Strategies in a Disruptive World PDF

Strategies in a Disruptive World Introductory Session The New Paradigms of Strategy Néstor Miranda Carús Professor of Strategic Management Introduction to the course Subject description In these sessions we will understan...

Strategies in a Disruptive World Introductory Session The New Paradigms of Strategy Néstor Miranda Carús Professor of Strategic Management Introduction to the course Subject description In these sessions we will understand... Ultimate goal: o how to create effective strategy in a fast o understanding of new paradigms and changing and disruptive world strategic management frameworks that will o the challenges of disruptive innovation enable companies to o the new competitive landscapes due to analyze current disruptive trends new disruptive entrants understand the potential impact on the industry anticipate future scenarios o how disruption impacts and transforms the and formulate successful strategies and structures, processes and corporate culture implementation plans. of companies This course will provide a set of frameworks that can be applied to a wide range of strategic problems Introduction to the course Objectives and skills Objectives Skills o How do we cope with the changing o Understand the hidden processes behind business landscapes? transformations in the business landscape. o How do disruptive innovations bring value o Review current technologies with the to our customers and to our organization? greatest potential to disrupt industries in o How do emerging disruptive trends affect the mid and long term the organization or the industry in which o Complete a full scenario planning exercise we operate? o Apply the methodologies for implementing o Which are the future scenarios that our new strategies. organization may face? o Understand the positive and negative o How should leaders deal with future consequences of disruptive technologies. scenarios? A new paradigm New strategies for an ever-changing world Introduction A new paradigm What is happening in today's business What happens to companies that are world? different from the traditional ones? o There is no longer a single approach to o Many of them are born with a new business strategy philosophy where there is no room for o Many companies are born directly from Business Plan / ROI / market researches... disruption o They detect problems, seek solutions o Many companies are born with a strategic through technology and move forward intent that goes beyond the traditional o They incorporate unconventional strategic plans approaches Can you think of any company that fits these tenets? The strategic landscape From self to the star across the chessboard and the mountain The “Strategic Landscape” Making the Future Visible (Hardin Tibbs) This strategic landscape represents the psychological reality of the future. Self Chessboard Mountain Star Adapted from H. Tibbs The “Strategic Landscape” Making the Future Visible (Hardin Tibbs) Strategic Landscape Self Our resources, capabilities, skills, values & attributes as a strategic player Chessboard Competitive positioning and competitive dynamics within our industry. Mountain Issues & challenges we are facing or we are likely to face and major goals or objectives we want to achieve. Star Enduring & guiding social, transformative or economic purpose Adapted from H. Tibbs The “Strategic Landscape” Making the Future Visible (Hardin Tibbs) The purpose of the organization A “future-focused role image” ‘The Star’— Our enduring Not completed or “used up” and guiding social role The strategic objective: A compelling, relevant future ‘The Mountain’— BHAG—“Big Hairy Audacious Goal” A concrete, specific goal What we hope to achieve A challenge, but achievable The strategic environment: ‘The Chessboard’— Strategic implementation and tactics Issues and challenges Threats and opportunities we are likely to face Actions of other strategic actors Driving forces Mapped and understood using scenarios The ‘self’ journeys across the chessboard to the mountain, Strategic identity: ‘The Self’— Our which lies in the Current reality, resources and capabilities medium term values and attributes future Self-knowledge as a strategic player Strengths and weaknesses Values Adapted from H. Tibbs Preferences and experience Video & Debate What SpaceX means for Elon Musk's Mars dreams Starship Update Strategic intent... Strategic landscape... https://youtu.be/3N7L8Xhkzqo or…purpose identify the 4 levels identify where it hides https://youtu.be/FbzegGHkk8c