CASE Participative strategy process in the city of Vaasa EXAMPLE Marko Kohtamaki and Suvi Einola "Why should businesses, workers, and students choose to for the new management team to engage in a broad stra- come to our city?' Like universities or companies, many tegic renewal programme. The city launched a process cities wrestle with the problem - or opportunity - of devel- of strategy making, through which strategy would not oping and sustaining their attractiveness. This was exactly only be planned and implemented, but also continuously the problem faced by the elected representatives and the re-invented. managers of the apparently successful municipality of Vaasa in western Finland as the effects of global reces- sion began to impact. Strategy workshops and tools Searching for sustainable economic success, munic- In the beginning of the process, the city's management ipalities aim to attract companies and a skilled work- team set the targets for the strategy work: to develop a city force. Municipal authorities try to develop their strategic which would be more agile and effective to face the com- decision-making to become more effective, agile and petition for companies and workforce. To generate agility responsive than competitors in meeting the expectations in the long run, the city management believed that the of businesses that could establish operations in the region, strategy work should be participative and involve personnel and of a workforce which could be attracted to move into throughout the city organisation. An underlying assumption their city. However, fast and agile decision-making, in was that participation would facilitate development of a parallel with the generic expectations of democracy and shared understanding about strategy among all stakehold- equality, poses a unique challenge for public-sector organ- ers. However, shared strategy discussions required tools isations. The city of Vaasa took up that challenge in 2012. to facilitate interaction, as described by the City Mayon 'Earlier, we used a system where everything came from The city of Vaasa top management and we made precise five-year plans. Vaasa is a small but international university city of 67,000 and everything was defined; that will be the outcome. inhabitants, with more than 100 different nationalities. when you do this. But these days, when there are so The city organisation employs over 6000 employees in many external factors which rapidly influence develop- four different sectors (social and healthcare, education ment in the city. you need to be able to create a basic and leisure, technical and administration). Vaasa's top framework inside which new opportunities can emerge." management team was renewed almost entirely in the 2010-2012 period, when a new mayor, divisional direc- (City Mayor, January 2013) tors, development director and human resources director To address the challenge of strategic agility and engag were appointed. This organisational renewal, together with ing personnel in the strategy work, a team of researchers the pressures of an economic recession in Finland, led together with the top management team built a concept to the city reforming its strategy and strategic decision- that could be used at different levels and divisions of the making in pursuit of strategic agility. Vaasa municipality. The concept included use of three The city was known for its energy technology and particular strategic management tools: a strategic capabil engineering manufacturing companies such as ABB ities framework, ' a value curve and a strategy map. ' With and Wartsila. A strong cluster of technology companies the help of these tools, the city's internal developers and had resulted in a low unemployment rate and, by any the researchers facilitated almost 100 strategy workshops economic measures, the city was considered highly suc- during 2013-2015. cessful. As a downside, long-term success had led to a The process of strategy-making was far from situation wherein the city's politicians and officials were straightforward. In the beginning, it was overshadowed relatively satisfied with its current state of affairs - with by tensions between political parties, and by concerns the attendant risks of strategic drift in a context that strat- about the economic recession. Some discussants even egy literature describes as a leaming trap.' However, the questioned whether the city really needed a strategy - recessionary economic conditions created an opportunity and, if there was to be new strategy, whether it should 525Strategists: Who? Strategising Strategising activities: methodologies: What? Which? Figure 16.1 The pyramid of strategy practice 499CHAPTER 16 THE PRACTICE OF STRATEGY be established for a longer period of time. Eventually, discussions. Facilitation helped workshop participants Vaasa's management concluded that the city certainly to concentrate on the key topics and issues, while the did need rapid renewal, and that a strategy should discussions were documented (on PowerPoint slides) to be established through a participative process and 'materialise' the strategy." be updated on a yearly basis. Moreover, they wanted