slides99 strategy & organization
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Young ExecutiveYoung Executive Programme 99Programme 99
IINTRODUCTIONNTRODUCTION TOTO
SSTRATEGYTRATEGYpresented by
Julien PITTON
2nd November
THINKING vs PLANNING
STRATEGY & MANAGEMENT
LEADERSHIP & INTENT
BUSINESS STRATEGY
TO COMPETETO ORGANISE
ADVANTAGE & CHANGEGLOBALISATION
WHY STRATEGY ?
WHY STRATEGY ?
4 YESYES19991999
INVESTMENT BANKING: THE INVESTOR POINT OF VIEW
BANKERS are Investors:
Corporate Banking
Equity Capital Markets hard underwriting
Asset Management
BANKERS are “SELLERS”:
Fund Managers: Loans secondary markets
Fund Managers: IPO/Convertibles/Brokerage Fund Managers: Mergers & Acquisitions
BANKERS
INVESTORS
5 YESYES19991999
THE FUND MANAGERSTHE FUND MANAGERS : What are there looking at !?!
What does the business do and what is the vision (including mission statement)?
What are the main profit drivers in the business?
How is the business doing. What is the recent track record?
What is the strategy in terms of technologies, products, markets and the delivery of shareholder value?
How will the product and market strategies be realised?
What is the financial strategy and according to what financial criteria is the business managed and controlled?
FUND MANAGERS
(1)
6 YESYES19991999
THE FUND MANAGERSTHE FUND MANAGERS : What are there looking at !?!
What are the key management and reporting structures?
How does the company compare against its domestic and international peer groups, in terms of products and market penetration as well as financial structure and performance?
What is the outlook and what are the key internal and external factors that might effect the business in the future?
Why should an investor buy this company’s shares?
FUND MANAGERS
(2)
7 YESYES19991999
THE FUND MANAGERSTHE FUND MANAGERS : What are there looking at !?!
FUND MANAGERS
(3)
VERY Important
Fairly Important
Quality of Management
Track Record and EPS Growth
Quality of Earnings
Corporate Strategy
Relative Price
Product/Brand Strengths
Quality of Accounting and Disclosure Practices
Communication with Investors
Balance Sheet
Market Share
Industry Prospects
Net Asset Backing
Level of Borrowing
Relative Yield
Research Coverage
Dividend Record
0 10 20 30 40 50 60 70 80 90 100
93
91
93
86
63
96
79
79
76
74
77
37
37
21
32
21
STRATEGY&
MANAGEMENT
9 YESYES19991999
Strategy & Management
SUCCEEDING
VALUE
COMPETITION
Strategy is about finding a wayStrategy is about finding a wayto succeed and then doing it.to succeed and then doing it.
10 YESYES19991999
INTENT
COMPETITIVE ADVANTAGE
SCOPE
Strategy & Management
What we will What we will notnot do” do” is at least as important as “what we will do” “what we will do”
11 YESYES19991999
“Frontier”
Lower Cost
Differentiate
Moving [A] to the
frontier
(“operational
excellence”)
vs taking[B] a position
(“strategic choice”)
[A]
[B]
You cannot be all things to all peopleYou cannot be all things to all peopleStrategy & Management
12 YESYES19991999
RESOURCES
CAPABILITIES
POSITION
Strategy & Management
CapabilitiesCapabilities: Ability to acquire and deploy resources to solve classes Ability to acquire and deploy resources to solve classes of problems and create valueof problems and create value !!
13 YESYES19991999
CHOOSING
CREATING
KEEPING
Strategy & Management
You succeed only if you get to You succeed only if you get to keep some of the value createdkeep some of the value created
14 YESYES19991999
DEMAND
GROWTH
COST OF INPUTS
TECHNOLOGY - P&D
Ingredientsin the PIE
Strategy & Management
In trying for a bigger piece, you In trying for a bigger piece, you could reduce the size of the total piecould reduce the size of the total pie!
15 YESYES19991999
ISSUES
INSTITUTIONS
INTERESTS
INFORMATION
Non-Market Issues:
The 4 I’s
Strategy & Management
Affect the size of the PIE and/or Affect the size of the PIE and/or Affect its division?Affect its division?
16 YESYES19991999
PEOPLEFEATURES
ARCHITECTURE PROCESSES & PROCEDURES CULTURE, VALUES AND ASSUMPTIONS
Strategy & Management
Culture:Culture:Set of beliefs that we share about why we are Set of beliefs that we share about why we are doing this!doing this!
