Technical Analysis and Strategic Projection

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Strategic Planning in a Software

Company

Professor Jyrki Kontio Software Business Laboratory Helsinki University of Technology

SOFTWARE BUSINESS LABORATORY Helsinki University of Technology

http://www.sbl.tkk.fi/

| Date: 15-Feb-05 | © Jyrki Kontio |Page: 2 |

What is a Strategy?

Definition of what we want to accomplish and

how we plan to achieve it

Consists of

Situation and environment analysis

Planning of future scenarios, visions

Strategic intent

”we will be satisfied when ...”

Definition of what it takes reach the strategic intent

who are the customers,

what is the product offered to them, how is it marketed,

what is the added value the product provides, how products differ from competitors products

Mission

(2)

Strategic Planning and Deployment Cycle

Business model Mission, Strategic Intent, Values Action Plan Deployment Objectives and measures Feedback and follow -up Strategic Positioning Environment Resources

Strategic Positioning

What business are we in and how do we differ

from other players?

Customers and markets

Offering: products and services Sales and distribution channels Competitors

Value proposition

Differentiation from competition Critical success factors

Revenue logic

How does the money flow in?

Liiketoimintamalli

Missio, visio, arvot Missio, visio, arvot

Toimenpiteet Toimenpiteet Tavoitteet, mittarit Tavoitteet, mittarit ur an ta j a pa la ut e ur an ta j a pa la ut e Strateginen asemointi Missä bus. olemme?

Ympäristö Missä ympäristössä toimimme? Voimavarat

Mitä voimavaroja tarvitsemme? Strateginen asemointi Missä bus. olemme?

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Customer’s value chain

Value Proposition

Product Offering

7

HELSINKI UNIVERSITY OF TECHNOLOGY

Services Architecture and technology Software Functionality Process capability People

Resources

What are the resources needed to compete in the business?

Capabilities

Competences of personnel

Processes

IT-systems and infrastructure

Position in the environment

Position in the value chain Partners and subcontractors

Other resources Company structure Financial resources Brand IPR Liiketoimintamalli

Toimenpiteet Toimenpiteet Tavoitteet, mittarit Tavoitteet, mittarit Jalkautus Jalkautus Se ur an ta j a pa la ut e Se ur an ta j a pa la ut e Strateginen asemointi Missä bus. olemme?

Ympäristö Missä ympäristössä toimimme? Voimavarat

(4)

Capabilities and Competitiveness

Capabilities that create a radical, novel and new compatitive

advantage. Usually through points of discontinuity.

Capabilities that create a

Competitive Advantage (CA)for a company

Capabilities that are common to companies in the industry and satisfy the Basic Competitive

Requirements (BCRs)in the industry. They are necessary but not sufficient prerequisities for being in the business

Capabilities that have an indirect effect on competitiveness. Support Capabilities Basic Competitive Capabilities Competitive Capabilities Radical Capabilities Large Small Impact o n comp et it iv en ess Processes/ Systems Organization/ Competence Products/ Customers/ Partners Operational model

Management System

Execution Business/ product programs Customer Cases Demand/ Supply Chain Includes process definitions and information systems that are used

Organizational

structure

Competencies existing in the organization

Products and roadmaps Customer base and

targeted segments

Partners

Marketing and sales

activities Product development projects and programs Manufacturing of products Inbound logistics Product delivery to customers

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| Date: 15-Feb-05 | © Jyrki Kontio |Page: 11 | Processes/ Systems Organization/ Competence Products/ Customers/ Partners Operational model Execution Business/product

programs CustomerCases

Demand/ Supply Chain

Strategy/ Intent & Objectives

Management System

Reviews

Plans Actions

Metrics

Examples of Capabilities

Asiakastoimialan ja –tarpeen

ymmärtäminen

Asiakkuuksien ja asiakastarpeiden

hallinta

Kokonais- tai ratkaisutoimituskyky

Teknologian kehittämisen hallinta

Tuotteistamisen hallinta

Markkinoinnin ja myynnin hallinta

Toimitus- ja palveluketjun hallinta

Muuntautumiskyky

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Analysis of the Environment

What is the environment in our business”?

What factors and players influence our

business?

How do the changes influence our

business?

Competitors, current and new Bargaining power of customers Bargaining power of suppliers Threat of competing products Availability if complementary

products

Liiketoimintamalli

Mitä voimavaroja tarvitsemme?

