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A review of the eight strategies common

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1 A review of the eight strategies common
The Strategic Plan A review of the eight strategies common to all organizations against factors in the changing external environment Strategic Management © Alan W. Kennedy

2 Strategic Management © 2002-2014 Alan W. Kennedy
Course Deliverables Introduction Day 1 Day 2 Day 3 Produce a Situation Analysis Produce a Strategic Plan Produce a Business Plan Strategic Management © Alan W. Kennedy

3 Results: Strategic Plan Content
Introduction Facts The Situation Analysis The Fact Gathering Process Major External Factors Stakeholder Expectations Organizational Performance Description of Current Strategies and Strategy Configuration 2. Analysis Issue Development The Analysis Process Likely Impact of Major Factors A Ranking of Major Factors & Expectations Possible Responses & Rationale 3. Strategy The Change Agenda A Description of Changes, if any, to Strategy An Explanation of the Rationale for Change Impact on the Organization (Timing and Degree) Major Risk Factors / Assumptions Financial Implications Long Term Hoped for Impact Strategic Management © Alan W. Kennedy

4 Steps 5 – 8: Strategic Planning
Introduction 1. Choice of Planning Process: Should we be doing strategic planning or business planning? Day One: Situation Analysis 2. Scoping Expectations: Have we assessed the expectations for strategic planning? 3. Internal Assessment: Do we truly understand the what’s, how’s and why’s of our current strategy? 4. External Assessment: What factors in the external environment must we truly understand? 5. The Situation Analysis Review: Do we have enough understanding to support informed decisions? Day Two: Strategic Planning 6. Issue Development: Are we able to connect external factors to the strategy framework? 7. Strategic Issue Identification: Are we able to develop scenarios to identify possible strategic issues? 8. Strategic Plan Communication: Have we described the likely “what” and “when” impact of change? 9. Strategic Plan Review: Do we understand the strategic plan and how it is likely to impact us? Day Three: Business Planning 10. Expectations Impact: Can we identify the impact of strategic plan expectations on functional activities? 11. Expectations Testing: Are the strategic plan expectations consistent with competitive reality ? 12. Strategy Implementation: How are new expectations (if any) to be integrated with ongoing responsibilities? Strategic Management © Alan W. Kennedy

5 What SWOT can & can’t tell us
Under Tarion’s Control – What is the situation inside Tarion? Not Under Tarion’s Control – What has changed in the External Environment? Strategic Management © Alan W. Kennedy

6 Strategic Management © 2002-2014 Alan W. Kennedy
Fact vs. Fiction Belief Tarion is controlled by the builders Fact Builders only control the nomination process and 8 of 15 seats on the board. Belief Tarion’s responsibilities as a regulator and warranty vendor conflict Fact The KPMG study found the unique combination of responsibilities a significant success factor. Belief All builders pay the same registration fee Fact The builder registration fee is only one aspect of licensing. Belief The private sector warranty vendors could provide better warranties cheaper Fact The KPMG study found no evidence to support this Belief Tarion has a monopoly on new home warranty insurance Fact All new homes must carry the Tarion warranty as the minimum warranty – not the only warranty Belief New home building industry standards in Ontario need to be improved Fact New home industry standards are the highest of any jurisdiction. Belief BC has put into place a new home warranty program structure that Ontario should adopt Fact The BC program is unproven and the BC market for is a fraction of the size of the Ontario market. Beilef Tarion could easily extend its regulatory and warranty coverage to the renovation industry Fact The renovation industry is fundamentally different from the new home building industry Strategic Management © Alan W. Kennedy

7 Stakeholder Identification
Understand the Appetite for Change Step 5 The major Tarion stakeholders and their role in the strategic planning process Stakeholder Categories Actual Stakeholders The Authority Group Those Stakeholders who approve the plan and authorize implementation The Board The Involve Group Stakeholders who should be involved because of the role they will play in implementation Consumer Associations Builders Associations (OHBA, GTHBA) Ministry (MCBS) Tarion Management Staff The Inform Group Stakeholders who need to be told what to do so that their actions are consistent with implementation Media (Print / Radio / T.V. / Magazine) Municipalities Builders Consumers Tarion Employees The Consider Group Any Stakeholders not falling in any of the above categories and who could have a response to implementation Industry Professionals Lawyers Architects - Engineers - Bankers Industry vendors: trades, manufacturers DAA Critics: CIELAP - Other DAA’s Other Ministries: (MMAH) - Other gov’t orgs: (CMHC) Competitors: (warranty companies) Other jurisdictions: (B.C.) Strategic Management © Alan W. Kennedy

8 ONHWP Act Consumer Protection Model
Understand Internal Assessment Findings Step 5 Consumer Protection Risks to Consumer Builder Risk Assuring Builder Ability to Perform Insuring Builder Failure to Perform Regulatory Protection Mandatory Builder Registration & Minimum Standards of Acceptable Builder Performance Financial Compensation No-fault Consumer Warranty Coverage & Simplified Consumer Claims Process Delivered by a not-for-profit industry stakeholder controlled corporation & completely self-funded from fee income Accountable to Ministry (MOU) Accountable to Industry Stakeholders Accountable to Corporate Law Strategic Management © Alan W. Kennedy

9 Strategic Management © 2002-2014 Alan W. Kennedy
Understand Internal Assessment Findings Step 5 The Alphas Current Strategy Mandate Administration of the ONHWP Act. Risk Firstly, use of regulatory authority; and secondly, use of insurance industry practices to manage risks to new homebuyers Growth Rise and fall with the new home building industry cycles Financial Use of insurance industry capital reserving practices; revenues from fees from sale of warranties and from builder licensing Technology Enable management productivity; e.g. call center, web-based services Organization A regulatory mentality and culture first and foremost; 2nd an insurer Marketing To educate new home buyers and home builders on the regulatory regime Service Delivery To deflect risk away from the Tarion onto builders Strategic Management © Alan W. Kennedy

