Introductiton to Strategy

INTRODUCTORY SESSION

POINT 1 : YOU HAVE ALREADY LEARNED THAT ANY BUSINESS 
NEEDS TO PERFORM THESE 5 TASKS

1. Plan ( Examine the future and draw up a plan of action)
2. Organize (Build assets and collect people for the plan happen)
3. Command (Maintain the desired activity among the people)
4. Coordinate (Bind, unify and harmonize)
5. Control (Ensure that things happen as per policy / plan / command)

YOU KNOW THIS - SO WE WILL NOT STUDY THESE TASKS.
BUT WE WILL LEARN HOW TO PERFORM THESE TASKS STRATEGICALLY.

POINT 2 : What is the meaning of performing these tasks strategically? 

It means to recognize that each business is unique - it operates in its own unique environment - and pursues its own unique goals - and has its own set of resources, constraints and compulsions - and hence its actions need to be unique by design. 

In other words, blindly following someone's prescription or doing something because it is fashionable is not being strategic. 

A company which behaves strategically follows DDDD loop : Discover, Diagnose, Design, Deploy route. All the major actions (deployments) of a strategic company are based on study and analysis (discover), thinking about what needs to be given for the desired output (diagnose), designing those inputs (design). These are the hallmarks of the strategy.     

POINT 3 : Example of strategic and non-strategic statements

• Non-strategic : "In the wrench making business that we are in, the largest company in the market XYZ has changed the material specification of their wrench from cast steel to forged steel hence we should also do the same"
• Strategic : "We have analyzed the recent change in the material specification of XYZ and we have concluded that they have done it mainly because their major customers are the auto industry which finds that cast tools get deformed faster leading to increase in on-line defects. However, our main customers are domestic users and plumbers and hence we do not want to undertake the change. In fact we expect XYZ to become 8% costlier as a result of the change but our costs will remain the same and hence our customers are likely to see us more favorably"

POINT 4 : A quick way of finding out if a company is strategic or not is to use the DDDD model

• Discover : How well does the company know its ext / int environment
• Diagnose : How well is this used to set a strategic agenda
• Design : How well and SMART is the action plan designed 
• Deliver : Is it implementable  

If the company does all these things well, they act strategically.

POINT 5 : The word "Strategically" means having a long term purpose and short term goal in mind which has been decided keeping in mind 2 things (1) landscape (circumstances) under which we shall operate (2) outcomes and results we desire - and then planning inputs and actions in a deliberate fashion keeping these in mind.    

POINT 6 : Thus, it is possible for you to perform all the 5 tasks (planning, organizing, commanding, coordinating and controling) either in a strategic way or not in a strategic way. You will notice that many times, the strategic companies and the not-so-strategic companies perform the same activities but their "way" of doing it is very different. That is what we are going to learn.

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THE NEED FOR A STRATEGIC THINKING IS FAR LESS WHEN

• the business is technically simple and most can understand it 
• the interaction with the customers and their feedback is visible,
• the extent of support of various stakeholders is known to most
• the decisions do not require a large commitment of resources 
• the environment does not change rapidly so that risk and uncertainty is visible
• the competitive landscape does not change rapidly
• the geographic, technology scope of business is small
• the employees perform general duties and know what is going on
• the employees can see most of the things for themselves

THE NEED FOR A STRATEGIC THINKING IS FAR MORE WHEN

• the business is technically complex and beyond most people's understanding  
• the interaction with the customers and their feedback is unknown to most
• the extent of support of various stakeholders is unknown to most
• the decisions need large commitment of resources 
• the environment changes rapidly so that risk and uncertainty is visible
• the competitive landscape changes rapidly
• the geographic, technology scope of business is vast 
• the employees are specialized and departmentalized and do not know going-on
• the employees cannot see most of the things for themselves

DOES FORMULATION OF A STRATEGY ENABLE SUCCESS?

Nothing in life “guarantees” success. But strategy formulation does help greatly in the strategy being a vehicle of inter company communication, binding and unification within the company and helps bring everyone on the same page and show them the same common direction and thus helps build a consensus on the broad direction for the future. This in trn helps enables the “emergent strategy” being closer to the “intended strategy”.

1. Gives a strong sense of common identity / purpose
2. Tells people collectively “what are we here for”
3. Enables people judge how they / department / company is doing
4. Helps people work towards right things
5. Helps people avoid effort in doing unwanted things
6. Provides a common language for performance conversations
7. Enables long term decisions : capacity, investments, locations, people, systems

WHAT MAY HAPPEN IF YOU HAVE NO STRATEGY

1. Self-starter employees / associates will not know what direction to go in
2. Unwanted proposals will come up,  get rejected, and reduce morale
3. Cost of supervision high to keep people off going in wrong direction.
4. Resources will get used up unproductively; waste of resources.
5. Long term decisions will get taken without the benefit of long term view
6. Energies will go in "trivial many" directions (rather than "vital few")
7. The support of stakeholders may not be consistent in absence of clear policy
8. Uncordinated work and friction
9. More shocks due to lack of anticipation of future

