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Outline

• Background: Strategy - A conceptual framework, the big issue is executing strategy

• Strategy Maps: The 1st step to executing strategy is describing strategy

• Alignment: Internal alignment of performance drivers with customer value proposition is source of competitive advantage

• Cause-effect: Strategy is a hypothesis, test it out analytically

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Strategy Execution

• What: Less than 10% strategies effectively formulated are executed effectively

• Why:– Problem of description– Lack of understanding … 95% of workforce– Inability to link with budgets … 60% of organi

zations– Spending less than 1 hour per month discussing

strategy … 85% of executive teams

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Strategy: A conceptual frameworkV.I.P.

• Creating and sustaining competitive advantage– Managing Value– Managing Imitation– Managing Perimeter

• Strategic positions– Best products– Total customer solutions– Systems Lock-in

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Value

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CustomerWillingnessTo pay

Price

Cost – AmountPaid to employeesAnd suppliers

Supplier’s Cost (orOpportunity cost)

Total Value

Value captured by customers

Value captured by firm

Value captured by suppliers

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Added Value – Two Competitors

Supplier opportunity costHarnischfeger crane = $ 2 m

Willingness to pay forHarnischfeger crane = $ 7.5 m

Willingness to pay forKranco crane = $ 7.5 m

Supplier opportunity costKranco crane = $ 2 m

HarnischfegerAdded value

= $ 0 mn.

Supplier opportunity costKranco crane = $ 2 m

Supplier opportunity costHarnischfeger crane = $ 3 m

Willingness to pay forHarnischfeger crane = $ 9 m

Willingness to pay forKranco crane = $ 7.5 m

Total value created = $ 5.5 m

Total value created = $ 5.5 m

Total value created = $ 6 m

Total value created = $ 5.5 m

HarnischfegerAdded value= $ .5 mn.

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Managing Imitation

• Basing value creation on broad range of resources & capabilities which are imperfectly tradable, imitable & substitutable, & superior fit

• Internal accumulation - combining tradable inputs with existing asset stocks and learning by doing and not endowment, sharing or acquiring

• Think of : 10 R&C being imitated to the extent of 80% = Total imitation of ?

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Managing Perimeter

• Products• Geographic territories• Value chain activities

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Describing Strategy

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Fiduciary Perspective Customer Perspective

Internal Perspective

Learning & Growth Perspective

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Describing Strategy

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Strategy Maps

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AlignmentDesigning a Strategy Map -> Balanced Scorecard

• Are financial objectives clearly defined?• Is the customer value proposition clearly

defined?• Are key business processes aligned with each

customer value proposition & financial objectives?

• Are the human capital & information capital aligned with key business processes?

• Is the organization capital aligned with a strategic change agenda?

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Building Personal Scorecards

• Cross functional team• Short duration• Full time• Clear deliverables– Cause and effect tree– Criteria– Building team scorecard– Create linkage to performance appraisal– Implementation Tool kit

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