10 Source: Seeingstrategy.com
Understand Internal Assessment Findings Step 5 Source: Seeingstrategy.com Strategic Management © Alan W. Kennedy

11 Management Activities Analysis
Understand Internal Assessment Findings Step 5 Business Model Management Strengths Weaknesses Governance strong structures good participation good skill mix Board appointments builder majority on board Builder Registration acceptance of security KPMG found the registration tied to builder performance and history mandatory registration stable builder population misunderstanding of how Tarion differentiates pricing for builders productivity low Enforcements KPMG found better consumer protection lack of transparency on operating statistics Enrollments mandatory more technology for productivity Warranty Services Tarion offers most extensive coverage of any jurisdiction home covered whether or not requested not well known that Tarion is only program to cover consumers whether or not home or bldg’s registered system clogged, consumers unhappy Risk Management impact of various risk prevention measures such as security not enough communication on improving builder performance Finance adapting insurance industry practices $2 billion in reserves not enough disclosure I.T. ready for e-commerce could be more use of technology Human Resources mostly financial services or legal backgrounds low personnel production no disclosure of performance measures Corporate Affairs builder research consumer research one way communication no transparency need to address criticisms need to publicize KPMG Strategic Management © Alan W. Kennedy

12 Management Activities Conclusions
Understand Internal Assessment Findings Step 5 Business Model Short Term Improvement Opportunities External Factors Most Impacting Performance Governance disclosure on Board composition, activities, etc. transparency trend in government - ministry expectations (MCBS) Barrett Commission Builder Registration individual performance measures Industry best practices Enforcement disclosure of activities, issues media Enrollments best practices - insurance industry practices e-commerce Warranty Services performance measures New home builder performance - warranty industry practices best practices - e-commerce - builder expectations consumer expectations - BRRAG Risk Management more disclosure Review of builders involved in conciliations Present building code legislation - Tarion Act & regulations BRRAG - case law / judicial decisions -warranty industry / BC construction technology Finance & Administration insurance industry practices -Stock/Bond market performance financial regulatory requirements - builder expectations B.C. Home Warranty - Warranty Industry Practices -Practices of other DAA’s I.T. technology Human Resources outsourcing trend Facilities needs assessment Corporate Affairs disclosure transparency -competitors for warranty - DAA practices Strategic Management © Alan W. Kennedy

13 Industry Analysis (as Warranty Co.)
Understand External Assessment Findings Step 5 Segment What is my chosen market called? New Home Warranty Segment Size / Growth How big is it and is it growing? Averages 50,000 new homes but ranges from a high of 70,000 to lows of 25,000 Growth is a function of provincial economy and population growth Segment Dynamics What dynamics are most shaping the segment? Customers/competitors/ Suppliers/Barriers to Entry/Alternatives Consumers don’t want to pay cost until they need protection Mortgage lenders require warranty on high-ratio loans Builders want rational cost since, in most markets, warranty cost cannot be “tacked on” to selling price Competitive pressure: lower costs, more choice Critical Success Factors What must a competitor do to succeed? not-for-profit status (to recognize economic fragility) industry self-management model (to recognize need to balance true cost/liability associated with added consumer protection elements and to manage “scope creep” inherent in government & monopoly bureaucracies) bundled regulatory authority / insurance responsibility (to recognize need to enforce a minimum standard) no-fault coverage for consumers (to recognize new home warranty is essentially about consumer protection) autonomy from government (to control “scope creep” and bureaucracy and to isolate reserve fund from political pressure) ongoing management of stakeholder expectations to stay aligned with major stakeholder groups Segment Evolution How is this segment likely to change over time? Given the evolution of the National House Building Council in Britain, it is likely to evolve into a competitive model – with the issue being whether Tarion becomes the mandatory minimum or the “rump” insurer of last resort to the industry. The New Jersey State model is the rump model – however, at the cost of the loss of no-fault for consumers. Strategic Management © Alan W. Kennedy

14 Competitor Analysis (as Warranty Co.)
Understand External Assessment Findings Step 5 Industry Attractiveness Competitors GE Capital Paveco London Life Competitor Focus Urban, large builders Deposit insurance Conversion coverage Excess coverage Critical Success Factors Competitor Strengths Cost Control / Productivity Marketing Pricing Product selection Financial strength Competitor Weaknesses No commitment to stay in the market No commitment to small builders Slow to pay claims No pricing breaks to consumers in good times No direct link to regulator Warranty is a trigger product – not a primary product Industry Evolution Likely Future Competitors Private sector competitors Likely Areas of Functional Excellence On-line delivery of builder and consumer services Strategic Management © Alan W. Kennedy

15 Customer Analysis as Warranty Co.
Understand External Assessment Findings Step 5 Question Answer Who are our most important customers? Builders are the most important customer. Consumers do not want to know anything about new home warranty products until they have a claim. Consumers cannot be educated on the value of new home warranty (which is why the purchase needs to be mandatory) What criteria drive the customer’s purchase decision? The criteria that drive the purchaser’s decision are bank requirements and cost. Banks in Canada require a warranty policy as a condition of mortgaging How do we compare, in the customer’s view to the competition? Tarion do not compare favourably to the competition because of bad press rather than actual performance. Tarion has done little to address the misinformation provided to consumers and builders about the Tarion model and the Tarion Act Which of our products & services are truly valuable to them? The registration requirements imposed on builders (e.g. security requirements, limits on units to be built, etc) is probably the most valuable to most consumers since the practice virtually eliminates warranty claims. The deposit loss coverage is the most important product to most consumers who have had to make a warranty claim What are the steps and who influences the purchase decision? The builder, in Ontario, is the source of the new home enrolment and transfer of the coverage to the consumer. In jurisdictions where warranty is not mandatory, lenders require warranty coverage for high ratio loans. How are customer criteria and behavior likely to change? As the overall cost of homes escalates, in terms of overall price and percentage of total family income dedicated to home ownership, there is likely to be less concern about “defects” insurance and more concern about insolvency and major structural defects insurance. What products and services are our customers going to need? As new homes continue to proliferate in terms of type (e.g. conversions, time-share, business/home use, etc.) home buyers (through builders and bankers) will demand products to cover these products. Strategic Management © Alan W. Kennedy

