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What is Strategy? Thinking like a Strategist
September 2012 Bangalore, India
Amit Kapoor
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Content
• Have a dialogue on strategy • Use a case study – “Growing for Broke” • Discuss heuristics for strategic thinking
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Start with this question…
Write down first three words that come to you mind when you hear
the word ‘Strategy’
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… followed by this question…
Describe in a line or two, in your own words – ‘What is Strategy?’
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… and finally this question
What is the one thing you would like to know (more) about Strategy?
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What is Strategy? System Story Design Subtlety Scene Gimmick
Learning Adapt Quick Respond Culture
Action Setup Procedure Policy Tactics Process
Excellence Execution Operational Quality People
Approach Blueprint Method Plan Planning Strategic
Competitive Industry Exploit High Ground Profit Cost
Focus Program Present Core Central
Competence Capabilities Focus Maneuvering
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Strategy is a young field
1% 1%
7% 6% 6%
10%
21% 22% 20%
1922 1932 1942 1952 1962 1972 1982 1992 2002
Strategy /Strategic Citation in Harvard Business Review [Title & Abstract] (% of total articles, 10 year period, starting year)
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Strategy definition
Strategy [ˈstratəәjē ] • the art of planning and directing overall military operations and
movements in a war or battle. Often contrasted with tactics • a plan of action or policy designed to achieve a major or overall
aim: time to develop a coherent economic strategy | shifts in marketing strategy.
Via Latin from Greek: • from ‘stratēgia’ : generalship • from ‘stratēgos’ : be a general
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Basic tension in Strategy
Advantage is Transient Corporate identity is slow to change
“… although the stickiness of company’s identity is typically
regarded as weakness, it’s also a great source of strength”
Art Kleiner, The Right to Win
“Now, here, you see, it takes all the running you can do, to keep in
the same place” said the Red Queen
Lewis Caroll, Alice in Wonderland
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Strategy Map
featuresstrategy
&com
petition
4The Red Queen among Organizations: How Competi-tiveness Evolves (Princeton University Press, 2008), thisturbulence can never level off into stability; as compa-nies copy and outdo one another’s proficiencies, thegame of business continually becomes more challenging.Rapid economic growth in emerging markets has madeadvantage even more transient, bringing billions of peo-ple into the global economy, along with hundreds ofenergetic new business competitors.
One might assume that the answer is to becomecompletely resilient, morphing to match the changingdemands of the market. But companies can’t, because ofthe second reality: Corporate identity is slow to change.The innate qualities of an organization that distinguishit from all others — its operational processes, culture,relationships, and distinctive capabilities — are built upgradually, decision by decision, and continually rein-
forced through organizational practices and conversa-tions. Very few companies have thoroughly reinventedthemselves, and those that have managed it have typi-cally had to force many people out, including top exec-utives, and to replace them with new recruits chosen fora different set of attitudes and skills. Even when leadersrecognize the need for change or know that the com-pany’s survival is at stake, this identity is difficult to shift;if no deliberate effort is made to refresh it, it can stag-nate to the point where it erodes advantage from with-in. As writers such as Jim Collins, Clayton Christensen,and Donald Sull have noted, it’s all too easy for estab-lished companies to fall prey to complacency and hubris(Collins), entrenched customer relationships and dis-ruptive technologies (Christensen), or inertia (Sull).
Yet although the “stickiness” of a company’s identityis typically regarded as a weakness, it’s also a great source
Exhibit 1: A Landscape of Strategy Concepts
Source: Walter Kiechel, The Lords of Strategy; Art Kleiner, The Age of Heretics; Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel, Strategy Safari
Henry MintzbergThe Rise and Fall ofStrategic Planning
1994
Chris ZookProfit from the Core
2001
Gary Hamel &C.K. Prahalad
Competing for the Future1994
Michael PorterCompetitive Strategy
1980
Bruce HendersonEssays1966
W. Chan Kim &Renée Mauborgne
Blue Ocean Strategy2005
Kenneth AndrewsThe Concept of
Corporate Strategy1971
William Abernathy & Robert Hayes
“Managing Our Way toEconomic Decline”
1980
Tom Peters &Robert Waterman
In Search of Excellence1982
ADAPTATION Act quickly and creativelyin response to events(organizational learning)
POSITIONExploit the high ground: createand hold a distinctive position
(market-back strategy)
EXECUTIONAlign people and processesfor operational excellence(the quality movement )
CONCENTRATIONFocus on your current
core business(private equity)
Michael Hammer& James Champy
Reengineering the Corporation1993
W. Edwards DemingOut of the Crisis
1986
Ram Charan &Larry Bossidy
Execution2002
MANY FEW
FUTURE
PRESENT
Each of these four quadrants represents a basic school of thought inbusiness strategy about the nature of the right to win. Starting at theupper right, the schools are Position (winners select favorablemarkets as defined by external forces); Concentration (winners makethe most of current core strengths and businesses); Execution (winnersgain advantage through operational excellence); and Adaptation(winners develop an overall direction through experimentation andrapid change). From the 1960s to today, many companies havebounced from one quadrant to another.
The grid itself reflects views of the best approach for developingbusiness strategy. The X-axis represents the point of view on
authorship: Who is responsible for major strategy decisions? At leftare those who favor collective choice (strategic thinking is instilledamong as many people throughout the company as possible). At rightare those who favor top-down formulation (strategy is developed bythe few, the designated expert planners and senior executives, whilethe rest of the enterprise is dedicated to execution).
The Y-axis depicts time orientation: the degree to which strategyis seen as present- or future-oriented. At the top are those who favormoving toward a long-term destination that may be different from thecompany’s current position. At the bottom are those who favor lettingthe company’s strategic direction emerge from its current state.
