Thursday, August 24, 2006

Hindsights - Some more wisdom from Guy Kawasaki

I read through a speech a Guy Kawasaki gave at Palo Alto High School Baccalaureate Speech 6/11/95 called “Hindsights”. It was him looking back and wishing he knew then what he knew now. Below I have taken some excerpts and summarised some of his messages.

"I am going to talk about hindsights today. Hindsights that I’ve accumulated in the 20 years from where you are to where I am. Don’t blindly believe me. Don’t take what I say as “truth.” Just listen. Perhaps my experience can help you out a tiny bit."

#10: Live off your parents as long as possible.

"You are going to work the rest of your lives, so don’t be in a rush to
start....
Delay, as long as possible, the inevitable entry into the workplace and a
lifetime of servitude to bozos who know less than you do, but who make
more money. "

#9 Pursue joy, not happiness.
This is probably the hardest lesson of all to learn. It probably seems to
you that the goal in life is to be “happy.” - happiness should be
predictable. Nice house. Nice car. Nice material things.
Take my word for it, happiness is temporary and fleeting.
Joy, by contrast,is unpredictable. It comes from pursuing interests and passions that do not
obviously result in happiness.
Pursuing joy, not happiness will translate into one thing over the next
few years for you: Study what you love. I think only one person on the original Macintosh team had a
classic “computer science” degree.

You parents have a responsibility in this area. Don’t force your kids to
follow in your footsteps or to live your dreams.

My father was a senator in Hawaii. His dream was to be a lawyer, but he only had a high school
education. He wanted me to be a lawyer.
For him, I went to law school. For me, I quit after two weeks. I view
this a terrific validation of my inherent intelligence.

#8: Challenge the known and embrace the unknown.

One of the biggest mistakes you can make in life is to accept the known
and resist the unknown.

You should, in fact, do exactly the opposite:
challenge the known and embrace the unknown.
Let me tell you a short story about ice. In the late 1800s there was a
thriving ice industry in the Northeast. Companies would cut blocks of ice
from frozen lakes and ponds and sell them around the world. The largest
single shipment was 200 tons that was shipped to India. 100 tons got
there un-melted, but this was enough to make a profit.
- These ice harvesters, however, were put out of business by companies that
invented mechanical ice makers. It was no longer necessary to cut and
ship ice because companies could make it in any city during any season.
- These ice makers, however, were put out of business by refrigerator
companies. If it was convenient to make ice at a manufacturing plant,
imagine how much better it was to make ice and create cold storage in
everyone’s home.
- You would think that the ice harvesters would see the advantages of ice
making and adopt this technology. However, all they could think about was
the known: better saws, better storage, better transportation.
- Then you would think that the ice makers would see the advantages of
refrigerators and adopt this technology. The truth is that the ice
harvesters couldn’t embrace the unknown and jump their curve to the next
curve.
Challenge the known and embrace the unknown, or you’ll be like the ice
harvester and ice makers.

#7: Learn to speak a foreign language, play a musical instrument, and
play non-contact sports.

#6: Continue to learn.
Learning is a process not an event. I thought learning would be over when
I got my degree. It’s not true. You should never stop learning. Indeed, it
gets easier to learn once you’re out of school because it’s easier to see
the relevance of why you need to learn.
In university you’re learning in a structured, dedicated environment right now.
You can also learn a tremendous amount without school.

#5: Learn to like yourself or change yourself until you can like
yourself.
I know a forty year old woman who was a drug addict. She is a mother of
three. She traced the start of her drug addiction to smoking dope in high
school.
This woman told me that she started taking drugs because she hated herself
when she was sober. She did not like drugs so much as much as she hated
herself. Drugs were not the cause though she thought they were the
solution.
She turned her life around only after she realized that she was in a
downward spiral. Fix your problem. Fix your life. Then you won’t need to
take drugs. Drugs are neither the solution nor the problem.

#4: Don’t get married too soon.
I got married when I was 32. That’s about the right age. Until you’re about
that age, you may not know who you are. You also may not know who you’re
marrying.
I don’t know one person who got married too late. I know many people who
got married too young. If you do decide to get married, just keep in mind
that you need to accept the person for what he or she is right now.

