strategy and your stronger hand

Company

LOGOStrategy and Your Stronger Hand

Ref: Jeff Moore

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Learning Objectives

1. What’s a Business Model?

2. Complex System Model

3. Volume Operations Model

4. Rx to avoid mixed-model failures

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An Orgn can excel at only one model:

Volume Operations

Complex Systems

Serving many customers through frequent, low price transactions, for instance, Amazon.com, Proctor & Gamble, and Microsoft

Serving a few large enterprises through infrequent, high price customized solutions e.g.: CISCO, Goldman Sachs

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Vol Ops vs Complex Sys

Few $s

$ 1+ mn

1000smillions

$ 1 bn

SameRevenue

No. of Customers

Cost/ Transaction

B2B vs B2C?

Cultivatingrelationships

Systemizingtransactions

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Descriptions

“Complex System Model” is geared toward delivering customized solutions to demanding and deep pocketed customers.

“Volume-Operations Model” is designed to package a company’s proprietary strength( its core technology, which may or may not be high tech),into standard products that meet the generic needs of mass markets.

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“Handedness”

• There are two ways of doing business, and any given company is as adroit at the one as it is awkward at the other.

• Understanding your own organizations handedness will guide you to the right strategic moves

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SolutionSales

Consulting &Integration Services

Solution Architecture

3rd PtyElemnt

Element1

Element2

3rd PtyElemnt

Technology Architecture

Integration Platform

Legacy System

Target Customer

Complex System Model

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BRAND ADVERTISING

DISTRIBUTION CHANNEL

SHARED INFRASTRUCTURE

Offer Offer

Offer

TECHNOLOGY

Volume Operations Model

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The Business Models

Value Creation Complex Sys Volume Ops

Research Qualitative Scenarios Quantitative Analysis

Design Intgrn of modular comps Modules that integrate

Source At the margin At the mean

Manfture Adaptive methodologies Deterministic Processes

Market Relationship Mktg Branding & Promotion

Sell Hi-touch persuation Low-touch distribution

Service Open-ended consultation

Discrete transactions

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Bad Marriages

• Compaq & DEC

• Charles Schwab(Retail Broker) & US Trust ( institutional banker)

• Time Warner( entertainment giant) & AOL( internet marketer)

The best strategic moves for a company are ones that supplement rather than complement the company’s current dominant business model.

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Health Insce Co.- 2 Tier

Complex Sys Approach

Hi tech patient building of customer relationships to sell employee benefits to large companies

Volume Ops Approach

To service those programs as client companies’ employees utilize them

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Xerox, Kodak, HPPrinting & Copying Divisions

ConsumerProducts

EnterpriseSystems

Hi End Lo End

Both are drawn to each other’s turf

Lines between the markets they serve is blurry!

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Shaking Hands vs Holding Hands

Right with Right Right with Left

Which is to be preferred?

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Rx – to avoid mixed model failures….

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Text2

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Text

Acquire or merge with costhat use same businessmodel you use

In a two tier industry establish separate, autonomousbusiness units for parts that use diff.business models

Consider partnering externally for servicesRequired from your non-dominant business model

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Complex Sys & Vol Ops

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Complex Sys or Vol Ops?Or two tier??

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Fox or Hedgehog?

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Approaching the challenges from opposite sides

Complex Systems

Focus on dramatically differentiated offerings and make them as cost effective as they can

(First effectiveness then efficiency)

Volume Ops

Focus on dramatically cost effective offerings that they try to make as differentiated as they can

(First efficiency then effectiveness)

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Skills

Complex Systems

Consultative & Adaptive

Volume Ops

Systems & automation oriented

Men are from Mars, Women are from Venus! - John Gray

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Same Term – Different Meanings

Complex Sys Volume Ops

Customer Intimacy

Deep domain expertise & developed relationships with decision making executives in key accounts

Pseudo Intimacy:•My Yahoo•Amazon.com’s book recommendations•AOL “you’ve got mail”

Pricing Price specific to a consumer based on situational dynamics. Pricing strategy more qualitative than quantitative

Price is the primary driver of the overall system

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Airliner – customized & complex

Avionics Galleys Seating Lights

VolumeOps

VolumeOps

VolumeOps

VolumeOps

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Staying ahead of the Pack

Volume operations commoditize categories created by complex systems

Complex systems respond by creating the next level of complexity