JWI 540 Strategy, Key Concepts, 9/15/12
I. Course Summary - Succinct version for quick reference & high level view
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1. Goal Clarity
To find a unique way for the firm and win in the market place
2. People first, strategy second
If you get the right people, game is over
3. Be a strong manager
understand firm's capabilities, identify target customers, size up competition, envision success, decide on strategic option,
define critical activities, coordinate activities & resolve conflict, prioritize action items, allocate resources & budget, communicate effectively, translate strategy to results
4a. Be customer centric
4b. Refine with customer segmentation
5. Know your competitors
Get down to the nitty gritty details; what are they having for breakfast ?!
6. Determine strategic objectives
Gain market share, contain costs, increase profit margins, meet financial targets, increase customer satisfaction
eg. GE will be #1 or #2 in arenas it competes in; else fix, sell or close
7. Identify Competitive positioning
How will you create value ? - Differentiate with highest value, lowest cost or a unique offering
8. Competitive advantage
firm's ability to create value that is unique and difficult to imitate.
9. Face the competition
traditional, latent, oblique
10. Competitive analysis
Techniques: perceived value, critical dimensions, SWOT, 5 forces, PESTEL, Benchmarking, Strategy testing, value curve
Constantly seek competitive analysis about your rivals
11. Strategy formulation
Strategy formulation is about finding the big Aha, setting a broad direction, and playing a dynamic game about how to win
12. Strategy Development
CEO cannot delegate this responsibility - must continually find new ways of winning
(a) 3 basic strategies: cost, innovation, execution
(b) Jack Welch's 5 slides framework to define a winning strategy
(c) PARTS framework to analyze strategy in any industry
(d) Four stages of strategy development
Analyze - 5 forces, SWOT, core competencies, future trends
Generate & Evaluate options - what choices does the firm have ? feasible ? risks?
Craft possible strategies - combine options into an unusual strategy and a winning game plan
Choose & Test strategy - will strategy stand up in a competitive environment ? conduct small tests to test the market and refine strategy; predict costs and revenue over time
Test strategy with VRINE: value, rarity, inimitability, non-substitutability, exploitability
(e) Make strategic choices for sustainable competitive advantage
Prioritize the most important activities
Get activities into the budget
(f) Develop a portfolio of strategic opportunities
core enhancement launch, product launch, positioning option, scouting option, stepping stones
(g) Appreciate Uncertainty
Nothing is permanent and everything changes - markets, customer preferences, products, technology
where to compete ? - markets, customers, products
how to compete ? - technologies, skills
Develop skills to take advantage of the new opportunities
Constantly create a balanced portfolio of strategic opportunities with a mix of risk and reward.
(h) Growth options - M&A, Partnerships, Alliances
Carefully weight Risk/Reward for each move
Majority of M&As fail. To increase the odds of success avoid 6 sins of M&A:
Merger of Equals, Culture fit, Reverse hostage, being afraid and not going in boldly, conqueror syndrome, paying too much in deal heat
(i) Have Exit Strategy clear
Under what conditions would you walk away from an M&A or Partnership negotiation ?
Think about Risk/Reward and BATNA.
13. Strategy Implementation
Strategy implementation is about putting the right people and skills in right jobs, and relentlessly seeking best practices
13a. Pull the 5 Strategy implementation levers
organization structure, systems, processes, people & rewards
contradictions can occur between the levers as a firm gets globalized
- Think global, act local; Decentralize decision making but coordinate policy.
13b. Shape the organizational structure
- arrangement of responsibilities, tasks, people within an organization as required by strategy.
Determines how information will flow efficiently through the firm (Carpenter & Sanders, 2009).
- types of structure include: Functional, multi-divisional, matrix, network
Strategy determines organizational structure
But org structure can also influence strategy
13c. Mobilize to win - get everybody on board
(i) ask dissenters to leave early on
(ii) Use critical tools to set the pace:
- DVP: Actively Generate Dissatisfaction (the way people feel) with status quo, Communicate a compelling vision (where you want them to go), Process (how they're going to get there)
- Gap Analysis: review regularly and remove obstacles in the way of the team
- Six Sigma
(iii) use financial and non-monetary incentives for those that remain loyal
13d. Align the organization
- vision (broad view and overarching direction),
- strategy (where and how the firm will compete to win with durable competitive advantage),
- organizational structure (arrangement of people - clarity in ownership of roles, responsibilities and resources),
- business process (includes success metrics that will be tracked eg. balanced scorecard & strategy map) and incentives.
14. Position the firm to succeed in any type of strategic opportunity portfolio
Capitalize on and expand on current capabilities
Assemble portfolio of strategic opportunities
Balance risk and reward
Match opportunities and firm's capabilities
Ramp up firm's capabilities
Get right person to run new ventures and staff sensibly
15. Defend the strategy
Detect and React to market changes quickly - use Porter's 5 forces model, monitor competitors, new entrants, substitutes
16. Strengthen core competencies (desired behaviors)
At the core of every successful firm are a handful of capabilities that result in high performance
These are complementary value creating skills or activities that other firms find diffficult to imitate
strategic capabilities and behaviors of the firm; improve the game continuously
technical know-how, reliable mfg process, close relationships with customers & suppliers, culture that fosters employee loyalty,distinctive use of technology
Tests for a core competency:
Does it truly create value from customer's point of view ?
Is it difficult to imitate ? Does it rely on a complex combination of actitivities and knowledge that lead to sustainable competitive advantage?
Does it further the strategy - closely linked to firm's strategic advantage?
17. Make customers stick
shift from transaction model to a long term relationship model
- 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
18. Learn as you go
18a. Be discovery oriented and explore new ideas
18b. Ensure firm's resources and capabilities are on top of the game
18c. Be Agile: Be open and flexible to change the strategy game with new data
18d. Be constantly on the move
- update fact base constantly
- think about relative strengths to anticipate competitor move
- look outside the firm: what is changing and what is likely to change in future ?
- look inside the firm: what are the obstacles and internal challenges could undermine strategy ?
II. Course summary - Detailed version for deep dive into details
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1. Goal Clarity - To find a unique way for the firm and win in the market place
Good things come with winning:
Firm gets stronger - profits allow sustainability and fuel future growth; growth energizes the whole place
Shareholder returns - shareholders get short term commitments and long term vision
Customer satisfaction - customers will get superior products, services, post-sales relationship
Employee satisfaction - employees get job security, better rewards
Community benefits - communities will benefit from employees giving back
2. Be Customer centric
How will you create value ?
understand the customer to make correct choice of
- 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)
Which customers to target - Who will buy what we sell?
Which products and services to offer them ?
How to better satisfy them ? - become customer centric, understand consumption chain, and develop long term relationships
Customer preferences evolve with time - understand the customer ; stay vigilant of changes in market shifts
3. Know your competitors
Know your competitors. Understand their styles.
