Download LiquidHub Business Strategy

What is Strategy?
Definition and questions to provoke our strategic thinking
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 Definition of Strategy
 In essence, "Strategy is the direction and scope of our organization over the long-term: which
achieves advantage for the organization through our configuration of resources within a
challenging environment, to meet the needs of markets and to fulfill stakeholder expectations."
 Questions to Provoke Our Strategic Thinking:
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How can our business be different from what our competitors do?
What is our unique, key idea(s)? What can we do that others can’t do at all or as well?
How can we increase the distance and difference between us and our competitors?
Why, where and how can we provide something that customers like better than anything else
available and yet also earn significant margins?
How can we create extra value?
How can we control more, yet own less?
Who are the best people for us to collaborate with, and how can we make it attractive for them to
collaborate with us rather than someone else?
What success have we had that was unplanned and unexpected? How can we multiply this
success?
Strategic Analytical Tool:
Balanced Scorecard (BSC) Framework
The Strategy
Financial Perspective
“If we succeed, how will we look to
our Shareholders?”
Client Perspective
“To achieve our vision, how must we
look to our client?”
Internal Perspective
“To satisfy our customers, which
processes much we excel at?”
Learning & Growth Perspective
“To achieve our vision, how must our
organization learn & improve?”
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Strategy: How we expect to create value; the art is to identify and
excel at the critical few processes that are the most important to
client value proposition.
The Balanced Scorecard not only is used to improve the
measurement of an organization’s intangible assets, but also is a
framework for describing and measuring strategies for creating
value. It consists of the following elements:
 Financial Performance: is a lag indicator, providing the ultimate
definition of an organization’s success. Strategy describes how an
organization intends to create sustainable growth in shareholder
value.
 Client Success: with targeted customers provides a principal
component for improved financial performance. In addition to
measuring the lagging outcome indicators of client/customer
success, such as satisfaction, retention and growth, the client
perspective defines the value proposition for targeted client
segments. Choosing the client value proposition is the central
element of strategy.
 Internal Processes: create and deliver the value proposition for
clients. The performance of internal processes is a leading indicator
of subsequent improvements in client and financial outcomes
 Learning & Growth: objectives describe how the people,
technology & organization climate combine to support the strategy.
Improvements in learning and growth measures are lead indicators
for internal process, client and financial performance. Intangible
assets are a key source of sustainable value creation.
Objectives in the 4 perspectives link together in a chain of cause-&effect relationships. Enhancing & aligning intangible assets leads to
improved internal processes, which in turn, drives success for clients
and shareholders.
Adapted from: Kaplan & Norton
So How to We Meets the Needs of Our Shareholders?
Balanced Scorecard Strategy Map: A Framework for Creating Strategy
Financial
Results
Create Shareholder Value: ROCE, EVA, EBIDTA
Revenue Growth Strategy
Our ultimate goal is to deliver
value-based metric(s) to our
shareholders through
financial growth &
operational productivity
Close Revenue at New
Clients [Prospects]
Productivity Strategy
Increase Revenues at
Existing Clients
Optimize Cost Structure
Optimize Utilization
Client Value
Proposition
Clarifies the conditions that
will create value for our
clients: defines the specific
strategy to compete for new
clients & retain existing ones.
Value
Creating
Processes
Defines the business
processes that we must
master to support our client
value proposition.
Alignment &
Readiness
Defines the intangible &
tangible assets that must
be aligned, integrated &
mobilized to create value
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product leadership
customer intimacy
operational excellence
“Client Value Proposition”
Service/Solution Attributes
Price
[Innovation
Quality
Processes]
Time
“Build the
Franchise”
Functionality
“Increase Customer
Value”
[Innovation
Strategic Job
Processes]Families
Image
Relationship
Service
Relationships
“Achieve Operational
Excellence”
[Customer Management
Strategic IT
Processes]
Portfolio
Brand
“Be a Good
Corporate Citizen”
[OperationalOrganization Change[Regulatory &
Processes]
Agenda Environmental Processes]
“Enable a Motivated, Prepared & Aligned Workforce”
“Build & Align Core &
Strategic Competencies”
“Build & Align Information
Technology Infrastructure”
“Create a Climate for
Action & Continuous
Improvement”
[Human Capital]
[Information Capital]
[Organizational Capital]
Adapted from: Kaplan & Norton
Strategic Analytical Tool:
4 Generic Strategies-Customer Objectives for Different Value Propositions
Best Total
Cost
Lowest-Cost
Supplier
Examples: Southwest
Airlines, Dell, Wal-Mart,
McDonald’s
Product
Leader
“offer products & services that are consistent, timely and low-cost”
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2
Appropriate
Selection
Speedy Purchase
“products & services that expand existing performance boundaries into the highly desirable”
High-Performance
Products
Examples: Sony, Mercedes,
Intel
Penetrate New
Markets
First to Market
“provide the best total solution to our customers”
