Introduction to Strategic Management
Porter (industry structure + unique positioning), Hitt (business-, corporate-, M&A and cooperative strategy), and three implementation readings (DICE, operating model, short→long-term resource allocation). Exam style: apply the framework to the case company, critique a proposal, recommend with a justified reason. Memorized lists alone will not pass — every point must be tied to the specific situation.
Porter = business-level (one product-market). Hitt = business-level and corporate-level (which set of businesses). DICE / Op model / Short-term→long-term = can the organization actually deliver the strategy? Objective 2's strategy map & balanced scorecard = how you implement and measure it.
Competition: The Right Mind-SetMagretta, Understanding Michael Porter — Part 1 intro + Ch. 1
Where superior performance comes from
- Industry structure → Five Forces (Ch. 2). Uniqueness is relative to a set of rivals; structure decides how created value is shared.
- Relative position within the industry → competitive advantage & value chain (Ch. 3). What value is created and how.
These three frameworks (five forces, competitive advantage, value chain) explain why profitability differs across industries and within an industry.
Competitive convergence (the trap of "being best")
Competing to be best → rivals imitate → everyone looks alike → price-only competition → zero-sum destruction (e.g. airlines copying each other). Often the only remedy is industry consolidation.
Competition is multi-dimensional: many needs → many ways to win (McDonald's for fast; In-N-Out for fresh, made-to-order).
| Compete to be the BEST | Compete to be UNIQUE |
|---|---|
| Be number 1 | Earn higher returns |
| Focus on market share | Focus on profits |
| Serve "best" customer with "best" product | Meet diverse needs of target customers |
| Compete by imitation | Compete by innovation |
| Zero sum — a race no one can win | Positive sum — multiple winners |
Self-test: What are the two sources of superior performance and which framework analyzes each?
Industry structure → Five Forces; relative position within industry → competitive advantage / value chain.Self-test: What is competitive convergence and its usual end-state?
Rivals competing to be "best" come to look alike; competition descends to price only; the usual remedy is consolidation.The Five Forces: Competing for ProfitsMagretta, Ch. 2
Industry structure is analyzed from the perspective of incumbents (explains how an industry can be attractive to those inside but not to outsiders — entry barriers). Structure is fairly sticky, but dynamic: forces shift over time, so profitability shifts.
Buyers & Suppliers are powerful when…
- They are large and concentrated (% of industry sales/purchases)
- The industry needs them more than they need the industry (no alternatives — surgeons, pilots)
- Switching costs work in their favor (iPhone lock-in)
- Differentiation works in their favor
- They can credibly threaten to vertically integrate (grocers' house brands vs Heinz/Kraft)
Buyers are price-sensitive when the purchase is: undifferentiated · expensive relative to their costs/income · inconsequential to their own performance.
Channels matter as much as end users (Walmart squeezing manufacturers). Often two buyer sets: distributors + end users (Blue Jay Tire).
Barriers to entry (assess)
- Economies of scale
- Customer switching costs
- Network effects (Instagram, Reddit)
- Capital requirements ("price of admission")
- Incumbency advantages independent of size (brand, prime location, distribution access)
- Government policy (patents, subsidies, regulation)
- Expected retaliation by incumbents
Rivalry is intense when…
- Many equal competitors (no leader setting practices)
- Slow growth → share battles
- High exit barriers
- Rivals irrationally committed
Price competition (most damaging) more likely when: offerings hard to tell apart · low switching costs · high fixed costs · capacity added in large increments · product perishable (food, fashion, airline seats, hotel nights).
Substitutes
Meet the same basic need in a different way; often from unexpected places; needn't be cheaper (energy drinks vs coffee). Switching costs matter here too.
NOT forces (factors, not structural)
Government regulation, technology, growth, complements — they matter only through their effect on the five forces. Growth does not guarantee profitability.
Using industry analysis
- Does the industry offer attractive returns? Why is it profitable now, what's propping it up, what's changing, what limits capture of value you create?
- Can you position where the forces are weakest?
Five Forces > SWOT (SWOT is more random; Five Forces is thorough). Can be done at industry level or for a specific company relative to its industry — past exams have asked both. First question: what precisely is the industry? (Netflix vs all entertainment).
