a presentation on how to think about strategy design for a graduate level management course for technology professionals

1. Success Through Strategy
By: Roger Hicks
Prepared for: OGI/OHSU Capstone Class
September 2006
roger.hicks@comcast.net

2. Take a Strategic Viewpoint
“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)
Roger Hicks Consulting, 2006
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3. Agenda
 Purpose
of strategy
 Development of strategy
 Results of strategy
Roger Hicks Consulting, 2006
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4. The Reason For Business Strategies
Businesses develop strategies
in order to quickly realize their
vision of the future.
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5. 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.
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6. 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.
Roger Hicks Consulting, 2006
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7. Increase Success !
- brand equity
- market share
- profitability growth
- etc.
Low %
- market size and growth
- technology fit
- management
- financial
- planning
- supply
- etc.
High %
Reduce Risks ?
Probability
The Impact of Strategic Choices
Ideal
Opportunity
Disaster
Threat
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
Roger Hicks Consulting, 2006
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8. 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.
Roger Hicks Consulting, 2006
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9. Overview
Purpose of strategy
 Development of strategy
 Results of strategy

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10. Strategy Development
Problems and Opportunities
Situation
Assessment
Implementation
and
Measurement
Identification
of Strategic
Alternatives
Selection of
Strategic
Factors
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11. 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)
Roger Hicks Consulting, 2006
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12. Define the Opportunity Space

Who


Select the type or
category of customer
to serve
What


WHAT
Select the kind of
customer activities
and needs to address
How

Select a product and
service solution to
deliver value
WHO
HOW
Roger Hicks Consulting, 2006
A market space definition is essential to the
development of successful strategies.
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13. Strategies To Change the Opportunity Space
Increased Capability
Upgrade
Connect
(users spend more for
performance and
luxury)
(users see more possibilities
when things work together)
Enable New Uses
Expand Established Uses
Assist
Replace
(users need incentives to
switch user paradigms)
(users invest to save
on cost of ownership)
Better Value
Firms can impact the rate of market growth and
overall size with growth strategies
Roger Hicks Consulting, 2006
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14. Prediction vs Control
Strategies for Approaching
Future Opportunities
Ability to Predict
What Happens
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.
?
low
Transformation
Influence
Rapid
Adaptation
Visionary
Leadership
Comprehensive
Planning
high
high
Ability to Control
What Happens
low
Source: Rob Wiltbank, Willamette University
Roger Hicks Consulting, 2006
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15. The Customer Value Curve
Competitor C
High
Value
Competitor A
Competitor B
Low
Factor 1
Factor 2
Factor 3
Factor 4
Factor 5
… Factor n
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”
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16. How Strategies Effect the Customer Value Curve
Value Factors
Costs
3. Compelling Story
Goals of Actions
Transform the logic
of the industry and
challenge the
conventional
business models
Optimize
2. Divergent Position
Add/Delete
1. Focused Effort
Positioning Actions
Elements of an
Effective Strategy
Reduce unappreciated
factors to a level
below the
industry standard.
Eliminate factors
the industry takes
for granted and
does not pay to
support.
Capabilities
Raise critical
factors well
above the
industry
standard.
Create desirable
new features and
functions the
industry has not
offered before.
Note: based on principles from “Blue Ocean Strategy”
Roger Hicks Consulting, 2006
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17. Established Businesses vs. Start-ups?
Markets
Old
Established
Firms
Old
Products
New
(evolutionary traits)
Start-ups
New
(disruption oriented)
Start-ups require a new way of thinking and can be created by
established firms wishing to diversify or from entreprenurial activity
Roger Hicks Consulting, 2006
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18. Use an Approach to Fit the Situation
Markets
Old
Old
New
Fight established competition
Win the share game
Exploit existing demand forces
Products
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
New
Many firms try to balance strategies that preserve the core business
but also stimulate new growth in order to survive market transitions.
Roger Hicks Consulting, 2006
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19. (degree of leverage from existing competencies)
OPERATIONAL RELATEDNESS
Organizational Strategies
An Organizational Design Framework*
Unrelated
Partly
Related
Strongly
Related
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
STRATEGIC IMPORTANCE
(how significant is the action to future success)
The strategic importance of an opportunity or activity has
a direct relationship to organization implementation.
*Source: Designs for Corporate Entrepreneurship in Established Firms by Robert Burgelman
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20. The Strategy Framework
Market Forces
Positions
Integrated
Strategy
Framework
Products
Technology
Shifts
Processes
Strategies must always be evaluated
and rebalanced as changes occur.
Roger Hicks Consulting, 2006
Strategies for Start-ups
Business
Functions
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21. Market Forces Impact Growth and Uncertainty
Market Penetration and Uncertainty
High
Emerging
Established
Expanding
Market
Uncertainty
Segment 3
Computing
Total Opportunity
Growth Rate &
Market Penetration
Telecom
Presentations
Segment 2
Segment 4
Television
Segment 5
Low
Instrumentation
Young
Market Maturity
Segment 1
Old
The attractive growth segment may change as competitors
take actions and capabilities diffuse into a market over time.
Roger Hicks Consulting, 2006
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22. Market Oriented Positioning Alternatives