#3: Play to win and win to play.
Playing to win is one of the finest things you can do. It enables you to
fulfill your potential. It enables you to improve the world and,
conveniently, develop high expectations for everyone else too.
And what if you lose? Just make sure you lose while trying something
grand. Avinash Dixit, an economics professor at Princeton, and Barry
Nalebuff, an economics and management professor at the Yale School of
Organization and Management, say it this way:
“If you are going to fail, you might as well fail at a difficult task.
Failure causes others to downgrade their expectations of you in the
future. The seriousness of this problem depends on what you attempt.”
In its purest form, winning becomes a means, not an end, to improve
yourself and your competition.
Winning is also a means to play again. The unexamined life may not be
worth living, but the unlived life is not worth examining. The rewards of
winning—money, power, satisfaction, and self-confidence—should not be
squandered.
Thus, in addition to playing to win, you have a second, more important
obligation: To compete again to the depth and breadth and height that
your soul can reach. Ultimately, your greatest competition is yourself.

#2: Obey the absolutes.
Playing to win, however, does not mean playing dirty. As you grow older
and older, you will find that things change from absolute to relative. When
you were very young, it was absolutely wrong to lie, cheat, or steal. As
you get older, and particularly when you enter the workforce, you will be
tempted by the “system” to think in relative terms. “I made more money.”
“I have a nicer car.” “I went on a better vacation.”
Worse, “I didn’t cheat as much on my taxes as my partner.” “I just have a
few drinks. I don’t take cocaine.” “I don’t pad my expense reports as
much as others.”
This is completely wrong. Preserve and obey the absolutes as much as you
can. If you never lie, cheat, or steal, you will never have to remember
who you lied to, how you cheated, and what you stole.
There absolutely are absolute rights and wrongs.

#1: Enjoy your family and friends before they are gone.
This is the most important hindsight. It doesn’t need much explanation.
I’ll just repeat it: Enjoy your family and friends before they are gone.
Nothing-not money, power, or fame-can replace your family and friends or
bring them back once they are gone. Our greatest joy has been our baby,
and I predict that children will bring you the greatest joy in your
lives—especially if they graduate from college in four years.
And now, I’m going to give you one extra hindsight because I’ve probably
cost your parents thousands of dollars today. It’s something that I hate
to admit too.
By and large, the older you get, the more you’re going to realize that
your parents were right. More and more—until finally, you become your
parents. I know you’re all saying, “Yeah, right.” Mark my words.
Remember these ten things: if just one of them helps you helps just
one of you, this speech will have been a success:
#10: Live off your parents as long as possible.
#9 Pursue joy, not happiness.
#8: Challenge the known and embrace the unknown.
#7: Learn to speak a foreign language, play a musical instrument, and
play non-contact sports.
#6: Continue to learn.
#5: Learn to like yourself or change yourself until you can like yourself.
#4: Don’t get married too soon.
#3: Play to win and win to play.
#2: Obey the absolutes.
#1: Enjoy your family and friends before they are gone.

Why Read?

To re-iterate the title with some expletives. Why the f#ck read? It takes up alot of valuable time that could be spent learning something.
After watching Guy Kawalaski's video (link in previous post) where he creatively illustrates the chief principles of his book, incidentelly the one recommended for last years ICT Business Opportunities course that I never got time to read!!, I realised that the 45 minutes I spent listening and watching that video would have commensurated to reading the preface and maybe half way throught the second chapter time wise. But in terms of learning it was worth 3 ingeminations of the book.
It gives so much more to get it not only summarised with concise examples but also straight from the horses mouth.
I'm sure Guy would have loved to write a 30 page book on his 11 main principles. But a 30 page book doesn't sell. Infact it's not even a book its a pamphlet to most people!

I'm currently reading a book on grammar, yes a book! Its called 'Eats, shoots and leaves'. Why grammar guidlines can't be put in bullet point form in a nice concise 15 page "pamhlet" I'll never know. Instead I'm forced to read 200+ pages filled with irrelavent info and silly anecdotes so that Lynne Truss can charge a book price!
Less is more, books bore! Video is the dillio!

Wednesday, August 23, 2006

The Art of The Start


Watched Guy Kawasaki, former Apple employee and author of "The Art of The Start" today. Very funny guy and great speaker with some great words to say about Entrepreneurship and Intrapreneurship, check it out here:
http://video.google.com/videoplay?docid=-3755718939216161559&q=label%3Aentrepreneurship
Here is a summary of his 10 main points on Entrepreneurship:

1# If you truly want to be a successful entrepreneur or to change the world your reason to start a business must be: TO CREATE MEANING NOT CREATE MONEY
How does one create meaning?
- Increase the quality of life (e.g. Apple: allow users be creative, save time, ...)
- Right a wrong (e.g. Apple: MS-DOS was wrong, needed to be done right!)
- Prevent the end of somethging good

Helps you to attract the right people who are not focused on money solely.

