Strategy_LinkedIn

John Devlin MBA FCCA https://au.linkedin.com/in/JohnDevlinSydney

Strategic Analysis And Development .

John Devlin, MBA, FCCA https://au.linkedin.com/in/JohnDevlinSydney


Content

What is Strategy

Topic

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Analytical techniques

2

Creating Opportunities

3

The Execution Premium 4

5

John Devlin


Content

What is Strategy

Topic

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2


3


5


Strategy rests on unique activities

Variety based positioning Needs based positioning Access based positioning

Best when a company can

best produce particular

products or services using

distinctive sets of activities

Best when groups of

customers have different

sets of needs and tailored

set of activities can serve

those needs best

Used when the best

configuration of activates to

reach customers is

different.

Strategy can be described in terms of customers.

However, the essence of strategy is in the way chosen activities are performed.

Strategy is about choosing activities that are different from rivals. If one set of activities enabled us

to produce all varities, meet all needs and access all customers. companies could easily shift

among them and operational effectiveness would determine performance


Strategy requires trade offs

Strategic positions not sustainable unless there are trade offs with other positions. Trades-offs

means more of one thing necessitates less of another.

Inconsistencies in image Arise from activities themselves Limits on internal control &

coordination's

Company known for one kind of

value may lack credibility and

confuse customers or

undermine reputations if it

attempts to deliver another kind

of value at same time

Different positions(and their

activities) require different

product. configuration,

equipment, employee behaviour,

skills and management

systems.

Companies that try to be all

things to all customers risk

confusion in the trenches as

employees make decisions

without a clear framework

If there is no trade off companies will never achieve sustainable advantage. They will have to run

faster & faster just to stay in place. Essence of strategy is choosing what not to do. Without trade

offs there would be no need for choice and hence no need for strategy, and performance would

depend wholly on operational effectiveness.

Strategic positions not sustainable unless there are trade offs with other positions. Trades-offs

means more of one thing necessitates less of another.


Problems with substituting operational effectiveness with strategy

As industries converge the more companies become the same

Use of benchmarking(best practice) leads to convergence to Industry average

Outsourcing of activities to efficient third parties means activities(the basis of competitive

advantage) become generic.

As competitors imitate improvements in quality, cycle times & supplier partnership strategies

converge. Everybody ends up running the same race.

Competition based on operational effectiveness alone, is mutually destructive. Can only be

arrested through limiting competition, i.e. through mergers or acquisitions.

Companies left standing are companies that outlast others, not ones with competitive advantage.


Operational effectiveness is

necessary but not usually sufficient

Initial efficiency state

Efficiency

Industry

standard

efficiency

New process devised

Efficiency

1 Company

gains

temporary

advantage

Can improve profit

through improving

efficiency

Industry

standard

efficiency

Diffusion of best practice

Efficiency

New Industry standard

of efficiency Companies

advantage

eliminated

Operational effectiveness in the long term leads to absolute increase in effectiveness but no

relative improvement for anyone.

As best practice diffuses throughout industry any relative advantage eliminated.

End result is that bar for “efficiency” has been raised for everyone but nobody has

gained relative advantage.

Old Industry

standard efficiency

Time


Advantage or

disadvantage

comes from all

activities a company

undertakes Cost Advantage from

doing the same activity

more efficiently

Differentiation through

choice of activities

which are performed

Operational effectiveness is not

strategy

A Company

outperforms rivals if

it can establish a

difference it can

preserve.

Strategic positioning

means performing

different activities or

same activities in

different way

Operational

Effectiveness

means performing

same activates

better than

competitors


Why do so many companies fail to

have a strategy?

When managers operate far from productivity frontier trade offs appear unnecessary.

Because of fear of competition managers seek to imitate everything about competitors.

They chase technology for its own sake

Managers mistake “customer focus” to mean that they must serve all customers needs all the

time.

Trades off require making some hard decisions.

