Exam Flashcards
Why is Strategy important?
- Assessment of the current course of action
- Development of alternatives
- Review other strategic documents
- Understand and describe the dynamics of an organization
What is Strategy?
Interaction model between
the organization and its environment
Difference between Strategy and Plan
Planning is future-oriented, whereas Strategy is action-oriented. Planning takes assumptions, but Strategy is based on practical experiences. Planning can be for the short term or long term depending upon the circumstances. Unlike Strategy, which is for the long term. Planning is a part of strategizing, but a strategy is not simply a plan.
Previously, in very deterministic (meaning predictable) environments, strategies were basically just plans (what we need to do to reach our goals) so the two terms got confused.
Levels of Analysis
- Functional (IT strategy, Communication strategy, etc)
- Business (specific areas of intervention or competitive areas). Municipality making a strategy for its schools
- Corporate (organization-wide): the entire municipality
- Sector-wide (policies, reforms)
Why is strategizing difficult in the public sector organizations?
- Difficulties in the definition of the “mission” (legalistic interpretation of mandates)
- The belief that responsibility for strategy formulation lies with the political level
- Weakness and short-term orientation of the strategic apex (related to political cycles that makes it difficult to politicians to compromise long-term)
- Convergence of multiple (conflicting) interests and difficulty to understand the role of the different stakeholders
- Lack of shared measures of performance
- Trade-offs between “effective” corporate strategies and “effective” sector-wide strategies
The multi-faced concept of strategy (Mintzberg)
- Plan (or Ploy): Intended course of action targeted to a given result
- Pattern in a stream of actions: Behavioural model used consistently as a reference
- Position: Match between the organization and its environment
- Perspective: Ingrained way of perceiving the world
Different types of organization models
- Traditional bureaucratic model: managers are just implementing, no strategy for them
- New public management approach: managers expand their role and have the responsibility for strategic planning. Politicians write the electoral commitments (goal planning) and we take care of doing them
- Governance: strategy is done collectively, engaging of stakeholders -> different from the private sector. Bring onboard different players and see their reactions vis-a-vis your ideas and negotiating
Garbage can model (Incrementalism)
Organizations characterized by:
- problematic preferences. Preferences are not clear and not consistent over time.
- unclear technology. Many people have no idea how things work.
- fluid participation. People come and go. Political cycles, staff turnover, promotions, rotations.
We search for a problem for our solution: “in such environments, solutions do not necessarily stem from needs: players in the strategy game have a given solution ready, and try to highlight problems or trigger needs to which their preferred solution can be the answer.”
Example: NextGen EU. 75% increase of the EU budget during the pandemic. It was a perfect opportunity to use a solution that was already prepared by someone, most people who support a shift for a United States of Europe like administration. The crisis was a perfect opportunity to implement this idea. Moreover, the UK was out of the picture and Germany was the head of the EU during that period. The idea was already in the garbage can and they took it out of the garbage can due to these perfect conditions.
Tame vs Wicked Problems
Tame problems:
- relatively well-defined and stable problem statements
- definite stopping points, i.e. we know when a solution is reached
- solutions can be objectively evaluated as being right or wrong
- classes of similar problems can be solved in similar manners
- solutions can be tried and abandoned
- technically it is not a complex problem
Example: New-York ice rink, cleaning canal.
Wicked problems: ill-defined, ambiguous problems associated with strong moral, political and professional issues; since they are largely stakeholder-dependent, there is little consensus about what the problem is, let alone how to solve it.
Example: climate change, racism, crime, sexual discrimination, violence against women.
How to solve tame and wicked problems?
Solving a tame problem: sit around the table, discuss, fight, modify, better accountable for different components of the problem. We can optimize, do A, B or C options.
Solving a wicked problem: a mess, intrinsically very political. Using analytical tools on a wicked problem is not effective, because we are trying to use mechanical tools on something that is not properly defined.
What is the value added of strategy? (Starbuck)
Problems with formal strategizing:
1) Formalization undercuts formal strategizing’s potential value, there are 4 main problems: skilled competitors with the same information; high-profit strategies are impractical, illegal or immoral; emphasizes big issues in the long-term that are unlikely to fold out as predicted; used to bring strong consensus and commitments, but such things can be dangerous unless the strategies are very likely to produce wanted outcomes.
