Strategy Grand Tour

Stefano Mastrogiacomo

04.2007

What does strategy mean ?

Etymology

"art of a general"

from Fr. stratégie, from Gk. strategia "office or command of a general," from strategos "general," from stratos "multitude, army, expedition "

Based on the Online Etymology Dictionary. Douglas Harper, Historian. 22 May. 2007.

What does strategy mean today ?

A plan, method, or series of maneuvers or stratagems for obtaining a specific goal or result.

Based on the Random House Unabridged Dictionary, © Random House, Inc. 2006.

http://www.flickr.com/photos/11937586@N00/397343251/

http://www.flickr.com/photos/jim-murphy/202064590/

Strategy is about dealing with a possible future …

and this is a matter of perspective…

http://www.flickr.com/photos/76329469@N00/312637677/

Some people think the future is predictable.

Success is matter of destiny.

Some other think the future is chaotic and unpredictable.

Success is a pure matter of chance.

http://www.flickr.com/photos/29cm/487919076/

We think (and we’re not the only ones) that the future is invented

and created every day. And there are great tools for that.

Today’s Agenda

To have a better understanding on how to make right assumptions about the future in order to gain a competitive advantage.

Defining Corporate Strategy

“the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration of resources within a changing environment and to fulfill stakeholdersexpectations”

Exploring Corporate Strategy, Johnson and Scholes, 2002

A simple strategic journey

Winners and losers

Point B

time

Point APoint A

now the future

Vision/GoalsStrategy/Plan

DecisionsEnvironment/Circumstances

Competitors

Resources/Core capabilitesVocabulary

A

B C

D1

D2 E

xx

xx

x

xx

Different approaches, different tools, different purposes

rivalryalignment processes

learning process

co-creation

cognition technology

free rider

manipulation

strategy as…

environment

Strategy as rivalry

Michael Porter

Elements of industry structure

Productivity frontier

Value chain

Activity systems

Example: US automotive industry (70’-80’)

Strategy as alignment processes

A

B C

D1

D2 E

Robert Kaplan and David Norton

Here

CEOs

Managers

Here

Staff

Ok

The need for focus

Strategy-Focused Organization principles

1.1 Top leadership committed1.2 Case for change clearly articulated

1.3 Leadership engaged1.4 Vision and strategy clarified

1.5 New way of managing understood1.6 Program manager identified

2. TRANSLATE STRATEGY TO OPERATIONAL TERMS

1. Mobilize CHANGE THROUGH EXECUTIVE LEADERSHIP

5. GOVERN TO MAKE STRATEGY A CONTINUAL PROCESS

3. ALIGN THE OrganizationTO THE STRATEGY

3.1 Corporate role defined3.2 Corporate – SBUs aligned

3.3 SBU – Support units aligned3.4 SBU – External Partners aligned

3.5 SBU – Board of directors aligned

5.1 BSC reporting system established5.2 Strategic review meetings conducted

5.3 Planning, budgeting, and strategy integrated5.4 HR and IT planning linked to strategy

5.5 Process management linked to strategy5.6 Knowledge sharing linked to strategy

5.7 Strategic Management Office established

2.1 Strategy map developed2.2 Balanced Scorecard created

2.3 Targets established2.4 Initiatives rationalized

2.5 Accountability assigned

4.1 Strategic awareness created4.2 Personal goals aligned4.3 Personal incentives aligned4.4 Competency development aligned

