Strategic Management

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Strategic Management

• GM 105
• Dr. Lindle Hatton

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CANOE THEORY

• Think of your organization as a long canoe
• The canoe has a destination
• Everyone in the canoe has a seat and paddle
• Everyone is expected to paddle
• Those who wont paddle have to get out of the
  canoe
• Those who prevent others from paddling have to
  re-adjust or get out of the canoe
• There are no passengers in the canoe
• The canoe theory understands crisis
• The canoe theory says you have the right to be
  happy

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CANOE THEORY
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BUILT TO LAST

• Preserve the Core

Stimulate Progress
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GOOD TO GREAT

• Level 5 Leadership
• First WhoThen What
• Confront the Brutal Facts
• The Hedgehog Concept
• A Culture of Discipline
• Technology Accelerators
• The Flywheel and The Doom Loop

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Private versus Public Organizations

• Purpose
• Goals
• Financing
• Decision-Making
• Key Stakeholders

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• Strategic Management
• Versus
• Strategic Planning

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Features of Successful Strategic Management

• Has support of organizations executive officer.
• Is user friendly.
• Is participatory, not left to planners.
• Is flexible.
• Leads to resources decisions.
• Engages and motivates all staff.
• Is fresh and continuous, not static and stale.

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Features (Continued)

• Is Proactive
• Not a Quick Fix
• Part of Quality Management
• Payoffs Increase over Time

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Lessons Learned About Strategic Planning

• Plans must be tailored to organization.
• No one size fits all.
• Time to complete takes longer expect 50 more
  than planned.
• Process needs a shepherd.
• Visionaries needed at beginning and detail types
  thereafter.

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Why Managers Dont Plan

• Time Consuming
• High Demands
• Not Rewarded
• Executives Dont Support It
• Too Risky

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Strategic Management Model

• Scanning
• Where are we now?
• Strategy Formulation
• Where do we want to be?
• Strategy Implementation
• How do we get there?
• Measurement/Performance
• How do we measure our progress?

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Strategic Management Model

• Strategy Formulation
• Where do we want to be?
• Vision
• Mission
• Values
• Goals
• Objectives

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VISION

• Vision without Action is a Daydream
• Action without Vision is a Nightmare
• Not Optional
• Stretch 30 Years
• 8-10 Words in length
• Future State
• Brief and Memorable

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VISION (Continued)

• Inspiring and Challenging
• Descriptive of the Ideal

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Vision Examples

• Light the Fire Within
• A Safer Future for All Communities
• See the Mountains Breathe Freely
• To Be the Happiest Place on Earth
• To Be the Worlds Best Quick Service Restaurant

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Vision Levels of People

• Some people never see it. (Wanderers)
• Some people see it but never pursue it on their
  own. (Followers)
• Some people see it and pursue it. (Achievers)
• Some people see it and pursue it and help others
  see it. (Leaders) John Maxwell, Developing The
  Leader Within You, 1993.

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VISION EXERCISE
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Mission Statement

• In the absence of a clearly defined direction one
  is forced to concentrate on confusion that will
  ultimately consume you.

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MISSION

• What is our purpose?
• Describes current state
• Timeline is 3-5 Years
• Builds on our distinctive competencies
• Tends to focus on Core Business
• 30-35 Words in length

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Mission Examples

• To Lead All Communities in Disaster
  Preparedness, Mitigation, and Recovery by
  Maximizing Assistance and Support.
• Caltrans Improves Mobility Across California.
• To produce superior financial returns for our
  shareholders as we serve our customers with the
  highest quality transportation, logistics, and
  e-commerce.

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MISSION EXERCISE
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Corporate Governance

• What is it?
• Codes of Governance
• Role of the Board of Directors
• Role of Top Management Team
• Executive Compensation

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Corporate Governance

• System by which a firms owners control its
  affairs.
• Does it work?

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Codes of Governance

• The Cadbury Code 1992
• Sarbanes-Oxley Act 2002
• Public Company Accounting Oversight Board
• Triple bottom line
• Four major issues
• Ownership structure and influence
• Fianacial Stakeholder rights and relations
• Financial transparency and information disclosure
• Board structure and processes (audit)

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Role of the Board of Directors

• Monitor
• Evaluate and influence
• Initiate and determine
• Organization of Board
• Insiders versus outsiders
• CEO/chair position
• Committees Effectiveness

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Role of Top Management Team

• Who is the TMT?
• Executive Leadership and Strategic Vision
• Articulates strategic vision for corporation
• Sets the model for others to identify and follow
• Communicates high performance standards and
  builds confidence in followers abilities to meet
  standards
• Managing strategic planning process

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Executive Compensation

• Incentive alignment
• Executive Ownership
• Incentive compensation
• Salary
• Bonus
• Stock Options
• LT Bonus

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VALUES

• Guiding Principles
• Help establish Culture
• Part of Preserving the Core
• Core Ideology

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Value Examples

• CHP PRIDE
• HP WAY
• J J Credo
• Build the Spirit of the Place

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Ethical Awareness Model

• Organizational Ethics
• Individual Ethics
• Personal Values

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VALUES EXERCISE
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Strategic Management Model

• Scanning
• Where are we now?
• Macro Analysis (STEP, PESTEL, ETC.)
• Industry Analysis Competitive Intelligence
• SWOT Analysis
• Internal versus
• External Elements

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Why Scan?

