Strategic Management Exam 2

Billy Madison (Adam Sandler) Quote

"I choose business ethics" "Ethics are, uh"

Maturity

(S-Curve) -Strategy: Cautiously manage current operations to maximize efficiencies -Growth slows to a halt -Remaining firms compete for market share -Demand mainly takes the form of replacement purchases, those having survived the shakeout compete on price (usually) -Examples: Smartphones (Apple), Streaming platforms (Netflix)

Growth

(S-Curve) -Strategy: Focus on capturing new customers -Mainstream Buyers become familiar -Prices Fall -Firms attain experience and economies of scale, establish distribution -Also a battle to become the industry standard

Shakeout

(S-Curve) -Strategy: Focus on improving the value proposition, invest to find a new S-curve -More competition, firms focus on differentiation. -Growth tapers off. Losing firms exit. -Rivalry intensifies, less effort on establishment of the category overall. -Consolidation of less successful firms become more common. Ex: rideshare now dominated by Uber and Lift

Decline

(S-Curve) -Strategies: Exit, Harvest, Maintain, or Consolidate -Growth becomes negative -Strong threat of substitution -Firms create exit strategies -Not always the worst spot to be in depending on your position and strategy, can reap benefits with low overall cost/effort. Ex: Landline phones, digital cameras, dunk-a-roos (comback story)

Introduction

(S-Curve) -Strategy: Focus on facilitating widespread adoption -Early adopters make initial purchases. -Firms direct their efforts at innovators, brand loyalists, visionaries, etc. -Considerable effort on educating the market and providing value.

Change Research

- 100% of all changes evaluated as 'successful' had a good technical solution or approach - Over 98% of all changes evaluated as 'unsuccessful' also had a good technical solution or approach

Focus Strategy

- an action plan the business develops to produce goods or services that serve the needs of a specific market segment -Serve needs of a narrow customer segment because they can better meet the needs than the firm targeting its products to a broad market -based on three main components: +needs of a group can be better served by focusing entirely on it +Focusing on a specific group usually increases customer loyalty +A business can sometimes garner an increased price as there may be a lack of substitute products/services Includes: focus differentiation & focus cost leadership

Frequency

-Anytime we have contractual talks in business, there is typically a certain amount of negotiation involved...as both sides try to leverage power -Beyond that, there are transaction costs associated with contracting, and those can add up overtime.

Idea Generation - Random Brainstorming

-Choose an option in the room -Brainstorm all the things you can/could do with this object (from usual to out-of-the-box uses) and its attributes. (Come up with 15-20 ideas) -Examine the ideas and look for associations with the original problem statement, then brainstorm 40 actionable ideas to address the problem.

Creating Bug Lists

-Debugging can boost creativity because tiny annoyances are often symptoms of bigger problems. -Think of a product you use every day: your toothbrush. Now write down every disadvantage you can think of. The product's flaws don't have to make sense. be unreasonable, fair, go on the attack. -Once you have the list, think of ways to get rid of the bugs, to make the product more efficient or more pleasant to use.

Types of Uncertainty

-Demand uncertainty: making it hard to determine how much supply I need (season products) -Environmental uncertainty: making it hard to predict availability of resources -Supplier Uncertainty: making it hard to predict if suppliers will be around, and be able to meet production needs

Limitations of Vertical Integration Analysis

-Depends on managers' and practitioners' ability to properly understand and categorize assets. -It cam be difficult to objectively evaluate the extent to which an asset is central to competitive advantage. -The framework tends to prompt strategic decisions based on only current and historical data.

Decision Making- Spend a Dollar

-Each participant is given 10 voting dots worth 10 cents each. -Select the top choices from the list of ideas they would like to carry forward. -Place the dots next to the idea(s) they selected. If an idea is more important, a participant may place more dots next to it. -Count the dots next to each idea and circle those with the most votes. These are a good start towards consensus on a few solutions that matter.

Different Types of Vertical Integration

-Forward Integration: entails a firm purchasing or creating a downstream operator in the supply chain EX: Amazon, Whole Foods, Under Armor, Disney+ -Backward Integration: entails a firm purchasing or creating an upstream supplier EX: Netflix, coke, Zara

Why do we have unethical behavior?

-Greed -Distinctions between activities at work and activities at home -Lack of a foundation in ethics -Survival (bottom-line thinking) -A reliance on other social institutions to convey and reinforce ethics

Why do employees resist change?