Starship the Holy Grail for SpaceX The strategic intent A vision for an organization's future Strategic intent The idea into practice Turn S.I. into reality Stay ahead of your competition o Create a sense of urgency o Build layers of advantages o Personalize challenges o Search for loose bricks o Provide employees with needed skills o Change the terms of engagement o Tackle one challenge at a time o Compete through collaboration o Stablish clear milestones “Strategic intent is like a marathon run in 400 m sprint” Hamel and Prahalad, 1989 “Let chaos reign, then reign in chaos… repeatedly” Burgelman and Grove, 2007 Strategies in a Disruptive World Module I - Introductory Session Strategy in a technology intensive world Néstor Miranda Carús Professor of Strategic Management Index Attendance list 5’ The new scenario for incumbent companies 20’ Business Model Innovation 30’ Pipelines, platforms and the new rules of strategy 25’ A new scenario The new scenario for incumbent companies The new scenario for incumbent companies Introduction An incumbent in business most What to do if you live in a disruptive commonly refers to an industry leader. world and your company is already established and consolidated An incumbent company may hold the o Business model... how far does it go? largest market share or have additional o Canvas/VRIO... how far does it go? o Five forces framework... how far does it go? influence within the industry. Can you think of any barriers that could be created by incumbents to make it difficult for new competitors to enter? Is the creation of barriers to entry always profitable for existing companies? The new scenario for incumbent companies Technology innovation impact in Strategic Analysis models Sustainable competitive advantage High comes from operational effectiveness (doing what your competitors do, but Productivity Frontier better) or strategic positioning (State of best practice) (delivering unique value to customers Value by doing things differently) Creation Low Michael Porter Low Relative cost position High Source: Michael Porter – What is Strategy (HBR Article) The new scenario for incumbent companies Technology strategic positioning Productivity Frontier Innovation High (State of best practice) & New Business Models Value Co-creators Value Creation Strategic support Business Solutions Standard Services Low Low Relative cost position High Source: Michael Porter – What is Strategy (HBR Article) The new scenario for incumbent companies The impact of technology on strategy Digital transformation: are you ready for The impact of the internet on industry exponential change? and competitiveness o By the futurist speaker Gerd Leonhard The internet powerfully influences industry structure and sustainable competitive advantage: Intensifying competitive rivalry and reducing entry barriers Dramatically increasing available information and shifting bargaining power to buyers https://www.youtube.com/watch?v=ystdF6jN7hc Source: Michael Porter The new scenario for incumbent companies The impact of technology on strategy The profitability of an industry relies Threat of entry - Economies of scale on of five sources of competitive - Absolute cost advantages - Capital requirements - Product differentiation pressure defined by Michael Porter - Access to distribution channels - Government and legal barriers. - Retaliation by established producers Suppliers: Industry rivalry Customers: - Bargaining power - Bargaining power. - Cost of product relative to total cost Concentration - Cost of product relative to total cost - Product differentiation Diversity of competitors - Product differentiation. - Competition between suppliers - Competition between customers - Customers switching cost Product differentiation - Customers switching cost - Customer information Excess capacity and exit barriers - Customer information - Customers ability to onward integration - Customers ability to backward integrate Cost conditions But what happens with entry Threat of substitutes: Five forces framework from barriers when a new technology - Buyer propensity to substitute Relative prices and performance Michael Porter (HBS) of substitutes appears? The new scenario for incumbent companies The impact of technology on strategy How the internet Barriers to entry influences industry (-) Reduces barriers to entry- no * Value Network : Complementors (+) Increases ability to compete need for sales force, access to structure? channels and physical assets. providing complementary value to (-) Technology is not