oam quiz 3
product innovation decreases as process innovation
increases (inverse graphs) -Less new products are going to be developed over time and the process innovation is improved -product innovation high -> early days new (experimentation, markets growing) -standard gets set then it gets distinguished **• While product innovation is more important at the introduction stage, process innovation is key when trying to transition from growth to maturity. (JB) two ways to stand out: -customer experience (customer have higher expectation) -cost•
**NOT NEEDED benefit of scale (high, low) benefit of founder's mentality incumbents insurgents great repeatable model struggling bureaucratic
incumbents: High benefit of scale, low founders mentality insurgents: higher benefit of scale, high founders mentality great repeatable model: high for both struggling bureaucratic: low for both
disruptions often trigger an
industry shakeout (has profound industry effects) -often top players survive and come through stronger, weak players fail or consolidated away
industries (categories) often follow a predictive lifestyle with dramatically different economies and
industry structure **understand early days of the industry is going to look very different from the later days of industry -the same industry can be at diff levels of maturity depending on where you are in the world (Ex: internet in Korea good vs. Internet in Atlanta) -> intro -> growth -> shakeout -> maturity -> decline *variation in how quickly an industry moves through life cycle
_______ are the first to adopt; love tech for its own sake
innovators -first to appreciate the architecture of your product -spend hours trying to get the product to work -don't mind there's less documentation -pose fewer requirements than other groups -they want the truth, access to the most technological adept person, the newest stuff and they want it cheap -worth listening to them, great sounding group -they are like kindling when making fire
founders have a hunger and entrepreneurial spirit that is both awesome and helpful. why
it allows them to fight and win against incumbents
during growth, a rising tide (not just one person everyon's doing well) lifts all boats, and everyone
jumps at the opportunity -initial success and market expands -strong demand = attracts lots of firms -prices start to fall (more production, economies of scale, learning curve = learn by doing, experience curve process innovation) -standards emerge = common set of engineering features and design choices (focus switches to continuous improvement, six sigma/lean operation, just-in-time manufacturing)
**Disruptive innovation =
less for less Disruptive innovation: attacking the low-end of the market, with a lesser product
lyft uses alliance with GM and alphabet/waymo to give it leverage ride sharing still
loses money Lyft alliance with GM and Waymo helpful in short-term but didn't create long term sustainable advantage
as the industry matures, growth slows and the basis of competition is
low cost, low price, and market share -demand slows, competitors start fighting for market share (red ocean) -cost leadership becomes important (firms start cutting prices, inefficient firms fail) -mergers and acquisitions increase (greater economies of scale) **price becomes an important competitive weapon -growth slowly, inefficient companies get knocked out!
what are benefits of alliances
more flexibility, more access, less cost You don't know if this is something you want to bet on (you're not sure) Reap benefits in industry without all the downside risks Take out competition
what are multi-divisional organization structures and examples
multiple separate CEOs of each business -both Alphabet and berkshire hathaway are multi-divisional structures
invention
new product, processes, or recombination -provides temporary monopoly for 20 years -required full disclosure of underlying technology and know-how -some companies would rather NOT file for a patent, keep it a trade secret (coca cola formula, google pagerank algorithm)
• When a [industry] matures, an ___________ usually emerges (YZ)
oligopoly
when markets emerge, an _____ often emerges (the rule of three)
oligopoly -saturated market; demand is flat/negative (sales are repeat or replacement) -the industry is consolidated (oligopoly) -market share of top 5 companies -either be one of the big three but don't be stuck in the middle
• Industry life cycle is speeding up partially because of
online-first, mobile-first, digital-first approach. (FA) -• One company can have multiple subsidiaries that are diversified into multiple stages of the industry lifecycle. Therefore a part of strategy is navigating and being able to organize the resources and capabilities in a way that can navigate the changes with in all those cycles (BL)
at the beginning (intro), entrepreneurs want to create a
product-market fit (selling something and getting money for it) -solving a useful problem (demand) -focus on R&D (designing new products) -pilot, prototypes, lots of interaction -small quantities, high cost, high price -first mover disadvantages!!! (3) -focus is on getting a minimally viable product and proof of concept -market acceptance = selling it to someone
how to show scardy cats it's not scary (technology adoption life cycle)
show laggards how early adopters did it and did it well (social proof and fomo)
determining whether to buy, borrow, build is a
strategic decision -do we have the resources, capabilities, and guts to do it ourselves? -can we collaborate with others. (strategic alliance) and get it done? -or do we really need to own this (M&A)?
alliances appear to have many benefits
strengthen position, entering new markets, getting a call option on a promising technology, complementing our capabilities most common form (non-equity alliance -> supplier agreement, licensing)
_____ is the most obvious element of an organizational design
structure -level of specialization, formalization, centralization, and hierarchy
early majority (pragmatists) are the bulk of volume of any
technology product -constitute about 1/3 of the total market -look for continuous improvement (measurable, predictable) -> evolution, not revolution (like the innovators or early adopters) -> look for references within their own industry -risk averse and prudent: -> pioneers are people with arrows in their backs -> don't want to be bleeding edge -focused on the quality of their vendors, want post-sales support -> prefer buying from market leader -requires significant patience to market to win their business -> hard to win over, but very loyal once committed
Great strategies will often fail if (CB)
the firm's organizational structure is not well-suited (or adaptable) to the firm's strategic plan for growth.