2# Create a Mantra for your employees - Why do you (employees) exist?
Example of a wrong 'Mission Statement for employess' - Wendys Fast food chain:
"The mission of Wendys is to deliver superior quality products and services for our customer and communities through leadership, innovation and partnership"
- Very generic (see Dilbert's mission statement generator http://www.dilbert.com/comics/dilbert/games/career/bin/ms.cgi)
- employees won't recall or strive for this
Wendy's should be changed to "Healthy fast food" - Encapsulated what they do and strive for.

FedEx - "Peace of Mind"
Nike - "Authentic Athletic Performance"

3# Get Going!
Not so much research, no focus group, just get going...
1. Think Different -
Don't do better sameness!
2. Polarize People - Create a product/service that wont appeal to all. Will end up mediocre!
3. Find a few soul mates - Steve Jobs : Paul Allen, Bill Gates : Steve Balmer -> need some one to compliment yourself, balance yourself off -> marketing: engineering, visionary: operational

4# Develop a Business Model
1. Specificity -
Who is my customer & how do I get my money out of her purse? "It's my money in her purse"
2. Keep it Simple - Do not innovate business models. Keep them simple. Innovate the technology and processes..

5# Weave a MAT( Milestones, Assumptions, Tasks)
When starting a company it is like the first skiier down the slope. Its a wonderful experience but need focus and direction.
1. Milestones: "Finishing Design", what you would call your spouse and tell her!
2. Assumptions: What are the number of customers you can call per day, what is the customer ROI, how does it coast to install our software - write them and test them.
3. Tasks - Help you reach milestones, help you test assumptions. "Rent an office" etc..

6# Niche yourself
Holy Grail of Marketing: Need to create value for the customer and be unique.



7# 10: 20: 30 rule
When pitching to a venture capitalist they hear a lot of pitches daily:

10 slides -
no more than ten slides. Don't bore the audience KISS principle.

20 minutes - If given an hour make the presentation for 20 minutes. Allow for unexpected occurences. Don't bore. Allow alot of question time.

30 pt font - should be the smallest font on the Power point slides. Makes it easy to read, reduces the amount of text you can add so you have to know your slides and not read them.

8# Hire infected people
1. Regardless of background hire those interested in product. Guy was himself in jewlery business when hired but loved mac.
2. Hire people better than yourself. A people hire A+ people. B people hire C people. C people hire D people...

9# Lessen barriers to adoption?
1. Flatten the learning curve
. Make it easier to 'plug and play'. - How many people can change the clock on the VCR?
2. Don't require eople to do anything you yourself wouldnt.
- fill out 65 text fields to sign-up.
3. Embrace evangelists
- reward those people who will bring your message to the world

10# Seed the clouds
1. Let 100 flowers blossom -
If non intended users buy your product let it be. It may lead to product differentiation or a new product.
2. Enable Test Drives - Let people try out the products in trial versions. Show they are smart and you trust them.
3.Lower level influence.
Don't always look to the CxO when trying to push the product. The higher up, the thinner the air. Get real influencers, tech. support, secetaries (post-its!),..


#11. Don't listen to the Bozos.
"I Think there is a market for maybe 5 computers in the world" Thomas watson, Chairman IBM, 1943

"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us."
Western Union Internal memo, 1876

"There is no reason why anyone would want a computer in their home"
Ken Olsen, Founder, Digital Equipment Corp. 1977

Friday, August 18, 2006

What is Strategy?

Competitive moves & business approaches to produce successful performance
or
Management’s “Game Plan” for
  • Running the business
  • Strengthening firm’s competitive position
  • Satisfying customers
  • Achieving performance targets
TBC..

Economies of Scope

Economies of scope are one of the main reasons for such marketing strategies as product bundling, product lining, and family branding. The situation that arises when the cost of performing multiple business functions simultaneously proves more efficient than performing each business function independently. A case of synergy.

Often, as the number of products promoted is increased and broader media used, more people can be reached with each dollar spent. This is one example of economies of scope. These efficiencies do not last, however, at some point, additional advertising expenditure on new products will start to be less effective (an example of diseconomies of scope).

