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Strategy & Business Plans. IEI Business Plan Workshops TL Hill [email protected] 215-204-3079. Business plan workshops. Matching Products and Services with Markets First one Competitive Analysis Last week Business Model Tonight Market and Sales

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Strategy business plans l.jpg

Strategy & Business Plans

IEI Business Plan Workshops

TL Hill

[email protected]

215-204-3079


Business plan workshops l.jpg
Business plan workshops

  • Matching Products and Services with Markets

    • First one

  • Competitive Analysis

    • Last week

  • Business Model

    • Tonight

  • Market and Sales

    • Monday, November 19, 2001 - 6:00 pm to 8:30pm

  • Financial Projections

    • Monday, November 26, 2001 - 6:00 pm to 8:30pm


Feasibility plan outline l.jpg
Feasibility plan outline

  • Production/Operating Functional Strategy

  • Intellectual Property Issues

  • Regulation Issues

  • Critical Risk Factors

  • Timeline

  • Break-even Analysis

  • Executive Summary

  • Product or Service

  • Technology/Core Knowledge

  • Target Market

  • Competition

  • Industry

  • Strategy/Business Model

  • Marketing and Sales Functional Strategy


Strategy can mean many things l.jpg
Strategy can mean many things

  • Strategic Management

  • Strategic Positioning

  • Strategic Navigation

  • Strategic Tactics

  • Plan

  • Process

  • Position

  • Pattern

  • Perspective

  • Procedure

  • Play

  • Ploy


Strategic management l.jpg
Strategic management

  • Is a detailed pattern of decisions that describes in some detail what a company will do

    • in light of what it might do,

    • what it can do,

    • what its leaders want to do, and

    • what it should do.

    • Kenneth Andrews


Strategic management6 l.jpg

Environmental Scanning

Strategic management

  • Disciplined iterative process…of pursuing a mission, while managing the relationship of the firm to its environment.

Evaluation &Control

StrategyFormulation

Mission

StrategyImplementation


Strategic management starts with the situation l.jpg

Industry

attractiveness,

industry dynamics, &

competitive

conditions

Social,

political,

regulatory,

& community

considerations

Other opportunities

and threats -- like new technologies

External Factors

Company’s Strategic Situation

Firm’s strengths,

weaknesses,

& competitive

market position

Shared vision, values

and company

culture

Ambitions,

philosophies, & ethical principles

of key executives

Internal Factors

Strategic management starts with the situation


But pushes beyond the situation l.jpg
But pushes beyond the situation

  • Strategic management is all about chasing a dream

  • In a disciplined but opportunistic way

  • By developing your assets

  • To take advantage of opportunities the world (environment, industry, market) gives

  • While shaping the world when you can.


Strategic management is about finding ways to grow l.jpg

Environmental Scanning

Evaluation &Control

StrategyFormulation

Mission

StrategyImplementation

Strategic management is about finding ways to grow...

Vision


Two basic strategic options l.jpg
Two basic strategic options

  • Position Strategy

    • Unique, valuable, defensible position in a market or industry

    • Supported by a tightly integrated value chain / activity system

    • Good for relatively stable industries/markets

  • Resource/Navigation Strategy

    • Vision-driven nurturing and leveraging of core resources

    • Supported by tight culture and explicit learning

    • Good for dynamic industries/markets


I strategic positioning l.jpg
I. Strategic positioning

  • A niche is typically the market the firm is uniquely qualified to serve

External Opportunities& Threats

Niche

Internal Strengths & Weaknesses


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Classic positional strategies

  • Cost (price) leadership

  • Differentiation

    • Quality, design, support/service, image

    • Always starts with the product

  • Focus

    • Broad or narrow

    • Always starts with a specific market segment


Examples of positional strategies l.jpg
Examples of positional strategies

  • Cost (price) leadership

    • Crown, Cork & Seal (pennies, plants). Wal-mart (warehousing, negotiation). Motel 6 (location, services, salespeople). Cintas (plants, logistics).

  • Differentiation

    • Mercedes (quality). Apple (design). Nordstrom (service). Nike (image). G&K (clean rooms, radiation). Most entrepreneurs (Zitner’s, Prompt.)

  • Focus

    • Wal-mart (broad - rural). Specialty bookshops (narrow - Giovanni’s room, NSP). Some entrepreneurs (NRI - changing mix & services).


