Firm A’s Actions Firm B’s Actions Rivalry CompetitiveOutcomes...

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Firm A’sFirm A’sActionsActions

Firm B’sFirm B’sActionsActions

RivalryRivalry

CompetitiveCompetitiveOutcomesOutcomes

IndustryIndustryCharacteristicsCharacteristics

OrganizationalOrganizationalCharacteristicsCharacteristics

What Is Strategy?• Plan/course of action...to achieve favorable

position

• Alignment of course of action with long-run goals

• A plan that integrates the goal, action pattern/sequence, and resources into a cohesive whole

• Steps taken to achieve competitive advantage…sustainable edge over competitors

Why Strategy? …Action that Creates Value

Lynagh’s

TwoKeysTavern

Is Strategy Important?

• Execs, consultants, and B-school professors: “...strategy is the single most important management issue and will remain so for many years.” Business Week, Aug. 1996

• Companies that now rely on “strategy groups”:

• UPS• Applied Materials• H-P• Smucker’s

• Sears• Nokia• EDS

Beyond SWOT

Environment:Outside-in (I/O)

Firm:Inside-out

Strategy

Destroying Strategic Management MythsFortune, June 1997

• Life is easy as “king of the hill” Hypercompetition erodes advantages

• Industry analysis is the key to strategy

Difficult to define “industry”

• Focus on your direct competitors

Potential competitors greater threat

• For CEOs, it’s you against the world

Savvy CEO involve more people

What Makes Shareholders Rich?...Create New Wealth

• Vision looks beyond current boundaries

• Strategy as continuous process

• New perspectives, voices, conversations

• Change rules of game

• Experimentation, surprise

New Strategy Glossary• value migration: movement of growth and profit opportunities

from one industry player to another

• co-evolution: by working with direct competitors, customers, and suppliers, a company can create new businesses, markets, and industries

• white-space opportunity: overlooked areas of growth possibilities that don't exactly match existing skills

• strategic intent: corporate goal or destiny that represents a stretch for the organization, a point of view about the competitive position a company hopes to build over the coming decade

Breaking the Rules...

SOUTHWEST

Dynamic Strategy Reborn...August 1996 June 1997

Where Does Strategy Occur?

Top Management

Functional Management

What do strategists do?

• Strive for competitiveness / above-average returns

• Assess external factors causing change

• Develop internal factors that create advantage

• Navigate stakeholder landscape

• Strategic management process… Five Stages

What else…..?

External Stuff• Globalization• Technological change• Diverse and increasingly

vociferous stakeholders• Wall Street• Environment

Internal Stuff• Building capabilities &

core competence• Organizational culture• Leadership• Strategic HR• Board of Directors

1. Articulate Mission / Intent

• Sense of purpose, direction…

• In which industries does firm compete?

• How does firm compete?

• Who are customers?

• Who are competitors?

2. Set Objectives & Performance Targets

• Financial: 10% ROI and $1.55 EPS by YE99

• Strategic: Achieve lowest prices and enter 5 new country markets by 2001

3. Craft Strategy

• How to compete:

– Differentiated innovator

– Multinational markets

– Market-push

4. Implement Strategy

• Delegate responsibility to functional mgt.

• Develop action plan:

– Establish European distribution center

– Create new ad campaign for 2004 Olympics

– Launch new version of product

– Cut prices on older version by 33%

5. Evaluation and Adjustment

• Assess results relative to goals

• Identify new opportunities / constraints

• Change strategy / implementation (as needed)

DroppedStrategicActions

IntendedStrategy

StrategyCarried Out

EmergentStrategicActions

Planning vs. Strategy “Process”:What’s the Difference?

a b c d e f g h

Competitive Interaction in Chess

This Sequence:

Black: Knight b4

White: Pawn c3

Black: Bishop g4

White: Queen b5

Black: Pawn c5

Named Sequences:

Epaulette’s Mate

Sicilian Defense

Different Approaches to Strategy• Blueprint

• Structural Equation

• Drama

• Journey

• Conversation

• Stimuli-Responses