E2 Flashcards
Porter’s three generic strategies
1 Cost leadership – offering products and services of the same
quality as competitors but at lower prices.
2 Differentiation – changing higher prices by offering more innovative
products, or products with a higher perceived quality.
3 Focus – concentrating only on a small part of the market.
Porter’s five forces analysis
1 New entrants – new entrants into a market will bring extra capacity
and intensify competition and any barriers to entry which may exist.
2 Rivalry amongst competitors – existing competition and its
intensity.
3 Substitutes – this threat is across industries (e.g. rail travel or bus
travel or private car).
4 Power of buyers – powerful buyers can force price cuts and/or
quality improvements.
5 Power of suppliers – powerful suppliers can charge higher prices,
forcing down profit margins.
business ecosystems x 3
Connected and open – the proliferation of mobile devices and Internet
access, necessitating new levels of trust and accountability with partners
and consumers.
• Simple and intelligent – advances in technology continue to reduce and
mask complexity and organisations gain more information and use data
analytics and insights to drive decision-making.
• Fast and scalable – transactions increase both in number and frequency
but the cost of collaboration inside and outside the organisation continues
to decline.
What are Business Ecosystems?
A business ecosystem can be defined as a network of organisations (suppliers,
distributors, customers, competitors, government agencies, etc.), who are
involved in the delivery of a specific product or service through both competition
and cooperation. This network of organisations and individuals will collaborate
and evolve roles and capabilities to build value and increase efficiency
characteristics of a business ecosystem
Orchestration refers to the formal or informal coordination of interactions
or collaborations among participants within the ecosystem i.e. the coordination, arrangement and management of these complex environments
Mutuality reflects an enhanced level of coordination with formally or informally shared ideals, standards, or goals.
How is value captured?
Value capture is the act or process of appropriating or allocating value.
Participants can capture value directly through transactions or indirectly from an
orchestrator.
How is value created?
Value creation refers to the act of bringing something of value into existence.
Participants can therefore create value by products enhancements, product
development, and the creation of new services or customer experience.
levels of ecosystem Complexity:
High complexity – an environment in which barriers to entry are high and
the threat of new entrants is low. It suggests that a participant’s role in the
ecosystem is relatively secure as their particular capabilities are typically
difficult to replicate e.g. nuclear power, or oil exploration.
• Low complexity – an environment in which barriers to entry are low and
the threat of new entrants is high. In this environment, a participant’s
position in the ecosystem is vulnerable, as their capabilities are typically
easy to copy e.g. production of consumables (bakeries), retailing
(individual boutiques), fitness instruction etc.
ecosystem Orchestration
Tight orchestration reflects an environment in which orchestrators have an
ability to influence behaviour or actions across the entire ecosystem. For
example, financial services, in which transactions are governed by
stringent and regulated rules of privacy, security and compliance.
Interactions will by necessity be rules-based, with orchestrators able to
enforce their will over others.
• Loose orchestration refers to an environment in which no individual
participant has significant influence across the ecosystem. There is often
an absence of strong regulation with limited ability for any particular
participant to enforce its will over others. For example the Internet in
regimes that have freedom of speech laws. While some content and
behaviour is specifically outlawed on criminal grounds in the most part,
individuals and organizations are free to express themselves and behave
any way they want.
Ecosystem Archetypes / types
Shark Tank – low orchestration and low complexity. Each participant will
fend for themselves, identifying opportunities, aligning capabilities and
making connections. An example of Shark Tank is the retail ecosystem of
the future where new technologies will make entry costs into retail ever
lower and competition will become even more intense. Consumers will
have low switching costs, changing between products at will, while the
potential competitive threat will increase as new entrants or existing
players watch on ready to take advantage of opportunities. Search costs
will become ever lower, with multiple organisations seeking to attract and
connect with consumers.
• Lion’s Pride – threats of new entrants are low due to the relative
complexity of the activities in which participants are engaged. In the Lion’s
Pride orchestration tends to be formal. The orchestrator will enable and
monitor activities within the ecosystem and remunerate individuals or
organisations for their participation. An example of Lions Pride will be the
future healthcare industry where an orchestrator will facilitate and manage
the interaction between patients, providers and physicians into a fully
integrated health, wellness and medical experience.
• Hornet’s Nest – complexity is high, but orchestration is low. Ecosystems
of this type tend to be simpler, with most of the value being transferred
directly by means of payment for specific activities. An example will be the
future of Media and Entertainment business where will likely become the
Hornet’s Nest ecosystem where consumers will likely be unwilling to be
tied to a single system to view content. They will demand whatever
content they want, on whatever platform or device they want, whenever
they want it, anywhere in the world.
