2.Strategic Intent

Strategic Intent By Gary Hamel and C.K. Prahlad

Within a span of 10-20 years

Strategic Intent

Prahalad and Hamel talk about corporate leaders whose ambitions are “all out of proportion to their resources and capabilities.”

E.g. Komatsu set out to “Encircle Caterpillar”, Canon sought to “Beat Xerox”

Strategic Intent is more than blind ambition

It includes a management process that energizes and focuses on organization’s employees through clear communication

Characteristics of Strategic Intent It captures the essence of winning

e.g.- Coca- Cola strategic intent has been to put a Coke within “arm’s reach” of every consumer in the world

It is stable over time. It provides consistency to short –term action, while leaving room for reinterpretation as new opportunities emerge.

e.g. Komatsu included a succession of medium term programs to beat Caterpillar

Improving QualityCultivating export

marketDriving down costs

New product development

Which is more attractive? Let blue collar employees be given the

responsibility to create more shareholder wealth

OR Give them the challenge to “Beat Benz”

???

It sets a target that deserves personal effort and commitment.

Strategic Planning and Strategic Intent The planning process acts as “feasibility

sieve” The goal of Strategic intent is to fold the

future back into the present Its is not about “How will next year be

different from this year?” But “What must we do differently next year ?”

While strategic intent is clear about ends, it is flexible as to means-it leaves room for improvisation

Building Challenge

Strategic intent implies a sizeable stretch for an organization.

Current capabilities and resources will not suffice

This forces the organization to be more inventive, to make most of limited resources.

Contd.

Traditional view of strategy focuses on the degree of fit between existing resources and current opportunities, strategic intent creates an extreme misfit between resources and ambitions.

Corporate Challenges

Like strategic intent, challenges stretch the organization.

E.g. canon set its engineers a target price of $1000 for a home copier

Corporate challenges include analyzing competitor and understanding the foreseeable pattern of industry evolution.

Effectiveness of Corporate challenges Create a sense of urgency(E.g. Komatsu budgeted on

the basis of worst case exchange rate that overvalued yen)

Develop a competitor focus at every level through widespread use of competitive intelligence.(E.g. Ford showed production line workers videotapes of operations at Mazda’s most efficient plant)

Provide employees with the skills

Give the organization time to digest one challenge before launching another.

Establish clear milestones and review mechanisms

Building reciprocal responsibility

Four Approaches to competitive innovation Building layers of advantage:

-wider a company’s portfolio of advantages, lesser the risk.

Searching for loose bricks: it means looking for the competitor’s blind spot.

Changing the terms of engagement Competing through collaboration:

through licensing, outsourcing, joint ventures.

Remaking Strategy

Western managers centers on the problem of maintaining strategic fit

The other centers on the problem of leveraging resources.

Similarity

Differences

Both models recognize the problem of competing with limited resources

Trimming ambitions to match available resources

Leverage resources to reach unattainable goals

The relative competitive advantage determines relative profitability

Search advantages that are inherently sustainable

Accelerate organisational learning to outpace competitors to build new advantages

Difficulties of competing against larger competitors

Search for niches/dissuades the company from challenging an entrenched competitor

Produces a quest for new rules to devalue the incumbent’s advantages

Balance in the scope of an organisation reduces risk

Reduce financial risk by building a balanced portfolio of cash-generating and cash-consuming business

Reduce competitive risk by ensuring a well balanced and broad portfolio of advantages

Strategy is not limited to the eight rules of excellence, seven S’s , five competitive forces , four life-cycle stages and innumerable two-by two matrix.

Concepts like the product life cycle, experience curve, product portfolio and generic strategies have toxic side effects:

-they reduce the no. of strategic options management is willing to consider

-they create a preference for selling business rather than defending them

They yield predictable strategies that rivals easily decode.

The strategist’s goal is not to find a niche within existing industry space but to create new space that is uniquely suited to company’s own strength.

Japanese companies have won not because they have smarter managers but because they have developed ways to harness the wisdom of anthill.

The challenge of top management Develop faith in organization's ability to

deliver on tough goals Motivate every employee Focus and internalize new capabilities

Thank You