16 External Factors Identified
Understand External Assessment Findings Step 5 External Factor Description 1. Technology I.T. to enable productivity & e-business 2. Case Law / Judicial Decisions Interpretation of the Act & Regs 3. Warranty Competitors Private sector warranty vendors 4. Best Practices Best practices in business & gov’t 5. Builder Expectations Less bureaucracy, secrecy, more transparent, productive 6. Ministry Expectations Expectations of MCBS 7. The Act and Registrations Tarion interpretation of Act & Regs 8. Consumer Expectations 9. New Home Builder Performance As shown in operating statistics 10. Transparency The trend to full information disclosure 11. E-Commerce Taking the business online 12. The Media Print/T.V./Radio 13. Barrett é BC New Homes Collapse The report on the collapse of BCNHW 14. BRRAG / Tourdes DAA Review Report Building Industry Regulatory Reform 15. BC New Home Warranty Program The now defunct BC warranty program 16. Insurance Industry Practices Process and practices 17. Financial Regulatory Requirements Capital and reporting requirements 18. Construction Technology / Practices Materials, practices & products Strategic Management © Alan W. Kennedy

17 Nominal Group Factors Ranking
Exercise Goal To demonstrate Nominal Group Technique Step 5 Your Ranking Factor Name Factor I.D. 1 2 3 4 5 6 7 8 9 10 Strategic Management © Alan W. Kennedy

18 Strategic Management © 2002-2014 Alan W. Kennedy
Factors Scoring Exercise Step 5 Weighting X10 X9 X8 Total Rank Your Ranking 1 2 3 Factors: Strategic Management © Alan W. Kennedy

19 0 = none 1 = weak 2 = medium 3 = strong
Cross Impact Analysis Theory Step 5 0 = none 1 = weak 2 = medium 3 = strong 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 AS P 1 Technology X 128 2 Case Law 60 3.Best Practices 144 4 Bldr Expects 21 273 5 Act & Regs 176 6 Cons Expects 20 420 7 Bldr Perform 135 8 Transparency 121 9 Economics 32 10 Media 11 Barrett Comm 12 BRRAG 13 BCNHWP 14 Ins Pracs 24 15 Reg Reqmts 16 Constr Tech. 18 PS .4 1.6 1.4 .9 .6 .5 Q sum of row = ∑ni sum of column = ∑nj product = ∑ni ● ∑nj quotient = ∑ni / ∑nj See T.J. Gordon and H. Hayward Initial Experiments with the cross- impact matrix method of forecasting Futures 1, (1968) Strategic Management © Alan W. Kennedy

20 X-Impact Analysis Calculations
Theory Step 5 Active = Q > 1.0 Critical = P > (n-1)2 Reactive = Q < 1.0 Inert = P < (n-1)2 Technology Q = 2.0 P = 128 > Case Law Q = 0.4 P = 60 > Best Practices P = 144 > Builder Expectations Q = 1.6 P = 273 > Act & Regulations Q = 1.4 P = 176 > Consumer Expectations Q = 1.0 P = 420 > 7. New Home Builder Perf Q = 0.6 P = 135 > 8. Transparency Q = 1.0 P = 121 > 9. E-Commerce Q = 0.5 P = 32 < 10. Media Q = 2.0 P = 8 > 11. Barrett Commission Q = 0 P = 0 < 12. BRRAG Report Q = 0 P = 0 < BC New Home Warranty Q = 6.0 P = 6 < Insurance Industry Prac Q = 4.0 P = 24 < 15. Financial Regulatory Req Q = 2.0 P = 2 < Construction Technology Q = 1.0 P = 5 < Strategic Management © Alan W. Kennedy

21 Plotting the Results Critical Active Reactive Inert
strong influencer / strongly influenced 1 Technology 2 Case Law 3 Best Practices 4 Builder Expectations 5 Act & Regulations 6 Consumer Expectations 7 New Home Builder Performance 8 Transparency 9 E-Commerce 10 Media 11 Barrett Commission 12 BRRAG 13 BC New Home Warranty 14 Insurance Industry Practices 15 Financial Regulatory Requirements 16 Construction Technology 425 400 375 350 325 300 275 250 225 200 175 150 125 100 75 50 25 6 4 Active strong influencer / weakly influenced Reactive weak influencer strongly influenced 5 3 7 1 8 2 9 10 14 13 11 12 16 15 Inert weak influencer / weakly influenced Strategic Management © Alan W. Kennedy

22 Factors Risk Assessment
Theory Step 5 - Technology - Best-Practices - E-Commerce - Case Law - Consumer Expectations - Builder Expectations - Transparency - Construction Technology - Finance Regulatory Requirements - Insurance Industry Practices - BC New Home Warranty Collapse - The Media - The Act & Regs - New Home Builder Performance - BRRAG Report - Barrett Commission low medium consequence high Impact medium Probability Strategic Management © Alan W. Kennedy

23 Understand the Appetite
Step 6 Objectives 6. Issue Development: Are we able to connect external factors to the strategy framework? Step 6 Prepare Statement of Strategy & Impact Conduct Scenario Analysis Convert Factors to Strategy Issues Review the Situation Analysis Select an Identified Factor Understand the Appetite for Change Connect the Factor to One of the 8 Strategies Understand Internal Assessment Findings Answer the Strategy Change Question Understand External Assessment Findings Strategic Management © Alan W. Kennedy

