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INNOVACIÓN DE MODELOS DE NEGOCIOS
SESSION 03
VALUE DISCIPLINES FOR COMPETITIVE ADVANTAGE
FACULTY TEAMIng. Jorge Valdes Simancas
Ing. Angel Tonatiuh Flores [ [email protected] ]
Daniel Pandza, M.A.Centro de Innovación
[email protected] 01-(33) 3669 3000 ext. 2266
www.gda.itesm.mx/innovar
CERTIFICADO EN INNOVACIÓNG2 - ENERO-MAYO 2009
GAP
CAP
Competitive Advantage over Time
GAP
Time
Ret
urns
Competitive Advantage GapCompetitive Advantage Gap– Distance from closest competitorsDistance from closest competitors
–New, better featuresNew, better features–Lower pricesLower prices–Superior customer serviceSuperior customer service
Competitive Advantage PeriodCompetitive Advantage Period– Barriers to entryBarriers to entry
–Market share dominanceMarket share dominance–Blocking patentBlocking patent–Switching costsSwitching costs–Brand loyaltyBrand loyalty
CAP
Moore (2002) Living on the F
ault Line. Harper B
usiness Press
CAPCAP highlow
GAPGAP
low
high
GAP/CAP Check:Where are Your Offers on this Grid?
ToyotaCorolla
PT Cruiser
ChryslerChryslerMinivanMinivan
AudiAudiTTTT
FordFordMustangMustang
VWVWBugBug
PorscheCarrera
Sustainability
FordExplorer
AtosSedan
Dif
fere
nti
atio
nD
iffe
ren
tiat
ion
Moore (2002) Living on the F
ault Line. Harper B
usiness Press
CAPCAP highlow
GAPGAP
low
high
GAP/CAP matrixWhere are Your Offers on this Grid?
Sustainability
Dif
fere
nti
atio
n
2002) Living on the Fault Line. H
arper Business P
ressMoore (
Value definitionValue definition
How will How will we we
Deliver Deliver value?value?
How will How will we we
capture capture value?value?
How will How will we create we create
value?value?
Effective strategy answer three key Effective strategy answer three key questionsquestions
Developing and Managing a Successful Technology & Product Strategy; Rebeca Henderson
Effective strategy answer three key Effective strategy answer three key questionsquestions
• How will we create value?How will we create value?• How will the technology evolve?How will the technology evolve?• How will the market change?How will the market change?
• How will we deliver value?How will we deliver value?• How do we manage the core business and growth How do we manage the core business and growth
simultaneously?simultaneously?• How do we use our strategy to drive real resource allocation?How do we use our strategy to drive real resource allocation?
• How will we capture value?How will we capture value?• How should we design the busines model?How should we design the busines model?• Where should we compete on the value chain?Where should we compete on the value chain?• How should we compete if standards are important?How should we compete if standards are important?
Developing and Managing a Successful Technology & Product Strategy; Rebeca Henderson
Maximizing shareholder value gives you a “workable” target
A meaningful maximum that can guide strategy...
☺
Price
Easy, but wrong target!
Correct, but difficult target!
Shareholder value!
Customer
satisfactio
n
Added Value
Appropiated Value
Imitation
Slack
Substitution
Holdup
The four threats to sustainability
Threats to the appropiability of added value; Cinthia Montgomery
What makes a resources valuable?
ScarcityScarcity Appropiability
Demand
Value creation zone
The dynamic interplay of three fundamental market forcesThreats to the appropiability of added value; Cinthia Montgomery
Appropriability of added value
Mutualism can be beneficial, even essential for success,in the business world. But it can potentially create a problem as well:
As players cospecialize, their added values begin to overlap.Making it impossible for all participants to appropiate the full amount.
Each can therefore be said to face the threat of being held up by the others.
• “The extent to which the value appropiated by an organization falls short of the amount potentially available to them”.
