Strategy Development:
An Overview & Practical Tips
Soft Expo
December 2004
Ascend World Wide, LLC
OBJECTIVE
To answer common questions about strategy
1. I generally know what it is, but did I miss anything?
2. How does other large and small companies develop strategies?
3. How can I quickly improve my strategy development?
CONTENT
What is a good strategy
Key elements of a complete strategy

Aspiration setting

Assessing market situation & uncertainties

Strategy setting

Testing and planning for execution
Summary and questions to ask
DEFINITION
Strategy: n.
1. A plan of action… intended to accomplish a specific goal.
2. The science and art of military command as applied to the overall
planning and command of combat operations.
ELEMENTS OF A ‘GOOD’ STRATEGY (PLAN)
Aspiration based
Address uncertainty
Have a portfolio
of options
Executable
Clear understanding of companies mission/vision and clear
linkage to them
Clearly understand key areas of uncertainties and their
potential impact
Prepare in advance alternatives to mitigate
uncertainties and considers dynamic environment
It should be clear and easily translated into detailed ‘action’
items
CONTENT
What is a good strategy
Key elements of a complete strategy

Aspiration setting

Assessing market situation & uncertainties

Strategy setting

Testing and planning for execution
Summary and questions to ask
STRATEGY DEVELOPMENT PROCESS OVERVIEW
Basics
Advanced
Set objectives
 Set context fo
r strategy (i.e.
define industry)


Basics
Advanced
Baseline analysis
company, competitors &
consumers
- External forces: demand,
regulation & technology
- Assess uncertainties
- Examine industry
structure, conduct and
basis of competition


Formally define
mission/vision
 Set targets from
mission/vision
Internal economics,
competitive position and
customer base
- Latent demand analysis;
state holder analysis &
technology assessment
- Uncertainty tools,: game
theory business dynamics,
etc.
ASPIRATION SETTING
ASSESSING MARKET
SITUATION &
UNCERTAINTIES
Basics
Advanced
Assess nature of
execution challenge
-Determine
execution
requirements
-Evaluate
organization per
requirements


Detailed analysis
of drivers of
execution
challenges
-Formal use of
execution tools:
KPI’s, strategic
roadmaps
TESTING &
PLANNING FOR
EXECUTION
STRATEGY SETTING
Basics
Advanced
Strategic posture
- Create portfolio of
strategic options
- Assess robustness
of portfolio
qualitatively
- Include uncertainty
in valuation


Use tools to
generate options (i.e.
5c, growth horizon,
strategic gameboard,
etc)
- Qualitative analysis
of robustness
- Option valuation
STRATEGY DEVELOPMENT PROCESS OVERVIEW
ASPIRATION SETTING
ASSESSING MARKET
SITUATION &
UNCERTAINTIES
TESTING &
PLANNING FOR
EXECUTION
STRATEGY SETTING

Know your mission and vision

Particular clarity on vision

Aspiration-led growth planning
WHAT ARE ASPIRATIONS?
Mission
Vision
Aspiration
Statement explaining why
a company exists
Clarification of What the
leaders want the
organization to become
*Force innovative, growthoriented thinking
*Provide context for major
decision-making
*Describes an enduring
reality
Useful for both internal and
external use
“To make people happy”
+
*Guides development of
strategy and organization
*Achievable within a specific
timeframe
*primarily for internal use
“To be the world’s
premier media and
entertainment company”
=
*Establish boundary conditions
for strategy decisions
*Help drive high-performance
VISION HAS FOUR COMPONENTS
“Become a $125 billion company by year 2000”
Fundamental aim
“Crush Adidas”
“Become the company most known for changing
the world-wide poor quality image of Japanese
products”
Vision
Core Strengths
Focus
Envisioned Future
“To deliver quality second to none in
premium automotive market worldwide”
“To be best entertainment company in Australia
and the Pacific Basin”
“Become the dominant player in commercial
aircraft and bring the world into the jet age”
EXAMPLE OF ASPIRATION – LED GROWTH: DISNEY
Aspiration: “To be the world’s premiere media & entertainment company
Widened the target
consumer beyond
children & families
Widened the range of
media to benefit from
cross-marketing
1980
Film and theme
parks company,
licensing a well
loved brand
Better exploited the
existing products and
brands
Increased prices at
theme park
 Released Disney
classics on video