proprietary products and services and is easily accessible for new entrants Bargaining power of suppliers (+/-) Internet procurement changes Bargaining power of channels Rivalry among competitors the bargaining rules. and customers (-) Reduces differences among competitors (-) Internet provides a channel ( +)Eliminates powerful channels or (-) Migrates competition to price for suppliers to reach end users. improves bargaining power over (-) Widens the geographic market increasing the number (-) All companies get equal access traditional channels of competitors. to suppliers and gravitate (-) Shifts bargaining power to (-) Lowers variable cost relative to fixed cost, increasing procurement to standardize end consumers. pressures for price discounting products that reduce (-) Reduces switching costs differentiation Substitute Products Source: Brandenburger and Nalebuff – Source: Michael Porter – Strategy (+) Overall industry more efficient: The right game : Use Game Theory to and the Internet – HBR Article Market Expansion Shape Strategy – HBR Article (-) New substitution threads The new scenario for incumbent companies How is technology changing our strategic environment? Development of the “Core Competencies” within the organization (Hamel & Prahalad “Competing for the future”) o Strategic Advantage lay in clearly identifying and strengthening core competencies within the firm Creating Business Ecosystems (Brandenburger & Nalebuff “Co-opetition”) o Managers can create Strategic Advantage by shaping and leveraging broader networks of resources beyond their individual enterprise, creating value nets and business ecosystems Value Innovation (W. Chan Kim & Renée Mauborgne “Blue Ocean Strategy”) o Strategic Advantage comes from creating new uncontested market spaces by rethinking market boundaries and reaching beyond existing demand The new scenario for incumbent companies From value chain to value network Integrated value chain (with high interaction costs) SUPPOR Firm Infrastructure T Human Resources ACTIVITI Technology ES Procurement PRIMAR Y ACTIVITI ES Technology Desing Manufacturing Marketing Distribution Service The new scenario for incumbent companies From value chain to value network “Adopting a network perspective provides an alternative perspective that is more suited to New Economy organisations, particularly for those where both the product and supply and demand chain is digitized.” (Joe Peppard, Anna Rylander) SUPPOR Firm Infrastructure T Human Resources ACTIVITI Technology ES Procurement Distribution Service Technology PRIMAR Y Substituto Complem Suppliers rs entors ACTIVITI Desing ES Marketing Manufacturing Network model (low interaction costs) 12 The new scenario for incumbent companies New business model drive innovation “A new corporate entity based on collaborative innovation and outsourcing to specialists is emerging in response to globalization and new technology. New Such ‘globally integrated Innovation Business enterprises’ will end up based Models reshaping geopolitics, trade, and education.” Competitive Advantage Samuel J. Palmisano, CEO, IBM New Business Processes (2001-2012) Source: Navi Radjo Vice New Products New Services President Forrester Research The new scenario for incumbent companies Disrupting and industry through specialization & new business model TSMC’s Microprocesors Disruption Microprocesors Disruptive Business Model https://youtu.be/GU87SH5e0eI https://youtu.be/CkNn98WE5_k 15 Building new Sources of Competitive Advantage Strategic Advantage is Created through: – Dynamic Specialization : Making difficult choices to focus on areas of world-class capabilities and use them as a platform for aggressive growth. – Connectivity and Coordination Learning how to access and mobilize the resources of others equally specialized companies to add even more value to customers. – Leverage Capability Building: Recognizing the most effective way to accelerate capability building is collaborating closely with other specialized companies, pushing each other to become better faster. Source: John Hagel III y John Seely Brown – “The only sustainable edge” – Harvard Business School Press Mechanisms for Building Capabilities Faster To compete in the new global arena where the advantage resides on intelectual capital and specialization of capabilities companies need to use the following mechanisms: o Global Sourcing: To seek out specialized capabilities wherever they reside to support the core capabilities of the firm. o Loose coupling of extended business processes : Using