Description
The ppt about Industry Transformation Strategy.
?Introduction ?Nature of Industry Transformation
?Trigger
?Experimentation ?Convergence
?Strategy during periods of Transformation
?Role of Strategy Fundamentals ?New Emphasis
?Conclusion
Customers
Suppliers
Companies
Compliments
Substitutes
• Industry structure changes slowly • Resistance from other parties • Industries like soft drinks and discount retailing are unchanged from 1960s • On the other hand, mass manufacturers such as Ford displaced small craftsmen, Home Depot replaced Mom & Pop hardware
• Changes can be evolutionary and revolutionary • Periods of industry transformation pose grave threats and major opportunities to companies • Elements that define industry structure often affect one another • E.g. soft drink industry has high entry barriers because of choices made by Coca Cola and Pepsi in the initial years
• Article focuses on the metamorphosis of existing industries as they rarely see the birth of a new one • Trigger • Era of Ferment & Experimentation • Convergence
• Three basic forms • Change in technology • Computerization in financial accounts mgmt • Bar codes & Scanners in Retail • Change in Customer Needs • Computer Sales People & Dell • Distance Vs ambience & Shopping Malls
• Change in Regulation • Deregulation of Airline Industry in the US in 70s
•Manager’s role & choice in affecting the transformation
• Hub & Spoke for delivery (Fedex) • Mass production of automobiles (Ford)
•Industry Transformations feed off multiple changes
• Supermarkets
• • • • Ownership of automobiles & refrigerators Movement of Consumers out of Urban centers Cost Consciousness Regulatory changes
• Trigger leads to experimentation
? Different positioning ? Different degrees of integration ? Launch of new ventures
• Period characterized by lower barriers to entry • Risk & Lack of information • Seeking of new partners
• Mimicking the first mover
• Role of capital providers
? Boom situations, High valuations attract greater capital ? Near term profit discipline
• Pattern of Experimentation
? Early efforts ? Setting the right precedent
• Dilemmas faced • Examples
? Synthetic Materials, Integrated Circuits, Personal Computers, Biotechnology, etc.
• Phase of shake out followed by consolidation • Quickening pace of industry transformation • Shortening of first mover monopoly • Number of players vis-à-vis economies of scale
• Graduate stabilization
• Popular school of Thought In the wake of Uncertainty that accompanies Industrial Transformation, it is futile to think of a strategy and the best bet is to postpone or abandon the effort to set a strategy. • Reasoning An explicit strategy in an ever-changing environment will make the company inflexible. • Recourse Available Rather than setting a strategy, senior managers should simply stay agile, run harder, and sleep faster.
• Contrarian School of Thought Deliberate and explicit setting of strategy is more important than ever during periods of uncertainty. • Reasoning Without an explicit strategy communicated throughout the ranks, management decisions can quickly lead a company in numerous inconsistent directions. • Recourse Available It is important that Firms should stick to a well chalked out strategic plan during the uncertain times as well because Firms with clear strategies often play a major role in defining the nature of the post-transformation industry.
• The argument that strategy cannot or should not be set deliberately in highly uncertain environments is based on the premise that Strategic Positioning is Static or that Strategy requires predicting the future precisely. • On the Contrary, effective positioning is dynamic. • Any Strategic position must be constantly refined as new insights about the value model emerge and as new technologies change the prospects for its delivery.
• A few of them…… Industry Structure, Competitive Advantage, Relative Buyer Value, Relative cost, Operational Effectiveness and Strategic Positioning. • They form the inherent underpinnings of Corporate performance. • The ultimate need for setting up any business is to earn a good rate of return. This serves as the universal truth of Business. • The fundamentals of strategy explains why some industries and companies meet this need while others do not.
• Taking strategy fundamentals into account, it is more challenging to anticipate the structure of an industry that barely exists than to dissect a well established competitive arena. • Payoffs from foreseeing the evolution of structure are
high.
• Managers who anticipate the structure well are more likely to choose attractive industries in which to compete
and are better able to position their companies with
respect to competitive forces.
• They take care to distinguish the enduring from the transient. • Good analysts look for internal consistency in the predictions they make about the industry structure.
• Good industry analysts identify clearly the uncertainties that remain even after they have done their best job to predict structure.
•Fundamentals of the strategy remain the same •Need for attention to issues and analytical tools •Substitution, Importance of shaping competition not just reacting to it, addressing uncertainty and postures towards uncertainty
•Understanding potential size, rate of growth, customers and segments •Economic Incumbent: customer’s price sensitivity •Dilemmas and choices
•Rules are rewritten •Consider the impact also on the long term industry structure •Enhance structure: influence on growth and profitability
•Fairly modest: Decision trees and Game theory • Intricate situations: Scenario Analysis • Alternative scenarios exist: test for robustness • Sensitivity Analysis • Monte Carlo simulation
Big bets Flexibility Experimentation
•Major investment can swing industry structure in company’s favor
• Needs healthy risk appetite
• Should not be against laws of economics • Ex. JVC’s VHS vs. Sony’s Betamax, Republic Industries
•Investment in ability to change rapidly • Environment cannot be influenced in company’s
favor
• Not a substitute for strategy • Mostly investment in transient stage of industry evolution
•Continuous learning and incorporation essential irrespective of strategy
• Involves institutionalizing successful ideas and
cutting off failed ones. • Flexibility and experimentation in terms of ‘option theory’. Ex. Walt Disney’s Disney stores
•Leadership is at the helm of setting and executing a strategy. • Becomes even more crucial during industry transformation • Need ability to learn quickly, adapt rapidly and distinguish vital changes • Decentralization most commonly adopted
• A clear strategy channels independent units toward
consistent action
doc_648902524.pptx
The ppt about Industry Transformation Strategy.
