Chapter 04 - |\ Identifying strategic actions What this...

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Unformatted text preview: |\ Identifying strategic actions What this chapter is about I Asking a good strategic question, unravelling the context and generating scenarios are only the first steps in practical strategy. I We now need to develop action plans that are as robust as possible against future uncertainties. I Simple matrix tools can be used to evaluate action plans or decisions that l have already been proposed. I However, we need to think about strengths, weaknesses, opportunities and 5 threats (SWOT) in order to identify the actions to be evaluated. I Conventional SWOT does not help very much, as it has serious limitations. 3 I A variant on SWOT overcomes those drawbacks and leads, almost automatically, to imaginative and comprehensive action plans. Introduction in the previous three chapters we showed how to pose strategic questions, unravel complexity and develop scenarios, so we now turn to those parts of the practical strategy toolbox which address the Vital question: ’We understand the issues and we have the scenarios. so what do we do?’ in short, we have to identify appropriate actions and strategies and work out how they can be implemented in the practical world. This is not trivial and it will need four chapters to cover the next four steps in ACTIFELD: I I — identifying actions and strategies in relation to contexts a this chapter I F a finding,r an organisation able to implement the actions — the viable firm (or policy, or organisation) matrix (VIM) in Chapter 5 r————'— r 86 Always remember to consider the ‘do nothing’ strategy. Chapter 4 / Identifying strategic actions I E — evaluating how the changes fit with the interests of stakeholders, and assess- ing the resource implications — congruence and resource analysis in Chapter 6 l L — detecting and overcoming obstacles to change — force field analysis in Chapter 7. Let us new address the first question, the relationship between strategies and contexts. Formulating and evaluating strategies There are, in principle, two ways in which one can relate strategies to scenario contexts. 1. Suppose that some competing strategies have already been formulated. In such a case, the question is how well or badly the strategies might play against end- state scenarios. . Use the scenario contexts as the starting point and work out the strategies appropriate to those contexts. if more than one context is used, it might be pos— sible to find strategies likely to be robust against the future’s uncertainties. The next two sections, A sirrrpfe riirrtrr'x technique and The Men Scenario Matrix, describe techniques used in the first case. The remainder of the chapter deals with the second method. As ever in this book, there is no single ‘right’ way of tackling the problem of relating strategies to scenarios. On balance, the second approach is probably to be preferred if time, resources and politics permit. For instance, if a set of actions and strategies are already being proposed by powerful interests in the organisation, one is likely to get nowhere by asking for time and resources to develop new ones. We have to live in the real world and, in the circumstances just described, the first method — assessing existing strategies against scenarios — may be all that is possible and would certainly be better than not assessing the strategies for their robustness against the future. ' if the situation is less constrained by politics or other factors, then formally developed scenarios, using, perhaps, the FAR approach from the previous chapter, and explicitly analysed strategies, using the method described later in this chapter, are likely to give more satisfactory strategic results. The strategy formulation method is very simple and does not require extensive resources. A simple matrix technique Van der Heijden (1996) uses a deceptively simple table of the consequences of the Mont i'leur' scenarios discussed in Chapter 3. His approach is to rate strategic options against scenarios by using multiple plus and minus signs to indicate how much better or worse each option is assessed to be, relative to carrying on with the present policy. The “do nothing” option should always be consid- ered when evaluating strategic choices because another strategy is not automatically better than the present one; that is clearly the case in the Lame Duck scenario. (Recall that these are end-state scenarios, not the more useful story scenarios.) His assessments are shown in 'i'able 4.1 in which a blank indicates no advantage or disadvantage relative to ’continue as is'. The Idon Scenario Matrix Table 4.1 Scenario/Option matrix . , t . 5 . Ostrich Lame Duck : Icarus scenario 3 Flamingos scenario scenario . scenario Withdraw + Continue as is Shorteterm It‘l‘u‘eSIi'tlBT‘iIS * ++ + Longuterm investments m A H — — + + t Source van der Heiiden (1996. p. 234) Van der Heijden stresses stroneg that the obiect is not to decide which option should be accepted; in fact it is clear from 'i'ahie 4.1 that none of the strategic options is fully robust against all the future’s uncertainties. The aim is to stimulate wort; tonerds improving the options for action. it is also clear that the world of the Flamingos is so attractive that effort might be devoted to help to bring.r it about so that long-term investments might prosper. Table 4.] says nothing about how the options were selected in the first place, though van der Heijden mentions the use of SWOT i strengths, weaknesses, opportunities and threats, which will be the subject of most of the rest of this chapter and which we shall see later for Herrington-Jones, and in the cases of the lVlurray/thrilng River Basin and Littleworth and Thrupp in Chapter M. The ldon Scenario Matrix A variation on this by Gait et at. (i997) is the [don Scenario Matrix, [don being:T their i'l'tldL‘H'liil‘ii. Space does not permit a full explanation but the framework is shown in Table 4.2; the reader should turn to the source for a full account. Starting with a blank matrix, the first stage is to identify the scenarios and, by some means, the decision options; these are written in the top row and the left— hand column. The matrix will handle as many scenarios and options as desired and is not limited to four and three as in this example. One then takes each deci- sion option in turn and works across the rows, asking, the. question "What would be the consequences of pursuing option 1 in scenarios A, B ...?' This is the meanng of 1A and so on which stand for ’this could cause problems unless we ...’, or ’to get Once a row has been com- I the best out of this we would have to arrange to . pleled, the itey step is to rephrase its option as a very specific choice that will be as robust as possible in the range of scenarios. The final stage is to work down each column and identify the core competences needed in each of the scenarios and then to identify the robust competences. 