Competing Successfully: Developing Strategies That Make Sense Prof. dr. Kurt Verweire
Content Introduction: Why is Strategy so Difficult? Case ING Direct USA Vlerick Strategy Formulation Framework 2
Introduction: Why Is Strategy So Difficult? 3
Introduction: Why is strategy so difficult? Success depends on being in the right industry But success also depends on the ability to achieve a competitive advantage Governance Strategy formulation Strategy implementation Performance 4
Introduction: Why is strategy so difficult? Strategy is often like desert rain. Before the raindrops hit the desert floor, they evaporate, creating little or no effect below 5
Introduction: Why is strategy so difficult? 6
Introduction: Why is strategy so difficult? 7
Case ING Direct USA
Vlerick Strategy Formulation Framework
Vlerick Strategy Formulation Framework 1995 2001 Being all things to all people is a recipe for strategic mediocrity and below-average performance [M.E. Porter, 1980] 2001 Focus is not about efficiency in a cost sense; It s about efficiency in a don t-get-distracted, get-all-the-wood-behind-one-arrow sense [Gary Hamel, 2000] 10
Vlerick Strategy Formulation Framework M.E. Porter COMPETITIVE STRATEGY IS ABOUT BEING DIFFERENT Companies can no longer compromise on quality capabilities. They must build products to deliver nothing less than superiority and eye-popping innovation. The goal is to create a business model that is unique in its conception and execution. In an increasingly non-linear world, only non-linear strategies will create new wealth! 11
Vlerick Strategy Formulation Framework Whom do we serve? What do we provide? How do we realize this? What is our value proposition? 12
Whom do we serve? Option Segment A Segment B I. Shared market segments R&D Purchasing Production Marketing And Sales II. Unique sales and marketing Own marketing/sales III. Unique production IV. Unique network - strategic segments Own production/marketing Complete value network Source: Kumar (2004) 13
What do we provide? At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. Good Best Sam Hood and her Interior Design team have over 20 years experience; during this time they have worked with literally hundreds of clients producing beautiful interior schemes that delight, inspire, look fantastic and work on a day to day basis too. 14
What do we provide? 15
What is our value proposition? The five attributes of all commercial transactions: Product: Goods and/or services purchased Price: Cost of goods and/or services Access: How easy consumers obtain and use goods Service: What is done extra before, during, and after the sale Experience (connectivity): How consumers feel about themselves as a result of goods and/or services Consumer relevancy framework Source: Crawford & Mathews (2001) 16
What is our value proposition? Level Access Experience Price Product Service Consumer seeks the company Consumer prefers the company Consumer accepts the company Consumer underworld Give me a solution; help me out in a bind. Make the interaction convenient for me. Make it easy for me to find what I need, get in and out in a hurry. Block my way, hassle me, keep me waiting, make it hard for me to get in and out. Establish intimacy with me by doing something no one else can. Care about my needs and me. Respect me, treat me like a human being. Dehumanize me; disrespect me; ignore my needs. Be my agent; let me trust you to make my purchases. Be consistent in your low pricing (this does not necessarily mean lowest price). Keep the prices honest; don t jack them up or offer big savings when there are none. Be inconsistent, unclear, or misleading in your pricing. Inspire me with an assortment of great products I didn t know about. Be reliable in your selection and stock position, so I can rely on you when I m in a bind. Be credible in your product and service offerings. Offer me poorquality merchandise and services that I can t use. Customize the product or service to fit my needs. Educate me when I encounter a product or a situation I don t understand. Accommodate me; bend over backward sometimes to show me you care. Give me an experience I d just as soon forget; give me a reason to tell my friends to stay away. 17
What is our value proposition? Source: Crawford & Mathews (2001) 18
How do we realize all this? Product Service Cost Best total cost Great prices and quality Their products last and last and last A no-hassle firm Consistency is their middle name Benefit Best product Premium-priced but worth it Consumers ask for it by name Best total solution They are experts Their services are exactly what I need Source: Treacy & Wiersema (1995) 19