STRATEGIC PLANNING Institute of Management Accountants North East
- Slides: 54
STRATEGIC PLANNING Institute of Management Accountants North. East Regional Council 10 th Annual Fall Conference Thomas A. Barron, Jr. , Ed. D. Director, M. S. in Organizational Effectiveness & Leadership Charter Oak State College
Agenda Ø The Nature of Strategic Planning Ø Value Proposition & Business Model Ø Strategic Analysis Models Ø Strategic Formulation Models Ø Strategic Plan Ø Conclusion
The Nature of Strategic Planning
The Strategic-Management Model Where are we now? Where do we want to go? How are we going to get there? Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Strategic Decisions Ø Long-term in nature (> 1 year) Ø Rare: Unusual and have no precedent to follow Ø Consequential: Commit substantial resources & demand a great deal of commitment from people at all levels Ø Directive: Set precedents for lesser decisions & future actions throughout the organization
Pitfalls in Strategic Planning Ø Doing strategic planning only to satisfy accreditation or regulatory requirements Ø Failing to communicate the plan to employees Ø Failing to involve key employees in all phases of planning Ø Top managers not actively supporting the strategic- planning process Ø Failing to use plans as a standard for measuring performance Ø Thinking tactically instead of strategically Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Value Proposition & Business Model
Value Proposition Ø An innovation, service, or feature intended to make a company or product attractive to potential customers. Ø Focus: Ø What problem or need is not being addressed in the market? Ø What product or service can you provide that will add more value or better solve a problem than current offerings in the market?
Value Proposition Ø Competitive advantage Ø Anything that a firm does especially well compared to rival firms Ø Goal: Utilize a firm’s competitive advantage to create economic value for both the firm and its customer
Value Proposition
Value Proposition Value Map Customer Profile Ø Products & Services Ø List of products & services a value proposition is built around Ø Customer Jobs Ø Describe what customers are trying to get done in their work & in their lives (their own words) Ø Pains Ø Describe bad outcomes, risks & obstacles related to customer jobs Ø Gains Ø Describe the outcomes customers want to achieve or the concrete benefits they are seeking Ø Gain Creators Ø Describe how your products & services create customer gains Ø Pain Relievers Ø Describe how your products & services alleviate customer pain
Value Proposition Steps: Ø Step 1: Create the Customer Profile Ø Step 2: Create the Value Map Ø Step 3: Determine the Fit
Customer Profile: Identify Jobs The types of things your customers are trying to get done in their work or personal lives Ø Functional Jobs- Customers attempt to complete a specific task or solve a specific problem Social Jobs- How customer wants to be perceived by others Ø Personal / Emotional Jobs- Customer seeks a specific emotional state Ø
Customer Profile: Types of Pains Undesired Outcomes, Problems, & Characteristics Ø Ø Functional- Doesn’t work well Social- I look bad doing this Emotional- Feel bad doing this Ancillary- Annoying, inconvenient Risks Ø Undesired potential outcomes Ø Important negative consequences Obstacles Ø Prevent a customer from starting a job or that slow them down Ø Cost, time, resources
Customer Profile: Types of Gains Describe the outcomes / benefits your customer wants Ø Required Gains Ø Solution will not work unless these gains are achieved Ø Expected Gains Ø Basic gains that we expect from a solution, even if it could work without them Ø Desired Gains Ø Gains that go beyond what we expect from a solution but would love to have if we could (customer can identify) Ø Unexpected Gains Ø Gains that go beyond customer expectations (customer does not identify).
