Perspectives - Selling Shoes story

Long time ago, i attended a creative training. The trainer was not impressive - the session was boring in fact. However, one takeaway for me is this story he shared with us which i remembered to this day. Here's the story.. but i modified it a bit..

One day, John the GM of a shoe company assembled David and Tom to his office. And he told them that he intend to find new market for his shoes. Separately, he sent them overseas toa developing country. David who flow off first reached the place and was dismay to find that the folks there were so backward that they dont wear any shoes. Tom arrived a day later and found the same conclusion. However, he was happy with his findings.

A week later, back in John's office, the GM asked them for their assessment. David, in his rather depressed tone, said that there is no market as no one there wore any shoes! GM then turned to Tom who was grinning all this while. When it's Tom's turn, he said he saw great potential there as no one wore any shoes! So there's a huge market to be filled. A very big market gap waiting for them to develop! ;-)

Lessons learned: (i) see things thru different lens, (ii) employ people who view things differently from you, (iii) always challenge your beliefs & creativity

Strategic Management

A. External Environment Scanning

• General Environment - PEST Analysis
• Industrial Environment - 5 Forces Analysis

B. Internal Environment Scanning

• Strengths - Identify Resources, Capabilities & Core Competencies
• Value Creation - Value Chain Analysis

C. Overall

• SWOT Analysis

D. Strategy Formulation/Development

• Define Strategic Options/Choices followed by Evaluation. Finally, put the selected options into Strategic Themes/Thrusts.

E. Strategy Execution/Implementation

• Develop Strategic Map with objectives, indicators & targets set.
• Use Balanced Scorecard.
  

2 approaches to strategic management

Two common approaches to strategic management.

1. Opportunity based. Study the business environment. Identify gaps or opportunities. Acquire resources and capabilities needed to accomplish the tasks. Execute.

2. Capability based. Study the internal capabilities. Identify internal strength. Find opportunities in the external business environment that requires the strengths. Execute.

In both the above approaches, the company must think about sustainability and defensive strategies in the face of existing and new competitors.

Strategic Options Evaluation

As a continuation of my earlier blog on Making Strategy, i missed out the importance of evaluating the strategic options. This is an important step in deciding which strategic options to use.

Strategic options may use a scoring system (range from -3 to +3) to measure against the issues/opportunities it would resolve or take advantage of. This method is based on relativity in scoring. The results are deliberated and top scoring options will then move on to the next stage of evaluation.

The second round entails measures (i) risk & returns, and (ii) manpower, financing & time. Here, scoring will use High, Medium & Low as accuracy is not essential. No option will be eliminated. Here, it's trying to find synergy and causality among the options.

Finally, the options are packaged into strategic thrusts or themes for manageability & ease of communication.. giving each thrust/theme an interesting or inspiring title.

From here on, use balanced scorecard to implement the strategy. ;-)

Making Strategy

i think i strike gold. after years of studying, getting my MBA, reading tons on mgmt, i finally completed my understanding on making strategy.. of course, practice makes perfect.

in a nutshell, there're basically two big steps - strategy formulation and strategy implementation. Strategy implementation usually uses balanced scorecard to assist. Strategy formulation has tons of tools to assist as well.. such as PEST analysis, SWOT analysis, scenarios planning, issue-based to strategy making. But these tools only provide insights to strategy making. 

The ultimate strategy formulation still depends on the leaders and senior mgmt to figure it out. It's here, where i always felt that there is a missing step between formulation & implementation. It's the strategy definition, or the art of articulating that strategy so that it is easily understood by everyone in the organization that matter most.

What's the use of having an excellent strategy where nobody understands, and therefore, no one knows how to implement them!

And i found the answer via Harvard Business Review April 2008 publication on Can You Say What Your Strategy Is?

In the article, in a nutshell:

• MISSION: Why we exist
  
• VALUES: What we believe in and how we will behave
  
• VISION: What we want to be
  
• Strategy: What our competitive game plan will be.
  
• Basic elements of strategy statement are OBJECTIVE=ends, SCOPE=domain, ADVANTAGE=means
  
• BALANCED SCORECARD: How we will monitor and implement that plan

Issue-based approach to strategy making

Issue-based approach to strategy making is less likely to produce innovative products and services. This is because it's based on existing competencies. It is suitable for solving existing issues, however. And usually in the space of operational excellence.

One possible way to break thru is to include competencies gap analysis & capabilities building into the process.. but still, it may not be good enough.

Another is to adapt the issue-based approach to opportunity-based approach. The technique is the same. In fact the competencies diagram can be shared or reused for both approaches.

An alternative and simple way to break thru innovation is to begin with a question - "What do our customers want or need?" Be truly customer-oriented. And not skills-oriented.