ADVANCED STRATEGY MANAGEMENT

Mr. Akhavan Alavi(Professor at University of Tehran)

Javad Sha’bani

DELTA MODELCHAPTER 2: CREATING NEW SOURCESOF GROWTH AND PROFITABILITY IN A NETWORKED ECONOMY

LAST CHAPTER IN BRIEF

ARNOLDO C. HAX

The Haxioms

1. The centre of strategy is the customer.2. You don’t win by beating the competition; you win by achieving

customer bonding.3. Strategy is not war; it is love.4. A product-centric mentality is constraining; open your mindset to include the customers, the suppliers, and the complementors as your key constituencies.5. Try to understand your customer deeply. Strategy is done one

customer at a time.6. Commodities only exist in the minds of the inept.7. The foundations of strategy are two: • Customer Segmentation and Customer Value Proposition • The Firm as a Bundle of Competencies 8. Reject the two truisms: • “The customer is always right,”and • “I know the customer needs and how to satisfy them.”

9. The strategic planning process is a dialog among the key executives of the firm – seeking consensus on the direction of the organization.10. Metrics are essential; experimentation is crucial.

CHAPTER 2CREATING NEW SOURCES OF GROWTH AND PROFITABILITY IN A NETWORKED ECONOMY

HOW TO ACHIEVE CUSTOMER BONDING: THE THREE MAJOR STRATEGIC OPTIONS IN THE DELTA MODEL

BEST PRODUCT

MICHAEL E. PORTER

BEST PRODUCT

MICHAEL PORTER'S THREE GENERIC STRATEGIES

ATTENTION

-Product Economics

-The Value Chain

-The Abilities to Develop

the Capacities

Major Strategic Driving Forces

-The Development of an Efficient Supply Chain

-A Proven Internal Capability for New Product Development

-The Securing

of Distribution

Channels

PRICE WAR

فهــزمـوهــم بـإذن الـلـه وقـتل داوود جـــالـوت وآتـاه الـلـه املـلك

ا يـشاء ولـوال دفـع الـلـه الـناس بـعضهم والـحكمة وعـلمه مـم

بـــــــبعض لفســـــــــدت األرض ولــــــــكن الـــــــلـه ذو فـــــــضل عـــــــلى

العاملني.

Strategic Positions of the Best Product Option

LOW COST(COST LEADERSHIP)

EVERYTHING BEING EQUAL

EXCEPTIONS:

EXCEPTIONS:

DIFFERENTIATION

Strategic Positions of the Best Product Option

MICHAEL PORTER'S THREE GENERIC STRATEGIES

FOCUSStrategic Positions of the Best Product Option

BEST PRODUCT

A LIMITED OPTION

Towards a Stronger Bonding with the Customer

Ability to Develop, Make,

and Deliver a Stream

of Innovative Products

An Efficient

Cost

Infrastructure

HOW TO ACHIEVE CUSTOMER BONDING: THE THREE MAJOR STRATEGIC OPTIONS IN THE DELTA MODEL

Total Customer Solution

Total Customer Solution

CUSTOMER ECONOMICS

PRODUCT ECONOMICS

PRODUCT MARKET SHARE

CUSTOMER MARKET SHARE

FIRST POINT

SEGMENTATION

CUSTOMER BONDING‣ Enhancing Customer’s Cost

Position

‣ Enhancing Customer’s Revenue Position

‣ Enhancing Customer’s Profit Position

Total Customer Solution

Total Customer Solution

CUSTOMER INTEGRATION

REDEFINING THE CUSTOMER EXPERIENCE

HORIZONTAL BREADTH

STRATEGIC POSITIONS OF THE TOTAL CUSTOMER SOLUTION OPTION

REDEFINING THE CUSTOMER EXPERIENCE

“Study your competitors not to imitate them.”

