Strategic ManagementGM 105Dr. Lindle Hatton

CANOE THEORYThink of your organization as a long canoeThe canoe has a destinationEveryone in the canoe has a seat and paddleEveryone is expected to paddleThose who wont paddle have to get out of the canoeThose who prevent others from paddling have to re-adjust or get out of the canoeThere are no passengers in the canoeThe canoe theory understands crisisThe canoe theory says you have the right to be happy

CANOE THEORY

BUILT TO LASTPreserve the CoreStimulate Progress

GOOD TO GREATLevel 5 LeadershipFirst WhoThen WhatConfront the Brutal FactsThe Hedgehog ConceptA Culture of DisciplineTechnology AcceleratorsThe Flywheel and The Doom Loop

Private versus Public Organizations PurposeGoalsFinancingDecision-MakingKey Stakeholders

Strategic ManagementVersusStrategic Planning

Features of Successful Strategic ManagementHas support of organizations executive officer.Is user friendly.Is participatory, not left to planners.Is flexible.Leads to resources decisions.Engages and motivates all staff.Is fresh and continuous, not static and stale.

Features (Continued)Is ProactiveNot a Quick FixPart of Quality ManagementPayoffs Increase over Time

Lessons Learned About Strategic PlanningPlans must be tailored to organization.No one size fits all.Time to complete takes longer expect 50% more than planned.Process needs a shepherd.Visionaries needed at beginning and detail types thereafter.

Why Managers Dont PlanTime ConsumingHigh DemandsNot RewardedExecutives Dont Support ItToo Risky

Strategic Management ModelScanningWhere are we now?Strategy FormulationWhere do we want to be?Strategy ImplementationHow do we get there?Measurement/PerformanceHow do we measure our progress?

Strategic Management ModelStrategy FormulationWhere do we want to be?VisionMissionValuesGoalsObjectives

VISIONVision without Action is a DaydreamAction without Vision is a Nightmare

Not OptionalStretch 30+ Years8-10 Words in lengthFuture StateBrief and Memorable

VISION (Continued)Inspiring and ChallengingDescriptive of the Ideal

Vision ExamplesLight the Fire WithinA Safer Future for All CommunitiesSee the Mountains Breathe FreelyTo Be the Happiest Place on EarthTo Be the Worlds Best Quick Service Restaurant

Vision Levels of PeopleSome people never see it. (Wanderers)Some people see it but never pursue it on their own. (Followers)Some people see it and pursue it. (Achievers)Some people see it and pursue it and help others see it. (Leaders) John Maxwell, Developing The Leader Within You, 1993.

VISION EXERCISE

Mission StatementIn the absence of a clearly defined direction one is forced to concentrate on confusion that will ultimately consume you.

MISSIONWhat is our purpose?Describes current stateTimeline is 3-5 YearsBuilds on our distinctive competenciesTends to focus on Core Business30-35 Words in length

Mission ExamplesTo Lead All Communities in Disaster Preparedness, Mitigation, and Recovery by Maximizing Assistance and Support.Caltrans Improves Mobility Across California.To produce superior financial returns for our shareholders as we serve our customers with the highest quality transportation, logistics, and e-commerce.

MISSION EXERCISE

Corporate GovernanceWhat is it?Codes of GovernanceRole of the Board of DirectorsRole of Top Management TeamExecutive Compensation

Corporate GovernanceSystem by which a firms owners control its affairs.Does it work?

Codes of GovernanceThe Cadbury Code: 1992Sarbanes-Oxley Act: 2002Public Company Accounting Oversight BoardTriple bottom lineFour major issues:Ownership structure and influenceFianacial Stakeholder rights and relationsFinancial transparency and information disclosureBoard structure and processes (audit)

Role of the Board of DirectorsMonitorEvaluate and influenceInitiate and determineOrganization of BoardInsiders versus outsidersCEO/chair positionCommittees Effectiveness

Role of Top Management TeamWho is the TMT?Executive Leadership and Strategic VisionArticulates strategic vision for corporationSets the model for others to identify and followCommunicates high performance standards and builds confidence in followers abilities to meet standardsManaging strategic planning process

Executive CompensationIncentive alignmentExecutive OwnershipIncentive compensationSalaryBonusStock OptionsLT Bonus

VALUESGuiding PrinciplesHelp establish CulturePart of Preserving the CoreCore Ideology

