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ETHIC AND RESOURCES BASED STRATEGY ETHIC AND RESOURCES BASED STRATEGY TO IMPROVE OUR COMPETITIVENES POWERTO IMPROVE OUR COMPETITIVENES POWER

Dr. Heru Kurnianto Tjahjono

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Background

Global Economy and Global Crises Competitiveness Power

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The Power of Competitiveness

Number 37 soon after 1998 economic crises. Turn down to number 54 in 2008. (Source: The World

Economic Forum) One of the reason of this decreasing in power of

competitiveness is related to Strategic Human Resource Management.

Ex: Our competitiveness power in tourism, just low price item contribute to competitiveness power, and others like services, technology, infrastructure do not contribute.

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Natural Resources

We are rich of natural resources like: mining (oil, gas, coal), farming, ocean (fish), beautiful sceneries, etc

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Human Resources

Indonesia actually has a big potential to become ”a leading and enlightening country”.

Ex 1: Indonesian students had won many international science tournaments such as mathematics olympics, physics olympics, and other science tournaments.

From time to time China, Israel and India have competed each other tightly.

Ex 2:The world’s youngest professor who works at one of the universities in USA, Prof. Nelson Tansu, is an Indonesian. He was born in Medan, on Oktober 20, 1977 and still hold an Indonesian pasport.(Source: website of Prof. Nelson Tansu)

It means: Indonesian are potential people.

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Paper Focus

• How to organize natural resources and human resources?

• Strategic Management has an important role• Resources Based view is perspective to

integrate intangible resources an tangible resources

• Ethic as based strategy beside resources based view to create social capital as the most important capital in organization.

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To qualify as competitively valuable or to be the basis for sustainable competitive advantage, a “resource” must pass 4 tests:1. Is the resource hard to copy?2. Does the resource have staying power –

is it durable?3. Is the resource really competitively superior?4. Can the resource be trumped by

the different capabilities of rivals?

Determining the Competitive Value of a Company Resource

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How to Organize Our Resources to Achieve Sustainable Competitive Advantage?

Determine our position Create a strategy map Create a lingkage between Vision, activities and budget Integrate management practices between functions4 Steps Human capital as foundation Organization and social capital Firm or nation Equity Outstanding Financial Return

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Determine our position: (1) Internal capabilities(2) External Situation, for ex:

The Components of a Company’s Macro-Environment

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A Firm’s Ethical Responsibilitiesto Its Stakeholders

Owners/shareholders – Rightfully expect some form of return on their investment

Employees - Rightfully expect to be treated with dignity and respect for devoting their energies to the enterprise

Customers - Rightfully expect a seller to provide them with a reliable, safe product or service

Suppliers - Rightfully expect to have an equitable relationship with firms they supply and be treated fairly

Community - Rightfully expect businesses to be good citizens in their community

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The Role of Strategic Management Practices and Its Paradox

Strategy as a ”Dream” Our nation has lost of its ”collective dream” to

build and to become a competitive nation. A Dream actually is an extraordinary energy to

push an extraordinary progress. In a strategy terminology, a dream becomes an

essential concept of strategic intent, which is an intention and a willingness to always continually be strived for success.

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Strategy as Process One thing that we can learn from the Soeharto era is a

grand design or blue print of continuous development. Good or bad of strategies used during the new era, the

existed of implementaton deviations or the existed of corruption, colusion and nepotism, we can see that there was a flow of formal process in a strategy. Starting from Vision, Objectives, Program, Aktivities and Budget.

Conceptually budget follows activity. Activity itself is a translation of vision, objective and program.

But in practice, activity follows budget.

Strategy as …

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Strategy as Politics In reality, strategy which related to many people and has an

extraordinary ”prosperity” usually will invite political process. Basically political process is related to interest for the wealth

access. In practice often strategy made by an authorized istitution did

not work as pro-active strategy. It means implementation did not suitable with previous plan and intention.

Political process is one important factor that explain that phenomena.

Same as in global political strategy, it was not clear to whom the policy of importing rice actually. A policy which only make farmers suffered.

See cases of Ghana and Honduras (Kompas, Thursday November 8, 2008. Quote from: Prof. Maksum, Ph.D – UGM farming expert).

Strategy as …

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Strategy as Legitimacy Many people in Government, business agents and

other instituions have not seen strategy as an urgent task.

