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Pathways Plus

Strategic Management and Leadership

Level 7

Unit 7006 and 7011 Organisational direction and strategic planning

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Pathways Plus

Unit 7006 and 7011: Organisational direction and strategic planning

Copyright © Chartered Management Institute, Management House, Cottingham Road, Corby, Northants NN17 1TT.

First edition 2009

Author: John Lambert Consultant: Bob Croson Series consultant: Roger Merritt Associates Project manager: Trevor Weston Editor: Suzanne Pattinson Page layout by: Decent Typesetting

British Library Cataloguing-in-Publication Data. A CIP catalogue record for this publication is available from the British Library.

ISBN 0-85946-351-6

All rights reserved, save as set out below. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England WIT 4LP.

Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher. Permissions may be sought directly from the Chartered Management Institute in Corby, UK. Phone Publications on (+44) (0) 1536 207344, or email [email protected].

This publication is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out, or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition being imposed on the subsequent purchaser.

Approved centres may purchase a licence from the publisher, enabling PDF files of the publication to be printed or otherwise distributed solely within the centre for teacher and student use only according to the terms and conditions of the licence.

Further information is available on the licence from the Chartered Management Institute. Phone (+44) (0) 1536 207344, or email [email protected].

Every effort has been made to trace holders of copyright material reproduced here. In cases where this has been unsuccessful or if any have inadvertently been overlooked, the publishers will be pleased to address this at the first opportunity.

The publisher would like to thank the following for permission to reproduce copyright material:

Pearson Education for permission to reproduce: Figure 2.1a on p.70 from Johnson and Scholes, Exploring Corporate Strategy, (2006, 6th edn); Figure 1.2a on p.90, Figure 1.4a on p.94, Figure 2a on p.100 and Figure 2.2a on p.103 all from Lynch, Corporate Strategy, (2006, 4th edn); Figure 1.3a on p.93 from Johnson, Scholes and Whittington, Exploring Corporate Strategy, (2008, 8th edn).

Associated Business Press for Figure 3.2a on p.111 from Grinyer and Spender, Turnaround: Managerial Recipes for Strategic Success, (1979).

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Contents

About Pathways Plus .................................... 5

Introduction .............................................. 9

Section 1 Strategic aims and objectives............ 11

Topic 1: Links to values, vision and mission .................... 12

1.1 Strategic values ...................................................... 12

1.2 Strategic vision and mission ....................................... 16

Topic 2: Identifying and auditing aims and objectives ........ 21

2.1 The process of developing aims and objectives ................ 21

2.2 Auditing aims and objectives ...................................... 24

Section summary .................................................... 28

Section 2 Stakeholder analysis....................... 30

Topic 1: Managing expectations .................................. 32

1.1 Stakeholders and their expectations ............................. 32

1.2 Conflicts of expectation ............................................ 33

1.3 Stakeholder management .......................................... 34

Topic 2: Stakeholder mapping .................................... 40

2.1 Power/interest matrix .............................................. 40

2.2 Developing and using an appropriate template................. 45

Section summary .................................................... 48

Section 3 Analysing present position................ 50

Topic 1: Organisation environment .............................. 52

1.1 Identifying the challenges.......................................... 52

1.2 Competitive environment .......................................... 54

1.3 External climate ..................................................... 58

1.4 Globalisation ......................................................... 61

Topic 2: Strategic capability ...................................... 68

2.1 What is strategic capability?....................................... 68

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2.2 Resources ............................................................. 69

2.3 Competences ......................................................... 71

2.4 Strategic advantage ................................................. 73

Section summary .................................................... 77

Section 4 Understanding strategic planning .......80

Topic 1: The strategic planning process ........................ 82

1.1 Establishing a process ............................................... 82

1.2 Strategy planning structure ........................................ 86

1.3 Ownership and involvement........................................ 89

1.4 Creating alternative strategic options............................ 91

Topic 2: Constructing the strategic plan........................ 96

2.1 Clarifying the strategic position................................... 96

2.2 Developing specifics ................................................. 99

Topic 3: Evaluating and reviewing the plan ................... 104

3.1 The evaluative approach ..........................................104

3.2 Reviewing the strategic plan......................................106

Section summary ................................................... 109

Further reading........................................ 111

Before you move on .................................. 113

Preparing for assessment ................................................113

The Management and Leadership Standards ..........................113

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About Pathways Plus

Development guides There are 12 development guides in the Pathways Plus series to cover the 14 units of the qualifications at CMI Level 7: Strategic Management and Leadership.

7001 Personal development as a strategic manager (ISBN: 0-85946-326-5)

7002 Strategic performance management (ISBN: 0-85946-331-1)

7003 Financial management (ISBN: 0-85946-336-2)

7004 Strategic information management (ISBN: 0-85946-341-9)

7005 Conducting a strategic management project (ISBN: 0-85946-346-X)

7006/ 7011

Organisational direction and strategic planning (ISBN: 0-85946-351-6)

7007 Financial planning (ISBN: 0-85946-356-7)

7008 Strategic marketing (ISBN: 0-85946-361-3)

7009 Strategic project management (ISBN: 0-85946-340-0)

7010 Organisational change (ISBN: 0-85946-345-1)

7012 Human resource planning (ISBN: 0-85946-350-8)

7013/ 7014

Being a strategic leader and strategic leadership practice (ISBN: 0-85946-355-9)

For further details on the development guides:

Phone: (+44) (0)1536 207344

Fax: (+44) (0)1536 207384

Email: [email protected]

Organisational direction and strategic planning

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Qualification structure There are three qualifications available:

CMI Level 7 Award in Strategic Management and Leadership

Candidates need to complete any combination of units to a minimum of 6 credits to achieve the qualification.

CMI Level 7 Certificate in Strategic Management and Leadership

Candidates need to complete any combination of units to a minimum of 13 credits to achieve the qualification.

CMI Level 7 Diploma in Strategic Management and Leadership

Candidates need to complete all core units (Group A) and three optional units (Group B) to a total of at least 66 credits to achieve the qualification.

Units Credit

Group A Unit 7001 Personal development as a strategic manager 6

Unit 7002 Strategic performance management 7

Unit 7003 Financial management 7

Unit 7004 Strategic information management 9

Unit 7005 Conducting a strategic management project 10

Unit 7006 Organisational direction 9

Group B

Unit 7007 Financial planning 6

Unit 7008 Strategic marketing 6

Unit 7009 Strategic project management 6

Unit 7010 Organisational change 7

Unit 7011 Strategic planning 9

Unit 7012 Human resource planning 8

Unit 7013 Being a strategic leader 7

Unit 7014 Strategic leadership practice 7

About Pathways Plus

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How to use the development guides The development guides provide a critical commentary to the ideas of writers and thinkers in the management and leadership field. They offer opportunities for you to investigate and apply these ideas within your working environment and job role.

Structure

Each guide is divided into sections that together cover the knowledge and understanding required for the equivalent unit or units of the Chartered Management Institute Level 7 Strategic Management and Leadership qualifications.

Each section starts with a clear set of objectives linked to the learning outcomes of the qualification. You don’t have to complete the sections in the order they appear in the guide (the mind map at the beginning of each guide will help you decide which sections and topics are of particular need or interest) but you should try to cover all sections if you are aiming for a full diploma qualification.

Activities

Throughout the guides there are activities for you to complete. These activities are designed to help you reflect on your own situation and apply your research to your organisation. Space and tables are provided within the activities for you to enter your own thoughts or findings, but in some cases you may choose to copy out the table or make notes in a separate notebook.

Timings

Timings are suggested for each activity to give you a rough idea of how long you should devote to them. They’re not hard and fast and you must decide whether you will benefit from spending longer on some activities than stated.

Supporting resources

The text of the guides is designed to provide you with an introduction to the subject and a commentary on some of the key issues, models and thinkers in the field. The activities are there to help provide a framework for your thinking. A key component of Pathways Plus (Pathways Plus because the development guides work together with the online supporting resources to provide an overall learning journey) is the list of references given throughout the text and at the end of each topic guiding you to the most appropriate supporting resources for you to explore yourself. These are marked with the symbol SR(as shown above).

You have the opportunity to select those resources that are of most interest or relevance to you and to use them as a source of guided research on a particular topic. Many of the supporting resources are immediately available by logging into CMI’s online

SR


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Student Resource Centre (SRC) or the CMI online management and leadership portal, ManagementDirect(MDir), whichever you have access to. These resources are marked in the reference list at the end of each topic with P+ standing for Pathways Plus. A button on the first page of the site (whether SRC or MDir) will take you straight to the list of supporting resources as listed in the Pathways Plus topics. When there, click on the title of your development guide, the section and the topic you’re interested in and then click straight to the article, video, podcast, checklist, extract or report that you want to find.

For those resources that are not available through the CMI site, you will be directed to other sources (some also online) to reach what you need.

Preparing for assessment

Further information on assessment is available in the Student Guide produced as part of the Pathways Plus series. If you have any further questions about assessment procedures, it’s important that you resolve these with your tutor or centre coordinator as soon as possible.

Further reading

You will find suggestions for further reading at the end of this guide as well as in the Student Resource Centre section of the Institute website at www.managers.org.uk/students.

Alternatively, email [email protected] or telephone 01536 207400.

P+

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Introduction

Welcome to this development guide on organisational direction and strategic planning. It specifically focuses on the content of the specification for Units 7006 and 7011 Organisational direction and Strategic planning.

Let’s begin at the beginning — what is strategy? Johnson and Scholes in Exploring Corporate Strategy define strategy as ‘the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations’.

Strategy, then, is a position the organisation takes based on its purpose (as determined by its stakeholders), the resources it has and the influence of the external business environment.

Strategy is also a process to be managed. This process, which is ongoing and self-reflective, is generally pictured as follows:

As you can see, although the sections are discrete, we’ve arranged them to follow the strategic process. You may need to move from one to the other to either complete activities or fully understand part of the process. For example, there’s more on approaches to the strategic process in Topic 1 of Section 4, which you may want to look at before you start. We will signpost these ‘leaps’ as they occur.

1. Understand and determine your organisational purpose

(Sections 1 and 2)

2. Analyse your external and internal situation

(Section 3)

3. Determine strategy options and select one

(Section 4, Topic 1: 1.4)

4. Implement your strategy and monitor it

(Section 4, Topics 2 and 3)


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Development guide mind map

Assessment If you are studying for the Level 7 in Strategic Management and Leadership qualifications you will be assessed by your approved centre on your knowledge and understanding of the following learning outcomes:

Unit 7006:

1 Be able to review and determine the organisational strategic aims and objectives

2 Be able to identify and analyse progress towards organisational strategic aims and objectives

3 Be able to determine and evaluate strategic options to support a revised strategic position

Unit 7011:

1 Be able to understand the purpose of a strategic plan

2 Be able to select a strategic direction from analysis of alternative strategic options

3 Be able to implement, evaluate, monitor and review the strategic plan

Section 1: Strategic aims and objectives

Section 4: Understanding

strategic planning

Section 3: Analysing present position

Section 2: Stakeholder analysis

Organisational direction and

strategic planning

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Section 1 Strategic aims and objectives

Introduction In this section you’ll start at the beginning of the strategic process and reflect on some fundamental questions, like what business you’re really in and why you’re doing what you’re doing. The answers to such questions give meaning to your strategy. Not having the answers is like leaving for the airport to go on holiday without having decided upon your destination. It’s what, in organisational terms, is called ‘strategic purpose’. In both this and the next section, you’ll try to get to the bottom of where you’re going and, indeed, where you believe you should be going.

Learning outcomes

This section addresses the following learning outcomes:

7006.1 Be able to review and determine the organisational strategic aims and objectives

7011.1 Be able to understand the purpose of a strategic plan

Section mind map There are two topics in this section as shown below. Check the subjects within each one and then continue with the areas you need to explore.

Section 1: Strategic aims and objectives

Topic 2: Identifying and

auditing aims and objectives

2.1 The process of developing

aims and objectives

2.2 Auditing aims and

objectives

Topic 1: Links to value,

mission and vision

1.1 Strategicvalues 1.2 Strategic

vision and mission


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Topic 1: Links to values, vision and mission

Introduction A number of factors are key in framing an organisation’s strategic purpose. These are typically your values, your sense of vision and your mission. They are normally expressed by ‘statements’. By understanding and organising these, you’ll be able to determine aims and objectives, which is where sense of purpose starts to move into something more concrete. It’s the beginning of strategic planning.

Values, vision and mission are based on the expectations and wishes of key stakeholders, about which there’s more in Section 2 where we deal with stakeholder analysis. If you’re unclear of the influence of stakeholders with regard to strategic purpose and in framing aims and objectives, you may want to look at that section first.

1.1 Strategic values One of the key drivers of strategic purpose in an organisation is its values. Values are part of the organisation’s culture — those subconscious assumptions and beliefs that frame its view of itself. ‘Subconscious’? Yes, but, more and more, these values are being analysed and made explicit so that there is a clear alignment between value and purpose.

Typically, we think of organisational values as things like communication, integrity, respect, excellence and so on — a mixture of ethical behaviour and work standards. But as these four values were cited by the failed and fraudulent energy company Enron (as claimed in its annual report for 2000) alarm bells should be ringing!

Values sound great, but they throw up some key questions for the strategist:

How can you ensure values are not just some fluffy, bland and meaningless corporate-speak?

How can you ensure that cultural values, corporate values and strategic values are all the same thing? They could be working against each other.

Before we answer these questions, you’ll consider what types of values an organisation may have.

Types of values

Lencioni noted four types of corporate values:

core values — these are the deeply ingrained principles that govern all the organisation’s actions. They are the source of a company’s distinctiveness. For example, Hewlett-Packard developed the ‘HP Way’: trust and respect for individuals,

SR 4


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high level of achievement and contribution, uncompromising business integrity, teamwork, flexibility and innovation.

aspirational values — those values that are needed in order to succeed in the future. Note that here is where a traditional value may be out of step with a strategic value.

permission-to-play values — what you might also call ‘threshold’ values (non-core, non-distinctive), namely, those minimum standards of behaviour required of people in the organisation, typically as set out in employee handbooks.

accidental values — cultural values that are taken for granted but don’t really reflect the core or aspirational values, such as ‘we don’t do things like that in this department’ or ‘nobody works on a Friday afternoon’: another example of where one value may be out of step with others. There’s more about culture and the ‘cultural web’ in Section 4, Topic 1.

If you think about it, you’ll quickly realise the ‘values thing’ is rather complicated. Everyone in an organisation contributes to values, and the values we bring can amount not so much to a common purpose as to common baggage. Here’s how:

There are differences in personal values — some people always go ‘the extra mile’ for the customer, while some never do.

Departments, business units, affiliated organisations may have different values — backroom staff who don’t have the same ‘commitment to customers’ as frontline employees.

Employees may have different values to customers — ‘We believe in providing a fast and efficient service’ may seem to the customer like ‘Hurry up, someone else is waiting to be served’.

Line managers and employees may see corporate values as meaning the values of the top echelon of the company, or as values transmitted ‘from above’ that have no direct relevance on the shop floor — this is the world of the incomprehensible new corporate logo and unwowing vision video.

And then, there are other stakeholders — suppliers, regulators, the board, people in the local environment and so on.

Is there anything here that reminds you of your own organisation?

The question therefore is this: how can all these values be made to point in one direction — the strategic one?

Plan your values

It may seem rather counter-intuitive, but you can actually analyse your values, develop consistent ones and implement them as part of your overall strategy. Here’s how:


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1 Analyse your values — send a questionnaire round with a broad range of values (15 to 20) and ask people to tick which of them they think are your core ones, or to rate them in terms of importance (1 to 5). This should include both strategic and other values — both documented and not. Don’t forget to complete one yourself.

2 Assess your current strategic aims and objectives vis-à-visthese values in terms of which ones best reflect them. If you are in the process of devising new aims and objectives, assess which of the values you think should be your organisation’s values for the future.

3 From both assessments, identify your distinctive strategic values. Be careful. You don’t want consensus values. While taking into account what stakeholders say, if you’re clear about where you’re going and what values are needed to get there, you’ll need to discard some people’s perceptions as you’re going to need to change them.

