SM II_ Group 5

The Process of Strategy Development and Implementation- Clayton M. Christensen & Tara Donovan

By(Group 5)

Prateek Suting (14PGP092)Arijit Hawlader (14PGP007)Suman Saurabh (14PGP047)

Sandip Kr. Sharma (14PGP114)

The Process of Strategy Development and Implementation- Clayton M. Christensen & Tara Donovan

By(Group 5)

Prateek Suting (14PGP092)Arijit Hawlader (14PGP007)Suman Saurabh (14PGP047)

Sandip Kr. Sharma (14PGP114)

Indian Institute of Management Raipur

Successful Strategies are arrived through Trial & Error and unanticipated success Successful Strategies are arrived through Trial & Error and unanticipated success

Objective of the PaperObjective of the Paper

2Indian Institute of Management Raipur

The purpose of this paper is to describe a simple model of the process by which strategy comes to be defined and is implemented.

Indian Institute of Management Raipur 3

The Process by which Strategy is Defined & ImplementedThe Process by which Strategy is Defined & Implemented

ResourceAllocation

Process

ResourceAllocation

Process

IntendedStrategyIntendedStrategy

EmergentStrategy

EmergentStrategy

Actual StrategyActual

Strategy

Strategic Actions:New products,services, processes,acquisitions


Improved understanding of

what works and what doesn’t

Unanticipated opportunities

Problems and success

Two independent & simultaneous processes

Intended/Deliberate Strategy:Organization must understand the management’s intended strategy.The strategy must be sensible to all the members of the organisation (from their vantage point).Intentions must be realized with an unanticipated external influence.

•Conscious & AnalyticalAssessment of Market Structure, Competitive Strengths & Weaknesses, Nature of Customer Needs and Drivers of Market Growth.Formulated in a project with discrete beginning & end.Managed by the top-tier management consultants.

Two independent & simultaneous processes

Intended/Deliberate Strategy:Organization must understand the management’s intended strategy.The strategy must be sensible to all the members of the organisation (from their vantage point).Intentions must be realized with an unanticipated external influence.

•Conscious & AnalyticalAssessment of Market Structure, Competitive Strengths & Weaknesses, Nature of Customer Needs and Drivers of Market Growth.Formulated in a project with discrete beginning & end.Managed by the top-tier management consultants.


Two Processes of Strategy FormulationTwo Processes of Strategy Formulation

Emergent Strategy:Results from manager’s daily response to problems or opportunities.Unforeseen by the Intended strategists during their analysis & planning.

•ExperientialCumulative Effect of day-to-day prioritization decisions.Managed by the middle managers, engineers, salespeople & financial staff. Decisions made despite or in absence of intentions.

Emergent Strategy:Results from manager’s daily response to problems or opportunities.Unforeseen by the Intended strategists during their analysis & planning.

•ExperientialCumulative Effect of day-to-day prioritization decisions.Managed by the middle managers, engineers, salespeople & financial staff. Decisions made despite or in absence of intentions.


Determines which intended and/or emergent initiatives get funding and pass through.

Complex diffused process - occurs at all levels in all companies.

Output of Resource Allocation Filter -> Strategic Actions -> Flow of new products, services, processes and acquisitions.

Key Challenge:

Understanding & Controlling the criteria by which day-to-day resource allocation decisions are made at all levels of the organisation.

Determines which intended and/or emergent initiatives get funding and pass through.

Complex diffused process - occurs at all levels in all companies.

Output of Resource Allocation Filter -> Strategic Actions -> Flow of new products, services, processes and acquisitions.

Key Challenge:

Understanding & Controlling the criteria by which day-to-day resource allocation decisions are made at all levels of the organisation.


The Resource Allocation FilterThe Resource Allocation Filter

Honda in North American market – Intended and Emerging StrategyHonda in North American market – Intended and Emerging Strategy


Honda targeted North American market to take the advantage the labor costBut Honda was a supplier of small, rugged “Supercub” motorcyclesSo, Honda developed high end motorcycle to enter the US marketMost of the dealers were not interested in this new developed product of Honda

Later stage, “Supercub” got popularity in the US marketBut Honda declined the opportunity

After 3 years middle management pushed corporate team to change the strategy

By 1964, most elements of a winning strategy emerged by trial and error method

Later Honda scaled their business, reduced cost and by 1980 become the dominant motorcycle brand in America

Honda targeted North American market to take the advantage the labor costBut Honda was a supplier of small, rugged “Supercub” motorcyclesSo, Honda developed high end motorcycle to enter the US marketMost of the dealers were not interested in this new developed product of Honda

Later stage, “Supercub” got popularity in the US marketBut Honda declined the opportunity

After 3 years middle management pushed corporate team to change the strategy

By 1964, most elements of a winning strategy emerged by trial and error method

Later Honda scaled their business, reduced cost and by 1980 become the dominant motorcycle brand in America

Honda’s Attack on the American Motorcycle MarketHonda’s Attack on the American Motorcycle Market

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Honda began its efforts with an intended strategy

Immediately, emergent inputs such as the reluctance of traditional dealers to carry Honda’s bikes and the Sears buyer’s request were received.

