Strategy, Business Model & Business Plan IEI Business Plan Workshops TL Hill tl .hill @temple.edu 215-204-3079
Business plan workshops
Matching Products and Services with Markets
Strategy & Business Model
Financial Analysis I: Using Financial Statements for Management
Financial Analysis II: Using Ratio Analysis for Management
Marketing and Sales Strategies
Management & Ownership
Thursdays 4:30 - 6:00
Feasibility plan outline
Including product/service & technology/core knowledge
Industry Analysis & Trends
Marketing & Sales Sketch
Production & Operations Sketch
Development & Milestones
Strategy funnel Customer & Benefits Competitive Dynamics Competitive Space Segment,Size Channels Strategic Positioning Value Proposition Industry Structure Environmental Trends Industry Market Perceptual Space
“Strategy” means many things
Entrepreneurship offers the exciting, seductive opportunity to craft a perfect fit between specific opportunities and internal capabilities
Firms that fit opportunities extremely well, often have advantage over bigger, stronger opponents…
Examples: Youthbuild, Dollar Express
Vision pulls strategy Vision
Strategy: disciplined, iterative process of driving towards vision, by finding or making and maintaining a defensible space or trajectory in a given business environment.
Environmental Scanning Evaluation & Control Strategy Implementation Strategy Formulation Mission
Mission: central audience + core product/service
Ideology: Values, principles, culture
Concrete picture of successful impact
Serious, scary stretch goals
What success will look like – in the marketplace:
One audacious goal:
Unique, valuable, defensible position in a market or industry
Supported by a tightly integrated value chain / activity system
Good for relatively stable industries/markets
Vision-driven nurturing and leveraging of core resources
Match SW to OT Strengths (S) Internal Factors External Factors Opportunities (O) SO Strategies ------------------------- WO Strategies ------------------------ Threats (T) ST Strategies -------------------------- WT Strategies ------------------------- Use strengths to avoid threats Min. weaknesses to avoid threats Use strengths to take advantage of opportunities Offset weaknesses to take advantage of opportunities Weaknesses (W )
OTSW exercise External Factors Internal Factors Strategic Situation Resources Competitive Position Culture Environment Industry Customer
Classic position strategies
Cost (price) leadership
Efficiency and scale
Quality, design, support/service, image -- that make a product or service special
Explicit tie to a broad or narrow market segment
Cost (price) leadership
Crown, Cork & Seal (pennies, plants).
Motel 6 (location, services, salespeople).
Cintas (plants, logistics).
Special niches (G&K clean rooms; Zitner’s candied apples; Prompt folding)
Processes & transactions continually redesigned for efficiency
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 Re-write your value proposition: The unique benefits your firm provides and to whom
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.
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.
Inbound Logistics Operations Outbound Logistics Marketing/ Sales After Sales Service Margin Technology Infrastructure Procurement Human Resources
Value chain for NSP Small but steady Technology: Desk-top, enterprise, email, web Editorial Newsletter Rights Production Printing Shipping In-house Library rate Sales: DM, Reps, Distributor Prepay Prepay disc. Green tax Infrastructure: Land trust, warehouse Financial: 501(c)3, friendly capital HR: Cooperative: multiple skills, networks, low-cost, apprenticeship Social Network: Audience, authors, rights, co-printing, Prompt
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 Limited Customer Service Modular Designs Low Mfg Cost Self-service Selection Self-transport Limited sales 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
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
Draw the value chain for your firm
Note reinforcing (and jarring) pieces
Try to create more reinforcements
Jot down functions and features
Look for patterns and connections
Try to crystallize patterns
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 fitinto wealth
By efficiently (profitably) transforming inputs into something that customers value enough to pay for – again and again and again
By supporting growth
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 build & capture wealth
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
Effective business models require hard choices
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
Business models start with what the world gives
4. Choose a position or approach - and build a strategy to take advantage
Seeing the position or approach is fundamentally creative
Immersion, scenarios, future search, dreams
Building strategy involves discipline and analysis
Business models are based on strategy
5. Identify stakeholders you must serve
Owners, family, workers, community
6. Identify the wealth you will capture
Capital, good life, family life, fame entrepreneurial effectiveness, social value
Business models enclose wealth
7. Sketch a structure that will operationalize the strategy
Value chain, activity system, culture, simple rules
8. Work out the implications
Timeline and milestones
Financial projections & capital needs
Path to profitability, sale, or other realization of value
Business models define structure
Build a business model exercise
Structural implications, timing, capital needs, etc
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
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 , 3 rd 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, 2 nd 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