Managers sometimes don’t want to disappoint customers or employees

Managers see trade offs as a sign of weakness.


Content

What is Strategy

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Alternative Strategic formulation

methodologies

Five Forces – Michael Porter 1

Strategic Stretch – Gary Hamel

2

•Achieving competitive advantage starts with detailed

understanding of the environment and your industry.

•What are the trends in the environmental forces

•How can we position ourselves to best exploit opportunities?

•Internal Analysis

•What do customers find valuable?

•Capability platform

•What are the we good at?

•What strengths can we leverage across organisation?

Value Innovation – Kim & Maurborgne

2

•Creating Markets

•Cost and Differentiation

•Don’t compete with competitors, make them irrelevant

•Create & Capture New demand


Michael Porters - Five Forces

Key Q: Is our industry attractive?

Threat of Substitutes

Threat of Entry

Power of Buyers

Power of Suppliers

Interfirm Rivalry

Achieving competitive advantage starts with

detailed understanding of the environment and

your industry..

An outside in approach

How best do you compete/position your company.


Garry Hamel – Resources based view

Inside out perspective.

Success comes from competences unique to an

organisation.

How can we create opportunity?

Culture

Competencies Structures

People

What are our core competencies?


Value Innovation: The Cornerstone of Blue Ocean Strategy

Value Innovation is created in the region where a company’s actions favourably affect both its cost

structure and its value proposition to buyers.

Value

Innovation

Costs: Costs are reduced by eliminating

and reducing the factors an

industry competes on

Buyer Value: Buyer Value is lifted by raising

and creating elements the

industry has never offered


Red Ocean V’s Blue Ocean Strategy

Red Ocean Blue Ocean

Competing in existing Market Space

Beat the Competition

Create uncontested market space

Make the competition irrelevant

Exploit Existing Demand Create and capture new demand

Make the value-cost Trade-off

Align the whole system of a firm’s activities with its strategic choice of

differentiation or low cost

Break the value-cost trade-off

Align the whole system of a firm’s activities in pursuit of differentiation and low cost


The Four Actions Framework Questions to challenge an industries strategic logic

Eliminate Which of the factors that the

industry takes for granted

should be eliminated

Create Which factors should be

created that the industry has

never offered

Raise Which factors should be

raised well above the industry

standard

Reduce Which factors should be

reduced well below the

industry standard

A new value

curve


8

Price Meals Lounges Seating ClassChoices

HubConnectivity

FriendlyServices

Speed Frequentpoint-to-point

departures

Strategy Canvas of Southwest Airlines

Low

High

Car

Southwest

Airlines

Other Airlines

Le

ve

l o

f S

erv

ice


From Head to Head competition to

Blue Ocean Strategy

Head to Head competition Blue Ocean Creation

Focuses on rivals within its industry

Focuses on competitive position within strategic group

Looks across alternative industries

Looks across strategic groups within industry

Focus on better serving the buyer group

Redefines the industry buyer group

Focuses on maximising the value of product and service offerings

within the bounds of its industry

Focuses on improving price performance within the functional

emotional orientation of the industry

Looks across to complementary product and service offerings

Rethinks the functional emotional orientation of the industry

Focuses on adapting to external trends as they occur

Participates in shaping external trends over time

Industry

Strategic Group

Buyer Group

Scope of Product offering

Functional Emotional orientation

Time


Content

What is Strategy

Topic

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Why do we need a Strategic

position?

Pre WWII

Production Orientation

Focus on efficiency in producing standard product.

We make the product according to our specification

1940’s -1970’s

Selling Orientation

Post 70’s

Market Orientation

Focus on selling our product.

Selling the brand

If people know about our product they will buy it

If we find out what customers want & then make it, then market it to customers, they may buy it if it suits their needs at a particular time

Source: P Kotler, Marketing Management, 7th Ed

Can we produce the product?

Can we produce enough of it?