4. MOTIVATE TO MAKE STRATEGY EVERYONE’S JOB

STRATEGY-FOCUSED

Organization

BEST PRACTICES

Balanced Scorecard Collaborative • bscol.com

Strategy Map example

© 2005 Balanced Scorecard Collaborative • bscol.com

Financial

Maximize return on assets

Profitable growth

Learning & Growth

Internal

Customer

Industry leading employee satisfaction

World-class leadership

effectiveness

Ensure market-driven skill development

Proactively build & manage

relationships

Seamless cross-group delivery of services

Leverage asset base

Continued Public Support Customer Service Excellence

Residential, Commercial, Industrial

Competitive price

Reliable energy supply

Supplier stability

Innovative solutions

Socially responsible

energy sources

Residential, Commercial, Industrial

Competitive price

Reliable energy supply

Supplier stability

Innovative solutions

Socially responsible

energy sources

Manage operation costs

Communication and education

programs

Effective customer service

processes

Understand drivers of

customer value

Ensure reliable service

Optimize asset

utilization

Optimize Core Business

Enterprise-wide risk

management

Max Returns on resource allocation

Continued cost

management

Optimize asset

utilization

Optimize Core Business

Enterprise-wide risk

management

Max Returns on resource allocation

Continued cost

management

Capitalize on deregulation opportunities

Business Growth

Trading opportunities

Use alliances &

joint-venturesDevelop

innovative service

offerings

Cross-group R&D

Capitalize on deregulation opportunities

Business Growth

Trading opportunities

Use alliances &

joint-venturesDevelop

innovative service

offerings

Cross-group R&D

Balanced Scorecard example

© 2005 Balanced Scorecard Collaborative • bscol.com

• ROCE• Revenue growth• Asset utilization rate• Operating costs / customer

• Maximize returns• Profitable growth• Leverage asset base• Manage operating costs

• Customer satisfaction rating

• % revenue from deregulated products/services• % trading revenue• Revenue from new services• % customers served through alliances and joint ventures• NPV product/service pipeline• % R&D projects meeting protocol gates (D)

• Customer/partner satisfaction (5 point scale)• Reliability index• Communication/education coverage (%)• % communication/education plans executed (D)

• Promised delivery %• New product uptake rate• On-time market research projects (D)

• Customer satisfaction rating – C.S. Center (see above)• Problem resolution cycle time – Customer Service Center (D)

• % rated capacity attained

• Employee productivity improvement

• % cost reduction• Cost of disruption vs. plan• Time to recovery (D)

Optimize Core Business• Optimize core utilization

• Max. return on resource allocation

• Continued cost management• Enterprise-wide risk management

Continued Public Support• Proactively manage relationships• Ensure reliable service• Communicate/educate customers

Customer Service Excellence• Seamless cross-group delivery• Understand customer drivers• Effective customer services

Business Growth• Capitalize on deregulation

opportunities• Optimize trading opportunities• Develop innovative services• Use alliances and joint ventures• Leverage cross-group R&D

• Strategic skill coverage ratio• Hours in strategic skills training (D)• Employee satisfaction rating (5 point scale)

• Leadership effectiveness rating (upward appraisal―5 point scale)

• Ensure market-driven skill

• Industry leading employee satisfaction

• World-class leadership effectiveness

Objectives Measures (D=Drivers)

14%6%

80%$150

80%

5%10%

$500M10%

$500M90%

4.090/100100%80%

90%20%90%

85%6hr

80%

2%

4%+/-15%

8 hr

65%10

3.0

4.0

FY0314.5%

8%85%$140

85%

7%12%

$550M20%

$550M95%

4.592/100100%85%

95%25%95%

89%4hr

85%

3%

5%+/-10%

4 hr

75%12

4.0

4.5

FY0415%12%90%$125

90%

10%15%

$600M25%

$600M100%

4.595/100100%90%

97%30%

100%

95%3hr

90%

4%

6%+/-5%

2 hr

85%15

4.5

4.5

FY05Targets

• Industry leading customer loyalty

Cus

tom

erIn

tern

alLe

arni

ng &

G

row

thFi

nanc

ial

• Customer loyalty program

• Telecom infrastructure development• Trading risk assessment (work support)

• Research alliance program

• Preventative maintenance

• Community outreach program

• Cross-selling marketing program• Service dispatch automation

• CIS upgrade• Call center software integration

• Fossil maintenance benchmark

• Shared service benchmark/outsourcing initiative

• ERP implementation

Initiatives

• Competency profiling

• Performance compensation link

• Leadership training program

Examples

Strategy as learning and as an emergent process

Henry Mintzberg

Emergent strategy

And also Peter Senge (learning organization)

Strategy in a networked society

Arnoldo Hax and Dean Wilde

Strategic Options

Best Product

Total customer solutions

System lock-in

System lock-in

Competition around the control of the ecosystem determinants

Complementors lock-in competitor lock-out

Proprietary standard

Total customer solutions

Competition for thecustomer « interaction system »

Redefining customer ’s experience

Best product

Competition based on product ’s economic attributes

Low cost or mere differentiation

Example

Example

Strategy as a free rider experience

xx

xx

x

xx

Kim and Mauborgne

Kim and Mauborgne

“The only way to beat the competition is to stop trying to beat the competition”

Red and blue ocean strategies

Red Ocean Strategy

Compete in existing market space.