Elaborations of positional strategies l.jpg
Elaborations of positional strategies

  • Penetrate new markets

    • Insurance in India. IMS.

  • Develop new markets

    • E-government. (Disruptive technologies.)

  • Develop new products

    • Gillette. Intel.

  • Become indispensable

    • Microsoft. Best subcontactors.

  • Fortify

    • Borders wholesalers, B&N’s leases.


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TOWS analysis

Internal

Factors

Strengths(S)

Weaknesses (W)

External

Factors

Opportunities (O)

SO Strategies

-------------------------

WO Strategies

------------------------

Use strengths to

take advantage of

opportunities

Offset weaknesses

to take advantage

of opportunities

ST Strategies

--------------------------

WT Strategies

-------------------------

Threats(T)

Use strengths to

avoid threats

Min. weaknesses to avoid threats


Tows analysis exercise l.jpg
TOWS analysis exercise

  • List 2 opportunities & 2 threats

  • List 2 strengths & 2 weaknesses

  • Match ‘em up

    • trying to use (or develop) strengths to take advantage of opportunities while offsetting weaknesses and defending against threats

    • avoiding strategies that put weaknesses in way of threats

  • Use classic strategies -- cost, differentiation, focus -- as prompts for ideas


Position strategies require fit l.jpg
Position strategies require fit

  • Fit refers to the niche a firm serves and the way its products or services are positioned

  • But fit also has to do with every other part of the internal structure of the firm.

  • A well positioned firm crafts itself to serve a niche better than anyone else

  • Starting a new firm offers the exciting, seductive, often advantageous opportunity to craft a perfect fitbetween specific opportunities and internal capabilities.


Value chain l.jpg

Human Resources

Technology

Infrastructure

Procurement

Margin

Value chain

After SalesService

Marketing/Sales

  • A strong value chain is a cross-linked net of activities that affects the cost or performance of the whole.

  • Supporting a strategy by optimizing both individual functions and the links between them to support a strategy yields a powerful, durable, hard-to-duplicate advantage.

InboundLogistics

OutboundLogistics

Operations


Value chain for nsp l.jpg

Cooperative: multiple skills, networks, low-cost, apprenticeship

Desk-top, enterprise, email

Land trust, warehouse, 501(c)3, friendly capital

Prompt press, newsprint

Value chain for NSP

Trade pbGalleys - review & hc

Prepay vsReturnsGreen tax

Direct mail

Distributor

Editorial

Library rate

UPS

Small but steady


Activity system l.jpg
Activity system apprenticeship

  • Is a less linear way of thinking about the kind of internal fit that supports a strategy.

  • Map crucially interrelated features and functions that define a firm’s unique skills and strategy.

  • Supports competitive advantage with reinforcing patterns or systems.


Ikea s activity system l.jpg

Self-service apprenticeshipSelection

LimitedCustomerService

ModularDesigns

Low MfgCost

High-traffic store layout

Design focused on low cost

Most items in stock

Year-round stocking

Flat packing kits

Self-transport

Limitedsales staff

Customer loyalty

Self -assembly

Suburban Location

On-site inventory

Easy to make

Wide variety

Long-term suppliers

Easy transport

Impulse buying

Explanatory labeling

Ikea’s Activity System


Experience curve l.jpg
Experience curve apprenticeship

  • For positional strategies, experience is the ultimate source of advantage.

  • Experience fuels the tacit knowledge that drives productivity improvements, innovations, elaborations of strategy, etc

  • Successful firms are especially good at creating the social and institutional structures that support the shared development of such tacit knowledge


Value chain or activity chart exercise l.jpg
Value chain or activity chart apprenticeshipexercise

  • Draw the value chain for your firm

  • Note reinforcing (and jarring) pieces

  • Try to create more reinforcements

    OR

  • Jot down functions and features

  • Look for patterns and connections

  • Try to crystallize patterns


Ii strategic navigation l.jpg
II. Strategic navigation apprenticeship

  • In a hypercompetitive world, all advantages are very temporary

  • Competition escalates rapidly along certain dimensions

    • Cost/Qualty, Timing/Know-how, Barriers to entry, Deep pockets

  • Leading to sudden shifts in the rules

    • as competition jumps to new arenas, along new ladders


Strategic navigation depends on timing l.jpg
Strategic navigation depends on timing apprenticeship

