POLICY vs STRATEGY
POLICY STUDIES
• INTERNAL FOCUS
• EMPHASIZES EFFICIENCY OF OPERATIONS
STRATEGIC STUDIES
• EXTERNAL FOCUS
• EMPHASIZES ADAPTING TO A CHANGING ENVIRONMENT
“SEAT-OF-THE-PANTS” MANAGEMENT = Intuitive Management
We must move away from intuitive approaches as:
THE ORGANIZATION BECOMES LARGER…
THE LAYERS OF MANAGEMENT INCREASE…
THE ENVIRONMENT BECOMES MORE COMPLEX.
THE FOUR PHASES OF STRATEGIC PLANNING
1--BASIC FINANCIAL PLANNING (Budgeting)
• Seek better control by emphasizing the meeting of budgets
• Focus is internal
2--FORECAST-BASED PLANNING
• Plan for growth by trying to predict the future beyond next year
• Predicting and forecasting the environment
3--EXTERNALLY-ORIENTED (Strategic) PLANNING
• Responding and reacting to market shifts and competitor actions
• Environmental reaction
4--STRATEGIC MANAGEMENT
• Developing a competitive advantage which creates your future
• Environmental proaction
STRATEGIC PLANNING
Any organization that doesn’t plan for the future isn’t likely to have one.
Planning without action is futile, but action without planning is fatal.
STRATEGIC PLANNING
• FORCES MANAGERS TO THINK ANALYTICALLY
• FOCUSES ATTENTION ON THE FUTURE OF THE FIRM
• INCREASES UNDERSTANDING OF THE ENVIRONMENT
• DEVELOPS ABILITY AND OUTLOOK OF MANAGERS
• IS A BASIS FOR PERFORMANCE EVALUATION AND ASSESSMENT
Three most highly rated benefits:
• CLEARER SENSE OF THE STRATEGIC VISION OF THE FIRM
• SHARPER FOCUS ON WHAT IS STRATEGICALLY IMPORTANT
• IMPROVES UNDERSTANDING OF THE CHANGING ENVIRONMENT
TRIGGERING EVENTS FOR STRATEGIC CHANGE
• SIGNIFICANT PERFORMANCE GAPS
• CHANGES IN OWNERSHIP
• CHANGES IN LEADERSHIP—A NEW CEO
• INTERVENTION BY A SIGNIFICANT EXTERNAL ENTITY
• STRATEGIC INFLECTION POINT
IN GENERAL, ANY CHANGES, CRISES, OR DEVIATIONS FRO THE
EXPECTED OR STATUS QUO
THE BASIC MODEL OF STRATEGIC MANAGEMENT
1--ENVIRONMENTAL SCANNING
– EXTERNAL ENVIRONMENT
• Opportunities and Threats
– INTERNAL ORGANIZATION
• Strengths and Weaknesses
2--STRATEGY FORMULATION
– DEVELOPING A MISSION/VISION
• Who are we? What is our business? Where are we headed?
– SETTING OBJECTIVES
• Financial Objectives – Earnings, ROA, Cash Flow
• Strategic Position Objectives – Market Share, Customer Service, Competitive Position
– CRAFTING STRATEGIES
• How to achieve the targeted results?…What is our strategic plan?
• Corporate, Business-level, Functional
3--STRATEGY IMPLEMENTATION
– ESTABLISHING PROGRAMS, BUDGETS, AND PROCEDURES
– ASSIGNMENTS
• Who does what by when?
4--EVALUATION AND CONTROL
– MONITORING, REVIEW, AND INTERVENTION
• When should we intervene?
THREE STRATEGIC LEVELS
CORPORATE-LEVEL STRATEGIES
Are long-term investment strategies
Is the corporate mission/vision well-served by continuing in this business?
