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MÖBIUS presentation: Value chain thinking at the heart of your strategy

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Get inspired by how value chain thinking impacts your bottom-line performance. Learn from the views of Arnoldo C. Hax on how to put value chains at the heart of your strategy. Value chains are key in customer bonding. Customer bonding is key in improving your bottom-line performance. Learn from the views of Kaplan & Norton on how to translate strategies into actions. Get a premium from strategy execution. Engage the debate and share your thoughts with your peers. For more information, contact Prof. Dr. Bram Desmet (0497.58.28.60)

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MÖBIUS presentation: Value chain thinking at the heart of your strategy

  1. 1. Value Chain Thinkingat the Heart of Your Strategy Prof.dr. Bram Desmet bram.desmet@mobius.eu +32 (0)497.58.28.60 1
  2. 2. 1980  Compete on: – Low CostMichaelPorter – Differentiation  Strategy is war  Focus on competitors  Compete on:1995 – Operational ExcellenceTreacy & – Product LeadershipWiersema – Customer Intimacy  Choose 1 dimension and be the best! System  Compete on Customer Bonding:2010 Dominant Exchange (eBay) Lock-In Proprietory Standard (Microsoft) – Best Product OfferingArnoldo Restricted Access – Total Customer Solution Hax (Eandis) Customer – System Lock-In  Choose 1 dimension per Horizontal Breadth (IBM) Bonding Low Cost (Ryanair) Total Best Customer Solutions Customer Integration (Axima) ??? Redefining The Customer (Apple) Differentiation (Apple) Product segment! Customer = Center.  Strategy is love. Competitive advantage comes from Strategy has customer bonding, not beating become more competition. complex 2
  3. 3.  Proprietory Standard 2010 – – e.g. Microsoft + network of complementors Arnoldo Hax improving your product  Dominant Exchange – E.g. eBay System – An interface between buyers and Lock-In sellers that is very hard to displace once it achieves critical mass Dominant Proprietory Exchange Standard  Restricted Access (eBay) – E.g. Utilities (Microsoft) – Significant barriers in place to Horizontal Breadth Restricted make it hard for competitors to – e.g. IBM for IS Access access the customer – “One Stop Shop” (Utilities) – Satisfy all customer needs  Low Cost Customer e.g. Ryanair, Colruyt Customer Integration Low Cost – – e.g. ABB Horizontal Bonding – Lowest Price, Hassle-Free Service, (Ryanair) – We no longer sell robots ... Breadth = “Operational Excellence” we sell “uptime” for (IBM)  Differentiation “automation” – E.g. Sony – Transfer knowledge to the Total Best – Always first on the market. Highest customer to enhance its Customer Product specs. =“Product Leadership” performance Redefining Differentiation – Early adopters & niches. Solutions Customer (Sony) – Get a price premium. Integration Customer Redefining Customer (ABB) = “Product Leadership” Relationship Relationship (Apple) – e.g. Apple (i-everything) – Unique experience throughout complete cycle of ownership The “Delta Model” of Arnoldo Hax 3
  4. 4. The “Delta Model” of Arnoldo Hax System Lock-InDominant ExchangeAn interface between buyers and sellers that is Dominant Proprietory Proprietory Standardvery hard to displace once it achieves critical mass Exchange Standard Capture an extensive network of complementors that improve ourRestricted Access Restricted product performanceSignificant barriers in place to make it hardfor competitors to access the customer Access CustomerHorizontal Breadth Bonding Low Cost Low Cost“One Stop Shop” Horizontal Breadth Lowest Price, Hassle-Free ServiceSatisfy all customer needs Total Best Customer Product Customer Redefining Differentiation Solutions Integration Customer Relationship Customer Integration Redefining Customer Differentiation Transfer knowledge to the customer Relationship Development of features and to enhance its performance Unique experience throughout functionalities that make the product complete cycle of ownership unique and command a price premium 4
  5. 5. The Case of Castrol (Lubricants)Castrol = leading lubricant company System Lock-In• Best Product Strategy was going nowhere • Differentiation through premium products easily copied by competitors after 6 months • Fast commoditization• Differentiate by adding services (Total Customer Solutions) • Build on accumulated knowledge about plant maintenance Customer (lubricant is used to improve the productivity of machinery Bonding and equipment) • Rather than use this knowledge strictly for developing new products, transfer that knowledge to selected customers Total Best Product• In the fight against Customer commoditization services can more easily be Solutions customized in comparison to products 5