first mover - not first one has the advantage but...
the first to scale has the advantage (let other people educate the market)
**Less for less (disruptive innovation)
the incumbents made their products too fancy; overshooting the market Ex: apple mac expensive, chrome books a third of price used in classes (schools chromebooks) A large part of the market doesn't want it to be that fancy Disruptors start at the low-end, but move their way up; process takes many years Incumbents "miss the opportunity" because they are "too busy being successful" -businesses don't like to canabalize their own businesses
how do you make money in late majority and laggards (4, 5)
they're not going to pay retail price, economies of scale, use low cost structure ex: maybe subscription service
use "bowling pin" approach for 1 profitable segment of pragmatists, wait for
tornado -why bowling pin? pin knocks one pin then knocks all the pins down **t/f to cross chasm you need to find as big of a market as possible to get some customers (FALSE because too much noise out there - focus small, niche)
organizational culture is made of values and norms
values = what's considered important norms = appropriate employee attitudes and behaviors in day-to-day interactions Organizations can't rely solely on strategy because culture can determine whether strategies succeed or fail. (OG)
-partner selection
what is the purpose of the alliance? does the targeted partner also want an alliance? which companies have a cultural fit?
centralization
who makes the decisions? -how centralized should the decision making be BP was slow to react to oil spill (over-centralized) -CIA did not adequately anticipate 9/11 attacks
the chasm is signified by what
wide competitive gulf - the significant differences in attitude toward technology from early adopters to early majority **without adequate demand from early adopters most products wither away ex: car (high cost early adopters, need lower cost for early majority)
strategy = make choices, firms must decide if they want to compete
with differentiation or cost leadership -scope, positioning **you can't be all things to all people need to decide what things do you want to be great at? -companies want to do it all in growth because things are going awesome!
Related to M&A and alliances, we discuss the pros of both in class. Would M&A have the same cons as strategic alliances?
yes
As the industry approaches the maturity stage,
• As the industry approaches the maturity stage, price becomes a more important factor in order to stay competitive in the market . (JK) • Majority of consumers lie in the early majority and late majority categories [#3 and #4 groups]. (BA)
Pros and cons of first mover
• Being the first mover gives you a lot of advantages, but you need to have a clear strategy and know the risks you are assuming, in order to be successful (SC) • Being a first-mover is not always an advantage as they experience higher R&D costs, uncertain demand, and risk of imitation. (DH) • [first-mover advantages/disadvantages] "you don't want to be the first mover, you want to be the first to SCALE" (RK) • being the first to scale lets others do the "grunt work" of a first mover while achieving many of the other advantages. (LM) • Better to be first to scale than first mover (think Apple not inventing Siri but scaling it). (EC)
• Early Majority group has _________ compared to other life cycle customer groups. (AR)
• Early Majority group has FOMO compared to other life cycle customer groups. (AR)
Early adopters are
• Early adopters are visionaries who are the first people to invest in tech enthusiasts (MS)
In a B2B setting, we have to be very careful about adopting new technologies because
• In a B2B setting, we have to be very careful about adopting new technologies because we are often dealing with a big customer base and their information/needs (technology adoption cycle) (AH)
• In order to cross the chasm you must find a niche to target a small customer segment and then hope
• In order to cross the chasm you must find a niche to target a small customer segment and then hope that your customer segment grows through word of mouth. (JF) • Crossing the chasm, while being a huge challenge, shoots firms into a new stratosphere of success and recognition. (IR) • While crossing the chasm is a major issue with bringing your idea/innovation to the broader market, you need to think creatively to innovate your cost structure in order to compete in late stage (for late majority and laggards). (BM) • The optimal way to build network effects and gain a sustainable competitive advantage is to create a niche and serve that demographic extremely well. (BC)
• Innovation is the commercialization of ideas;
• Innovation is the commercialization of ideas; innovating companies should begin by focusing on smaller, niche markets. (PC) • When a [industry] matures, an oligopoly usually emerges (YZ)
The stages of the technology adoption life cycle can show the different
• The stages of the technology adoption life cycle can show the different risk tolerances that people have (willing to experiment or not) (LO) • The most amount of profit occurs during the early [majority] stage of the technology life cycle. [ this is group #3, after the CHASM] (JE)
While product innovation is more important at the introduction stage, ___________ is key when trying to transition from growth to maturity. (JB)
• While product innovation is more important at the introduction stage, process innovation is key when trying to transition from growth to maturity. (JB)
corporate (company-wide) strategy answers the question...
