Principles for Strategy Process Johan Strümpfer © Johan P Strümpfer, 2006.

Principles for Strategy Process

Johan Strümpfer

© Johan P Strümpfer, 2006.

Need:

<Your Organisation> has expressed a need to make the planning process followed in 2006 sustainable into the future. The need refers to the process of reflection on <Your Organisation>’s strategic positioning undertaken in <Your Organisation> in 2006, and the consequent decisions taken on positioning <Your Organisation> for the future.

The primary audiences in <Your Organisation> involved in the above process in 2006 were the Group Exco, cluster Excos, a strategy resource group, a group wide top 500, and several cluster related large groups.

Purpose of the workshop:

To will assist a group within <Your Organisation> in putting a framework in place, that will enable them to develop a process to design their strategy for 2007 and beyond.

The workshop is aimed at a group of between 12 and 15 people who will play a role in determining the <Your Organisation> strategy process for 2007

We do anticipate a much deeper understanding of the principles to be pursued in such a process, i.e. on what is important.

We do anticipate greater clarity on how such a process could like in 2007, i.e. a rough outline. We do not anticipate a complete design of a strategy process to be available at the end of the workshop.

Workshop Method:

We will cover a large number of guiding principles in detail. These are guidelines for how a meaningful strategy

development process should look like. We will spend time in the group discussing what these

guidelines mean, and specifically, how <Your Organisation> should be implementing them.

The outcome of these “how to implement this” discussions will collectively give <Your Organisation> a draft design for a practical strategy process for 2007.

Opening: I am not trying to convince you of anything. These

principles are what I use. They are based on 25 years of exposure to planning and strategy, and much reflection on what is going on. These principles have helped me in practice. Pick and choose your way through this. This is not a contest of wills where I will try to convince you of what is right and how it should be done, vs. how you think things should be.

This is also not a review of strategy approaches or philosophies. This is simply what I have used in a large number of real situations.

Background on me: www.strumpfer.com

Workshop priorities

Priority 1: What matters is what you take away, not what I bring in here.

Priority 2: Refer Priority 1

And this means?• Volume of material• Volume of input• Volume of design

Here is Edward Bear, comingdownstairs now, bump,

bump, bump, on the backof his head, behind

Christopher Robin. It is,as far as he knows, the only way of coming downstairs,

but sometimes he feelsthat there really is another way, if only he could stop

bumping for a moment to thinkof it. And then he feels that

perhaps there isn’t. Anyhow,here he is at the bottom, and

ready to be introduced to you,Winnie-the-Pooh.

The topics that would be covered include

• Principles for Planning – detailed coverage

• Planning processes overviews • Planning Methods – very brief review of

some, not in depth coverage of many• Design – outline for <Your

Organisation> for 2007

Programme: Understanding principles Group A Principles: Building mental models

• Meaning and implications discussion. Group B Principles: Conversation Design

• Meaning and implications discussion. Group C Principles: Design of Inquiry

• Meaning and implications discussion. Group D Principles: Building Intellectual leadership

• Meaning and implications discussion. Group E Principles: Building the case for change

• Meaning and implications discussion. Group F Principles: Building competitive advantage

• Meaning and implications discussion. Putting it together: A picture for 2007.

The Background on Principles.

“There is nothing as practical as a good theory” Robert Maxwell.

Why? Something is complex when we do not

understand it. The task of complexity management is managing the learning process through which we create the appropriately rich mental models to guide us in terms of what we must do in a particular situation.

Problems with mental models(From John T Martin)

Group A Principles: Building mental models

Principle 1: The strategy process is about building mental models

Mental Models:

A mental model is a representation of some aspects of reality

Our actions are based on the mental models we hold of a situation

The confidence of our actions is based on our belief in our mental models

The effectiveness of our action is determined by the appropriateness of our mental models

TB Ryan

What does management do?

Systems Management:A perspective

Managers are faced with a system they need to manage. They have to intervene in such a way as to guide the system so that it moves from less to more desirable behaviour

To do this they need to have ....

TB Ryan

Managing requires...

