Strategic Management

GM 105Dr. Lindle Hatton

CANOE THEORY Think of your organization as a long canoe The canoe has a destination Everyone in the canoe has a seat and paddle Everyone is expected to paddle Those who won’t paddle have to get out of the

canoe Those who prevent others from paddling have

to re-adjust or get out of the canoe There are no passengers in the canoe The canoe theory understands crisis The canoe theory says you have the right to be

happy

CANOE THEORY

BUILT TO LASTPreserve the Core

Stimulate Progress

GOOD TO GREAT Level 5 Leadership First Who…Then What Confront the Brutal Facts The Hedgehog Concept A Culture of Discipline Technology Accelerators The Flywheel and The Doom Loop

Private versus Public Organizations Purpose Goals Financing Decision-Making Key Stakeholders

Strategic ManagementVersus

Strategic Planning

Features of Successful Strategic Management Has support of organization’s 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 Proactive Not a Quick Fix Part of Quality Management Payoffs Increase over Time

Lessons Learned About Strategic Planning Plans 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 Don’t Plan Time Consuming High Demands Not Rewarded Executives Don’t Support It Too Risky

Strategic Management Model Scanning

Where are we now? Strategy Formulation

Where do we want to be? Strategy Implementation

How do we get there? Measurement/Performance

How do we measure our progress?

Strategic Management Model Strategy Formulation

Where do we want to be? Vision Mission Values Goals Objectives

VISIONVision without Action is a DaydreamAction without Vision is a Nightmare

Not Optional Stretch – 30+ Years 8-10 Words in length Future State Brief and Memorable

VISION (Continued) Inspiring and Challenging Descriptive of the Ideal

Vision Examples “Light the Fire Within” “A Safer Future for All Communities” “See the Mountains – Breathe

Freely” To Be the Happiest Place on Earth To Be the World’s Best Quick Service

Restaurant

Vision Levels of People Some 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.

MISSION What is our purpose? Describes current state Timeline is 3-5 Years Builds on our distinctive

competencies Tends to focus on Core Business 30-35 Words in length

Mission Examples “To 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 Governance What is it? Codes of Governance Role of the Board of Directors Role of Top Management Team Executive Compensation

Corporate Governance System by which a firm’s owners

control its affairs. Does it work?

Codes of Governance The Cadbury Code: 1992 Sarbanes-Oxley Act: 2002 Public Company Accounting Oversight Board “Triple bottom line” Four major issues:

Ownership structure and influence Fianacial Stakeholder rights and relations Financial transparency and information

disclosure Board structure and processes (audit)

Role of the Board of Directors Monitor Evaluate and influence Initiate and determine Organization of Board

Insiders versus outsiders CEO/chair position

Committees’ Effectiveness

Role of Top Management Team Who is the TMT? Executive Leadership and Strategic Vision

Articulates strategic vision for corporation Sets the model for others to identify and

follow Communicates high performance standards

and builds confidence in followers’ abilities to meet standards

Managing strategic planning process

Executive Compensation Incentive alignment Executive Ownership Incentive compensation

Salary Bonus Stock Options LT Bonus

VALUES Guiding Principles Help establish Culture Part of Preserving the Core Core Ideology

Value Examples CHP PRIDE HP WAY J & J Credo “Build the Spirit of the Place”

Ethical Awareness Model Organizational Ethics Individual Ethics Personal Values

VALUES EXERCISE

Strategic Management Model Scanning:

Where are we now? Macro Analysis (STEP, PESTEL, ETC.) Industry Analysis – Competitive

Intelligence SWOT Analysis Internal versus

External Elements

Why Scan? To know your position in the environment To respond effectively to constant change To see the organization as a whole To avoid surprises To survive To lay the foundation for strategic issues

SCANNING: Key Environmental Variables Macro Environment: STEP, PESTEL Task Environment: Industry Internal Environment: Focal

Organization

Socio-Cultural Variables Lifestyle Changes Career Expectations Regional Shifts in Population Life Expectancies More women in workforce Greater concern for fitness Postponement of family formation Increase in temporary workers

Technological Variables Total Federal Spending for R&D Total Industry Spending for R&D Focus of Technological Efforts Patent Protection Wireless Communications Nanotechnology Productivity Improvements Genetic engineering

Economic Variables GDP Trends Interest Rates Money Supply Inflation Rates Unemployment Levels Wage/Price Controls Energy Availability & Cost Disposable & Discretionary Income

Political-Legal Variables Antitrust Regulations Tort Reform Environmental Protection Laws Taxation at local, state, federal levels Hiring and Promotion Laws Americans Disabilities Act of 1990 Sarbanes-Oxley Act of 2002

Demographic Variables Aging Population Rising affluence Changes in Ethnic Composition Geographic distribution of

population Disparities in income levels

Global Variables Increasing Global Trade Currency Exchange Rates Emergence of Indian and Chinese

Economies Trade agreements (NAFTA, EU,

ASEAN) Creation WTO

STEP EXERCISE Socio-Cultural Technological Economic Politico-Legal

Industry Analysis 6 Forces Analysis

Industry Competitors Suppliers/Vendors Customers/Clients Potential New Entrants Substitutes Other Stakeholders