Also, be robust, authentic and specific in your statement of values. Everybody says ‘we’re committed to our customers’, ‘excellence in everything we do’ or ‘we value our people’. What’s so distinctive about that? How are you committed? What do you mean by ‘excellence’? How do you value your people? What about being committed to making a profit, paying your staff more if you do, cutting down on specific costs, embracing risk or developing a can-do attitude.

4 Implement value initiatives, create ownership and manage the gap between what the strategic objectives are and what people think they are. This can be done through communication initiatives, performance management systems, promotion and reward. Values should be on the same level and skills and experience. There should be ongoing reminders in the workplace of what they are: posters on walls, straplines on leaflets and newsletters, discussions in team meetings.


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Activity Activity 1.1a 2+ hours

1 Assess your own organisation’s values either in line with the aims and objectives of your current strategy or in line with a strategy that’s still in development. Use a questionnaire or other tool as appropriate on a sample of stakeholders. Base it on an existing values statement if you have one (or ones you may find on the internet).

Here’s an example that you may wish to base your assessment on.

Value statements Tick appropriate box 5 ‘fully agree’, 4 ‘mainly agree’, etc

We reward our staff based on their work achievements

5 4 3 2 1

We all contribute to producing good value products

5 4 3 2 1

We are all responsible for customer service

5 4 3 2 1

We respect and value our suppliers by paying them fairly and in reasonable time

5 4 3 2 1

We believe in striking the right balance between work and home

5 4 3 2 1

2 Identify the difference between what you think the strategic values should be, or are, and the prevailing organisational values at a cultural or corporate level. Do the strategic values need to change or do other values need to change? Fill in the first two columns of the table below (or produce something similar of your own).

3 Note down in the third column some ideas that would improve the situation. You’ll return to this in the final activity at the end of this section.

Areas where there are differences

What needs to change

Ideas for improvement


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1.2 Strategic vision and mission Values work together with vision and mission to create the framework of your strategic purpose, from which come your specific aims and objectives.

Sometimes the lines between vision and mission are blurred, but, strictly speaking, a vision is an aspirational statement of where the organisation wishes to go, whereas the mission is a statement of current strategic positioning.

For example, Worthing and Southlands Hospitals NHS Trust mission statement is: ‘The Trust delivers high quality patient care and services to meet the needs of the community through the use of first class professional and technological resources and facilities.’ Its vision is: ‘The Trust will further develop its position as a major provider of acute services in West Sussex in partnership with the local healthcare community.’

Note how these mission and vision statements incorporate strategic values — ‘high quality’, ‘needs of the community’, ‘first class professional’ and ‘partnership’.

Vision: five reasons for it and five ways of judging it

Lynch identifies five reasons for developing a vision statement:

looking at the future is important and any full investigation of purpose needs to deliver this

the organisation’s mission and strategic objectives may be stimulated in a positive way by the further strategic options a vision may provide

the vision may lead to major strategic opportunities beyond the existing boundaries and organisational resources

market and resource projections for a few years ahead based on current environmental conditions may miss future possibilities opened up by innovation

a vision provides a desirable challenge for managers.

Hamel and Prahalad suggested five ways of judging the suitability of an organisational vision:

foresight — is the vision robust and coherent?

breadth — does it fully cover likely changes in the market place?

uniqueness — is there something unique that the organisation can capitalise on and surprise its competitors with?

consensus — a dangerous word in this context, as we mentioned above. A consensus vision sounds like a dream about mud. Perhaps they should have said ‘homogeneous’ — one vision, not many

actionability — how ready is this vision for implementation? Does the organisation have the core competences? Have the future opportunities been clearly identified?

SR 12

SR 2

SR 3


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Not everyone sees the value of vision, particularly where the environment’s changing so fast. How far can you really think ahead in this context? This doesn’t invalidate analysis aimed at clarifying it in more detail. It depends how good or intuitive a strategist you are. Others suggest that where there are a lot of part-time workers, contracted suppliers and flexible workers it will be difficult to get commitment to a shared vision. This again doesn’t invalidate vision. It just makes it more challenging.

Activity Activity 1.2a 30 mins

1 Consider your own organisation’s vision, especially in the light of Hamel and Prahalad’s observations. Write out your vision and fill in the table below.

Your organisation’s vision:

Comments

Is it fit for purpose?

Does it express your values and future aspirations?

Could it say more (or is it some bland sound bite like ‘the world’s favourite duct manufacturer’)?

A new improved version:

2 If you feel your organisation’s vision could be improved, have a go at rewriting it. Use the space in the table above if you wish.

If you haven’t got a vision, should you have one? If applicable, try drawing up a more appropriate one. There are plenty of examples of visions on the internet that you might be able to adapt.


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Mission: effectiveness and formulation

Lynch states that the mission of an organisation ‘outlines the broad directions that it should and will follow and briefly summarises the reasoning and values that lie behind it’. It also summarises for stakeholders where the organisation is positioned. Therein lies its usefulness.

He outlines four criteria for judging the effectiveness of mission statements. They should:

be specific enough to have an effect on the behaviour of people in the organisation

reflect the organisation’s distinctive advantages and be based upon an analysis of its strengths and weaknesses

be realistic and attainable

be flexible to take account of environmental changes.

In terms of formulating a mission statement, Lynch sees five elements:

1 Decide what business you’re in or want to be in.

2 Consider the mission from a customer perspective — who’s your business targeted at?

3 Ensure it reflects your core values and beliefs.

4 Add a touch of what you think is your sustainable competitive advantage (‘leader in the field’).

5 Summarise the main reasons for the strategic approach — ‘We are a team and must treat each other with trust and respect’.

Check the Worthing and Southlands Hospitals NHS Trust example above to see if its mission fits these five elements.

The point about the value of vision statements also applies to mission statements. Those people who believe strategy should emerge rather than be prescriptive (because of the uncertainty of the environment) doubt the validity of having a mission at all — though it’s hard to see how a statement that frames an organisation’s basic purpose can be useless. You surely can’t run or want to start a business without a clear sense of purpose.

There’s more about emergent approaches to strategy in Section 4.

SR 2


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Activity Activity 1.2b 30 mins

Assess your own mission statement against Lynch’s four effectiveness criteria and five elements for formulating a mission statement. How does it fare?

Effectiveness criteria Comments

Specific enough?

Reflect organisation?

Realistic and attainable?

Flexible?

Formulating a mission statement

Covers what business you’re in or want to be in?

From a customer perspective?

Reflects core values and beliefs?

Covers your sustainable competitive advantage?

Summarises the main reasons for the strategic approach?

If you’re formulating a new one, have a go at framing one against these criteria and check how it looks. Is it saying too much or not enough? Does it neatly dovetail with your vision statement?

Again, have a look at mission statements on the internet or the various supporting resources to help you do this.

You can amend or create a mission statement in the final activity of this section.


Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Chapter 4: Strategic purpose.

2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Chapters 10 and 12.

3 Hamel, G., and Prahalad, C.K., 1994, Competing for the Future, Harvard Business School Press.

SR


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Articles

4 Lencioni, Patrick, M., July 2002, ‘Make your values mean something’, Harvard Business Review, Vol 80, Issue 7, pp. 113—17 — excellent article explaining the different types of corporate values and how to make them ‘stick’. P+

5 Paarleberg, Laurie, E., and Perry, James, L., December 2007, ‘Values management: aligning employee values and organization goals’, American Review of Public Administration, Vol 37, Issue 4, pp. 387—408 — explores the process by which formal management systems foster the creation of shared organisation values, addressing the basic question: can workplace values be ‘managed’? P+

6 Collins, J.C., and Porras, J.I., Sept/Oct 1996, ‘Building your company’s vision’, Harvard Business Review, Vol 74, Issue 5, pp. 65—77 — an interesting prescriptive strategic framework that sits on the relationship between core values, core purpose, and future vision. P+

7 Collis, D.J., and Urckstad, M.G., April 2008,‘Can you say what your strategy is?’, Harvard Business Review, Vol 86, Issue 4, pp. 82—90 — how to make a simple strategy statement. P+

8 Weeks, Wallace, May 2008, ‘Revisiting your company's vision and mission’, HomeCare, Vol 31, Issue 5, pp. 20—22 — identifying the right business strategies and core values to align with the company's mission and vision. P+

9 Crawford, David, and Scaletta, Todd, Aug/Sept 2006, ‘The value of values — how to attract and retain productive employees with strategic values-focused management’, CMA Management, Vol 80, Issue 5, pp. 22—27 — good information on the difference between managers’ and employees’ perception of strategic values, including a useful value-focused analysis tool based on the Balanced Scorecard. P+

10 Osborne, Richard, L., Sept/Oct 1996, ‘Strategic values: The corporate performance engine’, Business Horizons, Vol 39, Issue 5, pp. 41—48 — useful on the role of strategic values and how to develop a ‘strategic journey’ based on them. P+

11 Van Lee, R., Fabish, L., and McGaw, N., Summer 2005, ‘The value of corporate values’, Strategy+Business, Booz & Company, Issue 39 — interesting survey on typical strategic values and how they can be reinforced; recommended and available free on the internet at www.strategy-business.com.

Weblinks

12 www.worthinghospital.nhs.uk/About_us/who_we_are — the mission and vision of Worthing and Southlands Hospitals NHS Trust.

http://www.strategy-business.com/press/article/05206?pg=8#authors�


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Topic 2: Identifying and auditing aims and objectives

Introduction Although you would expect a vision and mission to come before environmental analysis in the strategic planning process, when defining your strategic aims and objectives, you may think you should do the analysis first (see Section 3). This would have the effect of honing your strategy in the right direction. However, this is a two-way street. It’s also a good idea to frame aims and objectives from the vision/mission first, as it has the effect of making your aspirations more concrete. Otherwise, you may lose something important in the transposition if you don’t. You can still, and should, re-evaluate them after the analysis.

In this topic you’ll consider what strategic aims and objectives are and how you go about developing them from vision and mission statements. You’ll then look at how you should develop ways of auditing different types of objectives once they’ve been developed.

2.1 The process of developing aims and objectives An aim is a broad statement of strategic outcomes to be achieved, sometimes called ‘goals’, whereas objectives are specific outcomes, usually quantified. Objectives will generally therefore be aims broken down into something more ‘concrete’.

However, not all organisations develop both aims and objectives. Some may see the vision or mission statement as a sufficient aim or have a general statement of purpose. Others may call objectives what appear to be aims, or perhaps have objectives and sub-objectives. For example, how would you categorise these statements from Colorado Christian University?

Honor Christ and share the love of Christ on campus and around the world.

Teach students to trust the Bible, live holy lives and be evangelists.

Teach students how to think for themselves.

Be seekers of truth.

Debunk ‘spent ideas’ and those who traffic in them.

Ask God to multiply our time and ability to the glory of His great name.

These are just some of their ‘strategic objectives’, but how do they compare against the SMART criteria — specific, measurable, achievable, realistic/results-centred, time-bound — that we normally associate with objectives? Compare them with these from Worthing and Southlands Hospitals NHS Trust:

SR 7

SR 5, 6, 8


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Operating on a financially sound basis.

Working in partnership with other healthcare agencies to tackle the causes of, as well as provide treatment for, ill health.

Ensuring all staff have the competency and motivation to deliver the required standards of service.

Maximising training and educational opportunities for all staff.

It would pay you to spend some time on the internet looking at the strategic aims and objectives for a variety of organisations. You’ll be amazed at the variations.

Types of objectives

Quantitative and qualitative

Objectives should be measurable — this is absolutely key. Otherwise, how can you possibly know you’ve achieved them? This doesn’t necessarily mean they have to be quantitative, but the less quantifiable they are, the more they should be examined to make them more specific. Organisations often have measuring frameworks and systems to support objective quantification (see, for example, the balanced scorecard in Section 4). This is just as common in the public sector as private sector as you will probably know from, for example, the comparative target analysis that often forms a page or two in your local council’s newsletters. (More about measurement later.)

Financial and strategic

Another distinction is sometimes made between financial and strategic objectives. Financial objectives are strategic objectives expressed from the point of view of the shareholder — wider profit margins, higher dividends, rising stock price and larger cash flows, whereas strategic objectives in this sense are the marketing/customer perspectives — better product quality, superior customer service, growth, lower costs and so on. Obviously, this is more relevant to the private than public sector.

Short and long term

In respect of financial objectives and strategic objectives, the notion of short and long-term objectives is relevant in the perception that financial objectives tend to the short term and general strategic objectives to be long term. This may lead to conflict between the objectives. However, short-term is not confined to financial objectives and strategic objectives in general may be set out as short, medium or long term. (You may like to think how this affects our definition of strategy given in the introduction.)

Translating vision into aims and objectives

At this stage in the strategic planning process, without having made an environmental analysis, your objectives may lack precision (quantification in particular), but it’s worth while

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trying to get something specific on to paper to get you looking in the right direction. Here’s how you could do this:

Look again at your values, vision and mission statements, which should encapsulate the business you’re in or want to be in.

Divide this into areas of strategic importance — it could be from different perspectives as with the balanced scorecard (see Section 4) or in terms of different market opportunities, or both.

Assess the gap between where you are now and where you want to be.

Express this as SMART objectives.

Note that this process of developing strategic objectives, once the environmental analysis has been completed, would generally be more complex and should include appropriate stakeholder involvement.

Activity Activity 2.1a 1 hour

Analyse your organisation’s current strategic aims and objectives by filling in the table below.

Criteria Your comments

Areas for improvement

Do they logically flow from the vision/mission and encapsulate your strategic intent in key strategic areas?

Are they logically and usefully divided (into aims, objectives, sub-objectives, as appropriate)?

Do they meet each of the SMART criteria?

Are they quantifiable (as far as reasonable)? Is there a robust measurement framework?

Are they divided, as appropriate, into financial/strategic objectives, short and long-term objectives?

You can look at amending these objectives, or, indeed, creating new ones, in the final activity in this section.


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Aims and objectives in turbulent environments

Eisenhardt and Sull developed five basic rules for how managers of flexible, innovative organisations with few prescriptive strategic objectives should proceed in turbulent market environments in a way that allowed them sufficient flexibility and latitude but yet still maintained some of the strategic discipline objectives provide. Here are the five rules:

How-to rules — the processes for taking market opportunities.

Boundary rules — which opportunities can be pursued and which cannot.

Priority rules — how opportunities are ranked in terms of strategic importance.

Timing rules — the pace of emerging opportunities.

Exit rules — when managers should pull out of yesterday’s opportunities.

There’s more about emerging processes of strategy formulation in Topic 1 of Section 4.

2.2 Auditing aims and objectives In order to ensure you’ve achieved your aims and objectives, you need to be able to measure them adequately. And, typically, this will be quantitative. Your measurement system should be as subtle as your objectives and their various hierarchical levels. For example, they should be able to measure, as appropriate:

objectives for the organisation as a whole (aggregate) and those broken down for various business units (disaggregate)

primary objectives (aims/goals perhaps) at any level and their sub-objectives, the various sub-objectives functioning as the ‘means’ to the primary objectives ‘end’

short, medium and long-term strategic performance

financial, economic, behavioural and socio-ethical goals.

Strategic objectives and performance measurement systems

A performance measurement system provides an organised means of defining, collecting, analysing and making decisions regarding all performance measures within a process or activity.

A performance indicator is a level against which the management of any activity can be assessed. Measurement against the indicator enables managers to assess how efficiently, effectively and cost-effectively the operation is performing.

Performance measures provide a quantitative answer to whether you are reaching or exceeding the indicator set. They require the collection of raw data and conversion through a formula into a numerical unit.

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For example, Eskom, a company that generates, transmits and distributes most of South Africa’s electricity, has the following strategic objectives. Also shown are some of its performance indicators.

Strategic core objectives

Performance indicators

Securing continuity of supply

Energy availability factor Lost time incident rate index

Executing the build programme

Forecast/actual capital expenditure on new build Return on capital employed

Responding to climate change

CO2 emissions SO2 emissions

Maintaining financial sustainability

Financial ratios (14) Credit ratings (6)

Restoring public confidence

Customer service index Contact centre service level

Implementing EDI (electricity distribution industry) restructuring

Compensation for transfer of assets Impact on the Eskom credit rating

There’s more about measurement in Section 4, Topic 3.1.


Assess your strategic aims and objectives against the measurement systems and performance indicators you currently use. (If you are adopting some new strategic aims, then start to think about the most appropriate systems and indicators.)

