Other Random Stuff Flashcards
What is a value discipline?
A highly focused content for strategic thinking that concentrates efforts and deploys resources toward only one approach to market value. This approach is resource dependent and shapes the strategies and tactics of marketplace value and differentiation
Define Operational Experience
Focuses on providing customers with the goods and services they need at the best overall cost. Keeping costs low allows a business to offer competitive prices. Additionally, operational excellence helps minimise overhead costs through scale and resource advantages. Advanced management systems can eliminate intermediate production steps, further reducing costs and improving profit margins.
Define Product Leadership
You show Product Leadership by providing customers with the best product or service quality available.
Offers customers cutting-edge products and services
Focused on speed, innovation, time to market
Relentlessly pursues new solutions
Encourages idea generation at all levels of the organization
Define Customer intimacy
When you have extraordinary Customer Intimacy, you are the best at responding to customers’ needs. Customer intimate companies gather and assess detailed customer knowledge so they understand their customers’ needs.
Segmented target markets
Offering tailored to customer demands
Long-term customer loyalty strategy
High barriers to entry
Frontline employees empowered
Collaborative solution development with customer
Business decisions are made based on total customer lifetime value
Why concentrate on just one?
To make sure everyone is ‘singing’ from the same song sheet. To keep focused on just one of three areas of value. To keep the strategic direction robust.
(Financial Intelligence) what is the principle time value of money?
A dollar in your hand today is worth more than a dollar you expect to collect tomorrow. It’s worth a whole lot more than the dollar you expect to collect 10 years from now.
(Financial Intelligence) Explain the concept future value
What a given amount of cash will be worth in the future if it is loaned out or invested.
(Financial Intelligence) Explain the concept present value
Used most often in analysing capital expenditures, it’s the reverse of future value. To check out if an investment is worth spending money one, work out what the anticipated return would be right now.
Explain concept required rate of return
The rate you require before you will make an investment, also called a ‘hurdle rate’.
Common understanding of opportunity costs
What you have to give up in order to follow a certain course of action, eg you can’t buy a car if you want to go on a fancy holiday.
How is cost of capital calculated?
Looking at proportion of debt and equity, the volatility of company’s stock, overall interest cost on debt, prevailing interest rates in market, current tax rate. Then you need to calculate cost of debt, then cost of equity, then look at weighted cost of capital
What is a capital expenditure?
Purchase of an item that is considered a long term investment, eg computer systems. Shows up on the balance sheet vs income statement.
What is ROI
Return on investment - used to decide what capital investments to make to improve the value of the company
Why treat capital expenditures differently to ordinary purchases?
Expenditures involved large amounts of cash
Typically expected to provide returns for several years (so time value of money also important)
Always entail some degree of risk
How do we analyse capital expenditures?
- Determine initial cash outlay
- Project future cash flows from investment
- Evaluate future cash flows
More about strategy
Show me your commitments and I’ll show you your strategy
The transactional domain we identify as strategy is primarily concerned with how to effectively utilize the limited resources available to satisfy a plan.
Strategy puts in place the context and structure for how specific resources are to be allocated, committed, and deployed.
This domain offers a process for thinking and acting that helps to narrow the many possibilities available to an enterprise or individual for how to achieve a plan into a specific set of acts that focus and concentrate limited resources in a few key areas of concern.
Strategy is all about the effective and efficient use of limited resources through a set of unique and valuable transactions.
We characterize a strategy as an approach, method, or design for the allocation, commitment, and deployment of limited resources through a set of highly valuable transactions to achieve a personal or enterprise plan.
Strategy is structured as a set of unique, distinct, and highly valuable acts (transactions) that are crafted for the effective and efficient commitment of limited resources.
If a plan gives us the general course of action required to fulfill on an aim based upon our current situation and limited resources, then a strategy gives us the method and design for the allocation and deployment of those limited resources through a set of unique acts we construct as transactions.
“The intelligent allocation of limited resources is at the heart of strategy.”
