4: Value Chain Analysis Flashcards
§ VAC analysis allows you to think ahead about 3 things
+ 1 conclusion
§ your competitive position in the value chain
§ the opportunities and challenges you may encounter with the other players
§ the probable consequences for your business model
=> to reach your customer, you must attract and negotiate with players in the value chain having value-added or complementary assets
The 3 key principles of Value Chain Analysis
§ The VAC is sometimes more complex than presumed at first
§ Research is necessary when you do not know the playing field well
§ For your venture to succeed, you must find a way to obtain enough weight and impact on the VAC (through proprietary value creation) when you come to devise your business model
§ The smaller your impact on the VAC (less control over CA):
2 conseqs.
- the more important the presence of multiple competing players (alternatives) in
other sections of the value chain - The greater your need for legal protection of your idea
Business model
- def.
- rule of thumb
- Describes what a firm will do, and how, to build and capture wealth for stakeholders
- If you cannot explain the business in 50 words or less, you don’t fully understand your business
how to research a business model:
Talk to LOTS of stakeholders!
How to present a business model
in 3 elements
+ 2 why’s:
3 different elements
- The players
- The flow from company to client
- The flow from client to company
=> Easy to communicate
=> Quick generation of alternatives
The Teece matrix for entrepreneurial strategies
Complementary assets
Appropriability Freely available Tightly held
Low difficult to earn asset holder earns
High inventor earns inventor or holder
of bargaining power
Teece upper left quadrant:
- 3 features
- 1 example & 3 counterexamples
- 2 success keys
3 features:
- Established companies can imitate easily
- Growth is realised after success
- Born global companies are less likely to get off the ground
+ Typical example : Le Pain Quotidien
- Counter-examples : Red Bull, DHL, Amazon.com
- > Success is dependent on finding a blind un- addressed spot or niche
- > Entrepreneurial Passion is the main driver of success
Teece upper left quadrant: 2 macro-strategies
5+4
- Eric Ries’ Lean Startup approach
- Fail often, fail fast’
- start minimal & build up incrementally
- customer dev. = interview diverse potential customers
- anaylse web metrics
- use split (aka A/B) testing - Small Steps
- dating or bootstrapping
- money from Friends, Family, Fools…
- accelerators
- risk avoidance or sharing
Teece upper right quadrant:
- feature
- 2 key reqs.
- 4 examples
§ Growth is realised after partnerships
§ Entrepreneurial Passion needed, but not enough
§ Industrial Partners are needed which see a win win and own the market and help you scale up
§ Typical examples: B-to-C mass consumer startups, software companies, social
entrepreneurship ventures, total eclipse in Belgium (first in 350 years)
Teece lower left quadrant:
- 4 features
- 1-2 reqs.
- example
§ Choice between markets, contracts, aggressive strategies
§ Business Model has highest degrees of freedom
§ Could grow steadily from day one with a competitive entrepreneurial strategy
§ Born Globals are possible
§ Entrepreneurial Ambition is possible in addition to Passion
§ Typical example : Garmin 1999, date of founding (algorithm based company)
Teece Lower Right Quadrant:
- 3 features
- req.
- 2 examples
§ Venture Capital Backed Model
§ Business Model has as an objective to create value rather than revenues
§ Born Global is a necessity
§ Entrepreneurial Ambition is more important then Entrepreneurial Passion
§ Typical examples: High Tech Companies in Capital Intensive Technologies… 1998 Cropdesign. huge by 2006 despite no revenues (business model first to go to rice, but they could not raise sufficient money, then to corn)
Teece summary
in 4+4+3+4 points
UL -lean start-up/effectuation -bricolage -job passion -business model innovation UR -partnering -some funding -entrepreneurial passion -product/service ideas LL -some funding (< 1 mio) -private equity if growth is realised -entrepreneurial passion LR -business plan + milestones -VC funding + 5 mio Euro -management team -platform technology
Business plan:
6 major components
+ 4 Qs
6 major components:
- Idea / Technology
- Value Chain
- The business model
- Product/market
- Description of the management team?
- Financial assumptions
4 Qs:
§ How difficult is it for others to copy your idea?
§ To what extent have you tried to protect your idea? § Costs/benefits of your strategy
§ Freedom to operate?
Value Chain:
2 main + 4Qs
- value chain within the firm for distributing the offering
- position of the firm within the value network linking suppliers and customers
§ How will you reach the end consumer?
§ Who is most profitable in the value chain?
§ Negotiation power towards other parties in the value chain? § Do you have partners where a win-win is possible?
