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Course Assignment, HBR article Analysis
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© Copyrights Saad Munir. [email protected] Click to see credits.
Porter’s Stance
• Highlighted in HBS article ‘ Strategy and Internet’; 2000
• Major Premise: Stick to the traditional ways of doing business
• Vertically integrate• Use Internet as a complementary tool only• Internet usage can only help connect PCs• Networking can cause profitability to suffer• There is no thing as a business model• Internet would eventually cease being a source of competitive
advantage
Vertically Integrate
• Develop competencies internally
• The organizational goals haven’t changed, why should the ways to achieve them change either
• Tried and proven ways to do things( if the company was profitable before internet, why shift to internet)
Non Competitive Competitive
Non Core
Core
Spin off
Keep in house
Internal Cost and Capability Competitiveness
Stra
tegi
c Im
port
ance
Outsource
Out source or Join Venture
Bubble size represents revenue generated
Technology Positi
oning
Source: A.T Kearney
Unilever Outsources to Accenture
“The outsourcing programme is part of the company’s 'One Unilever' initiatives to increase
leverage of its scale, improve its marketplace competitiveness, deliver functional excellence, and create a more competitive cost-structure allowing it
to focus on its consumers and customers”
Partnering
• Resources that are not owned can be used
• Co-create with customers and other outside sources
• Suppliers and distributors can contribute to cheaper disruptive innovation
• Risk and cost reduction ( Revenue of top 5 contract manufacturers aggregated $ 50 B, ROIC > 25%)
What a DIG Does What a DIG Is NotScouts for new ideas and untapped potential
An R&D group dedicated to product and technological discovery
Scans the external environment for emerging technologies
A monopoly innovation function charged with enacting all stages of the innovation process
Facilitates participation in idea forums A systems-development or corporate-venturing unit
Acts as a centre of innovation expertise An office-bound centralized staff unit that sets policy and monitors performance
Publicizes promising innovations
Funds and serves as an incubator for promising innovations
Source: Harvard Business Review
P&G Distributed Innovation Group has increased the percentage of new product ideas from outside the company from 15% to 50%
Why Partner ? • Corporate alliances increases by 25% a year
• Alliances account for 33% of the company revenues
Revenue from Alliances
33%
Source: Harvard Business Review
How HP Perceived Itself How Microsoft Perceived HPCollaborative partnering mind-set – looks for the greater good
A non-player in services
Reinventing – trying to get more focused under new CEO’s leadership
Falling behind its competitors
Disciplined – takes a long-term, mature approach to evaluating market opportunities
Slow, bureaucratic – a laggard
Win-win partnering – actively seeks the other company’s wins
Unable to execute consistently and predictably
Flexible – looks for creative deals Conflicted sales strategies in the field
How Microsoft Perceived Itself How HP Perceived MicrosoftCompetitive, fast-moving, and entrepreneurial Excessively competitive and confrontational“Our products are changing the world in profoundly positive ways”
Controlling, paranoid and greedy
Center of the new economy “Win – don’t care” partnering mind-setFocuses on objectives and assumes others do the same
Focused only on the deal
Misunderstood: the world doesn’t realize what positive things the company does for everyone
Packaged software mentality – commoditize everything, even partnering
“The Eye of the Beholder”
Source: Harvard Business Review
The value of Internet
• Only a complementary tool‘ Latest stage in the ongoing evolution of information
technology’
• Not and emerging infrastructure for economic activity• Network for connecting desktop PCs
The TRUE value of Internet
• A complete infrastructure and architecture• More effective than earlier communication media• Used for transactions • Market Research • Recruiting • Brings the company closer to the market [ better CRM, greater
customer insight]• Allows for better governance
There is no such thing as Business Model
• The meaning of ‘business model’ has been misunderstood
• The term "Business model” is used more or less synonymously with “business strategy”
• Historically strategist have not been concerned about business models because each industry had a standard model
Internet based Business Models
• The core architecture of the firm• how deploy relevant resources • How to create differentiated value for its customers
• The business world is more customer driven these days which necessitates the companies to have continuous interaction with them
• Internet allows for development of newer, more innovative types of business models
• Allows greater speed of execution
Internet would eventually lose its importance
• All companies come to embrace internet, and the internet itself neutralize as the source of competitive advantage.
• The competitive advantage increases from traditional strengths
Competitive advantage of Internet
• “As the current technological revolution continues to change the face of the world market, only the businesses that are the fastest to anticipate change and to participate in the revolution will prosper” Southwick ; keynote speaker at the New Jersey Software Forum 2000
• Once the second generation of eMarkets gets going, the cost of entry will go up“; Bill Van Emburg, director of Quadrix Solutions
• Internet must not be considered only with reference to its present existence [ nobody had imagined any thing such as the internet and so cannot anticipate any future advancements]
• Internet would provide a basis for continuous innovation• Unique Products• operational efficiencies• customer services and relationships
Unique Products
Operational Efficiencies
Customer Services and Relationship
Access to information
Access to more suppliers
Greater freedom of choice
Competitor access to market information
Negative Impact on the Profitability
Reduced Profitability
The Positive aspect
• Fair competition
• Businesses would deliver what customers truly value
• Pressure to improve quality would increase
• Benefit to the customer would increase
‘Business fundamentals, indeed. Fundamentalism, no’
H u r r a H ’ s C r e a t i v i t y
H u r r a H ’ s C r e a t i v i t y
Credits
Sara ParveenUme KalsoomMariam MalikSadaf IwbalFahad SiddiquiAesha Shamshad Buttand Wardah Munir and all other subgroups.