Business Model For Competitive Advantage


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Using the organizations business model to establish a competitive advantage

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Business Model For Competitive Advantage

  1. 1. SUCCESSFULLY CHANGE AN ORGANIZATIONS BUSINESS MODEL FOR COMPETITIVE ADVANTAGE Creating Extraordinary Organizations, LLC Atlanta, Georgia Organizational Change Alliance November, 2009 David L. Broussard MBA, MTax, MS in Organizational Change
  2. 2. LEARNING OBJECTIVES 1. Differentiate Business Model & Strategy. 2. Develop a basic understanding of the 23 core Business Models and how to analyze them. 3. Determine if a Business Model creates a Competitive Advantage. 4. Participate in the design of a Business Model for either a for-profit or non-profit organization. 5. Outline a Business Model engagement for internal and external OD & OC
  3. 3. Organizational Growth Strategies 1. Increase Prices 2. Reduce Expenses: COGS, Employees, R & D, CapEx 3. Increase Sales:  Existing Customers – Existing Products/Services  Existing Customers – New Products/Services  New Products/Services – Existing Customers  New Products/Services – New Customers 4. Merge with or Acquire another organization 5. Go Public (Initial Public Offering) 6. Joint Venture or Alliance with another organization 7. Change the organizations Business 8. Create a Competitive Advantage
  4. 4. A Business Model is simply the point where the client/customers need for receiving value meets the organizations need for profit and sustaining financial viability. Not firm specific.Answers these Questions - Who buys What you sell and Why, and How do you make money?Strategy is a matter of deploying a firm’s resource bundle to meet the needs of the marketplace while blunting the ability of rivals to respond effectively in a competitive envirnoment. Firm
  5. 5. Competitive Advantage… When an organizations products and services can be provided in ways that deliver more sales and higher profitability relative to total assets used creating a higher Return On Investment than would occur if a competitor supplied the same customer. ‹ ROI = (Sales/Total Assets) x (Net Income/Sales) › Characteristics… 1. Unique 2. Difficult to replicate 3. Superior to competitor 4. Applicable to multiple situations 5.
  6. 6. Review with your neighbor what a Business Model is and be prepared to discuss with examples such as your employer, clients or organizations from your everyday life… Does this organization have a Competitive Advantage? If so, what is it? When & Why should an organization review its Business Model? See alternative organizations you may consider
  7. 7. Alternative organizations you may consider: Independent Bookstore (Bookstore) Borders (Bookstore) Amazon (Bookstore) Apple (ipod/itunes/iphone/apps/Facetime/Icloud) ATT (Phone Service) M-Pesa (M-Banking)Vonage (Long Distance Phone Calls) Skype (Free Phone Service) Go To (Online Meet) Wikispaces/Google Docs/Huddle.Net (Collaboration Online Work Space) Google (Information Search) Mozilla Firefox (Browser) LinkedIn (Online Personal Network) Dell (Custom Built Computers) IBM (Information Services) HP (Information Technology) Wal-Mart (General Retail) Home Depot (Hardware Store) IKEA (DIY Furniture) Comcast (Cable Programming) DirecTV (Satellite Broadcasting) Hulu (On Demand Viewing) Miramax/VIACOM/Disney (Entertainment) ABC/CBS/NBC/CNN/FOX/CNBC/MSNBC/HBO/GPB/BBC (TV Broadcast)Pandora (Customized Internet Radio) Sirius (Satellite Radio) NPR (Public) Radiohead (Free Music)NYTimes/WSJ/FT (Print Paper) Huffington Post (Online Newspaper) Politico (Niche Publication) Time (weekly Print) Newsweek (weekly digital) Economist (Print & Digital)
  8. 8. Georgia State University/Georgia Tech(Public University) Emory (Private University)University of Phoenix/Walden University (Alternative University) University (Alternative Learning) Wikipedia (Open Encyclopedia) Encarta (Encyclopedia) (Self Publisher) US Postal Service (Mail) FedEX (Private Mail) Cemex (Cement Delivery) Microsoft (Computer Based office Applications) Google Apps (Online Office Apps) Monsanto (User Agreements) Amazon (Kindle reader and books) United Way (Non-Profit) Community Foundation of Atlanta (Personalized Philanthropy) Gremeen Bank (Micro-Loans) Citigroup (International Bank) Aravind (Free Eye Surgery) Emory Eye Center (Academic Practice)
  9. 9. Core Business Models (See Handout for Descriptions) Competitors Management/Organization 1. Blockbuster 13. Entrepreneurial 2. Local Leadership 14. Value Chain 3. Relative Market Share 15. After-Sale Suppliers Customers 4. Installed Base 16. Loss Leader 5. De facto Standard 17. Specialization 18. Brand Economics of the Company Products/Services/Solution 6. Switchboard 19. Product Pyramid 7. Profit Multiplier 20. Multi-components 8. Transaction 21. Time 9. Cycle 22. Specialty Product 10. Experience Curve 23. New 11. Low-Cost Business Design 12. Freemium
  10. 10. Transaction Business Model Number 8Players▪ Company▪ ClientCompany to Client Company▪ Product▪ Service● Solution▪ Experience▪ ReputationClient to Company Product Money▪ Money▪ Less Money▪ No Money▪ Attention▪ ExposureAnalysis> Who> What Client> Why> How