87 88 ‘Conventional‘ SWOT has serious drawbacks. Chapter 4 / Identifying strategic actions Table 4.2 ldon Scenario Matrix Scenario A Scenario B Scenario c Scenario D Decision 1A Robust option 1 option 1 Decision Robust option 2 option 2 Decision Robust option 3 option 3 l Competence Competence Competence Competence Vital, or A B C D robust, I , _ competences Source: Gait et at. 1997', p. 107 The SWOT method and its limitations The conventional SWOT method A common initial step in developing actions and strategies is the well-known method of creating a table of strengths, weaknesses, opportunities and threats — so- called SWOT analysis. Identifying the SWOT factors can be achieved by simple brainstorming, but some sort of framework is often useful. A common one is PEST; political, eco- nomic, social and technological factors are considered in turn. Some people add another E for environmental aspects. There is even an acronym of SEPTEMBER, which has the huge drawback that no one can remember which E is which, so people can end up talking about different things at the same time. Other headings might be the management team, distribution facilities, IT skills and so forth. Perhaps the most effective technique is to use the principal factors from the mind map, make up from them an unambiguous acronym and display that prominently on the whiteboard when the SWOT analysis is performed. The limitations of SWOT However, SWOT has, in practice, three serious drawbacks. The first is that, unless the exercise is well managed, the numbers of strengths, weaknesses, opportunities and threats which people identify can be very considerable, even verging on the unmanageable. Considerable care may be needed to boil the ideas down to a sensible number, perhaps by combining similar items or rejecting those that are manifestly trivial. As a rough guide, an overall total of up to about 30 or 40 strengths, weaknesses, opportunities and threats can be coped with; more than that number is likely to lead to difficulties in making sense of the ideas. TOWS and strategies Secondly, SWOT often leads to disagreement, which can be heated, about whether a given item is, say, an opportunity or a weakness. For instance, in the case of Littleworth and Thrupp, in Chapter 14, it is a fact that some of the senior people are near retirement age. That is a weakness because of the loss of experi- ence but it is also an opportunity to bring in new blood. it is better to forget the arguments and recognise that a given item can appear more than once in a SWOT table. Finally, the third, and the most serious, weakness of SWOT, as it is convention- ally practised, is that it leaves unanswered the vital question of ’so what do we do now that we have u SW01 ' trrlile?’ The method explained in this chapter avoids the second problem because, as we shall see, it does not even matter very much where in the table a given item is placed, as it will always be considered. The method also solves the third problem as it is explicitly designed to deduce actions and strategies from the SWOTs. TOWS and strategies Basic ideas The alert reader will have noticed that SWOT has turned into TOWS. The reason is that it seems that the process works better by first thinking about the threats and opportunities of the external world before considering the internal weak- nesses and strengths. There is no real evidence for that; it is just an impression from experience. in the rest of the book we shall use TOWS, but it does not matter if you use S‘NO'I‘. The essence of the method is very simple,- the TOWS table is used to compare, contrast and combine the Ts, Os, W5 and $5, in various ways, so that action plans which, say, use one of the strengths to exploit an opportunity emerge more or less automatically. That is easy to say, but, like most of the tools for practical strategy, is rather harder to do, so we will demonstrate it by using a simple example followed by one that is much more profound, and finishing with the Harrington-Jones case study. First, we must deal with a more or less philosophical problem. Are TOWS absolute or relative? This can be a source of debate and confusion but, as ever, going back to first princi- ples in the dictionary can help to resolve the matter in a practical way. We find (Collins English Dictionary): I strength — something that is regarded as being beneficial or a source of power weakness w state or quality of being weak I l opportunity — favourable or advantageous combination ofcircumstances I threat — an indication of imminent harm [by implication from some person or cirriiiiisl'aiice]. 89 r———t 90 ACTIFELD is a very flexible process — adapt it to fit your problem. Don‘t adapt the problem to fit the process! Chapter 4 / Identifying strategic actions The words in italics suggest that we should see the Ss and W3 as inherent in the organisation and the Os and Ts as arising from the environment or context. For problems involving immediate action in the current 'world’ the Os and T5 are in the present environment and a futures study is not necessary. For other problems involving evolution over time, a futures study will be needed and the 05 and Ts will depend on the forecast context — (i context being it coherent configuration derived from ii FAR sector/fitctor matrix. As we shall see in the Harrington-Jones case at the end of the chapter, there are three contexts, each with its own set of slightly over- lapping Os and T5. By contrast, the $5 and W3 are Herrington-Jones's present position and are, therefore, kept constant and tested against the different Os and Ts. The end result is strategies to move Harrington-Jones into the future that are as robust as possible against those three forecast futures. TOWS and strategies: a worked example The case problem and the context The case study deals with research and development (R&D) strategies for the devel- opment of a military unmanned ground vehicle (UGV) which is, as its name suggests, a ground vehicle which can carry out tasks with little or no human con- trol. An unattended sensor is somewhat like that; it sits in place and reports enemy movements or other events. A UGV, however, has to be able to move. Although this case study has a military flavour, the same principles might be applied to any other high-tech Rt‘stD effort. First, we pose a strategic question: ’Find an immediate action plan to ensure that recent RSID applicable to UGVs can be exploited.’ This is simple to parse: why — by implication the R&D might be wasted; what 4 ensure that it is not wasted; when — in the imminent future; how — by developing a plan of action to exploit available technology in a useful way. The probiem is fairly straightforward so we probably do not need to unravel its complexity and, since the problem is imminent, we can omit the futures exploration. In short, it is not always necessary to go through the full ACTIFELD methodology. It is a very flexible process and it is important to realise that it can be bent to suit particular needs. The first step is shown in Table 4.3, which is a conventional TOWS table with a total of 12 items. Study the table but do not worry about where these facts came from, just accept them for this example. Revise the table if you wish, maybe 03 should be T4,- technology is changing so fast that no one can keep up. Note also that the three Ws, seen in isolation from the Ts, Os, and 33, might be enough to kill the whole project. It is one of the advantages of the TOWS method that it avoids such blinkered thinking. The critical step, which makes this method work, is shown in Table 4.4. it is very simple and consists only of moving the weaknesses and strengths to one side so as to make space in which to work, and then comparing items flow the original TOWS boxes. Table 4.4 is an example of the deduction made by comparing S2 and T2, and the process of comparisons is completed in Table 4.5, which contains a total of ‘10 actions. TOWS and strategies: a worked example 91 Table 4.3 The TOWS for the UGV problem External threats External opportunities T1 Other nations also doing research and 01 National and international research development agreements exist T2 Lack of recognised need for UGVs 02 Increasing number of UN operations T3 Collaborative research threatened by 03 Speed of technological development industrial recession 3 Internal weaknesses internal strengths } W.‘ Reduced funding 81 Strong research and development base ‘ W2 Lack of confidence in UGVs SE Some technology already available W3 High cost to develop advanced technology 83 Machines needed to compensate for reduced manpower Table 4.4 Starting to deduce actions External threats External opportunities T Other nations also doing research 01 National and international and development research agreements exist i T2 Lack of recognised need for UGVs OE lncreasing number of UN operations Collaborative research threatened 03 Speed of technological by industrial recession development c: Internal weaknesses W1 Reduced funding W2 Lack of confidence in UGVs Ws High cost to develop advanced technology Internal strengths Strengths vs. threats 81 Strong research and development base 82 Some technology already Use demonstrator vehicle to create ‘ ? available awareness (SFT?) I 83 Compensation needed for | reduced man power I 92 Chapter 4 / Identifying strategic actions Table 4.5 The complete action set T External threats External opportunities T, Other nations also doing research 01 National and international and development research agreements exist T2 Lack of reCOgnised need for 02 Increasing number of UN UGVs operations T3 Collaborative research threatened 03 Speed of technological by industrial recession development _1 Internal weaknesses i. Deploy simple vehicles to generate 5. Build simple vehicles to gain user need ,W ,T ser confidence ,0” W, Reduced funding (W2 3 2) U (W? L) , _ 2. Transfer funding to UGV research 6. Develop national and W2 Lad‘ 0f Confideme '” UGVS to avoid losing technological international R&D links (W1,O,) W3 High 005‘ t0 deVe'OP adVanCBd advantage (Wl'W‘l’Tl’TE) Y. Look for technology transfer technology from other research areas (W303) i Internal strengths 3. Use demonstrator vehicle to 8. Continue strategic research awa S T S ,O 8, Strong research and create reness ( 2’ 2) ( l 3) development base 4. Emphasise benefits of 9. Build vehicles using available collaborative research (8 ,T l technology for UN-type 8 Some technology already 1 3 . 2 o e tons S ,S ,0 available p ra I i 2 3 2) S C t, d d f 10. Develop national and 3 rein-$638”: if” "a: e or international R80 links a w U ‘30 J (8,0,.03) it is of great practical significance that the TOWS process, used imaginatively, has led to exactly the right collection of actions needed for this problem. We now have a com- plete basis for an action plan, rather than the incomplete plan that we might first have thought of. The final step, which is the main strength of this approach, is to notice that some of the actions are closely similar to one another. For example, actions 1, 3 anti 5 all relate to vehicles to demonstrate UGV technology, while item 9 uses similar wording but in the context of a UN operation. There are other similarities. The end result is: Group the related items to develop action plans. Actions 1+3+5+9 ——> Develop a simple vehicle based on available technology and suitable for UN operations (sortie sort of'surveillam‘e vehicle to monitor remote borders?) Actions 4+6+1O e Promote international links and collaboration (UN orientation achieves that) Actions 2+7+8 —> Continue research with emphasis on technology transfer (links with, say, 0il/l’i‘liflf‘fll/Che’l‘fiitfll industries for surveillance of hazardous environments?) Case study: Promoting ercommerce 93 The final action, or strategy, is very clear, straightforward and, above all, justified by the analysis. There is an audit trail of logic that is both easy to iustity and to revise if further 'l‘OWS items are identified or existing ones cease to apply. This case study used pairwise comparisons of the ’l‘OWSs but in later examples we