Leadership & Management

Business acumen for strategy

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Presentation materials on a business model framework used as part of a course on business acumen offered at the University of Wisconsin Center for Professional and Executive Development.
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  • 1. © Linda Gorchels Business Acumen for Strategy Linda Gorchels Emerita Director of Executive Training, UW-Madison Creativity Curator, Tomorrow’s Mysteries, LLC lgorchels@bus.wisc.edu
  • 2. Linda Gorchels www.BrainSnacksCafe.com Business Model Renewal Amazon.com
  • 3. Learning objectives (Fall 2015) By the end of this session you should be able to: • Connect the dots between business models, strategies, leadership and culture • Define (and refine) your own business model(s) • Lead strategic maneuvers and business model renewal through relevant change initiatives
  • 4. © Linda Gorchels TacticsStrategy ≠
  • 5. How long is “long-term?” • It varies by company and industry. However, here are some very broad guidelines. – product: 2-3 years – business unit: 3-5 years – company: 5-10 years – industry: 8-10 years or more © Linda Gorchels
  • 6. • Strategy is a long-term plan of action to achieve a particular goal. – Typical business goals include growth, market dominance, efficiency, etc., with the intent of achieving competitive advantage © Linda Gorchels • Strategy is sometimes viewed as the policies taken to win a war whereas tactics are the actions taken to win a battle. Both exist within the context of business models.
  • 7. Growth Initiatives Corporate Strategies Business Strategies Product/Service Strategies Field strategies Inorganic growth Organic growth Mergers, acquisitions, etc. Product development, increased sales Stockholder focus Customer focus
  • 8. Corporate Strategies Business Strategies Field Strategies Enterprise mission, vision, values Mergers, acquisitions, divestitures Strategic market alignment Organizational structure Product line acquisition Operational strategies New product development Channel redesign Functional strategies Account selection Lead generation Selling, account management Fulfillment Sales support & service © Linda Gorchels
  • 9. © Linda Gorchels PlanningStrategy ≠
  • 10. Michael Porter on Strategy © Linda Gorchels
  • 11. © Linda Gorchels “Leadership and management are two distinctive and complementary systems of action. Management is about coping with complexity. Leadership is about coping with change. Leadership complements management; it doesn’t replace it. Companies manage complexity by planning & budgeting, by controlling & problem solving. By contrast, leading an organization begins by setting direction, aligning people to the direction, and inspiring people to achieve a vision.” » John P. Kotter
  • 12. “Most of the management tools and techniques we studied had no direct causal relationship to superior business performance. What does matter, it turns out, is having a strong grasp of the basics. Without exception, companies that outperformed their industry peers excelled at what we call the four primary management practices – strategy, execution, culture, and structure.” Joyce, Nohria, Roberson © Linda Gorchels
  • 13. •Exploit existing assets and capabilities before exploring new ones. •Diversify your business portfolio. Great companies are adaptive, but generally exploit economies of scope. •Remember your mistakes – and don’t repeat them. •Be conservative about change. Christian Stadler © Linda Gorchels
  • 14. “An examination of over 400 companies listed at some point on the Fortune 100 since its inception revealed that 87% experienced a stall. Fewer than half were able to return to moderate or high growth within a decade, and for some the delay was fatal.” Matthew Olson & Derek van Bever © Linda Gorchels
  • 15. “Strategy has been the primary building block of competitiveness over the past three decades, but in the future, the quest for sustainable advantage may well begin with the business model. Seven out of 10 companies are trying to create innovative business models and 98% are modifying existing ones.” “How to Design a Winning Business Model” (Ramon Casadesus-Masanell, Joan Ricart), Harvard Business Review, January-February 2011, pp. 101+ © Linda Gorchels
  • 16. How is a business model developed? There are three parts …
  • 17. • Context • Strategic Decisions • Alignment © Linda Gorchels
  • 18. • Context • Strategic Decisions • Alignment © Linda Gorchels
  • 19. • Context • Strategic Decisions • Alignment © Linda Gorchels
