Adam Roberts - Strategy

REFERENCES
(AS FOUND ON LINKEDIN)

 

Tony Peacock
Project Director URS

 

Jonathan Fernandez
Programme Manager London Overground Limited

 

Remi Awolola
Project Engineer London Underground Limited

 

Charanjit Birk
Senior Project Engineer London Underground Limited

 

Merv Wyeth
Project Management Consultant APM Programme Management SIG

 

Mick O'Donnell
M & E Package Manager Crossrail

 

Rod Prigge
Director LRD Engineering

 

Andrew Elliott
Senior Construction Manager London Underground Limited

 

Mike Flowers
Director Web Management Limited

 

View Adam Roberts (MAPM)'s profile on LinkedIn

Papers > Strategy

ABSTRACT

A well thought out strategy can make the difference between the success and failure of a business. After reviewing the results from one specific business over the past 10 years it is evident that the development of a business strategy is not straightforward. There are multiple approaches that can be adopted when developing the strategy, as it is apparent that the creation of an effective strategy is not only extremely complex, but also very specific to the business in which it is being developed for. Not withstanding these complexities and the underlying forces that are required to form the building blocks of the strategy, the strategy should appear simple and easy to communicate. If it cannot be effectively communicated to the people that are required to implement it, then the probability of success will be reduced significantly.

 

Word Count: 4914

Key Words: Strategy, Success, People

INTRODUCTION

Johnson et al (2011)Strategy is an exciting subject. It is about the overall direction of all kinds of organisations

 

The aim of this paper is to investigate the application of strategic management theory, using a focus on a specific case study, detailing the various strategies that were adopted by multiple directors from a single business over a period of time. The intention is to investigate why different strategies seemed to be successful and why other strategies worked to the detriment of the business.

Some of the questions explored in relation to this are: If any of the directors had created a formal strategy, if they had a strategy but had not formalised it, or if strategies emerged formed from the individual’s personality, continually changing depending on their emotional state.

There is an underlying assumption in this paper, that all of the directors that were involved in the business during this nine-year period were ‘planningto increase their profitability and that they were all aware of the threats that were present from their competitors. Michael Porter (2004, p.1) suggests “Competition is at the core of the success or failure of firms” This paper will refer to Michael Porters (1985) five forces model, which will assist in assessing the business structures that were effected throughout the period.

 

Michaels Porters Five forces model:

 

Threat of substitute products

 

 

Threat of new entrants

 

Rivalry among existing Franchisee’s

Bargaining power of suppliers

 

Bargaining power of Buyers

 

 

 

 

A comparison is made between the different directors and their individual styles of strategic leadership, Northhouse (2004, p3); “Leadership is a process whereby an individual influences a group of individuals to achieve a common goal” discussing how their approach to the five forces contributed to the success and failure of the business throughout the period. Gold. J (2012.p53); “Leadership and Management Development (LMD) can be seen as a strategic tool to implement organisational strategy and develop and improve business performance

 

The findings to this paper are drawn down from interviews with current and past clients and from general observations taken throughout the period. It should be noted that the writer of this paper has first hand experience with this business as he directed the business from February 2002 – August 2004; knowledge of the previous director was obtained when the writer took over from him in 2002 and knowledge for the post period from 2006 to 2008 is drawn from discussions with that director, general observations, client feedback and multiple visits to the business during that period.

 

Case Study

“Action Sports” is an indoor sporting organisation (franchise) running predominantly in South Africa, this paper will focus on one of the arenas that operated within the Durban area of Kwa-Zulu Natal. The business had four fully operational sports courts available to the public for hire and were licenced to operate 24 hours a day 365 days a year. The area of the premises covered approximately 2000m2 and included a fully functional and licensed bar with a kitchen and take away facility, there were large changing rooms which would allow for up to 25 persons to make use of at any given time. There was a potential for the business to employ up to 20 full time staff and 30 part time staff if operated at full capacity. For the purpose of this paper we will assume that capacity is equal to 2000 clients (Players) per week. It was not believed that the business had the ability to run 24 hours a day, but did, on occasion, remain operational throughout a 24-hour period.

