Building and Sustaining Your Competitive Advantage by Handry SatriagoPresentation Transcript
Building and Sustaining YourCompetitive AdvantageA Session with Akademi Berbagi JakartaJakarta, 8 December 2012Dr. Handry SatriagoPresident & CEOGE Indonesia
The world we are facing today…
1. The more global world Borderless. Cyber connected.
A Global World…Princess Dianas death.An English princesswith an Egyptian boyfriendcrashes in a French tunnel,driving a German carwith a Dutch engine,driven by a Belgian who was drunkon Scottish whisky,followed closely by Italian Paparazzi,on Japanese motorcycles;treated by an American doctor,using Brazilian medicines.and youre probably reading this on your computer,that use Taiwanese chips,and a Korean monitor,assembled by Bangladeshi workersin a Singapore plant,That, my friend, is Globalization
It’s a flat world…Thomas Friedman (2005) • Globalization 1.0 (1492 – 1800) Globalization of the Country Aqcuiring natural resources…Colonialization • Globalization 2.0 (1800 – 2000) : Globalization of the Company The Golden Arches Theory..Multinational company • Globalization 3.0 (2000 – now) Globalization of the Individual The world is on the flat screen
The Dell notebook • Processors : Philipinnes, Costa Rica, Malaysia, or China • Memory : Korea-owned factory, Taiwanese-owned factory, Germany-owned factory, or Japan-owned factory • Graphic card : Taiwan, China • Cooling fan : Taiwan-owned factory in Taiwan. • Motherboard : Korean-owned factory in Shanghai, or Taiwan- owned factory in Taiwan. • Keyboard : Tianjin, China • Wireless card : Malaysia, American-owned factory in China
A Global World…The price of global communication
A keep changing world…with magnitude and frequency getting bigger Scientific Productivitiy and The Global The IT The Security Management Efficiency (1970) Economy (1985) Revolution Issues (1895) (1990) (2000)
The Message Revolution
it is growing world…The world in 2007
it is growing world…The world in 2030
The Golden Arches Theory Golden Arches Theory of Conflict Prevention (Thomas Friedman, 2000)Dell Theory of Conflict Prevention also known as "Dell Theory”has been presented by Thomas Friedman in his book The World Is Flat (2008).“The Dell Theory stipulates: No two countries that are both part of a major global supply chain,like Dell’s, will ever fight a war against each other as long as they are both part of the sameglobal supply chain.
The New EconomyA Day Without “Made In China”A $5T economy in 2010, 2nd in the world, 9% economicgrowth in 2009. Have >800MM labor force from 1.3Bpopulation. FDI flow >$100 B. China is potentialcustomers, partners, and employees for everyone. 13
The New EconomyIndia IntellectualRevolutionChina is the factory of the world,and India is the back office. It has>100MM english speakers (2x UK)workforce. More than 1 millionwhite collar, service industry jobsmoved to India*. The share of ITIndustry is more than 7% of GDP.Fourth largest economy (PPP) with>100B FDI, mostly in high techindustry. 14 *Robyn Meredith, The Elephant and The Dragon (2007)
The New EconomyAbu Dhabi is leading transition. pearl diving oil. 15K inhabitants 1.5M inhabitants <$1 per capita gdp $70K per capita gdp Past Present Future
The New Economy BRIC BRICI CIVETS Developed 92% “BRICs” “CIVETS” 12% 8% 8% 7% 48% 6% 5% 5% 32% 3% 2% GDP Debt Deficit Unemploy- GDP Debt Deficit Unemploy- GDP Debt Deficit Unemploy-growth ment growth ment growth ment
2. Surplus Society Competition
The surplussociety“has a surplus of similar companies, employing similar people, withsimilar educational backgrounds, working in similar jobs, coming upwith similar ideas, producing similar things, with similar prices andsimilar quality.”Kjell Nordstrom and Jonas Ridderstrale,Funky Business
Competitiveadvantage is easilydiminishedBy imitation, substitution, moving or resources, andlack of capability to endure the position
Extinction rate for companies is increasing Average Lifetime of S&P 500 Companies
An example of competition
An example of competition
An example of competitionBMW started it ……
Subaru Needs To SaySomething….
Bentley CEOHas TheFinalWords…
3. A Turbulence World Higher Risk
Turbulence examples Turbulence GE Impact 9/11 Catastrophe $600M lost in aircraft, NBC commercials and reinsurance business Enron, WorldCom Lost of confidence in conglomerate companies, bankruptcy share down 20% Natural Disaster Lost of market opportunity, shrinking growth Crisis Sub Prime Mortgage GE share hits $6..from $38..one of the lowest share price in GE Crisis history Dubai Crisis ?