strategy-making to become an integral part of city plan- Building on strategic capabilities ning and budgeting, something that would also steer investment decisions, instead of being just a separate Building on the resource-based view of a firm, the city annual exercise. of Vaasa decided to use a strategic capabilities approach During the strategy process, multiple tensions emerged to analyse its core resources and processes over time, to such as the dilemma between policy-making and effective understand upon what capabilities the city was building. strategic decision-making, the dilemma between partici- and what would be needed in the near future. The strate- pation and determined implementation, and the dilemma gic capabilities approach was utilised to understand the between value creation and service cost-cutting. Exten- valuable, rare, inimitable, and non-substitutable (VRIN) sive participation (100 strategy workshops across a range resources and processes within the city of Vaasa. The top of different organisational levels) played an important management team, councillors and city officials mapped role in coping with and in alleviating those tensions. The the municipality's strategic capabilities in workshops held strategy workshops offered a platform to develop shared early in 2013. The workshop groups utilised a mind map understanding about strategy across intra-organisational technique to create a picture of the municipality's stra- boundaries, enabling directors and middle managers to tegic resources and processes with the help of internal develop a common language building on the selected developers. The ideas generated were then grouped into strategy tools. Thus, throughout the process, middle five themes and finally synthesised into five descriptions managers, as well as the city's directors and politicians, (see Figure 1). This created the first sketch of the core were considered as strategists." In strategy workshops. capabilities at the municipality level. Similar processes the researchers and development planners acted as facil- were later conducted at the level of divisions, business itators and made notes and interpretations about the areas and business units. As the process was extended to WE BUILD ON Welfare Welfare Is ensured by locally produced high-quality basic services at every stage of life High energy The high energy atmosphere Agility of Vaasa encourages Agility manifests In rapid experimentation. We have a versatile energy Industry, a decision-making and Innovative and effective wide range of educational service models. offerings and a strong export expertise. International History Being International brings a lively The history of Vassa builds on distinctive urban culture, multilingual lam and and beautiful architecture, In which diverse good transport connections to the milleus, the sea and the archipelago have world. always had an Important role. Figure 1 Strategic capabilities of the city of Vaasa 526PARTICIPATIVE STRATEGY PROCESS IN THE CITY OF VAASA lower levels of the municipality organisation, participants to include the components of the value promise for each were encouraged to consider how their organisational customer segment (see Figure 2). Interactions in strategy units could support the city's strategy while developing workshops helped to build shared understanding about their strategic capabilities. The role of middle managers the key customers, value promises and the current state was crucial, not only for enriching the discussions with of affairs, as well as the strategic intent in all organise- up-to-date knowledge and experience, but also for making tional levels. sense of the strategic intentions and translating them into unit level actions. Configuring the strategy map Customer value thinking as part of the strategy The strategy map outlines the strategic logic of the city organisation, based on four dimensions from the Balanced The second strategy tool built on Blue Ocean strategy. Scorecard: (1) the financial perspective, (2) the customer with a focus on the components of the customer value perspective (the components of the value promise/value proposition. In the city of Vaasa, the value curve was used curve), (3) the process perspective and (4) resources and to identify, develop and explain a shared understanding competencies." The last dimension, originally stated as of the components of the value promise, initially at the leaming and growth in the Kaplan & Norton model, was municipality level. The city's top management team, redefined in the Vaasa strategy map as resources and along with councillors and city officials, utilised the tool competences, to integrate with the components of the first to compare Vaasa's future value promise against the cur- strategy tool. The strategy map thus builds on the outputs rent state of affairs, instead of just comparing its value of the two strategy tools used earlier in the process - proposition against competitors. Further, the city focused the strategic capabilities framework and the value curve. on its current customers and operations instead of trying The strategy map became the central tool of the strategy to search for 