Transcript Strategic Management in the Public Sector - BPATC

Strategic Management
Dr. I.G. Chowdhury
Date: 23-02-2010
Planning
• Planning is future thinking.
• Planning is integrated decision making.
• Format of plans of our time:
- Annual Budget
- 5 Year Plan
- Perspective Plan
STRATEGIC PlanNING
• Strategic Plan is the new plan format:
- PRSP
- MDG
- Vision 2021
Q. What is the difference ?
Q. What is strategy ?
Strategy
• Strategy is a direction, an aspired position to be
attained at the end of the plan period.
• Strategic Plan is a long-term plan.
• Strategic Plan is a shared plan.
• Strategic Plan is a leader-driven plan.
Strategic management
• The whole activity is divided into a group of interrelated tasks called strategic directions or
themes.
• Each task within a theme is a measurable
outcome with dates of completion.
• The total process of developing a strategic plan
and implementing it successfully in known as
Strategic Management
Strategic plan
Example
• We have just completed the first PRSP.
It was a three year plan covering the
period 2005-2007.
• The overall direction of the plan was
Unlocking the Potential
i.e. the human capability.
PRSP
Strategic Direction
•
•
•
•
•
•
•
Employment
Nutrition
Quality Education
Local Governance
Maternal Health
Sanitation & Safe Water
Criminal Justice
Example
PRSP-II
• Planning is a continuous process though for
ease of implementation it is divided into
chunks of activities.
• We are now in the midst of the second PRSP
covering plan period 2009-11. The theme of
the plan is Moving Ahead.
• Intermediate plans such as national budgets
are prepared with reference to goals and
objectives of the long-term plans.
Management by results
• Strategic Management is also known as management by
results ie how far the gap between the present and the
future position has been bridged.
• Attaining the desired results require successful
implementation of activities under each strategic theme
or direction.
• Effective implementation requires SMART (specific,
measurable, attainable, realistic, timed) objectives.
• Unless something is measurable it is not attainable.
IMPLEMENTATION
PRSP
• Implementation of a strategic Direction entails
satisfying several measures of performance. We shall
look at one such direction though not directly related
to the PRSP.
• HDI is a widely used measure of poverty developed
through the initiatives of the United nations.
• HDI is a composite index based on three basic
factors of development:
- a long and healthy life
- access to knowledge
- decent standard of living
HDI
Human Development Index
• According to this measure Bangladesh ranks
146 among 182 nations.
• Bangladesh is considered a medium level
country (0.5 – 0.8) in terms of human
development.
• Bangladesh score is 0.543 in 2009. It has
consistently improved from a very low 0.347 in
1975
MBO
• This process of implementation with set dates is also
known as MBO (Management by Objective) in
management parlance.
• MBO was a very popular management tool of the sixties.
• Like any other management practice it has merits and
demerits,
- Merit in being very focused
- Demerit in being regimented (command and control
style).
Strategic Management
5 Tasks
PLAN
• Vision
:
• Objective :
• Strategy :
Long-term destination
Targets to attain
Activities related to vision
MANAGEMENT
• Implementation
• Evaluation
: Doing
: Being there
Framework
• Vision
Future Position
• Objectives
Metrics of measurement
SMART
• Strategy
Decision making re Vision
Choosing between alternatives
• Tools of Analysis
SWOT, PEST
+ more
Framework
• Tools of Implementation:
Leadership
Culture
Ethics
• Measures of Evaluation:
Financial
Strategic
Vision
• Big Hairy Audacious Goal (BHAG)
• Examples:
- Vision 2020 Malaysia
- Vision 2021Bangladesh
- Digital Bangladesh
• If you don't know where you are going, any road will take you
there...Alice in Wonderland
Bangladesh 2015
Out of the LDC
• Out of LDC is the Position that the country seeks
to attain.
• This requires achieving set of economic targets
to work together (synergy).
• The GDP of a country is the sum total of values
created by all sectors of economy
– agriculture, industry and service.
Q. Who does what ?
Factor advantages
contradictions
•
Cheap labour ?
Germany has one of the highest wages
•
Bountiful natural resources?
Less than 20% land in Japan is useable
•
Government intervention?
Aircraft and software in Japan failed to
take-off
•
Management practices?
Germany and Sweden allow labour
representation in management
• Germany has negative balance of payment, high wages
and strong currency. Yet it enjoys enviable position in
automobile and machinery.
Towards competitive advantage
Q.What factors led to the development of some nations into
the home base for very successful industries?
- Switzerland
- Sweden
- America
- Italy
- Japan
for pharmaceutical and dairy products
for heavy trucks
for personal computers
for ceramic tiles
for consumer electronics
Factor inadequacy
• The failure to draw a definite conclusion may be
due to the inadequacy of the earlier economic
theories of absolute and comparative
advantages.