The affect of an economy of scope is to increase the efficiency of production as a result of increasing the number of different but related products offered.

If a sales force is selling several products they can often do so more efficiently than if they are selling only one product. The cost of their travel time is distributed over a greater revenue base, so cost efficiency improves. There can also be synergies between products such that offering a complete range of products gives the consumer a more desirable product offering than a single product would. Economies of scope can also operate through distribution efficiencies. It can be more efficient to ship a range of products to any given location than to ship a single type of product to that location.

For example, since jet fuel, gasoline, heating oil, lubricating oil and so forth are all constituents of petroleum that are gotten by "cracking" the petroleum into the separate constituents of its mixture, there is an economy of scope in operating a refinery. It is obviously better to produce all of these products jointly than to try to produce them separately.

For example, McDonalds can produce both hamburgers and French fries at a lower average cost than what it would cost two separate firms to produce the same goods. This is because McDonalds hamburgers and French fries share the use of food storage, preparation facilities, and so forth during production.

Another example is a company such as Proctor & Gamble, which produces hundreds of products from razors to toothpaste. They can afford to hire expensive graphic designers and marketing experts who will use their skills across the product lines. Because the costs are spread out, this lowers the average total cost of production for each product.

The Practical Vs. The Visionary Entrepreneur

There are two types of entrepreneurs in this world, visionary and practical.
The visionary entrepreneur has a grand vision for a product. They most likely found this vision while climbing in Huascaran National Park (Peru) or shopping in Calcutta. This type of entrepreneur needs no advice other than follow the dream. They'll doggedly chase it until they succeed or they end up in the gutter.

The practical entrepreneur is a much different beast. Most likely you know you want to do "something". You long to be your own boss and determine your own fate, but you don't have a grand vision to pursue. Instead, your looking to put your skills to work in a project that has a good chance at success. Millions would be great, but replacing your salary is just as appealing at least as a first step.

A lot of people out there have the talent to succeed, not many if not no good ideas.

If you fit this criteria, the 4 rules will assit you in figuring out a focus for a new venture.

1. Fragmented Market

This is my most critical factor and something I almost never see discussed anywhere else. A fragmented market is the practical entrepreneurs best friend. It's simple the most important thing to look for in your market research.

A fragmented market is one where:
- there are lots of small to mid size companies and where even the big players have stiff competition.
- There should be no dominant company.
- No company should have a double digit percentage
of the market or at worst low double digits.

No need to create markets
The reason this is the most critical factor is because of what it represents. First, it indicates that there are customers for this type of product. If you want to give yourself the best chance to succeed you need to enter a market where there are already customers looking for a solution.

You don't want to have to spend a lot of time and money explaining to potential customers why they need a solution for problem X. You want a market where they already know they have a problem and are looking for solutions.

Creating markets is the province of the visionary entrepreneur not the practical one.

No best = No one to compare to
Second, while there is lots of competition there is no competitor who is dominant. There is no competitor who you will always be compared against and have to stand up to. For example, building a piece of presentation software means you will always be compared to PowerPoint, building an image editor means going up against Photoshop, building a search engine means being compared with Google. These comparisons put you in a severe disadvantage. Those are dominant companies with dominant positions in the market.

Potential customers already have a clear idea in their head about what those products do and why they're the best which means you'll need to do a lot more work to explain why yours is better/different.

A rising tide helps all ships
Third, lots of other companies talking about the market and advertising in the market helps you. It creates awareness for potential customers all without you having to spend a cent. A rising tide raises all ships, etc.

Best of breed
Finally, in a varied market there's sure to be several companies which you compare very favorably against. Hence, you become a best of breed product when compared to these lesser alternatives. Since there's no obvious product to choose, potential customers will end up taking a somewhat random sampling of the market and you'll have a better chance at being seen as a best of breed option when compared to a random set of alternatives.

2. Business Before Consumer
In general, I would lean towards a B2B (Business to business) model over B2C. Primarily because I think early success is easier in a B2B market. When selling to businesses :

- you're free to charge more for your product this means you need to attract less potential customers early on to start being profitable.

- Business customers also have more opportunity for future growth. For example if a business buys 5 licenses to your product and in 6 months they've expanded their operations and now need 5 more these additional 5 licenses cost you exactly $0 to acquire and are pure profit.

These scenarios are very common in business and much less common in consumer products.

