495 Final
tight focus model
Strengthens core company business Automotive, chemical and some consumer goods - improve core!
Paradox of companies following the valuable management dogma
"Staying close to customers and giving them what they want can cause you to lose them." Managers do good by staying close to customers - and customers eventually defect to the very technologies they did not want earlier! When you stay too close to customers and have those customers moving towards the innovative tech
Strategy research seeks explanations of two broad types:
1 How market features, competition, and the wider external environment constrain profitability. Typically, these factors are used to choose a strategic position that offers the potential to be sustainably more profitable than average. 2 How characteristics of any specific firm, such as its resources and capabilities relative to competitors, enable it to achieve and sustain superior profitability.
Three classes of factor drive the inflows and outflows of resources:
1 Management decisions 2 External factors, including competitors' decisions 3 Existing levels of resources
Strategic Architecture
1 Performance at any time depends on resources, management decisions, and external factors. 2 Resources are won and lost (accumulated and depleted) over time. 3 Resource win and loss rates also depend on existing resource levels, management decisions, and external factors.
PEST analysis
1 Political factors include influences arising from the actions, policies, and attitudes of governmental and nongovernmental entities. The influence may be explicit and direct, such as the 1980s legislation that opened up competition in the US airline industry or more generalized, such as trading agreements between countries. 2 Economic conditions have various effects on business prospects and hence on strategy and performance. General economic growth of course helps stimulate many markets, enabling the growth of companies' sales and profits. Economic conditions may, however, have specific effects on particular industries, such as the severe drop in business air travel in 2009 as companies in other industries sought desperately to cut costs. 3 Social factors also influence how markets develop. The potential for any product or service may change in size due simply to population growth, age distribution, and other demographic effects. Other social mechanisms reflect behavioral factors, such as the increasing popularity of short-break vacations. 4 Technological developments cause two main effects. First, there is the improved functionality of products and services—the ever-increasing capability of cell phones and other electronic devices, for example. Secondly, technology can reduce unit costs. The extreme efficiency of web-based sales compared with the slow and costly alternative of using retail travel-agencies, for example, enabled new airlines to reach customers at very low cost.
4 phases of an organization (blockbuster example)
1 Start-up. In 1985 entrepreneur David Cook saw an opportunity to rent videos from stores in residential neighborhoods to consumers with VCRs. The stores were large and offered a wider range of movies than other rental outlets, which were mostly, small independently-run businesses. IT systems based on a customer membership card enabled control and ensured the most popular movies were available. 2 Growth. After just two years, Blockbuster was bought by another successful entrepreneur, Wayne Huizenga, who set out to dominate the market by opening hundreds of new stores each year. Eight years of rapid growth gave Blockbuster strong buying power with movie distributors, and hence low costs and early access to new titles. These factors made the company highly profitable, generating over 30% return on sales by 1995. Three big initiatives accelerated the company's growth: ○ A franchising scheme allowed independent operators to invest their own capital in new stores, using Blockbuster's systems and marketing in return for a share of revenue. ○ Several acquisitions of other significant chains extended the company's market reach and buying power. ○ International expansion took place through acquisitions in the United Kingdom, Australia, Japan, and other countries. 3 Maturity. After being acquired by Viacom in the mid-1990s, Blockbuster's profitability fell significantly, due to a combination of turbulent market conditions, loss of focus on the management of operational details, and a resulting high turnover of CEOs. Still, the basic business remained attractive, boosted by a new product range— software titles for videogame consoles, such as Nintendo, PlayStation, and Xbox. Thanks to video game rentals, store numbers and revenues continued to grow, if rather more slowly. The company also had to respond to the new service provided by Netflix, which enabled consumers to use the Internet to rent DVDs from home and return them by post. 4 Decline. By 2005 the first signs of the final phase of strategy's life cycle—decline and ultimate closure—were evident. Netflix had become a major force in the marketplace, making 2007 revenue of $1.2bn, and similar services from Amazon.com and others led to 19 intense price competition, driving down profit margins. Blockbuster's vast store network, once a source of its dominance, became a large
Product Development
1 idea generation, making use of basic R&D, competitors' products, customer focus groups or direct requests, employee suggestions, and so on. 2 initial screening, where the basic technological feasibility and market potential are assessed. 3 technical development, which includes the product's initial specification and testing. 4 commercial evaluation, including market research, assessment of likely sales, prices, and revenues, and estimation of production costs and the capital investment needed. 5 final development, when the product takes the form that customers will actually see, and the details of the production process are specified. 6 product launch, when marketing and sales activity start, sales are generated and the product is shipped.
five circumstances often requiring business model change and an example of each.
1. The opportunity to address a large segment of customers that are currently underserved. Example: Tata cars serves lowest income customers. 2. The opportunity to capitalize on a brand new technology by wrapping a new business model around it or finding new market: Apple and iTunes Military to Business 3. The chance to bring a job-to-be-done focus and to nail a specialized need within the industry that is not being met. Fedex - overnight delivery 4. The need to fend off low end disrupters If Nano car is successful they might climb the ladder and compete up market 5. The need to respond to a shifting basis of competition. Shifts are inevitable! Hilti found "good enough" was the attitude of tool buyers which hurt their high end position. So they shifted to rental with a different value proposition - "the right tool at the right time."
Principle 4: Make Strategy a Continual Process
85 percent of management teams spend less than one hour per month discussing strategy. Double loop process: integrates the management of tactics (financial budgets and monthly reviews) and the management of strategy into a seamless and continual process. Three important themes emerged in the implementations: 1. Organizations began to link strategy to the budgeting process (Chemical retail Bank) had 70 requests for funding, however 50% had no impact on the scorecard. 2. Companies need a strategy budget and an operational budget. 3. Introduction of a simple management meeting to review strategy. Excited employees Process for learning and adapting the strategy evolved Brown and root used statistical correlations between measures on the scorecard to determine if, for example, employee empowerment programs were increasing customer satisfaction and improving processes. Chemical retail bank tested the hypotheses more qualitatively during meetings at which managers validated and refined the programs being used to drive service quality and customer retention.
Which of the following is not a test of inimitability? A) Customer Satisfaction B) Physical Uniqueness C) Path Dependency D) Causal Ambiguity
A
Tata Ratan and Hilti conceived of and built their new business models.
