Strategic Management By Wallace Stettinius

1. Strategic ManagementBy Wallace Stettinius Learning Point

2. Not-For-Profits versus For Profits Learning Point

3. What Drives Sustained Superior Performance? A combination of effective strategies and excellent execution Strategy Effective Ineffective Long Term Success Success Unlikely Excellent Execution Maybe successful For a while Failure Poor Learning Point

4. What Is Strategy? It is about Change “It may be hard for an egg To turn into a bird: it would be a jolly sight harder for it to learn to fly while remaining an egg. We are like eggs at present. and you cannot go on indefinitely Being just an ordinary decent egg. We must be hatched or go bad.” --C.S. Lewis Learning Point

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6. What Is Strategy?Good Strategy/Bad Strategy • Strategy is a word that can mean anything. A word that can mean anything has lost its bite. The word is often used sloppily. • The term should mean a cohesive response to an important challenge • “There is nothing worse than a brilliant image of a fuzzy concept.” Ansel Adams • Bad Strategy is long on goals and short on policies or actions. It assumes that goals are all you need. • The core of strategy work is always the same: • discovering the critical factors in a situation, • identifying the biggest challenges to forward progress in those critical factors • devising a coherent approach to overcoming them which requires recognizing the nature of the challenges • designing a way of coordinating and focusing actions to deal with those challenges. By Richard P. Rumelt Virginia Commonwealth University – MGMT 642

7. What Is Strategy?The Strategic Management Puzzle • Strategic Management is a complex process, much like putting together a jigsaw puzzle • But with missing pieces • And with extra, irrelevant pieces • Involves many people • The situation is very dynamic • It begins with understanding the Nature of Business Learning Point

8. Jomini’s Model of Strategy (1838) Mission, Vision, Values,and Goals A Where Are We? B Where Do We Want to Go? C How Do We Get There? StrategyFormulation StrategyImplementation The Vision Comes First Learning Point

9. The Sigmoid CurveWhere you are makes a difference Ref: The Age of Paradox by Charles Handy p 49-57 Soar Maturity In the box Renewal Growth Falter Turn around There must be a sound Business Concept Conception Inflection Points Exit Startup Strategic Choices occur at Inflection Points Fail Learning Point

10. Crafting Strategy • Strategies evolve because you must react to Triggering Events or Inflection Points as new information develops and you learn from experience. • Evolving customer preferences. • Competitors’ moves. • New technologies. • Political and regulatory changes. • New opportunities. • Crises. • A performance gap. Learning Point

11. Strategy as Design or Process? "Ready - Aim - Steer" Creating Learning Adapting Learning Point

12. von Clausewitz -Strategic Intuition (1832) Learning Point The Four Steps of “coup d’oeil” – a “strike of the eye” • Intelligent memory – Existing Elements. • Presence of mind – Clear your mind expectations – Develop “Discovery Skills.” • The Flash of Insight – See what to do: The Vision • Resolution – Resolve. Determination. Will. Ready to do it: Kairos – The Moment of Commitment Vision Comes Last

13. Strategic Intuition Ordinary Intuition is a vague hunch or gut feeling. A form of emotion, not thinking. Expert Intuition A form of rapid thinking where you jump to a conclusion where you recognize something familiar. A pattern form the past. Strategic Intuition requires that you recognize when a situation is new and turn off your expert intuition. It is about the future. Learning Point

14. The Strategic Management PuzzleThe Art of Business Business is more an Art than Science. Market competition demonstrates characteristics of both art and science. Owing to the vagaries of human behavior and the countless other intangible factors which contribute to it, there is far more to the conduct of market competition than can be explained by science…We thus conclude that the conduct of it is ultimately an art, an activity of human creativity and intuition powered by the human will. Learning Point

15. The Strategic Management PuzzleThe Art of Business A Definition of an Entrepreneur “The art of business requires the intuitive ability to grasp the essence of a unique market situation, the creative ability to devise a practical solution, and the strength of purpose and skill to execute the act.” Warfighting. Learning Point

