Post on 28-Dec-2015
BUSINESS PLAN OUTLINEhttp://www.sbm.temple.edu/iei/competitions.html
• Executive Summary • Company Description
– Including product/service & technology/core knowledge
• Industry Analysis & Trends• Target Market• Competition • Strategy/Business Model• Marketing and Sales Plan • Production/Operations Plan
Technology PlanManagement & Organization Social ResponsibilityDevelopment & MilestonesFinancials
Including Capital Requirements & Financial Statements
Appendix
STRATEGY FUNNEL
Customer &Benefits
CompetitiveDynamics
CompetitiveSpace
Segment,SizeChannels
Strategic Positioning
ValueProposition
IndustryStructure
Environmental Trends
IndustryMarket
PerceptualSpace
Goal: Articulate and execute long-term, defensible offer of unique value to customers
WHAT IS STRATEGY?
• Plan• Process• Position• Pattern• Perspective• Procedure• Play• Ploy
• Strategic Management
• Strategic Position
• Strategic Navigation
• Strategic Tactics
STRATEGIC MANAGEMENT
Environmental Scanning
Evaluation &Control
StrategyImplementati
on
StrategyFormulationMission
Vision
• Disciplined, iterative process of driving towards vision, by finding or making and maintaining a defensible space or trajectory in a given business environment.
STRATEGY CHECKLIST
• Value proposition• Vision• Position or direction– Structure or resource base
• Revenue & business model• Timeline or guidelines• Fit
VALUE PROPOSITION
• Specific, concrete offer of benefits– Price, quality, convenience, choice, cost-savings,
reliability, etc
• To precisely defined customers– Who recognize that the offer solves a problem for the– EG: Our clients grow their business, large or small,
typically by a minimum of 30-50% over the previous year. They accomplish this without working 80 hour weeks and sacrificing their personal lives.
VISION
• Stable core– Mission: Central audience + core
product/service – Ideology: Values, principles, culture
• Focused ambition– Concrete picture of successful impact– Serious, scary stretch goals– Disciplined experimentation
VISION EXERCISE
• Stable core– Mission: – Ideology:
• Focused ambition– What success will look like – in the
marketplace:– One audacious goal:
POSITION OR NAVIGATION?
• Position Strategies– Unique, valuable, defensible position in a market or industry– Supported by a tightly integrated value chain / activity system– Good for relatively stable industries/markets
• Navigation Strategies– Vision-driven nurturing and leveraging of core resources– Supported by tight culture and explicit learning– Good for dynamic industries/markets
STRATEGIC POSITIONS REQUIRE NICHES
External Opportunities
& Threats
Niche
Internal Strengths & Weaknesses
• A niche includes the market the firm is uniquely qualified to serve
STRATEGIC SITUATION
External Factors
Internal Factors
Strategic Situation
Resources (know-how,
people, money, etc)
Vision, values
&culture
Social,political,
regulatory, technologic
al&
community
IndustryAttractivenes
s,dynamics, &competition
Unmet customer needs & desires
Competitive position (through
customers eyes & in industry)
Match SW to OT
Strengths(S)
InternalFactors
ExternalFactors
Opportunities (O)
SO Strategies-------------------------
WO Strategies------------------------
Threats(T)
ST Strategies--------------------------
WT Strategies-------------------------
Use strengths toavoid threats
Min. weaknesses to avoid threats
Use strengths to take advantage of opportunities
Offset weaknessesto take advantage of opportunities
Weaknesses (W)
SWOT EXERCISE
External Factors
Internal Factors
Strategic Situation
Resources Competitive Position
Culture
Environment Industry Customer
• Map SW to OT..
