Dr Ridhwan Fontaine Week 6 Strategy Dr Ridhwan Fontaine Week 6

Today’s class Review the course so far Talk about internal analysis Talk about the Ford Story I plan to leave at 10.30pm insha Allah

Proposed objectives 1. Explain the difference between strategy and planning 2. Explain the conventional strategic management model 3. Explain the importance of managing risk 4. Explain the critical importance of Islamic leadership 5. Explain the importance of unintended consequences

The Typical Approach Definition of success: Profit Maximization Strategic formulation Strategic implementation (a.k.a strategic execution) Common problem Dysfunctional organization (people lying to another, no trust,…..) 90% failure rate

Our Approach: POS Definition of success for leaders: Paradise after we die. Maximize social benefits in this life. Definition of success for the organization: Achieve the strategic objectives Approach: People first – leaders must internalise Islamic values and internalise systems thinking Operational excellence => this gives you strategic flexibility Strategic flexibility allows you to develop effective strategies

Internal analysis, processes and policies & Ford case study 7th July Internal analysis, processes and policies & Ford case study 14th July Generic strategy and strategic decision making 21st July Systems thinking and iceberg model 28th July Putting it all together, POS 30th July Final exam based heavily on Ford case study

Doing the Right Thing Right   Net Profit Legal Status Social benefit Importing luxury cars 1 million Halal Minimum Providing basic clinical services in a community where there are no other medical facility 500,000 Maximum Providing basic clinical services to high net-worth individuals in a community where there are other medical facilities 1.5 million

Islamic Leadership Workshop To develop an Islamic corporate culture is easy => everybody needs to have a shared understanding of the Qur’an and Sunnah This can be developed at work on a weekly basis (1h every week) – HOD facilitates the process, the content is on line In the long run, these values prevent people from lying, backbiting and playing politics inside the company

Conventional strategic model External analysis (Porter 5 Forces) Internal Analysis (policies and processes) Generic strategy (cost or quality) Strategic Decision Making

Michael Porter 5 Forces

Internal Analysis Processes (time) – your speed compared to other competitors Policies (% of sales) – guidelines from top management compared to other competitors

Scenario 1: Company A is a low cost provider Core Process Company A Company B Company C Finding new employees 3 weeks 2 weeks 1 week Finding new customers Manufacturing 48 hours 24 hours Collecting money from customers 40 days 30 days

Scenario 1: Company A is a low cost provider Key Policies Company A Company B Company C HR 3% of sales 4% of sales Marketing 20% of sales 10% of sales Manufacturing 30% of sales

Scenario 1: Company A is a low cost provider It takes time to fix a problem If company A invests less in marketing (e.g. reduce marketing budget from 20% to 10%) and invests more into manufacturing (e.g. increase manufacturing budget from 20% to 30%), the company might have a chance to survive in the long run. It will take 3 years or more for the differences to show

Scenario 1: Company A – 3 years later Why did the finding new customers drop from 2 weeks to 1 week even though the company reduced the marketing budget? Core Process Company A Company B Company C Finding new employees 3 weeks 2 weeks 1 week Finding new customers 1 weeks Manufacturing 24 hours Collecting money from customers 40 days 30 days

Scenario 1: Company A – 3 years later Why did the finding new customers drop from 2 weeks to 1 week even though the company reduced the marketing budget? Core Process Company A Company B Company C Finding new employees 3 weeks 2 weeks 1 week Finding new customers 1 weeks Manufacturing 24 hours Collecting money from customers 40 days 30 days The unintended consequences of investing too much in marketing and not enough in manufacturing was to increase the inefficiency of the marketing function

Key lessons Accepting reality Being Practical Being patient If you are not as good as your competitors, don’t hide. Turn it into a state of urgency. Use data to set you free Being Practical Top management policy has to be simple and effective (e.g. allocating more money to A and less money to B) Strategy is about deciding what to do and what not to do Being patient If it takes 3 years for a new policy to show results, you cannot measure the performance of a CEO on an annual basis.

Someone give an example for scenario 2

Ford Case Study The problem The solution

Proposed objectives compared to the Ford Case 1. Explain the difference between strategy and planning 2. Explain the conventional strategic management model 3. Explain the importance of managing risk 4. Explain the critical importance of Islamic leadership 5. Explain the importance of unintended consequences

POS compared to the Ford Case People first? Operational excellence? Strategic flexibility?