This document summarizes a presentation given by Dr. Handry Satriago on building and sustaining competitive advantage. The presentation discusses how the world is becoming increasingly globalized and flat, with interconnected supply chains and competition. It emphasizes that competitive advantage is difficult to sustain given globalization, turbulence in the business environment, and demanding customers. The presentation argues that nations and companies must focus on innovation, developing human capital and talent, and differentiating themselves through unique strategies to achieve and maintain competitive advantage in this challenging global context.

1. Building and Sustaining Your
Competitive Advantage
A Session with Akademi Berbagi Jakarta
Jakarta, 8 December 2012
Dr. Handry Satriago
President & CEO
GE Indonesia

2. The world we are
facing today…

3. 1. The more global world
Borderless. Cyber connected.

4. A Global World…
Princess Diana's death.
An English princess
with an Egyptian boyfriend
crashes in a French tunnel,
driving a German car
with a Dutch engine,
driven by a Belgian who was drunk
on Scottish whisky,
followed closely by Italian Paparazzi,
on Japanese motorcycles;
treated by an American doctor,
using Brazilian medicines.
and you're probably reading this on your computer,
that use Taiwanese chips,
and a Korean monitor,
assembled by Bangladeshi workers
in a Singapore plant,
That, my friend, is Globalization

5. 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

6. 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

7. A Global World…
The price of global communication

8. 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)

9. The Message Revolution

10. it is growing world…
The world in 2007

11. it is growing world…
The world in 2030

12. 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 same
global supply chain.

13. The New Economy
A Day Without “Made In China”
A $5T economy in 2010, 2nd in the world, 9% economic
growth in 2009. Have >800MM labor force from 1.3B
population. FDI flow >$100 B. China is potential
customers, partners, and employees for everyone.
13

14. The New Economy
India Intellectual
Revolution
China is the factory of the world,
and India is the back office. It has
>100MM english speakers (2x UK)
workforce. More than 1 million
white collar, service industry jobs
moved to India*. The share of IT
Industry is more than 7% of GDP.
Fourth largest economy (PPP) with
>100B FDI, mostly in high tech
industry.
14
*Robyn Meredith, The Elephant and The Dragon (2007)

15. The New Economy
Abu Dhabi is leading transition.
pearl diving oil.
15K
inhabitants
1.5M
inhabitants
<$1
per capita gdp
$70K
per capita gdp
Past Present Future

16. 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

17. 2. Surplus Society
Competition

18. The surplus
society
“has a surplus of similar companies, employing similar people, with
similar educational backgrounds, working in similar jobs, coming up
with similar ideas, producing similar things, with similar prices and
similar quality.”
Kjell Nordstrom and Jonas Ridderstrale,Funky Business

19. Competitive
advantage is easily
diminished
By imitation, substitution, moving or resources, and
lack of capability to endure the position

20. Extinction rate for companies is increasing
Average Lifetime of S&P 500 Companies

21. An example of competition

22. An example of competition

23. An example of competition
BMW started it ……

24. Audi Responded….

25. Subaru Needs To Say
Something….

26. Bentley CEO
Has The
Final
Words…

27. 3. A Turbulence World
Higher Risk

28. 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 ?

29. We want you to
know more of this.
4. Demanding
Customer
Faster. Cheaper. Better

30. Do we really know what our
customer wants and needs?
• The GE lighting story
• Xerox story
• The internet banking story
• GE MRI story

31. 5. The need for
A cleaner world
Global Warming. Pollution

32. 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

33. Indonesia in The
Global World

34. McKinsey Report 2012

35. Indonesia has been a hub for global trade and
business since long time ago

36. Indian
(1st century)
Chinese
(4th century)
Arabs
(13th century)
Europeans
(16th century)
• Portuguese
• Dutch
• British
We welcome everybody… • Spanish

37. The first
multinational
company in the
world
• 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

38. World Economic
Forum
Competitiveness
Index
The IMD World Competitiveness Yearbook
(WCY ) looks at the relationship between a
country’s national environment
(where the State plays a key role) and the
wealth creation process (assumed by
enterprises and individuals). The WCY
focuses on the outcome of the interaction of
four competitiveness factors, which
generally define a country’s national
environment. These are:
- Economic Performance
- Government Efficiency
- Business Efficiency
- Infrastructure
On the basis of these four factors and more
than 300 criteria, the WCY assumes that
healthy performance in these dimensions
creates a national environment that
sustains World Competitiveness.

