STRATEGIC MANAGEMENT

- Tarak Bahadur K.C., PhD

- Santosh Koirala

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Session Outline Strategy - concept Strategic thinking Strategic management

framework

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Fore Thought

Battles are won long before they are fought.

Anonymous

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Strategy

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Exercise

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Strategy:Your Definition

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Strategy

- is an action oriented plan of operation for achieving desired goals based on situation analysis, and emphasises what an organisation will be doing in future.

- is the answer to the question “How”? Strategies are simply a set of actions that enable an

organisation to achieve results.

- is a plan / tactics / scheme one adopts to get something done under conditions of uncertainty.

- is a method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.

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Strategy

Plan

Ploy

Pattern

Position

Perspective

5 Ps of Strategy – H Mintzberg

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Strategy … PLAN

o Consciously intended course of action, a set of guidelines to deal with the situation

PLOYo Specific maneuver intended to outwit an

opponent or competitor PATTERN

o In a stream of actions…consistency in behavior whether or not intended

POSITIONo Means of locating an organization in an

environment PERSPECTIVE

o An engrained way of perceiving the world

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Strategy

1. Managerial Intent1. Logical incremental2. Rational command

2. Cultural / Political Process

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1. Strategy: A Managerial Intent

Logical incrementalo Standardized planning procedureso Systematic data collection and

analysiso Constant environmental scanningo On going adjustment of strategyo Tentative commitment to strategyo Step by step small scale change

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Strategy: A ….

Rational command o Senior managers determines and

direct strategyo Strong vision or missiono Definite and precise objectiveso Analysis and evaluation of

environmentso Clear plans

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2. Strategy: A Cultural/Political Process

Muddling througho Managing conflicting interest

groupso Powerful groups with control over

critical resources more likely to influence strategy

o Standardized way of doing thingso Routines and procedures

embedded in organizational strategy

o Deeply rooted beliefs and assumptions

o Strong resistance to changeo Gradual adjustment to strategy

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Strategy: A …. Externally dependento Strategy is imposed by

external forces (e.g. legislation, parent organization)

o Freedom of choice severely restricted

o Groups dealing with the environment have greater influence over strategy

o Political activity within organization and between environment likely

o Externally driven strategy- Johnson &

Scholes

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Strategic Thinking

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Strategic Thinking- Development

Imp

act

Fundamental and sustained

Limited

Time

Strategic Planning Methods

Strategic ManagementIntegrated Systems

Strategic ThinkingCore Enabler

S T R

A T

E

G Y

1960s

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Self Assessment

Assess your strategic thinking abilities

Time 10 minutes

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ScoringUse the following table to interpret your score.

104–125

Exceptional: You’re a talented strategic thinker who possesses many of the traits, behaviors, attitudes, and cognitive capacities that are necessary for thinking strategically.

78–103

Superior: You’re a highly effective strategic thinker in many areas but would benefit from refining some of your skills.

51–77 Adequate: You know and practice many of the basics of strategic thinking. However, you can increase your success by further extending your skills.

25–50 Deficient: You’ll need to work broadly on your strategic thinking skills so that you can learn how to analyze opportunities and problems from a broad perspective and understand an action's potential impact on others.

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Strategic Thinking Strategic thinking means asking

“Are we doing the right thing?” Precisely, it means making that assessment using three key requirements about strategic thinking:oA definite purpose be in mind;oAn understanding of the environment, particularly of the forces that affect the fulfillment of purpose;

oCreativity in developing effective responses to those forces.

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Strategic Thinking

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Strategic Thinking - Level

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Strategic Management … is the application of strategic thinking to

the job of leading an organisation. “Managing strategically”, in other words:

o ‘Diagnosing situation strategically’, and o ‘Applying knowledge strategically’

…is the application of strategic thinking to the job of leading an organisation.

“… is continuous, iterative process aimed at keeping an organization as a whole appropriately matched to its environment.”

- Certo and Peter … Is an ongoing process and involving a

series of steps to be followed.