We want you toknow more of this.4. Demanding Customer Faster. Cheaper. Better
Do we really know what ourcustomer wants and needs?• The GE lighting story• Xerox story• The internet banking story• GE MRI story
5. The need for A cleaner world Global Warming. Pollution
The “Green” Business • Overall clean tech (solar, wind, biofuels) revenues will reach >$320B in 2018 • Increase push for business operation (Kyoto Protocol, Cancun Agreement) • Renewable energy, water, “green” products and services are among the most major industry in the future
Indonesia in TheGlobal World
McKinsey Report 2012
Indonesia has been a hub for global trade and business since long time ago
The firstmultinationalcompany in theworld• The Ducth East India Company or “Vereenigde Oostindische Compagnie” (VOC) was established 1602• First company to issue stock• Possess quasi government power includes wage war, coin money, and establish colonies• Paying annual 18% of divident for almost 200 years
World EconomicForumCompetitivenessIndexThe IMD World Competitiveness Yearbook(WCY ) looks at the relationship between acountry’s national environment(where the State plays a key role) and thewealth creation process (assumed byenterprises and individuals). The WCYfocuses on the outcome of the interaction offour competitiveness factors, whichgenerally define a country’s nationalenvironment. These are: - Economic Performance - Government Efficiency - Business Efficiency - InfrastructureOn the basis of these four factors and morethan 300 criteria, the WCY assumes thathealthy performance in these dimensionscreates a national environment thatsustains World Competitiveness.
We can play a role as anobject or subject ofglobalization
Indonesia shouldbe the majorplayer in the globalworld…Why
The thoughts of Michael PorterWhy nations have differences in prosperity? What drivesnation to become more competitive and prosperous? – Government policy? : Italy, Germany has low govt intervention...in South Korea and Japan, Govt intervention in some of the industry (machines, robotics, advance materials) is modest – Cheap-abundant labor? : Germany, Switzerland, Sweden, has high wages and labor shortages...besides, the high wages should be the target of competitiveness – Bountiful natural resources? : Germany, Japan, Singapore, South Korea...has limited natural resources – Mcroeconomic factors?, such as exchange rates, interest rates, govt deficits, but Japan, Italy, and South Korea has budget deficit...Germany and Switzerland has appreciating currcies, Italy and South Korea have high interest rates – Differences in management practices? including management- labor raltions..but different industries require different approach to management.
Source of Prosperity Kemakmuran dari Kemakmuran yang “warisan” diciptakan • Kemakmuran yang diciptakan dari hasil menjual • Kemakmuran yang diciptakan oleh sumber daya alam yang diwariskan ataupun perusahaan-perusahaan yang menghasilkan dari real estate (penyewaan atau penjualan atas produk dan jasa yang bernilai tinggi tanah) • Kemakmuran yang tidak terbatas, karena • Kemakmuran yang terbatas pada ketersediaan diciptakan dari kemampuan inovasi dan sumberdaya alam dan sifatnya sementara produktifitas dari perusahaan-perusahaan yang ada di dalam perkekonomian negara • Fokus perhatian adalah distribusi kesejahteraan tersebut (bagaimana membagi kue agar semuanya dapat) • Menciptakan kondisi agar produktifitas dan inovasi terus tumbuh adalah pusat dari • Aktor utama adalah Pemerintah sebagai pemilik kebijakan pemerintah sumberdaya dan distributor dari kesejahteraan yang dihasilkan dari bumi negara tersebut • Aktor utama adalah perusahaan-perusahaan di dalam ekonomi, dan peranan Pemerintah adalah menciptakan kondisi yang kondusif bagi perusahaan-perusahaan tersebut Source: Michael Porter (2003)
The more competitive the nation doesrelated to the more prosperous of thenation…
National CompetitivenessComponents Source: Michael Porter (2003)
Relationship between MicroeconomicsFoundations and GDP Per Capita Source: Michael Porter (2003)
The Diamond Model Goverment IFC (associations) Source: Michael Porter (2003)
Doing Business in IndonesiaDoing Business 2010 Report – World BankQuantitative indicators on business regulations and protection of property rightsthroughout 10 stages of business life from starting until closing the business • Procedure to start business New Zealand = 1 Singapore = 4 Hongkong = 4 Thailand = 8 Malaysia = 9 Indonesia = 11 Vietnam = 11 • Time to start business New Zealand = 1 Singapore = 4 Hongkong = 11 Thailand = 33 Malaysia = 13 Indonesia = 76 Vietnam = 50
Problems doing business in Indonesia2010 - 2011 Source : World Economic Forum (2012)
Human Development Index 2011
International Patenting OutputSource: Michael Porter (2008)
Cluster Policy versusIndustrial Policy Source : Michael Porter (2000)
La Jolla Institute for Allergy & Immunology La Jolla Institute for Allergy & Immunology Sidney Kimmel Sidney Kimmel Cancer Center Cancer Center San Diego Bio Research Centers Torrey Pines Institute Burnham Torrey Pines Institute for Molecular Studies Burnham Institute for Molecular Studies Genomics Institute Genomics Institute ofInstitute Novartis Scripps of Novartis Foundation Scripps Research Foundation Gene Research Research Institute Gene Research Institute Institute Institute Neurosciences San Diego Neurosciences Institute San Diego Supercomputer Institute Supercomputer Center Salk Center Salk Institute UCSD Institute UCSD School of School of UCSD Pharmacy UCSD Pharmacy School of UCSD School of Medicine Campus UCSD Medicine Campus Scripps Scripps Institution of Juvenile Diabetes Institution of Juvenile Diabetes Foundation Oceanography Foundation Oceanography Center for Stein Clinical International Center for Molecular Moores Stein Clinical InternationalLa Jolla Molecular Moores Research Facility Medicine Cancer Center Research FacilityBioengineering La Jolla Medicine Cancer Center HumanInstitute Bioengineering La Jolla Human Institute Institute for La Jolla Hubbs-Sea World Biomolecula Molecular for Institute Research Instituter Biomolecula Hubbs-Sea World Medicine Molecular Research Instituter Research Medicine Research Institute Institute
San Diego’s First Biotech Company (1978) Hybritech
San Diego’s Biotech Cluster (2005) Pfizer Lilly Novartis Johnson & Johnson
Multinational companiesneeded to boost localcompanies development(if they are ready….)