Self-test: When is price competition most likely? (5)
Hard to tell offerings apart; low buyer switching costs; high fixed costs; capacity added in large increments; perishable product.Self-test: Why can an industry be attractive to incumbents but not outsiders?
Structure is assessed from incumbents' perspective; potential entrants must first overcome entry barriers.Competitive Advantage: The Value Chain and Your P&LMagretta, Ch. 3
| Porter's framework | Industry structure | Relative position |
|---|---|---|
| Analysis focuses on | Five Forces | Value Chain |
| Analysis explains | Drivers of industry profitability | Differences in activities |
| Shows | Industry average price and cost | Relative price and cost |
Right vs wrong measures
✅ ROIC — weighs profit against all funds invested (opex AND capital). Strategy measured at business level.
❌ Return on sales (ignores capital) · Growth (ignores capital required) · Share price (only meaningful long-term) · Market share (ignores profitability). Non-profits: are resources used effectively?
Relative price vs relative cost
Premium price is sustainable only if the offer is unique AND valuable to customers. Industrial buyer value is usually economic; consumer value can be economic and/or emotional. Ability to command a higher price = essence of differentiation.
Lower cost: lower operating costs or more efficient capital use; sustainable cost advantages involve many parts of the company (Vanguard).
Value chain & value system
Value chain = sequence of activities a company performs to design, produce, sell, deliver, support its products. It sits inside a larger value system (suppliers, channels, end user) regardless of who performs the activities. Activities are things managers control — go beyond functions, zoom in on activities.
4 steps of value chain analysis
Examples
- Nike: keeps design + marketing/distribution, outsources manufacturing, sourcing, retail → captures most value ($0.50 shirt → $15 to retailer → $30 retail).
- Wheelchairs: refurbisher vs bulk importer vs Whirlwind (design + after-sales) — different choices across the same industry chain.
- Case: Blue Jay Tire sourcing inputs below rivals' cost; Darwin/Snappy automating applications.
Operational effectiveness ≠ strategy
Full definition: competitive advantage = difference in relative price or cost arising from differences in activities performed. You can do the same activities better (operational effectiveness) or choose different activities (strategy). Best practices are easily copied → OE alone is not a robust advantage.
Each activity is not just a cost but must add an increment of value. Value chain and value proposition must align — higher price must exceed the extra cost.
Self-test: Why is ROIC better than return on sales or growth?
ROIC weighs profits against all capital invested; ROS ignores capital, growth ignores capital required, share price only meaningful long-term, market share ignores profitability.Self-test: Why isn't operational effectiveness a sustainable advantage?
Best practices diffuse and are copied by rivals; sustainable advantage needs a different set of activities.Creating Value: The CoreMagretta, Part 2 intro + Ch. 4 (Tests 1 & 2)
Which customers?
Segments: geography (Walmart, small cities/large towns), demographics (Progressive, young risky drivers), personality (Edward Jones, conservative investors). Sometimes the customer choice comes first.
Which needs?
Often the primary decision; customers defined by common need at a given time (Enterprise Rent-A-Car: local renters whose cars are in repair, not travelers).
What relative price?
Sometimes primary: target over-served (overpriced) customers; strip features to cut cost and price (2 ketchup brands vs 12). Southwest: cheap flights, a need most travelers have some of the time.
Southwest — the textbook illustration
Airline five forces (all strong)
- Suppliers (unions, plane makers) powerful
- Buyers price-sensitive, low switching costs
- Rivals with high fixed costs fight on price
- New entrants can easily lease planes
- Substitutes on short trips (train, car)
Tailored value chain
- No meals, assigned seats, premium service → fast gate turnarounds → planes fly more
- Point-to-point, frequent flights (no costly hub & spoke)
- Standard fleet → efficient maintenance
- Website-only sales → no agent commissions
- Service culture → long-tenured, happy staff
Limits are essential: if the same value chain can deliver different value propositions equally well, those propositions have no strategic relevance (no defense against rivals). VP = demand side (outward, customers); VC = supply side (internal). Strategy brings demand and supply together. Strategies can be both differentiated and low cost by focusing on a customer group/need.
