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Why Your Strategy Stinks
1. WHY YOUR STRATEGY STINKS Richard Farr Brian Wood Telos Solutions Life Convention, Edinburgh: November 2009
2. Introductions Brian Wood Actuary CEO, Telos Solutions Former CEO of 2 lifecos ‘Blue Ocean Strategy’ licensed practitioner Co-author of “Beat the Pensions Crisis” Richard Farr Marketing specialist Business Development Director, Telos Former director of AIFA and Association of Mortgage Intermediaries Extensive experience in building societies and mortgages sector 2 Why your Strategy Stinks Farr & Wood
13. More time spent analysing than observing and thinking6 Why your Strategy Stinks Farr & Wood
14. Classic strategy theory (Porter et al) Analyse the market boundaries, plotting value against cost Choose the optimum position along the high value/ high cost to low value/ low cost spectrum There are no other choices Assumes the market is inherently static – innovation changes it slowly 7 Why your Strategy Stinks Farr & Wood
17. A slow death spiral8 Why your Strategy Stinks Farr & Wood
18. “McKinsey takes an overall, independent, and fact-based view of a client’s performance. We rely on facts because they provide clarity and align people.” “When a BCG consultant walks through your door, he or she will be thinking about two things: the competition you face and new ways for you to win.” “Bain work with top management to beat their competitors and generate substantial, lasting financial impact ... we dig deep into the numbers, as the basis for creating solutions.” “Booz Allen are experts in understanding industry structure and dynamics and in boiling it down to the insights that are most relevant to our clients’ situations.” Major strategy firms ... 9 Why your Strategy Stinks Farr & Wood
19. So: this is why your strategy probably stinks 1. Future orientation 2. Customer intimacy 3. Differ-entiation 4. Delivery 10 Why your Strategy Stinks Farr & Wood
30. Impact on Nintendo Low-cost graphics Low-cost controls Low-cost game development Production cost of Playstation: $800 Production cost of Wii: $150 Wii sales overtook Xbox and Playstation combined in 2008 Nintendo now worth more than Sony 16 Why your Strategy Stinks Farr & Wood
31. Competitor World View Our World View The area to expand Source of poor strategy FALSE 17 Why your Strategy Stinks Farr & Wood
32. Nintendo used ‘Blue Ocean’ tools RED OCEAN Existing markets Fierce competition Cost-plus pricing High legacy costs Thin margins BLUE OCEAN Uncontested market space Competition is irrelevant Market pricing Low costs High margins 18 Why your Strategy Stinks Farr & Wood
35. You have many more non-customers than customers Current customers are already served by you - and your competitors Everyone is a customer somewhere – so you can observe what they need/ like If the further reaches are too scary, dip your toe in by observing the “Soon-to-be” Now Soon-to-be Refusing Unexplored Observing non-customers 21 Why your Strategy Stinks Farr & Wood
36. Observe non-customer needs: Six paths 6 Industries that offer an alternative Other strategic groups Chain of buyers Complementary products & services Functional and emotional appeal Time 22 Why your Strategy Stinks Farr & Wood
37. Construct a new Canvas based on value Raise What factors should be raised well beyond industry standard? Create What factors that the industry has never offered should be created? Eliminate What factors that the industry has taken for granted should be eliminated? Reduce What factors should be reduced well beyond industry standard? 23 Why your Strategy Stinks Farr & Wood
46. Four attributes of great strategy: 1. Future orientation 2. Customer intimacy 4. Delivery 3. Differentiation 27 Why your Strategy Stinks Farr & Wood
47. Strategy and Deliveryare completely different disciplines Strategy is about creating a coherent direction that customers can relate to. Operations is about the nitty-gritty of internal process, expertise, people, costs. Success requires both – no point having a strategy that you can’t implement. 28 Why your Strategy Stinks Farr & Wood
48. The delivery gap Strategy thinking is: outside-in risk-taking conceptual Operations thinking is: inside-out risk-avoiding tangible So a natural gap tends to exist in most organisations 29 Why your Strategy Stinks Farr & Wood
49. Closing the gap Convert the strategy into operational terms tangibles: what will it look/feel/sound like? Explicitly manage the continuous flow between strategy and operations always messy Start with a ‘top-slice’ exercise to evaluate: costs timescales risks 30 Why your Strategy Stinks Farr & Wood
51. The full strategy development process Integrate with delivery Construct new strategy canvas Engage with non-customers Existing customer pain-points “As-is” Strategy Canvas 32 Why your Strategy Stinks Farr & Wood
52. The acid tests Are you offering something different and special to potential customers? vs Will people pay a fair “market price” for what you offer? Can your costs be low enough so that you generate a profit? Can you deliver it? 33 Why your Strategy Stinks Farr & Wood
