Tiffin University ?Basics of Strategy Please write 2 pages with at least 2 reference please find the attached files for more details .Thanks Can You Say Wh

Tiffin University ?Basics of Strategy Please write 2 pages with at least 2 reference please find the attached files for more details .Thanks Can You Say
What
Your
Strategy Is?
CAN YOU SUMMARIZE YOUR COMPANY’S STRATEGY in 35 words or
less? If so, would your colleagues put it the same way?
It is our experience that very few executives can honestly answer these simple questions in the af?rmative. And the companies that those executives work for are often the most successful
in their industry. One is Edward Jones, a St. Louis–based brokerage ?rm with which one of us has been involved for more
than 10 years. The fourth-largest brokerage in the United States,
Jones has quadrupled its market share during the past two decades, has consistently outperformed its rivals in terms of ROI
through bull and bear markets, and has been a ?xture on Fortune’s
list of the top companies to work for. It’s a safe bet that just
82 Harvard Business Review
1084 Collis.indd 82
|
April 2008
|
Getty Images and IPNstock
by David J. Collis and Michael G. Rukstad
hbr.org
3/4/08 10:14:03 PM
It’s a dirty little secret:
Most executives
cannot articulate the
objective, scope, and
advantage of their
business in a simple
statement. If they
can’t, neither can
anyone else.
1084 Collis.indd 83
3/4/08 10:14:09 PM
Can You Say What Your Strategy Is?
about every one of its 37,000 employees could express the
company’s succinct strategy statement: Jones aims to “grow
to 17,000 ?nancial advisers by 2012 [from about 10,000 today] by offering trusted and convenient face-to-face ?nancial advice to conservative individual investors who delegate
their ?nancial decisions, through a national network of one?nancial-adviser of?ces.”
Conversely, companies that don’t have a simple and clear
statement of strategy are likely to fall into the sorry category
of those that have failed to execute their strategy or, worse,
those that never even had one. In an astonishing number of
organizations, executives, frontline employees, and all those
in between are frustrated because no clear strategy exists for
the company or its lines of business. The kinds of complaints
that abound in such ?rms include:
• “I try for months to get an initiative off the ground, and
then it is shut down because ‘it doesn’t ?t the strategy.’
Why didn’t anyone tell me that at the beginning?”
• “I don’t know whether I should be pursuing this market
opportunity. I get mixed signals from the powers that be.”
• “Why are we bidding on this customer’s business again?
We lost it last year, and I thought we agreed then not to
waste our time chasing the contract!”
• “Should I cut the price for this customer? I don’t know if
we would be better off winning the deal at a lower price
or just losing the business.”
Leaders of ?rms are mysti?ed when what they thought
was a beautifully crafted strategy is never implemented.
They assume that the initiatives described in the voluminous documentation that emerges from an annual budget or
a strategic-planning process will ensure competitive success.
They fail to appreciate the necessity of having a simple, clear,
succinct strategy statement that everyone can internalize
and use as a guiding light for making dif?cult choices.
Think of a major business as a mound of 10,000 iron
?lings, each one representing an employee. If you scoop
up that many ?lings and drop them onto a piece of paper,
they’ll be pointing in every direction. It will be a big mess:
10,000 smart people working hard and making what they
think are the right decisions for the company – but with the
net result of confusion. Engineers in the R&D department
are creating a product with “must have” features for which
(as the marketing group could have told them) customers
will not pay; the sales force is selling customers on quick
David J. Collis (dcollis@hbs.edu) is an adjunct professor in the
strategy unit of Harvard Business School in Boston and the author of
several books on corporate strategy. He has studied and consulted
to Edward Jones, the brokerage that is the main example in this
article, and has taught in the ?rm’s management-development program. Michael G. Rukstad was a senior research fellow at Harvard
Business School, where he taught for many years until his untimely
death in 2006.
84 Harvard Business Review
1084 Collis.indd 84
|
April 2008
|
turnaround times and customized offerings even though
the manufacturing group has just invested in equipment
designed for long production runs; and so on.
If you pass a magnet over those ?lings, what happens?
They line up. Similarly, a well-understood statement of strategy aligns behavior within the business. It allows everyone
in the organization to make individual choices that reinforce
one another, rendering those 10,000 employees exponentially more effective.
