Product: Business strategy

With a business strategy the organization aims on the results, it wants to achieve in its environment. On the competitive advantage that the business want to achieve in order to realize the wanted competitive position in its environment.

The directing is preceeded by a whole process of strateggy development. An organization sets direction for its business by formulating objectives. Each organization knows a final objective, such as to improve shareholder value or the realization of politics or an ideal. To achieve that a course is charted of supporting objectives, such as:

• How do we sell our products or ideas to the environment (value proposition)?
• In what activities should we excel for that (processes)?
• What people and means do we need for that?

This relation between supporting and final objectives can be represented well with a balanced scorecard strategy map. A proven technique, that is used by most organizations in the world to model their strategies.

The significance of IT for your business has increased to such an extent, that a supporting IT-strategy has become a necessity in order to realize your business strategy. HIT provides solutions and products to underpin your business objectives with technology objectives.

Features

Corporate values, mission and vision.

Strategic position of the business in it's current environment: External threats and oppertunities in collaborations and competition. Internal strengths and weaknesses.

Strategic options and scenario's.

Strategy: competitive advantage, value proposition, strategic objectives, successfactors and measures in balanced scorecard strategy maps and EFQM.

Business Planning of strategic targets and initiatives.

Embedding in Business Information Planning and IT Business Strategy: Translation of business objectives to IT-priorities, make or buy- and centralisation/decentralisation-decisions. Adoption of corporate strategy in IT business strategy, such as required competence in quality and cost, contribution and innovation. See de solution Focussed IT and the products business information plan and IT-business strategy for more information.

Balanced scorecard strategy maps

Strategic choices can be implemented using strategy maps, as introduced by Kaplan and Norton in their best seller 'The Strategy-focused Organization'.

Strategic hypothesis are formulated by the strategic objectives and their cause and effect relations. Measures are defined for each objective to set targets. Strategic initiatives are defined to support the realization of these targets. Strategic initiatives are defined to establish and support the realization of these targets.

A balanced scorecard usually includes four perspectives in which objectives are formulated (see figure). In a strategy map mutual supporting objectives are linked through cause and effect-relations (arrows). For each objective as well more conditional successfactors can be formulated. The learn & growth-perspective includes the aspects work climate ('culture'), competence and technology and thus as well the information technology.

There are three different strategies or value propositions by which organization can approach their environment and in which businesses can distinct themselves from their competitors:

Customer intimacy

Product innovation

Operational excellence

The difference between these strategies lies in the emphasis that is made in the relation with the customers, the own image and the characteristics of the offered products. The figure below shows for each strategy the factors by which distinction is made to achieve competitive advantage and what factors are considered as more general requirements:

So each strategy knows a unique mix of a number of distinguishing features and is therefore called the value proposition of the organization. Financially seen the emphasis is on the following objectives:

Customer intimacy: preservation and extension of the profitability of existing customers (increase value to customer).

Product innovation: acquire new customers (new products, new markets; build the franchise).

Operational excellence: improve cost structure and asset utilization (productivity) to be able to compete on price.

Internally seen the choice between particularly customer intimacy and operational excellence has important consequences:

Customer intimacy is aimed at the gericht op de effectiveness for the customer. Thereby the efficiency of the customer is thought to be more important than the efficiency of the own organization. To help the customer is put first, even if the own resources have to wait for that. For example: 5-star hotel.

Operational excellence is aimed at the own efficiency. The own organization is directed on the optimal utilization of as little resources as possible. Even is the customer has to wait sometimes. The own efficiency is put first to the efficiency of the customer. For example: airline.

With product innovation the relation with the customer and the own efficiency are of less importance, because the customer is prepared to pay a higher price. Emotion plays a large role in the buying behaviour. For example the luxury fashion-industry. Even less affluent customers, such as youngster, rather buy one branded pair of trousers than three functionally equal cheap pairs. Trends follow in rapid succession and the industry makes an effort to offer that what's 'cool'.

They're different paradigms. For the organization as well as for the clarity about what IT-strategy to be handled it's important that a clear choice is made between one of the three paradigms.

