developing a strategic business plan

DEVELOPING A DEVELOPING A STRATEGIC BUSINESS STRATEGIC BUSINESS

Toolbox

STRATEGIC BUSINESS STRATEGIC BUSINESS PLANPLAN

Strategic PlanningStrategic Planning

…is the managerial process of developing and maintaining a strategic fit between the organization's objectives and resources and its objectives and resources and its changing market opportunities.

Org Objectives Resources

Changing Environment

Strategic Fit

The Role of StrategyThe Role of Strategy

Corporate Strategy:

•CorporateCorporate

Mission &Objectives

•Corporate•Business

•Functional

Operating Plans

Vision and StrategyVision and Strategy

Sun TzeSun Tze on Strategyon Strategy

� “Know your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather, and your victory will be complete.”your victory will be complete.”

Strategic MarketingStrategic Marketing

“Marketing Strategy is a series of integrated actions leading to a integrated actions leading to a sustainable competitive advantage.”

John Scully

Corporate MissionCorporate Mission

� Broad purposes of the organization

� General criteria for assessing the long-term organizational effectiveness

� Driven by heritage & environment

� Mission statements are increasingly being developed at the SBU level as well

Examples of Corporate MissionExamples of Corporate Mission

SINGAPORE AIRLINES is engaged in air transportation and related businesses. It operates world-wide as the flag carrier of the Republic of the flag carrier of the Republic of Singapore, aiming to provide services of the highest quality at reasonable prices for customers and a profit for the company

Examples of Corporate Mission Examples of Corporate Mission (cont’d)(cont’d)

MARRIOTT’S Mission Statement:

We are committed to being the best lodging and food service company in lodging and food service company in the world, by treating employees in ways that create extraordinary customer service and shareholder value

Corporate CultureCorporate Culture

� The most abstract level of managerial thinking

� How do you define culture?

� What is the significance of culture to an organization?an organization?

� How does marketing affect culture in the organization?

Corporate Objectives & GoalsCorporate Objectives & Goals

� An objective is a long-range purpose ◦ Not quantified and not limited to a time period

◦ E.g. increasing the return on shareholders’ equity

� A goal is a measurable objective of the business◦ Attainable at some specific future date through

planned actions

◦ E.g. 10% growth in the next two years

Strategic planningStrategic planning

STRATEGIC PLAN STRATEGIC PLAN DEVELOPMENTDEVELOPMENT

Industry dynamics and implications

Environmental and internal assessment

Competitive

• What are the major changes in industry dynamics and resulting opportunities and risks?

• What are your

Strategy articulation

Strategic definition and implications

Strategic

• What strategy will you pursue over the next 3 years?

• What will be the impact of

+ +

Competitive assessment

Internal assessment

competitive strengths and weaknesses?

• How does your current business emphasis fit with industry opportunity and competitive landscape?

Strategic initiatives

Financial projections

major strategic initiatives?

• What are the expected financial returns of your strategy?

+ +

Risk/contingen-cies & strategic

alternatives

• What strategic alternatives have you considered?

+

The Usual Business Planning The Usual Business Planning HierarchyHierarchy

Vision

Mission

Objectives

Strategies

Tactics

Plans

Vision Mission

Strategic Planning Strategic Planning –– Many Sub Many Sub PlansPlans

Objectives Strategies Tactics Plans



Framework of a Successful Framework of a Successful OrganisationOrganisation

Business Planning and Delivery Business Planning and Delivery

Strategic Plan

Business Plan

New Information

Feed Back

Sales & Marketing

Plan

State Sales Plans

Regional or Industry

Sales Plan

Vision is a Critical DriverVision is a Critical Driver� To succeed in the long

term, our business needs a vision of how we will change and improve in the future.

� “without a vision, the people perish”

VISION

Provides future direction

Consistently followed and

measured

people perish”

� The vision of the business gives its energy.

◦ It helps motivate us.

◦ It helps set the direction of corporate and marketing strategy.

Expresses a consumer

benefit

Is realisticIs motivating

Must be fully communicated

Values underpin all we doValues underpin all we doValues form the foundation of a business’ management style.

� Values provide the justification of behaviour and, therefore, exert significant influence on marketing decisions.

