Best practices in strategic planning

16 NOVEMBER 2017
Rapat Kerja Kementerian Perhubungan
Best Practices in
Strategic planning

1
Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved.
Mind blowing rate of change
To reach first 50 million users,
Facebook needs 3 years and 8
months
50 connected devices per HH by
2022 vs. 10 devices today
iPhone 7 is more powerful than
the entire NASA organization in
1969
75% of all mobile commerce from
tablets by 2-3 years
1.75B global smart phone users in
2014—75% increase from 2012
The data we have in 2 days is the
same as the whole data in
mankind until 2003

2
Institutions are less stable now
Each line represents a firm's rank over time
Example: Media Ranking by Net Sales
Note: Data includes all US and Canadian public companies
time
1.26 10.61 8.03Average sales rank change
during "era"

3
Disruption is happening...including in transportation

4
Institutions are facing risks to sustainability in 3 ways
Not seeing signals
for disruption
Seeing but not
changing strategy
Trying but failing to
change strategy
321

5
What happens to strategy and
management if we can no longer
reasonably forecast the future?

6
Companies
can create a
more effective
annual process by
applying a set of
best practices
Explore strategy at distinct time horizons
Constantly reinvent and stimulate the
strategic dialogue
Engage the broad organization
Invest in execution and monitoring

7
Companies
can create a
more effective
annual process by
applying a set of
best practices
strategic dialogue

8
Principle 1: Expand strategy into various time horizons
1
Vision and Ambition
>5 years
Business Unit Strategy
3-5 years
Annual Strategic Review
1 year
Corporate
• Analyze trends, articulate scenarios
• Anticipate, be prepared ("Plan Bs")
• Shape your future, influence the
environment
Business Unit
• Define multi-year development plan at
BU level
• Set customer segment and geographic
priorities
• Develop innovation roadmap
• Explore adjacencies and cross-BU
opportunities
• Explore partnerships and M&A
opportunities
Products Regions Functions
• Monitor strategy execution
• Assess changes in the environment
• Articulate critical questions
• Discuss discontinuities and options
• Validate / resource plans and
initiatives
Besides, monthly strategic reviews with the Executive
Committee is critical for fast adaptation and disciplined implementation

9
The long term: First thing is to set up a Purpose for the company
1
1. Profit margins target varies across business segments; taken lowest and highest limit of ranges
Source: company websites, press search
“To build a place where people can
come to find and discover anything
they might want to buy online”
“Caring for the world, one person at
a time”
“Sell Coca Cola within 50 meters of
every single person on earth”
“Caring for the world, one person at
a time”

