Strategic IQ, Smart Structure and Smart...

Strategic IQ, Smart Structure and Smart Mind

9/17/2018 [email protected] 1


2001

2016

HiGH IQ

Medium IQ

LOW IQ

DISTRIBUTED INTELLIGENCE

SYNCHED THINKING- ACTING

MIND SET OF CHANGE


DEBATING WHEN TO CHANGE

COMPETENT TO CHANGE

CLEAR MODEL OF SUCCESS

INCOMPETENT

IN DENIAL

STRATEGICALLY BLIND

HiGH IQ

Medium IQ

LOW IQ


INCOMPETENT

IN DENIAL

STRATEGICALLY BLIND

1. Blissfully Ignorant: They deliver profitable growth without knowing why: never had strategy and don’t know what it is. It is often easy to grow sales and profit when there is little competition. The time to develop strategy is before you realize you need one.

2. Pretend: They fool themselves with jargons, but what they do has little to do with building and sustaining competitive advantage.

3. Strategic Amnesia: Once they had a good strategy but now they have forgotten and operate on autopilot.

HiGH IQ

Medium IQ

LOW IQ


INCOMPETENT

IN DENIAL

STRATEGICALLY BLIND

They have a clear strategy that has worked for them in the past and

they refuse to give it up despite the fact that they can see the need for

change.

1. Some try to ignore the data.

2. Others accept it but wait for their fate.

3. Others exhaust themselves with tactical diversion like overhead cost reduction, reorganization in order to drive short term profit rather than fixing the long

term problem.

HiGH IQ

Medium IQ

LOW IQ


INCOMPETENT

IN DENIAL

STRATEGICALLY BLIND

1. They admit that they have a strategic problem but they don’t have the

competence to solve it.

2. Lost in the dark. They don’t know what it is but they can feel it.

3. They have got wide range of strongly held views but no real agreement on

how to proceed.

4. Poorly framed problems.

5. They agree on the problem but march off in the hope of victory even though

they are headed in the wrong direction.

Strategy formulation should not be outsourced; rather process and skills should be developed internally to formulate and implement strategy.

HiGH IQ

Medium IQ

LOW IQ


INCOMPETENT

IN DENIAL

STRATEGICALLY BLIND

Try harderOverhead Cost Reduction

Re-engineeringRe-organize

Financial Engineering

OPEN YOUR EYES

CONFRONT REALITY

COMMIT TO LEARN

Fixing today’s problems does not fix

tomorrow’s

HiGH IQ

Medium IQ

LOW IQ



COMPETENT TO CHANGE


Committed but Incompetent

External/ Internal Strategic Review

Strategic Awareness: Opportunity vs Competence

Strategic Options: Yet to decide >> Strategic Choice

HiGH IQ

Medium IQ

LOW IQ



COMPETENT TO CHANGE


Secret Strategy Syndrome

Share and Declare the strategy and logic behind

Strategic Change Program: Redeploy assets, realign the organization

Strategic Scorecard: New Metrics, New Reward System

HiGH IQ

Medium IQ

LOW IQ



COMPETENT TO CHANGE


Complacency: Convinced we’re right

Commit to rigorous revision cycle: Repeat the whole formulation and execution process

Keep Strategy fresh, skills well tuned: Learning Curve

HiGH IQ

Medium IQ

LOW IQ



MIND SET OF CHANGE


• The firm always look to increase advantage

• Think and act at the same time

• Processes that drive better strategy are developed as a cherished asset and embedded in the architecture

• Measure, reward, celebrate change

• Never satisfied with their current model.

• Set aside time and resources to test radical new approaches- operate on the edge

HiGH IQ

Medium IQ

LOW IQ



MIND SET OF CHANGE


• Instead of being just a top management job, integrate the frontline in strategy.

• Dramatically increases the number of people on the look out for strategic threats and opportunities, shaping options, making choices, developing metrics

• Information Systems to track if decisions are made in the best long term interests.


WHAT IS THE OBJECTIVE OF STRATEGY?

To deliver superior sustainable performance.

Firms that achieve this attract more and better resources (e.g. people, investment)

This makes them even more sustainable – a virtuous circle.