Ho
ld u
pH
old
up
Sla
ckS
lack
ManufacturerManufacturer
DistributorDistributor
SuppliersSuppliers
Value Value capturedcaptured
Total Total value value
createdcreated
WTPWTP
Managing InertiaThe Core/Context Analysis Framework
CoreTargeted
InnovationVector(s)
ContextAll other Activities
Mission CriticalProcess shortfall creates
serious and immediate risk
Non-Mission-CriticalAll other processes
Differentiation
Ris
k
Supports change
Re
tard
s c
han
ge
Risk
Reward
Disengages from a Disengages from a process but still have process but still have active control over its active control over its
outcomesoutcomes
(2003) Living on the Fault Line. Harper Business PressMoore
Core & Context
ContextCore
(2003) Living on the Fault Line. Harper Business PressMoore
The elements of the Business Model
ValueProposition
PartnerNetwork
CoreCapacities
ValueConfiguration
CustomerRelationship
DistributionChannel
Customer Segment
CostStructure
RevenueStreams
Success /Failure
Differentiation
Markets
Value Chains
Technologies
Industry advantage
Offer advantage
Category advantage
Customer advantage
Increasing
Impact
GAP
CAP
Competitive Advantage Drivers Competitive Advantage Effects
Competitive Advantage Hierarchy
Types of competitive advantage
Each lower layer provides a stronger basis for power in the marketplace(2003) Living on the Fault Line. Harper Business PressMoore
RepresentsRepresents differentiation embodied in the offer itselfdifferentiation embodied in the offer itself..
It is the It is the most fundamentalmost fundamental of all advantages. of all advantages.
Most of the organizations Most of the organizations devote most of their resources heredevote most of their resources here
In In commodity markets commodity markets wherewhere buying power is concentrated in the buying power is concentrated in the customer.customer.
Offer advantageOffer advantage is about is about the only advantagethe only advantage that a vendor can really that a vendor can really count on.count on.
And often And often it is priceit is price that carries the sale. that carries the sale.
This is the lower level in the power game.This is the lower level in the power game.
There are instead strategies that can end up being profitably.There are instead strategies that can end up being profitably.
Offer power
• None of the underlying sources of power in the competitive advantage hierarchy None of the underlying sources of power in the competitive advantage hierarchy can actually create value.Until companies ultimately transform them into can actually create value.Until companies ultimately transform them into differentiated offeringsdifferentiated offerings
This is the domain of price/performance marketing (good better and best).This is the domain of price/performance marketing (good better and best).
Product is asserting its differentiation and claiming a price reward for so doingProduct is asserting its differentiation and claiming a price reward for so doing
The more the Customers heterogeneity and customization of the product to The more the Customers heterogeneity and customization of the product to meet different needs, the greater the sustainability of the advantage gained.meet different needs, the greater the sustainability of the advantage gained.
Trying to differentiate the offerings.
Without building foundations in the lower in the lower stratastrata of the hierarchy. of the hierarchy.
Are deemed to be Are deemed to be short short lived and undervaluedlived and undervalued..
They representThey represent the surface of the surface of the modelthe modelThe part that actuallyThe part that actually touches touches the customer.the customer.GAP GAP is created throughis created through differentiating from other differentiating from other competing offers competing offers of the of the market.market.No CAP No CAP can be created at this can be created at this level.level.
Differentiated offerings
Market segments
Represent the third strongest form of competitive leverage, after Represent the third strongest form of competitive leverage, after technology leverage and value chain power.technology leverage and value chain power.
Initially the new value chains support a single integrated market defined Initially the new value chains support a single integrated market defined by the by the new category of productnew category of product
Over time, this approach of Over time, this approach of one size fits allone size fits all approach inevitably approach inevitably compromises the unique interest of specific compromises the unique interest of specific market segmentsmarket segments..
Where such compromised interest rebel, vertical markets emerge Where such compromised interest rebel, vertical markets emerge and create opportunities for companies and create opportunities for companies
That did not garner global value-chain power.That did not garner global value-chain power.
to get local market share dominance.to get local market share dominance.