shall see how, once one studies the matrix and absorbs it, comparisons are made from more than two boxes. Finally, one could carry this method further and do 'second-order’ Don.tlimityourse|fto 'i'OWS analyses for the communications systen'is for the UGV, its suspen- comparing things in sion, transmission and so forth. in Red) planning that can be very pairs-LOOk atitemSin valuable as it can give a coherent design and development plan for what 3” pans Of the table“ can, after all, be a complex undertaking involving many specialised disci- plines. If they work to a commonly understood strategy which has been derived ’top-down’ from the underlying need, the result may be more satisfactory and the process easier to manage. Promoting e-commerce Introduction This case study is intended to show a much more complex TOWS analysis. it will also suggest some ways in which the analysis of large problems can be organised. it contains a lot of detail and you will have to study it closely. it will come in stages and you will. be asked to work out some of the steps for yourself before looking at the 'answer’. Background Consumer e-commerce offers people the opportunity to buy from the Internet, or from digital television, products and services they would otherwise have bought from shops, supermarkets, travel agents etc., or even not bought at all. Consumer e-commerce has many apparent attractions, such as ease, convenience, the wide range of products that can be made available and, probably, reduced cost. indeed, some supermarket chains now otter e-commerce services in conjunction with their existing shops. Some e-commerce businesses seem to be prospering, others have not yet been successful, and it seems fair to say that, as yet, e-commerce has not been as successful as its proponents might have hoped. There are certainly some obvious difficulties. Consumers may be worried about security of credit card transactions over the lnternet. How can aftr‘rrwsales service be ensured? How will items be delivered? Many people have neither the skill nor the equipment to use the internet. On the other hand, there is strong governmental support for e-commerce. Young people who are used to computer games are now . becoming consumers themselves. The prospects of lower prices and, for busy ‘ people, being able to shop from home are attractive. V'Vhat then, are the strategies for promoting e-commerce in the near future and who might have to implement them? it is unlikely that we shall find some single 94 This kind of thinking is best done away from the office. Chapter 4 / Identifying strategic actions action, as with the UGV case, and it is possible that the ‘solution', to the extent that such a complex problem can be 'solved’, will be quite wide-ranging. To answer that question, a group of colleagues, knowledgeable about e-com— merce, spent about half a day at a working seminar to apply 'l'OWS to it. Before describing the results of their efforts we must first consider the important issue of managing and organising such a venture so as to get the best results from it. Organising a TOWS analysis Some of the points to be made here may seem obvious after they have been made but they are vital to a successful outcome from using the time of busy people. The whole point of TOWS is to draw out the shared knowledge of concerned people and an away-day, working seminar, study period, or whatever you choose to call it is an excellent and easy way of doing that. It is essential that the study be done away from the office in pleasant and well-fed sur- roundings. Mobile phones must be turned off and preferably left behind. However, the participants know about a problem domain, not an analysis tech- nique, so getting to feel comfortable with the technique will be a key factor. In this instance, the UGV case study was explained; it is simple and, as the problem was unfamiliar to them, the participants had no preconceptions about its details and could concentrate on the ideas. There is, however, a considerable gap between UCst and, in this case, consumer e-commcrce, so a second key factor is to produce a simple illustration of 'l‘OWS for the problem in question. Common sense and a little background reading will usu- ally supply enough knowledge to produce an illustrative TOWS matrix intended only to show that the ideas of the UGV TOWS can be replaced with terminology from the new problem domain. The example should help the partiCipants to get their ideas running freely. Preparation for the away-day may take a day or so but it is time well spent as input to the exercise. it is important to have enough participants to form at least two syndicates each of four or five people, as one group canth generate sufficient diversity of ideas. in this case, there were three syndicates of four, each group having people from diverse backgrounds, the cross-fertilisation of ideas within the group being an ingredient of success. We shall consider the management of syndicate work in Chapter 15 but, briefly, the facilitator has to make careful iudgements (or inspired guesses) about when to leave a syndicate to work things out for themselves and when to offer advice and guidance. Syndicate work is going well when the facilita- tor is ignored when he or she enters the room. It is also important for syndicates to allocate time to each phase of their work and to move to the next phase when time is up. The TOWS tables, and the actions deduced by the syndicates, are collated after the exercise; the final result of indicated strategies has to be developed by the facil- itator and all these results fed back to the participants. The results can be discussed at a short meeting, but, in the ideal world, they should be the input to a second away-day. This is similar to the two-stage FAR anaiysis described in Chapter 3, though, as in that case, a second round of TOWS is not always possible, given the demands on the time of busy people. Case study: Promoting e-commerce 95 The e—commerce TOWS table The final l'O‘i-"VS table. collated from the syndicate. results, is shown in Table —l.ti. You will need to study it carefully as there are 37 'l‘t'_)\-\='Ss; about al the limit of manageability, though inevitable for a wide-ranging problem such as this. They include technological, economic and social (such as WU, the tear that large num- bers of people might be excluded