2013 04-17 strategy wasil v2

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THE POWER OF ACCOUNTINGTHE POWER OF ACCOUNTING
IN SUCCESSFUL STRATEGYIN SUCCESSFUL STRATEGY
James Joseph Wasil
Senior IT Strategist
Ohio Bureau Workers’ Compensation
April 17, 2013
Columbus Public Library
96 S Grant Ave.
Some Opening Discussion PointsSome Opening Discussion Points
1. What agencies and organizations are represented
here today?
2. Does your organization possess a strategic plan?
3. Can anybody describe the basics of the strategic
plan?
4. How is the strategic plan linked to your budget?
5. How is the strategic plan linked to your investment
portfolio?

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6. What is the mission of your organization?
7. Who is responsible for the organization’s strategic
plan and strategies?
8. What role, if any, do you play in the organization’s
strategic plan and strategies?
9. What role, does Accounting have to do with
Strategic planning?
10. What did you hope to take away from this
presentation today?
What is Strategy, Anyways?What is Strategy, Anyways?
How many ways are there to envisage strategy?How many ways are there to envisage strategy?

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“The 10 Schools of Strategy”“The 10 Schools of Strategy”
. School of Strategy:
Design Process of
Conception
Learning Emergent
Process
Planning Formal Process Power Negotiation
Process
Positioning Analytical
Process
Cultural Collective
Process
Entrepreneurial Visionary
Process
Environmental Reactive Process
Cognitive Mental Process Configuration Transformation
Process
From Henry Mintzberg et al. Strategy Safari
What is Strategy?What is Strategy?
Traditionally,
“A strategy is a plan designed to
achieve a particular long term aim ”achieve a particular long-term aim.”
Oxford Dictionary (2002 ed.) p 829
Strategy as a PlanStrategy as a Plan
(Formulation)(Formulation)
Decision Plan Action
Goal
Decision Plan Action
Strategy as a PlanStrategy as a Plan
(Formulation)(Formulation)
Goal
Situation less than
desired - requiring
a diagnosis
Creation of Guiding
Policies: Strategy
A coherent set of
actions based on
Guiding Policies
Strategy can be formulated in advance…
Or it can be defined by behaviors – a series of decisions which determine
behavior over time
Strategy as a PatternStrategy as a Pattern
(Formation)(Formation)
Decisions Behavior Patterns Strategy
behavior over time
Decisions
based on
plans from
management
Decisions
based on
learning by
employees
Deliberate Emergent

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behavior over time
Strategic
Planning,
Entrepreneurial
Decisions
Leadership
team, Process
Changes
Deliberate Emergent
Strategy Can Be Many ThingsStrategy Can Be Many Things
Strategy as a:
Plan
Position
Perspective
Pattern
Hypothesis (Guess)
Stratagem (Ploy)
Strategic Management AccountingStrategic Management Accounting
What is Strategic Management Accounting
(SMA)?
Kenneth SimmondsKenneth Simmonds –– Father of SMAFather of SMA
 Emeritus Professor of Marketing and
International Business
 Research interests: Global strategy,
international business management,
strategic marketing, and strategic
management accounting.
 Fellow of Academy of International
Business; Fellow of Academy of
Marketing.
 Formerly: Geigy Professor of Marketing,
University of Manchester; Ford Foundation
Professor, University of Chicago; Professorial
Fellow, Said Business School, Oxford.
Reading: Simmonds K., (1981) The Fundamentals of Strategic Management Accounting, London.
“SMA is the provision and analysis of
management accounting data about a business
and its competitors for use in developing and
maintaining the business strategy, particularly
relative levels and trends in real costs and prices,
volume, market share, cash flow, and the
proportion demanded of a firm’s total resources.”
Ken Simmonds
1981
C
Porter’s Five
BSC
Strategy Execution Frameworks
B
Strategy
1990
Differentiation
Harvest
Strategies
Focus Strategies
SustainableCost
Advantage
Value chain
Competitor’sCost
Structure
COrganization
BSCSBUs
Time Dimension
yDimension

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C
Porter’s Five
BSC
B
Strategy
2013
Differentiation
Harvest
Strategies
Focus Strategies
SustainableCost
Advantage
Value chain & stream
Competitor’sCost
Structure
COrganization
BSCSBUs
Time Dimension
yDimension
Wasil 2013
Pe
Outcome Management (OM)
BSC
B
Strategy
2013 Non-profit and
Government Organizations
Differentiation
Harvest
Strategies
Focus Strategies
MissionYield
eerOrganizational
CostStructure
COrganization
BSCSBUs
Time Dimension
yDimension
Wasil 2013
We will now examine all three axes for a maturing SMA function.
Wasil 2013
Strategy
Time Dimension
yDimension
Wasil 2013
Data Dimension
The Accountant has the ability to supply data and information to
others in the organization to increase their knowledge and ability to
drive successful strategy
Wasil 2013
drive successful strategy.
Technology is taking accountants into new realms:
Cloud Services
BI
Management Accounting SystemManagement Accounting System
(MAS)(MAS)
If individual decision makers must compile
their own data, then the MAS is failing in
its function as a decision support systemits function as a decision support system
and not focusing adequately on key
strategy biz issues.
Keith Ward

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Strategy
Differentiation
Harvest
Strategies
Focus Strategies
Time Dimension
yDimension
Wasil 2013
Strategy
SMA starts with Strategy.
Strategy
Time Dimension
yDimension
Wasil 2013
Strategy
a) Operational Effectiveness and Efficiency (Harvest Strategies)
b) Differentiating Strategies
c) Focus Strategies
Three types of strategies:
Strategy
Time Dimension
yDimension
Wasil 2013
Three types of strategies:
Type Strategy What it means
Operational Effectiveness and
Efficiency
We do the same thing as others
but cheaper
Differentiating Strategies We do different things and
Wasil 2013
Differentiating Strategies We do different things and
better
Focus Strategies We are everything to these
customers and nothing to those
customers
The most common strategies proposed by Senior
Management involve Operational Efficiency and Effectiveness.
HOWEVER…
Wasil 2013
Operational Efficiency and Effectiveness is not really a
strategy
Operations, Tactics, and Strategy are different!
Operations Tactics Strategy
To-do items for Now Details for short run Important things for
Wasil 2013
To-do items for Now
(very short time
frame)
Details for short run
(short to medium
run)
Important things for
the long run
Not strategic –
activities make
strategy operational
May be strategic
depending on your
role, and may turn
into strategies later!
Strategic but may
be discarded later
and turn into
tactics!
Very many
operations
Dozens of tactics Few strategies

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Most strategic value comes from being different – and better,
and being able to sustain a competitive advantage over the
long run
Wasil 2013
Strategy
Differentiation
Harvest
Strategies
Focus Strategies
MissionYield
Time Dimension
yDimension
Wasil 2013
Value Chain
Wasil 2013
Michael Porter
Value Stream
Rummler and Brache
Mission Yield –
Units of Mission (which
are carefully chosen)
accomplished per dollar
spent.
Jorge Lopez of Gartner
Pe
Strategy
Differentiation
Harvest
Strategies
Focus Strategies
MissionYield
eerOrganizational
CostStructure
Time Dimension
yDimension
Wasil 2013