Bought Touchstone
& Miramax
 Started Cruise line
 Bought sports team
(Anaheim, Ducks,
Hockey)

Example actions
Bought ABC
(broadcasting co.)
 Opened Disney retail
stores

Example actions
Example actions
1995
Diversified
entertainment
power house
STRATEGY DEVELOPMENT PROCESS OVERVIEW
ASPIRATION SETTING
ASSESSING MARKET
SITUATION &
UNCERTAINTIES
TESTING &
PLANNING FOR
EXECUTION
STRATEGY SETTING

Know what you are selling
(features vs. benefits)

Understand market differences

Know the key buying factors

Recognize uncertainty
ASSESSING MARKET SITUATION AND UNCERTAINTIES
Develop perspectives on the future
Set the baseline
Understand
external
forces
 Company
 Competitor
 Customers
 Demand
 Regulation
 Technology
Assess
uncertainty
 Levels of
uncertainty
 Uncertainty tools
(mitigation Vs.
management)
Examine
industry
structure/
conduct
 Traditional arm’s
length
 Privileged
relationships
 Co-dependant
systems
Define basis
of
competitive
advantage
 Structural
Advantages
 Frontline execution
 Insight/Foresight
FEATURES VS. BENEFITS
Features
VS
Benefits
Characteristics of your product
• What it does
• How it looks
• Specifications
Resulting impact from product/services
• Unmet or perceived needs resolved
• Improvements from prior way of doing
things
• Resulting value
MSF is a video compression solution
that is:
• 100% software
• Allows up to 20 frames per sec.
• Performs under ARM7 & 2.5G
• MSF enables video clip downloads at
reasonable quality for 2.5G & Arm7
opening new markets
• In ARM9 phones, allows video streaming
which gives handset owners a whole new
way to enjoy their phones
UNDERSTANDING MARKET DIFFERENCES
SE Asia
VS
USA
• Concentrated to 2-3 operators per
market
• Slow migration to 2.5G—unable to
recoup investment yet
• Handset manufacturers are quite
independent from operators
• Handsets are ‘2nd Screen’ (source of
personal identity)
• Wallpapers, animation popular
• Pay for downloads, no access fee
• Strong focus on ‘standards’ due to
interoperability issues
• Market neither fragmented nor
concentrated
• Rapid migration to 3G
• Operators strongly influence H/S mfg.
• Handsets are ‘3rd screen’ (high income,
lots of gadgets)
• Wallpaper, animation not popular
• Pay for access as well as downloads
• Basic graphical solutions compelling
• Operators open to proprietary
solution if compelling in 2.5G
• Attention to handset mfg. Important
• Local partner sufficient
• Less likely to adopt new platform
• Graphical solutions less compelling
• Focus on application providing
• Branded content or focus on niche
• Local presence more important
IT’S ALL ABOUT KBF (KEY BUYING FACTOR)
KBF (operator example)
•
Description: The key factors (benefits)
that drives customer’s purchase
decision
1.
Must fit within a ‘standard’
environment
Has to have value proposition for 3G
Service compelling to customers &
likely to generate downloads
Contents of high quality (brand is best)
Reliable track record in US
Capable of integration with existing
service platform (i.e. billing)
Customer service mentality (expected
to quickly address issues)
2.
3.
4.
5.
6.
7.
Benefits
+
Marketing Strategy
=
• Customer focus
• Product
positioning
• Promotion types
• Pricing, terms
• etc.
UNDERSTANDING UNCERTAINTY LEVEL
Levels of uncertainty
?
A Clean Future
Example
Entry of Microsoft into
the open O/S market
with windows mobile
Discrete Outcomes
Example
Battle between
operators and handset
markets over the UI
Range of Future
Example
Outcome of 3G rollout
in US
Highly Uncertain
Example
Early investment
Into post-communist
Russia
UNCERTAINTY TOOLS
Levels of Uncertainty
?
Tools
Traditional Toolkit
 Porter’s 5 Forces
 Cost Curves
 Demand Curves

