Management 478 Exam 2
What is Judo Strategy?
"To become a judo strategist, ... three principles... should inform your thinking: movement, balance, and leverage. Each principle provides a different piece of the strategy puzzle. Movement throws your competitors off balance and neutralizes their initial advantages. Balance helps you engage with the competition and survive the attack. Leverage can enable you to bring your opponents down. When used together, these three principles will help you defeat rivals of any size."
Strategy aligns internal activities to the value proposition
- Activities are the basic units of competitive advantage - Identify processes/activities -- innovation processes (invention, product development, speed to market, partnerships) -- customer management processes (service) -- operational processes (supply chain, cycle time, capacity-- efficiency)
Strategic planning and scenario benefits at UPS
- Benefitted senior managers and strategists -- Fostered strategic thinking -- Involved many in the process - 'buy in' Monitored competitors -- Helped track competition -- Provided early warning Communicated objectives to managers -- Communicated priorities -- Helped drive acquisition planning/growth -- Provided common vocabulary - Increased sensitivity to future developments - Helped see future opportunities - provided context - Fostered taking corrective action
Strategic planning at UPS
- Centennial Plan - 40-50 predictions - Mission and objectives (qualitative) - Worked backward on strategy -- Customers and value-added services --Enterprise excellence - Road map = implementation -- Measures - Used plan to monitor early warning signals from industry environment
How to Compete Against Time Continued
- Change production runs from long to short - use information technology - Determine how your customers value these speed-based capabilities and price products/ services accordingly - Use multifunctional teams - Develop a strategy for surprising competitors with time-based advantage
Main ideas
- Competition is for the future not current industry position - Competition is between business models not generic strategies - Advantage comes from core competencies - Differentiation comes from core competencies
The Future
- Competitive advantages are eroding more rapidly - Entry barriers are being reduced - The Internet is shifting bargaining power from producers to consumers - Ultra low-cost competitors are emerging - Ideas 'want to be free' E.g. music
Principle One: Movement
- DEFINE THE COMPETITIVE SPACE - Redefine standards for market - Segment the market--focus - Use first-mover advantage to build market as you choose - FOLLOW THROUGH FAST - Stay focused and sequence growth to avoid becoming overextended - Maintain internal alignment - Use partnerships to leverage resources beyond your immediate control
Principle One: Movement - Move rapidly to avoid head-to-head conflict
- DON'T INVITE ATTACK! - Keep a low profile, avoid giving away your game - Position alongside competitors instead of attacking head-on - Don't 'moon' the giant- unless you want to lose- appear to be as inoffensive as possible
Use Judo Strategy when:
- Dealing with the competition is a top strategic priority - Competitors have the advantage of strength and/or size - You're unlikely to win going head-to-head
How it is done - at UPS
- Define the scope of the analysis (open future orientation or focused on an issue)(where we are going to be at UPS- 100th anniversary, in conjunction with Centennial plan) - Identify major stakeholders (managers and different functions) - Identify basic trends (market environment and demand characteristics) - Identify uncertainties (Axes of uncertainty) - Construct scenario outcomes -- Unlikely outcomes (Tangled Paths and Regressive World) -- Possible outcomes (Global scale prevails) -- Extreme outcomes (Brave New World) - Check for consistency and plausibility (participants craft stories)•Develop learning scenarios (what new themes have emerged?)(plan 2017) - Identify research needs (what are the blind spots, what do you need to learn more about?) - Identify early warning signals (things that are indicative for a particular scenario to unfold)(UPS did not have these at first)(did them in 2017) - Evolve toward decisions - address issues facing company (used with logistics decisions)(strategists liked it- operational managers didn't) - Try to generate three or four scenario plots (4 each session- 1997 and 2004)
Lessons from Judo:
- Emphasis is on your opponent - Suppliers, customers, and the environment still do demand our attention - Emphasis is on movement, change, and risk-taking
Balanced Scorecard
- Financial ("To succeed financially, how should we appear to our shareholders?") - Customer (" To achieve our vision, how should we appear to our customers?") - Learning and Growth (" To achieve our vision, how will we sustain our ability to improve?") - Internal Business Processes (" To satisfy our shareholders and customers, what business processes must we excel at?") - Vision and Strategy is in the middle
KPI (key performance indicators)
- Financial (revenue, volume, margins) - Customer (satisfaction, dealer relations) - Internal (best-in-class) - Learning and Growth (personal growth, functional excellence, process improvement)
Balanced Scorecard - why needed?
