Transcript Strategic Management Fundamentals

MBA in Perspective
Fundamentals in General Management
Prof. dr. Pieter Klaas Jagersma
BSN - Buren - May 20 2008
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Points to cover
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Speaker and approach
History of general management
Basics of general management
Scanning the environment
Policy formulation
Policy implementation
Policy evaluation and control
Last but not least
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Speaker and Approach
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Speaker
Science
‘Heart’share
Author
Entrepreneur
Non-executive
Private life
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About today’s lecture ...
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Put MBA in perspective - holistic approach
Cliffhangers (frameworks/visualizations)
From Paper > Practice
‘On the cutting edge’ - tailor made for BSN
Present some generalized lessons learned
‘The key to success is not trying to please
everyone’/Cosby ‘95 (monologue/dialogue)
Have fun!
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Today’s core message
Transparancy is the magic word!
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1
History of General Management (GM)
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Contents
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General management: what’s in a name?
General management and faculty
Journals and professional societies
Development of general management
theory and research
8
a
General Management: What’s in a
Name?
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Quite clear .....
General Management is about the
direction of organizations
‘Heart’ of wealth creation in modern
society!
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General Management =
General management is an approach in
which leading managers (‘general’
managers) decide what to do with
regard to which value chain activities in
a holistic manner and oriented towards
specific organization-wide goals [MBA]
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Surprise ...
Practice >> very old
but .....
Theory >> ‘child of sixties’
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Background
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First Industrial Revolution (1750-1850):
 no
‘strategic’ behavior >> businesses small, little
capital employed, room for everyone,‘invisible
hand of the market’
•
Second Industrial Revolution (1850-1920):
 construction
of key railroads >> mass market building possible >> ec. of scale/scope >> rivalry
 ‘visible hand of general managers’: large vertical integrated firms + management hierarchies to
deal with (environmental) complexity
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Background (Cont.)
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Alfred Sloan (CEO GM: 1923-1946):
 articulated
need for ‘general’ management thinking: business policy = f (strengths + weaknesses of
Ford)
 developed multidivisional ‘control’ structure
•
WW II vs ‘general’ management:
 how
to allocate scarce resources across an organization? (quantitative analysis/’OR’-’besliskunde’)
 through formal planning organizations can exert
control over market forces and future
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b
General Management and Faculty
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Roots of General Management as an academic
discipline
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First ‘Business Policy’ (GM) course at Harvard
University (1912)
GM/Business Policy course: built out of functional courses like accounting, operations, finance
(‘integration’)
Case method (Harvard style)
Model for other Business Schools
First course or final course
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General Management faculty
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Professors (experienced teachers with broad view
of business) + assistent/associate professors (former ‘senior’ - general - managers)
Eclecticism + holistic perspective: how to match
a firm’s choices with its (competitive) environment (famous ‘fit’ question)
General Management/Business Policy as a ‘capstone course’
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Consequence of ‘capstone course’
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Single ‘capstone course’ permits no development!
Faculty makes intellectual homes elsewhere
Course development work: cases (not articles and
books)
‘Rich’ general descriptions of practice (thanks to
case writing and consulting)
In 1963 influential ‘general management’ conference at Harvard Business School (HBS)
Since early 1970s accumulation of cases and research (externally)
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c
Professional Societies and Journals
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Professional societies
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The Planning Forum (USA)/Business Policy Society (UK) (since 1950s/1960s)
Strategic Management Society (since 80s)
>> Sponsored AMJ, AMR, AME, SMJ
Vereniging voor Strategische Beleidsvorming (VSB) (since 1980s)
NCD (since 1970s)
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General Management Journals - categories
 Specific Business Journals
LRP, The Planning Review (70s); JoM (60s); SMJ (80s)
and JBS (also since 80s)
 General Management Journals
HBR, SMR, CMR, JofB, Business Horizons, JoGM,
HMR, M@n@gement (www.managementsite.net)
 Academic Journals
ASQ, AMJ, AMR, Management Science, MAB, M&O,
ESB
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d
Development of General
Management Theory and Research
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Birth of the General Management Field: One
fundamental work/book
“Business Policy: Text and
Cases”
(Harvard Textbook Andrews /
Learned et al, 1965)
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Business Policy: Text and Cases (1965)
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Organization-concept of Chandler + ‘Distinctive Competence’ (Selznick, ‘57) + ‘uncertain environment’ (which means instant
adaptation of organizations)
Environment (thanks to changes): ‘opportunities and threats’ and firm’s ‘strengths +
weaknesses’ were adapted to avoid threats
and take advantage of opportunities [SWOT]
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Business Policy: Text and Cases (1965) (Cont.)
