Business acumen for strategy

© Linda Gorchels

Business Acumen for Strategy

Linda Gorchels Emerita Director of Executive Training, UW-Madison

Creativity Curator, Tomorrow’s Mysteries, LLC [email protected]

Linda Gorchels www.BrainSnacksCafe.com

Business Model Renewal Amazon.com

http://www.amazon.com/Business-Model-Renewal-Practices-Reinventing-ebook/dp/B007H6KOC4/ref=sr_1_6?ie=UTF8&qid=1416107731&sr=8-6&keywords=gorchels


Learning objectives (Fall 2015)

By the end of this session you should be able to: • Connect the dots between business

models, strategies, leadership and culture

• Define (and refine) your own business model(s)

• Lead strategic maneuvers and business model renewal through relevant change initiatives

© Linda Gorchels

Tactics Strategy ≠

How long is “long-term?”

• It varies by company and industry. However, here are some very broad guidelines. – product: 2-3 years – business unit: 3-5 years – company: 5-10 years – industry: 8-10 years or more

© Linda Gorchels

• Strategy is a long-term plan of action to achieve a particular goal. – Typical business goals include growth, market

dominance, efficiency, etc., with the intent of achieving competitive advantage

© Linda Gorchels

• Strategy is sometimes viewed as the policies taken to win a war whereas tactics are the actions taken to win a battle. Both exist within the context of business models.

Growth Initiatives

Corporate Strategies

Business Strategies

Product/Service Strategies

Field strategies

Inorganic grow th

Organic grow th

Mergers, acquisitions, etc.

Product development, increased sales

Stockholder focus

Customer focus

Corporate Strategies Business Strategies Field Strategies

Enterprise mission, vision, values Mergers, acquisitions, divestitures Strategic market alignment Organizational structure Product line acquisition Operational strategies New product development Channel redesign Functional strategies Account selection Lead generation Selling, account management Fulfillment Sales support & service

© Linda Gorchels

© Linda Gorchels

Planning Strategy ≠

Michael Porter on Strategy

© Linda Gorchels

http://www.youtube.com/watch?v=ibrxIP0H84M

© Linda Gorchels

“Leadership and management are two distinctive and complementary systems of action. Management is about coping with complexity. Leadership is about coping with change. Leadership complements management; it doesn’t replace it. Companies manage complexity by planning & budgeting, by controlling & problem solving. By contrast, leading an organization begins by setting direction, aligning people to the direction, and inspiring people to achieve a vision.”

» John P. Kotter

“Most of the management tools and techniques we studied had no direct causal relationship to superior business performance. What does matter, it turns out, is having a strong grasp of the basics. Without exception, companies that outperformed their industry peers excelled at what we call the four primary management practices – strategy, execution, culture, and structure.”

Joyce, Nohria, Roberson

© Linda Gorchels

•Exploit existing assets and capabilities before exploring new ones. •Diversify your business portfolio. Great companies are adaptive, but generally exploit economies of scope. •Remember your mistakes – and don’t repeat them. •Be conservative about change.

Christian Stadler

© Linda Gorchels

“An examination of over 400 companies listed at some point on the Fortune 100 since its inception revealed that 87% experienced a stall. Fewer than half were able to return to moderate or high growth within a decade, and for some the delay was fatal.”

Matthew Olson & Derek van Bever

© Linda Gorchels

“Strategy has been the primary building block of competitiveness over the past three decades, but in the future, the quest for sustainable advantage may well begin with the business model. Seven out of 10 companies are trying to create innovative business models and 98% are modifying existing ones.”

“How to Design a Winning Business Model” (Ramon Casadesus-Masanell, Joan Ricart), Harvard Business Review, January-February 2011, pp. 101+

© Linda Gorchels

How is a business model developed?

