Establishing Company Direction

The last thing IBM needs right now is a vision (July 1993)

What IBM needs most right now is a vision (March 1996)

- Louis V Gerstner Jr., CEO, IBM Corporation How can you lead if you do not know where are you going? - George Newman,The Conference Board

Managements job is not to see the company as it is but as it can become.

- John W Teets, CEO, Greyhound Corporation Developing a strategic vision is the first direction-setting task. The three elements of a strategic vision :

Coming up with a mission statement that defines what business the company is presently in and conveys the essence of Who we are and where we are now?
Using the mission statement as basis for deciding on a long-term course making choices about Where we are going? Communicating the strategic vision in clear, exciting terms that arouse organization wide commitment.

The Mission Statement : the starting point for forming a strategic vision
The mission is not to make a profit One of the roles of a mission statement is to give the organization its own special identity, business emphasis and path for development one that typically sets it apart form other similarly situated companies. A companys business is defined by what needs it trying to satisfy, by which customer groups it is targeting and by the technologies and competencies it uses and the activities it performs Technology, competencies and activities are important in defining a company s business because they indicate the boundaries on its operation Good mission statements are highly personalized unique to the organization for which they are developed

What Business Are We In?

According to Peter Drucker, every organization must ask an important question What business are we in? and get the correct and meaningful answer.
Company AT&T Production-oriented answer We operate a long-distance telephone company. Marketing-oriented answer We provide multiple forms of reliable, efficient and inexpensive telecommunication services.

Indian Oil
Indian Railways Xerox

We produce oil and gasoline products.

We run a railroad. We make copy machines.

We provide various types of safe and cost-effective energy. We offer a transportation and materialhandling system.
We automate offices.

Eastman Kodak
Revlon

We make cameras and film.

In the factory, we make cosmetics.

We help preserve beautiful memories.

In the drugstore, we sell hope.

Basic Concepts
A Strategic vision is a road map of a countrys future providing specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create. A companys Mission statement is typically focused on its present business scope who we are and what we do; mission statements broadly describe an organisations present capabilities, customer focus, activities, and business makeup. Objectives are organisations performance targets the results and outcomes it wants to achieve. They function as yardstick for tracking an organisations performance and progress.

Strategic objectives relate to outcomes that strengthen an organisations overall business position and competitive vitality; Financial objectives relate to the financial performance targets management has established for the organisation to achieve.

Characteristics of a Mission Statement

1. It should be feasible

2. It should be precise
3. It should be clear 4. It should be motivating 5. It should be distinctive

6. It should indicate major components of strategy

7. It should indicate how objectives are to be accomplished Objectives and Goals Objectives are open-ended attributes that denote the future states or outcomes. Goals are close-ended attributes which are precise and expressed in specific terms. Role of Objective Objectives define the organisations relationship with its environment Objectives help an organisation pursue its mission and purpose Objectives provide the basis for strategic decision-making Objectives provide the standards for performance appraisal

Characteristics of Objectives
1. Objectives should be understandable 2. Objectives should be concrete and specific 3. Objectives should be related to a time frame 4. Objectives should be measurable and controllable 5. Objectives should be challenging 6. Different objectives should correlate with each other 7. Objectives should be set within constraints

The Need for an Explicit Mission

1. To ensure unanimity of purpose within the organisation. 2. To provide a basis for motivating the use of the organisations resources. 3. To develop a basis, or standard, for allocating organisational resources. 4. To establish a general tone or organisational climate, for example, to suggest a businesslike operation. 5. To serve as a focal point for those who can identify with the organisations purpose and direction, and to deter those who cannot form participating further in the organisations activities. 6. To facilitate the translation of objective and goals into a work structure involving the assignment of tasks to responsible elements within the organisation. 7. To specify organisational purposes and the translation of these purposes into goals in such a way that cost, time, and performance parameters can be assessed and controlled.