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Complete
Customer
Solutions
Consistently High
Quality
Quality of
Solutions
Provided
Number of
Products/Services
per Customer
Quality of Client
Relationship
Customization of
Solution
Examples: IBM, Goldman
Sachs
System
Lock-In
Examples: Proprietary
Operating system, eBay,
Yellow Pages
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“high switching costs to end-use customers”
Offer Broad
Selection &
Convenient
Access
Provide a Widely
Used Standard
Provide
Innovation on a
Stable Platform
“add value to complementors”
Offer Easy-to-Use
Platform &
Standard
Provide Large
Customer Base
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The 4i’s Strategy
Example Strategy Map
Financial
Perspective
What we must deliver to
our shareholders
Revenue Growth Strategy [$250M]
[Long-Term Dimension]
Internal
Perspective
What processes we must
excel at
How we must develop our
organization
 Optimize Utilization
 Continuously Improve Cost Structure
Client Value Proposition
Services & Solutions Attributes
Guaranteed
Results
Superior
Quality
Leading-Edge
Functionality
Industry
Experts
EA/SOA
Focused
Certified
Technologists
Relationship Management
Customizable
Solutions
Responsive,
24/7 Client
Service
Trusted ,
Consistent &
Personal
Relationship
Image/Brand
Community
Activist
Progressive
Firm
Award-Winning
Organization
Innovation Processes
Customer Management &
Marketing Processes
Operations Management Processes
Regulatory & Social Processes
Processes that create new products
& services
Processes that enhance client
value
Processes that produce & deliver
services & solutions
Processes that improve
communities and the environment
Optimize Demand/Supply
Deliver Quality Engagements
Optimize Solution Infrastructure
Manage Engagement Risk [PMO]
Manage Financial Risk
Manage Pipeline Risk
 Be Green
 Promote Health of Associates
 Invest in Community
 Leverage Best Employment
Practices
 Rapidly Develop New Solutions
 Run Each Solution Like a Business
 Acquire Firms That Add Value
Creating Alignment &
Readiness:
Learning &
Growth
Perspective
Productivity Strategy [20% EBITDA]
[Short-Term Dimension]
Shareholder
Value
 Deepen Existing Client Relationships
 Create New Revenue Sources
Client
Perspective
What we offer our clients;
how we are distinct from
our competitors
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Design Compelling Brand
Communicate Value Proposition
Select Targeted Clients
Acquire Targeted Clients
Retain Clients
Focus on Solution Selling
Strategic Job
Families
Human Capital
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Attain Consulting 101 Skills
Attain Technology Certifications
Create Solution Skills
Attract, Grow & Retain the Best People
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Strategic IT
Portfolio
Information Capital
 Establish Intranet
 Create Time Entry Reports / BI
 Establish Project Work Area
Organization Change
Agenda
Organization Capital
 Create Culture of Improvement
 Clearly Communicate Expectations
 Emphasize Teamwork
Adapted from: Kaplan & Norton
Concept:
From Mission Statement to Measureable Outcomes
Strategy is not a
stand-alone
management
process. It is one
step in a logical
continuum that
moves an
organization from a
high-level mission
statement to the
work performed by
its associates.
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Strategy is about selecting
the set of activities in which
an organization will excel to
create a sustainable
difference in the marketplace.
Mission
Why We Exist
Values
What’s Important to Us
Vision
What We Want to Be
Strategy
How We Create Value [Our Game Plan]
Strategy Map
Translate the Strategy
Balanced Scorecard [BSC]
The sustainable difference
can be to deliver greater
value to clients than
competitors, or to provide
comparable value but at
lower cost than competitors.
“Differentiation arises from
both the choice of activities
and how they are performed.”
Measure and Focus
Targets & Initiatives
What We Need to Do
Personal Objectives
What I Need to Do
Strategic Outcomes
Satisfied
Shareholders
Delighted
Clients
Efficient and
Effective
Processes
Motivated &
Prepared
Workforce
Concept:
The Brand & the Brand Spectrum
brand spectrum: attribute hierarchy
EMOTIONAL
ATTRIBUTES
One of the foundations for developing a strong & distinctive brand is
to understand how clients feel. It is especially helpful to understand
not only what motivates choice and behavior by also where a brand
resides in the Brand Spectrum.
Understanding what motives consumers to choose one brand over
another helps identify which functional & emotional benefits are the
“cost of entry” and which can make a brand distinctive in the market.
WILL DIFFERENTIATE
Emotional attributes such as: trust,
interesting, respect, indispensable
MAY DIFFERENTIATE
Specialty areas, trends
MUST-HAVEs TO BE CONSIDERED
Value/price attributes, customer service,
variety, strength in basic products
FUNCTIONAL
ATTRIBUTES
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In today’s highly competitive markets, the attributes which
differentiate a brand are emotional rather than functional. In fact,
many of the functional attributes are the cost of entry. In contrast, the
true differentiators are emotionally based. As a result, the success of
genuine brands depends on the emotional link they can make with
consumers. Identification of the attribute hierarchy is very helpful in
the development of a promise by identifying which attributes are
needed for differentiation.
A second key step in developing a distinct & differentiated promise is
to understand what type of relationship clients have with your brand
and with key competitors. Is it more functionally driven, resulting in
little to no differentiation & customer loyalty? The stronger the
emotional ties with your brand, the stronger the customer loyalty.