An example is provided by BT Group - defining its values:

� BT's activities are underpinned by a set of values that all BT people are asked to respect:

◦ We put customers first

◦ We are professional

◦ We respect each other ◦ We respect each other

◦ We work as one team

◦ We are committed to continuous improvement.

� These are supported by our vision of a communications-rich world - a world in which everyone can benefit from the power of communication skills and technology.

� A society in which individuals, organisations and communities have unlimited access to one another and to a world of knowledge, via a multiplicity of communications technologies including voice, data, mobile, internet - regardless of nationality, culture, class or education.

� Our job is to facilitate effective communication, irrespective of geography, distance, time or complexity.

Source: BT Group plc website

Has the Company got a strong Has the Company got a strong Clear Mission?Clear Mission?

� The Business Mission is important to our sales & marketing planning

� It provides an outline of how the marketing plan should seek to fulfil the

PURPOSE – why the business exists

should seek to fulfil the mission

� It provides a means of evaluating and screening the marketing plan; are marketing decisions consistent with the mission?

� It provides an incentive to implement the marketing plan

VALUES & CULTURE – what management believes in

STANDARDS & BEHAVIOUR – the rules that guide how we operate

STRATEGY & SCOPE – what business are we in and how?

"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

Strategic Audit Strategic Audit -- ensuring that the Company resources and ensuring that the Company resources and competencies are understood and evaluatedcompetencies are understood and evaluated

Resource Audit

Value Chain Analysis

Core Competence Analysis

Performance Analysis

Portfolio Analysis

SWOT / PEST Analysis

Need to work within Company Need to work within Company Resources & ConstraintsResources & Constraints

• Existing Funds• New Funds

Financial

• Production• Marketing

Physical

• Sales• R&D & Technical• Information Technology

• Existing Staff• Future Staff Requirements• Training & Development

Human

• Goodwill• Reputation• Brands• Intellectual Property

Intangible

Objectives Objectives -- Corporate & Corporate & FunctionalFunctional

• Examples might include:

• We aim for a return on investment of at least 15%

• We aim to achieve an operating profit of over $10 million on sales of at least $100 million

• We aim to increase earnings per share by at least 10% every year for the foreseeable future

CorporateThese are objectives that concern the business or organisation as a whole

• Examples might include:

• We aim to build customer database of at least 250,000 households within the next 12 months

• We aim to achieve a market share of 10%• We aim to achieve 75% customer awareness of

our brand in our target markets • We aim to sell $2m of xyz product into ABC

market over the next 6 months

Functional Specific objectives for sales &

marketing activities

Value Chain AnalysisValue Chain Analysis� Value Chain Analysis describes the activities that take place in a business and

relates them to an analysis of the competitive strength of the business.

� Michael Porter suggested that the activities of a business could be grouped under two headings:

1. Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and

2. Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.

� Value Chain Analysis is one way of identifying which activities are best undertaken � Value Chain Analysis is one way of identifying which activities are best undertaken by our business and which are best provided by others ("outsourced").

� Linking Value Chain Analysis to Competitive Advantage

� What activities a business undertakes is directly linked to achieving competitive advantage.

� For example, if we wish to outperform our competitors through differentiatingourselves through higher quality then we will have to perform our value chain activities better than the opposition.

� But if we adopt a strategy based on seeking cost leadership this will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.

Value ChainValue Chain

Identification of client’s

Satisfaction of Client’s

InnovationInnovation

ProcessProcess

Operation Operation ProcessProcess

Post SalesPost Sales

ProcessProcess

of client’s necessities

of Client’s necessities

Market Market identificationidentification

products / products / services services definitiondefinition

products / products / services services creationcreation

Delivery Delivery products products

and and servicesservices

Services Services to the to the clientsclients

Primary ActivitiesPrimary ActivitiesPrimary value chain activities include:Primary value chain activities include:

Primary

Activity

Description

Inbound

logistics

All those activities concerned with receiving and storing externally sourced

materials

Operations The manufacture of products and services - the way in which resource inputs

(e.g. materials) are converted to outputs (e.g. products)

Outbound

logistics

All those activities associated with getting finished goods and services to buyers

Marketing and

sales

Essentially an information activity - informing buyers and consumers about

products and services (benefits, use, price etc.)