Know their plays. Anticipate their next moves.
Operate proactively rather than reactively.
Define your strategy to win.
4. Be a strong manager
Understand firm's strategic capabilities
Identify target customers
size up competition
decide on strategic option
translate strategy from high level concept to results
Envision success
Define critical activities
Coordinate activities and resolve conflict- balanced score card, strategy map
Prioritize action items in the plan - clarify barriers of success
Communicate effectively - be received, understood, credible, actionable, timely
Allocate resources and budget - iterative feedback
Understand Linkages in Consumption chain
Customer Need, Demand, Strategy & Competitive Advantage, Distribution Channel, Sales as the beginning of a Customer Relationship, Post Sales Service, Customer Delight
5. Customer segmentation
Segment customers into behavior clusters (Derick Jose, 2010)
Business question, variables, isolate key variables, cluster technique, iteration, segment personas, overlay geos, overlay sentiment, evolve actionable items, track ROI
6. People first, strategy second
If you get the right people, game is over
The team with the best players wins
7. Strategic objectives
Gain market share, contain costs, increase profit margins, meet financial targets, increase customer satisfaction
eg. GE will be #1 or #2 in arenas it competes in; else fix, sell or close
8. Competitive positioning:
How will you create value ? - Differentiate with highest value, lowest cost or a unique offering
9. Competitive advantage
It is the firm's identity in the market
It is the firm's ability to create value that is unique and difficult to imitate.
Internal sources of competitive advantage - managers should check if resources and capabilities offer the most value. If lacking, acquire them.
External sources of competitive advantage - compete in attractive industries, position the firm relative to competitors; or adopt strategies to make current industry more attractive
In a dynamic market, Competitive advantage is temporary - look for emerging opportunities; develop unique resources to create disruptive change
Relentless innovation is critical to sustain competitive advantage.
10. Face the competition
Tough competitors keep the pressure on a company to drive down costs and come up with new ways to win and keep customers.
Traditional competitors - these are the well known players
Latent competitors - players who can enter the industry from a different part of the same value chain; read their signals early and react defensively and offensively
Oblique competitors - players who enter from an unrelated field; unpredictable, can attack without warning; never underestimate them; recognize and react quickly
11. Competitive analysis
(a) Techniques
"Perceived Value" Mapping - focus firm's efforts on creating value the customer wants
Critical dimensions analysis - identify critical differentiating factors, figure out how competition provides value and where firm stands
SWOT - Analyze strengths, weakenesses, opportunities, threats
Five forces - Analysze industry structure with effects of rivalry, threat to new entry, supplier power, buyer power, threat of substitutes; complementors - provide complementary products and services
PESTEL analysis - Analyze market growth and decline using political, economic, socio cultural, technological, environmental, legal context
Benchmarking - quantitative & qualitative metrics to compare firm's performance vs competitors
Strategy testing - test for situations when strategy fails; rooted in facts or hope ? unrealistic ? undifferentiated? does it drive financial shareholder value? market too small? sustainable?
Value curve - visually plot how firms compete by consolidating competitors in a single value curve (key success factors vs performance rating); examine assumptions; predict moves
(b) Constantly seek competitive analysis about your rivals
12. Strategy formulation
Strategy formulation is about finding the big Aha, setting a broad direction, and playing a dynamic game about how to win
Strategy is an approximate course of action that is frequently redefined according to shifting market conditions
Strategic management is about CEO's view of how to compete in the marketplace and lead the firm to a win.
To find your strategy, think, what is the big Aha, the special sauce in your business, the differentiator that gives competitive advantage ?
Possess some unique skills & core competencies, make some contribution, apply some process better than anyone else
Strategy diamond for coordinated pattern of attack - arenas, vehicles, differentiators, staging & pacing, economic logic
Implementation levers - organization structure, systems & processes, people and rewards
Strategy formulation and implementation should be connected
Strategic leadership is critical for decisions regarding implementation levers and resource allocations
Execution is far more important than strategy & segmentation
Constantly monitor industry dynamics with Porter's 5 forces
Experience of setting strategy can turbocharge a manager's advancement within an organization.
Rising stars take on broader responsibilities and keep a perspective beyond their function and business unit.
Involvement in strategy-development raises visibility with top management
Presents new intellectual and political challenges - an opportunity to create lasting value through analysis and actions
Each of our situation is unique - Recognize a new way to look at something (Dr D)
Pull value and wisdom from wherever you can to make the best strategy tools perspectives
Take advantage of the situation - just do something well, provide value and deliver exactly what customers need when they want it
13. Strategy Development
CEO cannot delegate this responsibility - must continually find new ways of winning
(a) 3 basic strategies: cost, innovation, execution
(b) Develop a strategy creatively
Involve the right mix of people - skills, knowledge, personalities - and ask the right questions
original insights, lateral thinkers, articulate, diplomatic, unafraid to voice views, tolerant of views
Use qualitative and quantitative analyses and take into account diverse points of view
Do not bristle when laughed at; be comfortable with ambiguity
know the organization, industry, technologies, competitors, regulatory issues
Naive questions may open up new areas of exploration
De-average buyers and users
examine binding constraints
explore unexpected successes
imagine perfection
look beyond boundaries of the business
revisit assumptions underlying processes and products
Ask potential customers at the time they are experiencing the pain if they like the idea
eliminate customer pain points & capture value;
consider radical departure vs incremental improvements;
find surprising combinations & unexpected advantages
be the first to see opportunity - focus on a subset of unexplored possibilities, overlooked corners
bound the range of acceptable ideas
Four stages of strategy development
Analyze - 5 forces, SWOT, core competencies, future trends
Generate & Evaluate options - what choices does the firm have ? feasible ? risks?
Craft possible strategies - combine options into an unusual strategy and a winning game plan
Choose & Test strategy - will strategy stand up in a competitive environment ? conduct small tests to test the market and refine strategy; predict costs and revenue over time
Test strategy with VRINE: value, rarity, inimitability, non-substitutability, exploitability
Timing is important - how long will it take to get results ?
Buy In : CEO, Analysts of past performance of firm, rivals, current industry trends, company specialists in competitive intelligence, rgulatory analysis, marketing, finance, Ops, engineering
Evaluate options
Eliminate weak ideas; focus on top 3
Is the market big ? does it fit the org? is there demand - is the market ready ?
Defend it (5 forces), create growth options, be discovery-driven and be constantly on the move
Translate strategy from high level concept to results by envisioning success, defining critical activities to break through barriers, resolving conflict through coordination,
prioritizing action items and communicating effectively.