24 Current Strategy Configuration
Strategic Management © Alan W. Kennedy

25 Strategic Issue Definition
A question about strategy The two strategy questions: 1. Do we improve existing strategy ? or 2. Do we replace existing strategy with a new strategy ? Strategic Management © Alan W. Kennedy

26 Strategic Management © 2002-2014 Alan W. Kennedy
The CEO Aligns the 8 Strategies with Major Stakeholder Expectations and Competitive Reality Tech Org Marketing / Communi- cations Production/ Service Delivery Mandate Bus Definition Risk Growth Finance Changing Trends Changes in Demand Change in Alternatives/ Competition Best Practices Changes in Changed Stakeholder Expectations Changes in Need / Risk Industry Change Strategic Management © Alan W. Kennedy

27 All Managers Align Activities Assigned to Them to Strategic Plan Expectations (and then to competitive reality) Admin Compliance Budget Marketing / Services Customer Relations Call Centre Training Recruiting Monitoring Vice President Regional Call Centre Operations Changed Expectations Strategic Management © Alan W. Kennedy

28 Alpha Sets Culture Organization 8 Strategy Focus Actual Strategy
Identity IBM Business Definition Morphing to the high margin Information Technology Stantec Growth Growth by Acquisition Major Global Design Firm Bank of Canada Risk Managing Investor Expectations Canada’s Financial Risk Manager Bank of Montreal Financial Management Deposit-Taking The Bank of No Surprises Frank Gehry Architects Organization Starchitect One-of-a-kind design Google R&D / Technology To manage all your information needs The Biggest Cloud Nike Marketing Clothing for winners The Swooch FedEx Service Delivery 24 Hour Delivery Service Excellence Strategic Management © Alan W. Kennedy

29 Strategy Focus (Public / NFP)
Entity The 8 Strategies Mandate Toronto Police Services Risk Ontario Financing Authority Financial Management Stratford Theatre Company Organization Management National Research Council R&D / Technology CICA Marketing / Communications Nova Scotia Government Service Delivery Strategic Management © Alan W. Kennedy

30 Strategic Management © 2002-2014 Alan W. Kennedy
Drafting the Issue Theory Step 6 Tip #1 “????” Frame issues as questions The Distilled Spirits Industry in Canada has no future We need to exit the Distilled Spirits Industry in Canada Should we exit the Distilled Spirits Industry in Canada? Tip #2 “Should” Frame the issue in a way that invites debate Are we going to… How do we… Can we… Could we… Tip #3 “Yes” or “No” Answer the question  Yes  No  Don’t Know Strategic Management © Alan W. Kennedy

31 Issues: Connecting Factors to Strategy
Exercise: To connect an External Factor to one of the 8 Strategies Step 6 1 Description of the External Factor under Discussion: 2 External Factor Background: a) Without any response from us, what is the likely impact of this External Factor? b) Does current research and analysis offer insight on how best to respond? c) Have we taken action consistent with research to address this External Factor? d) How effective has our action been? 3 Draft a question that best connects this factor to one of the 8 Strategies Draft Issue: Should ? 4 Draft Issue Answer  Yes  No  Don’t Know 5 Further Research Required if answer to #4 is “Don’t Know”: Strategic Management © Alan W. Kennedy

32 Strategic Management © 2002-2014 Alan W. Kennedy
7 Ways to Avoid Action Step 6 1. For every proposal, point out every possible problem. 2. Ask detailed questions which cannot possibly be answered. 3. Profess not to have any answers while earnestly cautioning against proceeding. 4. Emphasize that the issue cannot be separated from all the other issues and therefore, cannot be resolved until all the other issues are resolved. 5. Appoint a consultant. 6. Create a committee. 7. Congratulate the issue. Discussion on it wasted 3 hours, but we are better for it. Strategic Management © Alan W. Kennedy

33 Assess Strategy Issues Understand the Appetite
Step 7 Objective 7. Strategic Issue Identification: Are we able to develop scenarios to identify possible strategic issues? Step 7 Prepare Statement of Strategy & Impact Identify Strategic Issues Convert Factors to Strategy Issues Review the Situation Analysis Develop Scenarios to Assess Strategy Issues Select an Identified Factor Understand the Appetite for Change Draft Competing Strategic Issues Connect the Factor to One of the 8 Strategies Understand Internal Assessment Findings Answer the Strategy Change Question Answer the Strategy Change Question Understand External Assessment Findings Strategic Management © Alan W. Kennedy

34 Strategy Scenario Development
Develop Scenarios to Assess Strategy Issues Step 7 1. In the lower left, describe how we look today because of the strategy we are using 2. In the upper right, identify an organization that is the best example of what we could look like if we successfully implemented the strategy and it became our Dominant Strategy. Current Strategy Changed Who is closest to what we do, represents a great example of what we could look like if this strategy became our dominant strategy? External Factor Addressed External Factor not Addressed What organization would an outsider think we look like because of our present strategy? Current Strategy not Changed Strategic Management © Alan W. Kennedy

35 Strategy Scenario Development
Example Step 7 Change EB Marketing Strategy - A highly focused retailer Customer Factor not Addressed Customer Factor Addressed - A retailer in trouble No Change in EB Marketing Strategy Strategic Management © Alan W. Kennedy

36 Strategic Issue Development
Exercise Step 7 First Statement of the Issue: Should we change our Strategy? Redrafted Strategic Issue: Should we change our present strategy which has characterized us as to a strategy which will change our image to and, by , deliver ? Strategic Management © Alan W. Kennedy