Service All those activities associated with maintaining product performance after the

product has been sold

Support ActivitiesSupport ActivitiesSupport activities include:

Secondary

Activity

Description

Procurement This concerns how resources are acquired for a business (e.g. sourcing

and negotiating with materials suppliers)

Human Resource

Management

Those activities concerned with recruiting, developing, motivating and

rewarding the workforce of a business

Technology

Development

Activities concerned with managing information processing and the

development and protection of "knowledge" in a business

Infrastructure Concerned with a wide range of support systems and functions such as

finance, planning, quality control and general senior management

Steps in a Value Chain AnalysisSteps in a Value Chain Analysis

Break down a market / organisation into its key activities

Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage;

Determine strategies built around focusing on activities where competitive advantage can be sustained

Core competenciesCore competencies� Core competencies are those capabilities that are critical to a business

achieving competitive advantage.

� The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power.

� Senior management cannot focus on all activities of a business and the competencies required to undertake them.

� So the goal is for management to focus attention on competencies that really affect competitive advantage.

� Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.

� We need to understand what we are good and what makes us better and to hone these advantages and to develop new ones to underpin the business strategy

Identifying Core CompetenciesIdentifying Core CompetenciesPrahalad and Hamel suggest three factors to help identify core competencies in any business:Prahalad and Hamel suggest three factors to help identify core competencies in any business:

What does the Core

Competence

Achieve?

Comments

Provides potential

access to a wide

variety of markets

The key core competencies are those that enable the creation of new

products and services.

Makes a significant

contribution to the

perceived customer

benefits of the end

product

Core competencies are the skills that enable a business to deliver a

fundamental customer benefit - in other words: what is it that causes

customers to choose one product over another? To identify core

competencies in a particular market, ask questions such as "why is the

customer willing to pay more or less for one product or service than

another?" "What is a customer actually paying for?

Difficult for

competitors to

imitate

A core competence should be "competitively unique": In many

industries, most skills can be considered a prerequisite for participation

and do not provide any significant competitor differentiation. To qualify

as "core", a competence should be something that other competitors

wish they had within their own business.

What is Competitive Advantage?What is Competitive Advantage?

� “Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match.”will not match.”

Philip Kotler

� “If you don’t have a competitive advantage, don’t compete.”

Jack Welch, GE

Four Generic StrategiesFour Generic Strategies

Cost Leadership

Differentiation

BroadTarget

Lower Cost Differentiation

Leadership

Cost Focus Differentiation

Focus

Scope

NarrowTarget

Other Characteristics of Other Characteristics of Competitive AdvantageCompetitive Advantage

� Substantiality

◦ Is it substantial enough to make a difference?

� Sustainability� Sustainability

◦ Can it be neutralized by competitors quickly?

� Ability to be leveraged into visible business attributes that will influence customers

(Source: Strategic Marketing Management, Aakers)

Seeking Competitive AdvantagesSeeking Competitive Advantages

� Positions of advantage◦ Superior customer value

◦ Lower relative total cost

� Performance advantages◦◦ Customer satisfaction, Loyalty, Market

Share, Profit

� Sources of advantages◦ Superior skills & knowledge, Superior

resources, Superior business process

WHERE TO COMPETE?WHERE TO COMPETE?

Customers

Target customers and segments• Which customers are you trying to target or attract?• Which are you willing to serve, but will not spend

resources to attract?• Which would you prefer not to serve?

How does the entity

Geographical scope of business activities• Geographic limits to the

Channels

Products

Geographic markets

How does the entity reach its target customers• Which distribution channels

will you use?• What customer segments

can they reach?

• Geographic limits to the business?

• Local, regional, multi-local, national, international, or global player?

• If local, which localities?

Quality and breadth of the product line• Breadth of the product line?• Quality of the product line?• Product bundles or a series of unrelated

products?

Capability platform: assessment of sources of Capability platform: assessment of sources of competitive advantage (1/2)competitive advantage (1/2)

Physical asset

Location/"space"

Distribution/sales network

Brand/reputation

Patent

• BHP’s low-cost mines

• Telecomm/media company with rights radio spectrum

• Avon’s representatives

• Coca-Cola

• Pharmaceutical company with a "wonder

Privileged assets

Example

Patent

Relationship with "license" allocator

• Pharmaceutical company with a "wonder drug”

