ETHIC AND RESOURCES BASED STRATEGY

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ETHIC AND RESOURCES BASED STRATEGY TO IMPROVE
OUR COMPETITIVENES POWER
Dr. Heru Kurnianto Tjahjono
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Background

• Global Economy and Global Crises
• Competitiveness Power

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The Power of Competitiveness

• Number 37 soon after 1998 economic crises.
• Turn down to number 54 in 2008. (Source The
  World Economic Forum)
• One of the reason of this decreasing in power of
  competitiveness is related to Strategic Human
  Resource Management.
• Ex Our competitiveness power in tourism, just
  low price item contribute to competitiveness
  power, and others like services, technology,
  infrastructure do not contribute.

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Natural Resources

• We are rich of natural resources like
• mining (oil, gas, coal),
• farming,
• ocean (fish),
• beautiful sceneries,
• etc

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Human Resources

• Indonesia actually has a big potential to become
  a leading and enlightening country.
• Ex 1 Indonesian students had won many
  international science tournaments such as
  mathematics olympics, physics olympics, and other
  science tournaments.
• From time to time China, Israel and India have
  competed each other tightly.
• Ex 2The worlds youngest professor who works at
  one of the universities in USA, Prof. Nelson
  Tansu, is an Indonesian. He was born in Medan, on
  Oktober 20, 1977 and still hold an Indonesian
  pasport.(Source website of Prof. Nelson Tansu)
• It means Indonesian are potential people.

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Paper Focus

• How to organize natural resources and human
  resources?
• Strategic Management has an important role
• Resources Based view is perspective to integrate
  intangible resources an tangible resources
• Ethic as based strategy beside resources based
  view to create social capital as the most
  important capital in organization.

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Determining the Competitive Value of a Company
Resource

• To qualify as competitively valuable or to be the
  basis for sustainable competitive advantage, a
  resource must pass 4 tests
• Is the resource hard to copy?
• Does the resource have staying power is it
  durable?
• Is the resource really competitively superior?
• Can the resource be trumped bythe different
  capabilities of rivals?

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How to Organize Our Resources to Achieve
Sustainable Competitive Advantage?

• Determine our position
• Create a strategy map
• Create a lingkage between Vision, activities and
  budget
• Integrate management practices between functions
• 4 Steps
• Human capital as foundation
• Organization and social capital
• Firm or nation Equity
• Outstanding Financial Return

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Determine our position (1) Internal
capabilities(2) External Situation, for exThe
Components of a Companys Macro-Environment
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A Firms Ethical Responsibilitiesto Its
Stakeholders
Owners/shareholders Rightfully expect some form
of return on their investment
Employees - Rightfully expect to be treated with
dignity and respect for devoting their energies
to the enterprise
Customers - Rightfully expect a seller to provide
them with a reliable, safe product or service
Suppliers - Rightfully expect to have an
equitable relationship with firms they supply and
be treated fairly
Community - Rightfully expect businesses to be
good citizens in their community
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The Role of Strategic Management Practices and
Its Paradox

• Strategy as a Dream
• Our nation has lost of its collective dream to
  build and to become a competitive nation.
• A Dream actually is an extraordinary energy to
  push an extraordinary progress.
• In a strategy terminology, a dream becomes an
  essential concept of strategic intent, which is
  an intention and a willingness to always
  continually be strived for success.

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Strategy as

• Strategy as Process
• One thing that we can learn from the Soeharto era
  is a grand design or blue print of continuous
  development.
• Good or bad of strategies used during the new
  era, the existed of implementaton deviations or
  the existed of corruption, colusion and nepotism,
  we can see that there was a flow of formal
  process in a strategy. Starting from Vision,
  Objectives, Program, Aktivities and Budget.
• Conceptually budget follows activity. Activity
  itself is a translation of vision, objective and
  program.
• But in practice, activity follows budget.

