Strategic Planning Methodology, Process and Facilitation

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Strategic Planning Methodology, Process and
Facilitation
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Why Strategic Planning?

• Why Strategy?
• The best way to predict the future is to create
  it
• --Peter Drucker

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Why Strategic Planning

• Strategic planning is the process of thinking
  systematically about the future to competitively
  position the firm
• Objectives of Strategic Planning

1. Build Prepared Minds to Create Real Time
   Strategic Thinking

1. Increase Strategic Innovation via experiments and
   initiatives
2. Build consensus around a strategy including long
   term and short term objectives

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Strategic Planning Process
Planning and Logistics
Preparatory Work
Research
Mission
Strategic Vision
Strategic Intent
Corporate Values
Industry Analysis
Strategic Analysis
Competitor Analysis
Company Analysis
Customer Segmentation
Selling Proposition
Competitive Advantage
Core Competencies
Elevator Pitch
Economic Engine
Implementation and Communication
Critical Issues
Output of Session
Key Initiatives

Objectives and Primary Tasks
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What is Strategy?

• What is Strategy?
• Strategy is about being different
• --Michael Porter

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What is Strategy?

• Elements of Strategy
• Mission
• Who the Firm wants to be
• Strategic Intent
• What the Firm wants to achieve
• Competitive Advantage
• How the Firm can achieve its strategic intent

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Strategic Vision
Planning and Logistics
Preparatory Work
Research
Mission
Strategic Vision
Strategic Intent
Corporate Values
Industry Analysis
Strategic Analysis
Competitor Analysis
Company Analysis
Customer Segmentation
Selling Proposition
Competitive Advantage
Core Competencies
Elevator Pitch
Economic Engine
Implementation and Communication
Critical Issues
Output of Session

Key Initiatives
Objectives and Primary Tasks
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Strategic Vision Mission

• Mission defines WHO the firm wants to be
• Defines purpose
• Timeless and visionary

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Strategic Vision Mission Examples
Whole Foods, Whole People, Whole Planet
Nike brings inspiration and innovation to every
athlete in the world If you have a body, you
are an athlete
Meritage delivers superior investment returns by
combining equity and expertise to build
successful communications businesses

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Strategic Vision Strategic Intent

• Strategic Intent WHAT the firm wants to achieve

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Strategic Vision Strategic Intent

• THE APOLLO PROGRAM
• I believe that this nation should commit itself
  to achieving the goal, before this decade is out,
  of landing a man on the moon and returning him
  safely to Earth.
• --President John F. Kennedy, 1962
• Why did the Country get so excited?

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Strategic Intent Characteristics

• Defines the what not the how
• Very Long Term
• Captures the essence of winning
• Implies stretch not fit
• Motivational and directional
• Tool for empowerment, not a tool for
  centralization
• Think the unthinkable

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Strategic Intent Examples
Six Hondas in a two-car garage
Maru-C (translation Encircle Caterpillar)
To put a Coke within arms reach of every
consumer in the world
1975 A computer on every desk and in every home
1999 Empowering people through great software
anytime, anyplace, and on any device

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Strategic Analysis
Planning and Logistics
Preparatory Work
Research
Mission
Strategic Vision
Strategic Intent
Corporate Values
Industry Analysis
Strategic Analysis
Competitor Analysis
Company Analysis
Customer Segmentation
Selling Proposition
Competitive Advantage
Core Competencies
Elevator Pitch
Economic Engine
Implementation and Communication
Critical Issues
Output of Session
Key Initiatives

Objectives and Primary Tasks
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Industry Analysis Five Forces

• Michael Porters Five Forces framework analyzes
  an industrys attractiveness based upon five
  elements
• Enables a company to devise appropriate plan of
  action
• Position the company to provide the best defense
  against the most threatening competitive force(s)
• Influence the balance of forces through strategic
  moves
• Anticipate changes in underlying forces and
  choose strategy before others recognize change

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Competitor Analysis Five Forces
THREAT OF ENTRY
Intense Rivalry Exists when
Sources of Barrier to Entry

• Numerous competitors with equal size/power
• Slow industry growth
• Lack product differentiation

• Low switching costs
• High exit barriers
• Rivals are diverse in strategies, origins and
  personalities

• Economies of Scale
• Product differentiation
• Capital requirements

• Cost disadvantages independent of size
• Access to distribution channels
• Government policy

COMPETITIVE RIVALRY
POWER OF SUPPLIERS
POWER OF BUYERS

• Supplier group powerful if
• Dominated by a few companies
• More concentrated than industry it sells to
• Limited competition in supplier products
• Credible threat of forward integration
• Industry is not important to supplier group

• Buyer group is powerful if
• Concentrated or purchases in volume
• Purchases standard/non-differentiated products
• Earns low profits
• Industrys product unimportant to quality of
  buyers product/service
• Credible threat of backward integration

SUBSTITUTES
Products that a buyer can choose in place of your
offering
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Competitor Analysis Five Forces

• Five Forces Analyses -- Airlines

Force Description Rating Implication for Entrant
THREAT OF ENTRY Capital intensive, but with leases and route-specific entry options Low Medium
POWER OF SUPPLIERS Concentrated supplier base, long-term leases, significant switching costs High
POWER OF BUYERS Buyers have multiple options on most routes High
THREAT OF SUBSTITUTES Personal aircraft, automobiles, trains and buses all serve as substitutes. Advanced communication technology reduces business travel demand Medium High
COMPETITIVE RIVALRY Low growth prospects, many players, cutthroat pricing High
Airline industry highly unattractive
Neutral
Positive
Negative
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Competitor Analysis Five Forces