"where to compete" *distinguish between vertical integration and diversification -vertical integration (doing more of one industry: value chain) How much is the firm doing internally. Ex: most auto makers handle 3 of the 6 high-level steps --->Tesla is very vertically-integrated; they make their battery packs, electric motors, sell directly to customers. Now they are refining lithium -diversification (multiple industries doing different stuff: products, services) -geography
growth paradox
(growth creates complexity and complexity kills growth)
how does digital-first, online-first, mobile-first innovation differ in the beginning (pros and cons)
***you want to have network effects Pros: No physical space, easier to distribute and expand (scalability high - grow) Startup cost lower The feedback cycle is a lot faster (adults learn a lot faster from reflection - customer feedback faster is better ex. Oam reflection feedback) Distribution is close to free Downside: fewer touch-points, easier to start startup cost low (hard to break through the noise and accepted - hard people finding it), a lot of apps fail/competition -hard to build a moat if it's easier to start up (difficult to make an unfair advantage in your favor)
**good organizational design has some
**good organizational design has some constructive tension **two different function how can they fight and different ideas help finance fold and be more thoughtful (agreeing ISNT THE GOAL) Why might sales/marketing disagree why might be good thing Sales wants to sell Marketing have segmentation and plan
potential first mover advantages (first to scale)
- economies of scale, learning curve effects, network effects - lock up suppliers or creating switching costs for customers 1. value creation (new, figure out how to create more value, set what value means) 2. opportunity for market share/brand (first to be in consideration for the top choices - company name and product becomes a VERB)
why do firms M&A with competitors? (why use M&A?)
- reduce competitor intensity (fewer rivals to worry about) - LOWER COSTS through economies of scale (spreading fixed costs over more units) -INCREASING DIFFERENTIATION through wider porfolio -PREEMPTING potential competitors (new entrants) ex: facebook bought 80 startups
Why Nike only distributing themselves (to own stores and distribution channels) and not distributing to footlocker and amazon
-Distribution = people channels -There are many variations of partial integration; or example, nike can sell in their stores AND other retailers
-alliance management
-are both parties making investments in the alliance? -how are we sharing knowledge? -how are we building trust
A. bowling pin approach (bowling pin alley)
-attack a specific segment; goal of 40% + market share -niche markets are profitable -address needs of specific users (not technologists) -drive word-of-mouth
can M&A become a core competency?
-companies with M&A deals can get good at it; develop core competency -over time, portfolio managers had annual total shareholder return of 10.5% vs. every-once-in-a-while M&A companies of 5.3% -> better at identifying good targets (attractive, great price, synergies) -> better at integrating with existing operations (faster, more comprehensive) -> better at managing portfolio (willing ness to sell/buy)
late majority
-constitute about 1/3 of total market -when they find something that works, don't like to change -slightly "fear" technology -similarly to early adopters; stubornly resist the pragmatist herd -like preassembled packages at a heavily discounted price -great opportunity to take "old technology" and repackage into a lower-cost, easy-to-use solution
B. inside the tornado
-focus on market share -sell to infrastructure buyer -commoditize your product -SHIP, SHIP, SHIP ex: Chat GPT targets users from 100 to hundreds of thousands in a day
the same industry can be at different levels of maturity by country
-internet availability (india at growth in past, now shakeout/maturity) -digital payments -electronic voting
many factors change during lifecycle
-key challenges; types of innovation -size and # of competition -type of customers
laggards
-last customer segment that come into market -entering in the declining stage of industry life cycle -adopt new product only if it's absolutely necessary -generally don't want new technology for personal or economic reasons **generally considered not worth pursuing
first mover disadvantages
-lots of R&D $$ spent, some wasted - educating customers to see the value -getting distribution
difference between early and late majority
-members of early majority confident in their ability to master new technology, late majority NOT -late majority prefer to wait until standards have emerged, to ensure reduction in uncertainty -late majority prefer to buy from well-established firms with strong brand image rather than unknown new ventures
exit
-not source of advantage, get out -US furniture manufacturers ** many fixed cost industries have exist costs which make these decisions harder
structure before strategy
-organizations have inertia, people respect organizational boundaries -stay in your lane -don't rock the boat -that's not my area
why do 50%+ alliances fail to deliver value?
-partner selection -alliance design/governance -alliance management
-joint venture (creation of new entity)
-requires $$, trust, commitment; JV managers have two bosses -hulu is owned by Disney (2/3) and comcast (1/3)
** NOT NEEDED so many ways for young companies to lose founder's mentality
-revenue grows faster than talent -erosion of accountability -lost voice of front line -the un-scalable founder
types of organization
-specialization -formalization -centralization -hierarchy -business strategy
-equity (purchase of ownership stake, or corporate venture capital, or investment)
-stronger tie, call option to buy more later -GM invests in lyft, coca-cola invests in Monster and BodyArmour
maintain
-support somewhat -marlboro with cigarette making
- reduce competitor intensity (fewer rivals to worry about)
-taking out the excess capacity in the market -creates a more oligopolistic market structure; more focused on non-price factors -strengthen bargaining power vs. suppliers vs. distributors
an invention needs to be ____, ____, _____ to receive a US patent
-useful, novel, and non obvious -idea, invention, innovation, imitators
-non equity (supply, licensing, distribution agreement) is very common
-weak ties, but flexible, fast and easy to start/stop
-alliance design/governance
-will this nonequity, or partial equity, or full joint venture -contracts are imperfect -how does governance process work?
founders feel, act, and are obsessed with what 3 things
1. Founders feel like they're insurgents 2. Founders act like owners (Personalization of risk; it's their money, When a good idea; they are willing) 3. Founders are obsessed with front line (Tell a lot of company by what they talk about their customers, Are they talking about customer margins or customer?) *super focused on result and doing what's need to make successful
At a minimum, smart diversification needs to pass 3 tests
1. attractiveness 2. cost of entry 3. better-off tests
innovation involves (3)
1. commercialization 2. delivery 3. acceptance
invention involves (3)
1. design 2. engineer 3. prototype
when an industry is on a decline, firms need to make difficult choices: (4)
1. exit 2. harvest 3. maintain 4. consolidate -what are you going to do about decline?
what's driving technology change?