Can we sell the product?

Can we charge enough for it?

What do customers want?

Can we develop it while they still want it?

How can we keep our customers happy?


Strategic positioning is about

answering some key questions

Key Q

uestions t

o A

nsw

er

Who are we serving?

What do we want to be?

What is our value proposition?

Requires a basis of segmentation.

We can’t be everything to everybody

What do we have to invest in/

improve to satisfy our key markets

How will we meet our chosen

segments needs?


Demographic

Industry

Size

Needs based

approach

Attribute based

approach

Segmentation should give us insight

as to how we can serve our clients

Segmentation

Reactive basis of

segmenting market

Proactive approach

What is the driver

of value that a

customer requires

to be met


Each Strategic Position requires a different

set of organisational capabilities

Value Provided

(Position)

Market

Deliverable 1

Market

Deliverable 2

Market

Deliverable 3

Specific

Deliverable 1

Specific

Deliverable 2

Specific

Deliverable 3

Specific

Deliverable 4

Specific

Deliverable 6

Specific

Deliverable 5

Resource or Capability 1







Each Strategic Position requires a different

set of organisational capabilities

Value Provided

(Position)

Market

Deliverable 1

Market

Deliverable 2

Market

Deliverable 3

Specific

Deliverable 1

Specific

Deliverable 2

Specific

Deliverable 3

Specific

Deliverable 4

Specific

Deliverable 6

Specific

Deliverable 5







Segment 1


Each Segment requires a different value

proposition which must resonate with their needs

Segmentation, comined with an audit of core competencies, generates options for

potential target markets to serve.

A value proposition is generally built around excellence in one of three dimensions

Operational Excellence

•Price

•Selection

•Convenience

•Zero Defects

Product Leadership

•High performance product

•Entering new market spaces

•Product Introductions

•Service Introductions

Customer Intimacy

•Customer knowledge

•Solutions offered

•Share of wallet

•Retention

It also provides the basis around which a value proposition should be built


Segment will determine “excellence”

dimension on which we will compete

Operational

Excellence

Customer Intimacy

Product Leadership

• What is it that clients want? • How do we deliver this in a way that is more

efficient & effective than competitors

• Different Types of Value • Price

• Benefit

• Quality

• Value equates to clients perception of

benefits received versus costs sacrificed.

• Costs • Monetary

• Search

• Psychological


Competitive advantage comes from

an organisation’s core competency

Combines in ways

competitors cannot

easily or quickly imitate

Able to be exploited

across the business

Ads value as perceived

by customer

Core

competency

Is a source of major competitive advantage

Can be defended for required period.

Can be applied across a wide range of applications


Internal capabilities enable our core

competency

Economic

Technological

Human

Management

Organisational

Assets, Financial Resources, Economies of

Scale, Brands, Customer Loyalty

Process, IT systems, Plant & Equipment

Skills attitudes and behaviour of employees.

Loyalty to organisation

Ability to coordinate and allocate capabilities.

Ability to make strategic choices and

implementation

The structures and systems people which

together comprise the organisational culture


The formulation of a strategic

position enables us to fill in the gaps

We are the

To

That

Because of

Our target market

Our core value

Our value proposition

Our capabilities


So…are we really measuring what will

enable our value proposition to be delivered?

