Strategy Frameworks & Tools Reference Guide

1. Strategy Frameworks & Tools Reference Guide Strategic Planning Frameworks, Models and Tools Reference Guide This presentation contains 30 common frameworks, models and tools for strategic planning. They include stakeholder analysis, internal analysis, environmental analysis, industry analysis, market analysis, competitive analysis, strategy development and strategy implementation. © Operational Excellence Consulting. All rights reserved.

2. NOTE: This is a PARTIAL PREVIEW. To download the complete presentation, please visit: https://www.oeconsulting.com.sg Contents 1. Power/Interest Grid 16. Greiner’s Growth Model 2. VRIO Framework 17. McKinsey’s Three Horizons of Growth 3. Porter’s Value Chain 18. Disruptive Innovation (Christensen) 4. PESTEL Analysis 19. Value Proposition Canvas 5. BCG Matrix 20. Business Model Canvas 6. GE-McKinsey Matrix 21. Core Competencies Model (Hamel & Prahalad) 7. Porter’s Five Forces 22. Risk Management Process 8. Industry Life Cycle Model 23. Probability-Impact Matrix 9. Competitive Profile Matrix 24. Big Hairy Audacious Goal (BHAG) 10. SWOT Analysis 25. Vision, Mission & Values 11. Porter’s Generic Strategies 26. SMART Objectives 12. Value Disciplines Model 27. Hoshin Planning 13. Ansoff Matrix 28. Balanced Scorecard 14. BCG Strategy Palette 29. McKinsey’s 7-S Framework 15. Blue Ocean Strategy 30. Kotter’s 8-Step Process for Leading Change 2 © Operational Excellence Consulting. All rights reserved.

3. The Power/Interest Grid for Stakeholder Prioritization is a useful tool for stakeholder analysis in the strategic planning process The Power/Interest Grid for Stakeholder Prioritization High Keep Satisfied Manage Closely POWER Monitor Keep Informed Low INTEREST Low High Source: Based on Eden & Ackermann, 1998 3 © Operational Excellence Consulting. All rights reserved.

4. The VRIO framework is a useful internal analysis tool to discover sources for sustainable competitive advantage VRIO Framework V R I O VALUE RARITY IMITABILITY ORGANIZATION “Is control of the resource/capability in the hands of a relative few?” “Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?” “Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?” “Is the firm organized, ready, and able to exploit the resource/capability?" "Is the firm organized to capture value?” 4 © Operational Excellence Consulting. All rights reserved.

5. Porter’s Value Chain – Introduction What It Is When To Use It § Porter’s Value Chain is a strategic management tool companies use to analyze and improve the value they offer their customers. § You should use value chain analysis when you need to clarify which activities are most important to your business success—in other words, which activities are critical success factors and how you can improve your capabilities in them. § The value chain is a tool for identifying key processes in your business, assessing your firm’s competitive capabilities in each and thereby assessing wherein lies the source of your competitive advantage. How To Use It § Follow these steps when using Porter's value chain: Why We Use It 1. Find the sub-activities that relate to each primary activity § Companies use this management tool to gain an advantage over their competitors. 2. Find the sub-activities that relate to each support activity § Improvements in the value delivery process can be found in any activity along the value chain. 3. Find connections between activities § Efficiency and effectiveness in these activities could lead to a sustained competitive advantage. 4. Constantly look for new ways to add value § Most organizations that achieve long-term success do so by constantly looking for ways to offer more value to their customers. § Companies often choose this model because it focuses on the customers. 5 © Operational Excellence Consulting. All rights reserved.

6. Analysis of the Value Chain to establish potential match for M&A or strategic alliances Porter’s Value Chain – Assessing Potential Match for M&A or Strategic Alliances 6 © Operational Excellence Consulting. All rights reserved.

7. The BCG Matrix – Description of the four quadrants BCG Matrix QUADRANT DESCRIPTION Are products that enjoy a relatively high market share in a strongly growing market. They are (potentially) profitable and may grow further. It is therefore advisable to invest in these products. Stars Are products that are extremely profitable, and no extra effort or investment is needed to maintain the status quo. A product becomes a cash cow when the growth of a product’s market decreases but the company’s market share remains high and stable. ? Cash Cows Are products that have high market growth but small market share, and so their growth rate is uncertain. Investments to generate further growth may or may not yield big results in the future. Additional investigation into how and where to invest is advised. Question Marks Should be dropped or divested when they are not profitable. If profitable, do not invest in them, but make the best of their current value. This may even mean selling the product’s operations and/or brand. Dogs Source: Adapted from BCG 7 © Operational Excellence Consulting. All rights reserved.

