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Charting a Companys Direction: Vision and Mission, Objectives, and StrategyChapter 2IF YOU DONT KNOW WHERE YOU ARE GOING, ANY ROAD WILL TAKE YOU THERE.

This is my favorite business related quotewhere do you think it came from?

Cheshire Cat to Alice, Alice in WonderlandLearning ObjectivesGrasp why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.Understand the importance of setting both strategic and financial objectives.Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets.Become aware of what a company must do to achieve operating excellence and to execute its strategy proficiently.Strategy Making, Strategy Executing Process

Actual performance, changin conditions, new opportunities may lead to revisionIf you meet your goal, make another4Stage 1: Developing a Strategic Vision, Mission, and a Set of Core ValuesStrategic Vision: What is it?Describes the route a company intends to take in developing and strengthening its business. It lays out the companys strategic course in preparing for the future.Key ElementsOutlines where top management wants an organization to goCharts strategic pathDistinctive and specific to a particular organizationAvoids generic language that is dull/boring and could be used by any organizationCaptures emotions of employees and steers them in a common directionIs challenging and a bit beyond a companys immediate reachStage 1: Developing a Strategic Vision, Mission, and a Set of Core ValuesCharacteristics of an Effectively Worded Vision StatementGraphic: paints a picture of the kind of company that management wants to create and the market positions the company strives to earnDirectional: forward looking; describes the strategic course that management has charted and the changes that will help the organization prepare for the futureFocused: specific enough to provide managers guidance in making tough decisions and allocating resourcesFlexible: may be adjusted over time as circumstances changeFeasible: within the reasonable reach of the organizationDesirable: indicates why the direction makes senseEasy to Communicate: is explainable in minutes and can be reduced to a simple, memorable slogan *most important?Stage 1: Developing a Strategic Vision, Mission, and a Set of Core ValuesCommon Shortcomings in Company Vision StatementsVague or incomplete: short on specifics about where the company is headedNot forward looking: does not identify if/how current focus will be alteredToo broad: so inclusive that the organization could head in many directionsBland, uninspiring, BORING: provides no motivation for people to get behind the visionNot distinctive: provides no unique company identityReliant on superlatives: sounds good, but says nothing; Global leader, Most successful, First choice of customersExamples of Strategic VisionsVague/incompleteNot forward lookingToo broadBland or uninspiringNot distinctiveToo reliant on superlatives *this too Be the global leader in customer valueGraphicDirectionalFocusedFlexibleFeasibleDesirableEasy to Communicate

One of the worst!8Examples of Strategic VisionsVague/incompleteNot forward lookingToo broadBland or uninspiringNot distinctiveToo reliant on superlativesOur vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.GraphicDirectionalFocusedFlexibleFeasibleDesirableEasy to Communicate

Possibility that this is too broad. 9Amazon Products

Amazon Products

Amazon Products

Amazon Products

Amazon Products

Examples of Strategic VisionsVague/incompleteNot forward lookingToo broadBland or uninspiringNot distinctiveToo reliant on superlativesWhat do you think of this one..Through all of our products, services and relationships, we will add to lifes enjoyment. Enrich and entertain a global audience. Deliver superior returns to our Shareholders.GraphicDirectionalFocusedFlexibleFeasibleDesirableEasy to Communicate

Not graphic to meNot super directional to me. Where do they want to go exactly? This is what they do right nowIs it focused? Does it give managers guidance? Teacher thinks so Flexible! If they want to venture from beer they have wiggle room to do so.Its feasibleDesirable? YupEasy to communicate. Its easy to understandNot distinctive-Superior returns profit should be a result of the companys strategy and not the strategic vision itself. Because all companies want to do this I would say it is not distinctive. Also could be one of many entertainment companiesToo broad??? A little bit they dont do all forms of entertainment15Communicating the Strategic VisionWinning support for the vision includes:Putting where are we going and why in writingDistributing the vision company-wideExecutive explanation of the vision (townhall type meeting works well people can ask questions and feel included in it, email easy but not effective)An engaging, inspirational visionChallenges and motivates workforceArticulates a compelling case for where the company is headedEvokes positive support and excitementArouses a committed organizational effort to move in a common directionSlogan!MBNA: Think of Yourself as a CustomerMBNAs slogan was written all over the office16Payoffs of a Clear Vision StatementCrystalizes an organizations long term directionReduces risk of rudderless decision-making (it should guide management when they make decisions tf decisions more aligned among company)Creates a committed enterprise where organization members enthusiastically pursue efforts to make the vision a realityProvides a beacon to keep strategy-related actions of all managers on common pathHelps an organization prepare for the future17ExerciseIn groups of 3 or 4, write a Vision Statement for any organizationreal or theoretical.We will discuss these and you will get feedback from your peers.

GraphicDirectionalFocusedFlexibleFeasibleDesirableEasy to Communicate

Vague/incompleteNot forward lookingToo broadBland or uninspiringNot distinctiveToo reliant on superlativesProvide products and services of superior quality and value that improve the lives of the worlds consumers, now and for generations to come Proctor and GambleTo bring innovation and inspiration to every athlete in the world Nike"To be the best quick service restaurant experience". Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile. McDonalds

McDonalds Striving to become our customers first choice for dining by providing superior quality, efficiency, and friendly service.

Forward looking/directional because McDonalds might be the a lot of peoples first choice for fast food but not necessarily all dining I think its focused because I believe managers could use this to guide their decisionsDesirable/motivatingEasy to communicate18Mission StatementThe Mission Statement:Identifies the firms product or services.Specifies the buyer needs it seeks to satisfy.Identifies the customer groups or markets it is endeavoring to serve.Specifies its approach to pleasing customers.Sets the firm apart from its rivals.Clarifies the firms business to stakeholders.

