[email protected]:(972)3-510-1768 -1- arena copyright 2002 alex coman it is not enough to succeed;...

[email protected] Tel:(972)3-510-1768 -1- WWW.Coman.Org ARENA

ARENA Copyright 2002 Alex Coman“It is not enough to succeed; others must fail”. Gore Vidal


ARENA Copyright 2002 Alex Coman

The ARENA Genome: Harmonic Strategic Planning

Arena Layers:Corporate, Business Function-Define Hierarchy

Refinement Stages:Arena, Focus, Action

Create Strategy

ARENA

F

O

C

U

S

A

C

T

I

O

NArena actors:

Partners, Threats; Current, FutureTailored Patterns.

Corporate Layer:Portfolio BusinessesMaximize Value

Function Layer:Process, Project and ProductAgile value drive

Business Layer:Positioning Products byMarket Strategy

Target CriteriaPrioritize attention

Manage Control span Dynamic Vectors:Vision, Resource, Deliver

Guru 2 Gorilla



Shareholder valueWarren Buffett, The Focus Investor’s Golden Rules:

«I’m 15% Phil Fisher and 85% Benjamin Graham»Benjamin Graham, quantitative: Fixed assets, current earnings, dividends.

Corporate filings and annual reports: cheap stocks.Phil Fisher, qualitative: future prospects, management capability.

Customers, competitors, managers: intrinsic value, long term.Invest: “Know nothing”: Index funds. “Know something”: 5-10 companies. Diversification overrated. It increases the chances of buying something you don’t know enough about.Volatility happens: thing long term 5 to 10 years.

DowJonesEuro

Stoxx 50

DowJonesEuro

Stoxx 50AverageEuropean

fund

AverageEuropean

fund1 Year

DowJonesEuro

Stoxx 50

DowJonesEuro


fund

AverageEuropean

fund

DowJonesEuro

Stoxx 50

DowJonesEuro


fund

AverageEuropean

fund

% I

ncre

ase

0

50%

100%

150%

200%

3 Year 5 Year


ARENA Copyright 2002 Alex Coman2001 - Annual Report

Stratus:…manufacturer of fault-tolerant computer systems…$267M Revenues…were estimated to be $84M in 1999 and $345M in 2000…expected to peak in fiscal year 2002 and decline thereafter through the end of the product’s life (2009) as new product technologies were expected to be introduced by us. A risk-adjusted discount rate of 35% was used to discount projected cash flows. The actual results to date have been consistent, in all material respects, with our assumptions at the time of the acquisition, except as noted below…Product development relating to the…projects was discontinued due to our reprioritization of product direction…Consequently, we did not realize the forecasted revenues from these projects. During fiscal year 2001, substantially all of the goodwill and acquired intangibles related to the purchase of Stratus were written off as part of our restructuring program…Chromatis Networks: Next generation optical transport solutions that provide telecommunications carriers with improvements in the cost, efficiency, scale and management of multi-service metropolitan networks…integrate data, voice and video services…and combine this traffic onto a wave division multiplexing system.…$428M represented its estimated fair value using the methodology described above…Revenues were estimated to be $375M in fiscal year 2001 and $1 billion in fiscal year 2002. Revenue was expected to peak in fiscal year 2005 and decline thereafter…A risk-adjusted discount rate of 25% was used…As part of our restructuring program in fiscal year 2001, the Chromatis product portfolio was discontinued and all of the remaining assets…were written off.Spring Tide Networks: Carrier-class network equipment..that enables service providers to offer new Value-added IP services and VPNs with low cost and complexity…IP service switch carrier class platforms that combine the connectivity of a remote access server, the network intelligence of a remote access server, and the switching capacity and quality of service capabilities of an ATM switch in one integrated switch.

