Charlottesville Venture Group May 18, 2004 Planning Doing Learning Thinking

Charlottesville

Venture Group

May 18, 2004

Planning

Doing

Learning

Thinking

Strategic Thinking 2

A Framework for Strategic Thinking The Art of Business

Business is more an Art than Science.

Market competition demonstrates characteristics of both art and science. Owing to the vagaries of human behavior and the countless other intangible factors which contribute to it, there is far more to the conduct of market competition than can be explained by science…We thus conclude that the conduct of it is ultimately an art, an activity of human creativity and intuition powered by the human will.



We call the artist an entrepreneur

Crafting Strategy is an exercise in Entrepreneurship

A Definition of an Entrepreneur

“The art of business requires the intuitive ability to grasp the

essence of a unique market situation, the creative ability

to devise a practical solution, and the strength of purpose

and skill to execute the act.”Warfighting.



Seeking new strategic opportunitiesSeeking new strategic opportunities

Collection of hard data(the scientific skills)

Collection of soft data(the perceptual skills)

Accumulation of facts andevaluation of probabilities

Accumulation of uncertaintiesand ambiguities

Use of analytical models todefine the opportunities

Use of intuition to definethe opportunities

Unique interpretationof the strategic opportunity

Th

e R

ati

on

al

Th

e In

tuitiv

e

Making choices about the futureon inadequate information


A Framework for Strategic Thinking The Art of Business Strategic Management is a complex

process, much like putting together a jigsaw puzzle

But with missing pieces And with extra, irrelevant pieces Involves many people The situation is very dynamic


A Framework for Strategic ThinkingThe Role of Strategy

Sustained superior performances should be the goal of every business

How is sustained superior performance attained?


StrategyEffective

Ineffective

Execution

Excellent

Poor

Long Term Success

Maybe successful For a while

SuccessUnlikely

Failure

A combination of effective strategies and excellent execution



Behind every successful company, there is a strategy – A Business Concept There is an underlying logic, even if clear only in

retrospect. Can be developed by formal analysis, trial and

error, intuition or pure luck.




Industry Dominant Traditional Strategic Competitor Competitor InnovatorUS Airlines American Delta, United, Northwest SouthwestCar Rental Hertz Avis, Europcar, National EnterpriseTV Networks NBC CBS, ABC CNNEarth Moving Caterpillar John Deere, Case KomatsuSteel US Steel Bethlehem, Inland NucorCoffee Maxwell House Folger’s, Nescafe StarbucksPhotocopier Xerox IBM, Kodak CanonComputer IBM DEC, NCR Microsoft

Sloan Mgmt Review Spring 1999



0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

#5 #4 #3 #2 #1

ROI %

Market Share Rank


A Framework for Strategic Thinking

What are you deeplypassionate about?

What can yoube the best in the world at?

What drives your economicengine?

From Good to Great,By Jim Collins

BHAG

The Hedgehog Concept


A Framework for Strategic Thinking The Hedgehog Concept Passion

1. Pick a good business for your organization2. Select an appropriate direction (Vision)3. Develop a Competitive Advantage

Excellence1. Become excellent in the skills that are critical for

success Economic Engine

1. Have a valid Economic Model2. Have an appropriate capital structure


A Framework for Strategic ThinkingPick a Good Business

Industry Mean Median Low High

Construction 24.9% 23.1% 11.1% 29.0%

Services 24.1% 11.0% -12.9% 101.5%

Manufacturing 16.0% 15.4% -8.4% 33.7%

Wholesale Trade 15.2% 14.5% 4.5% 28.1%

Retail Trade 14.0% 14.9% 4.1% 20.9%

Transportation & Utilities 12.7% 10.7% 0.7% 29.0%

Agriculture, Forestry 10.1% 10.6% 6.5% 14.7%

Mining 8.7% 4.1% -0.3% 16.3%

Finance, Ins. & Real Est. 7.9% 8.8% -2.2% 20.2%

Total Average 14.3% -12.9% 101.5%

2001 BizStats.com


A Framework for Strategic ThinkingPick a Good BusinessGood to Great Cumulative Stock Returns

1926-1999 1965-2000

73 years 35 years

General Market: $415 $56

Comparison $955 $93

Companies: +130% +66%

Visionary $6,356 $471

Companies: + 1,432% +741% Built to Last Good to Great


A Framework for Strategic ThinkingPick a Good BusinessHave Clarity of Purpose Be clear about.

who the customers are. What their needs are. What value you add in meeting those

needs. What skills are required to add that value.

Articulated in the Mission Statement.


A Framework for Strategic ThinkingHow do you apply these steps to your situation? Confront the brutal facts of your situation

Ask yourself the tough questions

Be willing to make major changes


A Framework for Strategic ThinkingHow do you apply these steps to your situation?Change

“It may be hard for an eggTo turn into a bird:

it would be a jolly sight harderfor it to learn to fly

while remaining an egg.We are like eggs at present.

and you cannot go on indefinitelyBeing just an ordinary decent egg.We must be hatched or go bad.”

--C.S. Lewis


A Framework for Strategic ThinkingHow do you apply these steps to your situation?

In TheBoxOf

Mediocrity

Poor trying to become

good

Soaring

Faltering


A Framework for Strategic ThinkingHow do you apply these steps to your situation?Finding the Starting Point Is the business meeting your revenue goals?

Are revenues growing, flat or declining? Is the business profitable? Is the business adequately capitalized?

What is the story

behind the financials


A Framework for Strategic ThinkingHow do you apply these steps to your situation?Finding the Starting Point Is there clarity of purpose? Is the direction realistic? Does the business have a competitive

advantage? Does the business have distinctive

competency in the skills critical for success? The four wheels must all be pumped up

Documents

Charlottesville Venture Group May 18, 2004 Planning Doing Learning Thinking