This document provides an overview of strategic management and the strategic planning process. It discusses establishing strategic direction through vision, mission, and identifying key performance areas. It covers developing business strategies, organizing strategy development, and gap analysis and objective setting. It then outlines the action planning process to align the organization to the strategy through communication and training. Finally, it discusses implementing the strategic plan, measuring and auditing results, and developing a continuous improvement process using the PDCA cycle.
4. 4
1 • Developing Strategies
2 • Identifying Key Performance Areas
3 • Business Strategies (4 definitions)
4 • Strategy Development
5 • Organizing the Strategy Development
Establishing Strategic Direction (Vision & Mission)
5. 5
“Having imagined the future, a company must
find a path that leads from today to tomorrow.”
-Competing for the Future,
Hamel and Prahalad, p.105
6. 6
Vision
Mission
Business Drivers
Stratesgy01
SO01
SO02
SO03
Stratesgy02 Stratesgy03 Stratesgy04
What we want to be
How we want to achieve the vision
The key factors that must be recognized
as critical to success of the mission
Concise statements
that explain how
each business
driver will be
addressed. May be
more than 1
strategy for each
business driver
Strategic objectives are the
metrics (numerical goals) by
which achievement of the
strategies are measured
SMART
objective
Developing Strategies
7. 7
The vital few performance areas critical
to the future survival and prosperity of
the organization.
Identifying Key Performance Areas
Driving Forces
• Changes in the long-term industry growth rate
• Product and Marketing innovation
• Technological change
• Changes in cost and efficiency
• Entry or exit of major firms
• Reductions in uncertainty and business risk
• Regulatory influences and government policy changes
• Diffusion of technical know-how across more
companies and more countries
• Growing buyer preferences (who buys the product)
(changing societal concerns,attitudes, and lifestyles)
8. 8
• The Actions a business willtake to widenthe
advantage ithas overits competitors.
• The Bridges between an organization’s current
reason for being and its long term vision.
• The broad Paths an organization chooses to
achieve its mission and key business drivers.
• The Process by which the organization more
clearly defines what its future approach to business
willbe and how that future willbe achieved;
Business Strategies (4 definitions)
A
B
2P
Business
Strategies
9. 9
Strategy Development
The organization must focus its creativityand develop a more detailed view of
its future and how to achieve it.
o How shall we organize ourselves for desired
future/customers/products/services
o How will wedeal with new
technologies/economic
logic/investment/risk and monitor& manage
this changes.
• organization’s vision,values, and key business drivers.
• strengths, core competencies,and opportunities
• issues facing the organization discoveredin the external scan
Review
Then, thinkingabout what we want the organization to be
five years from now, ask the following questions:
10. 10Organizing the Strategy Development
The three components of earnings growth or value creation
Improvingthe current
business or businesses
Growing new business
Anticipating and
managing industry change
• Improving
quality
productivity
Sales or margins
• Reducing
costs
cycle time
• Buildingon core
competencies
• Developingnew
competencies
• Searching for new markets
• Creating new businesses
• Understanding the external
environment
• Anticipating change
• Leveraging strengths
• Protecting weaknesses
• Adapting creatively to
changes in the industry
Generally business strategies should cover the three value creation categories ehT .
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11. Strategic Model 11
Planning the
Strategic
Planning
Process
Establishing
Strategic
Direction
Gap Analysis &
Objective
Setting
External
Scanning
SWOT
Analysis
Internal
Scanning
Customer
Value
Determination
Organizational
Value
Determination
Developing
Business
Strategy
Action
Planning
Implementation
AuditingResults
Stablishing the PlanData Collection
1 2
3 4
5 6 7 8
13. 13
1
• Gap Analysis
2
• Strategic Gap & Objectives
3
• Selecting and Quantifying the Strategic Objectives
4
• Financial Objectives & Strategic Objectives
Gap Analysis & Objectives Setting
14. 14Gap Analysis
Is the process through which a
company compares its actual
performance with its expected
performance
Steps of Gap Analysis
1. Use historical data to measure the
current performance of the organization
2. Analyse the data that was collected
3. Define the organizational goals
4. Close the gap
15. 15
if a small resturant wanted to become a top
tourist destination but currently only served
locals, a strategic gap analysis would look at
the changes required for the resturant to
meet its future
These changes might include:
1. Relocating to an area with more tourists
2. changing the menu to appeal to out-of-town visitors
3. Hiring more staff so the resturant's hours become more
convenient for travelers
Strategic Gap Analysis Example
If a business doesn't know where it stands in relation to
its future, it is not likely to achieve success.
16. 16Strategic Gap
A strategic gap is a shortfall between the
value-creation capability required for
success and the organization’s current
capability in that area
- The Northbound Train
Karl Albrecht, p. 183
Strategic Objectives
The corporate level performance measurements
or initiatives the organization must achieve in
order to survive, prosper, and reach its vision or
purpose over the near or intermediate term
17. 17Selecting and Quantifying
the Strategic Objectives
These objectives can be quantified as in a specific
earnings growth target. They are measurable and
generally are to be achieved over the next twelve
to twenty-four months.
