Strategic management

Ever since my switch from a strictly technically mindset to a more business and "entrepreneurial mindset" one of the areas I have been most interested in is strategic management.
For those of you not familiar with this term, it is

the managerial process of forming a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, and then over time initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate to keep the operations aligened to the startegy or to change the strategy to fit best external factors.

Strategic management is necessary for every company whether a startup or a global corporation. It can even used to help steer projects (school, work) to succes.
Usually employed by the team leader/CEO/Managing Director, it provides the overall drection to the whole enterprise.
The last part of the definition is important, "to change the strategy to best fit external factors". Having a great strategy is only half the battle, keeping it great is the second half. And you don't always have control of that. Enterprises can fail despite 'excellent' strategy because the world changes in a way they failed to understand. A strategy must connect with purpose, vision and likely current and future trends.

Strategic management can be seen as a combination of strategy formulation and strategy implementation, but strategy must be closely aligned with purpose.

RStrategy Formulation

involves:

• Doing a situation analysis: both internal and external; both micro-environmental and macro-environmental.
• Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
• These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

AKA: Where you are now| Where you want to go | How to get there

(SWOT, PEST, Core competence identification, 5 forces,..)

Strategy Imlementation

involves:

• Allocation of sufficient resources (financial, personnel, time, technology support)
• Establishing a chain of command or some alternative structure (such as cross functional teams)
• Assigning responsibility of specific tasks or processes to specific individuals or groups
• Managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.
• When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Strategy formulation and implementation is an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is dynamic - partially planned and partially unplanned.

Strategic Inflection Points

There are critical points at which a strategy must take a new direction in order to be in step with a changing business environment. These critical points of change are called strategic inflection points.

"a strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end. Strategic inflection points can be caused by technological change but they are more than technological change. They can be caused by competitors but they are more than just competition. They are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient." Andrew S. Grove, Intel

He goes on to give examples:

"In the mid-eighties, the Japanese memory producers brought upon us an inflection point so overwhelming that it forced us out of memory chips and into the relatively new field of microprocessors. The microprocessor business that we have dedicated ourselves to has since gone on to cause the mother of all inflection points for other companies, bringing very difficult times to the classical mainframe computer industry."

"The fact that an automated teller machine could be built has changed banking. If interconnected inexpensive computers can be used in medical diagnosis and consulting, it may change medical care. The possibility that all entertainment content can be created, stored, transmitted and displayed in digital form may change the entire media industry. In short, strategic inflection points are about fundamental change in any business, technological or not."

"You need to plan the way a fire department plans: It cannot anticipate where the next fire will be, so it has to shape an energetic and efficient team that is capable of responding to the unanticipated as well as to any ordinary event. Understanding the nature of strategic inflection points and what to do about them will help you safeguard your company's well-being."

Reasons why strategic plans fail

• Failure to understand the customer
  • Why do they buy
  • Is there a real need for the product
  • inadequate or incorrect market research
• Inability to predict enviromental reaction
  • What will competitors do
    • Fighting Brands
    • Price Wras
      
  • Will government intervene
• Over-estimation of resource competence
  • Can the staff, equipment, and processes handle the new strategy
  • Failure to develop new employee and management skills
• Failure to coordinate
  • Reporting and control relationships not adequate
  • Organizational structure not flexible enough
• Failure to obtain senior management commitment
  • Failure to get management involved right from the start
  • Failure to obtain sufficient company resources to accomplish task
• Failure to obtain employee commitment
  • New strategy not well explained to employees
  • No incentives given to workers to embrace the new strategy
• Under-estimation of time requirements
  • No critical path analysis done
• Failure to follow the plan
  • No follow through after initial planning
  • No tracking of progress against plan
  • No consequences for above
• Failure to manage change
  • Inadequate understanding of the internal resistance to change
  • Lack of vision on the relationships between processes, technology and organization
• Poor communications
  • Insufficient information sharing among stakeholders
  • Exclusion of stakeholders and delegates

Caveat

Although important, too much direction can stifle creativity, especially if it is rigidly enforced. In an uncertain and ambiguous world, fluidity can be more important than a finely tuned strategic compass. When a strategy becomes internalized into a corporate culture, it can lead group think. It can also cause an organization to define itself too narrowly - market myopia.

(Marketing myopia: organizations was constricted in terms of what they, too narrowly, saw as the business they were in - e.g. oil companies redefining their business as energy rather than just petroleum.

Marketing hyperopia - a better vision of distant issues than of near ones.

Marketing macropia - meaning an overly broad view of your industry.

)