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Strategy & BusinessPlans
IEI Business Plan Workshops
TL Hillthill@sbm.temple.edu
215-204-3079
mailto:Thill@sbm.temple.edumailto:Thill@sbm.temple.edumailto:Thill@sbm.temple.edumailto:Thill@sbm.temple.edumailto:Thill@sbm.temple.edumailto:Thill@sbm.temple.edu8/7/2019 Strategy & Business Plans
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Business plan workshops
Matching Products and Services with Markets First one
Competitive Analysis Last week Business Model
Tonight
Market and Sales Monday, November 19, 2001 - 6:00 pm to 8:30pm Financial Projections
Monday, November 26, 2001 - 6:00 pm to 8:30pm
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Feasibility plan outline
Executive Summary
Product or Service
Technology/CoreKnowledge
Target Market
Competition
Industry
Strategy/Business Model Marketing and Sales
Functional Strategy
Production/OperatingFunctional Strategy
Intellectual Property Issues
Regulation Issues
Critical Risk Factors
Timeline
Break-even Analysis
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Strategy can mean many things
Plan
Process
Position Pattern
Perspective
Procedure
Play
Ploy
Strategic Management
Strategic Positioning
Strategic Navigation
Strategic Tactics
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Strategic management
Is a detailed pattern of decisions thatdescribes in some detail what a company will do
in light of what it might do, what it can do,
what its leaders want to do, and
what it should do.
Kenneth Andrews
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Strategic management
Environmental Scanning
Evaluation &Control
StrategyImplementat
ion
StrategyFormulationMission
Disciplinediterative
processof pursuing amission,whilemanagingtherelationship ofthe firm to itsenvironment.
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But pushes beyond the situation
Strategic management is all about chasinga dream
In a disciplined but opportunistic way By developing your assets
To take advantage of opportunities the
world (environment, industry, market) gives While shaping the world when you can.
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Strategic management is about
finding ways to grow...Environmental Scanning
Evaluation &Control
StrategyImplementa
tion
StrategyFormulationMission
Vision
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Two basic strategic options
Position Strategy Unique, valuable, defensible position in a market or
industry
Supported by a tightly integrated value chain /activity system
Good for relatively stable industries/markets
Resource/Navigation Strategy Vision-driven nurturing and leveraging of core
resources Supported by tight culture and explicit learning Good for dynamic industries/markets
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ExternalOpportunities
& Threats
Niche
InternalStrengths &Weaknesses
I. Strategic positioning
A niche is typically themarket the firm is uniquelyqualified to serve
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Classic positional strategies
Cost (price) leadership
Differentiation Quality, design, support/service, image Always starts with the product
Focus Broad or narrow Always starts with a specific market
segment
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Examples of positional
strategies Cost (price) leadership
Crown, Cork & Seal (pennies, plants). Wal-mart (warehousing,negotiation). Motel 6 (location, services, salespeople). Cintas
(plants, logistics). Differentiation
Mercedes (quality). Apple (design). Nordstrom (service).Nike (image). G&K (clean rooms, radiation). Mostentrepreneurs (Zitners, Prompt.)
Focus Wal-mart (broad - rural). Specialty bookshops (narrow -
Giovannis room, NSP). Some entrepreneurs (NRI - changingmix & services).
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Elaborations of positional
strategies Penetrate new markets
Insurance in India. IMS.
Develop new markets E-government. (Disruptive technologies.)
Develop new products Gillette. Intel.
Become indispensable Microsoft. Best subcontactors.
Fortify Borders wholesalers, B&Ns leases.
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TOWS analysis
Strengths(S)
InternalFactors
External
Factors
Opportunities(O)
SO Strategies-------------------------
WO Strategies------------------------
Threats(T)
ST Strategies--------------------------
WT Strategies-------------------------
Use strengths toavoid threats
Min. weaknessesto avoid threats
Use strengths totake advantage of
opportunities
Offset weaknessesto take advantage
of opportunities
Weaknesses(W)
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TOWS analysis exercise
List 2 opportunities & 2 threats
List 2 strengths & 2 weaknesses
Match em up trying to use (or develop) strengths to take advantage
of opportunities while offsetting weaknesses anddefending against threats
avoiding strategies that put weaknesses in way of
threats Use classic strategies -- cost, differentiation,
focus -- as prompts for ideas
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Position strategies require fit
Fit refers to the niche a firm serves and the way itsproducts or services are positioned
But fit also has to do with every other part of the
internal structure of the firm. A well positioned firm craftsitself to serve a niche
better than anyone else
Starting a new firm offers the exciting, seductive,
often advantageous opportunity to craft a perfect fitbetween specific opportunities and internal capabilities.
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Value chain
A strong value chain is a cross-linked net of activities thataffects the cost or performance of the whole.
Supporting a strategy by optimizing both individual functions andthe links between them to support a strategy yields a powerful,durable, hard-to-duplicate advantage.