• To know your position in the environment
• To respond effectively to constant change
• To see the organization as a whole
• To avoid surprises
• To survive
• To lay the foundation for strategic issues

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SCANNING Key Environmental Variables

• Macro Environment STEP, PESTEL
• Task Environment Industry
• Internal Environment Focal Organization

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Socio-Cultural Variables

• Lifestyle Changes
• Career Expectations
• Regional Shifts in Population
• Life Expectancies
• More women in workforce
• Greater concern for fitness
• Postponement of family formation
• Increase in temporary workers

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Technological Variables

• Total Federal Spending for RD
• Total Industry Spending for RD
• Focus of Technological Efforts
• Patent Protection
• Wireless Communications
• Nanotechnology
• Productivity Improvements
• Genetic engineering

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Economic Variables

• GDP Trends
• Interest Rates
• Money Supply
• Inflation Rates
• Unemployment Levels
• Wage/Price Controls
• Energy Availability Cost
• Disposable Discretionary Income

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Political-Legal Variables

• Antitrust Regulations
• Tort Reform
• Environmental Protection Laws
• Taxation at local, state, federal levels
• Hiring and Promotion Laws
• Americans Disabilities Act of 1990
• Sarbanes-Oxley Act of 2002

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Demographic Variables

• Aging Population
• Rising affluence
• Changes in Ethnic Composition
• Geographic distribution of population
• Disparities in income levels

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Global Variables

• Increasing Global Trade
• Currency Exchange Rates
• Emergence of Indian and Chinese Economies
• Trade agreements (NAFTA, EU, ASEAN)
• Creation WTO

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STEP EXERCISE

• Socio-Cultural
• Technological
• Economic
• Politico-Legal

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Industry Analysis

• 6 Forces Analysis
• Industry Competitors
• Suppliers/Vendors
• Customers/Clients
• Potential New Entrants
• Substitutes
• Other Stakeholders
• Role of Complementors

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New Entrants and Entry Barriers

• Absolute cost advantages
• Access to inputs
• Government policy
• Economies of scale
• Capital requirements
• Brand identity
• Switching costs
• Access to distribution
• Proprietary products

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Buyer Power (Channel and End Consumer)

• Buyer volume and information
• Brand identity
• Price sensitivity
• Threat of backward integration
• Product differentiation
• Substitutes

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Supplier Power

• Supplier concentration
• Differentiation of inputs
• Switching costs
• Threat of forward integration
• Cost relative to total purchases in industry

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Substitutes

• Switching costs
• Buyer inclination to substitute
• Variety of substitutes
• Price-performance tradeoff of substitutes
• Necessity for product or service

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Degree of Rivalry

• Exit barriers
• Industry concentration
• Fixed costs
• Industry growth
• Intermittent overcapacity
• Switching costs
• Brand identity
• Diversity of rivals
• Corporate stakes

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Other Stakeholders

• Employees
• Unions
• Government
• Trade and Professional Associations
• Other Direct Influencers

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Role of Complementors

• Number of complements
• Relative value added
• Difficulty of engaging complements
• Buyer perception of complements
• Complement exclusivity
• Tend to increase profits by increasing demand for
  an industrys products

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6 FORCES EXERCISE
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Competitive Profile Analysis

• Identify Key Competitive Factors
• Identify key Competitors

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COMPETITIVE PROFILE EXERCISE
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Industry Foresight

• Customer
• Needs
• Unarticulated
• Articulated
•  
  
  Customer
• Served Unserved Types
  

Unexploited Opportunities
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Internal Environment

• Internal Profile Analysis
• SWOT Analysis

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Internal Profile Analysis

• Identify Key Core Functions
• Identify Key Measures for Core Functions
• Build Matrix

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SWOT Analysis

• Internal Environment
• Strengths
• Weaknesses
• External Environment
• Opportunities
• Threats

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SWOT EXERCISE
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Strategic Management Model

• Strategy Formulation
• Where do we want to be?
• Vision
• Mission
• Values
• Goals
• Objectives

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GOAL

• Supports the Mission
• Deals with One Issue or Item of Focus
• Reflects a primary activity or strategic
  direction
• Describes the To Be State
• BHAG
• Encompasses a long period, i.e. at least 3 years

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Goal Examples

• Achieve excellence in the delivery of disaster
  recovery and mitigation programs.
• Professionally develop our employees as a
  reflection of DADs key attributes and values.
• Increase the supply of housing, especially
  affordable housing.
• Become a model for customer service.
• To provide benefits in correct amounts and issued
  in a timely manner.

