#### Transcript Strategy as Competitive Advantage

Files mounted on the Making Strategy Sage web site Six sets of PowerPoint slides: Introduction to Making Strategy Strategy as the Prioritisation and Management of Key Issues Strategy as Purpose: Agreeing Goals and Aspirations for the Organisation Strategy as Competitive advantage Closure These slides are intended only as a supplement to the book and do not represent a complete picture of the theory, concepts, or practice that lie behind the approach to strategy. They provide some further examples and pick out some main themes. They have been designed so that they can be modified and added to. However, the copyright of the material lies with the authors. Four sets of PowerPoint slides that list the tasks for each of the four forums. These are directly from the book and save retyping them if required. A 2-page quick guide to the use of Decision Explorer. This guide provides the majority of the ‘hot-key’ instructions that used extensively during the Making Strategy process. Videos introducing the use of Decision Explorer in the issue management forum. This provides a quick way of ‘getting the hang’ of using the software at a basic level. © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Group Explorer There is also available a Group Support System that allows participants to enter statements and links directly in to a publicly displayed Decision Explorer model. The system also allows for the rating of statements, and the indication of preferences about, for example, options to focus on, undesirable options, leverage on goals, etc. The significant benefits of the system are higher productivity, anonymity when appropriate, the ability to monitor development consensus, and facilitator monitoring of levels of participation and type of participation. The system has been used extensively over the past 10 years by a number of Business Schools, managers, and consultants. It has been used with top management teams of MNC’s as well as with pressure groups. The system requires the purchase of the Group Explorer software from Ackermann&Eden at Strathclyde Business School, a full copy of Decision Explorer, Windows Server, and 2 laptop computers (one running Windows Server and the other Windows 7). See: Ackermann, F. and Eden, C. Negotiation in Strategy Making Teams Group Support Systems and the Process of Cognitive Change. Group Decision and Negotiation. 2011; 20(3)293-314. Andersen, D.; Richardson, G. P.; Ackermann, F., and Eden, C. Using a Group Support System to Add Value to Group Model Building. System Dynamics Review. 2010; 26(4)335-346. © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Making Strategy: Mapping Out Strategic Success Chapters 7 and 8 Strategy as Competitive Advantage Fran Ackermann and Colin Eden © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Please note, these slides are designed to be used in addition to the book: Making Strategy: Mapping Out Strategic Success. by Ackermann & Eden, Sage, 2011 They are not designed to be used in a ‘stand-alone’ manner, or to replicate theory and practice presented in the book. The assignment design represents one possibility for a 20 credit MBA course (thus each of the 4 parts represents approx 5 credits + Closure). © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Strategic Management is about agreeing which competences to practically focus energy, cash, effort, emotion © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Making Strategy in 4x~3hr workshops (2 days)…. Or single half day workshops Workshop 1 – morning • Strategy as the Prioritisation and Management of Key Issues • Statement of Strategic Intent Workshop 2 – afternoon • Strategy as Purpose: Agreeing Goals and Aspirations for the Organisation • Statement of Strategic Intent Workshop 3 – morning • Strategy as Competitive advantage • Statement of Strategic Intent Workshop 4 – afternoon • Strategy as Stakeholder Management • Statement of Strategic Intent DELIVERABLE OVERALL: • Statement of strategic intent (SSI) encompassing: issue management, purpose, competitive advantage, stakeholder management © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Refer to p184 The Basic Structure of a the Relationship between Competences and Goals © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Refer to p184 Refer to p185 The Distinctive/differentiated Strategy Model © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Refer to p184 Refer to p185 Refer to p186 Identifying Core Competences © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Core Competences? “Core competence has too often become a ‘feel good’ exercise that no one fails” Collis & Montgomery, 1995 “We talked to [core competence experts] and asked them to help us identify our core competences. But after having them work with our senior management, leading them through some group exercises, we really had a mess on our hands. We could not define what was core as opposed to non-core, and what was a competence as opposed to some process or offering we just did well.” Paula Cholmondeley, VP, Business Development and Global Sourcing, Owens-Corning Fiberglass. Quoted in Coyne, Hall & . Clifford, 1997 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 The Reality of Core Competences Evaluations Are usually motherhood statements • They cannot be managed, either operationally or strategically – They cannot be protected or sustained unless they can be managed • They are not necessarily at the core Nobody knows what they are at the core of and so: Nobody knows why they are at the core At the very least they are the outcomes of competences, and not necessarily distinctive and so: Don’t give competitive advantage unless they do differentiate © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Mapping Distinctive Competencies © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 “You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new.” Steve Jobs, Apple Corp © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Map of Distinctive Competencies Capture your possible distinctive competencies, and important competencies and spread them around a new view in DE Refer to p190, 210 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Refer to p72 Employ procedural justice… USE A “ROUND-ROBIN” IN TURN, ONLY ONE STATEMENT EACH, THEN AROUND THE GROUP AGAIN, AND AGAIN NO EVALUATION NO DISCUSSION, YET Be expansive and tentative © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Distinctiveness: “VRIN” (now updated) Valuable • when they enable a firm to conceive or implement strategies that improve its efficiency or effectiveness in delivering business goals and customer values Rare • valuable firm resources possessed by large numbers of competing firms cannot be sources of either a competitive advantage or a sustainable competitive advantage Imperfectly Imitable • because of a combination of three reasons: – unique historical conditions, – causally ambiguous, – ability to organize work to deliver value Non-Substitutable • there must not be strategically equivalent valuable resources that are themselves either not rare or imitable Barney, J. Journal of Management, 1991 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 So, a Distinctive