SUMMARY: USING THE TECHNIQUE OF STRATEGY PROCESS
Now we summarize the ideas in this chapter as a strategy “how-to-do-it”—how to use the strategy process as depicted in Figure 1.3 as a strategy technique to construct a formal organizational process for strategic planning.
1. Form top-down and bottom-up strategic-planning teams
• A top-level planning team should be formed and given the task of formulating a planning scenario for the long-range strategic planning exercise.
• Strategic business unit teams should be formed and given the tasks of constructing strategic company models for each business unit.
2. Schedule interactions between teams
• Both sets of teams (top-down and bottom-up) should periodically meet during their tasks to present to each other and discuss preliminary versions of the planning scenarios and strategic models as they proceed.
3. Construct a planning scenario and strategic models
• Express planning scenarios and strategic models in readable forms, emphasizing critical challenges and assumptions about the future.
4. Formulate an intuitive, synthetic strategic vision
• From consensus in the team interactions, formulate a brief gestalt of the direction for a strategic vision that captures the conceptual totality, principal purposes, and goals and assumptions about strategic change.
5. Construct an analytical long-term strategic plan
• The strategic vision is then used by a firm-level strategic teamtoconstruct
a strategic plan for the firm and by strategic-business-unit teams to construct a strategic plan for each business unit. The strategic visionprovides the strategic framework and performance measures for integrating the firm-level and business-level strategic plans.
6. Construct short-term operational plans in the direction of the strategic plan
• Operational business plans for the next-year’s budget planning can then be constructed by each business unit within the framework, assumptions, and goals of the strategic plans.
The importance of such a procedural framework for strategic planning is that it specifies the right kind and number of strategic planning teams needed for strategic planning in a diversified firm and/or in a single-business firm. Moreover, it specifies the task of each team and how these tasks are to be coordinated and integrated. Also, it specifies the kinds of outputs of the task and how they are used to create short-term business plans that have long-term strategic directions.
Essential to proper strategic thinking in an organization is a proper and logical clarity about the strategy process—types and tasks of planning teams, construction of consensual top-down/bottom-up strategic vision, and guidance of short-term planning with long-term strategy.
SUMMARY: USING THE TECHNIQUE OF STRATEGY IMPLEMENTATION PROCEDURE
We can now use the concepts of strategy implementation to construct a practical technique for guiding successful implementation of strategic plans in a large organization. Look again at Figure 2.4.
1. Choose the correct implementation pathway. Successful implementation of strategy requires using the right kind of strategic pathway, depending upon the life stage of an industry and of the business in the firm.
2. Form appropriate strategy implementation teams. Each kind of strategic pathway requires different kinds of organization and procedures of implementation.
A. New venture path
• If the strategic plan (or one of its parts) is directed toward exploiting the technical progress of a basic innovation, a new-venture team should be formed to launch an early-innovator new business in the new industry.
• The milestones of a new venture can be used to guide the implementation of the new business plan.
B. First-mover path
• If the strategic plan (or one of its parts) is directed toward taking a successful new start-up business into a growth mode, then a first-mover strategic team should be formed to implement the plan in all its first-mover components of:
Continuing to advance the new technologies
Developing large-scale production capacity
Developing a national distribution capability
Developing the management talent to grow the new firm
• The milestones of an expanding first-mover strategy can be used to guide the implementation of the new business plan.
C. Dominant player path
• If the strategic plan (or one of its parts) is directed toward reengineering a large firm to maintain and strengthen its dominant competitor challenges through:
Maintaining leadership as low-cost, high-quality producers, Maintaining national and international distribution capability and brand recognition.
D. Diversification path
• If the strategic plan (or one of its parts) is directed toward diversification of businesses for corporate growth, then implementation of strategy should take the form of systematically searching for, acquiring, and integrating new growth businesses (and divesting inappropriate businesses. (We will discuss this approach in greater detail in a later chapter.
E. E-Commerce Path
• For the type of e-commerce business, devise an appropriate information strategy and strategic business model to implement.
SUMMARY: USING THE TECHNIQUE OF STRATEGIC BUSINESS MODELS
1. Formulate alternative strategic models
A top-level corporate planning team(top-down strategic perspective)and a divisional-level team(s) (bottom-up strategic perspectives) should meet to formulate different appropriate perspectives of the totality of the company in the future by selecting one or more strategicmodel(s) that would meet the challenges anticipated by the planning scenario.