Questions to consider

Comments Recommendations for change

Are you using the right systems and indicators to fit the particular aims and objectives you are using?

Are you able to measure different facets of the aims and objectives, such as social and environmental objectives?

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Are the quantitative and qualitative aspects robust and informative?

You can make some more detailed suggestions in the summary activity at the end of this section.

Supporting resources Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Chapter 4: Strategic purpose.

2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Chapter 12, ‘Purpose delivered through corporate and business objectives’.

3 Parmenter, D., 2007, Key Performance Indicators: Developing Implementing and Using Winning KPIs, John Wiley & Sons — a useful and straightforward explanation of performance indicators including links to strategy.

Articles

4 Eisenhardt, K., and Sull, D., 2001, ‘Strategy as simple rules’, Harvard Business Review, Vol 79, Issue 1, pp. 106—16 — five basic rules for how managers of flexible, innovative organisations with few prescriptive strategic objectives should proceed in turbulent market environments. P+

Checklists

5 Setting SMART objectives — an explanation of the SMART approach to setting objectives. P+

Models

6 SMART objectives — a slightly different model from the checklist above. P+

Weblinks

7 www.ccu.edu/about/ — the vision, mission and strategic objectives of Colorado Christian University.

8 www.worthinghospital.nhs.uk/About_us/who_we_are/ — the strategic objectives of Worthing and Southlands Hospitals NHS Trust.

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9 http://financialresults.co.za/eskom_ar2008/ar_2008/ index.htm — the financial results site of Eskom, well worth searching to see the variety of their performance indicators, including ongoing social and environmental ones. Also, a good example of strategic purpose and how this is tied up with a variety of stakeholders. Check, for example, the HIV/AIDS strategy.


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Section summary In this section you’ve assessed your organisation’s strategic purpose in terms of its aims and objectives, covering the following:

Topic 1: Links to value, vision and mission

What values are and the types of values in your organisation — cultural, corporate, strategic (1.1)

How to plan strategic values (1.1)

The nature of a vision and mission statement (1.2)

Five reasons for having a strategic vision and five ways of judging the suitability of it (1.2)

Four criteria for assessing the effectiveness of a mission and five elements to formulating one (1.2)

Topic 2: Identifying and auditing aims and objectives

The differences between aims, objectives and sub-objectives (2.1)

Types of strategic objectives — quantitative and qualitative, financial and strategic, short and long term (2.1)

How to translate vision into aims and objectives (2.1)

Simple rules for aims and objectives in flexible organisations and turbulent environments (2.1)

The importance of measuring aims and objectives and what aspects of them you would want to measure (2.2)

Performance measurements systems and performance indicators as measures of strategic aims and objectives (2.2).

Activity Section summary activity 3 hours

1 Based on the outcomes of work you’ve already done in this section and your current organisational strategic position, develop an action plan for devising or amending the following:

a strategic values statement

a vision statement

a mission statement

strategic aims and objectives

a strategic performance-measurement system and appropriate performance indicators.

You can use the action plan below if you wish.


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Action Date to be completed

What is involved

Who is involved

Action met and date

Strategic values statement

Vision statement

Mission statement

Strategic aims and objectives

Strategic performance measurement system and appropriate performance indicators

2 Discuss it with appropriate key stakeholders. (You may need to complete Sections 2 and 3 before you can complete some of the tasks.)

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Section 2 Stakeholder analysis

Introduction As mentioned in Section 1, one aspect in defining strategic purpose in the organisation is the influence of its stakeholders. Indeed, without assessing stakeholder expectation, it’s hard to define the values, vision and mission accurately. Stakeholder analysis is the process of:

identifying your stakeholders

assessing what they expect from the organisation

deciding how much you have to consider them based upon the way they can impact the strategy through their power and approval (or disapproval)

prioritising and managing them in order to develop your strategy without conflict.

In Topic 1 you’ll consider different types of stakeholders and the nature of their different expectations and how these may conflict. You’ll also look at the process of managing stakeholders. In Topic 2 you’ll consider various tools for accurately mapping stakeholder influence in the organisation. By the end of the section, you should have a good feel for what your stakeholders expect and you can feed this back into any unfinished activities from Section 1.

Learning outcomes


7006.2 Be able to identify and analyse progress towards organisational strategic aims and objectives



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1.1 Stakeholders

and their expectations

Section 2: Stakeholder

analysis

Topic 2: Stakeholder

mapping

2.1 Power/ interest matrix

2.2 Developing and using an appropriate template

Topic 1: Managing

expectations

1.2 Conflicts of expectations

1.3 Stakeholder management


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Topic 1: Managing expectations

Introduction In this topic you’ll be looking at how to classify stakeholders in different ways, their various expectations, and how to manage these expectations through prioritisation. This includes the necessity of developing a communication plan. Part of this process is known as ‘stakeholder mapping’. As it’s a specialist tool for managers it will be considered separately in Topic 2.

1.1 Stakeholders and their expectations Who are stakeholders and what are their expectations?

The Chartered Management Institute defines a stakeholder as ‘Any group or individual with an interest or a stake in the operations of a company or organisation — anyone who can affect or be affected by its activities’. This may include quite a lot of people in a large organisation and a number of distinct types, as the diagram below indicates.

Figure 1.1a: Stakeholders of a large organisation. Source: R. E. Freeman, Strategic Management: A Stakeholder Approach (1984)

Generic types of stakeholders

A distinction may also be drawn between primary and secondary stakeholders. Primary stakeholders define the business and are vital to its continued existence — customers, suppliers, employees, shareholders. Secondary stakeholders are those who may affect relationships with primary stakeholders — competitors, consumer groups, government, the media, pressure groups, trade unions, community groups.

Political groups

Owners/ shareholders

Competitors

Firm

Employees

Government

CustomersSuppliers

Financial community

Activist groups

Trade associations

Unions

Customer advocate groups

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Johnson and Scholes look at it differently and consider external and internal stakeholders. They identify three broad types of external stakeholders:

economic stakeholders — suppliers, competitors, distributors, shareholders

socio/political stakeholders — policy makers, regulators, government agencies

technological stakeholders — key adopters, standards agencies and owners of competitive technologies who will influence the diffusion of new technologies and new industry standards.

Internal stakeholders may vary enormously in terms of departments, geographical areas and hierarchies.

As you can imagine, with so many different types of stakeholders, expectations may differ widely. Owners want financial return or value for money, employees want good wages, consumers want fair prices, regulators want safe products, suppliers want good payment terms. How can this be managed?

1.2 Conflicts of expectation It’s clear that one of the main reasons stakeholder expectation needs managing is because of the likelihood of conflict arising from so many different expectations. Johnson and Scholes list some typical examples of a strategic nature:

In order to grow, short-term profitability, cashflow and pay levels may need to be sacrificed.

'Short-termism' may suit managerial career aspirations but precludes investment in long-term projects.

When family businesses grow, the owners may lose control if they need to appoint professional managers.

New developments may require additional funding through share issue or loans. In either case, financial independence may be sacrificed.

Public ownership of shares will require more openness and accountability from the management.

Cost-efficiency through capital investment can mean job losses.

Extending into mass markets may require a decline in quality standards.

In public services, a common conflict is between mass provision and specialist services (preventative dentistry or heart transplants).

In large multinational organisations conflict can result because of a division's responsibilities to the company and also to its host country.

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What conflicts arise in your own organisation from different stakeholder expectations?


1 Identify your own stakeholders and make a list of both internal and external ones. This can be in general or with reference to a specific developing strategy.

2 Fill in the table below by dividing your stakeholders into primary and secondary stakeholders. Identify what their key expectations are and the likely or actual areas of conflict between them.

3 Then in the space at the bottom of the table make some comments on how this has affected your organisation in any strategic decision-making or strategic activities. For example, environmental pressure groups have forced you to refer to environmental concerns in your statements of value and performance indicators, or you’ve had to cut back on some strategic activities due to increasing supplier costs/wage demands, or ‘rationalisation’ plans have been tailored after political pressure as you’re the area’s main employer.

Primary stakeholders

Secondary stakeholders

Key expectations

Likely areas of conflict

Effects on organisation

1.3 Stakeholder management In order to manage stakeholder expectations, you have to, first, identify who they are and what their expectations are. You then need to assess the amount of power they have in the organisation and their likely positive or negative reaction to a particular strategy. You’ve already completed part of this task in Activity 1.1a. Analysing the relative power and reaction of


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different groups is called ‘stakeholder mapping’ (which you’ll do in Topic 2). Only when you’ve completed this analysis can you begin to manage the process, based on prioritisation of those with the greatest power or greatest reaction.

Figure 1.3a: Stakeholder management based on prioritisation

Prioritisation

To reiterate, you don’t manage all stakeholders in the same way: you flex your need depending on how you’ve prioritised them in terms of power and reaction. The general approaches are:

high level of power/high level of reaction — manage carefully

high level of power/low level of reaction — keep satisfied

low level of power/high level of reaction — keep informed

low level of power/low level of reaction — don’t do much.

So, for example, shareholders may be classified as high on the power scale, but low on the input scale for specific strategies.

Management of stakeholders in the strategic context

Stakeholder management is an ongoing control task. Remember that we are looking at it in terms of their involvement and influence in the strategic process. (Stakeholder management can be used in more specific contexts such as project management.) So in the strategic context, what parts of the strategic process are relevant to stakeholder input and what types of management activities are applicable? Here are some thoughts:

Values — using a value questionnaire to ascertain organisational values among key stakeholders.

Vision and mission — consulting stakeholders to see that their views are represented, as appropriate, in these statements. Don’t forget that a mission statement is a statement that is for their benefit to reflect back their expectations.

Aims and objectives — using stakeholder analysis is one way of helping you to frame aims and objectives. It’s a type of analysis of your internal environment that will enable you to see the likely impact of particular strategies on key

Who are my stakeholders?

What are their expectations?

What power do they have? What is their likely reaction?

(stakeholder mapping — Topic 2)


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stakeholders. Aims and objectives may need to be tailored appropriately based on this analysis.

Strategic evaluation systems and performance indicators — do your indicators reflect the people most impacted by your strategy, such as customer indicators and financial indicators for shareholders.

Strategic options and choice — making a strategic choice should not just depend on your own analysis, but on feedback from key players. You may still do what you were going to do in the first place, but it’s important to be seen to be offering input at this stage. You never know, someone may provide pertinent feedback that helps the strategic choice. It also buys a broader ownership of the strategy. It’s at this stage that you may need to bargain with stakeholders — if they support you in this one, you’ll support them on something else.

Implementation — how’s the strategy going? This should feed back to your evaluation system and performance indicators. Key stakeholders will feel involved through their role in the monitoring process and you need them to provide feedback to see where the strategy’s going.

An action plan could be drawn up based on these thoughts to include negotiation and communication strategies.

The communication plan

Stakeholder management is essentially one of engagement, which is best achieved by appropriate communication. This is known as a ‘public relations’ approach to stakeholders. No strategy development should just be informing: it has to be two-way and, where appropriate, consultative and even negotiative. Good communication builds confidence, credibility, loyalty and trust.

A communication plan should detail who your stakeholders are, where you’re going to consult them in the planning process, how often, and by what methodology (using a Gantt chart). Typical communication methodologies include (as appropriate to the prioritisation process):

emails

postings on websites

feedback in meetings

reports and reviews

communication leaflets/letters

inviting stakeholders to sit on steering, advisory or focus groups

conducting a public consultation — more or less a given in the public sector

consultation discussions with key stakeholders

strategy workshops/seminars/presentations.

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Consider the last time you launched a strategy, or were involved in one, either in your current organisation or a previous one. Answer the questions in the table below to determine how well it was managed.

Strategy details:

How far were stakeholders prioritised properly (according to their power/interest)?

How far were stakeholders consulted at the appropriate times in the strategic process?

How far were appropriate communication methodologies used for appropriate stakeholders?

What were the consequences for the strategy of poor stakeholder management?


Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Chapter 4.4: Stakeholder expectations.

2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Chapter 12.3: ‘Stakeholder analysis’.

3 Friedman, Andrew L., and Miles, Samantha, 2006, Stakeholders: Theory and Practice, OUP — a good and comprehensive historical overview of the theory of stakeholders, plus practical approaches to stakeholder analysis and management.

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Articles

4 Kaplan, Robert S., March/April 2008, ‘Strategy or stakeholders: which comes first?’, Balanced Scorecard Report, Harvard Business School Press, Vol 10, No 2 — a contrarian view of the importance of stakeholders as espoused by stakeholder theory.

5 Rivera-Camino, J., 2007, ‘Re-evaluating green marketing strategy: a stakeholder perspective’, European Journal of Marketing, Vol 41, Issue 11/12, pp. 1328—58 — an in-depth study of stakeholder management in the environmental context, which provides a self-diagnostic tool for managers to determine the organisation’s attitude to the environment. P+

6 Galbreath, J., ‘Does primary stakeholder management positively affect the bottom line?: Some evidence from Australia’, Management Decision, Vol 44, Issue 8, pp. 1106— 21 — explores the strategic benefits of a stakeholder management approach in terms of financial performance. P+

7 Dewhurst, Sue, and Fitzpatrick, Liam, Oct/Nov 2005, ‘Turning stakeholders into advocates’, Strategic Communication Management, Vol 9, Issue 6, pp. 6—7 — using the Johnson and Scholes power/interest matrix, the authors present a simple approach to getting key players in the organisation to buy into an initiative as its advocates. P+

8 Freeman, R.E., and McVea, J., 2001, ‘A stakeholder approach to strategic management’, Blackwell Handbook of Strategic Management, pp. 189—207 — a useful historical overview of stakeholder management in the context of strategic management. P+

9 Pirson, M., and Milholtra, D., Summer 2008, ‘Unconventional insights for managing stakeholder trust’, MIT Sloan Management Review, Vol 49, Issue 4, pp. 43—50 — a framework on gaining stakeholder trust based on new research showing that conventional methods may not work.

Checklists

10 Stakeholder analysis and management — key steps to making a stakeholder analysis and strategies for action (goes beyond strategic management). P+

Research summaries

11 Rawlins, B.L., March 2006, ‘Prioritizing stakeholders for public relations’, Institute for Public Relations, www.instituteforpr.org/research_single/prioritizing_ stakeholders — a clear and informative guide to stakeholder analysis and management, with particular reference to communications strategy.


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Weblinks

12 http://interactive.cabinetoffice.gov.uk/strategy/ survivalguide/skills/managing_stakeholders.htm — the Cabinet Office’s website strategy survival guide. Although for the benefit of the Prime Minister’s strategy unit, it has some good generic information on strategy, such as guidelines on drawing up a communications plan and stakeholder engagement plan, including a stakeholder-engagement plan template.


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Topic 2: Stakeholder mapping

Introduction Stakeholder mapping is a graphic-based tool for classifying the expectations of stakeholders in terms of their power/reaction in order to develop ‘political’ priorities for managing them. It’s part of the stakeholder analysis process.

The usefulness of stakeholder mapping is well described by Johnson and Scholes:

identifying which stakeholder expectations are most important in determining purpose and strategy

evaluating whether the actual levels of interest and power properly reflect the governance framework

identifying who the key blockers and facilitators of a strategy may be

assessing whether repositioning of certain stakeholders is desirable or feasible

assessing whether maintaining the level of interest/power of some stakeholders is essential.

The drawbacks of stakeholder mapping can be the following:

Stakeholder groups may not be homogeneous and the complexity of many varied sub-groups may be difficult to map.

A stakeholder’s reaction to a specific strategy may be difficult to predict.

Power can fluctuate, particular in dynamic organisations working in turbulent market environments (here today, gone tomorrow).

It may be difficult to distinguish between real power and official power as expressed in the organisational structure. Some people have power by virtue of their personality and/or intelligence, which may not be reflected in their positioning in the organisation. In a similar way, there may be a difference between actual and perceived power.

2.1 Power/interest matrix There are a number of tools available for stakeholder mapping. One of the most well-known and useful models is the power/interest matrix.

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Level of Interest Low High

Low

A Minimal effort

B Keep informed

Pow

er

Hig

h C Keep satisfied

D Key players

Figure 2.1a: Power/interest matrix

This model shows the relationship between a stakeholder’s power and their level of interest in supporting or opposing a particular strategy. Before looking at how this works, it’s as well to consider the nature of power first.

