What is Strategy? (Part Two)

Key Concepts Managerial Cognition Business Model Stakeholders The Balanced Scorecard

Managerial Cognition Involves managements’ beliefs and understanding about: Macro/Industry Environment (e.g., demographic trends, competitors) How to Compete (e.g., Strategic positioning: low cost, differentiation, focus) Appropriate Size and Diversity ( e.g., integrated healthcare systems) How to Organize (organizational structure)

Cognitive Biases in Strategic Management Examples: Confirmation Bias Availability Heuristic Non rational Escalation of Commitment Groupthink

Business Models Answers the following questions: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost? Consider the Following: Who is the customer? What does the customer value? What activities will be performed? How will these activities be performed?

Look at the Components of the Business How are Revenues Generated? How Does the Firm Lower Costs? Greater Profitability

Dell Corporation’s Business Model Primary Revenue Streams: Direct Sales Model for Individual Customers Relationship-Oriented Field Sales Force for Corporations and Institutional Customers Services (e.g., Training and Certification, Support, Professional, Deployment, etc.) Multiple Product Lines in Different Segments of the Industry (e.g., enterprise systems, client systems, printing and imaging systems, software and peripherals) Financial Services (Financing) ***Focused R&D and Branding via advertising

Dell Corporation’s Business Model Direct Sales Model and Extensive Market Segmentation Build to Order Manufacturing and Mass Customization Extensive Testing and Quality Control Partnerships with Suppliers and JIT Practices E-Commerce Technology (Sales and Service Support) Costs are Lowered Through:

Measuring Performance

What are stakeholders? Who are the different organizational stakeholders? What are some of the objectives of these stakeholders?

Impact of Stakeholders Relative influence and power over issues and initiatives Participation in strategic management process Expertise and validation Problem-solving and collaboration

Balanced Scorecard Four Types of Measures: Financial: How does the firm look to its Shareholders/Creditors? Customer: How does the firm look to its Customers? Internal Business Processes: Identifies processes most important to meet shareholder and customer expectations. Learning and Growth: Identifies the infrastructure that the firm must build to create long-term growth.

Financial Measures Return on Equity Cash Flow Return on Assets Return on Investment Project Profitability

Customer Measures Value for money Competitive Price Customer Service Customer Retention Market Share Image and Reputation

Internal Business Processes Superior Project Management Product development cycle Innovation Product Quality Measurement Order Process Time

Learning and Growth Product/Service Innovation Empowered Workforce Information Systems Capabilities Motivation Employee Capabilities, Satisfaction, Retention, Productivity

How does the firm decide what to measure?

Mission Critical Success Factors Critical Measures Financial Customer IBP L & G

Mission North Oakland Medical Centers is a multi-divisional urban healthcare system whose mission is to deliver high quality healthcare and health related services in northern Oakland County in a cost effective and efficient manner.

Financial Critical Success Factors and Measures Critical Success Factors: Increase in capitation contracts Reduce emergency room use Expand community philanthropy Critical Measures: Number of capitation contracts received % of capitation contracts relative to competitors % unnecessary emergency room usage Dollars raised (numbers and dollars of corporate donations)

Customer Critical Success Factors and Measures Critical Success Factors: Prompt Service High Quality Care Staff Attitude and Friendliness Good Food Critical Measures: Emergency room and Admission times Patient Referrals/Repeat Patients and External Ratings Patient Satisfaction Surveys Number of Complaints

Internal Business Perspective Critical Success Factors and Measures Critical Success Factors: Cost Control Efficiency Selected Specialization Quality of Care Critical Measures: Cost per patient day Analysis of use of equipment and space, degree of automation Cancer, heart (provide value for the cost) Evaluations of doctors, staff and administrators, patient satisfaction

Learning and Growth Critical Success Factors and Measures Critical Success Factors: Doctor research and creativity Continuous innovation State of the art technology Partnerships with research institutions Critical Measures: Number of professional presentations and publications Number and quality of new services offered in past 5 years Degree automation, expenditures on software/hardware, rate of increase of outpatients Number of joint activities

Oakland University Who are Oakland’s stakeholders? What are some of the objectives of these stakeholders?

How are these objectives linked to performance? How should performance be measured? What needs to be measured? How should the SBA best measure performance based on their stakeholders’ objectives?

SBA Mission Statement The mission of the School of Business Administration (SBA) is to advance knowledge and enhance students' abilities to manage in a global business environment. The mission is achieved through a synergistic combination of teaching, scholarship, and professional service, with emphasis on the linkage of theory and practice, and the application and management of technology. Toward the achievement of these ends, the SBA promotes collaborative relationships among students, faculty, administrators and employers.