MBA 501

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Developing strategy

Week 4 Workshop

MBA501 Dynamic Strategy and Disruptive Innovation

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• What does American astrophysicist Gregory Benford mean when he says:

Small Group Discussion

If you are losing at a game,

change the game.

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Small Group Challenge Rugby, England 1823

William Webb Ellis has a problem. His school sports program forces him to participate in a range of sports that he hates. And he hates no sport more than football.

Thanks to his large frame and lack of agility, William is always relegated to defensive positions where his classmates have little trouble humiliating him by manoeuvring the ball around him with a quick combination of sprightly kicks.

A player on the opposite team clears the ball with a powerful kick that sends it soaring in a high arc. The ball travels at high speed straight for William, as do at least half a dozen attacking players from the opposite team.

In groups, advise William what he should do.

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Stakeholder behaviour

• Competitive threat and cooperative potential are measures of potential change in stakeholder behaviour.

• The relative power of stakeholders, in terms of potential for changes in current actions, affects the success of particular strategic programs of an organisation.

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Stakeholder categories

There are four stakeholder categories:

1. Swing: high cooperative potential and high competitive threat

2. Defensive: low cooperative potential and high competitive threat

3. Offensive: high cooperative potential and low competitive threat

4. Hold: low cooperative potential and low competitive threat

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Stakeholder categories

Competitive threat

Cooperative potential

Offensive Swing

Hold Defensive

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Swing stakeholders

• Swing stakeholders have a strong ability to influence the outcome of a particular situation.

• A strategic program that seeks to change the rules is appropriate for swing stakeholders.

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Change the rules programs

There are three key change the rules strategies for managing swing stakeholders:

1. Formal rule changes through government

2. Change the decision forum

3. Change the kinds of decisions that are made

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Formal rule changes

• Government agencies are often swing stakeholders.

• Formal rule change strategies include lobbying lawmakers for legislative reform.

• Disability support groups successfully lobbied the federal government in 2013 for the introduction of the National Disability Insurance Scheme.

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Decision forum changes

• Decision forum change strategies include shifting the forum from the courtroom to the negotiation table.

• CBA avoided a prosecution over their foreign exchange trading model in 2016 by negotiating an enforceable undertaking with ASIC.

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Kinds of decisions changes

• Kinds of decision change strategies include shifting the debate from one subject or issue to an alternative.

• Mining interest groups mounted a public campaign against the mining tax in 2010 that shifted the debate from taxation to economic impact on ordinary Australians.

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• What does American political activist Michael Moore mean when he says:

Small Group Discussion

I may be preaching to the choir, but

the choir needs a good song.

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Small Group Challenge New York, US 2015

Billionaire real estate tycoon Donald Trump has a problem. He prepares to announce his candidacy for President of the United States from his home, Trump Tower. His prospects for success are slim. At the outset, he faces a crowded field of 17 contenders for the Republican nomination. And in the unlikely event he wins the nomination, he will then be pitted against Hillary Clinton, a former First Lady with over 20 years’ experience in politics.

Donald understands his greatest challenge initially will be visibility with voters, being able to set himself apart from the competition. The key presidential campaign issues are diverse and complex: the US economy, climate change, criminal justice, health care, and data security. He realises he needs a strategy to connect him with voters.

In groups, formulate a strategy to help Donald Trump connect with voters that’s different to Trump’s infamous slogan.

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Defensive stakeholders

• Defensive stakeholders can be of relatively little further help but can take steps to prevent an organisation from achieving its objectives.

• A strategic program that seeks to defend the organisation from potential competitive threat is appropriate for defensive stakeholders.

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Defensive programs

There are three key defensive strategies for managing defensive stakeholders:

1. Reinforce current beliefs about the organisation

2. Maintain existing programs

3. Let the stakeholder drive the transaction process

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Reinforcing current beliefs

• Shareholders are often defensive stakeholders.

• Reinforcing current belief strategies include holding shareholder meetings and producing annual reports that reaffirm the message that management is constantly striving to create more value for shareholders.

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Maintaining existing programs

• Maintaining existing program strategies ensure that any helpful stakeholder behaviour is preserved whilst competitive threat is neutralised.

• British engineering company Cobham has maintained or increased dividend payments to shareholders year after year for almost 50 years.

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Transaction process

• Transaction process strategies include implementing investor relations programs that allow shareholders to initiate and drive communication.