• "Favored nation" status with a key minister in liberalizing economy

Innovation

Cross-functional coordination

Market positioning

Cost/efficiency management

Talent development

• 3M with new products

• McDonald’s with QSC&V

• J&J with branded consumer health products

• Emerson Electric’s Best Cost Producer program

• P&G brand management program

Distinctive competencies

Necessary capabilities in order to succeed in the industry

Capability platform: assessment of Capability platform: assessment of sources of competitive advantage (2/2)sources of competitive advantage (2/2)

Extremely relevant

Somewhat relevant

Irrelevant

BU Overall

Segments

A B C

Physical asset

Location/"space"


Brand/reputation

Patent

Privileged assets

Necessary capabilities in

Step 1: Ensure that these are the capabilities required to succeed in the industry. Use this list as a thought starter, add and delete as you see appropriate

Step 2: Assess your overall position relative to the capabilities required to succeed in the industry. Also, determine if these capabilities are relevant to the segments you serve

Patent

Relationship with "license" allocatorInnovation


Market positioning

Cost/efficiency management Talent development


capabilities in order to succeed in the industry

Competitor capability comparisonCompetitor capability comparison

BU Overall

Competitors

A B C

Physical asset

Location/"space"


Brand/reputation

Patent

Privileged assets

Necessary

capabilities

••

••

Step 3: Compare the strengths and weaknesses of your competitive position vs. the necessary skills

Patent

Relationship with "license" allocatorInnovation


Market positioning

Cost/efficiency management Talent development


capabilities in order to succeed in the industry

Porter’s 5 Forces of Competitive Porter’s 5 Forces of Competitive Position DiagramPosition Diagram

New Market Entrants

Competitive Rivalry

Buyer Power

Product & Technology

Development

Supplier Power

Porter 5 ForcesPorter 5 Forces

Porter’s 5 Forces of Competitive Porter’s 5 Forces of Competitive Position version #2Position version #2

NewEntrants

Entry BarriersEconomies of ScaleBrand IdentityCapital Requirements

Determinants of Supplier Power

Switching Costs

Supplier Volume

Rivalry DeterminantsIndustry GrowthFixed CostsProduct DifferencesBrand IdentityExit Barriers

Porter’s 5 Forces of Competitive Porter’s 5 Forces of Competitive Position #3Position #3

IndustryCompetitors

Intensity of Rivalry

Suppliers Buyers

Substitutes

Supplier Volume

Impact

Forward Integration

Determinants of Substitution Threat

Relative Price

Performance

Switching Costs

Determinants of Buyer Power

Buyer Concentration

Buyer Volume

Backward Integration

Forces at work frameworkForces at work framework

1. Determinants of supplier power• Differentiation of inputs• Switching costs of suppliers and firms in the

industry• Presence of substitute inputs• Supplier concentration• Importance of volume to supplier• Cost relative to total purchases in the industry• Impact of inputs on cost or differentiation• Threat of forward integration relative to threat

of backward integration by firms in the industry

2. Determinants of barriers to entry• Economies of scale• Proprietary product differences• Brand identity• Switching costs• Capital requirements• Access to distribution• Absolute cost advantages

– Proprietary learning curve– Access to necessary inputs– Proprietary, low-cost product design

• Government policy• Expected retaliation

2. New entrants

3. Buyers1. Suppliers

5. Industry competitors

5. Rivalry determinants• Industry growth• Fixed (or storage) cost/value added• Intermittent overcapacity• Product differences• Brand identity• Switching costs• Concentration and balance• Informational complexity• Diversity of competitors• Corporate stakes• Exit barriers

3. Determinants of buying power• Bargaining leverage

– Buyer concentration vs. firm concentration

– Buyer volume– Buyer switching costs relative to firm

switching costs– Buyer information– Ability to backward integrate– Substitute products– Pull-through

4. Determinants of substitution threat• Relative price performance of

substitutes• Switching costs• Buyer propensity to substitute

3. Buyers

4. Substitutes

Intensity of rivalry

1. Suppliers

• Price sensitivity– Price/total purchases– Product differences– Brand Identity– Impact on quality perception– Buyer profits– Decision makers' incentives

Total sales

Territory

Region

Country

Client

WorldGeographicalLevel

Ninety ways to measure Ninety ways to measure demand (6 x 5 x 3)demand (6 x 5 x 3)

Company’s sales

Product lines

Product config

Product items

Sector sales

ProductLevel

Shortterm

Mediumterm

Longterm

Timing Level

Strategic Planning Link with Strategic Planning Link with Marketing PlanningMarketing Planning

� Businesses that succeed do so by creating and keeping customers.

