Strategic Management

GM 105
Dr. Lindle Hatton
CANOE THEORY
 Think of your organization as a long canoe
 The canoe has a destination
 Everyone in the canoe has a seat and paddle
 Everyone is expected to paddle
 Those who won’t paddle have to get out of the canoe
 Those who prevent others from paddling have to re-
adjust or get out of the canoe
 There are no passengers in the canoe
 There is a Coxswain
 No other crewmember has a title
 Crewmembers are multi-talented
 The canoe theory understands crisis
 The canoe theory says you have the right to be happy
CANOE THEORY
 BUILT TO LAST
Preserve the Core

Stimulate Progress
Stimulate Progress
 Best Practices
 Strategic Leadership
BUILT TO LAST
(Collins, 1994)
 BIG HAIRY AUDACIOUS GOALS
(BHAGs)
 CULT-LIKE CULTURE
 TRY A LOT OF STUFF AND KEEP
WHAT WORKS
 HOME-GROWN MANAGEMENT
 GOOD ENOUGH NEVER IS
GOOD TO GREAT
(Collins, 2001)
 Level 5 Leadership
 First Who…Then What
 Confront the Brutal Facts
 The Hedgehog Concept
 A Culture of Discipline
 Technology Accelerators
 The Flywheel and The Doom Loop
Core Ingredients of
Learning Organizations
 Mental Models – everyone sets aside old
ways of thinking.
 Personal Mastery - everyone becomes
self-aware and open to others.
 Systems Thinking – everyone learns
how the whole organization works.
 Shared Vision – everyone understands
and agrees to a plan of action.
 Team Learning – everyone works
together to accomplish the plan.
The Bananas
Bananas in the
Organization
Exercise
 We tried that and it didn’t
work.
 We don’t do it that way here.
 Mary is the only one who can
do that so…..
Strategic Leadership
 Ability to anticipate, envision, maintain flexibility, and
empower others to create strategic changes as
necessary
 Leadership is the process of transforming an
organization from what it is to what the leader would
it become
 Three interdependent activities
 Setting a direction
 Designing the organization
 Nurturing a culture dedicated to Excellence
 Top Management Team (TMT)
 Charge
Private versus Public
Organizations
 Purpose
 Goals
 Financing
 Decision-Making
 Key Stakeholders
Strategic Management
Versus
Strategic Planning
Features of Successful
Strategic Management
 Has support of organization’s executive
officer.
 Is user friendly.
 Is participatory, not left to planners.
 Is flexible.
 Leads to resources decisions.
 Engages and motivates all staff.
 Is fresh and continuous, not static and stale.
Features (Continued)
 Is Proactive
 Not a Quick Fix
 Part of Quality Management
 Payoffs Increase over Time
Lessons Learned About
Strategic Planning
 Plans must be tailored to organization.
 No one size ‘fits’ all.
 Time to complete takes longer – expect
50% more than planned.
 Process needs a shepherd.
 Visionaries needed at beginning and
detail types thereafter.
Why Managers Don’t Plan
 Time Consuming
 High Demands
 Not Rewarded
 Executives Don’t Support It
 Too Risky
Strategic Management Model
 Scanning
 Where are we now?
 Strategy Formulation
 Where do we want to be?
 Strategy Implementation
 How do we get there?
 Measurement/Performance
 How do we measure our progress?
Strategic Management Model
 Strategy Formulation
 Where do we want to be?
 Vision
 Mission
 Values
 Goals
 Objectives
VISION
Vision without Action is a Daydream
Action without Vision is a Nightmare

 Not Optional
 Stretch – 30+ Years
 8-10 Words in length
 Future State
 Brief and Memorable
VISION (Continued)
 Inspiring and Challenging
 Descriptive of the Ideal
Vision Examples
 “Light the Fire Within”
 “A Safer Future for All Communities”
 “See the Mountains – Breathe Freely”
 To Be the Happiest Place on Earth
 To Be the World’s Best Quick Service
Restaurant
Vision Levels of People
 Some people never see it. (Wanderers)
 Some people see it but never pursue it on
their own. (Followers)
 Some people see it and pursue it. (Achievers)
 Some people see it and pursue it and help
others see it. (Leaders)