-If we want to change course, or try something new, we need to find prudent ways to deal with this! -We can greatly increase our chances of success with an activation approach that includes focus on change management.

Misconceptions of Innovation

-Innovation is planned and predictable -Technical specifications must be thoroughly prepared -Innovation relies on dreams and blue-sky ideas. -Big projects will develop better innovations than smaller ones -Technology is the driving force of innovation success.

How questionable behavior is rationalized:

-It's not "really" illegal or immoral -It's in my /company's best interest -No one will find out -The company will have my back

Problem: Concern over wasted space

-Japanese grocery stores are much smaller than their US counterparts and therefore don't have room to waste. -Watermelons, big and round, wasted a lot of space. Most producers would simply tell the grocery stores that watermelons grow round and there is nothing that can be done about it. -But some Japanese farmers took a different approach. -If the supermarkets wanted a square watermelon, they asked themselves, "how can we provide one?". It wasn't long before they invented the square watermelon.

Finding the New S-Curve

-Markets, products, and technologies tend to follow the S-Curve -A new market, product, or technology may emerge to replace the old one. -One of the key roles of managers is to invest resources in a manner that produces new S-Curves.

Ground rules for enhancing innovation

-No judgements -Be curious -Recognize and respect others -There are no silly/bad ideas -Jump in and participate fully -Respect time constraints -Have fun -Remember that it can be learned!

Limitations of S-Curve

-Not all markets, technologies, or products follow an S-curve trajectory. -Knowing how long each phase will last is very difficult, getting the timing right to act on those suggestions can be very problematic.

Perception Tool - One Word

-On a sticky note, each participant writes one word that sticks in their mind about the problem -Place the sticky notes on a flip chart and review the words as a group -Decide how best to use these key words and build a complete problem statement -Write the first draft of your problem statement on a flip chart

Why Aren't We More Creative?

-Prejudice (Apple) -Functional fixation (Hammer) -Learned Helplessness (won't matter anyway) -Psychological Blocks "Computers in the future may weigh no more than 1.5 tons" -Popular Mechanics 1949 "I think there is a world market for maybe 5 computers" - Tom Watson, chairman of IBM, 1943 "650K ought to be enough for anybody" -Bill Gates 1981

Sources of Ethical Dilemmas

-Pressure from inside and outside interests (stakeholders) -Changes in societal values, morals and norms +Because society operates in a dynamic and ever-changing environment-consensus does not exist!

Vertical Integration:

-Purpose: Evaluate which assets a firm should own and which they can buy from other firms. -Ownership of assets is largely determined by difficulty of managing that asset. What determines if something is difficult to manage??: 1) Specificity: the more specific the assets involved, the greater the greater the chance that the contract is "held up". 2) Uncertainty: the higher the uncertainty, the more difficult it is to write a contract. 3) Frequency: the higher the frequency of transactions, the greater the chance of haggling.

Idea Generation - Reverse Brainstorming

-Reverse your problem statement by phrasing it in a way that would make you focus on achieving the contrary from what you want to do. -Brainstorm ways to achieve that goal (come up with 15-20 ideas) -Examine these ideas and reverse them back to the real problem. Be specific with 40 actionable ideas.

Innovation-Driven Organizations: Some Common Themes

-Sets explicit goals (creates innovation goals) -Creates a system of feedback and positive reinforcement (encourages/facilitates collaboration between innovators and the organization at large) -Emphasizes individual responsibility (identifies potential innovators early) -Provides rewards based on results (top management sponsors innovative projects) -Does not punish failures (encourages experimentation)

Strategy Activation Key Takeaways

-Strategy needs to be well defined and focused (priority needs to be clear!) -Initiatives need to be broken down into measurable parts -Continued rigor and accountability required to track performance (20/80 concept) -1-year operating plan should inform goal setting for employees -All employees should be able to understand how their work connects to the larger company goals

Limitations of Business Level Strategy

-The ability of many businesses to successfully reconcile differentiation and cost without becoming stuck in the middle. -Rigidity of these strategies -There should be a clear difference between low cost strategies and best cost strategies (price wars) -Applicability of this model with the advent of e-business.