Competence: (over the period of concern) Refer to p178, 210 Will be difficult to emulate Cannot be bought easily Will have a very high cost of entry/time to entry a competence is often a process: • the complex harmonization of technology and production skills • ability to organize work to deliver value • that is, cultural properties © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Adapted for demonstration A Few © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Possible DCs for an Oil company Competence discovery “Competences and resources are difficult to identify, isolate and measure because they are often tacit, inimitable, collective, deeply embedded and interactive and integrative” Doz 1994 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Which of the following is most difficult for competitors to imitate or obtain? • New technology • An innovative product • An individual’s knowledge / expertise • Collective expertise • Organisational culture Increasingly difficult as move down the list © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Try it… Target: dump at least 20-25 possible distinctive competencies DO NOT evaluate Be expansive and tentative Do NOT link © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 The timing… Time elapsed 00:15/00:25 • Developing a first draft of distinctive competences, scattered around a DE view (15-25mins) [Often this can take much longer with a notfor-profit organisation, as they have never before been asked to make explicit distinctiveness] © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Competences categorized Distinctive Asset (outcome): tangible & intangible Pattern of DC & C’s=DC Distinctive Competences Competences Distinctive Assets: tangible & intangible Refer to p215 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 BEWARE "every company carries the weakness of its strengths" Derek Pugh © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Roughly, and quickly, categorize according to: Refer to p215 • Distinctive competence outcome = DCO – Wouldn’t easily know how to manage or deliver the outcome – Close to being an outcome noticed by the customer • Possible Distinctive competence = DC – Can put “an ability to…” in front of – Delivers outcomes (probably by driving a sequence of other outcomes to the delivery of a DCO • Likely competence = C • Distinctive Asset = DA – May have arisen by serendipity, but now looks like it could/does deliver distinctive outcomes through use of distinctive or other competences • Threshold competence = TC – Not important for delivering distinctiveness, differentiation and so competitive advantage – But essential to deliver basic aspects the customer needs © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Not to be quoted Adapted for demonstration Create the DCO/ DC/ DA Sandwich increasingly more (relatively) distinctive >>> © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 The timing… Time elapsed 00:55/01:25 • Categorizing and rating (40-60mins) © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Thus, the steps, so far: Throw up possible DCs Word them so they express the distinctiveness Categorize as DCO, DC, DA through discussion: and so add and refine Place on a relative distinctiveness scale ONLY at this stage add links and also ladder down to surface more Refer to p218 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 An example of laddering down From Ackermann, F. and Eden, C. Strategic Management of Stakeholders theory and practice. Long Range Planning. 2011; 44(3)179-196. © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Try it… Target: categorize all statements and reword as appropriate to capture COMPETENCES Rate them for relative distinctiveness Add links and ladder down © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 The timing… Time elapsed 01:20/02:05 • Mapping a competence network (2540mins) © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Patterns…? Refer to p219 It is the way in which one competence supports or sustains another, and that, in turn, supports another, that can be distinctive (as well as possibly being distinctive competences in their own right) A pivotal distinctive competence is usually the combination of a particular unique pattern of interrelated competences, where it is the pattern that is distinctive. • For example, when that pattern is self-sustaining (a virtuous cycle of competences) then the pattern is of particular importance. “Southwest Airlines developed knowledge and skills that enable it to operate at much lower cost than other major airlines. Competitors that tried to imitate Southwest were not as successful because Southwest built a system of reinforcing competences that continue to provide the airline with competitive advantage over time” King et al. (2001) (our italics). © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Pattern Discovery…. © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 A Distinctive Competence arising from a Feedback Loop of Competencies © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 NOTE: a historical asset CANNOT be in a loop Every node must be a variable! A Distinctive Competence sustained by a being a part of a Feedback Loop © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 A Loop that Supports and Sustains a Distinctive Competence © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Not to be quoted Adapted for demonstration Pattern discovery © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Exploring the ‘pattern’ of most distinctive (ctrl-h on left part of full map) © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 The most distinctive mapped (>map onmap) © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 William Grant claims: COMPETITIVE ADVANTAGE Passion for nurturing brands First choice partners Freedom to win CORE COMPETENCES Family owned Long term view Sense of mission No compromise on quality Responsiveness Financial flexibility Strong employee engagement THE DANGER OF FOCUSING ON DCO’s ONLY © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Not to be quoted Adapted for demonstration © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Patterns Loops? • Loops must have variables throughout – Convert history to future? Create loops? Most D DCO tear-drop? Bundles of D’s? Portfolio DCs and DAs? © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Try it… Target: look for patterns Use >zoom onmap and >loop command in DE to check visual identification Check validity of loops, particularly check each item on the loop is a variable Highlight loop links (in RED bold) Look for distinctive patterns as portfolios/bundles © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 The timing… Time elapsed 01:35/02:25 • Identifying distinctive patterns (15-20mins) Although the process of exploring for distinctive patterns may usefully go on for a couple of hours. The process demands playing with the data. © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011 Assignment: Part 3 Refer to assignment details slides Save DE model • File name= ‘group name’_CA Write and Save SSI Refer to p199-200 Write Reflections piece © Colin Eden and Fran Ackermann: Lecture Notes For Making Strategy: Mapping Out Strategic Success, Sage, 2011