Those that do not deliver this often wither and die.

WHAT IS STRATEGIC BUSINESS MODEL?

The principles of how a company intends to deliver superior sustainable performance are captured in its Strategic Business Model.

This summarizes the choices the firm has made about

where to compete, what competitive advantage it seeks, what assets and activities it will invest in to deliver that advantage (its internal scope) and how it intends to organize these assets to do so.


Strategic Business Model

External ScopeThe Battlefields we choose to fight on

• Customers/ Channel• Products/ Services

• Geographies• Vertical Scope

Competitive advantageThe advantages over competitors we seek

• Lower Cost• Better ( Differentiation)

• Faster• Smarter

Internal Scope

• Activities• Assets, Architecture• Functional strategies

System Causal Logic

• If we do X, Y happens• Links between activities

• Virtuous circles

Strategic Scorecard

• Relative measures of success • Rate of change

• Goals and milestones on the way

Crucial Assumptions Driving Choices• If these assumptions turn out to be wrong, then the strategy needs to change

• We know how we would change it



External ScopeThe Battlefields we choose to fight on

• Customers/ Channel• Products/ Services

• Geographies• Vertical Scope

Competitive advantageThe advantages over competitors we seek



Internal Scope

• Activities• Assets, Architecture• Functional strategies

System Causal Logic

• If we do X, Y happens• Links between activities

• Virtuous circles

Strategic Scorecard

• Relative measures of success • Rate of change

• Goals and milestones on the way

Crucial Assumptions Driving Choices• If these assumptions turn out to be wrong, then the strategy needs to change

• We know how we would change it

Some Businesses and some segments are more attractive. Choose your battlefield.



Competitive advantageThe advantages over competitors we

seek



Position is not enough. Build an advantage that will help to win over other competitors playing

at the same position and to deliver superior profits

Requires a thorough understanding of customer

needs and how they are changing over time

• What are the activities required to satisfy needs?• What is the cost of each activity per unit of output?• What drives cost? Scale, Capacity utilization, Run

length, Regional market share, technology, location? • Focus on few things that really matter to customer• Offer same value at lower cost• Cost advantage > discount >> Profit

Better from Customer’s viewpoint:• Product Quality• Self Image• Emotion• Faster delivery• Shorter response time• Greater variety : one stop shopping• Can these combine to create a bundle of

value

• Price Premium > Extra Costs involved

Scope of advantage:

Narrow: serve one segmentBroad: Serve more segments

>> reduce cost

Static

Dynamic

Strategic innovators, quicker in coming up with ideas leading to edge in cost/differentiation

Some come at the later stage of PLC and becomes a me too at lower cost

Strategic innovators, coming up with ideas hard to copy or what the competitor is reluctant to copy; creates path for future


How does moderate strategic IQ operate?

Global View

How global PEST can affect ?

Industry Structure

• How Porter’s forces can affect profitability of different segments now and in future? How was

it in the past?• Are profits moving up streams or down streams

through the value chain?

• >> Choice of segment

Selecting the Competitive advantage• Static

• Dynamic

Configuring for Competitive advantage• In what ways the activities and assets can be

combined to deliver the CA?• Can be viewed from competition’s POV or from

level 0

Competitor AnalysisDispassionate view of Competitors: • How are they doing financially?

• How in strategic measures e.g. Relative Market Share, Relative Customer Satisfaction

• Which segments? Which advantages? Cost Position? Price Realization? Faster? Smarter?

Claimed strategy? Future moves? How will they react to industry trends? Likely reaction to our

moves? What will elicit violet response?

Managing uncertainties: Build scenariosDynamic S Curves, Porter in motion

Internal Strategic Review

• Assets• Formal Architecture

Defining Strategic Options• Identify a number of alternative strategic

business models (target positioning, type of CA, configuration of activities and

assets to deliver that CA, causal logic and underlying assumptions)

Making Strategic Choice

• NPV of cash flows• Consider costs of structural inertia

• Decision theory/ games• Does it align with values and mission

Test, Share/ Declare -> Strategy Execution and Change

Old co, new co, Change Management, Capacity Building for change

Strategic Scorecard, Align Rewards• Top Down to each activity

Rigorous Revision Cycle• Complacency: working well, old

logic not tested• Perpetual Deferral

• Five year planning cycle: start- stop with CEO change


Internal Strategic Review(Identify limitations and opportunity)

Assets

Examine the assets the firm has at its disposal and the way it organizes these assets to create value

• Are they right ones for delivering the current strategy?• Do they provide a competitive advantage?• Are they becoming obsolete? Turning into liability?• Are they creating structural inertia?• Is there any other opportunity for using them?