Self-test: State the three value proposition questions.
Which customers will you serve? Which needs will you meet? What relative price gives acceptable value to customers and acceptable profitability to the company?Self-test: What's the "crucial test" of whether value propositions are strategically relevant?
If the same value chain can deliver different VPs equally well, they have no strategic relevance.Trade-offs: The LinchpinMagretta, Ch. 5 (Test 3)
Incompatible product features
Best for one need performs poorly for another (BMW sports car vs low-income commuter).
Trade-offs in activities
Configuration best for one kind of value can't equally deliver another (small-lot custom plant vs long efficient runs).
Inconsistent image / reputation
Ferrari selling a minivan — confuses customers, hurts brand.
Straddling
Trying to keep one position while copying another. McDonald's (speed & consistency) copying Burger King's customization hurt its own speed. Don't confuse copying execution best practices with copying strategic trade-offs.
What NOT to do
Don't give every customer what they want. Southwest's founder to a complaining customer: "We will miss you. Love, Herb." Trade-offs are a matter of degree (Nike: premium shops + outlets, but never Walmart).
Self-test: Give the 3 reasons trade-offs arise.
Incompatible product features; trade-offs in the activities themselves; inconsistencies in image/reputation.Fit: The AmplifierMagretta, Ch. 6 (Test 4)
Consistency
Each activity aligned with the VP and contributes to its dominant theme (Zara: every step about speed). Bad fit: selling volume to discounters but building small custom lots.
Complement / reinforce
Activities strengthen each other (Netflix ratings data → recommendations → customers stay).
Substitution
Performing one activity eliminates another (Zara's prominent high-traffic stores and windows reduce advertising).
Examples
- IKEA: huge stores → free childcare + cafeteria (meatballs) keep shoppers longer. Activity-system map: dark nodes = VP, linked activities where fit exists.
- Zara: higher-cost European manufacturing → speed to stores → real-time fashion response, constant refresh → less price sensitivity.
Fit vs core competence / outsourcing
Old view: keep the core, outsource the rest. Porter asks: which activities are generic (can't be tailored) vs tailored? Keep strongly complementary activities in-house. The fewer activities you keep, the fewer opportunities for tailoring, trade-offs and fit. The whole matters more than any part.
Self-test: Two benefits of fit?
Amplifies competitive advantage (higher value or lower cost) AND makes it more sustainable — rivals must copy a whole nest of interdependent activities and first figure out what they are.Continuity: The EnablerMagretta, Ch. 7 (Test 5)
Continuity enables advantage by…
- Reinforcing identity — brand, reputation, customer relationships (you know what McDonald's gives you)
- Helping suppliers, channels, outside parties contribute (Nike's manufacturers know its standards); attracts the right employees
- Fostering improvement of activities and fit; builds unique capabilities tailored to the strategy
"Strategy is a stew, not a stir-fry." Frequent shifts in strategy are costly.
When strategy must change
- Customer needs change → core VP obsolete
- Innovation invalidates the essential trade-offs
- Technological/managerial breakthrough trumps the existing VP
What must always change
- Stay on the frontier of operational excellence (assimilate best practices)
- Change whenever there are ways to extend the VP or better deliver it (Netflix DVD → streaming; Reuters pigeons → digital)
Under uncertainty: you don't need detailed predictions — only a broad sense of which customers and needs will be robust 5–10 years out; strategy is the bet that they endure. "Flexibility" often means going only halfway. Continuity of direction makes effective change more likely (Dell's close customer relationships → better demand info → faster supply chain). Strategy guards against following fads.
Self-test: Name the 3 situations when strategy should change.