There are three parts …

• Context

• Strategic Decisions

• Alignment

© Linda Gorchels

Source:

Gorchels’ business model portfolio

Boost existing customer markets

Move into adjacent customer markets

Create new customer

markets

Cultivate and reframe existing products,

offerings, revenue streams and competencies

Sustaining

Growth (shorter-term planning

horizon; mining the core)

Cultivate and collaborate with external partners for

products, offerings, revenue streams and

competencies

Disruptive Growth (long-term planning

horizon; incite breakthroughs)

Transformative Growth

(intermediate-term planning horizon; advancing

into adjacencies)

©Linda Gorchels

The Innovation Paradox Robert C. Wolcott

© Linda Gorchels

http://www.youtube.com/watch?v=Afq5mJhuI_g

• Context – What’s going on?

© Linda Gorchels

Source: © Linda Gorchels

Data Hindsight

Plausible futures Foresight

Business impacts Insight

Environmental scan

3 Assess

2 Project

1 Compile

Compile

© Linda Gorchels

SWOT

Internal

External

Strengths Weaknesses

Opportunities Threats

© Linda Gorchels

Identify strengths (weaknesses)

Strengths can come from competencies, capabilities, resources or assets that are the source of a firm’s competitive advantage. · e.g. – competence in low-cost manufacturing · e.g. – capability of strong customer relations · e.g. – superior access to resources such as

raw materials · e.g. – unique assets such as location or brands

© Linda Gorchels

Dive into strengths

urable nimitable/non-substitutable aluable xploitable

© Linda Gorchels

SWOT

Internal

External

Strengths Weaknesses

Opportunities Threats

© Linda Gorchels

Monitor external trends over time

Technology

• Describe technology, science & innovation in your industry and in similar industries. – Can technologies from other

industries be adapted? – Are novel applications possible?

• What technological changes are expected or anticipated?

© Linda Gorchels

Industry & competition

• Think about your current or prospective industry. How would you define industry structure in terms of buyers, suppliers and competition? (Porter’s Five Forces)

© Linda Gorchels

• How are you uniquely positioned compared to these competitors? What is your value proposition and how will you maintain it in the future?

Porter’s Five Forces

© Linda Gorchels

Market • Is your primary market stable, growing, or

declining? • Have you saturated this market, or is there room

for profitable growth? • How might this change in the future? • Are there adjacent markets that

offer opportunities for the future? • What higher-level socio-cultural

trends (next page) could affect your market(s)?

Generational Cohorts (birth years)

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Cohorts

Traditionalist

Baby Boomer

Gen X

Millennial Z ?

© Linda Gorchels

Economy, environment, etc.

• Are there existing laws or requirements that pose opportunities or threats?

• What governmental and political changes might happen? – World affairs, politics, and public policy

© Linda Gorchels

• What pending legislation might affect your future?

• What environmental or sustainability issues should you consider?

© Linda Gorchels

Upstream business goals

• Are your goals determined or affected by higher-level corporate, division or business unit goals?

PROJECT

Environmental scanning – step 2 • Conceptualize plausible futures.

– Which technologies will be disruptive? – When will patent expirations (either yours or the

competition) occur? – How quickly will markets transform due to

demographic or other shifts?

© Linda Gorchels

Projecting into the Future Co

mpl

exity

Time

© Linda Gorchels

ASSESS

Environmental scanning – step 3 • Consider…

– The likelihood of each scenario – The potential impact on your business – How you might build on strengths, resolve

weaknesses, exploit opportunities and minimize threats

• Think in terms of dynamic stability

© Linda Gorchels

© Linda Gorchels © Linda Gorchels © Linda Gorchels

What is contextual leadership?

© Linda Gorchels

• Leadership requires agility and contextual intelligence. Effective leaders have to judge from the context of the situation if an autocratic decision is required, or whether it's the opposite. They have to adjust their style to fit the circumstances and the needs of the followers. There are times inspiration is most critical, and other times when transactional skills of motivating employees to implement a strategy-- making them more productive -- becomes more important.