from the e-revoiulion, and T], resistance and cynicism) factors. ’l'here are business implications, such as sr‘nall-to-inedium enter— prises lacking the necessary capabilities (WM), and traditional stores using l'l‘ to fight back against e-commerce (T7). There are legal considerations and the political factor that the government wants to promote e—cornmei'ce and has raised £22 bile lion from the sale of mobile telephone licences. TOWS analysis is a very effective, Table 4.6 The consumer e—commerce TOWS table Threats Opportunities l T1 Consumer resistance and cynicism 01 Nintendo generation grows up l T? Worries over delivery and afterrsales support 02 Existing network of law and regulation T3 Fears over data security 03 Companies cannot afford to lose market share T,l High-profile bad experiences O“1 Rapid development of technology with unioreseeable ‘ I advances T. “Show-stoppers : Viruses and fraud 0, Businessrtorbusiness ercommerce spreads TB Non—convergence over standards e..knowiedge T7 ln-store improvements via technology 06 Potential for cheaper goods 07 Potential for time-saving via home delivery 05 Potential for transparency of price/information Og Availability of £22 bn trom mobile telephone licence sale Weaknesses Strengths W1 Lack of user e-skills S.‘ Strong government support W2 Limited ownership of PCs and modems 82 Good benchmark companies with trusted brands W3 Limited payment systems. especially for young 83 Tradition of retail innovation people. but parental concerns _ ‘ 811 Strong creative community W4 Poor distribution systems . S,_1 Relatively good cable infrastructure W5 Lacks social interaction ' Sa Competitive market in telecomms and digital TV WG Fear of emergence of social exclusion | 87 Enlightened attitude to regulations and auctions i W7 Cost of telephone calls _ _ I 88 Developments in search engines I Wa Limited public access points Sn Capability for highly—targeted marketing Wg Slow growth in digital TV “ Sm Entrepreneurial culture Wm Lack oi e—skiils to set up eestore fronts WH Lack oi awareness. especially in small to medium enterprises 96 Chapter 4/ Identifying strategic actions and simple, framework for thought, especially in its ability to help people to iden- tify all of the ramifications of a complex problem. TOWS and actions The deduction of the actions suggested by the TOWS is shown in Table 4.7, which is spread over pages 97 and 98. It is important to notice that the actions are not deduced from simple pairwise comparisons of the TOWS headings. As one studies the table one sees combinations from three or even four of the TOWS headings, such as action 11. Again, you will need to study the table closely, as there are a total of 29 actions but, before that, you will learn much by creating an empty table, as was done in Table 4.4, and then deducing your own actions. Do'not be deterred if you think you know nothing about e—commerce — common sense and imagination will take you a long way to success. Note that some of the actions, such as 3 — research into electric vehicles, are very similar to the UGV technology strategy problem. There are similar cases in Table 4.7, not only in technology, where a second-order TOWS might be carried out to develop a specific action plan. TOWS and strategic areas l-‘or a problem with such wide social, economic, legal and technical ramifications as this one, it is not to be expected that there will be a single clear outcome as there was for the UGV case. We will expect to see a number of strategic areas emerge when actions are grouped by their similarities. The strategic areas are shown in Table 4.8, which is the main result of the whole exercise. It is important to realise that Table 4.8 can be read in several complemen- tary ways. None of them is the ’right’ way,- the different ones just give alternative perspectives on the problem. All the viewpoints are needed for a complete under- standing of the indicated actions and strategies. I Firstly, the table can be read from left to right. Thus, the first row states that actions '1, 9, 16, 2, and 11 combine into strategic. area A; promotion of aware— ness of, and access to, e-commerce. Similarly, 19, 20, 22 and 10 fall under area B, creation of a legal framework and protection against abuse. I The second way to read it is down the right-hand column. This shows that there are seven strategic areas. This result, that there are seven broad areas, as opposed to any other number, is of considerable importance. Unstructured thinking about this problem might have missed one or more of these areas. (Of course, you should be producing your own version of this analysis.) I In some ways it is most illuminating to take the third view, and read the table from right to left. This now shows that to achieve area A, for example, it is necessary to do all five of the actions listed. It might be a waste of money to combine actions 2 and 16 and put 10,000 PCs, with free Internet access, into places people visit, such as post offices, libraries, doctors surgeries and so on, if action 1, provision of on- the-spot training, and action 1] are not also implemented. Even these four actions might achieve only a passing benefit if action 9, continued education, is not also performed. 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EEOQ 626.. .3595 .mmoEO 501% 3.8% mg aim 2 320:. mung: wcorfiwmz EEOE 39.5. m cemtmanm meta wEFfiE @0305 9 @892: 3:66 mmmoEO Eon: wm:m.UmE§E B EmEQQmSQ 9 EszEE Q0655 9 E5325: 9 Begum 1 canmuznm mciczcou 99:05 m mEmEEou‘w .3 33% gm .6 mmmcmLm‘sm 29:91 < mucmfiwuom cmumoh 9 mEEmt 295$ Em: we CezoEoi H zmfimbm .5 no.5 E65 .8953 “En ummcmtma. acczguwu 950% 93.5 053.2% 35 umaofigt 2030233 950... mo..wEEoo-o 9:. m6 22m... 100 Chapter 4 / Identifying strategic actions I Finally, the frmrti'i view is also from right to left, but this time in terms of organi- sations. Under area A, this implies that implementng that set of actions would require effort from the health services, the Post Office company, the local govern ment councils which control schools, and so forth. Some details emerge, such as a contract between the government and an advertising agency to perform action 11, skilled presentation of the benefits of e-commerce. Even more subtle is the idea that, next time the licence to operate the national lottery is awarded, the applicant would have to show how they would