The individual franchisees had many constraints to running their business, as they are required to operate within the confines of the franchise agreement. The franchisor does very little to market the individual franchisee operations, but does assist by organising the structure of various annual inter provincial tournaments and also televised a series of games on National television.

The predominant sport played in these arenas is a derivative of Indoor cricket and Indoor netball, known as “Action Cricket” and “Action Netball” (although other sports are played to a lessor degree); the franchisor has created a unique set of rules for these sports, differentiating the sport from the main stream, in what can be assumed as an attempt to reduce the negative effects of non franchised competitor offering a cheaper product.

 

The arena had 5 different directors during this period, although each individual director’s strategy is unknown, as none were formalised, assumptions have been made resulting from interviews with both clients, staff members and the individual directors in control of the franchise.  For the purpose of this paper the matrix below attempts to show the effect that Michael Porters, five forces model had on each individual director, this paper will focus on three of the five directors.

 

 

Director 1 (1999 – 2002)

Director 2 (2002 – 2004)

Director 3 (2006 – 2008)

Threat of substitute products

Yes(Substitute arena operated ineffectively next door)

Moderate(Substitute arena showed no threat and later closed down)

Minor (No renewed interest was shown in the area)

Threat of new entrants

Minor (No further franchisees had been scheduled in the area)

Moderate(Franchisee showed interest in nearby area)

Yes(New entrant, outside of catchment area – effect to be determined)

Rivalry among franchisees

Yes(Lowered prices and approached rival arenas clients)

Minor(Created a working relationship and did not approach rival clients)

Yes(Lowered prices and approached rival arenas clients)

Bargaining power of suppliers

No(Not enough business)

Yes(Worked with smaller suppliers for sponsorships)

No(Not enough business)

Bargaining power of Buyers

Yes(Contravening franchise agreement)

No (Upheld franchise agreement)

Yes(Contravening franchise agreement)


METHODOLOGY

For the purpose of this paper and to attempt to simplify the analogy of the results, an assumption is made that the overall success or failure of each individual director can be determine by a specific set of values employed as performance indicators for the realisation of competitive strategy/performance, these being, the total number of players (Clients) who play at the arena on a weekly basis. This assumption is made due to each team being scheduled to play a game on a weekly basis, resulting in each player returning to the arena on average four times a month.
Note: There is a formula that can be used that will determine the average value of each player which factors in the possible refreshment sales, depending on the total number of players playing at the arena every night (as the more people coming in to the arena results in higher ratio turnover in the refreshment sector of the business); however for the purpose of this paper, we will only take into account the total number of players coming through the door.

Two methods of research have been adopted in this paper:

1.     Reviewing multiple texts on best practices in relation to strategy

2.     Discussions regarding both the case study and general strategy with peers, and with persons involved with the sports centre throughout the period.

 

LITERATURE REVIEW

Google definitions, defines Strategy as: “a plan of action designed to achieve a long-term or overall aim.” while Adair. J (2009 p.49); suggests that the word strategy is derived from two Greek words“stratas, a large body of people, and the egy element which means leadership. Strategy is simply the art of leading an organization.” If we were to combine the Google definition with Adair’s origin of strategy we could say that: ‘strategy is the means of creating, implementing (and recording) a plan of action to lead an organisation into a successful future’ Although it is often suggested that a good strategy should be communicated to staff and in some cases to clients. Lawson et.al. (2005); “For an organization to be able to implement its strategy, that strategy must be clearly communicated throughout the organization”.It may also be suggested that the company strategy should be written down in order for all members of the organisation to properly understand and drive toward the common goal; however after completion of the research for this paper, and review of both the Google definition and the origin of the word nowhere did it suggest that a company’s strategy should be written down. Jones. P (2008 p.599 / 3832)“When you ask for the strategy, you are often given the plans. Usually these are paper documents” Jones goes on to say that if the strategy is in people’s heads they will implement it on an on-going basis and will not have to continually refer to the long drawn out strategy document.