Customer needs change making VP obsolete; innovation invalidates essential trade-offs; a technological or managerial breakthrough trumps the existing VP.Strategic Management & Strategic CompetitivenessHitt, Ireland & Hoskisson Ch. 1 (sections 1-2 to 1-5)
| I/O (Industrial Organization) model | Resource-based model | Stakeholder model | |
|---|---|---|---|
| Focus | External industry environment (≈ Porter's Five Forces) | Internal resources & capabilities | Internal & external stakeholder relationships |
| Claim | Industry has a stronger influence on performance than managers' internal choices | Firm differences come from unique resources/capabilities, not industry characteristics | Well-treated stakeholders reciprocate → motivated employees, sales, innovation, efficiency |
| Key ideas | Performance depends on economies of scale, entry barriers, diversification, product differentiation, industry concentration, market frictions. Pick the most profitable industry; win by cost leadership or differentiation. | Resources (physical, human, organizational capital; tangible/intangible) → capabilities → core competencies. Advantage if VRIN: Valuable, Rare, costly to Imitate, Non-substitutable. Hard to win on resources alone. | Internal (employees incl. managers) vs external (capital suppliers, customers, suppliers, communities, unions, regulators). Primary (in value creation) vs secondary. Distributional justice: value received ≈ value contributed. Trust → feedback, supplier investment. |
| 4 assumptions (I/O) | (1) External environment imposes pressures/constraints that determine strategies earning above-average returns; (2) firms in an industry have similar strategies/resources; (3) resources are highly mobile so differences are short-lived; (4) decision makers are rational profit maximizers. | ||
Competitive landscape
- Hyper-competition: continuous instability & change — drivers: global economy + technology
- Global economy; globalization (economic interdependence); protectionism; global supply/value chains; BRIC + fast-growers. Risks: not knowing how to compete in new markets; over-diversifying
- Technology diffusion, perpetual innovation, disruptive technologies; speed to market can be the primary source of advantage
- Knowledge = key intangible resource; strategic flexibility & continuous learning
Social responsibility
CSR; sustainability (don't deplete natural elements you depend on); firms accountable for actions of firms they do business with.
Capability = capacity for a set of resources to perform a task in an integrative manner. Core competencies = resources/capabilities that are a competitive advantage over rivals.
Self-test: The 4 conditions for a resource/capability to give competitive advantage?
Valuable, rare, costly to imitate, non-substitutable.Self-test: Distributional justice?
Stakeholders feel they receive value from the firm similar to the value they contribute.Business-Level StrategyHitt Ch. 4
Business-level strategy: integrated set of commitments/actions to gain advantage by exploiting core competencies in a specific product market. Position by performing activities differently (→ low cost) or performing different activities (→ differentiation). None is inherently superior.
Customer relationships
- Reach — access/connection (Nike ads)
- Richness — depth of info flow (Google/Apple)
- Affiliation — ongoing repeat interaction (your daily coffee shop)
Who / What / How
- Who to serve — segmentation (consumer: demographic, socioeconomic, geographic, psychological, consumption patterns, perceptual; industrial: end-use, product, geographic, common buying factors, customer size)
- What needs
- How — core competencies
≈ Porter's value proposition.
Business model
What a firm does to create, deliver, capture value for stakeholders (customers: product; shareholders: ROI; employees: pay, benefits, learning). ≈ high-level VP + high-level value chain.
- Franchise (McDonald's, Subway)
- Subscription (Netflix)
- Digital platform (Uber, Airbnb, TikTok — fees, ads)
Business model innovation = replacing an outdated model.
| Strategy | Definition | Five forces defenses | Competitive risks |
|---|---|---|---|
| Cost leadership | Acceptable features at the lowest cost relative to competitors; standardized goods; logistics advantage valuable | Rivals hesitant to fight on price · powerful buyers can force prices down, but not so low the firm exits (fewer firms → buyers lose power) · higher margins absorb supplier increases; big leaders squeeze suppliers (Walmart) · low cost = entry barrier · can cut price vs substitutes | Processes made obsolete by competitor innovation · cost focus loses sight of customer perceptions · imitation |
| Differentiation | Products (at acceptable cost) customers perceive as different in ways important to them; continuously upgrade features | Brand loyalty lowers price sensitivity · buyers accept increases if needs met better · high margins absorb supplier costs/ pass on · loyalty & uniqueness = entry barrier · brand protects vs substitutes | Price gap vs cost leader too large · imitation reduces perceived value · experience reduces perceived value · counterfeiting |
| Focused cost leadership | Low cost (+ some differentiated features) for a narrow segment (IKEA) | Same as non-focused within the niche. Segments: buyer group, product-line segment, geographic market, technology (become expert, sell to other firms) | Same risks as non-focused plus: competitor out-focuses (narrower) · industry-wide competitors copy the focus · the niche evaporates |
| Focused differentiation | Differentiation for a narrow segment (XP for a few exams) | ||
| Integrated cost leadership / differentiation | Simultaneously low cost AND differentiation; adapts quickly. Enablers: Flexible Manufacturing Systems, Information networks (CRM, Salesforce), Total Quality Management (↑ satisfaction, ↓ cost from less rework, ↓ time to innovate) | — | Very hard to do both · hard to perform VC activities · stuck in the middle (appeals to no one) · may need alliances/acquisitions · needs long-term view |
Self-test: Competitive risks of differentiation (4)?