People make formal strategy only to get an aknowledment and legitimation.

There are still many practices in State Government (Pemda) where process of making Strategy Plan (Renstra) is delegated to staff employees just because it needed for an inspection.

Banking recapitulation case pasca 2008 crises and consultation assistance from foreign consultant BAH, nothing other than for the realization of financial assistance to inject those banks.

Strategy as …

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Strategi as Learning Crises repetition which we face is part of

learning process for our nation. In strategy perspective, not all strategies will

go as pro-active. Many strategies go re-active because of the uncertainty of external environment.

The important thing as an organization, our nation should have capacity to learn in order to anticipate environment changes that often are turbulent.

Strategy as …

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Strategy as …

Strategi as Culture We do not have the same values to support our bussiness

vision and strategies. Actually culture is the most important intangible resources

to achieve sustainable competitive advantage. Culture is very hard to imitate by competitors because its

characteristics embedded in company’s history and involve complex process.

We cannot determines the causes and the effects of what that create a culture.

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Our Social Capital

• Social capital consist of structural, relational and cognitive aspects.

• Social capital related participation, mutual trust and proud of our groups or community.

• Many research explain that social capital influence degree of performance in many level as individual, group, organization and nation.

• Putnam (1995) explain that wealth of American decrease. It caused by low of social capital

• How about social capital in Indonesia?

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Our Social Capital

Real sample related structural aspects is the nation commitment to pay tax which is still low and also ”zakat”payments that have not optimum.

From relational perspective, our nation is hit by untrustworthiness one to another, vertically between government and communities or horizontally among the communities.

This is related to corruption, colution and nepotism culture in our country.

From cognitive aspect, there is a tendency that patriotism spirit as citizen tend to be faded.

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Islamic Values In Business Strategy

Concept Competency Credible Caring Innovation Creativity

Customer Intimacy Efficiency Fair Process Trust and Commitment Voluntary Cooperation Etc.

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Blue Ocean Vs. Red Ocean Blue Ocean Vs. Red Ocean StrategyStrategy

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Blue Ocean vs. Red Ocean StrategyBlue Ocean vs. Red Ocean Strategy

• Create uncontested market space

• Make the competition irrelevant

• Create and capture new demand

• Compete in existing market space

• Beat the competition

• Exploit existing demand

Blue Ocean StrategyBlue Ocean Strategy Red Ocean StrategyRed Ocean Strategy

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Blue Ocean vs. Red Ocean StrategyBlue Ocean vs. Red Ocean Strategy

• Break the value- cost trade off

• Align the whole system of a firm’s activities with its strategic choice of differentiation and low cost

• Make the value-cost trade off

• Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

Blue Ocean StrategyBlue Ocean Strategy Red Ocean StrategyRed Ocean Strategy

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Blue Ocean Strategy ToolsBlue Ocean Strategy Tools

Strategy Strategy CanvasCanvas

• A diagnostic tooldiagnostic tool for building a compelling blue ocean strategy

• It captures the current state of playcurrent state of play in the known market space

• Allow you to understand :• where the competition is currently

investing• the factors the industry currently

competes on in product, service and delivery

• what customers receive from existing competitive offerings on the market

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Four Action FrameworkFour Action Framework

EliminateEliminate

ReduceReduce

RaiseRaise

CreateCreate

Which of the factors that the industry takes for granted should be eliminated?eliminated?

Which factors should be reduced well reduced well belowbelow the industry’s standard?

Which factors should be createdcreated that the industry has never offered?

Which factors should be raised well raised well aboveabove the industry’s standard?

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Four Action FrameworkFour Action FrameworkThe Case of Cirque du Soleil (A Circus Company)The Case of Cirque du Soleil (A Circus Company)

• Theme• Refined environment• Multiple productions• Artistic music and dance

EliminateEliminate ReduceReduce

RaiseRaiseCreateCreate

• Star performers• Animal shows• Aisle concession sales• Multiple show arenas

• Fun and humor• Thrill and danger

• Unique venue

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Six Principles of Blue Ocean StrategySix Principles of Blue Ocean Strategy