  6. 6. Market Segments Vs Customer SegmentsOften, companies segment markets byidentifying major clusters of business The Case of Castrolapplications. For instance for Castrolmarket segments are “cement”, “sugar”, (Lubricants)“pulp & paper”, “textile”, “food & Systembeverage”, “wood”, “mining” and “glass”. Lock-InThe brilliant next step for Castrol was toidentify, within each market segment,which customers to target with varying Redefining Customerdegrees of priorities. Relationship Unique experience throughout complete cycle of ownershipCustomer IntegrationTransfer knowledge to the customer Differentiationto enhance its performance Customer Development of features and functionalities that make the product Bonding unique and command a price premium over commodities Total Best Customer Product Tier 1 Tier 2 Tier 3 Solutions Relationship Transaction Support Productivity Conscious Customers Cost Conscious Price Conscious These customer are eager to receive These customers are concerned about These customers are basically buying support that will enhance their total costs but they believe new from the supplier that has a recent productivity, reduce total costs, and production does not necessarily yield quality level at a good price promote higher sales. higher sales or economies of scale = Primary Target Segment = Secondary Target Segment = Least Desirable Segment 6
  7. 7. Tier 1: Family OfficeThe client is composed of all the members of an A Case fromexceedingly wealthy family including multiplegenerations Retail BankingFamily holdings are financial as well as non-financialassets, comprising a complex porftolio SystemThe family office is run by a team of experts which Lock-In Market Segments Vs Customer Segmentsmanages these complex assets through a web of Traditional segmentation is based on the amountfinancial intermediaries Dominant of the financial assets, e.g. Exchange - From 0,1Mi – 0,5MiTier 2: Wealthy Individual - From 0,5Mi – 5MiAn extremely accomplished individual - From 5Mi – 50Miwith impressive financial assets Restricted - More than 50MiNeeds a CFO kind of relationship, Access This segmentation is a snapshot that ignores themeaning a person who will be a fullytrusted advisor on every financial evolution of the customer. The tiers defineddecision below recognize the potential evolution of Customer clients.Advisory service applied to a complextailor-made portfolio Horizontal BondingLong-term relationship is assured, Breadthhopefully generating an exclusivepartnership Best Total Customer Product Customer Redefining Differentiation Solutions IntegrationTier 3: Matured Investor CustomerSuccesful Individual with significant personal Relationship Tier 5: Basic Investorholdings Typically a young person at the beginning ofNeeds premium attention and customized his/her professional careerservices including complete estate planning, with Demands basic quality services with low-cost Tier 4: Accomplished Investor transactionsemphasis on retirement assets Typically a successful professional, at a middleThe creation of strong bonding based upon trust, Needs guidance on simple investment choices career stage and promising futuretransparency, and mutual benefits is established Potential for long-term relationship Begins to accumulate some wealth Requires advice on the selection of a more sophisticated financial portfolio, with clear understanding of risk/return tradeoffs The seeds for a long-term relationship are 7 planted, if value added can be demonstrated