1. A representative mental model of the current less desirable behaviour;

2. A feasible and acceptable mental model of desirable behaviour;

3. An adequate mental model of how the world works in this particular situation;

4. A belief based on the above 3 models that the system can be improved by managing it.

TB Ryan

17

Financial performance intwo product lines

19

Solution process Group inquiry: Participation Used Immersion, Soft Systems

Methodology and Systems Dynamics Modelling (Systems Practice Process)

Questioned and shifted their ways of thinking and understanding the business.

Continuous action• Refer: www.strumpfer.com/Publications • Article by Strumpfer & Brown

http://www.strumpfer.com/Publications



Principle 2: IKEA principle: Effective Action is build on appropriate Knowledge (mental models), which are produced by a good Inquiry process

Effective Action

PragmatistPhilosophy !!

Desired outcome?

Effective Action

PragmatistPhilosophy

AppropriateKnowledge(mental models)

Effective Action



QualityInquiry

Effective Action



Co-ordinatedAction

QualityInquiry

Effective Action



Co-ordinatedAction

SharedMentalModels

QualityInquiry

Effective Action



Co-ordinatedAction

SharedMentalModels

QualityInquiry

Joint/grouplearning

Effective Action



Co-ordinatedAction

SharedMentalModels

QualityInquiry

Joint/grouplearning

SystemsThinking

Effective Action



Co-ordinatedAction

SharedMentalModels

QualityInquiry

Joint/grouplearning

SystemsThinking

Principlesto increase

Principles to increaseeffectiveness

E.g.Multiple perspectivesConnectednessCausality

E.g.Shared workspaceConversation design



Principle 2: IKEA principle: Effective action is build on appropriate mental models, which are produced by a good Inquiry process

Principle 3: The strategy process is a learning process

Single and Double loop learning(Based on Argyris)

ActionDecided Outcome

DesiredOutcome

Gap

Single Loop Learning

Double Loop Learning

Effective StrategyEffective Strategy ProcessProcess

Ineffective StrategyIneffective StrategyProcessProcess

Changes beliefs,World views,Paradigm,

Theory in Practice,Mental Models

ActionTaken

Example

“Actually, nothing changed, …. except that I think differently.”

Don Brown.

Effective Action


Co-ordinatedAction

SharedMentalModels

QualityInquiry

Joint/grouplearning

SystemsThinking

Individual Learning Process

Group Learning Process

Solutions, Strategies & Experts

There is nothing as problematic as solutions(Argyris & Schön,1967)

The Berkeley experiments

Solutions

The Strategy Process is a

“Learning Intervention”

“Planning is Learning”

Meaning and implications discussion:

What do these principles mean? What are the implications of these

principles in practice? Measure of Performance? How does a group learn? What we should we do about this? What should your role be?

Programme:

Understanding principles Group A Principles: Building mental models







Group B Principles: Conversation Design

Principle 4: Strategy development is a learning conversation

Effective Action


Co-ordinatedAction

SharedMentalModels

QualityInquiry

Joint/grouplearning

SystemsThinking

CONVERSATION ! (Dialogue)



Principle 5: Keep the conversation alive

Conversation Design considerations:

Keep the conversation alive Focus the conversation on the right things Keep the interest up Keep the topic and angle fresh Keep it meaningful Keep the conversation relevant to the

concerns of the day (Practical relevance)• Eh…, how?

Basic conversation template

ContextSetting

Choice of Framework*

Question(s) To drive

Conversation

DebateConclusionsDecideImplications for

Action

Me/You

TheyThey

*More later

Process Design

C F Q

DCAC F Q

DCA

C F Q

DCA

C F Q

DCAC F Q

DCA

C F Q

DCA

Strategy: Things to strive to do

Why change?

CompetitivePositioning

EnterpriseDesign

Strategic Choices

Some actual frameworks driving strategic conversation design

Any number of frameworks possible



Principle 5: Keep the “Strategy Conversation” alive

Principle 6: An organisation is a “System of conversations”.

46

“Metaphor” = Analogy, model, lens

Lenses:• Mechanistic• Biological• Social Systems• People/Group Metaphor• Cultural Metaphor• Political Metaphor• Language system Metaphor

What does “strategy” mean when looked at through these lenses?

