Strategic Planning

Insight into the Creation of Winning Business Ideas

Why Planning?

“If you fail to plan, you plan to fail and If you don’t know where your are going, any road will get you there”

Success is transient unless you take care to unless you take care to preserve competitive positionpreserve competitive position

The Five Tasks of Strategic Planning

1. Purpose: Developing a Vision, a Mission and a Strategy

2. Strategic Analysis: Internal and External Environment

3. Elaborating a Strategy, Setting Objectives, Deciding Course of Actions.

4. Implementing and Executing Strategy5. Evaluating Performance, Reviewing the

Situation and Initiating Corrective Action

Strategic Planning ProcessSetting DirectionVision/Mission

ValuesGoals

Creating Strategydetermining the

way forward

ImplementingChange

making it happen

AssessingPerformance

today and tomorrow

Ongoing

Process

Characteristics of Powerful Visions

Legitimate and Sharedmust be accepted by individuals in the groupmust be a true expression of valuesaligns group members’ effortsposes a challenge for the group

Expresses highest aspirationsdescribes how group will “make a difference”

Stretch limits of current realitiespushes against possibilities

Achievabledescribes something that can happen

Barriers to creating visions

Lack of concern about the future of the program

Assumption that the past predicts the future for a program

Failure to think “out of the box”

What is a Mission ?

MissionA mission statement outlines what the company is now. It focuses on today; it identifies the customer(s); it identifies the critical process(es); and it states the level of performance.

What is a “Strategy ?”

 Michael E. Porter-“What Is Strategy?” (Nov-Dec 1996). Harvard Business Review, pp. 61-78.

Michael Porter argues that operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate.

In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match.

.

Custome

rs

unarticulated

articulated

Needs

Undiscovered New Way

Competition

Existing Imminent

Competition Competition

served unserved

New way to better meet existing customer needs

Serving new customers who have clear needs

Future: serving new customers who have new needs in a new way

Meeting customer needs that they don’t know they have

Competitive Strategy

Competitive Value Proposition

Superior Value

Inferior Value

Equal Value

Price

features

“give more of what customers value and less of what they don’t”

The 3 Big Strategic Questions

Where Are We Now?

Where Do we Want to Go?

How Will We Get There?

STRATEGIC ANALYSISInternal Environment:

Corporate AppraisalStrengths

Weaknesses

External Environment:

Market

Environment

CompetitionOpportunities

Threats

Revenues

Existing Customers

Existing value proposition

Satisfy customer needs

New Services

New customers

Costs

Production

Knowledge acquisition (IMS, Professional associations etc)

Global Key Account Management

Marketing-Promotion

Analysis Current

Performance

Key Performance Indicators:

Net sales ?

Growth rate ?

Profitability (%) ?

Benchmark?

•Set Stretch Goals

•Plan Actions

•Execute Plans

•Evaluate/Learn

•Feed-back/Reward

Key External Environment Components

Social, Cultural, Demographic, Consumerism Environmental

Economic, Globalization

Political, Legal, Governmental

Technology

Competitive environment

Market Analysis

Provides information about the customer, assessing its needs and purchase decision process about products or services.

Who are the customers, Where, What, Why , WTP? Behavior?, Intentions?

Who are the non-customers, Why?

How is the market segmented ?

What are the driving forces ?

Sales and marketing forecast ?

Competitor AnalysisCompetitor Analysis

AssumptionsAssumptionsWhat assumptions do our competitors hold about the future of industry and themselves?

Current StrategyCurrent StrategyDoes our current strategy support changes in the competitive environment?

Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?

CapabilitiesCapabilitiesHow do our capabilities compare to our competitors?

ResponseResponseWhat will our competitors do in the future?

What will our competitors do in the future?

Where do we have a competitive advantage?

Where do we have a competitive advantage?

How will this change our relationship with our competition?

How will this change our relationship with our competition?

Opportunities

An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.Possible Opportunities:

Emerging customer needsQuality ImprovementsExpanding global marketsVertical Integration

Threats

A THREAT is a factor in your company’s external environment that poses a danger to its well-being.Possible Threats:

New entry by competitorsChanging demographics/shifting demandEmergence of cheaper technologiesRegulatory requirements

10 Questions for Building Sustainable Profitable Businesses

1. How can we beat the competition?2. Which customers should we target?3. What products will our customers want to buy?4. How should we distribute to and communicate with our

customers?5. Which things should our company do, and which should

our partners and suppliers do?6. How can we avoid commoditization?7. Who should be on our management team?8. What is the best organizational structure for this business?9. How can we know when to change course?10. Whose investment capital will help, and whose might

hurt?

