Enactus O6U '16 Leadership Program: Strategic Thinking (1)

ENACTUS O6U

MCK 7-S MODEL

7-S CHECKLIST QUESTIONS:

Strategy:

What is our strategy? How do we intend to achieve our objectives? How do we deal with competitive pressure? How are changes in customer demands dealt

with? How is strategy adjusted for environmental

issues?

Strategies have TWO essential characteristics: They are developed consciously and purposefully.

EMBRACE – EXTEND – EXTINGUISH

EMBRACE – EXTEND – EXTINGUISH

Microsoft adopted a strategy of:

Developing of software substantially compatible with a competing product, or implementing public standards. [EMBRACE]

Addition and promotion of features not supported by the competing product or part of the standards, creating interoperability problems for customers who try to use the ‘simple’ standard. [EXTEND]

When extensions become a (de facto standards) because of their dominant market share, they marginalize competitors that do not or cannot support the new extensions. [EXTINGUISH]

Planning includes the ability to: Identify opportunities. Analyze problems. Establish priorities and needs. Allocate available resources.

Planning also includes the ability to establish: Policies and procedures. Objectives and standards of performance. Forecasts and budgets. Programs and schedules.

And this will happen by answering FIVE basic questions:

Where are we now? [THE SITUATION] How did we get there? [OUR MOMENTUM] Where are we going? [THE DIRECTION] Where should we be going? [THE DESIRED DIRECTION] How will we get there? [OUR STRATEGIC PLAN]

The Futures Wheel

HOW TO USE THE TOOL!?

Identify the change: Write the change that you need to consider in the center of a piece of paper, or on a flipchart. This could be an event, trend, problem, or possible solution.


Identify Direct, First-Order Consequences: Now, brainstorm possible direct consequences of that change. Write each consequence in a circle, and connect it from the central idea with an arrow. These are "first-order" consequences.

Identify Indirect, Second-Order Consequences: You now need to brainstorm all the possible "second-order" consequences of each of the first-order (direct) consequences that you wrote down in Step 2, and add them to your diagram in the same way. Then, repeat this by identifying the third-order consequences, fourth-order consequences, and so on.


Analyze Implications: Once you've completed all of the levels of the Futures Wheel, you'll have a clear picture of the possible direct and indirect consequences resulting from the change. List these.

Identify Actions: Where the possible consequences that you've identified are negative, think about how you'll manage them. Where consequences are positive, think about what you'll do to take full advantage of them.

IMPACT ANALYSIS

HOW TO USE IMPACT ANALYSIS

1. Prepare for Impact Analysis

The first step is to gather a good team, with access to the right information sources. Make sure that the project or solution proposed is clearly defined, and that everyone involved in the assessment is clearly briefed as to what is proposed and the problems that it is intended to address.


2. Brainstorm Major Areas Affected

Now brainstorm the major areas affected by the decision or project, and think about whom or what it might affect.

Different organizations will have different areas – this is why it's worth spending a little time getting this top level brainstorming correct.

As follows we show a number of different approaches that may be useful as starting points for identifying the areas that apply to you.

A. Organizational Approach:

Impacts on different departments. Impacts on different business processes. Impacts on different customer groups. Impacts on different groups of people.

B. McKinsey 7Ss Approach:


3. Identify All Areas

4. Evaluate Impacts

5. Manage the Consequences

THE RISK IMPACT/PROBABILITY CHART

The Risk Impact/Probability Chart is based on the principle that a risk has two primary dimensions:

Probability – A risk is an event that "may" occur. The probability of it occurring can range anywhere from just above 0 percent to just below 100 percent. (Note: It can't be exactly 100 percent, because then it would be a certainty, not a risk. And it can't be exactly 0 percent, or it wouldn't be a risk.)

Impact – A risk, by its very nature, always has a negative impact. However, the size of the impact varies in terms of cost and impact on health, human life, or some other critical factor.