John Maxwell, Developing The Leader

Within You, 1993.
VISION EXERCISE
Mission Statement
In the absence of a clearly defined
direction one is forced to concentrate
on confusion that will ultimately
consume you.
MISSION
 What is our purpose?
 Describes current state
 Timeline is 3-5 Years
 Builds on our distinctive competencies
 Tends to focus on Core Business
 30-35 Words in length
Mission Examples
 “To Lead All Communities in Disaster
Preparedness, Mitigation, and Recovery by
Maximizing Assistance and Support.”
 “Caltrans Improves Mobility Across
California.”
 To produce superior financial returns for our
shareholders as we serve our customers with
the highest quality transportation, logistics,
and e-commerce.
MISSION EXERCISE
Corporate Governance
 What is it?
 Codes of Governance
 Role of the Board of Directors
 Role of Top Management Team
 Executive Compensation
Corporate Governance
 System by which a firm’s owners control
its affairs.
 Does it work?
Codes of Governance
 The Cadbury Code: 1992
 Sarbanes-Oxley Act: 2002
 Public Company Accounting Oversight Board
 “Triple bottom line”
 Four major issues:
 Ownership structure and influence
 Fianacial Stakeholder rights and relations
 Financial transparency and information disclosure
 Board structure and processes (audit)
Role of the Board of Directors
 Monitor
 Evaluate and influence
 Initiate and determine
 Organization of Board
 Insiders versus outsiders
 CEO/chair position
 Committees’ Effectiveness
Role of Top Management Team
 Who is the TMT?
 Executive Leadership and Strategic Vision
 Articulates strategic vision for corporation
 Sets the model for others to identify and follow
 Communicates high performance standards and
builds confidence in followers’ abilities to meet
standards
 Managing strategic planning process
Executive Compensation
 Incentive alignment
 Executive Ownership
 Incentive compensation
 Salary
 Bonus
 Stock Options
 LT Bonus
VALUES
 Guiding Principles
 Help establish Culture
 Part of Preserving the Core
 Core Ideology
Value Examples
 CHP PRIDE
 HP WAY
 J & J Credo
 “Build the Spirit of the Place”
Ethical Awareness Model
 Organizational Ethics
 Individual Ethics
 Personal Values
VALUES EXERCISE
Strategic Management Model
 Scanning:
 Where are we now?
 Macro Analysis (STEP, PESTEL, ETC.)
 Industry Analysis – Competitive
Intelligence
 SWOT Analysis
 Internal versus
External Elements
Why Scan?
 To know your position in the environment
 To respond effectively to constant change
 To see the organization as a whole
 To avoid surprises
 To survive
 To lay the foundation for strategic issues
SCANNING:
Key Environmental Variables
 Macro Environment: STEP, PESTEL
 Task Environment: Industry
 Internal Environment: Focal
Organization
Socio-Cultural Variables
 Lifestyle Changes
 Career Expectations
 Regional Shifts in Population
 Life Expectancies
 More women in workforce
 Greater concern for fitness
 Postponement of family formation
 Increase in temporary workers
Technological Variables
 Total Federal Spending for R&D
 Total Industry Spending for R&D
 Focus of Technological Efforts
 Patent Protection
 Wireless Communications
 Nanotechnology
 Productivity Improvements
 Genetic engineering
Economic Variables
 GDP Trends
 Interest Rates
 Money Supply
 Inflation Rates
 Unemployment Levels
 Wage/Price Controls
 Energy Availability & Cost
 Disposable & Discretionary Income
Political-Legal Variables
 Antitrust Regulations
 Tort Reform
 Environmental Protection Laws
 Taxation at local, state, federal levels
 Hiring and Promotion Laws
 Americans Disabilities Act of 1990
 Sarbanes-Oxley Act of 2002
Demographic Variables
 Aging Population
 Rising affluence
 Changes in Ethnic Composition
 Geographic distribution of population
 Disparities in income levels
Global Variables
 Increasing Global Trade
 Currency Exchange Rates
 Emergence of Indian and Chinese
Economies
 Trade agreements (NAFTA, EU, ASEAN)
 Creation WTO
STEP EXERCISE
 Socio-Cultural
 Technological
 Economic
 Politico-Legal
Industry Analysis
 6 Forces Analysis
 Industry Competitors
 Suppliers/Vendors
 Customers/Clients
 Potential New Entrants
 Substitutes
 Other Stakeholders
 Role of Complementors
New Entrants and Entry Barriers
 Absolute cost advantages
 Access to inputs
 Government policy
 Economies of scale
 Capital requirements
 Brand identity
 Switching costs
 Access to distribution
 Proprietary products
Buyer Power (Channel and End
Consumer)
 Buyer volume and information
 Brand identity
 Price sensitivity
 Threat of backward integration
 Product differentiation
 Substitutes
Supplier Power
 Supplier concentration
 Differentiation of inputs
 Switching costs
 Threat of forward integration
 Cost relative to total purchases in
industry
Substitutes
 Switching costs
 Buyer inclination to substitute
 Variety of substitutes
 Price-performance tradeoff of
substitutes
 Necessity for product or service
Degree of Rivalry
 Exit barriers
 Industry concentration
 Fixed costs
 Industry growth
 Intermittent overcapacity
 Switching costs
 Brand identity
 Diversity of rivals
 Corporate stakes
Other Stakeholders
 Employees
 Unions
 Government
 Trade and Professional Associations
 Other Direct Influencers
Role of Complementors
 Number of complements
 Relative value added
 Difficulty of engaging complements
 Buyer perception of complements
 Complement exclusivity
 Tend to increase profits by increasing
demand for an industry’s products
6 FORCES EXERCISE
Competitive Profile Analysis
 Identify Key Competitive Factors
 Identify key Competitors
COMPETITIVE PROFILE
EXERCISE
Industry Foresight
Customer
Needs