What is power?

Johnson and Scholes define power in this context as ‘the ability of individuals or groups to persuade, induce or coerce others into following certain courses of action’. They describe it as the ‘mechanism by which one set of expectations will influence strategic development or seek compromises with others’. Do you agree?

In further assessing the nature of power, Johnson and Scholes make a distinction between:

sources of power — how stakeholders derive their power

indicators of power — the signs of stakeholder power.

Sources of power

Internal stakeholders External stakeholders

Hierarchy (formal power), e.g. autocratic decision making Influence (informal power), e.g. charismatic leadership Control of strategic resources, e.g. strategic products Possession of knowledge and skills, e.g. computer specialists Control of the human environment, e.g. negotiating skills Involvement in strategy implementation, e.g. by exercising discretion

Control of strategic resources, e.g. materials, labour, money Involvement in strategy implementation, e.g. distribution outlets, agents Possession of knowledge, skills, e.g. subcontractors, partners Through internal links, e.g. informal influence

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Indicators of power

Internal stakeholders External stakeholders

Status, e.g. job grade or reputation Claim of resources, e.g. size of budget Representation, e.g. powerful positions held Symbols, e.g. office size, titles

Status, e.g. reputation Resource dependence, e.g. size of shareholding, size of business with one customer Negotiating arrangements, e.g. they call the tune Symbols, e.g. take out to dinner, dealt with only by top manager


Choose one of your internal and one of your external stakeholders and provide examples of how they fit the criteria — how their status is indicated, how their source of power manifests itself.

Source/indicator of power Internal stakeholder

Hierarchy

Influence

Control of strategic resources

Possession of knowledge and skills

Control of the human environment

Involvement in strategy implementation

Status

Claim of resources

Representation

Symbols

Source/indicator of power External stakeholder

Control of strategic resources

Involvement in strategy implementation

Possession of knowledge, skills


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Through internal links

Status

Resource dependence

Negotiating arrangements

Symbols

Understanding the nature of power in your organisation will give you a better idea of how to map stakeholder influence on a strategy. Remember, however, that you also have to consider their likely involvement in any particular strategy, so whatever their power, it may be that you would manage them through simple monitoring rather than active engagement. For example, where organisations have business units or multi-national representation which are fairly autonomous, key players in the parent organisation may need less managing than hierarchically lesser players in the local organisation.

Activity Activity 2.1b 1 hour

1 Map your own stakeholders either in reference to a developing or potential strategy or a current strategy (if you didn’t do it in the first place) using the power/interest matrix. Fill in the diagram below by placing stakeholder details (initials if you wish) in the boxes marked A, B, C and D.

Level of Interest

Low High

Low

A Minimal effort

B Keep informed

Pow

er

Hig

h

C Keep satisfied

D Key players


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2 Prioritise the stakeholders using a numbering system.

3 You might like to finish by making some notes below of your thoughts about stakeholder management.

You can follow up these thoughts in more detail in the summary activity at the end of this section.

Likely and preferred situations: close the gap

In mapping your stakeholders, a distinction can be drawn between likely and preferred situations. The map you initially draw will indicate your likely situation, but what if this situation means that your strategy may face serious opposition? The idea of mapping your preferred situation is to show you what situation would enable you to get your strategy accepted. Closing the gap between ‘likely’ and ‘preferred’ is then a matter of negotiation and compromise achieved through stakeholder management.

There’s a good case study example of likely and preferred mapping in Johnson and Scholes on page 158.

Activity Activity 2.1c 45 mins

1 Follow up your previous activity by assessing your preferred situation using the power/interest matrix.

2 Develop your thoughts again on stakeholder management in order to bridge the gap between likely and preferred.

You can follow up these thoughts in more detail in the summary activity at the end of this section.

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Other stakeholder-mapping tools

There are some other stakeholder-mapping tools worthy of consideration. The following is the power/dynamism matrix.

Dynamism (predictability) Low High

Low

A Fewer problems

B Unpredictable but

manageable Po

wer

Hig

h C

Powerful but predictable

D Greatest danger or

opportunities

Figure 2.1b: Power/dynamism matrix

This matrix classifies stakeholders in terms of power and the dynamism of their stance, ‘dynamism’ meaning how predictable their likely reaction is.

Another model, the power, legitimacy, urgency model, looks at it slightly differently in terms of the legitimacy of their power and the urgency of their likely demands.

Figure 2.1c: Power, legitimacy, urgency model

2.2 Developing and using an appropriate template Your stakeholder-mapping matrices or other diagrammatic analyses should have produced a priority listing of stakeholders in reference to your strategy. Which particular tool you use is simply a question of the one that best suits you. As the three we’ve mentioned look at power in slightly different ways, you may be able to blend them in some way.

Urgency

Power

8 Nonstakeholder

Legitimacy 2

Discretionary Stakeholder

3 Demanding Stakeholder

1 Dormant

Stakeholder

4 Dominant

Stakeholder

5 Dangerous

Stakeholder

6 Dependent Stakeholder

7 Definitive

Stakeholder


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In order now to get to ‘rules of engagement’ with your stakeholder, it’s important you go a little further with your mapping. There are templates for this which can take into account the following variables:

Specific strategic objectives may only concern specific stakeholders.

Risks of non-engagement can be assessed.

Benefits of engagement can be assessed.

Here’s an example of a template that can do all of the above. (SH = stakeholder.)

Strategic objectives

SH1 SH2 SH3 Risks Benefits

1

2

3

The process would be:

1 List your strategic objectives in the first column.

2 List a power/reaction score for each stakeholder based on your mapping tool.

3 Identify the risks/benefits of non-engagement with the stakeholder — this could be both qualitative and quantitative.

You could then develop a detailed action plan to manage stakeholders as suggested in Topic 1: 1.3 of this section.


Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Chapter 4.4: ‘Stakeholder expectations’.

2 Friedman, Andrew L., and Miles, Samantha, 2006, Stakeholders: Theory and Practice, OUP — Part II, Section 6, Stakeholder management from the perspective of the organisation.

Articles

3 Newcombe, R., December 2003, ‘From client to project stakeholders: a stakeholder mapping approach’, Construction Management & Economics, Vol 21, Issue 8, pp. 841—8 — although in the project context, contains a useful application of the stakeholder-mapping technique. P+

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4 Steurer, R., Jan/Feb 2006, ‘Mapping stakeholder theory anew: from the ‘stakeholder theory of the firm’ to three perspectives on business-society relations’, Business Strategy & the Environment, Vol 15, Issue 1, pp. 55—59 — a new way of looking at stakeholder mapping from three perspectives: corporate, stakeholder, conceptual.


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Section summary In this section you have looked at stakeholder analysis, covering the following:

Topic 1: Managing expectations

generic types of stakeholders in the organisation: primary and secondary internal and external (1.1)

typical conflicts of interest that arise between stakeholders (1.2)

the process of stakeholder management (1.3)

the importance of prioritisation of stakeholders (1.3)

the parts of the strategic process that are relevant to stakeholder input and the types of management activities this involves (1.3)

the role of the communication plan (1.3)

Topic 2: Stakeholder mapping

what stakeholder mapping is (2.1)

the pros and cons of stakeholder mapping (2.1)

the power/interest matrix as a way of assessing stakeholder power and impact (2.1)

the nature of power — sources and indicators (2.1)

likely and preferred situations in stakeholder analysis (2.1)

other stakeholder mapping tools — power/dynamism matrix and the power, legitimacy, urgency model (2.1)

appropriate templates to use to follow up on stakeholder mapping (2.2).


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Activity Section summary activity 3 hours

1 Draw up a generic framework for strategic stakeholder management in your organisation, amending any existing ones as appropriate and determining appropriate templates. This should include:

a process for identifying key stakeholders and their expectations

a process for assessing their relative power/reaction using an appropriate mapping tool, which also defines likely and preferred situations

a process for cross-matching stakeholders against specific objectives including some form of benefit analysis and risk assessment

a process for cross-matching stakeholders against each part of the strategic process (see ‘Management of stakeholders in the strategic context’)

a plan for managing stakeholders based on prioritisation — this should include, but not be limited to, a communication plan. (For other management options see Friedman, Andrew L., and Miles, Samantha, 2006, Stakeholders: Theory and Practice, Part II, Section 6, Stakeholder management from the perspective of the organisation.)

Here is an example that you can adapt.

Processes to use/develop Process elements

Comments, e.g. what’s changed from before, why you’ve chosen it

Identifying key stakeholders

Mapping tool(s)

Cross-matching stakeholders to objectives

Cross-matching stakeholders to each part of the strategic process

Managing stakeholder plan

2 Discuss your framework with other practitioners and senior colleagues to ensure its suitability for your organisation and its flexibility for different strategic situations and activities.

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Section 3 Analysing present position

Introduction A major part of the strategic process is the analysis of the external and internal business environment. This enables you to determine the various threats and opportunities for, and internal strengths and weaknesses of, your business. And it also enables you to frame, develop or amend both your aims and objectives and your strategic options.

In this section you’ll cover where your organisation stands in the external environment and what its internal capabilities are.

Learning outcomes


7006.2 Be able to identify and analyse progress towards organisational strategic aims and objectives



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Section 3: Analysing present position

Topic 1: Organisation environment

1.4 Globalisation

Topic 2: Strategic capability

2.1 What is strategic

capability?

2.2 Resources

2.3 Competences2.4 Strategic advantage

1.3 External climate

1.2 Competitive environment

1.1 Identifying the challenges


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Introduction There are two ways of looking at organisational strategy — internal and external. Organisations need to focus on both. Some organisations have excellent internal coherence, demonstrated by efficient internal value chains. But they are not necessarily as effective as they could be because of a lack of clarity about the external climate. Equally, some organisations, particularly those that are very sales-focused, tend to have a real awareness of the external climate, but have a lack of internal coherence to make them effective. You’ll be looking at internal factors in Topic 2, but first you’ll explore the external factors — the environment in which your organisation operates.

External influences tend to interact with complexity and diversity. The speed of change and the uncertainty this brings is also an issue for many organisations. Add to that the environmental turbulence created through unforeseen events (for example, the impact of the ‘sub-prime’ mortgage crisis) and it becomes clear that thorough and continuing analysis of the external environment is crucial to help achieve the most suitable strategic position.

There are many tools for analysing the external business environment. We have picked some of the key ones, but you are advised to check out others in the relevant literature, particular Johnson and Scholes, and Lynch.

1.1 Identifying the challenges In a complex external business climate, you need to recognise the interplay between three factors — competitive environment, external climate and globalisation (the macro-environment).

Figure 1.1a: External business environment

External business

environment

External climate

GlobalisationCompetitive environment

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You then need to address the following challenges in order to establish an appropriate strategic direction:

complexity — the number of wrong strategic possibilities compared with the number of right ones, based on how difficult it is to assess your own macro-environment

diversity — achieving an appropriate balance of diversity (as opposed to focus) in your analyses and strategic options, for example, how flexible do you need to be?

speed of change — the way, for example, technological development or emerging markets may impact on you

environmental turbulence — the impact of sudden events like credit crunches, wars, eco-environmental factors and so on.


1 Think about your organisation’s current strategy (or a suitable part of it) and how it covers the three areas — competitive environment, external climate and globalisation. Does it go into enough depth? Does it reflect recent events or the current situation? Use the table below to make notes.

Strategy details:

Enough depth? Does it reflect recent events/current situation?

Competitive environment

External climate

Globalisation

2 Examine its strengths when measured against the four challenges of: complexity, diversity, speed of change and environmental turbulence. Suggest some tools that would be relevant and helpful to use.

Strategy details:

Strengths Tools

Complexity

Diversity

Speed of change

Environmental turbulence


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3 If you feel it would be helpful at this stage, analyse the strengths using the tools you’d identified.

You’ll be revisiting this analysis later once you’ve explored the different aspects of the topic in more depth. You’ll also be completing a SWOT analysis in the summary activity for this section.

1.2 Competitive environment Many key strategic decisions are driven, or at least influenced, by your customers, requiring clarity of understanding about exactly who they are and what they value.

Equally, you need to be clear who your competitors are and how they operate. By examining the value chains of competitors and comparing them with yours, it becomes possible to explore what differentiates you from your competitors and what are appropriate areas for improvement. This helps define the scope of your strategy. Do you opt for small niche markets, for example, or large ones?

Porter’s three generic strategies

Michael Porter maintained that sustainable competitive advantage is achieved through three generic strategies. These strategies were called ‘generic’ because they could apply to any organisation. He identified three strategies based on the relationship between product cost and differentiation (uniqueness) and broad and narrow market scope.

Competitive advantage Scope

Low cost Differentiation

Broad target Cost leadership strategy

Differentiation strategy

Narrow target Focus strategy

Figure 1.2a Generic strategies

Cost leadership strategy means that an organisation can sell its products at a basic level of quality at low cost in a large market to gain competitive advantage. This would require the organisation to have certain internal strengths such as investment in mass production, synergy (sharing resources, knowledge and skills) and tight cost controls. In other words, it is benefiting from ‘economies of scale’ — this is where the average costs per unit decrease with the increase in the scale or magnitude of output. For example, an organisation buys 1,000 units at £3.50 each, but if it buys 10,000 units, the supplier discounts the price to £2.50 a unit. Examples of this type of organisation include the supermarket chain Aldi and low-cost airlines like Ryanair and EasyJet.

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Differentiation strategy also applies to a large market, but this is based on product uniqueness, not low costs. Typically, this type of organisation would need a number of resources and competences to operate this strategy successfully, notably a strong brand, a creative development team and quality processes. Examples include Apple and Nike.

Focus strategy applies to a market segment only and can be based on either low costs or differentiation. In this situation, the organisation typically relies on a loyal customer base and tailors its competences to the specific needs of its market. This applies to many small firms.

These generic strategies are driven by powerful competitive forces. Porter identified five forces which he believed mapped the power within the competitive environment.

Porter’s five forces model

Porter’s five forces model is a well-known and widely accepted business model for analysing the competitive environment. The diagram shows the five forces, which act both separately and together to affect the competitive environment.

Figure 1.2b: Porter’s five forces model

Competitive rivalry

Threat of new entry

Supplier power

Threat of substitution

Buyer power

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To explore the five forces in relation to your own organisation, list the key issues for each force and rate their potential impact. A simple way of doing this would be to use a scale of ‘++’ forces to denote something that works strongly in your favour, and a single ‘—’ for forces moderately working against you. Fill in the table below. Some examples are already given.

Force Issues Potential impact

Competitive rivalry

Number of competitors High switching costs

Threat of new entry

Capital requirements

Threat of substitution

Buyer inclination

Buyer power

Low switching costs

Supplier power

Differentiation of inputs

It’s not enough, however, for an organisation to simply analyse its position in relation to the five forces. To seek a competitive advantage you need to identify how the five forces can be used in your favour.


Look at your analysis above and, referring back to your organisation’s current strategy, use the table below to list the key factors. Then identify what you could change to move the balance of power in favour of your organisation. Next note down

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how this might enhance your organisation’s competitive advantage and in the final column note down any ways you think you could improve your organisation’s process for scanning the competitive environment.

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1.3 External climate Now we can build on the analysis of the competitive environment by analysing the impact of other external factors.

Lynch’s four links model

According to Lynch, it can be argued that Porter’s five forces model is static and fails to recognise the dynamic influences of the external environment. Lynch therefore advocates a ‘four links model’ in which the links are:

government links and networks

complementors

informal cooperative links and networks

formal cooperative links.

Lynch accepts that the four links model doesn’t have the clarity and precision of Porter’s five forces, but suggests that this model is typical of an emergent approach to strategic development. The links provide an organisation with opportunities to experiment and develop new and original strategies.

Whichever model you prefer, remember that external climates can fluctuate and develop quickly and unexpectedly, so when scanning them to shape strategic direction you must factor in the stability (or lack of stability) in your environment.

Identifying external influences — PESTEL analysis

A PESTEL analysis — Political, Economic, Social, Technological, Environmental, Legal — is one way of analysing external influences.

