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Strategic Final - starting from session 14

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Geoffrey Moore is the

"old school" authority on technology B2B marketing - until recently, tech was largely a B2B discussion. now, B2C, C2C technology dominates the news, but the same concepts of word-of-mouth marketing still exist

early adopters (visionaries) are the

"rare breed to match technology with strategic opportunity" - often are new to the executive ranks, eager to make a mark - looking for a breakthrough; order of magnitude (10x) - willing to pay the price for a way to "leapfrog" the competition - access to budgets and able to fund early technology development - easy to sell to, difficult to please; often wants endless customization prominent examples: - john f kennedy launching the space program - steve jobs with the graphical user interface (GUI) for the mac - CEO of netflix relying the Amazon cloud for web streaming

transferring skills

& the sharing resources can help to hone strategic competitive advantage - enormous debate on this topic for the last 40+ years - some evidence to show that diversification in related industries (not unrelated) yields higher performance - potentially builds on the concepts of resource base view, economics of scale, and core competencies

matrix creates

*constructive tension* between differing objectives

seller-side vs buyer side

*seller-side* - select the type of ad you want on your site (size placement, industry type) - get paid as people click through *buyer-side* - auctions with no ad reps, no negotiations, no relationships - this system "ensures" that advertisers are only charged when user clicked on an ad

why is it called innovator's dilemma?

- "disruption" describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others - entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality -- frequently at a lower price. incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. - entrants then move upmarket, delivering the performance that incumbents' mainstream customers require, while preserving the advantages that drove their early success. when mainstream customers start adopting the entrants' offerings in volume, disruption has occurred.

new CEOs guide to transformation

- *transformation is a profound change* in a company's strategy, business model, organization, culture, people or processes; it is a *fundamental reboot, altering the trajectory of its future* - 1) *funding the journey* -- making "no-regret" decisions to a) free up money, b) free up time, c) create momentum for larger changes; often called "quick wins" in consulting world - 2) *develop a business model and operating model* to increase competitive advantage - 3) *building the right team, organization, and culture* - CEO should start 100 days *before joining the company* (pre-research) - once there, CEO needs to *take the action immediately* - *communication is critical* to reduce confusion, build trust, energize the organization, etc

profit from the core

- 90% companies worldwide failed to achieve sustained, profitable growth over the past decade - profit from the core (HBS Press) argues that most growth strategies fail to deliver value -- or even destroy it -- primarily because they wrongly diversify from the core business - the authors contend that this timeless strategic precept -- building market power in a well-defined core -- remains the key source of competitive advantage and the most viable platform for successful expansion

what is a potential TIDE interaction among Product (GBU) and Country (MDO) and GBS?

- GBU (Product) --> $2/liter recommended selling price - MDO (germany) <-- $1.6/liter pricing; $2/liter pricing if changes (packaging, water preferences) GBS (shared services)

what is vertical integration?

- VI is the merging together of two businesses that are at different stages of production. for example, a food manufacturer and a chain of supermarkets. merging in this way with something further on in the production process (and thus closer to the final consumer) is known as forward integration - difficult = expensive, can outsource - vertical integration can be contrasted to horizontal integration, the merging together of businesses that are at the same stage of production, such as two supermarkets, or two food manufacturers. Merging with something further back in the process backward integration. - businesses are downstream or upstream of each other depending on whether they are nearer to or further away from the final consumer makes sense = more quality control

PayTM is crushing it in India

- ant financial took a 25% stake in PayTM (225M users) - tencent invested in HIKE a payTM competitor - the indian government cancelled 86% of currency in circulation in 2016, and PayTm filled the void

facebook started

- as a social network (peer-to-peer) - became a platform (with developers) - has elements of a market place (users/advertisers)

assets collect risk

- assets collect risks around them in one form or another. inventory is one risk, and accounts receivable is another risk. - in our case-- with 70% of our sales going to large corporate customers -- accounts receivable isnt hard to manage because companies like Goldman and Microsoft and Oracle tend to be able to pay their bills - but in the computer industry, inventory can actually be pretty massive risk bc if the cost of materials goes down 50% a year and you have two or three months of inventory vs 11 days, you've got a big cost disadvantage - and you're vulnerable to product transitions, when you get stuck with obsolete inventory

disruptive innovation video

- big players focus on sustaining innovation, upgrading existing products and services to attract higher paying customers, but soon they start to ignore the regular customers who just want simple low cost alternatives -

key takeaways AIRBNB

- built the demand side first; supply always follows - trust and safety are important with all marketplaces

how to reinforce the firm's core competencies?

- clarify core competencies -- the entire organization needs to know (be reminded) on how they can support the competitive advantage - identify core competencies: for example, ask "How successful would we be without this competency?" - build and invest in core competencies (use it or lose it) - infuse resources throughout the organization. "stop thinking of the business unit as sacrosanct" - celebrate people and projects that embody core competencies

late majority (conservatives) are

- constitute about 1/3 of the total market - when they find something that works for them, dont like to change - slightly "fear" technology - similar to early adopters; they stubbornly resist the pragmatist herd - they like preassembled packages at a heavily discounted price - great opportunity to take "old technology" and repackage into a lower-cost, easy-to-use solution

better-off tests: common fails

- does the corporation bring significant advantage to the new unit (or vice versa)? - is the benefit "one-time" or long-term

what is GE's reason for existing now?

- execution focused - synergy (data, AI)

key takeaways

- facebook's entry was a clustered approach (get Harvard) before rolling out to other clusters (Stanford) - they focused on engagement, not just growth - realized the retention was critical (emailing your 10+ friends to join, tweaking products/timelines/relationship status)

attractiveness: common fails

- falsely believe the target industry is "similar" - low cost of entry = "why not" - falsely believe fast growth = profitability

Why did IBM choose open standards?