  11. 11. Installed Base Business Model Number 4Players▪ Company Company▪ ClientCompany to Client▪ Product More Money▪ Service▪ Experience▪ Reputation Product ProductClient to Company▪ Money▪ Less Money Less Money▪ No Money▪ Attention▪ ExposureAnalysis> Who> What> Why> How Client
  12. 12. Switchboard Business Model Number 6Players▪ Company▪ ClientCompany to Client Company▪ Product▪ Service▪ Experience▪ Reputation MoneyClient to Company▪ Money▪ Less Money▪ No Money▪ Attention Experience/Reputation▪ Exposure Product/ServiceAnalysis> Who> What> Why> How Client Client
  13. 13. Freemium Business Model Number 12Players▪ Company▪ ClientCompany to Client Company 1▪ Product▪ Service▪ Experience▪ Reputation Money No MoneyClient to Company Service▪ Money▪ Less Money Experience▪ No Money Reputation▪ Attention▪ ExposureAnalysis Exposure> Who> What Attention> Why> How Company 2 Client
  14. 14. Art & Science of Business Model Analysis WHO – Customer Selection WHY – Value Capture ►Customer Characteristics ►Customer Value to Company ● Number ● $ Value of Sale ● Repeat Sales ● Changing Priorities ● Ongoing Sales Support ● Ease of Finding ● Spending Patterns ►Company Value to Customer ● Value Proposition & Configuration ● Main Competition ● How Important ►Customer Acquisition ● Price to Value Relationship ● Entry Points ● Sales Support Requirements ● Promotional Activities HOW – Strategic Control ● Revenue & Cost Models WHAT – Scope ● ● Cross Selling Opportunity Ongoing Profit Structure ● Products/Services/Solutions ● Customer Relationship Management ● Functions/Activities (In-house) ● Distribution Channels ● Core Capabilities ● Functions/Activities (Out Source) ● Infrastructure ● Functions/Activities (Sub Contract) ● Functions/Activities (Joint Venture)
  15. 15. Potential Conflicts for New Business Models 1. Risks cannibalizing the existing customer base. 2. Risks undermining existing distribution network. 3. Risks compromising the quality of current offerings. 4. Risks damaging company’s reputation or brand. 5. Risks destroying organizations culture. 6. Risks confusing employees and customers. 7. Risks diffusing organizational focus. 8. Risks shifting customers/clients from high-value to low- value activities. 9. Risks legitimizing the new business model thus creating an incentive for other companies to enter the market. 10. Risks diluting financial and infrastructure
  16. 16. Business Model Protection Strategies ‹ Make Competitive Advantage Sustainable › 1. Create Moats – (Qualcomm) 2. Establish Long Term Contracts (ATT) 3. Create Multiple Revenue Streams (Disney) 4. Create Recurring Revenue Streams (Kindle) 5. Own the Standard (Microsoft) 6. Product Differentiation (Louis Vuitton) 7. Bargaining Power Over Suppliers (Wal-Mart) 8. Own the Customer (SAP) 9. First Mover Advantage (Apple) 10. Open Source Development (Linux/Red Hat) 11. Barriers to Entry and Exit (Boeing) 12. Global Reach (IBM) 13. Brand Loyalty (Coca-Cola) 14. User Agreements/Patents (Monsanto) 15. Cost Advantage (IKEA)
  17. 17. OCA Business Model Exercise1. Select an Organization for reviewing its Business Model. Alternative: Design a new Business Model for newspapers.2. Reassemble into teams with similar objectives.3. Determine Core Business Model design (s).4. Illustrate the Business Model with three component visual.5. Analyze the Business Model (Who, What, Why & How).6. Determine Competitive Advantage.7. Select a team spokesperson (s).8. Using the flip chart present & illustrate your Business Model.9. Explain the thought process used & Competitive Advantage.10. Address what risks your new Business Model faces.11. What can be done to protect the Business Model?
  18. 18. Business Model Design & Analysis Process 1. Determine Current Core Business Model Design 2. Create Business Model Illustration 3. Analyze (Who, What, Why & How) 4. Determine Competitive Advantage 5. Identify Current Business Model Risks 6. Develop Strategies to Protect Business Model 7. Repeat Steps 1 – 6 for New Business Models 8. Select Most Viable New Business
  19. 19. Business Model Engagement► Part 1: Know Where You Are Step 1: Identify & Analyze Current Business Model Step 2: Assess Current Business Model Integrity (SWOT) Step 3: Conduct a Strategic Thinking Assessment<Strategic Thinking is the generation & application of business insights on a continual basis to achieve competitive advantage > (Market Forces, Industry Dynamics, Key Trends, Macroeconomic Environment)►Part 2: Design the Business Model Desired Step 4: Design a Competitively Advantaged Business Model Step 5: Realign the Organizations Leadership Team Step 6: Position Business Model Relative to Organization►Part 3: Create & Manage New Business Model Step 7: Set Goals, Implementation Plan and Scorecards Step 8: Align People, Execution, Culture & Business Model
  20. 20. SUCCESSFULLY CHANGE AN ORGANIZATIONS BUSINESS MODEL FOR COMPETITIVE ADVANTAGE THANK YOU! Creating Extraordinary Organizations, LLC Atlanta, Georgia 404.226.1964 David L. Broussard MBA, MTax, MS in Organizational Change