Operational

Excellence

Product

Leadership

Customer

Intimacy

•Price competitiveness

•Availability

•Convenience/Speed of purchase

•Quality & consistency of products/services/processes

•Growth in customer base

•Share of Market

•First to market – Quality product development process

•High Performance product – Features & Functionality

•Marketing/Brand Awareness in Target Segments

•Customer referrals

•Share of Wallet of Target Segment

•Completeness of the solution – Selling multiple branded products & services

•Exceptional pre/post sales service

•Relationship length/customer retention

•Customer information

•Share of wallet of customer/customer profitability


Remembering that customers needs and

operational performance change over time

Cost

Dependability

FlexibilityQuality

Speed

Our perceived delivery Client Needs

Cost

Dependability

FlexibilityQuality

Speed

Time


Content

What is Strategy

Topic

1


2


3

The Execution Premium

4

5


Linking Strategy to Execution

Kaplan & Norton

• Strategy Map

• Measure/Targets

• Iniatiatives

• STRATEX

Plan the Strategy

• Mission Values, Vision

• Strategic Analysis

• Strategy Formulation

Develop the Strategy

• Profitability Analysis

• Strategy Correlations

• Emerging Strategies

Test and Adapt

• Strategy Reviews

• Operating Reviews

Monitor & Learn

• Business Units

• SupportUnits

• Employees

Align Organisation

• Key Process

Improvements

• Sales Planning

• Budgeting

Plan Operations

• Strategy Map

• BalancedScorecard

• STRATEX

Strategic Plan

• Dashboards

• Sales Forecasts

• Resources

• Budgets

Operating Plan

Execution

Process Initiative

1 2

3 6

5 4

Results

Results

Performance Measures

Performance Measures


Developing the Strategy

Strategy

Development

Process

Objectives Barriers Representative Tools

• Clarify Mission, Values

and Vision

Why are we in business

• Conduct Strategic

Analysis

What key issues affect our

strategy

• Formulate the Strategy

How can we best compete

Affirm high level guide lines about organisational purpose and conduct

Identify the events forces and experiences that impact and modify the strategy

Define where and how theorganisation will compete

The vision is frequently described in terms notconducive to execution

Analysis is frequently focused on outcomes and noton the drivers of strategy

There is no consensus on which approach to use in which circumstances

•Clear Mission •Core Values •Strategic Change Agenda •Enhanced Vision

•Environmental Scan •Competitive Scan •Strategic Issues

•Key Issue Analysis •Strategy Methodologies


Plan the Strategy

Strategy Translation

Process Objectives Barriers Enabling Tools

• Create the Strategy Map

How do we express our

strategy

• Select Measurs &

Targets

How do we measure our

strategy

To develop a comprehensive integrated Model of the strategy that pulls together the many diverse components of the plan

To convert strategic direction statements into measures and trargets that can be linked to the management system

Different strategies are built by different areas within the organisation. They are not integrated.

Lower-level objectives and targets arenot aligned with the higher-level goals

•Strategy Maps (cause & Effect) •Strategic objecctives

•BalancedScorecard •Measures •Targets •Gaps


Align the Organisation

Alignment Process Objectives Barriers Enabling Tools

• Align Business Units

How do we align business

units to create

corporatesynergies

• Align Support Units

How do we align support

units to

businessunotandcorporate

strategies

Cascade & Embed corporate strategyinto business unit strategies

Ensure that each support unit has a strategy that enhances the performance of corporate &business unit strategies

BU strategies typically are developed and approved independently without guidance of corporate perspective, lacdk of integration

Support units treated as expense centres withgoals to minimise costs rather than support enterprise and BU strategies

•Cascading of strategy maps to business units •Vertical and horizontal alignment

•SLA’a •Support unit strategy maps and scorecards

• Align Employees

How do we motivate

employees to help us

execute strategies

All employees understand the strategy and are motivated to help sucessfully execute the strategy

Most employees are not aware or do not understand the strategy. Their objectives and incentives focus on local tactical performance not strategy

•Formal strategy communication program •Employee objectives with clear linkage to strategic objectives •Competency development programs


Plan Operations

Strategy Execution


• Improve Key Process

What business process

change does the strategy

require?

• Develop the resource

capacity plan

How do welink strategy to

operating plans and

budgets?

Ensure the changes required by the strategic themes are translated to changes in operational processes

Ensure that resource capacity, operational plans, and budgets reflect the directions and needs of the strategy

No alignment between strategic priorities and quality and continious improvement programs.