?Introduction ?Nature of Industry Transformation
?Trigger
?Experimentation ?Convergence
?Strategy during periods of Transformation
?Role of Strategy Fundamentals ?New Emphasis
?Conclusion
Customers
Suppliers
Companies
Compliments
Substitutes
• Industry structure changes slowly • Resistance from other parties • Industries like soft drinks and discount retailing are unchanged from 1960s • On the other hand, mass manufacturers such as Ford displaced small craftsmen, Home Depot replaced Mom & Pop hardware
• Changes can be evolutionary and revolutionary • Periods of industry transformation pose grave threats and major opportunities to companies • Elements that define industry structure often affect one another • E.g. soft drink industry has high entry barriers because of choices made by Coca Cola and Pepsi in the initial years
• Article focuses on the metamorphosis of existing industries as they rarely see the birth of a new one • Trigger • Era of Ferment & Experimentation • Convergence
• Three basic forms • Change in technology • Computerization in financial accounts mgmt • Bar codes & Scanners in Retail • Change in Customer Needs • Computer Sales People & Dell • Distance Vs ambience & Shopping Malls
• Change in Regulation • Deregulation of Airline Industry in the US in 70s
•Manager’s role & choice in affecting the transformation
• Hub & Spoke for delivery (Fedex) • Mass production of automobiles (Ford)
•Industry Transformations feed off multiple changes
• Supermarkets
• • • • Ownership of automobiles & refrigerators Movement of Consumers out of Urban centers Cost Consciousness Regulatory changes
• Trigger leads to experimentation
? Different positioning ? Different degrees of integration ? Launch of new ventures
• Period characterized by lower barriers to entry • Risk & Lack of information • Seeking of new partners
• Mimicking the first mover
• Role of capital providers
? Boom situations, High valuations attract greater capital ? Near term profit discipline
• Pattern of Experimentation
? Early efforts ? Setting the right precedent
• Dilemmas faced • Examples
? Synthetic Materials, Integrated Circuits, Personal Computers, Biotechnology, etc.
• Phase of shake out followed by consolidation • Quickening pace of industry transformation • Shortening of first mover monopoly • Number of players vis-à-vis economies of scale
• Graduate stabilization
• Popular school of Thought In the wake of Uncertainty that accompanies Industrial Transformation, it is futile to think of a strategy and the best bet is to postpone or abandon the effort to set a strategy. • Reasoning An explicit strategy in an ever-changing environment will make the company inflexible. • Recourse Available Rather than setting a strategy, senior managers should simply stay agile, run harder, and sleep faster.
• Contrarian School of Thought Deliberate and explicit setting of strategy is more important than ever during periods of uncertainty. • Reasoning Without an explicit strategy communicated throughout the ranks, management decisions can quickly lead a company in numerous inconsistent directions. • Recourse Available It is important that Firms should stick to a well chalked out strategic plan during the uncertain times as well because Firms with clear strategies often play a major role in defining the nature of the post-transformation industry.
• The argument that strategy cannot or should not be set deliberately in highly uncertain environments is based on the premise that Strategic Positioning is Static or that Strategy requires predicting the future precisely. • On the Contrary, effective positioning is dynamic. • Any Strategic position must be constantly refined as new insights about the value model emerge and as new technologies change the prospects for its delivery.
• A few of them…… Industry Structure, Competitive Advantage, Relative Buyer Value, Relative cost, Operational Effectiveness and Strategic Positioning. • They form the inherent underpinnings of Corporate performance. • The ultimate need for setting up any business is to earn a good rate of return. This serves as the universal truth of Business. • The fundamentals of strategy explains why some industries and companies meet this need while others do not.
• Taking strategy fundamentals into account, it is more challenging to anticipate the structure of an industry that barely exists than to dissect a well established competitive arena. • Payoffs from foreseeing the evolution of structure are
high.
• Managers who anticipate the structure well are more likely to choose attractive industries in which to compete
and are better able to position their companies with
respect to competitive forces.
• They take care to distinguish the enduring from the transient. • Good analysts look for internal consistency in the predictions they make about the industry structure.
• Good industry analysts identify clearly the uncertainties that remain even after they have done their best job to predict structure.
•Fundamentals of the strategy remain the same •Need for attention to issues and analytical tools •Substitution, Importance of shaping competition not just reacting to it, addressing uncertainty and postures towards uncertainty
•Understanding potential size, rate of growth, customers and segments •Economic Incumbent: customer’s price sensitivity •Dilemmas and choices
•Rules are rewritten •Consider the impact also on the long term industry structure •Enhance structure: influence on growth and profitability
•Fairly modest: Decision trees and Game theory • Intricate situations: Scenario Analysis • Alternative scenarios exist: test for robustness • Sensitivity Analysis • Monte Carlo simulation
Big bets Flexibility Experimentation
•Major investment can swing industry structure in company’s favor
• Needs healthy risk appetite
• Should not be against laws of economics • Ex. JVC’s VHS vs. Sony’s Betamax, Republic Industries
•Investment in ability to change rapidly • Environment cannot be influenced in company’s
favor
• Not a substitute for strategy • Mostly investment in transient stage of industry evolution
•Continuous learning and incorporation essential irrespective of strategy
• Involves institutionalizing successful ideas and
cutting off failed ones. • Flexibility and experimentation in terms of ‘option theory’. Ex. Walt Disney’s Disney stores
•Leadership is at the helm of setting and executing a strategy. • Becomes even more crucial during industry transformation • Need ability to learn quickly, adapt rapidly and distinguish vital changes • Decentralization most commonly adopted
• A clear strategy channels independent units toward
consistent action
doc_648902524.pptx