- felt pressured by Apple's initial success - believed that customers would purchase because of IBM brand - wanted product to become PC standard -- NETWORK EFFECTS; value of product grows by more people using it -- economics of scale; lower costs from greater production level - IBM gave away the most valuable parts of the PC -- microprocessor (CPU) to intel -- operating system to microsoft what do you need to make money from a standard?

whatsapp key takeaways

- fewer contacts (20) vs. Facebook (980); higher engagement - usage - not growth - is the indicator of network effects - used the phone as log-in (low barrier to usage)

we substitute info for inventory and ship only when we have real demand from real end customers

- finer customer segmentation cuts - direct tools to help customers - big on customer strategy, attend meetings with customers

few facts from the case

- founded by Dr. Shetty, personal cardiac surgeon to Mother Theresa - original location in bangalore, India; 500 inpatient beds - completed 11,200+ open heart surgeries (OHS) as of 2004 - breakeven cost for open heart surgeries: -- $2000 for adults, $2900 for children vs $5500 in private Indian hospital -- has a mix of paying and charity cases - quality on par with the US - strong work ethic: doctors working 12-14 hour days - business activities - hospital, telemedicine, and insurance

KEY TAKEAWAYS: ORGANIZATIONAL DESIGN

- four major org types: product, geography, function, customer-based - matrix creates constructive tension between differing objectives - organizational structure is the just one (most obvious) aspect of organizational effectiveness also requires: -- clear roles and responsibilities, span of control, recruitment, retention, talent management, leadership, incentives, successful planning, knowledge management and CULTURE - organizational structure may/should change as needed to realign the resources (people) with the decisions which need to be made - Nelson Peltz believes that the matrix organization limits growth - effective decisions can be measured by 4 criteria: *decision quality, speed, yield, and effort*

four primary types of organizational structures

- functional - product-based - geographic - customer segment-based what are the benefits of each of the organizational structure types?

how does google encourage innovation?

- fund projects that have a 10% chance of earning a billion dollars over the long term. do not be surprised if we place smaller bets in areas that seem very speculative or even strange when compared to our current businesses. - encourage our employees, in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google. this empowers them to be more creative and innovative. many of our significant advances have happened in this manner. AdSense for content and Google News were both prototyped in "20% time".

att and time warner: exploit synergies

- gain access to great content? - differentiate wireless service with content? - rejuvenate the core business? - improve the "dumb" pipes?

google's employees

- googlers= free meals, doctors, washing machines - dont be evil culture

who was andy grove? what was his role in intel's success?

- helped bring the computer age; first employee at Intel - coined the term "strategic inflection point" -- getting out of memories -- sole-sourcing manufacturing and marketing directly to consumers - mgmt: "creative confrontation"; sign in sheet for latecomers - only the paranoid survivor; worked in a cubicle like everyone - meritocratic culture; pay for performance (reward the top) - missed a key strategic inflection point -- rise of the inexpensive (less than $1k) laptop, and non-PC devices (phones, set top boxes etc); eventually launched Celeron

industry economics (ex: high fixed costs, excess capacity, barriers to exit) makes hospitals a very competitive and low-margin business

- high fixed to variable cost -- pressure to increase market share - healthcare is largely a local service; 5,600 hospitals in the united states - excess industry capacity; 53% of average bed utilization - high exit barriers; operating margin of 5% - low industry growth rates - very focused on market share - M&A increasing; 200+ hospitals acquired/closed annually

background of indian healthcare

- in 2003, only 1% of GDP invested in healthcare - number of physicians per 1000 population was 0.5 (vs 2.7 in the US) - only 14% of population covered by health insurance - large demand for cardiac care - lack of rural care -- need for telemedicine, need to broader-based insurance coverage

disruptive innovation key takeaways

- innovative is the commercialization of ideas and inventions - different groups lead the technology adoption lifecycle: 1) innovators 2) early adopters 2.5) CHASM 3) early majority 4) late majority 5) laggards -- use a bowling pin to cross the CHASM; one profitable segment of pragmatists, wait for the tornado where everyone jumps aboard - industries (categories) often follow a predictable lifecycle with dramatically different economics and industry structure -- product, customer intimacy, operational excellence, category renewal - when innovating, companies can choose how much to focus on technology innovation vs business model innovation - disruptive innovation offers "less for less"

B2C

- integrative platforms built into e-commerce sites to accept payment to secure and expedite the sales process - in - store card processing machines for digital payments -- vantiv, stripe, bluesnap, square, first data

commercialization examples

- intel commanded premium pricing for their CPU at launch - in a similar way, US patents give the inventor exclusive rights for 20 years (utility) or 14 years (design) from the filing date - coca- cola & nutella's recipes remain trade secrets (more than 20+ years of value capture)

google

- long term focus in all business decisions - spend 20% of their time working on what they think will benefit Google will most -- empowers them to be more creative and innovative - decisions are made by 1/3 and they brief 2/3 later - dual class voting structure -- class A common stock = one vote per share; -- Class B common stock = 10 votes per share

C2C

- mobile driven apps to send sums of money between peers -- venmo, googlepay, square cash, snapcash (snapchat), case quickpay

KEY TAKEAWAYS: INTEL

- moore's law: gordon more accurately forecasted that computing power would approximately double every 24 month -- 50+ years; technology continually more powerful and cheaper - intel made two strategic inflection points -- abandoning DRAMS to higher value- added CPU chips -- restructuring industry dynamics by sole-sourcing x386 chips - intel captured value by proprietary standards (unlike IBM) - captured temporary monopoly profits with first-to-market, powerful Pentium chips; then rapidly cannibalized own market with new products (before competition could copy) - impressive 30+ year marketing campaign to pull demand (Intel Inside)

key takeaways: corporate strategy

- more than half of M&A transactions destroy shareholder value - competitive advantage is how to compete, while corporate strategy is where to compete - competition occurs at the business unit level - diversification adds costs and constraints to business units - shareholders can diversify themselves - tests of diversification: attractiveness, cost of entry, better off - to unlock value, there are 4 pre-requisities: portfolio management, restructuring, transferring skill, sharing activities - M&A takes many different forms -- acquisition, "carve out" a part of the business -- public, private ownership -- strategic buyer - someone who does the business -- financial buyer - someone who will sell again

corporate company wide strategy

- multiple industries/markets concurrently - what businesses to be in - how corporate should manage vertical integration (value chain) diversification (products, services) geography

KEY TAKEAWAYS NARAYANA

- natayana hrudayala has several ingredients for success: -- strong demand for low-priced services -- low(enough) cost structure to serve the market --- high utilization with spreads fixed cost over many cases --- economics of scale to exert leverage on suppliers --- valuable resources (highly skilled, productive surgeons etc) -- set of differentiated activities making it difficult for competition to imitate (ex: brand, telemedicine, insurance plan) - economics of scale exist across many dimensions -- financial and operational -- talent, clinical best practices (protocols), and insurance risk

KEY TAKEAWAYS NETWORK EFFECTS

- network effect occurs when a product or service becomes more valuable to its users, the more people use it - network effects increases the economic moat (barriers of the network) - Metcalfe's Law - network value is proportional to the square number of connected users - difference between a network, market, platform -- knowing the type of network, helps you ask the right questions -- yes, can be all three (FACEBOOK)

what is a network effect?