“From Resource Allocation to Strategy”, Joseph Bower and Clark Gilbert
Strategy is made by a series of resource commitments” but because this fundamental misunderstanding and the protective and preservational attitude upper management or enterprise ownership tends to show toward resource transparency, a weak or missing discipline of accurate thinking keeps most ‘strategic thinking’ in the clouds of high concepts and ideas rather than on the grounded and explicit work required to maximize effective and efficient use of limited resources.
“By looking into the black box of resource allocation, we are introducing a new set of characteristics that must be considered when thinking about crafting strategy.”
“The allocation of resources shapes strategic outcomes. How resources are actually allocated and used determines strategic outcomes—not the words on paper or policies.
” Managers wishing to manage strategic outcomes need to manage the resource allocation process and forces that shape it.”
Commitments in place today shape the outcomes of tomorrow.
Without addressing the current commitments in effect now, no real or substantial change can take place.
Commitments reveal strategy and determine priorities. Warren Buffet reminds us that, “We do what we are obligated to do,” that is, we operate inside constraints and commitments
—and true to form, Bower and Gilbert assert that the more focused and concentrated our commitments are the more powerful and effective our marketplace offers will be. “A natural reaction to the complexity of [the competitive marketplace] is to diversify,” however, “recent findings show that poor performers diversify.”
Without a surplus in financial resources, any strategy that commits resources toward multiple disciplines is weak and ultimately doomed.
Which begs the question: how would you know where your resources are going and what outcomes they must produce without a specific strategy for deploying them? What are our intentions and commitments aimed at or going to produce?
What is a value characteristic?
A characteristic is a distinguishing quality, attribute, or trait. When an offer is focused and clearly aimed at bringing into existence a specific customer experience—which is realized through substantial and significant help in specific Conditions of Life—the offer can further be distinguished in ways and by means that are so uncommon and so counter-intuitive to Current thinking, that near monopolistic advantages can be enjoyed.
Value characteristics, the highly distinctive traits that separate the bad and mediocre offers from extraordinary offers, are designed, engineered, crafted, constructed, marketed, sold, and continually evaluated and assessed for their value to specific customers.
Value characteristics are clear distinctions of utility and scarcity in terms of worth. Just because something is perceived as valuable, doesn’t mean that people are willing to transact to obtain it. What an offer is worth depends on what one is willing to exchange or sacrifice in order to get it. In other words, there is a trade-off or willingness to part with something else of equal or greater value.
Value characteristics help us distinguish and differentiate offers that are clearly grounded in a specific value discipline. Value disciplines are strategies. Value characteristics are what make strategies powerful.
The qualities and attributes of an offer are the explicit determinate that distinguish and differentiate one offer from another.
In our Current, indifferent and dynamic environment, differentiation and distinction require a tremendous amount of focus and concentration.
The very nature of a ‘purely competitive’ marketplace demands it. In this study, you will expand on your study and work in the area of differentiation and distinction.
“When people, from their perspective, are inundated with indistinguishable choices, they perceive a product, service, approach, or experience with a specific point of differentiation to be superior.”
Collapse of distinction - why is it hard in competition
It is difficult to effectively differentiate yourself in todays market because
1.ease of emulation
2. new competitors
3. customer boredom
Collapse - ease of emulation
When things look different or better, it is easy for everyone else to do the same.
This creates evolutionary product development vs genuine breakthroughs
Esp true when markets down, companies cut costs on R and D.
Problem is more companies focused on what their competitors are doing. vs what their customers need.
Collapse - new competitors
Now is the era of copy cat capitalism
entry barriers into industry are lowered across the board
customers might go to new competitors to shop around
Customer boredom
Familiarity breeds complacency
they take for granted what is boundlessly available in the marketplace.
No real interest in growth and cultivation.
new competitors will be aggressive in getting new customers
We need to have a retention plan ,to keep our existing customers
customers find doing business w someone new interesting and different, not necessarily better but different.
