11 - Customizing Your Strategy Map to Your Strategy Flashcards
What is the essence of strategy according to Michael Porter?
The essence of strategy is in the activities—choosing to perform activities differently or to perform different activities than rivals.
This highlights the importance of strategic fit among activities for competitive advantage.
What are the two basic sustainable strategies articulated by Michael Porter?
Low-cost and differentiation.
These strategies have generally stood the test of time.
What are the three generic types of strategies proposed by Michael Treacy and Fred Wiersema?
- Operational excellence
- Customer intimacy
- Product leadership
These strategies build upon Porter’s framework.
What is the fourth generic strategy articulated by Arnoldo Hax and Dean Wilde?
System lock-in.
This strategy involves attracting complementors to enhance the organization’s offerings.
What is value innovation as introduced by W. Chan Kim and Renée Mauborgne?
Achieving superior and sustainable performance by performing well on selected attributes preferred by large customer segments while minimizing costs on non-critical features.
This approach focuses on keeping prices down while delivering outstanding performance.
How is total value creation defined in the context of strategy?
The maximum price that customers are willing to pay less the cost of products and services provided by suppliers.
This considers the distribution of value among suppliers, the company, and customers.
What are the three segments of total value creation?
- Value captured by suppliers
- Value captured by company
- Value captured by customers
These segments depend on the bargaining power of each participant.
What is the role of competitive advantage in the sustainability of a company’s strategy?
Positions built on systems of activities are far more sustainable than those built on individual activities.
This emphasizes the interconnectedness of activities in achieving a competitive edge.
What is a key characteristic of companies employing a low total cost strategy?
Delivering a low total cost buying experience combined with consistent quality, speed of purchase, and excellent service.
Examples include Southwest Airlines and Wal-Mart.
Fill in the blank: Companies following a low total cost strategy must deliver consistent quality to minimize the costs incurred by their customers to detect and remedy _______.
errors.
Consistent quality is crucial for customer satisfaction and retention.
What do low total cost companies do to keep their costs down?
Offer a limited selection of products and services that meet the needs of most targeted customers.
This strategy helps in reducing production and service delivery costs.
What is the primary focus of innovation for low total cost companies?
Process innovations rather than product innovations.
These companies seek to enhance efficiency and reduce costs.
What must product leadership companies excel at to maintain their competitive edge?
Anticipating customers’ needs and discovering new opportunities for superior products and services.
This involves a balance of fundamental research and product development.
What is the main goal of product leadership companies regarding market introduction?
To be first-to-market with innovative or enhanced features and functionality.
This allows them to command high prices from early adopters.
Fill in the blank: The operations management processes for product leadership companies must be robust to accommodate continual _______.
introduction of new products.
This flexibility is essential for adapting to market needs.
What is a critical aspect of the customer management processes for low total cost companies?
Providing convenience and ease of access for customers.
This includes accessible ordering processes and superb post-sales service.
What is the role of electronic relationships in low total cost strategies?
Critical for cost reduction and making ordering and distribution processes error-free.
Electronic interchanges enhance convenience and efficiency.
What do product leadership companies prioritize in their operating processes?
Flexibility and improvement over low-cost production
This allows for rapid ramp-up and minor changes based on marketplace feedback.
Why is flexibility important for product leadership companies?
To accommodate new products and reduce manufacturing costs after stabilization
Inflexible processes can lead to loss of revenue and market share.
What are the two critical processes in customer management objectives for product leadership companies?
- Identifying leading-edge customers
- Educating customers about new product benefits
True or False: Existing customers are always the best source for new product ideas.
False
Innovative capabilities may be too new for advanced customers to appreciate.
What must product leadership companies manage when introducing new products?
Regulatory and social processes
This includes improving product safety and environmental impacts.
What is a key aspect of complete customer solutions?
Building long-lasting relationships with customers
This involves understanding customer needs and providing customized solutions.
What did IBM prioritize between 1960 and 1980?
Complete solutions tailored to customer needs
IBM focused on hardware, software, installation, and consulting.
What are the objectives of companies offering a customer solutions value proposition?
- Completeness of the solution
- Exceptional service
- Quality of the relationship
What is the primary focus of companies following a customer solution strategy?
Understanding customers’ future needs and preferences
Research is directed at enhancing customer value.
What do lock-in strategies aim to create?
High switching costs for customers
This generates long-term sustainable value.
Give an example of a company that uses lock-in strategies.
Microsoft
Customers face high costs when switching from Windows to another operating system.
What is system lock-in?
When a company’s core product becomes the industry standard
This leads to customers making significant investments in specific capabilities.
What are complementors in the context of system lock-in?
Entities that create value by selling compatible products or purchasing additional services
They enhance the core product’s value and contribute to system lock-in.
What is an example of a dominant exchange for transactions?
eBay
It acts as a sole-source clearinghouse for buyers and sellers.
How does the dominance of English serve as a form of lock-in?
It becomes the default language for global business interactions
This critical mass of users makes it more useful for others to learn.
What should companies focus on to achieve high lifetime profitability with customers?
Retaining and deepening customer relationships
Retention costs are typically lower than acquisition costs.
