Objectives

1. Improve your skills in strategic thinking 2. Understand the 8 essential steps in building a strategy 3. Develop your understanding of what is required to make strategy happen by closing the strategy to performance gap 4. Analyse of the Case Study

One day Alice came to a fork in the road and saw a Cheshire Cat in a tree. Would you tell me which way I ought to go from here? asked Alice. That depends a good deal on where you want to get to, said the Cat. I really dont care where, replied Alice. Then it doesnt much matter which way you go, said the Cat.
Lewis Carroll Alice in Wonderland (1865)

What is Strategy?
Strategy is a deliberate search for a plan of action that will develop a businesss competitive advantage and compound it.
Bruce Henderson Founder, Boston Consulting Group

What is the benefit of making strategic decisions?

Strategic decision-making is a tool to evaluate and select opportunities, clarify existing priorities, and learn to say no to the distractions that can blow you off course
Spain and Wishnoff Strategic Insights

Elements to Business Strategy

Purpose & Strategic Issues

Strategic Objectives & Strategies/Actions

Organisational Framework Structure, Systems, Staffing, etc.

Values & Culture

Where are we now?

Where do we want to be?

How will we get there?

Developing Strategy Stage 1: Strategic Analysis Where are we now? Stage 2: Strategic Choice Where do we want to be? Stage 3: Strategic Implementation & Continuous Review How will we get there?

Steps in Building Strategy

1. 2. 3. 4. 5. 6. Strategic Analysis Establish Purpose Determine Strategic Elephants Formulate Vision Agree Strategic Objectives Define Strategies/Actions Set Measures, Targets, Times and Responsibilities Implementation

Steps

7. 8.

Strategic Key Issues

What are the key strategic issues affecting your organisation?

The World of Strategy is Changing

A Lesson from Microsoft

IBM was more dominant than any company will ever be in technology, and yet they missed a few turns in the road. That makes you wake up every day thinking, Hmm, lets try to make sure todays not the day we miss the turn in the road. Bill Gates, Microsoft

Advances in Strategy: Managing the Value Chain

A value system is: A connected series of organizations, resources, and knowledge streams involved in the creation and delivery of value to end customers.

Michael Porters Frameworks

The Value Chain Primary Activities Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Michael Porters Frameworks

The Value Chain Support Activities Firm Infrastructure Human Resource Management Technology Development Procurement

Porters Value Chain

Support and Primary Activities
Firm Infrastructure Human Resource Management Technology Development

Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Porters Value Chain

Examine each of the activities in the value chain: If it has value, from the perspective of the customer, charge for it (i.e., the basis for a pricing strategy) If it does not, investigate to see if it can be made valuable, again from the perspective of the customer, and thus charge for it. If it cannot be made valuable, can it be eliminated all together? If it can, do so. If it cannot be eliminated, outsource it.

Porters Value Chain

Examine how the activities can be linked together (i.e., the chain) Well linked (or chained) activities are much harder for the competition to match; and you will have an advantage, even if a competitor is better than you in one or two activities.

The Lean Machine.We want value not fat!

How do supply chains create value?

Value Chain Analysis

What is a value chain?
Linked set of custom-value creating activities Vertical in nature (supply chain) Value is anything the customer is willing to pay for

Value Chain Analysis

Margins = perceived value (what are customers willing to pay for the value-add?) Competition (RFQ) establishes worth or value Center of gravity primary value adding activity Margins = Cost of value add (labor & equipment) + Profit + Waste Value Chain
Lumber
Cost - $.05/lb Sell - $.15/lb Margin - $.10

Pulp
Cost - $.15/lb Sell - $.30/lb Margin - $.15

Paper
Cost - $.30/lb Sell - $.35/lb Margin - $.05

Retail
Cost - $.35/lb Sell - $.45/lb Margin - $.10

*Note: The margins and costs are for demonstration purposes only and do not reflect true industry costs.

Gary Hamel: The World's Reigning Strategy Guru

The Economist

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In a big organization, the only way to change how managers work is to reinvent the processes that govern that work. Management processes such as strategic planning, capital budgeting, project management, hiring and promotion, employee assessment, executive development, internal communications, and knowledge management are the gears that turn management principles into everyday practices. They establish the recipes and rituals that govern the work of managers. While operational innovation focuses on a companys business processes (procurement, logistics, customer support, and so on), management innovation targets a companys management processes.
Source: Hamel, G., 2006, THE WHY, WHAT, AND HOW OF MANAGEMENT INNOVATION, Harvard Business Review, Feb 2006, Vol. 84, Issue 2

Under Andy Grove's leadership, Intel has become the world's largest chipmaker, the fifth-most-admired company in America, and the seventh most-profitable company among the Fortune 500

Strategic Inflection Points

What happens to a business when a major change takes place in its competitive environment.
introduction of new technologies introduction of a different regulatory environment simply a change in the customers' values a change in what customers prefer

Almost always it hits the organisation in such a way that those of us in senior management are among the last ones to notice
..But what is common to all of them and what is key is that they require a fundamental change in business strategy, and that's almost a definition of a Strategic Inflection Point.