Beat the competition.

Exploit existing demand.

Make the value/cost trade-off.

Align the whole system of a company’s activities with its strategic choice of differentiation or low cost

Blue Ocean Strategy

Create uncontested market space.

Make the competition irrelevant.

Create and capture new demand.

Break the value/cost trade-off.

Align the whole system of a company’s activities in pursuit of differentiation and low cost.

Strategic canvas

attrib

ute 1

attrib

ute 2

attrib

ute 3

…att

ribute

8

1 - low

5 - high

3 - medium

perf

orm

ance

value curve

by Alex Osterwalder

Other examples

Strategy as co-creation with customers

C.K. Prahalad

Collaboration as co-creation of value

shared destiny and co-creation of value

shared practices and co-innovation

collaboration with suppliers, key customers, partners

traditional business approach

market-based, transaction driven; across business unit boundaries

improved business processes; across legal boundaries

joint development; co-management of the enhanced network

Joint goals; joint leverage of competencies

arm’s-length relationship

sharing information (transaction data)

sharing and creating knowledge

discovering and creating new opportunities

prer

equi

site

s fo

r co

llabo

ratio

n

collaboration intensity

Strategy as environmental configuration

Chris Anderson

Example

http://www.longtail.com/the_long_tail/2007/05/a_wall_street_a.html

Other examples

Strategy as cognition

http://www.flickr.com/photos/theimagegroup/369496139/

Ackermann, Eden, Finn, Bryson, …

Four Barriers to Strategy Execution

Only 5% of the workforce understand the strategy

Only 25% of managers have incentives linked to overall

strategy

The People Barrier

The Vision Barrier

85% of executive teams spend less than one hour

month discussing strategy

The Management Barrier9 of 10 companies

fail to execute strategy

60% of organizations do not link budgets to strategy

The Resource Barrier

© 2005 Balanced Scorecard Collaborative • bscol.com

Development planQuisque augue felis, commodo a, elementum id, faucibus id, sem. Aenean rutrum enim. Praesent pulvinar dignissim nisl. Cras a nunc. Donec tincidunt odio sit amet lacus. Pellentesque metus tortor, ullamcorper vitae, lobortis vel, euismod in, mi. Ut laoreet, tellus laoreet blandit mollis, massa purus posuere purus, quismolestie ligula massa eu metus. Duis placerat, nulla sit amet ornare interdum, neque nunc mollis leo, vitae porttitor mi orci sit amet neque. Donec at enim. In facilisis tellus gravida ligula. Phasellus ut lorem. Pellentesque ac tortor eget augue suscipit ullamcorper. Aenean eleifend porta orci.

Etiam at arcu. Vestibulum lacinia nunc in eros. Suspendisse potenti. Aliquam erat volutpat. Donec gravida. Lorem ipsum dolor sit amet, consectetuer adipiscingelit. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Maecenas vel enim et metus semper fringilla. Donec ornare arcu. Maecenas faucibus ligula convallis nibh. Mauris dui quam, congue eu, commodo nec, tristique in, enim. Nulla auctor semper urna. Quisque a elit eu purusiaculis vestibulum. Aliquam dictum risus at odio. Fusce at lorem et elit faucibus placerat. Aenean velit. Proin elit odio, blandit et, scelerisque quis, pulvinar a, dui. Nunc magna dolor, bibendum ut, accumsan congue, tincidunt sit amet, neque. Proin consequat tincidunt lacus. In urna dui, congue nec, tincidunt sit amet, facilisis imperdiet, lorem.