provide Internet access in parallel with the lottery computers. This view also shows that there may be no existing agency able to carry out a particular action. For instance, who is going to do action 27, monitoring technology? Should whoever does that also do action 18? How will they do it and who should pay for it? Such seeming minutiae are, in fact, the necessities of successful strategic action, and the simple 'I'OWS approach has, with a minimal effort, pointed them out fairly exactly. in this problem, each of the 29 actions appears in only one strategic area but it is perfectly permissible for a given action to arise under more than one area. In fact, a given agency or organisation could well be involved in more than one strategic area and therefore have to coordinate with the different groups of actors in those areas. TOWS and strategies at Harrington-Jones and Co Introduction We now continue with the Harrington-Jones case by applying the TOWS and strategies technique to identify robust actions for the company. In Chapter 1 we assumed that Harrington-Jones is a food retailer, in Chapter 2 we developed an outline mind map for factors in its business sector, and in Chapter 3 we formu- lated scenarios for 2010. We also assume that Harrington—Jones is ambitious to be the number one retailer in the European Union. These assumptions are easy to change to give another exercise to help you to hone your skills. Note, though, that this TOWS analysis has to be very fulure-orientated. Herrington-Jones’s SWOT analysis The company perceives itself as having strengths and weaknesses, and also as facing opportunities and threats. By definition the strengths and weaknesses are intrinsic to Harrington-Jones but the opportunities and threats will arise in the future contexts revealed by the FAR analysis to be plausible and internally consis- tent. Since there are three future contexts we shall repeat the TOWS analysis three times with the aim of identifying strategies that will be as robust as possible against the uncertainty of a range of plausible futures. Case study: TOWS and strategies at Herrington-Jones and Co Strengths Herrington-Jones’s strengths are considerable in several aspects of the business. The brand. Herringion-Jones is a household name in the UK and the value of its brand is expected to assist, to some extent, any project that Herrington-Jones might attempt. Size. Harrington-Jones has an established presence in almost every town and city in the UK, and in many European cities. This gives a very large customer base and these two dimensions of presence and customers are connected in a positive feedback, or virtuous cycle, that feeds and sustains the growth of Harrington—Jones. Supply chain management. The widespread presence of Herrington-Jones’s shops causes complexity in managing inventory and distribution channels. Harrington-Jones has, however, created advantages specific to the business by its success in managing this complex supply chain. This is a major strength. lnfornialirm technology (IT) and electronic-ronnnerce. IT is at the core of managing Herrington-Jones’s large network of stores and the company is very competent in this field. it has made large strides towards integrating consumer electronic commerce into its established business and is ahead of its rivals in this respect. Established intermirirmai expansion strategy. Herrington-Jones’s growth in Eastern European countries has given it some experience of breaking into a new market. This will be one of Herrington-Jones’s strengths in tackling future threats from competition and taking advantage of growth opportunities. i/i’arla-r.‘lnss management. Herrington—Jones’s numerous experienced managers have enabled it to achieve its current leadership position in the UK retail market. This strength sustains Hern'ngton-Jones’s advantageous position in its aspiration to be the number one retailer in Europe. Weaknesses Of course, Harrington—Jones perceives some weaknesses. Paar brand strength outside the UK. One of Herrington—Jones’s problems in attempting to achieve dominance over the European retail market is that its brand recognition is not strong beyond the United Kingdom. Law margins. Currently, the retail business has low margins and high turnover, not so much of a weakness of Herrington-Jones as a characteristic of the whole retail sector. Changes in business practices and the blurring of traditional boundaries between business sectors may make it a serious weakness to be forced to accept these traits as inherent to the industry. Weak presence in the EU. Under the assumed objective, Harrington-Jones has to grow into the EU states and it does not, as yet, have the penetration it needs to create a virtuous cycle whereby scale feeds growth that in turn provides economies of scale, and so on, as is the case in its UK business. 101 102 Chapter 4/ Identifying strategic actions TOWS analyses for different contexts We now need to apply these strengths and weaknesses against the threats and opportunities specific to the three plausible future contexts. This is done in the next three sub-sections, and Tables 4.9 to 4.1], each of which is headed with the name of one of the scenarios for Herrington-Jones which were deduced in Chapter 3. Note that the strengths and weaknesses cells are the same in each case but the threats and opportunities vary to a greater or lesser degree as the contexts change. Each table is followed by the strategic insights that emerged from the comparisons of the TOWS elements. Case study: TOWS and strategies at Harrington-Jones and Co Context |: European superstate Table 4.9 Herrington-Jones’s TOWS for Context I: European superstate 103 Threats Opportunities T1 Competitors Oi Expansion LJK= Europe T2 Eacommerce 0..) New products (SIM/organic Ta Changing consumer need 03 IT + e—commerce + supply Til Regulation OK1 Lifestyle — more time/less money T5 Pollution Weaknesses 1. W1.W5,T..T3, a small fish moving 8. W1,W3.O1, acquire brands in . from a small pond to a large one mature markets and develop Wt LOW brand va‘ue OL'tS'de Of UK needs developing brand outside brands in developing markets We LOW margm , the UK 9. whomo, move into higher? W3 LOW EU penetramn 2. W2.T1.T2. Os. improve strength of margin organics or cut costs by value chain using GM crops 3. W2.T4.T5. promote on green to. W203, value chain efficiency ptatform as a Trojan horse drives profits Strengths 4. S1.T4.T1, in order not to lose 11. 