TWO LEVELS OF STRATEGY
• Corporate– Growth– Retrenchment– Stability
• Business– Cost (price) Leadership– Differentiation– Focus
GROWTH STRATEGIES
• Concentration– Vertical and Horizontal
• Diversification– Concentric– Conglomerate
GROWTH THROUGH CONCENTRATION
• Concentrate resources on a single business– Concentrate vertically, i.e., backward or
forward (supply or distribution)– Concentrate horizontally by growing
geographically or by expanding product or service offering
MEANS TO ACCOMPLISH GROWTH
· Mergers· Acquisitions· Internal Growth· Strategic Alliances· International
DIVERSIFICATION
• Used if firm’s current product lines do not have much growth potential
• Benefits– Economies of Scope– Increase market power– Share infrastructure– Maintain growth
CONCENTRIC (RELATED) DIVERSIFICATION
• Outperform unrelated diversification• Best when– low industry attractiveness– strong business strengths– strong competitive position
• Allows use of distinctive competence • Seek synergy
CONGLOMERATE (UNRELATED) DIVERSIFICATION
• Best when– Firm operates in unattractive industry– Firm lacks abilities or skills easily
transferable to related industry • Focus is financial & not core
competence or synergy– Balance cash flows– Reduce risk
STABILITY STRATEGIES
• Pause and Proceed with Caution• No Change• Profit
RETRENCHMENT STRATEGIES
• Turnaround• Captive Company• Sell out or Divestment– Spin-off– Management buyout (MBO)
• Bankruptcy or Liquidation
BUSINESS LEVEL STRATEGIES
• Cost (price) leadership– Efficiency and scale
• Differentiation– Quality, design, support/service, image -- that
make a product or service special
• Focus– Explicit tie to a broad or narrow
market segment
EXAMPLES
• Cost (price) leadership– Dell Computers (logistics, volume) – Motel 6 (location, services, salespeople). – Southwest Airlines (corporate culture, service)
• Differentiation– Quality (Mercedes) – Design (Apple) – Service (Nordstrom). – Image (Nike). – Special niches (Zitner’s candied apples; independent
films)
EXAMPLES
• Focus– Broad (Wal-Mart - rural)– Narrow (NSP - activists, NRI - network
administrators)– Segmented (Computer security – spooks and
commerce, Financial services – rich, poor and in-between.)
VALUE DISCIPLINE POSITIONING
Product Leadership•(Differentiation)
Customer Intimacy
•(Focus)
Operational Excellence
•(Cost Leadership)
VALUE DISCIPLINES
Product Leadership - Compete on Speed• Good design, great execution• Educate & lead the market • Ad hoc, risk oriented culture • Organization designed for innovation
Operational Excellence - Compete on Scale
• Low price, limited options, ultimate convenience• Managed customer expectations• Measurement culture• Processes & transactions continually redesigned
for efficiency
VALUE DISCIPLINES
Customer Intimacy - Compete on Scope
• Offerings tailored to customers & segments• Deep insight into customer needs• Problem solving service culture• Full range of services, so customers stay• Breakthrough thinking, unique solutions
POSITION STRATEGY EXERCISE
Product Leadership• (Differentiation)
Customer Intimacy• (Focus)
Operational Excellence• (Cost Leadership)
Choose a position strategy and explain how you will achieve it.
STRATEGIC POSITIONS REQUIRE FIT
• Fit refers to the integration of every part of firms’ internal structures to better serve a niche.
• Well-positioned firms craft themselves to serve niches better than others.
FIT: ENTREPRENEURIAL ADVANTAGE
• Possibility of crafting a perfect fit between specific opportunities and internal capabilities
• Firms that fit opportunities extremely well have an advantage over bigger, stronger opponents…
• Examples: – Dollar Express vs Dollar Tree– Youthbuild vs School District– Giovanni’s Room vs Borders
VALUE CHAIN
• 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.
MarginTechnology
InboundLogistics
Operations Outbound
Logistics
Marketing/Sales
After SalesService
Infrastructure
Procurement
Human Resources
ACTIVITY SYSTEM
• A less linear way of thinking about the internal fit that supports strategy.
• Map crucially interrelated features and functions that define a firm’s unique skills and strategy.
• Support competitive advantage with reinforcing patterns or systems.