Price difference vs cost leader too large; imitation; experience reduces perceived value; counterfeiting.Self-test: Three methods enabling an integrated strategy?
Flexible manufacturing systems, information networks (e.g. CRM), total quality management.Corporate-Level StrategyHitt Ch. 6
| Level | Type | Definition |
|---|---|---|
| Low | Single business | ≥ 95% of revenue from a single business |
| Dominant business | 70%–95% from a single business | |
| Moderate–High | Related constrained | < 70% from dominant business; all businesses share product, technological, distribution linkages |
| Related linked (mixed) | < 70% from dominant; only limited links | |
| Very high | Unrelated | < 70% from dominant; no common links |
✅ Value-creating
- Economies of scope (related) — sharing activities; transferring core competencies
- Market power (related) — blocking competitors via multipoint competition; vertical integration
- Financial economies (unrelated) — efficient internal capital allocation; business restructuring
➖ Value-neutral
- External: antitrust regulation; tax laws
- Internal: low performance; uncertain future cash flows; risk reduction for firm (synergy pursuit)
- Tangible resources; intangible resources
❌ Value-reducing
- Diversifying managerial employment risk
- Increasing managerial compensation
Defenses: poison pills, golden parachutes. Possible to over-diversify to failure.
Operational relatedness — share activities
Share primary (inventory delivery) or support (purchasing) activities. P&G; Gillette + Crest sharing marketing & distribution; Coca-Cola delivering many products on one route. Creates links/risk; needs coordination; research says it creates value.
Corporate relatedness — transfer core competencies
Complex sets of resources/capabilities linking businesses via managerial & technological knowledge. Value because (1) cost already incurred, (2) intangibles hard to imitate. Virgin brand → Virgin Mobile; Apple iPod/Mac interface → iPhone; Nike brand → clothing.
Market power & vertical integration
Market power: sell above competitive level and/or costs below competitive level. Vertical integration: backward (own inputs) or forward (own distribution) → saves cost, quality, protects from imitation; limit: outside firm may produce cheaper.
Financial economies (unrelated)
Internal capital market: corporate HQ has better and deeper info than outside investors (Berkshire Hathaway — Buffett's job = capital allocation). Risk: conglomerate discount. Restructuring: buy, fix, sell (house flippers) — hard for service/high-tech (few tangible assets).
Tax laws: if dividend tax > capital-gains tax → reinvest FCF (diversify); if dividend tax < cap-gains → pay dividends. Acquisitions also add depreciable assets → lower taxes. Uncertain cash flows: defensive diversification when product line matures; more stable revenue can lower cost of debt.
Self-test: Define economies of scope.
Cost savings from successfully sharing resources/capabilities or transferring corporate-level core competencies from one business to another.Self-test: Two information advantages of an internal capital market?
(1) Better info — outside investors may not get all (incl. negative) info; (2) depth of external disclosure is limited to keep competitors from copying.Merger & Acquisition StrategiesHitt Ch. 7 (sections 7-1 to 7-4)
Merger
Two firms integrate operations on a coequal basis (hard: who leads, culture fusion).
Acquisition
One firm buys a controlling or 100% interest in another.
Takeover
Acquisition that is unfriendly / unsolicited.
