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Generating Strategic Alternatives

Generating Strategic Alternatives. Strategy Table. Information Sources. The second step in the S&PA decision process develops creative, doable strategies. Decision Board. Frame. Plan. Evaluated Alternatives. Alter- natives. Project Team.

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Generating Strategic Alternatives

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  1. Generating Strategic Alternatives

  2. Strategy Table Information Sources The second step in the S&PA decision process develops creative, doable strategies. Decision Board Frame Plan EvaluatedAlternatives Alter-natives Project Team 1.09 • Generating Strategic Alternatives

  3. Generating a range of creative, doable alternatives is a vital element of decision quality. 4 3 Creative, Doable Alternatives: • Creative • Doable • Significantly different • Comprehensive • Compelling Key tools: • Creativity methods • Strategy table Failure modes: • Only one alternative • Missing a great alternative • Considering “not doable” alternatives DecisionQuality 5 6 1 1.09 • Generating Strategic Alternatives

  4. Combining analytic techniques with creativity methods produces compelling, doable strategies. • Building Strategy Tables • Summary 1.09 • Generating Strategic Alternatives

  5. Decision Hierarchy Policies Strategic Decisions Tactics A strategy table helps develop specific alternatives for each strategic decision. Strategy Table Strategic Decisions (one column for each) Plant Technology Products Quality Marketing Alternative 1 Alternative 2 Alternative 3 • • • • • • • • • • • • • • • • Plant • Technology • Products • Quality • Marketing There is one column in the table for each strategic decision. 1.09 • Generating Strategic Alternatives

  6. Plant Configuration and Location Quality and Cost Position Technological Stretch Product Range Marketing Strategy We identify mutually exclusive alternatives for each strategic decision. Example: Manufacturing Plant Modernization • Current • Close #1 • Close #1; • build • domestic • greenfield • Close #1; • build foreign • greenfield State of art Proven Current Full line One basic line and specialties Value- added specialties only Quality and cost leadership Improved quality; deferred cost reduction Minimal quality improvements Sell quality and influence market growth Sell quality Current 1.09 • Generating Strategic Alternatives

  7. Run out (milk) the business Moderate modernization Aggressive modernization Consolidation Sell our business (violates “take as given?”) Niche player only Buy out major customers Buy out major competitors Outsource to foreign manufacturers Joint venture for specialties Conduct a brainstorming session to create a wide range of ideas for strategies. Strategy Themes 1.09 • Generating Strategic Alternatives

  8. Using questions can help elicit a broader range of ideas. 1.09 • Generating Strategic Alternatives

  9. Each alternative strategy comprises a consistent set of choices—one alternative under each decision. Plant Configuration and Location Quality and Cost Position Strategy Alternatives Technological Stretch Product Range Marketing Strategy Aggressive Modernization Current Close #1; build domestic greenfield Close #1; build foreign greenfield State of art Proven Current Full line One basic line and specialties Value- added specialties only Quality and cost leadership Improved quality; deferred cost reduction Minimal quality improvements Sell quality and influence market growth Sell quality Current Close #1 1.09 • Generating Strategic Alternatives

  10. Four creative and doable strategy alternatives (“strategies”) emerge in the modernization decision. Plant Configuration and Location Quality and Cost Position Strategy Alternatives Technological Stretch Product Range Marketing Strategy Aggressive Modernization Moderate Modernization Consolidation Run Out Current Close #1; build domestic greenfield Close #1; build foreign greenfield State of art Proven Current Full line One basic line and specialties Value- added specialties only Quality and cost leadership Improved quality; deferred cost reduction Minimal quality improvements Sell quality and influence market growth Sell quality Current Close #1 1.09 • Generating Strategic Alternatives

  11. Construct a strategy rationale that conveys why the alternative is compelling. Strategy Rationale Description: Regain quality and cost leadership in a $2 billion/year business with growth rates estimated in excess of 10% per year for the next decade. Major Uncertainties: Introduction of low cost products from SE Asia manufacturing Quality differentiation achievable Performance of new technology Strategy: Aggressive Modernization Strengths • Utilizes existing plants and product line • High flexibility to switch production to match customer needs • Significant quality improvement and leadership position Weaknesses • Major capital required ­$800 million • Cost reduction program requires significant supplier and labor concessions 1.09 • Generating Strategic Alternatives

  12. Test Well #3 Test Well #1 Test Well #2 Like drilling “test wells,*” evaluating the initial alternatives identifies sources of value and risk. *An upstream oil and gas veteran would call these “exploration wells,” not “test wells.” 1.09 • Generating Strategic Alternatives

  13. Production Well As with oil exploration, results of initial testing often point to a better “hybrid alternative.” Test Well #3 Test Well #1 Test Well #2 The location of the production well (chosen course of action) is not expected to be one of the test well sites (initial alternatives). 1.09 • Generating Strategic Alternatives

