Strategy Flashcards
sustainint innovation involve what kind of planning?
deliberate
disruptive innovation involve what kind of planning?
discovery driven planning
performance
how well a product or service works
process of planning for sustaining innovations
make assumptions about the future
define strategy and build financial projections
make investing decisions
implement strategy
process of planning for disruptive innovations
make targeted financial projections
what has to happen for the projections to happen
implement a plan to test whether the assumptions are reasonable
invest on implementation
decisions to initiate disruptive innovation projects should be based on
pattern recognition
decision to iniciate sustaining innovation projects should be based on
numbers and rules
what will happen over time regarding manager’s innovation and customer’s desires?
manager’s innovation will surpass customer’s desires and become oversatisfied
ironclad rule of management
an organization must go from organic to mechanistic approach
correlation between performance and price
high performance leads to high price
when will a low end disrupter appear?
when an oversatisfied escenario happens
what is nonlinearity?
the same amount of effort over time leads to different results
investing is about..
patience
types of disruptions
big bang
high end disruption
low en disruption
new market disruption
high performance low price type of new disruption
big bang
high performance high price type of new disruption
high end disruption
low performance high price type of new disruption
new market disruption
low performance low price type of new disruption
low end disruption
stages of building a theory
observe phenomena
categorization
statements of association
target customer of new market disruption
non consumers/ unhappy whith complaints
christensen golden role of business
if you target the leading firm in their most profitable market you’ll die
how to measure a client’s happiness?
assess the average customer’s level of satisfaction
low en disrupters strategy
lower price and performance to target oversatisfied customers
low disrupters steps
select the lower profit product within an industry
find a way to make it cheaper (sacrifice performance)
appeal to oversatisfied customers
improve performance over time
asymetric motivation
mix high end disruptive inovation strategy and low end
factors that determine a company’s capabilities
resources
proceses
values
Patterns of interaction, coordination, communication and decision making employees use to transform resources into products
processes
defined and documented processes
formal
routines or ways of working that have evolved over time
informal processes
The organizations most serious disabilities to cope with change lie in
informal processes
They are inneficient when used for something else than what they were designed for
processes
Standards by which employees set priorities that enable them to judge wether o not an order is atractive and if a customer is important or if a new product is attractive, etc.
values
how does values reflect cost structure and business models?
determine How big an opportunity has to be to become interesting
barriers to disruption
excecutives
resource allocation process
you (focus on promotion)
factors within performance
functionality
reliability
external environment can be divided into 2
general environment
industry environment
elements of industry environment
suppliers
potential entrants
substitutes
buyers
porter 5 forces
entry barriers suppliers customers substitutes rivalry
low entry barriers lead to
increase competition and decrease of industry attractiveness
elements that highten a suppliers power
few within industry
key products
threat of integrating forward
no substitutes exist
elements that rise the customer’s power
few number of customers
products are undifferentiated
buyers threaten to integratebackwards
informed buyers
elemets that rise threat of substitutes
many substitutes
buyers face few switching costs
substitutes are less expensive or better quality
product that serves consumer in different way
substitute
rivalry is big if:
many competitors low concentration ratio slow industry growth lack of product diferentiation high exit barriers
what is missing from 5 force model?
cooperation
internal analysis
IO stands for
industrial organization
IO’s focus
external environment is key
RBV stands for
resource based view
RBV’s focus
internal environment
what makkes a resource valuable
scarcity
appropriability
demand
a valuable resource must
help produce something the customer want at a price they want to pay be hard to immitate be durable appropriable hard to substitute be competitive superior
avoid overinvesting in resources that
will yeild low returns
if there are no valuable assets
add resources
upgrade to alterantive
move to a more attractive industry for your capabilities
common straegy errors when trying to leverage resources
overestimate transferability
overestimate ability to compete
overestimate the advantage a generic resource will give
to enter an industry with high entry barriers
merger
aquisition
if suppliers have a lot of barganing power the industry…
sucks
IO key assumptions
external environment is more influential
the company success is tied to the environment
it is a good industry if there are high entry barriers
formula for profit margin
value-cost
core competencies are
what organizations do superior to their competitors
conditions of a core competency 3
valuable
diversifiable
difficult to imitate
only way to know your strenghts
feedback analysis
personal strenghts highlights
find your strenghts waste no effort on areas of low competnece discover reader or listener do not try to change yourself improve your best areas
what should i do? process
identify what does the situtation require
identify what you can contribute given your strenghts
what results have to be achieved to make a differenrce
a plan should cover no more than this time
18 months
Reasons for synergy failure
synergy upside bias parenting bias skill bias hoarding search bias transfer bias
parenting bias
managers wanting to force synergy
effect of parenting bias?
