The strategy choice cascade

Revision as of 17:38, 20 March 2022

Category:The strategy choice cascade.

Abstract

Strategy affects every aspect of a business, from employees to partnerships, services to sales channels, consumers to competitors. Strategic planning sets the stage for successful projects. Furthermore, more companies nowadays require more active involvement from project managers in the strategy phase. This is attributable to the fact that the market has become extremely volatile, and a manager with a strategic vision may make more rapid changes in the planning to maintain the project's competitive edge. The Strategy Choice Cascade is a methodology that analyzes the critical elements of the strategic alternative of interests. Moreover, it is a way for a team to visualize and discuss different approaches towards future projects. A strong strategy will generate a durable advantage and higher value in the competitive market. This article serves as a guide for articulating a strategy or strategic possibility as an integrated collection of choices that uniquely places a company, project or product in its industry. The strategy choice cascade will help project managers define the vision statement, objectives, and resources required for the project's success.

The strategy choice cascade

The Strategy choice Cascade and its relevancy to Project Managers

Strategy is an integrated collection of choices that generates a durable advantage and differentiate a project or company from the market competitors.^[1]Every facet of a business is affected by strategy, from employees to partnerships, services to sales channels, consumers to competitors. According to studies,^{[2] [3]} strategic planning establishes the foundation for successful project implementation. Teams that have a clear, well-defined, documented vision and mission statement have a greater probability of succeeding and effectively implementing projects.

Depending on the size of the enterprise and how the roles are structured, project managers may be involved at different stages in the project's strategy process; some may be involved from the beginning, some may be involved when all of the decisions have been made. Many publications,^{[2] [4] [5]} however, agree that the project manager should be engaged in the project's strategy to some extent. This is because today's market is seen as very unpredictable, and modification pleas are likely to arise as a result of the fast pace of competition. What was strategically aligned last year may no longer be so aligned, or the general strategic direction of the firm may have shifted.

In this situation, project managers would be expected to respond to those shifts. However, altering the course of the project without a clear knowledge of why the project was started in the first place and without a vision of the general direction might be challenging and inefficient. Thus, project managers must have strategic awareness and be a participant of the board of members setting the strategy.   As a result,  even when there are communication gaps with the board of directors, the manager will be familiar with the overall strategy of the project and vision and be able to modify the direction and make decisions accordingly.

Moreover, since one of the objectives of the project manager is to lead the project team through the fulfilment of project goals and stakeholder demands, having a clear vision and mission will help the manager achieve just that. The strategy choice cascade will assist the project manager in defining the vision statement, the objectives and the resources needed for the project's success. Implementing a strategic framework will set the pillars to any project as it aids managers to identify the market of interest, the differentiation plan as well as the management systems required. In order to acquire endorsement from stakeholders and provide motivation to the team, the project manager must also convey the project's strategic plan internally. ^[6][7] Thus, as a direct output of this strategic choice cascade framework, managers will have the foundations of a project communication plan which will enable effective communication with employees, customers, and other stakeholders. The framework also requires thinking about project interconnections, which will help decide which initiatives are worthwhile today and which can be of more interest at a later time.

The Strategy Choice Cascade is a tool that assists managers in portraying how a project meets corporate and customer goals in a systematic and organised way. It was designed at Procter & Gamble(P&G) and is discussed in A. G. Lafley and Roger L. Martin's book 'Play to Win: How Strategy Really Works. ^[8] Former P&G CEO A.G. Lafley, working closely with strategic consultant R. Martin, developed a strategy that doubled P&G's revenues, tripled profitability, and raised the company's market value by more than $100 billion. As a result of their success, the authors have developed a set of five critical strategic decisions that, when handled together, will put an organization, project or product ahead of the competition.

This cascade is comprised of five key elements:

1. The winning aspiration. This phase is all about establishing what the project aims to achieve and what would make it successful. 
2. Where to play. The playing field on which the project will compete.
3. How to win. How to come out on top. Winning implies outperforming competitors in terms of the customer value equation. There are three approaches to achieve a competitive edge, becoming a differentiator, a cost leader or a focus strategy.
4. Capabilities. The set of activities that a team must complete in order to gain a competitive edge.
5. Management Systems. Metrics and Systems that facilitate the capabilities and choices that constitute the strategy.

