Flexible business models

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© Dr . Steyn Heckroodt

Breakfast talk:Flexible Business Models

Cape Town: 12 July 2014JHB: 13 June 2014

Dr Steyn Heckroodt

Morphing of Strategy

• Morphing is a special effect in motion pictures and animations that changes (or morphs) one image or shape into another through a seamless transition

• What has morphed?• Our thinking• How and why?

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• Plait of environment and business• Environment – Pong – simple, non-complex, stable,

yes at times a bit disrupted

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Environmental change

Organisational strategy



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ScanningScenario planningStrategy selectionStructure for implementationForecasting


• Post WW 2 – Sun Tzu – the Art of War• Thinking – analytical – molecular• Segment and categorise• Simplify• East and West• Socialist and capitalist• More fundamentalist thinking Christians and Anti-Christ

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Quick paradigm history © Dr . Steyn Heckroodt

• In strategy – environmental scanning 1970s• 80s – Porters and PESTLEs• Tools and techniques• Boxed – simplified• Scenario planning• Forecasting dominated• Larger manufacturing organisations IBMs and other

mass producing concerns – economies of scale• Product push

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70s and 80s © Dr . Steyn Heckroodt

• 90s – New jargon• Push versus pull • Supply chain versus demand chain• Customer focus, centricity• Information era• Systemic thinking (Ackoff)• Dots and Coms• Y2K

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90s © Dr . Steyn Heckroodt

• 2000s• Complexity and complex thinking modes• Thinking modes and paradigms • Order and un-order, rules and heuristics,

epistemology and ontology• Credit crunch• Transient (temporary) versus sustainable

competitiveness • Fad trends versus long-term trends

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2000s © Dr . Steyn Heckroodt

What the complexity boils down to

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• 4Ps to SAVE• Design thinking (from forecasting to back-casting

and foresight)• Five-forces disciples (dominate existing markets)

versus blue-ocean enthusiasts (look to creating new opportunities)

• Industry to arena (Garmin)• PESTLE: Conceptual positioning to relational status

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Paradigm shifts to helpmanaging complexity © Dr . Steyn

Heckroodt

ENVIRONMENT

11 © Dr Heckroodt, S © Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking

– GAME OVER. Epubsa.co.za

Labour Government

Public Pressure Groups

Exchange rate Interest rate

Fuel/Energy price Staff

ShareholdersColleagues

ENVIRONMENT



Labour Government





• Strategy thinking paradigms change as our view(s) of the environment varies

• Deterministic, intended, selected and planned• Continuously emerging and amplifying with

unpredictable and unknown emergent processes• As the environment is becoming more sweeping

and random in its change though (Immelt), how can flexible business models help?

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So – to answer the why © Dr . Steyn Heckroodt

• Understand how strategy, business models and tactics (the trio) interconnect and affect each other and how this can help guide the search for novel, interesting and profitable new ways to compete.

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To answer that... © Dr . Steyn Heckroodt

• Strategy – the selection of a particular business model

• Tactics – the choices available to an organisation based on the business model choice

• Business Model – the logic of the organisation, the way it operates and how it creates value. – Content– Structure– Governance of transactions creating value

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Distinguish between…

• Content – the goods or information exchanged, as well as to resources and capabilities required

• Structure – the stakeholders that participate, their links, and the way they choose to operate

• Governance – the way flows of information, resources and goods are controlled by the relevant stakeholders

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‘

Business model © Dr . Steyn Heckroodt

• Is to be flexible an organisation’s ability to reposition itself in a market by dismantling its current strategy?

or• Is to be flexible an organisation’s ability to

reposition itself in a market by dismantling its current business model?

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Here’s the question… © Dr . Steyn Heckroodt

• Merging market focused (in- pond & downstream) and network focused approaches (upstream)

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Flexibility defined © Dr . Steyn Heckroodt

Market Focus

Network Focus

In-pond

• Organisations with strong, long-term, inter-organisation relationships both upstream and downstream

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1. Network influencer © Dr . Steyn Heckroodt

DELL

• Organisations buying and selling on the basis of price, quantity and delivery agreements. Upstream transactional relationships are suppliers of commodity products (milk, sugar,). Downstream customers include retailers

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2. Transactional model © Dr . Steyn Heckroodt

TRADER

• Utilise long-term relationships upstream, and ownership downstream

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3. Franchise model © Dr . Steyn Heckroodt

ZARA

ZARA

• Supplier-focused organisations• Long-term relationships upstream, but sell

downstream through transactional relationships, on the basis of price, quantity and delivery agreements. Downstream customers include retailers and wholesalers.