� They do this by providing better value for the customer than the competition.

� Marketing management constantly have to assess which customers they are trying to reach and how they can design products and services that provide better value (“competitive advantage”).

The main problem with this process is that the “environment” in which � The main problem with this process is that the “environment” in which businesses operate is constantly changing.

� So a business must adapt to reflect changes in the environment and make decisions about how to change the marketing mix in order to succeed.

� This process of adapting and decision-making is known as marketing planning.

Strategic Plan

Business Plan

Marketing Plan

Sales Plan State PlanRegional

PlanIndustry

Plan

Key Account

Plan

Strategic vs. Marketing PlansStrategic vs. Marketing Plans� Strategic planning is concerned about the overall direction of the

business. ◦ It is concerned with marketing, of course.

◦ But it also involves decision-making about production and operations, finance, human resource management and other business issues.

� The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives.business and create its shape so that the products and services it provides meet the overall business objectives.

� Marketing has a key role to play in strategic planning, because it is the job of marketing management to understand and manage the links between the business and the “environment”. Sometimes this is quite a straightforward task. ◦ For example, in many small businesses there is only one geographical market

and a limited number of products (perhaps only one product!).

◦ However, consider the challenge faced by marketing management in a multinational business, with hundreds of business units located around the globe, producing a wide range of products.

◦ Keeping control of marketing decision-making in such a complex situation calls for well-organised marketing planning.

Key issues in strategic and Key issues in strategic and marketing planning?marketing planning?� The following questions are key in the marketing and strategic

planning process:◦ Where are we now?

◦ How did we get there?

◦ Where are we heading?

◦ Where would we like to be?

◦ How do we get there?

◦ Are we on course?

� A marketing plan helps to:◦ The ability of a business to achieve profitable sales is impacted by dozens of

environmental factors, many of which are inter-connected

◦ Identify sources of competitive advantage

◦ Gain commitment to a strategy

◦ Get resources needed to invest in and build the business

◦ Inform stakeholders in the business

◦ Set objectives and strategies

◦ Measure performance

Situation AnalysisSituation Analysis� Internal Analysis—company; capability etc.

� External Analysis—customers, market definition, industry structure

� SWOT Analysis◦ Strengths, Weaknesses, ◦ Strengths, Weaknesses,

Opportunities & Threats◦ Identify & prioritize major problems and

opportunities: selection of key issues

� Based on the firm’s core competencies, decide on future options

SWOTSWOTInternal Environment

Strengths Weaknesses

World class productFinancial resourcesKnow-how

Technical supportInternal processesChannels network

External Environment

Opportunities Threats

Water & Energy crisesEnvironment awarenessProductivity improvement

Competitors market shareEuro X DollarTechnology development

SWOT ANALYSISSWOT ANALYSISOpportunities/Threats

• How are demand and supply expected to evolve?

• How do you expect the industry chain economics to evolve?

• What are the potential major industry discontinuities?

• What competitor actions do you expect?

YOUR BUSINESS CONVERT

OPPORTUNITIESBUILD ON STRENGTHS

NEUTRALIZE THREATS

Strengths/

ADDRESSWEAK-NESSES

Strengths/Weaknesses

• What are your BU’s assets/competencies that solidify your competitive position?

• What are your BU’s assets/competencies that weaken your competitive position?

Can be used as a thought starter for competitive analysis and internal

assessment

Surfaces potential opportunities/threats arising from factors external to the

business

SWOT Analysis is still a useful SWOT Analysis is still a useful ToolTool

TOWS matrixTOWS matrix

Strengths Weaknesses

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies Threats S-T strategies W-T strategies

S-O strategies pursue opportunities that are a good fit to the companies strengths.W-O strategies overcome weaknesses to pursue opportunities.S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.W-T strategies establish a defensive plan to prevent the firm's

weaknesses from making it highly susceptible to external threats.

PEST analysisPEST analysis

� A scan of the external macro-environment in which the company wants to operate (or operates) and can be expressed in terms of the following factors:following factors:

◦ Political

◦ Economic

◦ Social

◦ Technological

POLITICAL

• ecological/environmental issues

• current legislation home market

• future legislation

• European/international legislation

• regulatory bodies and processes

• government policies

• government term and change

• trading policies

• funding, grants and initiatives

• home market lobbying/pressure groups

ECONOMIC

• home economy situation

• home economy trends

• overseas economies and trends

• general taxation issues

• taxation specific to product/services

• seasonality/weather issues

• market and trade cycles

• specific industry factors

• market routes and distribution trends

• customer/end-user drivers

PEST Analysis - market, business, proposition, etc.

