Chapter 4 Focus on the Big Picture, not the Numbers Team 1: Alec Wegmann, Mark Beal, Adrienne Collins, Jessica Drummond, Mike Sanchez, Spencer Thomas Mario Santos,& Chad Hensley
Typical Red Ocean Strategy Plan • Lengthy industry analysis • Tactics to increase market shares, capture new segments, and cut costs • A full budget it almost invariably attached • Produced by people in various parts of the company, often with conflicting agendas.
These “Typical” Strategies don’t make sense • Often these plans do not contain strategy at all • Rather a compilation of tactics that individually make sense, but collectively do not add up to a clear unified direction.
Balanced Scorecard (mgt 3370) • another way to define strategy • focuses on creating a set of measurements for 4strategic perspectives
The problem: • conceptually unclear model with too many details
Focusing on the BIG PICTURE • By drawing an effective strategy canvas, a company and it’s managers can focus on the big picture rather than emersion in numbers, jargon, and operational details.
Strategy Canvas Accomplishes (3) things • First, it shows the strategic profile of the industry • Second, it shows the strategic profile of current and potential competitors. • Finally, it shows the company’s strategic profile, or value curve. • As stated before in Chp. 2, a Strategic Profile needs to have focus, divergence, and a compelling tagline.
The Strategy Canvas • Maps out what will separate you from your competition • Red Ocean strategy→Blue Ocean strategy requires a strong leader or a crisis. • Four steps to complete the Strategy Canvas.
Step 1: Realizing Current Strategy • Find out what the current positioning of the strategy is. • EFS (European Financial Services) suffered from ill-defined strategy. • ISQS 3344 (Flamm)
“European Financial Services” (EFS) and its Competitive Strategy • EFS’s Problem=No Defined Strategy • Management from Europe, North America, Asia, and Oceania convened and could not agree on its competitive advantage • It was the belief that regions and demographics contributed to different strategies
Awakening to Current Strategy • Contradictions in competitive strategies • Website advanced but slow • Comparison with Clearskies • Focused, original strategy • Moving away from red ocean • Strategy canvas very different from competitors and EFS (evidence of a blue ocean)
Step 2: Visual Exploration • A team needs to be sent into the field, putting managers face-to-face with what they must make sense of: how people use or don’t use their products or services. • A company should never outsource its eyes. There is simply no substitute for seeing for yourself.
Michael Bloomberg • He is hailed as a business visionary for his realization that the providers of financial information also needed to provide online analytics to help users make sense of the data.
Using business intelligence software called WebFOCUS from Information Builders, Brinker restaurants can calculate sales by shift and by restaurant to determine optimal labor costs. • From there, managers can decide how many employees are needed at any given site and time, and adjust workforce levels accordingly, on a day-by-day basis, to reflect demand.
EFS Example • The managers were sent into the field for 4 weeks to explore the 6 paths to creating blue oceans. • Each manager was to interview and observe 10 people involved in corporate foreign exchange.
EFS’s Findings • The managers concluded that customers valued speedy confirmation of transactions most. • Not account relationship managers, like the managers first hypothesized. • Then each team had to propose a new strategy with 6 new value curves.
SWOT Analysis (mgt 3370) • could be helpful in brainstorming new ideas
Step 3: Visual Strategy Fair • Part a: Teams present their newly redrawn strategy canvases • draw your canvas based on insights from field observations • show new ideas to a variety of people • Ex: EFS teams presented their new canvases to noncustomers, customers of competitors, and current customers, and corporate executives.
Step 3: Visual Strategy Fair • Part b: Get feedback on alternative strategy canvases from customers, competitor’s customers, and noncustomers • get invitees to explain what they like and dislike about the different value curve proposals • Ex: Teams presented their curves, judges picked their favorites and gave feedback
Step 3: Visual Strategy Fair • Part c: After collecting feedback, determine the optimal new strategy • should be based criteria you have found that will create a successful strategy • Ex: following the strategy fair, the teams were able to come up with a final value curve that reduced costs, focused on factors important to the customer, and had a compelling tagline
Step 4: Visual Communications • After future strategy is set, the last step is to communicate it in a way that can easily be understood by any employee • A visual layout helps show where the company currently stands and which areas it may need improvement in
Visualizing Strategy at the Corporate Level • A visual strategy creates more cohesion among the business and its entities. • Easier communication • Uniformed business
Samsung Electronics • Value Innovation Program Center • Development Teams of various business units • 40 inch LCD TV • SGH T-100
Pioneer-Migrator-Settler Map • Pioneers (Blue Ocean) • Offers unprecedented value • Value curve diverges from competition • Most powerful source of profitability growth • Settlers (Red Ocean) • “Me too” businesses • Value curve similar to the industry norm • Not a big contributor to future growth • Migrators • In between the two • Extends value curve • Offer improved value, not innovative value
Evaluating Your Company’s Portfolio • Plot current & planned portfolio’s on a PMS map • Valuable exercise in visualizing future performance • Portfolio consisting mainly of settlers • Low growth trajectory • Conformed to benchmarking, imitating, and price competition • Portfolio with a lot of migrators • Not exploiting growth potential • Are marginalized by value-innovating company’s
The Goal for Management • Shift the balance of future portfolio’s • Towards pioneers • Path to profitable growth • Balance the portfolio of businesses • Between profitable growth & cash flow • Settlers • Frequently today’s cash generators (Provides liquidity) • Pioneers • Large growth potential (Investment with high return) • Require cash at outset
Overcoming Limitations of Strategic Planning • Strategic planning should be more about collective wisdom building than top-down or bottom-up planning • Building the big picture is more important than number crunching exercises • A creative element is necessary, along with motivational techniques to invoke willing commitment, rather than bargaining to produce negotiated commitment
Overcoming Limitations of Strategic Planning • Building the process around a picture address many of managers’ discontents with existing strategic planning and yields much better results • “The soul never thinks without an image” Aristotle
Overview • Focusing on the big picture • -Visualizing a company’s current strategic position and charting its future strategy • Drawing your strategy canvas • 1. Realizing Current Strategy • 2. Visual Exploration • 3. Visual Strategy Fair • 4. Visual Communication
Overview • Visualizing Strategy at the Corporate Level • Using the Strategy Canvas • Using the PMS Map • Overcoming the Limitations of Strategic Planning