STRATEGY IN STRATEGIC HRM: PART 1Anilesh SethIdeator, Co Founder & CEO, KROWwww.krow.inEx-CEO/MD: LGSI, Qatalys & Supervalu India

www.slideshare.net/anileshhttp://In.linkedin.com/in/anileshsethanileshseth@hotmail.com

Part 1: Sessions 1 & 2

• Objective of these sessions is to enable an understanding of strategy and associated terms and tools to serve as a foundation to segue into Strategic HRM

• Content of Part 1: Overview of organizational strategy – role of strategy, understanding of types of strategy through case studies and examples, value proposition and organization life-cycle

• July 27, 2012 News ….”Samsung completely destroyed Apple in smartphone shipments Last Quarter”

• Samsung passed Nokia to become the top manufacturer for handsets overall

• Samsung “shipped” over 50 million smartphones in the second quarter

• Apple “sold” 26 million

• July 27, 2012 News ….”Samsung completely destroyed Apple in smartphone shipments Last Quarter”

• Samsung passed Nokia to become the top manufacturer for handsets overall

• Samsung “shipped” over 50 million smartphones in the second quarter

• Apple “sold” 26 millionAssignment: Do desk research on both companies and identify what each company is doing to ensure the no 1 slot. Are these sustainable? Pick a position on who will succeed. Output: Powerpoint – Max 4 slides.

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So what is Strategy?

So what is Strategy?

“Strategy is the direction and scope of an organization over the long-term; which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”

What the gurus say….

• Michael Eugene Porter (1996) Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value

Porter’s five forces analysis

• This is a framework used for evaluating a company’s competitive position

http://www.maxi-pedia.com/Five+Forces+model+by+Michael+Porter

What the gurus say….• Kenichi Ohmae The 3Cs Model

Reference: http://www.lacpa.org.lb/Includes/Images/Docs/TC/TC278.pdf

What the gurus say….

• Gary Hamel and CK Prahlad “To achieve success the company should connect its ends to its means through Strategic Intent”. This has 3 attributes:– Sense of direction– Sense of discovery– Sense of destiny

The military viewpoint• Deals with the planning and conduct of campaigns, the

movement and disposition of forces and the deception of the enemy

• “In peace, prepare for war, in war, prepare for peace. The art of war is of vital importance to the state (512 BC)”

Some common threads• The future….• Customers….• Competition….• Competitive advantage….• Entry barriers….• Innovation….• Marshaling resources….

A great starting point is asking the questions:- Where are we now?- Where do we want to go?- How do we get there?

“If one does not know to which port one is sailing, no wind is favorable.” Lucius Annaeus Seneca…Roman Philosopher (born 5 BC)

Porter’s generic business strategies

Cost leadership example: Wal-Mart• Wal Mart was founded in 1962 by Sam Walton• Rigorously pursued its core philosophy of cost-leadership• Sam realized that retailing was a volume driven business and success would be

achieved by offering customers better value for their money• Started by establishing discount stores in smaller towns• 1970s – it went national. Opened its first distribution center• 1980s – opened up the first SAM’s club. 276 stores• 1990s – EDLP went international. 1997 crossed 100 billion USD• 2000s – offering customers a seamless shopping experience – online, in store or

on a mobile device. 2010 – Bharti Walmart in India• 2012 – 50 years of helping people save money so they can live better. Employs

2.2 million associates worldwide, 200 million customers each week in 10,000 stores in 27 countries

• As of Jan 2012 it had revenues of 447 billion after Exxon and Royal Dutch Shell

How did Wal-Mart achieve this?

How did Wal-Mart achieve this?

• Warehousing and distribution System: strategically located distribution centers, cut overheads, reduce costs

• Inventory: As low as possible by tightly controlling supplier on-time delivery

• EDLP• Overseas outsourcing: Online and direct access to low cost

foreign suppliers• Supplier control: Encourages suppliers to keep reducing

costs, update computer systems, redesign packaging, examine financial accounts and ask them to cut margins etc

Product and service differentiation

• Product differentiation– Features– Manufacturing process– Performance– Design

• Service differentiation– Speed of delivery– Availability– Loyalty programs– After sales service and training– Warranty

Example:Cervelo – aerodynamic race bikes“Speed, Engineered”BMW – the ultimate driving machine

Example:Enterprise rent a car“We’ll pick you up”

Combination: Dominos pizza: New product intros with 30 minute guarantee

Differentiation example: Krispy Kreme

• Specialty retailer of premium-quality doughnuts• Started in 1937 – went IPO in 2000• First international store in Canada in 2001• Now in Sydney, London, Mexico, Puerto Rico,

Turkey• Plans to open up 80 stores in Southern India

and Western India in next 5 years• Revenue about 13.5 billion USD

Krispy Kreme – some elements of their strategy

• “It isn’t about what’s inside the doughnut but what's inside a customer’s head”

• Opinions are:– The Michelangelo of doughnut makers– It is an art– Heavenly inspired

• Loyalists are wait in line for hours on the opening day of a new unit – they camp out 24 hrs in advance!