modular design and management techniques to mobilize distributesd networks of specialized companies and create a more flexible operating process. o Productive Collaboration: Techniques to accelerate capability building by creating suitable settings for people with diverse and appropiate specializations to creatively resolve difficult business issues. Fuente: John Hagel III y John Seely Brown – “The only sustainable edge” – Harvard Business School Press Position within the network Specialist. Small number of activities that ar offered to a large number of partners. Integrator. Coordinates the activities of a large number of partners, adds some internal activities to offer a unique value for the customer. Platform : brings together different groups of users and encompasses the components and rules required by users to access services or complete transactions Management of Relationships within the Network Relationships Relative Coordination Dependence Value Capture Strength Strong High Ownership Great Deal Very High Equity A lot High Sourcing and Substantial Moderate Alliances Contract Occasional or some Minimum Market None Zero Week Low Type of External Relationships and Coordination Requirements Business Model Innovation Changing the game Business Model Innovation When the game gets tough, change the game Business Model Open Business Model o What is a BM? o What is “Open Innovation” (Henry Chesbrough, 2003)? How can it be Value Proposition implemented? o What is “Open Business Model” (Henry Target segments Products/Services Revenue model Chesbrough, 2006)? Business Model Value chain Cost model Organization Operating Model https://www.youtube.com/watch?v=pVGtuH1y7Xg Business Model Innovation When the game gets tough, change the game 3 game changing moves… …and 5 potential failures o Beating back intense competition o Portfolio bloat (ongoing projects surplus) Jetstar as Qantas' response to Virgin's entry into o Failure to scale-up the Australian low cost airlines market o Pet ideas (zombie projects) o Extending a BM with current customers o Isolated efforts Vélib, the free bicycle network in Paris offered by JC Decaux to renew its street furniture contract o Fixation on ideation o Extracting brand value by extending the BM o Internal focus Ikea captured the appreciation of real estate o Historical bias (underestimate disruptive values near its new stores in Russia with a new innovation) division in charge of managing Mega Malls Business Model Innovation When the game gets tough, change the game BMI takes many forms… The product/service as Free (or nearly free) Value The product as service an experience Trust premium Google and outcome Apple Whole Foods Vélib proposition General Electric Starbucks El Corte Inglés JC Decaux Uber / Cabify Spotify Integration/acceleration Low Cost Direct distribution Deconstruction of the supply chain Operating model Li & Fung Limited Zara TaTa Motors Nestlé Nespresso Jetstar (Quanta’s group) Tesla Toyota Person to Person Adjacency Business system Open Serial Paypal Ikea’s Mega Mall division Facebook Virgin group architecture Wallapop Adidas Padel (from Tik tok Samsung Bla bla car Adidas) Adapted from BCG Any suggestions? Business Model Innovation When the game gets tough, change the game Business Model Innovation Business Model Innovation o Are we changing the future by o What is BMI? implementing innovative business models? o When does it usually happens? o Does the health of the planet depend on o What are the risks of BMI? implementing new business models? o What is the best way to implement BMI? www.projectbreakthrough.io https://www.youtube.com/watch?v=y--1fjFtG5E https://www.youtube.com/watch?v=M2IFddEe4TE&t=29s Strategic principles for competing in the digital age Digitization is rewriting the rules of competition Strategic Principles Opportunities and threats Opportunities for the leaders… o Enhancing interactions among customers, suppliers, stakeholders and employees. The digital channels lower the cost of transactions and record them transparently, which can help in resolving disputes. o Improving management decisions as algorithms crunch big data from social technologies or Internet of Things Better decision making helps improve performance across business functions. o Enabling new business or operating models, such as peer-to-peer innovation or customer service. New business or operating models can disintermediate existing customers. Business Model Innovation When the game gets tough, change the game Seven trends could redefine competition …and 6 big