when synergy is forced employees will only do it when management is looking, and theyll stop once they are left alone
what is synergy upside bias?
managers being overconfident on synergy working based on a hunch rather than facts
what is skills bias?
assuming that the divisions have the sills to create synergy when in reality they are too focusen con competition
what is hoarding bias?
divisions not wanting to share knowledge or skills
what is search bias
bad IT in place
what is transfer bias
difficulty transfering tacit knowledge.
rule to engange in diversification via M&A
the net present value must be above 0
why is diversification good for managers
lowers employment risk
justification fro more compentition
rises managerial hubris and emperie building asprations
time compression diseconomies
If you try to get a result in a shorter amount of time than required you’ll get side effects
elements of strategy analysis
industry analysis (porter 5 forces) customer trends environmental forecast competitor analysis internal analysis
elements of strategy
arenas vehicles differentiatiors staging economic logic
what are strategy arenas?
where will the strategy take place
list of strategy arenas
product categories
markets
segments
geography
what are strategy diferentiators?
how we will win the marketplace. can be combined
list of diferentiators
image customization price styling quality
what is strategy staging?
speed and sequence of moves
what are the economic logic strategies?
lowest cost through scale
lowest cost through scope and replication
permium prices bc service
premium prices bc unique features
3 types of business as per their portfolio
settlers
migrators
pioneers
what are settlers?
business that offer me too products
what are migrators
busines with value improvements compared to the average
what are pioneers
busnisess that have value innovations
why should you pay attention to substitute industries?
the space between them provide opportunities for value innovation
which substitutes should you explore when there are many
high volume of usage
high dollar value
what are strategic groups
group of companies within an industry with a similar strategy
good strategy when analyzing strategic groups
take the decisive advantage of 2 different but complementary strategic groups
what is the chain of buyers
chain of customers involved in the buying decision
what to do if the industry is at one end of the functional-emotional spectrum?
do the other
how are emotionally oriented industries?
offer many extras that lead to
high price without elevating funcionality
3 important principles to assess trends over time
decesiveness to your business
irreversability
clear trajectory
what to do once you have identified a trend?
imagine what is its logical conclusion. work back from that to identify what needs to change to reach that superior value
steps when renewing organizations
establish sense of urgency form powerful guiding coalition vision communicate vision empower to act on vision plan and create short-term wins consistency institutionalize new approaches
how to establish a sense of urgency
find a way to communicate continuously, broadly and dramatically about
- crises
- potential crises
- great opportunities
percentage of failure at establishing sense of urgency
50%
indices of a declining competitive position
new competition shrinking margins decreasing market share flat earnings lack of revenue growth
goal of establishing sense of urgency
mking it seem more dangerous to stay the same way than to launch into the unknown
good way to create a powerful guiding coallition
offsite retreats
what will happen without a powerful enough guiding coallition?
the opposition will stop change easily
members of a powerful guiding coallition
senior managers
board members
key customer representatives
powerful union leaders
how to now if your vision is good enough
you can communicate it in 5 minutes or less and get a reaction that signifies understanding and interest
3 common mistakes when communicating vision
communication via 1 single meeting
only CEO speeches
nwesletters and speeches but contradictory behaviour from top excecutives
obstacles of new vision
employee’s mindest
organizational structure
compenzation systems
incongruent bosses
how early do you need a win?