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Internal appraisal of strengths and weaknesses >> ‘distinctive competencies’ and external appraisal of threats and opportunities >
‘potential success factors’ (CSFs/KSFs)
Internal + external appraisal = foundations of
‘business policy formulation’
‘Business policy formulation’ is ‘analytical’
and ‘business policy implementation’ is ‘administrative’ (denken versus doen)
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Their audience ...
Professors and students
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Who influenced General Management practice?
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General Electric (GE): in 1960s
‘godfather’ of business planning and
executive education programs with
help from ‘academic friends’ and
private consulting firms
(McKinsey&Company)
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Who influenced General Management practice?
(Cont.)
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The Boston Consulting Group - BCG
(Henderson - mid-1960s)
Why?
- Applying quantitative research to business problems
- Selling powerful oversimplifications
- What are basic rules for success?
- The most relevant frame of reference is the ‘concept’
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How?
 Concepts
 a.
Experience curve
Experience in production > market share > lower
costs > higher margins and cash flow > highest
profits > dynamic aspect called for ‘competitive
behavior’ (needing: ‘integrated’ management =
‘general management’)
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How? (Cont.)
 b.
Growth-share matrix
Cash cows/dogs/stars/question marks (‘era of portfolio analyses’)
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‘Growth-share matrix’
Marketshare
Industry growth
high
high
low
low
Star
?
Cash cow
Dog
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Industry attractiveness - Competitive position
matrix
Industry attractiveness (lots of criteria)
Business strength
high
medium
low
high
Invest/
growth
Selective
growth
Selectivity
medium
Selective
growth
Selectivity
Divest/
harvest
Selectivity
Divest/
harvest
Divest/
harvest
low
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How? (Cont.)
 Spin-offs:
Bain&Company etc etc
 ‘Thanks to’ BCG, the entrepreneurial responsibility of management was recognized
to consider the long-run, dynamic direction
of the firm, even while maintaining routine and efficient operations (mindset of decision makers: from efficiency to effectiveness)
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General Management research in the
1960s/1970s
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Experiental, case-based evidence in 1960s:
descriptive studies
Systematic observation, deductive analysis
and modeling (1970s): normative studies
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General Management research in the 1980s:
dichotomy
 Descriptive
studies of how policies are formed/implemented (‘management process’)
G. Steiner (long-range planning), H. Mintzberg (‘emergent decision
making’), J.B. Quinn (‘logical incrementalism’)
 Studies
seeking to understand the relationship between organization choices and performance (‘management content’ school)
HBS (growth and diversification), Purdue (heterogeneity and performance within a single industry), Harvard University (IO/market power and entry/exit barriers) et cetera et cetera
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General Management research in the
1990s/2000s
General Management inspired by
‘globalization’:
- third dimension of management (P/F)
product
functions
geography
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2
Basics of General Management (GM)
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Organization performance (‘firms’)
attractive- positioning potential
ness of
of firm
internal
industry
synergy
55%
20%
10%
potential
external
synergy
15%
maximum
profitability
100%
Source: Caves (1977); Porter (1980); Goldman Sachs (1996); Jagersma (2000)
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Definition of ‘general management’
General management =
1. environmental scanning +
2. (business) policy formulation +
3. (business) policy implementation +
4. (business) policy evaluation/control
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General Management is ...
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Future thinking/‘Controlling’ the future
Design of a desired future
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(Integrated) Decision making
Fundamental choices; Integration of hierarchically determined actions
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‘Formalized procedure to produce an articulated result, in the form of an integrated system of decisions/actions’ (Mintzberg, 1990)
Emphasis on formalization: decomposition, distinction, and rationalization of processes/decisions/actions
‘Business plans’
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Why business plans?