MarginTechnology
InboundLogistics
Operations Outbound
Logistics
Marketing/Sales
After SalesService
Infrastructure
Procurement
Human Resources
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Value chain for NSP
Smallbut
steadyDesk-top, enterprise, email
Editorial
Trade pbGalleys -review &
hc
Libraryrate
UPS
Direct mailDistributor
Prepayvs
ReturnsGreen
tax
Land trust, warehouse, 501(c)3, friendly capital
Prompt press, newsprint
Cooperative: multiple skills, networks, low-cost, apprenticeship
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Activity system
Is a less linear way of thinking aboutthe kind of internal fit that supports astrategy.
Map crucially interrelated featuresand functions that define a firms
unique skills and strategy. Supports competitive advantage with
reinforcing patterns or systems.
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Ikeas Activity System
Limited
Customer
Service
ModularDesigns
Low Mfg
Cost
Self-
serviceSelection
Self-
transport
Limited
sales staff
Customer
loyalty
Self
-assembly
Suburban
Location
Mostitems in
stock
Design
focused on
low cost
Explanato
ry 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
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Experience curve
For positional strategies, experience is the ultimatesource of advantage.
Experience fuels the tacit knowledge that drivesproductivity improvements, innovations, elaborationsof strategy, etc
Successful firms are especially good at creating the
social and institutional structures that support theshared development of such tacit knowledge
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Value chain or activity chartexercise
Draw the value chain for your firm
Note reinforcing (and jarring) pieces
Try to create more reinforcementsOR
Jot down functions and features
Look for patterns and connections Try to crystallize patterns
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Strategic navigation depends ontiming
ompetitiveEdge
Launc
h
Exploitation Counterattack
Strategic Window
Time
Rapid change erodespositionsleading totemporaryopportunities
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Strategic navigation requiresvision
Vision pullsfirms forward
Strategic intent is vision manifest as focused ambition: Lengthens organizational horizon
Promotes focus on ends Encourages creative means
Promotes consistency between evolving short-term goals and morestable long-term ones
Promotes focused resource allocation
Tends to motivate
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Strategic navigation builds oncore assets
Flexible strategies require core assets plus a commitment to developing them
Assets are sources of future value Tangible, intangible Owned or not (but available)
Often with a useful life
Often people: customers, employees, organizationalknowledge
Especially core competencies: special knowledge and skillsembedded in employees and systems
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Four arena analysis
Trace escalating competition along ladders Trying to predict shifts to new areas
Cost/Quality Cintas: Ever better plants and routes
Timing/Know-how Aramark: Bought into corporate uniforms
Barriers to entry New plants, sophisticated logistics, global reach
Deep pockets Slugging it out -- and sometimes buying out small fry
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Navigational strategies
Find loose bricks Stake out undefended territory, fly low, cherry
picklooking for a beachhead, not a niche (Honda) Change the terms of engagement
Sidestep barriers to entry (Canon)
Collaborate License, outsource, joint venture to gain
information and knowledge and advantage as go(lamp shades to ceiling fans)
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Navigational strategy exercise
What is the rate of change in your industry ormarket?
What is driving change? In what arenas is competition focused?
Cost/Quality, Timing/Know-how, Barriers toEntry, Deep Pockets?
How might you take advantage of flux in yourfield?
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A business model describes what a firm will do, andhow, to build and capture wealth for stakeholders
Effective business models operationalize goodstrategies -- turning position, fit, etc (or vision andresources) into wealth
Start-ups offer the opportunity to craft a perfectfit between specific opportunities and internalcapabilities.
III. Business models
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Build Wealth Through an alchemical transformation of inputs into something
that customers value enough to pay for at more than cost
Or through developing enough potential to be bought: valuablepositions, know-how, customers
Capture Wealth Private or public sale
Profit: Revenues plus cost control
Plus: The good life, a rich family life, entrepreneurial success,social impact
Business models build & capturewealth for stakeholders
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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
4.Choose a position/strategy
Business models start withstrategy
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4. Identify stakeholders you must serve Owners, family, workers, community
5. Identify the wealth you will capture Capital, good life, family life, fame
entrepreneurial effectiveness, social value
6. Sketch a structure that willoperationalize the strategy Value chain or activity system
Business models enclose wealth
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6. Work out the implications Functional strategies
Timelines: Ie., the path to profitability,sale or other realization of value
Financial projections & capital needs
Business models definestructure
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Build a business model exercise
Strategy
Stakeholders Wealth
Model
Structural implications
Revise model
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IV. Functional implications ofthe business model
Marketing and sales
People, management, governance Operations
Finances
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Marketing and SalesFinance
Next week: Marketing & Sales
Two weeks: Things Financial Now: Miscellaneous thoughts on
people, management, governance
and operations
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People
Employees, managers, stakeholders
More important even than cash Effectiveness, pleasantness
Most difficult resource to find, tokeep and to manage
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Business systems
OwnershipPressures
Managerial
Pressures
Family/StakeholderPressures
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Business systems dynamics
Each system has its own logic, its own bottomline Ownership: Wealth creation & maintenance Family & Stakeholders: Relationships Management: Efficiency & replicability
Each has its own time horizon Ownership: Ten years or one working life Family & Stakeholders: Reproduction of
generations
Management: Quarterly or annual results
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Governance defines the circlesand the relationships
Who decides what Owners, key employees, key customers, family
members, professional advisors
The decision makers for each circle Owners (board of directors)
Managers (management team)
Family/stakeholders (council)
The scope of their decisions
Their responsibility to each other
Conflict resolution
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Governance example
Company with strong family ties & 3 sons
Owners retirement needs drive succession Two sons buy business (not land) from father
CEO-in-training - 50.+%; Sales manager 50-% Board advisors
Family needs led to side business: Graphic artist, co-owned by CEO-in-training and serving main
business
Management needs turn alliance into new web-basedbusiness
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Governance structures
Direction Vision, values, culture
Formal visioning Cultural maintenance
Agreements
Contracts, bylaws Support
Facilitators, advisors, models
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Sharing the vision
Vision provides both energy andstability.