Figure 1 showing the 5 pillars of the strategy choice cascade.

Winning aspiration

The first item in the strategic decision-making process cascade regards the winning aspiration. In this step, management should define the strategic purpose of the company, including its driving goal and vision. The PMI standards for project management highlight the importance for project teams to change their attention from deliverables to planned outcomes to promote the value generation of projects. ^[6] Instead of merely generating a single product, this empowers project teams to execute on the project's vision. Whereas the deliverable may contribute to the project's desired outcome, it may fall short of the project's vision. Users may desire a certain software solution because they believe it addresses a business requirement for increased efficiency. Although the software is the project's deliverable, further workshop training for the product may be required to get the desired productivity outcome.

It should convey what success would look like for a specific project and what it aims to achieve in terms of strategy. Defining a winning strategy serves as the basis for exploring the best alternatives and it sets the stage for all subsequent strategic decisions. An enterprise's guiding purpose is its aspirations. Consider Spotify's mission statement:" unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it." ^[9] This statement is an affirmation of what it aspires to be and a reminder of the reason it exists. Or Nordstrom which vows "to give customers the most compelling shopping experience possible". ^[10] A mission statement can be conveyed in a variety of forms. However, it is recommended to be focussed on customers.  The objective of an organization, according to Peter Drucker, is to generate a client, and this is still valid today.^[11] This statement is in accordance with the PMI standards, which specify that the project should have a client-oriented emphasis, with the customer and other stakeholders playing a significant role in the project's development. ^[6]

Looking at the mission statements previously discussed, both of them base their goals on the needs of their consumers. The tone of those goals is also interesting to look at: Spotify aims to serve all artists and fans, not just a select few, while Nordstrom wants to serve all shoppers. A corporation should strive to win with its clients, not merely provide for their needs. And according to A.G. Lafley and R.L. Martin, the most important aspect of a company's ambition is that it should compete to win. From a project perspective, the vision may have both a customer focus and a financial focus: Improve the productivity of companies by providing consumer-preferred Enterprise resource planning (ERP) systems. Be the operating TSR leader in Europe for ERP systems and a value creator for the company.

Where to play

According to the PMI standard, the company, its clients, its channels, and its setting, all of which are dynamic components, are frequently what distinguishes a project. Project teams may adopt or develop alternative methodologies or approaches in order to achieve success as a result of these adjustments and continual learning. Every project's unique combination of circumstances should be examined by the project team in order to establish the best strategies for achieving the intended results.^[6]

Thus, A.G. Lafley and R.L. Martin's book addresses the project's operating sector as decisions of where to play. In this step, the focus should be to identify what type of market the project should target. It may be the same market the company has always known or maybe they are looking to explore a new segment. It is a matter of deciding where it is recommended to compete and where to avoid competing to gain the best competitive advantage. Recognizing this decision is critical since the playing field selected for the project will also be the area where you must find strategies to win. Choices on where to play can be found in a variety of contexts. 

1. Geography. When analyzing this aspect, the management identifies in which parts of the world the project will compete.
2. Customer: Analyse the customers targeted by the project from the perspective of demographic, psychographic, behavioural and geographic segmentation.
3. Channel. This study looks at the routes that a product follows from business to client. They can be direct or indirect sales channels, depending on whether the business performs the transaction directly with the client or through intermediaries.
4. Offerings. Identifying the specific services offered to serve the consumer and win in this market.
5. Stakeholders of the project stage. What stages will be completed by the business and with external contractors?

How to Win

Winning for a project means providing a better customer value equation than competitors. Porter's core argument in his book "Competitive Strategy" is that organizations may gain and maintain a competitive advantage in the marketplace by pursuing one of three strategies: ^[12]

• Cost leadership. Cost leadership refers to the company's objective of being the lowest-cost producer in its market. Cost advantages can come from a variety of places, depending on the industry's structure. A low-cost business must identify and use any cost advantages available. If a company can attain and maintain total cost leadership, it will outperform the industry average.