1. free trade, globalization -> amazing wealth creation over last 150 years 2. standardized shipping containers -> international freight costs drop 80-90% 3. semiconductor power (moore's law) -> computer power price drops in 1/2 every 18 months 4. democratization of communication -> radio, TV, internet, mobile phones 5. manufacturing process (think: ISOM) -> six sigma/lean operation, walmart supply chain -less digital divide, standardized metal box (supply chain costs dropped 80-90%), as more products become digital -> technology acelerate
Alliance drivers of change
1. globalization - entering new markets and local partners 2. industry convergence - every industry is a tech industry 3. technology acceleration - faster computing, cheaper storage, explosion of tagged data, deep learning models, interperability and API
first mover disadvantages
1. learning curve - learn from scratch (first person has to invent everything, you don't know much can't learn from others disasters) 2. have to educate customers that they want it (effort to get demand going) 3. fail strategies - low chance it might even be successful (not proven to be there)
there are four ways to unlock value... pre-requisites
1. portfolio management 2. restructuring 3. transferring skill 4. sharing activities
what are four types of structures
1. simple structure 2. functional structure 3. multi-divisional structure (M-form) 4. matrix structure
advantages of alliances
1. strength of strategic position; change industry structure 2. common way to enter new markets (In china: GM + SAIC, KO & COFCO, BMW & Brilliance) 3. hedge against uncertainty (like buying a call option); Roche invests in Genetech and then buys the whole company 4. Access complementary assets (monster gets coca cola's distribution) 5. learn new capabilities (GM & Toyota had a new joint venture car plant: NUMMI) Firms enter alliances to gain a competitive advantage. Alliances happen to have many benefits such as strengthening position, entering new markets and even getting access to promising technology. (AS)
**how to tell company culture
1. structure 2. recruiting 3. promotion (who you promote says a lot), process Sales compensated through your own target or team target
idea involves (3)
1. theory 2. research 3. science
for corporate strategy amazon: 1. in what stages of the industry (level of vertical integration) did amazon participate? 2. what range of product should amazon offer/not offer 3. where should amazon compete geographically?
1.) -backward integration -> amazon basics (what the supplier used to do) -forward integration -> to physical distribution (what their distributors used to do) 3.) India (yes) vs. flipkart (purchased by walmart); china (no)
three tests common fails
1.) Attractiveness: Falsely thinking the industry is similar enough Falsely chasing growth = profitability 2.) Cost of entry: Overpaying for acquisition -> buyer's remorse Underestimating the cost to ramp up start-up **Post-merger integration is hard and expensive Post-merger integration: all the work after merger Work to need to do after merger (things to integrate) Often delayed to not face problem Pros: coke and costa Attractiveness: acquire existing payer Familiarity to brand people not known before Cons: coke and costa **weakest: brick and mortar store very diff than putting beverage in a can Big takeaways: Depending on how it fits into strategy can make it a good or bad strategy Framing of questions needs to fit well with what you recommend 3.) Better-off Tests (is this creating a better economic moat): Does the corporation bring significant advantage to the new unit (or vice versa) Is the benefit "one-time" or long term
multi-divisional vs. matrix structure
A multi-divisional structure is a type of organizational structure in which a company is divided into autonomous divisions or business units, each of which is responsible for a specific product, service, or geographic region. Each division has its own functional departments, such as finance, marketing, and operations, and is headed by a division manager who reports to the CEO or a higher-level executive. On the other hand, a matrix structure is a type of organizational structure in which employees are grouped by both function and product or project. This means that employees have two bosses or managers, one who is responsible for their functional area and another who is responsible for the project or product they are working on.
Q: Is seems that Body Armour is successful, so why is Coke having a problem with Body Armour?
A: BodyArmour seems to doing okay, but it is just cannibalizing the PowerAde (sister brand), and also not doing as well as expected Hire good lawyers; somehow the contract with KO / MNST allowed KO to launch an energy drink (JK)
Q: When we discuss first mover advantage, the book seems to have pros(economies of scale and learning curve), that we say are cons?
A: I would say that learning curve is a CON because the first person figures it out painfully, then other people copy them. This is primarily because there is a difference between first-mover and first-to-scale.
Q: We discussed private equity managers I think related to the decline stage of the industry life cycle, and portfolio management and restructuring. Why do private equity managers want to have a large span of control? I thing it had something to do with lower costs.
A: Larger span of control means that the same manager has more direct reports, which means you need fewer managers.
Q: Is it a pros to being a first-mover: network effects and locking in suppliers?
A: Yes, I think so
Q: For "crossing the chasm", related to the bowling pin and inside the tornado, do you firs target a specific niche (pin)?
A: Yes, main point is that you need to target a specific, profitable niche and win. . . then get word of mouth marketing.