10
The long term: Megatrends and Scenarios are of high value to identify long
term opportunities and stress test the Vision
1
1. Clean-technology and energy revolution in transport. Increasing demand for integrated mobility services 2. China dominates the world economically, politically and industrially –
Chinese players leading in rail 3. Increasing virtual interactions and communities, less people mobility and more local focus 4. Trade blocks explode, drop in global trade . Rise of
protectionism and nationalism
Source: BCG case experience
BCG Megatrends library 4 stretched scenarios for the rail industry
Analyze Megatrends Stress test Strategy with Scenarios
16
BCG tracks more than 90 trends across a range of
topics...
Platforms & Connectivity
• Bandwidth
• IT communities and Web 2.0
• New media
• Networks
• Convergence
Technology Trends
• Nanotechnology
• New materials/substitutes
• Mobile electronic devices
• RFID and sensor networks
• Wireless communication
• Smart devices
• Internet Access
Life Sciences/ Healthcare
• Healthcare spending
• Biotech & proteomics
• Nutraceuticals/functional food
• R&D/Innovation challenge
• Provider & payer trends
Energy & Power
• Energy scarcity
• Alternative energy sources
• Sustainable forms of
transportation (e.g. fuel cell,
hybrid, electric)
Tech Trends
Scarcity vs. Abundance
• Waste/waste management
services
• Water scarcity
Environmental crisis
• Green products & markets
• Global warming awareness
• Carbon credits
Contentment vs. Striving
• Religion
• Happiness
• Business of pleasure
• Psychotropic drugs
• New communities
Challenge of Governance
• Privatization
• Education & training focus
• Shorter leader cycles
• Multi-polarworld
Risk & Security
• Insurance losses
• Failed states
• Identity theft
• Rise private security
• Counterfeit
• Rise natural disasters
• Global pandemic risk
Role of Business
• Greater transparency
Rise NGOs/non-profits
• CSR
• Extended enterprise
Meta trends
Economy & Employment
• Value Migration/Rise of
services
• Outsourcing/Off-shoring
• Consolidation/M&A
• Productivity/Performance focus
• R&D/Innovation imperative
• War for Talent
• Commoditization
• New organizational structures
Financial flows/Investment
Instruments
• Capital flows to developing
countries
• Rise in alternative investment
vehicles (VC, hedge funds)
• Socially responsible investing
• Geographic distribution
Trading Blocks & Flows
• E-trade and e-commerce
• Regional trade blocs
Wealth Creation &
Dispersion
• Global divide/Wealth disparities
• Off-shore investing
• Creation of global elite
Globalization
• RDE challengers
• Rise of China
• Rise of India & new market
leaders
• Next Billion consumers
• Rising middle class
Econo Trends
Demographics
• Aging Population
• Immigration/Ethnic diversity
• Increased role women
• Obesity and diet
(lifestyle illness)
Consumer Trends
• Trading up/down
• Sport & fitness
(leisure trends)
• Customization
• Organic
• Time compression-
Multitasking
• Entertainment/celebrity
• Brand affinity
• Health and wellness
Mobility & Flows
• International trade
• Communications
• Transportation
• Infrastructure needs
• Human mobility
Closed vs. Opened Systems
• Intellectual Property
• New innovation models
• Human genome project
• Open source
Centralized vs. Distributed
• Urbanization
• Grid computing/Intelligence
Terra Trends
Broad Scan
Mission Mobility1 Dragon Corp.2
World @ Home3 Divided Nations4

11
The long term: Vision and Mission should be translated into the various
elements of the Strategy House
1
Purpose
Vision
Strategic pillars
Strategic choices
Strategic initiatives
Enablers
Goals and metrics
• Reason-for-being
• Universal and timeless
• Aspirational statement of a desired future
• Can vary over time, e.g. 2-3 year horizon
• Desirable end-state outcomes which the businesses agree to achieve
• Specific, tangible
• A set of integrated decisions which position company to win and
guide day-to day action
• Where we will and will not play
• Specific areas of action or investment that collectively drive to goals
• Supportive actions or capabilities that are prerequisites for
accomplishing initiatives
• An outcome which is measurable, bounded by a timeframe, and links
to one or more of the objectives

12
Growth framework: Three levers for growth
1
Maximize the core Expand into adjacencies Explore new frontiers (disruptive)
321
Source: BCG growth / transformation framework
Improve
execution
Enhance
offering
Acquire /
partner
Reposition
business
Commercial quick hits
Innovation
M&A search and screen
Business model innovation
Organizational growth enablers
Emerging
markets
Core and
adjacent growth

13
Example for strategic initiatives for maritime ecosystem company
1
Maximize the core Expand into adjacencies Explore new frontiers (disruptive)
321
Source: BCG growth / transformation framework
Improve
execution
Enhance
offering
Acquire /
partner
Reposition
business
• Asset utilization
• Network optimization
• Operational improvement
• Consolidation & synergies
• International port
expansion
• Inorganic/M&A
• ....
• ....
• Sea transport e.g.
shipbuilding, ship repair
• Logistics e.g. warehousing,
3PL
• Hinterland e.g. toll roads,
railway
• Business services e.g.
hospital, education
• ....
• ....
• Container sharing economy
• Smart port e.g. autonomous
transportation, IoT, AR
• Big data commercialization
• ....
• ....
• ....
• ....