A simple revelation about lack of wealth Parents and children on the scooter! Busy traffic and dangerous conditions They need a safer all-weather alternative Market is 10's of millions Younger, less constrained teams Reduced vendor selection Reduced parts Outsourced vehicle building Hilti - Delivery Manage customer inventory Provide the best tool at the right time Create a fleet management program Shift from manufacturing to service
5 industry forces:
Activities of competitors Potential for new entrants into the industry Availability and appeal of substitutes Buying power of customers Power of suppliers
What does Porter think of Strategy?
Agrees easing regulation and global business reduce barriers Root of the problem: operational effectiveness doesn't equal strategy!!
Peoples Cost Structure
Aircraft Squeeze the most possible flying time out of them 10.36 hours per aircraft per day, compared with industry average of 7.08 hours Low labor costs Received training in multiple functions Was extensively cross-utilized all coach, no first class pay for baggage, snacks, amenities No "freebies" - Convenience services were unbundled from basic transportation costs
To determine whether your firm should alter its business model, Johnson, Christensen, and Kagermann advise these steps:
Articulate what makes your existing model successful. For example, what customer problem does it solve? How does it make money for your firm? Watch for signals that your model needs changing, such as tough new competitors on the horizon. Decide whether reinventing your model is worth the effort. The answer's yes only if the new model changes the industry or market.
the method for determining the strategic significance of the disruptive technology.
Ask the right people the right questions. Simple graph plotting product performance on vertical axis and time on horizontal axis can help identify right people and questions. It is the trajectory of the disruptive technology compared with that of the market that is significant. Example: mainframe computer market surpassed by personal computers not because the performance of personal computing technology surpassed the performance of mainframe technology, but because it intersected with the performance demanded by the established market.
method for placing the responsibility for building a disruptive technology business in an independent organization.
Assign a small group the task of developing and commercializing a product idea, in an environment that is away from company's mainstream customers. Creating a separate organization is necessary only when the disruptive technology has a lower profit margin than the mainstream business and serves the unique needs of a new set of customers. Example: CDC successfully created a remote organization to commercialize its 5.25 inch drive.
Threat of substitution is high when
Attractive price performance trade-off Low switching costs Recent Improvements in materials enable substitutions
Select one way in which the Resonating Focus CVP is different from the Favorable Points of Difference CVP. A. More is better - sell all value points to customer B. More is not better! Focus on delivering a few points that give greatest value. C. Avoid using "Points of Parity" D. None of the above
B
Strategy often fails because of which of the following? A) The steadiness of change B) Uncertainty and complexity of change and competition C) Senior management is busy distilling relevant information D) R&D and Project Management have the same skill set
B
Which of the following companies did not meet the mark in terms of the test of substitutability? A) Express Cleaners B) People Express C) IKEA D) Disney
B
Which of the following is not one of Porter's Five Forces? A) Suppliers B) Share Holders C) Industry Competitors D) Buyers
B
Which of the following is not one of the elements of People's marketing strategy? A. Convenient flight schedules B. Free beverages C. Low fares D. Positive atmosphere
B
Which of the following is not one of the three distinct sources from which Porter states that strategic positions emerge? A) Variety-Based B) Income-Based C) Needs-Based D) Access-Based
B
IBM used an approach dubbed ____________ when entering the PC market. A) Lead the market B) Second to invent C) Trail the market D) First to invent
B) Second to invent
Lessons Learned from Blockbuster
Basic Strategy Positioning : Remained relatively unchanged throughout their life cycle. Blockbuster provided a wide range of family-oriented movies through neighborhood stores, using a membership card system to ensure control and availability of popular movies. The addition of gaming software merely built upon that basic position. Objectives: Changed throughout the life cycle as the company changed. Steering the strategy: year to year dominated the strategic management throughout Blockbuster's life cycle.This required continual decision-making on the range of movies to offer, price levels,staff hiring and training, marketing spending and message, and—as is critical as for any retailer—the rate, location, size, and design of new store openings.
Customers control Manager's investment decisions
Before managers decide to launch a technology, develop a product, build a plant, or establish new channels of distribution, they must look to their customers first: Do their customers want it? How big will the market be? Will the investment be profitable? The more astutely managers ask and answer these questions, the more completely their investments will be aligned with the needs of their customers.
why the "Power of Buyers" is important
Buyers capture value when they force down prices, demand better quality or more service Buyers powerful when: Few buyers or large volume buyers Industry products are undifferentiated Few or no switching costs Soft drink producers control packaging manufacturers' power by threatening or actually making packaging materials themselves
The author claims that managers don't understand business models due to: A. A lack of good modeling tools B. No understanding of system dynamics C. Models have gone into corporate memory D. Lack of analysis training skills
C
Which of the following aspects of the Growth Trap cause companies to fail with strategy? A) Manager's lag technology B) Aggressive marketing C) Pressure to grow cause broadening of customer targets D) None of the above
C
Which of the following is a pro the "Favorable Points of Difference" type CVP? A. Knowing a point of difference exists does not automatically convey value of difference to a customer B. Many points of difference creates a lack of distinction as to which point of difference delivers the greatest value C. Helps answer "Why should I buy from you instead of your competitor?" D. "Value Presumption"- assuming
C
Which of the following is not a success factor for distinguishing high-functioning suites of innovation discovery tools from less effective ones? A. Close strategic alignment with the company and relevant business unit B. Strong company backing in good times and bad C. A hands-off approach between individual business units and corporate R&D D. Effective organization design E. Effective leadership and the right mix of personnel
C
test of substitutability
Can a unique resource be trumped by a different resource? Ex: steel industry, which used to make beer cans, was suddenly out at a major disadvantage when aluminum cans became the industry standard
Questions that help evaluate business model innovation for acceptable results?
Can you nail the job with a focused, compelling value proposition? Can the business model elements support each other? Can your new development process remain unaffected by existing negative influences? Will the new business model disrupt competitors?
• Capabilities as related to business processes
Capabilities, like resources, are asset stocks. Capabilities accumulate and deplete, and exhibit the characteristics of asset stocks established in Chapter 3. ü Capabilities differ from skills. Skills are attributes of individuals, and move with the people who hold them, but teams need more than the sum of those skills if they are to be capable. ü Capabilities are composite factors. Capabilities consist of people's skills, knowledge, and procedures for getting things done (see Figure 9.1). Nevertheless, it is possible and helpful to formulate a capability as a single factor. The terms "capability" and "competence" are interchangeable.