ORGANISATIONAL METAPHORS

47

MODEL OF ORGANIZATIONMACHINE MODEL

Conceptualised as Mindless system

Example: Any Tool

Objective: Serve purpose of the owner (profit)

Attributes: Efficiency & reliability (predictability)

Effective in: Production environment

Deficiency & failure: Inability to deal with changing environment

48

ORGANISATIONAL MODELSBIOLOGICAL MODEL

Conceptualised as Uni-minded system

Example: Human body

Objective: Serves itself (Survival & growth)

Attributes: Learning & adaptation

Effective in: Marketing environment

Deficiency & failure: Inability to deal with conflict in choice

49

ORGANISATIONAL MODELSSOCIAL SYSTEMS MODEL

Conceptualised as Multi-minded system

Example: Association of purposeful members

Objective: Serve members & environment (Development)

Attributes: Competency (ability & desire)

Effective in: Systems era (Connectedness)

Deficiency & failure: Inability to deal with conflict in choice

50

“Human Systems Are Different”

Freedom and Ability to ChooseENDS of Parts and Whole

Mental Model Parts (Groups,Individuals)

WholeOrganisation

MECHANISTIC

ORGANISMIC

SOCIALSYSTEM

51

Purpose of PlanningSocial systems view

Organisational Control System Integration

52

How is system controlled?Low

High

HighLow

CONTROL

AUTONOMY

Fear, Inaction Chaos

Authoritarian Empowerment

Alignment

SocialSocialSystemsSystems

ViewView

Conversation Systems View

Multiple simultaneous interlinked conversations

Conversations give meaning to words “The words we use is the world we live in” Conversations build the agreement and

commitments required for action Conversations yield the alignment we

need Free-flowing conversations create space

for creative insights and ideas to surface

Synthesis questions:-

1. What are key forces shaping the future <Your Organisation> Business Environment did you hear in the presentation & discussion?

2. What key strategic choices facing <Your Organisation> did you hear in the presentation & discussion?

3. What are some of the things <Your Organisation> needs to do as a consequence of this information?

E.g. <Your Organisation> 2005 Strategy Conversation

Exco Strategy Process

Env Scan

Env Scan

Env Scan

Strategy Task Group Environmental Scan

Future Shaping Forces & Strategic Choices

Future Shaping Forces & Strategic Choices: Tentative

W/s 1Strategic Choices

W/s 2Change Thrusts

StrategicChoices Identified

&Decided (some)

Key Strategic change thrusts

CEO conversation

W/s 3Implementation

Exco Strategy Process

Env Scan

Env Scan

Env Scan

Strategy Group Environmental Scan

W/s 1Strategic Choices

W/s 2Change Thrusts

CEO conversation

W/s 3Implementation

Three Inter-linked & synchronised

Strategic Conversations

Additional ones: Cluster Strategy ConversationsStaff (Top 500)Cluster groups

Process Design

Decision Support to MD

Decision Facilitation for Exco

<Your Organisation> Future DirectionConversation

Creates shared view of requirements

Improves quality of and confidence in vision

Interaction with Board

Builds shared map of future for successful transformation

Creates fundamental support for future direction with Board

They provide detailed input to map and share in map

Cluster Exco Input & Implementation

<Your Organisation> Future DirectionConversation

Objective: Effective Action How:

1. Better & Shared metal models of the business and its future operating environment.

2. Improved inquiry process. I.e. Better questions to reflect on and discuss.

Milestone: Decision on core strategic change thrusts.

Inq: Future & Future Bus Environement

•Trends

•FSF

•FBE

•Scenarios

Mang. Conf Engagement Events

InitiativesSuggestions

Interaction with Board & EXCO

•Videos

19-20 AprExco & Board Strat Session

4 - 15/45/3

Guardian Interact Sessions

Workplace Roll-Out* Theme Specific Roll-Out *

Apr - May May - Jun Jul - Sep

• Vision Confirmation

• Strategic Choices

• Initiatives List: Approved / Investigate / Rejects

• BU Planning

• Budget

• B. Score card

Project 2010 30/Jun

Apply CMF *

Change Governance & Support

Feedback & Progress

Monitoring

GoodCo 2010 (Drive Initiatives)

Interaction with wider GoodCo

Results Communication

Mar/Apr

Process Overview

ExcoExco

Session pre Strat Session

EG 2006 <Your Organisation> Environmental scan

Three, ultimately four sessionsInput, discussion, conclusion structure

“Listening” Questions for the Presentation:-

1. What a fundamental forces that will shape <Your Organisation>’s future business environment do you pick up?

2. What are key strategic choices that <Your Organisation> is face with from the presentation?

Presentation Discussion question:-

What are the implications for <Your Organisation> in this presentation?

