2_Strategy

Question 1

What is a strategy ?

Answer 1

A strategy is the integrated set of choices that positions the business in its industry so as to generate a sustainable competitive advantage (Takeaway 1)

Readings: Two fundamental questions a business must answer with its strategy is : Where should we compete, and how should we compete?

Readings: Strategy consists of choices.

Notes:

1. Integrated set of choices > this fits with your value chain (with the value proposition)
2. What is the industry of the business - how do we define the boundaries of the business
3. sustainable competitive advantage = making more money in the long run compared to competitors ! This is why Strategy is not like a business model

Question 2

How do you develop a strategy ?

Answer 2

Strategy development, creation, implementation and revision is best approached in a structured process (Takeaway 2)

Question 3

What is a strategy about ?

What is it aiming for ?

Answer 3

Strategy is not about being the best, but about being unique. (Takeaway 3)

Question 4

What is the difference between a good strategy and a poor strategy ?

Answer 4

Good strategies generate new value, poor strategies fight over existing value shares. (Takeaway 4)

Question 5

Where does the term Strategy come from ?

Answer 5

• The term ‘strategy’ originated from the military context
• Greek strategia is a compound of stratos (army) and agein (to lead)

Question 6

When did the word strategy appear in business and what existed before ?

Answer 6

• In business, it appeared only relatively recent (1970s).
• Before, people spoke of ‘long-term planning’ – forecasting numbers to map the future

Question 7

How does Carl von Clausewitz (prussian general) defines strategy ?

Answer 7

The talent of the strategist is to identify the decisive point and to concentrate everything on it, removing forces from secondary fronts and ignoring lesser objectives.

Notes:

1. You first need to identify, understand in which situation you are. You have to analyse your environment. In military: intelligence proceeds physics! In Business, this is how you find the value proposition for your customers.
2. Once you find this point, you should concentrate on this (and not the other areas) - you have to chose what not to do.
3. Ignore lesser objectives = ignore what is not important.

Question 8

What are the challenges between military context and business when you take the meaning of strategy too literaly ?

Answer 8

• the problem with the war/ military analogy is that it results in a misperception of what the goal of business strategies is.
• As war knows only one winner and one loser, it suggests a zero-sum game, and winning means being ‘the best’
  
  • Is there “the best” iphone or airline ? Not really, because people wand different things !
  • Some people sometimes feel underserved > that is how you can make an other business which serves more. Others would say they don’t need so much and are ok with lesser high quality
• ​In business, there is rarely such as thing as ‘the best’ product in a category – instead, it is about being unique and about creating unique value!
  
  • In the army, Strategy demanded a broad perspective; tactics were merely the means to an end.
• Good strategies generate new value for customers and firms, poor strategies fight over existing value shares

Question 9

What is Strategy ?
Give a clear definition and if possible also def of business plan

Answer 9

A strategy is the integrated set of choices that positions the business in its industry so as to generate a sustainable competitive advantage.

1. Integrated set of choices > this fits with you value chain (with the value proposition)
2. What is the industry of the business - how do we define the boundaries of the business
3. sustainable competitive advantage = making more money in the long run compared to competitors ! This is why Strategy is not like a business model

vs a Business model is a set of assumption or hypotheses about how you will make money in the market, and provides an integrated view on the key activities in your business.

Question 10

What are sustainable competitive advantages ?

Answer 10

A sustainable competitive advantage means that the business generates superior financial returns over the long run.

Question 11

Which questions does a strategy answer ?

Answer 11

Starting from the business’ winning aspiration (goals), a strategy answers two key questions:

1. Where do we want to play? (which industries, markets)

Notes: Industry is not only formed by competitors, but also suppliers and customers ! That is why it is important to chose the Industry.

2. H​ow do we want to play there? (how to win in these markets)

Question 12

What did Bounty and Gain brand do to improve its competitive position for paper towel?

Answer 12

Value Proposition: one paper towel which offers more strength and sborbency for a higher price (more for more; charging more for offering more).

But buys were not going up, so they made three superior product solutions for three different segments with unique needs! First is more absorbant, second is more soft and third one is cheap.

Notes: P&G wanted to go in business with all consumers. They researched who were the customers and what they wanted to become unique

The same logic saved Gain. Similar to Bounty, there was a segment of consumers, that no one was serving well. Important for these people was the smell of the washing detergeant smelt. Proof of clean was the smell !

Question 13

What is an intergrated cascade of choices ?

Which questions are asked ?

Answer 13

Notes: Set of interlinked questions that depend of one another. Going back there are feedback loops.

An integrated cascade of choices answers 5 questions:

1. What is our winning aspiration ?
   
   • Purpose of enterprise: guiding aspirations
2. Where will we play ?
   
