[caption id="attachment_29387" align="alignright" width="252"] Dada Adefolami:“However, strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to control mechanisms for guiding the implementation of the strategy.” [/caption]Strategic Management: Tools of Executive Decision Making By Dada Adefolami. Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company's top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes. Managing strategy, higher education institutions are under increasing pressure to produce corporate and strategic plans, both for external audiences and for the internal purposes of setting and achieving goals. They are significantly dependent upon public investment and the expectations of public bodies as well as upon a fast-changing market for their products and services. However, strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to control mechanisms for guiding the implementation of the strategy. Strategic planning became prominent in corporations during the 1960s and remains an important aspect of strategic management. MANAGING STRATEGY applied as a process and how to deal with implementation. Strategy needs to be managed as a staged process – see table below. The first stage is one of diagnosing the current position – quite separate from that of option generation. This separation is crucial, as otherwise managers will be trying to do too many different things –analytical and creative – all at the same time; the result being a mess. STRATEGIC PLANNING PROCESS 1 Current position SWOT PEST Five forces Vision and objectives Competitive bench-marking 2 Future options Cunning plan / checklists GAP analysis Strategic option grid 3 Strategic breakthroughs Value and cost drivers 4 Implementation Difficulty over time 5 Control and learning Can select from those options a small number of options – maybe as little as 3 – that are true ‘strategic breakthroughs’ to implement in this period, or ‘strategic decisions that will have a major impact on competitive position or capability or both, and on financial performance’. If these breakthroughs are too numerous, there will be a lack of critical mass of resources, effort and attention. Implementation is a separate cycle of strategic thinking (stage 4) where we are scoping strategic projects, doing detailed planning, business cases, the financials, planning change, gaining support and mobilising. This is still the land of strategic thinking. Final stage, control and learning, is not just about monitoring the operational and financial metrics, but also progress against strategic milestones. CEO/ CFO will play a very big part in this to ensure that it doesn’t get too tactical. This is also a learning process too, reflecting on what is/isn’t working in implementation and why, and adjusting it, and also continuing to learn about changing environment. This is a very organic, living process and this may not work well if there is too much emphasis on metrics and control. Turning to number 3, implementation, be warned this is often the graveyard of strategy. Here: performance = quality of strategy x quality of implementation x timing. This explains if messed up in implementation, the result can be so poor. Timing is also very important too, as the external and internal timings need to be right, so some strategies might get accelerated and some delayed. To get implementation right requires the following: 1. Project managing of strategic breakthroughs 2. Robust business cases 3. Change management issues thought through and managed 4. Appropriate strategic milestones and metrics frameworks in place 5. Strategy implementation techniques used well. Strategic breakthroughs, like entering a new market or a new distribution channel, are complex and may impact different parts of the organisation. Therefore, to project manage mean that instead of relying on busy operational managers to do it, some managers are full-time project managers instead. Project managing business projects, especially those involving a lot of change, is a different thing to managing technical projects, and demands a more fluid approach. There is a lot more work on business cases and on the broader long-term financial projections of revenues and costs. This involves looking at the value and cost drivers of each of these, the key assumptions, and evaluating these qualitatively and quantitatively, and producing influential and resilient business cases and incremental cash flows by strategic project. This is interesting work for the chief Finance Officer. Change management can be addressed by taking the key shifts between the present and the future and doing an extended ‘gap analysis’ of these, or ‘from-to’ analysis. Here split out the key shifts of ‘from-to’s’ and score how far from the old to the new we are, perhaps on a 1-to-5 scale, use by analysing the key shifts as: 1. strategy 2. systems 3. skills 4. structure 5. Style. All the usual softer issues need to be thought through in terms of buy-in, culture change, structure change, team building/rebuilding, etc. It is well known that in a major change some individuals and teams will move through the transition phases of change at different speeds and, in the course of this, performance can dip. This effect is magnified if done badly – for example if an acquisition is integrated badly. Where the change is severe due to the difficulties of the business – a ‘strategic turnaround’ – then this puts more pressure on the strategy development and implementation process. Leadership needs to be both commercially and strategically wise, and magnetic. Where there is inappropriate leadership, strategy will get bogged down no matter how good the process is. In terms of controls, it is important that besides the conventional financials and efficiency metrics and customer satisfaction ones that we find in a ‘balanced score card’, also include more outward-looking, dynamic and less tactical ones too, such as: 1. Relative market share 2. Customer ratings compared with those of key competitors 3. Strategic breakthrough milestones achieved 4. Long-term economic value actually generated (‘economic value added’ is the net present value of net cash flow in the business). Finally a number of strategy implementation tools can be deployed, including: 1. The option grid to evaluate and prioritise different ways of implementing a strategy, and also individual strategic projects, both before and after. 2. The extended ‘gap analysis’ in the form of ‘from-to’ analysis. 3. Value and cost driver analysis. When evaluating implementation difficulty, to go behind the box in the strategic option grid and also within the detailed planning of the breakthroughs – there are a number of tools, one of these, ‘force field’ analysis, which splits out and evaluates the key enablers and constraints. To evaluate how impactful the positive and negative forces are likely to be - on the basis of elegance implementation plan, you look at the overall picture of vector arrows up and down: if they are mainly down it tells you that you will have a very rough ride. Project management, should kick in at the start. The first stage of the process should be to do a ‘plan for the plan’. This is an area where the CFO should be very much being involved. A ‘plan for the plan’ is defined as ‘a detailed document of the optimal stage-by-stage process which deals specifically with the strategic issues faced in a creative, incisive and robust way, and that produces appropriate insights and outputs of maximum value’. A plan for the plan typically contains: 1. A list of the key strategic issues 2. A very high-level view of the likely gap analysis to get an idea of the stretch 3. Some separate first-stage planning activities (‘planning modules’), such as market analysis, customer value analysis, technology change, competitor analysis, process development, organisation development, cost management 4. Second-stage activities, such as strategic options workshop, board integration workshop, change management, communication, controls and metrics timings and time absorbed. Each one of these might have as a one-pager: 1. Outputs 2. Process and tools 3. Inputs (data, etc.) 4. Interdependencies with other modules 5. People, timings and facilities. The Finance Officer/ Manager Can play a big role in planning this. There is a second area of input for the CFO in writing ‘strategic position papers’ or ‘documents which diagnose the current position and explore options for a particular area or more generally without reaching definitive conclusions’. The aims of these are to generate a rich debate of the issues before making resource and other decisions, to provide input to the final strategic plan, to build commitment and to influence key stakeholders. Managing Strategic innovation and change addresses how technologies evolve and how they drive the need for organizational change and adaptation, focusing on the general-management challenges that innovative firms face. Hence SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. PEST analysis ('Political, Economic, Social and Technological analysis''') describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. Some analysts added legal and rearranged the mnemonic to SLEPT; inserting Environmental factors expanded it to PESTEL or PESTLE, which is popular in the United Kingdom. Balanced scorecard (BSC) is a strategy performance management tool-a semi-standard structured report, supported by design methods and automation tools, which can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions. Dr Dada Adefolami, MBA. PhD. CPF Acct. is Finance / Management Consultant and Certified Forensic Accountant(surajudada@yahoo.com; 08052043855)