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Soundview Executive Book SummariesIn the 21st century it is more critical than ever that CEOs provide clear strategic leadership. In the ever-changing business landscape, leaders must master both the art of strategy creation and formulation and the discipline of strategy implementation and review. Mike Freedman, president of the worldwide strategy practice of consulting company Kepner-Tregoe, Inc., presents the Kepner-Tregoe five-phase model for strategy formulation and implementation to show how your company can develop a strategic vision and action plan, communicate the vision, implement it, and monitor it to ensure ongoing success.
Freedman defines "strategy" as the framework of choices that determine the nature and direction of an organization.
A "framework" establishes the boundaries and scope of the business activity.
The "choices" are about the products and services provided, the markets served, and the key capabilities needed.
The "nature" of the organization is what exemplifies it, and describes its character. Like Intel's "chips" and McDonald's "fast food chains," nature gives strategic coherence to decision-making and communications.
"Direction" is the organization's future course determined by choices about future products and services, future customers, and future markets.
Also understand what strategy is not. A decision is not strategic simply because it is long-term, or involves a multi-million dollar expenditure. These decisions can be made within the strategic framework, but only decisions that change the framework are strategic.
There are three critical aspects to a strategy:
- A strategic vision must be based on facts, informed assumptions, and the best-possible what-if thinking.
- The vision must be communicated throughout the organization to clarify and align the role of every strategically critical player and process.
- The vision must be monitored to ensure continued strength, agility and relevance.
Recent strategic thinking has been weakened by dot.com-fueled fear of failure or the desire to appease Wall Street analysts. When weak strategies fail, some assume strategy is irrelevant or unnecessary. In fact, a company without a coherent strategy is particularly vulnerable in these times, as is any company that does have a clear direction but poor implementation.
Strategy requires the art of creativity to fashion a vision and the discipline to direct thought processes and execution. Discipline turns vision into reality. Executives must proactively create a strategy instead of succumbing to a default strategy that was inherited, stumbled into, or borrowed from a competitor. Lack of a clear strategy subjects your organization to competitor, shareholder, and employee threats.
There are five phases of strategy formulation and implementation. These five phases are:
- Strategic Intelligence Gathering and Analysis. You only need enough data to find implications of trends and assumptions for your own business. The team must ask universal questions that explain the past and present and look to the future. Examine broad areas of your external environment that are out of the organization's control: trends in the economy, society, government, politics, and technology that could affect your business. Then identify key players in your current value chain: your major customers, purchasers, and end users. What trends are likely in your supplier base? What is the overall competitive scenario in the structure of the industry's value chain? What are the essential requirements for success for any organization in the industry, and how do you measure up?
- Strategy Formulation. Strategy formulation begins with the company's strategic time frame and basic beliefs. Timeframe and basic beliefs will help determine how to guide the organization, define and strengthen your competitive advantage, recognize which key capabilities you need, allocate scarce resources, determine direction and scope for growth and new business, and plan expectations for return and profit. All goals must have an endpoint to create a sense of urgency for accomplishment. Your timeframe should be determined by your individual organization and the forces that affect it — from macroeconomic trends to emerging regulatory concerns to your value chain's timetable. The strategic time frame is not the same as the time period for long-range planning activities, which are often arbitrary and determined by accounting and shareholder expectation. Basic beliefs are deeply held tenets, creeds, convictions, or persuasions that provide the social cohesion of organizations.
- Strategic Master Project Planning. Reluctance or incompetence in crafting a process for implementing strategic change is the most reliable predictor of failure. Every corner of the organization must change, so strategy implementation should be built into the work of the entire organization. The scheduling, resourcing, and sequencing of project management are familiar to us all, but the Strategic Master Project Plan has the following distinguishing characteristics:
A. All projects in the Plan flow directly from the strategy.
B. Plan includes a considerable number of diverse projects.
C. Plan requires the disciplined prioritization of initiatives.
D. There is enterprise-wide adoption of common project management language and methodology.
E. Plan includes disciplined approach to project management methodology.
F. Success depends on discipline, commitment, and active support of entire top team.
- Strategy Implementation. The fourth strategic phase is implementation. Though all Strategic Master Project Plans are different, they do have some common traits that are so important that they must be regularly reviewed and realigned with the strategic intent when necessary. These include organization structure, strategic information management, complexity, culture and performance.
- Strategy Monitoring, Reviewing and Updating. The final phase of the strategy process asks the top team to keep the strategy "evergreen" by asking what could go differently than anticipated, how will you know if it occurs, and what will you do when it occurs. It is important to recognize that monitoring is just as important as strategy formulation and implementation.
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