Super cell: the best teams make the best games
Acquire the best talent for every single position, create the best possible environment for them, and then get out of the way Environment with zero bureaucracy Everything else, including financial goals, would be secondary *won by teams, not individual Every failure is a unique opportunity to learn Every lesson make us better at what we do If you haven't failed in a while it means you haven't taken enough risks. Celebrating failures (means more innovation and taking risks) Important for creative company
Alliances can be more useful for companies that want to enter markets without having to
Alliances can be more useful for companies that want to enter markets without having to completely acquire a company and taking on all the responsibilities of the entity. (OG) In the case of Coke, they were able to have a strategic alliance with Monster, which could have served to see what's inside a new industry and refine the process to create their own energy drink. (MC)
Don't be evil - google tries to maintain and claims objectivity in its search results; distinctly separating results from ads
At the core of Google's value system is that user experience matters most, if the user experience is simple and fast, and uncluttered with ads, and if google makes no attempt to steer users to its own sites, a bond of trust will form We maintain a church/state wall between the information a google search provides and advertising
until recently, technology was largely a B2B discussion. Now, what dominates
B2C and C2C technology dominates the news, but the same concepts of word-of-mouth marketing sell exists
business unit strategy vs. corporate strategy
B: single product market C: multiple industry/markets concurrently B asks: how to create competitive advantage C asks: what businesses to be in, how corporate should manage
Big downside of vertical integration =
Big downside of vertical integration = you're probably not good at the new activity (JK)
Celebrating failure at Supercell helps to create a culture that encourages risk-taking and experimentation, leading to more (MP)
Celebrating failure at Supercell helps to create a culture that encourages risk-taking and experimentation, leading to more creative and innovative ideas that can give the company a competitive advantage. (MP) Supercell is a great example of a unique company that takes risks by super empowering their employees to kill their own projects. (PC) Found the Supercell efficiency within their team (only 400 team members), coupled with their $10 billion valuation, proves that if teams are aligned in their approach, you are most efficient. (SR)
Channel conflict:
Channel conflict: if you sell your product through multiple channels, it can be confusing and they can cannibalize each other. (AD)
Google 70/20/10 why not good for everywhere
Companies don't have resources Not all companies need to be that innovative Some ppl in company work great for and not for others Google is able to do the 70%-20%-10% because they have enough resources to support this, and they truly care about innovation and finding ways to innovate. (SD)
Company culture is the single most important aspect of a firm. Good culture creates a cycle of (IR)
Company culture is the single most important aspect of a firm. Good culture creates a cycle of growth, positivity, and, above all, good results. (IR)
Why Nike only distributing themselves (to own stores and distribution channels) and not distributing to footlocker and amazon (Pros without others:)
Control everything, don't need to rely on outside sources (control their supply and limit) Margin given away is what you're not getting Quality management (control experience)
Culture examples
Deloitte no titles on business cards (message: we are a team don't need to talk to partner to get answer) Walmart: Walmart headquarters, office furniture leftover supplies from store (message: we are in job of being good at supply chain and customer have everyday low prices; not here for vendor's comfort) General electric: CEO corporate jet followed by another corporate jet if the first broke down
Why it's hard to implement culture
Hard to change dominate culture before to what it wants to be How much can be changed and make it work? Culture can be expensive (hiring the right people and keeping) Culture doesn't change overnight
Con Google becomes alphabet
Harder to manage individually instead of google (different organizational structures - google largest) Expensive - not efficient (hierarchy messed up)
Incumbents are risk-averse-
Incumbents are risk-averse-they want to continue doing what seems to be working, but customers and the industry environment are constantly changing, and it is important to change before you have to! (SR) Incumbents tend to keep [sustaining] innovating and overshoot the market for their new product, leaving the lower end of the market open for opportunities for disruption. (ML) Sometimes, reducing quality and cost is what customers want. Sometimes, incumbents go too far, making their products' "too fancy" for consumers' needs. (JR)
radical innovation
Innovations that target NEW markets and represent a major break from existing technologies or ways of thinking, such as the digital camera, the touch-screen smart phone, or the decoding of the human genome, are examples of
It is important to determine the organizational structure based on s (JZ)
It is important to determine the organizational structure based on 1. size, 2. culture, 3. strategy. (JZ)
cons of alliances
Know things about company (private information) Hard to find synergies Support each other which takes time (shared goals while remain legally independent), don't work well Lose level of control (agreement) Cultures different (same downsides as a merger but not fully married) ***Not all alliances are strategic (RK) While there are many advantages of alliances, there are ultimately many risks, including loss of control, partner failure and/or tarnishing brand image, communication challenges, and unbalanced benefits (GM) Alliances have many positives but they can also potentially create stronger rivals/competition. (BC)
DSP (delivery service partners) drivers last mile for amazon which is more expensive (small business owners create it) why amazon pick and chose routes it goes on?
MR greater than MC (private companies chose the best - profit, amazon airhub) Consistent (other can drive to main hubs) more simplified Last minute - locations constantly changing - not as much profit made Contracts adjust for season (demand fluctuate) - don't need people on payroll at all times.
Why does organizational design matter?
Many ways to do things, what are we trying to do, what is best way to make it happen Organize to capture the value Making things happen - putting right people in right positions to win
peter drucker says culture eats strategy for breakfast what does that mean?