7 reasons for acquisitions
- Increased market power — horizontal (same industry: United + Delta; best with similar strategies, needs integration), vertical (supplier/distributor; control of value chain), related (FedEx + print shops; Big Ben Bank + Darwin)
- Overcoming entry barriers (Amazon buying a grocer; cross-border acquisitions — higher risk if unfamiliar country)
- Cost of new product development & increased speed to market (Google buying a maps company)
- Lower risk compared to developing new products (but over-reliance erodes R&D/innovation)
- Increased diversification (Samsung; more related = more likely to succeed)
- Reshaping the firm's competitive scope (Campbell's → fresh soups)
- Learning & developing new capabilities (ideal: different but related)
7 problems in achieving success
- Integration difficulties — cultures, financial systems, working relationships, leadership structures; how people are treated
- Inadequate evaluation of target (poor due diligence → overpay for synergies/growth)
- Large or extraordinary debt (worse with bidding wars)
- Inability to achieve synergy (incl. private synergy — only from combining these two firms; benefits must exceed transaction & legal costs)
- Too much diversification — financial controls over strategic controls, short-termism, acquisitions substitute for innovation
- Managers overly focused on acquisitions — diverts attention from core business
- Too large — bureaucracy, lost nimbleness
Attributes of effective acquisitions (Table 7.1 — corrected version)
| Attribute | Result |
|---|---|
| Acquired firm has assets/resources complementary to acquirer's core business | High chance of synergy and competitive advantage |
| Acquisition is friendly | Faster, more effective integration |
| Acquirer conducts effective due diligence | Firms with strongest complementarities acquired; overpayment avoided |
| Acquirer has financial flexibility | Financing easier and less costly |
| Merged firm keeps low-to-moderate debt | Lower financing cost and risk |
| Acquirer emphasizes R&D | Long-term competitive advantage maintained |
| Acquirer manages change well and is flexible | Faster integration achieves synergies |
Self-test: Horizontal vs vertical vs related acquisition?
Horizontal: competitor in the same industry. Vertical: a supplier or distributor. Related: a highly related firm (integrate resources/capabilities).Self-test: What is private synergy?
Synergy that can only be created by combining those two specific companies (unique, fitting assets).Cooperative StrategyHitt Ch. 9
Joint venture
2+ firms create a legally independent company sharing resources (GM + SAIC). Good when critical knowledge/resources must be shared.
Equity strategic alliance
Firms own different percentages of a company they formed (many China investments; insurer's stake in WealthSimple to share in growth).
Non-equity strategic alliance
Contractual, less formal — airline alliances, outsourcing (Apple–Foxconn), licensing (e.g. a grocer selling a brand's products under license). Not suitable for complex knowledge transfer.
Why alliances: create value you couldn't alone and enter markets faster; you lack resources to pursue an opportunity.
| Market cycle | Nature | Alliance reasons | Case example |
|---|---|---|---|
| Slow-cycle | Advantages shielded from imitation for long periods / costly to imitate | Gain access to a restricted market; establish a franchise in a new market | Darwin (life insurance) |
| Fast-cycle | Unstable, unpredictable, hyper-competitive; advantages not shielded | Speed up new product development; speed new market entry; share risky R&D expenses for new technology | Fashion, coffee chains; insurtech like Snappy pushes life insurance faster |
| Standard-cycle | In between | Partners with complementary resources; economies of scale (code shares); pool resources for large capital projects; learn new business techniques | Blue Jay Air |
Business-level cooperative strategies
- Complementary — vertical: different stages of value chain (Apple–Foxconn). Best chance of success.
- Complementary — horizontal: same stage (drug firms sharing R&D cost & risk). Problems: partners compete while cooperating.
- Competition response (Google/Intel + watchmaker vs Apple Watch)
- Uncertainty reducing (fast-cycle, emerging markets, e.g. a group company entering a new country)
- Competition reducing — usually illegal: explicit collusion (OPEC), tacit collusion (airline pricing), mutual forbearance
Corporate-level cooperative strategies
- Diversifying alliance — product/geographic diversification
- Synergistic alliance — economies of scope (Nissan–Renault)
- Franchising — contractual control of shared resources (McDonald's; franchisee funds the outlet → the franchisor expands without capital outlay; needs lots of communication)
More complex and broader than business-level.
International (cross-border)
Limited domestic growth; foreign govt restrictions (Coca-Cola JV in India); lack of local culture/norms knowledge; local partners know customers, law, politics.
