Evolution of Management Systems Strategic Planning –Analysis of Firm’s Prospects –Competitive Analysis –Strategic Portfolio Analysis Closes the Competitive Gap –Diversification Analysis Long Range Planning –Action Programs, Budgets, and Implementation Strategic Planning –Balances Prospects against Objectives to produce a strategy Strategic Posture Management Strategic Work Environment Strategy Capability Environment Strategy Capability S1 S2 E1 E2 C1 C2 Capability is introduced into Strategic Management Mentality-Culture-Power Structure Systems-Organizational Structure Capacity

CORPORATE MANAGERS/LEADERS General Managers Functional Management “Workers” R & D PRODUCTION MARKETING LINE AND STAFF THE STUDY OF ORGANIZATIONS TOP DOWN BOTTOM UP Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

Organization's Behavior in the Environment ORGANIZATION Environment TRANSACTION THROUGH LINKAGES = COMPETITIVE (OPERATING) BEHAVIOR ADAPTATION (CHANGE) OF LINKAGES = STRATEGIC BEHAVIOR Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

MARKET PRODUCT SERVICE PRESENTNEW PRESENT NEW COMPETITION PRODUCT INNOVATION PRODUCT + MARKET INNOVATION MARKET INNOVATION ORGANIZATION’S BEHAVIORAL ALTERNATIVES Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

ENVIRONMENT PROFIT/PERFORMANCE MAKING STAKEHOLDERS LENDERS STRATEGIC DEVELOPMENT Strategic Data Competitive Data Profits Sales New and Historical Products Investment New Prototype Products/Technologies Funds THE PERFORMANCE ENGINE Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

History of a Strategic Change LIFETIME ROI = + AREA - AREA NET CASH FLOW Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

Strategic Diagnosis: Background Evolution of change Agenda makes it dangerous to base future plans on successful responses to historical challenges There is no single prescription for future success which will apply to all firms Management confronts two Key Problems – Each Organization needs to diagnose its unique future challenges, threat and opportunities – Each firm must design and implement its unique response to these challenges

Strategic Diagnosis: Definition A systematic approach to determining the changes that have to be made to a firm’s strategy and its internal capability in order to assure the firm’s success in its future environment Environmental Turbulence is a combined measure of the changeability and predictability of the firm’s environment – Complexity – Novelty – Rate of Change – Visibility

Strategic Diagnosis: Example Environmental Turbulence Strategic Aggressiveness Responsiveness of Capability Repetitive Slow Incremental Fast Incremental PredictableUnpredictable RepetitiveExpandingChangingDiscontinuousSurprising Custodial Adapts to Change Seeks Familiar Change StrategicFlexible Stable Reactive AnticipatoryEntrepreneurialCreative

Strategic Segmentation Strategic Information Model Competitive Positioning Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000 How can we systematically “divide” our environment into “workable areas”? How do we make sure that the information we received from the environment involves legitimate (perceived) information? How do we systematically design a competitive organization? How do we interpret qualitative data? Perception vs. Reality for Organizational Leaders

SBA:A Strategic Business Area which is a distinct segment of the environment in which a firm does (or may want to do) business In which SBAs will the firm do business in the future? What competitive position will the firm occupy in each SBA What competitive strategy will the firm pursue to gain this position SBA Segmentation Dimensions: Need, Customer type, Technology and Geography Characteristics: Growth, Performance (Profitability), Turbulence and Success factors Strategic Resource Area: In the resource based postindustrial universe, managers have to balance what they want to do against what they can do Strategic Influence Groups: Firms increasingly legal and societal pressures - Stakeholder Management Firm Environment SBA SBU SBASBA 1 SBA 2 Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

Critical mass Optimal Mass - + ROI INVESTMENT IN AN SBA CRITICAL MASS CM : INVESTMENT BELOW WHICH A FIRM BECOMES UNPROFITABLE IN AN STRATEGIC BUSINESS AREA Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

STRATEGIC SEGMENTATION STRATEGIC SUCCESS HYPOTHESIS FIRM’S OBJECTIVES SBA PROSPECTS STRATEGIC DIAGNOSIS SBA ATTRACTIVENESS TARGET COMPATITIVE POSITIONING PORTFOLIO POSTURE ENVIRONMENT COMPETITIVE POSTURE IN SBA ENTRPENEURIAL PLANNING SBA Degree of Preparedness Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

Strategic Information Model Power Filter: It is nature for managers and departments, whose power is threatened by discontinuities, to minimize or even refuse to recognize the impact of discontinuity. Mentality Filter: Rejection of novel information and predisposition on success models Strategic and Creative Mentalities focus on –Future, Novel and Unfamiliar change –Entrepreneurial drive and tolerance of failure Management Information Environment Data Perception Information Actions Mentality Filter Surveillance Filter Power Filter Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

Competitive Positioning Estimating SBA attractiveness –Global forecast –Future Turbulence –Historical Trends extrapolated into the future –Changes in the historical demand –Overall shifts in growth prospects –Numerical estimates of Future growth –Future shifts in the profitability Boston Consulting Group matrix Low High Low ? Cash Cows Dogs Volume Growth Market Share as a function of leading competitor SBA Attractiveness =  G +  P +  O -  T Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000

Example: North Central College Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000 MBA Educational Leadership Biology History Administrative Services –Admissions -Registrars -Financial Aid Academic Services –Advising - Technology Needs Facilities –Buildings and Services –Recreational Activities –Classrooms and Teaching Domains Identify Future Turbulence Establish Strategic Aggressiveness Establish Responsiveness of Capability

STRATEGY (S) CAPABILITY (C) STRATEGIC INVESTMENT (I) GROWTH THRUST (Domain) MARKET POSITION (Domain )MARKET DIFFERENTIATION SERVICE-PRODUCT DIFFERENTITION CRITICAL MASS VERITCAL INTEGRATION MANAGEMENT FINANCE MARKETING R&D PRODUCTION IN STRATEGY IN CAPABILITY IN FACILITIES COMPETITIVE POSTURE IN AN SBA POSTURE = S X C X (I-I cr ) Ansoff and McDonnell, 1990 Created by Robert Moussetis, 2000