8. BCG Matrix – Example of Apple BCG Matrix – Example Apple Watch iPhone High AirPods ? Market Growth Apple TV MacBook Low iMac iPad iPod Large Small Relative Market Share 8 © Operational Excellence Consulting. All rights reserved.

9. The GE-McKinsey Matrix provides a systematic approach to prioritize investments among its business units GE-McKinsey Matrix Selectivity/ Earnings Invest/ Grow Invest/ Grow High Industry Attractiveness Medium Harvest/ Divest Selectivity/ Earnings Invest/ Grow Low Harvest/ Divest Harvest/ Divest Selectivity/ Earnings Business Unit Strength Low Medium High Source: Adapted from GE-McKinsey 9 © Operational Excellence Consulting. All rights reserved.

10. Porter’s Five Forces analysis can be used to better understand the industry in which it operates Porter’s Five Forces 1. New Entrants Are there entry barriers for new contenders? 5. Existing competitors What advantages do competitors have? 4. Suppliers What level of influence do suppliers have? 3. Buyers To what extent can buyers bargain? 2. Substitutes How easily can your product or service be substituted with a different type of product or service? Source: Adapted from Porter 10 © Operational Excellence Consulting. All rights reserved.

11. Industry Life Cycle Model is the portrayal of different life stages or phases that companies experience in the industry Industry Life Cycle Model SALES Introduction Growth Maturity Decline TIME 11 © Operational Excellence Consulting. All rights reserved.

12. The Competitive Profile Matrix assesses how well positioned your company is in each segment Competitive Profile Matrix ILLUSTRATIVE Critical success factors in UK engineering niche market Weightage The company Competitor A Competitor B Market share 15% 5 3.3 2 Cost factors 35% 4 3.5 2.5 Differentiation factors: Product capability and range 15% 4 4.5 3 Product reliability 15% 4 4 2.5 Engineering service network 10% 5 3.5 2.5 Customer service 10% 3 3 2 Competitive position 100% 4.2 3.6 2.5 Scoring: 1 = Weak, 2 = Tenable, 3 = Favorable, 4 = Strong, 5 = Dominant Source: Adapted from Evans, 2014 12 © Operational Excellence Consulting. All rights reserved.

13. SWOT Analysis – Introduction What It Is Why We Use It § A SWOT analysis is a strategic planning technique that you can use to identify a company’s strengths, weaknesses, opportunities and threats. § A SWOT analysis provides helpful information for matching resources and capabilities to the competitive environment in which the organization operates. § It can provide new insights, such as where the company can improve compared to its competitors. § This may help you improve the organization, increase profitability and achieve more success overall. When To Use It § The model can be used as an instrument for devising and selecting strategy, and is applicable in any decision-making situation, provided the desired objective has been clearly defined. § It is often helpful to perform SWOT analyses frequently to ensure you monitor any changes accordingly. § The SWOT analysis is also frequently used to assess the same factors about the organizations, products and services of your competitors. § SWOT analyses evaluate both internal and external factors that affect an organization. Strengths and weaknesses refer to internal factors and opportunities and threats refer to external factors. § The SWOT analysis is often used in conjunction with other strategy tools, such as the PESTEL, Ansoff matrix and Porter’s 5 Forces frameworks, to support more robust assessments of drivers of business growth. 13 © Operational Excellence Consulting. All rights reserved.

14. Situation Analysis can be broken down into internal and external analysis Situation Analysis Situation Analysis Internal Analysis External Analysis Strength Weaknesses Opportunities Threats 14 © Operational Excellence Consulting. All rights reserved.

15. Porter’s generic strategies – Examples COST LEADERSHIP DIFFERENTIATION Broad IKEA, Southwest Airlines, Wal-Mart, McDonald’s, EasyJet, Costco and Amazon. Apple, Harley-Davidson, Nespresso, LEGO, Nike and Starbucks. TARGET SCOPE COST FOCUS DIFFERENTIATION FOCUS Narrow Home Depot, SanDisk, Claire’s, Monster and Smart. Rolls Royce, Honda motor cycles, Omega, Prada and Razer. Distinctiveness Cost COMPETITIVE ADVANTAGE 15 © Operational Excellence Consulting. All rights reserved.

16. There are three generic value disciplines that enable an organization to deliver to its customers Value Disciplines Model PRODUCT LEADERSHIP (“Best Product”) Product Differentiation Performance level of market leaders Minimal performance level in the industry Operational Competence OPERATIONAL EXCELLENCE (“Best Total Cost”) Customer Responsiveness CUSTOMER INTIMACY (“Best Total Solution”) Source: Adapted from Treacy & Wiersema, 1995 16 © Operational Excellence Consulting. All rights reserved.