• Factors that may have led to the inadequacy
include;
- technology changes can affect scale of
production advantage
Competitive Advantage
- capital and skilled labour can easily move
between nations
- firms compete globally where sources are
procured from one place, processed in
another and sold everywhere
- transportation and labour cost has
diminished dramatically to make some
factors almost redundant
Competitive advantage
• The world today is very competitive. Just look
back how many banks, hospitals or insurance
companies were there in the nineties. In addition
we have newer areas of businesses opening up
all the time from internet to wirelss.
• Competition constantly changes the landscape
in which new products, new ways of marketing,
new production processes and whole new
market segments emerge.
Creative destruction
• There is no equilibrium in competition.
• Static efficiency at a point of time is rapidly
overcome by a faster rate of progress.
• Firms continuously improve the design or quality
of their own products/services that can destroy
their own successful brands. This is Creative
Destruction.
In search of Competitive advantage
• How can a nation create the
environment in which its firms are
able to improve and innovate faster
than foreign rivals in a particular
industry?
Towards Competitive Advantage
Porter
Competitive Advantage
Porter’s Diamond
• Factor Conditions:
- Basic factors such as land, labour, capital, raw
material
- Advanced factors such as technological know-how,
managerial sophistication
- Physical infrastructure such as roads, railways and
ports
• Demand Conditions
- Home demand leading to demanding and
sophisticated consumers
Diamond
• Related and Supporting Industries
- Cluster of supporting industries such as
semiconductor industries feeding into personal
computers as has happened in the USA during the
1980s.
• Firm Strategy, Structure and Rivalry
- Managerial ideologies such as Japan emphasizing
on engineering aspects of production while the USA
stressing on Finance led to different patterns of
growth in the related industries.
GCI
Global Competitive Index
• The index has been developed and monitored at
the WEF (World Economic Forum) held every
year at Davos.
• The report "assesses the ability of countries to
provide high levels of prosperity to their citizens.
• The global competitive index purports to measure
how productively a country uses available
resources.
GCI
Global Competitive Index
• "The countries are evaluated as per score in 12
factors divided into 3 broad categories;
- Basic requirements
- Efficiency enhancers
- Innovation factors
- In the 2009-10 GCI Rankings Bangladesh
occupies 106th position amongst 133 nations
with In- #49, Sl- #79, P- #101, N- #125.
A. Basic Requirements
- Institution
- Infrastructure
- Macro-economy
- Health & education
• B- #108, N- #119, P- #114, S- #89 (Overall)
• B- #105, N- #106, P- #113, S- #38 (Health & Education)
B.
Efficiency Enhancers
- Higher education and training
- Goods market efficiency
- Labor market efficiency
- Financial market sophistication
- Technological readiness
- Market size
• B- # 97, N- #125, Pak- # 92, S- #74 (Overall)
• B- #129, N- #124, Pak- #118, S- #64 (Higher Ed & T)
C. Innovation &
Sophistication Enhancers
- Business sophistication
- Innovation.
• B- #114, N- 129, P- #84, S- #44
• Income thresholds for stages of development GDP per capita (US$)
- Stage 1: Factor driven
< 2,000
Transition from Stage 1 to Stage 2 : 2,000–3,000
- Stage 2 : Efficiency driven 3,000–9,000
Transition from Stage 2 to Stage 3 : 9,000–17,000
- Stage 3 : Innovation driven > 17,000
Convergence
Public & private sector
• The gap between public and private sector is
much shorter than the earlier days.
• Then, the public sector had almost total control
on our life, from school to hospital to university
to job.
• Now the public and private sector compete
among themselves. Yet managing a public
sector is somewhat different from private sector.
management
public & private sector
• Differences :
- a wide range of stakeholders with
conflicting interests are able to exert
significant impact on the agency’s
performance.
- the resource flow to the agency is often
less direct than cash payment as part of a
commercial transaction.
Stakeholders
management
• Differences:
– Limited flexibility and autonomy
– Goals are often vague
– The leader's authority is limited
– Political interference and scrutiny by outsiders
– Broad accountability is required
– Performance expectations shift continually
management
• Similarity:
- Customer Satisfaction is as important
- Resources must be used as efficiently
- Must be innovative to be in the race
- Must create value
Value creation links customers
/stakeholders need with organization’s
actual or potential capabilities.
Competition
• Organizations, whether in the public or the
private sector, must compete.
• At the national level, a nation competes with
another such as Bangladesh seeking a larger
share in the Indian market.
• Japan Inc. is a well-known term in business
vocabulary as the country fiercely promotes
company interests internationally.