Wide Focus model
Capture new thinking broadly across domains Mobile solutions, IT, and Internet-based product industries
Author Takeaways from Blockbuster Case
Changing a strategic position is a very rare event Companies don't change their strategic positions often However, companies often: Extend to new strategic positions Avoid threats to an existing strategic position
Three Management Tasks of Strategy
Choosing objectives for an organization - Objectives may be financial, such as growth in cash flow, or non-financial, such as reaching a target number of customers by a certain date. Objectives can also evolve as conditions change. Positioning the organization relative to other organizations - In business cases, this involves deciding which customers to serve, which products and/or services to provide, and how this will be done, usually in comparison to positions chosen by competitors. Steering the organization's progress over time - management has the continuing challenge of developing effective policies and making good decisions in order to build the resources and capabilities it needs
downside of People's growth and strategies
Chronic understaffing Constant pressure to hire, hire, hire Missed profit opportunity due to lack of personnel, possibility of doubling the profits of the company "Maintaining high positive attitude is enough to give you a heart attack" Burr's stance on this issue was that there were no emotional or human costs of hard work
Five key success factors of the most innovative organizations
Commitment of senior management Leverage intellectual property (IP) Strong management of IP portfolio A deep customer focus Well-defined and well-governed processes
Strategic Corporate Partnership
Companies seeking short-term product development, commercialization, and roll- out of outside innovations typically opt for strategic partnerships with already established start-up companies. Partner with existing companies to drive joint value creation Extends market potential Closes missing IP gap Creates competitive advantage A growing number of large companies are forming strategic partnerships to close knowledge gaps and drive value creation for both partners.
3 ways managers can develop capabilities to cope with change
Create new corporate structures within organizational boundaries so new processes can develop Spin out an independent organization to develop new processes and values ( Acquire a different organization whose processes and values closely match the new tasks requirements (ex: facebook buying instagram)
four elements that create and deliver the Business Model value
Customer Value Proposition (CVP) - help customers get an important job done Example: MinuteClinics enable people to visit a doctor's office without appointments by making nurse practitioners available to treat minor health issues. Profit Formula - blueprint for how the company creates profit from customer value Key Resources - people, technology, channels, brand, etc. Key Processes - operational and management approaches enabling repetition and scaling
IBM creates an environment of dynamic capabilities by requiring managers to have: A. Superior vision capability B. Strong ability to execute C. Project management skills D. Insight and execution skills
D
The Threat of Substitutes is high when which of the following factors are present? A) Low switching costs B) Improved products can now become substitutes C) Substitute offers attractive price -performance D) All of the above
D
Which is not one of the 3 factors that define what an organization can and cannot do? A) Process B) Values C) Resources D) Market position
D
Which is not part of the method for spotting and cultivating disruptive technologies? A) Determining disruptive versus sustaining B) Define the strategic significance C) Locate the initial market D) Integrate the operation into existing processes
D
Which of the following is not an approach mentioned in the section "Demonstrate Customer Value in Advance." A. Value Case Histories B. Value Calculators C. Use feedback and data to enhance CVP D. Use customer surveys to enhance CVP
D
Which of the following is not one of the four main paradigms for thinking about strategy? A. Porter's Five Forces B. Resources Based View C. Dynamic Capabilities D. Customer Driven Focus E. Game Theory
D
method for determining whether the technology is disruptive or sustaining
Decide which of the many technologies on horizon are disruptive Examine internal disagreements over the development of new products or technologies Who supports the project and who doesn't? (Marketing and financial MANAGERS RARELY SUPPORT DISRUPTIVE TECH, and technical personnel usually do.) Disagreement between the two groups often signals disruptive technology management should look at.
Type 3 rivalry
Definition: Struggling for share of activity from resources shared with competitors Consumer goods firms winning the largest share of retailers shelf space or voluntary groups capturing a larger share of donor's total giving 4th Population: Disloyal Customers Customers may be that way from the very start, OR Loyal for a few months then become disloyal later Disloyal customers are a challenge because their choice is competed for everytime they purchase
5 steps in the method for spotting and cultivating disruptive technologies.
Determine if the technology is disruptive or sustaining. Define the strategic significance of the disruptive technology. Locate the initial market for the disruptive technology. Place the responsibility for building a disruptive technology business in an independent organization. Keep it independent.
At Sonoco, each value proposition must be:
Distinctive. It must be superior to those of Sonoco's competition. Measurable. All value propositions should be based on tangible points of difference that can be quantified in monetary terms. Sustainable. Sonoco must be able to Execute this value proposition for a significant period of time.
Which of the following is not listed as one of the Five key success factors of the most innovative organizations? A. Leverage intellectual property (IP) B. Strong management of IP portfolio C. A deep customer focus D. Well-defined and well-governed processes E. Full delegation to line workers
E
Which of the following was part of the planned human dimension at People? A. Members profited substantially B. Lavish office design C. Specialization of tasks with little upward mobility D. Cheerful, friendly atmosphere E. Both A and D
E
Disadvantages of unfocused marketing efforts
Efforts spread across the whole will have less of an impact than if focused on specific parts of the market or against specific competitors. Trying to under-price, outsell, or out-service all competitors will incur considerable cost. Industry-wide competitive efforts will be visible and will attract retaliation from all competitors. Such generalized efforts exacerbate the very competitive conditions that damage profitability, for example by triggering price wats, or escalating advertising commitments.
In Principle 5, John Kotter describes how transformational change begins at the top with three discrete actions by the leaders. What are they?
Establishing a sense of urgency Creating the guiding coalition Developing a vision and a strategy Strategy implementation requires continual attention and focus on the changing initiatives and performance against targeted outcomes. If this isn't stressed, change won't take place and strategy won't be implemented. Successful balanced scorecard recognizes that this is a "Change" project not a "metrics" project. Project is mobilized Governance is then established to guide the transition Defines, demonstrates, reinforces the new cultural values to the organization STRATEGY IS A CONTINUAL PROCESS
Principle 1: Translate the Strategy to Operational Terms
Ex: Making a meal requires combination of raw materials (ingredients), tangible capital and assets (cooking implements, oven, stove) and intangible, human capital (the chef). But a great meal requires a recipe to take advantage of these assets Balanced scorecard provides framework to describe and communicate the strategy in an insightful and consistent way New framework of balance sheets, income statements, statement of cash flows becomes the "strategy map"
What are the five components on which the Balanced Scorecard enabled early adopting companies to focus and align?
Executive team Business unit Human resources Information technology Financial resource
How did IBM transform itself around customer needs a) externally and b) internally?
External: US Postal office - developed software to optimize mail handling External: Boeing - technology for network centric warfare products External: Mayo Clinic - gene profiling External: Bang and Olufson - develop electronic pill dispenser Internal: Radical shift in approach to strategic insight and strategic execution.