   • The right playing feeld:
   • where will we compete: geographic, product category, consumer segments, channels, vertical stages of production
3. How will we win?
   
   • Unique right to win:
     
     • value proposition
     • competitive advantages
4. What capabilities must be in place ?
   
   • reinforcing activities
   • specific configuration
5. What management systems are required ?
   
   • support system:
   • systems, structures, and measures required to support our choices

Question 14

What is a nested choice cascade ?

Answer 14

It is an interaction on different levels but same process as integrated cascade of choices

3 levels of integrated cascade of choices:

• Corporate-level
• Strategic group cascade
• indiviudal business cascade

Question 15

What is the strategy process ?

Answer 15

Notes: Strategy as a process answers the following questions:

• What is the purpose, what to we want to achieve
• What is the external and internal environment (what are we good at), both together influence on strategy creation
• Implementation is an other part of the process
• Perfomance measurement on internal & external environment feed back on the goals

Question 16

Why isn’t a business plan a strategy ?

Answer 16

1. Business plan doesn’t say what is the winning aspiration (purpose of enterprise)
2. Business plan doesn’t say management systems (key performance indicators that must be measured)
3. Business model doesn’t say what is the sustainable competitive advantage
4. Business model doesn’t say anything about the financial performance compared to the other competitors. From the business model canvas, we cannot say if the business is financially inferior or superior

Question 17

Is a goal, like for example being number 1 or 2 in the market a stragy?

Give reasoning

Answer 17

• Beeing number 1 or 2 is not a strategy! It doesn’t say anything why the company should be able to operate to a superior performance ! This comes from this military definition which is not right. Strategy is not about beeing the best but by creating UNIQUE VALUE !
• Beeing Nr. 1 or 2 doesn’t say why or how you will be better

BUT: “There is a competitive advantage of being the best – or the second best – that can, and should, be exploited.” says Jack Welch

It’s about beeing unique !

Question 18

Are goals, visions and mission statements strategies ?

Answer 18

1. No, but they are important in part of your strategy
2. A vision does not say how you will be better than others (but a vision is part of the plan)
3. Mission statement doesn’t say anything about industry or segments or how they want to deliver

Example Warwick Business school: “Our Vision is to be Europe’s leading University-based business school, developing transformational ideas and people that shape how we do business.” < not a stragegy

Example McDo: «Be our customers’ favorite place and way to eat.»

Example Nike: «To bring inspiration and innovation to every athlete* in the world. * If you have a body, you’re an athlete.»

Example twitter: «to give everyone the power to create and share ideas and information instantly, without barriers»

See Simonek video about why

Vision ist important part of the plan but is not everything:

• “A goal without a plan is just a wish!” (Antoine de Saint-Exupéry, le petit prince);
• “A vision without action is just a daydream, Action without vision is a nightmare.”(Japanese proverb)

Question 19

What is the purpose of Strategy ?

Answer 19

The purpose of strategy is to create a competitive advantage that generates superior, sustainable financial returns (readings)

competitive advantage = A firm’s ability to create a large gap between the amount its customers are willing to pay and the costs it incurs. To create this advantage, a firm must perform activities more effectively or distinctively than its industry rivals.

Question 20

How do you create a competitive advantage that generates superior sustainable financial returns ?

Answer 20

There are two requirements (readings):

1. The first is an understanding of the business landscape:
   
   1. the forces that shape competition,
   2. the dynamics among players, and
   3. the drivers of industry evolution.
   4. This informs where the firm chooses to engage with its competition.
2. The second is the choice of a position on this landscape.
   
   1. The firm’s positioning shapes the choice of a business model and
   2. the underlying set of activities that sustains it.

Question 21

What is a successful strategy and what isn’t ?

Answer 21

A strategy can fail because its choices are not truly integrated, and so its intended business model and positioning do not fully align.

A successful strategy demonstrates consistency—consistency with the realities of the external environment, with regard to internal activities, and with respect to longer-term dynamics in the industry and the organization.

Question 22

What is the relation of Stragey and Competition ?

Answer 22

Readings:

Even as the concepts of business strategy evolved, the underlying premise of strategy remained unchanged: It was the overarching plan for marshaling an organization to succeed in an uncertain environment and against opposing forces.

It is critical, then, to understand strategy in this original sense, as competitive strategy. Every business must operate in an environment marked by competition, structural forces, and uncertainty. Every business must make choices that fit together in a holistic, consistent way in order to succeed in that environment.

After all, the very purpose of strategy is to enable a business to achieve superior performance in its industry.

Question 23

How can we offer greater value to customers, while capturing more value than competitors ?

Answer 23

By being unique and taking different (valuable = different in a way, that have value for the consumers) positions from competitors !

“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value” said Michael Porter