2) There are fundamental barriers to achieving measurable gains through forecasting and strategizing.
3) There is a high frequency of large errors in managers perceptions of their own firms and their market environments.
Realistic achievements from formal strategizing:
- Help identify and leverage distinctive competencies, entry barriers, proprietary information and first moves
- Use forecasts to motivate alertness
- Inject realism into managers’ perceptions
- Keep strategies flexible
How to plan for different surrounding environments (predictability and complexity)
+ P -C = day-to-day management
+P +C = Planning
-P -C = scenario development
-P +C = Learning process (more flexibility, shorter time frames)
Purposes of a Strategic Plan
Strategic plans formalize choices and become “contracts” with internal and external stakeholders; as such they serve
different purposes:
- symbols = signal the importance of certain issues, or the willingness of doing something in a “systematic” way (“announcement effect”)
- advertisements = attract consensus and/or mobilize resources and/or identify possible partners
- simulation games = test how internal and/or external stakeholders are going to react to the changes advocated by the plan
- excuses for interaction = induce interaction with or among internal and/or external stakeholders (change trigger)
Key requirements of a Strategic Plan
- have a structure and format coherent with the intended goal and target audience: if we are communicating, the effectiveness of the communication is not intrinsic to the document but also take into account who are we communicating to (is the target the citizens? or politicians? or civil servants with a technical background? if so we should introduce some technical details and jargon)
- be as much fact-based and objective as possible (it is not a sales pitch by itself)
- be clearly written and internally consistent
- not exceed 30 pages
Typical pitfalls of Strategic Plans (Rumelt)
- failure to face the problem: problem not defined, thus it is impossible to assess the quality of the strategy (example, in the previous business plan of Bocconi the problem, was clearly stated “being a more international university, especially bringing students from Indonesia, China, India and the USA”)
- mistaking goals for strategy: what is missing? how to get there. Understand where we are, where we want to go, how to get there and what is going to change. A strategy is not about where to go, but how
- fuzzy strategic objectives: scrambled mess of things to accomplish (examples: achieving quality, customer service, etc)
- fluff: a restatement of the obvious, combined with a sparkle of buzzwords
Kernel of a good strategy (Rumelt)
A good strategy, truly designed for implementation rather than other objectives, acknowledges the challenges and outlines a context-specific, viable approach to overcoming them.
Good strategies have a basic underlying structure:
- a diagnosis: an explanation of the nature of the challenge, identifying certain aspects of the situation as the critical ones
- a guiding policy: an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis
- coherent actions: realistic, adequately resourced steps that are coordinated with one another to support the accomplishment of the guiding policy
How to evaluate strategies?
- choice of priorities: is everything a priority or do we have real priorities? Trade-offs and difficult choices to align demand and capability
- Unique value: will it produce unique value?
- Unique set of activities: am I imagining some innovative interventions
- Consistency: when implemented, will the strategy produce consistent results
- System alignment: is my strategy consistent with other variables
In Search of Fit: Tools to Analyze the Broader Environment
We have the SWOT (or TOWS) analysis that concerns the entire environment (external and internal).
Lewin’s Force-Field analysis: driving-forces vs restraining-forces.
- Competitive System (Critical success factors) regard the external factors and encompass the Opportunities and Threats to the organization. These are divided into 3 levels, from the broadest one to the most specific, each one having a specific tool related to it:
1) Macro-Environment: PEST analysis
2) Competitive-Environment: Porter’s Five Forces
3) Task-Environment: Problem Tree Analysis - Product (Competitive advantages) regard the internal factors and encompass the Strengths and Weaknesses.
- Organizational Arrangements (Core competencies) also regard the internal factors and encompass the Strengths and Weaknesses.
SWOT analysis: Environmental assessment
SWOT analysis are often very superficial.
By starting with the Strengths, we are establishing a bias beforehand.
Non-clear if we are talking about the strength of the product or the organizational arrangments.
How to define is something is a strength if we are not focusing on a specific environment?