A "growing" business is the best indicator of a successful business model. T/F?
F
A con of the "All Benefits" type CVP is that it is quick and easy. T/F.
F
Compared to smaller companies, larger companies are better at quick adjustments, and respond faster to emerging markets. T/F?
F
Creating a new model for a new business implies that the current model is threatened and should be changed. T/F?
F
Tata Ratan was responding to a shift in the basis of competition. T/F?
F
The Balanced Scorecard is only suitable for companies experiencing declining performance. T/F?
F
The article claims there is little value in articulating the business model, watching trends is what's important. T/F?
F
When investing in and leveraging resources, management should pay little attention to the industry forces at play. T/F.
F
Porter points out that OE is necessary to compete and sufficient to win long term. T/F?
F Porter says OE is necessary but NOT sufficient
People's bottom-line business indicators included cost containment, efficiency, and marketing payoff. T/F?
F they include marketing payoff, cost containment, and productivity
The Balanced Scorecard provides a framework to look at the strategy for value creation; what are the 4 different perspectives and their strategic priorities?
Financial - The strategy for growth, profitability, and risk viewed from the perspective of the shareholder Customer - The strategy for creating value and differentiation from the perspective of the customer. Internal Business processes - The strategic priorities for various business processes, which create customer and shareholder satisfaction. Learning and growth - The priorities to create a climate that supports organizational change, innovation, and growth.
Type 1 rivalry
First-mover advantage" Coffee shop example: Customers may move back into the "potential" pool again if offered poor value by one or the other of the coffee shops Both shops charge $2.95 and gain 2000 customers each after 6 months Competitor increases price to $3.15 and our shop drops price to $2.80 We start to win customers more quickly, while the competitor's win rate drops. Their customers also start going back into the potential pool, so their customer base starts falling. Our customers visit more often, and spend more per visit, whereas their customers visit less frequently, and spend less on each occasion. Our sales jump slightly at this point, with the higher number of customer visits and spend, and then continue to rise as we continue winning new customers. Their sales drop slightly, with less frequent customer visits and lower spend, and start to decline.
three types of fit
First-order: "simple consistency" Vanguard minimizes trading costs so no need for costly money managers Second-order: "activities are reinforcing" Neutrogena markets to upscale hotels Third-order: "optimization of effort" GAP does daily restocking of basic items in few colors (minimizes in-store inventory, supports its short model cycle)
model of AIDA:
Gaining Attention Attracting Interest Stimulating Desire Motivating to Act
New value proposition brought about by Gerstner?
Gerstner, the new CEO, claimed IBM was failing and not growing because "people took our business away" More startling, after reviewing IBM's strategies, he concluded that "the company didn't lack for smart, talented people. Its problems weren't fundamentally technical in nature. It had file drawers full of winning strategies. Yet the company was frozen in place . . . The fundamental issue in my view is execution. Strategy is execution." What IBM lacked was not the ability to foresee threats and opportunities but the capability to reallocate assets and reconfigure the organization to address them. The core competence required to execute this strategy was the ability to integrate systems to solve customers' business problems—open middleware (the software that permits applications to be used across a variety of platforms) and services were key to this. Competencies are embedded in organizational processes or routines around coordination, learning, and transformation. For IBM, this meant it would need to take its existing competencies in technology and quality and add to them the capability to learn better how to serve the customer, integrate the organization around the customer's needs, and to transform themselves from a great product company to one that solved customer's problems.
Companies have 2 choices when disruptive tech enters the market
Go downmarket and lower profit margins of the emerging markets that the disruptive tech will serve Go upmarket with sustaining tech and try to compete (more lucrative profit opportunity)
two key values that make companies less able to address disruptive change successfully.
Gross Margins: become unacceptable as competition emerges - drives companies upmarket to more lucrative segments Maintaining "constant rate of growth:" growing by 15% each year forces large companies to only accept appropriately sized opportunities Combination of these two embedded values prevents companies from seizing new market opportunities.
the problem and implication of "managers lacking the habit of thinking about their organization's capabilities as much as their individual employee's capabilities."
Hallmark of good management is to put right people in the right place to succeed. Assumption that this translates to organizational effectiveness too. But two identical people will have different outcomes in different organizations. Companies have capabilities too, and managers must pay attention to them!
Fit and Sustainability
Harder for competition to match an array of interlocked activities than to imitate a single approach Positions built an systems of activities are far more sustainable than those built on individual activities Focus allows companies to improve on that fit over time - making even stronger barriers Implies strategic focus on longer term when possible
How has Paccar built defenses or positioned successfully within industry forces in the heavy truck market?
Heavy truck market: Many buyers are large fleet operators so they drive down costs against suppliers.Trucks are standardized, encouraging price cuts Paccar's positioning: Focused on owner-operators Owner-operators not as price sensitive Love their trucks, take pride in them Economically dependent on them Built-to-order luxury trucks Luxury sleeper cabins Plush leather seats as a result, Paccars trucks: Maintain better resale value Roadside assistance and parts IT system reduces downtime Status symbols!
test of durability
How quickly does the resource depreciate? Walt Disney brand name lasted for 18 years of stagnancy after Walt Disney's death to Michael Eisner taking over the management team
Why is strategy so important and why does it often fail?
Important because: Strategy is the answer to "how can we achieve and sustain competitive advantage?" Strategy refers to the plans and actions firms take to achieve their objectives. Making quality decisions and executing well on those decisions. Strategy is about understanding market and technology evolution and transformation as well as the ability to execute against the plans. For many years, the senior management at Sears refused to believe that Wal-Mart was a competitor or a threat. The large integrated steel makers, such as Bethlehem Steel, discounted the emergence of mini-mills and Nucor, only to find themselves bankrupt 20 years later.
How Resources Drive Their own LOSS
Just as easily as resources can drive their own gain, they also can create their own loss As mentioned in previous slide, loss of airline customers depends on # of staff AND current # of customers themselves It is the quantity of customers that drives the # of journeys flown, hence increasing the potential for a poor service quality to arise in situations where airlines are understaffed or overbooked
IBM Business Leadership Model
Leadership Model included bringing together both Strategy and Execution. Combined strategic insight and strategic execution BLM then reflects the two fundamental dynamic capabilities of sensing and seizing. Combines Performance Gaps and Opportunity Gaps
Describe Porter's answer to why companies fail with strategy. Focus on the Growth Trap.