- Consumer products are also much more dependent on "being a hit". If you make a utility that sells for $20 then you need to sell at least 4000 licenses to cover your previous $80,000 year salary. While not a huge number it's still 4000 individuals you need to reach and convert. There's also little chance of hitting a home run by finding someone who wants 500 licenses at once, which is very possible in a corporate scenario.

3. Clear and Simple Revenue Model
You should be able to explain your revenue model in a sentence. "We're going to sell per seat licenses for $100 a seat and a 15% yearly maintenance fee". If the product you're researching would require special pricing then you need to avoid that market. Micro-transactions and the like are the domain of the visionary not the practical.

Beyond just being simple to explain you should have a complete understanding of how you would sell the product and your gross margins before you write one line of code. If it's unclear what approximate price you could charge or what your costs would be in this market then it's not a good market to enter. It doesn't have to be down to the dollar but you should know if you can charge $50 a person or $150.

Pricing Transparency
Clear and simple revenue models can also provide a competitive advantage over your competition. Older companies tend to have their pricing "evolve" over time into multiple tiers often separated by versions with unclear definitions like "pro" vs "enterprise". Making your pricing simpler to understand means customers can figure out your pricing at a glance rather than using a calculator and reading 5 pages of marketing hype to figure out the differences between versions. That's a lot of extra work for the consumer and we all know how people feel about extra work.

4. Dog Food

When you're a small shop there's not a lot of time for all the functions you need to perform. There's programming, marketing, testing,PR, and so on. One part that often gets left out is product research. Not just does the product work, but how can it be better. What features would make the experience of using this product superior. When your time is tight, avoiding these issues is an easy way to free up more time.

Eat your own dog food
One way to help ensure that at least some of this gets done is to make sure you build a product you'll actually use on a daily basis ("eat your own dog food"). This way there's at least some time built right in to your normal day. What features frustrate you, where could you do something better. Because you're getting the true customer experience you'll gain more insight into the product than if you just sat down and brainstormed about a product you don't use yourself.

Thursday, August 17, 2006

Articulate Speaking

Had a meeting yesterday in which I had to deliver my conclusion on whether a client should move into the Scandinavian market. I was against, while another consultant who was set to benefit from any such move was in favour. Knowing I had the better arguments but unable to fully convince our client, it came down to an inability to out articulate Mr.Consultants ardour...
Effective articulation is to knowledge as an engine is to petrol.

The Articulate Executive in Action

"If you are reasonably good at what you do, clearly articulate your ideas to all audiences, and know how to deliver your message so that people remember it and act on it, you can call yourself a leader," declares the author.

"Add integrity, courage, commitment, and vision, and you can call yourself a worthy leader."

You may think you're managing. But if you're merely managing, without articulating your vision, the inevitable consequence is "a strong bias toward the middle," or mediocrity. That's "the first step toward losing the game," cautions Toogood.

"High octane for the fast track," is CVA, or communications value added.

"If a leader with good business sense and a great idea or a solid sense of direction can talk the talk, that company will prosper."

Seven principles of CVA, include the diktat,

never bore such as, by making your presentation sink into "a stifling cloud of white noise that effectively turns everybody off."

More than before "always leave people with more when they walk out than when they walked in."

What you know "Importantly, speak only about what you know, tell stories, and be ready!Don't sound uninformed, out of your depth"

Then comes the POWER formula to help you step on the gas:

Punch, One theme, Window, Ear, and Retention. `

Punch - is achieved by strong statement that comes right at the start, rhetorical question, quotes, projection into the future, humour and so on.

One Theme - Stick to `one' message, though you may discuss it in many ways.

Window - is about `specific examples, illustrations, and anecdotes to provide proof'.

Ear - You lose the `ear', if you don't stay conversational and begin `speechifying.'

Retention - requires you to summarise key points, looping back to beginning, or asking audience to do something specific.

Not being competent with language is the 50 per cent problem' because, with such a liability, "you're not likely to connect, no matter how smart you are."

The answer to the quandary is "to look, act, and sound like a leader in all your communications."

