CORPORATE RENEWAL THROUGH STRATEGY & INNOVATION:

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1 CORPORATE RENEWAL THROUGH STRATEGY & INNOVATION: A CONFERENCE ON WAYS TO INVIGORATE GROWTH & SCALING

2 SESSION ONE STRATEGIES TO MEET DISRUPTION

3 Strategies to Meet Disruption: Growth through Change Professor Mike Mazzeo Corporate Renewal through Strategy and Innovation Kellogg Innovation and Entrepreneurship Initiative 22 October 2014

4 Competitive Advantage Explicit Definition: Resources or Capabilities that Enable a Firm to Create or Capture Value Better than Existing or Potential Competitors

5 Competitive Advantage Explicit Definition: Resources or Capabilities that Enable a Firm to Create or Capture Value Better than Existing or Potential Competitors The role of these resources and capabilities is critically important: Competitive Advantage must be based on something that is particular to the firm, i.e., something that it owns or controls.

6 Competitive Advantage Explicit Definition: Resources or Capabilities that Enable a Firm to Create or Capture Value Better than Existing or Potential Competitors The role of these resources and capabilities is critically important: Competitive Advantage must be based on something that is particular to the firm, i.e., something that it owns or controls. The goal should be superior economic performance: Categorization of profitability sources: cost leadership or product differentiation.

7 Competitive Advantage Explicit Definition: Resources or Capabilities that Enable a Firm to Create or Capture Value Better than Existing or Potential Competitors The role of these resources and capabilities is critically important: Competitive Advantage must be based on something that is particular to the firm, i.e., something that it owns or controls. The goal should be superior economic performance: Categorization of profitability sources: cost leadership or product differentiation. Firms should always be making evaluations on a relative basis: Competitive Advantage is inherently a comparative concept. It s not as important to identify what you do well as opposed to what you do better than the competition.

8 Change and Growth: Leveraging Resources and Capabilities The first part of a competitive advantage analysis is a comprehensive audit of resources and capabilities. Key steps: Name the things that the firm is able to do (its capabilities) and what is possesses that allow it to do those things (its resources). Be critical in distinguishing between those resources and capabilities that are superior and those that are just required to be in the game (competitive necessities).

9 Change and Growth: Leveraging Resources and Capabilities Having listed the key resources/capabilities, think explicitly about customers by formulating a VCP Key steps: Describe firms distinct activities, how they relate to one another, and the scarce resources/capabilities that support them Summarize how this system creates distinct value in a one sentence description of a value creation proposition or VCP Consider evolution of demand, technology, competition in the market in light of this description this will help identify growth opportunities

10 An Audit Sheet Resources/Capabilities Activity System VCP:

11 Change and Growth: Leveraging Resources and Capabilities How can a company adapt its activity system to take advantage of a potential growth opportunity? Analytical Steps. Recall previous articulated audit: The resources/capabilities, activity system and VCP. Articulate the VCP associated with the new opportunity, noting instances where existing resources and capabilities can be exploited. Compare the two, focusing on the following questions: Are certain resources and capabilities not necessary for the new VCP? Are some elements missing or underdeveloped?

12 Example #1: Lego Growing with Theme-Based Kits Resources/Capabilities Activity System Brand / History Worldwide Distribution Technology Manufacturing capability Manufacturing of high quality bricks Technical design of interlocking plastic pieces Design expertise Strong brand to sell to kids and parents Lego was historically a manufacturer of bricks for children s free construction play.

13 Example #1: Lego Growing with Theme-Based Kits Resources/Capabilities Brand / History Worldwide Distribution Technology Manufacturing capability Design expertise for specialized sets Licenses to produce scenes from quality films Activity System Manufacturing of high quality bricks to include in sets Strong brand to sell to kids, parents and license-holders Lego transitioned from a manufacturer of bricks for children s free construction play to a designer of theme-based block kits for assembling models of recognizable movie and other characters and scenes.

14 Strategy in Middle-Market Businesses: The Roadside MBA Project Owners of smaller, middle-market companies have a thirst for knowledge but don t have the resources (time, money) to get an MBA. Goal: Develop teaching resources to deliver MBAtype frameworks to a small/middle-market audience. Complication: Supporting materials (e.g., case studies) take a decidedly large corporation perspective.

15 Solution: ROAD TRIP!!

16 Roadside MBA Fast Facts Three Business School Professors Seven Road Trips from States visited and over 5,000 miles traveled More than 100 smaller, middle-market businesses interviewed from a variety of industries Many sketchy motels, bad diner meals and epic fails on driving directions.

17 Example #2: TiLite Finding a Growth Market through Capabilities

18 Example #2: TiLite Finding a Growth Market through Capabilities TiLite is a manufacturer of customized manual wheelchairs located in Pasco, Washington. The Ti in TiLite stands for Titanium. the company s roots were in making titanium tubes for the local nuclear facility. As the nuclear industry waned, the company looked for other markets where their expertise in working with titanium could be utilized. It turns out that titanium is an excellent metal for producing customized wheelchairs and TiLite s skills are very useful in this new market!

19 Example #2: TiLite Finding a Growth Market through Capabilities Resources/Capabilities Activity System Procurement of element Proximity to key customer Knowledge of nuclear industry Purchased raw titanium for use in manufacturing Used specialized techniques to produce Expertise in shaping and welding titanium Worked with customers to customize applications VCP: TiLite provided titanium tubing for the specific needs of the local nuclear industry using expertise in welding and swaging this metal.

20 Example #2: TiLite Finding a Growth Market through Capabilities Resources/Capabilities Activity System Procurement of element Proximity to key customer Knowledge of nuclear industry Purchased raw titanium for use in manufacturing Used specialized techniques to produce Expertise in shaping and welding titanium Worked with customers to customize applications VCP: TiLite provided titanium tubing for the specific needs of the local nuclear industry using expertise in welding and swaging this metal.

21 Example #2: TiLite Finding a Growth Market through Capabilities Resources/Capabilities Procurement of element Proximity to key customer Knowledge of nuclear industry Expertise in shaping and welding titanium Activity System Purchased raw titanium for use in manufacturing Worked with customers to customize applications Used specialized techniques to produce Research, sales, distn, etc. in the wheelchair market VCP: TiLite provided titanium tubing for the specific needs of the manual wheelchair industry using expertise in welding and swaging this metal.

22 Change and Growth: Leveraging Resources and Capabilities Takeaways: Look for growth opportunities in the roots of competitive advantage: a company s existing resources and capabilities. Adjacent products can often rely on very different capabilities, setting up a growth trap to avoid. Articulating a VCP can help to identity exactly what is needed to succeed with the new opportunity.

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