What can wedo differentlyto become awinner?
Our current situation: Macroeconomy is good, market is potential,but human capital is not ready, andpolicies for improvingcompetitiveness is not there yet…
We need competitive talent1. English speaking2. Analytical thinking3. Capability to create the dots4. Capability to connect the dots5. Communication skills6. Behavioural – learning, humble, empathy, realistic7. Passionate to excel8. Resilience
The Main Types ofCompetitive Advantage Cost advantage Competitive advantage Differentiation advantage
Cost Leadership PLUS.. • Focus on customer satisfaction • High level of employee dedication
Differentiation There are thousands of coffeehouses in the United States and coffee is one of the most commonly traded commodities in the world. Why is there only one Starbucks? (In 2004, Starbucks did $5.3B in sales. It has more than 8,500 locations in 30 countries)
Features of competitivestrategies Cost Leadership Differentiation Efficient scale Quality Standardization Innovation Design for low production cost Design Control of overheads and R&D Credibility Avoid marginal customers Brand name Reputation Environmental posture Customer service Integrated services
What is YourCompetitiveAdvantage?
The problem iscompetitiveadvantage easilydiminished…
Your Threat • Imitation • Substitution • Holdup and Stealing • Slack of your capability
The need is to havesustainable competitiveadvantage
Goal: Having A Unique Strategy If you have the Your strategy is same strategy as a wash your competitors… If the strategy is It provides only different but a temporary is easily copied… advantage If the strategy is It is strong and different but is sustainable hard to copy
Strategy is makingclear-cut choices abouthow to competeYou cannot be everything to everybody, no matter whatthe size of your business or how deep is your pocketJack Welch (2005)
At Soto ParuFapet Bogor,Strategy is allabout productsThe product that offered is youare ready “to die for” to get it…
At Coffee ClubPlaza Senayan,Strategy is allabout servicesThe services makes you forgetthat there are other good coffeecorner shop…
GE Strategy:Decommoditizing“Try desperately to make products and servicesdistinctive and customers stick to you like glue.Think about innovation, technology, internalprocesses, services add-ons-whatever works to beunique. Doing that right means you can even makea few mistakes and still succeed”Jack Welch (Winning, 2005)
“Strategy is choosing toperform activities differentlythan rivals do”Michael Porter (1980)
Think ofUnthinkable..“Hard times give you the courage tothink the unthinkable” (Andy Groove)
For Vertu, thestrategy isexpensiveness“I am selling expensiveness…ifit is not expensive, peoplewon’t buy it
Talking about“Survival of TheFittest” Theory…
A ValueProposition….Dennis RodmanBasketball Player• NBA champion (1989, 90, 96, 97, 98);• Defensive Player of the Year (1990, 91);• All-NBA Third Team (1992, 95);• All-Defensive First Team (1989, 90, 91, 92, 93, 95, 96);• Two-time NBA All-Star (1990, 92).
A ValueProposition….Vanessa MaeViolist
Being first in themarket is anadvantage, but withoutability to sustain it, theadvantage is easilygone..
The key is keep upgrading yourunderstanding about yourcustomers…unfortunately, manycompanies neglect this…
The Story of The Giant1950’s • Xerox is the king for copier machine..but afterthrough 100% 20 yrs patent expired, they are facing1970’s Market Share competition… by Xerox • Still go with big, high quality and expensive machine… • Market and customer CTQ are1979 changing…Market share dropped!Starting the Declining IBMcompetition: Market Kodak •IBM Share 1984 Canon •Canon Minolta Xerox Market Share = 8% •Kodak Others
GE Lighting in Indonesia:A Case Study • 1996, GE Lighting wanted to launched it’s “differentiator” products, The Ultra Softwhite Products • Based on the success in the US, and Europe, this product have 2 x longer life time than any other products in the market with the same price • Thinks the CTQ is lifetime • Great result in the beginning, but failed after 9 months…Indonesia market is different…lifetime is not the CTQ!
The Change Elements(Model developed by Handry Satriago, 2008) When to change? Where to change? Timing Timing What to change? Strategy/ Objectives/ Visions Change Systems/ Process Elements People Leadership Acceptance Who and How How to make people to lead change? accept the change?