What goes into a good statement of strategy? Michael
Porter’s seminal article “What Is Strategy?” (HBR November–
December 1996) lays out the characteristics of strategy in
a conceptual fashion, conveying the essence of strategic
choices and distinguishing them from the relentless but competitively fruitless search for operational ef?ciency. However,
we have found in our work both with executives and with
students that Porter’s article does not answer the more basic
question of how to describe a particular ?rm’s strategy.
It is a dirty little secret that most executives don’t actually
know what all the elements of a strategy statement are, which
makes it impossible for them to develop one. With a clear de?nition, though, two things happen: First, formulation becomes
in?nitely easier because executives know what they are trying
to create. Second, implementation becomes much simpler because the strategy’s essence can be readily communicated and
easily internalized by everyone in the organization.
Elements of a Strategy Statement
The late Mike Rukstad, who contributed enormously to
this article, identi?ed three critical components of a good
strategy statement – objective, scope, and advantage – and
rightly believed that executives should be forced to be crystal clear about them. These elements are a simple yet suf?cient list for any strategy (whether business or military) that
addresses competitive interaction over unbounded terrain.
Any strategy statement must begin with a de?nition of
the ends that the strategy is designed to achieve. “If you
don’t know where you are going, any road will get you there”
is the appropriate maxim here. If a nation has an unclear
sense of what it seeks to achieve from a military campaign,
how can it have a hope of attaining its goal? The de?nition
of the objective should include not only an end point but
also a time frame for reaching it. A strategy to get U.S. troops
out of Iraq at some distant point in the future would be
very different from a strategy to bring them home within
two years.
Since most ?rms compete in a more or less unbounded
landscape, it is also crucial to de?ne the scope, or domain,
of the business: the part of the landscape in which the ?rm
will operate. What are the boundaries beyond which it will
not venture? If you are planning to enter the restaurant
business, will you provide sit-down or quick service? A casual
or an upscale atmosphere? What type of food will you offer –
hbr.org
3/4/08 10:14:25 PM
platitude of “maximizing shareholder
French or Mexican? What geographic
A Hierarchy of
wealth by exceeding customer expecarea will you serve – the Midwest or the
Company Statements
tations for _______ [insert product or
East Coast?
service
here] and providing opportuniAlone, these two aspects of strategy
Organizational direction comes in
ties
for
our employees to lead ful?llare insuf?cient. You could go into busiseveral forms. The mission stateing
lives
while respecting the environness tomorrow with the goal of bement is your loftiest guiding light –
ment
and
the communities in which
coming the world’s largest hamburger
and your least speci?c. As you work
we
operate.”
Rather, it is the single
chain within 10 years. But will anyone
your way down the hierarchy, the
precise
objective
that will drive the
invest in your company if you have not
statements become more concrete,
business
over
the
next
?ve years or so.
explained how you are going to reach
practical, and ultimately unique. No
(See
the
exhibit
“A
Hierarchy
of Comyour objective? Your competitive adother company will have the same
pany
Statements.”)
Many
companies
vantage is the essence of your strategy:
strategy statement, which de?nes
do have – and all ?rms should have –
What your business will do differently
your competitive advantage, or
statements of their ultimate purpose
from or better than others de?nes the
balanced scorecard, which tracks
and
the ethical values under which
all-important means by which you will
how you implement your particular
they
will operate, but neither of these
achieve your stated objective. That
strategy.
is the strategic objective.
advantage has complementary exterThe mission statement spells out
nal and internal components: a value
MISSION
Why we exist
the underlying motivation for beproposition that explains why the taring in business in the ?rst place – the
geted customer should buy your prodVALUES
contribution
to society that the ?rm
uct above all the alternatives, and a
What we believe in
aspires to make. (An
description of how internal activities
and how we will behave
insurance company,
must be aligned so that only your ?rm
VISION
for example, might
can deliver that value proposition.