Leaders shape the future

© Linda Gorchels

• Core values – Beliefs your firm’s members hold in

common – May be different from aspirational

values • Mission

– Defines why your firm exists • Strategic vision

– A description of the desired future state of your firm

Enduring principles that guide the “culture” of a firm

Core Values

Link to reputation, positioning and brand identity

May be part of the mission statement or a separate

pronouncement

IBM Core values For 72 hours in 2011, we invited all 319,000 IBMers around the world to engage in an open "values jam" on our global intranet. IBMers by the tens of thousands weighed in. They were thoughtful and passionate about the company they want to be a part of. They were also brutally honest. … In the end, IBMers determined that our actions will be driven by these values:

• Dedication to every client's success • Innovation that matters, for our company and for the

world • Trust and personal responsibility in all relationships

www.ibm.com, Feb, 2012

© Linda Gorchels

© Linda Gorchels

Mission

Why your organization exists (purpose)

What it does to achieve its purpose

Mission statement -YMCA • The YMCA of San Francisco, based in Judeo-

Christian heritage [values], seeks to enhance the lives of all people [purpose] through programs designed to develop spirit, mind and body [business].

Source: VolunteerMatch website, January 2008 (descriptors – values, purpose, business – added).

© Linda Gorchels

Simon Sinek: Start with Why

© Linda Gorchels

http://www.youtube.com/watch?v=u4ZoJKF_VuA

Strategic vision

© Linda Gorchels

The “mental picture” of what the company will be in the future.

– Where is the company going; what will it look like; what will it become?

– What will it do differently to attain profitable competitive advantage?

Martin Luther King, Jr. started his vision statement with, “I have a dream …”

Komatsu’s vision, 60s-80s

• Komatsu – Encircle Caterpillar

– Date Corporate Challenge Activities – 1960s Protect home market Licensing deals Begin quality efforts Quality programs – 1970s Build export markets Industrializing nations – late 70s Create new products Future and Frontiers

markets program

© Linda Gorchels

Komatsu’s re-visioning

Komatsu’s vision changed in the 1990s. • The exclusive focus on best

practices to compete against Caterpillar caused Komatsu to stop thinking about strategic choices beyond head-to-head competition.

• Now it seeks out new opportunities

© Linda Gorchels

Interface Inc. Vision • To be the first company that, by its deeds,

shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits — by 2020 — and in doing so we will become restorative through the power of influence.

Corporate website, February 2009

© Linda Gorchels

© Linda Gorchels

Work to create readiness to change

today in an effort to reduce resistance to change

tomorrow

• Is there sufficient dissatisfaction with the status quo to support change?

• Do employees believe the organization has the capacity for successful change?

• Are there enough key supporters throughout the organization with a “readiness to change” propensity?

© Linda Gorchels

Diagnose your firm’s readiness to change

Change Readiness Matrix

Ready for learning

Ready for change

Ready for resistance

Ready for frustration

Leadership Change Capacity

Organizational Propensity to Change

Low

High

Low High

Adapted from Douglas B. Reeves, “Leading Change in Your School,” ASCD 2009.

© Linda Gorchels

One final thought (before getting to the

strategic business model decisions of where and how

to compete).

Let’s explore four different “mental

models” (categories) of

strategy.

Category 1:

Grow from the core

© Linda Gorchels

Grow From The Core • Strengthen and grow your core business

– Profit from the Core (Chris Zook) – Beyond the Core (Chris Zook)

• Leverage core competencies – Competing for the Future (Gary Hamel & C.K. Prahalad)

• Move toward BHAGs that build on core ideologies – Built to Last (James Collins & Jerry Porras) – The Soul of the Corporation (Hamid Bouchikhi & John

Kimberly)

© Linda Gorchels

Can your core business be

grown? Do you need to

move into adjacencies?

© Linda Gorchels

Category 2:

Pursue competitive advantage

© Linda Gorchels

• Define the competitive structure of your industry, identify the key success factors, and work to either change the structure in your favor or gain superiority in the key success factors – Competitive Strategy (Michael Porter) – Market-Driven Strategy (George Day)

Pursue Competitive Advantage

© Linda Gorchels

Define key success factors (table stakes) in

your industry and determine how to

succeed by excelling at them and/or redefining

them.