Instead implement an outside-in approach: TWOS analysis
PEST analysis: Environmental assessment (Macro-Environment)
Political (government policy and/or changes in legislation affect the economy, the specific industry, and the organization in question. Example: taxes, employment laws, environmental policies)
Economic (exchange rates, economic growth, supply and demand, inflation and recession)
Social (exchange rates, economic growth, supply and demand, inflation and recession.)
Technological (trends, and changes in technology, government investment)
PEST Analysis can assist an organization in recognizing and thereby capitalizing on opportunities offered by existing conditions in the business environment. It can also be used for identifying current or possible future challenges, allowing for effective planning of how to best manage these challenges.
PEST Analysis can be used in conjunction with other forms of strategic business analysis, such as the SWOT.
Porter’s five forces: Environmental assessment (Competitive Environment)
Competitors Suppliers Buyers Potential entrants Substitutes
Porter’s Five Forces is a framework for analyzing a company’s competitive environment.
Problem tree analysis: Environmental assessment (Task-Environment)
The Problem Tree Analysis method is a planning method based on needs. It should be followed by actual project planning, and it should analyse the capacity and intentions of stakeholders. With the PTA you can address the real needs of the beneficiaries.
A problem analysis identifies the main problems (negative aspects) of an existing situation and establishes the cause and effect relationships between such problems.
A shared problem analysis is especially valuable to address multi-stakeholder challenges: on the basis of available information, stakeholders discuss and agree on the key problems that exist in a given situation.
Three steps:
- definition of the framework and subject of analysis
- identification of the major problems to be addressed (A problem is a condition affecting negatively the relevant target group: it is not intended as the absence of a solution, but as a negative situation, and should be worded as such)
- development of a problem tree to establish causes and effects (causes -> problems - > effects or consequences)
After the problem tree, we can also develop a objective tree to tackle the problems.
Competitive advantage (Organizational assessment)
Competitive advantage discusses the “how” of strategy, i.e. the way in which the organization intends to achieve its goals based on the products or services, markets, locations, technologies and processes it focuses upon.
To create and capture value consistently, there must be something “special” about the organization; otherwise, a rival could replicate what the organization does, and competition would sharply limit the organization’s ability to capture value
Position: The position of the organization in the marketplace or stakeholders’ network.
Capabilities: The capabilities of the organization to meet demand or satisfy stakeholders’ expectations.
Generic Competitive Advanatges (Porter, based on the target and advantage)
Broad Market + Low Cost = Cost Leadership Strategy. Example: World Bank
Broad Market + Product Uniqueness = Differentiation Strategy. Example: World Health Organization
Narrow Market + Low Cost = Focus Strategy (low cost). Example: The Global Fund
Narrow Market + Product Uniqueness = Focus strategy (differentiation). Example: UNICEF
How to deliver superior value? (Treacy and Wiersema)
- “customer intimacy”: segmenting and targeting users precisely and tailoring supply to match the needs of those niches (e.g.: Trenitalia)
- “operational excellence”: providing users with reliable products or services on competitive terms and delivered with minimal difficulty or inconvenience (e.g.: Global Fund)
- “product leadership”: offering users leading-edge programmes that consistently enhance the use or application of the product or service, thereby making rivals’ programmes obsolete (e.g.: WHO)
What are core competences? (Coyne)
“A core competence is a combination of complementary skills and knowledge bases embedded in a group or team that results in the ability to execute one or more critical processes to a world-class standard”
- Insight / foresight competencies
- Frontline execution competences
Check if competence is: truly superior, sustainable, how much value it can generate and integral to our value proposition.
Sources of sustainable competitive advantage (Barney)
VRIO (evolves from disadvantage, parity, temporary advantage, sustained advantage) Valuable Rare Imitate (Costly to) Organized to capture value
Lewin’s Force-Field Analysis
Driving-forces vs Restraining-forces
Lewin’s “Force-field analysis” is a diagnostic technique meant to identify the variables involved in determining whether a strategic change will happen or not.
Helps to deal with confirmation bias and to explicitly address restraining forces
Strengthening driving forces is also going to increase restraining forces: current equilibrium doesn’t change, only tension increases -> work in softening opposition, i.e., restraining forces + incremental strategies.