2. Construct appropriate strategy policy matrices
In each appropriate strategic model, the divisional team should construct a strategy policy matrix to determine what kinds of policies would optimize the dominate strategy in the strategic perspective of the model.
3. Select the most robust strategic model
Next, the top-level strategy team and division-level strategy team(s) should together select the most desirable strategic corporate model to guide the strategic plan of the company that provides the strongest basis for survival and prosperity of the company’s future in the face of the strategic challenges and opportunities of the planning scenario.
4. Formulate a strategic policy matrix
The two teams should then formulate a set of business policies for this strategic corporate model, along with a strategic policy matrix that
emphasizes the assumptions and the desirable and anticipated interactions between the policies to be attended to in the implementation
of the strategic plan.
SUMMARY: USING THE STRATEGY TECHNIQUE OF PLANNING SCENARIOS
The topology of societal models of Figure 4.2 can be used to systematically explore trends and anticipated changes of the business environments to construct planning scenarios.
1. Form a planning scenario team
A planning scenario team for the company should be formed and consist of planning staffs and selected managers from both the firm level and strategic-business-units levels (company divisions or company businesses).
• The size and complexity of the scenarios team depends upon the business diversity of the firm.
2. Divide the scenario team in societal scenario teams
Form the scenario teams into groups (territory, culture, government,and economy) focused upon identifying and forecasting changes in these different societal sectors.
3. Use appropriate external experts to assist societal groups
The groups should identify and use as consultants appropriate external experts to help identify trends and describe structures underlying trends.
4. Prepare appropirate forecasts
Trends that can be partially expressed in quantitative measures should have extrapolated forecasts prepared by the groups, with narratives of underlying structural features upon which the extrapolations depend.
5. Present summary of planning scenario to company executives
A summary presentation of planning scenarios should be made and presented to executives of both the firm and divisional units for review and adjustment.
6. Modify planning scenario by strategic modeling teams
Strategic corporate modeling teams for the company and divisionalunits should next review and possibly modify the planning scenario, particularly identifying the parts of the scenario relevant to constructing a strategic company model.
7. Extract strategic issues from planning scenario
Each strategic modeling team should extract and summarize from the planning scenario, the strategic issues particularly relevant to constructing a strategic company model:
• Markets and innovation
• Competition and economy
• Operations and control
• Information and knowledge
8. Use the planning scenario to construct appropriate strategic models Using the strategic modeling techniques of Chapter 3, the modeling
teams should construct appropriate strategic company models for the businesses of the company.
SUMMARY: USING STRATEGY THEORY IN ESTABLISHING STRATEGIC MANAGEMENT IN A COMPANY
Strategy theory can be practically used as follows:
1. Establish a strategic process
• Devise the formal procedures, schedules, and team structure for putting into place a business process of strategic thinking, integrating top-down and bottom-up perspectives on change.
• Go beyond basic financial planning, forecast-based planning, externally oriented planning to strategic management and alliances.
2. Train personnel in strategic thinking
• Provide training for personnel in the key ideas and processes of strategic thinking.
• Develop a common use of strategic terms, such as strategy, strategy process, strategic management, planning scenarios, strategic models, environments, totality, control, vision, information, change, analysis, andsynthesis.
3. Fit strategic planning into annual budget planning
• Differentiate short-term operational planning processes and techniques from long-term strategic planning processes and techniques.
• Focus annual budget processes on operational planning as short-term projections from current operations.
• Modify the annual operational plans, according to needed next-year incremental changes required for implementing a long-term strategy.
4. Implement strategic change
• Establish an implementation team to monitor the progress of strategic change.
• Measure the progress of the strategic plan against performance in the annual budget operations planning procedures
SUMMARY: USING THE TECHNIQUE OF PLANNING LOGIC
The plan format for ongoing businesses and new businesses differ, and the format of the strategic plan needs to be adopted as appropriate.
1. Choose the appropriate plan format
• An ongoing, large business needs to focus primarily on changesincurrent operations and should separate the strategic plan from the operational plan to facilitate the focus on changes.
• A new business start-up needs to use a format that does not separate strategic and operational planning and should focus upon the business model, assumptions, and the milestones of the new venture.