CASE STUDY

GOLRANG

MANAGERS NEGOTIATION

STRATEGIC POSITIONS OF THE TOTAL CUSTOMER SOLUTION OPTION

SATISFACTION GUARANTEED OR YOUR MONEY BACK, NO QUESTION ASKED

CUSTOMER INTEGRATION

HORIZONTAL BREADTH

STRATEGIC POSITIONS OF THE TOTAL CUSTOMER SOLUTION OPTION

SUPPLIERS

STRATEGIC POSITIONS OF THE TOTAL CUSTOMER SOLUTION OPTION

COMPANY

COMPLEMENTORS

STRATEGIC POSITIONS OF THE TOTAL CUSTOMER SOLUTION OPTION

TOWARD A CUSTOMER LOCK-IN

TOWARD A CUSTOMER LOCK-IN

STRATEGIC POSITIONS OF THE TOTAL CUSTOMER SOLUTION OPTION

HOW TO ACHIEVE CUSTOMER BONDING: THE THREE MAJOR STRATEGIC OPTIONS IN THE DELTA MODEL

SYSTEM LOCK-IN

THE HAXIOMS

4. A PRODUCT-CENTRIC MENTALITY IS CONSTRAINING; OPEN YOUR MINDSET TO INCLUDE THE CUSTOMERS, THE SUPPLIERS, AND THE

COMPLEMENTORS AS YOUR KEY CONSTITUENCIES.

EXTENDED ENTERPRISETHE

ENTIRE SYSTEM OF COMPANIES

80% Market Share

Among Complementors

90% Market Share

In Its Industry

THREE WAYS TO GET SYSTEM LOCK-IN

PROPRIETARY STANDARDS ▸ The highest margins

▸ The greatest market share

▸ The most enduring sustainability

PROPRIETARY STANDARDS

EXAMPLE

PROPRIETARY STANDARDS

DOMINANT EXCHANGE

THREE WAYS TO GET SYSTEM LOCK-IN

PIERRE OMIDYAR

THREE WAYS TO GET SYSTEM LOCK-IN

85% Market Share

THREE WAYS TO GET SYSTEM LOCK-IN

THE SOURCE OF PROFITS FOR THE YELLOW PAGES

THE GENERAL AND

ADMINISTRATIVE EXPENSE

RESTRICTED ACCESS

THREE WAYS TO GET SYSTEM LOCK-IN

SAM WALTON

WALMART

“A FULL LINE DISCOUNT STORE NEEDS A POPULATION BASE OF AT LEAST 100,000”

BUT HOW IT COULD BE POSSIBLE IN RURAL AREA?

‣ Economic store places

‣ Integrated network

‣ Bargaining power

‣ Coordination between branches

‣ Many choices

SYSTEM LOCK-IN: A HIGHLY DESIRABLE STRATEGIC OPTION

OFTEN IT IS NOT AVAILABLE AS A FEASIBLE WAY OF DEVELOPING A STRATEGY

SYSTEM LOCK-IN: A HIGHLY DESIRABLE STRATEGIC OPTION

‣ Not very many industries allow for standards to be developed, and if they are, for those to be appropriated by a single player.

‣ Few industries permit the consolidation of a single Dominant Exchange in the hands of one player.

‣ Restricted Access is even more carefully guarded, because its consolidation raises regulatory concerns.

SYSTEM LOCK-IN CARRIES AN ETHICAL RESPONSIBILITY

THE VARIOUS DIMENSIONS OF THE TRIANGLE: A SUMMARY

BEST PRODUCT

BENCHMARKING

BUSINESS RE-ENGINEERING

TOTAL QUALITY MANAGEMENT

TIME-BASED COMPETITION

PROFILING THE THREE STRATEGIC OPTIONS OF THE TRIANGLE

TOTALLY DIVORCED FROM A

NETWORK-BASED ECONOMY

ENABLED BY

THE NETWORK-BASED

ECONOMY

THIS STRATEGY IS CENTERED ON THE SYSTEM, PARTICULARLY THE

COMPLEMENTORS.

THANKS FOR YOUR ATTENTION