- network effect occurs when a product or service becomes more valuable to its users, the more people use it - benefits of network effects -- network effects create barriers to exit for existing users and barriers to entry for new companies (build moats) -- protect companies from competitors who eat away margin -- can help create or tip winner-take-all markets - network is a set of "nodes" -- homogenous (skype) vs heterogenous (open table) -- type of cluster (hub-spoke, clique) and # of connectoins -- bi-directional (facebook) and unidirectional (twitter) -- complementary networks (MS Office and Office 365)

cost of entry: common fails

- overpay for acquisition --> buyer's remorse - underestimating the cost to ramp up start-up

google was NOT first to pioneer search. how were they successful

- overture pioneered pay per click; yahoo buys overture - google adopts similar CPC model (bidding $ + ranking) - google becomes search engine for Yahoo in 2000 (unbranded) - google runs searches for AOL, myspace.com - google continues to innovate: Froogle, AdSense, Maps, etc - google is unafraid to acquire technology -- YouTube, Waze, Google Earth, Motorola Mobility, DeepMind *YAHOO FAMOUSLY MISSES THE OPPORTUNITY TO ACQUIRE GOOGLE IN 1997 FOR $1M*

continued

- physicians are increasingly giving up private practice; 75% will be employed by 2020 - increased consolidation by medical device, equipment, and pharmaceutical companies - free standing ED, urgent care - walgreens/CVS - telehealth; remote consult - US government pays for 2/3 of all healthcare - consolidation of insurers - increase in consumerism - healthcare exchanges - quality/outcomes ratings (healthgrades)

what is the challenge facing P&G now?

- price willing to pay is lower -- new entrance, lower prices - losing market share - not innovative enough for products - private label (Kroger, Publix)

As P&G grew, they actively managed their portfolios and drove more economics of scale

- product focused or category specific

pre-requisites: transferring skill

- proprietary skills, which can be transferred - beachhead for new market and opportunities

How Google search works

- searching google's index of the web, not actual web; spiders software program - how they pick = how many times search words are mentioned in website, etc - PageRank is important; half a second

the power of virtual integration - michael dell

- sell directly to customers and build products to order - direct business model - gave a substantial cost advantage - get to have relationship with the customer - technology is enabling coordination - adv of tightly coordinated supply chain that have traditionally come through vertical integration; also benefits from the focus and specialization that drive virtual corporations

pre-requisites: sharing activities

- share resources (economics of scale and scope) - overcome organizational resistance

cleveland clinic

- significant revenue from philanthropic giving - patients first goal, restucture care delivery

KEY TAKEAWAYS - DIGITAL PAYMENT

- start by thinking of the industry structure and value chain -- who are the players? what is their strategic position? -- who is providing value? who is making the money? - look for shifts in consumer behavior (think: disruptive innovation) - legacy industry structure (credit cards, processors) will influence the pace of technology adoption (think: crossing the chasm) - the value chain will shrink when middlemen stop providing value (Dell case) - corporate strategy is knowing WHERE TO COMPETE (alipay- paytm) - its difficult for incumbents to shift their business (chase Pay shifting to mobile wallets) bc of their existing resources, an customer base (think: danger of straddling)

why did intel shift from memory chips to microprocessors? how was intel an innovator in marketing? what was grove's leadership style? was it effective? did intel make any missteps in the past? how is the semiconductor industry changing?

- strategy of branding = semiconductor chip is a valuable feature - emotional leader: constructive confrontation, not afraid of the future, results- focused - interesting leadership dev and products mentality - market = focus to customers, B2B market, pull marketing - evolution of strategy

pre-requisites: portfolio management

- superior insight to identify winners; sell off losers - private company or underdeveloped markets

more stuff they order

- teleconsultations - mobile cardiac diagnostic lab - training the next generation - specialists --> higher supply of cardiologists was expected to drive the costs of care lower - insurance scheme - Yeshasvini - 1.7 million farmers and families

core competence on the Economist reading

- the collective learning in the org, esp how to coordinate diverse production skills and integrate multiple streams of technologies

to succeed they must

- treat the project as a separate unit - ask what job do customers need to get done - segment customers by job not by product, market size or demographic - develop low cost ways to get the job done *P&G came up with Crest white strips like this, do it yourself alternative - disruptive innovation creates new markets and reshapes existing ones

will C2C penetrate the B2C market?

- venmo limits commercial use (withdrawal limit) - venmo "purchases" run through PayPal with a limited # of vendors

vertical integration takeaways

- vertical integration; combining business at different production stages -- companies closer to the customer are downstream -- difficult to implement successfully; expensive and hard to reverse - virtual integration means you basically stitch together a business with partners that are treated as if they're inside the company - dell's business model was direct-to-consumer and make-to-order -- grew rapidly and flexibility through virtual integration -- free flow of information with suppliers and customers -- reduced asset risk: lower inventory levels and A/R -- optimized (minimized) number of strategic partners

pre-requisites: restructuring

- willingness to intervene (Brazil's 3G cost cutting) - willingness to sell units when complete

3 tests

1. attractiveness test, cost of entry and the better off test

att and time warner: do the combined businesses have more value together? four ways to add value