Role of Complementors

New Entrants and Entry Barriers Absolute cost advantages Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Proprietary products

Buyer Power (Channel and End Consumer) Buyer volume and information Brand identity Price sensitivity Threat of backward integration Product differentiation Substitutes

Supplier Power Supplier concentration Differentiation of inputs Switching costs Threat of forward integration Cost relative to total purchases in

industry

Substitutes Switching costs Buyer inclination to substitute Variety of substitutes Price-performance tradeoff of

substitutes Necessity for product or service

Degree of Rivalry Exit barriers Industry concentration Fixed costs Industry growth Intermittent overcapacity Switching costs Brand identity Diversity of rivals Corporate stakes

Other Stakeholders Employees Unions Government Trade and Professional

Associations Other Direct Influencers

Role of Complementors Number of complements Relative value added Difficulty of engaging complements Buyer perception of complements Complement exclusivity Tend to increase profits by increasing

demand for an industry’s products

6 FORCES EXERCISE

Competitive Profile Analysis Identify Key Competitive Factors Identify key Competitors

COMPETITIVE PROFILE EXERCISE

Industry ForesightCustomerNeeds

Unarticulated

Articulated 

Customer

Served Unserved Types

Internal Environment Internal Profile Analysis SWOT Analysis

Internal Profile Analysis Identify Key Core Functions Identify Key Measures for Core

Functions Build Matrix

SWOT Analysis Internal Environment

Strengths Weaknesses

External Environment Opportunities Threats

SWOT EXERCISE

Strategic Management Model Strategy Formulation

Where do we want to be? Vision Mission Values Goals Objectives

GOAL Supports the Mission Deals with One Issue or Item of Focus Reflects a primary activity or

strategic direction Describes the “To Be” State “BHAG” Encompasses a long period, i.e. at

least 3 years

Goal Examples Achieve excellence in the delivery of

disaster recovery and mitigation programs. Professionally develop our employees as a

reflection of DAD’s 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

OBJECTIVES Add specificity beyond Goals Answer the questions

What is to be accomplished? When?

Should contain the SMART Elements

OBJECTIVES: SMART Model Specific Measurable Aggressive but Attainable Results-Oriented Timeframe

Strategic Objective Examples By 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. (Walgreen’s)

Reduce greenhouse gases by 10 percent (from a 1990 bast) by 2010. (BP Amoco)

Objectives Litmus Test

Strategic Objective Exercise

Strategic Management Model Strategy Implementation

Everyone is Responsible Few Guidelines No Easy 10-Step Checklist to Follow

Strategic Management Model Strategy Implementation

Most open-ended part of Strategic Mgmt

People implement strategies not Organizations

Strategic Management Model Strategy Implementation

How do we get there? Work Action Plans GOOMs

Strategy Implementation Considerations 7-S Framework – Strategic Fit Human Resources Patience

7-S Framework Shared Values Strategy Structure Systems Skills Style Staff

Human Resource Rule Hire Smart Train Hard Manage Easy

Parable of the BambooIt takes patience and discipline to develop

and empower people; in fact, it’s 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 results…How, 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 Strategies GOOMs Implementation Conference CEO involvement Other Strategies?

GOOMs Goals Outcomes Objectives Measures

Definitions Goal: Broad, General BHAG Outcome: Desired end result and

report performance Objective: What and When Measure: 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-C

heck-Act

Strategic Management Model Measurement / Performance

Why do we measure our progress?

Why Measure?Reactive Reasons Government Intervention Fewer Resources and Smaller

Budgets Increased Demand for

Accountability Mandated

Why Measure?Proactive Reasons Makes us more responsive to public needs Provides feedback on mission

accomplishment Creates blueprint for linking budget to

outcomes Good management and good public policy

Measurement / Performance

How do we measure our progress? 5 Types of Measures

Input Output Outcome Quality Efficiency

INPUT MeasureAmount of resources needed to provide a

particular product or service.Examples: Number of FTEs or PYs Number of eligible clients Number of customers requesting

service Number of applications received Number of sales orders received

OUTPUT MeasureAmount of products or services providedExamples: Percent of highways resurfaced Number of police reports filed Number of vaccinations given to school-

age children per year Number 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 disease Percentage of discharged patients living

independently Percent of increase in tourists Percent of monthly programmed sales

orders filled on time

QUALITY MeasureReflect the effectiveness in meeting the

expectations of customers and stakeholders

Examples: Number of defect reports compared to

number of reports produced Number 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/Input Output/Time Output/Cost Outcome/Cost

Keeping Plans Off The Shelf All Staff Meeting Announce Phases Review and Assess Plans at Quarterly

Sessions Sponsors and Team Leads for

Strategic Goals and Strategic Objectives

Deming Philosophy – PDCA

Developing Bench Strength “Drill Down” Application Sponsors, Team Leads, and Team

Members Work Action Plan “Project” Champion Leadership Training Leadership Conference Presentations

Establishing Organizational Permanence Training Emphasis Certification Awards & Recognitions “Caught-Ya” Celebrations Walk the Walk

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