What role does information technology play in customer management?
It provides data about customers and analytic capabilities
This helps in understanding preferences and measuring profitability.
What is the importance of organization capital objectives?
Fostering a customer-centric climate and culture
Employees must understand the value of long-standing customer relationships.
What is a key strategy for companies following a customer solutions strategy regarding product delivery?
Bundling products and services into customized solutions
This enhances the overall customer experience.
What language do Chinese, Japanese, and Swedes need to speak to communicate with each other?
Chinese needs to speak to Dutch, and Swedes need to speak to Swiss
This illustrates the importance of a common language in international discourse.
What factor contributes to the dominance of an exchange in a market?
Exploiting early-mover advantages
This involves signing up a critical mass of buyers and sellers faster than competitors.
How does the value of an exchange change with participation?
Increases nonlinearly
More participants lead to higher incremental benefits.
What is a key objective of a lock-in strategy from a financial perspective?
Emphasizes revenue growth more than productivity
High margins and market share opportunities outweigh cost-reduction benefits.
What are the revenue growth objectives in a lock-in strategy?
- Revenues from newly acquired customers
- High-margin revenues from secondary products and services
- Revenues from third-party access to the customer base
What is a common customer outcome objective in lock-in strategies?
Customer acquisition, retention, and deepening relationships
Rapid acquisition builds and sustains lock-in advantages.
What should companies measure to assess customer acquisition effectiveness?
Percentage and increase in number of customers using proprietary products
This helps evaluate the effectiveness of their lock-in strategy.
What is the importance of loyalty programs in lock-in strategies?
They enhance retention and extend reach with existing customers
Loyalty programs reward large cumulative purchases.
What does customer retention involve in a lock-in strategy?
Raising switching costs of existing customers
This can be measured by training and investment in complementary assets.
What factors attract and retain customers to a proprietary standard?
- Ease of use
- Belief in widespread usage
- Expectation of continual innovations
Why should companies treat complementors as customers?
They provide valuable products and services that require the proprietary product
Complementors benefit from a large installed base of customers.
What is essential for the innovation processes in lock-in strategies?
Developing proprietary products and protected standards
It facilitates powerful interactions among customers and complementors.
What should the innovation process maintain to ensure customer loyalty?
Backward compatibility with earlier product generations
This prevents customers’ investments from becoming obsolete.
What is a key measure of a company’s ability to manage complementors?
Number of complementors and sales of their products
This quantifies the sustainability of system lock-in strategies.
What is a customer management objective for new customers in a lock-in strategy?
Lowering their switching costs
This includes lowering search costs and creating product awareness.
What are the operational requirements for a successful lock-in strategy?
- Capacity to produce proprietary products
- Easy access and use for customers and complementors
What are the two critical regulatory objectives for a lock-in strategy?
- Protect proprietary products from imitation
- Avoid illegal practices that attract antitrust scrutiny
What is the purpose of context-specific philanthropy in lock-in strategies?
To support the company’s proprietary technology
Examples include donating computers to schools to build familiarity with products.
What is the human capital requirement for a lock-in strategy?
_______
This section was not fully provided in the text.
What is the primary goal of generating attractive job opportunities for urban high school graduates?
To alleviate a shortage of qualified employees for managing and maintaining complex networks built with Cisco routers.
What must the human capital requirement align with in a lock-in strategy?
The critical internal processes of that strategy.
What type of employees does a company need for managing customers and complementors?
Employees who have knowledge of these stakeholders’ businesses and needs.
True or False: Employees must be customer-focused to enhance loyalty among customers and complementors.
True.
What does information capital provide in a system lock-in strategy?
The platform used by customers, complementors, and competitors.
What is crucial for a company’s information technology in a lock-in strategy?
Providing a complex information resource with an easy-to-use interface.
Fill in the blank: The culture of a lock-in company should be highly _______ and complementor-centric.
customer.
What is the key to success for a lock-in company’s culture?
Providing exceptional service and responsiveness.
What should a well-constructed strategy map show?
The interrelationships among the organization’s internal processes and intangible assets.
According to Michael Porter, when is a strategy most successful?
When integrated and aligned activities enable the company to offer a better value proposition than competitors.
What different strategies do companies follow according to their strategy maps?
- Low total cost
- Product leadership
- Complete customer solutions
- System lock-in.
What strategy does Tata Auto Plastics follow?
A low total cost strategy.
What is the primary objective of TAPS’s financial perspective?
To increase its return-on-capital-employed (ROCE) beyond the company’s weighted average cost of capital (WACC).
What does TAPS focus on in the customer perspective?
Meeting customer expectations on quality, cost, and delivery.
What are the two strategic themes in TAPS’s internal perspective?
- Cost leadership
- Innovation.
What did TAPS executives use the Balanced Scorecard for?
To balance expectations among its various stakeholders.
What was a key performance measure for TAPS concerning industry cost leadership?
The ratio of operations cost to sales.
What is the overarching vision of MDS?
To build a great global health and life sciences company.
What is a key objective for MDS in terms of revenue growth?
A compounded average annual revenue growth rate of 15 percent on a rolling five-year basis.
What does MDS aim to achieve in its financial success?