© Linda Gorchels

Category 3:

Seek untapped marketspace

© Linda Gorchels

Seek Untapped Marketspace

• Move beyond the boundaries of direct comparative competitiveness – Blue Ocean Strategy (W. Chan Kim & Renee

Mauborgne) – MarketBusters (Rita Gunther McGrath & Ian C.

MacMillan)

© Linda Gorchels

Identify market opportunities that you

have the skills to satisfy, but that are

currently being underserved in your

industry

© Linda Gorchels

Category 4:

Anticipate disruption

© Linda Gorchels

Anticipate Disruption

• This is another look at new marketspace, but from the perspective of estimating when an emerging trend will take off, and building a strategy to take advantage of it – The Tipping Point (Malcolm Gladwell) – The Innovator’s Solution (Clayton Christensen &

Michael Raynor)

© Linda Gorchels

Follow technology, industry, and market

trends to identify – and take advantage of –

tipping points as early as possible.

© Linda Gorchels

• Strategic Decisions

© Linda Gorchels

Where to compete? (which customers?)

How to compete? (what value proposition?)

Can I achieve my goals & a sustainable

advantage with existing customers and

capabilities?

Might externalities force a change?

When?

Will I need to move into adjacencies or

new markets? New capabilities?

How can I build a portfolio of short-,

medium-, and long-term growth

options?

Back to the Growth Portfolio



Create new customer

markets

Cultivate and reframe

existing products, offerings, revenue streams

and competencies

Sustaining

Growth Arena (shorter-term planning horizon; mine the core)



competencies

Disruptive Growth Arena (long-term planning horizon; incite

breakthroughs) Transformative Growth Arena

(intermediate-term planning horizon; advance into

adjacencies)

© Linda Gorchels

Is the timing right?

Will we succeed financially?

Can we win?

What will be my differentiators?

How much effort is required?

Is there a cultural fit?

For each arena, consider …

Strengthen and defend the core!

Sustaining growth arena

© Linda Gorchels

To identify your core business, identify: 1. Your most potentially profitable,

franchise customers 2. Your most differentiated and

strategic capabilities 3. Your most critical product offerings 4. Your most important channels 5. Any other critical strategic assets

that contribute to the above (such as patents, brand name)

… From focus comes growth; by narrowing scope one creates expansion.

Chris Zook

© Linda Gorchels

• First, do what you do … better • Improve focus through spin-offs or product pruning • Consciously sustain the core while considering

various growth options

© Linda Gorchels

Transformative growth arena

Cultivate new value from adjacency expansion.

Cuuuuuuu uuuuu

Vuuuu uuuuuuuuuuu

Euuuuuuu

uuuuuuuuu

Auuuuuuu

uuuuuuu

Puuuuuuuuuuuuuu uuuuuuuuu

Cuuuuuuuuuuuu

uuuuuuuu

uuuuuuuuuuuuu

Cuuuuuuuuu

uuuuuuuuu

Nuu uuuuuuu

uuuuuuu

Ruuuuuuu

uuuuuuuu

uuuuuuu

Ruuuuuuuuuuu

uuuuuuuuu

Iuuuuuuu uuuuu uu

uuuuuu

Euuuu uuu

uuuuuuuuuu

Euuuu uuu

uuuuuuuuuuu

Cuuuuu uuu uuuuuu

uuuuuuuuuuuu

Cuuuuuuu uuuuu u

uuu uuuuuuuuuuuu

Guuuuuuu uuuuuuu

uuuu uuuuuuuuuuu

uuuuuuu

Auu uuuuuuuuuuu

Muuuuu uuuuuuuuu

Duuuuuu uuu

uuuuuuuu

Ruuuuuuuu

uuuuuuuuu

Cuuuuu uuu

uuuuuuuuuuuuu

uuuuuuuu

Tuuu uuuu

uuuuuuuuuu

Suuu uuuuuuu uuu

uuuuuuu

Cuuuuu uuuuuu uuuuuuu

Iuuuuuuuu

uuuuuuu

Ruuuuuu

uuuuuuuu uuuuu

uuuuu

Ruuuuuu

uuuuuuuuuu

Suuuuuuu uuuuu

uuuuuuuuuuu

Transformative Growth options

© Linda Gorchels

© Linda Gorchels

Disruptive growth arena

Seek out new, unexplored

opportunities for future growth.