In-Process Research and Development « IPRD »In connection with the acquisitions in fiscal years 2000 and 1999 of Chromatis, Spring Tide and Stratus, we allocated non-tax impacting charges of $428 million, $131 million and $267 million, respectively of the total purchase price to IPRD. As part of the process of analyzing each of these acquisitions, we made a decision to buy technology that had not yet been commercialized rather than develop the technology internally. We based this decision on a number of factors including the amount of time it would take to bring the technology to market. We also considered Bell Labs’ resource allocation and its progress on comparable technology, if any. We expect to use the same decision process in the future.We estimated the fair value of IPRD for each of the above acquisitions using an income approach. This involved estimating the fair value of the IPRD using the present value of the estimated after-tax cash flows expected to be generated by the IPRD, using risk-adjusted discount rates and revenue forecasts as appropriate. The selection of the discount rate was based on consideration of our weighted average cost of capital, as well as other factors, including the useful life of each technology, profitability levels of each technology, the uncertainty of technology advances that were known at the time, and the stage of completion of each technology. We believe that the estimated IPRD amounts so determined represented fair value and did not exceed the amount a third party would pay for the projects.Financial highlights: Shareholders’ equity: 2000:$30.50 2001:$5.73, (81.2%).Annual Meeting to be held on 02/20/02 at 09:00 A.M. Proposals: Evelyn Y. Davis: “Repeal Classified Board.” (Reelection of directors annually vs. recent stagger system).After thoughtful consideration…directors recommend a vote against proposal 2.



Merchandising,Music,

Publishing

Schumpeter: Creative destruction

Disney corporate portfolio

AnimationMerchandising

AnimatedFeatures

MusicPublishing

TVProgramming

Disneyland

BookPublishing

DisneyStores

DirectMail

HollywoodRecords

SoftwareVisual effects

Disneyworld

Films TouchstoneHome videos

HollywoodPictures

MiramaxAcquisition

MovieEntertainment

LiveEntertainment

KCAL TV ABC

EPCOT

Disney StudiosMGM

Euro Disney

DisneylandTokyo

HotelsResorts

Holidays,Resorts,

Real estate development

DisneyChannel

Theater

BroadcastingHokey Baseball

AmusementParks

Animal KingdomDisney America

DisneyInstitute

CruisesCommunities

‘30‘20 ‘50 ‘60 ‘80 ‘90 2000‘40 ‘70

MovieEntertainment

MovieEntertainment

BroadcastingBroadcasting

LiveEntertainment

LiveEntertainment

AmusementParks

AmusementParks


Publishing


Publishing

Holidays, Resorts,Real estate development

Holidays, Resorts,Real estate development


ARENA Copyright 2002 Alex ComanActive Portfolio Management

-10%

-5%

0%

10%

15%A business’s average total return to

shareholdersrelative to its industry

5%

1 5 10 15 20 25Business age in years

Comparing 1985 to 1995, the top 150 electronic-systems-companies

worldwide ranked by revenue: 75% of the firms in 1985

either slipped or disappeared by 1995

25% improved / 33% eliminated / 42% new

Source: Anderson Consulting (1997) “Exploiting Uncertainty: Hi-Techs High Performers Change the Dynamics of Competition



Pareto

Cum

Percent

0

20%

40%

60%

80%

100%

11

4455

15%15%25%25%

50%50%

44

15%15%

25%25%

50%50%

55

Sha

re o

f to

tal r

even

ue

Income Group

20%

40%

60%

80%

100%

Distribution of US federal Income-tax revenue by income group



Brandenburger and Nalebuff ‘95

Paradigmatic Isomorphism: Deep Structure

CompanyCompany

CustomersCustomers

SuppliersSuppliers

SubstitutesSubstitutes ComplementorsComplementors

Porter’s 5 forces:Sustainable competitive advantage; Entry Barriers

CompetitorsCompetitors

New entrantsNew entrants

substitutessubstitutes

SuppliersSuppliers BuyersBuyers

A. Grove, ’96: Six forces Diagram x10 force

The BusinessThe Business

ComplementorsComplementors

SuppliersSuppliers

ExistingCompetitors

ExistingCompetitors

A different wayA different way

CustomersCustomers

PotentialCompetitors

PotentialCompetitors

Mintzberg ’88: Generic Strategies

PrimaryIndustriesPrimary

Industries

ExtractionExtraction ProcessingProcessingFabricationFabrication AssemblyAssembly WholesaleWholesale RetailRetail