Unarticulated

Articulated

Customer
Served Unserved Types
Internal Environment
 Internal Profile Analysis
 SWOT Analysis
Internal Profile Analysis
 Identify Key Core Functions
 Identify Key Measures for Core
Functions
 Build Matrix
SWOT Analysis
 Internal Environment
 Strengths
 Weaknesses
 External Environment
 Opportunities
 Threats
SWOT EXERCISE
Strategic Management Model
 Strategy Formulation
 Where do we want to be?
 Vision
 Mission
 Values
 Goals
 Objectives
GOAL
 Supports the Mission
 Deals with One Issue or Item of Focus
 Reflects a primary activity or strategic
direction
 Describes the “To Be” State
 “BHAG”
 Encompasses a long period, i.e. at least
3 years
Goal Examples
 Achieve excellence in the delivery of disaster
recovery and mitigation programs.
 Professionally develop our employees as a
reflection of DAD’s key attributes and values.
 Increase the supply of housing, especially
affordable housing.
 Become a model for customer service.
 To provide benefits in correct amounts and
issued in a timely manner.
Goal Statements Litmus Test
Goal Exercise
OBJECTIVES
 Add specificity beyond Goals
 Answer the questions
 What is to be accomplished?
 When?
 Should contain the SMART Elements
OBJECTIVES: SMART Model
 Specific
 Measurable
 Aggressive but Attainable
 Results-Oriented
 Timeframe
Strategic Objective Examples
 By June 30, 2005 achieve 75% rating on the
DAD service index from all stakeholders.
 Increase sales growth 6-8% in the next 5
years. (P&G)
 Cut corporate overhead costs by $30 million
per year. (Fortune Brands)
 Operate 6,000 stores by 2010 – up from
3,000 in the year 2000. (Walgreen’s)
 Reduce greenhouse gases by 10 percent
(from a 1990 bast) by 2010. (BP Amoco)
Objectives Litmus Test
Strategic Objective Exercise
Strategic Management Model
 Strategy Implementation
 Everyone is Responsible
 Few Guidelines
 No Easy 10-Step Checklist to Follow
Strategic Management Model
 Strategy Implementation
 Most open-ended part of Strategic Mgmt
 People implement strategies not
Organizations
Strategic Management Model
 Strategy Implementation
 How do we get there?
 Work Action Plans
 GOOMs
Strategy Implementation
Considerations
 7-S Framework – Strategic Fit
 Human Resources
 Patience
7-S Framework
 Shared Values
 Strategy
 Structure
 Systems
 Skills
 Style
 Staff
Human Resource Rule
 Hire Smart
 Train Hard
 Manage Effectively
Parable of the Bamboo
It takes patience and discipline to develop and
empower people; in fact, it’s like growing
bamboo. Once the seed is planted, you must
water it daily for four years before the tree
breaks ground – then it grows 60 feet in 90
days! Executives who nurture people can get
similar results…How, you ask, can such rapid
growth be possible? It results from the miles
of roots that develop in those first four years.
Preparing people to perform is the task of
leadership.
Implementation Strategies
 GOOMs
 Implementation Conference
 CEO involvement
 Other Strategies?
GOOMs
 Goals
 Outcomes
 Objectives
 Measures
Definitions
 Goal: Broad, General BHAG
 Outcome: Desired end result and report
performance
 Objective: What and When
 Measure: A quantified unit that
assesses progress or achievement
GOOM Example
Goal 1: Achieve excellence in the delivery of
disaster recovery and mitigation.
Outcome: Increased Customer Satisfaction
Objective 1.1: By June 30, 2005, achieve
75% rating on the DAD Service Index from all
stakeholders.
Measure: DAD Service Index (DSI)
GOOM Exercise
 Work Action Plan Template
Sponsor: Completion Date
Organization:

n.n Goal

Outcome

n.n Objective

Measure

Task Description Team Lead Staff Hours Completion

Date
Plan- Do-Check-Act
Strategic Management Model
 Measurement / Performance
 Why do we measure our progress?
Why Measure?
Reactive Reasons
 Government Intervention

 Fewer Resources and Smaller Budgets

 Increased Demand for Accountability

 Mandated
Why Measure?
Proactive Reasons
 Makes us more responsive to public needs

 Provides feedback on mission

accomplishment
 Creates blueprint for linking budget to
outcomes
 Good management and good public policy
Measurement / Performance
 How do we measure our progress?
 5 Types of Measures
 Input
 Output
 Outcome
 Quality
 Efficiency
INPUT Measure
Amount of resources needed to provide a
particular product or service.
Examples:
 Number of FTEs or PYs

 Number of eligible clients

 Number of customers requesting service

 Number of applications received

 Number of sales orders received

OUTPUT Measure
Amount of products or services provided
Examples:
 Percent of highways resurfaced

 Number of police reports filed

 Number of vaccinations given to school-age

children per year

 Number of shafts produced in a single

operating shift
OUTCOME Measure
Reflect the actual results achieved and/or their
impact or benefit.
Examples:
 Reduction in incidence of disease

 Percentage of discharged patients living

independently
 Percent of increase in tourists

 Percent of monthly programmed sales orders

filled on time
QUALITY Measure
Reflect the effectiveness in meeting the
expectations of customers and stakeholders
Examples:
 Number of defect reports compared to

number of reports produced

 Number of course ratings in highest category

related to total number of course ratings

EFFICIENCY Measure
Also known as productivity measures.
Reflect the cost of providing products or
services.
Examples:
 Output/Input

 Output/Time

 Output/Cost

 Outcome/Cost
Keeping Plans Off The Shelf
 All Staff Meeting
 Announce Phases
 Review and Assess Plans at Quarterly
Sessions
 Sponsors and Team Leads for Strategic
Goals and Strategic Objectives
 Deming Philosophy – PDCA
Developing Bench Strength
 “Drill Down” Application
 Sponsors, Team Leads, and Team
Members
 Work Action Plan
 “Project” Champion
 Leadership Training
 Leadership Conference Presentations
Establishing Organizational
Permanence
 Training Emphasis
 Certification
 Awards & Recognitions
 “Caught-Ya”
 Celebrations
 Walk the Walk
NEXT STEP