1. Reconstruct market boundaries

2. Focus on the big picture, not the numbers

3. Reach beyond existing demand

4. Get the strategic sequence right

5. Overcome key organizational hurdles

6. Build execution into strategy

Formulation PrinciplesFormulation Principles Execution PrinciplesExecution Principles

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Formulating Formulating Blue Ocean StrategyBlue Ocean Strategy

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1. Reconstruct Market Boundaries1. Reconstruct Market Boundaries

• Focus on rivals within industry

• Focuses on competitive position within strategic group

• Focuses on better serving the buyer group

Head-to-Head StrategyHead-to-Head Strategy Blue Ocean StrategyBlue Ocean Strategy

• Looks across alternative industries

• Looks across strategic group within industry

• Redefines the industry buyer group

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1. Reconstruct Market Boundaries1. Reconstruct Market Boundaries

• Focuses on maximizing the value of product or service offerings within the bounds of its industry

• Focuses on adapting to external trends as they occur

Head-to-Head StrategyHead-to-Head Strategy Blue Ocean StrategyBlue Ocean Strategy

• Looks across to complementary product and service offerings

• Participates in shaping external trends over time

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2. Focus on the Big Picture, not the Numbers2. Focus on the Big Picture, not the Numbers

Focus on the

Big PictureBig Picture, not the Numbers

The Four Steps of Visualizing Strategy

• Visual Awakening

• Visual Exploration

• Visual Strategy Fair

• Visual Communication

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2. Focus on the Big Picture, not the Numbers2. Focus on the Big Picture, not the Numbers

Visual Visual AwakeningAwakening

• Compare your business with your competitors’ by drawing your “as is” strategy canvas

• See where your strategy needs to change

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2. Focus on the Big Picture, not the Numbers2. Focus on the Big Picture, not the Numbers

Visual Visual ExplorationExploration

• Go to the field to explore the six paths to creating blue oceans

• Observe the distinctive advantages of alternative products and services

• See which factors you should eliminate, create, or change

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2. Focus on the Big Picture, not the Numbers2. Focus on the Big Picture, not the Numbers

Visual Strategy Fair

• Draw your “to be” strategy canvas based on insights from field observations

• Get feedback on alternative strategy canvases from customers, competitors’ customers, and noncustomers

• Use feedback to build the best “to be” future strategy

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2. Focus on the Big Picture, not the Numbers2. Focus on the Big Picture, not the Numbers

Visual Communication

• Distribute your before-and-after strategic profiles on one page for easy comparison

• Support only those projects and operational moves that allow your company to close the gap to actualize the new strategy

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3. 3. Reach Beyond Existing DemandReach Beyond Existing Demand

The Three The Three Tier of Non-Tier of Non-customerscustomers

• First tier: “Soon to be” non-“Soon to be” non-customerscustomers who are the edge of your market, waiting to jump ship

• Second tier: “Refusing” non-“Refusing” non-customerscustomers who consciously choose against your market

• Third tier: “Unexplored” non-“Unexplored” non-customerscustomers who are in markets distant from yours

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4. 4. Get The Strategic Sequence RightGet The Strategic Sequence Right

The Sequence of Blue Ocean StrategyThe Sequence of Blue Ocean Strategy

Buyer utilityBuyer utilityIs there exceptional buyer

utility in your business idea?

PricePriceIs your price easily

accessible to the mass of buyers?

CostCostCan you attain your cost

target to profit at your strategic price?

AdoptionAdoptionWhat are the adoption

hurdles in actualizing your business idea?

A commercially viable A commercially viable blue ocean ideablue ocean idea

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ExecutingExecutingBlue Ocean StrategyBlue Ocean Strategy

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5. 5. Overcome Key Organizational HurdlesOvercome Key Organizational Hurdles

Overcome Key Overcome Key Organizational Organizational

HurdlesHurdles

Cognitive Cognitive HurdleHurdle

MotivationalMotivationalHurdleHurdle

ResourceResourceHurdleHurdle

Political Political HurdleHurdle

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5. Build Execution Into Strategy5. Build Execution Into Strategy

Fair Process of StrategyFair Process of Strategy

Strategy Formulation ProcessFair Process – Engagement, Explanation, Expectation clarity

AttitudesTrust and Commitment – “I feel my opinion counts”

Behavior Voluntary Cooperation – “I’ll go beyond the call of duty”

Strategy ExecutionExceeds Expectation – self initiated