Peters and Watermancompleted a study, on 62 successful American companies, in 1982.

They identified eight basic attributes, which appeared to account for success; they refined these further to create “ The McKinsey 7-S Framework. Mullins. L (2010 p.777); “any intelligent approach to organising had to encompass, and treat as independent, at least seven variables

 

1.     Strategy

 

Shared values

2.     Structure

 

3.     Systems

 

4.     Style

 

5.     Staff

 

6.     Skills

 

 

It should be noted that in the Peters and Waterman study, Strategy was attributed to success and not the sole reason for it, however it should also be noted that a good strategy would need to encompass all of the points mentioned in the report in which case strategy should possibly be in the centre of the list alongside ‘Shared Values’.   

 

Kerzner. H, PhD  (2001 p. 145)suggests that all businesses have between three to five core values, whichcome from within the organisation; “they represent what the organisation is at its very essence, as opposed to what it does from day to day.” He talks about four strategic thrusts when discussing strategic planning and suggests that: “they must be considered before your ‘project management methodology’ can be turned into a sustainable competitive advantage.” The same can be said for a business strategy that is focused on creating a sustainable competitive advantage, all four ‘strategic thrusts’ should be considered.

In the case study, we would expect:

1.     Core Values / Purpose

1)    Family value

2)    Strong sporting competition

3)    Value for money

2.     Strategic Focus

Kerznersuggests that we should ask three questions:

1)    Where will the organisation compete

2)    Against whom will the organisation compete

3)    How will the organisation compete

3.     Competitive Focus

Kerzner believes that the competitive focus should emphasise the difference between the competitor and organisation.  

·       Specific features offered by the competitors

·       Value added opportunities

·       Quality of service and product

·       Performance

4.     Synergy

Kerzner. H, PhD  (2001 p. 147)the organisations ability to perform more work in less time and with fewer resource” This would suggest that when creating a strategy, the ability of how well the individual members of the business function internally, will play a key role in the success of that business strategy.

 

If we assume that the business leadership team creates the strategy and that the management team will be expected to implement that strategy effectively, then this would suggest that the leaders would be required to communicate the message to their management team effectively.

Turner. J (2009 p.73); “As long as 2500 years ago Aristotle suggested that you should start by building relationships with people” If there is no respect between the management team and the business leaders, then there is a strong possibility that the message will be misinterpreted or lost completely. If strong relationships do not exist between these two teams or if the relationship is new then it would be advisable for the leaders to monitor the situation carefully and ensure that a plan is in place to react to changing situations if they develop. Rumelt. R (2012 p. 241); “as results appear, good leaders learn more about what does and doesn’t work and adjusts their strategies accordingly” In the event that there are three businesses with very similar objectives, it would seem to be prudent to attempt to copy the strategy of the rival business, to analyse their strategy with the objective of reproducing it, however without all of the relevant data there is the possibility that something will be misinterpreted. Goleman. D (1998 p.386); “Systems theory tells us that to ignore any significant category of data is to limit understanding and response.” It can be expected that all of the relevant data will not be available to a competitor business and therefore a complete replication of the strategy will not be possible resulting in the implementation of an inferior and ineffective replica strategy.

 

It may be suggested that in the scenario of a franchised sports arena, with only three rivals competitors in the immediate area and the fact that there is very little threat of a substitute product emerging into the market place, there is little room for an individual franchisee strategy as each franchisee could only focus on the marketing and cost of the sport, Porter. M  (2004 p.11); “Cost advantage and differentiation in turn stem from industry structure. The result from a firm’s ability to cope with the five forces better than its rivals” however as the pricing is fixed by the franchisor in the case study, each director would have to focus on what his desired, ‘end state’ result would be. In this instance we are assuming that all three directors were seeking to increase profitability of the business and that even though not all directors communicated their strategies effectively, that all had some sort of vision for the future of the business. Callahan. K et. al (2004 p.14);“The strategic person asks the question, "What result do we want?"

