What is Strategy? (Part Two)

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What is Strategy? (Part Two)
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Key Concepts

• Managerial Cognition
• Business Model
• Stakeholders
• The Balanced Scorecard

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Managerial Cognition
Involves managements beliefs and understanding
about Macro/Industry Environment (e.g.,
demographic trends, competitors) How to Compete
(e.g., Strategic positioning low cost,
differentiation, focus) Appropriate Size and
Diversity ( e.g., integrated healthcare
systems) How to Organize (organizational
structure)
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Cognitive Biases in Strategic Management
Examples Confirmation Bias Availability
Heuristic Non rational Escalation of Commitment
Groupthink
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Business Models
Answers the following questions How do we make
money in this business? What is the underlying
economic logic that explains how we can deliver
value to customers at an appropriate cost?
Consider the Following Who is the customer? What
does the customer value? What activities will be
performed? How will these activities be performed?
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Look at the Components of the Business
How are Revenues Generated?
How Does the Firm Lower Costs?
Greater Profitability
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Dell Corporations Business Model

• Primary Revenue Streams
• Direct Sales Model for Individual Customers
• Relationship-Oriented Field Sales Force for
  Corporations and Institutional Customers
• Services (e.g., Training and Certification,
  Support, Professional, Deployment, etc.)
• Multiple Product Lines in Different Segments of
  the Industry (e.g., enterprise systems, client
  systems, printing and imaging systems, software
  and peripherals)
• Financial Services (Financing)

Focused RD and Branding via advertising
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Dell Corporations Business Model
Costs are Lowered Through

• Direct Sales Model and Extensive Market
  Segmentation
• Build to Order Manufacturing and Mass
  Customization
• Extensive Testing and Quality Control
• Partnerships with Suppliers and JIT Practices
• E-Commerce Technology (Sales and Service Support)

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Measuring Performance
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What are stakeholders? Who are the different
organizational stakeholders? What are some
of the objectives of these stakeholders?
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Impact of Stakeholders

• Relative influence and power over issues and
  initiatives
• Participation in strategic management process
• Expertise and validation
• Problem-solving and collaboration

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Balanced Scorecard
Four Types of Measures Financial How does the
firm look to its Shareholders/Creditors? Customer
How does the firm look to its
Customers? Internal Business Processes
Identifies processes most important to meet
shareholder and customer expectations. Learning
and Growth Identifies the infrastructure that
the firm must build to create long-term growth.
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Financial Measures
Return on Equity Cash Flow Return on
Assets Return on Investment Project
Profitability
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Customer Measures
Value for money Competitive Price Customer
Service Customer Retention Market Share Image
and Reputation
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Internal Business Processes
Superior Project Management Product development
cycle Innovation Product Quality
Measurement Order Process Time
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Learning and Growth
Product/Service Innovation Empowered
Workforce Information Systems Capabilities Motiv
ation Employee Capabilities, Satisfaction,
Retention, Productivity
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How does the firm decide what to measure?
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Mission
Critical Success Factors
Financial
Customer
IBP
L G
Financial
Customer
IBP
L G
Critical Measures
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Mission
North Oakland Medical Centers is a
multi-divisional urban healthcare system whose
mission is to deliver high quality healthcare and
health related services in northern
Oakland County in a cost effective and efficient
manner.
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Financial Critical Success Factors and Measures
Critical Success Factors Increase in capitation
contracts Reduce emergency room use Expand
community philanthropy Critical
Measures Number of capitation contracts
received of capitation contracts relative to
competitors unnecessary emergency room
usage Dollars raised (numbers and dollars of
corporate donations)
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Customer Critical Success Factors and Measures
Critical Success Factors Prompt Service High
Quality Care Staff Attitude and Friendliness Good
Food Critical Measures Emergency room and
Admission times Patient Referrals/Repeat Patients
and External Ratings Patient Satisfaction
Surveys Number of Complaints
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Internal Business Perspective Critical Success
Factors and Measures
Critical Success Factors Cost
Control Efficiency Selected Specialization Quality
of Care Critical Measures Cost per patient
day Analysis of use of equipment and space,
degree of automation Cancer, heart (provide value
for the cost) Evaluations of doctors, staff and
administrators, patient satisfaction
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Learning and Growth Critical Success Factors and
Measures
Critical Success Factors Doctor research and
creativity Continuous innovation State of the art
technology Partnerships with research
institutions Critical Measures Number of
professional presentations and publications Number
and quality of new services offered in past 5
years Degree automation, expenditures on
software/hardware, rate of increase of
outpatients Number of joint activities
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Oakland University
Who are Oaklands stakeholders? What are some
of the objectives of these stakeholders?
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How are these objectives linked to
performance? How should performance be
measured? What needs to be measured? How
should the SBA best measure performance based on
their stakeholders objectives?
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SBA Mission Statement The mission of the School
of Business Administration (SBA) is to advance
knowledge and enhance students' abilities to
manage in a global business environment. The
mission is achieved through a synergistic
combination of teaching, scholarship, and
professional service, with emphasis on the
linkage of theory and practice, and the
application and management of technology. Toward
the achievement of these ends, the SBA promotes
collaborative relationships among students,
faculty, administrators and employers.