Competitive

Edge

  • Rapid change erodes positions…leading totemporaryopportunities

Strategic Window

Launch

Exploitation

Counterattack

Time


Strategic navigation requires vision l.jpg
Strategic navigation requires vision apprenticeship

  • Vision pulls firms forward

  • Strategic intent is vision manifest as focused ambition:

    • Lengthens organizational horizon

    • Promotes focus on ends

    • Encourages creative means

    • Promotes consistency between evolving short-term goals and more stable long-term ones

    • Promotes focused resource allocation

    • Tends to motivate


Strategic navigation builds on core assets l.jpg
Strategic navigation builds on core assets apprenticeship

  • Flexible strategies require core assets

    • plus a commitment to developing them

  • Assets are sources of future value

    • Tangible, intangible

    • Owned or not (but available)

    • Often with a useful life

    • Often people: customers, employees, organizational knowledge

    • Especially core competencies: special knowledge and skills embedded in employees and systems


Four arena analysis l.jpg
Four arena analysis apprenticeship

  • Trace escalating competition along ladders

    • Trying to predict shifts to new areas

  • Cost/Quality

    • Cintas: Ever better plants and routes

  • Timing/Know-how

    • Aramark: Bought into corporate uniforms

  • Barriers to entry

    • New plants, sophisticated logistics, global reach

  • Deep pockets

    • Slugging it out -- and sometimes buying out small fry


Navigational strategies l.jpg
Navigational strategies apprenticeship

  • Find loose bricks

    • Stake out undefended territory, fly low, cherry pick…looking for a beachhead, not a niche (Honda)

  • Change the terms of engagement

    • Sidestep barriers to entry (Canon)

  • Collaborate

    • License, outsource, joint venture to gain information and knowledge and advantage as go (lamp shades to ceiling fans)


Navigational strategy exercise l.jpg
Navigational strategy apprenticeshipexercise

  • What is the rate of change in your industry or market?

  • What is driving change?

  • In what arenas is competition focused? Cost/Quality, Timing/Know-how, Barriers to Entry, Deep Pockets?

  • How might you take advantage of flux in your field?


Iii business models l.jpg
III. Business models apprenticeship

  • A business model describes what a firm will do, and how, to build and capture wealth for stakeholders

  • Effective business models operationalize good strategies -- turning position, fit, etc (or vision and resources) into wealth

  • Start-ups offer the opportunity to craft a perfect fit between specific opportunities and internal capabilities.


Business models build capture wealth for stakeholders l.jpg
Business models build & capture wealth for stakeholders apprenticeship

  • Build Wealth

    • Through an alchemical transformation of inputs into something that customers value enough to pay for at more than cost

    • Or through developing enough potential to be bought: valuable positions, know-how, customers…

  • Capture Wealth

    • Private or public sale

    • Profit: Revenues plus cost control

    • Plus: The good life, a rich family life, entrepreneurial success, social impact


Business models start with strategy l.jpg
Business models start with strategy apprenticeship

1. Describe the landscape:

  • Porter + OT.

  • Environment, industry, and relevant trends.

    2. Paint in competitors:

  • Competitor table. Perceptual maps.

  • What do you need to play? How do competitors compete? What opportunities exist?

    3. Identify strengths & weaknesses

  • Vision, skills, core technologies

    4.Choose a position/strategy


Business models enclose wealth l.jpg
Business models enclose wealth apprenticeship

4. Identify stakeholders you must serve

  • Owners, family, workers, community

    5. Identify the wealth you will capture

  • Capital, good life, family life, fameentrepreneurial effectiveness, social value

    6. Sketch a structure that will operationalize the strategy

  • Value chain or activity system


Business models define structure l.jpg
Business models define structure apprenticeship

6. Work out the implications

  • Functional strategies

  • Timelines: Ie., the path to profitability, sale or other realization of value

  • Financial projections & capital needs


Build a business model exercise l.jpg
Build a business model apprenticeshipexercise

  • Strategy

  • Stakeholders

  • Wealth

  • Model

  • Structural implications

  • Revise model


Iv functional implications of the business model l.jpg
IV. Functional implications of the business model apprenticeship