  • 20. Source:
  • 21. Gorchels’ business model portfolio Boost existing customer markets Move into adjacent customer markets Create new customer markets Cultivate and reframe existing products, offerings, revenue streams and competencies Sustaining Growth (shorter-term planning horizon; mining the core) Cultivate and collaborate with external partners for products, offerings, revenue streams and competencies Disruptive Growth (long-term planning horizon; incite breakthroughs) Transformative Growth (intermediate-term planning horizon; advancing into adjacencies) ©Linda Gorchels
  • 22. The Innovation Paradox Robert C. Wolcott © Linda Gorchels
  • 23. • Context – What’s going on? © Linda Gorchels
  • 24. Source: © Linda Gorchels
  • 25. Data Hindsight Plausible futures Foresight Business impacts Insight Environmental scan 3 Assess 2Project 1Compile
  • 26. Compile © Linda Gorchels
  • 27. SWOT Internal External Strengths Weaknesses Opportunities Threats © Linda Gorchels
  • 28. SWOT Internal External Strengths Weaknesses Opportunities Threats © Linda Gorchels
  • 29. Identify strengths (weaknesses) Strengths can come from competencies, capabilities, resources or assets that are the source of a firm’s competitive advantage. · e.g. – competence in low-cost manufacturing · e.g. – capability of strong customer relations · e.g. – superior access to resources such as raw materials · e.g. – unique assets such as location or brands © Linda Gorchels
  • 30. Dive into strengths urable nimitable/non-substitutable aluable xploitable © Linda Gorchels
  • 31. SWOT Internal External Strengths Weaknesses Opportunities Threats © Linda Gorchels
  • 32. Monitor external trends over time
  • 33. Technology • Describe technology, science & innovation in your industry and in similar industries. – Can technologies from other industries be adapted? – Are novel applications possible? • What technological changes are expected or anticipated? © Linda Gorchels
  • 34. Industry & competition • Think about your current or prospective industry. How would you define industry structure in terms of buyers, suppliers and competition? (Porter’s Five Forces) © Linda Gorchels • How are you uniquely positioned compared to these competitors? What is your value proposition and how will you maintain it in the future?
  • 35. Porter’s Five Forces © Linda Gorchels
  • 36. Market • Is your primary market stable, growing, or declining? • Have you saturated this market, or is there room for profitable growth? • How might this change in the future? • Are there adjacent markets that offer opportunities for the future? • What higher-level socio-cultural trends (next page) could affect your market(s)?
  • 37. Generational Cohorts (birth years) 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Cohorts Traditionalist Baby Boomer Gen X Millennial Z ? © Linda Gorchels
  • 38. Economy, environment, etc. • Are there existing laws or requirements that pose opportunities or threats? • What governmental and political changes might happen? – World affairs, politics, and public policy © Linda Gorchels • What pending legislation might affect your future? • What environmental or sustainability issues should you consider?
  • 39. © Linda Gorchels Upstream business goals • Are your goals determined or affected by higher-level corporate, division or business unit goals?
  • 40. PROJECT Environmental scanning – step 2 • Conceptualize plausible futures. – Which technologies will be disruptive? – When will patent expirations (either yours or the competition) occur? – How quickly will markets transform due to demographic or other shifts? © Linda Gorchels
  • 41. Projecting into the Future Complexity Time © Linda Gorchels
  • 42. ASSESS Environmental scanning – step 3 • Consider… – The likelihood of each scenario – The potential impact on your business – How you might build on strengths, resolve weaknesses, exploit opportunities and minimize threats • Think in terms of dynamic stability © Linda Gorchels
  • 43. © Linda Gorchels
  • 44. © Linda Gorchels© Linda Gorchels© Linda Gorchels What is contextual leadership? © Linda Gorchels • Leadership requires agility and contextual intelligence. Effective leaders have to judge from the context of the situation if an autocratic decision is required, or whether it's the opposite. They have to adjust their style to fit the circumstances and the needs of the followers. There are times inspiration is most critical, and other times when transactional skills of motivating employees to implement a strategy-- making them more productive -- becomes more important.