37 Assess Strategy Issues Understand the Appetite
Step 8 Objectives 8. Strategic Plan Communication: Have we described the likely “what” and “when” impact of change? Step 8 Prepare Statement of Strategy & Impact Identify Strategic Issues Convert Factors to Strategy Issues Review the Situation Analysis Frame Strategies as SMART Objectives Develop Scenarios to Assess Strategy Issues Select an Identified Factor Understand the Appetite for Change Identify Strategic Assumption Draft Competing Strategic Issues Connect the Factor to One of the 8 Strategies Understand Internal Assessment Findings Communicating the Strategic Plan Select the Strategic Issue Answer the Strategy Change Question Understand External Assessment Findings Strategic Management © Alan W. Kennedy

38 English Bay Business Definition Strategy (Objective):
Frame Strategies as SMART Objectives Strategy or Objective Step 8 Precise & specific in content? Performance can be measured? Provides the starting point for action? Realistic balance of expectation & ability? Has a specific deadline? English Bay Business Definition Strategy (Objective): To become (return to being) a niche retailer with 80% of profitability coming from well-defined EB customers within the next 2 years Strategic Management © Alan W. Kennedy

39 Tarion Strategies (Objectives)
Frame Strategies as SMART Objectives Tarion Strategies (Objectives) Step 8 Strategy Framework Element Proposed Strategy Present Strategy Mandate Stick to the Act Risk Enforce compliance and embrace insurance practices Growth Rise and fall with industry cycles Financial Management Only take what is needed / Return surplus Organizational Design Separate Regulator from Insurer Communications Educate stakeholders Operations Deflect risk to builders Technology Enable management Strategic Management © Alan W. Kennedy

40 Strategic Assumption Identification
Identify Strategic Assumption Step 8 Assumptions Considered conjecture on specific factors 1. What is the Major External Factor driving Strategy Change? 2. What about that Factor could change and threaten our strategy 3. Do we have a contingency plan if this starts happening? 4. Is this assumption about the Factor beyond our control? 5. Should the assumption about this Factor be monitored. Strategic Management © Alan W. Kennedy

41 Strategic Management © 2002-2014 Alan W. Kennedy
Risk Strategic Management © Alan W. Kennedy

42 Strategic Management © 2002-2014 Alan W. Kennedy

43 Strategic Management © 2002-2014 Alan W. Kennedy
Strategy Element Strategy Mandate As stated under the York University Act. 1965, as amended Risk Enterprise risk management Growth Growth driven by campus construction – “If we build it, they will come” Financial Debt financings supplementing provincial funding Technology Enabler (including Orion Network) Organization Bicameral system (Separate Academic and Administrative Governance) Marketing Focused on attracting students and donors Service Delivery Graduate and undergraduate degree programs across 11 faculties. 43 Strategic Management © Alan W. Kennedy

44 Strategic Management © 2002-2014 Alan W. Kennedy
44 Strategic Management © Alan W. Kennedy

45 Strategic Management © 2002-2014 Alan W. Kennedy
8 Strategy Strategy Business Positioning Hydro Ottawa Limited is an Ontario regulated electricity local distribution company (LDC) that owns and operates distribution infrastructure in the City of Ottawa and the Village of Casselman and is the largest LDC in eastern Ontario and the third largest municipally-owned LDC in the Province of Ontario. Risk Hydro Ottawa manages risk by staying in compliance with the regulatory framework impacting the industry to employ fixed price contracts to reduce exposure to spot market prices, the continuance of Hydro Ottawa’s exceptional health and safety record, Growth Hydro Ottawa growth is strategy s expanding our distribution business beyond our current service territory; Financial Hydro Ottawa is a MEU under the Electricity Act. Revenues are regulated. Finances are managed to retain its credit-rating; compliance with OEB requirements, and, if appropriate, dividends to the parent Technology / R&D Hydro Ottawa has 2700 kilometres of underground cable, 2,700 kilometres of overhead lines, 40,500 transformers and 48,700 hydro poles.,Ottawa Hydro will introduce more intelligence and automation into our distribution system, in 2014, Hydro Ottawa will complete the development of a more detailed Smart Grid plan, as required by the Green Energy and Green Economy Act. Organization Hydro has a workforce of about 600 employees of which a large percentage are eligible for retirement in the next 5 years creating the need for a workforce replacement strategy and the development of a skilled, engaged and prepared workforce for the future Marketing Hydro Ottawa serves the residential; small business and bulk-metered; and large user customer segments The fundamentals of customer value in the electricity business are quality and cost – delivering a reliable service, while operating efficiently and effectively to keep rates competitive. Hydro Ottawa is consistently among the top performers in Ontario in both of these areas. Service Delivery Hydro Ottawa Limited has two core responsibilities. First, Hydro Ottawa is responsible for the safe and reliable delivery of electricity to more than 300,000 customers in the City of Ottawa and the village of Casselman. Second, Hydro Ottawa Limited bills for its services and for the services provided by other organizations in Ontario's electricity system. 45 Strategic Management © Alan W. Kennedy

46 Strategic Management © 2002-2014 Alan W. Kennedy

47 Strategic Management © 2002-2014 Alan W. Kennedy
The 8 Strategies Stantec Strategy Business Definition Fully integrated North American engineering and architectural services Risk Market, services, and life cycle diversification and no exposure to construction risk Growth To become and remain a top 10 global design firm through acquisitions Financial Management NYSE /TSX listed and growth funded by issuing equity Technology To support Best Trained, Best Informed, Best Equipped employees Organization Use of a Balanced Leadership Model for top and bottom line focus Marketing A top 3 service provider in chosen markets and seen as a Single Brand Identity Service Delivery Local Strength – Global Expertise; One Team. Infinite Solutions 47 Strategic Management © Alan W. Kennedy