• Five Forces Analyses Pharmaceutical Industry

Force Description Rating Implication for Entrant
THREAT OF ENTRY Capital required for research and development can be significant, but with potential for high payout Medium
POWER OF SUPPLIERS Many suppliers with commoditized inputs (e.g. chemicals) low threat of forward integration Low
POWER OF BUYERS Buyers often completely price inelastic patents limit substitutes near zero threat of backward integration Low
THREAT OF SUBSTITUTES Patent protection for multiple years enable monopoly rents Low
COMPETITIVE RIVALRY First-to-market competition is intense, but abundant growth opportunities as new diseases/cures are discovered Medium
Pharmaceutical industry highly attractive
Neutral
Positive
Negative
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Competitive Advantage
Planning and Logistics
Preparatory Work
Research
Mission
Strategic Vision
Strategic Intent
Corporate Values
Industry Analysis
Strategic Analysis
Competitor Analysis
Company Analysis
Customer Segmentation
Selling Proposition
Competitive Advantage
Core Competencies
Elevator Pitch
Economic Engine
Implementation and Communication
Critical Issues
Output of Session
Key Initiatives

Objectives and Primary Tasks
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Competitive Advantage

• Competitive Advantage is HOW the firm will
  achieve its strategic intent
• Doing something unique and different that
  customers value

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Competitive Advantage
Economic Engine
COMPETITIVE ADVANTAGE
Core Competencies
Customer Segmentation
Selling Proposition

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Customer Segmentation

• Strategic selection of a sub-segment of an
  addressable market to create or enhance a
  competitive advantage

Segment
Definition
Customers not consuming any product or consuming
only in inconvenient settings
NONCONSUMERS
Customers who consume a product but are
frustrated with its limitations they display
willingness to pay more for enhancements along
dimensions most important to them
UNDERSHOT CONSUMERS
Customers who stop paying for further
improvements in performance that historically had
merited attractive price premiums
OVERSHOT CONSUMERS
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Customer Segmentation
Company
Customer Segmentation
Nonconsumer Social networking was an entirely
new activity.
NONCONSUMRERS
Nonconsumer Googles customers used traditional
media outlets, but few to none utilized the
internet
Undershot Wealthy, health conscious consumer
who values organic environmentally friendly
products
UNDERSHOT CONSUMERS
Undershot Tennis shoes with high performance
technology
Overshot Frequent mid level business traveler
(i.e. salesperson) who wants low prices and on
time flights.
OVERSHOT CONSUMERS
Overshot First time furniture buyer who wants
inexpensive, immediately available and modern
furniture.
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Competitive Advantage
Economic Engine
COMPETITIVE ADVANTAGE
Core Competencies
Customer Segmentation
Selling Proposition

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Selling Proposition

• Profitability benefit of Selling Proposition

Neiman Marcus, Whole Foods
Wal-Mart, Southwest Airlines
Industry Average Competitor
Premium Differentiated Competitor
Low-Cost Competitor
Sales Price
Costs
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Competitive Advantage
Economic Engine
COMPETITIVE ADVANTAGE
Core Competencies
Customer Segmentation
Selling Proposition

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Core Competencies

• Core Competency
• A core competency is a business activity in which
  a firm can be BEST IN WORLD
• Three tests of a core competency
• Provides potential access to a wide variety of
  markets
• Makes significant contribution to perceived
  customer value and benefits
• Difficult for competitors to imitate
• Must support the selling proposition
• Consider outsourcing activities that arent core
  competencies

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Leveraging Core Competencies

• When a Company is seeking growth and
  diversification, it must leverage existing core
  competencies
• Example Honda

Honda Core Competencies
Small Engine Design
Moderate Scale Assembly with Outsourcing
Creative Distribution
Business Opportunities that leverage core
competencies
Misc. Pumps
Gener-ators
Out-boards
Lawn Mowers
Snow Blowers
Motor-cycles
Small Cars
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Competitive Advantage
Economic Engine
COMPETITIVE ADVANTAGE
Core Competencies
Customer Segmentation
Selling Proposition

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Economic Engine

• Economic Engine is a single financial measure of
  the competitive advantage
• Profit per X
• If you could pick one and only one ratio profit
  per X to systematically increase over time,
  what X would have the greatest and most
  sustainable impact on your business?

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Economic Engine
Key Economic Shift
Competitive Advantage Impact
Profit per
Commentary
CUSTOMER
Shift from profit per DIVISION to profit per
CUSTOMER
Analyzing profit per customer enabled the razors
and razor blade model whereby Gillette sells
razors at a loss to lock-in customers to its
highly profitable recurring revenue stream from
disposable razor blades.
Note exploiting core competency in blade
technology to their advantage
CUSTOMER VISIT
Shift from profit per STORE to profit per
CUSTOMER VISIT
After initially avoiding high real estate costs,
Walgreens shift to profit per customer visit led
to the strategic insight to pay a premium for
high profile store locations with multiple entry
ways
Required Walgreens to create core competencies in
real estate and product placement
EMPLOYEE
Shift from profit per LOAN to profit per EMPLOYEE
Wells Fargos profit per employee engine created
a lean cost structure well-equipped to face the
economic reality of banking commoditization in
the face of deregulation.
Did not change the low cost value proposition,
but required new core competencies in technology
to increase employee productivity and encourage
online banking

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Strategic Planning Methodology, Process and
Facilitation