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Pe
BSC
Strategy
Differentiation
Harvest
Strategies
Focus Strategies
MissionYield
eerOrganizational
CostStructure
COrganization
Time Dimension
yDimension
Wasil 2013
Pe
BSC
B
Strategy
Differentiation
Harvest
Strategies
Focus Strategies
MissionYield
eerOrganizational
CostStructure
COrganization
BSCSBUs
Time Dimension
yDimension
Wasil 2013
The Story of Bruce HendersonThe Story of Bruce Henderson –– andand
the Beginning of Strategy Consulting.the Beginning of Strategy Consulting.
•Worked for family business
•Spent 18 years with Westinghouse in
Accounting
•Joined Arthur D. Little Sr Vice President,
Management Services
•Founded the Boston Consulting Group (BCG)
in 1963 specializing in Business Strategy
Videos of Bruce Henderson have been posted on YouTube. See
the links below.
http://www.youtube.com/watch?v=YmZjJxS-Mw4
http://www.youtube.com/watch?v=c-STNDRnQ6M
http://www.youtube.com/watch?v=fYczwrR9lKY
Is this true?Is this true?
All businesses using the same raw
materials, and making the same product,
will essentially make the same profitswill essentially make the same profits
because their costs will be similar.
Is this true? NOIs this true? NO
Henderson found that any company that
makes products will continue to reduce its
costscosts…..
The Experience CurveThe Experience Curve
The EC is a function of:
•Learning
•Specialization
•Investment
•Scale
The more often a task is performed, the lower will be
the cost of doing it. The task can pertain to any
product or service whatsoever.
•The so-called secret sauce
Called “core competencies”
By Gary Hamel and
CK Prahalad

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The Story of Bruce HendersonThe Story of Bruce Henderson –– andand
the Beginning of Strategy Consulting.the Beginning of Strategy Consulting.
the Financial Times has stated that
Henderson..
"did more to change the way business is
done in the United States than any other
man in American business history.”
Financi
al times
"Costs characteristically decline by 20-30% in real terms
each time accumulated experience doubles. This means
that when inflation is factored out costs should always
The Experience CurveThe Experience Curve
The Experience Curve is a managerial tool primarily used to
predict cost behavior
that when inflation is factored out, costs should always
decline.
Bruce Henderson 1968
Firms That Focus on Extreme CostFirms That Focus on Extreme Cost
Reduction (only) Risk Loss of Value !Reduction (only) Risk Loss of Value !
“If high ROI thresholds are
used to limit capital
investment then theinvestment, then the
[experience curve] costs do
not decline as expected.”
Bruce Henderson
Growth Share MatrixGrowth Share Matrix
Relative Market Share
High Low
(Cash Generation)
hare
on)
High
RelativeMarketS
(CashGeneratio
Low
According to Henderson, there are four rules for cash flows:
1. Margins and cash generated are a function of market share. High
margins and high market share go together.
2. Growth requires cash input to finance added assets. The added
cash required to hold share is a function of growth rates.
3. High market share must be earned or bought. Buying market
share requires an additional increment of investment.
4. No product market can grow indefinitely. The payoff from growth
must come when the growth slows, or it never will. The payoff is
cash that cannot be reinvested in that product.
High Low
(Cash Generation)
hare
on)
High
RelativeMarketS
(CashGeneratio
Low

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High market share and slow growth = cash cows
Low market share and slow growth = dogs
All products/services become one or the other!
High Low
(Cash Generation)
hare
on)
High
RelativeMarketS
(CashGeneratio
Low
Low market share and high growth = question marks
High market share and high growth = stars
The star eventually becomes the cash cow!
You are Important to OurYou are Important to Our
Strategy!Strategy!
“Ignorance of an Organization’s past can
undermine the development of strategies for
its future.”
- Henry Mintzberg
The Need for StrategyThe Need for Strategy
“Strategy without tactics is the slowest route
to victory. Tactics without strategy is the
noise before defeat.” Sun Tsu
“Where there is no vision, the people cast off
restraint” Proverbs 29:18
Strategy Must be Linked toStrategy Must be Linked to
Operational ExecutionOperational Execution
“Operational effectiveness and strategy are
both essential to superior performance…
but they work in very different ways.”y y y
Michael Porter
“A visionary strategy that is not linked to
excellent operational and governance
processes cannot be implemented.”
Norton and Kaplan

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Prophetic Statement on StrategyProphetic Statement on Strategy
ExecutionExecution
“Our problem is not about the strategy
itself, but about our execution of it.”
Tony Hayward CEO
BP Oil (Gulf Oil spill)
The Need for Strategy ExecutionThe Need for Strategy Execution
Norton and Kaplan Study Findings:
Only 5% of the workforce understands their Only 5% of the workforce understands their
organization’s strategy
 Only 25% of managers have incentives linked to
strategy execution
 85% of executive teams spend less than one hour a
month discussing strategy (50% never discuss it)
 65% of organizations don’t link budgets to strategy
Kaplan and Norton foundKaplan and Norton found
that:that:
Organizations with aOrganizations with a
Formal Strategy ExecutionFormal Strategy Execution
Process OutperformProcess Outperform
Organizations without oneOrganizations without one
What Happens When You Tell YourWhat Happens When You Tell Your
Employees What Your Strategies Are?Employees What Your Strategies Are?
BSCol Research survey of 143 Companies, March 2006
What Happens When IT Aligns itsWhat Happens When IT Aligns its
Strategy to the Business?Strategy to the Business?
What Happens When You Tighten YourWhat Happens When You Tighten Your
Strategy to the Budget?Strategy to the Budget?

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The Financial Productivity ParadoxThe Financial Productivity Paradox
“IT doesn’t matter!”
Nicholas Carr, Harvard University
The Financial Productivity ParadoxThe Financial Productivity Paradox
"Companies around the world
have spent billions of dollars on
information technology, yet in
most cases this investment has
failed to produce any genuinefailed to produce any genuine
competitive advantage”.
Gary Hamel World Economic
Forum and the Strategic
Management Society
Financial Measures are LessFinancial Measures are Less
Important for ITImportant for IT
Traditional Industrial age competition
is being supplanted by a new form of
Information age competition ”Information age competition.
Maris Martinsons
University of Hong Kong
Imaging would not have passedImaging would not have passed
the ROI testthe ROI test
 Imaging at BWC projected costs
Expense Cost
Storage $952,965
Infrastructure $3,059,748
$333 2
Payback calculated at 7-9 Years
Maintenance $333,172
Services $2,778,417
Labor $3,241,486
GRAND TOTAL $10,365,788
BWC’S Medical Repository wouldBWC’S Medical Repository would
not have passed the ROI testnot have passed the ROI test
BWC
Indexers
Dolphin
Provider MCO
◦ No payback – Cost over $1 Million / year
to pay claims faster – Customer value
Medical Repository
MR Auto-
Index
V3
Security
By SSN
It’s all about Business ValueIt’s all about Business Value
 IT’s value may not be captured
accurately by conventional input-
output accounting methods.
 Effectiveness and Innovation cannot
be readily quantified in terms of
traditional outputs and these
improvements are not reflected in
economics efficiency statistics.