 

One of the key assumptions in this paper is that all of the directors that were in control of the sports arena had all been focused on increased profitability, however there is the possibility that one or all of them may have had alternative motives. The strategy may have been ego related and focused on retaining key individuals playing at their arena in the attempt to have more influence over the end of year inter provincial competition. There is also the possibility that profitability may have been neglected to make way for the retention of strategic relationships in the event that these relationships were required for future endeavours. Burnes. B (2009 p.233); “Those in power will select technologies and environments that will facilitate their maintenance of control” It should be expected that the key person responsible for driving the strategy would be focused on the success of the business, however this is not always the case.

Sun Tzusuggests thatorganisation should be the priority and that the less the focus is on the organisation the more likely the organisation is to failure. Wing. R. L (2000 p. 49); “Leaders are those who protect the organisation. If the protection is complete the organisation will be strong. If the protection is flawed, the organisation will be vulnerable.

 

FINDINGS

The director 1 (D1) in control during 1999 – 2002 had previously worked in one of the rival arenas and made the decision to purchase an arena in the region. He may or may not have communicated his strategy to his staff, however his strategy was unclear to the client base. There were mixed feeling as to the type of client that he was targeting, the emerging competition that had set up next door were posing a threat, which resulted in variances in his pricing strategy, instead of taking the opportunity to build on the relationship with his former employer at the rival arena, he attempted to contact their clients and offer them better deals. The arena was on the brink of foreclosure with the sale of the business being the director’s last option. On the date that the arena was handed over there were a total of 240 clients frequenting the arena on a weekly basis.

 

 

The director 2 (D2) in control during 2002 – 2004 owned an engineering business and had made the decision to venture into a new market. He was very careful to communicate his strategy to both his staff and to his clients during large competitions, when the majority of the client base would be present on one day. He had clearly shown that the business target market was for a family environment, by both communicating the fact and by implementing his strategy with a staged approach. The strategic alliances that were developed between the other two arenas where focused on the company strategy. The agreements that were forged with the suppliers were all related to family related advertising and family related sponsorships. There was a strict pricing policy and fairness policy, whereby no person would be judged any different to anyone else, regardless of their buying power, ability to play, or personal relationship. On the date that the arena was handed over there were a total of 1500 clients frequenting the arena on a weekly basis.

 

The director 4 (D4) in control during 2006 – 2008 had worked at the arena since 2002 and was presented with the opportunity to take on the director’s role. No strategy was communicated to either his staff or clients. The arena was struggling financially and he had made the decision to attempt to build a relationship with a large corporate supplier with the attempt to capitalise on the refreshment side of the business. He had not communicated his intent as to what the client focus would be, resulting in a steady decline in existing clientele. This director was removed from his post by the franchisor and the director’s role was offered to the director of another arena in the region. On the date that the arena was handed over there was approximately 200 clients frequenting the arena on a weekly basis.

 

Reviewing the three cases above it can be suggested that the two directors that were clearly failing, could have been failing due to not having a clear strategy, director 2 seemed to have a strategy and was continually communicating the value of that strategy to both customers and staff. Porter. M (1985 p.53);Firms must communicate their value to buyers through such means as advertising and the sales force” Directors 1 & 3 did however attempt to communicate the failings of the rival arenas in the area, making every attempt to entice teams to leave the other arenas to play at their arena, pointing out the rival arenas short comings by differentiating between the two. These communications were done sporadically and often as a one to one with the client, rather than open and transparent as Director 2 communicated his intentions.

Director 1 had no consistency and seemed to be chasing anyone that had money, there was no clear message and the only message that was being heard was ‘anything goes’.

Director 2 had a clear vision, which was ‘to create a safe indoor sporting environment for the entire family’ Prior to any change or event taking place at the arena the integrity of this vision was tested.

Director 3 seemed to have a vision to turn the arena into a predominantly adult entertainment venue focusing on the alcohol sales and it seemed that he had lost sight of the core business focus. 