1. buy an asset on the cheap (portfolio management), but it requires being smarter than the market in pricing the asset 2. run the target company more effectively (restructurers) 3. you gain market power, so you to price higher 4. exploit synergies, combining assets to create more value

premises of corporate strategy

1. competition occurs at the business unit level 2. diversification inevitably adds costs and constraints to business units 3. shareholders can readily diversify themselves

disruption facts

1. disruption is a process 2. disruptors often build business models that are very different from those of incumbents 3. some disruptive innovations succeed; some dont 4. the mantra "disrupt or be disrupted" can misguide us. - when new tech arises, disruption theory can guide strategic choices; uber: outlier - smart disrupters improve their products and drive up market - incumbents too focused on existing customers and their needs

economics of scale

1. financial - creating financial scale and stability 2. operations - optimizing operations 3. talent - recruiting and integrating talent 4. clinical - improving care by reducing variation 5. population - developing an network of care

intel started both the

1. memory business and also the 2. microprocessor business

UNLOCK VALUE 4 THINGS

1. portfolio management 2. restructuring 3. transfer skill 4. share activities

concepts of corporate strategy

1. portfolio management 2. restructuring 3. transferring skills 4. sharing activities

How is the Cleveland clinic different from more traditional hospitals?

1. reorganizing into institutes 2. system integration (IT) 3. salaried compensation 4. focusing on outcome measurements 5. enhancing patient experience 6. employee wellness

3 hurdles

1. rising competition is dampening margins 2. tangled links with AliBaba --> doesnt own shares in ANT but is entitled to 37.5% of its profits 3. foreign government may not like Chinese firms having a big role in their financial systems - china's financial system is isolated from the rest of the world

each stage of the tech adoption life cycle is dominated by a different group

1. technology enthusiasts, (innovators) 2. early adopters (visionaries) CHASM 3. early majority (pragmatists) - more WTP 4. late majority (conservatives) - more substitutes 5. laggards - (skeptics)

five barriers to disruption from easiest to hardest to overcome

1. the momentum barrier (customers are used to the status quo) 2. the tech-implementation barrier (which could be overcome using existing tech) 3. ecosystem barrier (which would require a change in the business environment to overcome) 4. new- technologies barrier (the tech needed to change the competitive landscape doesnt yet exist) 5. the business model barrier (the disruptor would have to adopt your cost structure) the more difficult the barrier, or the more barriers a disruptor faces, the more likely it is that customers will remain from incumbents

discussion questions for innovation

1. what is the difference between sustaining innovation and disruptive innovation? 2. what are the misconceptions of disruptive innovation? 3. how can an incumbent guard against disruptive innovation?

P&G readings

1946 = tide, crest, disposable diaper; international business focus 2000- stock declined resulting in a loss of nearly $50 billion in market capitalization 2005- merged with Gillette

FOUNDER'S MENTALITY = DISNEY

2 by 2 matrix = passion, owner mindset benefits of scale: high and benefits of founder's mentality (low) = incumbents (top left) benefits of scale: low and benefits of founder's mentality low = struggling bureaucracies (bottom left) benefits of scale: high and benefits of founder's mentality high = great repeatable models (top right) benefits of scale: low and benefits of founder's mentality high = insurgents (bottom right)

corporate strategy

2 questions what businesses the corporation should be in AND how the corporate office should manage the array of business units; corporate whole add to more than the sum of its business unit parts on avg, corporations divested more than half their acquisitions in new industries and more than 60% of their acquisitions in entirely new fields

how does google manage innovation?

20% free time, culture

narayana NOW

23 hospitals, 7 heart centers, 19 primary care facilities - one of the largest telemedicine networks in the world - INNOVATION: real time data on 30 parameters to improve efficiency - listed on Bombay stock exchange (BSE) in 2016; $1B+ market cap - global - Bangladesh and Cayman Islands (plans to enter Africa) - 30+ specialities - could continue doing cardiac surgery as part of their strategy - higher utilization

what is adsense?

3rd party sites

HBS Scorecard

4 perspectives to measure company's health - financial perspective, customer, internal, learning and growth - list goals and metrics for each perspective - order matters

!! how intel created and claimed value

A) consumer surplus - intel inside and capacity rationing B) profit - 1st to market, price high, and then next generation C) cost - 1st to full volume, learn and increase yields

semiconductor industry provide temporary monopoly profits with new products

A. Intel commands premium pricing at product launch B. when competition joins, then the prices start to fall C. intel launches next generation of product look at chart !!!!!!!

At&T, time warner and what makes vertical mergers succeed

ATT bought time warner - vertical mergers live or die by a single question: do combined businesses have more value than each one does separately? - if you're the acquirer, you can benefit only one of four ways: - buy an asset on the cheap, but it requires being smarter than the market in pricing the asset - run the target company more effectively, but it requires being a better parent than current management - you gain market power, allowing you to price the asset higher than you could otherwise - extract and exploit synergy, combining assets to create more value than would otherwise be possible - ATT and time warner = fourth - gaining access to great content - buying content cheaply or using it to differentiate - rejuvenating the core - creating more value

corporate strategy

CEOs obsessed but no consensus on what it is and how a company should formulate it

AdWords: Understanding CPC & CPM

CPM = cost per 1000 impressions; price they're willing to pay to serve 1000 impressions of their ad - pay $2 for every 1000 times the ad appears to a user - AdSense Reports = RPM = revenue per 1000 imressions

CPM vs. CPC vs. CPE

CPM = impression based bids from advertisers CPC = cost per click; advertiser pays when ad is clicked CPE = cost per engagement = user interacts with ad in a particular way (video and rich media) Active View CPM = 1000 viewable impressions and only pay for viewable impressions

who coined the term "disruptive innovation"

Clayton Christensen's innovator's dilemma HBS professors defined disruptive innovation: - low cost solution for the lower-end customers that incumbents are over-looking - initially, performance is inferior, but rate of improvement is faster than incumbents - less for less examples: - south korean car manufacturers - coursera, udacity, EdX (massively open online courses), MOOCS

benefits of vertical integration

Control access to inputs (and to control the cost, quality and delivery times of those inputs) - oil industry - Shell and BP came to control every step involved in bringing a drop of oil from its north sea or alaskan origins to a vehicle's fuel tank - vertical integration is a difficult strategy for companies to implement successfully. it is often expensive and hard to reverse (THREAT)

Business Unit (Competitive) Strategy

HOW to compete

IBM example

IBM was able to navigate the transition from mainframe to mini to personal computers mainframe computers - selling $1M x 100s - 80% gross margins mini computers - selling $200K x 1000s - 40% gross margins - 4 years to design personal computers - selling $2K x millions - 25% gross margins - 2 years to design how well are they transitioning from hardware to services?

conglomerate integration

Integration between businesses in totally different markets, diversification

what can we do to prevent companies from losing scale?