A Strategic Inflection Point is that which causes you to make a fundamental change in business strategy. Nothing less is sufficient.
Source: Andrew S. Grove (1998) Chairman of the Board, Intel Corporation

Keeping Your Strategic Eyes on the Radar When to transform?

Inflection Curve
Strategic Inflection Points what happens to a business when a major change takes place in its competitive environment. Business rises to new heights

Inflection Point An event that changes the way we think and act. Andy Grove, Founder of Intel

Strategic Analysis Scan Environment:

PESTel SOAR Stakeholder Analysis Competitor Analysis Sustainable Competitive Advantage

Forces Governing Competition in an Organisation

Threat of New Entrants Bargaining Power of Suppliers The Industry Jockeying for Position Among Current Competitors Threat of Substitute Products or Services Bargaining Power of Customers

Porter 1985

Porters Five Forces

The Hard Ss
Strategy: The direction and scope of the company over the long term. Structure: The basic organization of the company, its departments, reporting lines, areas of expertise, and responsibility (and how they inter-relate). Systems: Formal and informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer (retail systems, call centre systems, online systems, etc).

The Soft Ss
Skills: The capabilities and competencies that exist within the company. What it does best. Shared values: The values and beliefs of the company. Ultimately they guide employees towards 'valued' behaviour. Staff: The company's people resources and how they are developed, trained, and motivated. Style: The leadership approach of top management and the company's overall operating approach.

Who are your Stakeholders and your Competitors?

Who are those agencies or people that could impact on your business?

Mapping Your Stakeholders - Power v Interest Method

Simply rates a stakeholders power or interest Some stakeholders may have the power either to block or advance the growth of the organisation / entity Some stakeholders may be interested in what you are doing, others may not care. A powerful stakeholder with only a small or negligible stake in your project probably isnt going to waste his/her or your time but would like to keep abreast of progress.

Stakeholder Power / Potential

High Influence / Power

Low Stake / Importance

Keep Satisfied Useful for decision and opinion formulation, brokering: mitigate impacts.

High Stake / Importance

Manage Closely
Most critical stakeholder group: collaborate with closely.

Low Influence / Power

Monitor (minimal effort) - Least priority

stakeholder group: monitor or ignore.

Keep Informed Important stakeholder group, in need of empowerment: involve, build capacity and secure interests.

Stakeholder Power / Potential

Low Stake / Importance Keep Satisfied High Influence / Power Low Influence / Power Monitor (minimal effort) Keep Informed High Stake / Importance Manage Closely

= Sustainable

Goal of Strategy the Banking Is SCA relevant in

Sector? ______________________________ ______________________________ ______________________________ __________________ If not, why not and what do you think is the goal of strategy in the Banking Sector? ______________________________ ______________________________ ______________________________ ______________________________ _______________

Competitive Advantage Why customers choose you

Valuable Rare Difficult to imitate Constantly evolving

Built to Last The Importance of Vision

The Questions to ask ..

Does the Vision provide a beacon for guiding the kinds of adaptation and change required for continual growth? Does the Vision describe a future that is more attractive than the present? Will the Vision challenge you? Can the Vision serve as the basis to formulate strategy that can be acted on? Will the Vision serve as a framework to keep decision making in context?
Lipton,M. Chair of the Organisational Change Management Program Milano Graduate School.

A Useful Rule of Thumb

If you cant communicate the Vision to someone in five minutes or less and get a reaction that signifies both understanding and interest, you are not yet done with this phase of the transformational change process
Kotter 2007

The Group Challenge..discuss: 1. How can we build a strategic organization? 2. How can we make rule-breaking innovation a systemic capability? 3. How can we give everyone the chance to be an innovator? 4. How can we create work environments that inspire individuals to give their very best of themselvesthat truly inspire human beings?

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What must we do to execute the strategies? What are the priorities?

Turning Great Strategy into Great Performance

Companies typically realise only about 60% of their strategies potential value because of defects and breakdowns in planning and execution
Mankins and Steele Harvard Business Review July 2005

Closing the Strategy-to-Performance Gap

Rules

1. Keep it simple, make it concrete 2. Debate assumptions, not forcasts 3. Use a rigorous framework, speak a common language 4. Discuss resource deployments early 5. Clearly identify priorities; track real-time performance; build into meeting agenda 6. Continually monitor performance 7. Reward and develop execution capabilities

Harvard Business Review: Turning Great Strategy into Great Performance (2005) Mankins and Steele

Closing the Strategy-to-Performance Gap

Step
Keep it simple, make it Concrete

What is happening now in your own organisation?

What needs to happen to effect change?

Debate assumptions, not forcasts Use a rigorous framework, speak a common language

Discuss resource deployments early Clearly identify priorities; track real-time performance; build into meeting agenda Continually monitor performance Reward and develop execution capabilities

Harvard Business Review: Turning Great Strategy into Great Performance (2005) Mankins and Steele

We have a Strategic Plan . Its called Doing Things

Herb Kelleher Southwest Airlines

Project Teams and Project Tasks

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Reviewing your learning

Tomorrows Managing Organisational Change and Transformation Session Harvard Business Review: Turning Great Strategy into Great Performance (2005) Mankins and Steele

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Pulling it all together.

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