Strategic Thinking

Thinking Learning

Planning Doing

Charlottesville Venture Group May 18, 2004

A Framework for Strategic Thinking The Art of Business Business is more an Art than Science. Market competition demonstrates characteristics of both art and science. Owing to the vagaries of human behavior and the countless other intangible factors which contribute to it, there is far more to the conduct of market competition than can be explained by science… We thus conclude that the conduct of it is ultimately an art, an activity of human creativity and intuition powered by the human will. Strategic Thinking

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A Framework for Strategic Thinking The Art of Business

We call the artist an entrepreneur Crafting Strategy is an exercise in Entrepreneurship A Definition of an Entrepreneur “The art of business requires the intuitive ability to grasp the essence of a unique market situation, the creative ability to devise a practical solution, and the strength of purpose and skill to execute the act.” Warfighting.

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A Framework for Strategic Thinking The Art of Business Collection of hard data (the scientific skills)

Collection of soft data (the perceptual skills)

Accumulation of facts and evaluation of probabilities

Use of analytical models to define the opportunities

Accumulation of uncertainties and ambiguities Use of intuition to define the opportunities

Unique interpretation of the strategic opportunity

Making choices about the future on inadequate information

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The Intuitive

The Rational

Seeking new strategic opportunities

A Framework for Strategic Thinking The Art of Business 

Strategic Management is a complex process, much like putting together a jigsaw puzzle    

But with missing pieces And with extra, irrelevant pieces Involves many people The situation is very dynamic

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A Framework for Strategic Thinking The Role of Strategy 

Sustained superior performances should be the goal of every business



How is sustained superior performance attained?

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A Framework for Strategic Thinking The Role of Strategy A combination of effective strategies and excellent execution Strategy Effective Excellent

Ineffective

Long Term Success

Success Unlikely

Maybe successful For a while

Failure

Execution Poor

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A Framework for Strategic Thinking The Role of Strategy 

Behind every successful company, there is a strategy – A Business Concept 



There is an underlying logic, even if clear only in retrospect. Can be developed by formal analysis, trial and error, intuition or pure luck.

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A Framework for Strategic Thinking The Role of Strategy Industry US Airlines Car Rental TV Networks Earth Moving Steel Coffee Photocopier Computer

Dominant Competitor American Hertz NBC Caterpillar US Steel Maxwell House Xerox IBM

Traditional Strategic Competitor Innovator Delta, United, Northwest Southwest Avis, Europcar, National Enterprise CBS, ABC CNN John Deere, Case Komatsu Bethlehem, Inland Nucor Folger’s, Nescafe Starbucks IBM, Kodak Canon DEC, NCR Microsoft Sloan Mgmt Review Spring 1999

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A Framework for Strategic Thinking The Role of Strategy 35.00% 30.00%

ROI %

25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

#5

#4

#3

#2

#1

Market Share Rank Strategic Thinking

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A Framework for Strategic Thinking The Hedgehog Concept From Good to Great, By Jim Collins

What are you deeply passionate about?

What can you be the best in the world at?

BHAG What drives your economic engine?

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A Framework for Strategic Thinking 

Passion The Hedgehog Concept 1. 2. 3.

Pick a good business for your organization Select an appropriate direction (Vision) Develop a Competitive Advantage

Excellence

 1.

Become excellent in the skills that are critical for success

Economic Engine

 1. 2.

Have a valid Economic Model Have an appropriate capital structure Strategic Thinking

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A Framework for Strategic Thinking Pick a Good Business Industry Mean Median

Low

High

Construction

24.9%

23.1%

11.1%

29.0%

Services

24.1%

11.0%

-12.9%

101.5%

Manufacturing

16.0%

15.4%

-8.4%

33.7%

Wholesale Trade

15.2%

14.5%

4.5%

28.1%

Retail Trade

14.0%

14.9%

4.1%

20.9%

Transportation & Utilities

12.7%

10.7%

0.7%

29.0%

Agriculture, Forestry

10.1%

10.6%

6.5%

14.7%

Mining

8.7%

4.1%

-0.3%

16.3%

Finance, Ins. & Real Est.

7.9%

8.8%

-2.2%

20.2%

Total Average

14.3%

-12.9%

101.5%

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2001 BizStats.com

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A Framework for Strategic Thinking Pick a Good 1926-1999 Business 1965-2000

Good to Great Cumulative Stock 73 years 35 years Returns

General Market:

$415

$56

$955 +130%

$93 +66%

Visionary $6,356 Companies: + 1,432%

$471 +741%

Comparison Companies:

Built to Last Good to Great Strategic Thinking

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A Framework for Strategic Thinking Pick a Good Business Be clear about. Have Clarity of Purpose 

  





who the customers are. What their needs are. What value you add in meeting those needs. What skills are required to add that value.

Articulated in the Mission Statement. Strategic Thinking

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A Framework for Strategic Thinking How do you apply these steps to your situation?  Confront the brutal facts of your situation 

Ask yourself the tough questions



Be willing to make major changes

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A Framework for Strategic Thinking How do you apply these steps to “It may be hard for an egg your situation? To turn into a bird: it would be a jolly sight harder for it to learn to fly while remaining an egg. We are like eggs at present. and you cannot go on indefinitely Being just an ordinary decent egg. We must be hatched or go bad.”

Change

--C.S. Lewis Strategic Thinking

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A Framework for Strategic Thinking How do you apply these steps to your situation?

Soaring

In The Box Of Mediocrity Poor trying to become good

Faltering

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A Framework for Strategic Thinking H ow do apply these steps to Finding theyou Starting Point

your situation?  Is the business meeting your revenue goals? 

 

Are revenues growing, flat or declining?

Is the business profitable? Is the business adequately capitalized? What is the story behind the financials Strategic Thinking

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A Framework for Strategic Thinking H ow do apply these steps to Finding theyou Starting Point

your situation?  Is there clarity of purpose?  Is the direction realistic?  Does the business have a competitive advantage?  Does the business have distinctive competency in the skills critical for success? 

The four wheels must all be pumped up Strategic Thinking

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