What we want to be
The BASIC
de?ne its mission as
De?ning the objective, scope, and
ELEMENTS
providing financial
advantage requires trade-offs, which
STRATEGY
of a Strategy
What our competitive
security to consumPorter identi?ed as fundamental to
game plan will be
Statement
ers.) Such statements,
strategy. If a ?rm chooses to pursue
OBJECTIVE
=
Ends
however, are not usegrowth or size, it must accept that
BALANCED
SCORECARD
ful as strategic goals
pro?tability will take a back seat. If it
SCOPE = Domain
How we will monitor
to drive today’s busichooses to serve institutional clients,
and implement that plan
ADVANTAGE = Means
ness decisions. Simiit may ignore retail customers. If the
larly, it is good and
value proposition is lower prices, the
proper that ?rms be
company will not be able to compete
clear with employees about ethical values. But principles
on, for example, fashion or ?t. Finally, if the advantage comes
such as respecting individual differences and sustaining the
from scale economies, the ?rm will not be able to accommoenvironment are not strategic. They govern how employees
date idiosyncratic customer needs. Such trade-offs are what
should behave (“doing things right”); they do not guide what
distinguish individual companies strategically.
the ?rm should do (“the right thing to do”).
Firms in the same business often have the same mission.
De?ning the Objective
(Don’t
all insurance companies aspire to provide ?nancial
The ?rst element of a strategy statement is the one that
security to their customers?) They may also have the same
most companies have in some form or other. Unfortunately,
values. They might even share a vision: an indeterminate
the form is usually wrong. Companies tend to confuse their
future goal such as being the “recognized leader in the insurstatement of values or their mission with their strategic
ance ?eld.” However, it is unlikely that even two companies
objective. A strategic objective is not, for example, the
The trade-offs companies make
are what distinguish them strategically from other ?rms.
hbr.org
1084 Collis.indd 85
|
April 2008
|
Harvard Business Review 85
3/4/08 10:14:34 PM
Can You Say What Your Strategy Is?
in the same business will have the same strategic objective.
Indeed, if your ?rm’s strategy can be applied to any other
?rm, you don’t have a very good one.
It is always easy to claim that maximizing shareholder
value is the company’s objective. In some sense all strategies
are designed to do this. However, the question to ask when
creating an actionable strategic statement is, Which objective is most likely to maximize shareholder value over the
next several years? (Growth? Achieving a certain market
share? Becoming the market leader?) The strategic objective
should be speci?c, measurable, and time bound. It should
also be a single goal. It is not suf?cient to say, “We seek to
grow pro?tably.” Which matters more – growth or pro?tability? A salesperson needs to know the answer when she’s
deciding how aggressive to be on price. There could well
be a host of subordinate goals that follow from the strategic objective, and these might serve as metrics on a balanced scorecard that monitors progress for which individuals will be held accountable. Yet the ultimate objective that
will drive the operation of the business over the next several
years should always be clear.
The choice of objective has a profound impact on a ?rm.
When Boeing shifted its primary goal from being the largest
player in the aircraft industry to being the most pro?table,
it had to restructure the entire organization, from sales to
manufacturing. For example, the company dropped its policy of competing with Airbus to the last cent on every deal
and abandoned its commitment to maintain a manufacturing capacity that could deliver more than half a peak year’s
demand for planes.
Another company, after years of seeking to maximize profits at the expense of growth, issued a corporate mandate to
generate at least 10% organic growth per year. The change in
strategy forced the ?rm to switch its focus from shrinking to
serve only its pro?table core customers and competing on
the basis of cost or ef?ciency to differentiating its products,
which led to a host of new product features and services that
appealed to a wider set of customers.
At Edward Jones, discussion among the partners about
the ?rm’s objective ignited a passionate exchange. One
said, “Our ultimate objective has to be maximizing pro?t
per partner.” Another responded, “Not all ?nancial advisers
are partners – so if we maximize revenue per partner, we are
ignoring the other 30,000-plus people who make the business work!” Another added, “Our ultimate customer is the
client. We cannot just worry about partner pro?ts. In fact, we
should start by maximizing value for the customer and let
the pro?ts ?ow to us from there!” And so on. This intense debate not only drove alignment with the objective of healthy
growth in the number of ?nancial advisers but also ensured
that every implication of that choice was fully explored. Setting an ambitious growth target at each point in its 85-year
history, Edward Jones has continually increased its scale
86 Harvard Business Review
1084 Collis.indd 86
|
April 2008
|
and market presence. Striving to achieve such growth has
increased long-term pro?t per adviser and led the ?rm to its
unique con?guration: Its only pro?t center is the individual
?nancial adviser. Other activities, even investment banking,
serve as support functions and are not held accountable for
generating pro?t.