LOOK AT PPT

why are semiconductors important?

MOORE's LAW - in 1965, gordon moore noticed that the number of transistors per square inch on integrated circuits had doubled every 2 years. -- doubles in speed and lowers cost - this has continued for 50+ years - will likely meet its economic limit first -- new semiconductor "fab" cost $6B -- technically possible, but too expensive -- distributed computing means desktop speed is less important

Metcalfe's Law

Network value is proportional to the square number of connected users peer to peer --> facebook

india's top payment app has eyes on US market

PayTM

WeWork's strategically valuable resources? What are the key questions facing company? What's your point of view? Any new info? Opinion changed

SOS physical space and community matters vision is to control the future of physical space get ahead of the curve, convincing large companies to outsource, their real estate needs

who is the world's most advanced chipmaker

TSMC - taiwan semiconductor manufacturing company

how do you cross the chasm?

Use a bowling pin approach. Try to gain 40% of many niche markets. Wait for the tornado once you cross chasm segmentation

CORPORATE STRATEGY: WHERE OR HOW?

WHERE TO COMPETE

naranyana hospital is the ___ of healthcare

Wal-Martization of healthcare new tech to reduce costs, digital x-rays, negotiate supply prices bc Indian prices are flexible - increase hospital efficiency, overall costs lower

which two companies have the same business model

Walmart and K-Mart

Who does Google compete against? isnt their business more than search?

Yahoo, MSN, Amazon, Ebay, Apple, Microsoft, Dropbox, everyone

coca cola supply chain example

a = concentrate producers b = bottlers c = retail channels

sustainability factors

a core competence is more likely to provide a sustainable competitive advantage if the underlying source is.... SCARCE, RELEVANT, DURABLE

what is a business model?

a description of how a business runs: - customer value proposition - profit formula - resources - processes

why is it difficult to re-invent business models? why is it rare?

a few ways to think about this: - southwest vs straddlers - innovator's dilemma - red vs blue ocean *incumbents are comparing the marginal cost vs the full cost of creating something new" CChristensen

network

a group of interconnected people (social network) or system of things (telephones, printers, computers)

platform

a network of users and developers; the multi-sided feedback loop between those users, developers and the platform itself creates a flywheel effect, increasing value for each group - a platform that can be programmed, customized, and extended by outside users - often meets the needs and creates niches not defined by its original developers at the outset

core competency

a resource or capability that serves as a source of a firm's competitive advantage over its rivals

restructuring

a viable and historically profitable way to unlock hidden value private equity = buys companies make it better over 5-6 years, sell it off, higher multiples

portfolio management

a. diversification through acquisition, passive role b. create value through a company's relationship with each autonomous unit

transferring skills

a. exploit the interrelationships between businesses b. value chain -- value activities -- nine categories c. value chain defines the two types of interrelationships that may create synergy d. transferring skills leads to competitive advantage only if the similarities among businesses meet three conditions

restructuring

a. seeks out undeveloped, sick, or threatened organizations or industries on the threshold of significant change b. result is a strengthened company or a transformed industry c. the best companies realize they are not just acquiring companies but restructuring an industry. unless they can integrate the acquisitions to create a whole new strategic position, they are just portfolio managers in disguise. d. create value through a company's relationship with each autonomous unit

sharing activities

a. sharing enhances competitive advantage by lowering cost or raising differentiation; can reduce cost of differentiation b. costs: greater coordination required to manage a shared activity c. marriott example d. horizontal mechanisms are vital

is uber a disruptive innovation?

according to theory, no; here's why 1. disruptive innovations originate in low-end or new market footholds -- disruptions start by appealing to low end or unserved consumers and then migrate to the mainstream market 2. disruptive innovations dont catch on with mainstream customers until quality catches up to their standards

what is TSMC? core competencies?

adaptable, privacy, make them cheaper to make than the company itself can - *makes chips for other people* - TSMC is a contract manufacturer; also called a "foundry" -- unlike Intel, which makes their own chips - ability to invest in latest technology, processes (experience curve) -- latest fab will be $20billion - very successful; 56% of the contract manufacturing market -- market capitalization now exceeds Intel

organizational design

aka restructuring HAPPENS ALL THE TIME

google's parent company

alphabet

ANT financial and Tencent are crushing it

ant financial currently has 622M+ (2018) users -- ant financial has 51% share of market, 16x larger than PayPal alibaba is parent, ant is baby ant financial acquisition of Moneygram was blocked by US govt

financial perspective of balanced scorecard

are you doing well by your shareholders?

virtual integration means you

basically stitch together a business with partners that are treated as if they're inside the company

laggards (skeptics) ...

begrudgingly adopt technology when they are given no choice - about 1/6 of the total market - believes that technology often fails to deliver on promises - rarely is a profitable segment - can be a negative influence to other buyers - often a missed opportunity for companies to find out "what does not work"

VIRTUAL INTEGRATION PROVIDES

benefits of tightly coordinated supply chain + flexibility - not actually merging, but partnering together

example of portfolio management berkshire hathaway reliance

berkshire hathaway - buying company and letting them do what they want emerging markets

paranoid survivor - Andrew Grove

brain scan - world's leading chipmaker, market capitalization rocketed - intel inside campaign - Intel became a consumer brand - 8am mornings, tighten up quality control