decisions to take: o New pressures on price margin o Buy or sell business in your portfolio? o Competitors emerge from unexpected o Lead your customer or follow them? places o Cooperate or compete with new attackers? o Winners-take-all dynamics o Diversify or double down on digital o Plug-and-play business models initiatives? o Growing talent mismatches o Keep digital business separate or integrate o Converging global supply and demand them with current non digital ones? o Relentlessly evolving business models - at o Delegate or own the digital agenda? higher velocity. Strategies in a Disruptive World Module II Disruptive and exponential trends Néstor Miranda Carús Professor of Strategic Management Homework Disruptive Trends Video Homework Methodology Each group will choose the study of one disruptive exponential technology and one industrial sector. Several groups can coincide in the same trend. Deliverable: 6-7 minutes video presentation structured in 2 phases 1) Choose one high technological trend Study the state of the art WHAT problems it solves? WHICH industries it can impact and HOW 2) Choose one sector and analyze how this technology may affect/disrupt this sector in the next 10 years Disruptive Trends Disruptive Trends Science will never stop amazing us Scientists at Harvard University have engineered an artificial fish whose flapping tail is powered by cells from a human heart, a groundbreaking project that has ignited hopes for the future of cardiac research. https://youtu.be/8Sw6xRAG8XA “By replicating the biophysics of the heart into this fish, we were activating various processes within these cells that are designed to help them sustain themselves. We are hoping that in our next endeavor, we will keep these cells and these tissues alive much longer than even four and a half months.” Kit Parker, one of the authors of the study Disruptive Trends Many disruptive trends… 1. Gene Editing & Synthetic Biology 2. Brain Computer Interface Let’s choose 3. Automation & Robotics 4. Artificial Intelligence 5. 3-D Printing 6. Quantum Computing 7. Blockchain some of 8. IoT 9. Nanotechnology 10. Cultured Cells 11. Metaverse 12. Decentralized Finance (DeFi) them… 13. Aging – Immortality 14. Space Exploration 15. Democratization of Investing, Trading and Digital Wallets …and many more Disruptive Trends Genetics CRISPR – CAS9 Gene Editing o CRISPR-based technologies consist of a Cas enzyme, which can cut DNA or RNA and a short RNA molecule that directs the Cas enzyme to specific targets by base-pairing with the complementary sequence on the target DNA or RNA o CRISPR/Cas System: A Potential Technology for the https://youtu.be/6tw_JVz_IEc Prevention and Control of COVID-19 and Emerging Infectious Diseases https://www.frontiersin.org/articles/10.3389/fcimb.2021.639108/full https://youtu.be/jAhjPd4uNFY Synthetic Biology Applying Synthetic Biology to Reverse Climate Change What is Synthetic Biology ? : https://youtu.be/rD5uNAMbDaQ, https://youtu.be/OuPlG-LFNt8 Applications: https://www.youtube.com/watch?v=49zpQt46b9U https://youtu.be/lNttxYdGHs4 Disruptive Trends Brain computer interfaces https://youtu.be/2rXrGH52aoM https://www.youtube.com/watch?v=GhQfKDLJLq0  Automation & Robotics Disruptive Trends https://youtu.be/WSKi8HfcxEk https://www.youtube.com/watch?v=Jq0GknnKvXM  Industry 4.0 Disruptive Trends https://youtu.be/Uu8NU4w3Fyk https://youtu.be/ttfMEXGdh1s https://youtu.be/j62U089HDx0 Disruptive Trends Industry 4.0 ------------------------------------------------- Suscríbete a nuestros canales para más conferencias, información y noticias: 🔹Web: http://mornings4.com/ 🔹FB: https://www.facebook.com/mornings4/?ref=bookmarks 🔹IN: https://www.linkedin.com/company/11134894/ 🔹IG: https://www.instagram.com/mornings4/ 🔹TW: https://twitter.com/mornings4_0 https://www.youtube.com/ watch?v=-T99Ue41z1g Disruptive Trends 3D Printing o Industry and prototyping o Digital anatomy 3D printer o Printed houses o Human tissue o Civil engineering o Cultural heritage o Etc. First 3D printed footbridge in the world located in Alcobendas (Madrid, Spain) Disruptive Trends 3D Printing Civil engineering Cultural heritage https://youtu.be/KKhvghLsk-4 https://www.youtube.com/watch?v=_CqewBUYZ4M Disruptive Trends 3D Printing Industry and prototyping Digital anatomy 3D printer https://youtu.be/gi6HEFArqMY https://youtu.be/paLXaX0b-t4 Disruptive Trends 3D Printing Printed houses Human tissue https://www.youtube.com/watch?v=XHSYEH133HA https://youtu.be/uHbn7wLN_3k Disruptive Trends Cultured cells & meat https://youtu.be/29GFYxI4tek