Strategy_LinkedIn

John Devlin MBA FCCA https://au.linkedin.com/in/JohnDevlinSydney
Strategic Analysis And
Development
.
John Devlin, MBA, FCCA
https://au.linkedin.com/in/JohnDevlinSydney

Content
What is Strategy
Topic
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Analytical techniques
2
Creating Opportunities
3
The Execution Premium4
5
John Devlin

Content
What is Strategy
Topic
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2
3
5

Strategy rests on unique activities
Variety based positioning Needs based positioning Access based positioning
Best when a company can
best produce particular
products or services using
distinctive sets of activities
Best when groups of
customers have different
sets of needs and tailored
set of activities can serve
those needs best
Used when the best
configuration of activates to
reach customers is
different.
Strategy can be described in terms of customers.
However, the essence of strategy is in the way chosen activities are performed.
Strategy is about choosing activities that are different from rivals. If one set of activities enabled us
to produce all varities, meet all needs and access all customers. companies could easily shift
among them and operational effectiveness would determine performance

Strategy requires trade offs
Strategic positions not sustainable unless there are trade offs with other positions. Trades-offs
means more of one thing necessitates less of another.
Inconsistencies in image Arise from activities themselves
Limits on internal control &
coordination's
Company known for one kind of
value may lack credibility and
confuse customers or
undermine reputations if it
attempts to deliver another kind
of value at same time
Different positions(and their
activities) require different
product. configuration,
equipment, employee behaviour,
skills and management
systems.
Companies that try to be all
things to all customers risk
confusion in the trenches as
employees make decisions
without a clear framework
If there is no trade off companies will never achieve sustainable advantage. They will have to run
faster & faster just to stay in place. Essence of strategy is choosing what not to do. Without trade
offs there would be no need for choice and hence no need for strategy, and performance would
depend wholly on operational effectiveness.
Strategic positions not sustainable unless there are trade offs with other positions. Trades-offs
means more of one thing necessitates less of another.

Problems with substituting operational
effectiveness with strategy
As industries converge the more companies become the same
Use of benchmarking(best practice) leads to convergence to Industry average
Outsourcing of activities to efficient third parties means activities(the basis of competitive
advantage) become generic.
As competitors imitate improvements in quality, cycle times & supplier partnership strategies
converge. Everybody ends up running the same race.
Competition based on operational effectiveness alone, is mutually destructive. Can only be
arrested through limiting competition, i.e. through mergers or acquisitions.
Companies left standing are companies that outlast others, not ones with competitive advantage.

Operational effectiveness is
necessary but not usually sufficient
Initial efficiency state
Efficiency
Industry
standard
efficiency
New process devised
Efficiency
1 Company
gains
temporary
advantage
Can improve profit
through improving
efficiency
Industry
standard
efficiency
Diffusion of best practice
Efficiency
New Industry standard
of efficiency Companies
advantage
eliminated
Operational effectiveness in the long term leads to absolute increase in effectiveness but no
relative improvement for anyone.
As best practice diffuses throughout industry any relative advantage eliminated.
End result is that bar for “efficiency” has been raised for everyone but nobody has
gained relative advantage.
Old Industry
standard efficiency
Time

Advantage or
disadvantage
comes from all
activities a company
undertakesCost Advantage from
doing the same activity
more efficiently
Differentiation through
choice of activities
which are performed
Operational effectiveness is not
strategy
A Company
outperforms rivals if
it can establish a
difference it can
preserve.
Strategic positioning
means performing
different activities or
same activities in
different way
Operational
Effectiveness
means performing
same activates
better than
competitors

Why do so many companies fail to
have a strategy?
When managers operate far from productivity frontier trade offs appear unnecessary.
Because of fear of competition managers seek to imitate everything about competitors.
They chase technology for its own sake
Managers mistake “customer focus” to mean that they must serve all customers needs all the
time.
Trades off require making some hard decisions.
Managers sometimes don’t want to disappoint customers or employees
Managers see trade offs as a sign of weakness.

Content
What is Strategy
Topic
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Alternative Strategic formulation
methodologies
Five Forces – Michael Porter1
Strategic Stretch – Gary Hamel2
•Achieving competitive advantage starts with detailed
understanding of the environment and your industry.
•What are the trends in the environmental forces
•How can we position ourselves to best exploit opportunities?
•Internal Analysis
•What do customers find valuable?
•Capability platform
•What are the we good at?
•What strengths can we leverage across organisation?
Value Innovation – Kim & Maurborgne2
•Creating Markets
•Cost and Differentiation
•Don’t compete with competitors, make them irrelevant
•Create & Capture New demand

Michael Porters - Five Forces
Key Q: Is our industry attractive?
Threat of
Substitutes
Threat of
Entry
Power of
Buyers
Power of
Suppliers
Interfirm
Rivalry
Achieving competitive advantage starts with
detailed understanding of the environment and
your industry..
An outside in approach
How best do you compete/position your company.