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Strategic Plan In order to determine where we are

going, where we stand, then determine where we want to go and how we will get there. The resulting document is SP for performance improvement to achieve desired goals.

A living document that has ability to create successful future of the organization NOT large document with detailed plans created arduously over months at great effort and abandoned after they have been duly acknowledged and then filed away.

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Strategic Planning … is an organization's process of defining

its strategy, or direction, and making decisions on allocating its resources to pursue strategy including its people and capital.

… is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organisation is, what it does, and why it does it with a focus on the future. It is defined as the process of addressing the following questions:o Where are we? SWOT – Analysiso Where do we want to be? – VMO o How do we get there? – Strategy

Formulation

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Strategic Planning Process

1. Getting ready (agreement)2. Environmental analysis (SWOT

analysis)3. Strategy Formulation (Identification

of Strategic Issues, Vision/Mission, Objectives, Roles, Strategies)

4. Strategy Implementation (Strategic Actions/Action plan- Tasks/Activities, By whom, By when, Critical Success Factors, etc.)

5. Evaluation and Control

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1. Getting Ready (Agreement)

Assessing readinesso Commitment of leadership o Ability of leaders to devote necessary attention to the ‘big picture’

The purpose is to develop initial agreement among key internal decision makers about overall planning process for their support and commitment

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Steps in preparing for planning

Obtain formal commitment Select a strategic planning committee- a

combination of ‘visionaries’ and ‘actionaries’ or a planning liaison to spearhead the process, and clarify roles

Develop a work plan or a plan to plan that outlines who is responsible for each outcome and time frames

Consider the adequate level of resources (money and time) required for appropriate planning process

Identify the information that must be collected to help make sound decisions

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2. Environment Analysis

Analysis and diagnosis of an organization, often referred to as an Organization Audit or SWOT analysis

This is undertaken to assess an organisation’s ability to deal with its environment by identifying strengths, weaknesses, opportunities and threats (SWOT).

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Internal EnvironmentOrganisation / Supply side analysis

An analysis of internal organizational factors which reviews and investigates the prevailing processes, resources and performance of organization. The analysis identifies major strengths and weaknesses - of all the key functional elements (Structure, Functions, HR, Finance, IT, Rules, Procedures, etc.).

What are major internal Strengths and Weaknesses in terms of Structure, Resources, Processes, Performance, Culture, etc. ?

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External EnvironmentDemand side analysis

Covers the various stakeholders outside the organization. The analysis indicates the opportunities and threats faced by the organisation from its relationship with external stakeholders. Major categories of external environment: 1. Forces and trends – PEST 2. Clients, customers, or payers 3. Actual or potential competitors or collaboratorsWhat major external Opportunities and Threats (Political, Economic, Social, Technology, Legal, Stakeholders, etc.) do the organisation has?

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SWOT Profile

Internal Strengths Weaknesses

1. Mandate / Vision / Mission

2. Structure3. Systems / Processes4. Organizational

resources5. Performance /

outputs

Trained staff Weak implementation

External Opportunities

Threats

1. Political2. Economic3. Social 4. Technological

Health sector as one of the priorities of government

Self sufficiency in resources

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SWOT Profile- an example

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Considerations

SWOT as very meaningful tool rather than a causal ‘warm-up’ for strategy formulation

Use precise, verifiable statements ("Cost advantage of Rs……/unit in sourcing resources x", rather than "Good value for money")- be specific

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Considerations

Reduce long lists of factors, and prioritize them, so that you spend your time thinking about the most significant factors.

Make sure that options generated are carried through to later stages in the strategy formation process.

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Considerations

Apply it at the right level - for example, we might need to apply SWOT Analysis at service-line level, rather than at the much vaguer whole organization level.

Use it in conjunction with other strategy tools (e.g. Core Competence Analysis) so that you get a comprehensive picture of the situation you're dealing with.

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Exercise: SWOT Analysis

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3. Strategy Formulation

The formulation of strategy is best described as a process for developing a sense of direction and ensuring strategic fit. The outcome of which is a formal written statement that provides a definitive guide to the organization’s intentions.