Network
Multiple partnerships, best when geographically close (Silicon Valley); access partners' partners. Stable networks (mature industries, scale/scope — airline alliances) vs dynamic (frequent innovation — Apple/Google markets). Risk: locked in.
Competitive risks
- Inadequate contracts
- Misrepresentation of competencies
- Partners fail to use complementary resources
- Being held "hostage" by your partner
Managing risk
- Cost minimization — formal, detailed contracts & monitoring
- Opportunity maximization — trust-based, fewer restrictions, more learning
- Balance both; assign a senior executive to manage partners. Desired outcome: creating value / competitive advantage.
Self-test: Why would a firm choose equity alliance/JV over non-equity?
When critical knowledge or resources must be shared/transferred and the project is complex; non-equity (contract) suits simple arrangements.Self-test: 4 competitive risks of cooperative strategies?
Inadequate contracts; misrepresented competencies; partner fails to use complementary resources; being held hostage.The Hard Side of Change Management (DICE)CP311-101-25 · also Objective 3
| Factor | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| D Duration (time between milestone reviews) | < 2 months | 2–4 months | 4–8 months | > 8 months |
| I Integrity of team (×2) | Capable respected leader + skilled, motivated team + ≥ 50% of members' time | In between | Lacking all | |
| C1 Senior mgmt commitment (×2) | Clearly, visibly communicated need for change (words & actions) | Appear neutral | Reluctant | |
| C2 Local commitment (affected employees) | Eager | Willing | Reluctant / strongly reluctant (3–4) | |
| E Effort (extra work for employees) | < 10% | 10–20% | 20–40% | > 40% |
Zones: 7–14 high likelihood of success 15–16 risks rising 17+ worry zone
DICE calculator
Self-test: Reviews every 3 months, strong team, neutral execs (3), willing staff, 25% extra work?
D=2, I=1, C1=3, C2=2, E=3 → 2 + 2 + 6 + 2 + 3 = 15 → risks rising. Biggest lever: senior commitment (×2).A New Operating Model for a New WorldCP311-107-26 (McKinsey)
Clarity
Resources and accountabilities aligned to strategy; replace bureaucratic layers with purposeful flexible teams.
Speed
Workflows fast, tech-enabled, frictionless (vs slow decisions, poor governance, siloed hand-offs that block gen AI value).
Skills
Future-ready workforce; continually upgrade talent, re-evaluate location & outsourcing.
Commitment
Performance-oriented culture; shared behaviors ("secret sauce"); rewards reinforce them.
4-step redesign process
Examples
Top airline: passenger experience + efficiency/resilience → purpose anchored in reputation & customer benefit; integrated footprint (directly employed global workforce); traditional value-chain ecosystem; matrix structure + decisive leadership; control-oriented processes (cost & safety).
Financial-services infrastructure co.: grown by acquisition, slowing organic growth, high duplicated costs, over-complex matrix. Option 1 (refine: cost cuts + global integrated footprint, lower short-run risk) vs Option 2 (new fingerprint like SaaS tech firms: enterprise agile, decisive → empowering leadership, individual → collective rewards). Chose option 2 (higher value outweighs change). Up to 40 pts speed to market, +25% tech ROI.
5 practical questions for CEOs
- What is the gap between your value agenda and delivered performance? (root causes)
- What critical outcomes should the operating model generate? (4 outcomes, metrics, accountability)
- How does the model work as a system? (12 elements reinforce, find inconsistencies)
- What are the trade-offs between refining and a new design? (hard & soft barriers)
- How will leaders (incl. middle managers) need to engage differently?
Replaces McKinsey's older 7-S framework; hard elements (structure, processes, tech) + "soft stuff" (leadership style, culture, talent).
Self-test: List the 4 outcomes.
Clarity, speed, skills, commitment.Tying Short-Term Decisions to Long-Term StrategyCP311-108-26 (McKinsey survey) · also Objective 4
Results: firms prioritizing long-term value over short-term profit are much more likely to translate goals into plans/budgets and ~2× as likely to outperform on growth and return on capital. Innovative firms are 2× as likely to translate goals into 3–7 year plans. Spectacular growth comes from unshakable commitment to bold reallocation over long horizons.