'Blue Oceans' (new non-customers)." After development process, enabling management to describe finding and deciding on generic key customer segments and explain the whole strategic logic of its organisation (companies, citizens, communities), the top manage- using only the one visual image. Furthermore, if employed ment team, councillors and officials built a value curve properly, the strategy map would simplify and summarise HOW TO SUCCEED Welfare Attraction Economic success Establishment of new enterprises In 'Building plot the region In an hour Northern Silicon Multilingual Well being Valley of energy services among the Competent Cooperation citizens workforce with energy businesses and communities Vibrant urban culture The safest city Effective logistics In Finland Agile and Innovative city organisation City of Vaasa (goal) City of Vassa (present) Figure 2 Value curve of the city of Vaasa 527CHAPTER 16 THE PRACTICE OF STRATEGY VAASA - energy capital of the North Top 3 Population Debt Tax revenue Targets In happiness growth Employment ratiocitzen >75% top 6 In cities among cities > 1% average In cities The happlest and Versatile urban Skilled healthlest citizens culture: 'It workforce Respect for the Interactive In the work happens In Vaasa' Accessibility communities expertise 'Building P Value proposition and effective In an hour' Wide and logistics Trustworthy Attractive and Genuine diverse labour services functional business partnership markets environments Effective Managing service administration of processes Efficient and Long-term strategic Dellberative New, Innovative possessions well-timed business pollcy democratics partnership models decision- Service-oriented Customer-oriented making and competent services Logistics centers throughout life Recognising Knowledge of the Cooperation between the needs of capabilities and Processes and resources person nel One stop shop' principle `the city, higher education communities resources in and companies organisations Functioning Innovation service network capability Recognising the Strengthening needs o the allocated Partnership Lelsure High-level Land assets communication agreements opportun Ities education companies Citizens Companies Communities Figure 3 Strategy map of the city of Vassa the strategy so that it could be understood throughout benefit of forcing management to decrease the exces the organisation. The map also enabled management to sive number of key performance indicator (KPI) targets ground the strategy in the organisation, ensuring that it and measures, so that only the important ones were reflected the reality in, and the capabilities of, the munic- included on the one summary slide. From approximately ipality - so that strategy was no longer something just 70 initial measures, the city decided to focus on just planned and instructed by top management. The Vaasa 25 KPIs, with the five measures defined at the top of strategy map (see Figure 3) provided an effective tool for the strategy map being considered the most vital. Thus, discussing and defining the strategic logic of the organi- those selected prime metrics became the centrepiece sation, bringing strategy into practice. for steering the city's strategy, comparable to the sim- ple rules or guidelines as suggested by Eisenhardt and Execution of the city strategy Sull. 12 Finally, building on their strategy map, the city of Vaasa Towards real-time city management developed a spreadsheet table to synthesise targets, measures and strategic initiatives which could be sum- The city organisation began strategy work to increase marised on just one slide (Table 1). The city wanted to strategic agility, aiming to create simple practices and define clearly the link between strategic targets and guidelines that would steer the development work of dif investment plans, so that the strategy would begin to ferent divisions in the same direction - a direction defined steer investment decisions and budgeting. The admin- by the new vision to become 'the energy capital of the istration believed that the management system should north! The vision emerged during the management team be developed to facilitate strategy implementation and sessions, reflecting discussions at different levels of the follow-up. The use of the Excel table summary, for com- organisation, and was finally settled upon as represent municating across the organisation, had the additional ing an interpretation of the optimum future for Vaasa. 