Seek a favorable portfolio of business activities for the corporation
GROWTH
STABILITY
RETRENCHMENT
BUSINESS-LEVEL (Divisional) STRATEGIES
Are competitive strategies for each business segment the company operates in
How to improve the relative market position of each product/service line?
Emphasize development of a competitive advantage for each business line
COST LEADERSHIP
DIFFERENTIATION
FOCUS
FUNCTIONAL-LEVEL (Departmental) STRATEGIES
Are departmental strategies that focus on resource utilization and efficiency
Develop efficiency plans that are in harmony with higher-level objectives
TESTS FOR A WINNING STRATEGY
THOMPSON & STRICKLAND
GOODNESS-OF-FIT
HOW WELL IS THIS STRATEGY MATCHED TO THE
ORGANIZATION’S CAPABILITIES AND ASPIRATIONS?
COMPETITIVE ADVANTAGE
DOES THIS STRATEGY LEAD TO A SUSTAINABLE COMPETITIVE
ADVANTAGE?
DOES THIS STRATEGY STRENGTHEN OUR COMPETITIVE
POSITION?
PERFORMANCE
IS PROFITABILITY ENHANCED?
ARE LONG-TERM GAINS REALIZED IN STRATEGIC-POSITION AND
IN FINANCIAL AREAS?
FIVE CRITICAL STRATEGIC QUESTIONS
HAMBRICK & FREDERICKSON
ARENAS:
WHERE WILL WE BE ACTIVE? …WHICH AREAS?
VEHICLES:
HOW WILL WE GET THERE?
DIFFERENTIATORS:
HOW WILL WE WIN IN THE MARKETPLACE?
STAGING:
HOW FAST CAN WE DO IT… AND IN WHAT SEQUENCE?
ECONOMIC LOGIC:
WHAT RETURN CAN WE EXPECT… AND WHEN WILL WE GET IT?
IMPLEMENTATION
FINDING A GOOD “FIT” BETWEEN STRATEGY AND ….
-- ORGANIZATIONAL CAPABILITIES
-- THE REWARD STRUCTURE
-- INTERNAL POLICIES AND PROCEDURES
-- THE ORGANIZATION’S CULTURE
WE IMPLEMENT STRATEGY BY:
-- BUILDING AN ORGANIZATION (STRUCTURE) CAPABLE OF SUCCESSFULLY
SUPPORTING AND CARRYING OUT THE STRATEGY
-- DEVELOPING BUDGETS THAT STEER RESOURCES INTO CRITICAL INTERNAL
ACTIVITIES
-- MOTIVATING PEOPLE TO PURSUE TARGETED OBJECTIVES ENERGETICALLY
-- TYING REWARDS TO ACHIEVEMENT OF TARGETED RESULTS
-- CREATING A WORK ENVIRONMENT CONDUCIVE TO SUCCESSFUL
IMPLEMENTATION OF STRATEGY
-- INSTALLING STRATEGY-SUPPORTIVE POLICIES AND PROCEDURES
-- DEVELOPING AN INFORMATION REPORTING SYSTEM TO TRACK PROGRESS
AND MONITOR PERFORMANCE
-- EXERTING INTERNAL LEADERSHIP TO DRIVE IMPLEMENTATION FORWARD
MYTHS OF CORPORATE PLANNING
ACKOFF 81
MOST CORPORATE PLANNING IS LIKE A RITUAL RAIN DANCE,
IT HAS NO EFFECT ON THE WEATHER THAT FOLLOWS,
BUT IT MAKES THOSE WHO ENGAGE IN IT FEEL THAT
THEY ARE IN CONTROL.
MOST DISCUSSIONS OF THE ROLE OF MODELS IN PLANNING
ARE DIRECTED AT IMPROVING THE DANCING, NOT THE
WEATHER.
IMPLICATIONS:
DON’T FOCUS EXCLUSIVELY ON THE PROCESS…
KEEP AN EYE ON RESULTS!
IS THERE PROOF THAT THINGS ARE IMPROVING?