************************************
Four Horsemen Emotions
(i) Defensiveness
(ii) Stonewalling
(iii) Criticism
(iv) Contempt - most important factor

Cook County Hospital's Dept of Medicine, Brendan Reilly Case, by Malcolm Gladwell
**********************************************************************************
Problem: Only 10% of people suspected of having heart attack actually have a heart attack
Solution: Identify and check key indicators, assign weightage, discuss for collective decision
Isolate few useful indicators and focus analysis more on those
Analyze less info - focus on relevant things to watch
Boiled down to using ECG + 3 risk factors (pain felt, fluid in lungs, systolic BP)
Same thing can be done with people decisions

Analyze challenges at hand
Identify key competencies required in candidate
Measure them accurately
Predict Performance
Discuss and decide on hiring & promotion
If you make a hiring mistake, have the emotional strength to admit it
Act Decisively to deal with consequences

Becoming a Manager, Linda Hill
*******************************
Developing interpersonal judgment is an essential task of self-transformation


Chapter2: A Resource for your organizations
*********
Right people choices are a key driver of organizational performance
Most important single factor for top performance


Stanford GSB first year MBA's 3A's : Anxiety, Anger, Apathy
Exposed to brilliant minds broadens horizon: outstanding profs, exceptional students,

Good to Great, Built to Last, Jim Collins
******************************************
Greatness is not a function of circumstance
It is a matter of choice and discipline
In a volatile world, best hedge against uncertainty
- create the best most adaptable team in the industry
- adapt to whatever changes the world might throw at you

Essential Foundational Prerequisites for remarkable corporate performance
*************************************************************************
Outstanding leadership
Ability to build superior executive teams
"First Who" principle : Get the right people on the bus, wrong people off the bus,
right people into the right seats, figure out where to drive the bus

What Really Works (Joyce, Nohria, Roberson)
********************************************
Choice of CEO matters
- determines profitability
- decides whether the company will remain in the industry or not

4+2 Formula of successful companies:
Four primary practices: Strategy, Execution, Culture & Organization
Secondary practices: Talent of employees, Leadership & Governance, Innovation, Mergers & partnerships

The War for Talent, McKinsey
****************************
Best companies demonstrate more discipline and skill at making the right people choices

Wrong people at the Top could miss diagnosing the cause of problems
*******************************************************************
Layout, Product-mix, Service-level
Profitability by product, client, channel
All are symptoms - removal of CEO is the solution in such instances

People on Front lines of business: Do they consider people decisions as first priority, key determinant of success or failure?
***********************************
"You can have all the greatest stragies in the world
but they aren't worth much without the right people", Jack Welch

Fortune, 1999, CEO failure
**************************
One of the main reasons for CEO failure is
the profound difficulty experienced when it came to making senior appointments

How do CEOs blow it?
"By failing to put the right people in right jobs
and the related failure to fix people problems in time"

Why Smart Executives Fail, Sydney Finkelstein, 2003
****************************************************
Inability of the organization to put the right people in the right place

Circumstances linked to corporate failure are:
Creating new ventures,
dealing with innovation & change,
managing M&As,
addressing new competitive pressures

Causes behind executive failure are:
Flawed executive mindsets - distorted perception of reality
Delusional attitudes - keeps distorted perception of reality in place
Breakdown in communication systems - needed to convey urgent information
Personal attributes - deficiencies in leadership

What leads to organizational failure? Bad people decisions
*************************************
What leads to outstanding organizational performance? Great people decisions

CEO turn over study, Booz Allen Hamilton
*****************************************
1/3rd of CEO appointments are outright failures
CEO performance in second half of career is significantly lower than in first half; destrys value in many cases

Fernandez Araoz
***************
1/3rd of CEOs are at bottom half of performance curve vs their peers in the industry
More complex the job, greater the difference between a superior performer and an average one - up to 6X difference
Orgs that hire or promote mediocre execs suffer greatly
Orgs that identify and appoint great people develop unique competitive advantage
Investing in search, assessment, recruitment of best managerial candidates returns 10X the investment
Ability to make the right people decisions is critical for success in any business, time, geo or acquisition:
Norberto Morita, Columbia MBA, led Quinsa beverage company through systematic managerially induced value creation
Ability to pick the right people for each critical job made all the difference

Entrepreneurial Ventures, William Sahlman, HBS
***********************************************
When I receive a business plan, I always read the resume section first.
Without the right team, none of the other parts really matter.

