Strategy & the value of Relationships (Networks)

Strategy &the value of Relationships (Networks)

Martin Kramer Entrepreneur / CEO • IQ TeQ (Healthcare) • AvoMedia (Media/IT) • Rho-Marine (Leisure/Marine)

Strategy & The Value of Networks Topic is twofold Vast amount of information on “Strategy” and almost none on “The value of Relationships (Networks)”

What is Strategy? “What do you want to achieve or avoid? The answers to this question are objectives. How will you go about achieving your desired results? The answer to this you can call strategy.” William E Rothschild

What is Strategy? “Strategy is a plan” Mintzberg and Quinn Implies - Made in advance - Developed consciously and purposefully

Basic Model of Strategic Formulation 1 INTERNAL CAPABILITIES COMPETENCIES WHAT WE HAVE 1

Basic Model of Strategic Formulation 2 EXTERNAL ENVIRONMENT KEY SUCCESS FACTORS WHAT THEY HAVE [what we need?] 2

INTERNAL CAPABILITIES EXTERNAL ENVIRONMENT KEY SUCCESS FACTORS COMPETENCIES Basic Model of Strategic Formulation + 2 1 S W O T = CREATION OF STRATEGY PLANS TO WIN

Basic Model of Strategic Formulation + 2 1 INTERNAL CAPABILITIES EXTERNAL ENVIRONMENT S W O T KEY SUCCESS FACTORS COMPETENCIES CREATION OF STRATEGY Social Expectations Managerial Values Evaluation and Choice Of Strategy IMPLEMENTATION OF STRATEGY [Source: Minztberg and Quinn]

IQ TeQ Medical • IQ TeQ is a developer of PC Based Medical Diagnostics Equipment • Formed in 2001 • Team of 11 [3 R & D, 5 Sales] • Developed 3 Diagnostics Devices • Skirted the IT Security Market • Current Revenue pa. approx R 5 million

INTERNAL CAPABILITIES COMPETENCIES EXTERNAL ENVIRONMENT KEY SUCCESS FACTORS IQ TeQ Medical – Our Perceptions Developer of PC Based Medical Diagnostics Equipment Internal Capabilities (what we thought we had): • A Technology Competence • A great investment External Appraisal (what we thought they had): • The competitors were traditional, overhead heavy and slow • We were capable of significant market penetration

INTERNAL CAPABILITIES COMPETENCIES EXTERNAL ENVIRONMENT KEY SUCCESS FACTORS IQ TeQ Medical – Realities Developer of PC Based Medical Diagnostics Equipment Internal Capabilities (what we had): • We had a Technology Competence • A risky investment with an ‘also ran’ (A start-up) External Appraisal (what they had): • The competitors were well entrenched • We would work for every piece of a % point mkt share

AvoMedia • AvoMedia is a manufacturer of Digital Media Products (CD & DVD) • Formed in 2000 • Team of 15 [6 Production, 6 Sales] • Owned Manufacturing facilities • Current Revenue pa. approx R 8 million

INTERNAL CAPABILITIES COMPETENCIES EXTERNAL ENVIRONMENT KEY SUCCESS FACTORS AvoMedia – Our Perceptions Manufacturer of Digital Media Products (CD & DVD) Internal Capabilities (what we thought we had): • A real ‘smart’ product that everyone would want • Enough experience to “wax” this one External Appraisal (what we thought they had): • There was no competition / alternative • This was a multi million Rand BIG business (instantly!)

INTERNAL CAPABILITIES COMPETENCIES EXTERNAL ENVIRONMENT KEY SUCCESS FACTORS AvoMedia – Realities Manufacturer of Digital Media Products (CD & DVD) Internal Capabilities (what we had): • Product too early to market, but a sound ‘niche’ • A stupid will to win ““Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” Sun Tzu quotes (Chinese General and Author, b.500 BC) External Appraisal (what they had): • A small market (R 100 million) • 3 serious competitors

Creation of Strategy • In both companies • we exist in the context of competition • we had (have) a plan • the plan was (is) based on perceptions [not always close to the reality] • we make incremental wins • a strategy has emerged [it WILL emerge] and Networks were (are) key to the value

What are Networks • We do not mean IT Networks • In the most general sense, meaning “Systematic affiliation or connections” or “Established channels of communication”

The role of Networks • I’m not traditionally a promoter of networking, doesn’t sit well with my profile • Too uncontrollable • Too vague • Too potentially loaded with ‘failure’ • But I cannot, when looking back, deny the all encompassing value of networks

Basic Model of Strategic Formulation Networking (Relationships) INTERNAL CAPABILITIES EXTERNAL ENVIRONMENT S W O T KEY SUCCESS FACTORS COMPETENCIES CREATION OF STRATEGY Social Expectations Managerial Values Evaluation and Choice Of Strategy IMPLEMENTATION OF STRATEGY [Source: Minztberg and Quinn]

Networks in IQ TeQ Medical • IQ TeQ is build on our R&D Capability • I met our R& D Director, Ray, though Peter (a ‘supplier’/’customer’ of Avomedia) • I was referred to Peter via a FE manufacturer • We found the FE manufacturer on the web • IQ TeQ was initially funded by VC • Introduced via Rocco • Was introduced to Rocco via Johan • Contacted Johan initially off contact details found on the “SAVCA” which was listed on the web

Networks in IQ TeQ Medical • Major Markets via Networks of Distributors • Medica: BHS (S America), Elder Group (India), Clement Clarke (UK / Europe) • Via Clement Clarke: AllianceTech Medical (USA) • Via Acorn: A strategic local alliance partner • Major Suppliers, Some Key Staff, Strategic Partners

Networks in AvoMedia • AvoMedia is build on our Sales & Marketing & Manufacturing Capability • I met Candice (my partner) through a social network • AvoMedia’s survival was made possible by our competitors • We approached the first competitor to assist us as a supplier. They facilitated the introduction to the rest of the industry. • Jointly, they made it possible for us to supply

Networks in AvoMedia • Our Manufacturing Facilities were sourced via a network • Major Suppliers, Some Key staff

Value of NetworksYesterday and Today Two aspects that are relatively new and important to small business • The increase number, kind and importance • The use of technology to facilitate networking [Source: Dr. Vincent E Giuliano Chief Scientist, Mirror Systems Inc.]

Empowerment Networks • More formalised network value • Are the combination of IT and people networks to create advantages: • Branding (Franchisers) • Quality Assurance (Associations) • Economies of Scale (Co-operatives) • Supplier-dealer Networks (e.g. Car Market) • Knowledge Exchange at Meetings/Conventions • Things normally associated with Big Business [Source: Dr. Vincent E Giuliano Chief Scientist, Mirror Systems Inc.]

Conclusion ‘Networks’ provide an invaluable source of resources, And by implication They can give your small business the power of big business if leveraged correctly

Strategy & the value of Relationships (Networks)