Walmart is the clearest illustration of a cost differentiator, providing a 2% contribution to the US economy.^[13] As a result, it can sustain the lowest pricing and attract clients who make purchasing decisions based on affordability. The concept of low pricing is centred around having a big scale and lowering operational expenses. 

• Differentiation. In a differentiation strategy, a company aims to be exceptional by focusing on a few key aspects that customers value. It chooses one or more traits that many buyers in a given industry consider vital and positions itself to address those demands. It often regards a mix between superior and unique benefits. A superior benefit is when a company provides a specific service better than competitors, whereas a unique benefit is when the company provides a service that other companies do not.

Emirates is a great illustration of how you don't have to follow the same approach as your rivals to win in the market. In contrast to other airlines that pursue a cost-cutting strategy, such as Ryanair, Emirates chose to be a differentiator rather than a cost leader. They accomplish this through providing high-quality service and amenities to their customers, as well as taking good care of them during their journey.

• Focus. The goal of a focus strategy, also known as market segmentation, is to limit a company's competitive scope within an industry. Following this approach, a company chooses one or more industry sectors and personalises its strategy to serve them to the detriment of others. There are two versions of the focused approach: cost focus and differentiation focus. A company in cost focus pursues a cost leadership in its target market, whereas in differentiation focus it pursues differentiation in its target market.

TOMS, for example, is a shoe brand that employs the "Focus Strategy" by, focusing on a very specific market of consumers that value ethics within a company. TOMS' "One for One" concept asserts that for every item purchased, the company donates a third of its proceeds to grassroots causes, such as financial donations and collaborations with community groups, to create long-term change. ^[14]

Capabilities

A capability is a set of practices, tools, and systems, as well as organizational skills that enable an organization to achieve a certain goal. These are the competencies a company must have to improve their competitive edge. Without the correct set of capabilities, implementing the winning strategy is impossible. At this point in the strategy framework, management should describe the collection of activities that will be decisive for their project's success. This step may be fulfilled through a workshop facilitated by the project manager. In this exercise, the team should sit down and try to capture the strengths of the company that would strengthen the competitive edge of the project.

1. The determined strengths or capabilities will be captured in a diagram as nodes.
2. The next step is for the team to figure out the reinforcing connection between capabilities and represent it. through connections between nodes. Each capability becomes stronger as a result of these mutually reinforcing linkages, which is an important element of the activity system. For example, looking at Figure 3, the User Experience capability, is strengthened by Functionality in Design; a seamless design will improve the user's experience.
3. The actions that support the core capabilities are represented by the subordinate nodes. For example, a performant ecosystem is supported by seamless integration within apps, a performant cross-platform experience, and good integration with third-party ecosystems.

Figure 2 is an example of how the capability and activity system for a project should be. Let's say a Company named Tech Inc. is developing a project for an innovative phone and they are looking to provide the best user experience to customers through innovative hardware, software, and design. The management sits down and assess the core capabilities needed to succeed in making this project. These may include both existing capabilities or ones that need to be strengthened or implemented. As a result of the exercise, the team comes with the following capabilities:

• Design and functionality: Tech Inc. lays a high emphasis on product design, deviating from the norm to offer more appealing and streamlined products.
• User experience; Tech Inc.'s focus is simplicity and effective design, as they aim to make their products as simple as possible to use.
• Performant Ecosystem: Tech Inc. has a vertical integration that led to a product ecosystem where there is a clear interconnection between Tech Inc's different products.

This exercise only includes a subset of the capabilities required for the project's success; in reality, the system becomes more difficult and complex. Following this exercise, an additional step is to analyze the system and determine the maturity of those strengths and activity systems. The team would determine which capabilities are lacking or non-existent, and how they could be implemented for the project. This is an essential component for the project's success.

Figure 2 showing an example of Tech Inc.'s capability and activity system.

Management Systems

As according to Kaplan and Norton, Compiling a measurement system is an integral step of the management process. ^[15] Management should provide relevant measurements and a target for each strategic aim.

