emerging trends in business strategy dr.kabaly p subramanian
TRANSCRIPT
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Emerging Trends in Business Strategy
Dr. Kabaly P SubramanianFaculty of Business Studies Arab Open University
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Transient Advantage
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Transient Advantage
Sustainable Vs Transient Sustainable : Creating a strong position
and defend it for extended periods of time
GE, IKEA , Unilever,… Transient : Constantly start new strategic
initiatives building and exploiting many competitive advantages at once.
Milliken&Company (Chemicals), Cognizant (IT), Brambles (logistics),…
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Anatomy of a Transient Advantage
Launch Ramp up Exploit Reconfigure Disengage0
0.5
1
1.5
2
2.5
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Anatomy of a Transient Advantage
Stage Nature People Comments
Launch Identifies an opportunity and mobilize resources to capitalize on it
Capable of generating ideas, comfortable with experimentation and iteration
Ramp up Business Idea brought to scale
Capable of assembling right resources, at the right time, at the right quality and deliver on the promise
Exploitation Captures profits and share and forces competitors to react
Capable of analytical decision making, M&A and efficiency
Traditional companies have plenty of talent
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Anatomy of a Transient Advantage
Stage Nature People Comments
Reconfigure Keep the advantage fresh
Capable of radically rethinking business models or resources
Disengagement Resources are extracted and reallocated
Candid ,tough minded and can make emotionally difficult decisions.
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Facing the brutal truth
Companies shore up an existing advantage for as long as possible, until the pain becomes so obvious that there is no choice.
IBM,Nokia,Sony,Kodak,…
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Assessing the current advantage I don’t buy my own company’s products or services. We are investing at the same or higher levels and
not getting better margins or growth in return. Customers are finding cheaper or simpler solutions
to be “good enough”. Competition is emerging from places we didn’t
expect. Customers are no longer excited about what we
have to offer. We are not considered a top place to work by the
people we’d like to hire. Some of our very best people are leaving Our stock is perpetually undervalued
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Seven Dangerous Misconceptions
Deeply embedded assumptions lead companies into traps
1. The first mover trap2. The Superiority trap3. The Quality trap4. The hostage-resources trap5. The white-space trap6. The empire building trap7. The sporadic innovation trap
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first mover-trap
Belief that first to market and owning assets create a sustainable position.
In some businesses like aircraft engines or mining it may be true.
But most industries a first mover advantage doesn’t last.
Example : Motorola , Ford,…
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Superiority trap
Early-stage technology, process or product won’t be as effective as something that’s been honed and polished for years.
Example : Kodak , Barnes and Noble
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Quality Trap
Many businesses in exploit mode stick with a level of quality higher than customers are prepared to pay for.
When a cheaper , simpler offer is good enough, customers will abandon the incumbent.
Nokia
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Hostage-resources trap
Nokia developed a product that was remarkably similar to today’s iPad in about 2004.
Nokia never capitalize on this groundbreaking innovation.
Companies emphasis was on mass-market phones, and resource allocation decisions were made accordingly.
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White-space trap
When opportunities don’t fit their structure , firms often simply forgo them instead of making the effort to reorganize.
Foe instance a product manufacturer might pass up potentially profitable moves into services because they require coordination of activities along a customer’s experience, rather than by product line.
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Empire building trap
Bureaucracy building and fierce defense of status quo.
It inhibits, experimentation, learning and risk taking.
It causes employees who like to do new things to leave.
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Sporadic-innovation trap
Many companies do not have a system for creating a pipeline of new advantages.
Vulnerable to swings in the business cycle.
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Strategy for Transient Advantage-Eight ways
1. Think about arenas, not industries2. Set broad themes, and then people experiment3. Adopt metrics that support entrepreneurial
growth4. Focus on experiences and solutions to
problems5. Build strong relationships and networks6. Avoid brutal restructuring : Learn healthy
disengagement7. Get systematic about early-stage innovation8. Experiment,iterate,learn
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Think about arenas , not industry
Untraditional competitors take companies by surprise.
Google’s move into operating systems
Wal-Mart into healthcare Arena : combination of a customer
segment, an offer, and a place in which that offer is delivered.
Customer’s jobs to be done.
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Set broad themes and then let people experiment
Interpretation of weak signals in the environment to set broad themes.
Within those themes , they free people to experiment with different approaches and business models.
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Adopt metrics that supports entrepreneurial growth
Conventional metrics can effectively kill off innovation
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Focus on experiences and solutions to problems.
Many companies are so internally focused that they are oblivious to the customer’s experience.
Australia’s Brambles : Company realized that one of grocers’ biggest
cost was the labor required to shelve goods delivered to their stores.
Brambles designed a solution : plastic bins It has cut labor costs significantly Fruits and vegetables arrive in better shape This lead to substantial profits, appreciation
and growth.
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Brambles Innovation : Plastic Bins
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Build strong relationships and networks
Evidence indicate that the most successful and sought after employees are those with the most robust networks.