SecondaryIndustries

SecondaryIndustries

TertiaryIndustriesTertiary

IndustriesUpstreamIndustriesUpstreamIndustries

MidstreamIndustriesMidstreamIndustries

DownstreamIndustries

DownstreamIndustries

Hamel and Prahalad, ’94

Brand &Distribution

Brand &Distribution

Creating coalitionsCreating coalitions

Standards &Regulation

Standards &Regulation

Core

competencies

Core

competencies

Market Learning& ExperimentationMarket Learning

& Experimentation

Strategic Apex

Operating Core

Suppo

rt

Staff

Technostructure Middle

Line

Ideology

Marketing:7Cs: Company, competition, channel, customer,



Market segments: ExternalitiesMarket segments: Externalities

CompetitorsCompetitors

Spatial Paradigm: Vertical FlowUpstreamUpstream

DownstreamDownstream

FirmValue System

FirmValue System

Back OfficeBack Office

Front OfficeFront Office

Value/FoodChain

Value/FoodChain

DistributionChain/

Channels

DistributionChain/

Channels

SupplyChain/

Channels

SupplyChain/

Channels

SubstitutesSubstitutesComplementors

ClustersComplementors

Clusters

RegulatorsRegulators

ForwardIntegrationForward

Integration

BackwardIntegrationBackwardIntegration

VerticalIntegration

(Jumping theConnection)

HorizontalIntegration

900

Turn



HorizontalValue Chain:

Integration:Vertical

ControlInformation

Relationships: Business

Monopoly/ Regulatory Agency

Entities:Market

Firm/Coalition

Drugs

Teva

Farmer

Dairy

Distributor

Retailer

Consumer

Low

High

FDA

Syntax

Vocabulary

StructureConcise:

Link Markets rather than instances.Business implies information flow.Titles on significant arrows.

Pertinent entities only.

Web

ARENA Canonical Form



Application Programs

Integration

Operating Systems

UnixLinuxMS

WinNTMS

WinXPMS

WinCE

Word Excel Access Outlook Explorer Navigator

VerticalIntegrationForward

Horizontal Integration

Work Stations

Compilers

MSVisual

SunJava

Sun

VerticalIntegrationBackward

MSJoystick

Diversification Spinoff

IBMRolm

IBMAptiva

900

Turn

Compaq ‘83“Portable PC”

Deskpro ‘86PC

Armada‘88Laptop

Proliant‘89Servers

6000/8000’96Workstation

Palmtop’97PDA

TandemMainframes

DigitalSolutions & Services

DigitalAlpha Processor



DistributorsDistributors

Health-Care Corporate Arena

Drug ManufacturersDrug Manufacturers

EthicalEthical Generic Generic

GSKGSK TevaTeva

FDA Ministry of Health GMP

CTSCTS LemonLemon

Health Management Org.Health Management Org.ClalitClalit

VitamedVitamed

MacabiMacabi

Physicians

PublicPublic

Prescription

List

PharmaciesPharmaciesMacabiMacabi

Prescription DrugsPrescription Drugs Over the CounterOver the Counter

ShorTabShorTab

Advertising

IMS

SuperPharmSuperPharm

Web

ProductSpecialists

Glaxo ILGlaxo IL

TevaTeva NovoPharmNovoPharm

DiseaseManagement

DiseaseManagement

AmericanHospitalSupplies

AmericanHospitalSupplies

Telemedicine

eMed

EDI

Admin

ShahalShahal

PharmaPharma

NovologNovolog



Electronic Markets and Electronic Hierarchies Malone et. Al., Modeling Coordination in Organizations and