528PARTICIPATIVE STRATEGY PROCESS IN THE CITY OF VAASA Table 1 Goals, measures and strategic initiatives Targets Strategic InHallyes ATTRACTION Attractiveness of Population growthyear Making energy competence visible In activities and Investments the region previous year . Developing International Innovation cluster and R&D platforms New vacancies produced by In the city of vaasa area companies/all new vacancies Strengthening International accessibility through targeted Tax revenues Investments In all, ship, rall and road traffic . Number of national events Two multilingual campuses and learning environments: safeguarding an adequate local shareholder base The development of city centre, and revitalisation of the Islands and beaches Promoting a diverse urban culture: promoting positive atmosphere, e.g. In the form of International congresses and events Competitive urban Amount of plot and plan . The avail lable plots correspond to the demand: sticking with the structure reserves housing programme Reducing carbon dioxide Review of service networks that observe a life-cycle approach emissions The employment Proportion of employed In Training a competent workforce rate >-759 population (18-64-year-olds) WELFARE Welfare among the lenced happiness Directing the service network to the main functions: Intensitying population Morbidity Index the library network, early childhood education and the school Time limits In basic services newwork and norms within elderty Addressing current special healthcare as a separate Issue care are kept Securing the Integration of speciality healthcare, basic Amount of visitors In sports healthcare and social care: prioritising preventive work and cultural establishments New health centre In the city: centralisation of medical services Costs of elderly care and other possible services with ces within healthcare Raising the clients' level of Involvement and responsibilities: dellberative democracy, electronic services, utilisation of experience specialists In planning and developing services Strengthening the . Trust In decision-making Renewal of representative organisation democracy Local regional government: clarifying the roles of area board and regional councils Consolidating dellberative democracy practices Into the development of services ECONOMIC SUCCESS Effective Development of premises . Processing the plot possessions administration of Costs of premises free . Mapping the use of premises to Increase the use; selling markets unnecessary premises systematically on a tight schedule . Refraining from use of external rented premises The balance . Gross capital expenditure on Developing management systems between same level as depreciation Strengthening of state shareholdings In federations of Investments and municipal Ities decision-making loans, adjustment . The level of Internal Centralisation of service production and setting the quality of activities financing of Investment standards of services, cost effective production methods . Outsourcing and purchasing of services: cost accounting and pricing services Increasing annual margin Developing IT services Increasing Income Incomeyear/previous year, Leasing and selling plots and shares of stock within housing selling of possessions, Developing chargeable services, raising the charges and tariff's payments Optimising the Number of personnel, Anticipatory personnel planning personnel structure services produced other Reforming organisations and making the cross-administrative municipalities processes more efficient # The number of person-years 529CHAPTER 16 THE PRACTICE OF STRATEGY Development discussions Personnel plan business areas 31.12 Monitoring of the current Strategy work In year (measures TMT Challenger and actions) groups for Resource strategy plan Preparation of Competence Budget (council) financial statements development XII plans (business units, Mayor's budget Council's business proposal III strategy work areas Strategy work Monitoring In TMT of the measures monitoring strategy updating of the VIII In council measures WII VI Budget frame meetings Budget (board) Divisions, business areas and 31.7 business units \\strategy work Monitoring of Personnel plan' the current Budget frame, business units year outturn City government Proactive personnel plan Figure 4 Yearly management clock. Thus, there was no separate tool or facilitated session for city management initiated a process to integrate the KPI discussion of the vision statement: the vision emerged measures and targets into the annual planning and evalua during the strategy process work, was elaborated on as tion tasks. Further action was taken to develop a manage- it emerged, and finally ratified by the municipal parlia ment system that would support real-time management ment. The sequence illustrates the idea behind the way of the city's organisation. It was recognised that man- of working during the process - that the strategy can be agement would require further refinement of the KPIs, to developed through the discussions, based on a shared focus on the few most relevant KPIs at the different organ- understanding of the organisation, its capabilities and its isational levels and that could be effectively followed up. customers: that the strategic logic emerges step-by-step However, the involvement of those different organisational during the rounds of the strategy development process. levels - and the adoption of the strategy map as the main Finally, the city also developed a yearly 'management tool- had facilitated development of a shared understand- clock' (see Figure 4) to embed strategy updates into the ing about the strategic vision and strategy process across annual management activities' plan. In addition, Vaasa the whole municipality. 530PARTICIPATIVE STRATEGY PROCESS IN THE CITY OF VAASA 3. C. Long and M. 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