Infosys , for instance is choosy about which customers it will serve , but it maintains a 97% retention rate.
In GE, the senior leaders spend inordinate amounts of time building and preserving relationships with other firms.
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Avoid brutal restructuring; learn healthy disengagement
Netflix’s efforts to get out of the DVD shipping business and into streaming movies is an interesting lesson in the wrong way to do.
Two decisions that infuriated customers.
Massive price increase across board and split the DVD and streaming business.
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Get systematic about early stage innovation
To have a process for filling your pipeline with new ones. Your innovation process needs to be carefully orchestrated.
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Experiment,iterate,learn.
Planning new ventures with the same approaches they use for more established businesses.
They need to focus on experimentation, iteration and learning
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Leadership as orchestration Difficult to handle the complexity Figure out some key directional guidelines Putting in place good processes for core activities
such as innovation Use their influence over a few crucial inflection
points to direct the flow of activities Initiates conversations that question, rather than
reinforce, status quo. Seeking contrasting opinions and honest
disagreement. Involving broader constituencies in strategy process Recognizing the need for speed Fast and rough vs slow and precise
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Conclusion
Defining where you want to compete How you intend to win How you are going to move form
advantage to advantage is critical
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Value Innovation
Case : Accor group of Hotels
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Innovate for Value
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Prepare a list of factors on which the industry competes
Eating facility Architectural Aesthetics Lounge appeal Room size 24-hour reception Room furniture and amenities Bed quality Hygiene Silence Price
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Four Actions framework
Which factors should be reduced well below the industry standard
Which of the factors that the industry takes for granted should be eliminated?
Which factors should be raised well above the industry’s standard?
Which factors should be created that the industry has never offered
A new value
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ERRC Grid
Eliminate Raise
Reduce Create
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The case of Accor's Formule 1
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Formule 1 Room
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Formule 1 Reception
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Lesson : Challenge the Industry Standards
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What are the big problems?
Poverty, climate change, ageing population, food and water security, education,…
Solution : “INNOVATE”
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How to Innovate?
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Innovator’s DNA model for generating innovative ideas
Challenging the Status
Quo
Taking risks
Questioning
Observing
Networking
Experimenting
Associational Thinking
Innovative Business
Idea
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Questioning
What is ? What caused? Why? Why not? What if?
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Observing
Observe customers Observe whatever strikes your fancy Observe with all your senses
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Networking
Tap outside experts Attend Idea networking events Form a personal networking group
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Experimenting
Take apart products, processes and ideas
Test new ideas through pilots and prototypes
Cross physical borders Cross intellectual borders
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Associating
Creativity is connecting things : Steve Jobs
Connecting wildly different ideas, objects,services,technologies,and disciplines and dish up new and unusual innovations.
Plastic appliances : casing for Mac Computer + Media Industry =
iTunes,iPod,iPhone,iPad,…
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Net Promoter System
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NPS
Net Promoter score, a method of measuring customers’ loyalty by sorting them into promoters, passives and detractors.
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Customer Loyalty
Loyal, passionate customers stay longer, spend more, contribute suggestions and sing your company’s praises to friends and colleagues.
That’s why loyalty correlates so strongly with sustainable, profitable organic growth. On average, an industry’s loyalty leader grows more than twice as fast as its competitors.
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Ideally, companies ask just two questions in their surveys:
1. How likely is it that you would recommend us (or this product or service) to a friend or colleague? (On a zero-to-10 scale : least likely -most likely)
2. What is the primary reason for your score?
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NPS
A company’s Net Promoter Score indicates whether it’s winning with customers.
A company with a high Net Promoter Score relative to key competitors usually grows faster and more profitably. The competitive advantage of having a higher percentage of promoters than detractors is tough to beat. Promoters defect at lower rates than other customers. They also spend more over time and cost less to serve.
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NPS
Companies that use NPS often create the right products. That’s because they know their customers better. They seek client feedback and respond with products suited to customers’ needs. In The Ultimate Question 2.0, Fred Riechheld and Rob Markey discussed how low Net Promoter scores exposed design flaws in Logitech’s MX 5000 keyboard and mouse. Logitech listened to customer criticisms and improved its next model.
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NPS
NPS leaders have the most powerful marketing tool: positive word of mouth. All the advertising in the world can’t overcome a bad image spawned by customer detractors. But when a company does right by its customers, word spreads fast—and in most companies, new customers generated through referral expand purchases quickly and tend to stay longer than new customers generated through any other means.
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NPS
More companies cite their Net Promoter Score as a sign of improvement in investor presentations and earnings reports.
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References
Transient Advantage : Rita Gunther McGrath
Blue Ocean Strategy : W. Chan Kim and Renée Mauborgne
Innovators Dilemma : Clayton Christensen et al.,
Net promoter System : Fred Riechheld and Rob Markey
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Thank YouEmail : [email protected]