What is Strategy - Thinking like a Strategist

What is Strategy? Thinking like a Strategist

September 2012 Bangalore, India

Amit Kapoor

[email protected]

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Content

• Have a dialogue on strategy • Use a case study – “Growing for Broke” • Discuss heuristics for strategic thinking

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Start with this question…

Write down first three words that come to you mind when you hear

the word ‘Strategy’

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… followed by this question…

Describe in a line or two, in your own words – ‘What is Strategy?’

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… and finally this question

What is the one thing you would like to know (more) about Strategy?

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What is Strategy? System Story Design Subtlety Scene Gimmick

Learning Adapt Quick Respond Culture

Action Setup Procedure Policy Tactics Process

Excellence Execution Operational Quality People

Approach Blueprint Method Plan Planning Strategic

Competitive Industry Exploit High Ground Profit Cost

Focus Program Present Core Central

Competence Capabilities Focus Maneuvering

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Strategy is a young field

1% 1%

7% 6% 6%

10%

21% 22% 20%

1922 1932 1942 1952 1962 1972 1982 1992 2002

Strategy /Strategic Citation in Harvard Business Review [Title & Abstract] (% of total articles, 10 year period, starting year)

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Strategy definition

Strategy [ˈstratəәjē ] •  the art of planning and directing overall military operations and

movements in a war or battle. Often contrasted with tactics •  a plan of action or policy designed to achieve a major or overall

aim: time to develop a coherent economic strategy | shifts in marketing strategy.

Via Latin from Greek: •  from ‘stratēgia’ : generalship •  from ‘stratēgos’ : be a general

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Basic tension in Strategy

Advantage is Transient Corporate identity is slow to change

“… although the stickiness of company’s identity is typically

regarded as weakness, it’s also a great source of strength”

Art Kleiner, The Right to Win

“Now, here, you see, it takes all the running you can do, to keep in

the same place” said the Red Queen

Lewis Caroll, Alice in Wonderland

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Strategy Map

featuresstrategy

&com

petition

4The Red Queen among Organizations: How Competi-tiveness Evolves (Princeton University Press, 2008), thisturbulence can never level off into stability; as compa-nies copy and outdo one another’s proficiencies, thegame of business continually becomes more challenging.Rapid economic growth in emerging markets has madeadvantage even more transient, bringing billions of peo-ple into the global economy, along with hundreds ofenergetic new business competitors.

One might assume that the answer is to becomecompletely resilient, morphing to match the changingdemands of the market. But companies can’t, because ofthe second reality: Corporate identity is slow to change.The innate qualities of an organization that distinguishit from all others — its operational processes, culture,relationships, and distinctive capabilities — are built upgradually, decision by decision, and continually rein-

forced through organizational practices and conversa-tions. Very few companies have thoroughly reinventedthemselves, and those that have managed it have typi-cally had to force many people out, including top exec-utives, and to replace them with new recruits chosen fora different set of attitudes and skills. Even when leadersrecognize the need for change or know that the com-pany’s survival is at stake, this identity is difficult to shift;if no deliberate effort is made to refresh it, it can stag-nate to the point where it erodes advantage from with-in. As writers such as Jim Collins, Clayton Christensen,and Donald Sull have noted, it’s all too easy for estab-lished companies to fall prey to complacency and hubris(Collins), entrenched customer relationships and dis-ruptive technologies (Christensen), or inertia (Sull).

Yet although the “stickiness” of a company’s identityis typically regarded as a weakness, it’s also a great source

Exhibit 1: A Landscape of Strategy Concepts

Source: Walter Kiechel, The Lords of Strategy; Art Kleiner, The Age of Heretics; Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel, Strategy Safari

Henry MintzbergThe Rise and Fall ofStrategic Planning

1994

Chris ZookProfit from the Core

2001

Gary Hamel &C.K. Prahalad

Competing for the Future1994

Michael PorterCompetitive Strategy

1980

Bruce HendersonEssays1966

W. Chan Kim &Renée Mauborgne

Blue Ocean Strategy2005

Kenneth AndrewsThe Concept of

Corporate Strategy1971

William Abernathy & Robert Hayes

“Managing Our Way toEconomic Decline”

1980

Tom Peters &Robert Waterman

In Search of Excellence1982

ADAPTATION Act quickly and creativelyin response to events(organizational learning)

POSITIONExploit the high ground: createand hold a distinctive position

(market-back strategy)

EXECUTIONAlign people and processesfor operational excellence(the quality movement )

CONCENTRATIONFocus on your current

core business(private equity)

Michael Hammer& James Champy

Reengineering the Corporation1993

W. Edwards DemingOut of the Crisis

1986

Ram Charan &Larry Bossidy

Execution2002

MANY FEW

FUTURE

PRESENT

Each of these four quadrants represents a basic school of thought inbusiness strategy about the nature of the right to win. Starting at theupper right, the schools are Position (winners select favorablemarkets as defined by external forces); Concentration (winners makethe most of current core strengths and businesses); Execution (winnersgain advantage through operational excellence); and Adaptation(winners develop an overall direction through experimentation andrapid change). From the 1960s to today, many companies havebounced from one quadrant to another.

The grid itself reflects views of the best approach for developingbusiness strategy. The X-axis represents the point of view on

authorship: Who is responsible for major strategy decisions? At leftare those who favor collective choice (strategic thinking is instilledamong as many people throughout the company as possible). At rightare those who favor top-down formulation (strategy is developed bythe few, the designated expert planners and senior executives, whilethe rest of the enterprise is dedicated to execution).

The Y-axis depicts time orientation: the degree to which strategyis seen as present- or future-oriented. At the top are those who favormoving toward a long-term destination that may be different from thecompany’s current position. At the bottom are those who favor lettingthe company’s strategic direction emerge from its current state.