  8. 8. Tier Solutions we provide Benefits client Benefits for us(1) Family Office Outsourcing of Family Office Mgmt Comprehensive CFO services System lock-in possible through Comprehensive CFO-type services outsourced management of all financial (including structuring, Complete access to all FIC intermediary relationships consolidations, ...) customized products and services Potential investment banking relationship(2) Wealthy Some CFO-type services (e.g. Risk Access to global and High margin productsIndividual management, exclusive product institutional/alternative products, Cemented long-term relationship access) and structuring of complex Potential to maximize “share of Structuring and management of solutions wallet” complex financial solutions Long-term relationship Potential next generation Family Consolidation of total financial Potential for highly personlized CFO Office (dominant exchange and picture service system lock-in)(3) Matured Consolidation of total financial Access to global and High margin productsInvestor picture institutional/alternative products Cemented long-term relationship Some structuring and management and structuring of complex Potential to increase “share of of complex financial solutions solutions wallet” with IRC Risk and product appetite profiling Long-term relationship(4) Some structuring and management Access to best-in-class products Client beginning to develop taste forAccomplished of complex financial solutions Competitive pricing for wealth higher margin products Risk and product appetite profiling management services Potential to cement long-termInvestor Products, access to products and Long-term relationship with access relationship with more activist transactional support to additional resources advisory services by CRM(5) Basic Risk and product appetite profiling Access to best-in-class products Potential to establish long-termInvestor Products, access to products and Competitive pricing for wealth relationship transactional support management services 8
  9. 9. Your Company Think about 3 key customers / customer groups in a given market segment ... Where would you map System them on the Hax Model? Lock-InDominant ExchangeAn interface between buyers and sellers that is Dominant Proprietory Proprietory Standardvery hard to displace once it achieves critical mass Exchange Standard Capture an extensive network of complementors that improve ourRestricted Access Restricted product performanceSignificant barriers in place to make it hardfor competitors to access the customer Access CustomerHorizontal Breadth Bonding Low Cost Low Cost“One Stop Shop” Horizontal Breadth Lowest Price, Hassle-Free ServiceSatisfy all customer needs Total Best Customer Product Customer Redefining Differentiation Solutions Integration Customer Relationship Customer Integration Redefining Customer Differentiation Transfer knowledge to the customer Relationship Development of features and to enhance its performance Unique experience throughout functionalities that make the product complete cycle of ownership unique and command a price premium 9
  10. 10. 2008 2. Plan the Strategy 1. Develop the StrategyKaplan & Norton • Strategy map/themes • Mission, Values, Vision • Measures/targets • Strategic Analysis • Initiative portfolios • Strategy Formulation • Funding/STRATEX Strategic Plan 3. Align the Organization • Strategy map 6. Test and Adapt • Business units • Balanced scorecard • Profitability analysis • Support units • STRATEX • Strategy correlations • Employees • Emerging strategies Operating Plan • Dashboards 4. Plan Operations • Sales forecast 5. Monitor and learn • Key process improvement • Resources rqts • Strategy reviews • Sales planning • Budgets • Operating reviews • Resource capacity plan • Budgeting Execution • Process • Initiative Too many companies are (too) good in strategy formulation but (too) bad in (a disciplined) strategy implementation! 10
  11. 11. A strategy map tries to describe the way the organization intends to create value for its stakeholders 2004 Productivity Strategy Long-Term Growth StrategyKaplan & Norton Shareholder Value Improve Cost Improve Asset New Revenue Increase Structure Utilization Sources Customer Value Customer Value Proposition Price Quality Availability Selection Functionality Service Partnership Brand Product/Service Attributes Relationship Image Operations Mgmt Customer Mgmt Innovation Regulatory and Processes Processes Processes Social Processes • Supply • Select customers • Identify new • Environment • Produce • Acquire new opportunities • Safety and Health • Distribute customers • Select the R&D • Employment • Manage Risk • Retain customers portfolio • Community • Grow business with • Design and dvlp customers • Launch Human Capital Information Capital Organization Capital Culture Leadership Alignment Teamwork 11