• Westpac and Telstra implemented a shareholder app in 2015 which permits shareholders to vote on company matters digitally.

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• What does American professor Jef I. Richards mean when he says:

Small Group Discussion

Creative without strategy is called ‘art.’

Creative with strategy is called

‘advertising’.

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Small Group Challenge Portland, US 2010

Dan Weiden, founder of advertising agency Weiden+Kennedy, has a problem. Proctor & Gamble want Dan to advertise their Old Spice brand of men’s deodorants, shampoos, and body washes. Initial market research confirms Dan’s suspicions: Old Spice is an anti- brand, a label consumers actively avoid because of their negative beliefs. Old Spice is widely perceived as ‘grandfather’s aftershave’.

Dan explains this to Proctor & Gamble’s executive team and advises them to view this anti-Old Spice market segment as a key stakeholder group with high cooperative potential. Their negative beliefs about the brand certainly have an impact upon the company’s revenues. He further explains his belief that the right strategy could transform this stakeholder group into loyal Old Spice customers.

In groups, prepare an alternative strategy to transform the anti- Old Spice stakeholder group into loyal Old Spice customers.

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Offensive stakeholders

• Offensive stakeholders can help a great deal in achieving objectives, but pose relatively little further threat.

• A strategic program that seeks to exploit any available opportunities for gain are appropriate for managing offensive stakeholders.

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Offensive programs

There are three key offensive strategies for managing offensive stakeholders:

1. Change current beliefs about the organisation

2. Try to change the stakeholder’s objectives

3. Adopt the stakeholder’s position

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Changing current beliefs

• Segments of the market that are hostile or indifferent to the organisation are often offensive stakeholders.

• Changing current belief strategies include product repositioning programs such as McDonald’s 2015 very ‘Un- McDonald’s’ campaign for Create Your Taste.

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Changing objectives

• Changing stakeholder objectives strategies seek to convince the group to want the same thing as the organisation.

• Nike launched their first ‘Just do it’ ad campaign in 1988 and prompted a society struggling with procrastination and obesity to take accountability for their own physical wellbeing.

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Adopting position

• Adopting the stakeholder’s position strategies include openly agreeing with the stakeholder’s criticism of the organisation and committing to improvement.

• Domino’s Pizza launched a mea culpa advertising campaign in 2010 admitting their pizza ‘sucked’ and promising to deliver a better quality product in future.

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• What does American author W. Edwards Deming mean when he says:

Small Group Discussion

Let us ask our suppliers to come and

help us to solve our problems.

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Small Group Challenge Chicago, US 2004

Roger Deromedi, newly appointed CEO of Kraft Foods, has a problem. The troubled foodmaker continues to lose market share amidst growing concerns about nutrition. Roger has been appointed to restructure the organisation and turn its fortunes around.

He wastes no time putting together a new corporate structure he hopes will save $400 million in annual costs by cutting 6% of Kraft’s workforce and closing up to 20 manufacturing plants.

The directors approve the new corporate structure but are nervous about the potential adverse impacts on the supply network Kraft depends upon to provide the goods and services required to manufacture its confectionary, food and beverage products across its 50 or so different brands.

In groups, prepare a strategy to ensure the Kraft supply network is not adversely impacted by the company restructure.

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Hold stakeholders

• Hold stakeholders can be of relatively little extra help or harm.

• This does not mean they are unimportant.

• With hold stakeholders who are unlikely to move, existing strategic programs should be sufficient.

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Hold programs

There are three key hold strategies for managing hold stakeholders:

1. Monitor existing programs

2. Reinforce current beliefs about the organisation

3. Guard against changes in the transaction process

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Monitoring existing programs

• Suppliers can often be hold stakeholders.

• Programs need to be assessed for their ability to maintain current behaviour.

• For significant procurements, a contract management plan informs suppliers at the outset about how their performance will be assessed and recorded.

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Reinforcing current beliefs

• Reinforcing current belief strategies include implementing supplier relationship management initiatives to facilitate two-way communication.

• American automaker Tesla maintains legitimacy, trust, and volume guarantees with suppliers by treating them as partners in production.

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Guarding against change

• Guarding against change strategies include resisting any proposed alterations, whether internal or external, to the transaction process.

• Ensure too that any strategic programs that seek to change the rules with other stakeholders do not also inadvertently change the rules with hold stakeholders.