Inq: Future & Future Bus Environement

•Trends

•FSF

•FBE

•Scenarios

Mang. Conf

• Introduce & share possible futures

• Open the debate on the need for change

• Open debate on prefered course of action

Engagement Events

• 5 Large group sessions targetting 750 people (+/- 30%) representative groups

• Present & communicate a vision

• Participatively identify strategic initiatives for GoodCo success(vision)

• ID Specific required actions

InitiativesSuggestions

Interaction with Board & EXCO

19-20 AprExco & Board Strat Session

4 - 15/45/3

Guardian Interact Sessions

• All staff / countrywide

• Exco Driven, TG 2010 support

• Vision communication

• Future Process communication *

Workplace Roll-Out*

• For identified BU’s and work gourps *

• Leadership preparation and support on initiative roll-out / planning

• Initiative specific implpementation planning using 7S model to explore impact

• More detailed actions per initiatives

• BU plan input /content

Theme Specific Roll-Out *

• For 7S themes: Roll-out / paticipative sessions

• For theme: Intergration & coordination

• Theme task ops representative work groups

• Output: Company wide Theme action plans

Apr - May May - Jun Jul - Sep

• Vision Confirmation

• Strategic Choices against Balanced Scorecard

• Initiatives List: Approved / Investigate / Rejects

Budgetting

Project 2010 30/Jun

Apply CMF *

Change Governance & Support

Feedback & Progress

Monitoring of BU Plans

GoodCo 2010 (Drive Initiatives)

Interaction with wider GoodCo

•Videos

Exco

Exco Session pre strat session

Results Communication

•Exco & HR Driven

•Line Management involvement

•Video Based Feedback

New Initiatives

Conversation Design:

Novelty requirement: Keep the interest by varying the technique (framework)

Use different angles (frameworks & questions) to get to essentially the same topic• Who decides when the topic is

exhausted? You. See later.

Conversation Management… is about….

Targeting multiple conversation audiences;

Having synchronised conversations

Strategy Planning is having a “Strategic Conversation”

Design a

“Strategic Conversation”



principles in practice? Measure of Performance? How does one structure a strategic

conversation? What we should we do about this? What should your role be?

Programme:








Section omitted due to technical nature

Programme:








Refer separate diagram

Diagram to be developed Concept to be discussed

Shifting the burden structure

SymptomaticSolution

Problem symptom

FundamentalSolution

Side Effect

+

+

+

+

+

-

-

-

+

Shifting the burden structure in soft

problem situations

+

+

+

+

+

-

-

-

+

Deal with issue(make decision)

Current problem,“crisis” or issuerequires decision

Clarify thinking,decision criteria(Vision; Long termpositioning)

Time spent onfundamental re-thinking of assumptions

75

Thinking Ladder to Action

Choice of Action is based on Beliefs held of the situation, Which are based on Assumptions you

make regarding real situation, Which are formed from Observations

you make in the situation.



principles in practice? Measure of Performance? To what extend do we need to build

intellectual leadership? What we should we do about this? What should your role be?

Programme:








The Inflection Curve

Inflection point

10x force

Decline

Growth

Seven Forces Model(adapted from Grove)

Business

Power, vigour,competence ofexisting competitors

Power, vigour and competence ofpotential competitors

Power, vigour andcompetence ofcustomers

Power, vigour andcompetence of suppliers

Power, vigour andcompetence ofcomplementers

Possibility of that what your business is doing can be donein a different way

Socio-political

GoodCo Really

Succesful

GoodCo

Fail

Then Now “Short” Term FUTURE

FAIL

2010

Realistic & very credible failure scenarios for GoodCo.

“High”

Celebrating this at Management Conference.

Realistic & very credible high achievement scenarios for GoodCo.

MUCH better performance.

