Strategic Management:

The Key to Competitive

Advantage
Metal Bulletin Monthly’s
12th International Mini-Mill Conference

April 1999
Anthony Taccone
Partner
First River Consulting
The role of management

• The primary objective of business managers can be

summed up in two words:
Grow Profitably

• Other things certainly matter:

– meeting the needs of stakeholders
– operating ethically and safely
– ensuring long-term viability

• Without profitable growth as the primary objective, a

business risks losing its competitive edge

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Profitable growth requires two
things
Good ideas:
– how to compete
– where to compete (and where not to compete)
– how to leverage existing resources
– how to build new capabilities
Effective action:
– leadership from, and alignment among, senior
managers
– an involved and energized workforce
– a focused and flexible organization
– clear goals and objectives
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Three factors that impact
performance
Characteristics
of the Industry

PROFITABLE
GROWTH
Quality of Effectiveness of
strategy (ideas) organization (actions)

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 Alignment of actions and ideas is
key
Action without
ideas - at risk

Actions & ideas

aligned - nirvana

ACTIONS
(Strategy
implementation) Ideas ahead of action
- headed for trouble

IDEAS
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Generic strategic positions
Effectiveness of Actions

Strong
At risk of Already winning
stalling
Fine tune
Re-think

Headed for
Failure likely trouble
Overhaul Adapt
Weak

Weak Strong
Quality and quantity of Ideas

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Mini-mill performance is mixed
Mini-mill Growth and Profitability
(1990-1998)

30.0%
Nucor
Cash Flow RONA

25.0%
CMC
20.0%
Chaparral
15.0% Oregon
Co-Steel Ipsco Birmingham
10.0%

5.0%
4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
Annual Sales Growth

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Good (and bad) strategies don’t
last forever
• Customers continuously evolve
• Competitors respond and adapt
• Technology alters the landscape and changes the
competitive environment
• Socio-political developments impact economies and
industries

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Mini-mills at a strategic inflection
point?
Mini-Mill Strategic Momentum
1990-1994 vs. 1994-1998

30.0% Nucor
Cash Flow RONA

25.0%
Chaparral
20.0%
Oregon
Ipsco
15.0%

10.0%

5.0%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
Annual Sales Growth

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What is strategic management?

• A managerial process that focuses on identifying &

building competitive advantage

by

• Generating good ideas and implementing them effectively

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First - decide where you are today
Effectiveness of Actions

Strong
At risk of Already winning
stalling
Fine tune
Re-think

Headed for
Failure likely trouble
Overhaul Adapt
Weak

Weak Strong
Quality and quantity of Ideas

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Then - move forward with intent
• Start where you are
• Get more and different info
• Focus energy and effort
• Drive consensus and alignment among senior management

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Start where you are

• Understand your competitive environment

• Identify good and bad business (products, customers, etc)
• Define your sources of competitive advantage
• Identify weaknesses - and do something about them
• Don’t try to do things that you’re not capable of
• Think organic first

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Get more and different info

• Involve more and different people:

– Strategy formulation should not be a top management
only, staff-driven process
– People with organizational power are not necessarily
the people with true knowledge of competitive
conditions
• Gather different data in new ways:
– ask customers what needs are not being met and
LISTEN
– make people change places
– observe behavior instead of just asking questions

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Focus energy & efforts

• Don’t try to change everything at once

• Don’t pursue too many “strategic initiatives”:
– “It takes every erg of energy in your organization to do
a good job pursuing one strategic aim, especially in the
face of aggressive competition.”
• Andrew Grove, CEO Intel, taken from Only the Paranoid
Survive

• Create clear strategic priorities and learn to choose

• Set simple, consistent, and long-term goals

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Drive consensus & alignment
among senior management team
• Lack of consensus and outright confusion among senior
management teams leads to:
– misallocation of resources
– establishment of inconsistent objectives
– unnecessary and conflict
• To achieve consensus and alignment, all management
teams must:
– develop shared knowledge base
– commit significant time to business strategy
– encourage open and honest debate and discussion

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Decide on a general direction of
change
Effectiveness of Actions

Strong
At risk of Already winning
stalling
Fine tune
Re-think

Headed for
Failure likely trouble
Overhaul Adapt
Weak

Weak Strong
Quality and quantity of Ideas

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Dare to be different

• “No two species can co-exist that make their living in the
identical way.”
– Gause’s Principle of Competitive Exclusion
• Sources of differentiation advantage for steel companies:

Product Differentiation Service Differentiation

Difficult Opportunity

Process Innovation Redefine Value-Chain

Short Half Life Opportunity

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Manage for the long term

• “We give each manager a simple mission: Just run your

business as if:
- 1) You own 100% of it
- 2) It is the only asset in the world that you and your
family have or will ever have
- 3) You can't sell or merge it for at least a century”

- 1998 letter to Berkshire Hathaway shareholders

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