48 Strategic Management © 2002-2014 Alan W. Kennedy

49 Strategic Management © 2002-2014 Alan W. Kennedy
The Alphas Strategy Business Definition To be the global leader in “enterprise” wireless data communications Risk To protect our intellectual property and to protect network security and integrity Growth To resize to fit our chosen markets Financial Management To access capital markets through TSX / NASDAQ listings R&D / Technology To focus development of our proprietary platforms & services Organization Mgmt To use the strength of market position and value proposition to enable HR “pull” potential employees and to leverage proximity and relationship with University of Waterloo Marketing QNX software BB Messenger chat app Fleet mgmt for gov’t & corp users Service Delivery To deliver data security and network reliability Strategic Management © Alan W. Kennedy

50 Strategic Management © 2002-2014 Alan W. Kennedy

51 Strategic Management © 2002-2014 Alan W. Kennedy
Course Deliverables Day 1 Day 2 Day 3 Produce a Situation Analysis Produce a Strategic Plan Produce a Business Plan Strategic Management © Alan W. Kennedy

52 Strategic Management © 2002-2014 Alan W. Kennedy
Day Three Preparation Review the Goldstone Case Review the Day 3 Materials Review the Business Plan (Schedule “C”) Strategic Management © Alan W. Kennedy

53 Strategic Management © 2002-2009 Alan W. Kennedy
Day Two – Preparation Strategic Planning Reference Material - Read the Tarion Case - Review the Day 2 Materials - Review the Tarion Strategic Plan (Schedule “B”) - Identify the top 3 external factors you believe ONWHP must address because those factors will significantly impact Tarion over the next 3 to 5 years Strategic Management © Alan W. Kennedy

54 The 4 Steps in Strategic Planning
Prepare Statement of Strategy & Impact Identify Strategic Issues Convert Factors to Strategy Issues Review the Situation Analysis Frame Strategies as SMART Objective Develop Scenarios to Assess Strategy Issues Select an Identified Factor Understand the Appetite for Change Identify Strategic Assumption Draft Competing Strategic Issues Connect the Factor to One of the 8 Strategies Understand Internal Assessment Findings Communicating the Strategic Plan Select the Strategic Issue Answer the Strategy Change Question Understand External Assessment Findings Strategic Management © Alan W. Kennedy

55 External Factors: Builder Expectations
Communicating the Strategic Plan External Factors: Builder Expectations Step 8 1 Description of the External Factor under Discussion: Builder Expectations being those expressed in various surveys of builders and those expressed by major builder associations. 2 External Factor Background: a) Without any response from us, what is the likely impact of this External Factor? Implementation of BRRAG recommendations and loss of Tarion registration authority; loss of mandatory enrolment; loss of new home building industry control over Tarion to the residential building as a whole. b) Have we developed a strategy to address this External Factor? Project Simplify: an initiative to describe in detail the requirements of S.13 (the construction warranty) and the time frames within which builders must comply with S.13. c) How effective has our strategy been? No results except for a proposed appeal process by which builders may appeal Tarion decisions under the present conciliation process. d) Does current research and analysis offer insight on how best to respond? - Benchmarking Tarion conciliation / claims inspection process productivity reveals tremendous short term productivity potential Analysis of the complaints process reveals unnecessary bureaucracy and opportunities for productivity improvement Analysis of staffing requirements of the inspections and claims repair management process reveals opportunities for outsourcing and elimination of regional offices Builder research says that to reduce cost, make fairer, make more certain 3 Draft a question that best states the essence of the required response? Draft Issue: Should we change the way we presently administer consumer complaints, conciliations and claims practices? 4 Draft Issue Answer  Yes  No  Don’t Know 5 Further Research Required if answer to #4 is “Don’t Know”: Strategic Management © Alan W. Kennedy

56 External Factors: Consumer Expectations
Communicating the Strategic Plan External Factors: Consumer Expectations Step 8 1 Description of the External Factor under Discussion: Consumer Expectations for management of complaints, conciliation and claims management (recognizing that these consumers represent a very small fraction of the consumers holding Tarion warranties (less than 0.6% in a year). 2 External Factor Background: a) Without any response from us, what is the likely impact of this External Factor? Consumer complaining could drive BRRAG implementation (competitive warranty, move builder registration back to Ministry, include renovations in warranty). Consumer issues are popular with the media. b) Have we developed a strategy to address this External Factor? Project Simplify c) How effective has our strategy been? No results to date except for a builder appeal process to be added onto the end of the existing conciliation process d) Does current research and analysis offer insight on how best to respond? Eliminate time-wasting bureaucracy from the complaints, conciliations and claims processes. 3 Draft a question that best states the essence of the required response? Draft Issue: Should we change the way we manage the complains, conciliations and claims processes? 4 Draft Issue Answer  Yes  No  Don’t Know 5 Further Research Required if answer to #4 is “Don’t Know”: Strategic Management © Alan W. Kennedy

57 External Factors: Transparency
Communicating the Strategic Plan External Factors: Transparency Step 8 1 Description of the External Factor under Discussion: Transparency: The move by corporations and government to be open and accountable to stakeholders by providing comprehensive information disclosure and discussion of major issues. 2 External Factor Background: a) Without any response from us, what is the likely impact of this External Factor? Continuing and growing builder and consumer dissatisfaction Growing misinformation and misunderstanding about Tarion and the Act b) Have we developed a strategy to address this External Factor? - Development of a somewhat more informative Annual Report c) How effective has our strategy been? No further research conducted. No evidence that enough has been done. d) Does current research and analysis offer insight on how best to respond? Implementation of other DAA practices Implementation of corporate best practices Builders want disclosure on reserving practices and management of the Guarantee Fund Builders want disclosure on operating expenses Consumers want more access to information and more information on status of claims Most consumers expect to be able to access /input their file on-line Both builders and consumers need more information on how the Board is appointed /operates 3 Draft a question that best states the essence of the required response? Draft Issue: Should we change our disclosure policies 4 Draft Issue Answer  Yes  No  Don’t Know 5 Further Research Required if answer to #4 is “Don’t Know”: Strategic Management © Alan W. Kennedy

