theme 10 Flashcards
what is not a strategy or what is a bad strategy
What strategy is not: something about goals, budgets, visions and key priorities, it needs to answer more questions, it is an ask for challenge
Why a good strategy is rare?
It is rare because it forces us to make choices which are difficult and which we don’t know if these choices will pay off or not because the future is uncertain and especially in an extremely turbulent uncertainty. A good strategy coordinates efforts and has a thesis that may or may not be right but forces the organization to move in a particular way. Strategy is making a choice where you want to go and it is based on informed decisions which can be translated as hypothesis or a test. If this hypothesis is not correct you need to adapt and the faster you do it the better you can maneuver especially in different times such as emergent strategy.
What is a fluffy strategy?
• a fluffy strategy which means it is not a real strategy
o example: a retails bank strategy is: assume that your bank CEO gathers people and want to talk about his new strategy, and he says our fundamental strategy is one of customer-centric intermediation, we will be the best retailer of Belgium
it is a fluffy strategy, it doesn’t say anything about how he’s going to address the current challenges, it just gives you the vision or it may describe a kind of objective but is fluffy and so bad
- fail to face challenge, if you cannot identify and analyze the obstacles that you are facing you don’t have a strategy only goals, budget and wish list
- mistaking goals for strategy, if you want to grow revenues 20% in one year and the profit margin 20% without saying how it is a goal not a strategy
- bad strategic objectives: unless leadership understands how and why things didn’t work out in the past they won’t be able to rectify in the future
strategic agility
• adaptability means agility and the ability to adapt to a changing context which implies that you are flexible
only 22% of all companies are considered agile
• What has prisoner’s dilemma in game theory to do with strategy please explain
Prisoners dilemma is a part of what is called game theory that explains how to deals with irrational behavior and distrust and how to deal with generating trust in situation where trust is an indispensable characteristic in order to come to collaboration and cooperation
Game theory tells us that leader need to invest in relationships and those relationships can turn into economic capital and then profitability. More and more you see today organizations like BMW that are collaborating with smaller organizations that enables them to come up with solutions that would have costed them more if they would have done it by themselves. They are working with MOBILY which is an intel vision safety venture and they are using it to improve their autonomous vehicles which they are investing in just like tesla and other organizations
Strategy is not only about competing and outmaneuvering competitors, strategy sometimes and specially in these times is also about what can we do to enhance collaboration and therefore enhance trust between organizations. Establishing trust between members of the same organization is easier. Inn strategy it is hard to establish trust between two different companies in order to achieve the objective of collaboration
Game theory is able to teach us lessons about how culture and organizational structure can insight trust
prisoners dilemma
Its about two people that robbed a bank but police don’t have real proof that they committed a crime so the issue was that they had an agreement beforehand that if they are caught they wouldn’t talk and keep silent
The dilemma is, are you going to keep silent and collaborate or are you going to undermine your own agreement with the other person and therefore to fall in the trap of distrust
In this example
• if they both keep silent they would both get two years of prison
• if both confess, both will get 5 years and it is off course in the interest of both robbers not to confess
• if one of them confesses and the other stays silent then the one who stayed silent and lied will get 10 years and the one who confesses will get nothing
if they both confess and not collaborate it is a worst situation than if they have collaborated which is only 2 years instead of each 5 years
this dilemma emphasizes that in business we have to invest in relationships to create genuine trust that ultimately can be translated into profitability. If were talking about organizations and you make prize is not allowed for example two companies agreeing on prices
this dilemma is about how you collaborate and coordination games and how to make situations where you stick to your agreement is to your own benefit
If in prisoner’s dilemma both parties, go for the optimal equilibrium which means both trying to do the best for themselves without regards for the other it is called Nash equilibrium or dominant strategy
How do you escape prisoner’s dilemma
You create trust
Why does Teslas enterprise value, or market value or stock price soar in turbulent times like those if the covid pandemic, is it related to strategy? Please explain
People in 2017 weren’t believing that tesla can pull off and take all the automotive industry that why their stock was not so high but tesla did it when they released the model 3 which is cheaper than other models hence more competitive. Last year this model became the best selling car in the USA and the stock of tesla soared from almost 100 to 600 now
The main reason investors are pushing this price so high is directly related to the strategic expectations on tesla that only they will be able to generate cash flow by having 800000 but as important that investors believe that Elon musk is able to pull off a great car but he is also in the eco system that collaborated initially with Panasonic for batteries and he’s doing everything he can to upgrade software’s and getting the best software engineers you can imagine
Also space x which is another company owned by Elon musk shows that he is not just a dreamer and a visionary with crazy dreams but also pulls off things that nobody else was able to do before in such a short time
The enterprise value which is here the stock price is nothing else as the summation of the current cash flow they make and the expected cash flow they will generate which seems to be quite high, people believe that this is extremely innovative company and they have proven already that they can pull it off and among the most popular cars on the planet
Why did Airbnb stock price or market value or enterprise value soar with 108% on the first day of trading after the IPO of Thursday, is that related to strategy?
last week they went public and lest shares for investors and the owners now they are worth 10 billion as result of the stock price. They were able in the first day trading to double the stock price
investors believe that Airbnb has something special to offer and will be able to create great organization value for its stakeholders
if you look a competition and compare Airbnb especially couple of years ago you could ask why did they out out those organizations? In a lot of those online renting companies that has similar system with algorithm and AI but there was one big difference between them and Airbnb and that was that if you look how these organizations were functioning you see that they invited property owners to put a picture on the website of their home but there was an incentive but a lot of those owners to cheat make the picture more beautiful than the property they own and that lead to a phenomena called SNAD which meant significantly not as described which means people promoted rooms and houses and rentals as great property and charging a lot for them but then people were quite disappointed and on those websites you had to pay when you book
but this is where Airbnb distinguished themselves and were able to create trust and change the business model by saying you don’t have to pay when you book (they changed it later) , you can pay in the first 24hours upon arrival, which distinguished themselves significantly and it also affected the owners by obliging them to be faithful and eliminated SNAD because the people who rent can rate their staying which obliged the owners to show real photos and offer good experience
Explain what we learned from Mohamad Ali, George foremen boxing match which is related to agility and absorption
rumble in the jungle Georges foremen vs Mohamad Ali
at this iconic match that made Mohamad one of the best boxing players ever known for many years, Mohamad was seen as the agile (dancing bee) and could easily adapt, George was seen as the resilience and his power was unseen and hardly any could resist his punching power. Mohamad was able to strategically outmaneuver his competitors George
what we can learn from that match from a strategic business perspective is strategy in its initial base was outmaneuvering your competitors and that is exactly Mohamad did, he was known for being agile dancer he was expected by everybody including George that he would try to escape and that George would corner him so that he could not escape, but Mohamad did not dance as and he trained himself to an extent to absorb and become more resilient than he ever was preparing for the match and did the opposite of what everybody expected him to do and using his strengths in avoiding punches and dancing which is would have been ineffective because George strategized and prepared himself for Mohamad going for that strategy but in reality the emerging strategy was that Mohamad did something completely unexpected which means he was agile and this unexpectedness and agility made him win the battle.
He took a lot of beating and although it affected him, he was able to withstand in a very resilient manner and George was so tired at the end and he was out maneuvered and Mohamad won
Any organization needs to be prepared for being agile operationally, in portfolios (strategic business units) and purely strategically
