Introduction to strategy Tronn Å. Skjerstad Oslo, January 2013

We can always learn from history

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Introduction: do smarter strategic choices!

•  Competitive advantages are based on –  product and/or –  process

•  “Sustainable competitive advantages” are challenged due to

•  Globalisation •  Technology development •  Deregulation

•  Consequence: strategy development is challenged

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Implications

«Unless today’s established corporations learn to reinvent themselves and their industries, much of the new wealth will be created by newcomers.» Gary Hamel (1997)

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Strategy for the incumbents - stay on track or turn before it’s too late

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Strategy for the entrepreneurs: new customers, new needs and new solutions

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Different focus in different contexts

•  SMB: growth •  Large, multinational: complexity •  Professional partnership: individualism •  Non governmental organisation: strong values •  Public sector: the political dimension

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Introduction – focus and process

•  Two typical starting points for strategic choice –  Visionary front runner (proactive)à e.g. Google –  Copy of competitors (reactive) à e.g. Microsoft

•  Ideally an analytical, sequential process: Internal analysis External analysis

Strategy alternatives

Evaluation -  Realism -  Feasibility -  Accept

Implementation

(But this is not always the situation!)

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Task: ”strategic”

•  What makes a choice ”strategic”?

•  What are the key success factors for an effective strategy process?

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Introduction (ctd.)

•  What choices are really ”strategic”?

•  What are the threats against a good strategy process? –  External: complexity and information access –  Internal: guts and time pressure

”Long term planning” -  Lang term -  Irreversible -  Resource allocation -  Risky

“Important” -  Involves top management -  Urgent -  Limited information flow -  Involves consultants

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What is Strategy?

•  Origin-Greek word (strategos)-art of the general –  Sun Tzu, Chinese military strategist in 500 B.C.

–  Modern-day application to business and competition dates to the 1960s

•  Plan versus Action - strategy is “explicit, rigorous formal planning” versus “a set of flexible, goal-oriented actions”

•  Strategy as Theory-how to compete successfully Ø  Firms have both intended and emergent strategies Ø One firm’s strategies may not work in all situations

Ø Past success does not guarantee future success

Ø  It is often difficult to change strategy

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Fundamental Questions in Strategy

•  Why do firms differ? Ø Cultural differences between Western firms and Japanese

companies

Ø Networks of relationships have powerful effect

•  How do firms behave? Ø  Industry-based view - focus on competitive forces within an

industry that impact all firms

Ø Resource-based (capabilities) view - focus on internal strengths and weaknesses, firm specific resources and capabilities

Ø  Institution-based view - focus on government and societal forces

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Global Strategy and Globalization at a Crossroads

•  Three Defining Events - have brought corporate social responsibility, ethics, and governance to the forefront of strategic decisions Ø Anti-globalization protests

- lost jobs, downward pressure on wages for unskilled labor, environmental destruction

Ø Terrorist attacks - 9/11, Madrid, London

Ø Corporate governance crisis - industrial financial crisis, U.S. scandals, EU

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The “Strategy Tripod” Three Leading Perspectives on Strategy

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The Essence of Strategy

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Starting point: “where are we?” (aka SWOT)

Strengths

Weaknesses

Opportunities

Threaths

Internal analysis External analysis

Resource based models of competitive advantage

Environmental models of competitive advantage

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Environmental model…

Michael Porter’s five forces give us an idea of how to analyze competition…

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Resource-based model…

- Firm Resource Heterogenity

- Firm Resource Immobility

Value Rareness Imperfect Imitability Non-Substitutability

Sustained Competitive Advantage

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Institution based Considerations

In additon to the resource based and industry based considerations, we need to address both the formal and informal institutions…

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Institution based considerations

•  Institutions affect business decisions by signalling what behaviour that is acceptable (Peng 2009)

•  The institutional framework consists of –  The formal institutions, e.g. political laws and rules, and

economic contracts –  The informal institutions are the social norms for behaviour in a

society that are fundamental for cultural and ethical conditions

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Music streaming is the future It creates an optimal user experience – a fun one!

•  Access to a library of ALL music in the world – ever recorded •  Fixed-fee rental model - no need to own music •  Users explores new music in a totally different way – no need to decide to

buy a track or album •  Accessible from all connected devices – PC, mobile, TV, home stereos,++ •  Offline-mode – play music when not online •  Sharing of music online gets a new dimension

More people will play more music than ever before

Task

How do you predict that the music industry will develop in the next three to five years?

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Music will become interactive and multimedia

When music meets the interactive screens, music will become an interactive multimedia experience: • Music videos • More multimedia content; images, interactive presentations,++ • Background info: bios, lyrics, etc •  Interaction between artist and their fans • Live concerts and simultaneous music listening • Ticketing

Task

The concept “business model” is frequently used in strategy processes. What is a “business model”?

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Task: “everything gets free, and (some) people are loosing their jobs”

•  Dagbladet is in “dire straits” –  Dagbladet is loosing readers and revenues

from advertisers at an increasing speed –  Digital content is becoming increasingly

popular among consumers, but Dagbladets revenues from digital content are small

•  Do a “SWOT” for Dagbladet –  At least 5 Ss, Ws, Os and Ts –  Prioritize down to 2 of each

•  Suggest two-three strategic directions Dagbladet could follow towards 2016

–  Offensive –  Defensive –  (Realistic)

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