Garry Hamel – Resources based view
Inside out perspective.
Success comes from competences unique to an
organisation.
How can we create opportunity?
Culture
CompetenciesStructures
People
What are our core competencies?

Value Innovation:
The Cornerstone of Blue Ocean Strategy
Value Innovation is created in the region where a company’s actions favourably affect both its cost
structure and its value proposition to buyers.
Value
Innovation
Costs:
Costs are reduced by eliminating
and reducing the factors an
industry competes on
Buyer Value:
Buyer Value is lifted by raising
and creating elements the
industry has never offered

Red Ocean V’s Blue Ocean Strategy
Red Ocean Blue Ocean
Competing in existing Market Space
Beat the Competition
Create uncontested market space
Make the competition irrelevant
Exploit Existing Demand Create and capture new demand
Make the value-cost Trade-off
Align the whole system of a firm’s
activities with its strategic choice of
differentiation or low cost
Break the value-cost trade-off
Align the whole system of a
firm’s activities in pursuit of
differentiation and low cost

The Four Actions Framework
Questions to challenge an industries strategic logic
Eliminate
Which of the factors that the
industry takes for granted
should be eliminated
Create
Which factors should be
created that the industry has
never offered
Raise
raised well above the industry
standard
Reduce
reduced well below the
industry standard
A new value
curve

8
Price Meals Lounges Seating Class
Choices
Hub
Connectivity
Friendly
Services
Speed Frequent
point-to-point
departures
Strategy Canvas of Southwest Airlines
Low
High
Car
Southwest
Airlines
Other Airlines
LevelofService

From Head to Head competition to
Blue Ocean Strategy
Head to Head competition Blue Ocean Creation
Focuses on rivals within its industry
Focuses on competitive position
within strategic group
Looks across alternative industries
Looks across strategic groups
within industry
Focus on better serving the buyer
group
Redefines the industry buyer group
Focuses on maximising the value of
product and service offerings
within the bounds of its industry
Focuses on improving price
performance within the functional
emotional orientation of the industry
Looks across to complementary
product and service offerings
Rethinks the functional emotional
orientation of the industry
Focuses on adapting to external trends as
they occur
Participates in shaping external
trends over time
Industry
Strategic Group
Buyer Group
Scope of Product
offering
Functional
Emotional
orientation
Time

Why do we need a Strategic
position?
Pre WWII
Production Orientation
Focus on efficiency in
producing standard product.
We make the product
according to our specification
1940’s -1970’s
Selling Orientation
Post 70’s
Market Orientation
Focus on selling our
product.
Selling the brand
If people know about our
product they will buy it
If we find out what
customers want & then
make it, then market it to
customers, they may buy it
if it suits their needs at a
particular time
Source: P Kotler, Marketing Management, 7th Ed
Can we produce the product?
Can we produce enough of it?
Can we sell the product?
Can we charge enough for it?
What do customers want?
Can we develop it while they still want it?
How can we keep our customers happy?

Strategic positioning is about
answering some key questions
KeyQuestionstoAnswer
Who are we serving?
What do we want to be?
What is our value proposition?
Requires a basis of segmentation.
We can’t be everything to everybody
What do we have to invest in/
improve to satisfy our key markets
How will we meet our chosen
segments needs?

Demographic
Industry
Size
Needs based
approach
Attribute based
approach
Segmentation should give us insight
as to how we can serve our clients
Segmentation
Reactive basis of
segmenting market
Proactive approach
What is the driver
of value that a
customer requires
to be met

Each Strategic Position requires a different
set of organisational capabilities
Value Provided
(Position)
Market
Deliverable 1
Market
Deliverable 2
Market
Deliverable 3
Specific
Deliverable 1
Specific
Deliverable 2
Specific
Deliverable 3
Specific
Deliverable 4
Specific
Deliverable 6
Specific
Deliverable 5
Resource or Capability 1

Each Strategic Position requires a different
set of organisational capabilities
Value Provided
(Position)
Market
Deliverable 1
Market
Deliverable 2
Market
Deliverable 3
Specific
Deliverable 1
Specific
Deliverable 2
Specific
Deliverable 3
Specific
Deliverable 4
Specific
Deliverable 6
Specific
Deliverable 5
Segment 1

