Leverage Strategic Thinking

Leverage Strategic Thinking
By James Crown

A Five Phase Process For Going Beyond The Strategic Plan To Provide Sustainable Forward-Leaning Advantage

If you truly want sustainable competitive advantage, if you want to dominate the marketplace, then you need to be one step ahead of your competitors and one step ahead of your customers. The step ahead of the customers is critical – right now you are satisfying their ‘wants’, what you also must be working on is their future ‘needs’ and how to best satisfy those.

The key to both of these requirements is to use a tool often called ‘Strategic Thinking’ but also referred to as ‘Strategic Leadership’. Whichever name you use, the end result should be the same – a view beyond the strategic plan, a set of strategic statements that perform the future planning much as the forward-leaning vision and mission should be doing.

The methodology is straightforward, but there are two ways of resourcing the talent needed for making Strategic Thinking a useful and a dynamic tool.

Approach number one is for it to be used by the senior management team. This is a good approach and will produce ample rewards for the time taken. It’s also the normal approach.

Approach number two, I believe, is much more powerful. In this configuration, our Strategic Leadership Team (SLT) includes the senior management team led by the CEO (or MD), as well the Chairman and Board directors.

An excellent grouping is four or five from the senior management team, and 4 or 5 of the directors. This SLT can become on of the most powerful contributors to the ongoing success of the company.

Too Inward Looking

There is no doubt that most companies have hard-working seniors and well-meaning directors. The problem is that both are inward looking and concentrating on day-to-day problems without the ongoing, concentrated focus on the future. This leads to the failure to take a future vision, or the failure to convey that vision (with enough initiatives to provide clarity for that future) to lower-level managers who have to deliver it.

Unfortunately, this failure rests in two key areas where strategic leadership is often lacking.

The first area of concern is the lack of knowledge about the environment, both internal and external, in which the organization is currently positioned, with a high level of understanding and analysis of how that environment will move forward, change, and require adjustment of the strategic course for the company in the years to come.

Without this knowledge, or informed discussion about the possibilities ahead, and testing of the assumptions about that future, it remains very difficult to get the long-term objectives correct.

Failure to get the objectives right means a strategic plan and lower level implementation plans that are built on incorrect assumptions and thus ultimately deliver less-than-required outcomes, if not outright failure.

Another concern is the frequent inability to provide a high level of ongoing monitoring and reporting of the progress towards that future strategic position or vision.

Leadership and Strategy

My approach to strategic thinking is based on two simple definitions: the need for leadership (influencing people, by providing purpose, direction, and motivation, while operating to accomplish the mission and improving the organization), and strategy (the framework of choices that determines the nature and direction of your organization).

The Strategic Thinking process brings together your top thinkers – directors and senior management - as the SLT needs to ask complicated questions about the internal and external environment in which you operate, about assumptions, competitors, products, services, resources, beliefs and values, competitive advantage, markets and customers.

This is not Strategic Planning – that’s the role of the CEO or MD and his senior leadership team. This is Strategic Thinking where your SLT will formulate the future of your organization and then document higher level strategy to provide a basis upon which the detailed strategic plan can be developed.

Strategic Thinking, from my perspective as a practitioner, focuses on a few key questions and not masses of information. We explore and carefully review demand, competition, and capability as business risks.

Here we are looking at risk as ‘opportunity’. We learn to effectively manage the risks about products, services and markets where competitors may not know how, or be prepared to, manage those same risks.

Let’s define and play in our own ballpark with our own rules, rather than continue to play the same game alongside our competitors!

If we know how to identify and mitigate the risks associated with playing our own game in our own way, then we can seize the competitive advantage.

A Five-Phase Process

There are five phases in the Strategic Thinking process.

Phase 1 – Strategic Intelligence Gathering and Analysis – assesses future needs, examines internal variables, values and capabilities. Puts in place an invaluable and carefully reasoned set of assumptions about the future. This activity belongs to the Strategic Leadership Team.

Phase 2 – Strategic Formulation and Vision – examines alternative futures and selects an appropriate vision, around which strategy and objectives can be formulated. This development phase is executed by the Strategic Leadership Team.

Phase 3 – Strategic Master Plan (the Strategic Plan) – key objectives emerge along with performance measures and targets. Objectives, programs and projects can then be developed and are captured in the strategic plan. The execution of this activity belongs to the CEO and the Senior Management Team.

Phase 4 – Strategy Implementation and Reporting – from the strategic plan comes the implementation and action level, detailed in lower level business plans. This activity belongs to the Management Teams at the SBU, Department or Divisional level.

Phase 5 – Strategy Monitoring, Reviewing and Updating – regular monitoring allows adjustments to be made that keep the plans alive, flexible and relevant. This is a joint activity between the Strategic Leadership Team and the Senior Management Team.

Strategic Thinking Session Objectives

A typical strategic thinking workshop might have the following objectives:

>> to clearly develop, debate and document a strategic direction 2007 to 2012, building on the existing strategic plan, and extending our view forward.

