Optimizing Competitive Advantage Through Strategic Change

Diagnosis, Formulation, and Implementation of Strategic Change The objectives of this final stage of our strategic management ‘project’ are: Identify the primary underlying cause of the most important performance issue that needs to be corrected (i.e. root cause analysis and prioritization) Identify the most appropriate change to make to remedy that causal factor and improve performance (i.e. selection and specification of a solution) Step 1 – clarify the OUTCOME target Our aim is always to achieve, sustain, and improve competitive advantage. Recall that is defined as long-term, superior performance. What this basically means for this course/phase is that we are seeking to identify the optimum way we can improve long-term performance in a way that is most sustainable. That means a strategic change, not just a quick tactical move like cutting costs or have a sales promotion. So, narrow the scope of what ‘improve performance’ as a target means for the company you are analyzing. That is, use your performance assessment work to conclude if the most important improvement to target is improved value creation (growth rate) or value capture (profitability). Which dimension of performance most needs attention? Keep it simple here…just pick one of these two targets. Do not try to solve anything yet! Write a short statement that states your conclusion. Example statements for Step 1: XYZ’s revenue growth rate is declining and is below industry average. To improve strategic performance, their ability to create value must be improved. XYZ’s growth is acceptable but their profitability is below industry average. Specifically, their operating efficiency is inferior as indicated by their below average Operating Margin over the last three years. Their ability to capture value, specifically in operating profitability, is the primary area to focus on toward improving long-term performance. Step 2 – Summarize the variables in the strategic alignment model Recall the fundamental model of strategic alignment in which performance is largely a function of the quality of overall alignment. PERFORMANCEPERFORMANCE PERFORMANCE PERFORMANCE STRATEGYSTRATEGYRES & CAPsRES & CAPsEXTERNALEXTERNAL STRATEGY STRATEGY RES & CAPs RES & CAPs EXTERNAL EXTERNAL As you have already learned, a thorough analysis of each of the three aspects of alignment results in a set of primary conclusions. You’ve learned to prioritize the firm’s strengths/most valuable resources and capabilities, to specify the strategic choices that describe their competitive strategy, and to identify the key success factors and most significant change issues that shape the firm’s competitive environment. Now, get all those conclusions organized for analyzing cause-effect issues. Create an ‘all-in-one-place’ summary of your prior analysis steps. Summarize your conclusions from the previous templates about the firm’s internal strengths, their key strategic choices, and the key success factors in their external environment. A hypothetical example: Most valuable Res/Caps Competitive Strategy Industry Key Success Factors CEO Leadership Product Focus = Differentiate from substitutes Top engineers in industry Target Customers = Create switching costs Well respected brands Geographic Scope = Deliver exceptional service Well trained service staff Value Proposition = Multi-channel retailing Proprietary supply chain IT Business Model = Must be able to adjust capacity ….. (fill in to define each element for the firm) Must become experts with social media customer contact (There is no defined number of items to put in each column, just summarize your