Means: strategy can't work without culture Yes, If you don't have the right people, it's not going to work Culture manifests in many, many ways: Who's hired? Who's promoted? What events are celebrated (only successes?) What other ways can you read the culture of a company? Culture and strategy have to go hand in hand. If a company does not have a valid work culture, its employees will not be able to work at ease.(AF)
Why can't a company have both mechanistic and organic
Mechanistic: coursera consulting class specialized, formalized tall hierarchy centralized decision making economies of scale often, cost leadership strategy Organic: in class consulting course Flat organizational structure Decentralized decision making Flexible information flow More entrepreneurial behavior Often, differentiated strategy can be both? huge platform that scales like crazy but still have office hours (customer centric)
to make a product stick have... (STICKY)
Network effects (very sticky): more valuable the more people use it Ex: yelp reviews (more reviews better for everyone), fizz social media **more users is not better, but more people USE IT better OAM 331 no network effects -> past students don't benefit future students
Non-equity alliances are like while equity alliances or M&A are like
Non-equity alliances are like dating, while equity alliances or M&A are like marriage (MW, MC, BF)
Organizational culture is hard to get right; it takes a combination of (IW)
Organizational culture is hard to get right; it takes a combination of transparency, quality management, employee motivation, etc. (IW) A lot of culture has to do with trust within and between teams. (HI)
Organizational structure is inherently tied to (JY)
Organizational structure is inherently tied to strategy, but it is also true that strategy can arise from structure. (JY)
Transfer skill
Proprietary skills, which can be transferred Beachhead for new market and opportunities Ex: big tech buys small tech just for 30 engineers
Restructuring can be a major way to discover
Restructuring can be a major way to discover hidden value (KK)
hierarchy (who reports to whom?)
SPAN OF CONTROL: how many direct reports do you have? *Do private equity and financial investors to have wider span of control? YES, wider span of control org gets flatter
Pro Google becomes alphabet
See individual profits and losses (things making money/not making money - create more transparency) See which ones are ok and not ok Operating different (google - lagging indicator)
where do you think internet streaming is now (netflix, disney+, hulu)?
Shakeout/maturity, slowing down See growth slowing, see oligopolies form -maturity than boost during covid, basically slowly down now (mature) -shakeout/maturity: you see growth slowing, you also see oligopolies form
Share activities
Share resources (economies of scale and scope) Overcome organizational resistance "Buy things cheaper and do it together" Share strategic sourcing, brand equity and name brand **if you have a lot of markets and participants, you don't need to own everything
**useful framework to think about mergers: buy vs. Borrow vs. Build
Should we build it ourselves in house? Do we have the resources (VRIO) to get it done? Yes, have resources, capabilities, $$, core competencies, we crush If not, then can we borrow it through contract, outsource, or set up some alliance (tradeable: is there a market for this; closeness: who else does this collaboration need to be) Buy: (low relevance( of existing resources + (low tradability) + (high need for closeness) **often expensive, often fails, hard to reverse **inorganic growth = means you buy or acquire it Organic growth = coca cola selling more coca cola
Span of control is
Span of control is how many people report to you/how many people you manage. The higher the span of control, the flatter the organization (AL) Organizations usually want their managers to have a higher span of control so that faster decision-making and improved communication is possible (MS)
Strategy is very dependent on the company culture- because you need (MS)
Strategy is very dependent on the company culture- because you need the right people for strategy formulation (MS)
supercell is a gaming company with a 10B valuation with a very unique approach to business growth and teamwork
Supercell was willing to make trade-offs; they killed 14 games to make 5 games that people would be willing to play forever First game (gunshine) had around half a million monthly players in 2011 Made it for PC with mouse and keyboard Realized that the iPad was the ultimate games platform Decided to "mobile-only"; easy to play, can play for a few minutes at a time **killed the game, then another, then another
Portfolio management
Superior insight to identify winners; sell off losers Private company or underdeveloped markets
Why Nike only distributing themselves (to own stores and distribution channels) and not distributing to footlocker and amazon (Pro with foot locker and amazon:)
Supply chain improvement (stuck with current companies) New technology and management Attract new customers and higher revenue (new people who aren't) More readily accessible **what are you trying to do? If Nike only had their own retail stores, they control experience, have chance to cross-sell more Nike stuff, reduce potential mark up from distributors (JK) Nike may have multiple selling channels (Foot Locker, Amazon) because a) mature industry & mature company b) outlets target different customers c) shoe market is huge and Nike still wants to sell older models at cheaper prices at different channels (JK)
17-1: Netflix, now a common service - completely upset the
TV watching, and movie rental business uphill: started streaming in 2007, started creating own content, in 2019 spent $15B on content
There are 4 ways to unlock value:
There are 4 ways to unlock value: portfolio management, restricting, transfer skill, and sharing activities. (JK)
Unfortunately, the default path is from hungry insurgent to efficient, but uninspired incumbent
They grow big and boring (big and bureaucratic) Small with passion to big without passion
executives falsely believe that merely changing the structures (name and boxes) will change the business = not true. It takes __________ to make a big difference
Too often, executives falsely believe that merely changing the structures (name and boxes) will change the business = not true. It takes structure, processes, incentives, recruiting, retention, leadership, and culture to make a big difference (JK)
Vertical integration is all within one industry, diversification is across multiple industries. The more vertically integrated the company is, the less
Vertical integration is all within one industry, diversification is across multiple industries. The more vertically integrated the company is, the less flexibility it has. For example, Amazon is vertically integrating by creating their own hubs and focusing only on destinations that are achievable. (MC)
Vertical integration is either some form of buying your customer or
Vertical integration is either some form of buying your customer or buying your supplier (KB) Vertical integration (buying your customer or supplier) is challenging as you create a new set of rivals, yet if done correctly it can help control costs through optimizing the supply chain (e.g. Amazon delivering their own packages in strategic locations). (ML) Sometimes it is better to focus on what you are very good at, rather than trying to be everything all at once. (LO) Vertical integration, while not always a good idea, gives companies more control. Downsides: risky, creates enemies, and makes pivoting harder. One cool thing: Amazon can now deliver products for other companies. (EC)
How can google principle "don't be evil" help make decisions?
