Clarifying Strategy and Tactics for Value Creation

Survey Results

What position do you hold in your organization?

• 13 CEOs• 15 BOD members• 1 Interim CEO• 1 BOD Chair / CEO• 31 total responses

I believe that the current strategy for our company is on target and realistic.

I believe that we have full alignment and support for our strategy

across our management team, our board and the team at Milestone.

I believe there is a high level of open, honest and transparent communication across our organization, board and the team at Milestone.

I believe that our organization shows great discipline in executing on our key strategies and objectives.

Learning Objectives

• Establishing a common language and set of definitions around the core elements of strategy.

• Exploring the disconnect between overly ambitious strategies versus actual resources available and true organizational capabilities.

• Underscoring the critical need for full alignment and consensus on strategy between ownership and management teams.

• Discussing the why's and how's of ensuring that the entire company understands the strategy is aligned and committed to implement it.

• Examining the barriers to effective execution of strategy.• Reviewing the role of a BOD member in strategy alignment and execution.

What sort of questions should they be asking, what should they be looking for?• Understanding that as a key foundation the business MUST function well,

otherwise strategy is useless.

A few of my clients:

For the past 21 years…

Five Foundations of Effective Strategic Thinking

Business Acumen

Personal Experience

Pattern Recognition

Strategic Insight

Disciplined Execution

Key Terms: Mission Vision Strategy Objectives Tactics

“Simplicity is the ultimate sophistication” Leonardo da Vinci

Mission

A mission statement describes what an organization is all about: its purpose and primary objectives. It answers three key questions:

• Whom do we serve?

• What is the benefit to our stakeholders, community and

the world?

• Why does this organization exist? It should resonate with all members of the organization and help

them feel proud and excited to be a part of something bigger than themselves.

Medtronic Mission

“To contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health, and extend life.”

Vision

A vision statement is what the organization wants to become. It is a picture of the desired future, where they see the business 5-10-20 years from now.

Features of an effective vision statement include:

• Clarity and lack of ambiguity • Vivid and clear picture • Description of a bright future • Memorable and engaging wording • Realistic aspirations • Alignment with organizational values and

culture

Vision: Anheuser-Busch

• Be the world's beer company.• Enrich and entertain a global

audience .• Deliver superior returns to our

shareholders.

• Early 1900s: Democratize the automobile

• Current: To become the world's leading Consumer Company for automotive products and services.

Vision: Ford Motor Company

Workshop: Vision

Strategy

• Your strategy is the plan of action you want to take to achieve success in your business.

• It is a thoughtfully constructed plan to address a need to be met, or a problem to be solved; determining which resources you will marshal to meet that need or solve that problem; and setting the criteria for success.

• Strategy is not merely maintaining sight of the long term options for realizing the vision, but also includes an appreciation and study of the opponent's thinking and response to challenge.

Strategy Clock

Various Strategic Options

1. Low Price / Low Added Value (Dollar General)

2. Low Price (Walmart)

3. Hybrid (Target / Dell)

4. Differentiation (Nordstrom / Apple)

5. Focused Differentiation (Gucci)

Objectives, Strategic Objectives, Goals, KRA’s…

• Objectives are the major projects or programs that support the strategy.

• It is where senior leaders allocate significant resources to be deployed by mid-level and lower-level managers on specific tactics.

Tactics

• Your tactics are the specific actions, sequences of actions, and schedules you will use to fulfill your strategy.

• If you have more than one strategic objective you will have different tactics for each.

• Tactics are typically short-term, immediate actions… which taken together will eventually lead to the achievement of the overall strategy.

Lets go through the entire process…

Anheuser-Busch Mission:

Through all of our products, services and relationships, we will add to life's enjoyment.

Vision: Anheuser-Busch

• Be the world's beer company.• Enrich and entertain a global

audience .• Deliver superior returns to our

shareholders.

Strategy: Market domination through Differentiation

AND……

AND….

Tactics: Fitty

Tactics: Foodies

Tactics: Bubba

The Organizational Framework for Effective Strategy

WHO WHAT HOW

Cross-FunctionalTeams

BOD & Senior Leadership

Departments

Adapted from: Six Disciplines Execution Revolution

Individuals

Planning RetreatQuarterly Workshops

GoalsTracking

Dashboard

Dept. Tactical PlansStatus Reports

Regular Meetings

Individual Tactical PlansStatus Reports

Regular Meetings

IndividualsAction ItemsTo-do Lists

The Key: Brutal Honesty in the Analysis !!!!!!

The Missing Element?