Ending the CEO succession crisis, Ram Charan
********************************************
Many orgs lack effective succession programs

1992 Cadbury Report
*******************
Critical importance of high-caliber board members to all aspects of good governance

What makes great boards great, Jeffrey Sonnenfeld
*************************************************
It is not the rules and regulations, but it's the way people work together that makes for a boards greatness

Inside the Boardroom, Richard Leblanc, James Gillies
*****************************************************
Board process and Board membership are more important to board effectiveness than board structure

Ram Charan, adviser to many boards
**********************************
60% of corporate performance depends on right CEO and succession
which is one of boards main duties

Colin Carter & Jay Lorsch
*************************
good people in boards will perform well even if structure is less than ideal
opposite is not true

Human Equation, Competitive Advantage through people, Jeffrey Pfeffer, Stanford
*********************************************************************
It is important to choose right people at all levels of org

New Ventures & Small Business Management, Steven Brandt, Stanford
********************************************************
The Bible - Ten commandments for small business survival
#1 - Limit the number of participants to people who can consciously agree upon
and contribute directly to that which the enterprise is to accomplish, for whom, by when
#5 - Employ key peoplewith proven records of success at doing what needs to be done
in a manner consistent with the desired value system of the enterprise

Find people who can work together effectively
Find winners who can accomplish key tasks consistent with the value system
Make Great People Decisions

History of Great Managers
*************************
19th Century first Half: Alfred Sloan, GM, 40 years, Great Depression, WorldWar II
One of the key reasons for success, per his advisor Peter Drucker: He picked every GM executive
Mfg managers, controllers, engr managers, maser mechanics, at even the small accessory division
Placed right people in right jobs flawlessly
"My Years with GM", Sloan's book on discipline of management

"The job of a manager is not to like people. It is not to change people.
It is to put their strengths to work", Peter Drucker
Performance is the only thing that counts and Professional manager must attend to it
Performance means bottomline + setting the right example. And this requires integrity.
Integrity begins with right people decisions.

GE ranked as most admired company
*********************************
Outstanding breeding ground for great leaders
Jack Welch commands near universal respect among his peers

Chapter3
*********
4 Reasons Why Great people decisions are so hard (p 82)
*******************************************************
"Hiring Great People is Brutally Hard", Jack Welch

Statistical Odds

Difficult Assessments - Assessment errors, unique jobs, changing jobs, intangible traits, inaccessible candidates

Psychological Biases - Procrastination, overrating capability, Snap judgments, Branding, Evaluating people in absolute terms,
Seeking confirmatory info, Saving face, sticking with familiar, emotional anchoring, Herding

Wrong Incentives - Candidate circumstances, Political pressures


Hiring without Firing, HBR, 1999
*********************************
Getting the right people at the Top, MIT Sloan Management Review, 2005
**********************************************************************
Avoid disasters, gross failures, embarrassments and scandals
Start winning a small number of victories

Traps in picking winners for the top positions
*****
(i) Statistical Odds are against you
(ii) Difficult assessments - Assessing people for complex positions is inherently difficult
(iii) Psychological biases impair quality of decision making
(iv) Misplaced incentives and conflict of interest can sabotage these decisions

(i) Odds are against you
************************
There are only a small number of exceptional performers

(ii) Assessing people for complex positions is inherently difficult
*******************************************************************
- Assessment errors - can be as high as 50%
********************
- Unique & changing characteristics of jobs - what skills needed? what will each person deliver?
********************************************
eg. COO position could be situational: implementer, hatchet man, change agent, bad cop, heir apparent

- Difficulty in assessing intangible traits
*******************************************
can rapidly shift with Macroeconomic, political, competitive, technological changes
what's needed today can be quite different from what's needed tomorrow
eg. Franco Bernabe' Telecon Italia
In hostile takeover from Olivetti, expertise at leading cultural change became irrelevant.
More important skills were - Improving financial results quickly, rapidly assess  the value and synergy of core and non-core business combos,
instantly create intricate investment & business obstacles

Top leaders are differentiated in the soft areas which are harder to evaluate than qualities such as IQ or knowledge of industry
eg. Telco latin america; industry experience is not enough
Negotiation expertise & bridge-building with 3 warring bosses, Cross-cultural sensitivity in communication styles mattered more - to unify new venture under one strategy
American style - confrontational; Latin style - deferential in public; anger behind doors
CEO, different part of world, effective strategist, proven marketing expert, understood technology, products, customers - all these were inadequate in the end

Senior positions competencies
*****************************
Results orientation
Ability to collaborate
Develop people
Lead teams
Manage change

- limited accessibility to candidates
**************************************
* Many candidates have no tolerance for any kind of thorough evaluation
Little available time and concerned about confidentiality which could damage their reputation or their employer's reputation. Therefore participation is very limited
* Reaching candidates who are not looking for a job is difficult
* Problem of candidate availability grows exponentially with the seniority of the job

(iii) Biases & Traps
*********************
lurks within hiring teams and companies

Against the gods, Peter Bernstein
***********************************
Recognize and deal with biases that affect financial decisions

10 Emotional biases & Traps that affect judgments, feelings, behaviors & Sabotage people decisions
***************************************************************************************************
Higher the stakes, more senior the appointment, the stronger these forces
Guard against arbitrariness when it comes to making great people decisions