>> to understand the strategic thinking processing and stepping through the methodology which allows a more concrete future vision and strategic concept to be formed

>> to recognize how business risk at the strategic level can be leveraged to provide opportunities and competitive advantage across three distinct risk areas: meeting customer demands, countering or pre-empting competitive attacks, and ensuring our organizational capability can meet delivery expectations

>> to recognize, assess and mitigate strategic risks which may be encountered and which may adversely impact our objectives during our journey to deliver our future.

>> to have in place, by the end of the strategic thinking session, a strategic statement, back up by strategic formulation including some key objectives and initiatives, plus a statement on the principal risks we may face in implementing our strategies.

Strategic thinking is an ongoing process. Whether it is carried out quarterly, half-yearly, or whether there is a marked change in the external or internal environment is not that important. What is important is actually bringing together our top talent and arguing, debating and plotting our future.

In recent years I have started to question the need for rigorous planning timelines. The environmental changes we are faced with do not follow a set timeline, so why do we force our strategic thinking and strategic planning into set time frames?

It seems logical to update your strategic and business plans whether necessary. Update your thinking and planning as the environment changes, as customer needs mature, as your competitors encroach, and as your capability improves. If strategy formulation is ongoing, then so is the need to have an ‘ongoing’ capability to update our ‘planning’ documents, and ensure adequate ongoing implementation.

Advantages Are Obvious

The advantage of strategic thinking as as key component of the strategy development process is it provides an open-ended view of the future and is not constrained by a 3-5 year horizon.

It brings together the top ‘brains’ of the organization. When directors are involved it adds experience and knowledge at a whole new level. This must have a pay-off far in excess of its cost.

The work that is produced becomes integral to the success of the organization as it related to structure and resourcing, a definable theme for strategic communications, direction for marketing and promotions, guidance for level planning, as a contribution to purpose, values and culture, and as a critical link between human performance and the ultimate delivery of the company’s forward-leaning vision.


Author
James Crown is the CEO of Knowledge Group Consulting Sdn Bhd and Executive Director of Knowledge Group of Companies. He can be contacted on jcrown@kgc-consulting.com

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The Strategy Process

The Strategy Process

For the beginner, it is important to understand what is 'strategy process'. There are eight steps in strategy process, i.e:

(1) Initiating the strategy process
(2) Market Analysis
(3) Company Analysis
(3) Developing a Vision and Long-term Objectives
(4) Developing Corporate Strategy
(5) Developing Business Strategy
(6) Developing Functional Strategy and
(7) Strategy Implementation and
(8) Performance Monitoring

Initiating the Strategy Process
We start with initiating the strategy process.

Market Analysis

Developing A Vision and Long-Term Objectives
It shows the company must work.

Developing Corporate Strategy
At the corporate level, primary strategy formulation responsibilities include setting the direction of the organization, formulation of a corporate strategy, selection of business to compete, selection of tactics for diversification and growth, and management of corporate resources and capabilities.

BCG Matrix
Before we develop any corporate strategy, it is important to know the market attractiveness, company's market position and resources available.

Direction of Diversification
It depends on the structure of the market and the company's top management attitude in relation to growth, profit and risk profile.

Four types of diversification are:
(a) Vertical diversification (b) Horizontal diversification (c) Concentric diversification and (d) Conglomerates.

BUSINESS STRATEGY

Here we are talking about growth strategies and competitive strategies.

Growth strategies are concerned with increasing the size and viability of of the business overtime. Competitive strategies are concerned with how the firm intends to position itself to create value for its customers in ways that are different from competitors.

GROWTH STRATEGY
Growth strategy has two components: internal growth strategies and external growth strategies.

Internal Growth Strategies
By investing it resources, a business can pursue market penetration, market development,or product development.

Market Penetration - for existing products & existing market: this strategy is suitable if the market is not fully saturated.
Product Development - for existing market, but new product
Market Development - for existing products and new market
Diversification - for new products and new market.

External Growth Strategies
It involves investing organization resources in another company or business to achieve growth targets, and include horizontal integration and joint ventures/strategic alliances.

Horizontal Integration: it involves the acquisition of an organization in the same line of business.This strategy is used to to gain market share in a particular market.

COMPETITIVE STRATEGY
In planning for resources for growth strategy, we must decide the competitive positioning of the business.Both growth and competitive strategies are tightly linked. There are four types of strategies under competitive strategy: cost leadership, differentiation, best cost and focus.

Cost Leadership Firms become the lowest cost producers of a good or service. This firms attempt to serve a large percentage of the total market share. Firms pursuing a low cost strategy will employ one of the following factors: (a) high capacity utilisation, (b) economies of scale, (c) technological advances, and (d) learning/experience effects.

Differentiation For this strategy, the emphasis is on creating value through uniqueness.Uniqueness can be achieved through product innovations, superior quality, superior service, creative advertising,and better supplier relationships.

Best Cost This strategy refers to firms that are not pursuing a distinct strategy.

Focus Focus can be based on differentiation (differentiation cost) or lowest cost (cost focus) or a combination of differentiation and lowest cost (best-cost focus). The key to a focus strategy is providing a product or service that caters to a particular segment in the market.

Developing Functional Strategies

Strategy Implementation
After vision is available and strategies have been developed, it must be followed by implementation

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