Each Segment requires a different value
proposition which must resonate with their needs
Segmentation, comined with an audit of core competencies, generates options for
potential target markets to serve.
A value proposition is generally built around excellence in one of three dimensions
Operational Excellence
•Price
•Selection
•Convenience
•Zero Defects
Product Leadership
•High performance product
•Entering new market spaces
•Product Introductions
•Service Introductions
Customer Intimacy
•Customer knowledge
•Solutions offered
•Share of wallet
•Retention
It also provides the basis around which a value proposition should be built

Segment will determine “excellence”
dimension on which we will compete
Operational
Excellence
Customer Intimacy
Product Leadership
• What is it that clients want?
• How do we deliver this in a way that is more
efficient & effective than competitors
• Different Types of Value
• Price
• Benefit
• Quality
• Value equates to clients perception of
benefits received versus costs sacrificed.
• Costs
• Monetary
• Search
• Psychological

Competitive advantage comes from
an organisation’s core competency
Combines in ways
competitors cannot
easily or quickly imitate
Able to be exploited
across the business
Ads value as perceived
by customer
Core
competency
Is a source of major competitive advantage
Can be defended for required period.
Can be applied across a wide range of applications

Internal capabilities enable our core
competency
Economic
Technological
Human
Management
Organisational
Assets, Financial Resources, Economies of
Scale, Brands, Customer Loyalty
Process, IT systems, Plant & Equipment
Skills attitudes and behaviour of employees.
Loyalty to organisation
Ability to coordinate and allocate capabilities.
Ability to make strategic choices and
implementation
The structures and systems people which
together comprise the organisational culture

The formulation of a strategic
position enables us to fill in the gaps
We are the
To
That
Because of
Our target market
Our core value
Our value proposition
Our capabilities

So…are we really measuring what will
enable our value proposition to be delivered?
Operational
Excellence
Product
Leadership
Customer
Intimacy
•Price competitiveness
•Availability
•Convenience/Speed of purchase
•Quality & consistency of products/services/processes
•Growth in customer base
•Share of Market
•First to market – Quality product development process
•High Performance product – Features & Functionality
•Marketing/Brand Awareness in Target Segments
•Customer referrals
•Share of Wallet of Target Segment
•Completeness of the solution – Selling multiple branded products & services
•Exceptional pre/post sales service
•Relationship length/customer retention
•Customer information
•Share of wallet of customer/customer profitability

Remembering that customers needs and
operational performance change over time
Cost
Dependability
FlexibilityQuality
Speed
Our perceived delivery Client Needs
Cost
Dependability
FlexibilityQuality
Speed
Time

Linking Strategy to Execution
Kaplan & Norton
• Strategy Map
• Measure/Targets
• Iniatiatives
• STRATEX
Plan the Strategy
• Mission Values, Vision
• Strategic Analysis
• Strategy Formulation
Develop the Strategy
• Profitability Analysis
• Strategy Correlations
• Emerging Strategies
Test and Adapt
• Strategy Reviews
• Operating Reviews
Monitor & Learn
• Business Units
• SupportUnits
• Employees
Align Organisation
• Key Process
Improvements
• Sales Planning
• Budgeting
Plan Operations
• Strategy Map
• BalancedScorecard
• STRATEX
Strategic Plan
• Dashboards
• Sales Forecasts
• Resources
• Budgets
Operating Plan
Execution
Process
Initiative
12
3 6
54
Results
Results
Performance Measures
Performance Measures

Developing the Strategy
Strategy
Development
Process
Objectives Barriers Representative Tools
• Clarify Mission, Values
and Vision
Why are we in business
• Conduct Strategic
Analysis
What key issues affect our
strategy
• Formulate the Strategy
How can we best compete
Affirm high level guide
lines about organisational
purpose and conduct
Identify the events forces
and experiences that
impact and modify the
strategy
Define where and how
theorganisation will
compete
The vision is frequently
described in terms
notconducive to execution
Analysis is frequently
focused on outcomes and
noton the drivers of
strategy
There is no consensus on
which approach to use in
which circumstances
•Clear Mission
•Core Values
•Strategic Change Agenda
•Enhanced Vision
•Environmental Scan
•Competitive Scan
•Strategic Issues
•Key Issue Analysis
•Strategy Methodologies

Plan the Strategy
Strategy Translation
Process
Objectives Barriers Enabling Tools
• Create the Strategy Map
How do we express our
strategy
• Select Measurs &
Targets
How do we measure our
strategy
To develop a
comprehensive integrated
Model of the strategy that
pulls together the many
diverse components of the
plan
To convert strategic
direction statements into
measures and trargets
that can be linked to the
management system
Different strategies are
built by different areas
within the organisation.
They are not integrated.
Lower-level objectives
and targets arenot
aligned with the higher-
level goals
•Strategy Maps (cause &
Effect)
•Strategic objecctives
•BalancedScorecard
•Measures
•Targets
•Gaps