Markets

Supplier2Supplier2

Decentralized Market

Customer1Customer1

Centralized Market

Supplier1Supplier1 Supplier3Supplier3

Customer2Customer2 Customer3Customer3

Supplier2Supplier2

Customer1Customer1

Supplier1Supplier1 Supplier3Supplier3

Customer2Customer2 Customer3Customer3

IntermediaryIntermediaryBrokerBroker InfoMediaryInfoMediary


ARENA Copyright 2002 Alex ComanRebuilding the value chain: Benchmark

Capital

Manufacturer/publisher

Wholesaler/distributor

E-retailer

Portal/aggregator

Consumer

ReintermediationDisintermediation

The e-commerce matrix

BusinessConsumer

BusinessB2B

GM/FordEDI networks

B2C Amazon

Dell

ConsumerC2B

PricelineAccompany

P2PEbay

Napster

Microsoft’s Nathan Meirvold: “Anyone standing between suppliers and customers will become road-kill on the information highway.”

Microsoft’s Nathan Meirvold: “Anyone standing between suppliers and customers will become road-kill on the information highway.”



E-Hubs: The new B2B Marketplaces. Steve Kaplan.

The Forward Aggregator Model

Buyers

Small resellers

IBMCompaq Cisco MicrosoftLarge Suppliers

Small Buyers

E-hub: Fulfillment, Inspection,Receivables, Financing IntegratorFOB.com

Distributors

DowDupont Ashland 3MLarge Suppliers

E-hub: Fulfillment, call center, Distributor

financing, configuratorsIngramMicro

The Reverse Aggregator Model

Direction Of

Aggregation

DirectionOf

Aggregation

What Businesses BuyOperating

InputsManufacturing

Inputs

How Businesses

Buy

SystematicSourcing

MRO HubsAriba, W.W.Grainger,

MRO.com, BizBuyer.com

Catalog HubsChamdex, SciQuest.com,

PlasticsNet.com

SpotSourcing

Yield ManagersEmployease, Adauction.com,

CapacityWeb.com

ExcangesE-steel, PaperExchange.com, Altra Energy, IMX Exchange


ARENA Copyright 2002 Alex ComanTelecom Market

Equipment Providers/Integrators

Service Provider

Customers

Access Technologies

Component Providers

MTU SoHo Campus Rural SuburbanBusiness

Small Telco

BLECILECCLEC Large Telco

DLEC

Nortel Lucent Alcatel Cisco Siemens

FiberCopper SatelliteCable Cellular

OrkitVocaltecECICommatchAptonicsAmdoxRadcomNiceGilat ADC

Seabridge Motorola Comverse Comtouch



Time-To-Market: TTM

Garment Manufacturers

FarEast

Labels

Victoria’sSecret

Customers

Retailers

Fabric

FarEast

StandardZaraFocusCostSpeedManufactureO/SVertical

Info. Tech.Cash Registers

Hand Held devices

Models/Yr200-300>11K

TTM6 Months Design+

3M Manf..

4-5W design+1M 10-15Days

Delivery1/Season2/WeekBadproducts

?Off inWeeks

Inventory turnover3*GapAdv. Camp.NoneProfits+30%/year

Macy’s

Benetton

Benetton

BenettonWalmart

Inditex’7923 Robot

cut & Die #3>40%

Zara467Stores

Zara ‘75

400 SmallShops>50% Delta

Delta

H&M900

suppliers

H&M

InnerSecret

NWH&MGAPZaraMfg. Eur.vs. Asia50%17%80%Design to Delivery6-

8Months6Months2-5 Weeks

Inventory Unsold25%20-30%15-20%Profit margin12.4%10.6%14.9%Sales $Bill$3B$13.7B$2.6B

GAP

GAP

25-35yearsAnti Gap

Older&Wealthier

College CrowdTrendy Urban

Late TeensCost Conscious

Girls 12+UpCheap cool

Zara467Stores

Massimo Duti207

Pull&Bear238

Stradivarius114

Bershka127

St.Michael

M&S

SologTefron

HiTex

CK

[email protected]:(972)3-510-1768 -1- arena copyright 2002 alex coman it is not enough to succeed;...

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