https://www.youtube.com/watch?v=UA73qYxxNew https://gfi.org/science/the-science-of-cultivated-meat/ Disruptive Trends Quantum computing https://youtu.be/JhHMJCUmq28 Disruptive Trends Artificial intelligence https://youtu.be/b76gsOSkHB4?si=HfC2UlYF1FGXQeq3 https://youtu.be/0yCJMt9Mx9c Disruptive Trends AI Devices https://youtu.be/nPAcoZplLC4?si=PqI4N08biMUUG984 https://youtu.be/Rqh6fhcAqpw?si=4fHgG-L9d3HNpOYa https://youtu.be/9lNIwOOMVHk Disruptive Trends Metaverse https://youtu.be/odbqlASYv9E Disruptive Trends Decentralized Finance (DeFi) https://youtu.be/_tXd9SC9xZw Disruptive Trends Anti aging – Regenerative medicine immortality? https://youtu.be/cLZEEOZlTzo https://youtu.be/EYXKCfLJXM4 https://youtu.be/e0vKOYQUmgg Disruptive Trends Space exploration & Space Mining Blue Origin Firefly Aerospace https://youtu.be/VGosZWBTF7A?si=sCZ2Yy9kZReY6_ui SpaceX https://youtu.be/WCmO0fre9Fc?si=HAFVQCA8_UoPKvWH Rocket Lab Virgin Orbit Disruptive Trends Digitalization of investing, trading and digital wallets Robinhood Coinbase - Binance Paypal Block (Square) https://www.un.org/en/digital-financing-taskforce Homework Disruptive Trends Video Homework Methodology Each group will choose the study of one disruptive exponential technology and one industrial sector. Several groups can coincide in the same trend. Objective: To make a 6-7 minute video structured in 2 phases 1) Choose one high technological trend Study the state of the art WHAT problems it solves? WHICH industries it can impact and HOW 2) Choose one sector and analyze how this technology may affect/disrupt this sector in the next 10 years Strategies in a Disruptive World Module III - Multiple Disruption Typologies Technological disruption and exponential disruption Néstor Miranda Carús Professor of Strategic Management Disruptive innovation Revisiting the theory  Types of Innovation Product Innovation – i.e. diet cola with lime, electric car, laptop… Process Innovation – i.e. mass production, quality management… Value Innovation: Blue Ocean, New Market Spaces Management/Organizational Innovation – i.e. matrix organization design… Service Innovation – i.e. ShareNow, BlaBla Car Innovation in Industry Structure – i.e. Dell Computer  Levels of innovation Sustaining Innovation Disruptive Innovation Incremental Innovation Radical Innovation Radical vs. Incremental Innovation Incremental Innovation – either improves upon something that already exists or reconfigures an Microprocesors (Intel, ARM) existing form or technology to serve some other Car technology since Model T. purpose. Radical Innovation – something new to the Change from piston-powered engines to jet world, a departure from existing technology or propulsion technology in aviation. methods. Electric car  Radical Innovation Characteristics of radical innovations as defined by Rensselaer Polytechnic Institute Researchers and Lee A. Sage: – Improvements in known performance features of five times or greater – A 30 percent or greater reduction in cost – An entirely new set of performance features – Changes the basis of competition Industry Evolution (Incremental and Radical Innovation) Improvement Radical In features or Innovation Time 9 Incumbents often have advantages in Sustaining Innovation Innovation requirement for Technology Market Value Capture Execution viability Higher ability to In-depth Access to IP Ability to finance new Conduct understanding of the protection venture with existing technological customer mechanisms cash flows scanning and Customers are Better access to foresight familiar with capital markets Potential sources Support state-of- company (reduced Established access to of incumbent the-art R&D perceived risk) distribution channels advantages facilities Attract qualified personnel Source: Chandy & Tellis (2000), “The Incumbents Curse? Incumbency, size and radical product innovation” 10 Disruptive innovation Disruptive innovation is a challenge to incumbents Disruptive technologies Breakthrough Nature of Technological Change Radical Highest o Emerge occasionally Potential for Disruptive o Underperform established Growth Next- Platform products in mainstream Generation markets Derivative o Have features that fringe/new Improvement customers value o Different value proposition than previously available Base o Evolve while incumbent Replace Sell more products Reach continues to improve its Create Current to existing New New current technology Products customers Customers Market Impact on Market Source: Christensen (1997) Disruptive innovation Dynamics of