A compounded annual growth rate (CAGR) of earnings of 15 percent.
True or False: Each MDS business unit has the same customer value proposition.
False.
What is the purpose of MDS’s enterprise strategy map?
To represent a portfolio of strategies.
Fill in the blank: The culture at MDS is characterized by a passionate _______ shared by employees.
passion.
What is the goal of MDS in terms of shareholder value?
Achieve a compounded average annual EPS growth rate of 15 percent on a rolling five-year basis.
EPS stands for Earnings Per Share.
What was MDS’s target for compounded average annual revenue growth rate?
15 percent on a rolling five-year basis.
Revenue growth is a key objective for driving shareholder value.
How did MDS plan to increase return on capital?
By becoming more disciplined in capital allocation, exiting unproductive businesses, and leveraging technology.
Capital allocation refers to how a company decides to spend its available resources.
What was a priority for MDS regarding operating margin?
Manage operating expenses while eliminating inefficient, non-value-added activities.
Non-value-added activities are tasks that do not contribute to the end value of the product or service.
What was MDS’s approach to customer relationships?
Focus on attracting, growing, and retaining customer relationships through value propositions emphasizing intimacy, innovation, and superior service delivery.
What did MDS aim to achieve by better understanding customers and markets?
Drive all MDS processes and improve market entry, innovative solutions, and expectations.
This includes knowledge of competitors, suppliers, regulators, current and prospective customers.
Fill in the blank: MDS aimed to _______ new markets to drive future growth.
strategically enter
What was essential for MDS to meet customer requirements?
Follow-through on customer commitments and exceed expectations.
This builds enduring relationships with customers.
What was the key to MDS’s continued success?
Attracting and retaining the right people with competencies and values consistent with MDS’s culture.
What type of culture did MDS aim to build?
A high-performance culture that is values-driven, high-achievement, and team-oriented.
How was technology viewed in relation to MDS’s strategy?
Essential for enabling the strategy and improving return on capital.
What was the revenue target set by MDS for 2003?
$2 billion.
What was the purpose of the Balanced Scorecard (BSC) for MDS?
To clarify the role of corporate strategy and describe performance expectations of business units.
What was Boise Office Solutions’ revenue in 2002?
$3.5 billion.
What strategy did Boise adopt to increase profitability?
Create a clear distinction between high-value customer service and limited customer value based on pricing.
What approach did Boise use to enhance customer value?
One-to-one marketing approaches to create personalized experiences.
What was one objective of Boise’s internal process?
Rationalize operations and move customers to an e-commerce channel.
What was a key measurement for Boise’s customer management objective?
‘Done-in-one’ rates and on-time delivery.
How did Boise plan to reset customer value expectations?
By demonstrating greater overall management control of spending on office supplies.
What was necessary for Boise’s new customer-centric strategy?
Investing in customer-centric information technology and realigning the workforce.
What did Thomson Financial aim to achieve by 2005?
Transform to be 80 percent electronic.
What significant change did Thomson CEO Dick Harrington implement?
Divested 90 percent of print-based businesses.
What was the primary goal of Thomson Financial’s new strategic direction?
Deliver greater value more efficiently as a strategic partner.
What was the focus of TF’s customer strategy?
Provide tailored desktop technology bundled with workflow applications.
What key aspect was emphasized in TF’s financial perspective?
Grow revenue through expanded markets and improve return on invested capital.
What was a major challenge faced by Thomson Financial during BSC adoption?
Technological, regulatory, and economic changes affecting the marketplace.
What is the purpose of the Balanced Scorecard?
To inform product development, cross-selling potential, and partnership opportunities.
The Balanced Scorecard helps organizations align their business activities to their vision and strategy.
What is one solution suggested for rationalizing technology?
Consolidating platforms, components, and tools.
This approach aims to streamline operations and reduce complexity.
What is a key goal in improving operations according to the text?
Improve systems reliability and consistency of service.
Ensuring reliable operations is crucial for maintaining customer satisfaction and trust.
What strategy is suggested for developing people within the organization?
Develop leaders, attract and retain high performers, and broaden sales skills.
This includes enhancing product knowledge and creating a strategy-focused culture.
What initial perception did the Balanced Scorecard face?
It was greeted with skepticism and a belief that it was merely a metrics program.
Change management initiatives often encounter resistance, particularly if past experiences were negative.
What did CFO David Turner observe about TF upon his arrival in 2001?
TF was a decentralized organization lacking basic centralized processes.
This situation highlighted the need for a structured approach to strategy and measurement.
What benefits did the introduction of the Balanced Scorecard provide?
It underscored the cost of decentralization and offered a clear roadmap for transformation.
The Balanced Scorecard helped align strategy, people, and processes.
What type of reports did TF align across business units?
Monthly operational business unit-level reports on key measures and major initiatives.
These reports support consistency and accountability in performance tracking.
What is the purpose of the quarterly meetings among scorecard program managers?
To share best practices.
These meetings foster collaboration and continuous improvement across the organization.
True or False: The use of the Balanced Scorecard at TF has remained static.
False.
TF aims to continually leverage progress and evolve their use of the scorecard.
