A Dynamic VIEW OF STRATEGY Innovators’ Dilemma

1. BA 569 – Fall 2008 Alex Brenner ArjangFartash LanPhoughThi Nguyen A Dynamic VIEW OF STRATEGYInnovators’ Dilemma

2. The Heart & Soul of Strategy • Who: • Targeted Customers • What: • Product & Services • How: • Business conduct • Activities to perform efficiently

3. Strategic Positioning • Sources of Success: • The company defines, establishes & exploits: • A unique & distinctive strategic position • Sources of Business Failures: • Does not make clear & specific choices on: • The three Dimensions (3D): Who, What, How

4. Example 1: Nestle V-R-I-O • In 1988 Nestle’s Espresso machine (Nespresso) faced serious financial challenges • Offices & Restaurant were targeted through a distributor (Sobal Inc.) • Revenues took off after a new strategy: • What: Coffee capsules for Nespresso–V • Who: High-income households –R • How: Distribute by mail – O

5. Example 2: Edward Jones V-R-I-O • In 1970 – Implemented a new strategy • Growth took off – 15% annually • The New Strategy: • Who: Rural retail customers – V & R • What: Selected & trusted products – R • How: Family-like partnership of brokers – I & O

6. Example 3: Xerox V-R-I-O • The rise of Xerox – from 1960 thru 1980’s • Xerox invented the copier technology • First mover’s advantage – I & R • Implemented a clear & concise strategy: • Who: Corporate clients – V • What: High speed/vol. copiers – V & R • How: Lease & use direct sales-force – O

7. Example 3: Xerox / IBM & Kodak • IBM & Kodak introduced copiers w/ strategies similar to Xerox: • Who: High & medium end business customers – V • What: High speed and/or lower cost copiers – V & R • How: Direct sales force – O • IBM & Kodak failed • Head-on strategies that were imprecise & unable to compete with Xerox’s V-R-I-O

8. Example 3: Xerox / Cannon • Cannon adopted a unique strategy: • Who: Small & medium businesses & consumers – V • What: Quality copiers at competitive prices – V & R • How: Dealer network sales – O • Cannon’s strategy succeeded • Cannon adopted a distinct strategy & grew its sales, and over time I

9. Dominant / Traditional / Innovator

10. Option #1: Become Innovator • Compete efficiently & meet your current products / demand commitments – V • Experiment w/ new Tech & Ideas – I • Create an ambidextrous organization – I &R • Cannibalize the existing strategic position to create a new one – I & R

11. Option #2: Exploit others’ Innovations • Build a monitoring system – V • Prevent cultural inertia – V & R & I • Develop processes to enable experimentation – V • Be prepared to acquire new competencies – V & R • Manage the transition – V & I

12. A Dynamic Strategy

13. Conclusion • What does strategic positioning mean? • Who, What, How  V-R-I-O • What options exist to address disruptive competitive threats? • Dynamics of strategy and its four phases

14. Agenda – Which IBP Team has the best strategic positioning? • Join your IBP team • Each IBP team must provide the following: • Identify the Dominant & Traditional companies in your sector • Define your IBP business strategic positioning statement in terms of Who-What-How • Describe each element in terms V-R-I-O • The audience will pick the winner • The winning team will receive a prize