Scenario planning
with discrete
outcome
 Decision/Event
trees
 Game theory
 Stakeholder
Analysis

Scenario planning
with plausible
outcome
 Game theory
 Business
dynamics
 Latent demand
analysis
 Technology
forecasting

“Work backwards”
to what you ave to
believe to support
alternative
strategies
 Use
analysis/reference
cases to potentially
bound parameters

STRATEGY DEVELOPMENT PROCESS OVERVIEW
ASPIRATION SETTING
ASSESSING MARKET
SITUATION &
UNCERTAINTIES
TESTING &
PLANNING FOR
EXECUTION
STRATEGY SETTING

Determine strategic posture

Strategy as a portfolio

Ensure robustness
FOUR DIFFERENT STRATEGIC POSTURES
A.Shape the future
B. Adapt the fastest
Strategic posture
“A choice a
company makes
about how the
company
will interact
with its industry
environment”
C. Reserve the
right to play
D. Exit
COMPAQ’S ADAPTER STRATEGY EXAMPLE
Microsoft / Intel Web
Compaq
Build alliances with wet shapes
- Microsoft & Intel
Compaq’s
adapting
strategy
moves
Achieving easy access to new technologies
-New software
- New chip technology
Exploited near-term product opportunities
- Low cost desktop
- High performance PCs
Stressing product differentiation in marketing
-Products for local markets
- Tools for Japanese character
Investment
focus on
near-term
pay back
STRATEGY AS A PORTFOLIO
What it is
• Set of strategic options within a
business unit on business area
• Thoughtful collection of choices
based on assessment of industry
and company situation (including
uncertainties)
• Portfolio of potential action with
strong management commitment
to implement based upon evidence.
What it is NOT
• Set of strategic options across
business units or areas
• Collection of options developed
at a general level without specific
consideration of industry or
company situation
• Range of potential choices with
weak management commitment
PROCESS FOR BUILDING A ROBUST STRATEGY
Generate strategic
Options
Assemble a robust
Portfolio
Value the
Portfolio
• Categorize options
• Identify synergies
• Select appropriate
According to level of
and conflicts
Risks and investment
between categories
Valuation approach
Requirements
• Test for robustness
-‘Big bets’
• Check consistency
- Safety nets
of portfolio with
- No regret
overall post
- Real options
A
B
C
1
++
O
-
2
+
+
--
3
-
O
+
4
+
+
+
5
+
++
+
• Conduct financial
Valuation
SEMI-QUANTITATIVE TEST FOR ROBUSTNESS
Mobile technology company examples
Strategic options
Scenario A:
H/S makers and
Operators focus
only on standards
Scenario B :
Major market
operator partner
accepts tech.
Scenario C :
3G rollout
delayed in key
regional market
• M&A with a developer
of standard format
+
O
-
• Develop new product line to
appeal to handset makers
+
+
--
• Partnership with
major chipset makers
-
O
+
• Develop standard platform
application
+
+
+
• Acquire partnership with
content holders and invest
in content development
(no regret)
+
++
+
Net
TESTING FOR ROBUSTNESS
Does it …
• Recognize conflicts and achieve synergies
• Effectively manage uncertainties
• Leverage existing capabilities and build new ones
• Balance growth across time horizon (S,M,L)
• Match with the strategic posture
STRATEGY DEVELOPMENT PROCESS OVERVIEW
ASPIRATION SETTING
ASSESSING MARKET
SITUATION &
UNCERTAINTIES
TESTING
&
PLANNING FOR
EXECUTION
STRATEGY SETTING