Example:Dole Food Company, Inc. is committed to supplying the consumer and our customers with the finest, high-quality products and to leading the industry in nutrition research and education. Dole supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies.

A statement about what the company is doing now Because visions statement is future and mission statement is now they really should not be combined!19Strategic Vision vs. Mission StatementMission: NOWPresent business purpose; who we are and what we doVision: FUTUREWhere are we going?What markets do we want to serve?Phase 2: Setting ObjectivesPurpose of setting objectivesConvert strategic vision into specific performance targetsCreates yardstick for measuring performanceSMART GoalsSpell out how much of what kind of performance by whenSMART GOALS (not in the book) - Specific, Measurable, Attainable, Realistic, Timely

I want to go to the Olympics for a good swimmer specific, measurable, attainable, realistic but not timely 21Setting Stretch ObjectivesObjectives should be set at levels that stretch an organization to:Perform at its fullest potential, delivering the best possible resultsPush firm to be more inventiveExhibit more urgency to improve its business positionBe intentional and focused in its actions

Theres no better way to avoid ho-hum results than by setting stretch objectives and using compensation incentives to motivate organization members to achieve the stretch performance targets.-Mitchell Leibovitz: former Pep Boys CEOTypes of Objectives Financial ObjectivesStrategic ObjectivesOutcomes focusedon improving financial performanceOutcomes focused on improving competitive strength and market standing$Types of ObjectivesFocus on strategic objectives in the short term and the financial objectives will grow in the long term23Financial Objectives: rarely overlookedAnnual revenue growth / after tax profits of x%Annual increase in earnings per share of x%Annual dividend increases of x%Profit margins of x%Annual stock price increase of x%Bond and credit ratings of x

Strategic Objectives: often overlookedWinning x% market shareAchieving lower overall costs than rivalsOvertaking key competitors on product performance / quality / customer servicesAchieving customer satisfaction rates of xConsistently beating rivals to marketHaving wider product line than rivalsYour Financial and Strategic ObjectivesWhat are some of your objectives? You might call these personal goals.

Some of mine..Money coming in is greater than money going out at least 9 months of every yearComplete all Doctorate courses during 2015I will train for and complete an Olympic distance triathlon in 2015, and a half Ironman in 2016. (NoteId like to do a full ironman in 2017, but I havent convinced myself that this is realistic yet).

26Strategic Performance = Financial PerformanceAchieving good financial performance is not enoughCurrent financial results are lagging indicators reflecting results of past decisions and actions good profitability now does not translate into stronger capability for delivering even better financial results laterMichael Eisner: 1996, paid >$570M due to excellent Disney performance (his salary was performance based. Disney shareholders took him to court and he won but gave money bacl)Setting well-chosen strategic objectives and achieving them signalsGrowing competitivenessGrowing strength in the marketplaceA company that is growing competitively stronger is developing the capability for better financial performance in the years aheadGood strategic performance is thus a leading indicator of a companys capability to deliver improved future financial performance

Balanced Scorecard: organizations must set both strategic and financial objectives!Balanced Scorecard choose two financial objectives and two strategic objectives27Phase 3: Crafting a StrategyOnce you determine what you want to do, its time to figure out how youre going to do it!Developing a winning strategy involvesDiagnosing the direction and force of the market changes underway and making timely strategic adjustmentsSpotting new or better ways to satisfy customer needsFiguring out how to outwit and outmaneuver competitorsPursuing ways to strengthen the firms competitive capabilitiesProactively trying to out-innovate rivalsENTREPRENEURSHIP!Entrepreneurs are the ones the drive the company forward- they come up with new ideas and are innovative28The Hows that Define a Firms StrategyHow to grow the businessHow to please customersHow to outcompete rivalsHow to respond to changing market conditionsHow to manage each functional piece of the business (R&D, marketing, production, HR, finance, etc.)How to develop needed competencies and capabilitiesHow to achieve strategic and financial objectivesMarketing Dept spend money to get more customersFinance Dept stick to a budgetTF these depts are in conflict. How will we create a strategy to align depts29Who is Involved in Strategy MakingCorporate StrategyBusiness StrategiesFunctional StrategiesOperating StrategiesTwo-Way InfluenceTwo-Way InfluenceTwo-Way InfluenceCorporate-Level ManagersBusiness-Level ManagersFunctional ManagersOperatingManagersAll managers are involved in decision makingRyan would add key employees to the lowest level30Phase 4: Executing the StrategyPlan your work, work your plan!Operations oriented activity aimed at performing core business functions in a strategy supportive mannerTougher and more time consuming than crafting strategyKey tasks include Improving efficiency with which the strategy is executedShowing measurable progress in achieving both operating excellence and targeted resultsBuild a capable organizationAllocate resources to strategy supportive policiesInstalling information, communication, and operating systemsTying rewards to achievement of results / Motivating peopleKeep practicing and youll get better31Phase 5: Evaluating Performance and AdjustingHow are we doing? Is it working? If not, why not? What do we need to change?Is the organization passing the 3 tests? Strategic Fit, Competitive Advantage, PerformanceCrafting and implementing strategy is not a one-time activityCustomer needs and competitive conditions changeNew opportunities appear; technologies change; other outside developments occurOne or more aspects of the strategy may not be going wellNew managers with different ideasOrganizational learning Taking action to adjust tends to result inAltering long term direction and/or redefining the mission/visionRaising, lowering, or changing performance objectivesModifying the strategyImproving strategy executionLook at all three tests strategic fit, competitive advantage, performance

Dont lower your objectives unless its dire32Next ClassesRead Chapter 3We will also introduce the group assignments and you will organize into teams. If you want any control over who will be in your team, you need to be in class. Anyone not in class will be assigned to a team.

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