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Maria Novales-Flamarique

Global Strategy / Session 1: Meet & Greet /


Learning to problem solve

Finance cases 11 August 2015

ITAM!

Maria Novales-Flamarique
ITAM. Global Strategy. Autumn 2015
Welcome to Global Strategy!
❖  Objectives of today’s class:
•  Meet and greet each other
•  Introduce the Global Strategy course
•  How to problem solve!

Maria Novales-Flamarique
2 ITAM. Global Strategy. Autumn 2015
We will explore how to develop and execute strategy
in an international context (1/4)

❖  First of all, what is strategy?

SET OF CHOICES
ABOUT WINNING

Maria Novales-Flamarique
SOURCE: Playing to Win: How strategy really works; A.G. Lafley and Roger L. Martin 3 ITAM. Global Strategy. Autumn 2015
We will explore how to develop and execute strategy
in an international context (2/4)

❖  First of all, what is strategy?


To create sustainable
advantage and superior value
relative to the competition

Strategy is about making


Explicit specific choices to win in
the marketplace To do things and
not others

Build the business around those


choices

Maria Novales-Flamarique
SOURCE: Playing to Win: How strategy really works; A.G. Lafley and Roger L. Martin 4 ITAM. Global Strategy. Autumn 2015
We will explore how to develop and execute strategy
in an international context (3/4)
Specifically, strategy is the answer to 5 interrelated
questions

1 What is your winning aspiration?

2 Where will you play?

3 How will you win?

4 What capabilities must be in place?

5 What management systems are required?


Maria Novales-Flamarique
SOURCE: Playing to Win: How strategy really works; A.G. Lafley and Roger L. Martin 5 ITAM. Global Strategy. Autumn 2015
We will explore how to develop and execute strategy
in an international context (4/4)
From a global strategy perspective, these questions hold true.
Where we will compete:
What is our geographies, products,
winning segments, channels,
aspiration? production stages

Where will we
play?
The purpose of
our enterprise: Capabilities to win: our
our guiding reinforcing activities, our
aspirations How will we win? specific configuration

The unique right to win: our What capabilities


value proposition, our must be in place?
competitive advantage
What
Systems, support, measures, management
to support our choices systems must
Maria be
Novales-Flamarique
SOURCE: Playing to Win: How strategy really works; A.G. Lafley and Roger L. Martin 6 ITAM. in place?
Global Strategy. Autumn 2015
Over this semester we will explore Going Global

What is our
winning
Session 3: Assessing market selection
aspiration?
•  Session 7: Global M&A&A
•  Session 9: Global marketing
Where will we •  Session 10: Global operations
play? •  Session 11: Managing government
Session 2:
Introduction to relations
Global Strategy •  Session 12: Innovation in a global
How will we win? context

•  Sessions 4 and 5:
Globalizing the value What capabilities
proposition must be in place?
•  Session 6: Mode of foreign
entry What
•  Session 13: How to organize management
globally systems must be
•  Session 14: Global CSR in place?
Maria Novales-Flamarique
SOURCE: Playing to Win: How strategy really works; A.G. Lafley and Roger L. Martin 7 ITAM. Global Strategy. Autumn 2015
Let’s explore the syllabus together
❖  16 sessions that will take us from the strategic choices that
need to be made, to how a company should be thinking about
execution of the strategy
❖  Cases!!!!! Loads of them. We will be analyzing 11-12 cases
throughout the semester. Everyone will have to submit 3-page
write ups for each case. In addition, in teams, you will all
present a case and lead the discussion during one session!
❖  Mid-term and final exams will be case-based
❖  Important: Please read the syllabus in detail. It contains a lot
of valuable information including evaluating grids, deadlines,
readings, case questions, etc.