17. The Ansoff Growth Matrix offers a logical way of determining the scope and direction of a firm’s strategic development in the marketplace Ansoff Growth Matrix Increasing Risk Market Development Diversification Sell more of the same products and services in new markets. Sell new products and services into new markets. New 4 2 Markets Market Penetration Product Development Sell more of the same products and services in existing markets. This growth vector indicates growth through increase of market share for the present product- markets. Sell new products and services into existing markets. This growth vector means growth by developing new products to replace or complement existing products. Existing Relative risk: 1 Low risk 3 1 4 High risk New Existing Products 17 © Operational Excellence Consulting. All rights reserved.

18. The BCG Strategy Palette helps leaders match their approach to their particular business environment and execute strategy effectively BCG Strategy Palette RENEWAL High High ADAPTIVE SHAPING UNPREDICTABILITY HARSHNESS CLASSICAL VISIONARY Low Low MALLEABILITY Low High Source: Adapted from BCG 18 © Operational Excellence Consulting. All rights reserved.

19. Blue Ocean Strategy focuses attention on the creation of uncontested marketplaces through value innovation Blue Ocean Strategy Red Ocean Thinking Blue Ocean Thinking Industry Compete in existing market space Create uncontested market space Strategy Best the competition Make competition irrelevant Market Exploit existing demand Create and capture new demand Resources Make the value-cost trade-off Break the value-cost trade-off Choose between differentiation or cost Simultaneous pursuit of differentiation and cost Organization Maximize value within industry boundaries Offer total solution that transcends the industry Offerings Source: Adapted from Kim & Mauborgne 19 © Operational Excellence Consulting. All rights reserved.

20. Netflix uses the Blue Ocean strategy to create new demand and pursues differentiation with low cost to open up new market space Blue Ocean Strategy – Example of Netflix Create Reduce Eliminate Raise High Offering Level Netflix Cable TV Low Installation Process Ability To Watch Ability To View Movie Selection Commercials News Programs Price Parental Content Filtering Tech Support Staff Live Sports Devices Can Watch On Value Attributes Complexity From Any Location Full Seasons Netflix became the first online streaming content provider by offering a new value curve and de-emphasizing the traditional attributes. 20 © Operational Excellence Consulting. All rights reserved.

21. Greiner’s growth model describes the phases that organizations pass through as they grow, regardless of the type of organization Greiner’s Growth Phases Phase 1 Growth through creativity Phase 2 Growth through direction Phase 3 Growth through delegation Phase 4 Growth through co- ordination Phase 5 Growth through collaboration Phase 6 Growth through alliances Large Organization Size Growth crisis Red tape crisis Control crisis Autonomy crisis Leadership crisis Small Young Mature Time Source: Adapted from Greiner, 1998 21 © Operational Excellence Consulting. All rights reserved.

22. The Three Horizons of Growth Model helps to distinguish between the embryonic, emergent and mature phases of a business’s life cycle Three Horizons of Growth Model 5 – 12 years 2 – 5 years Horizon 3: Create viable options: Introducing entirely new elements to your business that don’t exist today. 1 – 3 years Horizon 2: Build emerging businesses: Taking what you already have, and extending it into new areas of revenue-driving activity. Value Horizon 1: Extend and defend core business: Activities that are most closely aligned to your current business. Time (Years) Source: Adapted from McKinsey 22 © Operational Excellence Consulting. All rights reserved.

23. Disruptive Innovation – Introduction What It Is Why We Use It § Disruptive innovation has been a buzzword since Clayton Christensen coined it back in the mid 1990s to describe the way in which new entrants in a market can disrupt established businesses. § Using disruptive innovation helps firms work out what they can do to avoid displacement brought on by radical, technological innovations or how they can pursue such innovations themselves. § According to Christensen, disruptive innovation is the process in which a smaller company, usually with fewer resources, is able to challenge an established business (often called an “incumbent”) by entering at the bottom of the market and continuing to move up-market. § Whether you are an incumbent intent on defending your market share and profits or you are a new entrant seeking to grab a piece of the pie, understanding disruptive innovation as a process can offer valuable insights you can incorporate into your business plan. § Although the concept of disruptive innovation was received as almost being a radical innovation in itself, it is a concept that can help explain certain developments in markets and industries. When To Use It § Disruptive innovation is most useful in highly dynamic markets and in situations where new technologies or technological innovations are emerging. § Disruptive innovation is a method that helps identify and manage potentially disruptive innovations. § Examples of companies that use disruptive innovation strategy: Uber, Netflix, Spotify, Toyota 23 © Operational Excellence Consulting. All rights reserved.