THE CORNERS OF THE CHART HAVE THESE CHARACTERISTICS:

Low impact/low probability – Risks in the bottom left corner are low level, and you can often ignore them.

Low impact/high probability – Risks in the top left corner are of moderate importance – if these things happen, you can cope with them and move on. However, you should try to reduce the likelihood that they'll occur.

THE CORNERS OF THE CHART HAVE THESE CHARACTERISTICS:

High impact/low probability – Risks in the bottom right corner are of high importance if they do occur, but they're very unlikely to happen. For these, however, you should do what you can to reduce the impact they'll have if they do occur, and you should have contingency plans in place just in case they do.

High impact/high probability – Risks towards the top right corner are of critical importance. These are your top priorities, and are risks that you must pay close attention to.

TO USE THE RISK IMPACT/PROBABILITY CHART, WE HAVE TO FOLLOW THESE STEPS:

List all of the likely risks that your project faces. Make the list as comprehensive as possible.

Assess the probability of each risk occurring, and assign it a rating. For example, you could use a scale of 1 to 10. Assign a score of 1 when a risk is extremely unlikely to occur, and use a score of 10 when the risk is extremely likely to occur.

Estimate the impact on the project if the risk occurs. Again, do this for each and every risk on your list. Using your 1-10 scale, assign it a 1 for little impact and a 10 for a huge, catastrophic impact.

TO USE THE RISK IMPACT/PROBABILITY CHART, WE HAVE TO FOLLOW THESE STEPS:

Map out the ratings on the Risk Impact/Probability Chart.

Develop a response to each risk, according to its position in the chart. Remember, risks in the bottom left corner can often be ignored, while those in the top right corner need a great deal of time and attention.

"Position" is another way to define strategy – that is, how you decide to position yourself in the marketplace. In this

way, strategy helps you explore the fit between your organization and your environment, and it helps you

develop a sustainable competitive advantage.

PEST APPROACH

PEST Analysis is a simple and widely used tool that helps you analyze the Political, Economic, Socio-Cultural, and Technological changes in your business environment. This helps you understand the "big picture" forces of change that you're exposed to, and, from this, take advantage of the opportunities that they present.

There are variations of PEST Analysis that bring other factors into consideration. These include:

PESTLE/PESTEL: Political, Economic, Socio-Cultural, Technological, Legal, Environmental.

PESTLIED: Political, Economic, Socio-Cultural, Technological, Legal, International,

Environmental, Demographic. STEEPLE: Social/Demographic, Technological, Economic, Environmental, Political, Legal,

Ethical.

SLEPT: Socio-Cultural, Legal, Economic, Political, Technological.

LONGPESTLE: Local, National, and Global versions of PESTLE. (These are best used for understanding change in multinational organizations.)

PEST ANALYSIS IS USEFUL FOR FOUR MAIN REASONS:

It helps you to spot business or personal opportunities, and it gives you advanced warning of significant threats.

It reveals the direction of change within your business environment. This helps you shape what you're doing, so that you work with change, rather than against it.

It helps you avoid starting projects that are likely to fail, for reasons beyond your control.

It can help you break free of unconscious assumptions when you enter a new country, region, or market; because it helps you develop an objective view of this new environment.

HOW TO USE THE TOOL:

Follow these steps to analyze your business environment, and the opportunities and threats that it presents.

Use PEST to brainstorm the changes happening around you. Use the prompts below to guide your questioning, and tailor the questions to suit the specific needs of your business.

Brainstorm opportunities arising from each of these changes.

Brainstorm threats or issues that could be caused by them.

Take appropriate action.

ANOTHER TOOL TO BE USED WHILE EVALUATING OUR STRATEGY AS A POSITION IS VRIO ANALYSIS:

VRIO is an acronym for the four question framework asked about a resource or capability to determine its competitive potential: the question of Value, the question of Rarity, the question of Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability to exploit the resource or capability).

VRIO falls into the internal analysis step of these procedures, but is used as a framework in evaluating just about all resources and capabilities of a firm, regardless of what phase of the strategic model it falls under.