FinancialReputation

Physical Human

KnowledgeRelationships

Cash in Hand, Balance sheet: Capacity to invest/ stay

Plant, Equipment, Retail outlet, Labs: Scale

Brand: Cost of supporting the brand < Price Premium

Patent: Entry Barrier/ Premium, Knowhow: Learning curve benefitsLoyalty: Customers, Suppliers, Labs, Channels, Govt, University

NPV of development: Morale > Performance/ Performance > Morale?


Internal Strategic Review(Identify limitations and opportunity)

Formal Architecture

Elements of Architecture must also be put to the test

• Are they internally consistent or is the organization at war with itself?

• Does the organization pay its people to do one thing but expect them to do another?

• Are all the elements aligned with the current strategy?• Do they provide a competitive advantage?

Alignment: Reward the right thing

Does it serve the strategy? Better than competition?

Complex multi-layered hierarchies have slower response time; For scale/ large global accounts it is okBecause independent units can not serve that

Alignment: Superior processes provides better metrics, response time, productivity, better design, effectiveness

Hiring, Developing, Firing: Aligned with strategy? Better than competition?

Roles, Responsibilities,

Reporting Relationship

Measurement and Rewards

IT,Communication

Human Asset Development

Business Process


How does high strategic IQ operate?

Distributed Intelligence

Managing the

Innovation Portfolio

Strategy as learning

CreativeDestruction

SmartVision

Push the current strategy to new limits, Self Cannibalization, Shape the environment, Break out

Conscious Capitalism, Inspirational, Grounded in

advantage

Leadership not to command but to shape a context, engage everyone effectively in the strategic change agenda

Innovation Machine, Experimentation

Look to reverse the logic, align rewards

CEO’s job is not to develop strategy and implement.. The

job is to build capacity for continuous change, shape the

environment to firm’s advantage

Project Return

Project Risk

High

Low

Low High

Driver Delight

Distraction Disaster


Causal logic/ Loop:

Lower store labor

Higher Purchase Discounts

Lower Costs

Lower Ad spend

Lower store cost

Smoother Logistics Pipeline

Lower National

Costs

Higher National Volume

Higher Sales/ store

Higher Regional Volume

Lower National

Cost/ Unit

Lower Store Cost/ Unit

Lower Regional

Cost

Lower Regional

Cost/ Unit

Everyday Low Price

Lower Prices

Regional Roll out

National Scale


The Maslow’s Hierarchy of Needs


Transcending the Tribal mind to Smart mind


Transcending the Tribal mind to Smart mind

Responsible for basic reflexes and self preservation. The behaviors triggered are without emotion and fiercely individualistic. Food, water, shelter and sex are paramount needs.

Coordinated Groups get more viable as species. Extended family under the control of alpha male improves chance of survival. Nursing, Protecting young, anger, fear, love, hate, joy, sadness, hierarchy, sympathy, shame, guilt, pride, jealousy, envy, gratitude, embarrassment, admiration, contempt, trust, detecting cheats. Transparency, accountability, honesty, fairness promote trust and make the group effective.

Symbolic language, reasoning skills, powerful communication, learning, generation of new ideas, self awareness, search for purpose…

Human brain is designed not to work; it tries to avoid conscious thinking as it burns up energy.. So it tries to run on autopilot



Higher form: Self confidence, Independence, freedom

Lower form: Recognition, status, fameGroup wisdom vs

Group stupidity and bias



Need to learn, understand and discover

Need for symmetry and beauty

Need to deliver our personal best, a continuous journey

Need to help others to realize their full potential

Strategic IQ, Smart Structure and Smart...

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