58 Service Delivery Analysis
Communicating the Strategic Plan Service Delivery Analysis Step 8 Change Warranty Service Delivery An “Insurer”? Spin fails to explain Strategy implementation flawed Expectations changed Old strategy seen as superior to new Consumer / Builder Expectations not Addressed Consumer / Builder Expectations Addressed Spin Some other strategy Expectations / Factor changed Improve existing strategy Today A “regulator” No Change to Warranty Service Delivery Strategic Management © Alan W. Kennedy

59 Strategic Issue: Service Delivery Process
Communicating the Strategic Plan Strategic Issue: Service Delivery Process Step 8 First Statement of the Issue: Should Tarion change the complaints conciliation claims process? Direction: Successful pursuit of this direction will “brand” the organization 1. The question: How would changing the complaints / conciliation / claims process brand or change Tarion direction? 2. The status quo: How is Tarion branded today? What is Tarion known for? Answer: Policing builders. 3. The choices: Stop policing builders. Start delivering insurance practices. Keep policing restricted to Act enforcement. Risk / Reward: The risk could be greater than risk as currently quantified and the returns could be greater than those presently enjoyed 1. The question: How could “stopping policing” change generate unusual risk or reward? 2. The status quo: What is today’s measure of risk / reward? Answer: # of complains / # of conciliations / # of claims 3. The choices: Eliminate complaints / conciliations by having an acceptable trigger for claims. Risk is that conciliation activity would turn into claims at $8000 each ($14.4 million) Reward is that most costs associated with complaints and claims could be eliminated (say 50% of $10 million). Implementation Period: It will take at least as long as the planning period to implement 1. How long will the change take to implement? 9 months for immediate change and up to 3 years for other changes 2. What are the major milestones? 9 months / 24 months / 36 months Implementation Review: There will be a need to reassess implementation from time to time if risks/rewards are greater or less than anticipated Time if risks / rewards are greater or less than anticipated 1. Would this proposed change warrant monitoring ? Answer: Yes. There would have to be industry / ministry buy-in. Approval: The issue, restated as an objective, would require approval to implement 1. Who within Tarion would need to approve this proposed change. Answer: The Board of Directors 2. What information would they need in order to be able to consider approving? Answer: Description of proposed change, rationale, impact, benefits, risks. Redraft as Strategic Issue: Should… Tarion implement insurance industry practices to manage the compensation provisions of the Act so Tarion would become solely an insurer to most builders and to consumers; all present policing practices for administering those provisions and the costs associated with those practices could be significantly reduced; and service delivery to consumers could be greatly improved? Strategic Management © Alan W. Kennedy

60 Strategic Issue: Transparency
Communicating the Strategic Plan Strategic Issue: Transparency Step 8 First Statement of the Issue: Should Tarion change its information disclosure practices? Direction: Successful pursuit of this direction will “brand” the organization 1. The question: How would changing the information disclosure practices brand or change Tarion direction? 2. The status quo: How is Tarion branded today? What is Tarion known for? Answer: Secretive. Note: This does not appear to be an issue of strategic direction as much as an operational improvement Risk / Reward: The risk could be greater than risk as currently quantified and the returns could be greater than those presently enjoyed 1. The question: How could information disclosure generate unusual risk or reward? 2. The status quo: The risk is political interference to end the Tarion model or Tarion administration of the model. The reward is stakeholder satisfaction. Note: This does not appear to be an issue of Risk / Reward as much as an issue of operational improvement Implementation Period: It will take at least as long as the planning period to implement 1. How long will the change take to implement? 2. What are the major milestones? Implementation Review: There will be a need to reassess implementation from time to time if risks/rewards are greater or less than anticipated Are greater or less than anticipated 1. Would this proposed change warrant monitoring? Approval: The issue, restated as an objective, would require approval to implement 1. Who within Tarion would need to approve the proposed change Answer: The Board of Directors 2. What information would they need in order to be able to consider approving? Answer: Description of proposed change, rationale, impact, benefits, risks. Redraft as Strategic Issue: Should… Transparency would not appear to be a strategic issue as implementation will not change the strategic direction of Tarion or attract unusual risk or reward. The Board will, no doubt, want to approve the ultimate disclosure recommendations. Strategic Management © Alan W. Kennedy

61 Organizational Design
Communicating the Strategic Plan Strategy Conclusions Step 8 Strategy Element Present Strategy Proposed Strategy Authority Group Mandate Restrict focus to administer Act No Change OK Risk Keep enforcing compliance and adopting prudent insurance industry practices Growth Follow industry cycles (boom to bust) Financial Management Return the surplus not required through fee reductions Organizational Design Command and control Change the culture and the values / beliefs to service mentality Communications One Way communication from Regulator (Tarion) to Regulated (Builders and Consumers) Two-way communication & information access Service Delivery Focus on ensuring builder compliance and Tarion claims avoidance Focus on servicing consumers as an insurer Technology Limited use Move from bricks to clicks Strategic Management © Alan W. Kennedy

62 Strategic Assumptions
Communicating the Strategic Plan Strategic Assumptions Step 8 Service Delivery Strategy: To convert Tarion administration of S. 14 (Claims) and S.17 (Conciliations) of the Act to an insurance response by adopting practices common to the insurance industry so that service delivery to consumers is greatly improved and Tarion costs associated with these services are greatly reduced Assumption: That builder performance will not deteriorate from the present standards of performance: I.e. 1.6% rate of conciliations to annual enrolments and insignificant claims arising from conciliation Will failure threaten the strategy? Yes Tarion could be overwhelmed in claims Will failure trigger a contingency plan? Perhaps a Builder auditing program? Is the assumption beyond control? Should the assumption be monitored? Strategic Management © Alan W. Kennedy