Procrastination - especially when times are good, status quo is maintained
Overrating capability - believing hired people are more capable than they actually are; assuming people can change quickly & confusing motivation for capacity (skills, experience)
Snap judgments - not calculating probabilities accurately; using first impressions, charisma, gossip, second-hand info more; long on snap, short on judgment
Branding - Branding mistake is to buy a reputation rather than an individual who embodies the reputation
Evaluating people in absolute terms - not taking into account circumstances eg. outstanding, loser; in people decisions everything is relative to a particular context
seeking confirmatory information - ignoring warning signs; not looking at evidence that conflicts conclusions; decisions, investments, negotiations could be sabotaged.
Hiring decisions fail because of this. It takes enormous discipline to assess candidates in depth, sifting through both positive and negative impressions to arrive at true qualifications (p73)
saving face - Lying
sticking with familiar - Good fit with comfortable & familiar rather than competence & complementarity
emotional anchoring - failing to see individuals in their own terms; comparing with past ideals; first & last in interviews get more attention than middlers
herding - hide in the middle of the herd rather than stick neck out; follow majority rather than acting independently; hesitating to express a different view. attend to whistleblowers

International tech company service line - Debacle
**************************************************
CEO stuck with the familiar managmeent consultancy, made snap judgments and did not conduct a competency analysis
looked rather at education backgrounds, employment history, appearance, speaking skills
true accomplishments and behaviors not checked rigorously
Job at hand require both an outstanding level of technological know-how as well as remarkable leadership, operational, collaboration skills (pg 66)

9 motives for lying
********************
Avoid being punished
Obtain a reward not otherwise obtainable
protect another person from being punished
protect oneself fro threat of physical harm
win admiration of others
get out of an awkward social situation
avoid embarrassment
maintain privacy
exercise power over others

Correct action
***************
Instead of lying, correct action is to acknowledge mistake and act on it quickly to speed up recovery

Sticking to familiar
********************
breeds myopia, self-absorption
dangerous when a change is needed that requires different competencies

Filtering out Biases
*********************
Build awareness
Have right advisors inside and outside the organization

Before hiring:
Identify strategic challenges, managerial priorities, key competencies needed
eg. focused and simple management approach of a broad-guage generalist to run a large, multibusiness corp

(iv) Bad incentives & Conflict of Interest
********************************************
Candidate Circumstances
************************
Understand the candidate's circumstance to root out exaggerated accounts of competence (plungers, risk-takers, high rollers),
discredit overly self-critical self-assessments

values determine behavior we think - this is an absolute way of thinking
actually circumstances influence behavior - we are more of relativists, situationalists; honesty and compassion are not fundamental, absolute, reliable human traits
behavior is a function of social context (gladwell, tipping point)
when put under intense pressure (economic, social), we may behave in ways socially and morally unacceptable & contrary to deeply held values

Job hunting: self-serving dishonesty; cheating is frequent

Politic Pressures: Quicksand
*******************
Can devastate morale, company performance
No one wants to work in an organization dominated by cronyism, internal politics

Politics created by well-meaning people who have agendas
A dominating chairman hired his friend, college room mate instead of going through a search and evaluation process
Lacking flexibility and strategic vision, the new CEO got fired

Joint Ventures: backstage politicking goes on to get their candidates elected, desiring to have an ally in charge regardless of skill set
Weak candidates advocated for fear of becoming redundant, enhance own chances of getting ahead
Get jobs in return for favors rendered - quid pro quo; hire friends of supporters & use services of companies


Single most important mistake in top leaders' decisions
********************************************************
Looking for a dramatic big decision that will catapult the company to greatness in one fell swoop

"Greatness gets built by a series of good decisions, executed superbly well, added one upon another over a long period of time", Jim Collins

Summary
*********
Carefully analyze and implement every important decision including people decisions
Avoid traps
Master every step in the people decision process - know when a change is needed, help integrate those great people you've hired


IV. Welch, Chapter 3: Differentiation: Cruel and Darwinian? Try Fair and Effective
***********************************************************************************
Differentiation rewards those members of the team who deserve more
Link it to candid performance appraise
Face up to Differentiation with transparency, fairness, speed. It clarifies business and makes it run better

While being in middle 70 percent can be demotivating to some people, it actually revs the engine of many others

Winning leaders invest where payback in highest. They cut losses everwhere else (p 38)
Protecting underperformers backfires - it hurts the underperforming people in the long run

V. Welch Podcast, Hiring is hard work,Business week
***************************************************
Biggest hiring mistakes (60 years of combined experience)
***********************
Toughest thing you do in business
Picking somebody is a real tough decision

Made so many mistakes

(1) - Too good to be True Trap
*******************************
Terrific woman, well dressed, charming, perfect experience, looking for a long time
Too good to be true - References were not calling back
Wanted to fill the job so badly
Had 3 jobs in the last year
Hiding a problem

(2) - Has your missing piece
*****************************
Needed plastics engineers. GE has electrical engineers
All Terribly impressed by DuPont
Scoured ranks of DuPont; head hunters, ads in newspapers
Hired some duds; DuPont prestigious brand but still had turkeys
missing piece could be MBA, better with words etc

(3) - Familiarity Trap
************************
Speaks similar language; but don't have the stuff
You are not hiring a language major; you are looking for a skill base
eg. Chinese manager does a better job in China vs an English speaking guy

(4) - Dead end job
*******************
Solved a problem in a year or two and hits a dead end. It is like getting a virus.
Fill a need but but get run way with it. Runway is a wonderful characteristic you want to have

(5)- Lacks Emotional Intelligence even if they are bright
**********************************
Maturity, Resilience, Poise, Empathy but does not have EQ
Great experiences, internships but had a I'm too good for you
fine line between arrogance and self-confidence
Wierd arrogance - crossed over the line of self-confidence
I have never made a mistake; I don't intend to make a mistake here

You are always on the razor edge of screwing this one up.
Time pressure is high. You want to get it over with to get to real work.