IKEA’S ACTIVITY SYSTEM
LimitedCustomer
Service
ModularDesigns Low Mfg
Cost
Self-service
Selection
Self-transport
Limitedsales staff
Customer loyalty
Self -assembly
Suburban Location
Most items in
stock
Design focused on low
cost
Explanatory labeling
Easy transport
Flat packing
kits
Wide variety
Long-term suppliers
Year-round
stocking
On-site inventory
Impulse buying
High-traffic store
layout
Easy to make
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
FIT 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
BUSINESS MODEL
• 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 and fit into wealth
FOUR ASPECTS OF BUSINESS MODELS
• Revenue Sources• Cost Drivers• Investment Size• Critical Success Factors
REVENUE SOURCES
• Subscription/Membership– Fixed amount at regular intervals prior to receiving
product/service• Volume/Unit-based
– Fixed price in exchange for product/service• Advertising-based
– Exempt from fee or pays fraction of the value• Licensing & Syndication
– One time fee• Transaction fee
– Fixed fee or percentage of total value of transaction
COST DRIVERS
• Fixed: item costs do not vary with volume
• Semi-variable: variable & fixed costs
• Variable: item costs vary with volume
• Non-recurring: item of cost occurs infrequently
INVESTMENT SIZE
• Maximizing finance needs
• Positive cash flow
• Cash Breakeven
CRITICAL SUCCESS FACTORS
• An operational function or competency that a company must possess in order to be sustainable & profitable
• Perform sensitive analysis
EFFECTIVE BUSINESS MODELS BUILD & CAPTURE WEALTH
• Build wealth: – By efficiently (profitably) transforming inputs into
something that customers value enough to pay for – again and again and again
– By supporting growth• Capture wealth:
– By siphoning off some of the accumulated wealth for stakeholders
– And by developing recognizable value – strategic positions, know-how, customers, free cash flow, lifestyles, social impact – that can be captured
EFFECTIVE BUSINESS MODELS REQUIRE HARD CHOICES
• About who matters– Owners, investors, family, workers, community
• About what kind of wealth matters– Financial capital, social capital, intellectual capital...ie.,
cash, good life, rich family life, entrepreneurial impact, social impact
• About the strategy that will deliver the wealth that matters to the stakeholders that matter
• About the structure that supports strategy
BUSINESS MODELS START WITH WHAT THE WORLD GIVES
1.Describe the landscape:– Porter– 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
BUSINESS MODELS ARE BASED ON STRATEGY
4. Identify stakeholders you must serve– Owners, family, workers, community
5. Identify the wealth you will capture– Capital, good life, family life, fame entrepreneurial
effectiveness, social value
6. Choose a position or approach– And elaborate a strategy to realize this– Especially a revenue model
BUSINESS MODELS DEFINE STRUCTURE
7. Sketch a structure to operationalize the strategy – Value chain, activity system, culture, simple rules
8. Work out the implications– Functional strategies– Timeline and milestones– Financial projections & capital needs – Path to profitability, sale, or other realization
of value
BUILD A BUSINESS MODEL EXERCISE
• Opportunity• Stakeholders• Wealth• Strategy
• Revenue Sources• Cost Drivers• Investment Size• Critical Success
Factors
•Model- Structural implications, timing, capital needs, etc.
GOOD EXECUTION IS MORE IMPORTANT THAN GOOD STRATEGY!
• Seeing a position or approach is fundamentally creative– Immersion, scenarios, future search,
• Constructing a strategy involves careful analysis and planning
• Executing a strategy requires relentless discipline
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).
• Craig Fleisher & Babette Bensoussan, Strategic and Competitive Analysis (Prentice Hall, 2003).
• 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 (CONTINUED)
• TL Hill lecture notes, 1999, 2001, 2002• 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).• Henry Mintzberg & Joseph Lampel, “Reflecting on the Strategy Process,” Sloan
Management Review, Spring, 1999.• 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• Hamermesh, Marshall & Piromohamed, “Note on Business Model Analysis for the
Entrepreneur,” Harvard Business School, 2002.