Choosing a Market Position Strategy

Win the race
•
•

Straddle two existing segments
•
•

•
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
•
•

Customers on the fringes of established markets who are underserved by incumbents
Family Vehicles – Minivans & SUV’s by Chrysler, Ford, Toyota
Defend a niche
•

Waves of investment needed to meet performance and production demands
PC Displays – LCD monitors by Samsung vs AUO vs LG Philips
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
Roger Hicks Consulting, 2006
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23. 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?
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24. The Strategy Framework
Market Forces
Positions
Integrated
Strategy
Framework
Products
Technology
Shifts
Processes
Strategies must always be evaluated
and rebalanced as changes occur.
Roger Hicks Consulting, 2006
Strategies for Start-ups
Business
Functions
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25. The Role of Technology Shifts
Technology Adoption Lifecycle
++ $
CRT
serving
EL
Plasma
PLCD
LED
deploying
Information Displays
AMLCD
+$
0$
DMD
making
CNT
OLED
New
-$
Age
Old
Products are the marriage of technology capabilities and customer
needs into an application solution that defines a segment of a market.
Roger Hicks Consulting, 2006
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Industry Profitability
Market adoption stage
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.

26. Technology Strategy Alternatives

Choosing a Product Technology Strategy

Exclusivity
•
•

Standardization
•
•

•
Incorporate the necessary technology ingredients into a more valuable proposition
Graphics processing and grey-scale LCD monitors for radiological imaging
Prototyping
•
•

Proliferate a fundamental capability that enables profitable adaptations
Common pixel formats for digital displays (VGA, XGA, SXGA, UXGA…)
Enhancement
•

Protect a critical technology with inferior alternatives for specific applications
Atomic Layer Deposition process for EL thin-film displays
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
Roger Hicks Consulting, 2006
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27. 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?
Roger Hicks Consulting, 2006
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28. The Strategy Framework
Market Forces
Positions
Integrated
Strategy
Framework
Products
Technology
Shifts
Processes
Strategies must always be evaluated
and rebalanced as changes occur.
Roger Hicks Consulting, 2006
Strategies for Start-ups
Business
Functions
28

29. The Role of Business Elements
How will Each Process and Capability in the Value Chain be Handled ?
Improve / Create
Outsource
Brand promotion
Culture
Sourcing
Customer Relations
Product R&D
Financing
Channels
Service
HR Services
Partnerships
Politics
Performance Measures
Project Management
Succession
Market Communication
Internal
Sustain
Outsource
X
Discard
Internal
Now
Later
X
X
X
Business process innovations can create differentiated
competitive advantages that allow companies to succeed
Roger Hicks Consulting, 2006
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30. Business Process Strategy Alternatives

Choose an Operational Oriented Strategy That Ads Value

Leveraged
•
•

Vertical
•
•

•
Put in place regulations and standards that create high entry barriers
Defend customers and market positions against disruptive innovations
Horizontal
•
•

Own the majority of the value chain and run efficient processes
Invest for economies of scale and effective flow of goods and services
Protected
•

Partners and relationships are encouraged in both directions on value chain
Focus on critical competencies that add defensible value for end users
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
Roger Hicks Consulting, 2006
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31. Business Process Question?
What is better, OK strategies and
great implementation or great
strategies and OK implementation?
Roger Hicks Consulting, 2006
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32. Overview
Purpose of strategy
 Development of strategy
 Results of strategy

Roger Hicks Consulting, 2006
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33. 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
Roger Hicks Consulting, 2006
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34. 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
Capital and resources are allocated to business
opportunities that have the best chance of creating
profitable returns in the least amount of time.
Source: Dan Eilers, Vanguard Ventures
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35. Effect of Strategy on Value
What is the value of a good set of strategies?
Potential Value
Market Value
Present Value
of Options on
Future Growth
Economic Value
Present Value of
Profits from
Operations
Book Value
Value of Assets
less Liabilities
Decrease of
market risk
Decrease of
technology and
implementation
risk
Strategic actions
optimize assets
and liabilities
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.
Roger Hicks Consulting, 2006
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36. 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)
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37. 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.
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38. The Elevator Pitch
An easy way to remember how to explain a strategy is to just give the ANSWER

Application description


Needs to fulfill


Who is interested in the benefits of the solution
Expertise required


How does the product and process bring value to the customer
Who cares


What problem do customers want to solve
Solution to the problem


What type of user activity is being addressed
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.
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39. 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.
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40. “However beautiful the strategy,
you should occasionally look
at the results”
Winston Churchill
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41. Thank You !
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