disruptive technologies 1 Performance at A new disruptive technology is launched the high end of the market It underperforms the dominant one along the dimensions valued by mainstream Product Performance customers Mainstream Incumbents most profitable customers do not want products based on disruptive technologies Performance at the low end of the market 2 Disruptive technology offer new features – typically (a) cheaper, (b) simpler, (c) smaller, or (d) more convenient than those based on the Source: Christensen (1997) dominant technology Time Disruptive innovation Dynamics of disruptive technologies Performance at the high end of the market 3 Product Performance Disruptive technologies enter Mainstream emerging/ insignificant markets that value new features Performance at the low end of the market 4 The new disruptive technology steadily improves in performance until it meets the standards of performance demanded by the mainstream market Source: Christensen (1997) Time Disruptive innovation Dynamics of disruptive technologies The incumbent continues to improve its current technology, leading to Performance at performance oversupply the high end of (overserving customers the market in their needs) 5 Product Performance Mainstream 6 Performance at At that point, the new the low end of (disruptive) technology displaces the dominant the market one and (b) the new entrant displaces the dominant incumbent(s) in the mainstream market. Source: Christensen (1997) Time Disruptive innovation Exponential disruption https://youtu.be/n67WesqphTw?si=CY5ak3YqZOuW0GC- 7 Democratization 6 Disruption Performance at the high end of the market Product Performance Mainstream 5 Demonetization Performance at the low end of the market 4 Dematerialization 3 Convergence Adapted from “The future is better than you think” 1 Digitalization 2 Irrelevance Time Peter Diamandis Disruptive innovation The innovator’s dilemma From theory to practise Harvard Business Review interview to o Was a disruptive innovation? Clayton M. Christensen o Was a disruptive innovation? o Was a disruptive innovation? o Any other companies to analyse? “Disruptive innovations are possible because they get started in two types of markets that incumbents overlook: low-end markets or new-markets” Clayton Christensen (HBR, 2015) https://www.youtube.com/watch?v=qDrMAzCHFUU o What is “the innovator’s dilemma”? Strategies in a Disruptive World Module III – Business Model Transformation The Apple Turnaround Néstor Miranda Carús Professor of Strategic Management Apple’s study case background The Mac paradox Apple’s study case background 1976-2012 Summary Apple’s study case background Dawn and dusk 1976-1985 o 1976 Steve Jobs and Steve Wozniak founded Apple Computer, building Apple I o 1977 Release of Apple II o 1981 IBM entered the PC market with a PC using Microsoft’s DOS operating system and an Intel microprocessor o Apple’s net income fell 62% between 1981 and 1984 o 1984: Apple introduced the Macintosh o 1985: Steve Jobs was forced out https://www.youtube.com/watch?v=8bepzUM1x3w Apple’s study case background Breaking dystopia Who’s the girl? Who are the men? What represents Big Brother? The challenge has always been to break rules to find something new, something unexpected, as a way of engaging people in telling the story Lee Clow Creative Manager of 1984’s ad https://www.youtube.com/watch?v=lWqWkVFcMkg Apple’s study case background Dark years 1985-1993 The Sculley Years 1996-1997 The Amelio years o John Sculley (Jobs CMO) promoted to CEO o Return to premium-price differentiation o 85-90 growth period strategy o 1990 Apple was the most profitable PC o OS failure and NeXT acquisition company in the world BUT… o Apple was near bankruptcy o 90-93 failure to move into the mainstream o Jobs became CEO in 1997 o 1993 Sculley was replaced by Spindler 1993-1996 The Spindler years o Specific companies licensed to make Mac clones o He pushed for international growth o 1996 large losses led to a CEO change The Apple turnaround From death valley to silicon valley The Apple turnaround Dawn and dusk If Apple was a pioneer firm in... o R&D developments o Customer engagement o Iconic advertising o Brand image o Long-term vision o Quality products …but at the end of the 90`s the company was almost bankrupted...how did Apple get into this situation? The Apple turnaround We were at a cocktail party, and [former Apple CEO] Gil Amelio was explaining Apple’s predicament to us, and he said: “Apple is a boat. There’s a hole in the boat, and it’s taking on water. But there’s also a treasure on board. And the problem is, everyone on board is rowing in different directions, so the boat is just standing still. My job is to get everyone rowing in the same direction so we can save the treasure.” After he turned away, I looked at the person next to me and asked, “But what about the hole?” Larry Ellison (Oracle CEO) Anecdote cited by Fortune Magazine in 1997 The Apple turnaround Discussion Topics 1. What was the hole? 2. What was the treasure? 