Maria Novales-Flamarique
8 ITAM. Global Strategy. Autumn 2015
16 sessions
1.  11/08: Meet & greet / Developing problem 9.  13/10: Global marketing
solving capabilities
10.  20/10: Global operations
2.  18/08: Introduction to Global Strategy / Case
method analysis 11.  27/10: Managing government relations

3.  25/08: Assessing market attractiveness 12.  10/11: Innovation in a global context

4.  01/09: Globalizing the value proposition (A) 13.  17/11: How to organize globally

5.  08/09: Globalizing the value proposition (B) 14.  24/11: Global CSR

6.  22/09: Mode of foreign entry 15.  1/12: Revision of all topics covered

7.  29/09: Global M&A&A 16.  Final exam (date TBD)

8.  06/10: Mid-term exam

Maria Novales-Flamarique
9 ITAM. Global Strategy. Autumn 2015
Cases!!!! (1/3)
How will we use cases in this class?
❖  We will make heavy use of cases during this class. Individual preparation and participation are
essential to the class’s success
Write-ups:
❖  Everyone needs to prepare write-up for each case (as of session 3), and submit it to me at the
beginning of the class
❖  These write-ups should be no longer than 3 pages (one appendix page is allowed for exhibits)
Presentations:
❖  You will create small teams (2-3 people per team), and each team will present and lead the
discussion on one case during the semester
❖  Please submit your presentation to me before the beginning of the class where you will be
presenting
Class participation:
❖  In addition, I will choose students at random to speak in class. This may be at the start of the case
discussion, or at some other point. In general, I will choose more than one student per case
discussion. I will also expect students to volunteer to speak
Maria Novales-Flamarique
10 ITAM. Global Strategy. Autumn 2015
Cases!!! (2/3)
How do I prepare a case?

1.  Quickly read the case and assigned readings


2.  Review the assigned questions for clues as to what requires more
attention
3.  Reread the case carefully, taking notes on what’s most important
4.  You may want to perform some quantitative analyses to explore
various hypotheses
5.  Write up some notes for yourself to guide your participation and
contributions to the classroom
6.  Write up your answer to the case questions (please see syllabus for
the actual case questions by case). Write-up should be NO
LONGER than 3 pages!!!
Maria Novales-Flamarique
11 ITAM. Global Strategy. Autumn 2015
Cases!!! (3/3)
How should I structure my case write-up?

•  Provide general background from the case and introduce the particular issue that
Introduction is the primary focus of the case (“warm up” for structuring your approach)
•  Single, short paragraph

•  Short, “single sentence”, statement of the problem that needs to be resolved


Problem statement

•  Analysis of the problem. Frame the issue in the appropriate context of the
Analysis company, industry, product line, market, etc., to show relationships and relative
strengths or weaknesses. Many of the guiding questions can be answered here

Alternative •  Presentation of alternative strategies or solutions for the problem at hand. Does
strategies not require a comprehensive discussion of each alternative

•  Presentation of recommendation and logic behind it


Recommendations You will receive an
example write-up
next week!
Maria Novales-Flamarique
SOURCE: Tom Morris, International Journal of Case Method Research & Application XIX, 212 ITAM. Global Strategy. Autumn 2015
Any questions on the syllabus?

Maria Novales-Flamarique
13 ITAM. Global Strategy. Autumn 2015
Welcome to Global Strategy!
❖  Objectives of today’s class:
•  Meet and greet each other
•  Introduce the Global Strategy course
•  How to problem solve!

Maria Novales-Flamarique
14 ITAM. Global Strategy. Autumn 2015
Maria Novales-Flamarique
15 ITAM. Global Strategy. Autumn 2015
What is problem solving?

Problem solving is a
structured, inductive
approach that can be
used to find the optimal
solution to a given
business opportunity or
challenge (or any
problem for that matter)

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 16 ITAM. Global Strategy. Autumn 2015
The 7-step problem solving approach

Structure problem
Define and generate Prioritize
problem ideas issues
Plan
Communications analysis
and
work
Develop
recommen-
dations Synthesize
Synthesize
Conduct analyses
findings
findings

Communications

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 17 ITAM. Global Strategy. Autumn 2015
What? You’re not impressed?

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 18 ITAM. Global Strategy. Autumn 2015
It’s a craft… so it takes some time

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 19 ITAM. Global Strategy. Autumn 2015
Let’s first solve a basketball problem…

https://www.youtube.com/v/IGQmdoK_ZfY

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 20 ITAM. Global Strategy. Autumn 2015
Step 1: Define the problem

“The biggest
tragedy is not
getting the wrong
answer …
but answering the
wrong question”
- Peter Drucker

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 21 ITAM. Global Strategy. Autumn 2015
Step 1: Define the problem
How can we create How can we delight
smarter phones? Vs. people with a
handheld computer?