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They provide a discipline forcing managers to take a
careful look ahead periodically (mngt of ‘future’)
They require rigorous communications about mission, vision, strategies, objectives, goals, and resource allocations: clarity
Basis for evaluating + integrating short-term (functional) plans
They help implement changes once decided on
They make the management group coherent
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Bad General Management - numbers oriented
‘Playing tennis by watching the
scoreboard instead of the ball’
- The Economist (1988)
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General Management (process): 6 basics
GM is a process - basic ingredients design great
general management
 Congruence/‘fit’ between ingredients is decisive
 Responsible for ‘pie’ is the ‘general’ manager,
CEO and/or Managing Board (RvB/Directie)
 The result of the GM process - a couple of steps is explicit and prioritized
 Simplicity always wins!
 Formulation + implementation ‘join hands’

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Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
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Basic requirements for successful General Management
Focus
Fit
Fitness Flexibility
..... on
customer
needs
..... between will
and skill
..... of front- ..... of total
and back- organization
office
4Fs
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3
Scanning the environment
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Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
47
External environment: what’s in a name?
•
•
•
Opportunities and threats (OTs) outside the
organization
Organizational context: determines success
or failure of organization
Variables (often) not within short-run control of general management
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External environment: two parts
 Societal
environment: forces that influence the long-term decisions of an organization
 Business (industry) environment: forces
or groups that directly affect an organization (stakeholders, 5-forces of Porter, unions, et cetera)
Scenario Building
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Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
50
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
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Societal trends
1. Sustainability (‘CSR/’Sustainability’)
2. Information society
3. Globalization
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BV Nederland verstrikt in
‘Economische Zone des
Doods’ (EZ2D)
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Headlines of international newspapers
“The Globalization of Markets .....”
“A Global Trade War on the Way?”
“Protectionist Pressures are Building .....”
“Ads that celebrate the Global Product .....”
“Multinationals Tackle Global Marketing .....”
“Globalization: The Debate Goes on .....”
“P&G’s Gamble on ‘Globalization’ .....”
“Going Global in Europe .....”
.....
Source: Financial Times/WSJ(E)
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Global industry - What’s in a name?
- ‘an industry in which a company’s competitive
position within that industry in one country is interdependent with that in another country’ (Porter,
1986)
- ‘an industry in which a competitive advantage is
derived from the exploitation of scale, scope and
skills economies or comparative advantage across
country boundaries within a centrally coordinated
business system’ (Jagersma, 2002)
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Industries can be characterized on a spectrum
Sources of sustainable competitive advantage
Source: Jagersma (2002)
Local
Derived from
country market
>>>
Emerging
>>>
Global
Derived from worldwide
management of business
system (integration)
- ‘3S economies’
- Country comparative
advantage (factor costs)
- Centralization of strategy and (de)centralization of stages of business system as efficiency and effectiveness dictate
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‘Doomloop’ for (most) companies
local
industries
emerging
industries
global
industries
MARGIN
- many players
- innovation
- effectiveness
- customer
- organic growth
- high margin
TIME
- (very) few players
- lack of innovation/imitation
- efficiency
- firm and competitors
- anorganic growth
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- low margin
Industries can be characterized on a spectrum
Industries on the MOVE
Source: Jagersma (2004 data 1980 vs 2002)
Local
47% (89%)
>>>
Emerging
33% (8%)
>>>
Global
20% (3%)
[1] Trade-off: local versus global industries
[2] Turbulence plus unpredictability > alliances/M&A
[3] New skills required (entrepreneurial skills?)
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[1] % companies/industries in ‘EZ2D’
[added value in terms of share of GNP]
Countries
Local
USA
Germany
UK
France
Spain
Belgium
Netherlands
Italy
Japan
South-Korea
34%
40%
39%
45%
49%
41%
47%
53%
39%
34%
Emerging
29%
30%
22%
29%
27%
26%
33%
35%
29%
21%
Global
37%
30%
39%
26%
24%
33%
20%
12%
32%
45%
Source: a.o. OECD, UN, EC/EU (2000-2003)
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[2] % industries on new/mature spectrum
2
3
5
3
1
Countries
New
Growth
Mature
USA
Germany
UK
France
Spain
Belgium
Netherlands
Italy
Japan
South-Korea
34%
14%
29%
15%
23%
20%
15%
13%
25%
28%
26%
32%
30%
26%
32%
28%
30%
23%
35%
33%
40%
54%
41%
59%
45%
52%
55%
64%
40%
39%
Source: a.o. OECD, UN, EU/EC (2000-2003)
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In our ‘global village’, competing globally is
imperative for countries
Countries
Global ‘competitors’
IMD; WEF; PKJ
USA
Germany
UK
France
Spain
Belgium
Netherlands
Italy
Japan
South-Korea
3
7
4
7
4
6
9
10
2
1
Global ‘casualties’
IMD; WEF; PKJ
?