14
The medium term: set up business unit strategy to realize the vision and
create value
Source: BCG case experience
Define
Strategic
intent
Identification
of choices
Assessment
of options
Select
strategy
1
Diagnose strategic situation Frame strategic choices
Industry dynamics
Segmentation and
evolution of demand
Sources of
competitive
advantage
Relative
advantage and
performance
Competitors
Company

15
Companies
can create a
more effective
annual process by
applying a set of
best practices
strategic dialogue

16
Board
Principle 2: The "W" approach for strategic dialogue
2
Q1 Q2 Q3 Q4
Board
Meeting
Plan
Review
Detailed
Planning
Target
Setting
Supervisory
board meeting
Business Units
Before
Board
Business Units
After
Action plan and
detailed financial
trajectory
Target
setting/key
questions
Review # 1
Strategic dialogue &
challenge
Review # 2
Plans approval
Supervisory
board
meeting
Board
Meeting
Input from
products
Propose plans
and options
Input from
functions

17
Systematic approach to always-on strategy is integrated with annual planning
and has three key components
2
Q1 Q2 Q3 Q4
Annual
Strategy making
Strategy
Development
Challenge
plan
Approve
plan
Set targets
Set long-
term
direction
Corporate
center
Fine-tune
plan
Propose
plan
Iterate as
needed
Business
units
Always-on
strategy
Sense- &
decision making
Strategic
scanning
Implemt.mgmt
Issue meetings
Monitoring & steering of initiative implementation
Prioritizing and resolving strategic issues
Scanning for issues
Iteration & decision-making
opportunity
Source: BCG

18
Strategic
scanning:
putting in
place a radar
function
Technology
Internal idea generation
Mega-trends
Business model innovations
Adjacencies
2

19
Companies
can create a
more effective
annual process by
applying a set of
best practices
strategic dialogue

20
Visioning
Analysis of the
environment
Plan Definition Implementation
Principle 3: Involve multiple stakeholders during strategy process
Illustration: company vision exercise
3
Employees
1 – 2 months 1 – 2 months 1 – 2 months 1 month
Interaction /Synthesis Interaction /Synthesis Interaction /Synthesis Interaction /Synthesis
Clients
Stakeholders
Business Partners
Source: BCG Case Experience

21
Companies
can create a
more effective
annual process by
applying a set of
best practices
strategic dialogue

22
Principle 4: Invest in strategy operationalization
4
Client
Strategic planning Strategic execution
Strategic dialogue Strategic Planning Strategy execution
Vision
Ambition
BU
Communicate and
mobilize Convert into
operational
initiatives
Align
incentives Resource
and engage
Define strategic
dashboard
Define key
strategic
questions;
Design process
Develop high level
plan, articulate
options
Develop detailed
strategic plans
Approve plans,
allocate resources
to support plans
Review, challenge,
consolidate,
approve high level
plans

23
Operationalization: illustration of good practices
Define
Strategy
Communicate
and mobilize Convert
into
operational
initiatives
Resource
and engage
Define
strategic
dashboard
Align
incentives
Cascading memos
Sales Operation Assets
-
Colleagues
Process
Customer
COMPANY A STRATEGY COMMUNICATION
-
Colleagues
Process
Customer
N-1
-
Colleagues
Process
Customer
N
10 CEO strategic initiatives
KEY ROLLING CEO INITIATIVES – ILLUSTRATIVE
1
2
3
5
6
4
7
9
8
10
Name Objectives
China and India
Value added services
Description
Quality
Commercial excellence
Operational excellence
Eastern Europe
Customer intelligence
Talent upgrade
New selling model
Cross-functional processes
Project Management Office
Managers bonus systems
"Strategic dashboard"
KPIs to track
progress of each
strategic initiative

24
” It is not the strongest of the species
that survive, not the most intelligent,
but the one most responsive to change.”
Charles Darwin

25
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