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Strategy as

• Strategy as Politics
• In reality, strategy which related to many people
  and has an extraordinary prosperity usually
  will invite political process.
• Basically political process is related to
  interest for the wealth access.
• In practice often strategy made by an authorized
  istitution did not work as pro-active strategy.
  It means implementation did not suitable with
  previous plan and intention.
• Political process is one important factor that
  explain that phenomena.
• Same as in global political strategy, it was not
  clear to whom the policy of importing rice
  actually. A policy which only make farmers
  suffered.
• See cases of Ghana and Honduras (Kompas, Thursday
  November 8, 2008. Quote from Prof. Maksum, Ph.D
  UGM farming expert).

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Strategy as

• Strategy as Legitimacy
• Many people in Government, business agents and
  other instituions have not seen strategy as an
  urgent task.
• People make formal strategy only to get an
  aknowledment and legitimation.
• There are still many practices in State
  Government (Pemda) where process of making
  Strategy Plan (Renstra) is delegated to staff
  employees just because it needed for an
  inspection.
• Banking recapitulation case pasca 2008 crises and
  consultation assistance from foreign consultant
  BAH, nothing other than for the realization of
  financial assistance to inject those banks.

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Strategy as

• Strategi as Learning
• Crises repetition which we face is part of
  learning process for our nation.
• In strategy perspective, not all strategies will
  go as pro-active. Many strategies go re-active
  because of the uncertainty of external
  environment.
• The important thing as an organization, our
  nation should have capacity to learn in order to
  anticipate environment changes that often are
  turbulent.

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Strategy as

• Strategi as Culture
• We do not have the same values to support our
  bussiness vision and strategies.
• Actually culture is the most important intangible
  resources to achieve sustainable competitive
  advantage.
• Culture is very hard to imitate by competitors
  because its characteristics embedded in companys
  history and involve complex process.
• We cannot determines the causes and the effects
  of what that create a culture.

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Our Social Capital

• Social capital consist of structural, relational
  and cognitive aspects.
• Social capital related participation, mutual
  trust and proud of our groups or community.
• Many research explain that social capital
  influence degree of performance in many level as
  individual, group, organization and nation.
• Putnam (1995) explain that wealth of American
  decrease. It caused by low of social capital
• How about social capital in Indonesia?

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Our Social Capital

• Real sample related structural aspects is the
  nation commitment to pay tax which is still low
  and also zakatpayments that have not optimum.
• From relational perspective, our nation is hit by
  untrustworthiness one to another, vertically
  between government and communities or
  horizontally among the communities.
• This is related to corruption, colution and
  nepotism culture in our country.
• From cognitive aspect, there is a tendency that
  patriotism spirit as citizen tend to be faded.

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Islamic Values In Business Strategy

• Concept
• Competency
• Credible
• Caring
• Innovation
• Creativity

• Customer Intimacy
• Efficiency
• Fair Process
• Trust and Commitment
• Voluntary Cooperation
• Etc.

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Blue Ocean Vs. Red Ocean Strategy
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Blue Ocean vs. Red Ocean Strategy
Blue Ocean Strategy
Red Ocean Strategy

• Create uncontested market space
• Make the competition irrelevant
• Create and capture new demand

• Compete in existing market space
• Beat the competition
• Exploit existing demand

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Blue Ocean vs. Red Ocean Strategy
Blue Ocean Strategy
Red Ocean Strategy

• Break the value- cost trade off
• Align the whole system of a firms activities
  with its strategic choice of differentiation and
  low cost

• Make the value-cost trade off
• Align the whole system of a firms activities
  with its strategic choice of differentiation or
  low cost

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Blue Ocean Strategy Tools

• A diagnostic tool for building a compelling blue
  ocean strategy
• It captures the current state of play in the
  known market space
• Allow you to understand
• where the competition is currently investing
• the factors the industry currently competes on in
  product, service and delivery
• what customers receive from existing competitive
  offerings on the market

