Strategic ThinkingStrategic Thinking

Prof. Abhishek NirjarProf. Abhishek NirjarStrategic Management GroupStrategic Management Group

Indian Institute of Management, LucknowIndian Institute of Management, Lucknow

Content for the session

StrategyStrategy

Strategic MindsetStrategic Mindset

Tools for developing Strategic ThoughtsTools for developing Strategic Thoughts

Strategy

1. The aim of strategy is to choose a unique strategic position for the Organisation

2. Generate Options

3. Strategic choice/s

• Combine to create a reinforcing assortment

• The assortment must achieve fit with the firm’s environment without sacrificing flexibility

4. The assortment of activities is the firm’s strategy. It needs organizational support to function properly

Unique Position

1. Who should I target as my customers?

2. What products and services should I be offering?

3. How should I do all this in an efficient manner?

Customer group

Customer function

Alternate Technologies

In our context…..In our context…..

Where is the school now? Where is the school now? Where does the school want to be in Where does the school want to be in

3, 5, 10, 20 years? 3, 5, 10, 20 years? How are we going to get there? How are we going to get there?

A Reinforcing Assortment

1. After the choice resources are allocated and activities identified

2. Fit and Flexibility has to be balanced: With pros and consan Example

ActivitiesActivities Pros Pros ConsCons

Flat StructureFlat Structure Open Open CommunicationCommunication

No perceived No perceived ProgressProgress

Cross-utilization of Cross-utilization of peoplepeople

Helps see the Helps see the big picturebig picture

No specialistsNo specialists

High Quality StaffHigh Quality Staff ProductiveProductive Recruitment Recruitment difficultiesdifficulties

High UtilizationHigh Utilization EfficientEfficient Wear and TearWear and Tear

Team workTeam work Motivating/Motivating/holistic holistic perspectiveperspective

No development No development of leadersof leaders

Fast GrowthFast Growth ProfitsProfits Attracts Attracts competitorscompetitors

Creating Internal and External Fits

The Firm’s Environment

Internal Organisational Environment

The Firm’s Strategy

Culture

People

Structure Incentives

Choice ofCustomers

Manufacturing

Choice of Products

Distribution

Inventory

No Strategy Remains Unique For Ever

Playing the Game Better Playing the Game Differently

Operational Excellence:

Focus on existing PositionRestructuringRefocusingProcess Re-engineeringQuality ProgrammesEmpowering Employees

Strategic Innovation:

New or unexpected customer segmentsto focus onNew Customer NeedsNew ways of producing, deliveringSelling and distributing your products/Services

What is the purpose of a business firm?

The strategic purpose of a firm is to create value that meets the need of its stakeholders.

Who are the stakeholders?

All parties that have an interest (or a stake) in the success or performance of the firm are its stakeholders.

All the parties that stand to benefit from a firm’s successful operation, including owners, suppliers, customers, employees, local communities, trade associations, and society at large.

Focal Point Of Strategy :Competitive Advantage

Competitive Advantage can be defined as the

• ability of a firm to outperform its industry

• to earn higher rates of profits than the industry norm.

• Create more value for the customer than the competitor does

Customers want goods and services which are

i) better, (Differentiation)

ii) cheaper (Cost Leadership)

iii) faster (Quick response)

Forms Of Strategy

Deliberate StrategyIntended

StrategyRealized Strategy

Unrealized Strategy

Emergent Strategy

Sustaining Competitive AdvantageSustaining Competitive Advantage

Creating superior customer valueCreating superior customer value

Creating superior value for the shareholdersCreating superior value for the shareholders

Disciplined and passionate execution of strategyDisciplined and passionate execution of strategy

The ability to innovate strategically.The ability to innovate strategically.

Managerial MindsetManagerial Mindset

Reactive, goals arise out of necessity not Reactive, goals arise out of necessity not dreamsdreams

See themselves as conservators and See themselves as conservators and regulators of existing orderregulators of existing order

Involved in situational and contextual Involved in situational and contextual characteristics of day-to day activitiescharacteristics of day-to day activities

Engage in and support short term least cost Engage in and support short term least cost behaviour to enhance financial performance behaviour to enhance financial performance figuresfigures

Strategic Focus adopts

Takes a long term focus

Requires coordination of complex, multi-pronged initiatives

Aims at order-of magnitude benefits, rather than incremental gains

Assumes that risk is inherent, and is (usually) willing to spend money to manage risk

Strategic MindsetStrategic Mindset

Combine both strategic and operating mattersCombine both strategic and operating matters

Formulate and implement strategies for both Formulate and implement strategies for both immediate and long term goals that ensure long-immediate and long term goals that ensure long-term survivalterm survival

Use linear and non-linear thinkingUse linear and non-linear thinking

Believe in strategic choice Believe in strategic choice

Strategic ThinkingStrategic Thinking Purpose is to discover Purpose is to discover

novel, imaginative novel, imaginative strategies which can re-strategies which can re-write the rules of the write the rules of the competitive game.competitive game.

Envision potential futures Envision potential futures significantly different from significantly different from the presentthe present

Creative, synthetic and Creative, synthetic and divergentdivergent

Strategic PlanningStrategic Planning Purpose is to Purpose is to

operationalise the operationalise the strategies developed strategies developed through strategic thinking through strategic thinking and to support the and to support the strategic thinking processstrategic thinking process

Analytical, Convergent and Analytical, Convergent and ConventionalConventional

Effective Strategic Thinking contributes Effective Strategic Thinking contributes

to….to…. Determining strategic directionDetermining strategic direction

Exploiting and maintaining competenciesExploiting and maintaining competencies

Developing human capitalDeveloping human capital

Sustaining an effective organizational cultureSustaining an effective organizational culture

Emphasizing ethical practicesEmphasizing ethical practices

Establishing balanced organizational controlEstablishing balanced organizational control

Model of Strategic Thinking (Model of Strategic Thinking (Liedtka, ’98)Liedtka, ’98)

Elements of strategic thinking

Strategic Thinking

Systems perspective

Intelligent opportunism

Intent Focused

Thinking in time

Hypothesis driven

Systems PerspectiveSystems Perspective: : A strategic mindset has a mental model

of the complete end to end system of value creation and the interdependencies within.

New insights conflict with deeply held internal images of ‘how the world works’how the world works’

Clear understanding of internal and Clear understanding of internal and external factors- business ecosystem external factors- business ecosystem essential essential

Intent FocusedIntent Focused Long term market or competitive Long term market or competitive

position a firm hopes to build over a position a firm hopes to build over a decade or so.decade or so. conveys a sense of directionconveys a sense of direction

Intelligent opportunism Adaptability

Thinking in Time the past has predictive value present is the departure from the past Continuous comparison, thoughtful of prospective

change Use both an intuition memory and its broad

historical context to think well about creating the future

Hypothesis driven Strategic thinking has to be creative and critical in

nature Use scientific methods What ifs… and the …if… then....

How can we build a Strategic Mindset?How can we build a Strategic Mindset?

Realize the importance of future based Realize the importance of future based thinkingthinking How to improve the value of your How to improve the value of your

company by thinking in time company by thinking in time Understanding the forces driving Understanding the forces driving

changechange How can future based thinking benefit How can future based thinking benefit

my organizationmy organization Initiate a thought process among allInitiate a thought process among all

Understanding the cycle time of Understanding the cycle time of Organizations Organizations Do companies have life cycles? Do companies have life cycles? Are all companies fated to die? Are all companies fated to die? How can companies beat the odds? How can companies beat the odds?

What mental models do managers have? Can What mental models do managers have? Can we change them?we change them?

Thank you Thank you