Management Conference – GoodCo’s Performance

CEO: Current Performance & how we got here.

Go

od

Co

’s P

er f

or m

an

ce

GoodCo

New

Current Situation

What we did / did not do?

What we did do to get here?

Possible Future

Environments

Practical Gap

Action results

Individual Expectations

Rethink action within existing

mentalframework

Level of surpriseSize of gap,

Magnitude of negative impact

Determine action

Rethink Mental

Framework

Limitation on extent

of frameworkchange

Current corporate

culture

Number and extent ofsurprises

corporate mindregisters

Opennessto change of

corporatemind

Corporate mind shift

How ready is this organisation for change?*

CEO/MD?Board?Executive management?Senior staff/middle management?

* What kind of change? See later

If you need to:-

Scenario planning

Refer tables

84

Arie De Geus: Change Management

“Memory of the future” Alternate time paths into the future One-track mind vs environmental

sensitivity Planning as learning

85

Scenario Planning

Building alternate future time paths Rich “memory of the future”

86

SCENARIODEFINITION

A COHERENT STORY ABOUT THE UNFOLDING OF FUTURE EVENTS.

87

Scenario Planning

Context for decision making Understanding more possibilities Develops mental model of the future Does not tell you what to do

88

Competitive Advantage

A sustainable competitive advantage is very rare

Knowing when to change is crucial

89

Alternate scenario approaches

Present

Futureshapingfactors

Different plausible future outcomes

Concerns

Key uncertaintiesRules of the game

Alternate futurescenarios

Events (influenceable)Trends (notinfluenceable)

End states

RequiredDirection

90

Scenario Planning

Present

Futureshapingfactors

Different plausible future outcomes

91

Scenario Development Technique: Consider a major issue, concern, question

or decision What could happen from a ...

• pessimistic (things get worse) viewpoint?• optimistic (things get better) viewpoint?• no-change (things neither worse nor better)

viewpoint?Describe a sequence of events unfolding.

What are the pitfalls and opportunities in each of these three outcomes?

How should I/you/we act on this issue if each of these three cases occur?

92

Steps in scenario development

Identify 3-5 major uncertainties in each of the windows on reality.

Combine to form 9-11 key uncertainties. Interpret to form sequence of unfolding events ,

using scenario technique (optimistic, pessimistic, no-change).

Describe logic of scenario using systems dymanic model

Identify pittfalls and opportunities in each scenario Itentify broad strategies.

Case Study: Telkom Scenarios

(Footnote: Race car driver training)

94

Participation

Appreciate Current Situation

Current Future Scenarios

Desired Future Scenario

Enterprise Design

Strategies & Action Plans

Planning Process

Srategy Conversation BUILDS:

Shared understanding of problematique (“mess”)

Alignment w.r.t. ends Agreement on action (see later) Continuous action (see later)

96

Effective Strategic conversation

“An effective strategic conversation requires a balance between integration of mental models, to enable the organisation to come to a shared conclusion and move forward, and differentiation of mental models, to ensure that a wide range of weak signals in the environment are perceived, understood and brought into the system to enter

the conversation and be acted upon.” (Van Der Heijden)

97

ENVIRONMENTAL SCANNING

POLITICAL ENVIRONMENT

ECONOMIC ENVIRONMENT

SOCIAL ENVIRONMENT

TECHNOLOGY ENVIRONMENT

INSTITUTIONAL/ORGANISATIONALENVIRONMENT

NATURAL/PHYSICAL ENVIRONMENT

WINDOWS ON REALITY

98

ENVIRONMENTAL SCANNINGKey Questions

WHAT CHANGES & TRENDS, IMPORTANTTO <your business and its industry>,DO YOU OBSERVE?

WHAT DRIVE THESE CHANGES? WHATFACTORS INTERACT TO PRODUCETHESE CHANGES?

WHAT IMPACT IS THIS LIKELY TO HAVEIN THE FUTURE? WHY ARE THEYIMPORTANT?

