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Flexible business models for sustainability
Dr Steyn Heckroodt – Senior Lecturer: Strategy
www: Lectureonbusiness.com
210/04/23 Dr S Heckroodt
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?
310/04/23 Dr S Heckroodt
Morphing of strategy
• Plait of environment and business• Environment – Pong – simple, non-complex, stable,
yes at times a bit disrupted
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Time
Environmental change
Organisational strategy
10/04/23 Dr S Heckroodt
Morphing of strategy
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Time
Environmental change
Organisational strategy
ScanningScenario planningStrategy selectionStructure for implementationForecasting
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
What the complexity boils down to
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Time
Environmental change
Organisational strategy
10/04/23 Dr S Heckroodt
• 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 helpmanaging complexity
10/04/23 Dr S Heckroodt
Environment
12 © Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
10/04/23 Dr S Heckroodt
ENVIRONMENT
13 © Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
10/04/23 Dr S Heckroodt
Environment
ENVIRONMENT
14 © Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
10/04/23 Dr S Heckroodt
Environment
ENVIRONMENT
15 © Dr Heckroodt, S © Dr Heckroodt, S
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
10/04/23 Dr S Heckroodt
Environment
• 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?
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So ...To answer the why
10/04/23 Dr S Heckroodt
• 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...
10/04/23 Dr S Heckroodt
• 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…
10/04/23 Dr S Heckroodt
• 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
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‘
Business model
10/04/23 Dr S Heckroodt
• 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…
10/04/23 Dr S Heckroodt
• Merging market focused (in- pond & downstream) and network focused approaches (upstream)
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Flexibility defined
Market Focus
Network Focus
In-pond
• Organisations with strong, long-term, inter-organisation relationships both upstream and downstream
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1. Network influencer
DELL
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
• Utilise long-term relationships upstream, and ownership downstream
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3. Franchise model
ZARA
ZARA
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
• 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-orientatedmodel
EXPORTERS
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
Shor
t le
ad ti
mes
Long
le
ad ti
mes
Supp
ly c
hara
cter
istic
s
Demand characteristics
Lean plan and optimize
Hybrid&
Postponement
Continuous replenishment
Agile quick response
Predictable Unpredictable
28Source: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
• Embed flexibility when aligning market demands with organisational supply
Network architectures need to
• 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 ofbusiness models
10/04/23 Dr S Heckroodt
• 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.
10/04/23 Dr S Heckroodt
• 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
10/04/23 Dr S Heckroodt
• 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 modelconsists of...
10/04/23 Dr S Heckroodt
• 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
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Let’s try and answer...
10/04/23 Dr S Heckroodt
• 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
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Sustainability contained
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The trio
Possible Business Models Tactics:
Competitive choices enabled
by each Business Model
Strategy plan of which Business
Model to use
10/04/23 Dr S Heckroodt
Case study
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Dominant attribute
QualityPrice
ConvenienceDemand
WW case study
10/04/23 Dr S Heckroodt
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
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Landlord
WW case study
10/04/23 Dr S Heckroodt
Strategic fitas a juncture
OrganisationAbility
Internal Information Live
External Information Live
Strategic planning = alive = moves beyond
annual event
OpportunityThreat
PROBABILITYIM
PACT
Strategic appropriateness
3910/04/23 Dr S Heckroodt