___________________________________________________________________

The Lost Art of the Great Speech: How to Write One; How to Deliver It

Dowis devotes several chapters to rhetorical devices that can lift a speech from the respectable to the eloquent. To illustrate how rhetoric can immortalize ideas, he uses the following quotations from speeches by famous Americans:

We pause to ask what our country has done for each of us and to ask ourselves what we can do for our country in return.
--Justice Oliver Wendell Holmes, May 30, 1884

In the great fulfillment, we must have a citizenship less concerned with what the government can do for it and more anxious about what it can do for the nation.
--Warren G. Harding, Republican national convention, June 7, 1916

And so, my fellow Americans, ask not what your country can do for you. Ask what you can do for your country.
--John F. Kennedy, Inaugural Address, January 20, 1961

Here are some suggestions from for making your speech successful.

1. Recognize the advantages of using a written speech: It helps to ensure that you will not ramble, that you will meet your time constraints, and that you will include important points with smooth transitions between them.

2. Limit your speech to a few main points. "The more ideas you pack into your speech, the less attention any single idea will get."

3. To achieve a sense of balance that is pleasing to the ear -- and often memorable -- express related thoughts in a group of three with each element of the triad having the same grammatical form and perhaps having repeated sounds.

4. Use simple, concrete, direct language: vivid nouns and strong verbs.

5. Keep your tone conversational with personal references, when they are appropriate, and contractions.

6. If you use humor, use it sparingly, and be sure that it relates to the point you are making. Do not use humor that could possibly offend anyone in your audience.

7. Mark the final copy of your speech for delivery, not for publication. Double space it with large type, short lines, and unbroken phrases. Use only the upper half of an 8 1/2- by 11-inch sheet so that it will be easier for you to look from your script to your audience.

8. Use pauses for dramatic effect, for emphasis, and as a transition. Think of pauses as the oral equivalent of punctuation marks and typographical devices. If a comma represents a short pause, a new heading warrants a long one. If your pauses seem too long, they are probably about right.

9. After you have practiced delivering your speech, record it -- on videotape if possible. Examine all aspects of your speech, including body language, for ways to improve your delivery.

10. Prepare an audio tape of your speech after you have practiced your delivery. Listen to it at least once a day to become more familiar with your speech.

Tuesday, August 15, 2006

Strategic Management Self Study

http://www.csuchico.edu/mgmt/strategy/

Principal of Competitive markets

The higher a company’s costs are above those of close rivals, the more competitively vulnerable it becomes!

Core Competencies

A core competency is something a company does especially well in comparison to its competitors!

Some examples:
* Superior skills in producing high quality product
* Superior system for delivering customer orders accurately & swiftly
* Better after-sale service capability
* More skill in achieving low operating costs
* Unique formula for selecting good retail locations
* Unusual innovativeness in developing new products
* Better merchandising & product display skills
* Superior mastery of an important technology
* Unusually effective sales force

A CORE COMPETENCE is important because of

o Added capability it gives firm
o Competitive edge it can yield
o Potential for it being a cornerstone of strategy

COMPETITIVE ADVANTAGE is easier to build when
o Firm has a CORE COMPETENCE
o Rival firms do not have offsetting competencies
o It’s costly & time-consuming for rivals to match competency

OPPORTUNITIES (from SWOT) most relevant to a firm are factors in EXTERNAL environment offering

* Some kind of competitive advantage
* Important avenues for growth

External factors posing a THREAT to firm

* Emergence of cheaper technologies
* Introduction of new/better products by rivals
* Entry of low-cost foreign competitors
* New regulations
* Vulnerability to rise in interest rates
* Potential of hostile takeover
* Unfavorable demographic shifts
* Adverse shifts in foreign exchange rates
* Political upheaval in a country

Role of SWOT analysis
SWOT analysis helps answer key questions

* Does firm have internal strengths an attractive strategy can be built on?
* Which weaknesses does strategy need to correct?
* Do firm’s weaknesses disqualify it from pursuing certain opportunities?
* Which opportunities does firm have resources to pursue with a chance of success?
* What threats should firm worry most about?

DECIDING WHAT THE STRATEGIC ISSUES ARE<

Having thorough understanding of the strategic issues a company faces is a precondition for effective strategy-making.
Until strategists have a clear fix on the issues, they are NOT ready to craft a strategy!



* Is present strategy adequate in light of driving forces in industry & geared to industry’s FUTURE key success factors?
* How good a defense does present strategy offer against the five competitive forces?
* Does present strategy adequately protect firm against external threats & internal weaknesses?
* Is firm vulnerable to competitive attack by rivals?
* Does firm have a competitive advantage or must it work to offset competitive disadvantage?
* Where are strong/weak spots in present strategy?

