Success through strategy (roger hicks sept 2006)

Success Through Strategy

By: Roger Hicks

Prepared for: OGI/OHSU Capstone Class

September 2006 [email protected]

Roger Hicks Consulting, 2006 Strategies for Start-ups 2

“Do not repeat the tactics which have

gained you one victory, but let your

methods be regulated by the infinite

variety of circumstances”

Sun Tzu c. 490 BC, (Chinese military strategist)

Take a Strategic Viewpoint


Agenda

Purpose of strategy

Development of strategy

Results of strategy

Roger Hicks Consulting, 2006 Strategies for Start-ups

The Reason For Business Strategies

Businesses develop strategies

in order to quickly realize their

vision of the future.

4


What is Strategy ?

A strategy is a deliberate choice of WHAT

should be done to deal with an opportunity

or threat in order to move in a direction that

will increase the chances of success in

accomplishing a desired outcome.

Tactics are HOW a strategy gets implemented.


Why Worry About Strategy ?

All these subjects need to be

addressed and defined at some point

in the development of a successful

enterprise.

All the pieces should fit together in a

coherent plan to guide actions.

Without clear communication of strategies the tactics

will have nothing to draw them in the right direction.


The Impact of Strategic Choices

Pro

bab

ilit

y

Hig

h %

Opportunity Threat

Ideal Disaster

Low

%

Reduce Risks ? - market size and growth

- technology fit

- management

- financial

- planning

- supply

- etc.

Increase Success ! - brand equity

- market share

- profitability growth

- etc.

The purpose of strategy in a business is to: • Reduce the risk of failure

• Increase the chances of capturing profitable opportunities

• Realize wealth and success faster


The Strategy Imperative

Companies without an integrated

set of strategies to address

market forces, technology shifts

and key business functions are

doomed to fail.

New ventures rarely have well defined strategies but as the business

evolves the choices made by management to attain success results in a

definite set of strategies that can be clearly stated and followed.


Overview

Purpose of strategy


Results of strategy


Strategy Development

Situation

Assessment

Identification

of Strategic

Alternatives

Selection of

Strategic

Factors

Implementation

and

Measurement

Problems and Opportunities


Deliberate Decisions Are Necessary

Strategies are a result of serious decisions

Choose between attractive alternatives

Results in a definitive course of action

Cannot go back without massive penalties

Decisions determine what will not be done vs. what

will be done

Decisions without effective

implementation are worse than

no decision at all.

choices

Strategy is ‘real’ when …“You make a consequential

choice … or fail to make a consequential choice.”

Burgleman

(Stanford)


Define the Opportunity Space

A market space definition is essential to the

development of successful strategies.

WHO

WHAT

HOW

Who

Select the type or category of customer to serve

What

Select the kind of customer activities and needs to address

How

Select a product and service solution to deliver value


Strategies To Change the Opportunity Space

Expand Established Uses Enable New Uses

Increased Capability

Better Value

Connect (users see more possibilities when things work together)

Assist (users need incentives to switch user paradigms)

Replace (users invest to save on cost of ownership)

Upgrade (users spend more for

performance and luxury)

Firms can impact the rate of market growth and

overall size with growth strategies


Prediction vs Control

Ability to Control

What Happens

Abili

ty t

o P

redic

t

What H

appens

low

low

high

high

Comprehensive

Planning

Rapid

Adaptation

Visionary

Leadership

Transformation

Influence

Source: Rob Wiltbank, Willamette University

New Venture

Businesses are more

successful when they

focus on control

functions where they

can influence the

market and deal with

unexpected

opportunities and

problems.

Strategies for Approaching

Future Opportunities

?


The Customer Value Curve

Factor 1 Factor 4 Factor 5 … Factor n Factor 2 Factor 3

Low

High

Valu

e

Competitor A

Competitor B

Competitor C

Each competitor has a distinctive customer value curve based on its’

choice of the key strategic factors to focus on to achieve success

Note: based on principles from “Blue Ocean Strategy”


How Strategies Effect the Customer Value Curve

Costs Capabilities

Op

tim

ize

A

dd

/Dele

te

Po

sit

ion

ing

Acti

on

s

Value Factors

Raise critical

factors well

above the

industry

standard.

Eliminate factors

the industry takes

for granted and

does not pay to

support.

Create desirable

new features and

functions the

industry has not

offered before.

Reduce un-

appreciated

factors to a level

below the

industry standard.

Note: based on principles from “Blue Ocean Strategy”

Goals of Actions

Transform the logic

of the industry and

challenge the

conventional

business models

Elements of an

Effective Strategy

1. Focused Effort

2. Divergent Position

3. Compelling Story


Established Businesses vs. Start-ups?

