Thinking Strategically

Nelson Phillips Professor of Strategy and Organizational Behaviour

Who am I….

• Nelson Phillips • [email protected]

What is strategy?

What business strategy is all about is, in a word,

competitive advantage

… t he sole purpose of strategic planning is to enable a company to gain, as efficiently as possible, a sustainable edge over its competitors. Corporate strategy thus implies an attempt to alter a company’s strength relative to that of its competitors in the most efficient way. – Kenichi Ohmae

What is strategy?

• Why do some industries make so much more money than others?

– Tobacco, Pharmaceuticals, PSF’s • Why do some firms make windfall profits year after year?

– Microsoft, Wal-Mart, IKEA, Wachtel Lipton

What is strategy?

• Not operational efficiency!

• Good strategies create competitive advantage: – Doing something others do but better • Examples?

– Doing something that no one else does • Examples?

– Must be difficult to imitate – Must have value for clients • Firm level strategy is often a portfolio

Strategy as a plan • Strategy is a consciously intended plan – Made in advance – Conscious and purposeful • Can be a ploy – Market signaling – Announcements

Strategy as a Plan - Airbus

Strategy as position • Strategy is understand as a position in an environment – Firms look for a niche • When there is a match between the firms positioning and the environment then the firm is successful – Can be the result of evolution or planning – Position can be to beat the competition or to avoid direct competition

Strategy as a Position - Louis Vuitton

Strategy as perspective • Strategy as a way of looking at the world • The “personality” of the organisation • Shared throughout the organisation • Often difficult to express

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iPhone combines three products maps, and searching — a revolutionary mobile phone, a widescreen iPod with touch controls, and a breakthrough Internet communications device with desktop-class email, web browsing, — into one small and lightweight handheld device. iPhone also introduces an entirely new user interface based on a large multi-touch display and pioneering new software, letting you control everything with just your fingers. So it ushers in an era of software power and sophistication never before seen in a mobile device, completely redefining what you can do on a mobile phone.

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Strategy as revolution • Strategy is not about beating the competition, it is about making them irrelevant.

– Focus on creating value – Focus on mass of customers even if some current customers are lost – Focus on total experience of customer – Ignore traditional industry boundaries and product definitions

Strategy as Revolution - easyJet

A Value Curve

Strategy as pattern • Strategy can be thought of as a pattern in a stream of actions • Not necessarily intended • Evolve over time and grow out of experience – Honda in the US “

Gradually the successful approaches merged into a pattern of action that becomes our strategy. We certainly don’t have an overall strategy on this

.”

Strategy as an emergent process • Strategy making in an unpredictable world – Creates the necessity for flexible strategic approaches.

• Strategy making by lower-level managers – Strategy evolves through autonomous action.

Strategy as an emergent process • Serendipity and strategy – Accidental discoveries and happenstances can have dramatic effects on strategic direction.

• Intended and emergent strategies – Realised strategies are combinations of intended and emergent strategies.

Intended and emergent strategies

Source:

Reprinted from “Strategy Formation in an Adhocracy,” by Henry Mintzberg and Alexandra McGugh, published in

Administrative Science Quarterly

, Vol. 30, No. 2, June 1985, by permission of

Administrative Science Quarterly

.

Intended and emergent strategies

Customer Orientation and Business Definition Abell’s Framework for Defining the Business – Consumer-oriented versus Product-oriented business definition

Source:

Derek F. Abell,

Defining the Business: The Starting Point of Strategic Planning

(Englewood Cliffs, N.J.: Prentice-Hall, 1980), p. 17.

Mission and Goals • Mission – Sets out why the organization exists and what it should be doing.

• Major goals – Specify what the organization hopes to fulfill in the medium to long term.

• Secondary goals – Are objectives to be attained that lead to superior performance.

Vision, or Mission • A statement of purpose (

strategic intent )

committing the organization to ambitious overarching (

stretch

) goals.

– Provides a sense of direction and purpose.

– Drives strategic decision making and resource allocations.

– Forces the seeking of significant performance improvements to attain goals.

A New Mission for Robin Hood Read the Robin Hood case. Answer the following questions in small groups.

1. What are the main strategic problems facing Robin Hood?

2. Develop a new mission statement for Robin. What are the strategic implications of your new mission statement?