Manager's chase technology to keep up Sign of weakness not to have "winner take all" attitude Growth Trap Trade-offs appear to limit growth so are counter-intuitive to many managers Pressure to grow causes broadening of customer targets - resulting in loss of distinctiveness Instead - better meet needs and provide varieties where company is already distinctive
Conclusion; important takes from "Creating the strategy"
Measure the Strategy: If financial measures were causing organizations to do the wrong things, what measures would prompt them to do the right things? Place strategy at the center of management processes: Strategy-Focused Organizations use the Balanced Scorecard as a framework for describing and implementing strategy across the corporation. Necessary but may not be sufficient: Having the scorecard, however, may still not be enough to beat the odds against successful strategy implementation - but the BSC will improve the odds considerably.
two ways in which the Resonating Focus CVP is different from the Favorable Points of Difference CVP
More is not better Focus on selling the few points that deliver the greatest value to the customer Use points of parity strategically May be required in order to even be considered against competitors Counter customer perceptions
Existing Resources Drive Gains and Losses
Most critical factor-driving flows of resources is the quantities of resources that already exist More sales people will cause to win more customers faster and slow the loss of existing customers More research staff will speed development of new products More maintenance people will slow the rate which failed equipment has to be replace A wider product range helps win customers more quickly
Neutrogena's positioning
Neutrogena "kind to the skin" Uses a slow, more expensive manufacturing process to mold its fragile soap Residue-free pH balanced Said no to deodorant and skin softeners Gave up large volume potential by not competing on price Created a premium "medical" soap reputation Focus on dermatologists Market through journals to doctors
Operational Effectiveness (OE) versus Strategic Positioning.
OE means performing similar activities better than rivals Greater efficiency results in lower unit costs Unsustainable over time as competitive advantage Necessary but not sufficient Strategic Positioning means performing different activities from rivals or performing them in different ways Greater value enables charging higher unit prices More sustainable over time than OE Operational Effectiveness will do the same thing better whereas strategic positioning will have other aspects of the business. Greater efficiency results in lower costs For example, Target may have a better and more efficient shipping and handling system than Walmart, something they both have However Walmart may have more selection and have more depth in their grocery department than Target. Rahn Notes: Strategy for target is to be a little more warm and better service with better products than Walmart
Which of these is NOT a perspective of the Balanced Scorecard Framework in this article? Customer Internal business processes Organizational design Financial Learning and Growth
Organizational design
"Migration of Capabilities"
Over time capabilities shift into processes and values Faced with recurring tasks, routines are created and they embody assumptions for decision making - yields culture (example: netflix's culture is that people will do 2 or 3 jobs as an employee)
human dimension at People
PE showed positive results in sphere of personal growth High levels of employee satisfaction showed up in first-year surveys done by Univ. of Michigan Cheerful, friendly energetic atmosphere permeated the planes and passenger terminals In a People flight manager position, the knowledge people gain is a phenomenal opportunity
The secret sauce?
Patience Companies revise business model 4+ times on road to profitability. Tolerate initial failure, course correction, learning. Patient for growth - allow the market to emerge. Impatient for profit - early validation that the market works.
tests of inimitability (unique and unable to copy)
Physical Uniqueness - (diamond mines) by definition are difficult to reproduce Path Dependency - (brand name) long term development of the resource Causal Ambiguity - (capabilities) when difficult to disentangle the key resource and how to recreate it Economic Deterrence - pre-empt competition by making sizable investment they will have to also build
What are the four main paradigms for thinking about strategy?
Porter's Five Forces: industry structure, entry deterrence, and positioning. Resource-based view (RBV): difficult-to-imitate firm specific assets e.g. IP, brands, operational excellence. Game Theory: bold strategic moves sending signals to competitors. Dynamic Capabilities: management builds and adapts competencies.
Strategy in terms of positioning, trade-offs, and fit and sustainability.
Positioning: creation of a unique and valuable position (image in customer eyes) involving a different set of activities than competitors. Trade-offs: making trade-offs in competing. Essentially making choices about what not to do! Fit and Sustainability: creating fit among activities and do many well Conclusion: without success in these factors, OE determines relative performance - not distinct or sustainable
pros and cons of the "Favorable Points of Difference" type CVP
Pros: Helps answer "why should I buy from you instead of your competitor?" Cons: many points of difference creates a lack of distinction as to which point of difference delivers the greatest value
pros and cons of the "All Benefits" type CVP
Pros: This approach requires the least knowledge about customers and competitors and, thus, the least amount of work to construct. quick and easy Cons: This major benefit has a drawback: benefit assertion, which is when managers may claim advantages for features that actually provide no benefit to target customers. Another pitfall is that many, even most, of the benefits may be points of parity with those of the next best alternative, diluting the effect of the few genuine points of difference
People express goal was to
Provide a 'broad new choice of flights" with high frequency service Keep costs low by "extremely productive use of assets" Offer "unrestricted deep discount price savings through productivity gains Focus on the several high density eastern US markets that had yet to reach the pricing benefits of deregulation Center operations in the densely populated new york-newark metropolitan area with service at the underutilized, uncongested, highly accessible newark international airport
What is an incubator?
Provide an array of resources and services. Enable many companies to support and collaborate with a handful of promising start-ups - up to 3 years
Three Dynamic Structures
Racing to capture potential resources: winning first-time buyers or hiring newly qualified staff Trying to steal resources away from competitors and prevent the reverse: hiring rival's staff or keeping customers from switching to a competitor's product Struggling for share of activity from resources shared with competitors: consumer goods firms winning the largest share of retailers' shelf space or voluntary groups *Often these 3 dynamics operate together
The two ways that industry structure can be reshaped.
Re-dividing profitability - increase share of profits to competitors rather than to suppliers, customers, etc. Expanding the profit pool - increase the total pie available
3 factors that define what an organization can and cannot do, and implications for change when innovating
Resources: processes values
Why does Porter claim OE is insufficient as a strategy?
Resulting major productivity gains drive costs down which are then passed on to customers as competitors catch up in productivity and also charge less - consultants, suppliers and customers reap this value - not providers Competitive convergence - benchmarking and outsourcing cause imitation - all firms begin to look the same and - must eliminate the competition to win
Burr's Personal Motivation and People's Philosophy "Six Precepts"
Service, committment to growth of people Best provider of air transportation Highest quality of management Role model for other airlines and other businesses Simplicity Maximization of profits
Business Ventures Models
Start-up and venture capital unit jointly establish proof of concept. development of a robust business plan. creates value by accelerating or deepening a start up's market penetration. creates value by accelerating the commercialization of a product of products through, for example, supplier agreements with the host business units of the corporate investors Whatever the underlying model, the company needs to ensure that the value of the partnership is clear to the start-up and that the right people are involved at the right time in the process.