8132.86.01. use current strength I existing base maintain home to increase market share St BTan‘? m the UK brand strength throughout Europe. including UK 7 32 3'29 "1 UK ' 5. s.,s2,T3,T5,T6, lower risk through 12. swsfiow customise highrmargin 83 supp‘y mam managemem international exposure develop services for new lifestyle SJ IT e'C‘?mmefce A strong international managers requirements (autorrecurring . 8:; E5tab"§hed internat'ona! 6, Sfl'rTg. first mover advantage — purchases) 1 expans'on Strategy harness technical efficiency gains 13. S1,S.,,O,,, use brand to set new Sit world'C'aSS ma'EQQmBHt (rotl out profitable model trends in competing in the new overseas) niche market 7'. 83,54.T4,T5, use IT & supply chain 14. 83,843,0‘? customer segmentation management to distribute goods pollution free and spillover effect of distribution and database Strategic insights for Context 1: l, 3, 4, 5, 6, 11, 14: Expand into the EU while maintaining UK strength. 2, 6, it), 14: Technology should open up new opportunities both in value added services and the back-office operation of value chain management 3, 9, 12., '14: The customer will be the driver of change in what can be sold; keep an eye on cur- rent trends, expect their evolution and be prepared for them. Generally speaking, the EU may end up being one superstate but the customers will be slower to conform and only broad trends will be in common. l l l t . l I ! r——7 104 Chapter 4/ identifying strategic actions Context ll: Apres moi le déluge Table 4.10 Herrington-Jones’s TOWS for Context ll: Apres moi le deluge Threats Opportunities T1 Competitors OI Expansion UK, Europe T2 E-commerce 02 New products (SM/organic T.3 Changing consumer need 03 IT + e-cornmerce + SCM TIl Pollution 04. Higher disposable income T Value of time 0 Decreased distribution costs 5 b Weaknesses 1. W1, W3‘ T1. T3, develop brand 8‘ Wm W3. 01, acquire brands in W L b d I _d I UK outSIde the UK mature markets and develop l OW WT V3 “e (MS! 8 O 2. W2, T1, T5, offer time-saving brands in developing market W Low margins A ‘ . . i . . 2 I servtces to Increase margin 9, W2. 02, 04. move into higheramargin W" Low EU penetration . . . i d 3. W2, T4. 03, move to higher margins organics or cut costs by using through promotion on green and fair GM crops trade platforms 10. W2, 03, 05. lower transportation costs and increased value chain efficiency allows for increases in profit margins Strengths 4. 81. T4, T1‘ prevent entry by 11‘ Si 52, 85‘ 01, use current strength I maintaining home brand strength to increase market share throughout 8 Brand in the UK ‘ i , i I I 5. S1. 82‘ T3. T5. reduce risk through Europe‘ including Uh S? 3'28 m UK I international exposure develop 12. SE. 54, 04, customise high—margin S3 imply Sham maflagemem strong international managers services for new lifestyle requirements S4 e‘CWmeTCB I I 6. 84. T1. T2. 03‘ first mover (autoarecurn‘ng purchases) S5 EStabIIShed mtemamnal exPans'on advantage, harness gains from 13. SW, 8?, 02. use brand to set new Strategy value added services. and roll out trends for competing in new niche 8“ world—Class managemem profitable model overseas markets. for example organic T. 83‘ 84! Td, use lT & supply chain products management to distribute goods 14‘ SB. SII‘ OI: exploit database to pollution free identity customers‘ exact needs and customise service provision Strategic insights for Context ll: 1, 4, 5, 8, 9, 1], 13: Brand strength, its creation and maintenance will be critical to the success of Harrington-Jones in its European expansion. 2, 3, 12, 14: Customers will not be shopping for basic reasons; the customer will become. a more complex entity that needs to be watched carefully and provided with more than a 'shopping experience”. 2, 6, 7, 9, 10, 14: Technotogy will cut costs and enable the provision of wider services. 7 Context lll: Green shoots Case study: TOWS and strategies at Harrington-Jones and Co 105 Table 4.11 Herrington-Jones’s TOWS for Context Ill: Green shoots r Threats l 1] Opportunities r T. Foreign competitors 01 Increased market share in UK. T2 Competitors promote green policies expansion into Europe Changing consumer preferences Tightening regulation Food scares 2 New products GM/organic O3 Ecommerce not deiivering on its promise O:J Consumption patterns ~ more money/less time Weaknesses W. Low brand value outside of UK I W2 Low margins W3 Low EU penetration W1. W3. T1. build brand outSide the UK W3. T2, TA, sWitch to 'green' distribution channels and reposition to build a green brand W9, T4, T5. 04.. adopt high quality standards (above those demanded by regulation) to overcome negative customer perceptions and justify higher margins 8‘ WT. W3. 01. acquire brands in mature markets and develop brands in developing markets 9. W2. 04. 81. move into higher margin organics or cut costs by using GM crops 10. W2. 03, longer-term R&D and trial runs to leverage eventual gains Strengths 81 Brand in the UK 82 Size In UK S:j Supply chain management 84 lT eecommerce ‘3 Established international expansion strategy World—class management 0') SW, 82, T1, T4, T5, invest in maintaining home brand strength and market share S1. 82. T1, T2, T3. T4, T5, reduce risk exposure by expanding abroad 84. T3, maintain e—commerce development strategy in expectation of longer—term benefits from customer management 83, T2, T3, use supply chain 11. 81, SE, 8b., 01, use current strength to increase market share throughout Europe. including UK 12. S1, 8?, 0,, use brand to set new trends in competing in the new niche markets 13. S4. 03. 04. customer database can be used immediately to improve individual marketing for conventional business model l i management and e-vehicles for environmentally friendly distribution of goods Strategic insights for Context ill: 1, 4, 8-. Expansion and brand strength are tied to each other and should be approaci'icd in tandem. 2. 3, 9, 12: 'l'he customers' preferences will shape the evolution of the industry and the ability to track these changes and anticipate their change will determine degree of success. 6, 7, 10, 13: 'i'echnoiogy infrastructure should be ready to meet the growth of the industry and its requirements. 