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Strategic Intent By Gary Hamel and C.K. Prahlad
Within a span of 10-20 years
Strategic Intent
Prahalad and Hamel talk about corporate leaders whose ambitions are “all out of proportion to their resources and capabilities.”
E.g. Komatsu set out to “Encircle Caterpillar”, Canon sought to “Beat Xerox”
Strategic Intent is more than blind ambition
It includes a management process that energizes and focuses on organization’s employees through clear communication
Characteristics of Strategic Intent It captures the essence of winning
e.g.- Coca- Cola strategic intent has been to put a Coke within “arm’s reach” of every consumer in the world
It is stable over time. It provides consistency to short –term action, while leaving room for reinterpretation as new opportunities emerge.
e.g. Komatsu included a succession of medium term programs to beat Caterpillar
Improving QualityCultivating export
marketDriving down costs
New product development
Which is more attractive? Let blue collar employees be given the
responsibility to create more shareholder wealth
OR Give them the challenge to “Beat Benz”
???
It sets a target that deserves personal effort and commitment.
Strategic Planning and Strategic Intent The planning process acts as “feasibility
sieve” The goal of Strategic intent is to fold the
future back into the present Its is not about “How will next year be
different from this year?” But “What must we do differently next year ?”
While strategic intent is clear about ends, it is flexible as to means-it leaves room for improvisation
Building Challenge
Strategic intent implies a sizeable stretch for an organization.
Current capabilities and resources will not suffice
This forces the organization to be more inventive, to make most of limited resources.
Contd.
Traditional view of strategy focuses on the degree of fit between existing resources and current opportunities, strategic intent creates an extreme misfit between resources and ambitions.
Corporate Challenges
Like strategic intent, challenges stretch the organization.
E.g. canon set its engineers a target price of $1000 for a home copier
Corporate challenges include analyzing competitor and understanding the foreseeable pattern of industry evolution.
Effectiveness of Corporate challenges Create a sense of urgency(E.g. Komatsu budgeted on
the basis of worst case exchange rate that overvalued yen)
Develop a competitor focus at every level through widespread use of competitive intelligence.(E.g. Ford showed production line workers videotapes of operations at Mazda’s most efficient plant)
Provide employees with the skills
Give the organization time to digest one challenge before launching another.
Establish clear milestones and review mechanisms
Building reciprocal responsibility
Four Approaches to competitive innovation Building layers of advantage:
-wider a company’s portfolio of advantages, lesser the risk.
Searching for loose bricks: it means looking for the competitor’s blind spot.
Changing the terms of engagement Competing through collaboration:
through licensing, outsourcing, joint ventures.
Remaking Strategy
Western managers centers on the problem of maintaining strategic fit
The other centers on the problem of leveraging resources.
Similarity
Differences
Both models recognize the problem of competing with limited resources
Trimming ambitions to match available resources
Leverage resources to reach unattainable goals
The relative competitive advantage determines relative profitability
Search advantages that are inherently sustainable
Accelerate organisational learning to outpace competitors to build new advantages
Difficulties of competing against larger competitors
Search for niches/dissuades the company from challenging an entrenched competitor
Produces a quest for new rules to devalue the incumbent’s advantages
Balance in the scope of an organisation reduces risk
Reduce financial risk by building a balanced portfolio of cash-generating and cash-consuming business
Reduce competitive risk by ensuring a well balanced and broad portfolio of advantages
Strategy is not limited to the eight rules of excellence, seven S’s , five competitive forces , four life-cycle stages and innumerable two-by two matrix.
Concepts like the product life cycle, experience curve, product portfolio and generic strategies have toxic side effects:
-they reduce the no. of strategic options management is willing to consider
-they create a preference for selling business rather than defending them
They yield predictable strategies that rivals easily decode.
The strategist’s goal is not to find a niche within existing industry space but to create new space that is uniquely suited to company’s own strength.
Japanese companies have won not because they have smarter managers but because they have developed ways to harness the wisdom of anthill.
The challenge of top management Develop faith in organization's ability to
deliver on tough goals Motivate every employee Focus and internalize new capabilities
Thank You