An approach to strategy development

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Agenda10:30 Strategy Development

01:00 Lunch

02:00 Strategy Implementation

03:45 Case Presentations

05:30 The Forgotten Customer

07:00 End

3:30Tea

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Sujit Das Strategy Consultant

Education: B.Tech; PGDBM

Experience:

44 years

* Manufacturing * Marketing

* SCM * Quality *Consulting

Siemens Fujitsu-ICIM TMTC

Areas of Interest: Strategy; Business Performance

An Approach to Strategy Development

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I believe that lack of Strategic Planning hasa profound influence on the position of a Business Organization in the market placeAnd most of the problems of theorganization can usually be traced to lack of Planning

- Ratan Tata

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Somewhere between the hallucinations of senior management and the cold reality of the market lies something called the Business Plan. There are two major steps to building a Business Plan:

• Gather information

• Ignore it

- Scot Adams, The Dilbert Principle

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Management Evolution

OperationalPerformance

ConformanceQuality

Strategy DrivenPerformance

Customer ValueManagement

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Presentation Coverage

What is Strategy?

Developing a Strategy

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What is a Strategy?

Business Concept

Where to compete How to compete

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What is a Strategy?

Where to compete

• Customer segments

• Product segments

• Market segments

• Channel segments

• Vertical integration

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What is a Strategy?

How to compete

• Value proposition

• Competitive advantage

• Partner relationships

• Relationship with other stakeholders

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What is a Strategy?

Integrated set of actions to create and capture value

ValueSelection

ValueManagement

ValueEnhancement

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What is a Strategy?Value Selection

TargetCustomers

KeyCustomer

Benefits

KeyCustomer

Costs

Comparisonwith

Competition

Leading to

Value PropositionClear, viable, achievable

Evidence of acceptable return

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What is a Strategy?Value Management

Design Manufacture Distribution Pricing

Leading to

Value Creation & DeliveryAs per Value Proposition

defined earlier

Service

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What is a Strategy?Value Enhancement

ContactManagement

RelationshipManagement

Leading to

Customer Loyalty & Positive Referral

ImageManagement

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What is a Strategy?Business Concept

Where tocompete

How tocompete

Int-e-grat-ed set of actions

ValueSelection

ValueManagement

ValueEnhancement

Leading to Leading to Leading to

Value Proposition Value Creation & Delivery

Customer Loyalty& Referral

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Steps in Strategy Development

Step 1: Visit the company purpose: Mission & Vision

Step 2: Assess the demand

Step 3: Understand the competition

Step 4: Understand the operating environment

Step 5: Summarize the Industry/ Segment scenario: current & likely

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Steps in Strategy Development (contd)Step 6: Identify the CSFs and their measures

Step 7: Determine the company’s ability to compete with respect to the CSFs

Step 8: Develop Strategic Options

Step 9: Develop the chosen strategy

Step 10: Develop key initiatives and short & long term targets of performance, with appropriate comparisons.

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Developing a Strategy

Step 1: Visit the company purpose:

Mission and Vision

The vision and mission statement sets the context for the development of a strategy. It defines a direction for the company, which the strategy builds on and translates into action.

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Developing a StrategyExample: Role of purpose in developing a strategy

To be a dominant player in time-keeping business

Dominance in watches, table clocks wall clocks

To be a dominant player in personal accessoriesbusiness

Diversification into jewelry, spectacle frames, pens

Leading to

Leading to

Mission 1

Mission 2

-----------------------

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Developing a Strategy

Step 2: Assess the demand

Demand assessment is best done by suitable segmentation of the market. Market segmentation enables the company to understand the relative potential of various segments in terms of volume, growth and margins.

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Developing a Strategy

Demand assessment steps:

1. Select the basis for segmenting the market2. Estimate segment size and growth3. Identify key demand drivers and their impact4. Understand price trends

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Example: Toothpaste market segmentation

Segment: Sensory Sociable Worrier

Benefit Flavour Brightness DecaySought of teeth prevention

Demographic Children Teens LargeStrengths Families

Lifestyle: Hedonistic Active Conservative

Ref: RJ Haley, “ Benefit Segmentation: A decision Oriented Research Tool”

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Developing a Strategy

Step 3: Understand the competition

The strategies adopted by competition need to be understood, both for current competition and as well as anticipated competition. Suppliers of substitute products also need to be included, as appropriate.