Sources of Changes in the Environment

Political changes

Economic changes and trends

Social and cultural changes

Technology changes

Legal changes

The environment

Industry changes

Between industry Within an industry

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Examples of an Industry Change

Myynti ja jakelu Sovellus-ohjelmistot Varus-ohjelmistot Laitteistot Suorittimet

IBM Digital Sperry Wang

Vertical Software Industry Structure – ca. 1980’s

Myynti ja jakelu Sovellus-ohjelmistot Varus-ohjelmistot Laitteistot Suorittimet Vähittäis-myymälät Super-storet Dealerit Suora-myynti Word Word Perfect ym.

DOS ja Windows OS/2 Mac Unix

Compaq Dell Packard Bell HP IBM Intel arkkitehtuuri Motorola RISCt ym.

New horizontal industry structure – ca. 1995

Andy Grove, 1996

Strategic Intent

Strategic intent

describes the planned

state of the firm

Usually (or ideally) in terms of concrete,

measurable objectives

Fixed to a specific point in time

Highlights the differences from the current

state

Often a ”stretch state”, i.e., ambitious set of

objectives

Sometimes the term ”vision” is used

Liiketoimintamalli

(8)

Examples of ”Mission Statements”

Our overriding objective is to create shareholder value

by continuing to be the world's premier entertainment company from a creative, strategic, and financial standpoint

We will be the leading forest product company in the world. We take the lead in developing the industry. Customers choose us because of the value we create for them. We attract investors because of the value we create. Our employees are proud to work with us. We are an attractive partner for our suppliers

To be the world leader - the customer's first choice - in

construction services and project development.

What Is a ”Value”?

Collins and Porras (Built to Last):

Core values are principles that

describe the fundamental [good]

beliefs and principles that are shared

by all people in the company.

Having good values correlates with

long-term success of a company

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Common Values

(AMA survey)

Q. What are the stated values of your organization?

Customer satisfaction 77%

Ethics/integrity 76% Accountability 61%

Respect for others 59%

Open communication 51%

Profitability 49% Teamwork 47% Innovation/change 47%

Continuous learning 43%

Positive work environment 42%

Diversity 41% Community service 38% Trust 37% Social responsibility 33% Security/safety 33% Empowerment 32%

Employee job satisfaction 31%

Have fun 24%

Why Are Values Important

”One of the most important management

tools when managing dynamic business”

(Alahuhta)

Some values correlate with research and

creative work

(Kanter; Rubenstein; Constantine; Humphrey)

:

Open communication Trust

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Whose values are these:

Customer satisfaction Customer satisfaction

Respect for individualRespect for individual

AchievementAchievement

Continuous learningContinuous learning Answer: Nokia

A successful example of a company that applies values consistently IntegrityIntegrity RespectRespect ExcellenceExcellence CommunicationCommunication Answer: Enron

Enron turned out to be one of the biggest corporate frauds in U.S. business history

Î Stated values and real values are not the same thing Î Empty or phony value statements create cynical and

dispirited employees and undermine managerial credibility

Key Lessons

(Lencioni)

Understand the different types of values:

Core:

deeply ingrained principles that guide all actions and are

part of the organization's culture Aspirational:

values that are lacking, but are needed

Permission-to-play:

values that reflect minimum behavior and social

standards for employees Accidental:

Values that develop without being cultivated by

management and reflect the common interest and personalities of employees

Be aggressively authentic Own the process

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Deploying Values

Values must be authentic and specific to the organization Values should not be developed by building a consensus

but they should impose a set of fundamental, strategically

sound beliefs on a broad group of people.

values should be developed by a small group, including any

founders, the CEO, and a handful of key employees. This process should not be rushed.

The authentic set of core values need to be integrated into every employee related process

We all should constantly reminding employees that core

values form the basis for every decision the organization makes

Core values should be embedded into the system and continuously promoted and reinforced.

Strategy As an Intention vs. Outcome

Organizations develop plans for their future They also evolve patterns out of their past

Plans => Intended strategy Patterns => Deliberate strategy

Changing environment => Emergent strategy

Plans + Patterns + Externalities => Realized

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Kirjallisuutta

Geoffrey A. Moore, Crossing the Chasm David B. Yoffie, Michael A. Cusumano,

Competing on Internet Time

David B. Yoffie, Judo Strategy

John W Mullins, The New Business Road Test:

What Entrepreneurs and Executives Should Do Before Writing a Business Plan

Peter F. Drucker, Management Challenges for

the 21st Century

Michael E. Porter, Competitive Strategy:

Techniques for Analyzing Industries and Competitors

Henry Mintzberg et al., Strategy Safari: A Guided

Tour Through the Wilds of Strategic Management