Strategic Diagnosis: Background

• Evolution of change Agenda makes it dangerous to base future plans on successful responses to historical challenges

• There is no single prescription for future success which will apply to all firms

• Management confronts two Key Problems– Each Organization

needs to diagnose its unique future challenges, threat and opportunities

– Each firm must design and implement its unique response to these challenges

Strategic Diagnosis: Definition

• A systematic approach to determining the changes that have to be made to a firm’s strategy and its internal capability in order to assure the firm’s success in its future environment

• Environmental Turbulence is a combined measure of the changeability and predictability of the firm’s environment– Complexity– Novelty– Rate of Change– Visibility

Strategic Diagnosis: Example

Environmental Turbulence

StrategicAggressiveness

Responsiveness of Capability

RepetitiveSlow

IncrementalFast

Incremental Predictable Unpredictable

Repetitive Expanding Changing Discontinuous Surprising

Custodial Adapts toChange

Seeks FamiliarChange

Strategic Flexible

Stable Reactive Anticipatory Entrepreneurial Creative

Strategic SegmentationStrategic Information ModelCompetitive Positioning

Ansoff and McDonnell, 1990Created by Robert Moussetis, 2000

• How can we systematically “divide” our environment into “workable areas”?

• How do we make sure that the information we received from the environment involves legitimate (perceived) information?

• How do we systematically design a competitive organization?

• How do we interpret qualitative data?• Perception vs. Reality for Organizational

Leaders

SBA:A Strategic Business Area which is a distinct segment of the environment in which a firm does (or may

want to do) business

• In which SBAs will the firm do business in the future?

• What competitive position will the firm occupy in each SBA

• What competitive strategy will the firm pursue to gain this position

SBA Segmentation• Dimensions: Need, Customer

type, Technology and Geography

• Characteristics: Growth, Performance (Profitability), Turbulence and Success factors

• Strategic Resource Area: In the resource based postindustrial universe, managers have to balance what they want to do against what they can do

• Strategic Influence Groups: Firms increasingly legal and societal pressures - Stakeholder ManagementFirm Environment

SBA

SBUSBU

SBASBA1

SBA2

Ansoff and McDonnell, 1990Created by Robert Moussetis, 2000

Critical mass

Optimal Mass

-

+ROI

INVESTMENT IN AN SBA

CRITICAL MASSCM: INVESTMENT BELOW WHICH A FIRM

BECOMES UNPROFITABLE IN AN STRATEGIC BUSINESS AREA

Ansoff and McDonnell, 1990Created by Robert Moussetis, 2000

STRATEGIC SEGMENTATION

STRATEGIC SUCCESSHYPOTHESIS

FIRM’S OBJECTIVESSBA

PROSPECTS

STRATEGICDIAGNOSIS

SBAATTRACTIVENESS

TARGET COMPATITIVEPOSITIONING

PORTFOLIOPOSTURE

ENVIRONMENT

COMPETITIVE POSTURE IN SBA

ENTRPENEURIAL PLANNING

SBA

SBA

SBA

Degree of Preparedness

Ansoff and McDonnell, 1990Created by Robert Moussetis, 2000

Strategic Information Model• Power Filter: It is nature for

managers and departments, whose power is threatened by discontinuities, to minimize or even refuse to recognize the impact of discontinuity.

• Mentality Filter: Rejection of novel information and predisposition on success models

• Strategic and Creative Mentalities focus on– Future, Novel and

Unfamiliar change– Entrepreneurial drive and

tolerance of failure

• Management Information

Environment

DataData

PerceptionPerceptionInformation

Actions

MentalityFilter

SurveillanceFilter

PowerFilter

Ansoff and McDonnell, 1990Created by Robert Moussetis, 2000

Competitive Positioning• Estimating SBA

attractiveness– Global forecast– Future Turbulence– Historical Trends

extrapolated into the future

– Changes in the historical demand

– Overall shifts in growth prospects

– Numerical estimates of Future growth

– Future shifts in the profitability

• Boston Consulting Group matrix

Low

High

High

Low

?

CashCows Dogs

Volume Growth

Market Share as a functionof leading competitor

SBA Attractiveness = G + P + O - TAnsoff and McDonnell, 1990

Created by Robert Moussetis, 2000

Example: North Central College

Ansoff and McDonnell, 1990Created by Robert Moussetis, 2000

• MBA• Educational Leadership• Biology• History

• Administrative Services– Admissions -Registrars -Financial Aid

• Academic Services– Advising - Technology Needs

• Facilities – Buildings and Services

– Recreational Activities

– Classrooms and Teaching Domains

Identify Future TurbulenceEstablish Strategic Aggressiveness

Establish Responsiveness of Capability

• STRATEGY (S)

• CAPABILITY (C)

• STRATEGIC INVESTMENT (I)

• GROWTH THRUST• (Domain) MARKET POSITION• (Domain )MARKET DIFFERENTIATION• SERVICE-PRODUCT DIFFERENTITION• CRITICAL MASS• VERITCAL INTEGRATION

• MANAGEMENT• FINANCE• MARKETING• R&D• PRODUCTION

• IN STRATEGY• IN CAPABILITY• IN FACILITIES

COMPETITIVE POSTURE IN AN SBA

POSTURE = SXCX(I-Icr)Ansoff and McDonnell, 1990

Created by Robert Moussetis, 2000