DIAGNOSING AND MANAGING STRATEGIC CAPABILITIES

Mayank Aggarwal D003 Hemant Negi D039

Presented By Amol Darvekar D021 Nagaraju Oruganti D041

Saurabh Dhole D023 Subba Reddy P D042

AGENDA
Resource-based View of Competitive Advantage Useful? Diagnosing Strategic Capabilities
- Value Chain - Value Network - Activity Maps - Benchmarking - SWOT Analysis

Managing Strategic Capabilities - Limitations

- Stretching and Adding Capabilities - Managing People - Building Dynamic Capability

The Resource-Based View Of Competitive Advantage Useful?

Risk of Tautology

Lack of Specificity

Obtain rare and valuable resources in order to achieve, and further that those resources should be hard to imitate and nonsubstitutable - INVALID

Illustration Number 3.8, Page 154 Exploring Corporate Strategy by Johnson, Scholes and Wittington [Pearson]

Value Chain
Describes the activities that together create a product or service Cost of the value chain activities determines the value of the product Primary activities are directly concerned with the creation or delivery of a product or service Support activities help to improve efficiency of primary activities

Primary Activities
Inbound logistics : Activities concerned with receiving, storing and distribution of inputs Operations : Transforming inputs into final products

Outbound logistics: Warehousing, materials handling and distribution

Marketing and sales: Sales administration, advertising and selling Service : Installation, repair, training and spares

Support Activities
Procuring : Process for acquiring various resource inputs

Technology development: Fundamental to the innovative capacity of the organization

Human Resource Management : Recruiting , Training and managing Infrastructure: Systems of planning,finance and quality control

Value Chain

Value Network
Set of inter organizational links that are necessary to create a product or service Where are the costs and values created? Which activities are centrally important? Where are the profit pools? Make or Buy decision Partnering decision

Value Network Diagram

Characteristics of Value Chain

Primary focus is on the benefits that accrue to customers, the interdependent process and the resulting demand and fund flows
Value is a subjective experience Occurs when needs are met through provision of products or services Value is an experience and it flows from the recipient

SOURCE Value Chain versus Supply Chain by Andrew Feller, Dr. Dan Shunk and Dr. Tom

Value
A key distinction in defining the value depends on the exchange that generates value is between B2B or B2C Three forms of values in B2B case

1)Technical
2)Organizational 3)Personal
SOURCE - Value Chain versus Supply Chain by Andrew Feller, Dr. Dan Shunk and Dr. Tom

Business to Consumer

Supply Chain vs Value Chain

Supply chain is the downstream of flow of goods from the source to customer. Value flows from the customer in the form of demand to the supplier Supply chain concentrates on upstream on integrating supplier and procedure process, improving efficiency and reducing waste Value chain focus downstream on creating value in the eyes of the customer
SOURCE - Value chain versus Supply chain by Andrew Feller,Dr. Dan Shunk and Dr. Tom

Supply Chain vs Value Chain

Need For Integration

Flows of supply should synchronize with flows of value from customers

Perceptions of value in a marketplace become exaggerated market bubbles occur

SCM requires that product design should be fully integrated with production capability, delivery process and customer demand
SOURCE - Value Chain versus Supply Chain by Andrew Feller, Dr. Dan Shunk and Dr. Tom

Activity Map
Means of identifying strategic capabilities of a company The critical success factors in the market are identified Out of these factors are identified those on which the business outperformed the competitors Identification of clusters of activities that underpin these CSFs and how they link with each other Activity Maps also inform managers what they can do to preserve & develop strategic capability

Activity Map for Plasco

SOURCE: Johnson, Scholes & Whittington, Exploring Corporate Strategy

Lessons from Activity Mapping

The different activities that create value to customers are consistent with each other & reinforce each other It is difficult for a competitor to imitate a mix of such activities than to imitate any given one Even if imitation were possible, it could pose another problem for competitors

Benchmarking
Strategic capabilities concern the ability to meet and beat the performance of competitors Benchmarking addresses the need to assess these capabilities in relative terms Types of Benchmarking
Historical Benchmarking Industry/Sector Benchmarking Best-in-class benchmarking

Benchmarking at Xerox
Xerox Corporation is considered pioneer in benchmarking A benchmarking study in 1980s indicated superiority of Japanese competitors in cost efficiency, quality, and new product development

Every department was encouraged to look globally to identify bestin-class companies for benchmarks
For inventory control and customer responsiveness, Xerox benchmarked L. L. Bean, the direct-mail clothing company

SOURCE: Grant Robert M., Analyzing Resources & Capabilities

Benchmarking at GM
During the 1980s, GM conducted a benchmarking study
It found that Toyota could make a changeover from one model to another on assembly line in eight minutes The comparable time at GM plants was eight hours The result was profound inquiry within GM of its manufacturing strategy and operational capabilities

SOURCE: Grant Robert M., Analyzing Resources & Capabilities

The Value of Benchmarking

The importance of benchmarking lies in the impact these comparisons might have on behaviours One major criticism: You get what you measure It only compares the inputs, outputs or outcomes but not competences

It will not identify the underlying reasons for good or bad performance

Benchmarking UK Hospitals
Commission for Health Improvement instituted a benchmarking exercise to grade the hospitals Ratings were based on parameters such as waiting times, outpatient waiting times, cleanliness, achievement of financial plans etc. But, the exercise was criticized for the volatility of gradings year on year The main idea behind this exercise was to help hospitals know and overcome the difficulties and offer better services

SOURCE: Johnson, Scholes & Whittington, Exploring Corporate Strategy

What is SWOT Analysis and Why should you use one?

