Strategic Decision Making - Some Notes on the Relevance of

Adequate Tools

Dr. Norbert JesseDepartment of Computer ScienceTU Dortmund UniversityGermany

technische universität dortmund

Content

1. Preliminary Note

2. A Tool Box

3. Some ExamplesVisionPortfolio TechniqueBalanced Score CardSWOT

4. Conclusion

An absolute classic

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Strategy is the art & science to use all sources and instruments (!) aiming at a long-term survival of an institution.

Hermann Simon

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Strategies can be characterized by:- usually innovative character- imminent relevance- implicate a variety and complex alternatives for the action plan- not a repetitive approach

Elements of Strategies

To know what you want

To know what you not want

Create something new (not imitation)

Integrate external opportunities and internal competencies

Sustainability (Hang in!)

Strategy is comprehensive

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Instruments – used with sense and thoughtfulness – help to develop and

implement strategies.

„You can come up with the best strategy in the world – the implementation is 90 % of it.“ Alfred Brittain

Analytical Instruments

Instruments for Implementation

Instruments for the Strategy of an Institution

• Vision• Portfolio Analysis• Scenario Analysis• Competitior

Aufklärung• Goal Strat• ….

• Quality Managment• Knowledge

Management• Balanced Scorecard• Investor Marketing• Options Selection• ….

Instruments for a Business Unitof an Institution

• Benchmarking• SWOT Analysis• Lifecycle Analysis• Strategic Business Unit

A.• Brand-Equity Analysis• Comstrat Analysis• ….

• Value-to-Customer• Market Segmentation• Pricing Instruments• Decision Support

Systems• ….

H. Simon/A. v.d. Gathen

Analytical Instruments

Instruments for Implementation

Instruments for the Strategy of an Institution

• Vision• Portfolio Analysis• Scenario Analysis• Competitior

Aufklärung• Goal Strat• ….

• Quality Managment• Knowledge

Management• Balanced Scorecard• Investor Marketing• Options Selection• ….

Instruments for a Business Unitof an Institution

• Benchmarking• SWOT Analysis• Lifecycle Analysis• Strategic Business Unit

A.• Brand-Equity Analysis• Comstrat Analysis• ….

• Value-to-Customer• Market Segmentation• Pricing Instruments• Decision Support

Systems• ….

H. Simon/A. v.d. Gathen

Vision

Aim and direction

Beyond the day: not gradual but leap forward – timeframe: 5+ years

Between utopia and reality: challenging; believe in once abilities; based on hard facts, global trends, assumptions of abilities

Communication

Shown through the role model of leaders, heads …

Personification

„When our goals were out of sight we doubled our efforts.“

Portfolio Analysis

Criteria for distributing resources on activities / BU

Combination of activities / BU with a long-term perspective

Criteria for starting new activities / BUs

Overall goal of Portfolio Selection Theory: Discuss options not isolated but in the overall context !A framework to discuss strategic decisions !

Portfolio Analysis

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Market Attractiveness Competitive Strength 1)

•Market growth and size

•Market quality•Supply security•Environmental

situation

•Relative market position (Image, development, …)

•Relative Potential (process efficiency, advantage of location, …)

•Relative R & D potential (innovation potential; state of research)

•Relative quality of human resources

Portfolio Analysis: Market Attractivity-Competitive Strength Portfolio

1) Compared to the most powerful competitor

Quantification via „Nutzwertanalyse“

Portfolio Analysis

Business Portfolio Metropolis Ruhr

Balanced Scorecard: Objectives

Leading and control of institutions more and more complex

In the past (before 1990) financial figures dominated Performance Measurement Approaches

Include perspectives: finance, customer, organisation & process, employees & knowledge

Overall goal: Transfer strategy into quantitative goals See ursache-consequence-mechanisms Identify the driving forces for results …

Balanced Scorecard: Process

Develop vision & strategy

Define strategic goals for business units

Identify cause-and-effect relations

Define operative goals & actions

Decide on figures to evaluate / measure goal expectations

Develop an action plan for implementation and feedback process

Implementation:

Define responsibilities for actions, evaluation etc.

Define time line

Analyse deviations from the target

Analyse consequences für strategy and goals

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SWOT Analysis

Strength & weaknesses – compared with competition

-> Analysis of potentials (resources: finance, technology, HR, …) and competitors

=> identification of options

Opportunities & risks – external reference

-> strategic discontinuities

SWOT-Analysis

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4. Summary

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Recommendations

Be explicit

Collect data, facts, figures

Discuss alternatives (build or rent, ….)

Make assumptions for decisions clear

Plan long-term

Analyse positive & negative feedback interdependencies

Thank You for Listening !