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Developing a Strategy

Competitive strategies need to be understood in terms of:

Corporate Initiatives: mergers, collaborations etc Marketing: Price, product offerings, volumes,

promotions, distribution etc Internal Efficiencies: cost control, logistics, R&D etc Manufacturing Strategies: vertical integration,

outsourcing etc

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Developing a Strategy

Step 4: Understand the operating environment

The operating environment consists of and is influenced by: Suppliers, distributors, technology changes, Government policies, society and macroeconomic conditions.

(P-E-S-T-E)

The operating environment consists of players and events which influence the behaviour and performance of the customer, the company and the competition.

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Developing a Strategy – Industry Scenario

Political

Economic

Social

Technological

Environmental

Customer

Company Competition

Distributors

Suppliers

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Developing a Strategy

Step 5: Assess the attractiveness of the industry/ segment

Industry/ segment attractiveness is assessed in terms of:

Size

Growth

Margins

Potential

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Developing a Strategy

Step 6: Identify the Critical Success Factors (CSF) and their measures

Critical Success Factors are those factors on which a company needs to excel in, for it to be successful in the chosen industry or segment. The set of CSF should not only reflect current reality but also take into account future industry scenarios.

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Developing a Strategy

Critical Success Factors are largely dependant on and influenced by:

Customers needs and desires: stated and latent Competitor actions: current and anticipated Events in the operating environment: current and

anticipated

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Developing a Strategy

Step 7: Determine the company’s ability to compete with respect to the CSF

A company’s ability to compete is determined by the company’s current and projected performance relative to competition as well as industry benchmarks. While assessing its ability to compete, a company must consider the strengths it currently possesses or is confident of developing within a reasonable time frame.

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Developing a Strategy

Step 8: Develop strategic options:

- Where to compete

- How to compete

Based on attractiveness of the segment as determined in Step 5 and the company’s ability to compete, as determined in Step 7, various strategic options (where to compete and how to compete) need to be generated. These are then viewed from the point of view of risk and return, leading to selection of the most appropriate strategic option.

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Developing a StrategyTypical Risk-Return Plot

Industry/ SegmentAttractiveness

Ability to compete

High risk,High return

High risk,Low return

Low risk,High return

Low risk,Low return

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Developing a Strategy?

Step 9: Develop the Chosen Strategy

Where tocompete

How tocompete

Key Action Plans

ValueSelection

ValueManagement

ValueEnhancement

Leading to Leading to Leading to

Value Proposition Value Creation & Delivery

Customer Loyalty& Referral

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ExampleValue Selection

TargetCustomers

KeyCustomer

Benefits

KeyCustomer

Costs

Comparisonwith

Competition

BlueCollar

Reliability • Reasonable price premium• Low service cost

Superiorquality

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Example:Value Management

Design Manufacture Distribution Pricing Service

Trouble free workingin various operatingenvironment

Outsource to control costs

• Wide coverage• Prominent presence

MaintainPricepoints

Set up dealer service network

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Example:Value Enhancement

ContactManagement

RelationshipManagement

ImageManagement

Brand leverageon the Tata name

Manage customer interfacesthrough dealer network

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Developing a Strategy

Step 10: Develop key initiatives and short and long term targets and projections of performance, with appropriate comparisons

Key initiatives, responsibilities and resource requirements are worked out in order to meet the targets set. Key departmental strategies, action plans and KRAs emerge out of these initiatives and are then deployed throughout the company

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Time FrameStep 1: Visit the company purpose: Mission & Vision

Step 2: Assess the demand

Step 3: Understand the competition

Step 4: Understand the operating environment

Step 5: Summarize the Industry/ Segment scenario: current & likely

1 week

3 weeks

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Time Frame (contd)

Step 6: Identify the CSFs and their measures

Step 7: Determine the company’s ability to compete with respect to the CSFs

Step 8: Develop Strategic Options

Step 9: Develop the chosen strategy

Step 10: Develop key initiatives and short & long term targets of performance, with appropriate comparisons.

4 weeks

4 weeks

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Outcome of Strategy Development Process

StrategyDevelopment

Process

• Finalization of CSFs

• Key Strategies andAction Plans