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Tangible vs. Intangible AssetsTangible vs. Intangible Assets
TANGIBLES:
Computers
Equipment
Desks
C
INTANGIBLES:
Information
Databases
Service
Brookings Institute study results.
Cars Customer
Relations
If Tangible Assets Now on the Books represent less than 10%
of our Value – Why do we still rely on ROI over Tangible Assets
as a test?
Firms That Focus on Extreme CostFirms That Focus on Extreme Cost
Reduction Risk Loss of Value !Reduction Risk Loss of Value !
“If high ROI thresholds
are used to limit capital
investment, then the
[experience curve] costs
do not decline as
expected.”
Bruce Henderson
Introducing the BalancedIntroducing the Balanced
ScorecardScorecard
The Balanced Scorecard was created in
order to avoid the reliance on solely
Financial measuresFinancial measures
What is the Balanced Scorecard?What is the Balanced Scorecard?
The Balanced Scorecard is
 A Communication Tool
A M t T l A Measurement Tool
 A Strategy Management System
What is Meant by “Balanced?”What is Meant by “Balanced?”
Balance between
 long and short-term objectives
Fi i l d fi i l Financial and nonfinancial measures
 Leading and lagging indicators
 External and internal performance
What Other Ways Can We DecideWhat Other Ways Can We Decide
Which Investments to Make?Which Investments to Make?
There are four Perspectives in the Traditional
Balanced Scorecard :
 Financial Financial
 Learning and Growth
 Internal Processes
 Customer

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What Other Ways Can We DecideWhat Other Ways Can We Decide
Which Investments to Make?Which Investments to Make?
The most common IT Balanced Scorecard
uses slightly different perspectives:
 Financial --> Business Value Financial > Business Value
 Learning and Growth--> Future readiness
 Customer --> User Orientation
For simplicity sake the presentation will continue to use the
traditional perspectives
Single Question Throughout…Single Question Throughout…
“What do we need to do well in
order to execute our strategy?”
Single Question Throughout…Single Question Throughout…
“What do we need to do well in
order to execute our strategy?”
For starters, we need to have a
well thought out strategy!
The Purpose of a BalancedThe Purpose of a Balanced
ScorecardScorecard
 The Balanced Scorecard is a tool that
executes on strategy by means of
developed performance objectivesdeveloped performance objectives.
Who Uses the BalancedWho Uses the Balanced
Scorecard?Scorecard?
 2008 Survey of 1,430 global
executives indicated that 53% of
companies use some form of thecompanies use some form of the
Balanced Scorecard.*
*Rigby, Darrell and Barbara Bilodeau, Management Tools and Trends
2009. Bain and Company. 2009.
Who Uses the BalancedWho Uses the Balanced
Scorecard?Scorecard?
 2004: 82% of Hackett Group’s 2,700
database of US companies uses the
Balanced Scorecard *Balanced Scorecard.*
*Lester, Tom. Measure for Measure. Financial Times. Oct. 5, 2004..

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Value PropositionValue Proposition
 “Clarity of the value proposition is
the single most important dimension
of strategy ”*of strategy. *
*Kaplan, Robert S.and David P. Norton. Strategy Maps. (Boston: Harvard Business School Press, 2004.)
A Focus on StrategyA Focus on Strategy
 The Balanced Scorecard allows you to
focus on what really matters, the few
critical drivers of success that powercritical drivers of success that power
your strategy and lead to the
achievement of your mission.*
*Niven, Paul. R. Balanced Scorecard Step-by-Step for Governement and Nonprofit Agencies. 2nd ed. J.Wiley:
Hoboken 2008.
A Focus on StrategyA Focus on Strategy
 How do we fit into the strategy,
goals, and objectives of the agency?
Hoboken 2008.
Introducing the Vision and MissionIntroducing the Vision and Mission
StatementsStatements
 How do we fit into the strategy,
goals, and objectives of the agency?
Warren Buffet Buys $10.7 BillionWarren Buffet Buys $10.7 Billion
in IBM Stockin IBM Stock (now worth $12 B)(now worth $12 B)
WSJ: “Mr. Buffet said he
invested in IBM after
reading its most recent
annual reportannual report..
and was struck by IBM’s entrenched position
on providing technology services to
businesses..
A ‘moat’ against competition… IBM fits all my
principles
Warren Buffet Buys $10.7 BillionWarren Buffet Buys $10.7 Billion
in IBM Stockin IBM Stock (now worth $12 B)(now worth $12 B)
Bloomberg: “I don’t think that there’s any
company that I can think of, big company,
that’s done a better job of laying out where
they’re going to go and then having gonethey’re going to go and then having gone
there.”

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Mission StatementsMission Statements
“Mission statement work is the single most
important work because the decisions
made there affect all other decisions.”
Origin of Mission StatementsOrigin of Mission Statements
In the 1590s, the Jesuits sent members
abroad in missions
(from the Latin mittere - to send)
The modern Mission Statement
gained traction from Philip Selznick.
(his book Leadership in
Administration 1957)
What is a Mission Statement?What is a Mission Statement?
Why we exist
A mission statement is a brief statement - usually
a few sentences to a paragraph, that describes
 Why we exist
 What we currently do (not what we aspire
to doing - that is the vision)
 What differentiates us from others
 Serves as the basis for goals and strategies,
so must be carefully crafted
Why are Mission, Vision, andWhy are Mission, Vision, and
Values Important?Values Important?Values Important?Values Important?
The OSIThe OSI
“Stack”“Stack”

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TheThe
StrategyStrategy
“Stack”“Stack”
BRAND
VISION
MISSION
VALUES - PRINCIPLES – “STRATEGIC
INTENT” – MAXIMS
STRATEGIC THEMES
STRATEGIC OBJECTIVES (GOALS)
DIVISION GOALS
DIVISION OJECTIVES
DIVISION STRATEGIES
ACTION PLANS AND TACTICS
How vision, mission, and values fitsHow vision, mission, and values fits
 Serves as the basis for
◦ Goals
◦ Strategies
◦ Portfolios
◦ Alignment with the Business State of Ohio◦ Alignment with the Business, State of Ohio
◦ In preparation of a Strategy Map and Balanced
Scorecard
◦ Our IT Strategic Plan
so must be carefully crafted
 First step of the Strategy Development
Process
Strategy Development ProcessStrategy Development Process
Strategy
Development Process
Objective Barriers Representative
Tools
1. Clarify Mission,
Values, and Vision
Why are we in
business?
Affirm high-level
guidelines about
organizational
purpose and
conduct.
The vision is
frequently described
in terms not
conducive to
execution.
•Clear mission
•Core values
•Quantified vision
(BHAG)
•Strategic change
agenda
•Enhanced vision
2. Conduct Identify, through Analysis is •Environmental scan
Strategic Analysis
What key issues
affect our strategy?
structured analysis,
the events, forces,
and experiences
that impact and
modify the strategy.
frequently focused
on outcomes and
not on the drivers of
strategy.
(PESTEL)
•Competitive scan
(SWOT)
•“Strategy of record”
analysis
•Strategic issues
3. Formulate the
Strategy
How can we best
compete?
Define where an
how the
organization will
compete.
There is a myriad of
possible
methodologies.
There is no
consensus on which
approaches to use in
which
circumstances.
•Key issue analysis
•Stra methodologies
•Strategy direction
statements
•Do-wells
Examples of Others’ MissionExamples of Others’ Mission
StatementsStatementsStatementsStatements
Mission Statement for the United StatesMission Statement for the United States
“We the People of the
United States, in order to
form a more perfect Union,
establish Justice, insure
domestic Tranquility,
provide for the common
defense, promote the, p
general welfare, and
secure the Blessings of
Liberty to ourselves and
our Posterity, do ordain
and establish this
Constitution for the United
States of America.”
Microsoft Mission StatementMicrosoft Mission Statement
“At Microsoft, we work to help people and
businesses throughout the world realize
their full potential. This is our mission.
Everything we do reflects this mission and
the values that make it possible.”