Forecasts, budgets, and operating plans developed independently from strategic plans

•TQM •Business process improvements •KSF’s •KPI”s/Dashboards

•Rolling forecasts •ABC model •Resource planning •Budgeting


Monitor & Learn

Feedback & Learning


• Operational Review

Meetings

Are our operations in

control?


Targets


strategy

To monitor and manage short term financial and operational performances

To monitor and manage the strategic initiatives and the balanced scorecard

KPI’s and dashboards that managers review not central to the strategy.

•Inadequate time at mgt meetings for discussions about strategy implementation •Strategic cross business initiatives not measured

•Driver models •Varaince Analysis •Review of KPI dashboards •Team problem solving •Follow-up program

•Theme monitoring •Initiative portfolio monitoring •Theme teams •Agenda managment

• Strategic Testing and

adopting meetings

Is our strategy workings

To periodically assess whether the results hypothesised in cause effect diagrams areoccuring as anticipated

•Data not available •Inadequate capability in strategy analytics •Employees not encouraged to propose new strategic options

•Analytical studies •ABC studies of pdt & customer profitability •Cause & Efffect testing and analysis •Review of emergent strategies


Test & Adapt

Strategy Translation


• Create the Strategy Map

How do we express our

strategy


Targets


strategy

To develop a comprehensive integrated Model of the strategy that pulls together the many diverse components of the plan

To convert strategic direction statements into measures and targets that can be linked to the management system

Different strategies are built by different areas within the organisation. They are not integrated.

Lower-level objectives and targets arenot aligned with the higher-level goals

•Strategy Maps (cause & Effect) •Strategic objecctives

•BalancedScorecard •Measures •Targets •Gaps


Three Types of Management

Review meeting

Operational Review Strategy Review Strategy Testing and

Adapting

Dashboards for key performance indicators weekly and monthly financials

Strategy map and Balanced scorecard reports

•Strategy Map, BSC, Strategic Analysis of hypothesis, External & competitive analysis

Information

requirements

Frequency

Attendees

Focus

Goal

Daily, Weekly, or monthly depending on business cycle

Monthly Annually

Departmental and functional personnel. Senior Mgt for financial review

Senior Mgt, Strategic Theme owners, Strategy Mgt officer

Senior Mgt, Strategic Theme owners, Functional and planning specialists, BU heads

Identify and solve operational problems (Sales declines, customer service)

Issues in strategy implementation. Progress of strategic initiatives

Test and adapt strategy based on causal analytics. Pdt line & channel profitability. External environment

Respond to short term problems and promotes continuous improvements

Fine tune strategy, make adaptions

Incrementally improve or transform strategy, establish strategic and ops plans, set strategic targets, authorise investments


The Balanced Scorecard & Strategy Map is a step

in a process that describes what value is and how

it is created

Mission - Why we Exist -

Values - What is important to us -

Vision - What we want to be -

Strategy - What is our game plan -

Strategy Map - Translates the strategy -

Balanced Scorecard - Measure & Focus -

Targets & Initiatives - What we need to do -

Personal Objectives - What I need to do -

The Balanced Scorecard & Strategy Map • Ensure activities and initiatives are aligned

to a companies strategy • Converts a companies strategy into

executable actions

Bridging the gap between strategy & operations to

create competitive advantage

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Man

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We have a tool to communicate &

coordinate the company’s strategy

Translating Vision

Feedback & Learning

Business Planning

Communicating & Linking

Vision & Strategy

Feedback & Learning:

Articulating the vision

Supplying Strategic feedback

Facilitating Strategic review & learning

Business Planning:

Setting Targets

Aligning Strategic Initiatives

Establishing Milestones

Communicating & Linking:

Communicating & educating

Set goals

Links rewards to performance measures

Translating the vision:

Clarifying the Vision

Gaining Consensus

Four Objectives:

Source: Kaplan & Norton; Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review , January – February 1996

The Balanced Scorecard:


Customer Perspectives

Financial Perspective

Process Perspective

Learning Perspective

Vision & Strategy

Process Perspective:

To satisfy our shareholders & customers

what business processes must we excel at?.