Describe two problems organizations face when implementing well-formulated strategy?
Strategies are changing but the tools for measuring strategies have not kept pace. Attempting to implement knowledge-based strategies in organizations designed for industrial-age competition
The scorecard allows organizations to build a new management system which has three distinct dimensions. What are they?
Strategy Make strategy the central organizational agenda - to describe and communicate their strategy in a way which all can easily understand Focus Create incredible focus - every resource and activity is aligned to the strategy Organization Mobilize all employees to act in fundamentally different ways - provide the logic and architecture to establish new organization linkages
3 key principles of strategic positioning
Strategy is the creation of a unique and valuable position, involving a different set of activities. Strategy requires you to make trade offs in competing- to choose what NOT to do Gains in one area can be achieved only at the expense of another area Strategy involves creating "fit" among a company's activities. How company's activities interact and reinforce one another (ex: vanguard aligns all of its activities with a low cost strategy; it distributes funds directly to consumers and minimizes portfolio turnover.
"Threat of Substitutes"
Substitute products limit an industry's profit potential by placing a ceiling on prices. Videoconferencing versus travel, travel websites versus travel agents. Sometimes hard to see - neckties versus power tools for gifts. When threat of substitutes is high, industry profitability suffers (think about what netflix did to the movie rental industry)
the pros and cons of the "Resonating Focus" type CVP
Suffers from being the hardest to accomplish- requires disciplined approach to understanding customers, competitors, and own products Ex: painters used to paint a house, then wait 3 days for it to dry, then come back and do another coat. This is inefficient, what if they could just have the paint dry fast so they can do the next coat in the same trip rather than losing money by having to go back and take multiple trips? The best way to be efficient was to create "quick dry" paint, which changed the industry
What are the 5 forces? How to reshape them in your favor?
Supplier power (standardize so your company can switch more easily among vendors) Customer power (expand services so it's harder for customers to leave for a rival) Established rivals (invest heavily in products that differ from competitor offerings New entrants (scare them off by elevating fixed competing costs) Substitutes (offer better value through wide product accessibility)
Suppliers powerful when:
Suppliers are more concentrated than the industry Supplier has other revenue sources Switching costs exist Differentiated products No substitutes Suppliers can credibly threaten to enter the market themselves
7 Barriers to entry
Supply side economies of scale: firms produce at larger volumes that enjoy lower costs per unit because they can spread fixed costs over more units, employ more efficient tech, or command better terms from suppliers. Demand side benefits of scale: arise in industries where a buyers willingness to pay for a company's product increases with the number of other buyers who patronize product. "Nobody ever got fired for buying from IBM" Customer switching costs: switching costs are fixed costs that buyers face when they change suppliers. Once a company installs software, say SAP for example, switching costs are high Capital requirement: the need to invest a lot of money in order to compete Incumbency advantages independent of size: Unequal access to distribution channels: a new food item must replace other items on the shelf Restrictive gov policy: think about liquor stores and how some markets are unable to get beer wine and liquor license so are unable to sell booze, a highly profitable item
What is the Corporate Venture Capital tool?
Support existing companies with capital in exchange for equity shares. In return, the company gains early access to promising ideas and companies inherent risk of venture investing and innovation support in general, concluding that the greater risk was not to invest at all.
According to Principle 2, "______" is the overarching goal of the organization. Financial Gain Development Synergy Employee Motivation
Synergy
Principle 2: Align the organization to the strategy
Synergy is the overarching goal of organization design Execs replace formal reporting structures with strategic themes and priorities that enable a consistent message and consistent set of priorities to be used across diverse and dispersed organizational units.
A key idea in the section on Superior Business Performance is CVPs are a fundamental part of business strategy. T/F.
T
Accelerators enable a corporation to rapidly screen a large number of start-ups focused on a particular technology or region. T/F?
T
According to the article, customers wield extraordinary power in directing a company's investments. T/F?
T
Disruptive technologies tend to be valued initially in new markets and applications. T/F?
T
Effective strategy comes from alignment of all components. T/F.
T
Every company studied that has tried to manage mainstream and disruptive businesses within a single organization has failed. T/F?
T
Executives use the Balanced Scorecard to help communicate and educate the organization about the strategy. T/F?
T
If you need new processes, you have to build a boundary from the existing organization. T/F?
T
In Digital's discussions about resource allocation, Mini's won over PCs. T/F?
T
Managers see disruptive change coming, but they use improper structures and processes when they react. T/F?
T
One reasons strategy is so important as it answers the question: How can we obtain and achieve a competitive advantage. T/F.
T
The Balanced Scorecard provides a framework which enables the creation of a "performance mind-set." T/F?
T
The Resourced Based View (RBV) sees companies as collections of physical and intangible assets and capabilities. T/F?
T
The best corporate venture units understand that greater than the risk of failure is the risk of not investing at all. T/F?
T
When employees decide priorities by assumption, corporate culture has emerged. T/F?
T
"Sensing New Opportunities and Strategic Insight"
Technology Team meets monthly to assess market readiness for emerging technologies Strategy Team meets monthly to examine current results and consider new growth areas Integration and Values Team facilitate Winning Plays - efforts requiring cross-organization effort Deep Dive - GM requests meeting with members from operating unit and strategy group to evaluate performance or opportunity gap.
Quality vs reputation
The connection between quality and reputation is very common. The principle is that quality affects current customers, while reputation affects potential customers (Figure 9.3). Since we are considering two different groups, our concern differs in each case—we want potential customers to join us, and we want active customers to stay with us and buy more from us. The factors that influence each group will also be different. Only current customers can have real experience of product or service quality, and therefore be motivated to leave if these are not good enough. Potential customers, on the other hand, can only respond to what they hear about product or service quality (i.e., the company's reputation).
productivity frontier and how porter believes it impacts businesses
The sum of all existing best practices at a point in time Maximum value created at given cost using best practices Frontier constantly shifts - new technologies and management approaches Competing at the Productivity Frontier produces "absolute" improvement in operational effectiveness Points out that OE is necessary to compete but not sufficient to win long term
Qualities of Tangible Resources that impact business performance
The various contributions per asset Profit contribution Average quality of a resource Equipment reliability
Apple's Ipod was such a huge success and changed their fiscal standing dramatically, however there were models before it. Why weren't those successful and Apple was?