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IBM’s Mission StatementIBM’s Mission Statement
“The company’s business model is built to
i i l lsupport two principal goals:
 helping clients succeed in delivering
business value by becoming more efficient
and competitive through the use of business
insight and IT solutions; and
 providing long-term value to shareholders.
Starbucks MissionStarbucks Mission
Our mission is to inspire and nurture
the human spirit – one person, one
cup and one neighborhood at a time.
Coke vs. Pepsi Mission StatementsCoke vs. Pepsi Mission Statements
Coke
Our Roadmap starts with our
mission, which is enduring. It
declares our purpose as a
company and serves as the
standard against which we
Pepsi
Our mission is to be the world’s
premier consumer products
company focused on convenient
foods and beverages. We seek to
produce financial rewards tog
weigh our actions and decisions.
•To refresh the world…
•To inspire moments of optimism
and happiness..
•To create value and make a
difference.
p
investors as we provide
opportunities for growth and
enrichment to our employees,
our business partners and the
communities in which we
operate. And in everything we
do, we strive for honesty,
fairness and integrity.
GM / Ford / Toyota MissionGM / Ford / Toyota Mission StatementsStatements
GM
GM is a multinational
corporation engaged in
socially responsible
operations worldwide.
It is dedicated to
provide products and
services of such quality
Ford
We are a global family
with a proud heritage
passionately committed
to providing personal
mobility for people
around the world.
Toyota
..to provide safe and
sound journey. Toyota
is developing various
new technologies from
the perspective of
energy saving and
diversifying energyservices of such quality
that our customers will
receive superior value
while our employees
and business partners
will share I our success
and our stockholders
will receive a sustained
superior return on their
investment.
sources. Environment
has been first and most
important issue in
priorities of Toyota and
working toward
creating a prosperous
society and clean world.
Proposed new BWC MissionProposed new BWC Mission
(2011)(2011)
“BWC will achieve
successful return to work
outcomes for injuredoutcomes for injured
workers, savings for
businesses, and safe
workplaces for all
Ohioans.”
Vision StatementsVision Statements

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What is a Vision Statement?What is a Vision Statement?
 Division Vision should align with that of the
Organization.
 Must be realistic, with a touch of optimism.Must be realistic, with a touch of optimism.
 Short! People should be able to recite!
“Where do we want to be at the end of our
A vision statement answers the question:
Where do we want to be at the end of our
planning horizon?”
??
How Far Out Do We Go?How Far Out Do We Go?
A planning horizon is a term
from Igor Ansoff (1965).
“..the period for which the
fi i bl t t tfirm is able to construct
forecasts with [what they
believe to be] an accuracy
of plus or minus 20%..”
This is the so-called Paretto 80/20 level!
A vision statement is
 typically a brand statement
 that tells everybody how we want to be that tells everybody how we want to be
perceived by the outside world at the end of
the planning horizon.
Frequently starts with “We want to be…”
Examples of Others’ VisionExamples of Others’ Vision
StatementsStatementsStatementsStatements
Microsoft Vision StatementMicrosoft Vision Statement
“[We want] to empower people through
great software, any time, any place ,or any
device.”

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Coke vs. Pepsi Vision StatementsCoke vs. Pepsi Vision Statements
Coke
Our vision serves as the
framework for our Roadmap and
guides every aspect of our
business by describing what we
need to accomplish in order to
Pepsi
Pepsico’s responsibility is to
continually improve all aspects
of the world in which we operate
- environment, social, economic
- creating a better tomorrowp
continue achieving sustainable,
quality growth.
g
than today.
GM / Ford / Toyota VisionGM / Ford / Toyota Vision StatementsStatements
GM
..to be the world
leader in
transportation
products and related
services. We will
earn our customers’
Ford
..to become the
world’s leading
consumer company
for automotive
products and
services.
Toyota
..to be the most
respected and
successful
enterprise,
delighting customers
with a wide range of
enthusiasm through
continuous
improvement driven
by the integrity,
teamwork, and
innovation of GM
people.
products and
solutions in the
automobile industry
with the best people
and the best
technology.
Context for UsContext for Us
Factors Affecting StrategyFactors Affecting Strategy
Our Business ModelOur Business Model
(also known as Strategy as a Position)(also known as Strategy as a Position)
 Steady Progress Through Operational
Efficiency and Effectiveness?
 Differentiation: Us versus Standard
Industry?
 Niche Role
 Competition allowed?
 Focus on Small Businesses?
 Reform - Rule Changes?
 Privatization
Factors AnalysisFactors Analysis
What is going on in Ohio and the world that
is, or could impact us?
Externally: PESTEL and OT of SWOT
Internally: SW of SWOT

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21
 PESTEL analysis:
 P – Political
 E – Economic
 S Sociological
Factors AnalysisFactors Analysis
121
 S – Sociological
 T – Technological
 E – Environmental
 L – Legal
 Government Term and Change
 Current legislation / Mandates (State and Federal)
 Future legislation / Mandates (State and Federal)
 Electorate
Political FactorsPolitical Factors
122
 Electorate
 Funding
 Policy
 Stakeholder needs/demands
 State Budget
 Business Climate
 Deficit
 Job Growth / Unemployment
Economic FactorsEconomic Factors
123
 Job Growth / Unemployment
 Inflation / Recession
 Monetary Growth
 Interest Rates
 Stock Market
 Taxes
 Medical Inflation
 Wage rates
 Demographics (age, distribution, growth..)
 Ethical Issues
 Healthcare
 Major Events and Influences
Sociological FactorsSociological Factors
124
 Major Events and Influences
 Safety and Health
 Social Networking
 Media Views
 Social Networking
 Lifestyle Trends
 Replacement technology solutions
 Data / Information
 Technology Development
 Technology collaboration opportunities
Technological FactorsTechnological Factors
125
 Technology collaboration opportunities
 Information Technology
 Healthcare technology
 Safety and Health
 Trends
 Energy – Going Green
 Occupational Exposures
Environmental FactorsEnvironmental Factors
126
 Occupational Exposures
 Weather