Markets P

rod

ucts

Old

Old

New

New

Start-ups

(disruption oriented)

Start-ups require a new way of thinking and can be created by

established firms wishing to diversify or from entreprenurial activity

Established

Firms

(evolutionary traits)


Use an Approach to Fit the Situation

Markets

Pro

du

cts

Old

Old

New

New

Many firms try to balance strategies that preserve the core business

but also stimulate new growth in order to survive market transitions.

Fight established competition

Win the share game

Exploit existing demand forces

Trade value for cost

Focus on low cost OR differentiation

Generate uncontested market space

Make old competitors irrelevant

Stimulate & capture new demand forces

Change the price/performance rules

Align for lower cost AND differentiation


Organizational Strategies

STRATEGIC IMPORTANCE (how significant is the action to future success)

OP

ER

AT

ION

AL

RE

LA

TE

DN

ES

S

(degre

e o

f le

vera

ge f

rom

exis

ting c

om

pete

ncie

s)

Special Business

Units

Independent Business

Units

Complete

Spin-Off

New Product

Business Department New Venture Division Contracting

Direct

Integration

Micro New Ventures

Department

Nurturing and

Contracting

Very Important Uncertain Not Very Important

Unrelated

Partly

Related

Strongly

Related

*Source: Designs for Corporate Entrepreneurship in Established Firms by Robert Burgelman

An Organizational Design Framework*

The strategic importance of an opportunity or activity has

a direct relationship to organization implementation.


The Strategy Framework

Processes

Market Forces

Technology

Shifts

Business

Functions

Integrated

Strategy

Framework

Strategies must always be evaluated

and rebalanced as changes occur.

Products

Positions


Market Forces Impact Growth and Uncertainty

The attractive growth segment may change as competitors

take actions and capabilities diffuse into a market over time.

Emerging Expanding Established

Low

High

Young Old

Market

Uncertainty

Total Opportunity

Growth Rate &

Market Penetration

Mar

ket

Pen

etra

tio

n a

nd

Un

cert

ain

ty

Market Maturity

Segment 3

Segment 4

Segment 5

Segment 2

Segment 1

Computing

Television

Instrumentation

Presentations

Telecom


Market Oriented Positioning Alternatives

Choosing a Market Position Strategy Win the race

• Waves of investment needed to meet performance and production demands

• PC Displays – LCD monitors by Samsung vs AUO vs LG Philips

Straddle two existing segments • Customers on the fringes of established markets who are underserved by incumbents

• Family Vehicles – Minivans & SUV’s by Chrysler, Ford, Toyota

Defend a niche • Easily identified market with unique set of requirements that are hard to address

• EE Test & Measurement – scopes and LA’s by Tektronix vs Agilent (HP)

Leadership with the standard platform • Everyone benefits from a common approach that can be adapted to mass markets

• PC User Interfaces – Operating Systems by Microsoft and Apple and now Google

Be No.1 when only the best will do • Markets with limited alternatives or high emotional drivers support big margins

• Professional sports, movies, singers, fine art, precious jewelry, designer cloths etc.

Competitive forces and customer values drive

the choice of an attractive market position


Market Strategy Question?

Is it better to enter a large market

with a tenable position or a small

market where leadership and

predictability is possible?



Processes

Market Forces

Technology

Shifts

Business

Functions

Integrated

Strategy

Framework



Products

Positions


The Role of Technology Shifts

The investments by government and industry in technology turns into inventions and innovations that are

adopted over time and serve to enable and expand market opportunities for businesses to pursue.

Products are the marriage of technology capabilities and customer

needs into an application solution that defines a segment of a market.

CRT

OLED

Plasma

PLCD

AMLCD

DMD

EL

Age

Mark

et

ad

op

tio

n s

tag

e

making

deploying

serving

New Old

Technology Adoption Lifecycle

LED

CNT

Information Displays

Ind

ustr

y P

rofi

tab

ilit

y

0 $

- $

+ $

++ $


Technology Strategy Alternatives

Choosing a Product Technology Strategy Exclusivity

• Protect a critical technology with inferior alternatives for specific applications

• Atomic Layer Deposition process for EL thin-film displays

Standardization • Proliferate a fundamental capability that enables profitable adaptations

• Common pixel formats for digital displays (VGA, XGA, SXGA, UXGA…)

Enhancement • Incorporate the necessary technology ingredients into a more valuable proposition

• Graphics processing and grey-scale LCD monitors for radiological imaging

Prototyping • Create new functionality with no obvious demand and evolve using market feedback

• Stereoscopic 3D displays

Leapfrog • Anticipate the next level of performance/price demands and obsolete the incumbent

• Digital instruments replacing analog instruments

Technology transitions are extremely

unpredictable and hard to take advantage of


Technology Strategy Question

As a new entrant into an existing

market (with differentiating

product capability) is it better to

have exclusive technology rights

or to proliferate the new

technology into the industry?