63 Impact on Business Performance
Communicating the Strategic Plan Impact on Business Performance Step 8 Major Functional Areas Short Term Priorities Mid Term Priorities Longer Term Strategic Management © Alan W. Kennedy

64 Impact on Today’s Reality
Communicating the Strategic Plan Impact on Today’s Reality Step 8 Major Functions Short Term Priorities Mid Term Priorities Longer Term Priorities Registration Review processes Move from paper – based to I.T. based On-line builder registration Enforcement No change Research use of I.T. to improve productivity Enforcement of conditions of registration Warranty Services Inspections outsourcing Close regional offices Complaints intake rationalization Claims management processes Implement Project Simplify Implement tech. based processes - Reduce associated costs (e.g. legal) Risk Management Review possible impacts on claims Identify builders involved in conciliation inspections for the last 3 years - Implement registration recommendations for “problem” builders - Implement recommended registration process improvements, if any Finance & Admin Reviewing reserving processes Implement new reserving practices Use of insurance industry rations to measure performance Corporate Affairs Identify immediate disclosure opportunities Enhanced website Use of stakeholder feedback to drive further disclosure I.T. Research of insurance processes Implement technology to support consumer processes Implement technology to support builder processes Human Resources Communicate strategic plan Begin staff file review for downsizing De-hiring strategy Identify training needs to move culture from policing to service Redraft values / beliefs to reflect service instead of policing - Training of warranty service personnel in consumer service - Performance measurement system to monitor and evaluate individual performance Facilities Review leases Plan head office space needs Move head office to a more economical location Strategic Management © Alan W. Kennedy

65 Stakeholder Expectation Analysis
Communicating the Strategic Plan Stakeholder Expectation Analysis Step 8 Strategy Framework Element Proposed Strategy Builders Consumers Ministry Business Definition / Mandate Risk Growth Financial Management Organizational Design Marketing Operations Technology Strategic Management © Alan W. Kennedy

66 Stakeholder Expectation Analysis
Communicating the Strategic Plan Stakeholder Expectation Analysis Step 8 Strategy Framework Element Proposed Strategy Builders Consumers Ministry Business Definition / Mandate No Change Narrow interpretation Consumer advocates want renovation warranty Ministry would like renovation warranty Risk Think ONWHP too cautious / over-reserved No Expectations Growth Ok Within Act Ok; corporate growth is a question Financial Management Reduce operating costs to lower fees Expect Tarion to be there when needed Minister pleased with lower fees Organizational Design Change the culture and the values / beliefs to service mentality Change the culture Change the culture to service / consumer bias Unclear Marketing Two-way communication and information access As much information as possible As much as is usually available from insurers / government Follow the lead of the Provincial Government Operations Focus on servicing consumers as an insurer / restrict policing to Act enforcement / Reduce costs Take focus off all builders and focus on “Bad builders” Online / fairness and certainty in claim management Make consumers happy Technology Move from bricks to clicks Okay if it reduces costs Give me the same as I get from other insurers / gov’t Online Tarion builder and consumer services Strategic Management © Alan W. Kennedy

67 Tarion Strategic Assumption
Identify Strategic Assumption Step 8 1. What is the Major External Factor driving Strategy Change? Builder & Consumer Expectations 2. What about that Factor could change and threaten our strategy More Failures / Claims 3. Do we have a contingency plan if this starts happening? Could we trigger Builder audits / claims tracking? 4. Is this assumption about the Factor beyond our control? Yes 5. Should the assumption about this Factor be monitored. Strategic Assumption: That Builder performance and / or Consumer claims practices will not adversely change because of some unanticipated (by Tarion) impact of changes to current Tarion practices during the course of strategy implementation. Strategic Management © Alan W. Kennedy

68 Strategic Management © 2002-2014 Alan W. Kennedy
Communicating the Strategic Plan Executive Summary Step 8 1. Planning Objective To develop a 3 year strategic plan for Tarion Warranty Corporation 2. Planning Scope: The members of the Board of Directors were canvassed on the range of strategy choices that would be acceptable to them. From this research, it was determined that the Board wanted the strategic plan focused largely on change that would improve Tarion service delivery to consumers. 3. Data Collection: To identify the relevant external factors to which Tarion must respond, the Tarion business model was constructed and Tarion management of that model was analyzed for strengths and weaknesses. That analysis identified 19 external factors to which Tarion must respond. Of those 19, 3 were identified as the most important for strategic planning purposes. The remaining 16 will be addressed in functional planning. 3. Strategic Issue Identification Analysis of the 3 external factors revealed that both builders and consumers want change to the way Tarion manages the complaints, conciliation, and claims processes and that both stakeholder groups want Tarion to start making available significantly more information on financial and operating performance than Tarion has provided in the past. The move to disclosure was not deemed to be a strategic issue – but rather something that Tarion must do. Changing the way Tarion manages the complaints, conciliations, and claims process was deemed to be strategic because, if the changes builders and consumers want are implemented, Tarion will become largely an insurer organization to most builders and all consumers. Risk would stay the dominant strategy Tarion today administers the Act as a regulator. The policing approach Tarion brings to the complaints, conciliations and claims practices, which are largely insurance practices, is no longer seen as acceptable by either stakeholder group. The approach is too costly, not nearly as effective as taking security from builders upon registration, and no longer seen as necessary since statistically, taking security and other risk prevention initiatives have virtually eliminated the need for the approach. 4. Impact of Change on Tarion The implementation of the proposed changes will end the current Tarion regulator mentality by which it sees all builders as potential “bad guys” and consumers as “victims”. This mentality will be replaced with an insurer’s mentality in which assuming, the customer has the conditions of the policy, the customer deserves the policy’s protection . The approach should also vastly improve service delivery to consumers and reduce operating costs. 5. Next Steps: Detailed implementation planning will begin after approval of the strategic plan is obtained. Strategic Management © Alan W. Kennedy


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