16. What Is Strategy? It must be ultimately about Action Planning is not about future decisions, but the future of present decisions.-Drucker. Only actions in the present change the future Learning Point

17. The Strategic Management Tension External Analysis Industry Environment and Changing Customer Needs “Need to Do” Internal Analysis Organization Resources and Capabilities “Can Do” Strategic Choices Management Values/Preferences “Want to Do” Learning Point

18. The Basic Framework for Strategic Analysis • THE INDUSTRY • ENVIRONMENT • Competitors • Customers • Suppliers • THE FIRM • Goals and values • Resources and capabilities • Structure and Systems STRATEGY Strategic Fit Grant – page 12 Learning Point

19. The Strategic Thinking Funnel B R O A D C H O I C E S Selecting the Business Mission & Purpose Level 1 Level 2 Level 3 Level 4 Determining the Direction Vision & Goals Competitive Strategies Functional Strategies NARROWER CHOICES Learning Point

20. The Strategic Thinking Funnel • The Functional Level Strategies • Marketing: Creating demand • Operations: Delivering what is wanted and promised • HR: Getting, training, organizing, rewarding • Finance: Funding and creating profit Learning Point

21. The Flywheel From Good to Great Breakout Buildup Culture of Discipline Level 5 Leadership First Who… Then What Confront the Brutal Facts Hedgehog Concept The Flywheel DISCIPLINED PEOPLE DISCIPLINED THOUGHT DISCIPLINED ACTION Stage 3 Stage 1 Stage 2 Clock Building – not time telling Preserve the core Stimulate Progress SUSTAIN GREATNESS Stage 4 Learning Point

22. Disciplined Thought • Managers constantly make decisions. • The question is “How do we make the best decisions?” • “Do we use passion, reason intuition?” “Don’t be deep feelers and poor thinkers” General George C. Marshall “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.” Martin Luther King The Strength To Love 1963 Learning Point

23. Disciplined Thought • Disciplined thinkers do not ignore their emotions. • But they are aware of them, control them, and are not driven by them. • Disciplined thinking is rational, analytical, unbiased reasoning based on an objective view of reality, combined with Expert or Strategic Intuition. • They are not prisoners of their experience but take information and ideas from anywhere they can find them. Learning Point

24. Disciplined Thought • Distinguish between fact and opinion: • When we draw conclusions about reality, we must distinguish between fact and opinions. • Opinion isn’t factual – it is judgment • Fact – It is provable or truth. • Disciplined thinkers constantly test the validity of their opinions. Learning Point

25. Discoveringthe Meaning of Data • Data with meaning and relevance becomes information. • Information that is understood, enhanced by identification of patterns and trends (often built on statistical analysis) becomes knowledge. • Knowledge combined with experience and values provide judgment that leads to wisdom. Learning Point

26. Five Discovery SkillsThe Innovators DNA (HBR, Dec 2009) Learning Point • Associating Ability connect seemingly unrelated questions, problems or ideas from different fields. • Questioning Don’t look for the right answers, ask the right questions “Why?” “Why Not?” “What if?” • Observing Scrutinize common phenomena, esp. behavior of customers and others messing around in your space. • Experimenting Try out new ideas by creating prototypes and pilots learning experientially • Networking Networking with diverse set of individuals provides different perspectives and new ideas.