But Real work is hiring the right person.
Hiring is hard hard work. Take your time. Think it through.
It is about the most important decision you will make

https://blackboard.strayer.edu/bbcswebdav/institution/JWMI/520/podcasts/hiring_is_hard_work.mp3

VI. Week1 Lecture1
********************

VIa. Why People Decisions are So Important
*******************************************
People are the primary drivers of success
Not Brilliant Strategy, Flawless operations, Unforgettable marketing, dumb luck

VIb. Secret to Company Performance & Success
*********************************************

(i) Great people decisions are key to organizational success
Remarkable Results come from (a) outstanding leadership and (b) ability to build superior executive teams (Jim Collins).

(ii) For an executive intent on building a great company, the most important decisions are people decisions.
Transitions from Good to Great require the discipline of "First Who"
- First get the right people on the bus and wrong people off the bus
- Put Right people into the right seats
- Figure out where to drive the bus
Until 90%-100% of the key seats are filled with right people, there is no more important priority (Collins, 2006).

(iii) Misguided people decisions are a recipe to failure.
"How to Make People Decisions", Peter Drucker, HBR 1985
Executives spend more time managing people and making people decisions than on anything else
But the track record of managers is poor with miserable results.
1/3rd of promotion and staffing decisions have a positive impact on the company
1/3rd have little effect
1/3 are disasters

(iv) Skill of people management may not be improving
Therefore mastering the skill to make great people decisions is an excellent and outstanding opportunity.
Once you become skilled at making great people decisions, your value to your organization will increase continuously.
You will get hired to hire others for more complex jobs.
Selecting right leaders could translate to 40% of a company's performance or value.

VIc. Mastering People Management
*********************************
3 general areas of people management are
- Assess your existing lineup of strategic talent
- practice the concept of differentiation
- put right players in right places

Additionally, once the winning team is assembled
Evaluate, Reward, Promote, Develop, Motivate people

Go beyond your business unit or organization to find the talent you need.
Hire the right players for your organizational needs.
Success rate for Jack Welch in early career 50%, 30 years later it rose to 80% ie not 100%
Because it is hard and there are common pitfalls and obstacles.

Professional success in early career depends on innate talents, how you develop those talents, initial career decisions.
***********************************************************************
As a manager, your ability to select, develop, promote, manage
the right people will be the most important determinant of success
***********************************************************************

People decisions have even greater impact in the case of complex jobs (Fernandex-Araoz, 2007).
More complex the job, larger the difference between a superior performer and an average one.
Simple task of flipping burgers - 1 sigma means 20% more productive than average worker
Selling life insurance - 1 sigma means 120% more productive than average worker
Managing consulting firm client relationships - 1 sigma means 600% above average


VId. The Power of People
**************************
Any strategy, no matter how smart, is dead on arrival unless a company brings it to life with people - the right people (Welch, 2005).
Develop a Passion for selecting and developing the best leaders.
Acquire, Invest, Develop, Promote the best people.

Most important "products" of a company are not lightbulbs or transformers but managerial talent (Colvin, 2006)
Charles Coffin, CEO of GE 1892-1912, set principles of organization design - good model for large companies.
GE is a visionary company as it developed Welch caliber CEOs for a century from inside (Collins & Porras, 1997).

VIe. 3 Reasons why Great people decisions are particularly important
*********************************************************************
for organizational & individual professional success

(1) Knowledge economy is people intensive
*****************************************
Fastest growing companies in knowledge economy are all human asset intensive
- Biotech, life sciences, software, professional services, entertainment, services
Success in these companies depend less on physical assets and more on talents of people and their ability to work together

(2) Rapid Pace of Technological Change & Volatile Economic Environment
***********************************************************************
Regulatory changes can also quickly change the rules of the game
When new skills must be put in place quickly and effectively
great people decisions become imperative not just for success but for survival

(3) Globalization
******************
Making people decisions becomes urgent and challenging.
Largest and fastest-growing markets, China & India, have the largest imbalance in enormous demand for talent and limited supply.
Countries like these will become the main battlefield in the war for talent over next two decades.
Best tools for waging this war will be developed here.