Jack Welch's 5 slides framework to define a winning strategy
Playing field - market size, market share, high value or low cost position? business rules? profit drivers? competitors SWOT,culture? main customers?
competitors - what have they done to change competitive playing field in last year - key people stolen ? products introduced ? new distribution channel ? new entrants ?
you - what have you done- key people stolen or lost ? innovative products introduced ? bought a company ? licensed or lost new technology? leading, chasing or outflanked ?
foresight around the corner - what 1 or 2 things a competitor can do to change the game and nail you - eg new product launches or technologies ? which M&A will knock you out ?
your winning move - what can you do to change the playing field - acquisition, new product, globalization ? What can you do to make customers stick more than ever or to anyone else?
Avoid analysis paralysis. Leap from analysis to action.
PARTS framework to analyze strategy in any industry
Define game changing levers
Players who create value - rivals, competitors, new entrants, suppliers, customers, complementors
Added value - high performance, timely, cost-effective ?
Rules - what can and cannot be done in the game ? eg Legal, industry standard. who makes the rules ? add higher value by breaking rules
Tactics - score points with stakeholders, suppliers, customers; get a better position in the strategy game; drive perceived cost lower than perceived value
Scope - what are the boundaries of the game? stand-alone or can link to other games?
Develop a portfolio of strategic opportunities
14. Create Strategic Opportunity Portfolio
Balance market uncertainty vs technical execution uncertainty
Core enhancement launch - low risk
Platform launch - opportunity close to the core business; build new skills
Positioning options - new market based on good customer information; execution risk high; experiment cheaply to verify
Scouting options - high market risk; test merit with experiments before heavy investing
Stepping stones - where and how to compete is not clear; high risks; experiment to lower uncertainty, monitor signals
15. Position the firm to succeed in any type of strategic opportunity portfolio
Capitalize on and expand on current capabilities
Assemble portfolio of strategic opportunities
Balance risk and reward
Match opportunities and firm's capabilities
Ramp up firm's capabilities
Get right person to run new ventures and staff sensibly
Bigger the risk, bigger the payoff
16. Make strategic choices for sustainable competitive advantage
Prioritize the most important activities
Get activities into the budget
17. Defend the strategy and react to market changes quickly - use Porter's 5 forces model, monitor competitors, new entrants, substitutes
18. Strategy Implementation
Strategy implementation is about putting the right people and skills in right jobs, and relentlessly seeking best practices
Strategic positions - "A" jobs critical to deliver value proposition
- they have the greatest strategic impact on capabilities.
- there is high level of performance variability in these positions
- needs disproportionate investment
It is an iterative process
Actively manage strategy to achieve desired behaviors, avoid surprises and deliver results
19. Strengthen core competencies
Core competencies: what enables the firm to do something really well
at the core of every successful firm are a handful of capabilities that result in high performance
complementary value creating skills or activities that other firms find diffficult to imitate
strategic capabilities and behaviors of the firm; improve the game continuously
technical know-how, reliable mfg process, close relationships with customers & suppliers, culture that fosters employee loyalty,distinctive use of technology
Does it truly create value from customer's point of view ?
Is it difficult to imitate ? For Sustainable competitive advantage, a firm must rely a complex combination of actitivities and knowledge
Does it further the strategy ? core competency must be closely linked to firm's strategic advantage
Build core competency or buy it - create something superior to industry standard
- shift resources and decision making power to the competency you want to develop
- skunkworks: free up a small group of stars to incubate new idea
- Buy it: acquire a firm, retain the true sources of value
Protect and Maintain a core competency
create a core competency with numerous elements
Continually invest in your core competency - help employee upgrade skills, hire more people, add new machines, shore up firm's advantage, keep close watch on rivals
Do not dilute resources: keep priorities straight
20. Appreciate Uncertainty
It is a fundamental fact of business
what changes? - markets, customer preferences, products, technology
Develop skills to take advantage of the opportunities
Create a balanced portfolio of strategic opportunities with a mix of risk and reward.
where to compete ? - markets, customers, products
how to compete ? - technologies, skills
21. Growth options - M&A, Partnerships, Alliances
21a. Fastest growth option - Mergers & Acquisitions (M&A)
Fastest, most powerful tool a firm can use to change its game.
Allows firm to quickly acquire capabilities and resources
Reduce costs through consolidating, elimination of redundant positions
Increase size, share, competitive advantage
Avoid common traps in M&A and make a successful acquisition?
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(i). Check if the same business result can be achieved at lower risk with a partnership or organic growth.
(ii). Does it make strategic sense and further the strategic objectives of the firm ?
Is this acquisition aimed at getting quick results that organic growth cannot match ?
Is this to Acquire a competitor?
Is this to move quickly into an area where you don't currently compete?
(iii). If acquisition is justified, are clear criteria for selection of target company set ?
(iv). Does the acquisition create value?
(v). Before starting the acquisition process, stay aware of the common traps in M&A (Welch, 2005)
Sin#1 - Beware of merger of equals. Anticipate people dueling over who is really in charge. Identify roles and responsibilities ahead of the acquisiton.
Sin#2 - Cultural fit based on values of the two companies is as important as strategic fit that is based on products, technologies and numbers. Some cultures don't combine, they combust. Cross-cultural differences in a merger are usually not addressed until it is too late.
Sin#3 - Reverse hostage situation
Due to deep concessions given, the acquired firm is in charge in the end. Don't pay too much for something you don't own.
Sin#4 - Being afraid rather than going boldly
Complete the integration process within 90 days of closing (eg. Lou Gerstner at IBM managed transitions successfully by drawing attention to the firm-wide priorities of the 90-days). Do not let uncertainty morph into inertia or fear.
Sin#5 - Conqueror syndrome
Don't march into new territory and install your people everywhere.
For new and expanded firm to survive, it needs the best team - you may need to let go of some of your own.
Sin#6 - Paying too much
Beware of deal Heat that comes from overheated desire.
Don't get caught in the negotiation frenzy fanned by competitive bidders and investment bankers.
M&A Risks:
People in acquired firm could have different objectives or be difficult to manage
M&A Risk mitigation
(i) Manage actively
(ii) Have clear and shared goals with well-defined targets
(iii) Have clearly defined and quantified benefits supported by strong business rationale
(iv) Monitor progress - Explicit metrics and detailed reporting must be used to ensure targets are met, problems are resolved quickly and effectively.
(v) Create and encourage formal and informal connections between the two firms
Provide multiple channels of communication about both opportunities and problems.
Ensure clear accountability so there is never any doubt about who is in charge and where decisions will be made.
(vi) Place qualified managers chosen from both firms - It is vital to Select, prepare, support, reward qualified managers.
Wisdom to know what not to do - and not doing it - is among the most valuable contributions of a strategic manager (JWI 540, Week8, Lecture1)
(vii) Manage expectations across both firms and encourage a learning mindset
PIPP During M&As
Pace - beware deal heat; quickly discover if there is any value in the acquisition and a future in the deal
Power - Read the power bases of both firms; create a power map; who is in charge - will make key staffing decisions ? who will control resources ? whose systems and culture to use ?