27. Disciplined Thought • Know your limits Never exceed your limits. You push the envelope, and you live for those moments when you are right on the edge, but you don’t go over…You have to know your strengths and limitations and live within your means….The sooner a company tries to be what it is not, the sooner it tries to ”have it all”, the sooner it will die. Yvon Ghouinard, founder of Patagonia Let my people go surfing – p74 Learning Point

28. Disciplined Thought • Hubris Born of Success 2. Undisciplined pursuit of more a. Over-reaching resources and competence 3. Denial of risk and peril 4. Grasping for salvation • Capitulation to irrelevance and death How The Mighty Fall Jim Collins Learning Point

29. Clarity of Purpose • Being clear about. • who the customer or client is. • What their needs are. • What value you add in meeting those needs. • What skills and resources are required to add that value. • Articulated in the Mission Statement. Learning Point

30. What is Strategy?Core Ideas of Competitive Advantage BusinessDefinition Customer/Needs The Business Model A Distinctive Value Proposition The Value Chain ( Business Processes) Activities with Core and Distinctive Competencies Rooted in Values and Resources Strategic capabilities The integration of high level routines, resources and distinctive competencies Sustainable Competitive Advantage Do the same things better or do different things than competitors Learning Point

31. Competencies Does the organization have the employees, systems, and resources to drive the business processes that deliver desired customer outcomes? What are the Key Success Factors – Indicators – Metrics – Standards/Goals? Learning Point 24

32. Tuning In What does Tuned In mean? • Looking for opportunity in unsolved problems or unmet needs • Outward-Inward Thinking versus Inward-Outward Thinking • In one word: Customer Centric • It means understanding what your or a prospective market values the most that could be done better and then figuring out innovative ways to do it better. Learning Point

33. Tuned Out What does Tuned Out mean? • Doing things for your convenience or efficiency. • Office hours • Telephone systems • Parking • The typical medical office • Hotel check-in and out times • Not being aware of what your customers needs and attitudes are. Rooted in not understanding your customer. Learning Point

34. Program Strategic AnalysisTecker Consultants Assumptions • There are more opportunities than there are resources – must prioritize • Should not directly duplicate the services of other organizations • Focus is important Learning Point

35. Program Strategic AnalysisTecker Consultants • The Dimensions • Program Attractiveness • How central to mission? • Will need continue? • Will support continue? • Competitive Position • Expertise – resources – reputation – market share • Alternative Coverage • Are other agencies capable of doing the work as well or better than you? Learning Point

36. Generic Program Strategies Program Attractiveness If you have an attractive program, with a strong competitive position and strong competitors you compete aggressively. If however your position is weak, you divest. If the program is unattractive, you build up the strongest competitor. CompetitivePosition Alternative Coverage (Competition) Learning Point

37. Generic Program Strategies This slides adds the variable of Weak competitors. Program Attractiveness Competitive Position Alternative Coverage (Competition) Learning Point

38. Generic Program StrategiesAttractive Programs Cell I –strong position but strong competition = Aggressively compete Cell II –strong position and weak competition – Aggressively grow Cell III –weak position with strong alternatives - Divest in an orderly way Cell IV – weak position but few alternatives – Build Strength (Fix it) or divest Learning Point

39. Generic Program StrategiesUnattractive Programs Cell V – Strong Position, high alternative coverage Transfer to competitors (may require building them up) Cell VI - Strong Position, low alternative coverage Essential but unattractive – understand why then fix it if you can Cell VII – Weak position, good alternatives Aggressively divest Cell VIII – Weak position, poor alternatives Transition, Joint Venture, attract attention to the problem Learning Point

40. Economic EngineThe Business Model Program A Program B Program C Admin Total Program Direct Expenses Earned Income Less Program Marketing Expenses Net Earned or Direct Income Direct Overhead Net Program Surplus (Deficit) Less Occupancy Expenses Less Administrative Expenses Plus Endowment Income Net Contributions Required Fundraising Expenses Gross Funds required Learning Point

41. Economic EngineThe Business Model • The Programs expenses and revenues should be disaggregated by type of program or type of client to show where you are making or losing money. • Core programs – those central to the mission • Non-core programs – those that must be at least self sustaining, or even have surpluses • Occupancy costs – if fixed assets are owned, you require a Funded Maintenance Reserve • Forward Funding is very desirable Learning Point