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Goal Statements Litmus Test
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Goal Exercise
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OBJECTIVES

• Add specificity beyond Goals
• Answer the questions
• What is to be accomplished?
• When?
• Should contain the SMART Elements

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OBJECTIVES SMART Model

• Specific
• Measurable
• Aggressive but Attainable
• Results-Oriented
• Timeframe

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Strategic Objective Examples

• By June 30, 2005 achieve 75 rating on the DAD
  service index from all stakeholders.
• Increase sales growth 6-8 in the next 5 years.
  (PG)
• Cut corporate overhead costs by 30 million per
  year. (Fortune Brands)
• Operate 6,000 stores by 2010 up from 3,000 in
  the year 2000. (Walgreens)
• Reduce greenhouse gases by 10 percent (from a
  1990 bast) by 2010. (BP Amoco)

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Objectives Litmus Test
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Strategic Objective Exercise
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Strategic Management Model

• Strategy Implementation
• Everyone is Responsible
• Few Guidelines
• No Easy 10-Step Checklist to Follow

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Strategic Management Model

• Strategy Implementation
• Most open-ended part of Strategic Mgmt
• People implement strategies not Organizations

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Strategic Management Model

• Strategy Implementation
• How do we get there?
• Work Action Plans
• GOOMs

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Strategy Implementation Considerations

• 7-S Framework Strategic Fit
• Human Resources
• Patience

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7-S Framework

• Shared Values
• Strategy
• Structure
• Systems
• Skills
• Style
• Staff

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Human Resource Rule

• Hire Smart
• Train Hard
• Manage Easy

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Parable of the Bamboo

• It takes patience and discipline to develop and
  empower people in fact, its like growing
  bamboo. Once the seed is planted, you must water
  it daily for four years before the tree breaks
  ground then it grows 60 feet in 90 days!
  Executives who nurture people can get similar
  resultsHow, you ask, can such rapid growth be
  possible? It results from the miles of roots that
  develop in those first four years. Preparing
  people to perform is the task of leadership.

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Implementation Strategies

• GOOMs
• Implementation Conference
• CEO involvement
• Other Strategies?

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GOOMs

• Goals
• Outcomes
• Objectives
• Measures

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Definitions

• Goal Broad, General BHAG
• Outcome Desired end result and report
  performance
• Objective What and When
• Measure A quantified unit that assesses
  progress or achievement

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GOOM Example

• Goal 1 Achieve excellence in the delivery of
  disaster recovery and mitigation.
• Outcome Increased Customer Satisfaction
• Objective 1.1 By June 30, 2005, achieve 75
  rating on the DAD Service Index from all
  stakeholders.
• Measure DAD Service Index (DSI)

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GOOM Exercise
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Strategic Management Model

• Measurement / Performance
• Why do we measure our progress?

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Why Measure?

• Reactive Reasons
• Government Intervention
• Fewer Resources and Smaller Budgets
• Increased Demand for Accountability
• Mandated

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Why Measure?

• Proactive Reasons
• Makes us more responsive to public needs
• Provides feedback on mission accomplishment
• Creates blueprint for linking budget to outcomes
• Good management and good public policy

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Measurement / Performance

• How do we measure our progress?
• 5 Types of Measures
• Input
• Output
• Outcome
• Quality
• Efficiency

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INPUT Measure

• Amount of resources needed to provide a
  particular product or service.
• Examples
• Number of FTEs or PYs
• Number of eligible clients
• Number of customers requesting service
• Number of applications received
• Number of sales orders received

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OUTPUT Measure

• Amount of products or services provided
• Examples
• Percent of highways resurfaced
• Number of police reports filed
• Number of vaccinations given to school-age
  children per year
• Number of shafts produced in a single operating
  shift

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OUTCOME Measure

• Reflect the actual results achieved and/or their
  impact or benefit.
• Examples
• Reduction in incidence of disease
• Percentage of discharged patients living
  independently
• Percent of increase in tourists
• Percent of monthly programmed sales orders filled
  on time

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QUALITY Measure

• Reflect the effectiveness in meeting the
  expectations of customers and stakeholders
• Examples
• Number of defect reports compared to number of
  reports produced
• Number of course ratings in highest category
  related to total number of course ratings

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EFFICIENCY Measure

• Also known as productivity measures. Reflect the
  cost of providing products or services.
• Examples
• Output/Input
• Output/Time
• Output/Cost
• Outcome/Cost

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Keeping Plans Off The Shelf

• All Staff Meeting
• Announce Phases
• Review and Assess Plans at Quarterly Sessions
• Sponsors and Team Leads for Strategic Goals and
  Strategic Objectives
• Deming Philosophy PDCA

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Developing Bench Strength

• Drill Down Application
• Sponsors, Team Leads, and Team Members
• Work Action Plan
• Project Champion
• Leadership Training
• Leadership Conference Presentations

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Establishing Organizational Permanence

• Training Emphasis
• Certification
• Awards Recognitions
• Caught-Ya
• Celebrations
• Walk the Walk

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