Whatever helps the customer get info faster "do your own thing well" Difficult why for google having this principle: Hard to monetize, Slow to roll out chat gpt and forced to roll it out which wasn't perfect
Restructuring ("what's really needed here?" changing business so it's competitive, It works and it's improving)
Willingness to intervene (Brazil's 3G cost cutting) Willingness to sell units when complete **layout = a lot of companies have too many people, private equity -Restructuring is a viable and historically profitable way to unlock hidden value; private equity had boomed for 20 years -Private equity takes money from private markets and invest it (money locked up for 5-7 years) Restructuring works: companies are often much less efficient than they think they are; it's also painful (layoffs) Tightening business to make it more profitable Private equity raises money to invest direclty into companies, typically with a 507 year holding period Raised $700 + B in 2021 More than $5 trillion with a T under management PE firms look to increased EBITDA (make the .......
Supercell believes in small independent teams; there are only 400 supercellians today; the teams make the decision to kill their game
Work in teams NOT individuals Surprising: no one wants to kill own baby best quality comes from small teams where everyone is passionate about what they do -create an organizational structure of very small teams/cells -supercell is a collection of these cells (organizational model is for speed and passion, not control)
When we discuss Amazon filling their plane with their own shipments' and other companies' shipment's, we discussed MR>MC. We discuss their plane being full, I think MR>MC is true even if the plane is half full, correct?. Having more shipments just lowers fixed cost per unit.
YES
**Do both KFC and Chickfila have a good corporate strategy
Yes, different strategies Chick-Fil-A and KFC both have effective corporate strategies, even though dramatically different. Chick-Fil-A = high customer service, private, slower growth, US-based. KFC = growth-oriented, adaptive to local markets (e.g., different recipes in different regions of China), publicly traded = need to take care of shareholders, and must grow EPS (JK) KFC Publicly-traded (YUM brands) 20,000 + outlets International; 120 countries More in China than in the US Diversified menu items and faster expansion **net margins 19% (pretty good) Chick-fil-A Privately held 22000+ outlets Only in the US (for now) Company culture base and consistency (few products) **which of the following frameworks does this show? --> Strategic positioning (how are you positioned? Broad and narrow) **there are a lot of ways to win
Which comes first, strategy or structure?
Yes, structure supports strategy (what we're trying to get done) In perfect world you do both, at times structure more important than strategy How should you go about doing that? --> Emerging strategy - new thing starts with strategy than structure ---> Tolerance for change (constant changing industries) orgs change all the time Right side - business unit strategy How my orders, know what to do 1. of course, the organizational strategy should support structure (who should have the big D - decision making power) 2. what does winning look like? How to emphasize unfair advantage
[Ideally] the organizational structure follows strategy, but inertia can limit dynamism. Basically, the company's (JK)
[Ideally] the organizational structure follows strategy, but inertia can limit dynamism. Basically, the company's structure limits or shapes strategy (even if that was not the intention) (JK)
once early majority enters market what is noticed?
a herding effect (early majority enters in large numbers)
idea
abstract idea or findings from research
is uber disruptive innovation?