2. Keep the strategic plan as brief as possible
• Ongoing organizations should focus on change as actionable items, targets, responsibility, measurable outcomes.
• Even for a very large organization, when anannualstrategicplanbecomes too long to read in a brief time and too dull to keep interest in reading it, then the planning process is flawed.
3. Use the plan to monitor progress
• If a plan cannot be used to monitor progress of activities through appropriate milestones and goals, then the plan can not help identify unwarranted assumptions and unanticipated risks in the strategic business model of the company.
4. When devising a plan, keep in mind why plans fail
• Plans fail when future action is not well thought through.
• Plans fail when unrealistic assumptions and targets are expressed in the plan.
• Plans fail when competitors and markets do unanticipated things.
• Plans fail when the form of planning overwhelms the substance of planning.
• Plans fail when too much bad luck simply overwhelms action.
5. Use the planning process to know when and how to revise action
• The planning process should not be simply a formal exercise for management to show that they appear to know what they are doing. A planning process will eventually put the company at risk if it does not
—Seriously probe and question the current business conventions
—Effectively scope the horizon for important change
—Facilitate real and effective top-down-and-bottom-up communication about operations and change
SUMMARY: TECHNIQUE FOR USING STRATEGIC VISION
The strategy process uses strategic vision as the result of the strategic thinking of preparing planning scenarios and strategic corporate models as depicted in Figure
1.1. Formulating strategic vision in an organizational context can be facilitated by the following procedure:
1. Prepare a strategic vision statement
• After reviewing the planning scenario and strategic business model, a strategic leadership team should prepare a brief strategic vision statement that focuses on changes in strategic perceptions, commitments, preparations, and policies.
• Mission statementsin operational plans are not the equivalent fastrategy vision in strategic planning because mission statements focus upon a continuity, whereas strategic vision focuses on changes to continuity.
2. Express strategic perception
• To what significant changes need to be attended in the future environments and businesses.
3. Express strategic commitment
• What changes in operational directions and commitment of resources will be necessary?
What new efforts will be required as, new products, services, operations, markets, businesses, and so on?
• Which measures of performance will be primary in addressing successful action on the changes.
Leadership should be careful about what they really wish in performance (as opposed to what they say) for they are closely observed by their followers, who distinguish the real commitment of their leaders from their public statements.
4. Express strategic preparation
• What kinds of preparation are necessary to prepare for the future as, research, investments, acquisitions, training, and so on.
5. Express strategic policy
• What changes in business policies and business practices need to be revised?
SUMMARY: TECHNIQUE OF ANTICIPATING MARKET CHANGE
Forecasting market change is needed in both the planning scenario and in constructing a strategic corporate model:
1. Scan progress in science for new knowledge
• In the planning scenario, use the model of societal structures to examine progress in science within the culture sector in the model
• Relate new scientific knowledge to relevance of advancement in technology in the economy sector of the model
• Distinguish incremental change in technologies from discontinuities
2. Anticipate new functional capabilities
• Forecast progress in technology as impacting changes in application systems
• Judge value of change in application systems and tools to customer systems
3. Identify next-generation product systems
• For dramatic progress in technologies, imagine new features of application systems and tools that would allow new tasks
• Imagine what the face of the customer will demand in these changes in new or changed tasks
4. Identify current markets that will not experience functional change
• Analyze types of groups and fashion leaders for guiding cyclic change in these markets
• Reexamine market niche structure to see if further refinement is likely
5. Write scenarios for market change in the competitive discontinuities
• Imagine how next-generation products or services can alter requirements for product-lines and services
SUMMARY: TECHNIQUE FOR ANTICIPATING COMPETITION CHANGE
The strategy process requirestheconstructionofastrategicbusinessmodel,which incorporates a strategic issue of anticipated and planned changes in the conditions of competition. A systematic way to explore possible changes in competition is to use the following strategy technique:
1. Depict the value-chain industrial structure of a business
• For each business in the company, construct and analyze the competitive conditions of all the sectors in the industrial value-chain of the business.