Identifying Strategic Issues- fundamental policy question/choice which affects an organization’s mandate, goals, programs, management processes, organization structure, culture, etc.

Vision/Mission, Objectives, Roles, Strategies An effective strategy is:

o Technically workableo Politically acceptable to key stakeholderso Accords with the organization’s philosophies and

valueso Ethical and legalo Deals with the issues supposed to address

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Approaches to strategy formulation

Whittington (1993) has identified four approaches to the formulation of strategy:1.Classical – as a rational process of deliberate

calculation.

2.Evolutionary – as an evolutionary process that is a product of market forces in which the most efficient and productive organizations win through.

3.Processual – strategy formulation as an incremental process that evolves through discussion and disagreement.

4.Systemic – strategy is shaped by the social system in which it is embedded. Choices are constrained by the cultural and institutional interests of a broader society rather than the limitations of those attempting to formulate corporate strategy.

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Considerations in Formulating Strategy

Organisational competence and resources to capture opportunities

Environmental threats to its long-term well being

Personal values and aspirations of managers

Societal obligations and ethical considerations

Organisational culture

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Strategic PlanObjecti

veStrategy

Measures/

Indicators

Target

Initiatives Resources

Critical Succes

s Factors

What

Who

When

Improve health service

Increase number of health professionals

Decreased Doctor-Patient ratio

10 % by 2017

Increase the number of students / seats

MoHP, Pvt. Sector

2014

Budget,Infrastructure, RP

MoF, Availability of RP, Involvement of Pvt. Sector, Govt. policy

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4. Strategy Implementation

For effective implementation, it needs to be translated into more detailed policies that can be understood at the functional level of the organization.

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4. Strategy Implementation

However beautiful the strategy, you should occasionally look at the results.

- Winston Churchill

For effective implementation, it needs to be translated into more detailed policies that can be understood at the functional level of the organization.

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A General Framework for Strategy Implementation

o Building an organisation structure to the requirements of the strategy

o Allocating resources and energies on accomplishment of the strategic goals

o Ensuring organisation-wide commitment

o Installing administrative support system

o Shaping the organisation culture to fit the strategy

o Exerting strategic leadership

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Basic Approaches to Strategy Implementation

I. Commander ApproachII. Organisational Change

ApproachIII. Collaborative ApproachIV. Cultural ApproachV. Crescive Approach

I. Commander Approach

Manager determines “best” strategy

Manager uses power to see strategy implemented

Three conditions must be met:1. Manager must have power2. Accurate and timely

information is available3. No personal biases should be

present

II. Organisational Change Approach

Focuses on the organisation

Includes focusing on the organisation’s staffing and structure

Often more effective than commander

Used to implement difficult strategies

III. Collaborative Approach

Enlarges the organisational change approach

Manager is a coordinator

Management team members provide input

Group wisdom is the goal

IV. Cultural Approach Includes lower levels of the

organisation Breaks down barriers

between management and other employees

Everyone has input into the formulation and implementation of strategies

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V. Crescive Approach

Moves upward from the "doers“ and lower middle-level managers

The top management team shapes the employees' premises

“Strategy" becomes the sum of all successful approaches

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5. Evaluation and Control

The implementation of the strategy must be monitored and adjustments made as needed. Evaluation and control consists:

I. Defining parameters to be measured

II.Defining target values for those parameters

III.Performing measurementsIV.Comparing measured results to

the pre-defined standardV. Making necessary changes

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WHY STRATEGIC INITIATIVES FAIL?

SI will fail when one is STUPID:Sponsorship not forthcomingTeam member do not function as agents of change

Unclear vision and commitmentPoorly planned change programme

Inappropriate/ Insufficient Communication

Don’t take account of culture

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The SUCCESS Principle

Shared visionUnderstand the organizationCultural alignmentCommunicationExperience help where necessary /

Executive supportStrong leadershipStakeholder buy-in / Systematic

planning / Short-term wins

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The story continues…