The Question of Value: "Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?“

The Question of Rarity: "Is control of the resource/capability in the hands of a relative few?“

The Question of Imitability: "Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"

The Question of Organization: "Is the firm organized, ready, and able to exploit the resource/capability?" "Is the firm organized to capture value?

What is the first thing that pops in your mind when you hear the term corporate culture? A great many people refer to the classic phrase coined by the McKinsey organization, that culture is "how we do things around here". And while that may be true, there are so many elements that go into determining what you do and why, that this definition only scratches the surface.

The choices an organization makes about its strategy rely heavily on its culture – just as patterns of behavior can emerge as strategy, patterns of thinking will shape an organization's perspective, and the things that it is able to do well.

For instance, an organization that encourages risk-taking and innovation from employees might focus on coming up with innovative products as the main thrust behind its strategy. By contrast, an organization that emphasizes the reliable processing of data may follow a strategy of offering these services to other organizations under outsourcing arrangements.

To get an insight into your organization's perspective, use cultural analysis tools like the Cultural Web, and the Congruence Model.

THE CULTURAL WEB

The Cultural Web identifies six interrelated elements. By analyzing the factors in each, you can begin to see the bigger picture of your culture: what is working, what isn't working, and what needs to be changed. The six elements are:

Stories – The past events and people talked about inside and outside the company. Who and what the company chooses to immortalize says a great deal about what it values, and perceives as great behavior.

Rituals and Routines – The daily behavior and actions of people that signal acceptable behavior. This determines what is expected to happen in given situations, and what is valued by management.

Symbols – The visual representations of the company including logos,

how plush the offices are, and the formal or informal dress codes.

Organizational Structure – This includes both the structure defined by the organization chart, and the unwritten lines of power and influence that indicate whose contributions are most valued.

Control Systems – The ways that the organization is controlled. These include financial systems, quality systems, and rewards (including the way they are measured and distributed within the organization.)

Power Structures – The pockets of real power in the company. This may involve one or two key senior executives, a whole group of executives, or even a department. The key is that these people have the greatest amount of influence on decisions, operations, and strategic direction.

THE CONGRUENCE MODEL:

The Congruence Model is based on the principle that an organization's performance is derived from four elements: tasks, people, structure, and culture. The higher the congruence, or compatibility, amongst these elements, the greater the performance.

The higher the congruence, or compatibility, amongst these elements, the greater the performance. For example, if you have brilliant people working for you, but your organization's culture is not a good fit for the way they work; their brilliance will not shine through. Likewise, you can have the latest technology and superbly streamlined processes to support decision making, but if the organizational culture is highly bureaucratic, decisions will undoubtedly still get caught in the quagmire.

To avoid this type of incongruence, the Congruence Model offers a systematic way to consider the root elements that drive organizational performance. The following diagram shows how the four critical elements relate to strategy and performance:

STEP ONE: ANALYZE EACH KEY ELEMENT SEPARATELY:

Tasks: First you need to understand what work is at the core of your organization's performance. Here you are looking at the critical tasks that are done within the organization from two perspectives: What work is done, and how is it processed.

Does the work require specific knowledge or skill? What are the intrinsic rewards involved in completing the work? Is it mechanistic or creative? How does the work flow? What sort of approach is needed to do this work best? Quick? Thorough?

Caring? Analytical? Precise? Enthusiastic? ... Where are the interdependencies?


People: You know what work is done; now you have to look at who does it. You need

to know what types of people are currently performing the organization's critical tasks.

Who interacts to get the work done? Bosses, employees, peers, external stakeholders.

What skills do the people possess? Knowledge, experience, education, competencies.

Is there a demographic profile? Age, gender, ethnicity. What are these people's preferences and expectations for

compensation, reward, career progression, recognition, and organizational commitment?


Organizational Structure: This element involves looking at the formal structure, systems and processes that support the organization.