...MORE

99

ENVIRONMENTAL SCANNINGKey Questions

WHICH HIGH IMPACT DEVELOPMENTSMAY UNFOLD IN FUNDAMENTALLYDIFFERENT DIRECTIONS, DEPENDINGON OUTCOME OF FUTURE EVENTS?(KEY UNCERTAINTIES)

WHICH OF THESE DEVELOPMENTS ARE: -UNDER CONTROL OF <your business>? -MAY BE INFLUENCED BY <your business>? -NOT INFLUENCABLE NOR CONTROLLABLE? (RULES OF THE GAME)

Linking Environmental Scan & Scenario Development

Env Scan front-end to Scenario Development – eg Telkom



principles in practice? Measure of Performance? To what extend do we need to build

the case for change? What we should we do about this? What should your role be?

Programme:








103

Strategy is Acting to SurviveStrategy is the conscious

behaviour manifested in the behaviour of individuals and groups for the purpose of continued survival.

Why? A little diversion…later

Johan Strümpfer, 1997Johan Strümpfer, 1997

104

“What is strategy?”

Strategy is the creation of a unique and valued position, involving a set of activities. If there were only one ideal position, there would be no need for strategy. Companies would face a simple imperative -- win the race to discover and preempt it. The essence of strategic positioning is to choose activities that are different from rivals’. If the same set of activities were best to produce all varieties, meet all needs, and access all customers, companies could easily shift among them and and operational effectiveness would determine performance.

(Porter)

105

Views on Strategy

Prahalad: … a strategic architecture is the link between present and the future. I tells you what you should be doing now, …, in order to create a winning position for yourself in a new opportunity arena.

106

Views on Strategy Porter: … getting ahead--then staying ahead- is

the basis of strategy: creating a competitive advantage. Strategy is about setting yourself apart from the competition. It’s not a matter of being better at what you do -- it’s a matter of being different at what you do. … A good strategy is concerned with the structural evolvement of the industry as well as with the firm’s own unique position within that industry. … Increasingly, ... companies ... don’t just optimise within an industry, but actually reshape and redefine their industry.

107

Views on Strategy

Seymour: …there’s not another market extant that shows as well as the [Personal Computer] business how irrelevant zero-sum thinking has become: Successful companies expand the entire marketplace, not just their own revenues.

108

The strategy logic

Business success

Available resources

OrganisationalMaintenance andDevelopment Effort

DistinctiveCompetencies

ProfitPotential

CustomerValue

CustomerChoices

Competitive advantage

109

The strategy logic: te essence of strategy

Choose a position, with respect to the overall operating context, that is different.

The positions the set of activiest the business underatakes.

What is different about this position? Why is it valued, by whom?

110

The Strategic Business Model

A rational articulation of business success, past and future

A shared mental model of what makes the business succeed

Successful organisations concentrate on one strategic business model (not business, not core business)

A shared framework for ensuring focus

SBM work adapted from Van Der Hijden

111

The strategy logic

Business success

Available resources



ProfitPotential

CustomerValue


112

Business success

Available resources



ProfitPotential

CustomerValue


Operational& OrganisationalEffectiveness

113

Strategy Development and Strategic Business Model

SBM structures a joint rational consideration of the business focus

Evaluation of current strengths and weaknesses of distinctive competencies and their interaction

The future outlook for maintaining business success in changing conditions.

114

Profit Potential

Profit

Operational Effectiveness

Quality of strategyImplementation

ProfitPotential

StrategyAppropriateness

115

Profit Potential

Current value creation Perceived future value creation

Buyers value system

Seller’sDistinctive Competencies

The offer

VALUE

“Fit”

116

Profit Potential results from

Discovering new ways of doing something for customers for which they will pay (creating value)

Bringing together a combination of factors & competencies to do this (create this value)

Creating uniqueness in this formula (difficult to emulate) in order to lay claim to this created value

Maximising the difference between customer value and supplier cost

117

Distinctive Competencies

Competency: Ability to do something Distinctive: created in the organisation over

time and uniquely part of the organisation• Cannot be sold or traded

• Not company “strengths”

• Barriers to entry for competition

What is unique about this particular Strategic Business Model, and why are others unable to emulate it?