Morbi sed nibh. Vivamus vitae dolor. Ut bibendum volutpat mi. Pellentesque quis magna non lectus elementum pretium. Aliquam quis est vitae arcu consequatfringilla. Cras magna risus, placerat eget, egestas consectetuer, ornare vel, felis. Nam ornare justo id orci mattis ultricies. Morbi luctus. Ut pretium odio ac libero. Nunc sollicitudin pharetra lorem. Aenean scelerisque, lacus eget ullamcorper scelerisque, ipsum urna viverra mi, eget viverra quam eros eget velit. Utlacinia feugiat purus. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Etiam nunc nisl, aliquam blandit, luctus id, commodo laoreet, sem. Phasellus sit amet orci ut sapien vulputate pellentesque. Pellentesque dapibus purus et quam. Nam sit amet magna in neque dignissimsodales. Aenean non justo nec magna lobortis volutpat.

StrategyLorem ipsum dolor sit amet, consectetuer adipiscing elit. Cras in tortor. Sed posuere erat. Maecenas pulvinar nulla eu magna. Vivamus semper, risus ut egestas pulvinar, lectus ante feugiat quam, sit amet congue odio lacus ac ipsum. Aliquam suscipit, est ut volutpat vulputate, nulla felispulvinar libero, non ornare libero ipsum tristique tortor. Fusce sed lorem vitae justo feugiat malesuada. Donec aliquet. Vivamus semper eros necdiam. Vivamus sem arcu, imperdiet nec, congue ac, scelerisque vel, nulla. Donec et mauris. Integer a nulla vulputate pede consequat euismod. Praesent molestie urna nec leo. Proin eros. Maecenas ac sem nec dui sodales tempus. Maecenas suscipit egestas velit. Suspendisse vel tortor. Proin imperdiet, sem nec aliquet ultrices, nunc est egestas eros, non hendrerit magna eros eget augue. Maecenas sed leo vitae leo faucibusvulputate. Proin dignissim eros at augue.

Nam luctus nulla non nibh. Nam at lorem ac mauris laoreet viverra. In placerat consequat nunc. Donec rhoncus nunc ac urna. Integer vestibulumcondimentum orci. Fusce velit turpis, malesuada quis, scelerisque ut, eleifend vitae, ipsum. Vestibulum eu erat. Vestibulum justo nisl, tinciduntet, semper vel, tristique quis, eros. Vestibulum tempus, massa vel consectetuer congue, erat magna consequat purus, a facilisis orci nibh vitae purus. Nam tincidunt venenatis ligula. Nunc orci nulla, ornare quis, lobortis viverra, dapibus at, turpis. Suspendisse sit amet nisl at enim tinciduntblandit. Curabitur augue est, suscipit sed, egestas sit amet, vehicula vitae, tellus. Maecenas nec metus vel nisi interdum pellentesque.

Words

Text

18% 300%

12%

1%

Causal maps

Military foundations of strategy

Strategy as persuasion and manipulation

Sun Tzu – The Art of War (~500 BC)

Sun Tzu

“if they are strong, avoid them”

any comment ?

Strategy as enemy total destruction

Karl von Clausewitz (~1800)

On war

"The complete or partial destruction of the enemy must be regarded as the sole object of all

engagements.”

Biological foundations

Daniel Dennett

Genotype and phenotype

genotype + environment → phenotype

Intentionality

The intentionality characteristic of humans is a result of evolutionary processes. Humans have goals and desires and tend to operate in order realize their goals (according to their understanding of the world or their beliefs).

Darwinian creatures

Kinds of Minds: Towards an Understanding of Consciousness

Daniel C. Dennett

Popperian creatures

Kinds of Minds: Towards an Understanding of Consciousness

Daniel C. Dennett

Gregorian creatures

Kinds of Minds: Towards an Understanding of Consciousness

Daniel C. Dennett

Summary

A

B C

D1

D2 E

xx

xx

x

xx

Different approaches, different tools, different purposes

rivalryalignment processes

learning process

co-creation

cognition technology

free rider

manipulation

strategy as…

environment

Quick checklist

Identify the strategic issues

1. What’s the problem ? What’s the context ?

Select the right method and tools

1. Read reference books

2. Ask questions to experts

3. Use the internet

Co-create strategy with all future participants

Operationalize: translate concepts into daily activities

Monitor execution (measure progress)

Update strategic destination if necessary

Thank youwww.arvetica.com

Many thanks to Flickr and

McMollie

Jimurphy

Grafixation

leonzerider

ayalan