Before jumping in and learning skills of effective management
Learn also what not to do


Other reasons
*************
(4) Second career "self re-starters"
************************************
Will need to make right people decisions

(5) Cross functional initiatives
********************************
Require a constant assembly of different teams
Wisdom of Teams, Katzenbach: team basics, people choices that go into composition of teams is overlooked

(6) Traditional processes breaking down, Outside partners coming in
********************************************************************
Innovation is no longer within a closed organization
right people decisions in choosing outside partners is key (Henry Chesbrough)

(7) Service sector
*******************
Makes up 80% of all economic activity in advanced economies
Picking the winners will be key

(8) Decentralization of people decisions
****************************************
managers will be called upon to build great teams
expected to be skilled at finding and hiring great talent

summary
Great people decisions lead to success
Great people decisions need active management
They are less like physical infrastructure, more like money
They will achieve full potential only if you deploy them effectively
Mastering great people decisions - build, maintain, reshape - single most decisive skill in determining your career success
It is also the secret behind great organizational performance


VII. Week1 Lecture2
*******************

Why People Decisions are so difficult
**************************************
People management skills are critical to you and your organization's success.
There are Barriers to making good people decisions which is why managers so often get people decisions wrong.
Overcome these biases to put the right people in the right jobs and become an effective leader.

(i) The Odds are against you - just a small number of candidates are actually exceptional; evaluation process only has 50%-80% success rate
****************************

(ii) Logistical challenges of assessing people
***********************************************
Target not clear as Some jobs are truly situation specific (especially for top jobs): competencies hard to quantify, assessment not easy
*****************
Moving Target as Some jobs are in flux: Requirements and priorities can rapidly shift from macroeconomic, political, competitive and technological changes
*************
Soft stuff Difficult to know eg. ability to collaborate, develop other people, lead, navigate change; talk may be good but prolonged observation key to know how they really play
*****************************
Evaluation Time is short: Always in a rush as candidates also have limited time, there is not always enough time to make a thoughtful and informed decision
************************
Confidentiality: candidates unavailable for a thorough evaluation; candidates perfectly happy in present job will not allow you to talk to references
***************
Assessment becomes a leap of faith

(iii) Psychological Biases of Assessing People
****************************************
(a) Overrating: Most people rate themselves above average and may motivate unqualified people  to apply for positions - confusing motivation for capacity & competence.
Without necessary skills, attributes and experiences candidates can fail.
(b) Unreliable internal info: using Snap judgments Relying on First impressions: candidate's charisma is unreliable indicator to predict future performance
(c) Unreliable external info: gossip, bad information can lead to removal of good candidates and inclusion of bad candidates
(d) Reliance on Brand: where the candidate went to school or used to work
(e) Sticking to Familiar & Safe: Instead of evaluating a candidate on own merits, judging relative to someone you know and like; hiring someone they can get along with
Desire for a good fit can blind you to desirability of competence, complementary skills and diversity
(vi) Herding: Imitating other people's conclusions; following the majority rather than acting independently. Due to fear of making a mistake or laziness or wanting to
be a team player.They may feel a pressure to endorse a wrong candidate who favorably impressed everyone else

(vii) Conflicts of interest:
****************************
Between candidate's interests and those of your company: laid off candidate may apply for a job well beyond his experience or capability
Politics: most pervasive of challenges, people want to hire and promote friends. Quid Pro Quo - offer a job in return for past favors or future promises.
Jockey in joint ventures to get their candidates elected for important roles, regardless of skills or track records. Job security - people may advocate for
weak candidates so they will look good in comparison

Dr DP

Strategic Management & Competitive Advantage

JWI 540 Strategy Week1 , 7/1/12
Jack Welch Management Insitute

Learning Objectives
*******************
Analyze the business rationale for strategic management.
Differentiate among various types of strategies.

I. Carpenters & Sanders, Chapter1: Introducing Strategic Management
********************************************************************
Strategy is the coordinated means & pattern of actions by which an organization pursues and achieves its goals in the face of competition
Strategy outlines the means by which a firm creates unique value for its customers and stakeholders
It forces the firm's managers to think holistically about what the firm does
and why those activities consistently lead customers to prefer the firm's products & services over those of competitors

Strategy means General's view ie CEO's view, strategic leader's perspective
It is a big picture perspective on the firm and its context (ie over and above the myopic details & operational tactics of a single functional area)
It is a holistic view of the organization and a plan that will lead the firm to victory
It determines how competetive decisions need to be made

Strategic Management
********************
Process by which a firm manages the formulation and implementation of its strategy to perform in the marketplace
Helps understand which activities are important and why

(i) Vision, Mission, Values - Fundamental org purpose and character
(ii) Goals & Objectives - Specific targets for success
(iii) Strategy Diamond - Coordinated pattern of attack
Arenas: Where will we compete? Product categories, channels, market segments, geos, core technologies, stages of value-creation ?
*******
Vehicles: How will we get there? Internal organic investment & development, Joint Ventures, Licensing/Francising, Alliances, Acquisitions?
********
Differentiators: How will we win in the marketplace?
***************
Why customers would choose firm's product or services over those of competitors?
Customer perceives higher value through Image, Customization, Technical superiority, Price, higher Quality, better Service, Reliability, Style, Features, Speed to Market ?
Make tough tradeoffs and decide early

Staging & Pacing: What will be our speed and sequence of strategic moves? Speed of expansion, Sequence of growth initiatives?
*****************
Depends on resources -Cash, human capital, knowledge, urgency, credibility, need for early wins

Economic logic: How will we obtain our returns?
***************
lowest costs - doing tasks fundamentally differently & efficiently, or through scale ?, special deals?, scope?, replication?
premium price - due to unmatched service, proprietary product features?


