flexible business models
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© Dr . Steyn Heckroodt
Breakfast talk:Flexible Business Models
Cape Town: 12 July 2014JHB: 13 June 2014
Dr Steyn Heckroodt
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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?
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© Dr . Steyn Heckroodt
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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
© Dr . Steyn Heckroodt
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Morphing of Strategy
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Time
Environmental change
Organisational strategy
ScanningScenario planningStrategy selectionStructure for implementationForecasting
© Dr . Steyn Heckroodt
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• Post WW 2 – Sun Tzu – the Art of War• Thinking – analytical – molecular• Segment and categorise• Simplify• East and West• Socialist and capitalist• More fundamentalist thinking Christians and Anti-Christ
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Quick paradigm history © Dr . Steyn Heckroodt
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• 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 © Dr . Steyn Heckroodt
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• 90s – New jargon• Push versus pull • Supply chain versus demand chain• Customer focus, centricity• Information era• Systemic thinking (Ackoff)• Dots and Coms• Y2K
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90s © Dr . Steyn Heckroodt
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• 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 © Dr . Steyn Heckroodt
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What the complexity boils down to
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Time
Environmental change
Organisational strategy
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• 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 © Dr . Steyn
Heckroodt
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ENVIRONMENT
11 © Dr Heckroodt, S © Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking
– GAME OVER. Epubsa.co.za
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
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ENVIRONMENT
12 © Dr Heckroodt, S © Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking
– GAME OVER. Epubsa.co.za
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
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ENVIRONMENT
13 © Dr Heckroodt, S © Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking
– GAME OVER. Epubsa.co.za
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
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ENVIRONMENT
14 © Dr Heckroodt, S © Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking
– GAME OVER. Epubsa.co.za
Labour Government
Public Pressure Groups
Exchange rate Interest rate
Fuel/Energy price Staff
ShareholdersColleagues
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• 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 © Dr . Steyn Heckroodt
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• 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... © Dr . Steyn Heckroodt
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• 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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© Dr . Steyn Heckroodt
Distinguish between…
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• 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 © Dr . Steyn Heckroodt
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• 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… © Dr . Steyn Heckroodt
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• Merging market focused (in- pond & downstream) and network focused approaches (upstream)
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Flexibility defined © Dr . Steyn Heckroodt
Market Focus
Network Focus
In-pond
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• Organisations with strong, long-term, inter-organisation relationships both upstream and downstream
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1. Network influencer © Dr . Steyn Heckroodt
DELL
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• 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 © Dr . Steyn Heckroodt
TRADER
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• Utilise long-term relationships upstream, and ownership downstream
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3. Franchise model © Dr . Steyn Heckroodt
ZARA
ZARA
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• 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 © Dr . Steyn Heckroodt
MOBILE/BANKS
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• 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 © Dr . Steyn
Heckroodt
CO-OP
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• 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 © Dr . Steyn Heckroodt
SPAR
SPAR
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Shor
t le
ad ti
mes
Long
le
ad ti
mes
Supp
ly c
hara
cter
istics
Demand characteristics
Lean plan and optimize
Hybrid&
Postponement
Continuous replenishment
Agile quick response
Predictable Unpredictable
© Dr . Steyn Heckroodt27
Source: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
© Dr . Steyn Heckroodt
• Embed flexibility when aligning market demands with organisational supply
Network architectures need to
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• Two sets of aspects for designers to consider:– Design elements (content, structure and governance)
that describe the activity system’s architecture– Design themes (novelty, lock-in, complementarities, and
efficiency) that describe its sources of value creation• 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 © Dr . Steyn Heckroodt
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• 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. © Dr . Steyn Heckroodt
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• 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 © Dr . Steyn Heckroodt
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• 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)
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Business model consistof... © Dr . Steyn
Heckroodt
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• 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... © Dr . Steyn Heckroodt
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• 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 © Dr . Steyn
Heckroodt
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The trio © Dr . Steyn Heckroodt
Possible Business Models Tactics:
Competitive choices enabled
by each Business Model
Strategy plan of which Business
Model to use
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Case study
35 © Dr Heckroodt, S © Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking
– GAME OVER. Epubsa.co.za
Dominant attribute
QualityPrice
Convenience
Demand
WW case study
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36 © Dr Heckroodt, S
Source: 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
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Strategic fitas a juncture
OrganisationAbility
Internal Information Live
External Information Live
Strategic planning = alive = moves beyond
annual event
OpportunityThreat
PROBABILITYIM
PACT
STRATEGIC APPROPRIATENESS
© Dr Heckroodt, SSource: Amended from Heckroodt, S. Strategic Thinking – GAME OVER. Epubsa.co.za
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