Strategy development process

With a balanced scorecard strategy map the pursued strategy is recorded and implemented. A strategy development process preceedes this, for which a fundamental approach is employed:

The foundation of each organization is the socialization of people in the creation and growth of the organization. From that socialization a way of cooperating and attitude has followed, as well refered to as the 'culture'. Kaplan and Norton recognize the influence of this as the work climate of the organization. On the long term, on which we focus with strategy, the culture of an organization determines the right strategy and the success of it. Therefore it's a fundamental part of the business strategy product. More on this under culture.

With the mission the organization settles it's reason of existence. It's a process of identifications that follows after the socialization. Not just the own identity, but as well the external image, follows from this. In the business strategy product the mission therefore is 'rooted' into the culture of the organization.

The vision states how the organization wants to manifest its mission in the future, both internally as externally. The vision is therefore constituted from the mission and the external oppertunities and threats and the internal strengths and weaknesses. With this as well the various strategic options and scenarios are developped to translate the vision to a strategy.

The establishment of the culture, mission and vision are preferably handled iteratively, from coarse to fine. In a first round a global image is outlined with an estimated mission and vision as results. Next this image is refined in a number of following steps until the result adequately fits your reality, so you can make clear choices from the strategic options and scenarios. Only then it's useful to elaborate a strategy with for example strategy maps.

Culture
To address the influence of culture in organization HIT uses the 5D-model of Geert Hofstede *). Each organization is a collaboration of people. The founders, owners, managers, workers, but as well the partners, customers and suppliers, with whom is cooperated. The origin and growth of an organization is a process of socialization, in which shared practices come to being. For example whether people treat each other hierarchic or just cooperative. This is expressed in the symbols (logo, dresscode, etc.), heroes (founders, leaders, stars) and rituals (social essential activities, such as tact, self-control and acting vigorously with the Police) of the organization. The shared practices follow from the values, that are shared by the people; the collective tendency to prefer a particular routine or procedure to others. For a substantial part these values are determined by the society, country and the family of origin. It determines whether people feel comfortable in the organization, but as well what customers and suppliers feel attracted to the organization. This 'soft' side of the organization thus has 'hard' effects. With the model of Hofstede the cultural foundation of the organization is charted in relation to the hard effects.

*) publiced in for instance 'Cultures and Organizations, Software of the Mind', Geert Hofstede, 1991.

Mission
In the mission the 'soft' cultural aspects get 'harder' by the establishment of the identity and image of the organization. For example 'law servants' and 'the strong arm' of the Police. The identity and the image determine the role or function the organization can fill in its enviroment. For example 'the surveillance of the public order and security and the tracing of lawbreaker'. In most organizations the mission doesn't change substantially in time. To have a clear mission though is of real importance, because it states the outlines of the primairy function of the organization. That is the kind of activities (surveillance, tracing) and points of interest (public order and security, lawbreakers). The mission thereby lays the foundation of for example possible products (goods or services/activities) - market (points of interest) - combinations. This way the identity and mission of the organization are established structurally on the basis of the cultural foundation.

Vision, options and scenario's
With the vision the organization states what it wants to achieve in the years to come and why that is important. I.e. what's the ambition for the coming years.

Met de visie geeft de organisatie aan wat het de komende jaren wil bereiken en waarom dat belangrijk is. Oftewel wat de ambitie is voor de komende jaren. As the years go by the vision changes as well. For example anno 2003 the Police has different ambitions than twenty years ago. For the business strategy-product an external and internal analysis can be performed with among others the following methods and techniques. First a rough sketch is given of the position of the organization in relation to its enviroment with among other things:

• Value system of Porter, to outline the various functions of the organization mutually and in relation (power, dependency, added value and direction of development) to the environment.
• 5-forces model of Porter, in which the environment is charted by means of
  • competitive rivalery within the industry
  • threat of new entrants
  • threat of subsitutes
  • bargaining power of buyers
  • bargaining power of suppliers
• DEPEST-analysis of the most important influences from the environment, demographic, ecological, political/legal, economical, socio-cultural and technological.
• Stakeholderanalysis of the stakeholdergroups, their relations, coalitions, concerns and power and the priorities following from that.
• Customeranalysis, to classify and group the customers
• Marketcharacteristics, to outline the volume and dynamics of the environment.

