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Mastering business strategy simplifying the complex

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  • 1. Mastering Business Strategy: Simplifying the Complex By Dr. Michael McDermott [email protected] 25/01/2014 McDermott, 20141

2. Perspectives on Strategy Author(s)Perspective(Published)1.Emergent StrategyExecutives use unpredictability is used as a justification to avoid tough choices go-with-theflow.Michael PorterCompetitive AdvantageChoose industry & unique competitive position.Prahalad & HamelCore CompetencesCapabilities with four traits determine competitive advantage.Kim & MauborgneBlue Ocean Strategy Create new & larger market space where no rivals, & enjoy benefits of lowest cost & highly differentiated.(1980) 3.(1990)4.(2005)25/01/2014Key MessageHenry Mintzberg (1978)2.Key Concept McDermott, 20142 3. Perspectives on Strategy Author(s)Perspective(Published)Key ConceptKey Message5.Richard RumeltGood vs Bad StrategyFocus all resources on the big problem.6.Cynthia Montgomery (2013)The StrategistArticulate distinctive purpose & communicate that.7.Lafley and MartinPlaying to WinMake five integrated choices.8.Rita McGrathThe End of Competitive AdvantageForget sustainable advantage, and live with transient advantage25/01/2014(2011)(2013)(2013) McDermott, 20143 4. 1. MINTZBERG AND DELIBERATE VS EMERGENT STRATEGY 25/01/2014 McDermott, 20144 5. Emergent Strategy25/01/2014 McDermott, 20145 6. Mintzberg (1978) Deliberate vs Emergent Strategy StrategyDeliberateEmergentRecommendationsDelay making strategic choices until future is predictable.Monitor remote external environment & make necessary adjustments.25/01/2014Adjust also when major change sin external competitive environment McDermott, 20146 7. Companies develop intended strategy; Some plans are dropped or unrealized;25/01/2014Some unintended ideas emerge and are implemented McDermott, 20147 8. 25/01/2014 McDermott, 20148 9. 2. MICHAEL PORTER: COMPETITIVE POSITION FOR COMPETITIVE ADVANTAGE 25/01/2014 McDermott, 20149 10. Michael Porter and Strategy The Porter view stresses the importance of analysis Good analysis = good strategy Good strategy = sustainable competitive advantage 25/01/2014 McDermott, 201410 11. Michael Porter and Strategy What industry do we compete in? So perform industry analysis. Determine the nature of the nature. How do we compete? Select a generic strategy.25/01/2014 McDermott, 201411 12. Michael Porter and Strategy Strategic AnalysisStrategic ChoiceCompetitive AdvantageIndustry AnalysisChoice of Generic StrategyCompetitive Advantage25/01/2014 McDermott, 201412 13. Industry Analysis and Five Forces25/01/2014 McDermott, 201413 14. 25/01/2014 McDermott, 201414 15. Michael Porter and Strategy: Generic Strategy Finding a unique competitive position. But often in highly competitive industry. All seeking to grab a share of a defined market. 25/01/2014 McDermott, 201415 16. 3. PRAHALAD AND HAMEL: CORE COMPETENCE OF THE FIRM AND STRATEGIC INTENT 25/01/2014 McDermott, 201416 17. Why are tribute bands not superstars25/01/2014Its obvious! We do not have all the four traits of core competences McDermott, 201417 18. Core Competences and the Resource-Based View (RBV)of the Firm (Prahald and Hamel, 1990)Competitive advantage is determined by internal considerations the companys capabilitiesCapabilities must possess four key traits25/01/2014 McDermott, 201418 19. Core competences are of crucial importance (see above). But what are the defining traits of core competencies? 25/01/2014 McDermott, 201419 20. A Core Competence Passes three Tests25/01/2014 McDermott, 201420 21. 25/01/2014 McDermott, 201421 22. 25/01/2014 McDermott, 201422 23. Strategic Intent25/01/2014 McDermott, 201423 24. Strategic Intent Once tiny Japanese companies developed explicit strategic intent to beat their much larger US and European rivals 1960s Once tiny South Korean companies developed explicit strategic intent to beat their much larger Japanese rivals 1980s Once tiny Chinese companies developed explicit strategic intent to beat their much larger Asian rivals 1990s/2000s25/01/2014 McDermott, 201424 25. Core competencies are increasingly based upon a companys network 25/01/2014 McDermott, 201425 26. 4. KIM AND MAUBORGNE: BLUE OCEAN STRATEGY 25/01/2014 McDermott, 201426 27. Strategy Michael PorterKim & MauborgneOr how to survive with a Red Ocean Strategy 25/01/2014Developing a Blue Ocean Strategy McDermott, 201427 28. 25/01/2014 McDermott, 201428 29. 25/01/2014 McDermott, 201429 30. Mmmm.wonder Why this slide is here?25/01/2014 McDermott, 201430 31. 5. RICHARD RUMELT: WHATS THE PROBLEM? 