Knowledge Economy

-The knowledge economy as we know it is being eclipsed by something new, call it the Creativity Economy. -Increasingly, the new core competence is creativity, the right brain stuff that smart companies are now harnessing to generate top-line growth. The game is changing. It isn;t just about math and science anymore. It's about creativity, imagination, and above all, innovation. -Most successful businesses are those that are quick/effective in finding a problem to solve or an opportunity to leverage. -Those that do it will creativity and/or innovation are likely to benefit for longer periods of time.

S-Curve Analysis

-To understand and interpret the evolution of a market, product, or technology. We can use the S-Curve to assess current markets, products, or technologies and make strategic decisions. -Early research studied the diffusion of new technologies like household appliances and color televisions. 1) Initial slow growth 2) Rapidly accelerating growth 3) Larger share of the market adopts 4) Growth slows and eventually stops -These S-Curve characteristics were found in many different fields and domains of research.

Blue Ocean/Integrated Strategy

-an action plan the business develops to reconcile both high degrees of low cost and high degrees of differentiation -untapped market space, creation of additional demand, limited/no direct competition, opportunity for high profitability -claim that hybrid strategies can succeed and be highly effective -"Value Innovation" Via: +Eliminate aspects of typical industry strategy +Reduce product/service attributes below industry standard +Raise/enhance attributes of product/service +Create - what can we offer that has typically never been provided in our industry?

Cost Leadership Strategy

-an action plan to produce goods or services at the lowest cost -Source of cost advantage allows reduction of price -Cost drivers: lever that the business can utilize to decrease the cost associated with producing a product or service +Reduce cost of input factors +Economies of scale +Economies of learning +Efficient production techniques +Low-cost product design +High-capacity utalization +Managerial efficiency

Differentiation Strategy

-an action plan to produce goods or services that customers perceive as being unique in ways that are important to them (Value = Benefits - Cost) -Competitive advantage when value>competitors

Benefits of Vertical Integration Analysis

1) A systematic way to work through strategic decisions pertaining to firm scope. 2) A way to evaluate carefully what a firm should own and what they might buy.

How can approaches like IPS help?

1) By increasing the creative thinking when solving business problems. 2) By balancing logical and creative thinking 3) By encouraging playfulness and humor 4) By maximizing the idea time for teams and helping them foster constructive debates, risk taking, and trust/openness.

Change Management Key Takeaways

1) Don't skip or ignore this! (anything times 0=0) 2) The power is not in the tools, but in the engagement and discussion that take place as a result 3) Transparent communication, rationale and data help stakeholders understand the why 4) Be open to shifting and adjusting solutions during this step (within reason) it might end up being better!

Firm Options During Decline Stage of S-Curve

1) Exit: bankruptcy or liquidation 2) Harvest: reduce investment and maximize cash flow 3) Maintain: continue supporting business at reasonable level 4) Consolidate: buy rivals to establish stronger position

Benefits of Business Level Strategy

1) Gives a clear picture of what position the firm occupies in the consumers' mind's eye. 2) Allows you to see the differential positioning of your competitors or industry incumbents. one may also infer if there is unoccupied strategic space that could a availed 3) Can help assess the viability of strategic repositioning 4) Gives the strategist a complete understanding into the cost and value drivers of the business and industry.

Process of Utilizing the S-Curve:

1) Identify: solution alternatives 2) Inform: strategic options 3) Assess: how quickly things are changing 4) View: a portfolio perspective in making strategic decisions 5) Consider: exit, harvest, maintain, or consolidate

Why Do Strategies Fail?

1) Not differentiated and specific 2)Not known and understood 3) Not actionable 3) Not linked to departmental, team and individual objectives 4) People do not act according to their departmental, team and individual objectives. 5) People do not act according to their departmental, team and individual objectives. 6) Strategies are not linked to structure, resource allocation and reward 7) Feedback and management reporting is tactical, not strategic

Can you foster an innovative climate?

1) View and present issues as challenges that can be overcome, not barriers 2) Accept ideas in a supportive and constructive way. 3) Reward and recognize the behaviors that promote innovation. 4) Use/provide processes and tools that support innovation.

Benefits of S-Curve

1. Highlights how the markets, technologies, or products that a firm depends on today may not be the ones that make it successful in the future 2. Assess the impact of innovation and change on a firm 3. Assess how long value can be generated from the existing portfolio 4. Highlight the appropriate strategic philosophy for where a firm is positioned along the S-curve

Teens ages 13-15 years old ___ scored in the creative genius category.