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Implication: CHANGE necessary!
Countries
Industries
Companies
Units/departments
Managers/employees
Skills
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Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
63
Tool no. 1 - Mapping an industry landscape: SCP
model
Structure
Conduct
Performance
Main drivers/’shocks’
- Technology breakthroughs
- Changes in government policy/regulations (domestic/
international)
- Changes in life styles/tastes
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Tool no. 2 - Mapping an industry landscape: ‘5
forces model’ of Porter (1980)
Bargaining Power of
Suppliers
Bargaining Power of
Customers
concentration/fragmentation
of suppliers
forward integration
improvement in supplier information
surge or decline in supply
new means for coordinating
with suppliers
concentration/fragmentation
of buyers
backward-integration
improvement in buyer information
surge/decline in demand
shifts in customer tastes
new means for coordinating
with customers
Threat of Substitutes
emergence of new substitute
change in barriers of entry
increase in buyer comfort with
a substitute
Rivalry among Existing Competitors
shift in industry growth
change in mix between
fixed and variable costs
emergence of dominant
design or product
consolidation
fragmentation/new entry
.....
Threat of New Entry
decline in EOS + customer
heterogeinity > market fragmentation into niches
emergence of switching costs
65
Tool no. 3 - Mapping an industry landscape:
‘value net’ of Brandenburger and Nalebuff (1996)
Customers
Competitors
Company
Complementors
Suppliers
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Four phases in the evolution of environmental
scanning
Primitive
No impetus
“Face it”
No effort
No purpose
Ad hoc
“Watch out”
Reactive
Deal with environment to proNo active search tect the future
Random effort
Sensitive to cer- Appropriate
tain issues
responses
Scan to enhance Less specific inunderstanding fo collection
Proactive
Predict environment
Structured effort
Deliberate effort
Looking for compe67
titive advantage
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
68
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
69
Internal environment: what’s in a name?
•
•
•
•
Strengths and Weaknesses (SWs) inside the
organization
Organizational content: determines success
or failure of organization
Variables within short-run control of general management
First of all: structure, culture, and resources
70
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
71
Vertical and horizontal synergy
MB
vertical
synergy
BU 1
Headquarters/
Head Office/
Corporate Center
CS
BU 2
BU 3
horizontal
synergy
72
Vertical synergy
MB
vertical
synergy
BU 1
Headquarters/
Head Office/
Corporate Center
CS
BU 2
BU 3
73
Generic roles of CC/HQ
Steer
Bind
MBCs
?
Support
74
Ways for CC/HQ to add value
•
•
•
•
Coordinate
Integrate
Allocate
Initiate
75
How to add value as CC/HQ no. 1 - Coordinate
X
Transfer/share of skills,
experience and knowledge
K
Y
B
ECONOMIES OF SKILLS/KNOWLEDGE
76
How to add value as CC/HQ no. 2 - Integrate
X
Y
X/Y
Cost
Volume
Volume
Volume
ECONOMIES OF SCALE
77
How to add value as CC/HQ no. 3 - Allocate
CC
X
Resources
- People (MD)
- Funds (enhance ROI)
Y
ECONOMIES OF SCOPE
78
How to add value as CC/HQ no. 4 - Initiate
 Stand-alone BU performance improvement
 ‘Sounding board’ for making decisions (‘objective view’)
 Agreeing/monitoring performance (‘stretched targets’)
 Selecting/replacing BU managers
 Approving major capital expenditures
 Mobilizing special expertise (M&A skills)
 Corporate development
 To help implement growth strategies (‘spotting’)
 To help implement desinvestment strategies
79
Horizontal synergy
EB
Headquarters/
Head Office/
Corporate Center
CS
BU 1
BU 2
BU 3
horizontal
synergy
80
Why is horizontal synergy difficult to realize?