  12. 12. E.g. Strategic Theme: Earn higher customer loyalty from innovative offerings 2004 Productivity Strategy Long-Term Growth StrategyKaplan & Norton Shareholder Value Extra Revenue by Improve Cost Improve Asset New Revenue Increase Extra Revenue from Increasing Share Structure Utilization Sources Customer Value New Products of Wallet Customer Value Proposition Price Quality Innovative Products Availability Selection Functionality Service Partnership Brand Product/Service Attributes Relationship Image Operations Mgmt Customer Mgmt Innovation Regulatory and Processes Processes Processes Social Processes • Supply • Select customers • Identify new • Environment • Produce • Acquire new opportunities World-Class • Safety and Health • Distribute customers •Internal Product Select the R&D • Employment • Manage Risk • Retain customers portfolio • Community • Grow business with Development • Design and dvlp customers • Launch Stable and High- Human Capital Workforce Talent Information Capital Organization Capital Culture Leadership Alignment Teamwork 12
  13. 13. Corresponding KPI’s, Targets + Initiatives 2004 Productivity Strategy Long-Term Growth Strategy Kaplan & Norton Shareholder Value Extra Revenue byMeasures Improve Cost TargetImprove Asset Initiatives New Revenue Extra Revenue from Increase Increasing ShareAnnual Revenue Growth Structure +25% Utilization xx Sources Customer Value New Products of WalletPercent Revenues from new products 30% xx Customer Value Proposition Price Quality Innovative Products Availability Selection Functionality Service Partnership Brand Measures Target Initiatives Product/Service Attributes Relationship Image Customer Retention 80% Relationship Mgmt Program Share of Account 40% Gain-Sharing Program Operations Mgmt Customer Mgmt Innovation Regulatory and Processes Processes Processes Social Processes • Supply • Select customers • Identify new • Environment • Produce • Acquire new opportunities World-Class • Safety and Health • Distribute customers •Internal Product Select the R&D • EmploymentMeasures Target Initiatives • Manage Risk • Retain customers portfolio • CommunityFirst To Market 75% Annual industry• showbusiness with Grow program Development • Design and dvlpTime To Market 9 months Development cycle time engineering customers • Launch Stable and High-Measures Target Initiatives Human Capital Workforce TalentSpecialized Competency Available 100% Competency Model Information Capital New Hiring ProgramKey Staff Retention 95% Supervisory Training Organization Capital Benefits Program Culture Leadership Alignment Teamwork 13
  14. 14. 2008 2. Plan the Strategy 1. Develop the StrategyKaplan & Norton • Strategy map/themes • Mission, Values, Vision • Measures/targets • Strategic Analysis • Initiative portfolios • Strategy Formulation • Funding/STRATEX Strategic Plan 3. Align the Organization • Strategy map 6. Test and Adapt • Business units • Balanced scorecard • Profitability analysis • Support units • STRATEX • Strategy correlations • Employees • Emerging strategies Operating Plan • Dashboards 4. Plan Operations • Sales forecast 5. Monitor and learn • Key process improvement • Resources rqts • Strategy reviews • Sales planning • Budgets • Operating reviews • Resource capacity plan • Budgeting Execution • Process • Initiative Too many companies are (too) good in strategy formulation but (too) bad in (a disciplined) strategy implementation! 14
  15. 15. Thank You!Prof.dr. Bram Desmet bram.desmet@mobius.eu +32 (0)497.58.28.60 15
  16. 16. TFC : The Value ChainExperience “The Fresh Connection” gives a real life value chain experience within a simulated environment: • SCM is not only the responsibility of one function or manager, it is cross-functional teamwork • Coordinated decision making is critical • A strategy is necessary to have a common direction • How to translate strategy into action • The quality of the supply chain has a big impact on the company profitability • The right management information is very important; • Internal and external collaboration is key to success.
  17. 17. The Fresh Connectionconfigurations • The business simulation is highly configurable • Experience the importance of internal collaboration • Experience the importance of a clear strategy • Learn to translate a strategy into action • Experience the difference between target and plan • … • A number of simulations is available off the shelf • Simulations can also be customer specific by including or excluding content elements or events What is the impact of such a strategic choice at tactical level in The Fresh Connection?

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