24. Disruptive Innovation is an innovation that leads to a product or service designed for a new set of customers Disruptive Innovation High end of the market MOST PROFITABLE Higher PERFORMANCE CUSTOMERS WILL PAY FOR Incumbent’s sustaining trajectory Mainstream Entrant’s disruptive trajectory PRODUCT PERFORMANCE Low end of the market LEAST PROFITABLE Lower Time Source: Adapted from Christensen, 1997 24 © Operational Excellence Consulting. All rights reserved.

25. Entire industries have been disrupted by companies who offer the exact same thing in a more convenient form Disruptive Innovation – Examples Uber Netflix Spotify Uber disrupted the taxi industry by getting you from Point A to Point B without having to wait out in the rain for a cab. Netflix disrupted Blockbuster by giving us access to any movie we wanted without late fees. Spotify disrupted the digital music industry by allowing you to stream anyone’s music without having to own it yourself. Netflix, Spotify, Uber: None of these companies rose to the top by inventing a new product or service. They offered you the exact same thing their competitors did — just in a simpler way. Source: Adapted from Hubspot 25 © Operational Excellence Consulting. All rights reserved.

26. The Value Proposition Canvas allows us to dive deeper into the Value Proposition and Customer Segments of the business model Are you creating value for your business? The Business Model Canvas makes explicit how you are creating and capturing value for your business. ? ? ? ? ? Zoom in to the detailed picture to investigate if the customer value proposition in your business model really creates value for your customer. Zoom out to the bigger picture to analyze if you can profitably create, deliver and capture value around this particular customer value proposition. ? ? + Zoom - Zoom Are you creating value for your customer? The Value Proposition Canvas makes explicit how you are creating value for your customers. Source: Adapted from Strategyzer 26 © Operational Excellence Consulting. All rights reserved.

27. Example: Starbucks Business Model KP KA VP CR CS Starbucks Rewards Marketing Unique Coffee Co-created with Customers Starbucks Reserve Coffee Aficionados R&D Coffee Growers Starbucks App Supply Chain Management Mobile Professionals Specialized Coffee M/C Makers Third Place between the Home and Office KR CH People Retail stores Students A Place to Hangout with Friends, Do Homework Brand Packaging & Bottling Plants Store Design C$ R$ Marketing & R&D Retail Sales People Costs Retail Sales Retail Sales Coffee & Milk Rent 27 © Operational Excellence Consulting. All rights reserved.

28. The Core Competencies Model is a strategic tool to determine the unique assets that can be used to create and offer value to customers Core Competencies Model New Premier plus 10 Mega opportunities Core Competencies Existing Fill in the blanks White spaces New Existing Market Source: Adapted from Hamel & Prahalad, 1994 28 © Operational Excellence Consulting. All rights reserved.

29. Examples of core competencies Apple 3M Rolex Sony Persistently innovating adhesives and substrates Making user-friendly computer interfaces and design Design and production of high-status watches Miniaturization of electronic equipment 29 © Operational Excellence Consulting. All rights reserved.

30. The Probability-Impact Matrix is a tool that helps in the process of quantifying levels of risk Probability-Impact Matrix Low Probability/High Impact: High Probability/High Impact: High Contingency Planning Strategic Planning Impact of Risk Low Probability/Low Impact: High Probability/Low Impact: Low Planning Not Required Operational Planning High Low Probability of Occurrence 30 © Operational Excellence Consulting. All rights reserved.

31. In articulating a vision, organizations should define its core ideology and set a 10-to-30-year BHAG (big, hairy, audacious goal) Big, Hairy, Audacious Goal § Core values are your firm’s “essential and enduring tenets— timeless guiding principles that require no external justification” Core ideology § Core values § Core purpose § Core purpose is your firm’s “fundamental reason for being” Envisioned Future § 10-to-30-year BHAG (Big, Hairy, Audacious Goal) § Vivid description Source: Adapted from Collins & Porras, 1996 31 © Operational Excellence Consulting. All rights reserved.

32. BHAG: The great success of Facebook is based on long-term thinking and strategic foresight Big, Hairy, Audacious Goal 10 years Artificial intelligence WhatsApp 5 Connectivity …Vision …Language …Planning … …Drones …Satellites …Laser …Telco Infra … Messenger Facebook …Search …Groups …Video Virtual reality/ augmented reality 3 …Mobile VR …Rift …Touch …Social VR …AR Tech … Instagram Source: Adapted from Lewrick et al., 2018 32 © Operational Excellence Consulting. All rights reserved.