Types of Stakeholders
Champions Allies Fence-sitters Mellow Opponents Hard-core Opponents
Why is stakeholder analysis important?
Stakeholder analysis is a tool suitable to shed light on the functioning of a system, by:
- Pinpointing the key actor in that system
- Identifying their relationships
- Assessing their respective interests
Logical steps in Stakeholder analysis
- Identification: who are the stakeholders and how are they involver
- Classification: interest and power
- Selection of engagement strategy: monitor, inform, satisfy, engage
- Implementation of the engagement strategy
Step 1 - Identification: who are the stakeholders?
Stakeholders are those individuals or collective entities which rely on the organization to have their goals met, and on which the organization relies to reach its goals.
Stakeholders are contingent to the issue at hand.
Step 2 - Classification of Stakeholders
“How important the decision at hand is for that specific stakeholder? To what extent he/she is ready and willing to fight for or against a given outcome?
Interest:
Collect information
Look at actual behaviours rather than statements
Be specific: WHAT aspects exactly they care about?
Power:
How much can the influence the process or outcome?
Be specific: what can they do for or against our agenda?
Analyse if they can facilitate or block a decision or its implementation
Step 3 - Selection of engagement strategies for Stakeholders
- P -I = Monitor
-P +I = Keep informed
+P -I = Keep satisfied
+P +I = Key Partner
Engagement is instrumental, not an end in itself. Engagement is a tool to reach policy objectives. Engage the ones who are going to help you solve the problem - key partners
-> need to be cynical and blunt
Truman’s pluralistic theory (Stakeholders Interplay)
Interest groups = source of counterweight and independence of civil society from the “State”
Coalitions are more or less similar in strength -> balance between mobilization and counter-mobilization. You represent one of the organised interests. If you start promoting aggressively your position you will get agressive too in their reaction, because the opponents are also organized.
The balance between mobilization and counter-mobilization makes decision-makers independent from vested interests
Olson’s paradox of collective action (Stakeholders Interplay)
Interest group mobilization is often limited and influenced by group size: small organised groups usually prevail over large, unorganised latent groups. Small group size makes it easier to reach an agreement and reduces free riding.
Colorado State Hospital Case in Stakeholder Engagement
Dr. Kort put serious focus and effort into the engagement of many of the most important Pueblo stakeholders. This made it so that those actors that previously were opponents and critiques of the hospital, started supporting and promoting it, forming a strong coalition of Pueblo actors in prol of the Hospital. She did so by actively participating in the local chamber of commerce, meeting with the editorial board of the local newspaper, and communicating and evolving other relevant stakeholders. She also created a community advisory board that gathered political, technical, media and community actors that was a success. The fostering of these relationships was essential for the well-functioning and protection of the Colorado State Hospital as well as for the promotion of its interests.
The internal operation of the hospital was also exemplary, an impressive accomplishment considering that there were strong unions to deal with. Despite the downsizing of the hospital and consequent layoffs, Dr. Kort managed to overcome this problem by implement a strong consumer-focused approach in which the employees took great pride, highly contributing for a positive and committed environment that led to better and more efficient work. Employees training and appreciation events were also big moral boosters and unifying elements.
Other success factors included constant communication and debate on decisions, giving more budget authority to divisions.
Social Weather Analysis
Social weather describes what the media (and thus public opinion) are talking about and how in a given period of time.
Knowing what issues dominate in the media is a must to make sure your messages are compatible with ongoing conversations.
Banch and Allen’s IA^3 framework (Stakeholder analysis in non-market environments)
Issue: an organization should take a position on an issue if the issue’s resolution could significantly affect the organization’s ability to fulfil its goals
Actors: the next step is identifying interested actors, i.e. those with an economic or ideological stake in it
Interests: We need to understand what motivates the actors who care about an issue
Arenas: actors can meet in courtrooms, parliamentary committee hearings, the news media, the public domain, etc
Information: the kind of information that can influence the resolution of an issue varies across arenas
Assets: reputation, trustworthiness, supporters, etc
By identifying who cares about an issue, what the various actors’ interests are, and in what arenas they meet to settle the issue, an organization can plot what information and assets it may need to shape the issue’s evolution in a way that favours its agenda.