Monday, August 14, 2006

Competitive Position Evaluation

"Competitiveness entails concentrating resources on those activities where the company
can gain dominating expertise to serve its target customers"


A competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors:

* Reveals strength of firm’s competitive position
* Shows how firm stacks up against rivals
* Indicates whether firm is at a competitive advantage/disadvantage against each rival
* Provides insight into how firm can build its strategy on its competitive strengths
* Provides insight into how firm can make strategic moves to alleviate its competitive weaknesses


One common and useful technique is constructing a competitor array. The steps include:

* define your industry - scope and nature of the industry
* determine who your competitors are
* determine who your customers are and what benefits they expect
* determine what the key success factors are in your industry
* rank the key success factors by giving each one a weighting - The sum of all the weightings must add up to one.
* rate each competitor on each of the key success factors - this can best be displayed on a two dimensional matrix - competitors along the top and key success factors down the side.
* multiply each cell in the matrix by the factor weighting.
* sum columns for a weighted assessment of the overall strength of each competitor relative to each other.

An example of a competitor array follows:



Based on material presented in "Beat the Competition: How to Use Competitive Intelligence to Develop Winning Business Strategies", Ian Gordon, Basil Blackwell Publishers, Oxford, UK, 1989.

Some Key performance indicators would be:
- product innovation ability
- distribution networks
- customer focus

Competitive strengths and competitive advantages empower a company to improve its long-term market position!

The Value Chain

* A VALUE CHAIN consists of two major types of activities

* PRIMARY ACTIVITIES that create value for customers
* RELATED SUPPORT ACTIVITIES

* Costs of performing each value chain activity can be DRIVEN UP or DOWN by two types of factors

Structural cost drivers
* Scale economies
* Experience curve effects
* Technology requirements
* Capital intensity
* Complexity of product line

Executional cost drivers
* Commitment of work force to continuous improvement
* Attitudes & capabilities regarding quality
* Cycle time in getting new products to market
* Utilization of existing capacity
* Whether internal business processes are efficiently designed & executed
* How efficiently firm works with suppliers and/or customers to reduce costs

Keys to understanding a company's cost structure
* Whether firm is trying to achieve a competitive advantage based on
o Lower costs or
o Differentiation
* How costs in one value chain activity spill over to affect costs of others
* Whether linkages among activities in value chain present opportunities for cost reduction

The value chain system

* COST COMPETITIVENESS depends on
o Costs of internally performed activities
o Costs in value chains of suppliers & forward channel allies

* Assessing firm’s COMPETITIVENESS requires knowledge of value chain system
o Firm’s own value chain
o Value chains of suppliers
o Value chains of forward channel allies

SUPPLIERS’ value chains matter
o Suppliers incur costs in creating & delivering inputs used in firm’s value chain
o Cost & quality of inputs influence firm’s cost and/or differentiation capabilities

FORWARD CHANNEL value chains matter
o Costs & margins of downstream firms are part of price paid by ultimate end-user
o Activities channel allies perform affect satisfaction of end-user

Example value chain activities:
Timber farming > Logging > Pulp mills > Papermaking > Printing & publishing > PULP & PAPER INDUSTRY

Benchamarking
* Benchmarking performance of a firm’s activities against rivals & best practice firms provides evidence of firm’s cost competitiveness
* Benchmarking is an excellent tool to determine
o If costs are in line with competitors
o Which business processes need to be scrutinized for improvement
o Which firms perform a given activity best

Focuses on CROSS-COMPANY comparisons of how well activities are performed

* Purchase of materials
* Payment of suppliers
* Management of inventories
* Training of employees
* Processing of payrolls
* Getting new products to market
* Performance of quality control
* Filling & shipping of customer orders

KEY POINT: A firm’s COMPETITIVENESS depends on how well it manages its VALUE CHAIN relative to competitors


Three areas in firm’s value chain contributes to cost differences compared to rivals

* 1. SUPPLIERS’ activities
* 2. Firm’s INTERNAL activities
* 3. FORWARD channel activities

Correcting supplier related cost disadvantage

* Negotiate more favorable prices with suppliers
* Work with suppliers to help them achieve lower costs
* Integrate backward
* Use lower-priced substitute inputs
* Do a better job of managing linkages between suppliers’ value chains & firm’s own chain
* Try to make up difference by initiating cost savings in other areas of value chain