2. Forecast changes in technologies within the structure
• Examine the progress in all the technologies within the value chain to determine possible impacts of progress on competition within the chain
3. Analyze impact of these changes upon business competitiveness
• Formulate what kinds of products, services, quality, and cost will be necessary under changes
• Foresee forecast possible changes in industry structure
• Formulate opportunities for altering the structure to the competitive advantage of the business
4. Use information technology to improve design capabilities
• Formulate design process strategies necessary to competitively design new products or services
• Upgrading the quality of information technology in design tools and procedures is essential to prepare a business for continuing future competitiveness
5. Plan future products/services
• Formulate product and/or service strategies for the future of the business
SUMMARY: USING THE STRATEGIC TECHNIQUE OF MODELING OPERATIONS
In formulating operations strategy, it is important to develop a detailed strategic model of the business as an operating system.
1. Model A Business In Detail As An Operating System
• Describe and relate the planes of transformation to areas for strategic changes in operations and to information-flow control of operations.
3. Examine Wherein Changes In Operations Should Be Made
• Forecast progress in technologies relevant to all the enterprise subsystems.
4. Formulate Strategic Projects For Operational Change
• Identify needed projects for strategic change in operations in the different areas of the change plane of the enterprise model.
SUMMARY: USING THE STRATEGIC TECHNIQUE OF INFORMATION STRATEGY
Information strategy has two components, technical and business, that need to be integrated. Three strategic challenges need to be addressed: e-commerce, legacy systems, and enterprise integration. All information strategies for these may also require business process redesign.
1. Form an information strategy team
• Divide the team into three strategy subteams:
• E-commerce strategy subteam:
Have one subteam examine e-commerce information strategy
Construct an e-commerce strategy matrix, which examines the businesses within the company as to type and strategies for attracting, informing, value-adding, and profiting.
• Legacy System Strategy Subteam
Review progress in information technology that would incrementally improve and/or dramatically improve the information processing capabilities of the existing system.
Decide whether or not these improvements can be easily added to the existing system.
When improvements can easily be made, identify, and specify strategy projects to implement change.
When improvements require replacement of the existing system (in part or in whole), identify and specify a legacy replacement strategy project.
• Enterprise Integration Strategy Sub-team
Examine the information integration of current system.
Identify business processes and functions where information communication is not working well.
Examine how communication can be improved.
2. Examine business process redesign
• Schedule meetings of the whole information strategy team, including the subteams on e-commerce, legacy, and integration to explore commonalities and synergy in creating new information strategy.
• Explore what business processes require redesign to:
Improve operations
Improve e-commerce channels
Exploit improvement or replacement of legacy systems
Improve enterprise integration of operations
• Identify the new information technologies that would accompany these redesigns.
3. Develop information strategy
• Identify desired strategic changes in information technologies and business applications.
• Estimate order-of-magnitude costs of change and benefits of change.
• Identify necessary strategy projects for implementing change
SUMMARY: USING THE TECHNIQUE OF DIVERSIFICATION STRATEGY
Now we summarize the ideas in this chapter as a strategy technique:
1. Identify The Reasons For Diversification
• Different reasons for diversification will determine different strategies of diversification.
2. Establish Core Competency Strategies
• Different kinds of core competencies will influence different strategies of diversification.
3. Analyze The Corporate Industrial/business Portfolio
• The current business portfolio should be reviewed as to the proper market positions of the businesses within their industrial context.
4. Review Interactions Between Firm-level And Business-level Staff
• Properly integrate corporate strategic performance measures with staff reward packages. Smart people usually do what they are really paid to do.
5. Properly Manage Strategic Acquisitions
• Management of the successful integration of acquisitions into corporate structure is essential for the success of the acquisition.
6. Properly Manage Strategic Innovation
• Continual innovation within portfolio businesses of their product, production, operations efficiency is necessary for their long-term competitiveness and profitability
SUMMARY: USING THE TECHNIQUE OF KNOWLEDGE STRATEGY
Now we summarize the ideas in this chapter as a guide to knowledge strategy.
1. Create a knowledge pathway map for each business
• Knowledge is implemented into utility at the business level.
• Strategy for implementing new knowledge needs to identify the specific pathway to contribute to the bottom-line financial perspectiveof anybusiness.
2. Develop a research and engineering capability for each path
• New knowledge can not be competitively implementedwithoutaresearch and engineering capability to customize the knowledge for a businesses activities that match or exceed competitor’s similar activities.
3. Develop a research plan
• Research and engineering capabilities needed to be carefully planned and executed to innovate new products/processes/services effectively and within time and budget targets.