They introduced itunes, a low cost way to purchase the music that pairs with the ipod. Similar to buying the razor blades with the gillette razor. Business model innovations have reshaped entire industries and redistributed billions of dollars of value. Retail discounters such as Wal- Mart and Target, which entered the market with pioneering business models, now account for 75% of the total valuation of the retail sector. Low-cost U.S. airlines grew from a blip on the radar screen to 55% of the market value of all carriers. Fully 11 of the 27 companies born in the last quarter century that grew their way into the Fortune 500 in the past 10 years did so through business model innovation.
Strategically valuable resources have 5 characteristics:
They're difficult for rivals to copy They depreciate slowly You're company, not employees, suppliers, customers- controls their value They can't be easily substituted for They're superior to similar resources your competitors own
Consequences of Resource Accumulation
Time compression diseconomies- takes a long time to expand into something large, like a McDonalds or Starbucks Asset mass efficiencies: the more you have the more you get Interconnectedness of asset stocks- building resources depends on the resources you already have in place (ex. The more smart people you have the more smart people you can attract in the case of McKenzie) Asset erosion- assets can deteriorate over time unless the company maintains them Causal ambiguity- can be hard to know the cause... Ex. RyanAir : if you have a lot of employee turnover you need to track it on a monthly or quarterly basis.
Four types of advertising
To Build Awareness To Communicate Brand "Values" and Win Consumer Interest Promotions for Interested Consumers Loyalty Promotions to Persuade Consumers to only Purchase their Brand
People Express Marketing Strategy
To build and maintain passenger volume by offering extremely low fares and frequent, dependable service on previously overpriced unsupervised routes Very low fares- 40% to 50% below the competition's standard fares 65% to 75% below during off peak hours Pitch to "smart" air travelers Ads sought to identify PE as the smart travel choice for smart, thrifty, busy travelers Memorable positive atmosphere
Principle 3: Make strategy everyone's everyday job
Top down communication, every employee understands what is happening in their day to day activities Employees had to learn about customer segmentation, variable costing, database marketing. Personal objectives were set and communicated holistically.
importance of trade-offs
Trade-offs create the need for choice and protect against repositioners and straddlers Inconsistencies in image or reputation Trade-offs reflect inflexibilities in machinery, people or systems Limits on internal coordination and control - management makes strategy clear (confusing to staff if trying to be all things to all customers)
Five principles of a Strategy-Focused organization
Translate the strategy to operational terms Align the organization to the strategy Make strategy everyone's everyday job Make strategy a continual process Mobilize change through executive leadership
What is strategy? Pt 2
Two decades of rapid change Competition, markets, technology Outsource aggressively for efficiencies "Positioning" rejected as too static Belief is prevalent that rivals can copy any market position Competitive advantage is temporary Renders positioning ineffective Porter sees things differently
Type 2 Rivalry
Type 2 rivalry can occur with Type 1. * Definition- Type 2 rivalry is trying to steal resources away from competitors and prevent the reverse: In the chapter the book uses price as a factor to lure you (resource) to their business. Let's say Starbucks cuts it price of coffee from $3.00 to $2.85, and Petes Coffee increases their price from $3.00 to $3.15 This attracts more customers and increases sales for Starbucks while the resources (people) leave Petes. The main point is that each week more and more customers will switch to Starbucks spending more time and money. While Petes loses customers, sales, and profits. The Key assumption in the Type 2 rivalry is that some individuals are more price sensitive than others. So as time goes on, more and more people will change their preference of the product..
The tech changes that do damage established companies are usually not radically new or difficult from a tech point of view. They have 2 characteristics:
Typically present a different package of performance attributes, ones that are not valued by existing customers Performance attributes that existing customers do value improve at a rapid rate that the new tech can later invade those established markets
How to develop a Compelling CVP
Understand customers business Invest time and effort to understand your customers businesses and identify their unique requirements and preferences Substantiate your value claims "We can save you money" won't cut it as a CVP. Document Value Delivered Create written accounts of cost savings or added value that existing customers have actually captured by using your offerings Make CVP a central business skill Improve and reward managers ability to craft compelling cvps
approaches mentioned in the section "Demonstrate Customer Value in Advance."
Value Case Histories: document cost savings and other added value. Value Calculators: develop process for accurate measurement. Pay customers to allow you to do "live" research onsite. Then use this feedback and data to enhance the CVP!
three distinct sources from which Porter states that strategic positions emerge?
Variety-based - Jiffy-Lube Superior value chain for specific product or service Usually meets only a subset of needs Needs-based - IKEA Serve all the needs of a customer segment Closest to traditional thinking of positioning Access-based - Carmike Cinemas Small town customers Standardized, low cost approaches to serve them
"Digital's Dilemma" from the perspective of resources, processes and values
Very successful mini computer maker - core competency of "computer making?" Engineering talent - routinely designed computers more sophisticated than PCs Plenty of cash, great brand, good technology HOWEVER Due to existing overhead - product must generate 50% margins Management ensures that this is prioritized so company makes money Mini's always won over PCs in resource allocation decisions
"the old model will work,"
When you can fulfill the value proposition by: Using your current profit formula, Using most, if not all, of your current processes and resources, and Using the same core metrics, rules and norms as you do now. Example: Swiffer - a disruptive technology that fit into P&Gs current business model approach. example 2: The "flaw" of light cleaning was a "feature" to the simplicity seekers. P&G had trouble with selling in Italy, where sweating is culturally associated with good cleaning. But in America they found a ready market in people who wanted a quick, light cleaning with disposable materials.
SWOT analysis
While now largely viewed as inadequate, SWOT remains the first method most executives think of for developing strategy. SWOT is an acronym for the four main issues that the method considers. "SW" refers to the Strengths and Weaknesses of a business, relative to competitors, and to what is needed to succeed— i.e., internal considerations. "OT" refers to Opportunities and Threats that the organization might face—features of the external environment.
Test of competitive superiority
Whose resource is really better? Every company claims they do certain activities better and values that as a core competence, yet they are really overvaluing that skills Example of medical-diagnostics test equipment manufacturer with "man-machine" interface distinctive capability.
A mobile solutions company looking for new applications of its technology would use which of the following? Tight-focus Wide-angle Lean model SIM process
Wide Angle
What explained people's rapid success?