1 to 2 years in
how long does it take for cultural changes to be completed
5 to 10 years
2 ways to help institutionalize new approaches
help people see the good results from their new behaviours
educate next generation of top managers
levels of strategy
competitive
corporate
what is competitive strategy?
how to create competitive advantage in each of the businesses a company is in
premises about diversification
competition occurs at business unit level
diversification adds costs to business units
shareholders can diversify themselves
portfolio management principles
diversification through acquisition
autonomous units compensated based on results
corporation supplies capital and management techniques
inter unit connection types
transfering skills
sharing activities
transfering skills between units leads to competitive advantage if
similar activities
involves core skills
represents high value for receiving unit
tests that determine if an acquisition provides true value
attractiveness
cost of entry
better off
parenting
steps of choosing a corporate strategy
identify relationships among existing business units
ID opportunities to share skills
select core business
dispose of units not related
lay groundwork for diversification and create horizontal relationships among core
businesses
pursue diversification that have shared activities
pay dividends
how to mae certain a core business is sound?
upgrading management
internationalizing strategy
improving tech.
what to do if shared activities between units are limited?
pursue diversification through transfer of skills
a buyer group is powerful if
mayoristas standard product low profit margin quality is unimportant threat of backwards integration
a company should sell to powerful buyers only if…
its a low cost producer or the product has unique features
a supplier group is powerful if
few companies
unique product
no competition
threat of foward integration
threat of a powerful supplier
rise prices & reduce quality
high competition with rivals is related to
same size slow growth lack of diferentiation high fixed costs perishable products high exit barriers
lower cost comes from
good effiency
2 ways of strategic positioning
different activities than rivals
same activities in different ways
the sum of all existing best practices at any given time, maximum value a company can create
productivity frontier
decisions made by high level excecutive regarding the future of a company
corporate level strategy
scope of corporate strategy
portfolio and industries
scope types
vertical
geographical
horizontal
what is vertical scope?
vertical integration strategy, are we making or outsourcing?
wha is horizontal scope
product diversification strategy
when is best to vertically integrate?
when your product performance is not yet good enough so you can experiment
when the product’s performance is better than what’s demanded what should you invest in?
speed
convenience
customization
when should you outsource
when the product is more than good enough
what is comoditization?
final stage of product, there is no diferenciation and must compete on price
best strategy for commodities
passionate personalization
product diversification has a negative relationship with…
geographical diversification
How should the corporate office manage its group of businesses
synergy
whats the essence of strategy?
finding an industry that is not yet good enough, and vertically integrate to be able to experiment, get the performance up and make a lot of money.
The strategy with the most probability to succeed is also the one with the most probability to fail.
strategy paradox
the oposite of sucess
doing nothing (mediocrity)
CEO life cylce stages
respond to mandate experimentation selection of enduring theme converging dysfunction
at what stage of its life cylce should a CEO be replaced?
converging
3 types of people
takes
marchers
givers
google employees categories
butterflies
lone stars tshaped managers
why do butterflies are the ones that fail the most in life?
they five without consideration of own well being and get taken advantage of
cost of entry test elements
how much does it cost to enter the industry
can we get the money quickly?
atractiveness test question
is it gonna make money
better off test question
is there syergy with existing structures
traffic lights framework elements
value advantage
existing business
profit pool
sponsorship
kinds of growth
seasonal
secular
mckinsey 3 horizons
h1 stable main business
h2 emerging business with potential
h3 uncertain huge potential
dynamic capability
being able to manage H1, H2, H3 at the same time
doing something because its time
time pacing
event ppacing
when we are reactive to environment and competitors
focus on H1
ROI market share revenue efficency reducing costs
H3 focus
survival
taking risks
theory of dynamic capability
do the next right step, where you’ll end up will show on its own
where should your focus be according to the theory of dynamic capablity?
being flexible and taing advantag of fleeting opportunities
complexity theory
too much conection creates rigidity and too little creates chaos
how to create simple rules
determine objective
find real bottleneck
craft rules
the perfect life is a balance between….
being
loving
working