Customer Profile Prioritization Prioritize Jobs, Pains, & Gains Jobs Pains Gains Important Extreme Essential Insignificant Moderate Nice to Have
Customer Profile- Management Tips Ø One Value Proposition Canvas for each different customer segment Ø Do not mix jobs & outcomes Ø Focus on all three job types (Functional, Social, & Emotional) Ø Focus on the customer & facts, dig deep, really understand what is going on with your customer Ø Brainstorming is key Ø Be specific
Value Map Steps: Ø Step 1: List Products & Services Ø Step 2: Identify Pain Relievers Ø Step 3: Identify Gain Creators Ø Step 4: Rank Products & Services, Pain Relievers, & Gain Creators
Value Map: Products & Services Ø List all the products and services that you offer Ø Helps customers complete jobs Ø Functional Ø Social Ø Emotional Ø Customer segment focus
Value Map: Pain Relievers Describe exactly how your products & services alleviate specific customer pains Ø Savings (time & money) Ø Make customers feel better; eliminate concerns Ø Fix underperforming solutions Ø Eliminate obstacles Ø Eliminate negative social consequences Ø Eliminate / minimize risks Ø Eliminate processing / customer errors Ø Eliminate barriers that keep customers from adopting your value proposition
Value Map: Gain Creators Describe exactly how your products & services will produce outcomes and benefits that your customer expects Ø Savings (time & money) Ø Outcomes that customers are specifically looking for or exceed expectations Ø Outperform current value propositions; makes adoption of value proposition easier Ø Make work / life easier; Create positive social consequences Ø Achieve customer dreams / aspirations
Value Map Prioritization Products & Services Pain Relievers Gain Creators Essential Nice to Have
Fit Achieved when customers get excited about your value proposition Ø Address important jobs Ø Alleviate extreme pain Ø Create essential gains Ø Based on what the customer cares about Ø Ongoing, continuous challenge for businesses
Great Value Proposition Characteristics Ø Embedded in great business models Ø Focus on jobs, pains, & gains that matter most to the customer Ø Focus on unsatisfied jobs, unresolved pains, & unrealized gains Ø Target few jobs, pains, & gains but do so extremely well Ø Address functional, social, & emotional jobs Ø Align with how customers measure success Ø Focus on jobs, pains, & gains that a lot of people have or will pay a lot of money for Ø Differentiate from competition on jobs, pains, & gains that customers care about Ø Outperform competition substantially on at least one dimension Ø Are difficult to copy
Competitive Advantage Core Competency Identification Ø Collection of competencies the corporation does exceedingly well Ø Provides access to a wide variety of markets Ø Make a significant contribution to the perceived customer benefits of the end product / service Ø Difficult for competitors to duplicate Ø 5 to 6 core competencies at most Core Competencies + Strong Value Proposition = Competitive Advantage
Business Model A business model describes a rationale of how an organization creates, delivers and captures value
Business Model Customer Segments: Value Proposition: Ø Require / justify a distinct Ø An innovation, service, or offer Ø Reached through different distribution channels Ø Require different types of relationships Ø Substantially different profit generation levels Ø Willingness to pay for different aspects of the offer feature intended to make a company or product attractive to potential customers.
Business Model Channels: Key Resources: Ø Awareness- How do we raise Ø Physical awareness of company’s products & services? Ø Evaluation- How do we help customers evaluate our Value Proposition? Ø Purchase- How do we allow our customers to purchase the products and services? Ø Delivery- How do we deliver a value proposition to our customers? Ø After Sales- How do we provide post-purchase customer support? Ø Intellectual Ø Human Capital Ø Financial
Business Model Customer Relationships: Ø Customer acquisition Ø Customer retention Ø Boosting sales (upselling) Key Activities: Most important things a company must do to make its business model work Ø Production Ø Problem solving Ø Platform / network
Business Model Revenue Streams: Cost Structures: Ø Revenues from one-time or Ø Cost-driven (Focus on recurring customer payments Ø Asset sales Ø Subscription fees Ø Renting / Leasing Ø Licensing Ø Brokerage Fees Ø Advertising Ø How do we price our product or service? ? ? minimizing costs) Ø Value-driven (Focus on value creation) Ø Cost Characteristics: Ø Fix Costs Ø Variable Costs Ø Economies of Scale (Unit Output) Ø Economies of Scope (Scope of Operations)
Business Model Key Partnerships Motivations: Ø Optimization and economies of scale Ø Reduction of risk and uncertainty Ø Acquisition of particular resources and activities Types of Partnerships: Ø Strategic alliances (noncompetitors) Ø Coopetition (strategic partnerships between competitors) Ø Joint ventures to develop a new business Ø Supply chain relationships to assure reliable supplies
Strategic Analysis Models
Strategic Analysis Management Tips # 1: Everything we do related to strategic management revolves around reacting to or acting in anticipation of external environmental conditions # 2: Assign measures / quantify everything