  • 45. Leaders shape the future © Linda Gorchels • Core values – Beliefs your firm’s members hold in common – May be different from aspirational values • Mission – Defines why your firm exists • Strategic vision – A description of the desired future state of your firm
  • 46. Enduring principles that guide the “culture” of a firm Core Values Link to reputation, positioning and brand identity May be part of the mission statement or a separate pronouncement
  • 47. IBM Core values For 72 hours in 2011, we invited all 319,000 IBMers around the world to engage in an open "values jam" on our global intranet. IBMers by the tens of thousands weighed in. They were thoughtful and passionate about the company they want to be a part of. They were also brutally honest. … In the end, IBMers determined that our actions will be driven by these values: • Dedication to every client's success • Innovation that matters, for our company and for the world • Trust and personal responsibility in all relationships www.ibm.com, Feb, 2012 © Linda Gorchels
  • 48. © Linda Gorchels Mission Why your organization exists (purpose) What it does to achieve its purpose
  • 49. Mission statement -YMCA • The YMCA of San Francisco, based in Judeo- Christian heritage [values], seeks to enhance the lives of all people [purpose] through programs designed to develop spirit, mind and body [business]. Source: VolunteerMatch website, January 2008 (descriptors – values, purpose, business – added). © Linda Gorchels
  • 50. Simon Sinek: Start with Why © Linda Gorchels
  • 51. Strategic vision © Linda Gorchels The “mental picture” of what the company will be in the future. – Where is the company going; what will it look like; what will it become? – What will it do differently to attain profitable competitive advantage? Martin Luther King, Jr. started his vision statement with, “I have a dream …”
  • 52. Komatsu’s vision, 60s-80s • Komatsu – Encircle Caterpillar – Date Corporate Challenge Activities – 1960s Protect home market Licensing deals Begin quality efforts Quality programs – 1970s Build export markets Industrializing nations – late 70s Create new products Future and Frontiers markets program © Linda Gorchels
  • 53. Komatsu’s re-visioning Komatsu’s vision changed in the 1990s. • The exclusive focus on best practices to compete against Caterpillar caused Komatsu to stop thinking about strategic choices beyond head-to-head competition. • Now it seeks out new opportunities © Linda Gorchels
  • 54. Interface Inc. Vision • To be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits — by 2020 — and in doing so we will become restorative through the power of influence. Corporate website, February 2009 © Linda Gorchels
  • 55. © Linda Gorchels
  • 56. © Linda Gorchels Work to create readiness to change today in an effort to reduce resistance to change tomorrow
  • 57. • Is there sufficient dissatisfaction with the status quo to support change? • Do employees believe the organization has the capacity for successful change? • Are there enough key supporters throughout the organization with a “readiness to change” propensity? © Linda Gorchels Diagnose your firm’s readiness to change
  • 58. Change Readiness Matrix Ready for learning Ready for change Ready for resistance Ready for frustration Leadership Change Capacity Organizational Propensity to Change Low High Low High Adapted from Douglas B. Reeves, “Leading Change in Your School,” ASCD 2009.
  • 59. © Linda Gorchels One final thought (before getting to the strategic business model decisions of where and how to compete). Let’s explore four different “mental models” (categories) of strategy.
  • 60. Category 1: Grow from the core © Linda Gorchels
  • 61. Grow From The Core • Strengthen and grow your core business – Profit from the Core (Chris Zook) – Beyond the Core (Chris Zook) • Leverage core competencies – Competing for the Future (Gary Hamel & C.K. Prahalad) • Move toward BHAGs that build on core ideologies – Built to Last (James Collins & Jerry Porras) – The Soul of the Corporation (Hamid Bouchikhi & John Kimberly) © Linda Gorchels
  • 62. Can your core business be grown? Do you need to move into adjacencies? © Linda Gorchels
  • 63. Category 2: Pursue competitive advantage © Linda Gorchels
  • 64. • Define the competitive structure of your industry, identify the key success factors, and work to either change the structure in your favor or gain superiority in the key success factors – Competitive Strategy (Michael Porter) – Market-Driven Strategy (George Day) Pursue Competitive Advantage © Linda Gorchels
  • 65. Define key success factors (table stakes) in your industry and determine how to succeed by excelling at them and/or redefining them. © Linda Gorchels
  • 66. Category 3: Seek untapped marketspace © Linda Gorchels
  • 67. Seek Untapped Marketspace • Move beyond the boundaries of direct comparative competitiveness – Blue Ocean Strategy (W. Chan Kim & Renee Mauborgne) – MarketBusters (Rita Gunther McGrath & Ian C. MacMillan) © Linda Gorchels
  • 68. Identify market opportunities that you have the skills to satisfy, but that are currently being underserved in your industry © Linda Gorchels
  • 69. Category 4: Anticipate disruption © Linda Gorchels
  • 70. Anticipate Disruption • This is another look at new marketspace, but from the perspective of estimating when an emerging trend will take off, and building a strategy to take advantage of it – The Tipping Point (Malcolm Gladwell) – The Innovator’s Solution (Clayton Christensen & Michael Raynor) © Linda Gorchels
  • 71. Follow technology, industry, and market trends to identify – and take advantage of – tipping points as early as possible. © Linda Gorchels
  • 72. © Linda Gorchels
  • 73. • Strategic Decisions © Linda Gorchels Where to compete? (which customers?) How to compete? (what value proposition?)