DEFINITION OF STRATEGY

Since we shall address how to perform various tasks, we will use a task oriented definition of strategy in the course : "Analysis, Planning and Managing of major initiatives taken by your company's top management - on behalf of its various stakeholders - regarding how it develops and deploys resources and competencies - to selected issues in its chosen environments - to improve the performance of the company. This includes (a) how it chooses the organization's mission, vision (b) how it sets the objectives (c) how it developes policies and plans -  often in terms of projects and programs designed to achieve these objectives (d) how it allocates resources to implement these policies and plans, projects and programs (e) how it tracks the strategic performance of the company (in terms of balanced scorecard model)”

HOWEVER THERE ARE OTHER PERSPECTIVES

AND DEFINITIONS OF STRATEGY

The "strategy" word is used with multiple meanings  

1. Strategy as a plan : collective and documented intention : direction, course of action
2. Strategy as a ploy : a maneuver intended to outwit a competitor/s
3. Strategy as a consistent pattern : of past behavior / intended future behaviour  
4. Strategy as a position : within conceptual frame of stakeholders /environment
5. Strategy as perspective : determined by a master strategist / team

Other definitions of strategy

1. "Managing business with deep awareness of underlying purpose"
2. "An underlying pattern in a stream of decisions".
3. "Determining of basic long-term goals and objectives of an enterprise, examining various possible courses of action, selecting them, using the selected ones to decide allocation of resources, so that the goals are met"
4. "A long term direction set by the management - to satisfy the stakeholders sustainably - by choosing which aspects of external environment it will respond - in what way - and how it will develop and deploy its internal resources and competencies to do so". 
5. "Strategy provides clear guidance for taking long term decisions regarding capabilities, medium term projects and short term operations".
6. "strategy is about gaining competitive advantage or best exploiting emerging opportunities. As there is always an element of uncertainty about the future, strategy is more about a set of options ("strategic choices") than a fixed plan".
7. "Giving clarity of direction to the troops so as to focus their effort towards the right goals and yet give them enough empowerment regarding how they want to do it without straightjacketing them into a plan". 

HOW MARKETING STRATEGY (WHICH YOU ALREADY KNOW) DIFFERS FROM THE BUSINESS STRATEGY : The class seemed to know it well and drew the process view of marketing on the board sequentially as follows

• Starting with situation analysis (technique : 5C analysis)
• Followed by strategy formulation consisting of 3 components
• selecting the target market (technique : market attractiveness index)
• developing a value proposition (technique : positioning)
• developing route- to-market (technique : selection of sales channel & process)
• Arriving at marketing mix based on the strategy ( template : 7Ps)
• Acquiring and retaining customers
• Result (Outcome) of marketing : (Profit and Customer satisfaction (simultaneously))

THE HIERARCHY OF STRATEGIES

The major preoccupation of the marketing strategy is to how to allocate company resources to front-end activities to generate value for the chosen customers and how to capture a part of it through value capture. The basic unit of discussions regarding marketing strategy is a "PxM" ( Product x Market ) combination at the front end of the business. 

The major preoccupation of the business strategy is how to allocate company resources to both front-end and back-end activities so that both the front-end and back-end work together in a mutually reinforcing and efficient way to make the company sustainably competitive. The basic unit of discussions regarding business strategy is a complete combination of front end (PxM) and associated back end.

The major preoccupation of the corporate strategy is how to allocate company resources to the multiple businesses that may exist under the company banner. Which of these businesses to invest in, which to maintain and which ones to downsize, re-scope or exit. Corporate strategy is also about which tasks to consolidate centrally and which ones to decentralize. 

WHAT MAKES A COMPANY STRATEGICALLY SUCCESSFUL ?

The answers seem to come from two sides 

External side : Key assumption being that you will succeed if you are in the right competitive position (not to be in a highly competitive industry where revenue or margins will be under threat and hence your resources will produce less result) in the right industry (a large and growing industry where your internal resources and competence can make a difference).   

Internal side : Key assumption being that you will succeed if you have the right resources (physical, financial, intangible) which are (a) of value when operating in the competitive position you are in your chosen industry (b) not easy for your competitors to imitate (c) available to you on a sustainable basis.  

The truth, of course, is that both are required to succeed : you need to choose the right industries to operate in, get into the right positions in these industries and finally you need to build the right capabilities within your company. 

APPLICATION ASSIGNMENT

Setting strategic agenda : take up the case of your whole company - or any one of the business divisions (not departments) - and using the techniques taught in the class identify 5 areas of action and prioritize them. You may refer (click here) or you may refer to the simple method of CONICS

• Capitalizing on which opportunities should not be missed by us
• What obstacles need to be overcome
• Neutralizing important threats
• Scaling up and improving the areas where positive performance already exists
• Correction of those weaknesses that are coming in our way
• What  problems must be solved