Corporate Strategy Components & Issues

Strategy Component Scope, Mission & Intent Key Issues What business (es) should the firm be in? What customer needs, market segments, and/or technologies should be focused on? Objectives What is the firms enduring strategic purpose or intent? What performance dimensions should the firms business units and employees focus on? What is the target level of performance to be achieved on each dimensions? What is the time frame in which each target should be attained? Development strategy How can the firm achieve a desired level of growth over time? Can the desired growth be attained by expanding the firm;s current businesses? Will the company have to diversify into new businesses or product markets to achieve its future growth objectives?

Corporate Strategy Components & Issues contd..

Strategy Component Resource allocation Key Issues How should the firms limited financial resources be allocated across its businesses to produce the highest returns? Of the alternatives strategies that each business might pursue, which will produce the greatest returns for the dollars invested?

Sources of synergy

What competencies, knowledge and customerbased

intangibles (e.g.., brand recognition, reputation) might be developed and shared across the firms business? What operational resources, facilities or functions (e.g., plans, R&D, salesforce) might the firms businesses share to increase their efficiency?

Some Mission Statements

UNILEVER The mission of our company, as William Hasketh Lever saw it, is to make cleanliness commonplace, to lessen work for women, to foster health, and to contribute to personal attractiveness that life may be more enjoyable for the people who use our products. MCKINSEY & CO. To help business corporation and governments to be more successful. CADBURY INDIA

To attain leadership position in the confectionary market and achieve a strong presence in the food drinks sector.
RELIANCE INDUSTRIES To become a major player in the global chemicals business and simultaneously grow in other growth industries like infrastructure. RANBAXYS To become a $1 billion research-based global pharmaceuticals company.

Mission
Mission: A statement which defines the role that an organization plays in the society Purpose: Anything which an organisation strives for.

What is Corporate Mission: An expression of the growth ambition of the term. It is the firms future visualised. Represents the shared purpose of the corporation.
The Constituents of the Corporate Mission: Ambition and visionary zeal Values Beliefs A specification of the business What does Mission do: Directs entire planning; guides formulation of the objectives communicates the corporate vision to everyone, forms gains useful insights by agitating the mission afresh. How do firms formulate Mission? Should be written down Concreteness Vs generality in mission statements Mission should be revised when warranted.

The Vision
The entrepreneurial challenge in developing a strategic vision is to think creatively about how to prepare a company for the future. Forming a strategic vision is an exercise in astute entrepreneurship, not a time for pipe dreams or fantasies about the companys future. Many successful organizations need to change direction not in order to survive but in order to maintain their success A well-articulated strategic vision creates enthusiasm for the course management has charted and engages members of the organization The best-worded vision statement clearly and crisply illuminate the direction in which organization is headed

Abstract of Intels Mission- related Information

Management Style Intel is a company of individuals, each with his or her own personality and characteristics. Management is self-critical. The leaders must be capable of recognizing and accepting their mistake and learning from them. Open (constructive) confrontation is encourages at all levels of the corporation and is viewed as a method of problem solving and conflict resolution. Decision by consensus is the rule. Decisions once made are supported. Position in the organisation is not the basis of the quality of ideas. A highly communicative, open management is part of the style. A high degree of organisational skills and discipline are demanded. Management must be ethical. Managing by telling the truth and treating all employees equitably has established credibility that is ethical.

Abstract of Intels Mission- related Information

Work Ethic / Environment
It is a general objective of Intel to line up individual work assignments.

We strive to provide an opportunity for rapid development.

Intel is a result-oriented company. The focus is on substance versus form, quality versus quantity. We believe in the principle that hard work, high productivity is something to be proud of. The concept of assumed responsibility is accepted (If a task needs to be done, assume you have

the responsibility to get it done).

Commitments are long term; if career problems occur at some point, reassignment is a better

alternative than termination.

We desire to have all employees involved and participative in their relationship with Intel.

Four Steps To Be Taken

1. Identification of claimants. 2. Understanding of specific claims vis--vis the company 3. Reconciliation of claims and assigning them priorities.

4. Coordination of claims with their elements of the mission

Claims of Insiders Claims of Outsiders

Executive officers
Board of Directors Stockholders Employees Company Mission

Customers Suppliers Creditors Governments Unions Competitors General Public

Inputs to the Development of the Company Mission