Information - reduce anxiety and increase trust before, during after M&A; avoid miscommunication; don't share too much or too little
People - match right people with right jobs; face resistance; decide who should go; deal with emotions; balance needs of top 20% vs middle 70%
21b. Partnership
Capitalize on other firm's resources - people, money, skills, energy
Benefits of Partnering
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(a) Opportunity to learn fast and fail fast - walk away without trying to salvage a large investment.
(b) Enjoy a high potential upside for a relatively small investment while being protected from serious downside risk.
(c) Share different skill sets and financial risk
Beneficial in High-risk investments: share knowledge and financial exposure.
eg. Green energy industry has great deal of uncertainty around consumer preferences, dominant technologies, regulatory decisions, costs.
(d) Take small stakes in entrepreneurial firm in the form of Joint ventures or partnerships on selected projects.
eg. Rapidly changing high-tech sectors. Cisco & MSFT
Lower cost and higher flexibility than M&A
Different ways to partner
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(i) Informal relationship: Preferred supplier network; agree to give purchasing preference to certain suppliers in exchange for better terms.
(ii) Formal relationship: Contractual agreement; Joint venture in which two firms share ownership of a project or enterprise.
(iii) Strategic Alliance: Formal agreement but not shared ownership.
(iiia) Highly integrated alliance: Functions almost like a formal relationship
Different functions inside both firms are involved from R&D, marketing, customer service, manufacturing, distribution eg. Apple & Nike with ipod sensors
(iiib) Focused alliance: involves a limited part of each partner's business such as manufacturing.
eg.IKEA had long standing mfg arrangements with some supplires, got favorable rates
(iiic) Experimental alliances: shorter duration, project-specific. Temporarily use a partner's distribution network to get customer reaction to
your product in a foreign market.
Risks of Partnering
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(i) Difficult to manage
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Partners Not fully committed. Relationship can easily dissolve. Partner can suddenly pull out resulting in a rude suprise.
- Slow in decision making
- reluctant to commit resources
- unwilling to respond with sense or urgency when internal problems arise
(ii) Different objectives
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Partners kid themselves into thinking they will be able to reach their goals
but end up working at cross-purposes
(iii) Betrayal
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Malicious partner
Secretly allocates costs from other parts of its business to a Joint Venture, cheating the partner.
Loss of proprietary data, processes, product designs - clear guidelines and safeguards not in place.
Hollow out one partner - cheating partner grabs substantial knowlede, people, resources.
Mole - partner's real intent is to weaken the other firm.
Victim firm does not realize what is happening until it is deeply committed to the partnership and the damage is done.
(iv) Intangible and unquantifiable metrics for success
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(v) Constantly Nitpicking a Strong contract
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Insisting on following the letter of the contract
(vi) Too formal or Too informal relationships
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Too informal: No relationships at all
Too formal: Rigidly defined with specified points of communication
To ensure a successful partnership
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(i) Manage actively
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Increase managerial attention more than in-house action items as they focus on risky new activities
(ii) Have clear and shared goals with well-defined targets
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(iii) Have clearly defined and quantified benefits supported by strong business rationale
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eg. tangible increase in sales
Intangible benefits could result in less disciplined partnerships
eg. hoping both partners will learn about new markets
need to specify what they hope to learn over a certain time period, how knowledge will be measured, how it will be used.
(iv) Have a strongly worded contract - but never use it to nitpick
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Mistrust and failure can result from nitpick
Very existence of a contract can lead to success
(v) Monitor progress
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Vitally important to good alliances and partnerships.
Do not delegate duties to partner firm and hope for the best.
Explicit metrics and detailed reporting must be used to ensure targets are met, problems are resolved quickly and effectively.
(vi) Create formal and informal connections between partner firms
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Provide multiple channels of communication about both opportunities and problems.
Encourage informal contact between people from two firms.
Ensure clear accountability so there is never any doubt about who is in charge and where decisions will be made.
(vii) Place qualified management on both sides
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Vital to Select, prepare, support, reward qualified managers.
Partnerships complicated by Geos, culture eg. US-China joint venture
No single manager can master all necessary skills without support from home team
(viii) Manage expectations
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Learning mindset - manage expectations about how much can be accomplished
Removes stigma of failure when partnership or alliance dissolves.
Ending or restructuring an alliance is a powerful indicator of success.
Companies may now know enough to pursue similar opportunities on their own or acquire resources they need on a temporary basis.
Wisdom to know what not to do - and not doing it - is among the most valuable contributions of a strategic manager
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22. Have Exit Strategy clear
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Under what conditions would you walk away from an M&A or Partnership negotiation ?
Think about Risk/Reward and BATNA.
23. Make customers stick
shift from transaction model to a long term relationship model
- 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
24. Learn as you go: Be discovery oriented and explore new ideas
Ensure firm's resources and capabilities are on top of the game
25. Be Agile: Be open and flexible to change the game with new data
26. Be constantly on the move
- update fact base constantly
- think about relative strengths to anticipate competitor move
- look outside the firm: what is changing and what is likely to change in future ?
- look inside the firm: what are the obstacles and internal challenges could undermine strategy ?
27. Mobilize to win - get everybody on board
(i) ask dissenters to leave early on
(ii) Use critical tools to set the pace:
- DVP: Actively Generate Dissatisfaction (the way people feel) with status quo, Communicate a compelling vision (where you want them to go), Process (how they're going to get there)
- Gap Analysis: review regularly and remove obstacles in the way of the team
- Six Sigma
(iii) use financial and non-monetary incentives for those that remain loyal
28. Align the organization
- vision (broad view and overarching direction),
- strategy (where and how the firm will compete to win with durable competitive advantage),
- organizational structure (arrangement of people - clarity in ownership of roles, responsibilities and resources),
- business process (includes success metrics that will be tracked eg. balanced scorecard & strategy map) and incentives.
29. Shape the organizational structure
- arrangement of responsibilities, tasks, people within an organization as required by strategy.
Determines how information will flow efficiently through the firm (Carpenter & Sanders, 2009).
- types of structure include: Functional, multi-divisional, matrix, network
Strategy determines organizational structure
But org structure can also influence strategy
30. Pull the 5 Strategy implementation levers - organization structure, systems, processes, people & rewards
contradictions can occur between the levers as a firm gets globalized
- Think global, act local; Decentralize decision making but coordinate policy.
This is one of the finest courses I have ever taken in my life.
It is a complete game changer that informs and transforms the way for a CEO to think and lead a firm to a win in the market place.