DISCUSSION & ARGUMENT

It can be argued that D2 had the winning strategy as he had achieved major growth in the business, up until the time that he handed over, however short term growth does not ensure sustainability. The rapid growth of this centre between 2002 and 2004 may not have been sustainable, resulting in inevitable failure, regardless as to who was leading the team in the future, furthermore this would also suggest that the business went through some major changes during this period, which would have required a change management process including a method of constantly monitoring and measuring the effects that both the changes and the new strategy were having on the business. <http://www.building4business.com.au/strategic.html (26/12/2013 - 14.39)> “Strategic change is the movement of a business away from its present state towards some desired future state to improve its current circumstances. It enables the execution of the strategy

 

Figure.1 The strategic change cycle
http://www.building4business.com.au/strategic.html

It can be argued that D1 and D3 were aiming towards increased value and long-term sustainability. Although the strategy was not successful for either one of these individual cases, it may have been that D2 was only successful due to the failure of D1 and that D3 could not succeed due the negative legacy left by D2. In which case if their individual strategies had been reduced to writing then all of these strategies could be analysed with the intention of developing a new strategy incorporating the positive and reducing the negative attributes of all three. It can also be argued that if the strategy is effectively communicated there is opportunity for flaws, allowing them to be corrected prior to any irreparable damage being experienced. This type of open communication can however introduce risk, that of a competitor learning the strategy and attempting to emulate it, however as the value chain will differ between competitors, the threat of emulation is reduced significantly. Porter. M (2004 – p.36); states that although two businesses may be similar in many ways, that their value chain will differ. “People Express and United Airlines both compete in the airline industry, for example, but they have very different value chains embodying significant differences

If we were to look at the figure 2 we will note how essential these factors are in defining a successful strategy, Porter. M (2004 – p.38); suggests that the way a business performs individual tasks is a reflection on its strategy. And goes on to say “value, instead of cost, must be used in analysing competitive position

 

Porter M - Generic Value Chain

Figure. 2 Porter. M (2004; 976 of 10619) Generic Value Chain

We can therefore make the assumption that a good strategy would encourage the clientele to ‘perceive’ that they are receiving a higher value than that is being offered by a competitor’s organisation, while ensuring that the total cost of the ‘end state’ does not exceed (the sales price less the percentage profit) that is required by the business. OGC (2010 – p.5); The value ratio – ‘Value Benefits / Cost”, can be used to ascertain the success criteria of the value chain, by substituting all of the costs and benefits into a monetary figure, if the ratio is higher than 1, then the strategy may be flawed and either a reduction in costs or an increase in benefits will be required.

 

In figure 2, ‘Porters - Generic Value Chain’ it is made clear that our case study has many individual attributes that would separate them from their competitors, even though their businesses are very similar and the franchisor has a fixed pricing regime; for example: Each individual franchisee has a unique premises layout and has the ability to use this space in different ways to create a competitive advantage over the other franchisee’s.

 

CONCLUSIONS

 

·       Understanding of the business and the businesses ‘Value Chain’

Porter believes that, by understanding the value chain, will assist in determining the difference in cost between competitors and by exposing those differences assist in determining competitive advantage. Porter. M (2004 – p.38); “value activities are therefore the discrete building blocks of competitive advantage”

·       Strong (visionary) leadership skills.

If it is expected that a strategy will be the tool used to ‘lead an organisation into a successful future’ then it can be assumed that the person creating that tool would be required to have some sort of vision of that future and a clear understanding as to which direction the business will need to go, to achieve that objective.  Goleman. D (1999 P.123); “A visionary corporate leader sees years or even decades ahead

·       Communication

In his book, first published in 1948, Barnard. C (2003 – p.240); describes communication as the ‘sine quo non’ of an organisation. “The lines of communication, the system of status, and associated procedures” as the“ essential tools of administration” It can be assumed that without an effective communication procedure, it will be difficult to determine if the strategy has been implemented in the most effective manner.