How is the company organized? Mechanistic or organic. Are there distinct business units or other separations? Regional, functional,

by product, by market. How distinct and/or rigid are the lines of authority? How standardized is the work? Rules, policies, procedures. How is work measured and incentivized and rewarded?


Culture: Here you are concerned with the unwritten rules that define how work is really done – which depends on attitudes, beliefs, commitment, motivation, and so on, as well as the formal elements of process and structure that you have already examined. This element is the hardest to define, and often the one with the most influence.

What do people really do to get work done? How does information flow around the organization? What are the beliefs and values of individuals in the organization? What leadership style is adopted? Is there a political network in play?

STEP TWO: ANALYZE HOW THESE ELEMENTS INTERRELATE IN YOUR ORGANIZATION

Work and People: Is the work being done by the right people?

Work and Structure: Is the work done in a well-coordinated manner given the organizational structure in place?

Structure and People: Does the formal organization structure allow the people to work together effectively?

STEP TWO: ANALYZE HOW THESE ELEMENTS INTERRELATE IN YOUR ORGANIZATION

People and Culture: Are the people working within a culture that best suits them?

Culture and Work: Does the culture support the nature of the work that needs to be done?

Structure and Culture: Do the formal and informal structures work cooperatively or do they compete?

STEP THREE: PLAN TO CREATE AND MAINTAIN CONGRUENCE

If strategies can be intended (whether as general plans or specific ploys), surely they can also be realized. In other words, defining strategy as a plan is not sufficient; we also need a definition that encompasses the resulting behavior.

Thus the last definition is proposed: Strategy is a pattern, specifically, a pattern in a stream of actions. By this definition, Strategy is consistency in behaviors, whether or not intended.

AS AN EXAMPLE; WE INTRODUCE VIPP TRASHION BINS BY LEVER COUTURE.

Tools such as USP Analysis and Core Competence Analysis can help you with this. A related tool, VRIO Analysis, can help you explore resources and assets (rather than patterns) that you should focus on when thinking about strategy.

Your USP [Unique Selling Propositions] is the unique thing that you can offer that your competitors can't. It's your "Competitive Edge." It's the reason why customers buy from you and you alone.

USPs have helped many companies succeed. And they can help you too when you're marketing yourself (when seeking a promotion, finding a new job, or just making sure that you get the recognition you deserve.) If you don't have a USP, you're condemned to a struggle for survival – that way lies hard work and little reward.

TO USE THIS ANALYSIS TOOL, WE HAVE TO FOLLOW THESE FOUR STEPS:

1. Understand the Characteristics That Customers Value

First, brainstorm what customers value about your product or services, and about those of your competitors. Move beyond the basics that are common to all suppliers in the industry, and look at the criteria that customers use to decide which product or service to buy.

As with all brainstorming, by involving knowledgeable people in the process, you'll improve the range of characteristics you'll identify. So talk to salespeople, customer service teams and, most importantly, to customers themselves.


2. Rank Yourself and Your Competitors by These Criteria

Now, identify your top competitors. Being as objective as you can, score yourself and each of your competitors out of 10 for each characteristic. Where possible, base your scores on objective data. Where this isn't possible, do your best to see things from a customer's perspective and then make your best guess.


3. Identify Where You Rank Well

Plot these points on a graph. This helps you spot different competitors' strengths and weaknesses.

And, from this, develop a simple, easily communicated statement of your USP.


4. Preserve Your USP (and use it!)

The final step is to make sure that you can defend your USP. You can be sure that as soon as you start to promote a USP, your competitors will do what they can to neutralize it. For example, if you've got the best website, they'll bring in a better web designer. Or if you've got a great new feature in your product, you'll see it in theirs next year

If you've established a USP, it makes sense to invest to defend it – that way; competitors will struggle to keep up: By the time they've improved, you've already moved on to the next stage.

And once you've established a USP, make sure that the market knows about it!

Enactus O6U '16 Leadership Program: Strategic Thinking (1)

Business

Transcript of Enactus O6U '16 Leadership Program: Strategic Thinking (1)