(iv) Internal & External Sources of Competitive Advantage
************************************************
Internal - Possess or Acquire Unique Resources that rivals cannot duplicate
External - Position the firm to take advantage of industry opportunities
Dynamic - Look for opportunities to shape high velocity & interconnected markets

(v) Strategic Leadership

(va) Implementation Levers
*************************
Organizational structure:
*************************
How Responsibilities, Tasks, People are organized; authority, hierarchy, units, divisions, coordinating mechanisms
Is the current structure appropriate for the intended strategy?
Are the reporting relationships and delegation of authority set up to execute the strategic plan ?
Is the organization centralized or decentralized for the strategy ?

Systems & Processes:
********************
organizational processes and procedures used in daily operations
Control & incentive systems, Resource Allocation procedures, info systems, budgeting, distribution

People & Rewards:
*****************
Get the right people, develop & train them to realize the strategy
Rewards can accelerate or undermine (rewards for A hoping for B)

(vb) Resource allocation decisions
**********************************
develop support among stakeholders


Strategy Diamond can be applied at multiple levels:
**************************************************
Product Strategy
Business Strategy - spell out how the firm plans to compete; use strategy diamond
Corporate Strategy - spell out which businesses the firm will compete in, how ownership by the corporate parent adds value to business, how diversification helps each LOB compete better
Global Strategy

Strategy Implementation
***********************
Organization should coordinate its structures, systems, processes & strategic leadership to translate strategy to action


The success of a strategy depends on vision, planning and execution

A firm's performance is directly related to the quality of its strategy and competency in implementing it
Strategy is also referred to as Business Policy
Responsibility of strategy is to ensure firm's whole is greater than sum of parts (distinct business units; functional units)
Strategy is affected by functional areas of the firm - marketing, finance, accounting, operations
Analyze the conditions of a firm, the industry, formulate strategies, determine how to implement the strategy

What should be the objectives of your firm?
How will competition interfere in getting there and what needs to be done to minimize threats?


Three themes
************

(i) Strategy is dynamic
************************
Firms, industries and competitive environments are dynamic in nature
*************************************************************************
Look at it not as a snapshot in time but an ongoing movie
A firm's position is a result of many strategic decisions made over time
Capabilities and resources have to be developed over time

(ii) Strategy Formulation and Implementation should be connected
******************************************************************
Beware the knowing-doing gap
Use levers to get alignment: Org structure, systems & processes, people & rewards
All of firm's activities must complement each other and support the strategy

(iii) Strategic leadership is key
*********************************
for a firm to formulate and implement strategies that create value
Make substantive implementation-lever and resource-allocation decisions
Develop support for strategy from key stakeholders


Business Strategy
*****************
Ways by which a firm goes about achieving its objectives within a particular line of business (LOB), industry or segment
in the short term and in the long run
How GE competes against Rolls-Royce for contracts from Airbus & Boeing
How it cooperates with other suppliers of technology
Decision to scale up to reduce the cost

Corporate Strategy
******************
A firm like GE or 3M can have 100s of LOBs
(i) In what businesses will we compete in ?
*******************************************
Decide if the firm should enter or exit a business
(ii) How can we, as a corporate parent, add value to our various LOBs?
*********************************************************************
Find ways to create value by having two or more LOBs cooperate and share
GE - Senior management orchestrates synergies across commercial and consumer finance groups
UnderArmour - Create synergy between performance apparel and athletic footwear
(iii) How will diversification or entry into a new industry help compete in other industries ?
**********************************************************************************************
UnderArmour: Entering Athletic footwear may help sell more performance apparel and better compete with Nike which operates in both markets
WalMart: Diversification into grocery business segment of retail increases foot traffic and boosts sales of non-grocery retail products

Strategy Formulation & Implementation are linked
*************************************************
Strategy Formulation: Decide what to do
*********************
Strategy Implementation: Perform all activities necessary to do what has been planned
***********************

Good strategies present solutions to complex problems
*****************************************************
Externally - enable production of goods and services that beat the competition and have a ready market
Internally - provide all employees with clear guidelines about what the firm should and should not be doing


Competitive Advantage
*********************
A firm's ability to create value in a way that its rivals cannot.
Firms attempt to achieve a position of Competitive Advantage over their rivals when serving target customers.