- Financial measures tell the story of past events - Financial measures are inadequate for the creation of future value through investment in customers, suppliers, processes, technology and innovation - Balances financial measures with drivers of future performance
And what is the reward for time based competition?
- Firm becomes leader in developing new innovations in products/services, technology, work processes and organizational structures. - Firm is first to get new products in hands of customers - Firm increases both efficiency and quality - Firm can use what is learned to move to next wave of innovation - can develop new applications...
Principle Two: Balance - Be flexible and give way when attacked by superior force
- Grip your opponent - Avoid escalatory moves - Push when pulled - Design joint ventures and equity deals to co-opt or deflect competition - Sell your services to your opponents to stop them from developing competing capabilities - Partner with opponents to "take them out of the game" - Study opponents and copy their most compelling ideas - Avoid war of attrition - Take force out of opponents attack by building on his products, services and technology - Conserve your energy, return to fight another day
Fast Companies
- Grow faster and are more profitable than their industry competitors - Become closer and more essential to their customers - Obtain leadership positions in their industries - Offer managers the excitement of growing flexible core businesses!
Judo strategy - main points
- In judo, unlike many martial arts, true strength comes from turning your opponent's weight and power to your advantage. - Judo depends for success upon the skill of using an opponent's own weight and strength against him, thus enabling a weak(er) or light individual to overcome a physically superior opponent (Columbia Encyclopedia). - At the most basic level, judo strategy is a metaphor about how to compete and win. - A useful mindset for small companies competing with large ones, or new firms competing with established ones, or firms in turbulent environments seeking value chain and technological advantages.
A competency must meet the following test to be considered core:
- Inimitability - it must be difficult to copy - Durability - must offer continuing value - Appropriability - must allow the firm to capture value on industry value chain - Sustainability - can't be trumped by substitute -Competitive superiority - must be a skill truly superior to competitors
Principle 3 = Leverage
- Leverage is fundamentally about finding a pivot that makes it possible to bring your opponent down. -- In Judo, competitors use their shoulders and hips as levers- -- In Judo strategy, competitors use three techniques...(next slide)
Principle Three: Leverage - Use the weight of your opponent against him
- Leverage your opponents assets - Leverage your opponents partners - Leverage your opponents competitors Turn assets into hostages by forcing opponent to cannibalize their own strength to respond to your attack - Execute! - Out-partner your opponent by showing other companies that they can do better by working with you - Divide and conquer: force opponents into unpleasant choices by pitting them against their partners - Add value to your opponents' competitors' products* - Provide a distribution channel for your opponents' competitors' products and services
Management innovation defined
- Management innovation is anything that substantially alters the way in which the work of management is carried out, or significantly modifies customary organizational forms, and, by so doing, advances organizational goals. (page 19, The Future of Management)
Pitfalls of Strategic Planning
- Managers sometimes do not support planning for good reasons (commitment) - Organization climates conducive to effective planning are not conducive to effective strategy making (and vice versa) - Planning can defeat change - Control is an illusion - Hard data is often unreliable
Mission - An enduring statement of purpose
- Markets - Technology - Customers - Products - Philosophy - Stakeholders - Performance - Ethics - Social Responsibility
Strategic planning at UPS Continued
- Mission was springboard for plan - Used SWOT -- Scenarios as input - 5 year (and more) time horizon - Used plans, scenarios, maps -- Multiple processes - Values - speed, efficiency, service excellence, employee ownership, stability
Leveraging your opponent's assets:
- Nintendo vs. Sega - Nintendo was seen as family-friendly-Great games-Non-violent (for the most part) - Sega attacks with Moral Kombat - Nintendo would have had to make an unpleasant or cannibalize strength to respond.