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What defines a Strategic Problem?
Strategic Problem
Ill-Defined and Unique
Too Much or Too Little Data
Limited Time and Resources
Conflicting Stakeholder Views
Several Critical Unknowns
Cross - Functional Complexity
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One word strategy
Strategy is a “Hypothesis”
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Kernel of a Strategy
Guiding Policy
the overall approach chosen to
overcome the obstacles
Good Diagnosis
which
defines the nature of the
challenge
Coherent Actions
the set of co-
ordinated actions and
resource allocation
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Thinking like a Strategist
Generating the Hypotheses
Making the Case
o Develop the problem definition
o Concretize the scope
o Map the issues, and deliverable
o Develop the issue tree o Generate the
hypotheses o Develop the data
matrix o Refine hypotheses (as
required)
o Collect data and conduct analysis
o Synthesize finding and conclusions
o Develop recommendations
o Develop message and storyboard
o Write and review the output
Testing the Hypotheses
2 31 4Defining the Question
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The Strategic Question
• Define the fundamental question that needs to be answered
• Focus on the big picture and not the details • Explore the gap between what the company has
and what the company wants • Understand how it fits with what else the company is
trying to achieve
1. Defining the Question
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Issues and Deliverables • What issues must you investigate to answer the
fundamental question? • What is the type of output will be produced from this
investigation? • What deliverables are expected? Will that address
the company’s requirement? • What time and resources would be required to
accomplish this?
1. Defining the Question
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Develop Issue Tree
Strategic Question
Issue 1
Issue 2
Issue 3
Sub Issue 2.1
Sub Issue 2.2
Hypothesis 2.2.1
Hypothesis 2.2.2
Sub Issue 2.3
2. Generating the Hypotheses
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Issues vs. Hypotheses What is an Issue? • Denotes a major piece of
the problem
• Pointed to company concerns (“So what?”)
• Limited in number
• Similar in size
• Will not “fall”
• Phrased as a question
• Amenable to closure
What is a Hypothesis? • Phrased as statement to
prove or disprove
• Is an 'hunch' or an educated guess
• Nested under an issue
• Provides tentative answer to issue question
• Provides context for or guides information gathering
2. Generating the Hypotheses
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Case Study: Issue Tree Strategic Question Issues
What should be Paragon Tools’ growth strategy?
How will the product and services ecosystem look in the machine tool ecosystem in the next 10 years?
What is the best “Way-to-Play” for Paragon Tools in the machine tool ecosystem?
How can Paragon Tools leverage its existing capability system developed to get the “right to win” in this ecosystem?
2. Generating the Hypotheses
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Case Study: Hypotheses Issue Sub-Issues Hypotheses
How will the product and services ecosystem look in the machine tool ecosystem in the next 10 years?
How will the service ecosystem emerge in the next 10 years? Which platorms? Which formats?
H1: Market consolidate around 3 major platforms – for services
H2: Customers will shift from buying tools to complete lifecycle packages
... ....
2. Generating the Hypotheses
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Types of Hypothesis
Propositional e.g. market consolidate around three platforms – for services
• If accepted becomes finding
• Leaves "so what"
• Simple to test, more complex to interpret
• Seeks "predictive" data
Diagnostic e.g. customers will shift from buying tools to complete lifecycle packages • If accepted becomes
conclusion • Answers "so what" • Simple to interpret if data fits,
more complex to test • Seeks "cause and effect"
data
2. Generating the Hypotheses
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Develop Good Hypothesis • Connect the Dots - General / specific exp • Do your Homework - Lit search, web search, books /
journals • Engage with People - Planning meetings, clients,
colleagues • Stand on the Shoulder of Giants - Experts, practice guides,
other assignments • Gather Preliminary Data - Industry analysis, probing
questions • Think Hard about it!
2. Generating the Hypotheses
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• Think on two key dimensions
o Method of enquiry: Interview/Focus Group, Research and Surveys, Observations
o Source of data: Internal, Client, Competition / Customers, Industry / Government
• Be cost conscious in selection of method of enquiry
• Assess reliability and conduct triangulation
• Organize and document rigorously
Building the Data Matrix 3. Testing the Hypotheses
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Synthesizing the Facts
Facts 1
Fact 2
Fact 3
Finding 1
Finding 2
Conclusion 1
Conclusion 2
Finding 3 Fact 4
Fact 5
Recommendation 1
Recommendation 2
Recommendation 3
Recommendation 4
3. Testing the Hypotheses
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Developing Recommendation
• Generate alternatives, evaluate, screen and select: Complete the logic tree
• Specify and describe actions, results and benefits
• Take account of existing conditions, barriers and resources
• Cover the assignment topics and outputs • Can be tracked back to address the root cause findings
3. Testing the Hypotheses
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Structuring the Story
Argument First Action First
What's wrong
What's causing It
Here's what you should do
This is how
You must change
Here's what you should do
This is how
Change
Change
Add the why's
4. Making the Case
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• Objective: Build relationship, share information, solve problem, take decision
• Audience: Who, characteristics as individual / group, receptivity, expectation, culture
• Purpose: Telling, selling, conferring, collaborating • Story: Content, emphasis, style • Medium: Visual (letter, report, text, video) or Oral
(presentation, meeting, one-to-one)
Doing the Communication 4. Making the Case
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Heuristics for Daily Problem Solving
• Structure your thinking • Build your fact base • Develop an initial hypothesis • Solve the right problem • Don't boil the ocean • Produce an output daily • Synthesize every day (Elevator Speech) • Focus on the change
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Wrap Up
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• Strategy is a hypothesis
• Strategy consists of a good diagnosis, guiding policy and coherent action
• Use heuristic for daily practice and play
Amit Kapoor September 2012