118

Fundamental Sources Of Distinctiveness

Uncodified institutional knowledge• Uniqueness is not enough; must be embedded• Sits in networked people• Sits embedded in processes• Does not sit in individuals (Not personal

knowledge) Sunk costs/irreversible investments

• Investments in reputation• Sits in legal protection• Sit in specialised assets

119

Examples of Distinctive Competencies

Institutional Knowledge:• Institutional R&D capability• Company know-how• Functional knowledge pools• Knowledge of customer value systems• Shared assumptions and values

120

Examples of Distinctive Competencies-2

Embedded processes:• Leadership style and commitment• Links into the world of the consumer• Access to distribution channels• Institutional relationships with government• Internal communication, business systems,

and culture• Staff identification and commitment• …...

121


Reputation and trust:• Brand• Installed base• Dominant size and presence• Financial clout

Legal protection• Concession agreements• Patents• Ownership of prime sites

122


Activity specific assets:• Investments in size, market share and

image• Sunk investments in sites, exploration,

experimentation, specialised equipment, …• Investments in economies of scale,

distribution systems• First mover in production capacity

investment

123

Systemic Distinctive Competencies

Distinctive competencies may occur singly• Easier to emulate

Synergy in distinctive competencies obtained by systemically integrating distinctive competencies• Yields potent Strategic Business Model• Very difficult to emulate

124

Distinctive Competencies Depreciate and perish over time:

Eventually competitors finds ways to emulate the essence of the competency

The overlap between the competency and the customer value system reduces because of evolving customer values.• Distinctive Competencies must be maintained

and renewed through creation of new ones out of value generated with existing ones.

125

Characteristics of Good Distinctive Competencies

Investments are largely irreversible Distinctive Competencies cannot be sold or transferred to

other firms There is a limit to which development thereof can be

speed up by increasing investments Development thereof is a gradual evolution through

collective learning and information sharing Strong Strategic Business Models exploit multiple

distinctive competencies re-inforcing each other in a synergistic way

Distinctive Competencies create competitive advantage in the eyes of customers.

126

Competitive Advantage Derives from:-

A Profit potential, derived from premium price: • Distinctive Competencies are used to create a

differentiated product, the characteristics of which the customer is prepared to pay a superior price compared to competitive products

A Profit potential derived form cost leadership:• The distinctive competencies are used to create unique

low-cost ways of creating or making available a non-differentiated product. This allows the supplier to make available a competitively priced alternative for the customer.

127

Sources of Differentiation

Intrinsic to product:• Unique features and attributes, of quality,

design, availability, and support Intrinsic to relationship:

• Dynamic capability to produce uniquely fitting product, based on superior relationship between supplier and customer, based on image, access, effective communication and understanding.

128

Differentiation

Requires deep understanding of what creates value for the customer• Customer research is not enough• Customers do not know needs they

have not experienced Can only be created out of the

optimisation of the total customer/supplier system

129

Cost leadership

Works with standardised and clearly defined products with a continuing market

Customers have many alternative sources of supply

Operates in commodity markets

Summary: Competitive Advantage derive from

Cost leadership Differentiation in terms of unique & valued

qualities in the offering.

Both depend on distinctive competencies• Increasing complexity to build

BOTH have a limited shelf life• Decreasing shelf life duration

The diversion:- Why?