  • Marketing and sales

  • People, management, governance

  • Operations

  • Finances


Marketing and sales finance l.jpg
Marketing and Sales apprenticeshipFinance

  • Next week: Marketing & Sales

  • Two weeks: Things Financial

  • Now: Miscellaneous thoughts on people, management, governance and operations


People l.jpg
People apprenticeship

  • Employees, managers, stakeholders

  • More important even than cash

    • Effectiveness, pleasantness

  • Most difficult resource to find, to keep and to manage


Business systems l.jpg
Business systems apprenticeship

OwnershipPressures

Family/StakeholderPressures

ManagerialPressures


Business systems dynamics l.jpg
Business systems dynamics apprenticeship

  • Each system has its own logic, its own bottom line

    • Ownership: Wealth creation & maintenance

    • Family & Stakeholders: Relationships

    • Management: Efficiency & replicability

  • Each has its own time horizon

    • Ownership: Ten years or one working life

    • Family & Stakeholders: Reproduction of generations

    • Management: Quarterly or annual results


Governance defines the circles and the relationships l.jpg
Governance defines the circles and the relationships apprenticeship

  • Who decides what

    • Owners, key employees, key customers, family members, professional advisors

  • The decision makers for each circle

    • Owners (board of directors)

    • Managers (management team)

    • Family/stakeholders (council)

  • The scope of their decisions

  • Their responsibility to each other

  • Conflict resolution


Governance example l.jpg
Governance example apprenticeship

  • Company with strong family ties & 3 sons

  • Owner’s retirement needs drive succession

    • Two sons buy business (not land) from father

    • CEO-in-training - 50.+%; Sales manager 50-%

    • Board advisors

  • Family needs led to side business:

    • Graphic artist, co-owned by CEO-in-training and serving main business

  • Management needs turn alliance into new web-based business


Governance structures l.jpg
Governance structures apprenticeship

  • Direction

    • Vision, values, culture

    • Formal visioning

    • Cultural maintenance

  • Agreements

    • Contracts, bylaws

  • Support

    • Facilitators, advisors, models


Sharing the vision l.jpg
Sharing the vision apprenticeship

  • Vision provides both energy and stability.

  • Core Ideology anchors the team

  • Dynamic Envisioned Future draws the team forward

    • Long-term, audacious goals

    • Concrete, vivid description of the future


Value driver analysis l.jpg
Value driver analysis apprenticeship

[Time Frame]

H

InterventionZ

InterventionB

InterventionC

Impact

InterventionY

InterventionX

InterventionA

L

H

Probability of Success


Value driver analysis47 l.jpg
Value driver analysis apprenticeship

  • Work with teams (management, boards, stakeholders) to

    • List possible projects or initiatives

    • Rank each by magnitude of impact

    • Rank each by probability of success

  • Place them on the matrix

  • Concentrate on high value/high probability options


Value of the analysis l.jpg
Value of the analysis apprenticeship

  • Focus

    • No low hanging fruit, no wild gambles

  • Process

    • Generates commitment

    • Builds trust

  • Brings data and analysis

    • To what is for most entrepreneurs, intuitive

  • Models a useful tool


Legal structures l.jpg
Legal structures apprenticeship

  • Corporations are liability and task entities

    • With governance implications

  • Sole proprietorships

    • S corporation

  • Partnerships

  • C Corporations

    • LLC

  • Stakeholder Corporations

    • ESOPs, cooperatives, joint ventures, community corporations


Support structures l.jpg
Support structures apprenticeship

  • Boards of advisors

    • Next size up, pay

  • Professional team

    • Accountant, lawyer, coach, tie-breaker, insurance?


Governance section l.jpg
Governance section apprenticeship

  • Key stakeholders and how and why they count

  • Legal structure

  • Key agreements that distribute power and responsibility


Management responsibilities l.jpg
Management responsibilities apprenticeship

  • Vision

    • Blends personal & organizational visions

    • Fosters common culture

  • Strategy

    • Environmental scanning

    • Strategy

    • Measurable objectives

  • Resources

    • Tools, systems, education


Management responsibilities53 l.jpg
Management responsibilities apprenticeship

  • Systems

    • Efficient, effective processes

    • Fit between systems

  • Relationships

  • Staff development


Responsibility charting l.jpg
Responsibility charting apprenticeship

  • Provides a language and forum for discussing decision making -- at governance, management or staff level.

  • Creates greater clarity about how decisions are to be made and who will be accountable for those decisions.

  • Allows for a discussion of the difficult issues of power and authority.