10%

Adults over 25 years old ___ scored in the creative genius category.

2%

Children ages 8-10 years old ___ scored in the creative genius category.

32%

___ percent of strategies fail to be executed by organizations according to Harvard Business School Professor Robert Kaplan's book: The Balanced Scorecard: Translating Strategy into Action

90%

Among 1600 children ages 3-5 years old were given 8 tests of divergent thinking, ___ scored in the creative genius category.

98%

But What is Original?

A Beautiful Mind, TED, RadioHour

Fast Follower

An organization that waits for a competitor to successfully innovate before imitating it with a similar product. EX: Facebook

War In Ukraine, Consider STEEP, Is it Ethical to Take Advantage of Opportunities Presented by Events/Factors that are Negative? Covid-19 for example.

Any different from realtor taking advantage of a change in interest rates? (Economic Portion of STEEP).

How can we try to initiate change?

Ask for It!

So how do we decide when and how?

Assess if a firm should vertically integrate. 1) How difficult is it to write contracts? 2) How critical is the asset to the firm's competitive advantage? Assume control of resources and capabilities that combine to create a competitive advantage for a firm.

New S-Curve in Application

Cable TV replaced with Streaming Services Old S-Curve: Cable TV New S-Curve: streaming services Where are we on that curve?

Problem Statement - We need to improve the overall brand recognition and reputation for our energy drink.

Do random brainstorming.

Problem Statement: We need to improve the overall quality of customer service in our call center.

Do the idea generation (reverse brainstorming)

Change Research

Effective Results (E) are equal to Quality (Q) of the solution times the Acceptance (A) of the idea and Accountability (A) and Alignment (A) of the implementation. Q*A^3=E

The Industry Standard Battle (S-Curve)

Examples: -VHS vs. B -Blue-ray vs. DVD

Stages of S-Curve Analysis

Introduction Growth Shakeout Maturity Decline

"The best way to have a good idea is to have lots of ideas"

Linus Pauling, Nobel Prize Winner, Chemistry and Peace

Different Types of Competitive Advantage

Low cost, differentiated, dual advantage (Porter's: Focus)

How Strategy & Leadership Intersect

Management Systems Leadership Systems Improvement & Change Toolbox

Ideas are great. Ideas + action are AWESOME

Managers would prefer if an employee has an idea that they also combine it with some ACTION to get them started. Not only does it make the idea seem more realistic, it gives your manager something to socialize.

Improvement & Change Toolbox

Methodologies and approaches to help drive efficiency and effectiveness of solutions

As a strategist, it is ___ your job to arbitrate or negotiate ethics...especially in the diagnose state of our process. It is your job to understand the world/market as it is and aim to predict how it will be as accurately as you can! This is the only way we can discern what our universe of opportunities and options are for developing strategies. The choice of taking actions on those opportunities is when organizational _____ (values) come into play!

NOT; ethics

Is this to suggest that we should just take ideas from other people?

No, but try as we might, we can't un-see or un-hear or un-remember things we've experienced. And why does it help us to build on existing ideas? I built the foundation and infrastructure of knowledge management at two organizations based off of this!

New S-Curve in Application (x2)

Old S-Curve: In-person classes New S-Curve: online classes Where are we on that curve?

Strategy Activation is the Last Addition to

Strategy Hall of Fame

What examples would specificity be the case for?

Tesla, Tiffany & Co

"Change initiatives are the vehicles by which strategy is delivered...

They represent the most significant dimension in determining whether goals and objectives are achieved. They are the connective tissue that allows us to bridge the gap between strategy and execution."

Leadership Systems

a platform for engaged and accountable talent

Management Systems

an operational rigor that connects strategy to execution and sustained results

Institutionalization:

deliberate step to incorporate ethical objectives with the economic objectives of the venture

Porter's position is that Cost and Differentiation are

mutually exclusive (this has been challenged by subsequent research)

Focus Differentiation

narrow segment, high perceived value

Focus Cost Leadership

narrow segment, lowest possible price

Solution: Establish a code of ethics

o Should be done early as possible o Base it on your moral code o Establish a strategy § Ethical consciousness § Ethical process and structure § Institutionalization

Ethical consciousness:

setting the tone for ethical decision making and behavior (through words and actions)

Ethical process and structure:

the procedures, position statements (codes) and announced ethical goals designed to avoid ambiguity