Strategy Canvas
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Four Action Framework
Which of the factors that the industry takes for
granted should be eliminated?
Eliminate
Which factors should be reduced well below the
industrys standard?
Reduce
Which factors should be raised well above the
industrys standard?
Raise
Which factors should be created that the industry
has never offered?
Create
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Four Action Framework The Case of Cirque du
Soleil (A Circus Company)
Reduce
Eliminate

• Star performers
• Animal shows
• Aisle concession sales
• Multiple show arenas

• Fun and humor
• Thrill and danger

Raise
Create

• Theme
• Refined environment
• Multiple productions
• Artistic music and dance

• Unique venue

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Six Principles of Blue Ocean Strategy
Formulation Principles
Execution Principles

1. Reconstruct market boundaries
2. Focus on the big picture, not the numbers
3. Reach beyond existing demand
4. Get the strategic sequence right

• Overcome key organizational hurdles
• Build execution into strategy

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Formulating Blue Ocean Strategy
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1. Reconstruct Market Boundaries
Blue Ocean Strategy
Head-to-Head Strategy

• Focus on rivals within industry
• Focuses on competitive position within strategic
  group
• Focuses on better serving the buyer group

• Looks across alternative industries
• Looks across strategic group within industry
• Redefines the industry buyer group

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1. Reconstruct Market Boundaries
Blue Ocean Strategy
Head-to-Head Strategy

• Focuses on maximizing the value of product or
  service offerings within the bounds of its
  industry
• Focuses on adapting to external trends as they
  occur

• Looks across to complementary product and service
  offerings
• Participates in shaping external trends over time

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2. Focus on the Big Picture, not the Numbers
Focus on the Big Picture, not the Numbers
The Four Steps of Visualizing Strategy

• Visual Awakening
• Visual Exploration
• Visual Strategy Fair
• Visual Communication

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2. Focus on the Big Picture, not the Numbers

• Compare your business with your competitors by
  drawing your as is strategy canvas
• See where your strategy needs to change

Visual Awakening
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2. Focus on the Big Picture, not the Numbers

• Go to the field to explore the six paths to
  creating blue oceans
• Observe the distinctive advantages of alternative
  products and services
• See which factors you should eliminate, create,
  or change

Visual Exploration
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2. Focus on the Big Picture, not the Numbers

• Draw your to be strategy canvas based on
  insights from field observations
• Get feedback on alternative strategy canvases
  from customers, competitors customers, and
  noncustomers
• Use feedback to build the best to be future
  strategy

Visual Strategy Fair
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2. Focus on the Big Picture, not the Numbers

• Distribute your before-and-after strategic
  profiles on one page for easy comparison
• Support only those projects and operational moves
  that allow your company to close the gap to
  actualize the new strategy

Visual Communication
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3. Reach Beyond Existing Demand

• First tier Soon to be non-customers who are
  the edge of your market, waiting to jump ship
• Second tier Refusing non-customers who
  consciously choose against your market
• Third tier Unexplored non-customers who are in
  markets distant from yours

The Three Tier of Non-customers
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4. Get The Strategic Sequence Right
The Sequence of Blue Ocean Strategy
Buyer utility Is there exceptional buyer utility
in your business idea?
Price Is your price easily accessible to the mass
of buyers?
Adoption What are the adoption hurdles in
actualizing your business idea?
Cost Can you attain your cost target to profit at
your strategic price?
A commercially viable blue ocean idea
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Executing Blue Ocean Strategy
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5. Overcome Key Organizational Hurdles
Resource Hurdle
Cognitive Hurdle
Overcome Key Organizational Hurdles
Political Hurdle
Motivational Hurdle
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5. Build Execution Into Strategy
Fair Process of Strategy
Strategy Formulation Process Fair Process
Engagement, Explanation, Expectation clarity
Attitudes Trust and Commitment I feel my
opinion counts
Behavior Voluntary Cooperation Ill go beyond
the call of duty
Strategy Execution Exceeds Expectation self
initiated