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Strategy Dynamics Course - Class 4b – The strategic architecture

This Class brings together the principles from classes 1 to 3, plus the issues of interdependence and feedback from class 4a, to show how a business (or other organisation) works as an integrated, dynamic system. And that system explains how both the business performance and the system itself develop over time. The Class shows how to use this system, or "strategic architecture", to understand, plan and manage performance over time.

The class is most relevant – indeed unavoidable! – if you are to putting together an integrated plan for the whole business.

You do not have to build the whole system if you are focusing on a specific issue, or a particular part of the organisation. But you should still make sure to cover any important linkages with other parts. A manufacturing company worried about growing its service team, for example, may need to include the growth dynamics of the customer base and changes to their product range – but probably does not need to worry about how the company’s production capacity or finances are changing.

The class shows that the core relationships between customers, products, capacity and staff are fundamentally common to almost all organisations, and – if it generates cash (rather than getting cash from outside sources) – how some of that cash is fed back to enable the system to be sustained and to grow. It also explains how the balance between the demand the organisation receives and its ability to handle that demand (usually reflecting staff and capacity) limits its performance and growth.

To complete your understanding of the financial aspects of the system, the class shows how costs are driven, not just by having resources but also by the need to add and retain those resources – marketing, hiring, product development and so on.

Key issues addressed

  • The most common relationships between the core resources of a business – customers, products, staff, capacity and cash.
  • How to anticipate future performance, based on the relative development and interdependence between these items.
  • The generic strategic architecture for a business, as a template for guiding the structure of specific cases.
  • The relationship between resource-flows and certain costs, in addition to the costs of having those resources.
  • The business as a cash-making "machine" – and where that cash goes.
Class 4b.0 - The "strategic architecture". Summary - (24 min)
The common relationships between customers and demand, capacity+staff and supply, and product range that make up the "strategic architecture" of the business that generates profits.
Class 4b.1 - Implementing the generic structure - (23 min)
An example of how to use the generic architecture common to most businesses to develop a model of the system for a specific case – a restaurant start-up.
Class 4b.2 - Costs of sustaining and growing resources - (21 min)
How, in addition to the costs of having resources, other costs are driven by efforts to retain, add or dispose of resources.
Class 4b.3 - The business as a cash-generating "machine". - (10 min)
How the system declines if nothing is spent to sustain it, and the need to spend more if we want the system itself and the cash flow it generates to grow.
This course is supported by a series of worksheets provided in both PDF format and as Sysdea online models.
Exercises with the Sysdea models for Class 4b: Summary
  • Manufacturing company C Strategic Architecture:
    In this development of the plastics processing company, three scenarios are included that match the cases described in the class video.
Exercises with the Sysdea models for Class 4b.1: Implementing the generic structure.
  • Generic Core Strategic Architecture. This is not a working model - it is a generic structure linking resource flows to the resources themselves and then to performance outcomes. Amongst many details that are missing, it does not display the impact of competitors or other external factors, and the financial details should be developed with a finance professional.
  • Restaurant start-up core architecture. This model is about growth and profits of a new mid-market restaurant for its first 6 months of operations (26 weeks).

free access for teachers - login or register Additional materials are available to registered teachers as well as free access to the complete course. Login here or register here for more information.

Other resources and links

Books

Robert Kaplan and David Norton, The Balanced Scorecard, (1996), Harvard Business School Press: Boston MA
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Kaplan, R. and Norton, D. (2004) Strategy Maps, Harvard Business School Press, Boston MA.
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