Dr DP
I. Course Summary - Succinct version for quick reference & high level view
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1. Goal Clarity
To find a unique way for the firm and win in the market place
2. People first, strategy second
If you get the right people, game is over
3. Be a strong manager
understand firm's capabilities, identify target customers, size up competition, envision success, decide on strategic option,
define critical activities, coordinate activities & resolve conflict, prioritize action items, allocate resources & budget, communicate effectively, translate strategy to results
4a. Be customer centric
4b. Refine with customer segmentation
5. Know your competitors
Get down to the nitty gritty details; what are they having for breakfast ?!
6. Determine strategic objectives
Gain market share, contain costs, increase profit margins, meet financial targets, increase customer satisfaction
eg. GE will be #1 or #2 in arenas it competes in; else fix, sell or close
7. Identify Competitive positioning
How will you create value ? - Differentiate with highest value, lowest cost or a unique offering
8. Competitive advantage
firm's ability to create value that is unique and difficult to imitate.
9. Face the competition
traditional, latent, oblique
10. Competitive analysis
Techniques: perceived value, critical dimensions, SWOT, 5 forces, PESTEL, Benchmarking, Strategy testing, value curve
Constantly seek competitive analysis about your rivals
11. Strategy formulation
Strategy formulation is about finding the big Aha, setting a broad direction, and playing a dynamic game about how to win
12. Strategy Development
CEO cannot delegate this responsibility - must continually find new ways of winning
(a) 3 basic strategies: cost, innovation, execution
(b) Jack Welch's 5 slides framework to define a winning strategy
(c) PARTS framework to analyze strategy in any industry
(d) Four stages of strategy development
Analyze - 5 forces, SWOT, core competencies, future trends
Generate & Evaluate options - what choices does the firm have ? feasible ? risks?
Craft possible strategies - combine options into an unusual strategy and a winning game plan
Choose & Test strategy - will strategy stand up in a competitive environment ? conduct small tests to test the market and refine strategy; predict costs and revenue over time
Test strategy with VRINE: value, rarity, inimitability, non-substitutability, exploitability
(e) Make strategic choices for sustainable competitive advantage
Prioritize the most important activities
Get activities into the budget
(f) Develop a portfolio of strategic opportunities
core enhancement launch, product launch, positioning option, scouting option, stepping stones
(g) Appreciate Uncertainty
Nothing is permanent and everything changes - markets, customer preferences, products, technology
where to compete ? - markets, customers, products
how to compete ? - technologies, skills
Develop skills to take advantage of the new opportunities
Constantly create a balanced portfolio of strategic opportunities with a mix of risk and reward.
(h) Growth options - M&A, Partnerships, Alliances
Carefully weight Risk/Reward for each move
Majority of M&As fail. To increase the odds of success avoid 6 sins of M&A:
Merger of Equals, Culture fit, Reverse hostage, being afraid and not going in boldly, conqueror syndrome, paying too much in deal heat
(i) Have Exit Strategy clear
Under what conditions would you walk away from an M&A or Partnership negotiation ?
Think about Risk/Reward and BATNA.
13. Strategy Implementation
Strategy implementation is about putting the right people and skills in right jobs, and relentlessly seeking best practices
13a. Pull the 5 Strategy implementation levers
organization structure, systems, processes, people & rewards
contradictions can occur between the levers as a firm gets globalized
- Think global, act local; Decentralize decision making but coordinate policy.
13b. Shape the organizational structure
- arrangement of responsibilities, tasks, people within an organization as required by strategy.
Determines how information will flow efficiently through the firm (Carpenter & Sanders, 2009).
- types of structure include: Functional, multi-divisional, matrix, network
Strategy determines organizational structure
But org structure can also influence strategy
13c. Mobilize to win - get everybody on board
(i) ask dissenters to leave early on
(ii) Use critical tools to set the pace:
- DVP: Actively Generate Dissatisfaction (the way people feel) with status quo, Communicate a compelling vision (where you want them to go), Process (how they're going to get there)
- Gap Analysis: review regularly and remove obstacles in the way of the team
- Six Sigma
(iii) use financial and non-monetary incentives for those that remain loyal
13d. Align the organization
- vision (broad view and overarching direction),
- strategy (where and how the firm will compete to win with durable competitive advantage),
- organizational structure (arrangement of people - clarity in ownership of roles, responsibilities and resources),
- business process (includes success metrics that will be tracked eg. balanced scorecard & strategy map) and incentives.
14. Position the firm to succeed in any type of strategic opportunity portfolio
Capitalize on and expand on current capabilities
Assemble portfolio of strategic opportunities
Balance risk and reward
Match opportunities and firm's capabilities
Ramp up firm's capabilities
Get right person to run new ventures and staff sensibly
15. Defend the strategy
Detect and React to market changes quickly - use Porter's 5 forces model, monitor competitors, new entrants, substitutes
16. Strengthen core competencies (desired behaviors)
At the core of every successful firm are a handful of capabilities that result in high performance
These are complementary value creating skills or activities that other firms find diffficult to imitate
strategic capabilities and behaviors of the firm; improve the game continuously
technical know-how, reliable mfg process, close relationships with customers & suppliers, culture that fosters employee loyalty,distinctive use of technology
Tests for a core competency:
Does it truly create value from customer's point of view ?
Is it difficult to imitate ? Does it rely on a complex combination of actitivities and knowledge that lead to sustainable competitive advantage?
Does it further the strategy - closely linked to firm's strategic advantage?
17. Make customers stick
shift from transaction model to a long term relationship model
- 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
18. Learn as you go
18a. Be discovery oriented and explore new ideas
18b. Ensure firm's resources and capabilities are on top of the game
18c. Be Agile: Be open and flexible to change the strategy game with new data
18d. Be constantly on the move
- update fact base constantly
- think about relative strengths to anticipate competitor move
- look outside the firm: what is changing and what is likely to change in future ?
- look inside the firm: what are the obstacles and internal challenges could undermine strategy ?
II. Course summary - Detailed version for deep dive into details
****************************************************
1. Goal Clarity - To find a unique way for the firm and win in the market place
Good things come with winning:
Firm gets stronger - profits allow sustainability and fuel future growth; growth energizes the whole place
Shareholder returns - shareholders get short term commitments and long term vision
Customer satisfaction - customers will get superior products, services, post-sales relationship
Employee satisfaction - employees get job security, better rewards
Community benefits - communities will benefit from employees giving back
2. Be Customer centric
How will you create value ?
understand the customer to make correct choice of
- 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)
Which customers to target - Who will buy what we sell?
Which products and services to offer them ?
How to better satisfy them ? - become customer centric, understand consumption chain, and develop long term relationships
Customer preferences evolve with time - understand the customer ; stay vigilant of changes in market shifts
3. Know your competitors
Know your competitors. Understand their styles.
Know their plays. Anticipate their next moves.