When do the organizational

competencies that caused your

organization’s (or industry’s) success

become impediments to growth, suggesting

a need for disruption?

© Linda Gorchels

Tips for disruptive growth

• Explore several plausible futures • Avoid reliance on “best” customers

– jumpstart emerging markets • Maintain a long-term perspective

(even long-term incrementalism)

Now think about alignment



Create new customer

markets

Cultivate and reframe

existing products, offerings, revenue streams

and competencies

Sustaining

Growth Arena (fine-tune current

strategy, culture and structure)



competencies

Disruptive Growth Arena (redesign structure and incentives,

enable relevant differences in metrics, consider separation of

sub-group)

Transformative Growth Arena

(modify strategy, structure and/or culture, perhaps via

traditional change management)

© Linda Gorchels

Wolcott-Lippitz Innovation Structures

© Linda Gorchels

Sustaining growth might use any, including Opportunist

Disruptive Growth

Henry Mintzberg on culture

“Culture is the soul of the organization — the beliefs and values, and how they are manifested. I think of the structure as the skeleton, and as the flesh and blood. And culture is the soul that holds the thing together and gives it life force.”

© Linda Gorchels

What about subcultures?

Subcultures • Are located throughout the

organization • Can enhance or oppose firm’s

dominant culture (i.e., are countercultures) Countercultures can:

• provide surveillance • be an early indicator of

emerging values

© Linda Gorchels

Stable Innovative Outcome-focused Process-focused Team accountability Individual accountability External orientation Internal orientation Efficient Conversational Conservative Fast-paced

Current position Desired position

Identify desired change gaps

© Linda Gorchels

Apply Kotter’s Change Management Model

1. Create a sense of urgency

2. Establish a guiding team

3. Create a powerful vision

4. Disseminate the vision

5. Motivate progress

6. Coordinate quick wins

7. Reinforce the direction

8. Embed into the culture

© Linda Gorchels

1. Create a sense of urgency

• The reason for change is not always obvious

• Demonstrate how the status quo is more dangerous than change

© Linda Gorchels

2. Establish a guiding team

• Ensure sufficient authority and credibility

• Depoliticize senior management to allow team members to speak freely

• Make sure it’s clear who is responsible for leading the various change initiatives

© Linda Gorchels

3. Create a powerful vision

• Create a shared need. Do employees: – See the reason for change? – Understand why the change is important? – See how it will help the business in the short-and

long-term? – See how it will help them in the short- and long-

term?

© Linda Gorchels

4. Disseminate the vision

• Be an evangelist and convert one mind at a time if necessary

• Don’t worry about redundancy (as long as the message is consistent)

• Help employees get excited about the change

© Linda Gorchels

Remember

People need to know: - How is this change relevant to what

I do? - What, specifically, should I do? - How will I be measured and what

consequences will I face? - What tools & support are available? - What’s in it for me?

© Linda Gorchels

5. Motivate progress

© Linda Gorchels

• Cultural alignment must be both leadership-driven and grassroots-enabled

• Help people see what this will look like when you’re done

6. Coordinate quick wins • Showcase success • If necessary,

“nudge” it along a bit

7. Reinforce the direction

• Don’t allow short wins to lull people into complacency and lose sight of the bigger picture

• On the other hand, don’t resort to endless meetings

© Linda Gorchels

8. Embed into the culture

© Linda Gorchels

• Make the change “the way we do things around here”

• Ensure the structure, systems, resources and people are in sync

© Linda Gorchels

What about multiple futures?

• While all strategy implementation is “emergent” or “dynamic” to an extent, it’s even more prevalent when the future is indeed fuzzy, as may be the case with disruptive change.