De?ning the Scope
A ?rm’s scope encompasses three dimensions: customer or offering, geographic location, and vertical integration. Clearly
de?ned boundaries in those areas should make it obvious to
managers which activities they should concentrate on and,
more important, which they should not do.
The three dimensions may vary in relevance. For Edward
Jones, the most important is the customer. The ?rm is con?gured to meet the needs of one very speci?c type of client. Unlike just about every other brokerage in the business, Jones
does not de?ne its archetypal customer by net worth or income. Nor does it use demographics, profession, or spending
habits. Rather, the de?nition is psychographic: The company’s customers are long-term investors who have a conservative investment philosophy and are uncomfortable making
serious ?nancial decisions without the support of a trusted
adviser. In the terminology of the business, Jones targets the
“delegator,” not the “validator” or the “do-it-yourselfer.”
The scope of an enterprise does not prescribe exactly what
should be done within the speci?ed bounds. In fact, it encourages experimentation and initiative. But to ensure that the
borders are clear to all employees, the scope should specify
where the ?rm or business will not go. That will prevent managers from spending long hours on projects that get turned
down by higher-ups because they do not ?t the strategy.
For example, clarity about who the customer is and who it
is not has kept Edward Jones from pursuing day traders. Even
at the height of the internet bubble, the company chose not
to introduce online trading (it is still not available to Jones
customers). Unlike the many brokerages that committed
hundreds of millions of dollars and endless executive hours
to debates over whether to introduce online trading (and
if so, how to price and position it in a way that did not cannibalize or con?ict with traditional offerings), Jones wasted
no money or time on that decision because it had set clear
boundaries.
Similarly, Jones is not vertically integrated into proprietary mutual funds, so as not to violate the independence
of its ?nancial advisers and undermine clients’ trust. Nor
will the company offer penny stocks, shares from IPOs, commodities, or options – investment products that it believes
are too risky for the conservative clients it chooses to serve.
And it does not have metropolitan of?ces in business districts, because they would not allow for the convenient, faceto-face interactions in casual settings that the ?rm seeks to
provide. Knowing not to extend its scope in these directions
hbr.org
3/4/08 10:14:40 PM
has allowed the ?rm to focus on doing what it does well and
reap the bene?ts of simplicity, standardization, and deep
experience.
De?ning the Advantage
Given that a sustainable competitive advantage is the essence of strategy, it should be no surprise that advantage
is the most critical aspect of a strategy statement. Clarity
about what makes the ?rm distinctive is what most helps
employees understand how they can contribute to successful
execution of its strategy.
As mentioned above, the complete de?nition of a ?rm’s
competitive advantage consists of two parts. The ?rst is a
statement of the customer value proposition. Any strategy statement that cannot explain why customers should
buy your product or service is doomed to failure. A simple
graphic that maps your value proposition against those of
rivals can be an extremely easy and useful way of identifying
what makes yours distinctive. (See the exhibit “Wal-Mart’s
Value Proposition.”)
The second part of the statement of advantage captures
the unique activities or the complex combination of activities allowing that ?rm alone to deliver the customer value
proposition. This is where the strategy statement draws
from Porter’s de?nition of strategy as making consistent
choices about the con?guration of the ?rm’s activities. It is
also where the activity-system map that Porter describes in
“What Is Strategy?” comes into play.
As the exhibit “Edward Jones’s Activity-System Map” shows,
the brokerage’s value proposition is to provide convenient,
trusted, personal service and advice. What is most distinctive
about Jones is that it has only one ?nancial adviser in an of?ce,
which allows it to have more of?ces (10,000 nationally) than
competitors do. Merrill Lynch has about 15,000 brokers but
only 1,000 of?ces. To make it easy for its targeted customers
to visit at their convenience – and to provide a relaxed, personable, nonthreatening environment – Jone…
Purchase answer to see full
attachment