10 – 15%

What Inhibits Execution?National Survey of 4,000 Senior Executives

4. Inability to work together (21%)

3. Company culture (23%)

2. Economic climate (29%)

1. Holding onto the past / unwillingness to CHANGE (35%)

The Four – I’s

• Ignorance• Inflexibility• Indifference• Inconsistency

How to avoid the Four I’s

• Aggressive external market focus.

• Ridiculously high level of customer focus.

• Keep the “Main Things” the main things.

• Bullish on knowledge sharing and learning.

• Teamwork / communication is mandatory – not optional

• Passion and commitment at all levels.

• Foster a healthy paranoia.

• Revel in change.

Where are we going andhow will we behave on the way?

FocusDifferentiation“No”

Guiding Collation

Vision + ValuesStrategy

ObjectivesInitiativesPrograms

Procedures / ProtocolsRepeatable ProcessClear / consistent / relentless

Training +time / money /

supplies / people

Measure / TrackCommunicate

Transparency Accountability

Celebrate SuccessEliminate Mediocrity

A few key points… All together now!

Clear, Consistent, Continuous…

Measure & Post Create A Dashboard of Key Indicators

MPS Margin Per Sale

Talent

Customer Service

Customer Retention

BOD and Management Relationship

BOD / Management Team / MP

Company Management

Team

Key Point:Strategy is INTERNALas well as EXTERNAL

The Pattern of Business Success

(T + C + ECF) x DE = Success

The level of highly satisfied and engaged EMPLOYEES in your business.

The number one factor in increasing the level of highly satisfied and engaged CUSTOMERS in your business is…

Job + Organizational Engagement = Employee Engagement

Not Engaged Engaged

Enga

ged

Not E

ngag

ed

Job Engagement

Org

aniz

atio

nal E

ngag

emen

t

50%

9%

Benchwarmers

7%

Free Agents

34%

Stars

Disengaged

Actively Disengaged Employees…

22%

Key Drivers of Customer Satisfaction and LoyaltyFinancial

Performance

Quality P&S&

Customer Relationship

EmployeeSatisfaction

Empowerment High Standards

Long-termOrientation

Enthusiasm, Commitment,

Respect

Training &Development

Fair Compensatio

n

CR= 104.12% increase in profits

CR= .404

CR=.334

CR=.277

CR=.275CR=.249

CR=.280 Coaching

CR=.285

CR=.371

CR=.365

CR=.191

CR=.247

TolerateNothing

Less

From: Practice What You Preach by Maister

Global study:16 countries529 companies15,589 respondents

Chart: 4Workshop: 5

Customer satisfaction drives customer loyalty… and customer loyalty drives profitability

100%

90

80

70

60

50

40

30

20

Extremely Dissatisfie

d

SomewhatDissatisfie

d

SlightlyDissatisfie

dSatisfied

Very Satisfied

Zone of Defection

Zone of Indifferenc

e

Zone of Affection

Loya

lty

Customer Satisfaction

Terrorist

Evangelist

A 5% increase in loyalty among your best customers…

Can produce a profit increase of 25% – 85%

I hate you

I don’t care about you

I love you

Actively disengaged employees can reduce revenues by up to 22%, while highly satisfied and engaged

employees can drive profits up by as much as a 189%

Culture = Cash

Best Practices: Talent• Create a pipeline of talent into your

company.

• Hire for attitude – train for skills.

• Use team interviewing.

• Train people how to interview.

• Use a focused competency model.

• Use numerous types of testing.

• Do a thorough reference check.

• Make sure they really want to work for you.

• Hire slow – fire fast.Make “Hiring Right” a core competency!

Culture• Innovation• Kaizen• Accountability• Urgency• “Ownership Mentality”

Web of Value

VOC + MOT

Extreme Customer Focus

Whoever owns the… VOICE OF THE

CUSTOMEROwns the Marketplace

Moments of Truth

The Evergreen Project

10 year study of 160 top companies

40 distinct industries

200 management practices

Winners, climbers, tumblers, losers

Winners had an average Total Return to Shareholders of 945%...

The Losers only averaged a TRS of 62%

From: What (really) Works by Joyce, Nohria, Roberson

The Four Primary Practices:

1. A sharply focused, clearly communicated and well-understood strategy for growth.

2. Flawless operational execution that consistently delivers the value proposition.

3. A performance-oriented culture that does not tolerate mediocrity.

4. A fast, flexible, flat organization that reduces bureaucracy and simplifies work.

22

The Secondary Management Practices:

• Talent = find and keep the best people.

• Key leaders show commitment and enthusiasm for the business.

• Embrace strategic innovation.

• Master the power of partnerships.

From: What (really) Works by Joyce, Nohria, Roberson