Processes

Market Forces

Technology

Shifts

Business

Functions

Integrated

Strategy

Framework



Products

Positions


The Role of Business Elements

How will Each Process and Capability in the Value Chain be Handled ?

Brand promotion

Culture

Sourcing

Customer Relations

Product R&D

Financing

Channels

Service

HR Services

Partnerships

Politics

Performance Measures

Project Management

Succession

Market Communication

Improve / Create Sustain

Outsource

Discard

Outsource Now Later Internal Internal

X X

X

X

Business process innovations can create differentiated

competitive advantages that allow companies to succeed


Business Process Strategy Alternatives

Choose an Operational Oriented Strategy That Ads Value

Leveraged • Partners and relationships are encouraged in both directions on value chain

• Focus on critical competencies that add defensible value for end users

Vertical • Own the majority of the value chain and run efficient processes

• Invest for economies of scale and effective flow of goods and services

Protected • Put in place regulations and standards that create high entry barriers

• Defend customers and market positions against disruptive innovations

Horizontal • Become excellent in one stage of the value chain

• Broaden the solution to address an ever widening array of customer segments

Captive • Give direction and exert influence over critical stages of the value chain

• Sustain high value position by gaining respect and support of partners


Business Process Question?

What is better, OK strategies and

great implementation or great

strategies and OK implementation?


Overview

Purpose of strategy


Results of strategy


Strategy Results In….

Direction

Focus on a distinctive and intentional trajectory

Boundaries

Choices made on positions, products and processes

Priorities

Clear articulation of critical capabilities and actions


What Indicators Do Provider of Capital Look For?

Market Size – how large can it become?

Technology – uniqueness and protection

People – perceptive, desire, trustworthy

Risks – stages, ability to manage

Source: Dan Eilers, Vanguard Ventures

Capital and resources are allocated to business

opportunities that have the best chance of creating

profitable returns in the least amount of time.


Effect of Strategy on Value

Value of Assets

less Liabilities

Present Value of

Profits from

Operations

Present Value

of Options on

Future Growth

Market Value

Economic Value

Book Value

Strategic actions

optimize assets

and liabilities

Decrease of

technology and

implementation

risk

Decrease of

market risk

What is the value of a good set of strategies?

Potential Value

Numerous methods are available to find the value of a new venture such as Net

Present Value, Venture Capital Method, Options Theory etc. These methods make

use of a discount variable to adjust the expected returns which is largely dependent

on risk levels associated with the chosen strategies for process, product and position.


Putting it All Together

Growth Driver Market Position Technology Approach Business Processes

Assist

(channel pref.)

Hybrid

(best of both)

Standardization

(set the rules)

Leveraged

(partners required)

Upgrade

(better perf.)

Leadership

(win the race)

Exclusivity

(protected IP)

Vertical

(private value chain)

Connect

(work together)

Specialization

(own a niche)

Enhancements

(accessories for all)

Protected

(regulated market)

Replace

(lower owner cost)

Defacto #1

(be the standard)

Prototyping

(test the new uses)

Horizontal

(do one thing well)

Phenomenon

(mass appeal)

Luxury

(no compromises)

Leapfrog

(obsolete the old)

Captive

(direct value chain)

A complete strategy will include key choices that have been made relative to these primary business elements

(one possible set of choices is shown as an example)


Seven Habits for Successful Strategies

Alignment of strategic priorities across the executive team.

Checking validity of assumptions.

Translation of strategy elements into functional operations.

Installing appropriate capabilities in the organization.

Visibility of key performance metrics.

Making adequate resources available when needed.

Rapid adaptation of strategies to changing situations.


The Elevator Pitch

Application description What type of user activity is being addressed

Needs to fulfill What problem do customers want to solve

Solution to the problem How does the product and process bring value to the customer

Who cares Who is interested in the benefits of the solution

Expertise required What resources and abilities come together to produce the solution

Results expected How will success be measured in terms of marketplace position,

business capability, technology strengths and financial trajectories.

An easy way to remember how to explain a strategy is to just give the ANSWER


Recap

Strategy decides what not how.

Strategy reduces risk and increases opportunity.

Strategies are interdependent.

Strategies evolve to address changing conditions.

Strategies determine positions, products and processes.

Actions depend on strategies which depend on choices

between realistic alternatives.

Poor strategy is fatal (eventually) but it’s possible to

recover from poor implementation.


“However beautiful the strategy,

you should occasionally look

at the results”

Winston Churchill


Thank You !

Success through strategy (roger hicks sept 2006)

Business

Transcript of Success through strategy (roger hicks sept 2006)