Weeks 3 & 4: Strategy Execution Risk Flashcards
What is the choice cascade model?
Senior managers (“upstream choice makers) set the context of choices for their employees downstream and empower them to use their best judgment in the scenarios they encounter
Seven Rules for Successful Strategy Execution
- Keep it simple
- Challenge assumptions
- Speak the same language
- Discuss resource deployment early
- Identify priorities
- Continuously monitor performance
- Develop execution ability
Successful strategy execution levers
- Ensuring information flows where it is needed
- Clarifying decision rights
Blue ocean strategy
a set of managerial actions and decisions that aim at creating a major market through their business offering in an uncontested market place
Red ocean strategy
when companies try to outperform their rivals to grab a greater share of existing demand
The value net model
The model helps a company identify the key players among its customers, suppliers, competitors, and complementors
The concept of co-opetition
Complementors and Competitors coexisting
Reasons for acquisition failures
Strategy
- Incompatible cultures
- Incompatible business models
- Synergy non-existent or overestimated
Due Diligence
- Acquirer overpaid
- Foreseeable problems were overlooked
- Aspects of the target where extreme divestiture might be required were overlooked
Implementation
- Inability to manage target
- Inability to implement change
- Clash of management styles/egos
Acquisition failure mitigation approach
Due diligence should be undertaken to validate synergies (Be wary of Delusional Optimism!)
Acquisitions are strategic decisions that elicit a ________________ from competitors
“strategic response”
What is inherent within the choice-cascade model?
a positive reinforcement loop
The choice makers help their employees make better choices in four specific ways
- Clearly explain the choice that has been made and the rationale for it
- Explicitly identify the next downstream choice
- Assist in making the downstream choice as needed
- Commit to revisiting and modifying the choice based on downstream feedback
Strategy Execution Risk
A mismatch between strategy and execution
OAS
Strategic Communication Tool and the vital link between strategy and execution
- Objective: What the strategy is meant to achieve
- Advantage: How the organization will achieve the Objective
- Scope: The domain (niche) in which it will operate
Building blocks of strong execution in order of priority
▪ Designing information flows
▪ Clarifying decision rights
▪ Aligning motivators
▪ Suitably changing organizational structure
What Matters Most to Strategy Execution
Clarifying decision rights and making sure information flows where it needs to go. If you get those right, the correct structure and motivators often become obvious.
Blue Ocean Strategy vs. Red Ocean Strategy mottos
Red Ocean Strategy: Kill or Be Killed
Blue Ocean Strategy: Thrive and Let Others Exist
Added Value (AV) equation
Added Value (AV) = Total Value with you - Total Value without you
Value Net complements Porter’s Five Forces by
generalizing “Substitutes” to “Substitutes & Complements”
Valuation Theory
A company’s worth equals the Present Value of all cash flows it will generate. An established discount rate, r (“hurdle rate”) is needed.
Awareness – Motivation – Capability Triangle helps assess
retaliation threat
M&A Expected Benefits
Synergies that will result in:
Cost savings (efficiencies), Growth potential, or both
Strategy Execution Frameworks
▪ Blue Ocean Strategy
▪ Value Net Strategy
▪ Mergers & Acquisitions principles
▪ Awareness - Motivation - Capability Model
Mitigation of Post Merger Integration Risks Examples
▪ Articulate a “Deal Thesis” to state how the merger creates value and designs the organization around it
▪ Communicate clearly and frequently
▪ Create an Integration Mgmt Office with a strong leader
▪ Keep and amplify the strengths of both parts and jettison the weak parts of both
▪ Commit to one culture, manage it actively, and be clear about what you want from the top down