Disruptive innovation is NOT a

breakthrough innovation

early majority (pragmatists) are the

bulk of volume for any technology product - constitute about 1/3 of the total market - they look for continuous improvement (measureable, predictable) -- evolution, not revolution (like the innovators or early adopters) -- look for references from within their own industry - risk averse and prudent: -- "pioneers are the people with arrows in their backs" -- "dont want to be bleeding edge" - focused on the quality of their vendors, want post -sales support -- prefer buying from the market leader - requires significant patience to market and win their business -- hard to win over, but very loyal once committed

two different strategies:

business unit and corporate strategy

learning and growth perspective of balanced scorecard

can you continue to improve and create value

internal perspective of balanced scorecard

can you efficiently deliver what your customers want

google ppt

cannot overstate the return on equity Google has had over the last 10+ years - $1,194 on 4/1 - google has a market capitalization of $851B

why did dell's business model allow them to evolve faster?

capital: suppliers build factories and capabilities headcount: fewer number of employees how is this different from straight outsourcing? - quality: set service level agreements (SLA) - information: build data linkages - free flow of info - purchase agreements: ex: 25% of Dell's next year production - partners: optimize (fewer the better) the # of partners

key challenge in virtual integration

charging the focus from how much inventory there is to how fast its moving

other stuff

chasepay is hard 1. competitors have moved quickly while potential customers have moved slowly QR codes are becoming more popular moving away from cash payments reduces costs, discourages informal economy and increases the tax base

no contest: when it comes to mobile payments,

china dwarfs the US

rise of digital payments

china's digital payments giant keeps bank chiefs up at night - ANT FINANCIAL - a payments company affiliated with AliBaba, one of China's two giant internet firms; ANT is popular in China - world's most valuable fin tech firm worth $60 billion - deal signed to install in millions of American retail outlets - ANT accounts for a quarter of its revenues --> gives ANT a huge scale at home; 16% times larger than PayPal

Optimizing AdSense

clickthrough rate (CTR) = clicks/impressions, views or queries x 100% - key component to revenue: # of impressions = counted each time an individual ad is shown on your site

what enables TSMC to survive against Intel, Samsung?

close to customer, good specifications

innovation is the

commercialization of ideas and inventions

corporate

company wide strategy

premise #1 v imp

competition occurs at the business level; diversified companies do not compete individual business units compete not cologomrates

business unit strategy

competitive

why does it make sense to organize by category not brand?

complementary products to not cannibalize your own sales 1950s - product focused - brand manager --> hierarchy 1980s - category management - brand manager --> category --> hierarchy 1990s - global matrix - brand manager --> category --> global category --> hierarchy 2005 - 3 equally important independent units --> product, market, shared services --> no major hierarchy

hospital industry is

complex, heavily regulated, and has many groups competing for their profits porter's 5 forces - rivalry - high threat of entry - low supplier power - medium buyer power - high threat of substitutes - medium government - high

late majority aka

conservatives

core competency

core competency is the root in the trees the tree barks are the core products the branches are the business units the green part in the tree is the end product

cost of entry test

cost of entry must not capitalize all the future profits

operations attempted to drive unit costs lower through a high level of capacity utilization and productivity

costs

what is WeWork? what industry do they compete in? who are their customers? how would you describe their cost structure? what is their strategy?

coworking community real estate renting business startup who dont have cultures set up yet making revenues not profits measuring success by estimating space they need to buy light assets

the immediate need for innovation is to

create more value and higher willingness to pay differentiation or cost advantages increases economic surplus - want to create more value

china digital payment

creating different ecosystems

examples of VI

dell computers = combined traditional vertical integration of the supply chain with the special characteristics of the virtual organization to create something that he called virtual integration; Dell assembles computers from other firms' parts, but it has relationships with those firms that are more binding than the traditional links between buyer and supplier - expensive and hard to reverse

sustainable competitive advantage: scarce

difficult and/or costly to obtain difficult to imitate

Dell's Business Model

direct-to-consumer for make-to-order (MTO) products - michael dell began in 1984 with a simple business insight: he could bypass the dealer channel through which PC were then being sold. instead, he would directly sell to customers and build products to order... Dell eliminated the reseller's markup and the costs and risks associated with carrying large inventories of finished goods. - "you actually get to have a relationship with the customer", he explains. and that creates valuable info, which, in turn, allows us to leverage our relationships with both suppliers and customers - couple that information with technology and you have the infrastructure to revolutionize the fundamental business models of major global companies

four frameworks to keep in mind when thinking about innovation

disruptive innovation business model innovation technology adoption innovation industry lifecycle

premise #2 v imp

diversification inevitably adds costs and constraints to business units -- one company discovered that a weekly executive meeting was consuming 300,000 hours of time annually because of the trickle down effect. -- 1 weekly meeting took up 7,000 hours (headcount x hours x week) -- however, that forced 11 unit meetings (20k hours), forced 21 team meetings (63k hours) and forced 130 preparatory meetings (210k hours) in a chain reaction

customer perspective of balanced scorecard

do they like your products and services?

sustainable competitive advantage: durable

does not depreciate rapidly can innovation/technology devalue this resource or capability? doesn't that sound like RBV?

relying on only lagging indicators is like

driving while looking in the rearview mirror

crossing the chasm

early adopters to the majority

single player mode helps with

early adoption (at least its useful); but its also good to have a "multi-player" hack to get adoption

the better off test

either the new unit must gain competitive advantage from its link with the corporation or vice versa

lifecycle timeline

embryonic --> growth --> shakeout --> mature --> decline

who does google compete against?

everyone

commander's intent

everyone needs to know what success looks like -- strategy is useless without implementation -- remember, "the enemy gets a vote" -- this allows flexibility, creativity, and Honda B entrepreneurship

if moore's law applied to cars, space, and air travel

everything would be super fast

4 components of balanced scorecard

financial (shareholder) - lagging indicators customers - satisfaction internal (operational) - new merchants, attrition rate learning and growth

5 stages of economics of scale in healthcare -

financial and operational

5 stages of economics of scale

financial, operations, talent, clinical, population

test to determine whether something is a core competence

first, a core competence provides potential access to a wide variety of markets second, a core competence makes a significant contribution to the perceived customer benefits of the end product third, a core competence is difficult for competitors to imitate bc it is a complex harmonization of individual technologies and production skills

what is a core competency?