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22
 Regulatory environment
 Legal actions
 Attorneys
 Industrial Commission
Legal FactorsLegal Factors
127
 Industrial Commission
 HIPAA
SWOTSWOT
Strengths and Weaknesses focus internally
Opportunities and Threats are external
Capability MaturityCapability Maturity
BarriersBarriers
Strategy Development ProcessStrategy Development Process
Strategy
Development Process
Objective Barriers Representative
Tools
1. Clarify Mission,
Values, and Vision
Why are we in
business?
Affirm high-level
guidelines about
organizational
purpose and
conduct.
The vision is
frequently described
in terms not
conducive to
execution.
•Clear mission
•Core values
•Quantified vision
(BHAG)
•Strategic change
agenda
•Enhanced vision
2. Conduct Identify, through Analysis is •Environmental scan
Strategic Analysis
What key issues
affect our strategy?
structured analysis,
the events, forces,
and experiences
that impact and
modify the strategy.
frequently focused
on outcomes and
not on the drivers of
strategy.
(PESTEL)
•Competitive scan
(SWOT)
•“Strategy of record”
analysis
•Strategic issues
3. Formulate the
Strategy
How can we best
compete?
Define where an
how the
organization will
compete.
There is a myriad of
possible
methodologies.
There is no
consensus on which
approaches to use in
which
circumstances.
•Key issue analysis
•Stra methodologies
•Strategy direction
statements
•Do-wells
•Outcome
Management for
Social Non-Profits
Here is What You are Up Against!!Here is What You are Up Against!!
“Organizational members, on average, rarely
engage in behaviors associated with
management of mission statement meaning
and thus pay little attention to theirand thus pay little attention to their
organization’s formal mission statement.”
Journal Healthcare Management
2010, Jan-Feb. Vol. 55(1)
Desmidt, Sebastian et al

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23
This Study also Found that …This Study also Found that …
“Members who engage in behaviors
associated with management of mission
statement meaning evaluate thestatement meaning evaluate the
organizational strategic direction more
favorably and perceive a higher level of fit
between their personal values and the
organizational values.”
Recommendations of the Study..Recommendations of the Study..
• Create an information-rich environment
that complements an elucidates the formal
mission statement.
• Provide high levels of information on critical
context specific topics to increase
organizational understanding.
• Incorporate structural mechanisms that
enable debate, clarification, and enactment.
THE BALANCED SCORECARDTHE BALANCED SCORECARD
Customer
Learning & growth
Internal ProcessesSTRATEGY
GOOD
IDEAS Financial
STRATEGY GOAL
The Four PerspectivesThe Four Perspectives
 The Learning and Growth Perspective
◦ Human Capital: Aligning People with Strategy
◦ Closing Skills Gaps in Strategic Positions
T i i f S◦ Training for Success
◦ Recruiting the Right People
◦ Retaining the Right People and Succession Planning
To achieve our vision, how must our
organization learn, innovate, and
improve?
 The Learning and Growth Perspective
◦ Aligning information with the Strategy
◦ Creating the Climate for Growth and Change
C lt d M t it f th O i ti◦ Culture and Maturity of the Organization
◦ Innovation
◦ Recognition and Rewards
◦ Alignment
 The Internal Process Perspective
◦ What key processes must we excel at to
accomplish our goal and add value for customers?
To satisfy our customers and
stakeholders, which processes must
we excel at?

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24
 The Customer Perspective
◦ What do our customers expect or demand from us?
◦ What is our value proposition for serving them?g
 Operational Excellence
 Product / Service Leadership
 Customer Loyalty
To achieve our vision, what must we
do well for our customers?
Who is the Customer?Who is the Customer?
 A customer is a person or group that
directly benefits from our products and/or
our services.
 The Financial (Fiduciary) Perspective
◦ How effectively do we deliver on our mission anda make a
distinctive impact?
◦ What opportunities exist for broadening our sources of◦ What opportunities exist for broadening our sources of
revenue?
◦ How robust and reliable are our financial systems to produce
accurate data?
If we succeed, how will we look to our
stakeholders?
Example Themes for EachExample Themes for Each
PerspectivePerspective
 Financial
◦ Aggressive Growth
◦ Maintain overall margins
 Customer
◦ Customer Loyalty
◦ Complete product-line offering
Example Themes for EachExample Themes for Each
PerspectivePerspective
 Internal Business Process
◦ Build the brand
◦ Fashion leader
◦ Quality product◦ Quality product
◦ Superior shopping experience
 Learning and Growth
◦ Strategic skills
◦ Personal growth
Evolution of the Balanced ScorecardEvolution of the Balanced Scorecard
3rd Gen
Strategic
Governance
Framework
4th Gen
2nd Gen
1st Gen
Improved
Measurement
System
Management
System
1990 1995 20052000

4/17/2013
25
Generations of ScorecardsGenerations of Scorecards
First Generation:
 Was an operational tool to measure
performance ONLY
Focused on defining and measuring core Focused on defining and measuring core
competencies
 Looked at creating measures for each
perspective
 DID NOT include strategy
 Good prescriptive approach DNE
First Generation Balanced ScorecardFirst Generation Balanced Scorecard
“To succeed
financially,
how should we
appear to our
stakeholders?”
FINANCIAL
“To achieve “To satisfy our
&
CUSTOMER
INTERNAL BUSINESS
PROCESS
Kaplan, Robert S. and David P. Norton. Translating Strategy into Action: The Balanced
Scorecard. Harvard Business School Press: Boston. 1996.
our vision, how
should we
appear to our
users?”
“To acheive
our vision, how
will we sustain
our ability to
change &
improve?”
stakeholders &
users, what
processes must
we excel at?”
LEARNING &
GROWTH
VISION AND
STRATEGY
Measures…Measures…
When you can measure what you are speaking
about, and express it in numbers, you know
something about it; but when you cannot
measure it, when you cannot express it in
numbers, your knowledge is of a meager and
unsatisfactory kind.
—Lord Kelvin
Types of MeasuresTypes of Measures
 Diagnostic measures - monitor whether the
business remains in control and can signal
when unusual events are occurring that
require immediate attention
 Strategic measures - define a strategy
designed for competitive excellence
Types of Performance MeasuresTypes of Performance Measures
Measure Example
Input Timesheets
Output Timesheet results
Outcome Benefit received fromOutcome Benefit received from
timesheet information
Key Performance IndicatorsKey Performance Indicators
Dimension Example
Trajectory Increase, Decrease
Object to be measured Widgets
Baseline value 10 widgets per hour
T t l 15 id t h
KPI’s have five dimensions:
Target value 15 widgets per hour
Target date First Quarter 2013
The KPI should reflect SMART:
Specific
Measureable
Achievable
Relevant
Timeframe