·       Understanding of the market (customer needs)

The new strategy will need to take into account the current market forces, if the strategy does not address these needs there is the distinct possibility that it will fail to achieve its objective. This is effectively like a pre sales call analysis, learning all that you can in relation to the business that you are approaching, except in this respect, the leader would need to learn all he can about the wider customer base prior to developing a new strategy. Tracey. B (2003 – p.30);if you're dealing with the business, make it a point to find out everything you can about its products, services, history, competitors, and current activities

·       Knowledge of the competitors

Without thorough knowledge of the business competitors it will be extremely difficult to develop and implement a strategy that will ensure sustainable growth.Porter. M (2004 – p.xxii)competitive advantage is about how a firm actually puts the generic strategies into practicePorter goes on to say “competitive advantage grows fundamentally out of the value a firm is able to create for its buyers that exceeds the firm’s cost of creating it

 

 

Strategy Matrix

Figure 3 Strategy Matrix

 

Porter discusses the 5 forces model to identify the five points that will need to be taken into account when creating a strategy, what is being suggested in figure 3 is in addition to Porters 5 point model, suggesting that the person creating the strategy should pay close attention to the points listed, meaning that there should be a good understanding of what the threats are and where they are coming from, what the opportunities are and where they can be found; and how the current situation can be exploited for maximum gain.

 

The strategy should be constantly monitored, and reviewed for possible flaws and enhancements, looking for opportunities to benefit on any changes within the market place, at any time. For example if, in the case study described in this paper, the scoring board technology was old and required upgrading, the constant failure of this equipment would upset the players, as they expected at the very least to have a working score board when playing a game. If one of the franchisees bought the new scoreboard, the disgruntled players, playing in another centre, where they had not yet been upgraded, would start playing in the centre were the new technology was now available. If, however the original strategy was to increase the length of time that each player remained in the centre and the franchisee had made the decision to spend additional funds on enhancing the kitchen facility, he may have a new kitchen facility with no customers (players) turning up to make use of it. By monitoring his strategy and by understanding the market, he could quickly alter the strategy of ‘prolonging the customer experience’ to ‘enhancing the customer experience’ ensuring that he maintained sustainable growth.

 

It would be beneficial to ensure that the strategy is written down and recorded, there does not seem to be any evidence that publishing the strategy for public review will enhance the strategy in any way, however by having it written down will allow for the original strategy to be reviewed from time to time, highlighting how far from the original strategy the business may be operating. There is evidence, however that the strategy should be clearly communicated to those people that are required to implement it.

REFERENCES

1.     Burnes. B (2009); Managing Change 5th Edition – Prenyice Hall

2.     Callahan. K & Brooks. L (2004); Essentials of strategic Project Management – John Wiley & Sons, Inc.

3.     Johnson. G, Whittington. R, Scholes. K (2011); Exploring Strategy – Text & Cases 9th Edition – prentice Hall

4.     J. Rodney Turner (2009); The Hand Book of Project Based Management 3rd Edition – McGraw Hill

5.     Laurie J. Mullins (2010); Management & Organisational behaviour 9th Edition – Prentice Hall

6.     Michael E Porter (2004); Competitive Advantage – The Free Press

7.     Richard Rumelt (2012); Good Strategy / Bad Strategy – Profile books Limited

8.     R L Wing (2000); The Art of Strategy, A new translation of Sun Tzu’s Classic – The Art of War – Broadway

9.     Goleman. D (1999); Working with Emotional Intelligence – Bloomsbury Publishing Plc.

10.  Barnard. C (2003); The Early sociology of Management and Organisations – Routledge

11.  Tracey. B (2003); Be a Sales Superstar – Berrett-Koehler Publishers Inc.

12.  Raef Lawson, William Stratton and Toby Hatch (2005) - Achieving Strategy with Scorecarding - ©Wiley Periodicals, Inc.

13.  Jones. P (2008); Communicating Strategy - Gower Publishing Limited


WORK HISTORY

ASTAD Project Management - QATAR, Doha

 

London Underground Limited 

 

NHS Homerton Trust

 

M J Quinn

 

Wingate

 

Tube Lines Limited

 

RBEBS Limited Various

 

eVentFil Closed Corporation 

 

Filtra (Pty) LTD