for companies with multiple business units or product lines: - core competencies: *root system* that provides nourishment, stability -- what organization knows: *coordinating production and technology* - what your company *does better than everyone* -- access to a *wide variety of markets* -- benefits the product as *perceived by the customer* -- *difficult for the competitors* to match - bind existing businesses together and helps capture new opportunities -- prevents you from taking disastrous outsourcing decisions -- *knowledge fades* when it is not used - more than just the sum of your existing products

cleveland clinic history

founded for care with cooperation, compassion and innovation - annual professional reviews for every physician - new units called institutes 2013, cosgrove set out to reduce costs by $1.5 billion over the next 5 years to address cost pressures and adapt to declining reimbursements by both public and private payers

example of corporate strategy

general electric competes in multiple industries -- to varying degrees -- globally where to compete - healthcare, aviation, transportation, multi-model

P&G corporate structure

global business units, selling and market operations, global business services and corporate functions; portfolio is organized around 10 category - based global business units

Narayana Heart Hospital means

god's compassionate home in sanskrit; equally divided into 4 quadrants; each a place of prayer and meditation for 4 religious faiths

decision-driven organization

good financial performance comes from effective decision-making -- not from organizational structure (over-simplified view) when reorganizing, focus on decisions rather than structure -- different types: big one-off vs. small routine decisions -- placing decisions in the right place (corporate vs business unit) -- what level does the decision need to take place? (VP vs. Dir) -- reduce the number of decision bottlenecks -- align goals, processes, information, measures, and incentives -- train people... (of course) ask "what are the key decisions to execute the strategy" and then reorganize around these decisions

dont be evil mentality -

google tries to maintain and claims objectivity in its search results user experience matters most, and if it happens then a bond of trust will form. we maintain a church/state wall between the information a google search provides and advertising

benefits of vertical integration

greater capacity it gives organizations to control, access to inputs (and to control the cost, quality, and delivery times of those inputs) ex: oil industry in the 1970s and 80s

slow growth often means

headcount reductions

the US has a complex system with both public and private

healthcare providers and payers

what is the most common illness in India

heart disease

andy grove - the man who put intel inside

heart of the computer revolution - organization builder and manager rather than an innovator "creative confrontation" - intel's switch from memory chips to microprocessors

is it profitable? semiconductors

high barriers to entry, super profitable

cleveland clinic more

high quality, low cost - innovation is the only long term solution to high quality affordable healthcare clinic aims to improve healthcare system, cost -- not good at keeping people well over the long haul

anomaly in disruptive innovation

higher education industries that have resisted the forces of disruption at least until very recently

competitive strategy

how to create competitive advantage in each of the businesses in which a company competes

with the 386 chip, intel stopped licensing and became the sole source of manufacturing strategic inflection point #2

idk

once innovation starts creating value --

imitators quickly follow innovation = commercialization

china's payment industry is $11T, expected to be $40T+ by 2021

in china, there are some tailwinds for mobile payments -- many retailers lack the point of sale (POS) machines -- many consumers dont have credit and debit cards -- alipay and tenpay directly access the bank, unlike the US, which go through a payments processor (Visa, MC) -- supportive ecosystem Utilities require digital payments alibaba (alipay) launched with a large captive audience of buyers and sellers who use AliBaba -- money market fund has $166B (2017) with $5B in loans Tencent's WeChat "never-have-to-leave" environment

surviving disruption reading

in order to assess an innovation and whether a missile will hit you, graze or pass you: 1. identify the strengths of your disruptor's business model 2. identify your own relative advantages 3. evaluate the conditions that would help or hinder the disruptor from co-oping your current advantages in the future

bed utilization

increasing?

is google search a winner-take-all category? why?

india at 94%, US, japan, south korea, russia, china

healthcare facts in general

inelastic demand, WTP is high, everyone needs it

inventions are not

innovation

Technology Enthusiasts aka

innovators

intel vs TSMC

intel - integrated device manufacturer; designs and manufacturers chips foundry, making chips for designers without factories - nodes - high switching costs may not be a product of technological complexity alone - moore's law is running out of steam

What change in industry structure served as a catalyst for Intel to become the CPU leader?

intel invented the microprocessor, but were late bringing to market - apple II, based on motorola processor was the first breakthrough - then IBM entered the market in 1981, they adopted open standards -- the PC industry structure shifted from A (vertical) to B (horizontal)

few examples of health systems which are competing differently

kaiser - physician groups, hospitals, nursing home, hospice, ambulatory and speciality care - controlling the ENTIRE VALUE CHAIN MD Anderson Cancer Center - cancer types and clinical trials - #1 ranking in cancer care - DOING ONE THING VERY WELL

sustainable competitive advantage: relevant

key driver of industry profitability

AdWords

keywords that advertisers choose to pay for and appear as sponsored links on the Google results pages - online advertising platform to drive interested people to websites - enter words that are relevant to your ad - helps businesses grow, when and where you want ads to show - go mobile with AdWords; you pay when someone clicks on ad and visits website

What are the characteristics of semiconductor manufacturing?

large facilities requiring lots of fixed costs -- processing and automation equipment -- factories ("fabs") maintain ultra- pure clean rooms complex manufacturing process has high marginal costs too -- hundreds of process steps -- long production time of 4+ weeks

semiconductor manufacturing is a

large industry dominated by US, Korea, Taiwan (intel, samsung, TSMC) make up almost 50% of sales

portfolio management is

less compelling proposition because of cheap $, free markets the idea that corporations acquire sound businesses and let them run autonomously seems less relevant than in the past -- unprecendented 20+ years of inexpensive capital -- free- flow of information and managerial talent -- large pool venture capital, and private equity investors

like most things, industries have a

lifecycle which moves from growth to maturity to decline - industries (categories) often follow a predictable lifecycle with dramatically different economics and industry structure

balanced scorecards should link strategy (tops down) with operational reality (bottom up)

liked to strategy (tops down) actionable (bottom up) has cause- effect linkages -- outcomes which reflect customers' values -- segmented by customer group -- sorted by internal processes -- identified key skills, information, actions needed by all employees strategy --> outcomes <-- value, customer segments, internal process, skills and information

there are multiple types of innovation which occur at different times of the industry lifecycle

look at chart on page 15 starts with product innovation in the first stages then customer intimacy innovation in the growth and shakeout stages then operational excellence innovation in the shakeout to mature stages then category renewal innovation in the mature/decline stages

the US payments infrastructure has multiple middlemen (payment processes, credit cards)

lots of legacy infrastructure and incumbents -- payment processors, card issuers, banks, credit card companies, etc US consumers are used to offline (19b checks/year) some changes expected with the convergence of: -- device (samsung, apple) -- tech firms (alibaba, google) -- startups (venmo, square) -- retailers (starbs, walmart)

what are the biggest threats to google?

