Strategy in Action

In the Vision, Mission, and Level of Ambition module you will be introduced to best-practices on how to define your company’s “envisioned future”  by formulating your Vision statement, and its “core ideology", intrinsic in your Mission statement. You will translate those inspiring statements, into a set of tangible, long-term KPIs. This exercise will help clarify to internal and external stakeholders what success looks like for your company, and how you plan to measure it.

A Vision is a vivid statement describing the future state of your organisation - what it hopes to become and achieve in the long-term. It determines the strategic direction, serving as a "North Star" that keeps everyone aligned during the company's growth journey.

The Mission is a statement that describes the company's core purpose,  the organisation's reason for existence (raison d’ être). A well-conceived mission statement captures the essence of a company’s Core Ideology

The Level of Ambition (LoA) is a small set of strategic KPIs, which effectively translate the company's inspiring vision and mission statements into tangible objectives, which characterise the organisation in its future state. The definition of these metrics provides an unambiguous, quantified definition of what the success of the company will look like.

Strategic foresights are informed and evidenced predictions, which illustrate any possible directions in which society, technology, industries and markets might evolve in the future. Foresights are useful when developing a company’s Vision and Mission statements to ensure that business leaders consider all future scenarios when driving their organisations forward.

The Balanced Scorecard is a strategic framework, which illustrates that successful companies look to monitor and continuously improve their performance across 4 different pillars:

• Financial

• Customer

• Internal Business Processes

• Learning and Growth.

An Internal Analysis is a deep dive in your company's internal environment to better understand its key resources and competencies, and how they compare to other players in the marketplace. This module will help you define your Core Strengths - the capabilities, from which you derive your competitive advantage. At the same time you will evaluate your Core Weaknesses - those areas, in which competitors outperform you, and which might require further investment.

There is often confusion between what Comparative and Competitive advantage are.

• Firms are said to enjoy Comparative Advantage, when they perform certain key capabilities better than competitors in the marketplace.

• Competitive Advantage, instead, is a company's ability to leverage it's comparative advantage to create more Value for its customers, shareholders, employees.

How to identify the organisation's key capabilities and how to measure value creation, Davide and Giovanni discuss in the next lectures.

Porter's Value Chain is one of the fundamental frameworks in management. Its intended purposes is to help organisations uncover the areas of their business, which create value for their customers and internal stakeholders.

In his research, Porter uncovered patterns in the way that companies operate and create value. Therefore, the standard Value Chain is divided into two types of activities:

• Primary Activities - the activities that an organisation chooses to perform, which are directly related to the delivery of its products and services

• Support Activities - the activities performed within an organisation, which have a cross-functional impact, providing the infrastructure and necessary inputs for primary activities to be performed

The Capability Matrix is a strategic tool that companies can leverage to assess and map their capabilities, according to how important they are and how well the organisation performs in them. The dimensions of the matrix are:

• Importance - how important is a certain capability for the organisation to be able to deliver its value in the marketplace

• Relative Performance - relative to other competitors in the marketplace, what is the organisation's ability, know-how behind a certain capability, and what is its capacity to deliver it, in terms of resources who possess the know-how

The 4 quadrants of the matrix helps organisations to segment their core strengths and core weaknesses.

There are many ways to measure value creation. A very common financial metric for measuring value is Return on Invested Capital (ROIC). It is calculated as the ratio between a company’s operating income after tax (NOPAT), and its net invested capital, expressed in percentage. It is used to assess the efficiency with which a company allocates the capital under its control, in order to generate profit. We can decompose the ROIC to help us make strategic decisions:

• Core Business Decisions - How can we maximise the profitability of our operations?

• Investment Decisions - How can we optimise the utilisation of the capital we have at hand? Where should we invest those funds?

• Financial Decisions - How can we reduce the cost of our capital? What is the optimal balance between debt and equity?

Activity-based costing (ABC) is a model that assigns overhead and indirect costs to related products and services. It allows you to uncover how much resources are being absorbed by each product or service, and in turn, helps you to better understand which are your most profitable offerings.

The VRIO Framework is a strategic framework, which companies uses to assess their capabilities in order to identify their unique core competencies:

• Valuable - How valuable is each capability for our organisation and its operations?

• Rare - How rare is this capability in the marketplace? Can the organisation easily acquire it from outside, or is it a capability, which needs to be built internally and over time?

• Inimitable - How easy is it for competitors to copy the capability?

• Organisation - How well is the company organised to deliver the capability?

The VRIO framework can be used to generate the capability matrix discussed by Giovanni, earlier in this course.