106 Chapter 4/ Identifying strategic actions Conclusion - strategies for Hemington-Jones and Co Three robust strategies emerged from this analysis: 1. European expansion: acquire retail brands in mature European markets and develop retail brands in new European markets, with the aim of capitalising on learning scale efficiencies. 2. E-cornmerce: invest in infrastructure, exploit gains from first mover advantages in efficient supply chain management, position to provide competition both on cost and tailored value-added services. 3. Lifestyle: build up responsive and detailed customer database to monitor changing customer needs and take advantage of segmentation of the consumer market to cherry-pick attractive segments. Augment the focus on value by pro yiding “more than just a mere shopping experience'. You should recall, though, that the strategy recommendations are based on scenar- ios from one cycle of the FAR method. One of the tnain strengths of PAR is that it is an iterative procedure, and that a more useful and imaginative set of scenarios could be created by another FAR cycle it time and resources permit. We can suggest some of the thoughts that might well influence a second sectorffacior array. first, the factors in the ’Technology' sector focus exclusively on data processing and the Internet. Novel transport technologies, and technologies related to food production (GM foods), might be equally important and could be included as additional factors. Second, it is not clear to what extent the ’httegration’ sector plays a useful role. Perhaps different regional customs (with regard to both types of food and consumer habits) are more important than political changes regarding the significance of national borders. Finally, there is the question of the nature of relations with suppliers. Clearly, free market competitive bidding for contracts by suppliers (re. a spot market for inputs) on the one hand, and networks of long- term relationships between Harrington-Jones and its suppliers on the other, will be appropriate to different external circumstances. Moreover, different products might also be suitable to different supplier relationships. For instance, an emphasis on highsquality organic produce might imply that a business model based on net— worked suppliers is preferable. As exercises You might now, as a syndicate exercise, repeat the Harrington-Jones FAR and then the TOWS analysis. Alternatively, you could usefully repeat this analysis for Tom Tiddler and Son who or 'n a small chain of shops in Devon and Cornwall (a region of England which is a very popular holiday destination with a strongly seasonal trade) and are seeking to defend their position from encroachment by Hern'ngton- Jones into the larger towns. Chapter summary Chapter summary The l step in ACTlFELD is actually quite straigl‘itforward, though, like all the rest of ACTIFELD, it is easier to explain than it is to do. Studying examples helps, but the only way to learn it is to apply it, preferably in a syndicate, to a problem that inter- ests you. That 'study-and—then—apply' method is the key to the outline course structure on the instructor's website. The key to the approach. is the simple idea of building a SWO'i‘ or 'i‘t')WS table in the usual way, and then making space to compare the TOWSs, initially in pairs, such as is against Os but, as insight deepens, taking items from three or even four cells in the ’l‘t'iWS table. People seeing this for the first time often say that it is the single most powerful step in ACTIFELD and that they will never do SWO‘l' in the usual way again. i disagree that there is any single most powerful step in ACTIFELD - the steps hang together as a whole. 1 agree with. the second comment; the 'usual’ way of doing SWOT often gets nowhere as it can become bogged down in argu- ment about whether something is a 'l', t), or whatever. liven without that, there is the problem of ‘SWOT, so what?’ (pun intended). The TUWS and strategies t—ipproach is intended to overcome those problems but to make it work some skills are needed: I The first is not to worry too much about which of the TOWS categories X belongs in. You have to be sensible about this; if X is riiarritestly a weakness, it would be silly to put it down as an opportunity. Apart from that, however, as long as X. is at least roughly in the right place, it will be considered when its time comes. I Secondly, be prepared to recognise that something can be in more than one cell in the matrix. The retirement of senior staff could well be both a weakness and an opportunity. I the third skill is to focus on the aim, which is to identity strategies; the "l‘OWS table is a means to that end, but not the end in itself. Don't, therefore, waste time on debating the table but, as soon as it is reasonably acceptable, get on to the real work. l-‘inally, the real work is to identify the actions and group them into strategic areas, and the keys here are: I Start by looking at pairwise comparisons of the cells in the matrix but try to free your imagination to search for triple and quadruple comparisons. I Be careful to compare like with like and opposite with opposite. For instance, like with like involves senior staff leaving. The relevant actions might be to get them to write down some of their experience before they leave, and to get the new staff to work alongside them for a while. The opposite relationship might be to use a company's strength in 1T to counter a competitor's customer loyalty scheme. I Avoid having a large number of TOWS elements supporting one action. That might suggest that the TOWS matrix is double-counting similar effects and it might need to be revised or simplified. 107 ————-7 108 Chapter 4 / Identifying strategic actions I Make sure that everything in the 'l‘OWS table has been used at least once. If some item has not been used, is it trivial or is there a fault in the matrix or the deductions? These tips and tricks will help, but the fundamentals for success are the free range of imagination, combined with the use of the discipline and clarity of the approach to help to turn unconstructive z-n‘guments into fruitful discussions. References Gait, M” Chicoine—Pipen (3., Chicoine-l’iper, N, Hodgson A. (1997), Mon Scenario ’I'lir'nking, ldon Resources, Pitlochry, Perthshire. Van der Iieijden K. (l 996) Scenarios. The un‘ uf‘srmtc'gic rmwersniion. John Wiley and Sons, Chichester. ...
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