Word of Mouth about customer satisfaction Favorable impressions by journalists Amazing employee response to PATCO strike which occurred just months after PE began flying PE's low cost structure enabled them to enter market at low fare
You're strategically valuable resources, the ones enabling your enterprise to perform activities better or more cheaply than rivals, give your company
a competitive edge. These can be Physical assets (prime location) Intangible assets (strong brand image) Capabilities (brilliant manufacturing process) Ex: japanese companies have always excelled in capabilities with their lean manufacturing processes
Other Uses for the Quality Curve and Resource Attributes
assessing the development of product features; for example, to avoid feature fatigue when consumers become overwhelmed with features they can neither understand nor use strategic turn-round to rescue an organization in difficulty,commonly due to having over-built low-quality resources, such as unprofitable customers and products. (This was a widespread feature of troubled companies following both the 2001 and 2009 recessions.)
A successful Balanced Scorecard program starts with the recognition that it is not a metrics project; it's a/an "______" project. Organizational Proposal Change Strategic
change
Strategists job is to
cope with competition
Must include
customers, suppliers, entrants and substitutes as well
BCG analyzed the top 30 companies in each of the six innovation-intensive industries. In all six industries, 43 percent of the top 10 companies have
established incubators or accelerators. Many of the companies locate their incubators and accelerators in innovative hot spots: Silicon Valley, Berlin, London, and Tel Aviv.
What is an Accelerator?
in contrast, enable rapid screening of a large number of start-ups focused on a particular technology or region. Support takes the form of a structured business-development curriculum for a fixed term (typically, three months). The start-ups invited to participate in the accelerator are usually on the verge of launching revenue-generating activities, and the corporate sponsor promotes their development by granting them access to office space, technical support, high-quality mentoring, networks of other start-ups, and funding sources. In return, the company gains early access to promising ideas and companies.
Management implications for investing in and leveraging resources
investing in resources Eisner invested 50 million into "who framed roger rabbit" for the return of disney. Led to aladdin and lion king Upgrading resources Moving beyond what the company is already good at byAdding new resources Upgrading to alternative resources that are threatening the company's current capabilities Leveraging resources Disney's example of investing $50 Million in animation capability - then leveraging that as a platform.
Goodyear, Xerox, Bucyrus-Erie, Digital. Leading companies all—yet they all failed to stay at the top of their industries when technologies or markets changed radically. That's disturbing enough, but the reason for the failure...
is downright alarming. The very processes that successful, well- managed companies use to serve the rapidly growing needs of their current customers can leave them highly vulnerable when market-changing technologies appear. When a technology that has the potential for revolutionizing an industry emerges, established companies typically see it as unattractive: it's not something their mainstream customers want, and its projected profit margins aren't sufficient to cover big- company cost structures. As a result, the new technology tends to get ignored in favor of what's currently popular with the best customers. But then another company steps in to bring the innovation to a new market. Once the disruptive technology becomes established there, smaller- scale innovations rapidly raise the technology's performance on attributes that mainstream customers value.
On October 24, 1980, People had
its certificate to offer air passenger service between New York-New Jersey area and 27 major eastern U.S. cities everyone worked long hours, "it was hell" said Don Burr
Consistent business pattern
leading companies fail to stay on top when technologies or markets change. Xerox let Canon create small copier market. Big part of the problem was: Bureaucracy Aging executives Arrogance Poor planning Short term horizons
Resource Based View (RBV)
links a company's internal capabilities (what they do well) with the external industry environment (what the market demands and what competitors offer) companies are collections of physical and intangible assets and capabilities - unique to each company Assets and capabilities determine how well a company performs its functions
sustaining technology
maintaining a rate of improvement on important attribute for example the thin film components in disk drives made the drives more efficient
Strategy is about understanding
market and technology evolution and transformation as well as the ability to execute against the plans. For many years, the senior management at Sears refused to believe that Wal-Mart was a competitor or a threat. The large integrated steel makers, such as Bethlehem Steel, discounted the emergence of mini-mills and Nucor, only to find themselves bankrupt 20 years later.
Managers can avoid missing the next wave by
paying careful attention to potentially disruptive technologies that do not meet current customers' needs. But recognizing the pattern and figuring out how to break it are two different things. Although entrants invaded established markets with new technologies three times in succession, none of the established leaders in the disk-drive industry seemed to learn from the experiences of those that fell before them.
Disruptive Technology
performs poorly on important attributes at first, better on unimportant attributes Sonys early transistor radios Distributive technologies tend to be valued initially in NEW markets and applications Ex: existing market of people who listen to music through cd players aren't interested in walkmans, but a new market of people who want to walk with their music that would be interested in walkmans, which is disruptive technology
Strongest forces determine
profitability and become central to strategy formulation
The Balanced Scorecard approach
retained measures of financial performance, the lagging indicators, but supplemented them with measures on the drivers, the lead indicators, of future financial performance The article points out that the Balanced Scorecard was also very useful as a "Change" coordinating mechanism - to guide and manage educating the corporation about the strategy, and also the implementation of strategy itself.
managers must be able to
sense changes and seize opportunities
Dimensions of Capability
specify capabilities requires that we be clear what being "good at" something actually means. There are three elements to consider: (1)is the activity done quickly; (2) is it done well; (3) and is it done at low cost?
A study of 275 portfolio managers reported that
the ability to "execute strategy" was more important than strategy itself In the industrial economy, companies mainly used financial metrics to evaluate a firm's health. The key problem is that financial measurements are LAG INDICATORS that only report recent outcomes based on results from past actions
What is strategy?
the creation of a unique and valuable position, involving a different set of activities. Strategic position emerges from three distinct sources Serving few needs of many customers (jiffy lube provides only auto lubricants) Serving broad needs of fewer customers (bessemer trust targets wealthy clients) Serving broad needs of many customers in narrow market (carmike cinemas operates only in cities with a population under 200,000)
Strategy must be
the heart of the management systems
Chapters 1-6 have explained
the need to constantly build & retain resources over time in order to deliver continually improving performance, but we must remember... SO ARE COMPETITORS!
Performance Trajectory
the rate at which the performance of a product has improved and is expected to improve in some important attribute. "Copies per minute"
Bathtub behavior
there is inflow and outflow of resources --- could be new customers or employees Winning customers adds to a customer base; recruiting new employees increases our staff resource; marketing our products raises awareness among potential customers; training our staff enhances their level of skill. Customers are lost to competitors; resignations and firings reduce our staff base; discontinuing a product reduces our product range; intense pressure on staff reduces morale.
Porter claims
they define competition too narrowly
Test of Appropriability
who captures the value that the resource creates? Profits are subject to a host of players, including customers, distributors, suppliers, and employees.
When Apple introduced the iPod, it did something far smarter than wrap a good technology in a snazzy design. It:
wrapped a good technology in a great business model. Combining hardware, software, and service, the model provided game- changing convenience for consumers and record-breaking profits for Apple.