SWOT identifies the positives and negatives inside your institution (S-W) and outside of it, in the external environment (O-T)

Develops full awareness check of the situation which can help with both strategic planning and decision-making
It is simple and applicable to a variety of levels of operation. It can also be used for personal development.

When do you use SWOT?

Explore possibilities

Make decisions

Adjust and refine plans mid-course

Communicati on and organizing data

Listing Internal Factors: Strengths and Weaknesses (S, W)

Resources Processes and Experience

Human resources - staff, board members, target people Physical resources - your location, building, equipment

Financial - grants, funding agencies, other sources of income Activities and processes - programs you run, systems you employ Past experiences - building blocks for learning and success, your reputation in the community

Listing External Factors : Opportunities and Threats (O, T)

The economy local, national, or international Funding sources - foundations, federal, Investors

Economy
Future Trends

Demographics - changes in the age, race, gender, culture Physical Environment and Legislation

Who develops the SWOT?

Institutional Members An individual or a small group of people Stakeholders Board of Directors BU Heads

How do you use your SWOT Analysis?

Knowing what the positives and negatives of your program are puts you in a more powerful position for action. While a SWOT analysis is not in itself an action, it can be a support team to help you

Identify the issues or problems you intend to change

Set or reaffirm goals

Create an action plan

SWOT Analysis of the Telecom Sector in INDIA

MANAGING STRATEGIC CAPABILITY

The Limitations of Managing Strategic Capabilities

The competences are Valued But not understood

Management has awareness about positive impact and value of activities

Understanding of how positive impact arises is lacking

Care need to be taken not to disturb bases of such capabilities

Competences are not Valued

Managers have knowledge about activities and processes Positive impact or value of capability is not recognized May result in elimination of activities, which create value

Competencies are Recognized, Valued and Understood

Management has understood and recognized the value of competences Over-formalizing and codifying activities can be a threat Formal processes cannot integrate, synthesize, or create new directions -only humans can perform such processes

The Taj Hotel Group

Strategic capability- Strong ties with employees Effect of the new performance management systems

Apprehension among employees

Internationalizing Management creates ceiling for Indian Managers
SOURCE Case Study on The Taj Hotels, Palaces, and Resorts Harvard Business School

STRETCHING AND ADDING CAPABILITIES

Extending Best Practices Adding and Changing Activities Stretching Competences Building on Apparent Weaknesses Ceasing Activities Trade-offs External Capability Determinant

Extending Best Practices

Adding and Changing Activities

Enterprise Resource Planning Review of Credit Policy E-Commerce

Incentive Plans for employees Automating Procedures

Stretching Competences

SOURCE Business Strategy and Business Model : Extending the Strategy-Structure-Performance Paradigm by C. Zott and R. Amit [INSEAD-Wharton Alliance Centre for Global R & D]

Building on Apparent Weaknesses

Long queues with musical devices and motion censors

Press 4 to hear the Joke of the Day

Pick Enterprise. Well Pick You Up.

Danovel positioned itself as a specialist

SOURCES - How to Turn Your Business Weaknesses into Strengths by Sam Chan on www.hiretheworld.com - Turn that Weakness into a Strength by Jacky Tai in Singapore Business Review

Ceasing Activities
Drawbacks Virtues

SOURCE - Top 7 Outsourcing Advantages by James Buchi on www.operationstech.about.com

External Capability Development

Managing People For Capability Development

Targeted Training

HR Policies

People recognise importance of their work in terms of strategic capability of organisation

Develop Peoples Awareness

Building Dynamic Capabilities

Recognise intuition

Welcome conflicting ideas

Learning Organisation

Experimentation is a norm

Spiral of Knowledge Interaction

TO
Tacit knowledge Explicit knowledge

Tacit knowledge

Socialization (sympathised knowledge)

Externalization (conceptual knowledge)

FROM
Explicit knowledge Internalization (operational knowledge) Combination (systematic knowledge)

By Nonaka and Takeuchi

Knowledge-Creation Processes
Tacit knowledge Explicit knowledge Tacit knowledge Socialization Externalization Combination Explicit Internalization knowledge

Socialization Externalization

Sharing experiences between individuals Apprenticeship model Articulate tacit knowledge into explicit concepts Model building, metaphors, analogies Systematizing concepts into knowledge system Meetings, documents, computer networks Embodying explicit knowledge into tacit knowledge Learning by doing

Combination
Internalization

Socialization Ikuko Tanaka, a software developer, first learns the tacit secrets of the Osaka International Hotel baker Tacit

Tacit

Tacit

Externalization Translates secrets into explicit knowledge that she can communicate to her team

Tacit

Explicit Internalization Through process of creating product, team members enrich their tacit knowledge

Explicit Combination Team standardizes knowledge, putting it together in a manual and embodying in a product

Explicit

Explicit

SOURCE - The knowledge-Creating Company Ikujiro Nonaka, HBR, Nov-Dec 91

Thank You!