Competitive Outcomes Firm A’s Actions

Rivalry

Firm B’s Actions

Organizational Characteristics Industry Characteristics

What Is Strategy?

• Plan/course of action...to achieve favorable position • Alignment of course of action with long run goals • A plan that integrates the goal, action pattern/sequence, and resources into a cohesive whole • Steps taken to achieve competitive advantage…sustainable edge over competitors

Why Strategy? …Action that Creates Value

Lynagh’s

Two Keys Tavern Two Keys Tavern

Is Strategy Important?

• Execs, consultants, and B-school professors: “...strategy is the single most important management issue and will remain so for many years.”

Business Week

, Aug. 1996 • Companies that now rely on “strategy groups”: • UPS • Applied Materials • H-P • Smucker’s • Sears • Nokia • EDS

Beyond SWOT

Environment: Outside-in (I/O) Firm: Inside-out (RBV)

Destroying Strategic Management Myths

Fortune,

June 1997 • Life is easy as “king of the hill”  Hypercompetition erodes advantages • Industry analysis is the key to strategy  Difficult to define “industry” • Focus on your direct competitors  Potential competitors greater threat • For CEOs, it’s you against the world  Savvy CEO involve more people

What Makes Shareholders Rich?

...Create New Wealth

• Vision looks beyond current boundaries • Strategy as continuous process • New perspectives, voices, conversations • Change rules of game • Experimentation, surprise

New Strategy Glossary

• value migration : movement of growth and profit opportunities from one industry player to another • co-evolution : by working with direct competitors, customers, and suppliers, a company can create new businesses, markets, and industries • white-space opportunity : overlooked areas of growth possibilities that don't exactly match existing skills • strategic intent : corporate goal or destiny that represents a stretch for the organization, a point of view about the competitive position a company hopes to build over the coming decade

Breaking the Rules...

S OUTH W EST

Dynamic Strategy Reborn...

August 1996 June 1997

Where Does Strategy Occur?

Top Management Functional Management

What do strategists do?

• Strive for competitiveness / above-average returns • Assess external factors causing change • Develop internal factors that create advantage • Navigate stakeholder landscape • Strategic management process…

Five Stages

What else…..?

External Stuff • Globalization • Technological change • Diverse and increasingly vociferous stakeholders • Wall Street • Environment Internal Stuff • Building capabilities & core competence • Organizational culture • Leadership • Strategic HR • Board of Directors

1. Articulate Mission / Intent

• Sense of purpose, direction… • In which industries does firm compete?

• How does firm compete?

• Who are customers?

• Who are competitors?

2. Set Objectives & Performance Targets

• Financial: 10% ROI and $1.55 EPS by YE99 • Strategic: Achieve lowest prices and enter 5 new country markets by 2001

3. Craft Strategy

• How to compete: – Differentiated innovator – Multinational markets – Market-push

4. Implement Strategy

• Delegate responsibility to functional mgt. • Develop action plan: – Establish European distribution center – Create new ad campaign for 2004 Olympics – Launch new version of product – Cut prices on older version by 33%

5. Evaluation and Adjustment

• Assess results relative to goals • Identify new opportunities / constraints • Change strategy / implementation (as needed)

Planning vs. Strategy “Process”:

What’s the Difference?

Intended Strategy Strategy Carried Out Dropped Strategic Actions Emergent Strategic Actions

Competitive Interaction in Chess

2 1 8 7 4 3 6 5 This Sequence: Black: Knight b4 White: Pawn c3 Black: Bishop g4 White: Queen b5 Black: Pawn c5 a b c d e f g h Named Sequences: Epaulette’s Mate Sicilian Defense

Different Approaches to Strategy

• Blueprint • Structural Equation • Drama • Journey • Conversation • Stimuli-Responses • Conversation

Competitive Outcomes Firm A’s Actions

Rivalry

Firm B’s Actions

Organizational Characteristics Industry Characteristics