33. Vision, Mission & Values – The big picture Vision, Mission & Values Vision (“Where are we going?”) Current State (“Where are we now?”) Mission (“What are we doing to get there?”) Core Values (“What are our beliefs, principles and philosophy?”) 33 © Operational Excellence Consulting. All rights reserved.

34. Hoshin Planning is a strategic planning model that uses a catchball process for goal alignment and deployment Hoshin Planning Process Refers to the year-end assessment of each hoshin. Were process and outcome goals achieved? If so, ask why five times. If not, ask why five times. What did we learn? How can we strengthen our capabilities? Setting the annual goals of a company and its departments. Goals address both processes and outcomes and are usually developed by senior management in consultation with their subordinates. Hoshin Evaluation Hoshin Generation Hoshin Planning Process Refers to the management activities required to implement the hoshins developed and involves applying the various PDCA cycles. There should be formal and informal reviews throughout the year to make the current status and countermeasures visible. Entails establishing lower-level goals and plans, both within and across departments through catchball. As the hoshin cascades through each department, activities become more bite-sized. Each level must translate the hoshin goal and means into meaningful action. Hoshin Implementation Hoshin Deployment Source: Adapted from Pascal Dennis, 2015 34 © Operational Excellence Consulting. All rights reserved.

35. Hoshin planning process incorporating PDCA cycles Hoshin Planning Process – PDCA Cycles Hoshin Planning comprises overlapping PDCA cycles. Create plan to achieve breakthrough objectives Prioritize and select breakthrough objectives Determine current condition Determine desired condition Deploy the plan (catchball) 2nd 1st A P A P PDCA cycle PDCA cycle C D C D Annual review: Reflection and learning points Review plan (weekly, monthly, biannual) Confirm and implement plan (A3 report) A P Note that there is a 3rdPDCA cycle over a 3-5 year horizon C D Source: Adapted from Pascal Dennis, 2015 35 © Operational Excellence Consulting. All rights reserved.

36. The Balanced Scorecard focuses the entire organization on financial and non-financial outcomes The Balanced Scorecard FINANCIAL To succeed financially, how should we appear to our shareholders? CUSTOMERS BUSINESS PROCESSES Vision and Strategy To achieve our vision, how should we appear to our customers? To satisfy our shareholders and customers, what business processes must we excel at? LEARNING & GROWTH To achieve our vision, how will we sustain our ability to change and improve? Source: Based on Kaplan & Norton 36 © Operational Excellence Consulting. All rights reserved.

37. The McKinsey 7-S framework is most often used as a tool to assess and monitor changes in the internal situation of an organization McKinsey 7-S Framework Structure Strategy Systems Shared Values Skills Style Staff Source: Adapted from McKinsey 37 © Operational Excellence Consulting. All rights reserved.

38. The 7-S framework can best be used as a matrix for assessing the impact of the proposed strategy of the organization Example – Food4U Supermarket is moving away from its traditional middle-of-the-road retail model towards an upscale, fresh, full-service, convenience-oriented grocery and fresh market. An initial decision to hire specialists may have consequences reaching far beyond the scope of the strategy at it was proposed. Shared Values Staff Skills Style Systems Structure Strategy - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Strategy - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Structure - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Systems Shared Values - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Need for specialists: e.g. butcher, bread, baker, food display specialists - - - - - - - - - - - - - - - - - - - - Style - - - - - - - - - - Skills Potential conflict: (older) specialist vs. (younger) temporary employees Staff 38 © Operational Excellence Consulting. All rights reserved.

39. Kotter’s 8 Steps of Change provides a roadmap for advancing a culture of performance excellence Kotter’s 8-Step Change Model 1 Establish A Sense Of Urgency Institute Change Sustain Acceleration Build A Guiding Coalition KOTTER’S 8-STEP MODEL FOR LEADING CHANGE Form A Generate Short- term Wins Strategic Vision Enable Action By Removing Barriers Enlist A Volunteer Army Source: Adapted from John Kotter, 1996 & 2014 39 © Operational Excellence Consulting. All rights reserved.

40. Operational Excellence Consulting is a management training and consulting firm that assists organizations in improving business performance and effectiveness. Based in Singapore, the firm’s mission is to create business value for organizations through innovative design and operational excellence management training and consulting solutions. For more information, please visit www.oeconsulting.com.sg 40 © Operational Excellence Consulting. All rights reserved.