17 YESYES19991999
Determinants
of Performance
StrategyResources
Capabilities
Position
EnvironmentPIE
CompetitorsCustomersSuppliers
ComplementorsGovernment
Social...
OrganisationPeople
FeaturesActivities
PERFORMANCEPERFORMANCE
Strategy & Management
18 YESYES19991999
General Management
UNDERSTAND the basis for current performance
IDENTIFY threats & opportunities
DEVELOP/SELECT a strategy to meet these goals
IMPLEMENT IT
Strategy & Management
19 YESYES19991999
General Management
ADAPT to changes
DEVELOP new capabilities
SHAPE the environments
Performance is the result of the fit between Performance is the result of the fit between the actions and the strategic context in which the actions and the strategic context in which they are taken.they are taken.
Strategy & Management
20 YESYES19991999
CHOICES S.C.A. RENEWAL GOALS
General ManagementStrategy & Management
The choices a firm makes about how it acquires The choices a firm makes about how it acquires and deploys its assets are the main way in which and deploys its assets are the main way in which it influences its performance.it influences its performance.
This is what the firm ultimately controls!This is what the firm ultimately controls!
21 YESYES19991999
STYLE “Captain of the ship” to which extent strategy is “top down” is strategy within organisations is really
planned at all,
Strategy & Management
In small firms, the ultimate responsibility for strategy In small firms, the ultimate responsibility for strategy typically rests with the senior general management.typically rests with the senior general management.
The “top down” view can be of only limited The “top down” view can be of only limited applicability to a multi-business enterprise. applicability to a multi-business enterprise.
General Management
22 YESYES19991999
Perspectives
STRATEGY PROCESS IS COMPLEX
“LOWER” MANAGEMENT MATTERS!
LUCK MATTERS!
Strategy & Management
A declaration by top management that the firm A declaration by top management that the firm will change does not make change happen.will change does not make change happen.
23 YESYES19991999
Conclusion
An exceptional rate of return cannot An exceptional rate of return cannot be earned by the average firmbe earned by the average firm.
The competitive interaction quickly dissipates any profits.
In final analysis, people make the In final analysis, people make the difference.difference.
Strategy & Management
THINKINGvs
PLANNING
25 YESYES19991999
Strategic planning strategic thinking.
Strategic thinking is about synthesis.
Planning represents a calculating style of management, not a committing style
Thinking vs Planning
Life is larger than our categories. Life is larger than our categories. Real strategic change requires inventing new Real strategic change requires inventing new categories, not rearranging old ones.categories, not rearranging old ones.
26 YESYES19991999
For strategic planning, the grand fallacy is this:
because analysis encompasses synthesis, because analysis encompasses synthesis, strategic planning is strategy making.strategic planning is strategy making.
This rests on 3 fallacious assumptions:
prediction is possibleprediction is possiblestrategist can be detached from the subjects strategist can be detached from the subjects
of their analysisof their analysisstrategy making process can be formalisedstrategy making process can be formalised
Thinking vs Planning
27 YESYES19991999
OPERATIONAL EFFECTIVENESS Performing similar activities Performing similar activities betterbetter than than
rivals perform them. rivals perform them. It includes but is not limited to efficiencyIt includes but is not limited to efficiency.
STRATEGIC POSITIONING Performing Performing differentdifferent activities from activities from
rivals or performing similar activities in rivals or performing similar activities in different ways.different ways.
Thinking vs Planning
28 YESYES19991999
TRADEOFFS
MORE IMPLIES LESS
No tradeoffs means no need for choice, no need for No tradeoffs means no need for choice, no need for strategy. strategy. Any good idea could and would be quickly imitated. Any good idea could and would be quickly imitated. Performance would once again depend wholly on Performance would once again depend wholly on operational effectiveness.operational effectiveness.
Thinking vs Planning
LEADERSHIP&
INTENT
30 YESYES19991999
Leadership & Intent
Leardership is the ability Leardership is the ability to elicite extraordinary to elicite extraordinary performance from performance from ordinary peopleordinary people
31 YESYES19991999
STRATEGIC INTENTFOCUS
MOTIVATION
ROOM
SUSTAINING ENTHUSIASM
CONSISTENTCY
Leadership & Intent
32 YESYES19991999
STRATEGIC FIT
LEVERAGING RESOURCES
FORESEEABLE PATTERN
The essence of strategy lies in creating The essence of strategy lies in creating tomorrow’s competitive advantages faster than tomorrow’s competitive advantages faster than competitors mimic the ones you possess today.competitors mimic the ones you possess today.