• Wolf Pack – low complexity and high levels of orchestration. Barriers to
entry are low, indicating that entry into the ecosystem is relatively easy.
Orchestration is however high, suggesting that while individual activities
within the ecosystem are simple, the overall environment created is
potentially highly sophisticated. An example of Wolf Pack maybe the future
Energy and Utilities industry. In the future, every home, building, facility or
appliance may be both a consumer and producer of energy. The presence
of a strong orchestrator will ensure that energy flows are measured,
reserve energy is stored and networks remain in good working order.
8.1 Keeping ahead of customer expectations
Design thinking – instead of designing a single product or service that
can be marketed to many customers, there should be a shift in mind-set to
designing many experiences for one customer. This must be mixed with
the ability to constantly learn and adapt as customer needs change.
• Experiential pilots – this refers to the need to monitor how customers
behave and to gain an appreciation of their reaction to new experiences.
Questions should be asked such as “How are the customers responding to
a new technology in the way they engage with it? How are customers
being influenced by others? What reactions, emotional and behavioural,
are we seeing through the new customer experience?”
The organisation should be prepared to continuously take products to a
new level, through innovation and developing prototypes, to be able to
gauge such reactions.
• Prototyping – instead of waiting until a new product has been perfected
before bringing it to market, an organisation should recognise that speed
to market is vital. So, the first generation of a product may be only about
80% ready, but it provides vital feedback in terms of customer reactions
and what needs to be done with the second version.
• Brand atomisation – organisations will need to design their offerings so
that they can be more widely distributed and be part of the platform that is
offered by other providers.
traditional business model therefore has four key aspects:
define value – firms look at who they create value for and what counts as
value for them
• create value – firms look at how resources are sourced and turned into
outputs that customers and others desire
• deliver value – firms find ways to get value to those it was created for
• capture residual value for themselves and others to share between the
firms, their shareholders and others (i.e. stakeholders).
value can be
financial / non financial
tangible / intangible
past, present or future
short term or long term
stakeholder analysis
mendelow matrix
Interest
Low High Power Low Minimal Effort Keep informed
High Keep Satisfied Key Player
who to create value for
- Identify
- Prioritise
- estalish & id - the needs of the high proprity stakehodlers
- formulate value propositions - that meet the needs of the high priority stakeholders
ranking stakeholders
power
legitimacy
urgency
five key elements that must
connect and align to create value at an appropriate cost.
partners (suppliers employees etc) resources processes activities (that use the processes) outputs (products services)
deliver value - value based customer segments
looks at customers in terms of the revenue they generate & the cost of establishing & maintaining that relationship
when is value captured?
when revenue earned from delivering value exceeds the costs of creating value.
3 issues / models in capturing value
cost model
revenue model - pricing & collection policy
sharing residual value gov (taxes), shareholders (divs),
Disruptive technology
Disruptive technology relates to instances where technology is used to
fundamentally change and ‘disrupt’ the existing business model in an industry
eg uber
5 ways of surviving digital disruption
1 The Internet of Me – users are being placed at the centre of digital
experiences through apps and services being personalised.
2 Outcome economy – organisations have an increased ability to measure
the outcomes of the services that they deliver; customers are more
attracted to outcomes than just simply to products, and this is what
organisations should focus on.
3 The Platform (r)evolution – global platforms are becoming easier to
establish and cheaper to run. Developments such as cloud computing and
mobile technology offer huge potential for innovation and quicker delivery
of next-generation services. The rate of evolution is only going to increase.
4 The intelligent enterprise – using data in a smart way enables
organisations to become more innovative and achieve higher degrees of
operating efficiency.
5 Workforce reimagined – whilst greater use is made of smart machines,
the role of human beings is not being removed altogether; they are simply
being used in a different way. Ways need to be identified in which man
and machines can work effectively together to create better outcomes.
Strategies to build disruptive business models
build, buy (another company), partner, invest
and incubate/accelerate.
digital operating models x 5
customer centric - focus on making customers lives easier
extra frugal - standarised organizational structure
data-powered - prowess n analytics & software intelligence
skynet - use of machines to increase productivity and flexibility in production
open & liquid - constant flow of dialog with the outside world. eg facebook.
mintzbergs 10 roles of a manager
interpersonal (figurehead, leader, liaison)
informational (monitor, disseminator, spokesperson)
decisional (entrepreneur, disturbance handler, resource allocator, negotiator)
types of power
Power is the capacity to exert influence,
reward power coercive power referent power (charisma or the desire to be like that person) expert power legitimate power