Figure 1.3a: PESTEL analysis

Technological influences

Social influences

The organisation

Economic influences

Political influences

Legal influences

Environmental influences

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You might like to take the opportunity to search the internet or the Chartered Management Institute’s EBSCO site for examples of how organisations like yours use it, and the different variations to the standard model. (Consider also the use of an alternative to PESTEL such as scenario-based analysis.)

Here are some sample influences for each heading in PESTEL.

PESTEL Sample influences

Political Trading policies Taxation Funding, grants and initiatives Home market lobbying/pressure groups International pressure groups

Government policies/initiatives Government term and change Political trends Wars and conflict Shareholder/stakeholder needs/demands

Economic Home economy situation Job growth/unemployment Interest and exchange rates Internal cash flow Consumer confidence/disposable income

Inflation Overseas economies and trends Seasonality/weather issues Market and trade cycles Market routes and distribution trends

Social Demographics Consumer attitudes and opinions Education/skill levels Media views Lifestyle changes Brand, company, technology image

Major events and influences Ethnic/religious factors Advertising and publicity Ethical issues Population shifts

Technological Competing technology development Information and communications Consumer buying mechanisms/technology Obsolescence/replacement technology/solutions

Innovation potential Intellectual property issues Manufacturing advances Collaboration tools Software changes Manufacturing maturity and capacity

Environmental Ecological Environmental/waste issues Environmental regulations Carbon footprint/pollution Energy issues

Stakeholder/investor values Staff attitudes Organisational culture Staff morale

Legal Current legislation in home market Future legislation European/international legislation Regulatory bodies and processes Environmental regulations

Employment law Consumer protection Industry-specific regulations Health and safety Competitive regulations


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Activity Activity 1.3a 1 hour 30 mins

1 Use the PESTEL framework to explore the external influences on your organisation in view of its current or a future strategy. Be detailed in your approach. You should consider which influences are most appropriate for each heading given the context of your analysis.

2 Use the sample table below (or one of your own) to help record your findings.

3 Having considered the implications and importance of each influence, give it a score in order to recognise the key influences.

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You can feed the details from PESTEL back into your analysis in Activity 1.1a. It will also help you in the summary activity at the end of this section.

Once you’ve explored this subject to your satisfaction, move on to the next influence on the organisation environment — globalisation.

1.4 Globalisation Globalisation is a much-used term, as the following demonstrates:

It describes the growing integration of the world’s economy including markets, trade activities and regulatory regimes.

It’s about the differences between the economies of different countries, their cultural frameworks and the effect they have on the business environment.

It’s also about companies treating the whole world as one market and one source of supply, and sometimes operating with different companies in different cultures to produce global partnerships.

In general, it can be said that there have been seven factors that have led to globalisation:

technological change

cost of transportation

deregulation of business

removal of exchange controls

liberalisation of trade

broadening of consumer taste

growth of emerging markets.

Globalisation and organisations

According to George Yip’s model for a total global strategy, there are four factors that global organisations must consider.

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Figure 1.4a: Total global strategy

Market globalisation: This is the convergence of customer needs creating global marketing, which is fed through a variety of media-enhancing global brands.

Global costs: Rather than sourcing inputs from the local environment, organisations can look for best-cost options across the globe.

Government policies: The recognition by most governments that alliances fare better than going it alone leads to greater free trade across boundaries, which opens the way for global organisations.

Global competition: As competition increases, it feeds on itself thus creating more competition. Global brands are competing through the media to capture potentially huge markets.


Consider your organisation. What effect has globalisation had on the strategy? For each of the headings in Yip’s model, list the key factors that have shaped your current strategy. Then identify what the implications of current global events are for your strategy as appropriate.

Key factors to shape current strategy

Implications of current global events

Market globalisation

Global costs

Global competition

Market globalisation

Governmental policies

Global costs

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Government policies

Global competition

Globalisation and nations

Why do certain areas become centres of excellence for specific products or trades? Traditionally, economic theory focuses on the following five factors for comparative advantage for regions or nations:

land

location

natural resources

labour

population size.

However, because these factors can’t easily be influenced, this gives a very passive (inherited) view of a nation’s economic opportunity.

Porter, via his ‘diamond model’, offers an alternative way to understand a nation’s comparative position in respect of global competition. Porter’s model uses a concept of ‘clusters’ or groups of interconnected firms, suppliers, related industries and institutions that arise in certain locations, such as Silicon Valley.

They thrive when there is a concentration of enough resources and competences and then reach a critical threshold, giving them a key position in their economic branch of activity. With that comes a decisive, sustainable, competitive advantage over others or even a world supremacy in that particular field.

The diamond model shows the competitive advantage of nations as the outcome of four interlinked advanced factors and activities in and between companies in these clusters. These can be influenced in a proactive way by government through, for example, subsidies, grants, corporate fiscal policy, regulatory standards and training initiatives.

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Figure 1.4a: Porter’s diamond model


1 Consider your own organisation and the industry or sector you are involved in. Complete the five elements of Porter’s diamond model to show your industry or sector’s position as a ‘cluster’. Then make some key points on how your organisation can maximise its position in the cluster.

Your position as part of a cluster

How you can maximise your position

Firm strategy, structure and rivalry

Factor conditions

Demand conditions

Related and supporting industries

Government

Firm strategy, structure and

rivalry

Related and supporting industries

Demand conditions

Factor conditions

Government

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2 If you don’t think your organisation fits the diamond model, briefly comment below on why it doesn’t fit.

Activity Activity 1.4c 30 mins

In light of the activities you’ve completed and your reading of the related supporting resources, including those that follow, draw some initial conclusions about your organisation’s current environment and the likely direction for its future strategy. To help you do this consider the following:

the key environmental factors affecting your current strategy — for both good and bad

how you can reinforce that part of the strategy that’s in tandem with the external environment

any changes you can make to the strategy in the future where it’s being adversely affected by environmental factors.


Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Part 1, ‘The Strategic Position’, Chapter 2 and Chapter 8, ‘International strategy’.

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2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Part 2, ‘Analysis of the Environment’, Chapter 3 for the four links model and Part 6, Chapter 19 for globalisation, including an interesting analysis model called the C-C-B Paradigm.

3 Yip, G., 1992, Total Global Strategy, Prentice Hall — the factors that affect an organisation’s global strategy.

4 Porter, M., 1998, Competitive Advantage of Nations, Macmillan Business Books — a classic study on how prosperity is created and sustained on a national basis.

5 Porter, M., 1980, Competitive Strategy: Techniques for analyzing industries and competitors, The Free Press — more about generic strategies.

Articles

6 Grundy, T., August 2006, ‘Rethinking and reinventing Michael Porter’s five forces model’, Strategic Change, pp. 213—29 — looks at a number of important opportunities for using Porter’s model in an even more practical way. P+

7 Williams, S.D., May 2007, ‘Gaining and losing market share and returns: a competitive dynamics model’, Journal of Strategic Marketing, pp. 139—48 — draws upon decades of competitive dynamics research to present a model linking strategic action to shifts in market share and returns. P+

8 Venables, Anthony, J., Winter 2006, ‘Shifts in economic geography and their causes’, Economic Review, Vol 91, Issue 4, pp. 61—85 — discusses how location can be a factor in competitive advantage. P+

9 Elbanna, S., and Child, J., June 2007, ‘The influence of decision, environmental and firm characteristics on the rationality of strategic decision making’, Journal of Management Studies, pp. 561—91 — based on a study in Egypt, this presents an integrated model of strategic decision-making rationality informed by three perspectives.P+

10 Keim, G.D., and Hillman, A.J., Jan/Feb 2008, ‘Political environments and business strategy implications for managers, Business Horizons, pp. 47—53 — discusses how in a globalised context public policy can influence organisational strategic decision-making. P+

11 Meyer, K.E., July 2006, ‘Global focusing: from domestic conglomerates to global specialists’, Journal of Management Studies, pp. 1109—44 — shows how European companies with moderate international operations have accelerated their internationalisation by focusing on global niche markets. P+

12 Turner, I., Winter 2007, ‘New perspectives on global markets’, Journal of General Management, pp. 1—12 — focuses on the different viewpoints regarding global economy and society in the light of emerging technologies in the 21st century. P+


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Checklists

13 Carrying out a PEST (PESTEL, STEEPLE) analysis — focuses on a PEST analysis, but gives a very good method of analysing the environment. P+

Models

14 ‘Porter’s five forces’ — a clear and concise description of Porter’s model. P+

Thinkers

15 Michael Porter: What is strategy? — excellent information, taking the model and exploring it in greater depth. P+

Research summaries

16 ‘Environmental scanning trends affecting the world of work in 2018’ — focuses on PEST, but gives a very good background to the issues facing organisations in the next decade. P+

Multimedia

17 Causon, J., 2008, ‘The future of management’ — podcast by CMI’s marketing director. P+

18 Skinner, Paul, ‘Monitor your business environment and anticipate change’ (video), 50 lessons. P+

Weblinks

19 www.bidigital.com/ci — resources on competitive intelligence.

20 www.cipd.co.uk/subjects/corpstrtgy/general/pestle-analysis.htm — CIPD factsheet on PESTEL/PESTLE analysis that includes case studies and further links to other good sites.

21 www.globalisationguide.org — resources on globalisation.


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Introduction In Topic 1 you looked at the external environment and how it can influence strategic direction — in other words, how your organisation could ‘fit’ its strategy to its environment. In this topic you’ll consider the opposite: how the organisation could use its internal strengths to ‘stretch’ its strategy to the appropriate environment.

2.1 What is strategic capability? Strategic capability is the organisation’s ability to perform at the level required for success as determined by its resources and competences — and, further, its ability to use these resources and competences to gain strategic advantage over its competitors. Because a competence may be defined as a ‘deployment’ of resources, this stretching of the organisation’s capability has been labelled ‘resource-based strategy’.

Roots of strategic capability

Strategic capability starts with the product. Does the organisation have a product that customers value or may value in the future? Does it have a product that provides particular value (also known as ‘critical success factors’ or CSFs) to enable it to outperform its competitors? The equation is then whether it has the resources and competences to deliver this value — either to stay in business or to outperform the competition.

Levels of strategic capability

Organisations have different levels of strategic capability:

The more value the product has, the more unique the organisation’s resources, and the more core its competences, the more it is capable of strategic advantage.

The more that the product’s value, the organisation’s resources and its competences are only ‘adequate’, the less capable it is of strategic advantage, though it probably has enough to stay in business. (This concept of having enough to stay in business is known as ‘threshold’).

The less the product value, the less adequate the organisation’s resources, the more redundant the competences, the more likely is business failure or the need for repositioning.


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The following diagram from Johnson and Scholes (6th edition) shows the relationships between product, resources and competences.

Figure 2.1a: Strategic capability. Source: Johnson and Scholes, Exploring Corporate Strategy, (2001) 6th edn


Consider your own organisation. Fill in the table below by listing the threshold features and critical success factors for your key product or service. Think: what is it customers value in them?

Threshold features Critical success factors

Now you’ll move on to consider the components of strategic capability in more detail, starting with resources.

2.2 Resources Resources are key to strategic capability. They may be broken down into four areas:

physical — land, buildings, equipment, utilities, raw materials, production capacity

human — employees, contractors and their knowledge and skills

financial — capital, cash, creditors, debtors

intellectual — intangibles (brand, patents, systems, data).

New customers

Other segments Exit or

business failure

With different threshold

requirements

New customers

Other New arenas

With these CSFs

By creating these CSFs (changing

rules of the game)

What do customers value?

Threshold product features

Critical success factors (CSFs)

Potential providers must meet all these

requirements

Are particularly valued

Are used to distinguish between providers

Redundant competencies Threshold competences Core competences

Inadequate resources Threshold resources Unique resources

Strategic capability

…to create new opportunities

…creating failure

…requiring positioning

…to stay in business

…to outperform competition

…to exploit other opportunities

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Hierarchy of resources

Not all resources have the same value to the organisation. Johnson and Scholes differentiate between threshold and unique resources:

Threshold resources are those required to compete on a ‘level playing field’ with competitors.

Unique resources are those that sustain the ability to provide value in a product and underpin competitive advantage.

For example, threshold resources for restaurants would include a place for diners, a kitchen, cooks and serving staff, booking service, cash flow, raw food, hot water, gas and electricity. Unique resources may be the particular provenance of food, the ability of a top-class chef, the brand, location, restaurant design or having a very rich parent financing the business.

Lynch expands on this model using the terms ‘base resources’ and ‘core resources’ for threshold and unique. He then adds ‘peripheral resources’ and ‘breakthrough resources’:

Peripheral resources are those resources usually brought in out of convenience or tradition such as advertising, legal services, transport, catering and so on.

Breakthrough resources are resources that could provide a major competitive advantage in the future such as innovative ability.

Elements of uniqueness

Lynch identified seven major elements of uniqueness which an organisation could possess to sustain competitive advantage:

prior or acquired resources — having a unique resource already means you are building on existing strengths such as the brand

innovative capability — see breakthrough resources above

being truly competitive — for example, by being able to deliver both lower cost and high quality

substitutability — having a resource that can’t be replaced, such as having Sir Alex Ferguson as your manager

appropriability — the resources benefit just your organisation and not others

durability — the resources have longevity, such as a patent

imitability — the resource can’t be easily copied, such as a hotel in a specific beautiful setting.

It’s unlikely that any organisation would possess all seven, but one or two combined with threshold resources could make all the difference.

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It’s useful to measure the various resources in your own organisation to identify your level of competitive advantage. List your key ones in the table below and then decide whether they are threshold or unique resources. Tick the relevant box and make notes if appropriate.

Resources Threshold Unique

Note at this point that there’s a difference between resources you use and those you could use better, such as knowledge management. There’s more about this later in this topic.

2.3 Competences Competence is a performance concept relating to applied knowledge, techniques, skills and attitudes. It’s about the way a resource is deployed into organisational activities, and the processes that link these activities in order to underpin the customer value of a product or service. For example, all the primary and support activities of an organisation from operations through to human resource management — the value chain — form part of a company’s competences.

Competences are important because although organisations may have similar resources, it’s the way they are deployed that can provide strategic advantage.


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Core competences

A core competence, as opposed to a threshold one, is a competence that critically underpins the CSFs of a product in order to give competitive advantage. ‘It’s what we do well’, you might say.

Three tests of a core competence

Hamel and Prahalad suggested three tests for identifying a core competence:

It should provide potential access to a wide range of markets.

It should make a significant contribution to the perceived customer benefit of the end product.

It should be difficult for customers to imitate.

For example, Amazon has a core competence in supply chain management for the following reasons:

It has branched out into other products beyond its core product (books).

It offers different methods of delivery and price of delivery to suit customer choice.

Its logistics expertise makes it difficult for others to imitate.

To relate this back to resources and strategic advantage, you could say that its unique brand coupled with its supply chain management core competence gives Amazon a strategic advantage in the marketplace. (You might like to think about a similar equation for Amazon’s customer relationship management core competence.)

Building core competence

Theorists like Prahalad and Hamel suggest that it’s important for an organisation to identify its core competences so that it can then build on them to give it strategic advantage. This means identifying the people, activities and processes that turn resources into value and developing them through a process of continuous improvement and enhancement. In tandem, this also means allocating resources to these areas.


Identify your own organisation’s core competences by applying the three tests of a core competence to see if they really are as ‘core’ as the organisation thinks. Make brief notes in answer to the questions where appropriate.

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Core competences

Access to a wide range of markets?

Significant contribution to customer benefit of end product?

Difficult for customers to imitate?

2.4 Strategic advantage As we said at the beginning of this topic, strategic capability is an organisation’s ability to use its resources and competences to gain strategic advantage over its competitors. However, the challenge is not just to identify and utilise existing resources and core competences, but to build on these so that the organisation is not outflanked by more aggressive competitors. Strategic advantage will not stand still, so if you do you’ll lose it. Hence, this is a time issue and the building process needs to be accelerated.

Building capability

Hagel and Seely Brown suggest that to accelerate capability building as quickly as possible, organisations should combine the ‘leverage’ school of strategy with the ‘core competences’ one, as follows:

The core competences school emphasises the need for the organisation to focus inwardly on its specialisations and progress them, most notably by accelerating learning.

The leverage school emphasises the need to look for complementary capabilities outside the organisation and collaborate with organisations with similar business objectives.