Core Ideology anchors the team Dynamic Envisioned Future draws the
team forward Long-term, audacious goals Concrete, vivid description of the future
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Value driver analysis
Probability of
Success
Impact
[Time Frame]
L
H
H
Intervention
B
Intervention
Z
Intervention
A
Intervention
X
Intervention
CIntervention
Y
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Value driver analysis
Work with teams (management, boards,stakeholders) to
List possible projects or initiatives Rank each by magnitude of impact
Rank each by probability of success
Place them on the matrix Concentrate on high value/high
probability options
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Value of the analysis
Focus No low hanging fruit, no wild gambles
Process Generates commitment Builds trust
Brings data and analysis To what is for most entrepreneurs, intuitive
Models a useful tool
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Legal structures
Corporations are liability and task entities With governance implications
Sole proprietorships S corporation
Partnerships
C Corporations
LLC Stakeholder Corporations
ESOPs, cooperatives, joint ventures, communitycorporations
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Support structures
Boards of advisors Next size up, pay
Professional team Accountant, lawyer, coach, tie-breaker,
insurance?
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Governance section
Key stakeholders and how and whythey count
Legal structure Key agreements that distribute power
and responsibility
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Management responsibilities
Vision Blends personal & organizational visions
Fosters common culture
Strategy Environmental scanning
Strategy
Measurable objectives Resources
Tools, systems, education
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Management responsibilities
Systems Efficient, effective processes
Fit between systems
Relationships
Staff development
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Responsibility charting
Provides a language and forum fordiscussing decision making -- at
governance, management or staff level. Creates greater clarity about how
decisions are to be made and who will
be accountable for those decisions. Allows for a discussion of the difficult
issues of power and authority.
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DECISION:
Roles Involved
CEO Oper. Sales Fin.
Approve
Responsible
Consult
InformedTypeso
fParti
cipation
Responsibility chart
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Responsibility chart details
Approve Sign off on decisions
Veto power
Final responsibility to commit resources
Shares accountability
Responsible
Takes the initiative, develops alternatives,recommends, implements.
Accountable for results
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Responsibility chart details
Consult Input but no veto power
Inform Notify
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Management team section
Names & Experience Resumes
Missing members Recruiting plan
Advisors & roles Recruiting plan
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Operations
What you do
How you do it
Cost implications
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Operations Examples
Arbill computerized information, pay incentives,
training, culture, evidence Anderson
architected solution simplifies training and
control and resource management ties in with knowledge management
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Operations section
Key processes & strategy
Efficiency / cost control
Recruiting, training, evaluatingstrategy
Fit with overall strategy Continuous improvement
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Operations exercise
Sketch out basic operational steps
Note cost assumptions
Create research list to confirmassumptions, fill in gaps, collectnumbers
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Bibliography
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 ofBusiness Strategy, 21 (4), July-August 2000, pp 29-35.
James Collins & Jerry Porras, Built to Last(HarperBusiness, 1994).
Richard DAveni, 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 CEOs Guide to Acceleratingthe Transition in Mergers, Acquisitions and Gut Wrenching Change, (HarperBusiness1999).
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 betweenStrategic Intent and Core Capability", International Journal of Strategic Management-Long Range Planning, Vol. 31, No. 3, pp. 406-417, 1998
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Bibliography, cont.
TL Hill lecture notes, 1999, 2001.
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, 3rd Edition(Prentice Hall,1998).
Alex Moss, Praxis Consulting presentation on worker ownership, 1999
Sharon Oster, Modern Competitive Analysis, 2nd 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
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Evaluation
What was the most useful part oftodays workshop?
Least useful?
What should I definitely keep thesame?
What should I change -- and how?