Leadership & Intent
33 YESYES19991999
COMPETITIVE INTELLIGENCE
CREDIBILITY
MILESTONES
Leadership & Intent
Competitive suicide - pursuing both differentiation Competitive suicide - pursuing both differentiation and cost - is exactly what many competitors strive for.and cost - is exactly what many competitors strive for.
34 YESYES19991999
Strategic intent assures consistency in resource allocation over the long term.
Clearly articulated corporate challenges focus the efforts of individuals in the medium term.
Competitive innovation helps reduce competitive risk
Leadership & Intent
BUSINESSSTRATEGY
36 YESYES19991999
RELATIONSHIPS
CHOICE OF ACTIONS
VISIONMISSION
VALUESPURPOSE
Business Strategy
Useful complements to strategy but Useful complements to strategy but generally different from and very generally different from and very imperfect substitutes for strategy.imperfect substitutes for strategy.
37 YESYES19991999
GOALS
SCOPE
COMPETITIVE ADVANTAGE
LOGIC
Business Strategy
Strategy contains the core argument Strategy contains the core argument for why and how the firm will succeed.for why and how the firm will succeed.
38 YESYES19991999
CONSISTENCY
CONSONANCE
ADVANTAGE
FEASIBILITY
Four broad criteria for evaluating strategy are:
Business Strategy
A strategy that fails to meet one or more of these A strategy that fails to meet one or more of these criteria is strongly suspect.criteria is strongly suspect.
39 YESYES19991999
COMMUNICATING CLARITY CO-ORDINATION INCENTIVES EFFICIENCY
Business Strategy
Top management may believe that its strategy is Top management may believe that its strategy is so “unique” that every competitor would copy it, so “unique” that every competitor would copy it, if only they knew it!if only they knew it!
40 YESYES19991999
MISSION
VISION
VALUES
Business Strategy
A vision is not always necessary for strategy A vision is not always necessary for strategy It is never sufficientIt is never sufficient
41 YESYES19991999
Business Strategy
TO COMPETE!
43 YESYES19991999
OPERATIONAL EXCELLENCE
CUSTOMER INTIMACY
PRODUCT LEADERSHIP
OPERATIONAL FLEXIBILITY
To Compete !
Less focused companies must do far more than simply Less focused companies must do far more than simply tweak existing processes to gain this advantage.tweak existing processes to gain this advantage.
44 YESYES19991999
`
BUSINESS PROCESSES.
OPERATIONAL EFFECTIVENESS COMPETITIVE ADVANTAGE
THE CEO
Competing on Capabilities
To Compete !
Strategic advantages built on capabilities are Strategic advantages built on capabilities are easier to transfer geographically than more easier to transfer geographically than more
traditional competitive advantages.traditional competitive advantages.
45 YESYES19991999
`
SPEEDCONSISTENCYACUITYAGILITYINNOVATIVENESS
Competing on Capabilities
To Compete !
Capabilities-driven companies conceive the organisation as Capabilities-driven companies conceive the organisation as a gigantic loop that begins with identifying the needs of the a gigantic loop that begins with identifying the needs of the
customer and ends with satisfying them.customer and ends with satisfying them.
TO ORGANISE
47 YESYES19991999
PEOPLE
ARCHITECTURE
PROCESSES
CULTURE
To Organise
The boundaries of the firm and the nature and intensity of incentives The boundaries of the firm and the nature and intensity of incentives (explicit and implicit, objective and subjective, financial and intrinsic) are (explicit and implicit, objective and subjective, financial and intrinsic) are
major determinants of the location on the frontier.major determinants of the location on the frontier.
48 YESYES19991999
Trade-off
Initiative
Co-operation
More entrepreneurial
More co-operative
To Organise
49 YESYES19991999
Disaggregated Firm
Initiative
Co-operation
Market/entrepreneurialFirm
Classic Bureaucracy
To Organise
50 YESYES19991999
Organisational Learning
VARIATION
SELECTION
RETENTION
To Organise
There exists a trade-off between devoting There exists a trade-off between devoting resources to long term learning benefits and resources to long term learning benefits and
short-term operating efficiency benefitsshort-term operating efficiency benefits
51 YESYES19991999
Behavioural Objectives of Design
Architecture
Processes/Routines
Culture
(Capability-based)Sustainable
Competitive Advantage
Initiative
Co-operation
Learning
To Organise
52 YESYES19991999
DynamicsIDENTIFY THE STRATEGY
Scope
(Capability- based) Sustainable Competitive Advantage
Goals & Basis for Profitability
IMPLEMENT A STRATEGY
Architecture
Processes / Routines
Culture
IINITIATIVENITIATIVE
CCO-OPERATIONO-OPERATION
LLEARNINGEARNING
DRIVES
DRIVES
Implies&
Drives
Implies&
Drives
RRESOURCESESOURCES
CCAPABILITIESAPABILITIES
PPOSITIONOSITION
To Organise
ADVANTAGE&
CHANGE
54 YESYES19991999
Strategic Dissonance Aligning corporate strategy and strategic action
is a key top management responsibility.