  • 74. Can I achieve my goals & a sustainable advantage with existing customers and capabilities? Might externalities force a change? When? Will I need to move into adjacencies or new markets? New capabilities? How can I build a portfolio of short-, medium-, and long- term growth options?
  • 75. Back to the Growth Portfolio Boost existing customer markets Move into adjacent customer markets Create new customer markets Cultivate and reframe existing products, offerings, revenue streams and competencies Sustaining Growth Arena (shorter-term planning horizon; mine the core) Cultivate and collaborate with external partners for products, offerings, revenue streams and competencies Disruptive Growth Arena (long-term planning horizon; incite breakthroughs) Transformative Growth Arena (intermediate-term planning horizon; advance into adjacencies) © Linda Gorchels
  • 76. Is the timing right? Will we succeed financially? Can we win? What will be my differentiators? How much effort is required? Is there a cultural fit? For each arena, consider …
  • 77. Strengthen and defend the core! Sustaining growth arena © Linda Gorchels
  • 78. To identify your core business, identify: 1. Your most potentially profitable, franchise customers 2. Your most differentiated and strategic capabilities 3. Your most critical product offerings 4. Your most important channels 5. Any other critical strategic assets that contribute to the above (such as patents, brand name) … From focus comes growth; by narrowing scope one creates expansion. Chris Zook © Linda Gorchels
  • 79. • First, do what you do … better • Improve focus through spin-offs or product pruning • Consciously sustain the core while considering various growth options © Linda Gorchels
  • 80. Transformative growth arena Cultivate new value from adjacency expansion.
  • 81. Customer focus Value proposition Existing customers Adjacent markets Product/service offerings Collaborative external relationships Commercial processes New revenue streams Redefine customer targets Reprioritize customers Increase share of wallet Enter new industries Enter new geographies Create new market applications Consider price & fee alternatives Generate revenue from non-product sources Add complements Modify offerings Develop new products Re-bundle offerings Create new collaborative solution Test open innovation Sellthrough new channel Create hybrid channel Integrate channel Rethink customer value chain Rethink automation Simplify sales transaction Transformative Growth options © Linda Gorchels
  • 82. © Linda Gorchels Disruptive growth arena Seek out new, unexplored opportunities for future growth.
  • 83. When do the organizational competencies that caused your organization’s (or industry’s) success become impediments to growth, suggesting a need for disruption?
  • 84. © Linda Gorchels Tips for disruptive growth • Explore several plausible futures • Avoid reliance on “best” customers – jumpstart emerging markets • Maintain a long-term perspective (even long-term incrementalism)
  • 85. • Alignment – How to pull it all together: Structure, strategy, culture, people © Linda Gorchels
  • 86. © Linda Gorchels
  • 87. Now think about alignment Boost existing customer markets Move into adjacent customer markets Create new customer markets Cultivate and reframe existing products, offerings, revenue streams and competencies Sustaining Growth Arena (fine-tune current strategy, culture and structure) Cultivate and collaborate with external partners for products, offerings, revenue streams and competencies Disruptive Growth Arena (redesign structure and incentives, enable relevant differences in metrics, consider separation of sub-group) Transformative Growth Arena (modify strategy, structure and/or culture, perhaps via traditional change management) © Linda Gorchels
  • 88. Your business model exists in the alignment of your strategy, structure, culture and people. © Linda Gorchels
  • 89. © Linda Gorchels Structure is the skeleton of an organization.
  • 90. Wolcott-Lippitz Innovation Structures © Linda Gorchels
  • 91. Wolcott-Lippitz Innovation Structures © Linda Gorchels Sustaining growth might use any, including Opportunist Disruptive Growth
  • 92. © Linda Gorchels Culture is the soul.
  • 93. Henry Mintzberg on culture “Culture is the soul of the organization — the beliefs and values, and how they are manifested. I think of the
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