Infrastructure, systems, procedures, and metrics that support and measure your strategy across time make up management systems. It is doubtful that an organisation will be able to develop and sustain its capabilities without particular management systems in place to aid the process. These management systems are required to complete the strategic framework and guarantee that appropriate action is taken throughout the company. IT systems, organizational structures, and KPIs are examples of management systems. According to the PMI standard, a reliable evaluation of the project work's value contribution should take into account the complete context and life cycle of the project. While value is achieved over a period of time, good processes may help the team reap the benefits sooner. Project teams may begin to show progress at an early stage, so implementing a measurement system from the start is an important part of project planning. When consulting metrics, project managers can inspect at any time if the outputs are on track to achieve the desired results.

Within a strategy, setting measurement systems incorporates two key elements: focus and feedback.

1. Focus. Knowing that the process of applying the strategy will be reviewed against some metrics, motivates the company to perform at its best.

1. Feedback. Comparing both predicted and real results encourages follow-up adjustments in the strategy.

Expected outcomes should be stated with as much precision as possible. Instead of expressing the strategy's desired goal as raising the market share, it is preferable to define a range. If the market share falls within that range the company has succeeded, if it falls below it failed. Avoiding specificity in expected outcomes, allows the board to justify any result as rather expected. Every business unit or function inside an enterprise should have distinct measurements that relate to the organizational context and the unit's own decisions. To keep the company from relying just on a single metric of success, the metrics should cover financial, customer, and internal aspects.

The figure below depicts an example of a simple exercise that the enterprise's board of directors could carry out.

• The first step is to identify some specific strategic outcome goals, such as increasing customer satisfaction by a certain amount.
• After establishing a goal, the team should explore metrics to assess the progress toward that goal, such as Net Promoter Score and User Retainment.

Figure 3 showing an example of goals and respective management systems.

Example

This is an example of a management team going through all five choices of the Strategy Choice Cascade. For the purpose of this exercise, the enterprise is a small ice cream manufacturing company. The management is proposing a new project, where they will look into creating their first plant-based ice cream product. This project targets the environmentally-conscious customer, within the European market.

Limitations

One significant limitation is that this strategy framework excludes competing reactions from determining the company's focus. Predicting competitive responses from other companies are critical in deciding if a company's strategy can survive in the market. If the strategy is for a smaller company, for example, the margin of error is limited due to resource constraints and the reality that larger companies with significantly higher finances may quickly undertake serious moves on the smaller company's market niches.

As a result, when a firm reconsiders its strategy, it may need to assess whether the competition would react at all, and if so, which choices will the competitor explore and most likely adopt. The strategy entails condensing all potential investigations of a competitor's reaction to a certain strategic move as an answer to those questions. ^[16]

An example of a competitive reaction involves Snapchat's new trending feature and Instagram's reaction to it. Because of the famous Snapchat Stories feature, social media users were gravitating towards Snapchat. The feature made it simple to publish content and allowed users to shoot more natural or realistic photos, as well as alter them with filters and effects. Most of all, stories would vanish after a set amount of time. Instagram saw this new product's success and their response was to make a very similar feature to Snapchat's offer. Instagram's team created a clone of Snapchat Stories, even name it the same. As a result, Instagram Stories gained 250 million users in its first year, while Snapchat's stock value plummeted. ^[17]

The authors A.G. Lafley and R.L. Martin saw this limitation and suggested it should be taken into account in parallel with deciding on the strategies. They recommend considering reiterating the strategic possibility as they delve deeper into the company's current context, challenges, and opportunities. It is considered preferable to question what your rivals are going to do before proceeding than waiting patiently to see what transpires. Only tactics that deliver a large head start on generating future competitive advantages are worth the investment.

The strategy framework aims to highlight all five questions that must be answered and implemented in order to create a strong strategy and long-term competitive edge. However, the framework does not address where to begin or how to produce and decide between strategic possibilities. The first move is to learn about the industry that the company is in, its various segments, and their relative appeal. Porter's framework is a powerful resource for figuring out how profitable markets and sectors are. The second step is to figure out what consumers and end channels really want and how the company's present or future offers may help them get it. Following consumers, the company should investigate what capabilities and costs they have in comparison to the competitors. Finally, as previously said, it is critical to examine how the company's new ideas will be received by the competitors.