Correcting forward channel cost disadvantage
* Push for more favorable terms with distributors & other forward channel allies
* Work closely with forward channel allies & customers to identify win-win opportunities to reduce costs
* Change to a more economical distribution strategy
* Try to make up difference by initiating cost savings earlier in value chain

Correcting Internal cost disadvantages
* Initiate internal budget reductions
* Re-engineer business processes to do better job of managing executional cost drivers
* Try to eliminate some cost-producing activities by revamping value chain system
* Relocate high-cost activities to lower-cost geographic areas
* See if certain activities can be outsourced or performed cheaper by contractors
* Invest in cost-saving technological improvements
* Innovate around troublesome cost components
* Simplify product design to achieve cost reduction
* Try to make up difference by achieving savings in other areas of value chain system

KEY POINT: Value chain analysis is a powerful managerial tool for identifying which activities have COMPETITIVE ADVANTAGE potential

Competitive Edge is based on ability to:
* Perform competitively crucial activities along value chain better than rivals
Diagnosing competitive capabilities involves
* Construct a value chain of firm’s activities
* Examine linkages among internally performed activities & linkages with suppliers’ & customers’ chains
* Identify activities & competencies critical to customer satisfaction & market success
* Make appropriate internal & external benchmarking comparisons to determine
o How well firm performs activities
o How cost structure compares with rivals

The Opportunity Assesment Framework

Here is a framework I developed last year for one of the entrepreneurship classes. We used this to evaluate the potential of triple play services over WiMax as a new business concept.

1. What is The Idea
1.1 What are the market opportunities and what the solution might be? What makes it particularly compelling?
1.2 Do you have personal experiences with this market area?
1.3 Is there existing intellectual property that you must license or new intellectual property you must develop?
1.4 Has anyone tried something like this before?
1.5 Previous developments in this area
2. The Opportunity
2.1 Opportunity Recognition:
2.1.1 Trends
2.1.2 High Speed Internet (Broadband)
2.1.3 IPTV
2.1.4 Telephone services (VOIP)
2.2 IPTV Projections
2.3 Wireless
3. The Market Space
3.1 Positioning
3.2 Emerging Markets
3.3 Competitive analysis
3.3.1Relative cost
3.3.2 Service
3.3.3 Name recognition
3.3.4 Features
3.4 Possible market entrants:
3.4.1 Differentatiation Strategy
3.4.2 Cost Leadership Strategy
3.5 Competitive advantage matrix
3.6 Barriers to entry for competitors
3.6.1 Challenges posed by Wireless triple play services:
3.6.2 Custom built DRG
4. The Customer Space
4.1 Target Market:
4.2 What the customer needs
4.3 Why does the customer need it
4.4 Benefits of WiMAX
4.5 What is customer using today?
4.6 How the customers will be reached
4.7 Market Segment
5. Partners and Allies
6. Business Model
6.1 Revenue Model
6.2 Distribution Model
6.3 Production Model
7. Risk Analysis
7.1 Risk Summary
7.1.1 Financial Risk
7.1.2 Technological Risk
8. References
9. Appendix
9.1 Analyzing Emerging Markets: Lithuania
9.2 Number of subscribers per package
9.3 Revenue per package per year
9.4 Anticipated Growth
9.5 Sample Scenario Conclusions

Wednesday, August 09, 2006

Technological oriented versus customer oriented

A common mistake made by many companies in the IT industry is that they rely too much on their products 'bells and whistles' to try and entice the customer.
How many of those bright and funny symboled buttons do you use on your TV remote?
How much of the functionality do you use in word? It has far more features than the average user will ever need. Do you know there is a function that lets you type about foxes and lazy dogs multiple times?
TRY THIS:

Open a new Word document and type (or copy and paste) the following:

_ rand(200,99)

Press Enter and wait 3 seconds...

here _ is the 'equals sign' its just the blog wont allow it
make sure you enter the actual 'equals sign'

This product "innovation" is meant to keep them on top!? If you ask me if they focused on innovating in respect to what the customer wants and not what their geeks think would be 'cool' functionality they'd be a lot more succesful. Many comapnies make this tradgic mistake: betamax as we saw earlier, ericsson mobiles (for a while), microsoft SQL is on the way there.
Its the health industry equivalent of booking an appointment for your family doctor. Upon entering and taking a chair and proceeding to tell him you ailment he interrupts with
"wait till you see the cool new drug I have for you to try out!".