But Honda’s resource allocation process filtered out those inputs to its strategy.

Finally, the accumulated evidence convinced the Honda team that a better strategy was at hand.

They persuaded corporate management to change the filter in the resource allocation process

One by one, the elements of a winning strategy emerged.

Honda switched the filter in the resource allocation process again, and a remarkably successful intended strategy process was executed.

Honda began its efforts with an intended strategy

Immediately, emergent inputs such as the reluctance of traditional dealers to carry Honda’s bikes and the Sears buyer’s request were received.

But Honda’s resource allocation process filtered out those inputs to its strategy.

Finally, the accumulated evidence convinced the Honda team that a better strategy was at hand.

They persuaded corporate management to change the filter in the resource allocation process

One by one, the elements of a winning strategy emerged.

Honda switched the filter in the resource allocation process again, and a remarkably successful intended strategy process was executed.

Indian Institute of Management Raipur9

Analysis of Honda’s StrategyAnalysis of Honda’s Strategy

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2

3

4

5



ResourceAllocation

Process

ResourceAllocation

Process


EmergentStrategy

EmergentStrategy


Strategy





The vast majority of ideas “bubble up” from employees within the organization.

So, middle managers’ decisions play a crucial role in the resource allocation process.

Senior managers must ensure that middle managers and those below them are using to make prioritization decisions.


The Crucial Role of Resource Allocation in the Strategy Development ProcessThe Crucial Role of Resource Allocation in the Strategy Development Process


ResourceAllocation

Process

ResourceAllocation

Process


EmergentStrategy

EmergentStrategy

Organizational Context:Acceptable margins allowed by cost structureTenure in job in management development processesCareer Impact of project failure (tolerance of failure)

Organizational Context:Acceptable margins allowed by cost structureTenure in job in management development processesCareer Impact of project failure (tolerance of failure)

Structural Context:Need to boost stock price by accelerating growth rateCustomers’ demandsCompetitors’ actions

Structural Context:Need to boost stock price by accelerating growth rateCustomers’ demandsCompetitors’ actions


Strategy



Contextual Factors Affecting Filtering Mechanisms in the Resource Allocation ProcessContextual Factors Affecting Filtering Mechanisms in the Resource Allocation Process





The Role of Resource Allocation in Strategy-Making :The Case of Intel

The Role of Resource Allocation in Strategy-Making :The Case of Intel



1968 1971Early 1980s

1984

Strategic Shift

manufacturer of semiconductor memories, developed world’s first commercially viable DRAM chips highest revenue generator, most resource allocation for DRAM chips.

By chance invented the microprocessor during a funded development for a Japanese calculator company. started few Resource allocation for Microprocessor

Price levels of DRAM chips dropped due to intensified market .Microprocessor margins continued (less intense comp.) Resource allocation process diverted systematically without any explicit management decision to change strategy.

Financial crisis to the company, DRAM contracted to only 3% of Intel’s volume. Senior mgmt. stopped DRAM R&D spending and recognized Intel as a microprocessor company.

Learnings /observations :Resource allocation process transformed Intel from a DRAM company into a microprocessor company.The strategy shift emerged through the middle managers daily decisions of resource allocation (not an intended strategy articulated by executives earlier.)Learning from emergent strategy was used to change the deliberate strategy and implement the modified one.

Learnings /observations :Resource allocation process transformed Intel from a DRAM company into a microprocessor company.The strategy shift emerged through the middle managers daily decisions of resource allocation (not an intended strategy articulated by executives earlier.)Learning from emergent strategy was used to change the deliberate strategy and implement the modified one.

Intel: Intended Strategy shift due to resource allocationIntel: Intended Strategy shift due to resource allocation

Strategy is never static.Rarely, successful strategic models are first formulated and then implemented.Be Open to emergent strategy & apply strategies acc. to learning.


A model of Strategy-Making :A model of Strategy-Making :


Research into Disruptive Technology:Research into Disruptive Technology:Managing the strategy development process requires rare skill by senior managers when disruptive threats and opportunities emerge.

Mistakes of Prodigy Company:Non-flexible strategy and technology to respond to emergent strategic evidence.The company employed a deliberate strategic process before the correct strategy could be known.

SM II_ Group 5

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