•
•
•
•
Leading (‘general’) managers use 1950s-’70s
insights (Ansoff/portfolio models - BCG etc)
Information flows vertically, not horizontally
Within units focus on customers/market - not
on collegues in other units/departments
Bonus/incentive structure focused on own +
unit performance, not based on collaboration
across organization
81
‘Portfolio management’ approach versus
‘Synergy management’ approach
high
synergy
management
Synergy
‘CORPORATE
RESTRUCTURING’
portfolio
management
low
limited
high
Diversification
82
Circumstances determining horizontal synergy
Is horizontal synergy a
strategic priority? What
is the weight of horizontal synergy as a strategic priority? Do we have enough time to act?
urgency
HRM/IT/IS-systems;
culture; quality BU-management etc
strategic
importance
horizontal
synergy
basic
conditions
lower cost position and/or differentiation for WHOLE company.
Company instead of BUs is leading
support inside
organization
‘fertile ground’ for horizontal
synergy strategy is necessity:
BU/general management !!!
83
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
84
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
85
Leading firms have a very strong set of principles
which heavily influence their behavior/culture
Goldman Sachs 14 business principles
1. Our clients’ interests always come first. Our experience shows that
if we serve our clients well, our own success will follow.
2. Our assets are people, capital and reputation. If any of these are
ever lost, the last is the most difficult to regain.
3. We take great pride in the professional quality of our work. We
have an uncompromising determination to achieve excellence in
everything we undertake.
4. We stress creativity and imagination in everything we do. While recognizing that the old way may still be the best way, we constantly
strive to find a better solution to a client’s problem.
5. We make an unusual effort to identify and recruit the very best person for every job.
86
Leading firms have a very strong set of principles
which influence their behavior/culture (2)
Goldman Sachs 14 business principles
6. We offer our people the opportunity to move ahead more rapidly
than is possible at most other places. We have yet to find the limits to
the responsibility that our best people are able to assume.
7. We stress teamwork in everything we do. We have no room for those who put their personal interests ahead of the interests of the firm and
its clients.
8. The dedication of our people to the firm and the intense effort they
give their jobs are greater than one finds in most other organizations.
9. Our profits are a key to our success. They replenish our capital and
attract and keep our best people. It is our practice to share our profits
generously with all who helped create them.
87
Leading firms have a very strong set of principles
which influence their behavior/culture (3)
Goldman Sachs 14 business principles
10. We consider our size an asset that we try hard to preserve. We
want to be big enough to undertake the largest project that any of our
clients could contemplate, yet small enough to maintain the loyalty, the
intimacy and the esprit de corps that we all treasure and that contribute greatly to our success.
11. We constantly strive to anticipate rapidly changing needs of our
clients and to develop new services to meet those needs.
12. To breach a confidence or to use confidential information improperly or carelessly would be unthinkable.
13. Our business is highly competitive, and we aggressively seek to
expand our client relationships.
14. Integrity and honesty are the heart of our business.
88
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
89
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
90
Resources
•
•
•
•
Human resources (human ‘beings’)
Financial resources
ICT resources
Knowledge/ideas
HRM
FM
IM
KM
GM requires a
‘holistic approach’
91
To summarize
Societal environment
Industry environment
Internal environment
92
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
93
4
Policy formation
94
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
95
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
96
Mission: what’s in a name?
The purpose/reason for the organization’s
existence. Alternatives:
 A broad mission
 A narrow mission
97
Mission: examples
Broad mission
We provide transportation vehicles to
people throughout the world
Narrow mission
We build exclusive cars for the US and
Europe
98
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
99
Vision (example)
To become the leading European supplier of
oriental products
East India Companies, Netherlands (1602)
100
Vision (example)
To make a contribution to the world by making tools for the mind that advance human
kind
Apple
101
Vision (example)
To become the leading consumer marketing
company in the USA and internationally
Sara Lee Corporation
102
Vision (example)
We want to be the leading supplier of PCs
and PC servers in all customer segments
Compaq Computer
103
Vision (example)
Campina wil als cooperatieve onderneming
met succes zuivel- en zuivelverwante producten van hoge kwaliteit op de markt
brengen voor de consument en de industrie
Campina
104
Vision (example)
We want to provide value to our customers to make their lives better via lower prices
and greater selection; all else is secondary
Wal-Mart
105
Vision (example)
We want to honorably serve the community
by providing products and services of superior quality at a fair price to our customers
Motorola
106
Vision is important according to Executives
•
•
•
1,500 senior leaders/870 CEOs
20 different countries
Key traits/talents and skills by year 2000
‘Strong sense of vision’ is most important TRAIT (98%!)
AND
‘Strategy formulation to achieve a vision’ is most important
SKILL(gap of 25% with other skills)
Source: Korn Ferry/Columbia University (1989)
107
What about skills and ability of managers?