Value ExamplesCHP PRIDEHP WAYJ & J CredoBuild the Spirit of the Place

Ethical Awareness ModelOrganizational EthicsIndividual EthicsPersonal Values

VALUES EXERCISE

Strategic Management ModelScanning: Where are we now?Macro Analysis (STEP, PESTEL, ETC.)Industry Analysis Competitive IntelligenceSWOT AnalysisInternal versus External Elements

Why Scan?To know your position in the environmentTo respond effectively to constant changeTo see the organization as a wholeTo avoid surprisesTo surviveTo lay the foundation for strategic issues

SCANNING: Key Environmental VariablesMacro Environment: STEP, PESTELTask Environment: IndustryInternal Environment: Focal Organization

Socio-Cultural VariablesLifestyle ChangesCareer ExpectationsRegional Shifts in PopulationLife ExpectanciesMore women in workforceGreater concern for fitnessPostponement of family formationIncrease in temporary workers

Technological VariablesTotal Federal Spending for R&DTotal Industry Spending for R&DFocus of Technological EffortsPatent ProtectionWireless CommunicationsNanotechnology Productivity ImprovementsGenetic engineering

Economic VariablesGDP TrendsInterest RatesMoney SupplyInflation RatesUnemployment LevelsWage/Price ControlsEnergy Availability & CostDisposable & Discretionary Income

Political-Legal VariablesAntitrust RegulationsTort ReformEnvironmental Protection LawsTaxation at local, state, federal levelsHiring and Promotion LawsAmericans Disabilities Act of 1990Sarbanes-Oxley Act of 2002

Demographic VariablesAging PopulationRising affluenceChanges in Ethnic CompositionGeographic distribution of populationDisparities in income levels

Global VariablesIncreasing Global TradeCurrency Exchange RatesEmergence of Indian and Chinese EconomiesTrade agreements (NAFTA, EU, ASEAN)Creation WTO

STEP EXERCISESocio-Cultural TechnologicalEconomicPolitico-Legal

Industry Analysis6 Forces AnalysisIndustry CompetitorsSuppliers/VendorsCustomers/ClientsPotential New EntrantsSubstitutesOther StakeholdersRole of Complementors

New Entrants and Entry BarriersAbsolute cost advantagesAccess to inputsGovernment policyEconomies of scaleCapital requirementsBrand identitySwitching costsAccess to distributionProprietary products

Buyer Power (Channel and End Consumer)Buyer volume and informationBrand identityPrice sensitivityThreat of backward integrationProduct differentiationSubstitutes

Supplier PowerSupplier concentrationDifferentiation of inputsSwitching costsThreat of forward integrationCost relative to total purchases in industry

SubstitutesSwitching costsBuyer inclination to substituteVariety of substitutesPrice-performance tradeoff of substitutesNecessity for product or service

Degree of RivalryExit barriersIndustry concentrationFixed costsIndustry growthIntermittent overcapacitySwitching costsBrand identityDiversity of rivalsCorporate stakes

Other StakeholdersEmployeesUnionsGovernmentTrade and Professional AssociationsOther Direct Influencers

Role of ComplementorsNumber of complementsRelative value addedDifficulty of engaging complementsBuyer perception of complementsComplement exclusivityTend to increase profits by increasing demand for an industrys products

6 FORCES EXERCISE

Competitive Profile AnalysisIdentify Key Competitive FactorsIdentify key Competitors

COMPETITIVE PROFILE EXERCISE

Industry ForesightCustomerNeeds

Unarticulated Articulated Customer Served Unserved Types

Internal EnvironmentInternal Profile AnalysisSWOT Analysis

Internal Profile AnalysisIdentify Key Core FunctionsIdentify Key Measures for Core FunctionsBuild Matrix

SWOT AnalysisInternal EnvironmentStrengthsWeaknessesExternal EnvironmentOpportunitiesThreats

SWOT EXERCISE

Strategic Management ModelStrategy FormulationWhere do we want to be?VisionMissionValuesGoalsObjectives

GOALSupports the MissionDeals with One Issue or Item of FocusReflects a primary activity or strategic directionDescribes the To Be StateBHAGEncompasses a long period, i.e. at least 3 years

Goal ExamplesAchieve excellence in the delivery of disaster recovery and mitigation programs.Professionally develop our employees as a reflection of DADs key attributes and values.Increase the supply of housing, especially affordable housing.Become a model for customer service.To provide benefits in correct amounts and issued in a timely manner.