Operate proactively rather than reactively.
Define your strategy to win.
4. Be a strong manager
Understand firm's strategic capabilities
Identify target customers
size up competition
decide on strategic option
translate strategy from high level concept to results
Envision success
Define critical activities
Coordinate activities and resolve conflict- balanced score card, strategy map
Prioritize action items in the plan - clarify barriers of success
Communicate effectively - be received, understood, credible, actionable, timely
Allocate resources and budget - iterative feedback
Understand Linkages in Consumption chain
Customer Need, Demand, Strategy & Competitive Advantage, Distribution Channel, Sales as the beginning of a Customer Relationship, Post Sales Service, Customer Delight
5. Customer segmentation
Segment customers into behavior clusters (Derick Jose, 2010)
Business question, variables, isolate key variables, cluster technique, iteration, segment personas, overlay geos, overlay sentiment, evolve actionable items, track ROI
6. People first, strategy second
If you get the right people, game is over
The team with the best players wins
7. Strategic objectives
Gain market share, contain costs, increase profit margins, meet financial targets, increase customer satisfaction
eg. GE will be #1 or #2 in arenas it competes in; else fix, sell or close
8. Competitive positioning:
How will you create value ? - Differentiate with highest value, lowest cost or a unique offering
9. Competitive advantage
It is the firm's identity in the market
It is the firm's ability to create value that is unique and difficult to imitate.
Internal sources of competitive advantage - managers should check if resources and capabilities offer the most value. If lacking, acquire them.
External sources of competitive advantage - compete in attractive industries, position the firm relative to competitors; or adopt strategies to make current industry more attractive
In a dynamic market, Competitive advantage is temporary - look for emerging opportunities; develop unique resources to create disruptive change
Relentless innovation is critical to sustain competitive advantage.
10. Face the competition
Tough competitors keep the pressure on a company to drive down costs and come up with new ways to win and keep customers.
Traditional competitors - these are the well known players
Latent competitors - players who can enter the industry from a different part of the same value chain; read their signals early and react defensively and offensively
Oblique competitors - players who enter from an unrelated field; unpredictable, can attack without warning; never underestimate them; recognize and react quickly
11. Competitive analysis
(a) Techniques
"Perceived Value" Mapping - focus firm's efforts on creating value the customer wants
Critical dimensions analysis - identify critical differentiating factors, figure out how competition provides value and where firm stands
SWOT - Analyze strengths, weakenesses, opportunities, threats
Five forces - Analysze industry structure with effects of rivalry, threat to new entry, supplier power, buyer power, threat of substitutes; complementors - provide complementary products and services
PESTEL analysis - Analyze market growth and decline using political, economic, socio cultural, technological, environmental, legal context
Benchmarking - quantitative & qualitative metrics to compare firm's performance vs competitors
Strategy testing - test for situations when strategy fails; rooted in facts or hope ? unrealistic ? undifferentiated? does it drive financial shareholder value? market too small? sustainable?
Value curve - visually plot how firms compete by consolidating competitors in a single value curve (key success factors vs performance rating); examine assumptions; predict moves
(b) Constantly seek competitive analysis about your rivals
12. Strategy formulation
Strategy formulation is about finding the big Aha, setting a broad direction, and playing a dynamic game about how to win
Strategy is an approximate course of action that is frequently redefined according to shifting market conditions
Strategic management is about CEO's view of how to compete in the marketplace and lead the firm to a win.
To find your strategy, think, what is the big Aha, the special sauce in your business, the differentiator that gives competitive advantage ?
Possess some unique skills & core competencies, make some contribution, apply some process better than anyone else
Strategy diamond for coordinated pattern of attack - arenas, vehicles, differentiators, staging & pacing, economic logic
Implementation levers - organization structure, systems & processes, people and rewards
Strategy formulation and implementation should be connected
Strategic leadership is critical for decisions regarding implementation levers and resource allocations
Execution is far more important than strategy & segmentation
Constantly monitor industry dynamics with Porter's 5 forces
Experience of setting strategy can turbocharge a manager's advancement within an organization.
Rising stars take on broader responsibilities and keep a perspective beyond their function and business unit.
Involvement in strategy-development raises visibility with top management
Presents new intellectual and political challenges - an opportunity to create lasting value through analysis and actions
Each of our situation is unique - Recognize a new way to look at something (Dr D)
Pull value and wisdom from wherever you can to make the best strategy tools perspectives
Take advantage of the situation - just do something well, provide value and deliver exactly what customers need when they want it
13. Strategy Development
CEO cannot delegate this responsibility - must continually find new ways of winning
(a) 3 basic strategies: cost, innovation, execution
(b) Develop a strategy creatively
Involve the right mix of people - skills, knowledge, personalities - and ask the right questions
original insights, lateral thinkers, articulate, diplomatic, unafraid to voice views, tolerant of views
Use qualitative and quantitative analyses and take into account diverse points of view
Do not bristle when laughed at; be comfortable with ambiguity
know the organization, industry, technologies, competitors, regulatory issues
Naive questions may open up new areas of exploration
De-average buyers and users
examine binding constraints
explore unexpected successes
imagine perfection
look beyond boundaries of the business
revisit assumptions underlying processes and products
Ask potential customers at the time they are experiencing the pain if they like the idea
eliminate customer pain points & capture value;
consider radical departure vs incremental improvements;
find surprising combinations & unexpected advantages
be the first to see opportunity - focus on a subset of unexplored possibilities, overlooked corners
bound the range of acceptable ideas
Four stages of strategy development
Analyze - 5 forces, SWOT, core competencies, future trends
Generate & Evaluate options - what choices does the firm have ? feasible ? risks?
Craft possible strategies - combine options into an unusual strategy and a winning game plan
Choose & Test strategy - will strategy stand up in a competitive environment ? conduct small tests to test the market and refine strategy; predict costs and revenue over time
Test strategy with VRINE: value, rarity, inimitability, non-substitutability, exploitability
Timing is important - how long will it take to get results ?
Buy In : CEO, Analysts of past performance of firm, rivals, current industry trends, company specialists in competitive intelligence, rgulatory analysis, marketing, finance, Ops, engineering
Evaluate options
Eliminate weak ideas; focus on top 3
Is the market big ? does it fit the org? is there demand - is the market ready ?
Defend it (5 forces), create growth options, be discovery-driven and be constantly on the move
Translate strategy from high level concept to results by envisioning success, defining critical activities to break through barriers, resolving conflict through coordination,
prioritizing action items and communicating effectively.