Align the Organisation
Alignment Process Objectives Barriers Enabling Tools
• Align Business Units
How do we align business
units to create
corporatesynergies
• Align Support Units
How do we align support
units to
businessunotandcorporate
strategies
Cascade & Embed
corporate strategyinto
business unit strategies
Ensure that each support
unit has a strategy that
enhances the
performance of corporate
&business unit strategies
BU strategies typically are
developed and approved
independently without
guidance of corporate
perspective, lacdk of
integration
Support units treated as
expense centres
withgoals to minimise
costs rather than support
enterprise and BU
strategies
•Cascading of strategy
maps to business units
•Vertical and horizontal
alignment
•SLA’a
•Support unit strategy
maps and scorecards
• Align Employees
How do we motivate
employees to help us
execute strategies
All employees understand
the strategy and are
motivated to help
sucessfully execute the
strategy
Most employees are not
aware or do not
understand the strategy.
Their objectives and
incentives focus on local
tactical performance not
strategy
•Formal strategy
communication program
•Employee objectives
with clear linkage to
strategic objectives
•Competency
development programs

Plan Operations
Strategy Execution
Process
• Improve Key Process
What business process
change does the strategy
require?
• Develop the resource
capacity plan
How do welink strategy to
operating plans and
budgets?
Ensure the changes
required by the strategic
themes are translated to
changes in operational
processes
Ensure that resource
capacity, operational
plans, and budgets reflect
the directions and needs
of the strategy
No alignment between
strategic priorities and
quality and continious
improvement programs.
Forecasts, budgets, and
operating plans
developed independently
from strategic plans
•TQM
•Business process
improvements
•KSF’s
•KPI”s/Dashboards
•Rolling forecasts
•ABC model
•Resource planning
•Budgeting

Monitor & Learn
Feedback & Learning
Process
• Operational Review
Meetings
Are our operations in
control?
Targets
strategy
To monitor and manage
short term financial and
operational performances
To monitor and manage
the strategic initiatives
and the balanced
scorecard
KPI’s and dashboards that
managers review not
central to the strategy.
•Inadequate time at mgt
meetings for discussions
about strategy
implementation
•Strategic cross business
initiatives not measured
•Driver models
•Varaince Analysis
•Review of KPI dashboards
•Team problem solving
•Follow-up program
•Theme monitoring
•Initiative portfolio
monitoring
•Theme teams
•Agenda managment
• Strategic Testing and
adopting meetings
Is our strategy workings
To periodically assess
whether the results
hypothesised in cause
effect diagrams
areoccuring as anticipated
•Data not available
•Inadequate capability in
strategy analytics
•Employees not
encouraged to propose
new strategic options
•Analytical studies
•ABC studies of pdt &
customer profitability
•Cause & Efffect testing
and analysis
•Review of emergent
strategies

Test & Adapt
Strategy Translation
Process
• Create the Strategy Map
How do we express our
strategy
Targets
strategy
To develop a
comprehensive integrated
Model of the strategy that
pulls together the many
diverse components of the
plan
To convert strategic
direction statements into
measures and targets that
can be linked to the
management system
Different strategies are
built by different areas
within the organisation.
They are not integrated.
Lower-level objectives
and targets arenot
aligned with the higher-
level goals
•Strategy Maps (cause &
Effect)
•Strategic objecctives
•BalancedScorecard
•Measures
•Targets
•Gaps

Three Types of Management
Review meeting
Operational Review Strategy Review
Strategy Testing and
Adapting
Dashboards for key
performance indicators
weekly and monthly financials
Strategy map and Balanced
scorecard reports
•Strategy Map, BSC, Strategic
Analysis of hypothesis, External
& competitive analysis
Information
requirements
Frequency
Attendees
Focus
Goal
Daily, Weekly, or monthly
depending on business cycle
Monthly Annually
Departmental and functional
personnel. Senior Mgt for
financial review
Senior Mgt, Strategic Theme
owners, Strategy Mgt officer
Senior Mgt, Strategic Theme
owners, Functional and
planning specialists, BU heads
Identify and solve operational
problems (Sales declines,
customer service)
Issues in strategy
implementation. Progress
of strategic initiatives
Test and adapt strategy based on
causal analytics. Pdt line & channel
profitability. External environment
Respond to short term
problems and promotes
continuous improvements
Fine tune strategy, make
adaptions
Incrementally improve or transform
strategy, establish strategic and ops
plans, set strategic targets, authorise
investments

