1. What is Strategy? Chapter One Cornelis A. de Kluyver John A. Pearce II
and
John A. Pearce II
Third Edition

2. It is a pattern in a stream of actions.
What is Strategy?
It is a pattern in a stream of actions.

3. Strategy is About…
Positioning an organization for competitive advantage
Deciding what to do and what NOT to do
Which industries to participate in
What products and services to offer
How to allocate resources, add value
Creating value for shareholders and other stakeholders by providing value to customers

4. Strategy… Differs from Tactics:
Forces trade-offs and should focus on differentiation from rivals
Focuses on value creation
Allows for learning and adaptation
Takes a long-term perspective
Responds to the needs of all stakeholders

5. Strategy is About Making Choices…
Who will you target as customers and who will you not?
What will you offer these customers and what will you not offer them?
How will you do all this? – What activities will you perform; which will you not?

6. Choosing is Not Enough; You Must Force Trade-offs and Create Fit
Dell’s manufacture-to-order system forced competitors to make trade-offs (Key to Differentiation)
Southwest Airlines has created fit (Key to competitive advantage through Operational excellence)

7. Southwest Airlines’ Activity System
No meals
No baggage
transfers
Limited passenger service No
connections
with other
airlines
No seat
assignments
Limited use of
travel agents
Short-hand
point to point
routes between
midsize cities
and secondary
airports
15 minute
gate
turnaround
Standardized
fleet of 737
aircraft
Frequent reliable departures
Automatic
ticketing
machines
Lean, highly
productive ground
and gate crews
High
compensation
of employees
Very low ticket prices
“Southwest,
the low-fare
airline”
High aircraft utilization
Flexible union
contract
High level
of employee
stock
ownership

8. Strategy Should Consider the Company’s Ecosystem
The environment
International law
Governments
Standards bodies
Stakeholders
Supplier’s suppliers
Customer’s customers
New entrants
Customers
Suppliers
Competitors
Substitutes
Organisation
I put this diagram together some years ago for a client. It isn’t rigorous but it doe indicate most of the areas which need attention. Students of strategy will recognise Michael Porter’s five forces amongst other influences.

9. What is an Ecosystem?
Simply put, it's the idea that today's companies are embedded in multiple, complex relationships that make them interdependent on each other for success.
But it's only recently that corporate leaders are realizing that an ecosystem is more than a concept.
The ecosystem has intense implications for how companies plan for the future, and they ignore those implications at their own risk.

10. Sound Strategy Development Focuses On:
Articulating strategic intent
Creating and leveraging organizational capabilities
Fostering innovation and learning
Embedding strategic leadership

11. A Clear Strategic Intent Provides Focus…
“Beat Xerox”
“A Computer on Every Desktop”
“Be #1 or #2 in every business…”

12. Matching Competitive Advantages of Rivals is No Longer Enough…
Write the rules; Don’t copy someone else’s
Toyota
Canon
Microsoft
Google
“Companies that have risen to global leadership invariably began with ambitions that were out of all proportion with their resources and capabilities...” (Hamel and Prahalad)

13. Organizational Capabilities are Increasingly Critical to Success

14. Competencies Must Be Nurtured Continuous innovation and learning are critical
Core Competencies
(CC’s)
Customer benefit
Cost benefit
Competitive differentiation
Basic Competitive Requirements
Essential to all competitors
No industry differentiation
Latent Core Competencies
Unexploited
Insufficient breadth/ depth
High potential
Future Core Competencies
Important in the future
Agenda for competence building

15. The Competitive Advantage Cycle: Value, unless constantly nourished, erodes over time
Rewards:
Satisfaction
Loyalty
Profits
Share
Positional
Advantages Realized
Superior Customer Value
Investments
In Renewal
Sources of Advantage
Superior Assets
Superior capabilities
Competitive
Dynamics
Erode
Advantages
Key
Success
Factors
Barriers to
Imitation

16. Strong Leadership at All Levels of the Organization is Key
Mission
Documents the purpose of the organization’s existence, may guide conduct
Vision
Represents organization’s strategic intent
Sets stretch targets
Strategic Thinking
Creates a vision for the organization
Is primarily top-down (CEO/Senior management driven)
Requires creativity, analysis and synthesis
Strategic Planning
Is both top down and bottom-up
Plays supporting role focused on analysis, communication

17. A Clear Process Provides Structure…
Evaluate
Current
Performance
Mission
Goals
Objectives
Strategies
Environmental
Analysis
Economic
Socio-cultural
Technological
Political
Opportunities &
Threats
Company
Structure
Resources
Processes
Staffing
Culture
Strengths &
Weaknesses
Industry
Evolution
Competition
Competitive
Analysis &
Positioning
Evaluation
Resource
Requirements
Risk/return
Implementation
Strategy
Options
Business Unit
Corporate
Where are we now?
Where should we go?
How do we get there?

18. Strategy as a Portfolio of Options…
Strategy is not about creating a detailed, long-term plan
Strategy should focus on a long-term strategic intent and flexible means for realizing that intent
Learning and continuous renewal are essential parts of strategy

19. Not All Strategy Can Be Planned…
Deliberate
Strategy
Intended
Strategy
Realized
Strategy
Unrealized
Strategy
Emergent
Strategy

20. Strategic Choices Must Be Supported by Organizational Choices
Culture
Processes/
Incentives
People
Structure
Strategy