The emphasis on building capability adds a new dynamic to these two schools and to the organisation’s strategic capability.

How to build capability

Hagel and Seely Brown suggest three strategic imperatives for building capability:

dynamic specialisation — aggressive focus on world-class areas of capability (core competences) to achieve growth

connectivity and coordination — learning how to use the resources of equally specialised organisations to add value

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leveraged capability building — collaborating closely with equally specialised organisations, pushing each other to go faster.

In terms of leverage, this could mean, for example, closer links with suppliers or outsourcing core operating processes to specialists.

Innovation and building capability

The dynamic inherent in accelerated capability building should foster innovation, not just product innovation but innovation in core processes and activities. For example, collaboration with a specialised technology provider may result in new customer-relationship management systems across the whole organisation.


1 Considering your answers to the activities in this topic so far and the Johnson and Scholes model on strategic capability, make a detailed assessment of your own organisation’s strategic advantage. Complete the table below.

Comments on uniqueness

Product or service features

Resources

Competences

2 Then consider how you could develop or build on your core capabilities to maintain and progress strategic advantage.

This activity may have made you aware how useful it might be to benchmark similar organisations to yourself to identify their strategic capabilities. You could then compare yourself with them in terms of how you can improve your strategic advantage.


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Supporting resources Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Part 1, ‘The Strategic position’, Chapter 3, ‘Strategic capability’.

2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Part 3, ‘Analysis of resources’.

3 Hagel, J., and Brown, J.Seely, 2005, The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization, Harvard Business School Press — challenging book on the need for organisations to develop an institutional capacity to work closely with other highly specialised firms to get better faster.

Articles

4 Hamel, G., and Prahalad, C.K., May—June 1990, ‘The core competence of the organisation’, Harvard Business Review, Vol 68, Issue 3, pp. 79—91 — how to identify and build core competences from strategic intent. P+

5 Mills, J., Platts, K., and Bourne, M., 2003, ‘Competence and resource architectures’, International Journal of Operations & Production Management, Vol 23, Issue 9, pp. 977—94 — aims to produce a justified, generic, pictorial architecture of the relationships between resources and competences within firms. P+

6 Ljungquist, U., 2007, ‘Core competency beyond identification: presentation of a model’, Management Decision, Vol 45, Issue 3, pp. 393—402 — outlines a model that is conceptually and empirically applicable in contexts extending beyond mere core-competence identification. P+

7 Lawson, B., and Samson, D., Sept 2001, ‘Developing innovation capability in organisations: a dynamic capabilities approach’, International Journal of Innovation Management, Vol, 5, Issue 3, p. 377 — argues that innovation management can be viewed as a form of organisational capability. P+

8 Oladunjoye, G., Titi and Onyeaso, Godwin, Sept 2007, ‘Differences between resources and strategy in strategic management: an experimental investigation’, International Journal of Management, Vol 24, Issue 3, pp. 592—604 — features the use of a classroom experiment to test for the difference between resources and capabilities. P+

9 Chmielewski, Danielle A., Paladino, A., 2007, ‘Driving a resource orientation: reviewing the role of resource and capability characteristics’, Management Decision, Vol 45 Issue 3, pp. 462—83 — examines the role of resource and capability characteristics as drivers of a resource orientation in different market conditions. P+

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10 Tallman, S., 2001, ‘Global strategic management’, Blackwell Handbook of Strategic Management, pp. 464—90 — an examination of global strategy in a resource and capability-based context. P+

11 Ray, S., Ramakrishnan, K., Jul—Dec 2006, ‘Resources, competences and capabilities conundrum: a back-to-basics call’, Decision, Vol 33, Issue 2, pp. 1—24 — explains the terms ‘resources’, ‘competences’ and ‘capabilities’. P+

12 Barney, Jay, March 1991, ‘Firm resources and sustained competitive advantage’, Journal of Management, Vol 17, Issue 1, pp. 99—120 — the link between firm resources and sustained competitive advantage using four empirical indicators: value, rareness, imitability, and substitutability.P+

13 Teece, David J., Pisano, Gary, Shuen, Amy, 2000, ‘Dynamic capabilities and strategic management’, Nature & Dynamics of Organizational Capabilities, pp. 334—62 — discusses and compares resource-based theories of firm strategy and assesses the dynamic capabilities framework. Comprehensive references for further reading. P+

14 Wernerfelt, Birger, April—June 1984, ‘A resource-based view of the firm’, Strategic Management Journal, Vol 5, Issue 2, pp. 171—4 — seminal article of the resource-based view exploring the usefulness of analysing firms from the resource side rather than from the product side. P+

15 Lockett, Andy, O'Shea, Rory P., Wright, Mike, 2008, ‘The development of the resource-based view: reflections from Birger Wernerfelt’, Organization Studies, 2008, Vol. 29, Issue 8&9, pp. 1125—41 — assesses the development of the resource-based view of the firm from Wernerfelt's own perspective as he looks back over his 1984 article ‘A resource-based view of the firm’. P+

16 Nahapiet, Janine, Ghoshal, Sumantra, April 1998, ‘Social capital, intellectual capital, and the organizational advantage’, Academy of Management Review, Vol. 23, Issue 2, pp. 242—66 — the role of social and intellectual capital in developing organisational advantage. P+

Checklists

17 Performing a SWOT analysis — key steps in the process. P+

Models

18 ‘SWOT analysis (organisational)’ — basic explanation of the tool. P+

Weblinks

19 www.businessballs.com/swotanalysisfreetemplate.htm — provides information on the origins of SWOT analysis and has a free template in Word to download.

20 There are many examples in EBSCO and on the internet of SWOT analyses.


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Section summary In this section you’ve analysed your organisation’s present position and covered the following:


the key external influences on the organisation — competitive environment, external climate and globalisation (1.1)

the challenges facing the organisation from the external environment in terms of complexity, diversity, speed of change and environmental turbulence (1.1)

Porter’s three generic strategies and five forces model as a way of analysing the competitive environment (1.2)

Lynch’s four links model as a way of analysing the external climate (1.3)

PESTEL analysis to identify external influences (1.3)

the seven factors affecting globalisation — technological change, cost of transportation, deregulation of business, removal of exchange controls, liberalisation of trade, broadening of consumer taste and growth of emerging markets (1.4)

the five factors of comparative advantage across nations — land, location, natural resources, labour, population size (1.4)

Porter’s diamond model on globalisation (1.4).


three key aspects of strategic capability — resources, competences, strategic advantage (2.1)

what strategic capability is and its various levels (2.1)

the four types of resources, the hierarchy of resources and the seven factors defining the uniqueness of resources (2.2)

what competences are, what a core competence is and why it’s important (2.3)

the three tests of a core competence (2.3)

how to build core competence (2.3)

how to build capability by combining the leverage school of strategy and the core competences one (2.4)

how to build capability through three strategic imperatives — dynamic specialisation, connectivity and coordination, and leveraged capability building (2.4)

the role of innovation in capability building (2.4).


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Activity Section Summary Activity 3 hours

1 Considering everything you’ve read so far in this section and the activities you’ve carried out, make a comprehensive SWOT analysis of your organisation covering:

its internal strengths and weaknesses

its external opportunities and threats.

You can use this SWOT table if you wish.

Strengths Weaknesses

Opportunities Threats

2 Identify the implications of this analysis in terms of strategic direction for your organisation.

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3 Make some key recommendations for your organisation going forward. You might like to go on to discuss them with appropriate stakeholders to get a balanced view.

4 Return to your aims and objectives in Section 1 and redetermine them, as appropriate, in the light of this analysis.

5 Start to develop some strategic options, as appropriate. (You can finalise them in Section 4.)

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Section 4 Understanding strategic planning

Introduction Having a vision and analysing your environment is the start of strategy, but it’s the planning that’s expected to deliver it. In this section you’ll cover constructing a plan, and evaluating and reviewing the plan. You’ll also take the opportunity to look at the strategic process as a whole in terms of the different approaches to strategic planning, planning structure, ownership and innovation, and making a strategic choice from the options available.

Learning outcomes



7011.2 Be able to select a strategic direction from analysis of alternative strategic options

7011.3 Be able to implement, evaluate, monitor and review the strategic plan

7006.3 Be able to determine and evaluate strategic options to support a revised strategic position


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Section mind map There are three topics in this section, as shown below. Check the subjects within each one and then continue with the areas you need to explore.

Section 4: Understanding

strategic planning Topic 3:

Evaluation and review

Topic 1: The strategic planning process

3.1 The evaluative approach

3.2 Reviewing the strategic

plan

1.1 Establishing a

process

Topic 2: Constructing

the plan

2.1 Clarifying the strategic

position 2.2 Developing specifics

1.3 Ownership and

involvement

1.4 Creating alternative strategic options

1.2 Strategy planning structure


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Introduction ‘Strategic planning’ is defined by the Chartered Management Institute as ‘the formal process of setting objectives or goals and formulating policies, strategies and procedures to meet them, usually over a number of years. Strategic planning focuses on the long-term aspects of the planning process and uses scenarios and other planning methods to identify assumptions, risks and environmental factors that may prevent an organisation from achieving its goals’.

Note immediately the use of the words ‘formal’ and ‘long-term’. The normal way of developing strategy is by this prescriptive approach, which is the one we’ve been using, However, there’s a health warning: in uncertain environments, or depending on the nature of your business, this may not be the best approach. A fundamentally anti-planning approach may be better: one that is reactive, short term and develop-as-you-go, also called ‘emergent’. To plan or not to plan, that is the question.

This topic then considers the dilemma of approaches to developing strategy and, in addition, assesses the following:

the role of structure in strategic planning

ownership and involvement in strategic planning

in formal processes only, the creation of alternative strategic options.

1.1 Establishing a process To help you make up your mind about your own approach to strategy development, you need to be aware that theorists have been at pains to discriminate between the two as best they can and apply them to the various contexts organisations find themselves in.

Intended and emergent strategy development

Johnson and Scholes have distinguished between ‘intended strategy development’ and ‘emergent strategy development’:

Intended strategy development is an expression of a desired strategy as deliberately formulated or planned by managers.

Emergent strategy development comes about through everyday routines, activities and processes in organisations leading to decisions that become the long-term direction of the organisation — realised rather than desired.

Fortunately for managers, these two processes are not mutually exclusive, so they both appear in some degree or other in any organisation.

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The following table identifies some of the key processes that may be at work in the two different approaches to strategy development, and how there may be interaction between them in various ways.

Intended strategy processes Emergent strategy processes

Strategic leadership — top-down control by strong leader such as Rupert Murdoch or the head of a family business

Logical incrementalism — a step-by-step approach based on experimentation and learning, perhaps typical of any start-up company

Strategic planning systems — everything planned in advance, i.e. the formal approach of analysis, planning and evaluation as, for example, seen in oil companies with large and long-term capital investment

Resource allocation processes (RAP, also known as the Bower-Burgelman explanation) — a strategy that is based on one part of a business doing the best, and so getting the most resources, typical of a project-based organisational approach

Externally imposed strategies — where organisations adopt a strategy determined by a powerful stakeholder such as the government in the public sector or the ‘parent’ of a multi-national company

Political processes — where strategies develop through internal or external battles between interest groups or stakeholders, such as boardroom battles or football supporters versus club owners

Cultural processes — where strategy emerges as the outcome of taken-for-granted assumptions (paradigms) and behaviours in organisations. For example, in times of change, organisations may simply apply the same old formulas to the solution, thereby drifting into an even worse situation

Intended and emergent processes acting together

Organisations make plans which then drift aimlessly over time — this is known as ‘strategic drift’

Organisations make plans but adapt them carefully to changing circumstances (planning incrementalism)

Organisations make plans but also emphasise learning and innovation to adapt to changes

Organisations adopt plans in simple, static market conditions but abandon them in complex, turbulent conditions

In a psychological context, it’s interesting to note that top managers often see strategy as planned, while line managers, who have to implement it, see it as chaotic! How is your strategy ‘perceived’ in your organisation?


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1 Use the table below to consider how your own organisational strategy normally works in the context of each of the 12 cells. Provide examples to demonstrate the relative strengths and weaknesses of the various processes at work.

Intended strategy processes Emergent strategy processes

Strategic leadership Logical incrementalism

Strategic planning systems Resource allocation processes

Externally imposed strategies Political processes

Cultural processes

Intended and emergent processes acting together

Strategic drift

Planning incrementalism

Learning and innovation to adapt to changes

Plans abandoned in complex, turbulent conditions

Strategy perception

2 Assess on a scale of 1 to 10, where 1 is totally planned and 10 totally chaotic, where your organisation is currently sitting in the strategy development process.


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The organisational context: making assumptions

We gave some indication in the previous table of how different approaches to strategy development may suit different contexts in which organisations are working in. Relevant determining factors would include predictability of supply and demand, type and size of marketplace, type of organisational structure, quality of internal resources, and so on — typically, a variety of internal and external pressures as examined in Section 3.

It may seem, for example, that organisations in stable markets with fairly predictable demand and bureaucratic set-up would be best suited by a prescriptive planned approach to strategy. And those in fast-changing, innovative situations would need a ‘think on your feet’ one. But not so fast! If things are so predictable, why plan at all? It does actually take time and money to plan. The majority of UK businesses are small — how many of them make coherent strategic plans or need to? Jim-the-plumber has a de facto emergent strategy, that is, he just reacts to whatever circumstances arise. And this may work well for his own local environment. On the other hand, for organisations like News Corporation, Apple and Nokia, in highly chaotic markets, how much more important is it to carefully plan ahead in view of massive technological outlay, huge levels of debt and uncertain demand?

Are public sector organisations better suited to intended or emergent strategies? After all, think how their marketplace may have changed in the past decade — in many instances, public bodies now collaborating or competing with the private sector. And those bastions of traditional and seemingly careful capitalist planning — banks — running out of capital and being recapitalised and part-owned by governments? Now, there’s an emergent strategy nobody envisaged.


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Look again at Activity 1.1a, where you set out where your organisation was actually sitting, relatively, in terms of intended and emergent approaches to strategy development against a range of processes.

1 Without making assumptions about the approach your organisation normally takes, as highlighted above, make some key points about where you think you should be sitting in terms of your approach to strategy development. Examine the processes highlighted in the table in turn — cultural and political, externally imposed, and those where intended and emergent work together.

2 Now give a score between 1 and 10 to indicate where this would position your organisation on the ‘totally planned’ to ‘totally chaotic’ scale and compare it with the score in Activity 1.1a. Draw some conclusions about the comparison.

As we will be generally concentrating on the classic prescribed approach to strategy in this topic, it’s worth while finding out more about alternative approaches to strategy. Lynch in Chapter 15 identifies and describes the following five, all with an emergent nature: survival-based, chaos-based, network-based, game-theory-based and learning-based.

1.2 Strategy planning structure You’ve looked at general approaches to strategy development and you have some idea of the prescribed process. Now it’s time to put some flesh on the bones. Here’s an example Lynch provides of the intended/prescriptive route, where he also draws comparison with one of the emergent ones (the chaos, or ‘uncertainty-based’ as he also calls it).

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Figure 1.2a: Comparing prescriptive and uncertainty-based strategic routes. Source: Lynch (2006)

As you might expect, the skin seems to be falling off the bones of the uncertainty-based rate. It seems quite extreme. There’s no ‘long-term direction’ as envisaged in Johnson and Scholes’ definition of emergent strategy. (The launch of Sky television in 1990 is given as an example of the uncertainty-based strategy as the outcome was impossible to predict. Do you think Lynch is right? See his case study 13.4 and assess whether News Corporation’s approach falls into the structure described above.) Still on the notion of short term and long term, there’s an interesting point here: some emergence can be put into a strategy by cutting down the length of the planning cycle (that is the period within which you expect your plan to be realised and/or effective).

Benefits of structured planning

You’d find very few strategists, certainly in the larger organisations, that didn’t think some structured planning, however short term, was necessary. The perceived benefits include the following:

It provides the ‘how’ to achieve the mission ‘where’.

It brings ‘what we want to achieve’ and ‘what can be achieved’ into greater relief.