machine intelligence, big data disruption - personal genetics

Sundar -

machine learning and AI focus

what is a balanced scorecard?

management tool that converts mission and vision statement into a comprehensive set of financial and operational metrics TAKEAWAY: MORE THAN JUST FINANCIAL

P&G has a great history

many distinguishing characteristics: - first profit sharing program - paying dividends continually since 1890 - first centralized R&D labs - first market research department - invented the soap opera in 1933: Guiding Light Largely R&D led company - Ivory invented by Gamble's son in 1897 - Tide (secret project) created against Brand Management wishes

adsense serves as a

matchmaker between advertisers and web destinations

vertical integration readings what is VI:

merging together of two businesses that are at different stages of production - ex: a food manufacturer and a chain of supermarkets

Disney Hulu Netflix

netflix spent every day focused on winning subscribers while Hulu focused on generating revenue for its owners

market

network where money/transactions flow between two+ sides of distinct (heterogenous) groups; supply and demand meet

network vs market vs platform

next flashcard

att and time warner: get market power

no one believes in the potential for market power here; that applies to horizontal mergers, not vertical ones

att and time warner: buy cheap

no one thinks time warner was a bargain, not at roughly 35% above its trading price

att and time warner: run better

no one, including AT&T itself, argues that the company can better manage Time Warner's assets

intel readings

not good enough? - booming market for cheap PCs took Intel by surprise. so did the convergence of computers and consumer electronics - missed two inflection points - critical changes in the computer industry - entire business model = based on the premise of building even faster and more powerful microprocessors - frustration = tardiness of the telephone companies in bringing into homes and small businesses the fat bandwidth that video and graphics rich websites require

hybrid strategy

of attracting paying patients by virtue of its reputation for high quality combined with a relentless focus on lowering its costs of operations - lowest charges in the country - financially constrained patients pay less

what is strategy and how do these concepts apply to the intel case?

operational effectiveness is not strategy - processes, methods, techniques, etc are easily replicated - strategy means different activities or performing similar activities differently. systemic "fit" makes difficult to copy - long run sustainable advantages entail trade-offs -- the more difficult it is for a rival to make those trade-offs, the greater the sustainability of advantage

how is P&G currently organized?

organizational structure is comprised of global business units, selling and market operations, global business services and shared service and corporate functions. it combines global scale benefits with a local focus on consumers and retail customers in each country where P&G products are sold.

KEY TAKEAWAYS GOOGLE

organize user's information - google pioneered an effective way to index the web: PageRank - they experiment (planned emergence strategy) to discover what works; using its size and balance sheet to pa for discoveries -- some products are failures (social network orkut) - what is google's ambitions? who do they compete against? -- google's core (current) business is search, and their ability to provide highly-targeted ads through AdWords and AdSense - how does Google manage their innovation? -- they report that half of new products come from the 20% rule -- long history of acquisitions (YouTube, Waze) - what are the greatest threats to google?

what is google's corporate strategy?

organizing user's information

what do payment processors do?

payment processors approve and settle all digital payments with the issuing credit card company/bank - entire cycle happens in a matter of seconds/minutes - processors make fees and/or sale commission the following is for a debit card transaction --> lululemon - first data - visa - wells fargo

what is google's core competency? (resources + capabilities)

people, data, search engine, products and services, matchmaker, ecosystem

P&G continues to simplify (2016)

portfolio transformation around 170 brands to around 65 brands

early majority aka

pragmatists

new CEOs guide to transformation 4 primary levers can help fund the journey

primary levers - revenue, organizational simplicity, capital efficiency, cost reduction LOOK at PACKET

who has the most influence? product, function or geography

product - changed org design to match the economy - product based structure then 4 people reporting under each category

what are the innovations in the cell phone industry in the following areas?

product innovation, customer intimacy innovation, operational excellence innovation, category renewal innovation

WeWork issues and recommendations

profitability, saturation, cost, growth recs: slowdown (already a blue ocean), focus on control and customization of spaces - cant double every year and maintain quality CEO - attracting capital, can predict trends

major component of Dr. Shetty's ambition is to

provide cardiac care to the rural poor

4 attributes of decision-making

quality speed of decisions yield effort

disney fax

really good at creating content core products = characters 3 tests for diversification

what are intel's resources and capabilities that create its core competencies?

resources - tangible or intangible -- location, human capital, patents, experience, tech/equipment, reputation, working capital, loyal customers capabilities - ability to utilize assets profitably -- sales and marketing, HR management, legal acumen, culture, new product design, financial engineering, brand management, forecasting *VALUE DEPENDS ON RARITY AND COSTS OF IMITATION*

most hospitals do not have sufficient economics of scale

revenues are falling - reimbursements falling - volumes are falling - doing the same things costs are increasing - high fixed cost (physicians, buildings, capital equipment) - increasing IT costs same set of activities, no trade offs, undifferentiated

what is google's main business? what is their business model?

search engine two: AdWords and AdSense - ads

what are adwords?

search, bidding on words A Vickrey auction is a type of sealed-bid auction. Bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins but the price paid is the second-highest bid. highest bidder pays one cent higher than second to highest bidder

bullwhip effect- semiconductors

semiconductor sales are very cyclical. what are the root causes of this cyclicality?

Strategic Final - starting from session 14

Kaugnay na mga set ng pag-aaral

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Chapter 10 (Math Foundations)- Arithmetic and Number Properties

Chapter 8

Audit Exam #3

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DWP 10 - Quiz

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ch 8

CM METABOLIC DISORDERS

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