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 22 ITAM. Global Strategy. Autumn 2015
Step 1: Define the problem
Characteristics of a good
problem statement

Clear Specific, not general


statement of Measurable
problem to be Action-oriented
solved Relevant (to the key problem)
Time-bound

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 23 ITAM. Global Strategy. Autumn 2015
Step 1: Define the problem
Amber, a bottled beer company, is losing market share and revenue

How would you write the problem statement?

Can the Amber beer company be


managed differently to increase Too general
profitability?

Should the Amber beer company


Not disputable
improve its deteriorating position?

Amber beer is suffering from poor


profitability despite a strong market Statement of fact
niche position
Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 24 ITAM. Global Strategy. Autumn 2015
Step 1: Define the problem
Amber, a bottled beer company, is losing market share and revenue

Specific What opportunities exist for Amber


beer to improve market share by Relevant
3% and revenue by $40mn per
year through 2017 through Measurable
enhancements to the channel
strategy or innovative sales and
marketing approaches? Action-
oriented
Time bound

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 25 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
How would you
eat an elephant?

… one bite at a time!


Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 26 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
Two fundamental
approaches to structuring

List of questions or List of potential


issues solutions or hypotheses

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 27 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
We organize (structure!) these lists in logic trees

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 28 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
Why use an issue tree?
1.  To break a problem into component parts so
that:
▪  Problem-solving work can be divided into
intellectually manageable pieces
▪  Priorities can be allocated to individuals
2.  To ensure that the integrity of problem solving
is maintained:
▪  Solving the parts will solve the problem
▪  The parts are mutually exclusive and
collectively exhaustive (i.e., no overlaps, no
gaps)

3.  To build a common understanding within the


team of the problem- solving framework

4.  To help focus use of organizing frameworks


and theories Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 29 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
Is your structure
MECE?
▪  Mutually Exclusive – No overlaps
list items “exclude”
each other

▪  Collectively
No gaps
Exhaustive –list
items “exhaust” the
relevant field, i.e.,
contain everything
that belongs on the
list.
SOURCE: McKinsey Approach to Problem Solving 30
Maria Novales-Flamarique
ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
Let’s take an example: how did Robert Maxwell die?
▪  Robert Maxwell was a famous and controversial
publisher and businessman
▪  By the 1980s, Maxwell’s various companies owned,
among others, the Daily Mirror, the Sunday Mirror,
and the Berlitz language schools
▪  He also owned a half-share of MTV in Europe and
other European television interests

▪  In 1991, Maxwell is presumed to have fallen


overboard from his luxury yacht
▪  The official verdict was accidental drowning, though
some commentators have surmised that he may
have committed suicide and others that he was
murdered
Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 31 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
Gunshot wound
Was he murdered? Knife wound
Poison
Other means

Did he commit Self-inflicted gunshot wound


suicide? Threw himself overboard
Other means

How did Robert Heart attack


Did he die of natural Pulmonary edema
Maxwell die?
causes? Other health problems

Fell overboard from his yacht


Did he have an Car accident
accident? Other accident

Considers
all options He has taken another identity
Is he really dead?
He has his old identity, but is undetected
Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 32 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
“I think the following
approach will solve
the problem”

Use the hypothesis-


driven tree when
formal logic is required
to confirm or refute the
hypothesis

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 33 ITAM. Global Strategy. Autumn 2015
Step 2: Structure the problem
Simple example of hypothesis tree: How can I save more?
Buying lower quality •  Buy generic versions of toiletries, OTC, etc.
versions will save
•  Substitute cheaper versions of entertainment
you money
(e.g., bus vs. plane, DVD instead of movie theater)

Buying important
•  Buy dry groceries, bulk items at discount shops
items discounted / on
sale will ensure •  Stock up on books, clothes, during sales
quality at a lower
To reduce your price
monthly
expenditures, you Costs of certain •  Split rent with roommate
should spend less on items can be shared
the items you buy without sacrificing •  Carpool to work instead of driving alone
quality completely

Buying fewer items is


not an option since
you need everything
you buy
Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 34 ITAM. Global Strategy. Autumn 2015
Step 3: Prioritize
80/20
impact
Tips
▪  Use judgment;
listen to your intuition
▪  Do back-of-the-
envelope calculations
▪  Seek different
perspectives: experts,
stakeholders, friends
▪  Take risks to learn more