Typical outline of the prescriptive model of the corporate strategy process

Flow processUncertainty-based strategy process

Mission and objectives Short-term only: possibly some strategic intent with innovation as a stated aim

Environmental analysis Resources analysis

Unpredictable: waste of time. Important to be aware of internal factors but the analysis will not have the predictive thrust of the

No clear flow process

Strategy options generation Options generation is irrelevant since the outcomes are unknown and unpredictable

Chaotic only with constant monitoring of the environment

Strategy selection Strategy selection is also irrelevant but spontaneous small groups and learning mechanisms might be involved in short-term selection

Implementation Informal, destabilising networks are useful. It may also be worth holding some resources in reserve because of the unknown

Flexible response from informal groups depending on the opportunities that emerge

?

?

?


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It provides a focus for business activities.

It identifies strengths and weaknesses and opportunities and threats that may not be apparent.

It facilitates effective and efficient use of resources.

It provides a mechanism of control over what the organisation is doing.

It provides a mechanism to evaluate ‘ideal’ against ‘real’ (intended versus realised) and to make appropriate adjustments.

Why may structured planning fail?

Taking a structured planning approach to strategy does not guarantee its success. There are a number of pitfalls on the way, one of which you’re already met — the unpredictability of the business environment. Here are some others:

The mission and objectives are too idealistic.

The plan is poorly thought through and/or poorly executed.

The plan is not flexible enough to deal with environmental change.

The wrong strategy option is selected.

Inadequate control mechanisms are in place to measure outcomes.

Inadequate resources are provided to achieve the plan.

The organisational culture resists/subverts the strategy.

There’s poor communication of the plan to lower tiers of management.

You should consider here any reasons why structured planning may have failed in your organisation in recent times.


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1 Using what’s been said about the benefits and pitfalls of strategic planning as the basis for an analysis of your own organisation’s approach to structured planning, assess how your strategy is currently progressing based on the factors that may enhance it and those that may weaken it.

2 Identify those areas that need attention — these will form the basis for some action planning at the end of the section.

1.3 Ownership and involvement We mentioned above that one of the reasons a plan may fail is due to poor communication of the plan to lower tiers of management. We’ve also mentioned the way strategy is sometimes perceived differently by top managers and line managers. This highlights an important point about strategy development — namely, who provides the input to it and who has responsibility for its success. Is it simply the role of top managers to devise and everybody else works from it? Or do the ‘people on the ground’ know best? And what about stakeholders such as customers? For example, council planning departments involve people in their strategic local development frameworks (LDFs) by holding local meetings to gather their opinions.

Culture and the cultural web

Ownership and involvement relate to some basic questions about the underlying culture of the organisation, that is, the

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subconscious assumptions and beliefs that frame its view of itself. Culture will influence strategy — both in its framing and implementation — and so it needs to be taken seriously (see Section 1 for influences on the development of values).

Johnson and Scholes have developed the notion of the ‘cultural web’ to help explain these influences.

Figure 1.3a: The cultural web of the organisation. Source: Johnson, Scholes and Whittington (2008)

The ‘paradigm’ is the set of assumptions held relatively in common and taken for granted in an organisation.

In terms of ownership and involvement in strategic planning, consider how ‘organisational structures’ and ‘power structures’ may decide how the strategy is formulated and who has what role in it.


Look again at your key stakeholders to assess whether the right people are providing input to your current strategy and taking responsibility for its success. Use the table below.

Stakeholders Role/responsibility Comments

You can consider areas for improvement at the end of the section.

Stories Symbol

ParadigmRituals and

routines Power

structures

Organisational structures

Control systems

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1.4 Creating alternative strategic options Returning to the classic prescribed strategic process, following environmental analysis and in line with organisational purpose, the next step is to create viable strategic options and choose one of them. Lynch sees this process in terms of two types of options: environment and resourced-based.

Figure 1.4a: Developing strategic options. Source: Lynch (2006)

Environment-based options

Environment-based options focus on the analysis the organisation has carried out of their external environment (see Section 1, Topic 1). These include:

generic strategies — as defined by Porter (see Section 3, Topic 1.2)

market options — as defined by Ansoff and the Ansoff matrix: market penetration, market development, product development, diversification; or for an alternative approach, refer to Johnson and Scholes’ strategy clock

expansion methods — as defined by Lynch’s expansion method matrix, which focuses on the organisation’s internal and external expansion opportunities and the geographical spread of its activities at home and internationally in order to

Key elements of organisation’s purpose

SWOT Analysis

Environment-based options: Generic strategies Market options

Expansion methods

Resource-based options: Value chain Resource-based view

Cost reduction

Prescriptive selection between options or

emergent approaches to strategy development

Conclusions

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identify the expansion methods available (internal development, merger, exporting, licensing).

Resource-based options

These focus on the internal analysis of the organisation (see Section 3, Topic 2). Typically, they include:

the value chain — identifying where in the value chain (the main connecting functions of your organisation) value can be added to identify competitive advantage. There are two basic areas: upstream (at the start of the value chain — supply) and downstream (towards the end — sales)

resource-based view — identifying the resources that provide competitive advantage such as competences

cost reduction — a counter-intuitive strategic option aimed not at expansion but at reducing costs. This may be through the advantages of economies of scale (higher volume production but at lower unit cost) or capacity utilisation (for example, increasing the operating hours of working plant).

Not all types of organisations fit neatly into the resource-based view, and Lynch notes some special cases in terms of small businesses and not-for-profit organisations.

Choosing the strategic option

Choosing the best strategic option for your organisation requires strategy evaluation. This can be based on both an environmental and resource-based view. The criteria frequently used for this evaluation are known as SAF:

suitability — does the option address the key issues relating to the organisation’s strategic position? Look back at your various analyses such as PESTEL, five forces, core competences, stakeholder mapping and cultural web. There are various tools to analyse suitability such as the TOWS Matrix, ranking, decision trees and scenarios.

acceptability — do the likely performance outcomes meet the expectation of stakeholders? This is usually a financial assessment, typically cost—benefit analysis. Risk analysis is also relevant.

feasibility — does the organisation have the capability to deliver the strategy, namely, the financial and other resources? A cashflow analysis would be useful here.

For an alternative to SAF using six criteria — consistency, suitability, validity, feasibility, business risk, attractiveness to stakeholders — see Lynch, Chapter 14. (He also has a useful 10-point checklist to assess internal feasibility.)

It’s important you know how all these tools work, so spend some time here finding out more about them.

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Activity Activity 1.4a 2 hours 30 mins

Good research is needed for this activity as a lot of ground has been covered. It’s also important to discuss the various issues with others to get a broader perspective of them.

1 Consider how your organisation normally makes its strategic decisions. Creating appropriate tables or diagrams, examine the three suggested options for both the environmental and resourced-based approaches to strategic choice and assess which is the best choice for your type of organisation. It could be a mix-and-match solution.

2 How does your current approach compare with this ‘ideal’ approach? Draw some conclusions.

Strategic options

Best choices Why?

Environmental

Resource-based

3 If you are actually in the process of choosing a strategic option, use the SAF criteria and appropriate analysis tools (including risk assessment) to assess your preferred choices. Or you could just apply the SAF criteria to your current strategy and assess whether, in the light of these criteria, the right strategic choice(s) have been made.

Strategic options

Suitable? Acceptable? Feasible?


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4 Evaluate the various tools you use to assess SAF. Have you been using the right ones for your organisation?

SAF tools Comments


Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Part 1, The Strategic Position, Chapter 5, Culture and strategy; Part II, Strategic choices; and Part III, Strategy in action, Chapter 11, Strategy development processes.

2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Part 1, Introduction, Chapter 2, ‘A review of theory and practice’ and Part 5: ‘Developing the strategy’, Chapters 13—15.

3 Mintzberg, H., Lampel, J. B., Quinn, J. B., and Ghoshal, S., 2002, The Strategy Process: Concepts, Context, Cases, 4th Edition, Prentice Hall.

Articles

4 Hollan, J. F., August 2008, ‘The perils of strategic planning’, Associations Now, Vol 4, Issue 9, pp. 72—78 — this article is based on Mintzberg’s classic ‘The Rise and Fall of Strategic Planning’ and explains why most strategic plans don’t work.P+

5 Mintzberg, H., ‘The fall and rise of strategic planning’, Jan/Feb 1994, Harvard Business Review, Vol 72, Issue 1, pp. 107—14 — more insights by the master based on his classic book, which you really should read. P+

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6 Bovaird, Tony, May 2008, ‘Emergent strategic management and planning mechanisms in complex adaptive systems’, Public Management Review, Vol 10, Issue 3, pp. 319—40 — presents a revised conceptual framework for strategic management with reference to the application of best value in UK local government from 1997 onwards. Useful for those in the public sector interested in emergent processes. P+

7 Grant, Robert M., June 2003, ‘Strategic planning in a turbulent environment: evidence from the oil majors’, Strategic Management Journal, Vol 24, Issue 6, pp. 491—517 — a counter to those who think strategic planning is irrelevant in a chaotic environment, based on a study of eight oil companies. P+

8 Mair, J., and Thurner, C., May 2008, ‘Going global: how middle managers approach the process in medium-sized firms’, Strategic Change, Vol 7, Issue 3/4, pp. 83—99 — examines the extent and effect of middle managers' involvement in the strategy-formulation phase of an internationalisation strategy process. P+

9 Hodgkinson, Gerard P., Whittington, R., Johnson, G., and Schwarz, M., October 2006, ‘The role of strategy workshops in strategy development processes: formality, communication, co-ordination and inclusion’, Long Range Planning, Vol 39, Issue 5, pp. 479—96 — the role of workshops in strategy development through a large-scale UK survey of managerial experience of these events. P+

10 Brauer, M., and Schmidt, S., June 2006, ‘Exploring strategy implementation consistency over time: the moderating effects of industry velocity and firm performance’, Journal of Management and Governance, Vol 10, Issue 2, pp. 205—26 — does strategy really ‘drift’ that much? Research on 20 European-originating organisations based on the alignment between their resource allocation decisions (RAD) and their corporate concept. P+

Checklists

11 Strategic planning — a 12-point guide to the strategic planning process. P+

12 Deciding whether to outsource — an exploration of a specific strategy choice. P+

Models

13 Ansoff matrix — the market option approach to strategy formulation. P+

14 Johnson and Scholes’ cultural web’. P+

Research summaries

15 ‘The role and importance of strategy workshops’ — a survey on their nature, role and effectiveness. P+


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Topic 2: Constructing the strategic plan

Introduction Having made your strategy selection, the final part of strategic planning is implementation. This includes both constructing the plan (this topic) and evaluating and reviewing it (Topic 3).

Figure 2a: The basic four-stage implementation process. Source: Lynch (2006)

It’s important to note that not all implementation processes are the same and there will certainly be differences in terms of size and application of the implementation.

2.1 Clarifying the strategic position It may seem fairly obvious that once the main strategy objectives have been defined, and the strategy chosen, it is then implemented as defined. But there’s a proviso to this. Such an outcome is a rather ideal one and it may not happen quite like this is practice. The reasons for this include the following:

Strategic change is a continuous process rather than one with distinct stages as the prescriptive model suggests. So it may proceed incrementally — a small step here, an experiment there, and then an adjustment of the strategy and so on.

The two principles of ‘bounded rationality’ and ‘minimum intervention’ — ‘bounded rationality’ indicates that because of the scope of implementation, managers may not implement everything as they should and, indeed, will interpret the process in their own way. ‘Minimum intervention’ means that managers may implement it in terms of the notion ‘if it ain’t broke, don’t fix it’. Hence, they will only do so much as seems to be the answer to the strategic problem being addressed.

Strategy choice

Resource allocation

and budgeting

Statement of the main strategy objectives

Quantifiable Non-quantifiable

Formulation of specific plans

Tasks Deadlines Responsibilities

Monitoring and control procedures

Objectives Resources Validity of the planned environmental projections

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Emergent approaches to strategy — where the strategy itself actually develops from the implementation rather than the other way round.

Mind the gap: clarifying the strategic objectives

It is all the more important, where greyness may occur in the gap between strategy definition and implementation, to have clarity about the strategic objectives (see Section 1 for more about strategy objectives).

Mind the gap: clarifying strategic outcomes

Further clarification of the strategic objectives also involves linking them to outcomes, so that those developing the strategy can more easily identify what specific tasks and resources are needed to achieve those targets. Also, all those involved in the implementation can measure what they have to achieve against what they are actually achieving and, thereby, make appropriate adjustments.

The balanced scorecard

A typical way of linking strategic objectives to implementation is via Kaplan and Norton’s balanced scorecard. This uses both strategic and financial perspectives — both qualitative and quantitative — to translate strategy objectives into measurable performance. The measures are called key performance indicators (KPIs), and the perspective of the scorecard is four-fold: financial, customer, internal and innovation and learning.

Financial perspective Customer perspective

Objective: increased profitability KPIs: economic value added, gross margins, return on sales, cost reduction

Objective: improved customer satisfaction KPIs: customer feedback, customer complaints, delivery times, response time

Internal perspective Innovation and learning perspective

Objective: streamlined processes KPIs: reduced waste, reduced unit costs, improved sourcing, product quality

Objective: continuous improvement KPIs: number of employees on training, improved quality in product delivery, quantity of employee suggestions, sales per employee

Figure 2.1a: Example of perspectives, objectives and KPIs in the balanced scorecard

The move from objective to implementation via a KPI would work something like this:

1 An organisation has a strategy objective of raising profitability.

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2 A measure is decided on for this, such as cost reduction.

3 A target is developed for the next financial year, such as 5% decrease in costs.

4 Specific objectives and tasks are devised to achieve this, for example, based on implementation of quality processes.


Make an assessment of how you currently translate strategy objectives into implementation in your organisation. Use the table below to make comments on each aspect listed.

Aspects to consider Comments

Clarity of strategy objectives

Ease of translating objectives into measurable outcomes

Extent to which objectives and implementation drift apart

Gap between what people should be doing and what they actually do, and why this occurs

Extent to which strategy alters during the implementation stage (leading possibly to changes in the already determined strategy)

Use of balanced scorecard or something similar (EFQM excellence model)

Aspects of the balanced scorecard will also be covered in development guides 7002, 7003, 7004 and 7012.


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2.2 Developing specifics The strategic plan now has skin and bones but requires all the other details if it is to function properly. This is where planning can go wrong as the strategy moves downstairs — cascades, if you like — to other functions, business units and line managers, and, ultimately, to individuals. And this is as good a reason as any why ownership and involvement is so important in order that everyone’s singing the same song.

Here’s an example of a typical functional cascade from Lynch.

Figure 2.2a: Creating tasks from strategic objectives. Source: Lynch (2006)

Specific questions for implementation

Lynch notes a number of important questions to ask yourself at this stage of the strategy development process:

Who developed the strategies now being implemented? This relates back to ownership and involvement again and affects the level of briefing required for those managers not previously involved.

Who will implement the strategies? Generally speaking, this is where the line managers get involved, but the key here is

Corporate strategic plan objective:Increase return on capital from

10% to 12% over three years

Marketing objective: Increase

market share from 5% to 7%

over three years

Operations objective: Decrease

manufacturing cost by 3% over three

years

Human resources objective: Recruit and train four

new skilled staff in

association with R&D

Finance objective: Introduce new cash

management system to

reduce costs by 2% over three years

Research and Development

objective: Complete

new product programme to enhance

quality while reducing

costs by 3% over three

Research and Development action plan:

Deadlines Milestones Resources etc.

Marketing action plan:


Operations action plan:


Human resources action plan:


Finance action plan:


translated into

translated into

translated into

translated into

translated into

translated into

SR 2

SR 2


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‘wire-crossing’, particularly where strategies move across functions or business areas.

What objectives and tasks must people undertake? This is where the cascading process comes into its own as each tier of the hierarchy briefs the one further down: objective following objective, milestone following milestone, plan following plan. But what happens in flat organisations or small ones?

How can objectives and tasks be handled in fast-changing environments? Suddenly, objectives and tasks become obsolete — as, indeed, may strategy objectives. Rapid response indicators are needed and flexibility to change implementation activities.

How will the implementation process be communicated and coordinated? This will already have been done to some extent among managers. But it’s not just a question of developing written plans for those not previously involved: what about buying into the mission and vision? How does everyone get to see the overall approach of which they are a bit player? How can the enthusiasm for change be communicated? What media should be employed?

