Strategy

“Making strategy work is more difficult than the task of strategy making” Lawrence Hrebiniak

Today’s Topics Strategy Effectiveness –Maximizing Impact and Avoiding Pitfalls

A little background….

Three Reasons why Good Strategies Fail ExecutionExecutionExecution Hallmark of a good strategy is a firm’s ability to translate it into action

Execution ≠ Tactics

Execution = Getting Things Done

Why aren’t strategies executed well? Fuzzy frame of reference Dysfunctional separation between strategy formulation and strategy execution Resistance to change Structural issues Poor communication Conflicting mandates & reward systems Weak linkage among strategies Diffusion of resources and energy Lack of accountability

Common denominator = People The lifeblood of an organization, strategies are vessels that affect and are affected by living and breathing people.

Levels of Strategy Corporate strategy Business-level strategy Marketing strategy

Market Orientation Consistent and synchronized focus on customer needs and competitive advantage.

But who is the customer? Manufacturer Wholesaler/Distributor Retailer Consumer

But who is the customer? Manufacturer Wholesaler/Distributor Retailer Consumer

And are functional areas really aligned? Operations Marketing / Sales

Levels of Strategy Corporate strategy Business-level strategy Marketing strategy

Consumers Retailers Distributors Field Brand

Consumers Retailers Distributors Field Brand

As the pendulum swings….. CORPORATE FIELD

Brand Positioning/Strategy (Multiple Brands) Brand PromotionsMedia ServicesEvent Marketing Field Marketing (Planning & Integration) Distributors Field Sales

Brand Positioning/Strategy (Multiple Brands) Brand PromotionsMedia ServicesEvent Marketing Field Marketing (Planning & Integration) Distributors Field Sales Retailers Ntl Retail Sales

Investment Model Excerpt

Five Basic Criteria Were Used For Determining “Investment” Markets Brand Volume 30% MC/bbl 25% Industry Volume15% Brand Share15% Brand Trend15% 12 MMT 7.5% YTD 7.5%

Tier Breaks Were Established For Varying Levels Of Investment Brand A example: Tier 1 = 12 markets representing 35% of volume Tier 2 = 26 markets representing 25% of volume Tier 3 = 24 markets representing 15% of volume 60 75% 60 75%

For Each Tier, An Investment Model Was Established For each Tier 1 Brand A market: 1. Estimate the cost of a XXXX TRP radio plan. 2. Assume that XX% of the local marketing investment is spent against radio. 3. Derive a local marketing spending target, i.e., divide Step 1 by Step Adjust spending targets upward if market indexes highly on Hispanic population, LDAC-24 population growth, or is a designated competitive target attack/defend market.

Fixed Commitments and Shortfalls were Identified and Accommodated Brand B Example: Contract spending in 4 markets exceeds the total recommended local marketing investment: City A Covered cost of contracts plus City B equivalent of XXXX radio TRPS X X% City C City D Covered cost of contracts plus normal Tier 1 spending

General Overview –Investment recommendation was based on a weighted average derived from the investment model plus added emphasis for the following brand imperatives. –The template identified XX investment markets that account for XX% of the brand’s volume. Six additional markets were added based on brand imperatives. –The Brand A investment for 2001 is $XX million or XX% of the local marketing budget. –Contracts account for XX% ($XX MM) of the investment. –$XX mm was removed from the optimum model to cover contract overages in certain markets. Brand A LOCAL MARKETING INVESTMENT STRATEGY

Tier 1 Spending Path Allocate resources against complete array of local investment opportunities. Local radio OOH Marquis sports/music/event sponsorships. –Activation funding budget. Hispanic programming/sponsorships. National promotion localization funding. Local fairs/festivals/sponsorship funding. Local ground-up promotions budget. Key channel initiative fund. –On-premise –C-store –Supers/liquors Brand A LOCAL MARKETING INVESTMENT STRATEGY

Levels of Strategy Corporate strategy Business-level strategy Marketing strategy

Multidimensionality Strategy begets strategies begets strategies begets tactics….. Linkage?

Destination, objectives, strategies, measures (DOSM) Company: D O S M Division: D O S M Region: D O S M Area: D O S M

Destination, objectives, strategies, measures (DOSM) Company: Division: Region: Area:

Two problems –Fuzziness and slippage along the line –Somebody has to execute this stuff

An Illustration

It all comes down to choices “The essence of strategy is what not to do.” Michael Porter, “What is Strategy”, HBR “Not choosing means creating managerial complexity that results in doing business with yourself, rather than with your customers” Michael Treacy & Fred Wiersema Discipline of Market Leaders Discipline of Market Leaders

Strategy is a means, not an end Mediocre strategy well executed trumps a great strategy poorly executed What are you willing to drop to get what you want? –Have to be able to say NO

Do a few, unique, things really well Define what success looks like Align the air war and ground war Mobilize troops Measure & reward results Share accountability

Impact = I 3 Innovation X Integration X Intensity