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What defines a Strategic Problem?

Strategic Problem

Ill-Defined and Unique

Too Much or Too Little Data

Limited Time and Resources

Conflicting Stakeholder Views

Several Critical Unknowns

Cross - Functional Complexity

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One word strategy

Strategy is a “Hypothesis”

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Kernel of a Strategy

Guiding Policy

the overall approach chosen to

overcome the obstacles

Good Diagnosis

which

defines the nature of the

challenge

Coherent Actions

the set of co-

ordinated actions and

resource allocation

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Thinking like a Strategist

Generating the Hypotheses

Making the Case

o  Develop the problem definition

o  Concretize the scope

o  Map the issues, and deliverable

o  Develop the issue tree o  Generate the

hypotheses o  Develop the data

matrix o  Refine hypotheses (as

required)

o  Collect data and conduct analysis

o  Synthesize finding and conclusions

o  Develop recommendations

o  Develop message and storyboard

o  Write and review the output

Testing the Hypotheses

2 31 4Defining the Question

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The Strategic Question

•  Define the fundamental question that needs to be answered

•  Focus on the big picture and not the details •  Explore the gap between what the company has

and what the company wants •  Understand how it fits with what else the company is

trying to achieve

1. Defining the Question

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Issues and Deliverables •  What issues must you investigate to answer the

fundamental question? •  What is the type of output will be produced from this

investigation? •  What deliverables are expected? Will that address

the company’s requirement? •  What time and resources would be required to

accomplish this?

1. Defining the Question

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Develop Issue Tree

Strategic Question

Issue 1

Issue 2

Issue 3

Sub Issue 2.1

Sub Issue 2.2

Hypothesis 2.2.1

Hypothesis 2.2.2

Sub Issue 2.3

2. Generating the Hypotheses

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Issues vs. Hypotheses What is an Issue? •  Denotes a major piece of

the problem

•  Pointed to company concerns (“So what?”)

•  Limited in number

•  Similar in size

•  Will not “fall”

•  Phrased as a question

•  Amenable to closure

What is a Hypothesis? •  Phrased as statement to

prove or disprove

•  Is an 'hunch' or an educated guess

•  Nested under an issue

•  Provides tentative answer to issue question

•  Provides context for or guides information gathering


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Case Study: Issue Tree Strategic Question Issues

What should be Paragon Tools’ growth strategy?

How will the product and services ecosystem look in the machine tool ecosystem in the next 10 years?

What is the best “Way-to-Play” for Paragon Tools in the machine tool ecosystem?

How can Paragon Tools leverage its existing capability system developed to get the “right to win” in this ecosystem?


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Case Study: Hypotheses Issue Sub-Issues Hypotheses

How will the product and services ecosystem look in the machine tool ecosystem in the next 10 years?

How will the service ecosystem emerge in the next 10 years? Which platorms? Which formats?

H1: Market consolidate around 3 major platforms – for services

H2: Customers will shift from buying tools to complete lifecycle packages

... ....


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Types of Hypothesis

Propositional e.g. market consolidate around three platforms – for services

•  If accepted becomes finding

•  Leaves "so what"

•  Simple to test, more complex to interpret

•  Seeks "predictive" data

Diagnostic e.g. customers will shift from buying tools to complete lifecycle packages •  If accepted becomes

conclusion •  Answers "so what" •  Simple to interpret if data fits,

more complex to test •  Seeks "cause and effect"

data


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Develop Good Hypothesis •  Connect the Dots - General / specific exp •  Do your Homework - Lit search, web search, books /

journals •  Engage with People - Planning meetings, clients,

colleagues •  Stand on the Shoulder of Giants - Experts, practice guides,

other assignments •  Gather Preliminary Data - Industry analysis, probing

questions •  Think Hard about it!


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•  Think on two key dimensions

o  Method of enquiry: Interview/Focus Group, Research and Surveys, Observations

o  Source of data: Internal, Client, Competition / Customers, Industry / Government

•  Be cost conscious in selection of method of enquiry

•  Assess reliability and conduct triangulation

•  Organize and document rigorously

Building the Data Matrix 3. Testing the Hypotheses

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Synthesizing the Facts

Facts 1

Fact 2

Fact 3

Finding 1

Finding 2

Conclusion 1

Conclusion 2

Finding 3 Fact 4

Fact 5

Recommendation 1

Recommendation 2

Recommendation 3

Recommendation 4

3. Testing the Hypotheses

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Developing Recommendation

•  Generate alternatives, evaluate, screen and select: Complete the logic tree

•  Specify and describe actions, results and benefits

•  Take account of existing conditions, barriers and resources

•  Cover the assignment topics and outputs •  Can be tracked back to address the root cause findings

3. Testing the Hypotheses

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Structuring the Story

Argument First Action First

What's wrong

What's causing It

Here's what you should do

This is how

You must change

Here's what you should do

This is how

Change

Change

Add the why's

4. Making the Case

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•  Objective: Build relationship, share information, solve problem, take decision

•  Audience: Who, characteristics as individual / group, receptivity, expectation, culture

•  Purpose: Telling, selling, conferring, collaborating •  Story: Content, emphasis, style •  Medium: Visual (letter, report, text, video) or Oral

(presentation, meeting, one-to-one)

Doing the Communication 4. Making the Case

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Heuristics for Daily Problem Solving

•  Structure your thinking •  Build your fact base •  Develop an initial hypothesis •  Solve the right problem •  Don't boil the ocean •  Produce an output daily •  Synthesize every day (Elevator Speech) •  Focus on the change

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Wrap Up

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•  Strategy is a hypothesis

•  Strategy consists of a good diagnosis, guiding policy and coherent action

•  Use heuristic for daily practice and play

Amit Kapoor September 2012