The Balanced Scorecard & Strategy Map is a step
in a process that describes what value is and how
it is created
Mission
- Why we Exist -
Values
- What is important to us -
Vision
- What we want to be -
Strategy
- What is our game plan -
Strategy Map
- Translates the strategy -
Balanced Scorecard
- Measure & Focus -
Targets & Initiatives
- What we need to do -
Personal Objectives
- What I need to do -
The Balanced Scorecard & Strategy Map
• Ensure activities and initiatives are aligned
to a companies strategy
• Converts a companies strategy into
executable actions
Bridging the gap between
strategy & operations to
create competitive advantage
Developingour
strategicposition
Managing
ourbusiness
TheExecution
Premium

We have a tool to communicate &
coordinate the company’s strategy
Translating
Vision
Feedback &
Learning
Business
Planning
Communicating
& Linking
Vision &
Strategy
Feedback & Learning:
Articulating the vision
Supplying Strategic feedback
Facilitating Strategic review & learning
Business Planning:
Setting Targets
Aligning Strategic Initiatives
Establishing Milestones
Communicating & Linking:
Communicating & educating
Set goals
Links rewards to performance measures
Translating the vision:
Clarifying the Vision
Gaining Consensus
Four Objectives:
Source: Kaplan & Norton; Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review , January – February 1996
The Balanced Scorecard:

Customer
Perspectives
Financial
Perspective
Process
Perspective
Learning
Perspective
Vision &
Strategy
Process Perspective:
To satisfy our shareholders & customers
what business processes must we excel at?.
Customer Perspective:
To achieve our vision how should we appear
to our customers?
Financial Perspective:
To succeed financially how must we look to
our stakeholders?
Learning Perspective:
To achieve our vision how will we sustain
our ability to change and improve?
Translates the vision
through 4 perspectives:
Source: Kaplan & Norton; Using the Balanced Scorecard as a Strategic Management System, Harvard Business Review , January – February 1996
The Balanced Scorecard:
The Balanced scorecard

Balanced Scorecard Framework
Long Term
Shareholder Value
Productivity Strategy Growth Strategy
Improve
Asset
Utilisation
Improve Cost
Structure
Enhance
Customer
Value
Enhance
Revenue
Opportunities
Customer Value Proposition
Price Quality
Avail-
ability
Select-
ion
Funct-
ionality
Service
Partn-
ership
Brand
Operations Mgt
Processes
Customer Management
Process
Innovation Processes
Regulatory and Social
Processes
Processes that produce
and deliver products and
services
Processes that enhance
customer value
Processes create new
products and services
Processes that improve
communities and the
environment
Human Capital
Information Capital
Organisational Capital

Internal processes deliver value over
different time horizons
Operational
Effectiveness
Time(Years)
1 2 3 4 5
Shareholder
Value($) Customer
Management
Product
Innovation
Good Corporate
Citizen
Long Term
Shareholder Value
Short Term Medium Term Long Term

Steps to define core
Define
•Core of current business
•Reach consensus on the true state of the core
Assess
•Potential of Core
•Is key differeniator durable
Develop
•What will the future look like?
•How different will that be from status quo
Identify
•Options for redefining the core
•Both from inside and outside
Identify
•Hidden Assets
•Can these assets create new assets or enableothers
Decide •Criteria to choose assets to employ in redefining core

Steps to build strong core as foundation
forstrong core
Define
•Define Business you are in
•Set correct boundaries
•Define the Core
Assess
•Potential of Core
•Is key differentiator durable
Develop
•What will the future look like?
•How different will that be from status quo
Identify
•Options for redefining the core
•Both from inside and outside
Identify
•Hidden Assets
•Can these assets create new assets or enableothers
Decide •Criteria to choose assets to employ in redefining core

Evaluating your core business
Core
Customers
Core
Differentiation
Core
Capabalities
Culture &
Organisation
Evaluation
of Core
Industry
Profit
Pool
State of Core Customers:
Profitability, Market Share, Retention, Share
of Wallet, Customer Loyality & Advocacy.
State of Core Differentiation:
Definition & metrics of differentiation, relative
cost position, Business Models of
competitors.
State of Industry Profit Pool:
Size, Growth & Stability, Share of profit
captured, Shifts & projections.
State of core capabilities:
Inventory of Key capabilities, Relative
Importance, Gaps v’s competitors, Gaps v’s
Needs
State of culture & organisation:
Loyality and turnover, Capacity & Stress
points, Energy & Motivation, Bottlenecks to
growth, alignment to objectives
Determining health of core business:

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