Strategy - A View From The Top Chapter 2
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Transcript of Strategy - A View From The Top Chapter 2
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Strategy - A View From The Top
Chapter 2
BY:Brian Davis
Larin SandersIvan Salazar
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Going From Good To Great – Level 5 leaders – Become a hedgehog – Technology – Flywheel effect • Doom loop
– Core values
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4 + 2 = Sustained Business SuccessMcKinsey & Co, Joyce, Nohria, and Roberson
• MUST excel at 4 primary management practices – Strategy – Culture– Execution – Structure
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4 + 2 = Sustained Business Success
• Strategy – Devise and maintain a clearly stated, focused
strategy – Communicate strategy to everyone – Focus on growth – Understand the knowledge about the company
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4 + 2 = Sustained Business Success
• Culture – Develop and maintain a performance-oriented
culture – Develops and encourages outstanding individuals
and team contributions – Low turnover – Set a benchmark outside the industry
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4 + 2 = Sustained Business Success
• Execution– Develop and maintain a flawless operational
execution – Make the process as efficient as possible
• Structure – Build and maintain a fast, flexible, flat organization– Simple as possible
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4 + 2 = Sustained Business Success
• MUST master 2 or more of the 4 secondary management practices– Talent – Innovation – Leadership– Mergers and partnerships
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• Talent – Hold on to talented employees and find more – Building and retaining an effective workforce team
• Innovation – Make industry-transforming innovations – Can transform an industry
4 + 2 = Sustained Business Success
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• Leadership – Find leaders who are committed to the business
and its people – Choosing the right CEO can raise performance
significantly • Mergers and Partnerships – Seek growth – 2nd most popular avenue of growth – Small consistent deals
4 + 2 = Sustained Business Success
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• How to be Successful – Learn how to implement your business decisions – Use selected technology – Going beyond is not rewarded – Must implement flawlessly– Must be able to excel on six or more dimensions
always
4 + 2 = Sustained Business Success
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Strategy And Performance : A Conceptual FrameworkIn developing the right organizational model, companies must focus on three critical dimensions:
1. People 2. Knowledge 3. Incentives
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Strategy
Purpose
Leadership
Structure
Systems Processes
Culture
Performance/Control
People
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Strategy, Purpose, and Leadership• Strategy-structure-systems: create the right
organizational structure and disciplined planning and control support systems.
• This doctrine helped companies cope with high growth, integrate operations, and manage diversified business portfolios.
• Minimizing human initiative, which has been a principal strength, became a major weakness.
• New competitive realities lead to managers focusing on developing corporate competencies such as innovation, entrepreneurship, and decentralized decision making.
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Strategy, Purpose, and Leadershipcont.
• Corporate leaders began to articulate broader, long-term strategic intent to deal with more intense global competition.
• Also, sought ways to involve employees at all levels in the strategic management process.
• Strategic leadership recognizes that strategic discipline and control are secured through commitment, not compliance.
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Strategy and Organizational Change
• There are five organizational variables that are key to creating effective organizational change.– Structure– Systems– Process– People – Culture
• They are all interrelated, so a new strategy often requires change in ALL variables.
• Style, skills, and superordinate goals.
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Structure• The issue of structure is not just one of
deciding whether to centralize or decentralize decision making.
• Vital for an organization to be able to
adapt and evolve strategically and then adopting a structure that allows it to refocus as and when necessary.
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Structure cont.• Corporate structures reflect 1 out of 5
dominant approaches to organization: functional, geographically, decentralized, strategic business unit, & matrix structures.
• Overall, The goal should be to create an organizational environment that gathers resources effectively and is naturally self-correcting as strategic changes need to be made.
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Systems and Processes• The right systems and process enhances
organizational effectiveness & facilitates coping with change.
• A company’s planning, budgeting and accounting, information, and reward and incentives systems can be critical to successful strategy implementation.
• A process is a systematic way of doing things. • Defines the organizational roles and
relationships, and they can facilitate or obstruct change.
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People• Attracting, motivating, and retaining the right people have become important strategic objectives.
• Many companies have recognized how expensive it is to replace knowledge and talent.
• Improvement through skill development.
• Developing tomorrow’s skills, individually and collectively, is key to strategic flexibility.
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Culture• Performance is linked to the strength of a
company’s corporate culture.• Leaders must demonstrate strong values and a
concern for employees, customers, and shareholders.
• Corporate culture is a shared system of values, assumptions, and beliefs among a firm’s employees that provides guidance on how to think, perceive, and act.– artifacts, shared values, and basic assumptions
• Words and phrases are used to define the image a firm wants to portray.
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The Balanced Scorecard• Developed by Robert Kaplan and David Norton • A set of measures designed to provide strategists with a quick,
yet comprehensive, view of the business• Answers 4 basic questions1. How do customers see us?2. At what must we excel? 3. Can we continue to improve and create value?4. How do we look to our company’s shareholders?
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The Balanced Scorecard
• The Balanced Scorecard requires managers to translate a broad customer-driven mission statement into factors that directly relate to customer concerns such as :
• Product quality • On-time delivery • Product performance • Service and cost• Measures are defined and are articulated into
performance metrics.
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The Balanced Scorecard
• Evolved over time into an overall management system that encompasses 4 management processes:
1. Translating a vision2. Communicating goals and linking rewards to performance 3. Improving business planning4. Gathering feedback and learning
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Performance and control
• Most methods for measuring and evaluating performance at different levels in the organization are focused on outcome control.
• Outcome control is principally achieved by altering the incentive structure for business units, executive teams, and individual management.
• But, when changing existing corporate culture a behavior control style of management should be used.
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The Role of the Board
• Creating a culture of high performance is central to a board of directors’ fundamental mandate which is to “direct the affairs of the company”.
• To create a high performance culture a board should do the 6 following things:
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• 1. Define its role, agenda, and information needs.
• Boards must define their priorities and a view of what matters most to the success of the enterprise.
• Provides guidance and support
• Board should know the business of the company and the competitive environment in which it operates.
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2. Ensure that management not only performs, but performs with integrity.
• Directors should assess management’s integrity not only at the outset in their hiring decisions, but continuously through the decisions made by management.
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3. Set expectations about the tone and culture of the company.
• The board plays an important role in assuring that management is promoting an appropriate ethical culture within the company.
• “Tone at the top” should be a priority throughout the company and not viewed simply as a compliance mater.
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• 4. Formulate corporate strategy with management.
• The board should challenge the management team to propose and continually fine-tune the corporate strategy.
• The board should determine benchmarks
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• 5. Ensure that the corporate culture and the company’s approach to audit and accounting, internal controls, and disclosure are consistent and aligned.
• 6. Help management understand the expectations of shareholders and regulators.