Victories in one or more market competitions create strong GAPs Victories in one or more market competitions create strong GAPs and highly sustainable CAPs,and highly sustainable CAPs,
But only over a limited domain of economic opportunity.But only over a limited domain of economic opportunity.
Value Chain competitionThere are four phases of value chain competition:There are four phases of value chain competition:
New chain vs incumbent chainNew chain vs incumbent chain. Determining whether the new . Determining whether the new technology can gain a foothold for itself in the market.technology can gain a foothold for itself in the market.
Among Among emerging value chainsemerging value chains each seeking to impose its each seeking to impose its standards on the marketplace at the expense of the others.standards on the marketplace at the expense of the others.
This tend to have a This tend to have a winner take all outcomewinner take all outcome, so prudent companies , so prudent companies will try to secure a place in every chain that has a chance to be the will try to secure a place in every chain that has a chance to be the winner.winner.
The third and fourth occur The third and fourth occur within value chainswithin value chains where individual where individual companies jockey for power, both among their direct competitors for companies jockey for power, both among their direct competitors for a specific role in the chain, anda specific role in the chain, and
Also with the other chain membersAlso with the other chain members over how profits are allocated over how profits are allocated across the chain.across the chain.
In these latter two competitions, the goal is to build power In these latter two competitions, the goal is to build power while the while the chain is still fluidchain is still fluid and forming. and forming.
In technology enabled markets once the chain has formed, In technology enabled markets once the chain has formed, it is it is often too late to effect change in positionoften too late to effect change in position (high switching cost). (high switching cost).
Competitive advantage hierarchy
•The highest form of competitive leverage comes The highest form of competitive leverage comes from riding from riding the adoption of a new wave of the adoption of a new wave of technologytechnology, as it displaces and older one., as it displaces and older one.•New paradigms New paradigms rewrite all the rulesrewrite all the rules of competition, of competition,•Making Making obsolete all market positionsobsolete all market positions
Should be Should be read from read from the bottom the bottom up. up.
For this displacement to occur, the new technology must be integrated For this displacement to occur, the new technology must be integrated into end to end systems that meet existing customer needs.into end to end systems that meet existing customer needs.
In the new economy, no one company is responsible for this integration, In the new economy, no one company is responsible for this integration, instead it is the end product of a value chain.instead it is the end product of a value chain.
Whole Product Analysis
The The ProductProduct
ComplexComplexconfigurationsconfigurations Hardware Hardware
SoftwareSoftware
PeripheralsPeripherals
ConnectivityConnectivityInstallationInstallation
Presales Presales servicesservices
Postsales Postsales service & service & supportsupport
Based on Based on understanding understanding customer’s problem customer’s problem and its solutionand its solution
What other What other competitors in competitors in category have in category have in common with youcommon with you
What you can show based What you can show based on commitment to solve on commitment to solve
problem through a problem through a preengineered solutionpreengineered solution
Complementary Complementary ProductsProducts
Complementary Complementary ServicesServices
Why Morphing Between Groups is Hard
Complex SystemsComplex Systems Volume OperationsVolume Operations
SalesHigh-touch salesComplex sales cycle
ServicesConsultativePlanned
MarketingWhole-product focusValue-chain orientation
EngineeringConfigurationCustomization
SalesLow-touch salesSingle decision-maker
ServicesTransactionalReactive
MarketingFeature-benefit focusEnd-user orientation
EngineeringMass-producedMass-customized
Product economics1. Product design (Mission critical)2. Branding and distribution channels3. Product become subordinated as
systems evolve (better whole product)4. Product share5. Rivalry (beating the competitor)6. Competence culture
Supply chain efficiency1. Productivity and price2. Offer can be commoditized3. Neutralize product leadership.4. Context rather than core5. Neutralizing customer intimacy6. Outsourcing any type7. Optimizing efficiency (Process
