M

A

R

C

U

S

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-2

8CONTINUOUS REINVENTION

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-3

Learning Objectives

Reviewing and summarizing the analytical approach to achieving sustained competitive advantage (SCA) presented in the book, which involves external and internal analysis followed by a series of moves related to timing, cost, differentiation, business scope, globalization, innovation and entrepreneurship.

Being aware that this approach to SCA must be carried out constantly and that a firm’s strategy must be regularly reinvented.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-4

Learning Objectives (Continued)

Understanding judo as a strategy, which involves rapid movement to sweet spots followed by defense of those spots against competitors’ inevitable encroachments.

Providing examples of how firms have reinvented their strategies through such means as achieving greater closeness to customers, bridging supplier-customer gaps, and putting in place smart business designs.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-5

Ex. 8.1 Judo Strategy: David versus Goliath

Netscape Navigator Microsoft Internet Explorer700 employees and $80 million sales in 1997

17,000 employees and $6 billion sales in 1997

Strategy: build market share, set standard

Open system

Published source code

Virtual R&D

Essentially free via server

Strategy: bundle with Windows 95 or free by downloading

Outbid for customized AOL

version

Put AOL icon on Windows desktop

Undercut MSN network

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-6

Ex. 8.2 Matched Pairs of Companies Showing

Competitive Advantage and Disadvantage (selected)

Companies 5-Year Average Market Return, 1997-2002

Sector

Amphenol

LSI Logic

34.0%

3.4

Technology

SPX

Snap-On

28.8

1.7

Manufacturing/appliance

FiServ

Parametric

31.2

-21.2

Software

Dreyers

Campbell Soup

22.4

-2.8

Food

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-7

Ex. 8.3 Seeking Sustained Competitive Advantage

Attributes Advantage DisadvantagePosition Sweet spot – being in

an uncontested space

Sour spot – being in a contested space

Movement Agility – getting to an uncontested space

Rigidity – not getting to an uncontested space

Hard-to-imitate capabilities

Discipline – protecting an uncontested space

Ineptness – inability to protect an uncontested space

Concentration Focus – exploiting an uncontested space

Diffuseness – inability to exploit an uncontested space

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-8

A Strategic Approach to the Dilemma

SCA = Sustained Competitive AdvantageEA = External AnalysisIA = Internal AnalysisM = Moves that the strategist can take

SCA = EA + IA + M

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-9

A Strategic Approach to the Dilemma (Continued)

EA = External Analysis5F = Five ForcesMF = Macroenvironmental ForcesSA = Stakeholder Analysis

EA = 5F + MF + SA

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-10

A Strategic Approach to the Dilemma (Continued)

IA = Internal Analysis7S = Seven SsVC = Value ChainRCC = Resources, Capabilities, and Competencies

IA = 7S + VC + RCC

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-11

A Strategic Approach to the Dilemma (Continued)

BS = Business StrategyT = Timing of the moves a firm might makeP = Positioning

BS = T+ P

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-12

A Strategic Approach to the Dilemma (Continued)

CS = Corporate StrategyMAD = Mergers, Acquisitions, and Divestitures

CS = MAD

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-13

A Strategic Approach to the Dilemma (Continued)

GS = Global StrategyGE = Global ExpansionOS = Outsource

GS = GE + OS

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-14

A Strategic Approach to the Dilemma (Continued)

IS = Innovation StrategyO = OpportunitiesC = Commercialization

IS = O + C

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-15

A Strategic Approach to the Dilemma (Continued)

SCA = Sustained Competitive AdvantageEA = External AnalysisIA = Internal AnalysisBS = Business StrategyCS = Corporate StrategyGS = Global StrategyIS = Innovation Strategy

SCA = [EA + IA] + [BS + CS + GS + IS]

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-16

Ex. 8.4 From Products to Solutions

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-17

Ex. 8.5 Micro-segmenting of Customers

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-18

Ex. 8.6 Compressing the Supply Chain

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-19

Ex. 8.7 Multiple Channels for Product Distribution

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-20

Ex. 8.8 Where Can Value Chain Dominance Be Established?

SupportActivities

Primary Activities

InputsOutputsResearch and

Development ProductionMarketingAnd Sales Service

Company Infrastructure

Human Resources

Materials Management

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

8-21

Smart Designs

To create smart business designs, strategists must think in terms of customers, suppliers, distribution channels, and competing value chains.

Smart designs rest on a willingness to regularly reassess them; they cannot be taken for granted.