Competition
• Competition for a public sector
organization comes not just from other
government instrumentalities but also from
private sector firms
willing and able to take over some or all of
its activities
from being a full function supplier to
specific activities e.g. outsourcing
Competition
Examples
• Public Sector competing Private Sector
- BTTB and Grameen Phone
- BTV and ATN
• Public Sector competing Public Sector
- Bangladesh Railway & BRTC
- LGRD & Roads and Highways
Strategic management
• How these competitions are fought are the
subject matter of strategic management.
• Strategy is not built on vacuum – it needs
analysis of resources and capabilities.
• SWOT, PEST are some of the frequently used
tools in strategic management.
• We shall look at some of these tools.
ANALYSIS
Know your enemy (Sun Tzu, 500 BC)
High
Equal
chance of
losing
Win
Equal chance
of losing
Know
Yourself
Win
Equal
chance of
losing
Lose
Lose
Equal chance
of losing
Low
L
Know your enemy
H
ANALYSIS
GAP
Value for money
HR
upgrade
100%
GAP
50%
IT
packaging
100%
100%
Innovation
sales support
distribution
ANALYSIS
BOSTON MATRIX
Star
High
Star
Market
Growth
Cash
Cash
cow
cow
Proble
mProblem
child
child
Dog
Dog
Low
H
Market Share
L
ANALYSIS
INTENSITY OF COMPETITION
Five Forces
Low
Medium
Rivalry
X
New entrants Threat
Buyer bargaining
X
X
Supplier bargaining
Substitute threat
OVERALL
High
X
X
X
ANALYSIS
VALUE CHAIN
Group Exercise
#1.
Future gazing –
list 3 possible future scenarios
that profoundly may impact the
country …
a larger SAARC in thenEC style
#2.
Vision statement – about 5 lines
…. out of the LDC into MIC
Group Exercise
#3.
SWOT
- list 3 in each category
#4.
Strategy
– list 3 courses of action
#5.
Major impediments to overcome
- list 3
#6.
Indicators to monitor
- list 3
Mission
• Materializing the vision comes through
successfully implementing the task list.
• It begins with the mission.
Mission relates to what you do, how you do.
Strategy
• Strategy is a road map of the journey to
the vision.
• Having all the ingredients in place does
not guarantee success.
• Good Strategy + Bad Implementation =
Chaos
objectives
• Objectives are metrics of measurement along
the road to implementation.
• The should be SMART
- Specific
- Measurable
- Attainable
- Realistic
- Timed
Implementation
Leadership
• Effective strategy is a function of the style of
leadership, leading or being led.
• The context of leadership has changed over
time. Leader today is considered a coach than a
task master.
• More emphasis is given on softer elements of
management e.g. delegation and motivation.
Implementation
Communication
• The vision needs sharing with members of the
team, else there is no team. This requires
communication.
• Lateral communication can be more difficult than
vertical communication. The vision requires
different styles of communication with different
stakeholders.
• Health for All, Freedom from Hunger are better
understood by all.
Implementation
Culture
• Culture is the way people think, behave and
interact.
• Organizational Culture evolves as it learns to
cope with its problem of external adaptation and
internal integration, that has worked well enough
to be considered valid and to be taught to new
members as the correct way to perceive, think &
feel.
Evaluation
Doing the right things
•
Evaluation is not an easy task, more so
in the public sector that have more
qualitative than quantitative metrics of
measurement.
•
Qualitative indicators such as
motivation, emotional bonding, are as
important as the quantitative indicators
such as ROI.
Evaluation
Balancing the outcome
• The organization growth needs balancing
between the elements of growth.
• A skewed growth is problematic.
• A healthy national GDP growth but Gini is
problem.
• A good company growth at the cost R&D can
affect sustainability.
Evaluation
Balanced Scorecard
• Managed through a composite scorecard having both
qualitative and quantitative outcomes.
• Profit +Employee Motivation +Customer Satisfaction = ?
• These factors are kept side-by-side on a dashboard, not
added up.
• If a pilot flying an can fly an aircraft with such meters why
can’t an organization be managed?.
Change Management
• Strategy is not cast in stone. While being
implemented, the business environment is
continuously scanned for possible changes.
• A strategy may need adjusting to adapt to such
changes.
• Changes may range from fine tuning to total
rejection. Why continue building a bridge if the
river bed has shifted meanwhile?
Change Management
• ‘”when the facts change, I change my mind” …Keynes
• This is change management, the precursor to
strategic management.
• Yet it was in the 1890s the head of the US Patent Office
applied for closure of the office as everything that could
be invented had been invented.
•
Sam Watson, founder of IBM, once commented that the
world ‘has a market for may be five computers.