Goal Statements Litmus Test

Goal Exercise

OBJECTIVESAdd specificity beyond GoalsAnswer the questions What is to be accomplished?When?Should contain the SMART Elements

OBJECTIVES: SMART ModelSpecificMeasurableAggressive but AttainableResults-OrientedTimeframe

Strategic Objective ExamplesBy June 30, 2005 achieve 75% rating on the DAD service index from all stakeholders.Increase sales growth 6-8% in the next 5 years. (P&G)Cut corporate overhead costs by $30 million per year. (Fortune Brands)Operate 6,000 stores by 2010 up from 3,000 in the year 2000. (Walgreens)Reduce greenhouse gases by 10 percent (from a 1990 bast) by 2010. (BP Amoco)

Objectives Litmus Test

Strategic Objective Exercise

Strategic Management ModelStrategy ImplementationEveryone is ResponsibleFew GuidelinesNo Easy 10-Step Checklist to Follow

Strategic Management ModelStrategy ImplementationMost open-ended part of Strategic MgmtPeople implement strategies not Organizations

Strategic Management ModelStrategy ImplementationHow do we get there?Work Action PlansGOOMs

Strategy Implementation Considerations7-S Framework Strategic FitHuman ResourcesPatience

7-S FrameworkShared ValuesStrategyStructureSystemsSkillsStyleStaff

Human Resource RuleHire SmartTrain HardManage Easy

Parable of the BambooIt takes patience and discipline to develop and empower people; in fact, its like growing bamboo. Once the seed is planted, you must water it daily for four years before the tree breaks ground then it grows 60 feet in 90 days! Executives who nurture people can get similar resultsHow, you ask, can such rapid growth be possible? It results from the miles of roots that develop in those first four years. Preparing people to perform is the task of leadership.

Implementation StrategiesGOOMsImplementation ConferenceCEO involvementOther Strategies?

GOOMs GoalsOutcomesObjectivesMeasures

DefinitionsGoal: Broad, General BHAGOutcome: Desired end result and report performanceObjective: What and WhenMeasure: A quantified unit that assesses progress or achievement

GOOM ExampleGoal 1: Achieve excellence in the delivery of disaster recovery and mitigation.Outcome: Increased Customer SatisfactionObjective 1.1: By June 30, 2005, achieve 75% rating on the DAD Service Index from all stakeholders.Measure: DAD Service Index (DSI)

GOOM Exercise

Work Action Plan Template

Sponsor:

Completion Date

Organization:

n.n

Goal

Outcome

n.n

Objective

Measure

Task Description

Team Lead

Staff Hours

Completion Date

Plan- Do-Check-Act

Strategic Management ModelMeasurement / PerformanceWhy do we measure our progress?

Why Measure?Reactive ReasonsGovernment InterventionFewer Resources and Smaller BudgetsIncreased Demand for AccountabilityMandated

Why Measure?Proactive ReasonsMakes us more responsive to public needsProvides feedback on mission accomplishmentCreates blueprint for linking budget to outcomesGood management and good public policy

Measurement / PerformanceHow do we measure our progress?5 Types of MeasuresInputOutputOutcomeQualityEfficiency

INPUT MeasureAmount of resources needed to provide a particular product or service.Examples:Number of FTEs or PYsNumber of eligible clientsNumber of customers requesting serviceNumber of applications receivedNumber of sales orders received

OUTPUT MeasureAmount of products or services providedExamples:Percent of highways resurfacedNumber of police reports filedNumber of vaccinations given to school-age children per yearNumber of shafts produced in a single operating shift

OUTCOME MeasureReflect the actual results achieved and/or their impact or benefit. Examples:Reduction in incidence of diseasePercentage of discharged patients living independentlyPercent of increase in touristsPercent of monthly programmed sales orders filled on time

QUALITY MeasureReflect the effectiveness in meeting the expectations of customers and stakeholdersExamples:Number of defect reports compared to number of reports producedNumber of course ratings in highest category related to total number of course ratings

EFFICIENCY MeasureAlso known as productivity measures. Reflect the cost of providing products or services.Examples:Output/InputOutput/TimeOutput/CostOutcome/Cost

Keeping Plans Off The ShelfAll Staff MeetingAnnounce PhasesReview and Assess Plans at Quarterly SessionsSponsors and Team Leads for Strategic Goals and Strategic ObjectivesDeming Philosophy PDCA

Developing Bench StrengthDrill Down ApplicationSponsors, Team Leads, and Team MembersWork Action PlanProject ChampionLeadership TrainingLeadership Conference Presentations

Establishing Organizational PermanenceTraining EmphasisCertificationAwards & RecognitionsCaught-YaCelebrationsWalk the Walk

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