Things that will slow you down!
- Organizing for economies of scale rather than fast throughput - Functional organization design (traditional business departmentalization)
Fleisher and Bensoussan consider scenario analysis to be good at:
- Orienting the firm relative to its future - Accuracy (research shows that when assumptions are good, most likely scenarios tend to be pretty accurate) - Useful - technique is useful in helping build strategic plans - However - scenarios are considered to be only 'okay' in terms of being an objective approach to planning; and are weak in terms of efficient use of resources (time consuming)
How to Compete Against Time
- Plan for small improvements - Plan for many improvements - Put relevant groups together - Put relevant resources together - reduce waste
Advantages of Fast Companies?
- Productivity increases (lower labor costs, higher economies of scale) - Prices can be increased (10-100% premium, 20% is average) - Risk is reduced (reduces forecasting) - Share is increased (what customer wants not what company has, time-based customers are increasing)
According to Hamel and Prahalad there are three tests
- Provides access to a variety of markets - Provides significant customer benefits - Is difficult for competitors to imitate
How to compete for the future
- Regenerate core strategies - Seek new voices in strategy (-making) - Maximize diversity Distinguish orthodoxy from deep principle - Look outside the industry - Value not created by efficiency experts but by anarchists - New perspectives are needed to re-conceive reality - Don't be infected with orthodoxy
Other definitions of scenarios
- Scenarios are (coherent and credible) stories about the future. - Scenarios are built upon a dynamic sequence of interacting events. - Scenarios help: -Select strategies - Realize uncertainties - Identify what might happen - Offer early warnings
Balanced Scorecard - Definition
- The BSC uses traditional organizational effectiveness criteria as the foundation for mapping relationships in the value-adding process: -- The Balanced Scorecard provides a Framework to Translate a Strategy into Operational Terms (next slide) -- Financial measures tend to be used in aggregate. Non-financial measures tend be used for local improvements -- The Balanced Scorecard emphasizes that both sets of measures be part of the information
SMART Objective
- The end result of planned activity - Can be set for functional areas or company divisions Criteria: -Specific -Measurable -Accepted -Relevant -Timely
The Future of Management
- The major innovations of the future will not necessarily be products or services. - The major breakthroughs will come in the form of organizational and management innovation. - Creating a truly innovative form of management within a firm will provide tremendous value...
How Scenario Planning works?
- The scenario planning method works by understanding the nature and impact of the most uncertain and important driving forces affecting the future. - It is a group process which encourages knowledge exchange and development of mutual deeper understanding of central issues important to the future of your business. - The goal is to craft a number of diverging stories by extrapolating uncertain and heavily influencing driving forces. - The stories together with the work getting there has the dual purpose of increasing the knowledge of the business environment and widen both the receiver's and participant's perception of possible future events. - The method is most widely used as a strategic management tool, but it is also used for enabling group discussion about a common future.
UPS Case Summary
- This case traces the history of UPS and its move from a package delivery company to a logistics service firm. - In 2004 UPS has adopted both a formal strategic planning process and a more informal scenario construction process. Their formal planning process follows the established model of 'mission - objectives - strategies.' The scenarios are built at executive retreats facilitated by consultants. - There were two main scenario construction retreats- and two main scenario grids resulted. The case exhibits include the grids. - The benefits of planning were good project control, prioritization, and implementation. The scenario benefits included enhanced thinking about the future and opportunity/option identification. - The case ends with managers contemplating the value of their planning exercises.
Concluding points:
- This is a very non-elitist view of strategy - Key challenge is not efficiency- it is irrelevancy! Change! - Competition is between and among business models for future markets - Know Collis and Montgomery criteria! - Key challenge is not about getting better but about getting different. Innovation is everyone's job. - Reinvent and re-conceive your business model. - Reinvent management practices
The Time Paradigm
- Time is the secret weapon of business. Advantages in response time provide leverage for all other competitive differences that make up a company's overall competitive advantage. - A new generation of competitors is obtaining remarkable results by focusing its organizations on flexibility and responsiveness.