Determine strategic posture

Strategy as a portfolio

Ensure robustness
ASSESS EXECUTION REQUIREMENTS AND IDENTIFY GAPS
Dimensions of
execution
Required
Current
Gaps
Top management
leadership
Alignment and commitment among management,
and they focus their energy and efforts.
Front line
execution
Ensuring proper skills, structure, and system,
for exceptional front line execution or decision-making
Implementation
planning
Setting clear overall and interim goals, establishing
Clear roles and responsibilities and resource planning
Performance
management
Clear communications, monitoring evaluation and
reward/punishment
ASSESS EXECUTION REQUIREMENTS AND IDENTIFY GAPS
Dimensions of
execution
Required
Current
Gaps
Top management
leadership
Alignment and commitment among management,
and they focus their energy and efforts.
Front line
execution
Ensuring proper skills, structure, and system,
for exceptional front line execution or decision-making
Implementation
planning
Setting clear overall and interim goals, establishing
Clear roles and responsibilities and resource planning
Performance
management
Clear communications, monitoring evaluation and
reward/punishment
STRONG PREDICTOR OF SUCCESS
ALIGNMENT ALONG THE FOUR DIMENSIONS IS A STRONG PREDICTOR OF SUCCESS
High performances
Weak performers
Aligned on all 4 dimensions
83
Aligned on only 3 dimensions
17
Aligned on only 2 dimensions
0
Aligned on only 1 dimensions
0
Aligned on none of the
dimensions
0
0
0
6
50
44
30.0
37.4
3.0
16.2
2.5
Total
shareholder
returns
Average
ROE
Earnings
growth
Total
shareholder
returns
Average
ROE
Earnings
growth
CONTENT
What is a good strategy
Key elements of a complete strategy

Aspiration setting

Assessing market situation & uncertainties

Strategy setting

Testing and planning for execution
Summary and questions to ask
STRATEGIC DEVELOPMENT FLEXIBILITY
 In today's fast
evolving market
situation, strategy
development must be
flexibility
 Depending on
urgency, scope and
company culture,
strategy development
can be
-traditional/sequential
-rapid/interactive
Traditional/sequential
Rapid/interactive
 3 + months
 3-4 weeks (or less)
 Comprehensive/extensive
 Iterative (Think – Do – Check
–Revise)
 Broader in scope
 Sequential and relatively
exhaustive
Appropriate for : long-term strategic
planning on for setting up new
division / business line
 Focused issues, threats or
opportunities
Appropriate for: urgent competitive
threat situation or improvement of
existing business lines
THREE KEY INGREDIENTS TO A SUCCESSFUL TEAM
Successful teams
• Take full ownership of the market/customer
• Provide ideas & solutions, not information & issues
• Driven for tangible results
Right people
• Familiarity with target
customer or market
• Capable of developing close
relationships
• Creative and a problem
solver
Clear goals
• CEO should set reasonable
short-term goals based on
status
• Tangible, measurable and
controllable
Incentives
• Feedback and evaluation to
team members
• Performance based
rewards
Typical issues witnessed:
• Language OK, but not too
shy to adopt to new culture
which holds back
relationship building
• Lack of creative problem
solving mindset (thinkers)
• Objectives too high-level
for employee capability
• Lack of structure to
problem solving
• No special incentives or
rewards tied to outstanding
performance
QUESTIONS TO SERVE AS A “CHECK LIST”
1. Aspiration setting

Why does the company exist?
What does the leaders want the company
to become?
•Fundamental aim
•Core strengths
•Focus
•Envisioned future
2. Assessing market situation and
uncertainties
Is there a clear baseline of the market
situation?
 (company, customer & competitors)


What benefits are your products
offering?

Are market differences fully analyzed
and understood?

Who are the key decision-maker and
what are their KBT?

Is the vision clear and reasonable, and
can serve as basic for planning?

Is there a clear perspective on the future
with key uncertainties identified?

QUESTIONS TO SERVE AS A “CHECK LIST” (cont.)
3. Strategy setting
What is your strategic posture? (How will
you compete?)

Do you have a portfolio of options based
on uncertainties?

Is the strategy portfolio robust?
-Recognize conflicts/synergies
-Manage uncertainties
-Balanced over time
-Leverage capabilities
-Match strategic posture
4. Testing & panning for execution
What are the requirements along the
“Four dimensions”?
-Top management leadership
-Front line execution
-Implementation planning
-Performance management


What is your current status and gaps
requiring action?

Do you have the right team in place to
plan and lead strategy?