against taxis (no) vs limos (yes) Uber XL (it's less for less: not full bar, no driver, no amenities)
big companies not only lose their enthusiasm/mojo but also struggle from their size and complexity
bad news: -curse of the matrix -fragmentation of customer experience -complexity doom loop -death of the nobler mission
specialization
being good at a specific thing -> unsurprising, larger firms have more people, tasked with more specific tasks -> PRO: get really good at narrowing things -> CON: lose breath of experience, lateral thinking
matrix creates ______ ________
between differing objectives
If you don't take risks, you don't get the opportunity to learn from your failures and that's the (IC)
biggest risk in of itself (IC)
consolidate =
buy up smaller players -private equity sometimes rolls up an industry to create economies of scale and more pricing power
late majority
buyers entering market in the maturity stage -large customer segment 34% **early and late majority drives most of industry growth and firm profitability -share all the concerns of early majority
NUMMI factory (joint venture between GM and toyota) was a great story of
co-opetition, each party was able to learn something -GM learn toyota's famous production system -Toyota would learn to engage an American workforce
innovation =
commercialization
**idea vs. invention vs. innovation. innovation is the
commercialization of ideas, inventions **innovation. Is more than an idea, it's an idea of if you're commercializing it. Does something Is willing to pay to commercializing it? ex: picture of kid commoditizing other kids projects and wins
Innovation is crucial for a firm to create a competitive advantage. With innovation comes many challenges and costs, but eventually leads to the process of
commercialization. (RS) • Innovation is the commercialization of ideas; innovating companies should begin by focusing on smaller, niche markets. (PC) • Different core competencies are needed in different stages of industry maturity. (AV)
how firm appeal to early adopters
communicate the product's potential applications in more direct way than attracting initial technology enthusiasts ex: put down money to buy tesla without seeing it
**This is founders mentality: paradox growth creates
complexity Give example of how you can see it happening How small companies are scrapy and big companies are very different As a company grows, some of the things that made it great begin slowing it down. Growth creates, complexity, complexity kills growth. (JB)
M&A can be a
core competency. (AG) Post-merger integration is the stage where most deals fail (MW) 50% of M&A destroys value, but PE firms have seen a 15% return on investment over the past 5 years. (CM)
vertical integration is doing more stuff in your industry it's buying (pros and cons of vertical integration)
customer or buying supplier Pros: less dependent on supplier, you're doing more of the work **causal ambiguity **biggest pro is control: quality, volume -supplier has to make something if they're bought (Amazon build own transportation (faster than UPS), uses DSP drivers for last mile) Cons: new rivals (inherit more enemies they have more things do the same in); competing against the previous suppliers or customers, less strategic flexibility, a huge ship, difficult to turn **lack of flexibility and locked in business Ex: samsung tv best semiconductor (corporate makes you buy samsung one even though it's not as good) **if there are 6 parts of the process and you do 3, the competition does all 6 the one who's all in is more susceptible to a downturn? the one who's all in more susceptible all going down together -do what you're good at
early majority
customers coming into the market in the shakeout stage main consideration: strong sense of practicality -pragmatists and concerned with what technology can do for them -weigh benefits and costs carefully (aware many hyped up products will fade away - prefer to wait and see how things shake out) -seek out reputable reviews, make up 1/3 so winning them over is VERY IMPORTANT -CUSP of MASS MARKET
early adopters
customers entering the market in the growth stage -eager to buy early into a new technology or product concept -unlike technology enthusiast: demand driven by imagination and creativity rather than use of new technology demand fueled as much by intuition and vision as by technology concerns ask: what can this new product do for me and my new business?
each stage of the technology adoption life cycle is dominated by a
different group -technology enthusiasts (innovators) -> early adopters (visionaries) -> early majority (pragmatists) -> late majority (conservatives) -> laggards (skeptics) **main point: y access is size of the market (% of total customers), most of the customers are in the fat middle of the time period, and the chart is chronological **Risk tolerance - appetite for risk (right side scardy cats, left not scared)
**jack welch: ceo of general electric "you should change before you have to"
disruptive innovation: incumbents very wary to disrupt themselves and overtime it becomes the main thing -Incumbents don't do that: they change when they have to
the innovations that cause "why bad things happen to good companies" dilemma are
disruptive innovations -company that follows everything in the book blind-sighted by an innovation because it was doing everything right
don't be evil - google tries to maintain and claims objectivity in its search results
distinctly separating results from ads
_______________ are the rare breed to match technology with strategic opportunity
early technologists (visionaries) -often are new to the executive rank, 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 ex: JFK launching space program -CEO netflix relying amazon cloud for web streaming
strategic alliances come in many formats and levels of engagement; the majority of engagements don't require
equity (dating, no marriage) -non equity (supply, licensing, distribution agreement) is very common -equity (purchase of ownership stake, or corporate venture capital, or investment) -joint venture (creation of new entity)
Customer satisfaction can never _____ employee satisfaction. (PP)
exceed
Reason: Disruptive innovations use new technologies to target
existing markets
matrix organizations
fancy way of saying you report to two bosses -organizations institutionalize cross-function collaboration, which is a fancy way of saying that you have two bosses
Technology has been on a 100-year march; everything's been getting
faster, more digitized, widely distributed -technology adoption is accelerating; time to reach 50% diffusion -car = 84 years, TV = 28 years, PC = 19 years ** a lot of technology is appretive = it builds on itself
harvest
get what you can, don't reinvest -IBM and typewriters
P&G organizational structure
groups working on same thing **once you have too many diff things it's hard to grow international: -country specific functions; managed locally
technology adoption life cycle: early majority vs. late majority (volume the same but why early majority can have more customers?
having higher willingess to pay (late majority: conservatives wait for others to do it)
while alliances are common, it is strategic alliance if it has potential to
help the company's competitive advantage
crossing the chasm
how do you get from early adopters to early majority **T/F are there a lot of dead ideas in chasm (YES) ex: during pandemic it was professors using online education
formalization
how standardized is the work -REDUCING VARABILITY; standard operating procedures (1 one to do things) -THINK: MCD consistency, airplane checklists; con = less INNOVATION, rigid customer service
while business unit (competitive) strategy answers the question...
how to compete
open innovation admits there are lots of good ideas out there emphasis on
identification, partnering, capturing value
imitators =
if it's profitable, there will be new entrants and competitors
once innovation starts creating value, what soon follows
imitators