3 perspectives of Competitive Advantage are used to formulate effective strategies
****************************************
Internal Perspective - CA is a function of Unique firm-specific Resources and Capabilities that allow firms to beat competition
External Perspective - CA is largely a function of overall structure, attractiveness, profitability of industries & a firm's position
Dynamic Perspective - no firm can sustain Competitive Advantage over a long period of time

Internal perspective of CA
***************************
Analyze firm's resources and determine strategies rivals can't duplicate
Resource-based view of the firm
Firms with superior Resources and Capabilities gains the advantage
Firms obtain valuable and rare resources, develop capability and drive customers to their products and services at the expense of competitors
Objective of managers is to determine what resources and capabilities offer the most value, acquire them if lacking, leverage them in executing the firm's strategy

External perspective of CA
***************************
Analyze industry and position firm to take advantage of industry opportunities
Industry attractiveness and position of firm relative to competitors determines CA
Firms should position themselves to compete in attractive industries OR adopt strategies to make their current industries more attractive (Michael Porter)

Dynamic perspectives of CA
***************************
Competitive Advantage is temporary - a firm's current market position is not an accurate predictor of future performance.
Look at the firm's past for clues about how it arrived at its present position. Look at the future competitive landscape and how the firm can influence it.
Look for opportunities to shape high velocity and interconnected markets
Develop unique resources to create disruptive change


II. Winning, Welch, Chapter11: It's All in the Sauce
*****************************************************
Strategy
- A living breathing dynamic game about how to win
An approximate course of action that you can frequently revisit, redefine
according to shifting market conditions
- it is fun, fast, alive and gets you where you want to go
- pick a general direction and implement like hell
- Don't make it too complex: Do not let details cloud clarity on what to do
Ponder less, Do More to Win
- Make clear cut choices about how to compete
- It is the job of the CEO, not a wide-scale, bottom-up activity
- Decommoditize: Make distinctive products & services thrpough innovation, technology, service add-ons, unique internal processes

3 steps for Strategy Implementation
************************************

(i) Find a Big Aha to set a broad direction (2-30 days)
********************************************
Fast & Simple way to get to competitive advantage
Find a strategic position where no one can beat you

(ii) Put Right people & Skills in right jobs to drive the Aha forward
********************************************
Fit & match skills to strategy
Key Skills For commodity business (Quality, Cost, Service):
Hard driving, Detail oriented, Meticulous, Disciplined, Efficient
Focus on Operating Margins, Cash Flow

Key Skills For High Value-Add business:
Dreamers in love with ideas, Visionary
Focus on long term Strategy

(iii) Relentlessly seek Best Practices
***************************************
Companies that win Imitate & Improve
To implement the hell out of the Big Aha
Seek out best practices from inside or outside the company
Adapt, continuously improve the best practices & make it fun
Create a thriving, thirsting, learning organization
where everyone is searching for a better way
filled with energy, curiosity & can-do spirit
operate with speed, informality, open communication as in a corner store
new products, services, procedures, ideas, growth opps should pop out as a norm

Upper Crust Pizza: Strategy is all about Pizza Product
Gary Drug: Strategy is Service

5 Slides
*********
Playing Field, Competitors, You, what's around corner, Winning Move
********************************************************************
Leap from Analysis to Action:
Launch the New Product, Make the Acquisition, Double the Sales Force, Invest in major new capacity


Slide1: What the playing field looks like now
**********************************************
(i) Who are the competitors ? Large, Small, Old, New
How big is the market and where do we fit in ?
(ii) What is the Marketshare ? Globally & in each market ?
(iii) What are the business characteristics ? Commodity or High Value ? Long or short cycle ?
Where is it on the growth curve ?
What are the drivers of profitability ?
(iv) Strength & Weakness of each competitor
How good are their products?
R&D spending of each ?
How big is Sales force?
Is Culture performance driven ?
Who are the main customers? How do they buy?

Slide2: What has the competition been up to ?
********************************************
What does each competitor have for breakfast ?
(i) What has each competitor done in past year to change the playing field?
eg. stealing key sales people, introduced 2 new products, merged & has integration difficulties
(ii) Anyone introduced game-changing new products, new technologies, new distribution channel?
(iii) Any new entrants? What have they done in the past year?

Slide3: What have you been up to?
*********************************
(i) What have you done in past year to change competitive playing field ?
(ii) Bought a company, introduced a new product, stole key people, licensed new technology?
(iii) Lost any competitive advantage, sales person, special product, proprietary tech?
NET - outflanked ? are you leading the market or chasing it?

Slide4: What's around the corner?
*********************************
(i) What scares you most in the year ahead ?
What 1 or 2 things can a competitor do to nail you ?
(ii) What new products or technologies could your competitors launch that might change the game?
(iii) What M&A might knock you off your feet ?

Slide5: What's your winning Move?
*********************************
(i) What can you do to change the playing field?
Acquisition, new product, globalization ?
(ii) What can you do to make customers stick to you more than ever, and more than to anyone else?