An External Analysis aims to evaluate the markets, in which companies operate, as well as the macro-economic and industry dynamics affecting them. This module will help you effectively map out the markets, which you serve today and those, which you could expand into. You will learn how to evaluate the dynamics in each market and identify the threats you might face, as well as the opportunities for growth, which you can pursue.

The Ansoff Matrix is a framework that can be used to evaluate an organisations' strategic growth options by mapping out the company's product or service offerings, and the customer segments, which they are sold into. 

• Customer Segments - groups of customers with similar jobs to be done, reached through similar distribution channels and sharing one or more similar characteristics

• Offerings - product or service lines, which the organisation monetises

The PESTEL Analysis is a well-known framework used to identify external, macro forces affecting an industry environment. The framework considers 6 different type of factors that affect specific markets and the players in them:

• Political

• Economic

• Social

• Technological

• Environmental

• Legal

The Porter’s Five Forces framework is one of the most famous management frameworks. Devised by professor Michael Porter, it is used to analyse the operating and competitive environment in a specific industry. The model considers 5 key factors, which shape the attractiveness and profitability of any industry:

• Competitive Rivalry

• Barriers to Entry

• Bargaining Power of Buyers

• Bargaining Power of Suppliers

• Threat of Substitutes

Market Segmentation is the process of dividing the wide base of customers that a company serves today, or that it could serve in the future, into groups, or customer segments, which share some sort of common characteristics, including. These characteristics could include:

• Customer Demographics

• Geographies

• Behavioural Traits and common Jobs To Be Done

• Similar distribution channels that customers could be reached through

• And many more..

Market Sizing is a technique organisations often use to quantify the potential for them to grow into specific markets. The size of any market is expressed as the total annual monetary value of goods or services sold within a specific industry. There are three different market size values, which companies need to consider when making strategic decisions:

• Total Addressable Market

• Serviceable Addressable Market

• Serviceable Obtainable Market

A company's Monetisation model is the way it extracts economic value in exchange for its products and services. Examples of monetisation models include:

• Fee-for-service or fee-for-product

• Subscriptions

• Ad monetisation

• Freemium

• Licencing

An organisation's Strategic Priorities are those few key objectives and areas of focus, which it has chosen to address in its current strategic cycle, and which will help it to achieve its level of ambition. In this module, you will learn how to leverage your SWOT to choose key strategic priorities across the 3 Horizons of growth, in order to guarantee your company a sustainable pipeline for growth.

The SWOT is a framework, used to synthetise a company's internal Strengths and Weaknesses and its external Opportunities and Threats. Once identified, those elements can be used to help scope and define the organisation's strategic and enabling priorities.

The TOWS is a useful technique, which combines the internal and external elements of an organisation's SWOT to help formulate their strategic priorities. The technique looks to simply answer the question "How can we leverage our strengths to exploit opportunities and protect ourselves against threats, while overcoming our weaknesses?".

The 3 horizons is yet another fundamental management framework, which segments a company's strategic actions according to their inherent uncertainty, and time to reach scale and become sustainable and profitable business models:

• Horizon 1 - activities in this horizon focus on maximising the profit and value generated by the company's proven, current core business

• Horizon 2 - activities in this horizon focus on  growing and exponentially scaling business models and innovations, which have been validated by the market, and which could one day move to horizon 1, becoming part of the organisation's core business

• Horizon 3 - activities in this horizon focus on exploring completely new, innovative ideas for products, services, or business models and validating the market demand for them

The 3 Horizons framework dictates that a company must simultaneously deploy activities across all 3 horizons in order to generate a sustainable pipeline of growth opportunities.

An organisation's Strategic Priorities are a set if clear, directional strategic objectives, which the company has formulated across the 3 horizons, leveraging the insights from its internal and external analysis. The execution of those strategic priorities will help the company achieve its Level of Ambition.

Enabling Priorities focus on alleviating internal and organisational constraints, or on boosting cross-functional capabilities, which organisations require in order to deliver their strategic priorities. Companies often find it necessary to address their enabling priorities first, before being able to deliver on their strategic priorities.

Researching and identifying best practices is a way to gain useful insights that will inform the definition of a company's strategic and enabling priorities.

Strategic Scenarios are simple simulations, which forecast the different ways, in which the financial position of an organisation might evolve over time.

Strategic Scenarios are different types of financial scenarios, based on certain assumptions of how the future for a business might unfold. There are three different strategic scenarios a company should develop to forecast its financial performance:

• Ambition Scenario

• Baseline (Inertial) Scenario

• Worst-case Scenario