Annotated Bibliography

A. G. Lafley, Roger L. Martin (2013) "Play to Win: How Strategy Really Works". Together, A.G. Lafley and Roger L. Martin untangle the method for using strategy to direct firms to win in the markets they compete in. The writers explain what strategy, how to think about it, why it is required, and how to put it into action. They substantiate their claim by referencing one of the most notorious company turnarounds in history, in which the authors took part. In only ten years, former Procter & Gamble CEO A.G. Lafley, working closely with strategic consultant Roger Martin, doubled P&G's revenues, tripled profitability, and raised the company's market value by more than $100 billion. This book contains all of their knowledge. The authors have developed a set of five critical strategic decisions that, when handled together, will put an organization ahead of the competition. 

Drucker, Peter, (1986) The Practice of Management, Harper Collins, New York. This book makes a significant addition to the study of business efficiency and offers interesting insights into the evolution and role of management. The book remains very relevant today and it is based on the author's many years of experience dealing with small, medium, and big enterprises. It is intended to serve as a management guide, allowing readers to evaluate their performance and shortcomings, and enhance the performance of the business they oversee.

Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press. Michael E. Porter unpacks the principles of competition and transforms them into strong analytical tools to aid management in interpreting market forces, forecasting industry evolution, and positioning any organization to compete more effectively.

Project Management: A guide to the Project Management Body of Knowledge (PMBOK guide), 6th Edition (2017). This publication is a valuable resource for managing projects in every business. The markets have evolved and expanded dramatically throughout the years, businesses have changed yet projects remain essential drivers of any company's success. The publication also provides the standard for Project Management which sets the foundation for the large body of information, while the guide captures and summarizes it effectively.

References

1. ↑ Porter, M.E. (1996) What is Strategy? Harvard Business Review
2. ↑ ^{2.0 2.1} D Dinsmore, P. (1990). Strategic Planning in Project Management: Bringing Pie in the Sky Down to Earth. PM Network, 4(2), 36–38.
3. ↑ Halliday, J.D & Olusegun, A. (2019). Effect of Strategic Planning on HIV and AIDS Project Implementation in Abuja. International Journal of Business and Management. 10. 37-44.
4. ↑ Tharp, J. (2007). Align project management with organizational strategy. Paper presented at PMI® Global Congress 2007—EMEA, Budapest, Hungary. Newtown Square, PA: Project Management Institute.
5. ↑ Romano, L. (2014). Corporate strategy for project managers: why strategic alignment and awareness is so important. Paper presented at PMI® Global Congress 2014—EMEA, Dubai, United Arab Emirates. Newtown Square, PA: Project Management Institute.
6. ↑ ^{6.0 6.1 6.2 6.3} Project Management: A guide to the Project Management Body of Knowledge (PMBOK guide), 6th Edition (2017)
7. ↑ Project Management: "Managing Successful Projects with PRINCE2" 6th Edition (2017)
8. ↑ A. G. Lafley, Roger L. Martin (2013) "Play to Win: How Strategy Really Works"
9. ↑ About Spotify
10. ↑ Nordstrom Is the First Retailer That Actually Understands What We Want
11. ↑ Drucker, Peter, (1986) The Practice of Management, Harper Collins, New York
12. ↑ Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press.
13. ↑ Pricing Strategy of Walmart
14. ↑ TOMS Impact report 2021
15. ↑ Kaplan, R.S. & Norton, D.P. (1993) Putting the Balanced Scorecard to Work Harvard Business Review
16. ↑ Predicting Your Competitor's Reaction. Harvard Business Review, 1 Aug. 2014
17. ↑ Kantrowitz, A. (2020, April 7). Snapchat was 'an existential threat' to facebook - until an 18-year-old developer convinced Mark Zuckerberg to invest in Instagram Stories. Business Insider. Retrieved March 10, 2022