Responsibility chart l.jpg

DECISION: apprenticeship

Roles Involved

Fin.

CEO

Oper.

Sales

Approve

Responsible

Types of Participation

Consult

Informed

Responsibility chart


Responsibility chart details l.jpg
Responsibility chart details apprenticeship

  • Approve

    • Sign off on decisions

    • Veto power

    • Final responsibility to commit resources

    • Shares accountability

  • Responsible

    • Takes the initiative, develops alternatives, recommends, implements.

    • Accountable for results


Responsibility chart details57 l.jpg
Responsibility chart details apprenticeship

  • Consult

    • Input but no veto power

  • Inform

    • Notify


Management team section l.jpg
Management team section apprenticeship

  • Names & Experience

    • Resumes

  • Missing members

    • Recruiting plan

  • Advisors & roles

    • Recruiting plan


Operations l.jpg
Operations apprenticeship

  • What you do

  • How you do it

  • Cost implications


Operations examples l.jpg
Operations Examples apprenticeship

  • Arbill

    • computerized information, pay incentives, training, culture, evidence

  • Anderson

    • architected solution simplifies training and control and resource management

    • ties in with knowledge management


Operations section l.jpg
Operations section apprenticeship

  • Key processes & strategy

  • Efficiency / cost control

  • Recruiting, training, evaluating strategy

  • Fit with overall strategy

  • Continuous improvement


Operations exercise l.jpg
Operations apprenticeshipexercise

  • Sketch out basic operational steps

  • Note cost assumptions

  • Create research list to confirm assumptions, fill in gaps, collect numbers


Bibliography l.jpg
Bibliography apprenticeship

  • Verna Allee, “Reconfiguring the Value Network,” The Journal of Business Strategy, 21 (4), PP 36-39.

  • R Boulton, B Libert, S Samek, “A Business Model for the New Economy,” The Journal of Business Strategy, 21 (4), July-August 2000, pp 29-35.

  • James Collins & Jerry Porras, Built to Last (HarperBusiness, 1994).

  • Richard D’Aveni, Hypercompetition (Free Press: 1994).

  • Kathleen Eisenhardt & Donald Sull, “Strategy as Simple Rules,” Harvard Business Review, January 2001.

  • Mark Feldman & Michael Spratt, PWC, Five Frogs on a Log: A CEO’s Guide to Accelerating the Transition in Mergers, Acquisitions and Gut Wrenching Change, (HarperBusiness 1999).

  • Pankaj Ghemawat, Strategy and the Business Landscape (Prentice Hall, 2001).

  • G. Hamel & C. K. Prahalad, “Strategic Intent,” Harvard Business Review, May-June 1989.

  • Robert Hamilton lecture notes, 1998.

  • Robert Hamilton, E. Eskin, M. Michael, "Assessing Competitors: The Gap between Strategic Intent and Core Capability", International Journal of Strategic Management-Long Range Planning, Vol. 31, No. 3, pp. 406-417, 1998


Bibliography cont l.jpg
Bibliography, cont. apprenticeship

  • TL Hill lecture notes, 1999, 2001.

  • J. D. Hunger & T.L. Wheelan, Essentials of Strategic Management (Prentice Hall, 2001).

  • Ivan Lansberg, Succeeding Generations (Harvard Business School Press, 2000).

  • B. Mahadevan, “Business Models for Internet-based E-Commerce,” California Management Review, 42 (4), Summer 2000, pp 55-69.

  • Henry Mintzberg & James Brian Quinn, Readings in the Strategy Process, 3rd Edition (Prentice Hall, 1998).

  • Alex Moss, Praxis Consulting presentation on worker ownership, 1999

  • Sharon Oster, Modern Competitive Analysis, 2nd Edition (Oxford University Press, 1994).

  • Michael Porter, Competitive Advantage (Free Press, 1985).

  • Michael Porter, “What is Strategy?”, Harvard Business Review, November-December 1996.

  • Jim Portwood lecture notes, 1998.

  • C.K, Prahalad & G. Hamel, “The Core Competence of Corporations,” Harvard Business Review, May-June, 1990.

  • Pamela Tudor, Notes on responsibility charting, 1999


Evaluation l.jpg
Evaluation apprenticeship

  • What was the most useful part of today’s workshop?

  • Least useful?

  • What should I definitely keep the same?

  • What should I change -- and how?


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