Strategic Management Session 1 PDF

Strategic Management Session 1 Growth from the Core FHR MBA August 26th, 2024 dr. boris blumberg Take away from the course Recall and recognize strategy frameworks and princuples Sustainable advantage – strategy as meaning maker – go beyond a check the boxes exercise, comfort traps. Under...

Strategic Management Session 1 Growth from the Core FHR MBA August 26th, 2024 dr. boris blumberg Take away from the course Recall and recognize strategy frameworks and princuples Sustainable advantage – strategy as meaning maker – go beyond a check the boxes exercise, comfort traps. Understanding the Where to Play – How to Win framework Understanding the main concepts of Core Business strategy Evaluate the business challenges, choices and risks that emerge in a strategic transformation What to expect o A learning approach – openess, honesty, positive feedback o Trust, safe context for experimenting and case sharing o Bridge academic learning with real life practices o Clear structure o Practical, hands on o Interactive, teamwork with cases Who is Boris? Professional view  Teaching: Strategic Management, Research Methods  Research focus: Networks, Entrepreneurship and Research Methods  Administrative: Executive Director UMIO Who is Boris? chronological Who is Boris? What he loves about life. Now to you – who are you? Mandatory Answers o Your name, your background, what are you doing? o What is your personal learning objective for this course? Choose 2 questions to answer o What do you consider the most overrated virtue? o Which words or phrases do you most overuse? o Which talent would you like to have? o What is your most treasured material possession? o What is your life motto? Today’s programme is based on the strategy concepts from these books 8 Learn from strategy practices 9  Strategic discipline - What we’ll talk about today A melting core Sustained forces redefining profitable growth the business requires focus on e through hidden battlefields and Fo fin cu assets leadership de s Re Define economics the core Expand Companies expand from a strong core into adjacencies by applying a repeatable 10 formula  Imagine we enter the flip flop business 11 Flip flop business Flip flop business: Low end – cheap experience Hidden and not displayed Street markets are major channel Question You are the strategy director – What will you do? Weigh the pros and cons of the flip flop business.  Discuss 15 minutes in small groups  Top of the mind what would you do. Havaianas strategy changed the ‘flip flop’ playing field, growing from the core on 2 dimensions: distribution & geography 14 15 Strategy frameworks in perspective DOING SOMETHING NEW BUILDING ON WHAT YOU REACTING ALREADY DO OPPORTUNISTICALLY TO EMERGING POSSIBILITIES DEFINE THE CORE BUSINESS CREATING UNCONTESTED Playing to Win – How Strategy (Sharing & Synergy) NEW MARKETS really works (2014 A.Lafley, Finding Your Next Core (about Make competition irrelevant - Roger L. Martin, and Jennifer adjacency moves) Blue Ocean strategies - Kim & Riel) Grow outside the Core, Focus, Mauborgne, 2005) Repeatability, Adjacencies, DISCOVERY-DRIVEN Hidden Assets (Chris Zook, REINVENTING YOUR 2001 & 2004) PLANNING (McGrath and BUSINESS MODEL - Clay McMillan’s work on) Classic Scenario & portfolio Christensen, Henning COMPETITIVE RESPONSES Kagermann, and Mark Johnson’s flexibility-as-strategy (1990s, (Hardball: Five Killer Strategie, “Reinventing Your Business Tim Luehrman’s “Strategy as a Lachenaure & Stalk), Model. Portfolio of Real Options,”, DEFEND AGAINST Cusomano’s “Judo Strategy.”, DISRUPTION (D’Aveni – TRANSFORMATION Empire Strike Back, Surviving STRATEGIES BASED ON STRATEGIC PLANNING Disruption, Clay Christensen) RECONSIDERING YOUR CYCLES. Mankins & Steel’s COMPANY OR YOUR more recent “Stop Making Plans: GOOD-TO-GREAT (Jim Collins, INDUSTRY’S VALUE CHAIN- 5 Start Making Decisions,”) 2001): What are we good at? Forces - Strategy (Michael What are you passionate about, Porter, 1980), 3 Generic LEAN START-UPS (Eric Ries, BEHAG, Hedge Hog concept. Strategies (Michael Porter), Steven Blank’s “Why the Lean CORE COMPETENCES – Market leadership strategies – Start-Up Changes Everything) Hamel, G. & C.K. Prahalad product leadership, customer (1994), Competing for the intimacy & operational Future 16 excellence (Treacy & Wiersma, 1995)  Strategic discipline - What we’ll talk about today A melting core Sustained forces redefining profitable growth the business