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4. Agent model © Dr . Steyn Heckroodt

MOBILE/BANKS

• Organisations with transactional relationships upstream and long-term relationships downstream. They have a sales focus; close relationships with downstream retailers, while purchasing supplies purely on the basis of price and quality

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5. Sales-orientatedmodel © Dr . Steyn

Heckroodt

CO-OP

• Organisations with transactional relationships upstream and corporate ownership downstream. Downstream customers included retailers and business-to-business customers

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6. Retail model © Dr . Steyn Heckroodt

SPAR

SPAR

Shor

t le

ad ti

mes

Long

le

ad ti

mes

Supp

ly c

hara

cter

istics

Demand characteristics

Lean plan and optimize

Hybrid&

Postponement

Continuous replenishment

Agile quick response

Predictable Unpredictable

© Dr . Steyn Heckroodt27

Source: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education


• Embed flexibility when aligning market demands with organisational supply

Network architectures need to

• Two sets of aspects for designers to consider:– Design elements (content, structure and governance)

that describe the activity system’s architecture– Design themes (novelty, lock-in, complementarities, and

efficiency) that describe its sources of value creation• Business models are made of concrete choices and

the consequences of these choices• Different designs have different specific logics of

operation and create different value for their stakeholders

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Aspects for design © Dr . Steyn Heckroodt

• Choice Consequence• Secondary airports Low airport fees• Lowest ticket prices Large volume• Low commissions Low cost• Standardized fleet Bargaining power• Single-class Economies of scale• No meals Faster turnaround• Nothing free Additional revenue• No unions Flexibility in staff

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Ryan Air exp. © Dr . Steyn Heckroodt

• Every organization has a business model• It makes some choices, which have consequences• But not every organization has a strategy – a plan of

action for different contingencies that may arise• In this sense flexibility refers to morphing from one

business model to another whilst maintaining the strategic direction, vision and mission

• Model - are crucial in determining organisations’ value creation

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Now – the point © Dr . Steyn Heckroodt

• Content – goods or information exchanged, as well as to resources and capabilities required

• Structure – stakeholders, their links, and the way they choose to operate

• Governance – the way flows of information, resources and goods are controlled

• These issues are all interrelated – the question is• “How does one build a sustainable competitive

advantage?” (long-term and transient)

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Business model consistof... © Dr . Steyn

Heckroodt

• If the business model is a reflection of the organisation’s strategic choice, strategy proper is not the model

• Strategy proper is the choice and creation/creator of the model

• Flexibility for purposes of sustainability would refer to morphing between models – not strategies

• Different scenarios calls for different models• Strategic contingencies consist of different models

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Let’s try and answer... © Dr . Steyn Heckroodt

• This makes strategy a high-order choice that has profound implications on competitive outcomes

• Choosing a particular business model means choosing a particular way to compete– A particular logic of the organisation– A particular way to operate and to create value for the

organisation’s stakeholders– A particular content, structure and governance of

transactions

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Sustainability contained © Dr . Steyn

Heckroodt

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The trio © Dr . Steyn Heckroodt

Possible Business Models Tactics:

Competitive choices enabled

by each Business Model

Strategy plan of which Business

Model to use

Case study



Dominant attribute

QualityPrice

Convenience

Demand

WW case study

36 © Dr Heckroodt, S

Source: Amended from Heckroodt, S. Strategic Thinking – GAME OVER. Epubsa.co.za

Staff

Landlord

Landlord

Strategic thinking mode – pro-active partnering

Strategic thinking mode – reactive flexibility – willingness and ability to adapt

Staff

WW case study

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Landlord

WW case study

Strategic fitas a juncture

OrganisationAbility

Internal Information Live

External Information Live

Strategic planning = alive = moves beyond

annual event

OpportunityThreat

PROBABILITYIM

PACT

STRATEGIC APPROPRIATENESS

© Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking – GAME OVER. Epubsa.co.za

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Email: [email protected]: 082 417 5125

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Flexible business models

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