More than 90 percent of managers reported
a lack in confidence in their own skills
and ability to formate and implement a vision
Source: Korn Ferry/Columbia University (1989)
108
Visions can help organizations .....
Make better strategic/operational decisions faster
 focus - “It’s easy to say what you’re going to do. The
hard thing is figuring out what you’re not go-ing to
do” (Michael Dell)/offers direction
 acquire required and wanted resources (employees
/skills/investors)/stimulates development of certain
capabilities (‘direction’)
 Promotes/accelerates change
 vision as ‘change road map’ (IBM)

109
Visions can help organizations (2) .....
Basic element for strategic plan
 the ‘building block’ strategic management process
 integrates short-term actions which have to be productive to long-term interests
 ‘compass’ for decentralized/global corporations
 It motivates and inspires individuals/groups
 their effort contributes to a larger picture
 employee pride and motivation >> performance
 Public Affairs-tool

110
Visie en visioen
Visie = Visioen
Collectief Individueel
+
Individueel!
111
What is a vision?
Source: Jagersma (2007)
It is a guide to corporate priorities that reflects a fact-based view of the future and
sets forth aspirations that are demanding
but achievable
112
Mission or vision?
Mission =
What is our Business?
Source: Peter Drucker (1973)
113
Vision + mission + et cetera: what’s in a name?
Source: Jagersma (2007)
Question
Answer
Who are we?
Mission
Where are we heading? Vision
How do we get there?
Strategy
How do ‘I’ contribute?
Targets/Bonus/
Incentives (APs)
114
‘Vision rollout process’ (‘VRP’) =
A process in which relevant employees meet in small
groups - with their peers, supervisors, and /or more
senior managers - to learn about the vision + discuss
what it means for them
 Technique to encompass the ‘three requirements’
 Two basic forms:
 A cascade rollout, which moves through functions or units down the company/organization
 A horizontal rollout, which involves peer group
meetings

115
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
116
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
117
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
118
Objectives and goals: what’s in a name?
 Objectives
are ‘qualitative’ by nature (longrange and short-term objectives)
 Goals are quantified objectives
Achievement should result
in fulfilling of VISION
119
Specific objectives/goals
•
•
•
•
•
•
•
•
Profitability
Quality ([T]QM/EFQM)
Efficiency (low-cost operations)
Teamwork/productivity
Effectiveness (customer orientation)
Flexibility
Corporation: ‘good place to be’
.....
120
Specific examples
•
•
•
Achieve a ROI of 10% for the period 2008’09 (short-term goal)
Become number one in global automotive
market share by 2012 (long-term objective)
Increase domestic car and truck market share by more than 5,15 procent by Q3 in 2013
(long-term goal)
121
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
122
Strategy: what’s in a name?
•
•
•
•
Corporate strategy
Business strategy
Competitive strategy
Functional strategy
1 Hierarchy
2 Interrelated
3 Coordination/
Integration
123
Corporate strategy: what’s in a name?
Source: Jagersma (2008)
A corporate strategy states:
•
•
How and where the corporation will growth /divest
activities (external coordination) and
How the corporation will optimize its internal organization (internal coordination)
..... and therefore will achieve its vision and objectives/goals
Corporate strategy ‘describes’ how an organization intends to
achieve its vision and objectives/goals
124
Corporate strategy: questions to be answered
•
•
•
•
•
•
Should we stay in the same business(es)?
Should we leave this business entirely or just parts of
it by merging, liquidating, and/or selling part of our
corporation?
Should we try to grow in this business by start-ups,
alliances, or M&A?
Should we try to grow internationally?
Should we grow in another business?
.....
125
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
126
Business strategy: what’s in a name?
Source: Jagersma (2008)
A business strategy states:
•
•
How and where the BU will growth/divest activities (external coordination) and,
How the BU will optimize its internal organization
(internal coordination)
..... and therefore will achieve its vision and objectives/goals
Business strategy ‘describes’ how a business unit intends to
achieve its vision and objectives/goals
127
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
128
Competitive strategy: what’s in a name?
Source: Jagersma (2008)
Five dimensions
 an integrated set of actions
 aimed at achieving a sustainable reputation
in an industry (segment)
 that is over competitors in serving markets
 by finding alternatives to produce a better
relationship between cost and benefits
 for customers.