Next an analysis is made in what and how well the organization performs and could be performing in relation to its environment with among other things:

• Competitorsanalysis, to compare the own strengths and weaknesses to those of the competitors
• Business Scope and Domain of Abell, to plot the functions in relation to the own capabilities and points of interest, such as customers.
• PMC-matrix, to measure the productgroups or functions in relation to the consumergroups or points of interest (product-market combinations).
• MaBa-analysism to score PMC's on the attractivity of the business and the market.
• I2-cell-matrix, to establish how well the organization anticipates on the points of interest, in particular customer requirements, in comparison to the rivals.

The internal organization and business is outlined with among other things:

• Value chain of Porter, to elaborate the value system to the internal activities, their relations and added value for the business with distinction between the primary and supporting activities.
• Managementprocesses, general cyclic structure of management-activities in relation to the primary and supporting activities.
• Organization-structure, hierarchy and interfaces within the organization.
• Process-organization, general picture of what activities are performed where in the organization
• Resource-mapping, general picture of the relations between people and means, their functions and positions in the organization and their roles in the processes.

On the basis of this outline the internal strengths and weaknesses are analysed and charted with among other things:

• Marketingmix, for insight in the relation between the four P's (product, price, place and promotion) and the target groups.
• Business attractiveness to employees, such as image, Aantrekkelijkheid onderneming voor werknemers, zoals imago, reward, development and career-oppertunities.
• Core competences, to classify and score the activities and used knowledge and skills.
• Financial analysis (ratio, Dupont, etc.).

The external and internal analysis is arranged and summarize in a SWOT (Strengths-Weaknesses-Oppertunities-Threats)-analysis. Next the strategic options and scenarios are developped and scored with among other things:

• Product-marketevolutionmatrix of Hofer, to evaluate the existing and possible product-marketcombinations in relation to their marketsituation and the competitive position of the organization.
• Classification by the generic strategies of Porter, costleadership, differentiation and focus.
• Various options and checks, such as possible (other or adjusted) positions in the value system of Porter, Business Scope and Domain of Abell, etc..
• Scenarioplanning by means of the uncertainty and influence to the organization of the various environmental and change factors.
• Sensitivity analysis, to determine the possible consequences of threats in relation to the capabilities of the organization to react in the various strategic options.
• MaBa-analysis, to score possible new PMC's on the attractivity of the business and market.
• Risk-reward analysis, in which the strategic options are plotted in relation to the riscs and possible profits or benefits.

For each organization is examined what methods and techniques are relevant to develop the vision and the options and scenarios to translate that vision to the strategy. By the use of standard templates and tools every application can be realized fast though. The development time is determined chiefly by the acquiring, collecting and processing of the required (organization specific) information.

Strategy
To conclude the options and scenarios chosen are elaborated integral or thematic with balanced scorecard strategymaps. If you wish in combination with for example EFQM. The final result is a set of measurable targets, that you can set out in your organization. The Managed IT and Organized IT solutions provide you with the handles for that.

Substantiation and realization of the business strategy

To analyse and underpin the strategic hypotheses and to realize strategies into operation, the business architecture and organization products are best structured using the same perspectives and aspects. This improves the analysis of business cases and design of business blueprints. Better quality in less time at lower costs. Enabling better strategies and more effective realization of strategies. Read more in the special on hooking up strategies.

The strategy map is as well a starting point for the Business Informationplan. The informationplanning has to be set and prioritized on the business objectives and their cause and effect relationships. Ensuring the business strategy is supported on time with the IT services needed.

Interested?

Please feel free to contact HIT for more information and to help you with your specific business-IT issues. An orientating talk is free of obligations and can already clarify a lot of affairs.

The service of HIT is deliverd by means of solutions, products and services. HIT provides initial support too. The free Q&A support has been here since 1996. Take as well a look at the background-page and the specials (in left margin), to read more background information.