requires focus on e through hidden battlefields and Fo fin cu assets leadership de s Re Define economics the core Expand Companies expand from a strong core into adjacencies by applying a repeatable 17 formula What is Business Definition? Business definition describes the core and the economic boundaries of the battlefield within which companies compete Business activities beyond these core boundaries have little influence on strategic success or failure within them 18 Business Definition  Indicates whether two business segments should be operated as one or as separate businesses  Allows to determine the relevant market share  Is key to assess the basic economics of your business: relative market share drives profitability Companies that define their businesses incorrectly make poor strategic decisions. Many companies define their businesses too broadly to be useful and at the same time overlook competitors who are successfully leveraging more narrowly defined economics against them (cherry picking) 19 Consequences of incorrect Business Definition Costs Customers Competitors Incur unnecessary Neglect profitable Overlook relevant costs customer competitive threats Forgo opportunities segments Miscalculate to capture Over-invest in “market share” synergies unprofitable Set inappropriate Do not transfer customers performance experience Misjudge relevant targets Underinvest in market trends Overlook relevant important R&D Overlook relevant capacity changes initiatives geographies Misjudge true cost position 20 One business or seperate business? 21 Complexity of Business Definition Is it one business or not? One Business Separate Businesses Touring quality Lady Gaga and rappers Different manufacturers (Audio microphones and speakers use both Technica vs. Bose) Similar distribution Little manufacturing process channels knowledge is transferable Limited direct cost sharing Cross pens and BIC pens Both used for same function, High perceptual barriers to writing customers Similar raw materials Limited customer base overlap Some manufacturing steps shared Beer and distilled Brand name sharing opportunities Limited benefits of shared spirits Same distribution channels R&D Sold by same salesforce Key manufacturing processes are different Different raw materials  A few logical arguments are not 22 robust enough to delineate 22 businesses To delineate the economic boundaries, use the Business Definition matrix High One business with potential for One business differentiation or niche position (charge cards and credit (cross pens and BIC pens) cards) Separate businesses with potential for cost leadership (oil and refinery by-products) Cost Sharing Separate businesses Separate One business (beer and distilled spirits) businesses with with potential for potential for substitution bundling (milk cartons and (touring quality glass milk microphones bottles) and speakers) Low Low High Customer Sharing 23 Degree of customer sharing Customer base Functional substitution Perceptual barriers overlap Do you share many of Do different products currently Do customers perceive the same customers? (or potentially) fulfill the significant differences same customer needs? among the products? - Who makes the - Product utility analysis - Value perception purchase decision? o Do products offer similar o Functional value - Who uses the product? value along non-price o Ease of doing attributes (e.g., scissors - What else is business and knives cut cloth well)? purchased with the o o Is product bundled with Individual & product? other products (e.g., razors network value and blades)? o Inspirational value - Cross-price elasticity analysis 24 Degree of cost sharing Value chain steps How sharing occurs Examples Shared suppliers Gasoline and petrochemicals Purchased Shared raw materials Standard to luxury car models on Materials Shared inbound logistics common platform Procurement Similar or shared manufacturing Vitreous china toilets and sinks (Kohler) - facilities Forgings for Hammer Heads and Manufacturing - processes wrenches Multiple applications of same R&D Tape and Post-it Notes (3M) effort Combustion chamber design in Diesel R&D engines Common marketing + advertising Healthy Choice frozen dinners and Sales and Same sales force cereal Marketing Soda and orange juice (Coca-Cola) Shared info systems BankBoston checking accounts and Administrative savings accounts Support Shared general management Same distribution channels Cigarettes and candy (Philip Morris) Distribution Channels Electronic connectors & wire and cable Shared brand image driving Walmart versus category specialists Branding + Price premium price realization Northern Europe truck markets Realization  Question Business definition PepsiCo Select 3 business categories of PepsiCo. Define for each of them the business they are in Position each of the 3 businesses according to your ideas in the business definition matrix. 