• international pressure groups

• wars and conflict

• interest and exchange rates

• international trade/monetary issues

SOCIAL

• lifestyle trends

• demographics

• consumer attitudes and opinions

• media views

• law changes affecting social factors

• brand, company, technology image

• consumer buying patterns

• fashion and role models

• major events and influences

• buying access and trends

• ethnic/religious factors

• advertising and publicity

• ethical issues

TECHNOLOGICAL

• competing technology development

• research funding

• associated/dependent technologies

• replacement technology/solutions

• maturity of technology

• manufacturing maturity and capacity

• information and communications

• consumer buying mechanisms/technology

• technology legislation

• innovation potential

• technology access, licencing, patents

• intellectual property issues

• global communications

PEST or SWOTPEST or SWOT� A PEST analysis most commonly measures a market; a

SWOT analysis measures a business unit, a proposition or idea.

� Generally speaking a SWOT analysis measures a business unit or proposition, whereas a PEST analysis measures the market potential and situation, particularly indicating growth or decline, and thereby market attractiveness, business potential, and suitability of access - market potential and 'fit' in potential, and suitability of access - market potential and 'fit' in other words.

� PEST analysis uses four perspectives, which give a logical structure, in this case organized by the PEST format, that helps understanding, presentation, discussion and decision-making.

� PEST analysis can be used for marketing and business development assessment and decision-making, and the PEST template encourages proactive thinking, rather than relying on habitual or instinctive reactions.

ProducersIndustry

S

• Technology breakthroughs

Economics of demand• Availability of substitutes

Marketing• Pricing

Finance• Profitability

Externalshocks

Feedback

tructure C onduct P erformance

StructureStructure--conductconduct--performance (SCP) performance (SCP) modelmodel

breakthroughs• Changes in

government policy/regulations– Domestic– International

• Availability of substitutes• Differentiability of products• Rate of growth• Volatility/cyclicalityEconomics of supply• Concentration of producers• Import competition• Diversity of producers• Fixed/variable cost structure• Capacity utilization• Entry/exit barriersIndustry chain economics• Bargaining power of input

suppliers• Bargaining power of customers

• Pricing• Volume• Advertising/promotion• New products/R&D• DistributionCapacity change• Expansion/contraction• Entry/exit• Acquisition/merger/ divestitureVertical integration• Forward/backward integration• Vertical joint ventures• Long-term contractsInternal efficiency• Cost control• Logistics• Process R&D• Organization effectiveness

• Profitability• Value creationTechnological progressEmployment objectives

Definition of risksDefinition of risksDefinition

• Risk of loss due to changes in industry and competitive environment, as well as shifts in customer preferences Business risk

• Risk due to changes in regulatory environment (e.g. deregulation)Regulatory risk

• Risk due to major changes in technologyTechnology risk

• Risk of failures due to business processes and operations or people’s behavior, either intentional (e.g. fraud) or unintentional (e.g. errors)

Integrity risk

• Risk of loss due to changes in the political, social, or economic environments

Macroeconomic

risk

ManagementManagement

� Management, control and evaluation

Five disciplines Five disciplines –– Peter SengePeter Senge

� Personal Mastery:

◦ Aspiration involves formulating a coherent picture of the results people most desire to gain as individuals, alongside a realistic assessment of the current state of their lives today.

◦ Learning to cultivate the tension between vision and reality can expand people's capacity to make better choices, and to achieve expand people's capacity to make better choices, and to achieve more of the results that they have chosen.

� Mental Models:◦ Reflection and inquiry skills is focused around developing

awareness of the attitudes and perceptions that influence thought and interaction.

◦ By continually reflecting upon, talking about, and reconsidering these internal pictures of the world, people can gain more capability in governing their actions and decisions.


� Shared Vision: ◦ Establishes a focus on mutual purpose.

◦ People learn to nourish a sense of commitment in a group or organization by developing shared images of the future they seek to create, and the principles and guiding practices by which they hope to get there. practices by which they hope to get there.