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 35 ITAM. Global Strategy. Autumn 2015
Step 3: Prioritize
Argument 1.1
Issue 1 Argument 1.2
Argument 1.3
Argument 1.4 •  First step in constant,
iterative refinement process:
Argument 2.1 •  Balance between
Issue 2 Argument 2.2 hypotheses / theories
Argument 2.3 and data
•  Use 80/20 thinking

Argument 3.1
Problem statement •  Concentrate your efforts on
Issue 3 Argument 3.2
what is most important
Argument 3.3
•  Always ask “so what?”, but
also ask what you have
Argu forgotten
Issue me
4 Argu nt 4.1
me
Argu nt 4.2 •  Elimination of non-essential
men
t 4.3 issues is key to limiting
unnecessary work
Issue Argu
5 me
Argu nt 5.1
men
t 5.2 Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 36 ITAM. Global Strategy. Autumn 2015
Step 4: Plan
Tips
▪  Driven by prioritized
logic tree
▪  Define
–  What analysis, what
end products
–  Who – ownership!
–  By when
▪  Review as you learn

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 37 ITAM. Global Strategy. Autumn 2015
Step 5: Analyze

If you torture the


data long enough,
it will confess to
Vs.
anything

- Ronald Coase

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 38 ITAM. Global Strategy. Autumn 2015
Step 6: Synthesize
Facts/ data Vs. Summary Vs. Synthesis

Condensed What does


re-statement of it mean?
facts So-what?

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 39 ITAM. Global Strategy. Autumn 2015
Step 6: Synthesize
Facts/ data Vs. Summary Vs. Synthesis

I have misplaced
my keys
I misplace
Oops, 2 months important I am too
late on my taxes!
items and disorganized; I
Where is my
I am need to get
passport?
missing better
I did not call my
deadlines organized
mom to wish her a
happy birthday

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 40 ITAM. Global Strategy. Autumn 2015
Step 7: Develop recommendations
▪  Include why, what and
how – objective, rationale,
structured set of actions, …
What makes for a ▪  Easy to understand –
great structure, stories, simplicity
recommendation? ▪  Make it memorable –
emotion, stories, language
▪  Make it personal – …

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 41 ITAM. Global Strategy. Autumn 2015
Step 7: Develop recommendations
A key structural decision is whether to use inductive or
deductive logic in the key line
Deductive Logic: “Argument” Inductive Logic: “Grouping”

Governing Governing
Thought Thought

Situation Comment Implication Reason/ Reason/ Reason/


+ > Action Action Action

Progression of ideas answers why Separate but coherent ideas


question answer why or how question
•  Reasoning •  Reasons
•  Need for action •  Actions
•  Resistant audience •  Receptive audience
Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 42 ITAM. Global Strategy. Autumn 2015
Ta da! The 7-step approach to problem solving!

Structure problem
Define and generate Prioritize
problem ideas issues
Plan
Communications analysis
and
work
Develop
recommen-
dations Synthesize
Synthesize
Conduct analyses
findings
findings

Communications

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 43 ITAM. Global Strategy. Autumn 2015
Problem solving: use with caution!

https://www.youtube.com/v/-4EDhdAHrOg

Maria Novales-Flamarique
SOURCE: McKinsey Approach to Problem Solving 44 ITAM. Global Strategy. Autumn 2015
Next week, we’ll be analyzing “The Globalization of
the NFL” together

❖  Why was the NFL unsuccessful in its globalization


attempts?
❖  How can a professional sport generate value globally?
❖  What strategy would you advise?

Maria Novales-Flamarique
45 ITAM. Global Strategy. Autumn 2015
Preparation for next week!
❖  For next week:
❖  Prepare “The Globalization of the NFL” case study (review guiding
questions in syllabus)
❖  Read:
❖  “Why do firms go abroad? Strategies to create value globally”
❖  “Managing global expansion: a conceptual framework”
❖  Read the syllabus! It’s your guide for this class!
❖  By 14 August 2015:
❖  Send me an email with the names of your case team members
❖  Thank you! Have a great week!

Maria Novales-Flamarique
46 ITAM. Global Strategy. Autumn 2015