leadership)8. Repet. situations/objective Quality 9. Focus on timing rhythm /speed10. Reducing misses not increase hits11. Value chain reengineering 12. Network positioning13. Control culture
Customer economics1. Superior matching/Knowledge of
the customer domain2. Core / personal service.3. Context / Automated
personalization4. Set the bar higher/ Less tolerance5. Customer relationships6. Demand chain mgmt7. Skill vs scale8. Number of hits9. Optimizing scope10. Customer share11. Buyer and user are the same12. Collaboration Culture
Customer Customer IntimacyIntimacy
Value Value NetworkNetworkArchitectArchitect
Best Best ProductProduct
Process Orientation
Degree ofDifferentiation
Through Processes
Value disciplinesValue disciplines
Best product
Unilever’s Managing Risk in Innovation
Consumer Value Perception
En
ablin
g T
echn
olo
gy
AggressiveHigh CompetitiveStrength butHigh Risk
VulnerableEasily imitated product or service
Reactive Low Risk but Low
Competitive Strength
RecklessHigh Risk Low
Business Gains
Radical
Next Generation
Incremental
Base
New Core Product
Product New Benefit
Product Improvement
Product Variant
No Change
Developing and Managing a Successful Technology & Product Strategy; Rebeca Henderson
Operational excellenceSeeks to differentiate from others in category through superior execution• Measured by productivity and ultimately by price.• It is most succesful when the offer can be commoditized• Neutralizing the power of product leadership.• Works better when it is context rather than core.• Thereby neutralizing the power of customer intimacy.• Outsourcing of virtually any type is a natural ground for differentiating
through operational excellence.• Mass production represents another.• The key is a focus on process.• Value chain reengineering.
Operational excellence• Identify the minimum set of attributes required by the customer.• It seeks to root out any subactivity that does not explicity add value.• Some tools like JIT, advanced and collaborative supply chain, vendor
managed inventory, • are attempts to make uses of funds for inventory more productive.• Focusing on process implies a focus on timing.• Attend to rhythm first and speed second.• Process focus works best in situations that are repetitive where output
quality can be measured objectively.• Success is measured by reducing the number of misses rather than
increasing the number of hits.
Value network arquitects/ Operational efficiency
Customer Intimacy
Seeks to differentiate from others in category through superior matching of customer expectation with order fulfillment.
Justifies a pricing premium based on greater perceived and received value.
When the offer is core to the customer. Personal service and tailoring are key. Requires superior domain expertise in a consultative sales and service
relationship, Leading to tailored offers that solve the customer´s problem end to end.
Customer Intimacy
The key is a superior knowledge of the customer domain and Personal expectations and values, Combined with the ability to customize the offer to capitalize on this
knowledge. Focus on response time. Calibrated by the interval between:
• The customer's becoming aware of a need or an The customer's becoming aware of a need or an opportunity and opportunity and
• The vendor being able to present the offering that The vendor being able to present the offering that matches.matches.
The more context the offer, the shorter the interval The more context the offer, the shorter the interval that the customers will tolerate.that the customers will tolerate.
Customer Intimacy
Customers are willing to grant significant more time when the offer is core,
But they also set the bar higher for making the match. Scale companies embrace mass customisation to meet these demands. In which they can premake the offer and Stage it for final configuration and customization at the point of
purchase. This is in itself a form of operational excelllence, focused on earning a
premium as opposed to increasing a discount. Customer inimacy works best when the buyer and the user are the Customer inimacy works best when the buyer and the user are the
same.same. Like in most consumer purchases.Like in most consumer purchases.
Customer Intimacy
The major challenge is that the domain expertise is scarce. Customer sensitive representants even scarcer and Both are hard to scale. Is measured by the number of hits. Works best on collaborative cultures. Where the customer's problem or need become the focusing element of
the collaborative effort. The goal is to optimizing the offerings on relation to customer's
experience as opposed to optimizing the means of production wich is the goal of
Operational excellence, Or optimizing the competitive performance of the offer itself wich is the
goal of product leadership.
Customer intimacy
The progression of economic value from core commodities to optimum experiences
(adapted from The Experience Economy by Pine and Gilmore).