  14. Strategy #1 Strategy #2 Strategy #3 Evaluation Hybrid Strategy Analysis typically reveals a hybrid alternative that combines best features of initial strategies evaluated. 1.09 • Generating Strategic Alternatives

  15. Combining analytic techniques with creativity methods produces compelling, doable strategies. • Building Strategy Tables • Alternative Generation • Creativity • Need-Finding: Viewing from multiple perspectives • Idea Generation: Creating Real Options • Sorting • Summary 1.09 • Generating Strategic Alternatives

  16. The goal of strategy generation is a small number of high-quality strategic alternatives that: • Respond to the real issues and challenges facing your business • Incorporate the best creative thinking • Cover the full range of possibilities but are significantly different • Encompass all parts of your business • Are doable and compelling. 1.09 • Generating Strategic Alternatives

  17. The second board meeting addresses the alternatives developed by the project team. Decision Board Frame Plan EvaluatedAlternatives Alter-natives Project Team Strategy Table Information Sources 1.09 • Generating Strategic Alternatives

  18. Appendix 1.09 • Generating Strategic Alternatives

  19. Product Strategy Table Product Strategies Basic Line A Basic Line B Specialty Product I Specialty Product J Specialty Product K Full line One basic line and specialties Value-added specialties only Maintain Phase out Drop now Maintain Phase out Drop now Yes No Yes No Yes No “Nested” strategy tables help to expand the alternatives for each decision. Main Strategy Table Plant Tech-nology Products Quality Marketing Full line One basic line and specialties Value-added specialties only 1.09 • Generating Strategic Alternatives

  20. Combining analytic techniques with creativity methods produces compelling, doable strategies. • Building Strategy Tables • Alternative Generation • Creativity • Need-Finding: Viewing from multiple perspectives • Idea Generation: Creating Real Options • Sorting • Summary 1.09 • Generating Strategic Alternatives

  21. Alternative Generation • Why good alternatives are important • Exercises and Tools Creativity Need-Finding Idea-Generation Sorting 1.09 • Generating Strategic Alternatives

  22. Without a robust set of options, the value of analysis is significantly compromised. LEARN MORE in the process of developing better solutions • Test new or unconventional ideas without big commitments (prototyping) • Bring together the best contributions from a broad set of perspectives REALIZE VALUE in setting up well for execution • Support communication with internal and external stakeholders • Fosters confidence, understanding and buy-in across the organization CREATE VALUE by generating innovative approaches • The highest value options are rarely the obvious ones • Efficient use of resources; choose among many options rather than work-rework-rework again Even great analysis of an mundane idea cannot turn it into a brilliant strategy. 1.09 • Generating Strategic Alternatives

  23. In many organizations, creativity is the opposite of analysis. Customer-Focused Shareholder Value Spreadsheet Analysis “Ah ha” Factor AppliedCreativity Value Discipline Finance, Market Research, C-suite R&D, PR, Communications “The bean-counters only know how to say “no”.” “Innovation is messy and hard to measure.” • In isolation, leads to… • Naval-gazing, inwardly focused • Incremental or “me too” ideas • Weak value proposition, not related to customer needs • In isolation, leads to… • Blue-sky concepts, not actionable • Too difficult or expensive to implement • Short-sighted, quick-fix ideas 1.09 • Generating Strategic Alternatives

  24. A toolkit and language that includes both creativity and analysis is best positioned to produce high value strategy. Produce Growth Opportunities AppliedCreativity Value Discipline Cycle builds learnings and buy-in Refine Options and Evaluate Trade-offs Although most people (and organizations) are more comfortable on one side or the other, great strategists can use either or both as needed. 1.09 • Generating Strategic Alternatives

  25. Alternative Generation Creativity + Need-Finding + Idea Generation + Sorting 1.09 • Generating Strategic Alternatives

  26. Creativity Principles: • Everyone can be creative (though some of us have forgotten how or are out of the habit) • Many of us were at our most creative when we were children (or are in a child-like frame of mind) • Creativity often requires that one step out of the usual routine • Creativity is important in business • Creative leaders perform better and inspire teams • Creative team members make things happen (1+1 = 3) • Creativity is a source of organic growth that provides value to all stakeholders • Creative lives are more fun Note: Many of these exercises and perspective are based on Stanford University’s Joint Program in Design 1.09 • Generating Strategic Alternatives

  27. Warm-up Exercise:Personal Introductions Objective: Get to know one-another and remind each other of our creative and playful selves Exercise: Create a self portrait with pipe cleaners which is most reflective of you. Tell the group your name and talk about why you chose that item 1.09 • Generating Strategic Alternatives

