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Presentation Transcript
business models
Business Models

“A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). The process of business model construction is part of business strategy.”

what strategy is and isn t
What Strategy Is (and Isn’t)
  • Strategic Analysis
  • Industry Analysis
  • PEST Trends
  • Competitor Analysis
  • Resources & Capabilities

NY Times:America’s newspaper of record

  • Mission
  • Purpose
  • Values
  • Organization
  • Structure
  • Process
  • Rewards
  • Symbols
  • People
  • Policies
  • Activities

Strategy

Central, integrated, externally oriented concept of how to achieve objectives

  • Objectives
  • Specific targets

GE:#1 or #2 in our chosen industries

Adapted from Hambrick & Fredrickson, AME 19(4) 2005

what strategy is
What Strategy Is
  • Strategic Analysis
  • Industry Analysis
  • PEST Trends
  • Competitor Analysis
  • Resources & Capabilities
  • Mission
  • Purpose
  • Values

Strategy

1. Markets

2. Growth

3. Value Creation 4. Economics

5. Ecosystem

  • Organization
  • Structure
  • Process
  • Rewards
  • Symbols
  • People
  • Policies
  • Activities
  • Objectives
  • Specific targets

Adapted from Hambrick & Fredrickson, AME 19(4) 2005

strategy and business models
Strategy and Business Models

Activities

Choices

Market

Customers

Distributors

Competitors

  • Value
  • Basis of differentiation
  • Ecosystem
  • Network
  • Value Chain
  • Regulators
  • Social Media
  • Economics
    • Price
    • Cost
    • Risk

Growth

Scope

Mode

Pace

strategy and business models1
Strategy and Business Models

Activities

Choices

Market

Customers

Distributors

Competitors

  • Value
  • Basis of differentiation
  • Ecosystem
  • Network
  • Value Chain
  • Regulators
  • Social Media
  • Economics
    • Price
    • Cost
    • Risk

Growth

Scope

Mode

Pace

value price cost
Value – Price – Cost

(V - P) + (P - C) = V - C

Willingness to Pay (WtP)

VALUE

Consumer Surplus

PRICE

Profit Margin

Labour (L) Material (M) Capital (K)

COST

Price does not create value

competitive dynamics
Competitive Dynamics

Buyers and Suppliers use bargaining power to drive costs up and prices down

Willingness to Pay (WtP)

VALUE

Consumer Surplus

PRICE

Profit Margin

Labour (L) Material (M) Capital (K)

COST

Rivals and Entrants determine the range of bargaining

Substitutes can change the entire value equation

personal computer business models
PersonalComputerBusinessModels

telephone

internet

telephone

internet

MS

Intel

drives

key-b

monitor

etc.

a/s

service

C

U

S

T

O

M

E

R

S

order

sales

(corp.)

ship

assmbly

to order

parts

invty

PC

assmbly

order/

ship

parts

invty

ware-

house

retailer

whole-

saler

V-A

reseller

personal computer business models1
PersonalComputerBusinessModels

MS

Intel

drives

key-b

monitor

etc.

1.5 days

2 days

C

U

S

T

O

M

E

R

S

a/s

service

order

ship

assmbly

to order

parts

invty

PC

assmbly

order/

ship

parts

invty

ware-

house

retailer

whole-

saler

V-A

reseller

30 days

15 days

strategy and competitive advantage
Strategy and Competitive Advantage

Value Frontier

(state of best practice)

Improvement in Operational Effectiveness

Source: adapted from Porter, M.E.; 1996

strategy and competitive advantage1
Strategy and Competitive Advantage

Value Frontier

(state of best practice)

Source: adapted from Porter, M.E.; 1996

strategy and competitive advantage2
Strategy and Competitive Advantage

Value Frontier

(state of best practice)

Source: adapted from Porter, M.E.; 1996

slide14

Strategy and Competitive Advantage

Value Frontier

(state of best practice)

Source: adapted from Porter, M.E.; 1996

strategy and competitive advantage3
Strategy and Competitive Advantage

Value Frontier

(state of best practice)

Source: adapted from Porter, M.E.; 1996

sustainable growth formula
Sustainable Growth Formula

Retention Ratio

r

=

g*

=

N.I.

ROE

x

E

sustainable growth formula1
Sustainable Growth Formula

Retention Ratio

r

A

S

g*

=

N.I.

x

x

x

E

A

S

Financial Leverage

Profit Margin

Asset Intensity

sustainable growth formula2
Sustainable Growth Formula

r

A

S

g*

=

N.I.

x

x

x

E

A

S

100%

2

2

40%

=

10%

x

x

x

competing in the new normal
Competing in the “New Normal”

2008 can best be described as a global de-leveraging

Less debt is now available and this situation is unlikely to change in the foreseeable future

Interest rates remain low, but businesses cannot count on long-term low-rate regime

Less debt and lower risk appetites mean debt will be harder to acquire and more expensive for all but the best borrowers

Increased bank regulation and reporting requirements will add costs to banks that they, in turn, will pass on to their customers

Canadian exchange new normal: 40% currency appreciation in 2 years

slide22

Big Channel Deal

Milestones and Risk Profiles

Complete Business Plan

Complete Prototype (technology works)

First Paying Customer Order

Risk

Seed Funding

Secondary Funding

Time

lumismart value price cost analysis
LumiSmart Value-Price-Cost Analysis

2800

Value to Customers

1500

Potential Profit Margin

750

Unit Cost

400

slide27

Brokerage

Advertising

Unit Sales

Royalties

Subscription

strategic leadership
Strategic Leadership

FORMULATES

WINNING STRATEGIES

EVALUATES THEM

SYSTEMATICALLY

EXECUTES THEM

BRILLIANTLY

IMPROVESPERSONAL, TEAM &

ORGANIZATIONAL

CAPABILITIES

Now & Future: Political, Economic, Societal. Technological, Competitive.

ANALYZES THEENVIRONMENTTHOROUGHLY

Now & Future: Formulating and choosing winning strategies in an uncertain and rapidly changing business environment

Perform Today

Now & Future: Ensuring that we have the capabilities, capacity and culture to succeed in our strategic choices.

Build for Tomorrow

business models and competitive advantage
Business Models and Competitive Advantage

Competitive advantage lies in the gap between value and cost

Look to new entrants to identify new business models

Integration of internal processes with ecosystem partner activities can provide powerful barriers to imitation

Different risk factors are associated with different business models – risk factors can be multiplicative

The business models is not sufficient to ensure sustained performance – LEADERSHIP makes the difference