• Created a cultural icon and built customer pride– Exhibit at the Smithsonian National Museum of American History– The Doughnut Theatre – watch them being made– Doughnut of the month– Website: Friend of Krispy Kreme – make customers feel they are part of the

company– Collectibles (shirts, boxers, shorts, mugs, hats etc.)

Types of business level strategy

Porter’s 4 generic

strategies

Cost leadership

Differentiation

Low-cost focus

Differentiation focus

Efficient supply chain

Customer service,quality, convenience,

Lowest provider for a niche marketExample: Redbox for DVD rentals

Caters to a niche,Example Kopi LuwakExample Breeze Resorts

Foundational elements: - Customer intimacy – this involves a high level of investment in understanding customers- Product innovation

Strategy vs Tactics

• A strategy is a market based move that involves a significant commitment of organizational resources and is difficult to implement and reverse

• A tactic is a market based move that is taken to fine-tune a strategy

Example: Hyundai Motor Corporation’sexpenditures on R & D and plant expansionto become one of the world’s largest car-makersby 2010 and sell one million units annually in theUS

Example: Hyundai Motor Corporation’s US pricing strategy

Strategy vs Tactics

What is this “Vision thing”?

• Vision– Long term, encouraging, aspiration for the future– Must be in line with corporate values

What is this “Vision thing”?• Vision

– Long term, encouraging, aspiration for the future– Must be in line with corporate values

Boeing (1950):Become the dominant player in commercial aircraft and bring the world into the jet ageBoeing (2016):People working together as a global enterprise for aerospace leadership

Microsoft (1980):A personal computer in every home running Microsoft softwareMicrosoft (Steve Balmer):Enabling people and businesses to realize their full potentialReading: Marketing Myopia: http://hbr.org/2004/07/marketing-myopia/ar/1

Assignment: Research the vision statements of at least one successful start up and oneestablished Indian corporate. Find out if this has changed over the years

Organization life-cycle

Ref: http://www.product-arts.com/articlelink/1246-company-evolution-a-the-organizational-life-cycle

Likely to mirror industry maturity

Can apply SWOT/Porter’s 5 forcesat each stage – it will be different

The KODAK case study• In Jan 2012, the 131 year old film pioneer filed for bankruptcy• Since 2004, they reported only one year of full profit• Kodak appears to have fallen to undercutting of prices by companies like

Fujifilm and then the onset of digital technologies. Kodak actually halted investment in film in 2003

• Kodak’s turnaround strategy has the following components:– Creation of a digital business– Exiting traditional operations – closing 13 plants and 130 labs– Workforce reduction by 47,000 since 2003– Reducing cost-structure– Monetizing non-core IP assets (digital patents – selling and suing!)

Question: Was Kodak in business to create cameras and film or was Kodak in business to help people capture and preserve memories?

Value Proposition

• A business or marketing statement that summarizes why a consumer should buy a product or use a service. It:– explains how your product solves customers

problems or improves their situation– delivers specific benefits (quantified value) – tells the customer why they should buy from you

and not from the competition (unique differentiation)

– should be simple and conciseCheck out this video: http://www.youtube.com/watch?v=VZ5rgVgn5qk

More about value propositions

• Example of what it should *not* be:Revenue-focused marketing automation & sales effectiveness solutions unleash collaboration with customers and internal departments throughout the revenue cycle

• Caution not to mix them up with slogans like: “L’Oréal. Because you’re worth it”

Example of a good value proposition

Example of a good value proposition

Connecting some dots….

What is “Strategic” HRM?

Discussion: Who “manages” employees – HR or Managers?

What is strategic HRM?

• Strategic HRM is the practice of aligning business strategy with that of HR practices to achieve the strategic goals of the organization

• This meshes with the values of a company and can manifest itself in ways such as innovation leadership or outstanding customer service

• This demands a proactive and hands on approach by the management as well as the HR department

• The HR department’s role here is more of “facilitation”

Essential elements of strategic HRM

• Internally transforming HR staff and structure

• Enhancing administrative efficiency

• Integrating HR into the strategic planning process

• Linking HR practices to business strategy and to one another

• Developing a partnership with line management

At the core is ensuring thata company’s Human Resourcesare a source of key Competitiveadvantage

Example: Use of tools as an enabler of change management

• The ADKAR model

Awareness ..of the need for change

Desire ..to support and participate in the change

Knowledge ..of how to change

Ability ..to implement required skills and behaviours

Reinforcement ..to sustain the change

Source: ADKAR, A model for change in business, government and our community - Jeffrey M. Hiatt

Case: The need to downsize……

Barrier Point

A D K A R1

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3

4

5

Strategy Implementation

Strategy Development

Strategic Analysis

The Strategic Management Process

Reference books• Competitive Strategy: Techniques for Analyzing Industries and Competitors

– Michael Porter• Competitive Advantage: Creating and Sustaining Superior Performance

– Michael Porter• Cases in Competitive Strategy

– Michael Porter• Strategy Maps

– Kaplan & Norton• What Matters Now

– Gary Hamel• Strategic Flexibility

– Gary Hamel, C K Prahlad, Howard Thomas, Don O’Neal• Competing for the Future

– Gary Hamel, C K Prahlad• Strategic Management

– Hitt, Ireland, Hoskisson

Thank you!