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The Mind of the Strategist
Posted On 01/09/2008 23:43:11 by derfus
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THE MIND OF THE STRATEGIST
By Kenichi Ohmae, 1982 &nb sp;
A Book Review by Derfus2008-01-10
This classical book of Ohmae written 25 years ago is divided into three parts: The Art of Strategic Thinking, Building Successful Strategies and Modern Strategic Realities. As in any planning activity, analysis is the critical starting point. Critical issues must be identified and should be dissected into their constituent parts to closely study the observed phenomena. The author proposes the use of Issue and Profit Diagram. The former is a detailed flowchart akin to a decision tree where the issue being discussed is broken down into an exhaustive list of possible issues and identifying applicable solutions. This approach reduces the chances of missing out any factor to a minimum. The latter is a diagram that analyses how profitability can be improved, considering all three variables contributing to profit, namely, selling price, cost and also volume.
For Kenichi Ohmae, strategic advantage can be achieved via the four routes: injecting a concentration of resources into a particular area where the company sees an opportunity to gain most, the key factors for success (KFS); building up on identified relative superiority; pursuing aggressive initiatives to challenge principal competitors; and exploiting strategic degrees of freedom or deployment of innovations. There are three main players of any business strategy: the company itself, the customers, and the competition, collectively known as the “strategic triangle.” The job of the strategist is to achieve superior performance relative to competition and at the same time must be sure that the strategy properly matches the strengths of the corporation within the needs of the clearly defined market.
A successful strategy is one that ensures a better or stronger matching of the corporate strengths to customer needs than is provided by competitors. The customer-based strategies cover market segmentation based on objectives and coverage, be it geographical or channel. It should not discount resegmenting the market over time and changes brought about by changes in customer mix.
Corporate-based strategies should focus on selectivity of the key functions from sourcing to servicing, make or buy decisions and improving on the internal cost effectiveness of the organization itself. Lastly, competitor-based strategies are about building a powerful corporate image against its competition, and the streamlining or balancing of the critical resources, the hito-kane-mono or people, money and things (fixed assets).
In Part III of the book, Ohmae foresees several strategic changes happening during the 1980’s. These are the shifts from labor to capital-intensity of the traditionally assembly-oriented industries; from multinationals to mulitilocals brought about also by the increase in capital requirements, and the impact of rising cost of materials on the traditional fixed-asset industries becoming variable-cost industries.
PERSONAL REFLECTION
The Mind of the Strategist is relevant to the problem of strategic stagnation in any organization. We should avoid the tunnel vision – don’t get too fixated on the road you are on, there maybe better alternate routes. Another thing to be avoided is the peril of perfectionism – sometimes it’s better to do something that is almost right than wait for the perfect solution and miss the strategic opportunity.
One finds in this book, that there is no secret formula for successful business strategy. What it teaches is that there are some specific concepts and approaches that can help anyone develop the kind of mentality that comes up with superior strategic ideas. Habits of mind and modes of thinking can be acquired through practice to help us free the creative power of our minds.
What I like best are Ohmae’s assertions that a corporation must get the product right and produce it at a level of quality and cost effectiveness that competitors can’t match, and in the end the profit will come in. Profit should be the result, not the purpose of business.
BOTTOMLINE MESSAGE
The bottomline message of the book is that successful business strategies do not come from rigorous analysis but from a thought process, which is basically creative and intuitive rather than rational. Rational analysis should be used to stimulate the creative process, to test the ideas that emerge, to work out their strategic execution of the ideas.
Tags: Strategic Management Review
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