3. Did Steve Jobs, after taking over as CEO, just got everyone to row the boat faster or he really closed the hole? What was the process of getting Apple back to profitability ? 4. What was the logic behind the diversification of Apple to enter the consumer electronics industry with the launch of the iPod? How was the iPod business model different? 5. Which of the resources and capabilities developed for the iPod were leveraged to gain advantage in the new industries? 6. Evaluate Apple´s entry into the Smartphone industry with the iPhone and into the ultra portable mobile devices industry with the iPad. 7. What is different now with the products launched by Tim Cook. Evaluate Apple’s strategies since 2011 The Apple turnaround Closing the hole? Where was the hole? How/why did the hole start and grow? The Apple turnaround Jobs’ strategy analysis How did Steve Jobs closed the hole and got everyone to row in the same direction? https://youtu.be/IOs6hnTI4lw The Apple turnaround Open BM vs closed BM + Apple Integrated Business Model IBM (Lenovo) HP Applications (Compaq) Corporate Customer value Resellers Dell Microsoft Computer Peripherals Intel (AMD) ACER VAR´s Components CLONES Mass Retailers - Business Model / Chain value The Apple turnaround Dawn and dusk What happened with the differentiation gap? Why? Mac PC Customer value Time Integrated firms have the advantage when products aren’t good enough and quality becomes a priority Modular Open business models overtake over-served markets. Beat competitors with functionality Performance Beat competitors with speed, responsiveness and customization Time Structure of the PC Industry Platforms Platform * “Foundation Technology that is essential for a broader, independent ecosystem of businesses. The platform requires complementary innovation to be useful and vice versa” Product * “Proprietary and under one company control” * Source: Michael A. Cusumano & Annabelle Gawer. The Elements of Platform Leadership MIT Sloan Management Review Article – Spring 2002 The Apple turnaround Business model canvas The new Apple value proposition ? https://www.youtube.com/watch?v=rRwldMYkKdA The Apple turnaround Changing Apple’s BM Let's try to think about Jobs' transformation of each box…. Key Resources Client Relationships Value Proposition Client Segments Partner Network Distribution Channels Key Activities Revenue Cost Structure Streams The Apple turnaround Business model canvas The new Product Paradigm The Apple turnaround What was Steve Jobs' Business model canvas ultimate goal? BMC describes how a company creates, and that’s why he delivers and captures value, and that’s focused on changing … why it’s so relevant on analyze the transformation of the BM Client Key Resources Value Relationships Client Partner Segments Network Proposition Distribution Channels TO THIS CHANGE Key Activities THIS Revenue Cost Structure Streams The Apple turnaround Did Jobs finally solve Apple’s long- Entering the Consumer Electronics Industry standing problems? How was the Rowing in a new direction iPod different? https://youtu.be/kN0SVBCJqLs?si=5WSDGiOxwnycxFNi The Apple turnaround Technological Convergence Disruption 3 Products in One https://youtu.be/MnrJzXM7a6o?si=GkbdTEEFvHw6PnqX The Apple turnaround Technological Convergence Disruption Extending the Platform https://youtu.be/Ndnmtz8-S5I?si=q9qDSlezTtyPz8Of What’s next? Apple’s business model designed as a platform Networked Platform * Foundation Technology offered by an intermediary that brings together different groups of users and encompasses the components and rules required by users to access services or complete transactions Platform * Foundation Technology that is essential for a broader, independent ecosystem of businesses. The platform requires complementary innovation to be useful and vice versa Product * Proprietary and under one company control * Source: Michael A. Cusumano & Annabelle Gawer. The Elements of Platform Leadership MIT Sloan Management Review Article – Spring 2002 The Future of Apple The new Product Paradigms ? Can Apple be disrupted ?