39. We can play a role as an
object or subject of
globalization

40. Indonesia should
be the major
player in the global
world…
Why

41. The thoughts of Michael Porter
Why nations have differences in prosperity? What drives
nation 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.

42. 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)

43. The more competitive the nation does
related to the more prosperous of the
nation…

44. National Competitiveness
Components
Source: Michael Porter (2003)

45. The thoughts of Michael Porter

46. Microeconomic Competitiveness
The Global Competitiveness Report 2008-2009 © 2008 World Economic Forum

47. Relationship between Microeconomics
Foundations and GDP Per Capita
Source: Michael Porter (2003)

48. The Diamond Model
Goverment
IFC
(associations)
Source: Michael Porter (2003)

49. Doing Business in Indonesia
Doing Business 2010 Report – World Bank
Quantitative indicators on business regulations and protection of property rights
throughout 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

50. Problems doing business in Indonesia
2010 - 2011
Source : World Economic Forum (2012)

51. Human Development Index 2011

52. International Patenting
Output
Source: Michael Porter (2008)

53. Cluster Policy versus
Industrial Policy
Source : Michael Porter (2000)

58. 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 International
La Jolla Molecular Moores Research Facility
Medicine Cancer Center Research Facility
Bioengineering
La Jolla Medicine Cancer Center Human
Institute
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

59. San Diego’s First Biotech Company (1978)
Hybritech

60. San Diego’s Biotech Cluster (2005)
Pfizer Lilly
Novartis
Johnson & Johnson

61. Multinational companies
needed to boost local
companies development
(if they are ready….)

62. What can we
do differently
to become a
winner?

63. Our current situation: Macro
economy is good, market is potential,
but human capital is not ready, and
policies for improving
competitiveness is not there yet…

64. We need competitive talent
1. English speaking
2. Analytical thinking
3. Capability to create the dots
4. Capability to connect the dots
5. Communication skills
6. Behavioural – learning, humble,
empathy, realistic
7. Passionate to excel
8. Resilience

65. The Main Types of
Competitive Advantage
Cost advantage
Competitive
advantage
Differentiation
advantage

66. Cost Leadership
PLUS..
• Focus on customer
satisfaction
• High level of employee
dedication

67. 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)

68. Features of competitive
strategies
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

69. What is Your
Competitive
Advantage?

70. The problem is
competitive
advantage easily
diminished…

71. Your Threat
• Imitation
• Substitution
• Holdup and
Stealing
• Slack of your
capability

72. The need is to have
sustainable competitive
advantage

73. 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

74. Strategy is making
clear-cut choices about
how to compete
You cannot be everything to everybody, no matter what
the size of your business or how deep is your pocket
Jack Welch (2005)

75. At Soto Paru
Fapet Bogor,
Strategy is all
about products
The product that offered is you
are ready “to die for” to get it…

76. At Coffee Club
Plaza Senayan,
Strategy is all
about services
The services makes you forget
that there are other good coffee
corner shop…

77. GE Strategy:
Decommoditizing
“Try desperately to make products and services
distinctive and customers stick to you like glue.
Think about innovation, technology, internal
processes, services add-ons-whatever works to be
unique. Doing that right means you can even make
a few mistakes and still succeed”
Jack Welch (Winning, 2005)

78. “Strategy is choosing to
perform activities differently
than rivals do”
Michael Porter (1980)

79. Think of
Unthinkable..
“Hard times give you the courage to
think the unthinkable” (Andy Groove)

80. For Vertu, the
strategy is
expensiveness
“I am selling expensiveness…if
it is not expensive, people
won’t buy it

81. Talking about
“Survival of The
Fittest” Theory…

82. A Value
Proposition….
Dennis Rodman
Basketball 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).

83. A Value
Proposition….
Vanessa Mae
Violist

84. Being first in the
market is an
advantage, but without
ability to sustain it, the
advantage is easily
gone..

85. The key is keep upgrading your
understanding about your
customers…unfortunately, many
companies neglect this…

86. The Story of The Giant
1950’s
• Xerox is the king for copier machine..but after
through 100% 20 yrs patent expired, they are facing
1970’s Market Share competition…
by Xerox
• Still go with big, high quality and expensive
machine…
• Market and customer CTQ are
1979
changing…Market share dropped!
Starting the Declining IBM
competition: Market Kodak
•IBM Share 1984 Canon
•Canon Minolta
Xerox Market Share = 8%
•Kodak Others

87. 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!

88. Customer changing, market changing,
the successful sustainable competitive
advantage companies always ready to
make changes..

89. 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?