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26
Lag and Lead Performance IndicatorsLag and Lead Performance Indicators
Value
Lagging Indicators
The Past The FutureNow
Leading Indicators
Early Warning SignsHistorical
The Metrics Continuum (Gartner)The Metrics Continuum (Gartner)
Lagging Leading
Regulated
Financial
Key
Performance
Indicators
Key Risk
Indicators
Weak
Signals
Example
Metrics
Revenue Time to
Market
Business
Disruptions
Stakeholder
Decisions
Auditability Very High High Medium Low
Business
Patterns
Activities
Defined Creative Exception Collective
Patterns
Smith, Michael, and Betsy Burton. Leading Indicators Guide Pattern Seeking in a Performance-
Driven Culture. Gartner Research Note 00205679. August 2, 2010
Caveats to Creating MeasuresCaveats to Creating Measures
 Care should be taken not to sub-optimize
measures. (measures that, if the
organization were not careful, could pull
down other measures, or end up as
artifacts.)
 For example, “increase call volumes.” which
can be achieved by poor responses or
hanging up on your customer.
Types of MeasuresTypes of Measures
 Balanced Scorecard measures are not a
replacement for the organization’s day to
day measurement system.
Second Generation:
 Attached strategic objectives to
perspectives and one or more KPI’s
 Created a cause and effect (CAE)
relationship between perspectives
 Introduced Strategy Linkage Models now
known as Strategy Maps
Balanced ScorecardBalanced Scorecard ShowingLinkageShowingLinkage ofof
Objectives to PerspectivesObjectives to Perspectives
Objectives Measures Targets Initiatives
FY12 FY13 FY14
Financial
CustomerCustomer
Internal
Processes
L&G

4/17/2013
27
The Cause and effect principle…The Cause and effect principle…
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lostFor want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.
The cause and effect principleThe cause and effect principle ––
An ExampleAn Example
 GOAL: A Reduction of current BWC/IT
budget by $10 million annually (for the
purpose of reinvesting in agency top prioritypurpose of reinvesting in agency top priority
projects)
 If we focus our employee training on
elements of the simplified MUSE architecture
then they will be ready for change (Learning
The cause and effect principleThe cause and effect principle –– AnAn
ExampleExample
then they will be ready for change. (Learning
and Growth)
 If employees are ready for change then we
can move ahead faster with [new process]
needed by business units as a result of the
ExampleExample
needed by business units as a result of the
core study with less risk. (Internal Processes
Perspective)
 If can move ahead faster with less risk, then
we can change over to new systems and
applications that better satisfy our end users
ExampleExample
applications that better satisfy our end-users
(Customer Perspective) and reduce costs.
 If we can begin reducing our costs sooner
then we will be able to self-fund more
important investments for the agency
The cause and effect principleThe cause and effect principle ––
An ExampleAn Example
important investments for the agency.
(Financial Perspective)

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28
Motivated ReasoningMotivated Reasoning
 Managers who are involved in selecting
strategic initiatives are likely to perceive
those initiatives as more successful.
Taylor, William B. The Balanced Scorecard as a Strategy-Evaluation Tool: The Effects
of Responsibility and Causal-Chain Focus. Cornell University. Dissertation. 2007.
Balanced Scorecard Can ReduceBalanced Scorecard Can Reduce
Motivated ReasoningMotivated Reasoning
 If the scorecard is framed as a causal
chain, managers will be less susceptible to
motivated reasoning because success
becomes more clearly defined: an initiative
must not only improve the measure on
which it should have a direct effect, but
also must improve the measures on which
it should have an indirect effect.
Taylor, William B. The Balanced Scorecard as a Strategy-Evaluation Tool: The Effects
of Responsibility and Causal-Chain Focus. Cornell University. Dissertation. 2007.
What is a Strategy Map?What is a Strategy Map?
 A strategy map is a one page
graphical representation of what you
must do well in each of the fourmust do well in each of the four
perspectives in order to successfully
execute your strategy.*
Hoboken 2008.
What is a Strategy Map?What is a Strategy Map?
Also, a strategy map:
 Documents the primary strategy goals (of
organization, division, etc.)
 Shows each objective as text in a block or
o aloval
 Has 20 or fewer objectives
 Shows objectives layered across
perspective “lanes”
Structure of a Strategy MapStructure of a Strategy Map
..that supports the vision, BHAG, overall goal, mission, or value statement
..that must meet our stakeholder expectations (Financial Perspective FP)
..that provide a satisfying customer experience (Customer Perspective CP)
..to deliver the strategic processes (Process Perspective IBP)
We will enable our people in IT..
(Learning, Growth, Innovation Perspective LG)

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29
Imaging ExampleImaging Example
 Examine all of the ways that information comes into
and goes out of a company, where it could be
digitized.
 This would allow us to “translate” free form and
analog information into digital format where we
could operate on it with our computer systems andp p y
transport it on our data network.
 We could offer information back in the form of our
customers’ choosing.
 This would allow us to provide new services, handle
information faster, with fewer mistakes, have higher
customer service, and save money.
Example: ImagingExample: Imaging
 Learning and Growth (innovation)
 L&G: Examine all ways that information comes
into and goes out of a company where it could beinto and goes out of a company where it could be
“digitized.”
 L&G: Understand potential technologies related to
digitized information.
 Begin vendor discussions and learn about
technology alternative approaches
So that we can…
 IP: Develop business processes that exploit
capturing free form / analog information and digital
Develop business processes that exploit capturing free form / analog information and digital conversion.
Integrate new technologies into our business applications
capturing free form / analog information and digital
conversion.
 IP: Build integrated processes that deliver data
and digital content
 IP: Develop business processes that embrace
digital technologies.
 So that we can….
 Customer Focus
 CF: Reduce time of customer interactions
 CF: Reduce time to deliver information to
company staff and customers
 CF: Reduce lost information impacting customers
So for fiduciary stakeholders expectations, we can…
 Financial Perspective
 FP: Reduce the cost of each transaction with
customers
 FP: Reduce staff size
 FP: Reduce cost by being able to reallocate work
between service offices
To enable….
 A digital doorstep surrounding BWC
that digitizes all information entering
BWCBWC.

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30
Structure of a Strategy MapStructure of a Strategy Map
VMG: Build a digital doorstep surrounding Company that digitizes all
information entering and allows for digitized output
Minimize customer
interaction time
C
F
Reduce info
lag
Offer more channels
to customers
Reduce Trans
Cost
F
P
Reduce staff
size
Reduce
Service offices
Examine Info I/0
into Company
L
G
Learn about new
digital technologies
Begin Vendor
discussions
I
P
Develop business
processes to deliver
data / digital content
Develop business
processes exploiting
free form / analog info
Build integrated
processes with
digital content
interaction timeF lag to customers

4/17/2013
31
Third Generation:
 Includes a Destination Statement
 May include other perspectives including a
simplification of using only twosimplification of using only two
perspectives: Activities and Outcomes
 Many practitioners have adopted
destination statements but fewer have
tinkered with the perspectives
What is a Destination Statement ?What is a Destination Statement ?
 A description ideally including quantitative
detail, of what the organization is likely to
look like at an agreed future date.
 Sub-divided into descriptive categories
Lawrie, Gavin and Ian Cobbold. Development of the 3rd Generation of Balanced
Scorecard. 2GC: Berkshire UK. May 2002.
 Sub divided into descriptive categories,
typically the four perspectives.
The Basic ProcessThe Basic Process
 Assemble with Sponsoring executive
a strategically minded group to
create a balanced scorecard and a
strategy mapstrategy map.
 Create a SharePoint site for balanced
scorecard
 Review the Vision, Mission, Values,
and Strategy Themes