129
Competitive strategy: five key words
Source: Jagersma (2008)
Key words
Implications for general manager
Actions
Do something different than ‘business
as usual’
Find long-term position not easily
duplicated
Achieve lower cost or more benefits
for same cost or both
(Re)action(s)?
Understand why they buy
Sustainable
Reputation
Competitors
Customers
130
Three characteristics of good competitive
strategies
 Customer:clear
product/market definition
(i.e., business/value proposition)
global
2
Market
national
1
exclusive
mass
Product
131
Three characteristics of good competitive
strategies (2)
 Company:
cost/benefit leadership (relative and real or perceived)
Benefits
more
industry average
better positioning
worse positioning
Cost
more expensive
132
Three characteristics of good competitive
strategies (3)
 Competitors:
sustainability
 Customers’ needs/preferences
change continuous-
ly
 Competition is dynamic process: own actions influence those of competitors (‘game theory’)
133
Types of sustainable competitive advantage
 Structural
advantages
 resource
access (Gazprom; BHP Biliton et cetera)
 market dominance (eBay)
 switching barriers (Microsoft)
 governmental effects - regulation (Telmex)
 Reputation
 corporate
image (Amex)
 corporate identity (Rabobank; Goldman Sachs)
134
Types of sustainable competitive advantage (2)
 Business
system/value chain superiority
 superior
performance in one function(s) (Merck;
McKinsey; ‘outsourcing virtuosos’)
 Metaskills
 innovation
(Apple)
 organizational skills - time-based competition (3M)
 adaptability (Nokia)
135
A good competitive strategy will tell you .....
 Which
Customer segments to emphasize
 What Competitors count in each segment
 How long the Company’s advantage can be
expected to last: sustainability of position
What to do functionally?
Functional strategies
136
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
137
Functional strategy: what’s in a name?
An integrated set of actions aimed at achieving a sustainable competitive advantage in
a functional element of the value chain/business system, that is over competitors
Marketing/sales strategy
Logistics strategy
R&D strategy
Tax management strategy
HRM strategy .....
138
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
139
4
Policy implementation
140
Policy implementation: what’s in a name?
The process by which decisions are put into action by action programs/actions
operational execution
ANNUAL PLANS
141
Action programs: what’s in a name?
•
•
What is needed (resources) to realize specific functional objectives and goals (what to
do; how to do it; when to do it; and what
do we need?)
Embedded in annual plans of business units
/departments of Corporate Center/HQ (budget)
142
Explicit; prioritization; consistency; communicate; responsibility
Basics of GM process
INGREDIENTS
Scanning the
environment
External
- Societal
- Industry
Internal
- Structure
- Culture
- Resources
Policy
formation
Mission
Vision
Objectives
Goals
Strategies
(C, B, C, F)
‘FIT’
Policy
roll-out
Policy
evaluation
Action programs
(margin)
BBS/EFQM
(performance)
143
5
Policy evaluation/control
144
Introduction
To measure is the first step
to improve
145
Evaluation and control: what’s in a name?
The process in which strategies, choices, decisions, actions etc and performance results
are monitored so that actual performance
can be compared with desired performance
146
Evaluation and control: tools
BBS/EFQM/INK
147
Evaluation and control: (1) BBS (Kaplan and
Norton, 1992)
Financial
Perspective
Customer
Perspective
(How do customers see
us?)
Goals/Measures
(How do we look
to shareholders?)
Goals/Measures
Innovation +
Learning
Perspective
Internal
Business
Perspective
(What must we excel
at?)
Goals/Measures
(Can we continue to improve + create value?)
Goals/Measures
148
Evaluation and control: (2) EFQM / INK-’Model
Nederlandse Kwaliteit’ (MANS, 1995)
Resultaat
elementen
Ondernemingsresultaten
Waardering
door personeel
Waardering
door klanten
Waardering
door maat’pij
Management van processen
Organisatie
elementen
Middelenmanagement
Personeelsmanagement
Beleid & Strategie
Leiderschap
149
Policy evaluation/control
(BBS/EFQM/INK)
General Management: to summarize
What were/are our aspirations? (Mission and
Vision)
How much to grow/contract? (Objectives and
Goals)
Which initiatives do we need? (Strategy and
Action Programs)
What is our ‘platform’? (SWOT) to achieve our
aspiration(s)
150