Principles of a Strategy-Focused Organization
- Translate strategy to operational terms - Align the Organization to the Strategy - Make Strategy Everyone's Everyday Job - Make Strategy a Continual Process - Balance
How to Beat a Judo Master
- Unnerve the competition, use fear, uncertainty and doubt - announcing your moves and pricing and making aggressive capacity signals (scares weak competitors) - Outspend smaller opponents - Deny opponents access to critical resourcesProvoke head-on battles - Learn the rules and force opponents to play by them
What do you think of UPS planning?
- What are the benefits? -- Costs?èWho was involved? -- Who was not involved? - Why do both strategic planning and scenario planning? - If you were a consultant, what would you recommend? What did you learn?
Yoffie's recommendation:
- You and your firm must be willing to take risks - But risk must be taken because the greatest hazard in life is to risk nothing - Be unique-Me too strategies rarely work - Create value - More than just product- include whole value chain - Communicate value - No matter how great your product, it has to be perceived as great by customers - Be a moving target - Sitting ducks are always picked off
Use Judo Strategy if:
- Your firm is a small player facing off against stronger competitors (David versus Goliath) - You're a large player moving into areas where powerful opponents may already be entrenched - You have the capabilities to outmaneuver opponents
Core Competency =
- are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies - It is about the delivery of value - In terms of SWOT it is about S/O or strength with opportunities
Strategic vs. business plans
A business plan - Is typically used at 'start up' for new ventures - Includes mission as well as feasibility analysis - Break-even analysis - Typically submitted to banks and venture capitalists- investorsè Strategic plan - To facilitate the objectives of an on-going enterprise - 3 to 5 year planning horizon is typical - Used to integrate diversified firms or complex organizations - Used to address overall organizational effectivenessèBut sometimes these terms are used interchangeably
Collis and Montgomery, HBR, 1995:
A core competency must pass the following tests (must be valuable to customers plus): - Inimitability - it must be difficult to copy - Durability - must offer continuing value - Appropriability - must allow the firm to capture value on industry value chain - Sustainability - can't be trumped by substitute -Competitive superiority - must be a skill truly superior to competitors
Strategic Planning
A formalized procedure for articulating the mission and objectives of the organization and for specifying an integrated system of decisions for reaching those objectives.
Building Strategy Maps
A strategy map for a Balanced Scorecard makes explicit the value proposition. A map embeds measures in a chain of cause-and-effect relationships, connecting desired outcomes with strategy drivers. A map is a framework for describing the strategy process.
Strategy as:
Architecture - Purpose - Skill (not SBUs) - Future oriented Stretch - Strategic Intent (vision, capturing the essence of winning, how will next be different, a sense of destiny-discovery-direction) - Ambitious goals Leverage - Resources can be leveraged to concentrate, complement, and conserve. - Constraints are not necessarily an impediment to leadership
To Create the Future
Change the Rules Redraw Industry Boundaries Create New Industries - New Opportunities -New Space Co-create value with customers Create organizational innovation (create an innovative organization)
Core Competency
Contributes to long-term value (provides access to many markets) Adds to customer value - creates new business models Differentiates completely (is very difficult to imitate) Extends into tomorrow's markets!!
When resources and capabilities serve as a source of competitive advantage for a firm, the firm has created a:
Core competence
Competencies continued
Core competencies are resources and capabilities that serve as a source of competitive advantage over rivals Core competencies distinguish a company competitively --- they lead to distinctive products and services McKinsey and Co. recommends using three to four competencies when framing strategic actions
What defines a core competency?
Core competencies are unique, durable, hard to copy, sustainable, valuable, competitively superior skills that come from internal values, resources, and capabilities (strengths) ...and they determine the firm's ability to compete for future markets - the real battleground is the future.
Substitutes for Strategic Plans
Culture/Values Balanced Scorecards Core Competencies Scenarios Environmental Scanning Other?
The basic idea from Value based management.net
Firms can earn sustainable above-average returns if they possess superior resources and if those resources are protected by some form of isolating mechanism preventing their diffusion throughout the industry.