Customer Perspective:

To achieve our vision how should we appear

to our customers?

Financial Perspective:

To succeed financially how must we look to

our stakeholders?

Learning Perspective:

To achieve our vision how will we sustain

our ability to change and improve?

Translates the vision

through 4 perspectives:

Source: Kaplan & Norton; Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review , January – February 1996

The Balanced Scorecard:

The Balanced scorecard


Balanced Scorecard Framework

Long Term Shareholder Value

Productivity Strategy Growth Strategy

Improve Asset

Utilisation

Improve Cost Structure

Enhance Customer

Value

Enhance Revenue

Opportunities

Customer Value Proposition

Price Quality Avail-ability

Select-ion

Funct-ionality

Service Partn-ership

Brand

Operations Mgt Processes

Customer Management Process

Innovation Processes Regulatory and Social

Processes

Processes that produce

and deliver products and

services

Processes that enhance

customer value

Processes create new

products and services

Processes that improve

communities and the

environment

Human Capital

Information Capital

Organisational Capital


Internal processes deliver value over

different time horizons

Operational

Effectiveness

Time(Years)

1 2 3 4 5

Shareholder

Value($) Customer

Management

Product

Innovation

Good Corporate

Citizen

Long Term Shareholder Value

Short Term Medium Term Long Term


So…are we really measuring what will

enable our value proposition to be delivered?

Operational

Excellence

Product

Leadership

Customer

Intimacy

•Price competitiveness

•Availability

•Convenience/Speed of purchase

•Quality & consistency of products/services/processes

•Growth in customer base

•Share of Market

•First to market – Quality product development process

•High Performance product – Features & Functionality

•Marketing/Brand Awareness in Target Segments

•Customer referrals

•Share of Wallet of Target Segment

•Completeness of the solution – Selling multiple branded products & services

•Exceptional pre/post sales service

•Relationship length/customer retention

•Customer information

•Share of wallet of customer/customer profitability


Steps to define core

Define •Core of current business

•Reach consensus on the true state of the core

Assess •Potential of Core

•Is key differeniator durable

Develop •What will the future look like?

•How different will that be from status quo

Identify •Options for redefining the core

•Both from inside and outside

Identify •Hidden Assets

•Can these assets create new assets or enableothers

Decide •Criteria to choose assets to employ in redefining core


Steps to build strong core as foundation

forstrong core

Define

•Define Business you are in

•Set correct boundaries

•Define the Core

Assess •Potential of Core

•Is key differentiator durable

Develop •What will the future look like?

•How different will that be from status quo

Identify •Options for redefining the core

•Both from inside and outside

Identify •Hidden Assets

•Can these assets create new assets or enableothers

Decide •Criteria to choose assets to employ in redefining core


Evaluating your core business

Core Customers

Core Differentiation

Core Capabalities

Culture & Organisation

Evaluation of Core

Industry Profit Pool

State of Core Customers:

Profitability, Market Share, Retention, Share

of Wallet, Customer Loyality & Advocacy.

State of Core Differentiation:

Definition & metrics of differentiation, relative

cost position, Business Models of

competitors.

State of Industry Profit Pool:

Size, Growth & Stability, Share of profit

captured, Shifts & projections.

State of core capabilities:

Inventory of Key capabilities, Relative

Importance, Gaps v’s competitors, Gaps v’s

Needs

State of culture & organisation:

Loyality and turnover, Capacity & Stress

points, Energy & Motivation, Bottlenecks to

growth, alignment to objectives

Determining health of core business:


Strategic Analysis And Development .

John Devlin, MBA, FCCA https://au.linkedin.com/in/JohnDevlinSydney

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