4/17/2013
32
 Perform external and internal factor
analysis (SWOT and PESTEL)
 Review other goals and objectives
 Use all-hands events, traditional and
social media channels
 Create a series of scenarios that
paint different stories about the
future to the end of the planning
horizonhorizon
 Determine commonalities between
the scenarios
 Decide on Balanced Scorecard
perspectives (do we use the standard
perspectives or newer ones?)
 Determine how the Balanced
Scorecard will be used here
 Decide on how to communicate the
B l d S dBalanced Scorecard
 Interview key players outside of the
group as necessary
 Develop strategy map objectives in
each perspective
 Develop a shared understanding with
bj iobjectives
 Conduct a strategy mapping
workshop
 Review the cause and effect logic of
the map, balance, significance of
objectives to limit them to only the
most important itemsmost important items
 Create key performance indicators
 Review current and future strategic
initiatives
 Tie initiatives to measures
 Create alignment by cascading the
balanced scorecard
 Link Resource allocation to the
Balanced Scorecard.

4/17/2013
33
StrategyStrategy--Focused OrganizationFocused Organization
Principles (SFO)Principles (SFO)
Benefits of the Balanced Scorecard and what
Kaplan and Norton call the “Strategy-Focused
Organization”Organization
 Leaders drive strategy execution
 Executives make a case for change
A ll ti l t d t t i t A well-articulated strategy exists
 Leaders reinforce strategic priorities
 An office or place for Strategy Management
is established
 Strategy is translated into a strategy map
 Strategy is described by a Balanced
ScorecardScorecard
 Targets are identified for all measures
 Strategic initiatives are rationalized
 Executives are accountable for initiatives
 Enterprise contribution to IT strategy is
defined
Enterprise scorecard g ides b siness nits Enterprise scorecard guides business units
 Scorecards align end-users
 Scorecard reports occur to the board and or
stakeholders
 A strategic awareness is created
 Personal goals are aligned
P l i ti li d Personal incentives are aligned
 Competency development is aligned
 Budget is driven by strategy
 Planning for HR/IT is linked to strategy
P tf li f t t i i iti ti i li d t Portfolio of strategic initiatives is aligned to
themes
 Process improvement is aligned to strategy

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34
 Process improvement is aligned to strategy
 Best practice sharing is in place
St t i f i f ti id Strategic performance information guides
decision making
 Strategy is reviewed on a regular basis
 How do different organizations view
strategy?
 What makes for a winning approach (is
there such a thing?)
 What is the best “strategy of strategies”
for an organization to follow, from
planning to execution?
Key Strategy IssuesKey Strategy Issues
 Is there a difference between private
industry, non-profits, and governmental
agencies in the approach they must take?
 There are now tools based on organizational
strategy that refine risk and investment
justification beyond simple ROI.
 Professional organizations are now more than
ever defining strategy.
 Schools of thought have arisen around
strategy approaches.
 Innovation is both good and bad for
Key Strategy PointsKey Strategy Points
 Innovation is both good and bad for
companies led by entrepreneurs and
intrepreneurs.
A: It depends! (In other words, how
detailed and complicated does it need to
be?)
Q: What is Strategy Anyways?Q: What is Strategy Anyways?
Strategy as Plan
“A plan of action resulting from the
practice of strategy” (Webster) or
 “Strategy refers to a plan of action
designed to achieve a particular goal.”
(Oxford)
“St t i t f t t’
Types of StrategyTypes of Strategy
 “Strategy consists of top management’s
plans to attain outcomes consistent with
the organization’s missions and goals.”
(Wright)
Strategy as Pattern-Based
Types of Strategy
• Strategies as Patterns: Consistency
of behavior over time (Mintzberg,
Gartner)

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35
Strategy as Position
 Strategies as Position: “Strategy is a
combination of the ends (goals) for which
the firm is striving and the means
(policies) by which it is seeking to get
there.” [in terms of adjusting to
competition] (Porter)
Strategy as Perspective
 Strategy as a collective enterprise effort of
values and beliefs to shape strategy of the
organization.
(Drucker)
Strategy as Stratagem
Maneuvers to fool or lead competitors to either
engage or discourage engagement. (Schelling)
Strategy is very much related to
Structure
But also…But also…
Structure has evolved to
“Governance”
 Originally applied to organizational
hierarchical structure (Sloan, Chandler)
 Became more functional and addressed
decision rights (Richard Eells)
 Has become much more complicated but
advancement occurred post Sarbanes
Oxley
Structure (Governance)Structure (Governance)
Oxley.
What is Governance?
Governance consists of the Leadership and
Organizational structures and processes that
ensure that the Organization sustains and
extends its Strategy & Objectives.
- Adopted from ITGI
Governance consists of the traditions and institutions byGovernance consists of the traditions and institutions by
which authority in a country is exercised. This includes
the process by which governments are selected,
monitored and replaced; the capacity of the government
to effectively formulate and implement sound policies;
and the respect of citizens and the state for the
institutions that govern economic and social interactions
among them.
From World Bank Group

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36
World Governance IndexWorld Governance Index
Governanc
Stakehol
ders
Operational Management versus Governance
Business Focus
Manageme
nt
e
Employe
es
Now Timefram
e
Planning
Horizon
Executing
Ensuring
Tactic
s
Strategy
Governance FocusGovernance Focus
AreasAreas
Looking outward: Demand governance -
what should we work on? Where should resources
be invested for greatest return? How do we know?
Looking Inward: Supply governance - how
should we do what we do? What are the
constraints, policies, rules and standards we must
comply with?
Value Delivery
Strategic
Alignment
Governance FocusGovernance Focus
AreasAreas
Alignment
Resource Management
Risk Management
Performance Management
GovernanceGovernance
FrameworksFrameworks
ITIL v2
CMMi
ISO
13335,15408,1
7799.20000
Hi
Powers
Performance:
Structure,
Process, &
Controls
MOF
Specificity
BAL
SCORE
CARD
COBIT V
4.1
ITIL v3
Sophistication
Six 
PRINCE2
COSO,SOX
NIST 800
PMBOK
HiLow
Low
Earns credibility
& improves and
aligns strategies
Controls
HIPAA
 Strategy first was associated with the Military:
◦ The Art of War 6th century BCE Sun Tzu
Roots of StrategyRoots of Strategy
◦ The Art of War, 6th century BCE , Sun Tzu
◦ “Strategy without tactics is the slowest route to victory.
Tactics without strategy is the noise before the defeat.”
◦ On War, 1832, Carl von Clausewitz