Jack Welch's 5 slides framework to define a winning strategy
Playing field - market size, market share, high value or low cost position? business rules? profit drivers? competitors SWOT,culture? main customers?
competitors - what have they done to change competitive playing field in last year - key people stolen ? products introduced ? new distribution channel ? new entrants ?
you - what have you done- key people stolen or lost ? innovative products introduced ? bought a company ? licensed or lost new technology? leading, chasing or outflanked ?
foresight around the corner - what 1 or 2 things a competitor can do to change the game and nail you - eg new product launches or technologies ? which M&A will knock you out ?
your winning move - what can you do to change the playing field - acquisition, new product, globalization ? What can you do to make customers stick more than ever or to anyone else?
Avoid analysis paralysis. Leap from analysis to action.
PARTS framework to analyze strategy in any industry
Define game changing levers
Players who create value - rivals, competitors, new entrants, suppliers, customers, complementors
Added value - high performance, timely, cost-effective ?
Rules - what can and cannot be done in the game ? eg Legal, industry standard. who makes the rules ? add higher value by breaking rules
Tactics - score points with stakeholders, suppliers, customers; get a better position in the strategy game; drive perceived cost lower than perceived value
Scope - what are the boundaries of the game? stand-alone or can link to other games?
Develop a portfolio of strategic opportunities
14. Create Strategic Opportunity Portfolio
Balance market uncertainty vs technical execution uncertainty
Core enhancement launch - low risk
Platform launch - opportunity close to the core business; build new skills
Positioning options - new market based on good customer information; execution risk high; experiment cheaply to verify
Scouting options - high market risk; test merit with experiments before heavy investing
Stepping stones - where and how to compete is not clear; high risks; experiment to lower uncertainty, monitor signals
15. Position the firm to succeed in any type of strategic opportunity portfolio
Capitalize on and expand on current capabilities
Assemble portfolio of strategic opportunities
Balance risk and reward
Match opportunities and firm's capabilities
Ramp up firm's capabilities
Get right person to run new ventures and staff sensibly
Bigger the risk, bigger the payoff
16. Make strategic choices for sustainable competitive advantage
Prioritize the most important activities
Get activities into the budget
17. Defend the strategy and react to market changes quickly - use Porter's 5 forces model, monitor competitors, new entrants, substitutes
18. Strategy Implementation
Strategy implementation is about putting the right people and skills in right jobs, and relentlessly seeking best practices
Strategic positions - "A" jobs critical to deliver value proposition
- they have the greatest strategic impact on capabilities.
- there is high level of performance variability in these positions
- needs disproportionate investment
It is an iterative process
Actively manage strategy to achieve desired behaviors, avoid surprises and deliver results
19. Strengthen core competencies
Core competencies: what enables the firm to do something really well
at the core of every successful firm are a handful of capabilities that result in high performance
complementary value creating skills or activities that other firms find diffficult to imitate
strategic capabilities and behaviors of the firm; improve the game continuously
technical know-how, reliable mfg process, close relationships with customers & suppliers, culture that fosters employee loyalty,distinctive use of technology
Does it truly create value from customer's point of view ?
Is it difficult to imitate ? For Sustainable competitive advantage, a firm must rely a complex combination of actitivities and knowledge
Does it further the strategy ? core competency must be closely linked to firm's strategic advantage
Build core competency or buy it - create something superior to industry standard
- shift resources and decision making power to the competency you want to develop
- skunkworks: free up a small group of stars to incubate new idea
- Buy it: acquire a firm, retain the true sources of value
Protect and Maintain a core competency
create a core competency with numerous elements
Continually invest in your core competency - help employee upgrade skills, hire more people, add new machines, shore up firm's advantage, keep close watch on rivals
Do not dilute resources: keep priorities straight
20. Appreciate Uncertainty
It is a fundamental fact of business
what changes? - markets, customer preferences, products, technology
Develop skills to take advantage of the opportunities
Create a balanced portfolio of strategic opportunities with a mix of risk and reward.
where to compete ? - markets, customers, products
how to compete ? - technologies, skills
21. Growth options - M&A, Partnerships, Alliances
21a. Fastest growth option - Mergers & Acquisitions (M&A)
Fastest, most powerful tool a firm can use to change its game.
Allows firm to quickly acquire capabilities and resources
Reduce costs through consolidating, elimination of redundant positions
Increase size, share, competitive advantage
Avoid common traps in M&A and make a successful acquisition?
************************************************************
(i). Check if the same business result can be achieved at lower risk with a partnership or organic growth.
(ii). Does it make strategic sense and further the strategic objectives of the firm ?
Is this acquisition aimed at getting quick results that organic growth cannot match ?
Is this to Acquire a competitor?
Is this to move quickly into an area where you don't currently compete?
(iii). If acquisition is justified, are clear criteria for selection of target company set ?
(iv). Does the acquisition create value?
(v). Before starting the acquisition process, stay aware of the common traps in M&A (Welch, 2005)
Sin#1 - Beware of merger of equals. Anticipate people dueling over who is really in charge. Identify roles and responsibilities ahead of the acquisiton.
Sin#2 - Cultural fit based on values of the two companies is as important as strategic fit that is based on products, technologies and numbers. Some cultures don't combine, they combust. Cross-cultural differences in a merger are usually not addressed until it is too late.
Sin#3 - Reverse hostage situation
Due to deep concessions given, the acquired firm is in charge in the end. Don't pay too much for something you don't own.
Sin#4 - Being afraid rather than going boldly
Complete the integration process within 90 days of closing (eg. Lou Gerstner at IBM managed transitions successfully by drawing attention to the firm-wide priorities of the 90-days). Do not let uncertainty morph into inertia or fear.
Sin#5 - Conqueror syndrome
Don't march into new territory and install your people everywhere.
For new and expanded firm to survive, it needs the best team - you may need to let go of some of your own.
Sin#6 - Paying too much
Beware of deal Heat that comes from overheated desire.
Don't get caught in the negotiation frenzy fanned by competitive bidders and investment bankers.
M&A Risks:
People in acquired firm could have different objectives or be difficult to manage
M&A Risk mitigation
(i) Manage actively
(ii) Have clear and shared goals with well-defined targets
(iii) Have clearly defined and quantified benefits supported by strong business rationale
(iv) Monitor progress - Explicit metrics and detailed reporting must be used to ensure targets are met, problems are resolved quickly and effectively.
(v) Create and encourage formal and informal connections between the two firms
Provide multiple channels of communication about both opportunities and problems.
Ensure clear accountability so there is never any doubt about who is in charge and where decisions will be made.
(vi) Place qualified managers chosen from both firms - It is vital to Select, prepare, support, reward qualified managers.
Wisdom to know what not to do - and not doing it - is among the most valuable contributions of a strategic manager (JWI 540, Week8, Lecture1)
(vii) Manage expectations across both firms and encourage a learning mindset
PIPP During M&As
Pace - beware deal heat; quickly discover if there is any value in the acquisition and a future in the deal
Power - Read the power bases of both firms; create a power map; who is in charge - will make key staffing decisions ? who will control resources ? whose systems and culture to use ?