High High RelevanceRelevance
CUSTOMER CUSTOMER NEEDSNEEDS
Low Low RelevanceRelevance
Low Differentiation
POSITIONED POSITIONED COMPETITIVELYCOMPETITIVELY
High Differentiation
Core Core CommoditiesCommodities
• Internal Internal Supply Supply chain.chain.
• Product Product innovationinnovation
•Solutions Solutions innovation.innovation.• Demand Demand
side of side of Supply Supply
networks.networks.•Systems Systems integrationintegration
•Experience Networks.
•Personalized Experiences
Cost Driven PremiumPRICING PRICING STRATEGYSTRATEGY
RelationshipOwner
Value NetworkArchitect
Product Innovator
“Dominate theEco-System”
“CreativeDestruction”
“Work Backwardsfrom the Customer”
Process Orientation
Degree ofDifferentiation
Through Processes
Strategy Space business model frameworkStrategy Space business model framework
Many worldsMany worlds
Core Value Drivers1. Product development2. Branding3. Distribution channels
Core Value Drivers1. Network positioning2. Process leadership3. Optimizing efficiency
Core Value Drivers1. Customer relationships2. Demand chain mgmt3. Optimizing scope
RelationshipOwner
Value NetworkArchitect
Product Innovator
Process Orientation
Degree ofDifferentiation
Through Processes
Associated core value driversAssociated core value drivers
Many worldsMany worlds
2000
2000
or here . . .
RelationshipOwner
Value NetworkArchitect
Product Innovator
2000
1985
and sometimes move here . . .
businesses start here . . .
1990
19621990
1996
Example business model paths over timeExample business model paths over time
Many worldsMany worlds
Degree of differentiation
through process
Process OrientationRelationship
Owner
Value NetworkArchitect
Product Innovator
Core Value Drivers1. Customer relationships2. Demand chain mgmt3. Optimizing scope
Stalemate!
Core Value Drivers1. Network positioning2. Process leadership3. Optimizing efficiency
Example competitive migration pathsExample competitive migration pathsAmazon vs Wal martAmazon vs Wal mart
Many worldsMany worlds
Competitive Advantage Grid
SorcerersSorcererseBay, Yahoo, Nintendo, Polaroid.
DisruptersDisruptersAmazon, AOL, Time Warner, Qualcomm, Enron.
EnchantersEnchanters Home, Shopping, Tivo, Intuit, Pleasant Company
FlashersFlashersPriceline, eTrade, Netscape, Napster.
Disruptive Innovation
InnovatorsInnovatorsIpod, Iphone, Sharper Image.
ExcludersExcluders
Cisco, Microsoft, Mercedes, Nokia, Toyota
ExcellersExcellersREI, Adobe, Ferrari, Lawson, Reiek
ReassuresReassuresDuracell, Sony, Tumi, Dyson.
Product Leadership
Niche-carversNiche-carvers Silicon Vailey Bank. Pleasant Company.
Market- MakersMarket- MakersMerril Lynch, N.Y. Yankees, Disney, IBM.
IncludersIncludersMcKinsey, Martha Stewart, Saturn, Starbucks.
DelightersDelightersNordstrom’s, Nike, Crystal Geyser, Hold Everything.
Customer Intimacy
ReinventorsReinventorsMcDonalds, Fed Ex, Jiffy-Lube, Charles Schwab, Colora Genomics.
DominatorsDominatorsWalmart, Dell, Visa, Exxon.
SatisfiersSatisfiersKinko’s, IKEA Southwest Airlines
EconomizersEconomizers BIC, Motel 6, Costco
Operational Excellence
Category Advantage
Industry Advantage
Customer Advantage
Offer Advantage
(2003) Living on the Fault Line. Harper Business PressMoore
CONTACT:Daniel Pandza | Innovation CenterTecnológico de Monterrey | Campus Guadalajara
Tel: 0052 (33) 3669 3000 ext. 2266E-Mail: [email protected] URL: http://www.gda.itesm.mx/innovar
Center Blog: http://paradygnamics.wordpress.com
NUEVAS PERSPECTIVAS PARA EL ÉXITO
EMPRESARIAL
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