Companies try to out McDonald McDonalds
but havent done the research and setting up processes, so will fail
Differentiating your business
imperative, not just to create space in today’s marketplace from today’s competitors but the new ones you are not even aware of
What wont work in today’s world
trying to build a better product than anyone else
to be the lowest cost provider
to treat your customers better with great service
sameness, differentiation, distinction
sameness = you are no different to your competitors
differentiation = displaying traits that are different to your competition
distinction = your primary source is to deliver superior customer service.
“when people from their perspective, are inundated with indistinguishable choices, they perceive a product, service or approach or experience with a specific point of differentiation to be superior
How to attain distinction
You don’t need to be better in every dimension available, there are four basic points which create the foundation
- clarity
- creativity
- communication
- customer experience focus
clarity
let customers know who you are and what you stand for in dazzling brilliance
not all things to all people, but have a concept which makes you distinctive and unique in the marketplace.
Be precise about what you are and what you are not, tell them what you specialise in vs being a generalist
Questions to ask re clarity
- consider a few fundamental qs
What makes us different?
How do we stand out from competitors? - Brainstorm with your colleagues
What are our defining values?
What is our mission? - Try to come up with a high concept statement which encapsulates and embodies everything you do.
Remember you can not differentiate what you cannot define.
Your goal is to be as precise as possible about who you are, and what your organisation is and isn’t. Be ready to fire customers and prospects who fail to fit your format.
creativity
positively exploit what your are good at in new and original ways.
no single right way
To become good at being creative
- believe that you are creative
- expose yourself to new forms of mental stimulus
- look for synergy
come up with workable and worthwhile creative differentiation
- break down all customer interactions - where are the points of contact
- choose just one of these touch points - how can we enhance it?
- develop your point of difference - positively exploit an opening in the market and make the interaction better
communication
tell stories that illustrate graphically what you do better than anyone else
Everyone loves a good story
Stories can
describe your operational excellence in action
create shared meaning with the organisation
help orient new people
bring about change
renew your sense of purpose
help guide decision making
enable everyone to cocreate strategy
tell your stories in a concise and compelling manner
3 acts
- introduce the characters and the challenges they are facing
- describe the various initial attempts to resolve the conflict
- lead character comes up w an idea that resolves the conflict
remember to screen test your story
customer experience focus
organise your company around the singular goal of delivering superb customer experience.
use personalisation and emotion
only reason any business exists is to generate a profit by providing a customer experience so alluring and good that customers are prepared to pay for it
customer interaction comes in 3 diferent levels
- processing - expect their orders to be processed correctly
- service - expect good levels of service and support
3 - experience - emotinal connection, great experience
some qs
how do we hear the customers voice?
feedback mechanisms? (unfiltered, sanitised?)
how will our decisions impact our custoners?
do we try to do compelling stuff to differentiate at every opp?
is customer service part of everyones jd?
can everyone use their initiative?
ultimate customer experience
- What would happen if everything went right?
- ask clients what the ultimate experience would be
- compare and sync both lists
- outline any roadblocks
- execute the changes
Zero to one - four characteristics of monopoly
Proprietary technology - 10 x better than your closest substitute. I could create a super whizzy template which we could populate to create a roadmap to implementing strategy, once they have completed the PSTI program.
Network effects - make a product more useful as more people use it - some kind of online community, where they support each other
Economies of scale - the fixed price of creating a product can be spread across larger base of customers - cannot see how this applies to my offering.
Branding - power of brand eg Apple, iphone - will get a rebrand later this year
Working capital
the money a company needs to finance its daily operations.
add up company’s cash, inventory and AR and subtract short term debts.
What is DSO and why is it important?
Day sales outstanding. Average number of days it takes to collect on receivables.
Helps to work out how much working capital you need. Create a strong criteria to understand if a customer is worth taking on.
What are 3 working capital accounts
Accounts receivable, accounts payable, inventory
Why is managing inventory so important?
It can reduce working capital requirements by freeing up large amounts of cash.
cash conversion cycle
timeline relating to the stages of production to the company’s investment in working capital.
take days sales outstanding, add days in inventory, subtract number of days payable outstanding
accounts receivable ageing
what % of your customers are paying their bills for more than 90 days. gives you a full picture
