A Master class presented in Dubai at Westford School for Management on how the increase flexibility in your business model amidst volitile business environments. 1 July 2014

1. Flexible business models for
sustainability
Dr Steyn Heckroodt – Senior Lecturer: Strategy
www: Lectureonbusiness.com

2. 229/06/14 Dr S Heckroodt

3. 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?
329/06/14 Dr S Heckroodt

4. Morphing of strategy
• Plait of environment and business
• Environment – Pong – simple, non-complex, stable,
yes at times a bit disrupted
4
Time
Environmental change
Organisational strategy
29/06/14 Dr S Heckroodt

5. Morphing of strategy
5
Time
Environmental change
Organisational strategy
Scanning
Scenario planning
Strategy selection
Structure for implementation
Forecasting
29/06/14 Dr S Heckroodt

6. • Post WW 2 – Sun Tzu – the Art of War
• Thinking – analytical – molecular
• Segment and categorise
• Simplify
• East and West
• Socialist and capitalist
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Quick paradigm
history
29/06/14 Dr S Heckroodt

7. • 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
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8. • 90s – New jargon
• Pull versus push
• Demand chain versus supply chain
• Customer focus, centricity
• Information era
• Systemic thinking (Ackoff)
• Dots and Coms
• Windows and Apple
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90s
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9. • 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
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10. What the complexity
boils down to
10
Time
Environmental change
Organisational strategy
29/06/14 Dr S Heckroodt

11. • 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 help
managing complexity
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12. Environment
12
© Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public
Pressure
Groups
Exchange
rate Interest rate
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price Staff
ShareholdersColleagues
29/06/14 Dr S Heckroodt

13. ENVIRONMENT
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© Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public
Pressure
Groups
Exchange
rate Interest rate
Fuel/Energy
price Staff
ShareholdersColleagues
29/06/14 Dr S Heckroodt
Environment

14. ENVIRONMENT
14
© Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public
Pressure
Groups
Exchange
rate Interest rate
Fuel/Energy
price Staff
ShareholdersColleagues
29/06/14 Dr S Heckroodt
Environment

15. ENVIRONMENT
15
© Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public
Pressure
Groups
Exchange
rate Interest rate
Fuel/Energy
price Staff
ShareholdersColleagues
29/06/14 Dr S Heckroodt
Environment

16. • 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?
16
So ...
To answer the why
29/06/14 Dr S Heckroodt

17. • 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...
29/06/14 Dr S Heckroodt

18. • 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…
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19. • 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
19
‘
Business model
29/06/14 Dr S Heckroodt

20. • 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…
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21. • Merging market focused (in- pond & downstream)
and network focused approaches (upstream)
21
Flexibility defined
Market Focus
Network Focus
In-pond

22. • Organisations with strong, long-term, inter-
organisation relationships both upstream and
downstream
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1. Network influencer
DELL
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23. • 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
TRADER
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24. • Utilise long-term relationships upstream, and
ownership downstream
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3. Franchise model
ZARA
ZARA
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25. • 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
MOBILE/BANKS
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26. • 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-orientated
model
EXPORTERS
29/06/14 Dr S Heckroodt

27. • 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
SPINNEYS
SPINNEYS
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28. Short
leadtimes
Long
leadtimes
Supplycharacteristics
Demand characteristics
Lean plan and
optimize
Hybrid
&
Postponement
Continuous
replenishment
Agile quick
response
Predictable Unpredictable
28
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

29. • 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 of
business models
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30. • 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.
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31. • 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
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32. • 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)
32
Business model
consists of...
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33. • 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
33
Let’s try and answer...
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34. • 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
34
Sustainability
contained
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35. 35
The trio
Possible
Business
Models Tactics:
Competitive
choices enabled
by each
Business Model
Strategy plan
of which
Business
Model to use
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36. Case study
36
Dominant attribute
Quality
Price
Convenience
Demand
WW case study
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37. 37Source: 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

38. 38
Landlord
WW case study
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39. Strategic fit
as a juncture
Organisation
Ability
Internal
Information Live
External
Information Live
Strategic planning =
alive = moves beyond
annual event
Opportunity
Threat
PROBABILITY
IMPACT
Strategic appropriateness
3929/06/14 Dr S Heckroodt