Disruptive Innovation: Clayton M. Christensen-Harvard Business School, 2003

Crafting a Strategy

HOW to outcompete rivals and win a competitive advantage.

HOW to respond to changing industry and competitive conditions

HOW to defend against threats to the company’s well-being

HOW to pursue attractive opportunities

The difference between where we are (current status) and where we want to be (vision and goals) is what we do (Objectives, action)

Setting Goals and Objectives

VISION

GOALS

Strategy

Plans

Objectives

The Differencebetween Goals and Objectives

Goals are broad objectives are narrow.

Goals are general intentions; objectives are precise.

Goals are intangible; objectives are tangible.

Goals are abstract; objectives are concrete.

Goals can't be validated as is; objectives can be validated.

Setting Goals Increase revenues through new products and services

Increase revenues by selecting most desirable customers and adapting marketing strategies to key customers

Identify and eliminate projects, activities and processes that are not contributing to the strategy

Reduce costs by optimizing assets’ utilization in the region

Identify individual skills and information systems

Allocate resources and organize processes based on market needs and performance.

Set Individual targets and milestones in the alignment of business strategy

Review strategy and individual goals based on performance results, feedback from customers, strategic initiatives and increase of market knowledge within the organization

Two Types of Objectives

FINANCIAL OBJECTIVES

NON FINANCIAL VALUE DRIVERS

Short-Run

Long-Run

Settings ObjectivesObjectives translate the mission into measurable performance targets Individual objectives are related to the objectives of the whole organizationBalance short-term/long-term objectives on line with the vision

Objectives reflect key activities and actions and have an impact on performance

Objectives must be understood by employeeObjectives must be affected by action of employee and measurable

Used to evaluate and reward individual contribution

Used for personal improvement

How to Measure Profit ?(*related MBA course: Financial Management )

Profit = Revenue – Cost

Return on Sales (ROS): Profits / Revenuequick, easy starting point – and often sufficientdoesn’t reflect use of capital

Return on Equity (ROE): Profits / Equityreturn to owners’ investmentsShareholders' Equity :It is the amount of the company that is financed through common and preferred shares.

Economic Value Added (EVA): Profit – (Capital employed x Cost of capital)

Creating Value at the Focal Objective:

Non Financial Value Drivers

Customer Satisfaction Innovation Technology Brand Attract Talented Employees Alliances Quality of Products and Services Impact on Environment

Understanding of Competitive Environment

Appraisal of Resources

Strategy = Choices

Competitive Advantage

Goals

Sustained Superior Profitability

Lower Cost per Unit of Quality

Scarce ResourcesOrganizational Capabilities

Industry StructureCompetitorsCustomers Where to Compete

How to CompeteHow to Organize

Business Strategy Development

Differentiation Strategy

BrandServices/Speed of DeliveryReliabilityAestheticsTechnologyCustomer servicePricing/Low costValue chain configuration

Setting Measures and Targets

“If You Can't Measure it, You Can't Manage it”

Introducing the Balanced Scorecard

The Balanced scorecard. R. Kaplan and D. Norton, Harvard Business School Press, 1996

Setting Measures and Targets

The Balanced scorecard. R. Kaplan and D. Norton, Harvard Business School Press, 1996

4 Perspectives of the Balanced Scorecard:

• Financial

•Customer

•Internal/Business Processes

•Learning and growth

Questions to participants:

1. What is your Company’s Vision: What does it means to you ?

2. How effective is your Company’s Strategy? Indicate reasons ?

3. How is the vision/strategy communicated within your organization ?

4. What are the factors that are causing your company to change strategy ?

5. How profits are made in your industry?

6. How do your company construct superior value proposition?

Thought Leaders Recommended Reading

Steven R. Covey: The Seven Habits of Highly Effective People

J.Nicholas De Bonis: Value-Based Marketing for Bottom-Line success

Peter Drucker: Managing for Results

Robert Kaplan: Balanced Score Card

John P. Kotter: Leading Change

Philippe Haspelagh: Managing for Value

Michael E. Porter : Competitive Advantage

Jack Welch: King of Shareholder Value