Conversely, if few emotional links exist with your brand, clients are
more functionally driven and can more easily be persuaded to choose
another brand.
Competitors that operate at the functional level have to constantly
reinforce their relationship with clients, usually through pricing
adjustments and promotions.
Strategic Analytical Tool:
Balanced Scorecard Strategy Map – Explanation of Terms
FINANCIAL
PERSPECTIVE:
CLIENT
PERSPECTIVE:
INTERNAL
PERSPECTIVE:
INTERNAL
PERSPECTIVE:
 The BSC retains the
financial perspective as
the ultimate objective
for profit-maximizing
firms. Financial
performance measures
indicate whether the
company’s strategy,
including its
implementation and
execution, are
contributing to bottom
line improvement.
 Financial objectives
typically relate to
profitability – measured
by EBITDA.
 Basically, financial
strategies are simple;
firms make more money
by [1] selling more, and
[2] spending less.
Thus, the firm’s financial
performance improves
through 2 basic ways –
revenue growth and
productivity.
 Revenue growth
occurs by deepening
relationships with
existing customers,
selling entirely new
products, selling to
clients in new segments.
 Productivity
improvements can
occur in 2 ways [1]
reduce costs, and [2]
utilize assets more
efficiently.
 The revenue growth
strategy requires a
specific value
proposition, in the
customer perspective,
that describes how the
organization will create
differentiated,
sustainable value to
targeted segments.
Managers identify
targeted customer
segments in which the
business unit competes.
 Successful outcomes
from a well-formulated
& implemented strategy
are: client satisfaction,
retention, acquisition,
profitability, market
share and account
share.
 A strategy should
identify specific
customer segments
 The client value
proposition defines the
company’s strategy by
describing the unique
mix of product, price,
service, relationship and
image that a firm offers
its targeted clients.
 The client value
proposition should
communicate what the
firm expects to do for its
customers better or
differently than its
competitors.
 Internal processes
accomplish 2 vital
components of strategy:
[1] produce & deliver
the value proposition for
clients; [2] improve
processes & reduce
costs for the
productivity component
 Operating processes
produce & deliver the
service/solution to
clients
 Client management
processes expand &
deepen relationships
with targeted
customers.
 Customer Selection
Process: defines a set of
customer characteristics
that describes an
attractive client
 Customer Acquisition
Processes: relates to
generating leads,
communicating to new
potential clients, pricing
and closing.
 Customer Retention is
a result of excellent
service &
responsiveness to
customer requests.
 Growing a client’s
business involves
managing the
relationship effectively,
becoming known as a
trusted advisor.
 Innovation processes
develop new products,
processes and services,
often enabling the firm
to penetrate new
markets & customer
segments. Managing
innovation includes 4
sets of processes: [1]
identify opportunities for
new products and
services; [2] manage
the research and
development portfolio;
[3] design & develop
new products &
services; [4] bring the
new products and
services to market.
 Once ideas for new
products & services
have been generated,
managers must decide
which project to fund
and which will be
developed entirely with
internal resources,
which done
collaboratively in a joint
venture and which will
be licensed.
 Regulatory & Social
Processes: help
organizations
continually earn the
right to operate in
communities in which
they product & sell.
Regulations impose
standards on firms’
practices.
LEARNING &
GROWTH
PERSPECTIVE:
 Learning & growth
describes the
organization’s intangible
assets and their role in
strategy.
 Human Capital: the
availability of skills,
talent and know-how
required to support the
strategy.
 Information Capital:
the availability of
information systems,
networks and
infrastructure required
to execute the strategy.
 Organization Capital:
the ability of the
organization to mobilize
and sustain the process
of change required to
execute the strategy.
 Whereas all
organizations attempt to
develop their people,
technology & culture,
most do not align these
intangible assets with
their strategies.
 The key to creating
this alignment is
granularity – that is, to
move beyond
generalities and focus
on specific capabilities
and attributes required
by the critical internal
processes of strategy
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Strategy Map, Balanced Scorecard and Action
Plan
 The Strategy Map describes the logic of the
strategy, showing clearly the objectives for the
critical internal processes that create value and the
intangible assets required to support them.
 The Balanced Scorecard translates the strategy
map objectives into measure & targets.
 But objectives and targets will not be achieved
simply because they have been identified; the
organization must launch a set of action programs
that will enable the targets for all the measures to
be achieved.
 The organization must supply scarce resources –
people, funding and capacity – for each action
program.
 These action programs are referred to as
Strategic Initiatives.
 For each measure on the Balanced Scorecard,
managers must identify the strategic initiatives
needed to achieve the target.
 These initiatives achieve results. Hence, the
execution of strategy is managed through the
execution of initiatives.
 The action plans that define & provide resources
for the strategic initiatives must be aligned around
the strategic themes, and must be viewed as an
integrated bundle of investments instead of as a
group of stand-alone projects. Each strategic
theme should have a self-contained business case.
Strategic Analytical Tool:
The process for defining strategy
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