Degr

ee o

f cha

nge

Small change (incremental)

Large change (radical)

One future Several plausible futures

Concreteness of change

Streamlined change

management tools

© Linda Gorchels

Enlightened trial-and-error

Traditional change

management tools

Business model

portfolio

Build a business model portfolio

• Allow old and new to co-exist as necessary

• Accept that growth may come in regenerative spurts

• Evolve and sell off old business models to make room for investing in emerging ones

© Linda Gorchels

Remember ….

© Linda Gorchels

The actual strategies implemented might not be the strategies planned. • Strategy emerges through the

individual actions of various employees.

• That’s why Henry Mintzberg used the phrase “crafting strategy.”

• Be open to different approaches to achieving your vision.

By now you should be able to: • Connect the dots between

business models, strategies, leadership and culture

• Define (and refine) your own business model(s)

• Execute strategies and business model renewal through relevant change initiatives

© Linda Gorchels

So what does this mean for you? • Determine the need for change

– Conscientiously scan the environment • Shape the vision and define the goals

– Prepare long-term direction and plausible futures • Craft strategic portfolios to attain the goals

– Manage sustaining, transformative and disruptive change options

• Align business model components – Adapt organizational structure and culture

• Manage change efforts – Involve and energize employees and stakeholders

© Linda Gorchels

Linda Gorchels www.BrainSnacksCafe.com

Business Model Renewal Amazon.com



Just as we routinely upgrade computer systems, we must upgrade our own knowledge systems. Linda has helped over 10,000 people over a 25+ year period with these educational upgrades, merging anecdotal client experience with researched “best practices,” and sharing the resulting insights with managers and executives. After working in the office products, publishing and insurance industries, she joined UW-Madison’s Center for Professional and Executive Development, both as a corporate trainer and program director. Now, as a director emerita, she provides workshops for select clients. An award-winning author of The Product Manager’s Handbook, she has also written The Product Manager’s Field Guide, The Manager’s Guide to Distribution Channels, Business Model Renewal, and Product Management ShortRead Series. Linda is now a blogger, mystery author and Creativity Curator for her own company, Tomorrow’s Mysteries, LLC.

Linda M. Gorchels

For more information, refer to the following books on Amazon, follow my blogs, and download several free

articles from my website, BrainSnacksCafe.com.

The Product Management ShortRead Series is a collection of “bite-sized” (about 100 pages) books on selected topics .

Product Management 101 and Product Strategy & Roadmaps were published in January 2017.

Creatively Innovative is scheduled for late 2017.

http://www.amazon.com/Business-Model-Renewal-Practices-Reinventing/dp/0071784039/ref=sr_1_6_twi_2?ie=UTF8&qid=1422414291&sr=8-6&keywords=gorchels

http://www.amazon.com/Managers-Guide-Distribution-Channels/dp/0071428682/ref=sr_1_5_twi_2?ie=UTF8&qid=1422414265&sr=8-5&keywords=gorchels

http://www.amazon.com/Product-Managers-Handbook-Linda-Gorchels/dp/0071772987/ref=tmm_hrd_title_0?ie=UTF8&qid=1422414148&sr=8-1

http://www.brainsnackscafe.com/

https://www.amazon.com/Product-Management-101-ShortRead-ebook/dp/B00J71EM1Q/ref=sr_1_3?ie=UTF8&qid=1486163957&sr=8-3&keywords=gorchels

https://www.amazon.com/Product-Strategy-Roadmaps-Management-ShortRead-ebook/dp/B01MUGA6LG/ref=sr_1_2?ie=UTF8&qid=1486163957&sr=8-2&keywords=gorchels

https://www.amazon.com/Product-Management-101-ShortRead-ebook/dp/B00J71EM1Q/ref=sr_1_3?ie=UTF8&qid=1486163957&sr=8-3&keywords=gorchels

https://www.amazon.com/Product-Strategy-Roadmaps-Management-ShortRead-ebook/dp/B01MUGA6LG/ref=sr_1_2?ie=UTF8&qid=1486163957&sr=8-2&keywords=gorchels

Business acumen for strategy

Leadership & Management

Transcript of Business acumen for strategy