  28. Exercise: Monk on the Mountain • "One morning, exactly at sunrise, a Monk began to climb a tall mountain. A narrow path, no more than a foot or two wide, spiraled around the mountain to a glittering temple at the summit. The Monk ascended the mountain, deep in meditation, stopping many times along the way to rest and eat the dried fruit he carried with him. He reached the temple shortly before sunset. After several days of fasting he began his journey down the mountain, starting exactly at sunrise, back along the same path, again with many pauses along the way for food and meditation. His average speed descending was, of course, greater than his average climbing speed. • The Puzzle: Is there one spot along the path that the Monk occupies on both trips at exactly the same time of day? If so, prove it. James Adams; Conceptual Blockbusting, a Guide to Better Ideas 1.09 • Generating Strategic Alternatives

  29. Exercise: 30 Circles • Draw 30 circles on a page • Make 5 rows with 6 circles in each row • Once you have 30 circles in a 5x6 grid • Turn the circles into something 1.09 • Generating Strategic Alternatives

  30. Often, our own and others’ biases get in the way of creativity. Categories of Conceptual “Blocks”: • Intellectual • Expert belief • Inflexible style • Isolated • Wrong information • Perceptual • Stereotyping • Difficulty isolating the problem • Choosing too tight a view • Cultural/Environmental • Control is good, chaos is bad • Not supposed to have fun • Lack of support for new ideas • Emotional • Fear of failure • Embarrassment • Uncomfortable with imagination or intuition James Adams; Conceptual Blockbusting, a Guide to Better Ideas 1.09 • Generating Strategic Alternatives

  31. Need-Finding • Objective: identify unmet needs and areas of opportunity that, if solved, could bring value to all stakeholders • Note, this is about identifying needs, NOT solutions • The best ideas are always those that meet ACTUAL end-user needs • Needs can potentially be addressed by many different solutions • E.g., “I should get a new chair” is a narrowly-framed solution. “I need a comfortable place to work” can be addressed by swapping chairs with someone, a comfy sofa, yoga, better lighting, a pillow, an ergonomic desk, etc. • Getting at the core of an issue will lead to more and better alternatives 1.09 • Generating Strategic Alternatives

  32. Need-Finding Tool: Idea Maps 1.09 • Generating Strategic Alternatives • An Idea Map is a graphic, free-association process that helps you, the explorer, “find your way” around a topic • This map is inside-out because you create it yourself from the location of interest • Not top-down like a regular map – you don’t want someone else’s view • Maps are often useful in proportion to their completeness • Push for as much detail as possible • Start at the center: what is the topic you want to understand better? • Move out from there: what are different elements to this topic? • Continue to free-associate out from the center, identify connections and conflicts

  33. Idea Mapping ExerciseIssue: I need a new car Freeway Reliability Commute Job Location Co. Viability US New Job Bicycle History Transportation Cost Alternatives Unions Manufacturers Train Pensions Carpool Home Ex-US CARS More? Power Other Uses Mileage 2 car-seats Style Kids Image Vacation Sports Skiing Fun Carry Stuff Playhouse Color Tahoe Building Materials Activity Moving Garden Friends 1.09 • Generating Strategic Alternatives

  34. Idea Mapping Exercise: Pharma Example Who are all the stakeholders? What are their needs in relation to the condition we are addressing? Consistency of Response Minimal side effects Easy to comply with Dependability No side effects Good education and support programs Parents Physicians Patients Asthma Rx Safety Child/teen Good cost-to-benefit value Ignore condition Low-profile IP protection Reduce acute (expensive) episodes Managed Care Manufacturer Profitability High impact 1.09 • Generating Strategic Alternatives

  35. More Need-Finding Tools • Ethnographic Research • Hands-off observation of stakeholders in their “natural habitat” • Look for unconscious workarounds and haphazard fixes • Day-in-the-Life-of (DILO) Interviews • Visit and participate in customers’ daily lives • Seek to understand what the challenges are in their jobs or lives • Only later ask, “is there a way we could help with our product or service?” • Note: Examine the experience with fresh eyes • What does the user like/not like about the current experience? What is lacking? • What else does this person do? Feel? Want? • What un-articulated needs might we uncover for this customer? 1.09 • Generating Strategic Alternatives

  36. Idea Generation • There are four parts to a good brainstorming session • Framing a good question • Warming up • the Brainstorm itself • Naming the outcomes 1.09 • Generating Strategic Alternatives

  37. Framing 1.09 • Generating Strategic Alternatives

  38. Warming-up • To be at their best, people need to move from their analytic/critical focus to a synthesis/non-judgmental focus. • Bring a joke book to pass around • Ask people to share a childhood nickname or hobby • Ask the team to come up with 25 uses for a paper clip • Visual games - Pictionary™, or “complete the drawing” game • Physical environment and team dynamics matter • Be sure to give this exercise enough time • Address any potential conflicts ahead of time • Bring food, candy, toys, etc. (play-doh, pipe-cleaners, etc.) 1.09 • Generating Strategic Alternatives