Information - reduce anxiety and increase trust before, during after M&A; avoid miscommunication; don't share too much or too little
People - match right people with right jobs; face resistance; decide who should go; deal with emotions; balance needs of top 20% vs middle 70%
21b. Partnership
Capitalize on other firm's resources - people, money, skills, energy
Benefits of Partnering
***********************
(a) Opportunity to learn fast and fail fast - walk away without trying to salvage a large investment.
(b) Enjoy a high potential upside for a relatively small investment while being protected from serious downside risk.
(c) Share different skill sets and financial risk
Beneficial in High-risk investments: share knowledge and financial exposure.
eg. Green energy industry has great deal of uncertainty around consumer preferences, dominant technologies, regulatory decisions, costs.
(d) Take small stakes in entrepreneurial firm in the form of Joint ventures or partnerships on selected projects.
eg. Rapidly changing high-tech sectors. Cisco & MSFT
Lower cost and higher flexibility than M&A
Different ways to partner
**************************
(i) Informal relationship: Preferred supplier network; agree to give purchasing preference to certain suppliers in exchange for better terms.
(ii) Formal relationship: Contractual agreement; Joint venture in which two firms share ownership of a project or enterprise.
(iii) Strategic Alliance: Formal agreement but not shared ownership.
(iiia) Highly integrated alliance: Functions almost like a formal relationship
Different functions inside both firms are involved from R&D, marketing, customer service, manufacturing, distribution eg. Apple & Nike with ipod sensors
(iiib) Focused alliance: involves a limited part of each partner's business such as manufacturing.
eg.IKEA had long standing mfg arrangements with some supplires, got favorable rates
(iiic) Experimental alliances: shorter duration, project-specific. Temporarily use a partner's distribution network to get customer reaction to
your product in a foreign market.
Risks of Partnering
********************
(i) Difficult to manage
***********************
Partners Not fully committed. Relationship can easily dissolve. Partner can suddenly pull out resulting in a rude suprise.
- Slow in decision making
- reluctant to commit resources
- unwilling to respond with sense or urgency when internal problems arise
(ii) Different objectives
**************************
Partners kid themselves into thinking they will be able to reach their goals
but end up working at cross-purposes
(iii) Betrayal
***************
Malicious partner
Secretly allocates costs from other parts of its business to a Joint Venture, cheating the partner.
Loss of proprietary data, processes, product designs - clear guidelines and safeguards not in place.
Hollow out one partner - cheating partner grabs substantial knowlede, people, resources.
Mole - partner's real intent is to weaken the other firm.
Victim firm does not realize what is happening until it is deeply committed to the partnership and the damage is done.
(iv) Intangible and unquantifiable metrics for success
********************************************************
(v) Constantly Nitpicking a Strong contract
********************************************
Insisting on following the letter of the contract
(vi) Too formal or Too informal relationships
*********************************************
Too informal: No relationships at all
Too formal: Rigidly defined with specified points of communication
To ensure a successful partnership
*********************************
(i) Manage actively
********************
Increase managerial attention more than in-house action items as they focus on risky new activities
(ii) Have clear and shared goals with well-defined targets
***********************************************************
(iii) Have clearly defined and quantified benefits supported by strong business rationale
******************************************************************************************
eg. tangible increase in sales
Intangible benefits could result in less disciplined partnerships
eg. hoping both partners will learn about new markets
need to specify what they hope to learn over a certain time period, how knowledge will be measured, how it will be used.
(iv) Have a strongly worded contract - but never use it to nitpick
*************************************
Mistrust and failure can result from nitpick
Very existence of a contract can lead to success
(v) Monitor progress
********************
Vitally important to good alliances and partnerships.
Do not delegate duties to partner firm and hope for the best.
Explicit metrics and detailed reporting must be used to ensure targets are met, problems are resolved quickly and effectively.
(vi) Create formal and informal connections between partner firms
*****************************************************************
Provide multiple channels of communication about both opportunities and problems.
Encourage informal contact between people from two firms.
Ensure clear accountability so there is never any doubt about who is in charge and where decisions will be made.
(vii) Place qualified management on both sides
**********************************************
Vital to Select, prepare, support, reward qualified managers.
Partnerships complicated by Geos, culture eg. US-China joint venture
No single manager can master all necessary skills without support from home team
(viii) Manage expectations
***************************
Learning mindset - manage expectations about how much can be accomplished
Removes stigma of failure when partnership or alliance dissolves.
Ending or restructuring an alliance is a powerful indicator of success.
Companies may now know enough to pursue similar opportunities on their own or acquire resources they need on a temporary basis.
Wisdom to know what not to do - and not doing it - is among the most valuable contributions of a strategic manager
****************************************************************************
22. Have Exit Strategy clear
***********************
Under what conditions would you walk away from an M&A or Partnership negotiation ?
Think about Risk/Reward and BATNA.
23. Make customers stick
shift from transaction model to a long term relationship model
- 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
24. Learn as you go: Be discovery oriented and explore new ideas
Ensure firm's resources and capabilities are on top of the game
25. Be Agile: Be open and flexible to change the game with new data
26. Be constantly on the move
- update fact base constantly
- think about relative strengths to anticipate competitor move
- look outside the firm: what is changing and what is likely to change in future ?
- look inside the firm: what are the obstacles and internal challenges could undermine strategy ?
27. Mobilize to win - get everybody on board
(i) ask dissenters to leave early on
(ii) Use critical tools to set the pace:
- DVP: Actively Generate Dissatisfaction (the way people feel) with status quo, Communicate a compelling vision (where you want them to go), Process (how they're going to get there)
- Gap Analysis: review regularly and remove obstacles in the way of the team
- Six Sigma
(iii) use financial and non-monetary incentives for those that remain loyal
28. Align the organization
- vision (broad view and overarching direction),
- strategy (where and how the firm will compete to win with durable competitive advantage),
- organizational structure (arrangement of people - clarity in ownership of roles, responsibilities and resources),
- business process (includes success metrics that will be tracked eg. balanced scorecard & strategy map) and incentives.
29. Shape the organizational structure
- arrangement of responsibilities, tasks, people within an organization as required by strategy.
Determines how information will flow efficiently through the firm (Carpenter & Sanders, 2009).
- types of structure include: Functional, multi-divisional, matrix, network
Strategy determines organizational structure
But org structure can also influence strategy
30. Pull the 5 Strategy implementation levers - organization structure, systems, processes, people & rewards
contradictions can occur between the levers as a firm gets globalized
- Think global, act local; Decentralize decision making but coordinate policy.
This is one of the finest courses I have ever taken in my life.
It is a complete game changer that informs and transforms the way for a CEO to think and lead a firm to a win in the market place.
Dr DP