Inevitably, strategic actions will begin to lead or lag strategic intent.
Dissonance is strategic when it signals impending industry or corporate transformation.
Advantage & Change
The most fundamental and least readily visible source of strategic The most fundamental and least readily visible source of strategic dissonance derives from the divergence between the changing basis of dissonance derives from the divergence between the changing basis of
competition in the industry and the firm’s distinctive competencies, the competition in the industry and the firm’s distinctive competencies, the latter becoming less relevant for competitive advantage.latter becoming less relevant for competitive advantage.
55 YESYES19991999
Strategic dissonance signals a strategic inflection point.
These changes create a “valley of death” for the incumbents because they materially affect their profitable growth trajectories.
How to tell signal from noise?
Strategic Dissonance
Advantage & Change
When spring comes, snow melts first at the periphery!When spring comes, snow melts first at the periphery!
56 YESYES19991999
Strategic Dissonance
Advantage & Change
GROWTH
TIME
STRATEGIC INFLEXION POINT“SIP”
COMPETITIVE ADVANTAGE PERIOD“CAP”
57 YESYES19991999
DENIAL
ESCAPE OR DIVERSION
ACCEPTANCE
PERTINENT ACTION
Strategic Dissonance: Don’t dismiss it Don’t dismiss it
Advantage & Change
Diversion often involves major acquisitions Diversion often involves major acquisitions unrelated to the core business that faces a SIP.unrelated to the core business that faces a SIP.
GLOBALISATION
59 YESYES19991999
Being able to develop and implement Being able to develop and implement an effective global strategy is the acid an effective global strategy is the acid test of a well managed company.test of a well managed company.
GLOBAL STRATEGY or
“MULTILOCAL STRATEGY”
Globalisation
How global is their industry and how global How global is their industry and how global should their business strategy be?should their business strategy be?
60 YESYES19991999
Global strategy levers
Market participation Products/services Location of value adding activities Marketing Competitive moves
Globalisation
A business that has a fully globalised strategy A business that has a fully globalised strategy would make maximum use of each of the five would make maximum use of each of the five
global strategy levers.global strategy levers.
61 YESYES19991999
THE CORE STRATEGY
DEVELOPING
INTERNATIONALISING
GLOBALISING
Globalisation
Briefly, a multilocal strategy treats competition in each country Briefly, a multilocal strategy treats competition in each country or region on a stand alone basis, while a global strategy takes an or region on a stand alone basis, while a global strategy takes an
integrated approach across countries and regions.integrated approach across countries and regions.
62 YESYES19991999
Benefits andCosts of
Globalisation
GlobalOrganisation
Factors
IndustryGlobalisation
Drivers
GlobalStrategyLevers
The Globalisation TriangleThe Globalisation Triangle
Globalisation
63 YESYES19991999
The Globalisation Forces
GOVERNMENT
DRIVERS
INDUSTRYINDUSTRYGLOBALISATIONGLOBALISATION
POTENTIALPOTENTIAL
Globalisation
MARKET
DRIVERS
COMPETITIVE
DRIVERS
COST DRIVERS
64 YESYES19991999
Countries need to be selected in terms of their potential contribution to globalisation benefits also.
The ideal is a standardised core product that requires a minimum of local adaptation.
The value chain is broken up, and each activity may be conducted in a different country.
MarketMarketparticipationparticipation
Products Products & services& services
ActivityActivitylocationlocation
In multilocal In a global
Countries are selected on the basis of their stand-alone potential in terms of revenues and profits.
The products and services offered in each country are tailored to local needs.
All or most of the value chain is reproduced in every country.
Globalisation
65 YESYES19991999
ABILITY TO DEVELOP
AND IMPLEMENTGLOBAL
STRATEGY
ORGANISATIONSTRUCTURE
PEOPLEMANAGEMENTPROCESSES
Management and Organisation Factors Affecting Global Strategy
CULTURE
Globalisation
STRATEGYSTRATEGY