� Team Learning:◦ Group interaction.

◦ Through techniques like dialogue and skillful discussion, teams transform their collective thinking, learning to mobilize their energies and actions to achieve common goals, and drawing forth an intelligence and ability greater than the sum of individual members' talents.


� Systems Thinking:

◦ People learn to better understand interdependency and change, and thereby to deal more effectively with the forces that shape the consequences of our actions.

◦ Systems thinking is based upon a growing body ◦ Systems thinking is based upon a growing body of theory about the behavior of feedback and complexity - the innate tendencies of a system that lead to growth or stability over time.

◦ To help people see how to change systems more effectively and how to act more in tune with the larger processes of the natural and economic world.

Project management Project management -- processesprocesses

Project management Project management –– a processa process

Project management Project management –– process process chainchain

Project management Project management –– risk risk analysisanalysis

Success Keys Success Keys -- DeploymentDeployment

Deployment - Completing the Plan

Success Failure>Assign roles and responsibilities

>Establish priorities

>No accountability for deployment

>Too many goals, strategies, or objectives - no apparent priority

>Involve mid-level management as active participants

>Think it through - decide how to manage implementation

>Charge mid-level management with aligning lower-level plans

>Make careful choices about the contents of the plan and form it will take

>Plan in a vacuum-functional focus

>No overall strategy to implement

>Make no attempt to link with day-to-day operations

>Not being thorough-glossing over the details

Success Keys Success Keys -- CommunicationCommunication

Deployment - Communicating

Success FailureAssign roles and responsibilities

Communicate the plan constantly

No accountability

Never talk about the planCommunicate the plan constantlyand consistently

Recognize the change process

Help people through the changeprocess

Never talk about the plan

Ignore the emotional impact of change

Focus only on task accomplishment

Success Keys Success Keys -- ImplementationImplementation

Implementing - I

Success Failure

Assign roles and responsibilities

Involve senior leaders

No accountability

Disengagement from process

Define an infrastructure

Link goal groups

Phase integration of implementationactions with workload

Involve everyone within theorganization

Unmanaged activity

Fragmented accomplishment ofobjectives leads to sub-optimization

Force people to choose between implementation and daily work; too many teams

No alignment of strategies

Success Keys Success Keys -- ImplementationImplementation

Implementing - II

Success Failure

Allocate resources for implementation

Focus only on short term need for resources

Manage the change process

Evaluate results

Share lessons learned; acknowledgesuccesses through open andfrequent communication

Ignore or avoid change

No measurement system

Hide mistakes/lay blame;limited/no communication

Success Keys Success Keys -- MeasurementMeasurement

Strategic Measurement - I

Success Failure

Assign roles and responsibilities

Use measurement to understand

No accountability

Sub-optimization: focus only onUse measurement to understandthe organization

Use measurement to provide aconsistent viewpoint from which togauge performance

Use measurement to provide anintegrated, focused view of thefuture

Sub-optimization: focus only onefficiencies

Use measures that provide no realinformation on performance; usetoo many measures

Use measurement to focus on thebottom-line only

Success Keys Success Keys -- MeasurementMeasurement

Strategic Measurement - II

Success Failure

Use measurement to communicatepolicy (new strategic direction)

Use measurement to control

Update the measurement system

Use measurement to providequality feedback to the strategicmanagement process

Never review measures

Fail to use measurement to makestrategic, fact-based decisions; useonly for control

Success Keys Success Keys -- EvaluationEvaluation

Evaluation

Success FailureAssign roles and responsibilities

Recognize when to update the plan

No accountability

Poor timing and not recognizing external forces

Modify strategic planning process to accommodate the more mature organization

Incorporate new leaders into the strategic planning process

Integrate measurement with strategic planning

Use experienced strategic planning facilitators

Rigid application of strategic planning process; ignore lessons learned from previous efforts

Ignore impact of new leaders

Don't use measurement information

Shortcut the process

Best Companies Spend more time Best Companies Spend more time on Forward Planning than Historical on Forward Planning than Historical AnalysisAnalysis

Achieving Agility Through a New Approach to Forecasting In today’s turbulent economy, rolling forecasts are proving to be an important new tool in changing the way budgeting and planning has traditionally been handled. Mary Brandel

Benefits of Rolling Forecasts Benefits of Rolling Forecasts

developing a strategic business plan

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