25/01/2014 McDermott, 201431 32. Recognize this star, the movie and the dialogue? Grady: We're trying to solve the problem. Billy: Good. What's the problem? Grady: The problem is that we've lost 3 key players that we now have to replace. BILLY Not like this. You're not even looking at the problem. Okay, stop. The problem we're trying to solve is that this is an unfair game. There are rich teams, poor teams, 50 feet of crap and then there's us.Billy = Good Strategy 25/01/2014Grady = Bad Strategy McDermott, 201432 33. The Key Message? Progress requires candid admission of the true problemNo problem = no strategy Strategy = problem solving 25/01/2014 McDermott, 201433 34. Pre-requisite of Good StrategyThe Root Cause of Bad Strategy 25/01/2014 McDermott, 201434 35. The ProblemThe SolutionHow can an older, slower, weaker, boxer who has lost his unique competences beat the world champion in energy-sapping heat of Africa?25/01/2014 McDermott, 201435 36. Bad Strategy25/01/2014Good Strategy McDermott, 201436 37. Bad Strategy25/01/2014Good Strategy McDermott, 201437 38. Whats the Big problem facing these companies?25/01/2014 McDermott, 201438 39. Whats the Big issue/problem facing these companies?The issue or problem may not be conspicuously obvious.but there is one lurking within.25/01/2014 McDermott, 201439 40. Whats the Problem? Most companies refuse to pose this basic question. Why? It makes them feel very uncomfortableit demands admitting there is a problem 25/01/2014 McDermott, 201440 41. 6. CYNTHIA MONTGOMERY: THE STRATEGIST 25/01/2014 McDermott, 201441 42. Strategy and Leadership The Porter view separates the role of the leader from strategy. It ignores the importance of the strategist (the CEO) This is a major error. 25/01/2014 McDermott, 201442 43. Meaning-Makerstrategy has been narrowed to a competitive game plan, divorcing it from a firm's larger sense of purpose; the CEO's unique role as arbiter and steward of strategy has been eclipsed;The Roles of the Strategist The Reasoner 25/01/2014and the exaggerated emphasis on sustainable competitive advantage has drawn attention away from the fact that strategy must be a dynamic tool for guiding the development of a company over time (Montgomery, HBR, 2008)The Operator McDermott, 201443 44. The Buck Stops with the StrategistDevelop Stated Purpose25/01/2014Develop StrategyArticulate Strategy in Concise StatementSets Direction McDermott, 2014Establishes PrioritiesGuides all Activities44 45. 1. Defines firms unique value. 2. Explains its relevance why it matters 3. Easy to understand & memorableDevelop Stated PurposeDevelop Strategy25/01/2014Articulate Strategy in Concise StatementSets Direction McDermott, 2014Establishes PrioritiesGuides all Activities45 46. The Buck Stops with the Strategist Develop Stated PurposeDevelop StrategySets DirectionEstablishes PrioritiesGuides all ActivitiesArticulate Strategy in Concise StatementStrategy statement is important 25/01/2014 McDermott, 201446 47. Strategies and Strategy Statements The Honed Strategy & Strategy Statement Sets direction; Establish priorities; Guides activityThe Weak Strategy & Strategy Statement Fails to provide direction; Causes panic; Creates confusion.Source of competitive advantage 25/01/2014Source of competitive disadvantage McDermott, 201447 48. Strategy and Strategy Statements EffectiveIneffective1. 2. 3. 4. 5. 6.1. 2. 3. 4. 5. 6.Distinctive Provides focus the what Specific the how Explanatory and transparent Targeted the who Inspirational25/01/2014Too Generic could be anyone Covers all bases Clichs meaningless Baffling and opaque Scattered Dull McDermott, 201448 49. 7. A.G. LAFLEY AND ROGER L. MARTIN PLAYING TO WIN: STRATEGY IS FIVE INTEGRATED CHOICES 25/01/2014 McDermott, 201449 50. "The most important thing in the Olympic Games is not winning but taking part; the essential thing in life is not conquering but fighting well. Baron Pierre de Coubertin, founder of the Olympics,You play only where you can win 25/01/2014 McDermott, 201450 51. You Play only where you can Win? Really Can US auto companies beat BMW, Mercedes? Can Walmart win in China? Can JC Penney beat Macys? Can Google win in China? Can Avon win anywhere? Can RIM (Blackberry) win in enterprise solutions? Can Dell win in B2C as opposed to B2B?25/01/2014 McDermott, 201451 52. Winning Demands Beating the Biggest and also the Best US airlines need to compete only where they can win - beating the airlines below The Biggest25/01/2014The Best McDermott, 201452 53. How to Win With a Low Cost StrategyWith Differentiation There can be only one winner! There can be several winners Whoever has the lowest costs But the rewards rise with the level of differentiation achieved. Focus must be on costreduction and standardization And a willingness to lose customers that do not settle for standardization Focus is customerunderstanding & brand building High commitment to innovationBoth strategies require the pursuit of distinctiveness 25/01/2014 McDermott, 201453 54. Strategy is Five Choices What is your winning aspiration? The purpose of your enterprise, its motivating aspiration. Choice 1. Where will you play? A playing field where you can achieve that aspiration. Choice 2. How will you win? The way you will win on the

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