III. Welch, Business Week 2009, Shareholder Value
********************************************
Shareholder value is an outcome, not a strategy
Shareholder value increases as an outcome of implementation of successful strategies

Strategies drive business
eg. innovation aimed at producing leading products in every cycle
low-cost global supplier
globalize a company taking its strengths in one market and translating them to every market
Strategy is something you can touch
helps you know what to do when you come to work every day
It energizes and motivates employees

For sustained shareholder value, the job of a leader is to deliver commitments in the short term
while investing in the long-term health of the business
Good managers know how to eat today and dream about tomorrow at the same time

How everybody Wins:
*******************
Employees get job security, better rewards
Customers will get better products and services
Communities will benefit from employees giving back
Shareholders get short term commitments and long term vision

Future of Capitalism
*********************
What do companies do
How do they reward people
Who they are for

IV. Assignment1 Preparation
****************************
Bartlett & Nanda Case Study: Ingvar Kamprad and IKEA
Moon Case Study: IKEA Invades America


V. JWI540 Jack Welch Video WK1
******************************
Global competitive situation - have nots want what wants have
will get more intense
need to innovate, do more with less, provide most value
innovative product & services
Drugstore facing CVS- by name, 30 mins prescriptions delivered home, credit line, takes care of you
Strategy is Service - challenge is to find that big Aha in the business
Pizza place strategy - Sauce, the best in Boston
No charts, books, analysis - just great sauce
To find your strategy, think, where is the special sauce in your business ?



VI. Week1 Lecture1 (Trish Gorman)
**********************************

Strategy
********
- is about winning by beating competitors
  execution is of paramount importance ie. focus not on thick ppts but on action, results, winning
- is a customized playbook to help the business beat competition
- is a set of guiding principles that define how people in the business
    should and shouldn't act
    what they should and shouldn't prioritize
    to achieve their goals
    over a given time period
- takes into account the organization's skills, customers, environment
- guides in efficient use of resources and in getting additional resources needed
- changes when company's business environment changes
- provides guiding principles for the long-term
- leverages tools as well as gut calls
- should be nested and consitent: developed for business functions, business units and entire company

Strategy at Different Levels of the Organization
*************************************************

Functional Strategies (Mfg, IT, Marketing & HR)- can operate across the organization or in specific business unit areas
R&D - Develop viable options to extend products with more and different features and services
Marketing - Segment and identify high potential markets within current consumer base
Operations - Identify and implement production of new offerings

Business unit strategies - Extend product offerings with different features & services to current consumer base in select geos
compete for marketshare, develop new products, control operational costs

corporate strategy - Leverage existing brands with loyal consumers
Focus on Decisions at the top:Resource Allocations & Budgets across the firm, select Acquisitions & Divestitures, systems shared across business units


Elements of a Good Strategy (Objective, products/customers Scope, what will be superior to competition -Competitive Advantage)
******************************************************************************************************************************
Competition - what, where, how
******************************
Jack Welch 5 slides
*******************

(i) Strategic objectives:
**************************
Gain market share, contain costs, increase profit margins, meet financial targets, increase customer satisfaction
- GE: To defeat rivals, shift from low-value commodities to high-value technology products; sell services instead of products
- How strategic objective is expressed makes a big difference
in guiding and energizing people, heighten urgency, sharpen focus, inform the attitude of every employee
Jack Welch blunty said GE would become #1 or #2 in arenas it competed in; else fix, sell or close

(ii) Scope - Where will we compete
***********************************
3 competitive arenas

(a) Customer or product/service offerings
******************************************
Identify target customers; be clear about what you will and will not sell them
Cannot be all things to all people

(b) Geographic region
**********************
Determine how broadly you'll compete geographically - regionally, nationally, globally
taking into account company's ambition, industry dynamics, economic environment

(c) Degree of Vertical integration
***********************************
How much of the value chain your company will choose to control
end-to-end raw materials to products & after-sale servicing
OR
focus only on final products & leave component parts and sales of of product to others

eg. Edward Jones strategy
Defined by
chosen customer segment - customers who don't like risk and don't want to manage their own investments
Geographic location - convenient locations in suburbs and small towns
Degree to which it is vertically integrated - controlling a limited distribution channel made up of one-person offices
These decisions shape the company's important decisions, about what it'll do and what it won't
eg. it will not offer online trading

(iii) competitive advantage
**************************
outcome to achieve & timeframe, arena to compete, methods to achieve the objectives and win
How to gain competitive advantage over rivals


Why we need a formal strategy
******************************
- coordinate activities across the organization: balance freedom with constraints of guiding principles
- respond quickly and coherently to change in marketplace conditions: when new competitor enters or demand drops, changes including direction need to be made
Major decisions and how they will affect competitive advantage should be guided by a coherent strategy
- resources are limited: managerial time, money and resources to launch and grow new businesses are constrained

Go beyond Defense & Play offense:
*****************************
Plan desired strategic behavior  (possess some unique skills & core competencies, make some contribution, apply some process better than anyone else)
=> Execute brilliant offensive competitive maneuver
=> seize competitive advantage & Thrive

Dr DP