  39. Brainstorming: General rules to fine-tune this familiar tool Defer Judgment “The dread of criticism is the death of genius.” – William Gilmore Simms, American author, 1806-1870 Quantity “To have a great idea, have a lot of them.” – Thomas Edison, inventor, 1847-1931 Quality = Crazy “One doesn’t discover new lands without first consenting to lose sight of the shore for a very long time.” – Andre Gide, French critic, 1869-1951 Leapfrog “Ideas are like rabbits. You get a couple and learn how to handle them, and pretty soon you have a dozen.” – John Steinbeck, American author, 1902-1968 1.09 • Generating Strategic Alternatives

  40. Naming • Participants often feel like nothing happened if you do not “name” and “number” the outcomes of the session • Unique ideas are given a descriptive and often funny name that captures the essence of the idea • Things that were recorded can be combined into ideas; likewise ideas can be split up into multiple ideas • The goal is to say “we had 52 ideas” and be able to describe each with a unique name • Choosing the best ideas comes next 1.09 • Generating Strategic Alternatives

  41. Brainstorming Exercise • Assume that a steel pipe is imbedded in the concrete floor of a bare room as shown. The inside diameter of the pipe is 0.06” larger than the diameter of the ping pong ball that is resting at the bottom of the pipe. Your team has been given the following objects: • 10 feet of clothesline, a hammer, a screw driver, a box of Corn Flakes, a file, a wire coat hanger, an old shoe, a dog leash, and a light bulb • List all the ways you can think of to remove the ball without damaging the ball, the pipe, or the floor. *James Adams; Conceptual Blockbusting, a Guide to Better Ideas 1.09 • Generating Strategic Alternatives

  42. More Tools for Idea Generation (1): Morphologies • Create new concepts by creating unnatural structures • Make many random runs through the alternatives in a Strategy Table • Interpret your "invention" as a Alternative; could you build a case for it? • Example: Cylindrical Plastic Cap Ink Alternatives: square metal attached cap cartridge faceted glass no cap embedded sculpturedwoodretracts paper tip beaded paper use for cleaning solid ink >>> New Innovation: A “square (cubic), wooden, cap-less, solid ink pen", one corner of the cube writes, and each face of the cube can hold a personal picture. *James Adams; Conceptual Blockbusting, a Guide to Better Ideas 1.09 • Generating Strategic Alternatives

  43. More Tools for Idea Generation (2): Put Yourself on Someone Else’s Shoes 1.09 • Generating Strategic Alternatives

  44. Sorting • Objective: identify a set of Alternatives that is worth evaluating • The right set of Alternatives will… • Cover a wide range of “test wells” • Allow the team to explore and learn from the full range of possibilities • Push the boundaries but be realistic • Do not include options that are completely out of scope • Gives management confidence that the topic has been fully-explored • Include options that decision-makers will want to understand better and evaluate • Be willing to share the full list and range of brainstormed ideas 1.09 • Generating Strategic Alternatives

  45. There are several prioritization approaches that can be used. 2x2 Matrix: Each option is mapped against a 2x2 matrix of value vs. risk., or other important characteristics of the market • The dividing lines and specificity are less important than relative placement • Those in the best value corner are carried forward Group consensus/discussion: Ask the group to highlight the top 3-4 options and confirm agreement. • Best used if the choice is straightforward or team is already well-aligned Voting (n/3): Each participant is given a set number of votes, calculated as 1/3 the number of options under consideration. Have each person mark their votes on the wall. • Generally shows team preference and provides guidance but is not guaranteed to provide a clear “top 3” or “top 4”. Good basis to begin discussion, however. Scoring System: Each option is scored against commercial and technical considerations on a scale of 1 to 5 • Those with the highest overall fit (sum of scores) are carried forward. Matrix and Scoring require team consensus on the list and score or placement in the matrix. This may require off-line input or iteration. 1.09 • Generating Strategic Alternatives

  46. Judging the quality of alternatives indicates whether value-creation potential has been fully explored. Creative, Doable Alternatives: 0% “Business as usual” • Only one alternative • Considering infeasible alternatives • Missing good/great alternatives 50% “Creative, good alternatives” • Alternatives that “span the space” • May need to verify feasibility • No clear winner; need evaluation 100% “Hybrid alternatives” • Explored options and gaming strategies • New alternatives combining best features • Understand how to implement each strategy 3 Meaningful, Reliable Information 4 Clear Values and Trade-offs 2 Creative, Doable Alternatives 5 Logically Correct Reasoning DecisionQuality 0% 100% 1 Appropriate Frame 6 Commitment to Action 1.09 • Generating Strategic Alternatives

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