Another way to say the same thing:
Four indicators of the potential of firm resources to generate sustained competitive advantage The VRIN model or framework: - Is the resource valuable? - Is the resource rare? - Is it hard to imitate? - Does it result in (Non) Substitutability -- Can the firm organize itself around the resource so as to become isolated from the competition (O).
Strategies
How the firm will achieve corporate objectives: -Grow -Stabilize -Retrench How the firm will compete in an industry or business: -Cost leadership -Differentiation -Focus
Judo Strategy - Formula 409 Example
In 1967 Wilson Harrell used movement (quickly contacting customers once he learned of Cinch) Balance (withdrawing 409 temporarily from the market), Leverage (bet on P&G taking time to do formal market research) against P&G. The result was that he was able to buy some time and then sell Formula 409 to Clorox Corporation for over $7 million in 1971.
Example - UPS
Main uncertainties or dimensions - Business environment - Commerce, Biz Model, Demand Four scenarios - Company city - global integrated trading env. - Bordered disorder - terrorism and unrest - Networks without borders - seamless commerce - Connected chaos - local econ. and virtual orgs.
Mission and vision
Mission = purpose - Part of plan - Part of 10k - Part of charter - Part of annual report Vision - Future oriented - Where do we go? What do we want the firm to become?
Model - 3 main components
Movement - Quick decisions, fast follow through, speed in terms of resource allocation Balance - Flexibility and knowing when/how to 'give in' and when/how to counter-punch Leverage - Finding weak spots in enemy- a point where they can be taken down
Objectives - Format
Objective - Goal #1 -- Strategy -- Strategy - Benchmark -- quantitative -- qualitative - Implementation -- Who is responsible? By when? What report?
Methods of Scenario Planning
Qualitative - Intuitive methods - trend spotting, nominal group technique Delphi method - An aggressive attempt to collect the inputs regarding future trends from a panel of experts This is the most qualitative scenario approach Quantitative - Computer-generated econometric models - Statistical forecasting - Cross-impact analysis - or probability estimates
When a firm combines __________ and ___________, it builds core competencies.
Resources; capabilities
We need a new model of strategy:
Strategic fit (between resources and opportunities) Generic strategies (low cost vs. differentiation) strategy hierarchy (corp. and bus.-level) ... have abetted the process of competitive decline!
Environmental Analysis (SWOT)
Strengths Weaknesses Opportunities Threats
UPS Application
UPS case offers a good statement on how to facilitate strategic planning: - Prepare managers with SWOT-based assignments - Prepare top managers through participation in Strategic Adv. Grp. - Draw mission from charter - Build general qualitative goals first and then get more specific - Address goals to major performance issues such as -- UPS brand, competition, growth, profitability, efficiency, cost control, people, customers, etc. -Address strategy to 'how we will achieve the goals' -- Attract winning workforce -- Enhance customer services in relevant areas -- Expand services in relevant areas -- Create environment conducive to enhanced service - Create strategy road maps to help implement strategy and get to specifics
So, Why Plan?
We have to! - Public Relations - Politics Communication--- -- internal -- external Accountability/Performance
Core competencies are
a bundle of skills and technologies that enables a company to provide a particular benefit to customers A competency is the set of most significant value-creating skills and key areas of expertise which are distinctive to your firm and critical to its long-term growth It is not what the company does, or makes. - It is the collective learning and coordination skills behind the firm's product lines. What skills does the firm value? A firm is a collection of competencies. A "core competency" is more than an asset or brand. It is a form of advantage. It is the source of advantage! A "core competency" is an aptitude or skill. - It is a set of skills that allows your firm to do better than competitors in the critical areas where the most value is added.
Royal Dutch Shell's definition of scenarios
cenarios are carefully crafted stories about the future embodying a wide variety of ideas and integrating them in a way that is communicable and useful. Scenarios help us link the uncertainties we hold about the future to the decisions we must make today. Shell likes the technique because it considers vast array of economic factors
Scenario planning
is a model for learning about the future in which a corporate strategy is formed by drawing a small number of scenarios, stories how the future may unfold, and how this may affect an issue that confronts the corporation.
