StrategyStrategy

““Making strategy work is more Making strategy work is more difficult than the task of difficult than the task of

strategy making”strategy making”Lawrence HrebiniakLawrence Hrebiniak

Today’s TopicsToday’s Topics

Strategy EffectivenessStrategy Effectiveness– Maximizing Impact and Avoiding PitfallsMaximizing Impact and Avoiding Pitfalls

A little background….A little background….

Three Reasons why Good Three Reasons why Good Strategies FailStrategies Fail

ExecutionExecution

ExecutionExecution

ExecutionExecution

Hallmark of a good strategy is a firm’s ability to translate it Hallmark of a good strategy is a firm’s ability to translate it into actioninto action

Execution ≠ Tactics

Execution ≠ Tactics

Execution =

Getting Things Done

Why aren’t strategies Why aren’t strategies executed well?executed well?

Fuzzy frame of referenceFuzzy frame of referenceDysfunctional separation between strategy formulation Dysfunctional separation between strategy formulation and strategy executionand strategy executionResistance to changeResistance to changeStructural issuesStructural issuesPoor communicationPoor communicationConflicting mandates & reward systemsConflicting mandates & reward systemsWeak linkage among strategiesWeak linkage among strategiesDiffusion of resources and energyDiffusion of resources and energyLack of accountabilityLack of accountability

Common denominator = Common denominator = PeoplePeople

The lifeblood of an organization, strategies The lifeblood of an organization, strategies are vessels that affect and are affected by are vessels that affect and are affected by living and breathing people.living and breathing people.

Levels of StrategyLevels of Strategy

Corporate strategyCorporate strategy

Business-level strategyBusiness-level strategy

Marketing strategyMarketing strategy

Market OrientationMarket Orientation

Consistent and synchronized focus on Consistent and synchronized focus on customer needs and competitive customer needs and competitive advantage.advantage.

But who is the customer?But who is the customer?

Manufacturer

Wholesaler/Distributor

Retailer

Consumer

But who is the customer?But who is the customer?

Manufacturer

Wholesaler/Distributor

Retailer

Consumer

And are functional areas And are functional areas really aligned?really aligned?

OperationsOperations

Marketing / SalesMarketing / Sales

Levels of StrategyLevels of Strategy

Corporate strategyCorporate strategy

Business-level strategyBusiness-level strategy

Marketing strategyMarketing strategy

Consumers

Retailers

Distributors

Field

Brand

Consumers

Retailers

Distributors

Field

Brand

As the pendulum swings…..As the pendulum swings…..

CORPORATE FIELD

Brand Positioning/Strategy(Multiple Brands)

Brand Promotions Media Services Event Marketing

Field Marketing (Planning & Integration)

Distributors

Field Sales

Brand Positioning/Strategy(Multiple Brands)

Brand Promotions Media Services Event Marketing

Field Marketing (Planning & Integration)

Distributors

Field Sales

Retailers

Ntl Retail Sales

Investment Model ExcerptInvestment Model Excerpt

Five Basic Criteria Were Used For Five Basic Criteria Were Used For Determining “Investment” MarketsDetermining “Investment” Markets

Brand Volume Brand Volume 30%30%

MC/bbl MC/bbl 25%25%

Industry VolumeIndustry Volume 15%15%

Brand ShareBrand Share 15%15%

Brand TrendBrand Trend 15%15%12 MMT 7.5%12 MMT 7.5%

YTD 7.5%YTD 7.5%

Tier Breaks Were Established For Tier Breaks Were Established For Varying Levels Of InvestmentVarying Levels Of Investment

Brand A example:Brand A example:

Tier 1 = 12 markets representing 35% of volumeTier 1 = 12 markets representing 35% of volume

Tier 2 = 26 markets representing 25% of volumeTier 2 = 26 markets representing 25% of volume

Tier 3 = Tier 3 = 2424 markets representing markets representing 15%15% of volume of volume

6060 75% 75%

For Each Tier, An Investment For Each Tier, An Investment Model Was EstablishedModel Was Established

For each Tier 1 Brand A market:For each Tier 1 Brand A market:

1. Estimate the cost of a XXXX TRP radio plan.1. Estimate the cost of a XXXX TRP radio plan.

2. Assume that XX% of the local marketing investment is spent 2. Assume that XX% of the local marketing investment is spent against radio.against radio.

3. Derive a local marketing spending target, i.e., divide Step 1 by 3. Derive a local marketing spending target, i.e., divide Step 1 by Step 2.Step 2.

4. Adjust spending targets upward if market indexes highly on 4. Adjust spending targets upward if market indexes highly on Hispanic population, LDAC-24 population growth, or is a Hispanic population, LDAC-24 population growth, or is a designated competitive target attack/defend market.designated competitive target attack/defend market.