They also
• Balance short and long term results
• Over the long run the strategic objectives must
identify and satisfy all stakeholders interests:
Customers / Shareowners / Employees /
Environment / Community / Suppliers /
Government
18. 18
Consider the following points when developing strategic objectives:
• Build on strengths
• Shore up weaknesses
• Explore and take advantage of opportunities
• Thwart threats
• Develop needed competencies
• Close strategic gaps
For example, one gap may be that declining revenues in the regulated
business require new sources of revenue from non-regulated lines of
business to fill the earning gap.
Another may be that success may require that employees master a new
skill or use of a new technology to gain a competitive advantage desired
to meet the organization’s long term vision.
Selecting and Quantifying
the Strategic Objectives (cont.)
19. 19
Financial Objectives Strategic Objectives
• Faster revenue growth
• Faster earnings growth
• Higher dividends
• Wider profit margins
• Higher returns on invested
capital
• Stronger bond and credit
ratings
• Bigger cash flows
• A rising stock price
• A bigger market share
• A higher, more secure industry rank
• Higher product quality
• Lower costs relative to key
competitors
• Broader or more attractive
product line
• A stronger reputation with
customers
• Superior customer service
• Recognition as a technology
leader and/or product innovator
20. Strategic Model 20
Planning the
Strategic
Planning
Process
Establishing
Strategic
Direction
Gap Analysis &
Objective
Setting
External
Scanning
SWOT
Analysis
Internal
Scanning
Customer
Value
Determination
Organizational
Value
Determination
Developing
Business
Strategy
Action
Planning
Implementation
AuditingResults
Stablishing the PlanData Collection
1 2
3 4
5 6 7 8 9
22. 22
1 • The Action Planning Process
2 • Why Do Organizations Fail to Execute Strategy?
3 • Strategy-Focused Organization
4 • Communicate Communicate Communicate
5 • Train Train Train
Action Planning
23. 23
The Action Planning Process
• The organization should be given the opportunity to
review, discuss, and internalize the organization’s vision,
strategies, and objectives
• More detailed action plans developed toimplement
the strategic plan, that should be developedby each
division or departmentor teams
• individual performance plans should reflect specific
work activities for individuals that support the overall
organization’s business plan
• Need several iterations of reviewingand goal setting at
each level in the organization
24. 24Why Do Organizations Fail to Execute Strategy?
9 of 10 companies fail to execute strategy.
• The Vision Barrier – Only 5% of the
work force understands the strategy
• The Management Barrier – 85% of
executive teams spend less than one
hour per month discussing strategy
• The Resource Barrier – 60% of
organizations do not link budgets to
strategy
• The People Barrier – Only 25% of
managers have incentives linked to
strategy
25. 25
Strategy-Focused Organization
• Translate the strategy into
operational terms
• Mobilize change through executive
leadership
• Align the organization to the strategy
• Govern to make strategy a continual
process
• Motivate to make strategy
everyone’s job
26. 26
Organizations are most successful
when everyone knows how what
he or she does contributes to the
overall success of the enterprise
(face-to-face sessions)
Communicate Communicate Communicate
27. 27
Train Train Train
The training should include:
• How to deal with the new strategies
• Understanding the business
• How the company makes money
• Information on the cost structure
and profit margins
• Improving the business processes
• Awareness of the customer and the
competitive environment
28. Strategic Model 28
Planning the
Strategic
Planning
Process
Establishing
Strategic
Direction
Gap Analysis &
Objective
Setting
External
Scanning
SWOT
Analysis
Internal
Scanning
Customer
Value
Determination
Organizational
Value
Determination
Developing
Business
Strategy
Action
Planning
Implementation
AuditingResults
Stablishing the PlanData Collection
1 2
3 4
5 6 7 8 9
10
31. 31
Implementation
• Strategy must ultimately
become part hcae tahw fo
yad yreve gniod si nosrep
• If the plan becomes separate
yreve gniod era ew tahw morf
evah ew ,yadfailed ot
nalp lufgninaem a poleved
• Constantly measuring and
refining our actions
32. 32
Measurement and Audit of Results
Routine audits or assessments are essential
eht ekam ot dna ytilibatnuocca niatniam ot
adjustments
Several methods are routinely utilized:
• Quarterly, results or performance review meetings
with line management
• Employee and customer surveys.
• Financial results audits
• Comprehensive organization assessments
• European Economic Area (EEA) Policy Reform and
Institutional Assessment
• Malcolm Baldrige National Quality Award
Assessment
33. 33
Developing a Continuous Improvement Process
Ongoing Environmental Scanning
the organization must
• Conduct ongoing environmental scanning or
intelligence gathering.
• Scan and analyze for trend lines or discontinuities
that can destroy the value of the enterprise, or
conversely provide the opportunities for growth
and renewal.
• Continuously evaluate the value it provides to its
customers relative to the competition
34. 34
PDCA Cycle
Plan / Do / Check / Adjust
(PDCA) cycle of continuous
improvement forms the basis for
many of the world’s quality or
total quality management (TQM)
programs