4/17/2013
37
 Required that printed items, especially
legal documents and newspapers be
printed on stamped paper.
 Had to be paid in British money, not
Colonial money.
 Ostensibly the tax was to reimburse the
British for expenses of the French Indian
Example: The Stamp Act of 1765Example: The Stamp Act of 1765
British for expenses of the French-Indian
war (1756-1763)
 Henry Mintzberg has categorized strategy into
ten schools (slides follow Mintzberg’s points):
School Strategy is
formulated as
Nature
Design Conception Prescriptive
Planning Formal “
Strategy “Schools”Strategy “Schools”
Planning Formal
Positioning Analytical “
Entrepreneurial Visionary Descriptive
Cognitive Mental process “
Learning Emergent “
Power Negotiation “
Cultural Collective “
Environmental Reactive “
Configuration Transformation Integrative
 This is the school most of us identify with
External
Appraisal
Threats &
Opportunit
ies
Environme
Key
Success
Factors Evaluation
The Design SchoolThe Design School
Internal
Appraisal
Environme
nt
Strengths
&
Weakness
es of Org
Factors
Distinctive
Competen
cies
Evaluation
/ Choice
of
Strategy
Implement
ation of
Strategy“SWOT
”
PESTEL Analysis
External
Appraisal
Threats &
Opportunit
ies
Environme
Environme
nt
PESTEL is an acronym for the following factors:
P = Political
E = Economic
S = Sociological
T = Technological
E = Environmental
L = Legal
(There may also be other factors such as Educational,
Competitive, Supplier, Market factors
The “STACK”
THE BRAND
VISION STATEMENT
MISSION STATEMENT
STRATEGIC THEMES
GOALS AND OBECTIVES
STRATEGIES
KEY PERFORMANCE AND RISK
INDICATORS
How design school works:
 Top down driven, ultimate strategist is
CEO
 Simple prescriptive model
 Strategies are perspective (a way of doing
things), explicit, simple
S l d f
 Strategies are implemented after
formulation
 Historically significant

4/17/2013
38
Issues with the Design School:
 Top down driven means little upward
participation in either creation or
execution
 Rather simplistic
 May be inflexible or not allow for agility
 Too convenient
 SWOT usually not applied or misapplied
 Mixed reviews on its effectiveness!
 Highly formal, tight processes, requires
formal training procedures, techniques
 Typically executed by strategy department
 Key figures: Igor Ansoff, 1965, Russ Ackoff
 Builds on School of Design
 More Quantitative
 May involve scenario planning
The Planning SchoolThe Planning School
 May involve scenario planning
 Offers bottom up opportunities through
capital budgeting
 Issues with the Planning School:
◦ Can strategic planning really be formalized and
processed and still hit the mark?
◦ Does the term “planning horizon” really make
sense?
◦ Strategic planning creates a certain level of
inflexibility as opposed to agility now being
The Planning SchoolThe Planning School
touted.
◦ Can strategy or the weather be forecasted
well?
 Killed off many proponents of the
planning school
 Origin was from military maxims (Sun Tzu
and von Clausewitz): Maxims are similar
to Ben Franklin almanac sayings “A stitch
in time saves nine” or in modern parlance,
“The company who starts the price war
The Positioning SchoolThe Positioning School
The company who starts the price war
takes the profit out of the product.”
 Offers a quantum states version of possible
types of strategy. Enter Michael Porter.
 Porter cites the three generic strategies:
◦ Overall cost leadership (Efficiency and
Effectiveness) “Our product is like the others only
less expensive.”
◦ Differentiation. “Our product is different than the
others.” When it is very different, it becomes a
“Blue Ocean Strategy” (Mau and Bourgne)
◦ Focus or “Boutique”. “Our product is very
specialized and focuses on this or that group.”
 Porter’s Five (Competitive) Forces:
◦ Entry and Exit barriers
◦ Threat of Substitution
Threat of Substitution
◦ Bargaining power of buyers
◦ Bargaining power of suppliers
◦ Rivalry among current competitors

4/17/2013
39
 Positioning school kicked off modern
strategy efforts (e.g., Bruce Henderson of
BCG, Porter, McKinsey & Co.)
 Positioning school emphasized experience
and market share
◦ Experience Curve
◦ Growth Share Matrix
◦ Growth Share Matrix
 Issues with the Positioning School
◦ Analysis does not produce synthesis.
◦ Analysis does not in itself foster
◦ Analysis does not in itself foster
strategy creation
◦ Generic positions not unique
perspective
 Entrepreneurs are the leaders who are
either founders or brought into an
organization for their vision, intuition, and
experience (versus the plan). May also
include intrapreneurs
 Strategy is in the mind of the leader
Structure is usually simpler as defined by
Entrepreneurial SchoolEntrepreneurial School
 Structure is usually simpler as defined by
entrepreneur.
 Issues:
 Hit or miss
 Entrepreneurs pass away.
 The credit or blame may be overrated
toward the entrepreneur.
Entrepreneurial SchoolEntrepreneurial School
 Smart people anywhere in the organization
are capable of formulating strategy. The
private is closest to the front.
 Strategy making is a process of learning over
time.
 Logical incrementalism (James Brian Quinn)
 The emergence of “the collective”
The Learning SchoolThe Learning School
The emergence of the collective
 Role of leadership is to manage the process
of strategic learning

4/17/2013
40
 Hamel and Prahalad:
◦ core competencies
◦ Strategic intent
 Core competencies are hard to duplicate,
hard to even understand by the
organization, but vital to its strategies.
 Strategic Intent to focus on winning
 Strategic Intent to focus on winning,
motivating, to guide resource allocation
 Learning school approach is great for
professional organizations
 Issues
◦ May be seen as a series of tactical maneuvres
◦ May even be seen as no strategy
◦ Long term planning is difficult
◦ Long term planning is difficult
 Strategy as a social networking and
interacting process
 Culture influences all strategy either in
planning or execution
 Bjorkman – the strategy change process:
◦ Strategic drift
Unfreezing of current belief system
Cultural SchoolCultural School
◦ Unfreezing of current belief system
◦ Experimentation and regarding-formulation
◦ Stabilization
 Jay Barney (Ohio State) – Resource-
based Theory: Strategic Resources have:
◦ Valuability
◦ Rarity
◦ Inimitability
◦ Non-subsitutability
Cultural SchoolCultural School
That is: “VIRN”
 Kaplan and Norton
 Most organizations do not measure the
results of their strategic efforts
 90% of all organizations do not implement
strategies they have designed
 There is an almost total reliance on
fi i l f t
The Balanced ScorecardThe Balanced Scorecard
financial performance measurements
 Only looking to financial measures
◦ Is inconsistent with intangible asset value
◦ Is a lagging indicator of past performance
◦ Reinforces work functional silos
◦ Substitutes cost reduction activities in lieu of
value creation

4/17/2013
41
 Balanced Scorecard translates an
organization’s strategy into four
perspectives:
◦ Financial
◦ Customer
◦ Internal Processes
◦ Employee Learning and Growth
Balanced Scorecard is a measurement
 Balanced Scorecard is a measurement
system, a strategic management system,
and a communication tool
 How do different organizations view
strategy?
 What makes for a winning approach (is
there such a thing?)
 What is the best “strategy of strategies”
for an organization to follow, from
planning to execution?
DiscussionDiscussion -- Key Strategy IssuesKey Strategy Issues
 Is there a difference between private
industry, non-profits, and governmental
agencies in the approach they must take?
Questions?Questions?
James Wasil
Work: 614-466-1578
Cell: 614-271-5970
Q & AQ & AQ & AQ & A

2013 04-17 strategy wasil v2

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