Fixed Commitments and Shortfalls Fixed Commitments and Shortfalls were Identified and Accommodatedwere Identified and Accommodated

Brand B Example:Brand B Example:Contract spending in 4 markets exceeds the total Contract spending in 4 markets exceeds the total recommended local marketing investment:recommended local marketing investment:

City ACity A Covered cost of contracts plus Covered cost of contracts plus

City BCity B equivalent of XXXX radio TRPS X X% equivalent of XXXX radio TRPS X X%

City CCity C

City DCity D Covered cost of contracts plus normal Covered cost of contracts plus normal Tier 1 spendingTier 1 spending

General OverviewGeneral Overview

– Investment recommendation was based on a weighted average derived from the Investment recommendation was based on a weighted average derived from the investment model plus added emphasis for the following brand imperatives.investment model plus added emphasis for the following brand imperatives.

– The template identified XX investment markets that account for XX% of the brand’s The template identified XX investment markets that account for XX% of the brand’s volume.volume.

Six additional markets were added based on brand imperatives.Six additional markets were added based on brand imperatives.

– The Brand A investment for 2001 is $XX million or XX% of the local marketing budget.The Brand A investment for 2001 is $XX million or XX% of the local marketing budget.

– Contracts account for XX% ($XX MM) of the investment.Contracts account for XX% ($XX MM) of the investment.

– $XX mm was removed from the optimum model to cover contract overages in certain $XX mm was removed from the optimum model to cover contract overages in certain markets.markets.

Brand A LOCAL MARKETING INVESTMENT STRATEGY

Criteria Rationale

Core Market for Brand M LDAC-34 population growth Minimum index of 200 vs. the national

average Hispanic population growth Minimum index of 150 vs. the national

average Competitive Target priority market Task team recommended markets

Tier 1 Spending PathTier 1 Spending Path

Allocate resources against complete array of local investment opportunities.Allocate resources against complete array of local investment opportunities.

Local radioLocal radio

OOHOOH

Marquis sports/music/event sponsorships.Marquis sports/music/event sponsorships.– Activation funding budget.Activation funding budget.

Hispanic programming/sponsorships.Hispanic programming/sponsorships.

National promotion localization funding.National promotion localization funding.

Local fairs/festivals/sponsorship funding.Local fairs/festivals/sponsorship funding.

Local ground-up promotions budget.Local ground-up promotions budget.

Key channel initiative fund.Key channel initiative fund.– On-premiseOn-premise

– C-storeC-store

– Supers/liquorsSupers/liquors

Brand A LOCAL MARKETING INVESTMENT STRATEGY

Levels of StrategyLevels of Strategy

Corporate strategyCorporate strategy

Business-level strategyBusiness-level strategy

Marketing strategyMarketing strategy

MultidimensionalityMultidimensionality

Strategy begets strategies begets Strategy begets strategies begets strategies begets tactics…..strategies begets tactics…..

Linkage?Linkage?

Destination, objectives, strategies, measuresDestination, objectives, strategies, measures(DOSM)(DOSM)

Company: D O S MCompany: D O S M

Division: D O S MDivision: D O S M

Region: D O S MRegion: D O S M

Area: D O S MArea: D O S M

Destination, objectives, strategies, measuresDestination, objectives, strategies, measures(DOSM)(DOSM)

Company: 2 4 6 12Company: 2 4 6 12

Division: 4 6 12 20Division: 4 6 12 20

Region: 6 12 20 30Region: 6 12 20 30

Area: 12 20 30 50Area: 12 20 30 50

Two problemsTwo problems

– Fuzziness and slippage along the lineFuzziness and slippage along the line

– Somebody has to execute this stuffSomebody has to execute this stuff

An IllustrationAn Illustration

It all comes down to choices It all comes down to choices

““The essence of strategy is what The essence of strategy is what notnot to do.” to do.” Michael Porter, “What is Strategy”, Michael Porter, “What is Strategy”, HBRHBR

““Not choosing means creating managerial Not choosing means creating managerial complexity that results in doing business with complexity that results in doing business with yourself, rather than with your customers”yourself, rather than with your customers”

Michael Treacy & Fred WiersemaMichael Treacy & Fred Wiersema

Discipline of Market LeadersDiscipline of Market Leaders

Strategy is a means, not an endStrategy is a means, not an end

Mediocre strategy well executed trumps a Mediocre strategy well executed trumps a great strategy poorly executedgreat strategy poorly executed

What are you willing to drop to get what What are you willing to drop to get what you want?you want?– Have to be able to say NO Have to be able to say NO

Do a few, unique, things really wellDo a few, unique, things really well

Define what success looks likeDefine what success looks like

Align the air war and ground warAlign the air war and ground war

Mobilize troops Mobilize troops

Measure & reward resultsMeasure & reward results

Share accountabilityShare accountability

Impact = IImpact = I33

Innovation X Integration X IntensityInnovation X Integration X Intensity