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Outline. Background: Strategy - A conceptual framework, the big issue is executing strategy Strategy Maps: The 1st step to executing strategy is describing strategy Alignment: Internal alignment of performance drivers with customer value proposition is source of competitive advantage
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Outline • Background: Strategy - A conceptual framework, the big issue is executing strategy • Strategy Maps: The 1st step to executing strategy is describing strategy • Alignment: Internal alignment of performance drivers with customer value proposition is source of competitive advantage • Cause-effect: Strategy is a hypothesis, test it out analytically @Ashok K. Sar
Strategy Execution • What: Less than 10% strategies effectively formulated are executed effectively • Why: • Problem of description • Lack of understanding … 95% of workforce • Inability to link with budgets … 60% of organi zations • Spending less than 1 hour per month discussing strategy … 85% of executive teams @Ashok K. Sar
Strategy: A conceptual frameworkV.I.P. • Creating and sustaining competitive advantage • Managing Value • Managing Imitation • Managing Perimeter • Strategic positions • Best products • Total customer solutions • Systems Lock-in @Ashok K. Sar
Value Customer Willingness To pay Value captured by customers Price Total Value Value captured by firm Cost – Amount Paid to employees And suppliers Value captured by suppliers Supplier’s Cost (or Opportunity cost) @Ashok K. Sar
Added Value – Two Competitors Willingness to pay for Harnischfeger crane = $ 7.5 m Supplier opportunity cost Harnischfeger crane = $ 2 m Total value created = $ 5.5 m Harnischfeger Added value = $ 0 mn. Total value created = $ 5.5 m Willingness to pay for Kranco crane = $ 7.5 m Supplier opportunity cost Kranco crane = $ 2 m Supplier opportunity cost Harnischfeger crane = $ 3 m Willingness to pay for Harnischfeger crane = $ 9 m Harnischfeger Added value = $ .5 mn. Total value created = $ 6 m Total value created = $ 5.5 m Willingness to pay for Kranco crane = $ 7.5 m Supplier opportunity cost Kranco crane = $ 2 m
Managing Imitation • Basing value creation on broad range of resources & capabilities which are imperfectly tradable, imitable & substitutable, & superior fit • Internal accumulation - combining tradable inputs with existing asset stocks and learning by doing and not endowment, sharing or acquiring • Think of : 10 R&C being imitated to the extent of 80% = Total imitation of ? @Ashok K. Sar
Managing Perimeter • Products • Geographic territories • Value chain activities @Ashok K. Sar
Describing Strategy @Ashok K. Sar
Describing Strategy Fiduciary Perspective Customer Perspective Internal Perspective Learning & Growth Perspective @Ashok K. Sar
Strategy Maps @Ashok K. Sar
AlignmentDesigning a Strategy Map -> Balanced Scorecard • Are financial objectives clearly defined? • Is the customer value proposition clearly defined? • Are key business processes aligned with each customer value proposition & financial objectives? • Are the human capital & information capital aligned with key business processes? • Is the organization capital aligned with a strategic change agenda? @Ashok K. Sar
Building Personal Scorecards • Cross functional team • Short duration • Full time • Clear deliverables • Cause and effect tree • Criteria • Building team scorecard • Create linkage to performance appraisal • Implementation Tool kit icfai