26  Team exercise - PepsiCo, Inc. is a multinational food, snack, and beverage corporation PepsiCo has interests in the manufacturing, marketing, and distribution of grain- based snack foods, beverages, and other products #5 business categories 27 Place the businesses of Pepsico in the matrix High One business with potential for One business differentiation or niche position (charge cards and credit (cross pens and BIC pens) cards) Separate businesses with potential for cost leadership (oil and refinery by-products) Cost Sharing Separate businesses Separate One business (beer and distilled spirits) businesses with with potential for potential for substitution bundling (milk cartons and (touring quality glass milk microphones bottles) and speakers) Low Low High Customer Sharing 28  Strategic discipline - What we’ll talk about today A melting core Sustained forces redefining profitable growth the business requires focus on e through hidden battlefields and Fo fin cu assets leadership de s Re Define economics the core Expand Companies expand from a strong core into adjacencies by applying a repeatable 29 formula Question: What is the similarity between the following Nike businesses? ‘top of mind’ 30 https://stmed.net/sites/default/files/football-wallpapers- Nike’s strategic discipline 35 Reebok competitor strategy 36  Nike’s strategic discipline and the outcome 1987 - 2019 37 Their next business? 38 How to define your ‘core’ business ? Channels Customers Most Most important profitable Core Most Most Assets critical critical Products Most differentiated Capabilities / 39 Value chain parts How to reach full potential in your core Channels Customers  Channel dominance  Building superior loyalty  Partnerships with (=retention, cross-sell leading channel and referral) participants  Designing new  GEM in online experience around Core unmet needs Geographies1 Products  High regional density  New-to-world features  Patents Capabilities / Value chain parts  Experience build-up  Cost leadership 40  Agile governance  Does a discipline also apply to platform strategies? 41 42 How Uber, valued at billions, was sent packing by a start-up in Singapore 43 Yes, Uber grows strong Services y Customers d e liver d Foo p o oling Rural Car h ailin g Rid e i s e rvice Older urban Tax Young urban ri vers d C ab er s o nal r driv s Core i Eu USA o s a fes ate C cyclis t So ro P r v r uth Pac Asia pe Pri Moto Am ific e ri c a Capabilities/drivers Location based services Geographies App design Partnering/ecosystem building 44 Capabilities / Sold off Data & App design  However Grab has a discipline in South East Asia Transport Delivery Food s u ranc e Payment In e d it s m ents very s Services C r ile p ay dde li M o b t fo o mile delivery Customers L a s a st mile L p o oling Rural Car h ailin g Rid e i s e rvice Older urban Tax Young urban ri vers d C ab er s Ma o nal r driv s Core Ph la s i a t Th ilipin ysia ro fes ate C cyclis s P v r r V a e Sin Indon ietna iland s Pri Moto drive C n My amb gapo esia m Va an ma odia re r Capabilities/ Location based services drivers Geographies App design Partnering/ecosystem building Capabilities / 45 Data & App design Two became one, after Grab dethroned Uber. 46 46  Strategic discipline - What we’ll talk about today A melting core Sustained forces redefining profitable growth the business requires focus on e through hidden battlefields and Fo fin cu assets leadership de s Re Define economics the core Expand Companies expand from a strong core into adjacencies by applying a repeatable 47 formula Signs that you have to redefine your core 1. Growth formula 2. Industry profit pool 3. New model stalls out shrinks or shifts threatens core 48 Ways to redefine the core 49 What we spoke about today A melting core Sustained profitable forces redefining growth requires the business focus on battlefields through hidden and leadership e Fo fin assets economics cu de s Re Define the core Expand Expand from a strong core into adjacencies by applying a repeatable formula 50