Strategic Decision Making - Some Notes on the Relevance of Adequate Tools Dr. Norbert Jesse Department of Computer Science TU Dortmund University Germany technische universität dortmund

Content 1. Preliminary Note 2. A Tool Box 3. Some Examples Vision Portfolio Technique Balanced Score Card SWOT 4. Conclusion

An absolute classic

5

6 Strategy is the art & science to use all sources and instruments (!) aiming at a long-term survival of an institution. Hermann Simon

7 Strategies can be characterized by: - usually innovative character - imminent relevance - implicate a variety and complex alternatives for the action plan - not a repetitive approach

Elements of Strategies  To know what you want  To know what you not want  Create something new (not imitation)  Integrate external opportunities and internal competencies  Sustainability (Hang in!)  Strategy is comprehensive

9 Instruments – used with sense and thoughtfulness – help to develop and implement strategies. „You can come up with the best strategy in the world – the implementation is 90 % of it.“ Alfred Brittain

Analytical InstrumentsInstruments for Implementation Instruments for the Strategy of an Institution Vision Portfolio Analysis Scenario Analysis Competitior Aufklärung Goal Strat …. Quality Managment Knowledge Management Balanced Scorecard Investor Marketing Options Selection …. Instruments for a Business Unit of an Institution Benchmarking SWOT Analysis Lifecycle Analysis Strategic Business Unit A. Brand-Equity Analysis Comstrat Analysis …. Value-to-Customer Market Segmentation Pricing Instruments Decision Support Systems …. H. Simon/A. v.d. Gathen

Analytical InstrumentsInstruments for Implementation Instruments for the Strategy of an Institution Vision Portfolio Analysis Scenario Analysis Competitior Aufklärung Goal Strat …. Quality Managment Knowledge Management Balanced Scorecard Investor Marketing Options Selection …. Instruments for a Business Unit of an Institution Benchmarking SWOT Analysis Lifecycle Analysis Strategic Business Unit A. Brand-Equity Analysis Comstrat Analysis …. Value-to-Customer Market Segmentation Pricing Instruments Decision Support Systems …. H. Simon/A. v.d. Gathen

Vision  Aim and direction  Beyond the day: not gradual but leap forward – timeframe: 5+ years  Between utopia and reality: challenging; believe in once abilities; based on hard facts, global trends, assumptions of abilities  Communication  Shown through the role model of leaders, heads …  Personification „When our goals were out of sight we doubled our efforts.“

Portfolio Analysis  Criteria for distributing resources on activities / BU  Combination of activities / BU with a long-term perspective  Criteria for starting new activities / BUs Overall goal of Portfolio Selection Theory: Discuss options not isolated but in the overall context ! A framework to discuss strategic decisions !

Portfolio Analysis

15 Market AttractivenessCompetitive Strength 1) Market growth and size Market quality Supply security Environmental situation Relative market position (Image, development, …) Relative Potential (process efficiency, advantage of location, …) Relative R & D potential (innovation potential; state of research) Relative quality of human resources Portfolio Analysis: Market Attractivity-Competitive Strength Portfolio 1) Compared to the most powerful competitor Quantification via „Nutzwertanalyse“

Portfolio Analysis

Business Portfolio Metropolis Ruhr

Balanced Scorecard: Objectives  Leading and control of institutions more and more complex  In the past (before 1990) financial figures dominated Performance Measurement Approaches  Include perspectives: finance, customer, organisation & process, employees & knowledge Overall goal: Transfer strategy into quantitative goals See ursache-consequence-mechanisms Identify the driving forces for results …

Balanced Scorecard: Process  Develop vision & strategy  Define strategic goals for business units  Identify cause-and-effect relations  Define operative goals & actions  Decide on figures to evaluate / measure goal expectations  Develop an action plan for implementation and feedback process Implementation:  Define responsibilities for actions, evaluation etc.  Define time line  Analyse deviations from the target  Analyse consequences für strategy and goals

20

21

SWOT Analysis  Strength & weaknesses – compared with competition -> Analysis of potentials (resources: finance, technology, HR, …) and competitors => identification of options  Opportunities & risks – external reference -> strategic discontinuities

SWOT-Analysis

25 4. Summary

26

Recommendations  Be explicit  Collect data, facts, figures  Discuss alternatives (build or rent, ….)  Make assumptions for decisions clear  Plan long-term  Analyse positive & negative feedback interdependencies

Thank You for Listening !