Leaders and managers

Picking up on the point about roles in strategic implementation, Johnson and Scholes make some interesting comments about leaders and managers in the context of strategic change programmes, and these could equally well apply to all strategy contexts. Here’s what they say:

They differentiate between charismatic leaders mainly concerned with building the vision as opposed to instrumental or transactional leaders who focus more on designing systems and controlling the organisation’s activities. In terms of implementation, their role would be one of encouragement and overseeing to ensure the vision is carried through. That is certainly one way of communicating the strategy at all levels.

Middle/line managers have traditional roles in implementation of employee plan formulation and monitoring and control, but there are some other key roles as well including:

making sense of a top-down strategy within their line context

tailoring strategic responses as events unfold

providing a feedback bridge between employees and strategy makers

advising senior managers on any problems in implementation.

SR 1


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Resource allocation

Finally, getting back to some more detail, let’s not forget resource allocation in the implementation process. This means not just providing budgets but providing sufficient time, people, tools and information to get the job done. Typically, three criteria are relevant to resource allocation:

whether the need for resources are commensurate with the needs of the strategy mission and objectives

whether they are commensurate with core competences and enhancement of the value chain

the level of risk associated with the strategy.

You don’t want to over-allocate or under-allocate resources as, on the one hand, you may waste them or, on the other, your strategy may fail through lack of them. If the strategy is a well-thought-out one, resourcing shouldn’t be a big issue (resources can always be found), but if it’s experimental, a drip approach may fit the bill.


Look again at Lynch’s ‘specific questions for implementation’ and apply it with reference to a recent strategic initiative you have been involved in.

Strategic initiative details:

Specific questions for implementation

Comments Recommendations for improvement

Who developed strategies now being implemented?

Who implemented the strategies?

What objectives and tasks did people undertake?

How were objectives and tasks handled in fast-changing environments?

How was the implementation process communicated and coordinated?


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Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition Pearson Education — see Part III, Chapter 14, ‘Managing strategic change’.

2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Part 6, ‘The implementation process’, especially Chapter 17.

3 Kaplan, R., and Norton, D., 1996, The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press.

Articles

4 Norreklit, H., Jacobsen, M., and Mitchell, F., Sept/Oct 2008, ‘Pitfalls in using the balanced scorecard’, Journal of Corporate Accounting & Finance (Wiley), Vol 19, Issue 6, pp. 65—8 — this article briefly reviews the main attractions of the balanced scorecard and then shows how these apparent advantages might lead to problems. P+

5 Bianchi, C., and Montemaggiore, G. B., Summer 2008, ‘Enhancing strategy design and planning in public utilities through “dynamic” balanced scorecards: insights from a project in a city water company’, System Dynamics Review(Wiley), Vol 24, Issue 2, pp. 175—213 — shows how the use of dynamic balanced scorecards can significantly improve the planning process in a strategic learning perspective. P+

6 Dror, S., June 2008, ‘The Balanced Scorecard versus quality award models as strategic frameworks’, Total Quality Management & Business Excellence, Vol 19, Issue 6, pp. 583— 93 — an insightful comparison between the Malcolm Baldrige National Quality Award (MBNQA), the European Foundation for Quality Management (EFQM) and the Balanced Scorecard.P+

7 Krentz, S., and Clark, C. S., September 2008, ‘Strategic resource allocation’, Trustee, Vol 61, Issue 8, pp. 28—30 — how to stretch your strategic resources in a health-care context. P+

Checklists

8 Implementing the balanced scorecard — a useful stepped guide to developing a balanced scorecard approach for your organisation. P+

9 Developing new products — explores the process from beginning to end, but includes some interesting options for the implementation stage. P+

SR


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Weblinks

10 www.balancedscorecard.org — home of the Balanced Scorecard Institute, with some useful resources on the scorecard.

Leader videos

11 ‘Communicate your strategy clearly’, Sanjiv Ahuja. P+


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Topic 3: Evaluating and reviewing the plan

Introduction It’s rather pointless developing a strategic plan if you don’t then have relevant and robust systems in place to measure how it’s progressing. Effective monitoring and control systems mean that you can:

check that implementation activities are achieving the strategy objectives

check that implementation activities are being carried out

check for significant environmental changes that may affect the plan and its implementation

check resources are being used effectively

check that the strategy is achieving what it’s supposed to be achieving.

3.1 The evaluative approach There are a number of things to consider in your approach to evaluating your strategy:

developing strategic control systems

deciding who’s responsible for what and when

dealing with the results from strategic control systems — reviewing the plan.

Strategic control systems

A strategic control system is an organised way of finding out how far strategy objectives are being achieved. Its purpose is therefore to collect and analyse data, both qualitative and quantitative:

It uses measures or performance indicators to identify change. These may be financial or otherwise, such as return on investment, sales growth, cost reduction, waste, safety, customer satisfaction, service/product quality, employee profitability, service utilisation and so on.

It uses a variety of ‘soft’ and ‘hard’ methods to collect the data, such as questionnaires, interviews, discussion groups, appraisals, product monitoring systems, accounting and financial systems, logistics, point of sale and HRM systems.

A particularly comprehensive strategic control system is the balanced scorecard mentioned earlier. This is quite a useful control framework for any organisation to assess its strategy as it’s quite easy to modify and adapt it to your own needs. But the key thing is to have some robust indicators in place if the holistic approach is not appropriate, for example, if you’re a small business.

SR 2, 3


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Getting the best from strategic control systems

Bungay and Goold noted some key points about strategic control systems on how to get the best out of them:

Don’t have too many indicators. Instead, concentrate on the key ones because of the danger of information overload.

Distinguish between the information required for different levels of the organisation, so that each level gets the information it needs to make decisions appropriate to its sphere of influence.

Don’t over-rely on quantitative data. There’s always a need for interpretative input into data, such as opinions. For example, you may be processing more patients per hour through your hospital, but has this been at the expense of clinical priorities? Customer service or employee satisfaction should typically err towards the qualitative rather than quantitative side.

Relax controls once they become established. This may seem counter-productive, but the idea is not to get too hung up with measuring detail and thus forget the vision that drives the strategy.

Don’t expect the control system to do too much at first. Some time needs to elapse before you can get meaningful comparative data.

And, following up the point above, link the budgetary system of your organisation with the strategy financing so that short-term budgetary considerations do not take precedence over longer-term financial outlay.

Who does what, and when

There should be no confusion about who does what in terms of their responsibilities for gathering control data. Different functions and levels of the organisation will have different responsibilities for different types of data and different collations. And the process of monitoring should be regular so that comparisons may be made on a like-for-like basis.

It’s important to develop a monitoring attitude among people because of the dangers of ‘strategic drift’. It may happen that the impetus of the strategy falls away through irregular monitoring patterns, as no one can quite see where it is leading them.


You may have already looked at your strategic control system in Section 1 in terms of performance indicators linked to aims and objectives, where you were asked to make some recommendations for change.

Taking this into account, use a table to compare your favoured or current system against Bungay and Goold’s criteria above.

SR 4


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Bungay and Goold’s criteria

Comments Recommendations for improvement

Number of indicators

Information required

Amount of quantitative data

Relaxation of controls

Time delay

Short term versus long term

3.2 Reviewing the strategic plan You’ll be familiar with the problem of collecting data, which then just piles up and never gets looked at again: collection-for-collection’s-sake. In the mindset of collecting data it’s easy to forget that it’s being collected for a purpose. Regular monitoring should be backed up with regular analysis and interpretation with relevant stakeholders. And the questions to ask?

Is the strategy working?

What is working in it and what isn’t?

Why isn’t it working? Has the environment changed? Is it being implemented properly? Is it the wrong strategic choice?

What modifications do we need to make?

Do we need to modify the strategy or the way it’s being implemented, or both?

Is the evaluation process itself working?

Is the strategy facing ‘cultural’ resistance?

Dealing with cultural issues

In terms of cultural resistance, Johnson and Scholes (based on Grinyer and Spender) note the following ways the cultural paradigm (damagingly) influences the strategic process — before it’s the culture itself that has to change!

SR 1


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Figure 3.2a: The dynamics of paradigm change. Source: Grinyer and Spender (1979)

How much is that a reflection of what has happened in your organisation in the past?


Use the table below to record the cultural resistance to a strategic change initiative you’ve had in your organisation.

Strategic change initiative details:

Elements people generally resisted

Particular departments or areas that resisted

Key ways to overcome this resistance in the future


Books

1 Johnson, G., Scholes, K., and Whittington, R., 2008, Exploring Corporate Strategy, 8th edition, Pearson Education — see Part I, Chapter 5, ‘Culture and strategy for the

Step 1Tighter control

Step 2Reconstruct or develop new

strategy

Step 3 Abandon

paradigm and adopt new one

If unsatisfactory

Culture Development of strategy Implementation Corporate

performance

SR


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dynamics of paradigm change’ (exhibit 5.6). (Grinyer and Spender reference is to their book Turnaround: Managerial Recipes for Strategic Success, Associated Business Press, 1979.)

2 Lynch, R., 2006, Corporate Strategy, 4th edition, Pearson Education — see Part 6, The implementation process, especially Chapter 17.

3 Kaplan, R., and Norton, D., 1996, The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press.

Articles

4 Bungay, S., and Goold, M., 1991, ‘Creating a strategic control system’, Long Range Planning, Pergamon, Vol 24, No 3, pp. 32—9 — all about strategic control systems. P+

5 Bull, Richard, ‘November 2007, ‘Performance measurement’, Financial Management, pp. 43—4 — using financial results to assess the different dimensions of a firm's vision and strategy.P+

6 Haworth, J., June 2008, ‘Measuring performance’, Nursing Management UK, Vol 15, Issue 3, pp. 22—8 — explains how balanced scorecard frameworks can be used to measure performance in emergency care settings to support departmental strategic objectives. P+

7 Martinez, R., August 2008, ‘Shipper scorecard’, Multichannel Merchant, Vol 4, Issue 8, pp. 48—9 — a simple but instructive set of performance indicators for parcel carriers, which could be used in a strategic context. P+


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Section summary In this section you’ve considered the strategic planning process including:


intended and emergent strategy development processes (1.1)

the danger of making assumptions about strategy approaches (1.1)

structured planning in intended and emergent processes (1.2)

benefits of structured planning (1.2)

why structured planning may fail (1.2)

ownership and involvement in strategic planning (1.3)

cultural influences and the cultural web (1.3)

strategic choice — resource and environment-based options (1.4)

the process of choosing the right option using appropriate criteria (such as SAF) and appropriate tools (1.4)

Topic 2: Constructing the strategic plan

clarifying strategic objectives and outcomes (2.1)

the balanced scorecard as a way of linking strategic objectives to implementation (2.1)

the specifics of implementation including resource allocation (2.2)

Topic 3: The evaluative approach

using, and getting the best from, strategic control systems for evaluating the strategy (3.1)

reviewing the strategic plan (3.2)

dealing with cultural issues that may affect the strategic planning process (3.2)

Activity Section Summary Activity 3 hours

Look back at the previous activities in this section and assess your own organisation’s strategic planning process.

1 In your notebook or on a separate sheet of paper draw a model strategic planning route for your organisation based on those depicted in Topic 1.2, or similar ones.


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2 Identify some critical success factors for this model to work.

3 Suggest some appropriate methodologies for ownership and involvement.

4 Identify some key strategic evaluation tools you should use in future, adapted if necessary.

5 Make some key recommendations for improvements to your strategy implementation process.

6 Identify, if you haven’t already done so, a suitable strategic control system and explain why it’s suitable.

7 Identify any future activities you could carry out to overcome resistance to strategic change.

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Further reading

Aaker, David A., 2001, Developing Business Strategies, 6th edition, Wiley

Allison, M. and Kaye, Jude, 2003, Strategic Planning for Nonprofit Organizations, 2nd edition, Wiley

Ambrosini, Veronique, Johnson, G. and Scholes, K., 1998, Exploring Techniques of Analysis and Evaluation in Strategic Management, Financial Times/Prentice Hall

Baloqun, J., Hailey, Veronica Hope, Johnson, G., and Scholes, K., 2008, Exploring Strategic Change, 3rd edition, Financial Times/Prentice Hall

Bryson, John M., 2004, Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, 3rd edition, Jossey Bass

Dranova, D. and Marciano, S., 2005, Kellogg on Strategy: Concepts, Tools, and Frameworks for Practitioners, Wiley

Dixit, Avinash K., Nalebuff, Barry J., 2008, The Art of Strategy: A Game Theorist's Guide to Success in Business and Life, W W Norton

Drucker, P., et al., 1998, Harvard Business Review on Measuring Corporate Performance, Harvard Business School Press

Grant, Robert M., 2007, Contemporary Strategy Analysis: Concepts, Techniques, Applications, 6th edition, Blackwell

Harvard Business Review on Strategies for Growth, 1998, Harvard Business School Press

Harvard Business School, 2005, Strategy: Create and Implement the Best Strategy for Your Business, Harvard Business School Press

Johnson, G. and Scholes, K., 2000, Exploring Public Sector Strategy, Financial Times/Prentice Hall

Kaplan, R., 2002, Harvard Business Review on Advances in Strategy, Harvard Business School Press

Kaplan, R. and Norton, D., 2004, Strategy Maps: Converting Intangible Assets into Tangible Outcomes, Harvard Business School Press

Kaplan, R., 2006, Alignment: Using the Balanced Scorecard to Create Corporate Synergies, Harvard Business School Press

Kim, W. Chan, and Mauborgne, Reneé, 2005, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, Harvard Business School Press

Malek, William, A., Morgan, M. and Levitt, Raymond Ellis, 2008, Executing Your Strategy: How to Break It Down and Get It Done, Harvard Business School Press


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Migliore, R. Henry, 2008, Strategic Planning for Not-for-Profit Organizations, Haworth Press Inc

Mintzberg, H., 1994, The Rise and Fall of Strategic Planning, The Free Press

Mintzberg, H., Ahlstrand, B. and Lampel, J., 2005, Strategy Bites Back: It Is Far More, and Less, than You Ever Imagined, Prentice Hall

Parmenter, D., 2007, Key Performance Indicators: Developing, Implementing, and Using Winning KPIs, Wiley

Porter, Michael E., 2004, Competitive Advantage, new edition, The Free Press

Segal-Horn, Susan, 2004, ‘The modern roots of strategic management’, European Business Journal, Vol 16, Issue 4, pp. 133—42 — the history and development of strategy is explained from its early roots in war and politics to its move into the business context.

Stern, Carl W. and Deimler, Michael S., 2006, The Boston Consulting Group on Strategy: Classic Concepts and New Perspectives, Wiley

Van Der Heijden, Kees, 2005, Scenarios: The Art of Strategic Conversation, Wiley

Wilson, I. and Ralston, B., 2006, Scenario Planning Handbook: Developing Strategies in Uncertain Times, South-Western Educational Pub

Thinkers

(These are available online at the CMI Student Resource Centre and ManagementDirect.)

Igor Ansoff: Father of corporate strategy

Sumantra Ghoshal: Professor of the Spring strategy

Gary Hamel: The search for a new strategic platform

Kenichi Ohmae: The art of Japanese business

Richard Tanner Pascale: Change, agility and complexity

C K Prahalad: A new view of strategy

Sun Tzu: Strategy and the art of war

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Before you move on

Preparing for assessment You may now be interested in completing the assessment for this unit. The Student Guide for the Pathways Plus series contains all the necessary information about assessment procedures, or you can contact your centre coordinator.

The Management and Leadership Standards In addition to covering the core and optional units for the Level 7 Management and Leadership qualifications, the content of these development guides also relates to the National Occupational Standards for Management and Leadership. These standards describe in detail the activities, behaviours and knowledge that define effectiveness in the management field. You can find full details about the standards at www.management-standards.org.uk.

The National Occupational Standards for Management and Leadership don’t correspond exactly with the Institute’s specification, as they provide competency statements that are not defined by level, but are focused towards the needs of organisations. Each development guide therefore draws on components from one or more areas of the National Standards.

The material in this development guide relates to the National Occupational Standards units as shown below.

Unit Unit title NOS units

Unit 7006 Organisational direction B2, B3, B4, B8, C5, D4, E10, E11, F3, F10, F12

Unit 7011 Strategic planning B1, B3, B4, B7, B8, C3, C5, D2, D4, E8


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