SWOT Analysis External Analysis: Opportunities & Threats Ø Economic Ø Social, Cultural, Demographic, & Environmental Ø Political, Legal, & Governmental Ø Competitors Ø Technological
Porter’s Five-Forces Model of Competition Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
SWOT Analysis Internal Analysis: Strengths & Weaknesses Ø Management Ø Marketing Ø Finance/Accounting Ø Production/Operations Ø Research & Development Ø Management Information Systems Ø Human Resources
Internal Analysis Focus Ø Competency = Capability Ø Core Competency Ø Collection of competencies spread across the organization that the business does exceedingly well Ø Distinctive Competency Ø Core competencies that are superior to the competition
Value Chain Human Resource Management Recruiting, Training, Development Technology Development R&D, Process Improvement Procurement Purchasing of raw materials, machines, supplies Inbound logistics Operations Outbound logistics Marketing & Sales Primary Activities Service Profit Margin Support Activities Firm Infrastructure General Mgt. , Accounting, Finance, Strategic Planning
Strategy Formulation Models
SWOT Matrix- Four Types of Strategies SO Strategies WO Strategies Ø Use a firm’s internal strengths to take advantage of external opportunities Ø Aim at improving internal ST Strategies WT Strategies Ø Use a firm’s strengths to Ø Defensive tactics directed avoid or reduce the impact of external threats weaknesses by taking advantage of external opportunities at reducing internal weakness and avoiding external threats Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
SWOT Matrix Example Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
SWOT Matrix Example Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Strategic Plan
Mission Statement Ø “What is our business or our reason for being? ” Ø Broadly outlines the organization’s future direction. Ø Expresses values or expectations of stakeholders. Ø Short , concise, clear, & easy to remember. Ø Galvanize all employees to focused action
Mission Statement Ø Broad enough to allow for creative growth Ø Be limited enough to exclude non-congruent ventures Ø Serve as a framework for evaluating both current and prospective activities Ø Value proposition focused
Strategic Plan Objectives Strategies Tactical Plan
Strategic Plan Objectives: Ø Overarching goals identified as most important to the current and future health of the business Ø Limited in number Ø Abstract, serves as the framework for identifying and categorizing strategies Common Examples: Ø Achieve growth Ø Profit maximization Ø Efficiency Ø Leverage technology Ø Customer service
Strategic Plan Strategies: Ø High-level plan for purposes of achieving an organization’s business objective Ø Must use SMART criteria Ø Identifies Key Performance Measures Example Objective: Achieve Growth Ø In the next 3 years remodel and expand 15 existing stores Ø In the next 3 years build 5 new stores, at least 75, 000 sq. ft. in Massachusetts
Strategic Plan Tactical Plan: Ø Annual operating plan Example Objective: Achieve Growth Ø Based on identified Ø Remodel 2 stores in Objectives and Strategies Ø SMART criteria Ø Utilizes Key Performance Measures to evaluate level of success Ø Allocate required resources Sturbridge and Worcester Massachusetts remodel and expand 2 existing stores in Boston by December 31 Ø Build 1 new store in Hyannis, Massachusetts with 75, 000 sq. ft. by October 31
Strategic Plan Key Performance Measures / Key Performance Indicators Ø Organizations should identify key performance indicators that will drive organizational success that will assess achievement of objectives and strategies Ø If these measures are achieved the organization should achieve its plan Ø Limit the number of KPM / KPI of “total company-based” measures to be focused on by senior management (10 -12) Ø Financial as well as operational measures are required
Competitive Companies Characteristics Ø Market share matters, growth matters Ø Whether it’s broke or not, fix it & make it better Ø Innovate or evaporate Ø People (more specifically the talents and skills they contribute that provide a value-add to an organization) make a difference Ø Cost, quality, and speed of delivery are expected by customers Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Conclusion- Key Concepts Ø Understand remember precisely what business you are in- VALUE PROPOSITION !!! Ø Strategic environmental analysis is a critical aspect of the strategic planning process. A quality effort in this phase is a prerequisite for future strategic planning & implementation success. Ø People love to plan, but it is the “DO”, the achieving of results that matters. Everyone must be held accountable to the achievement of the plan.
References David, F. R. , & David, F. R. (2015). Strategic management: A competitive advantage (15 th ed. ). Upper Saddle River, NJ: Pearson. Osterwalder, A. , & Pigneur, Y. (2010). Business model generation. Hoboken, NJ: John Wiley & Sons Osterwalder, A. , Pigneur, Y. , Bernarda, G. , & Smith, A. (2014). Value proposition design. Hoboken, NJ: John Wiley & Sons
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