Telephony

Telegram

PABXFacsimile

Telex

TelevisionRadio

Telegraphy

1850TelegraphyTelegraphy

Telegram

Telephony

1880

1930

TelephonyTelephony

TelephonyTelephony

RemoteComputing

RemoteComputing

RemoteComputing

Stereo Radio

Stereo Radio

Stereo Radio

1880

1850

1930

1970

1980

1990

2000

2000

1990

1980

1970

Telex

Telex

Telegram

Telegram

Telegram

PagingMobile

telephony

Mobiletelephony

Mobiletelephony

Satelliteservices

Satelliteservices

Satelliteservices

Navigation

Visualisation

Telemetry

CCTVPrivate circuit

Private circuit

Private circuit

Private circuit

PABX

999Service

PABX Interconnect

PABX Interconnect

Facsimile

Fax

999Service

EDI

EDI

EDI

EmailEmail

Email

Low speeddataMedium

speeddata

High speeddata

Linkline

CallstreamCallstream

DistributedComputing

PacketSwitched Data

Image transmission

TeletexGraphics Database

Videotex

Multimedia Video LibraryCable TV

Satellite TV

NICAM TVVideo ConferenceVoice Conference

Quadrophony

MIDI

Alpha-numericpaging

Mobiledata

Skyphone

Remotesensing

Remotesensing

TelepresenceTelemetry

Telemetry

Surveillance

SurveillanceSecurity services

LANDECNET

TCP/IPSNA

Token ring

CSMA/CDToken bus

ISDN

MegastreamStar services

FaxColour fax

DDSN

999Service

Credit cardverification

File transferCircuit switched

dataTelexEFTPOS

Voice messaging

Network servicesDDSNCentrex

Intelligent network

999 Services

Fast fax

Speech fax

Text fax

Transactionprocessing

File transfer

Smart card comms

Credit cardverification

Circuit switcheddata Cashless

services

TelexArchiving

EFTPOS

Home bankingX.400

Voice messaging

TranslationVoice

recognitionHi-fi Telephony

Video Telephony

Multi-mediaTelephony

Linkline

Broadband data

Telemarketing

DistributedComputing Packet

Switched Data

Broadband image transmission

ID verification

Multi-media iInteractive video

Video Library

Teletex

Videotex

Multi-mediadatabase

Cable TVSatellite TV

NICAM TVHDTV

Video narrowcast

EQTVHome shopping

Video ConferenceVoice Conference

Shareware services

Quadrophony

MIDI

Alpha-numericpaging

Mobile alarmsVoice paging

Mobile faxMobile videotext

Telewriting

Personal numberingMobile data

PCN

Mobilevideophone Worldwide

mobility

Skyphone

Tracking

Navigation

Transportservices

Mobile VANS

Teleworking

Video games

Visualisation

Virtual reality

OSICSMA/CD

LANToken ring

LAN InterconnectSONET

DQDBSMDS

BISDN

FDDIATM

Frame relayKilostream

ISDN

Megastream

SDH

Wireless LANSecurity services

Source: Ericsson, quoted by Acton, Telkom.

133

Why industries change:Why industries change:

increase in competitiveness technology globalisation consumerism

135

Why industries change:Why industries change:

increase in competitiveness• globalisation• technology• consumerism

simple survival pressure form an exploding population of individuals and organisations

more people, more educated peopleWere are only in the early stages of this dynamic

<Your Organisation> Future Road Map:Key questions

1. To what extent does <Your Organisation> have to change/innovate to regain a dominant competitive position? (How much change is needed?)

2. What should <Your Organisation>’s future strategic competitive position be? (How will we compete?)

3. What are we striving to achieve? Where is <Your Organisation> going to? What are the key choices we face?

4. How will we get there? What are the main things <Your Organisation> has to do?

To what extent does <Your Organisation> have to change/innovate to regain a dominant competitive position?

(How much change is needed?)

“Strategic Bankruptcy”

Refer to separate article



principles in practice? Measure of Performance? To what extend do we need to (re-)

build our competitive advantage? What we should we do about this? What should your role be?

Programme:








A template process framework:

Refer next slide Develop a set of pictures depicting

your views on a desirable strategy process for <Your Organisation> in 2007.

Strategy: Things to strive to do

Why change?

CompetitivePositioning

EnterpriseDesign

Strategic Choices

Tools:•SBM•SDM•Bus Idea

Outcomes:•DistinctiveCompetencies•(Core Competence)•Expire by date•New Trajectories

Tools:•Env Scan•Scenarios•7 Forces

Tool:•StrategicChoiceMaking

Tools:•MED•NetworkDesign

Tools:•NGT•Brainstrom•Clustering

Outcomes:•Differentiation

Outcomes:•OperatingModel•BusinessStructure

Outcome:•SharedPerceptionof doom

Outcomes:•Directionlist(3-5 items)

Additional Material for Reference

Multiple Perspective Exploration

Viewpoints Viewpoint definitions Prioritisation of outcomes ( with

causal logic) Activity models Build consensus on action

Problems and solutions

There is nothing as problematic as solutions(Argyris & Schön,1967)

The Berkeley experiments

Solutions

Principles for Strategy Process Johan Strümpfer © Johan P Strümpfer, 2006.

Documents

Transcript of Principles for Strategy Process Johan Strümpfer © Johan P Strümpfer, 2006.