SECTION 1: WHAT IS STRATEGY ?

Organization needs to make choices

WHO is our customers?

In terms of customer segments

In terms of geographic regions
WHAT is it that we sell to our customers?
What is your value proposition in terms of products & services.
HOW to do business?

How to acquire/retain customers, manage customer relationships

How to deliver value proposition (e.g., distribution)
A good Business model entail: making a set of mutually reinforcing choices (Who, What How)

External consistency (how you create value for your customers?)

Internal consistency (how your choices strengthen and fit with each other?)
Six principles of breakthrough strategy?

SECTION 2: COMPETITION
Fundamental of Strategic Analysis (Industry factors, Sources of competitive advantage)
Porters Five Forces: Industry profitability depends on:
1. Competition in the industry
The larger number of competitors (along with products/services they offer)
Low product differentiation
High exit barriers
Low industry growth rates
High economies of scale, high fixed/variable cost ratios
company less power, less profitable
2. Threat of entry
High capital requirement
Large economies of scale
Superior access to inputs/channel of distribution
Legal barriers
Threat of retaliation
Strong barriers to entry more time and cost to enter the market a company has less power
3. Power of supplier
Few suppliers/ more unique goods Suppliers have more power company will be more dependent and
less power.
4. Power of customers
How many buyers, how significant each customer is, how much it would cost a customer to switch from one
company to another the more the ability of customers to drive price down company less power.
5. Threat of substitute products
More substitute for products companys power can be weakened
Porters Generic Strategies
Porters Value Chain
How organization create value, change input into outputs?
Primary Activities
Primary activities relate directly to the physical creation, sale, maintenance and support of a product or
service. They consist of the following:
Inbound logistics These are all the processes related to receiving, storing, and distributing
inputs internally. Your supplier relationships are a key factor in creating value here.
Operations These are the transformation activities that change inputs into outputs that are sold
to customers. Here, your operational systems create value.
Outbound logistics These activities deliver your product or service to your customer. These are
things like collection, storage, and distribution systems, and they may be internal or external to
your organization.
Marketing and sales These are the processes you use to persuade clients to purchase from you
instead of your competitors. The benefits you offer, and how well you communicate them, are
sources of value here.
Service These are the activities related to maintaining the value of your product or service to
your customers, once it's been purchased.
Support Activities
Procurement (purchasing) This is what the organization does to get the resources it needs to
operate. This includes finding vendors and negotiating best prices.
Human resource management This is how well a company recruits, hires, trains, motivates,
rewards, and retains its workers. People are a significant source of value, so businesses can
create a clear advantage with good HR practices.
Technological development These activities relate to managing and processing information, as
well as protecting a company's knowledge base. Minimizing information technology costs, staying
current with technological advances, and maintaining technical excellence are sources of value
creation.
Infrastructure These are a company's support systems, and the functions that allow it to
maintain daily operations. Accounting, legal, administrative, and general management are
examples of necessary infrastructure that businesses can use to their advantage.

When entering a market in the face of entrenched, dominant incumbents, it is helpful to:
Take an approach that is relatively foreign to the incumbents
Targeting a new and different customer segment, growing the market.
Doing sth that benefits (at least neutral) towards incumbents, at least in the short run

SECTION 3: RESOURCES & CAPABILITIES

Fundamental of Strategic Analysis (Industry factors, Sources of competitive advantage)
FIRM RESOURCES include all assets, capabilities, organizational processes, firm attributes, information,
knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that
improve its efficiency and effectiveness
This includes
Tangible resources (machinery, building, etc.)
 Intangible resources (brand, culture, etc.)
Human resources (people with specialized skills, people with communication abilities, etc.)
Strategy need to build on resources that are: VRI (valuable, rare, difficult to imitate or Substitute)
Imitability of asset stocks is often determined by:
Time compression diseconomies
Asset mass efficiencies success breeds success (e.g. the stock of R&D for further breakthrough
or Word of mouth
Interconnectedness of asset stocks
Asset erosion
Causal ambiguity (e.g. jackpot model in the pharmaceutical industry)

SECTION 4: DISRUPTIVE /STRATEGIC INNOVATION

Strategic Innovation:
1. Competing firms may emphasize different customers and trade-off different customer values value
curve
2. Strategically innovative firms may create new values
3. Firms may even create market space people use the product who would not have used the product
at all before.
4. The firms internal activities are aligned with the chosen customer values.

Where/How should managers look for inspirations for value/strategic innovations?

Looking across substitute industries
Looking across strategic groups within industries
Looking across the chain of buyers
Looking across complementary product and service offerings
Looking across functional and emotional appeal to buyers
Looking across time

SECTION 5+6: PLATFORM STRATEGIES

Multi-sided platforms are organizations that create value by enabling direct interactions between two or
more distinct types of affiliated customer groups.

Pricing principles for MSP:

Charge higher price when the group has less price sensitivity.
If there is no priced transaction between the sides, charge more to the side that benefits more form
the presence of the other side.
If there is a priced transaction between the sides, charge more to the side that can extract more
value from the other side.

SECTION 7: ORGANIZING FOR INNOVATION

Sources of Organizational inertia:
Structural: Organizational rigidity + vested interest
 Cognitive: cognitive frames + hubris/overconfidence
Evolutionary processes within markets and within organization, owing to competition: variation and
selection.
EXPLOITATION EXPLORATION
Organization Organization
Structure Bureaucratic. Flat organization without
Specialization and division hierarchical control.
of labour. Task-oriented project team
Hierarchical control
Processes Operating units controlled Processes directed toward
and coordinated by top generation, selection,
management, which funding, and development
undertakes strategic of ideas.
planning, capital allocation Strategic planning flexible,
and operational planning financial and operating
controls loose.
Reward systems Financial compensation, Autonomy, recognition,
promotion up the hierarchy, equity participation in new
power, and status symbols venture
People Recruitment and selection Key need is for idea
based on the needs of the generators that combine
organization structure for required technical
specific skills: functional knowledge with creative
and staff specialists, personality traits. Managers
general managers, and must act as sponsors and
operatives orchestrators.

1. The success trap

Where it comes from (e.g. Nokia, Kodak, etc.)
Organizational ecology: Darwinian change in industries
Variation & selection within markets
2. Exploration organisation
Advantages and disadvantages
Bringing variation & selection inside the firm
3. Exploitation organisation
Advantages and disadvantages
4. Responding to disruptive innovation (versus sustaining innovation)
Structural separation
Flipping back and forth