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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

Strategy & Business Plans

IEI Business Plan Workshops

TL Hill

[email protected]

215-204-3079

business plan workshops
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
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
Strategy can mean many things
  • Strategic Management
  • Strategic Positioning
  • Strategic Navigation
  • Strategic Tactics
  • Plan
  • Process
  • Position
  • Pattern
  • Perspective
  • Procedure
  • Play
  • Ploy
strategic management
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

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

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
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

Environmental Scanning

Evaluation &Control

StrategyFormulation

Mission

StrategyImplementation

Strategic management is about finding ways to grow...

Vision

two basic strategic options
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
I. Strategic positioning
  • A niche is typically the market the firm is uniquely qualified to serve

External Opportunities& Threats

Niche

Internal Strengths & Weaknesses

classic positional strategies
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
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
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.
tows analysis
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
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
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

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

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
Activity system
  • 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

Self-serviceSelection

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
Experience curve
  • 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
Value chain or activity chart exercise
  • 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
II. Strategic navigation
  • 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
Strategic navigation depends on timing

Competitive

Edge

  • Rapid change erodes positions…leading totemporaryopportunities

Strategic Window

Launch

Exploitation

Counterattack

Time

strategic navigation requires vision
Strategic navigation requires vision
  • 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
Strategic navigation builds on core assets
  • 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
Four arena analysis
  • 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
Navigational strategies
  • 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
Navigational strategy exercise
  • 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
III. Business models
  • 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
Business models build & capture wealth for stakeholders
  • 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
Business models start with strategy

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
Business models enclose wealth

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
Business models define structure

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
Build a business model exercise
  • Strategy
  • Stakeholders
  • Wealth
  • Model
  • Structural implications
  • Revise model
iv functional implications of the business model
IV. Functional implications of the business model
  • Marketing and sales
  • People, management, governance
  • Operations
  • Finances
marketing and sales finance
Marketing and SalesFinance
  • Next week: Marketing & Sales
  • Two weeks: Things Financial
  • Now: Miscellaneous thoughts on people, management, governance and operations
people
People
  • Employees, managers, stakeholders
  • More important even than cash
    • Effectiveness, pleasantness
  • Most difficult resource to find, to keep and to manage
business systems
Business systems

OwnershipPressures

Family/StakeholderPressures

ManagerialPressures

business systems dynamics
Business systems dynamics
  • 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
Governance defines the circles and the relationships
  • 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
Governance example
  • 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
Governance structures
  • Direction
    • Vision, values, culture
    • Formal visioning
    • Cultural maintenance
  • Agreements
    • Contracts, bylaws
  • Support
    • Facilitators, advisors, models
sharing the vision
Sharing the vision
  • 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
Value driver analysis

[Time Frame]

H

InterventionZ

InterventionB

InterventionC

Impact

InterventionY

InterventionX

InterventionA

L

H

Probability of Success

value driver analysis47
Value driver analysis
  • 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
Value of the analysis
  • 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
Legal structures
  • 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
Support structures
  • Boards of advisors
    • Next size up, pay
  • Professional team
    • Accountant, lawyer, coach, tie-breaker, insurance?
governance section
Governance section
  • Key stakeholders and how and why they count
  • Legal structure
  • Key agreements that distribute power and responsibility
management responsibilities
Management responsibilities
  • Vision
    • Blends personal & organizational visions
    • Fosters common culture
  • Strategy
    • Environmental scanning
    • Strategy
    • Measurable objectives
  • Resources
    • Tools, systems, education
management responsibilities53
Management responsibilities
  • Systems
    • Efficient, effective processes
    • Fit between systems
  • Relationships
  • Staff development
responsibility charting
Responsibility charting
  • 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

DECISION:

Roles Involved

Fin.

CEO

Oper.

Sales

Approve

Responsible

Types of Participation

Consult

Informed

Responsibility chart
responsibility chart details
Responsibility chart details
  • 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
Responsibility chart details
  • Consult
    • Input but no veto power
  • Inform
    • Notify
management team section
Management team section
  • Names & Experience
    • Resumes
  • Missing members
    • Recruiting plan
  • Advisors & roles
    • Recruiting plan
operations
Operations
  • What you do
  • How you do it
  • Cost implications
operations examples
Operations Examples
  • 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
Operations section
  • Key processes & strategy
  • Efficiency / cost control
  • Recruiting, training, evaluating strategy
  • Fit with overall strategy
  • Continuous improvement
operations exercise
Operations exercise
  • Sketch out basic operational steps
  • Note cost assumptions
  • Create research list to confirm assumptions, fill in gaps, collect numbers
bibliography
Bibliography
  • 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
Bibliography, cont.
  • 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
Evaluation
  • 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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