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BUSINESS STRATEGY KEY TOPICS IN THIS MODULE

DEEPAK SOMAYA

Mission, Vision and Values

Business Models
V-A-R-S framework
Leading Strategically Fit and Coherence
Module Overview SWOT Framework

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BUSINESS STRATEGY GOOGLE’S MISSION

DEEPAK SOMAYA

Google's mission is to organize the

world's information and make it
universally accessible and useful.
Leading Strategically
Mission, Vision and Values

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WHY HAVE A MISSION?
Informs all stakeholders why the
company exists
Helps to resolve disputes about its
future direction
Inspiring for employees and
managers
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WHAT MAKES A GOOD MISSION? (2 OF 2)
Actually live and practice the
mission in the company
Keep it short, inspiring and
memorable
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WHAT MAKES A GOOD MISSION? (1 OF 2)
Emphasize creation of customer or
social value, not being the best or
simply making money
Focus on important needs or
problems to address, not products
or services
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VISION (1 OF 2)
An aspirational statement about the
future direction and impact of a
company
Google: “To provide access to the
world’s information in one click.”
May change occasionally (unlike
missions)
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VISION (2 OF 2) VALUES (1 OF 2)

Strategic Intent: A stretch vision, with
a strategic plan for getting there
Canon: “Beat Xerox”
Some companies also lay down
values they hold and expect to
adhere to
A “code of conduct” for the
company and its employees

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VALUES (2 OF 2) ROLE OF LEADERSHIP (1 OF 2)

Google lists 10 beliefs that it holds Do Mission, Vision & Values have a
real impact on companies?
#6: You can make money without Formal statements say little about
doing evil what is followed in practice

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ROLE OF LEADERSHIP (2 OF 2) LEADERSHIP AND ADHERENCE ARE KEY

Which company’s core values? Enron (Annual Report, 2000)

Communication – We have an Went bankrupt in 2001
obligation to communicate. Excessive risk-taking and
Respect – We treat others as we unethical behavior
would like to be treated. Culture of greed, competition
Integrity – We work with customers and star employees
and prospects openly, honestly, and
sincerely.
Excellence – We are satisfied with
nothing less than the very best in
everything we do.
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WHAT DID WE LEARN? BUSINESS STRATEGY

DEEPAK SOMAYA

Mission, vision and values could be

important for success, but only if
they are
Designed well Leading Strategically
Lived and practiced So, Why Care About Business Models?
Constantly communicated by
leaders
A true reflection of the ethos of
the company

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A QUICK TRIP AROUND TOWN

Why should we care about business models and business model innovation?

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SO, WHY CARE ABOUT BUSINESS MODELS? INVESTMENT AND RETURNS FROM VARIOUS
INNOVATIONS
Creating unusual level/type of CEO Point Allocation to Operating Margin Growth in
“churn” Type of Innovation Excess of Competitive Peers
6%
Not just regular competition 50% (Compound annual growth rate over 5 years)
5%
Blockbuster lost despite being Innovative Focus 40%
4%
really good at what it did 30%
3%
And despite all the resources it 20%
2%
had 10%
1%
0% 0%
Pro duc ts/ Ope ratio ns Busine ss M o de l Pro duc ts/ Ope ratio ns Busine ss M o de l
Se rvic e s/M arke ts Inno vato rs Inno vato rs -1% Se rvic e s/M arke ts Inno vato rs Inno vato rs
Inno vato rs Inno vato rs

Source: I BM 2 0 0 6 CE O Surv ey
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A BUZZWORD OF THE INTERNET BOOM?

So what is a business model exactly?

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BUSINESS STRATEGY
DEEPAK SOMAYA

Lots of confusion in the literature about how one defines a “business model”.

Leading Strategically Start with a more practical approach…

The V.A.R.S. Framework – Part 1

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THE VARS MODEL

Four Main Interrelated Elements

Value Proposition
What comprises a business model? Activities - Resources - Capabilities
Realization (Revenue model)
Scope of Enterprise

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VALUE PROPOSITION ACTIVITIES - RESOURCES - CAPABILITIES

Goal => Increase Economic Value Key enablers …

Added (EVA) How does the firm create EVA?
… relative to existing offering(s) Within the firm and/or its value chain
Drive a wedge between … (or value network)
Value to customers Increasingly technology-enabled
Costs and risks incurred But technology doesn’t work in
isolation

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BUSINESS STRATEGY REALIZATION (REVENUE MODEL) (1 OF 2)

DEEPAK SOMAYA

How do you convert EVA into a

revenue stream?
Sale for cash, credit or installments
Leading Strategically Sale of services
The V.A.R.S. Framework – Part 2 Leasing or Subscription models

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REALIZATION (REVENUE MODEL) (2 OF 2) SCOPE OF THE ENTERPRISE

Product and complements (Razor-

blade)
Freemium (free + added premium
services)
Two-sided markets (Google; E-Bay)
Platforms and Ecosystems
(Facebook)

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SCOPE OF THE ENTERPRISE THE V-A-R-S ARE HIGHLY INTERDEPENDENT

Which market segments are being

X
addressed?
Customization to each customer / Activities Value
segment Resources Proposition
Capabilities
Horizontal scope
Which offerings (products or services)?
Channels?
Revenue Scope of the
Vertical scope (integration versus Enterprise
Model
outsourcing or partnering)
Can be critical in driving value and
cost!
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BUSINESS MODEL DEFINITION (1 OF 2)

“A pragmatic theory (or design)

What is a business model? Really?
Now, venture a (tentative) definition …
that explains how an enterprise
generates and realizes (superior)
value”
A mental / abstract
representation
A set of (testable) hypotheses

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BUSINESS MODEL DEFINITION (1 OF 2) BUSINESS STRATEGY

DEEPAK SOMAYA

What a business model is not …

Detailed operational or tactical
plans
A complete strategy for Leading Strategically
sustainable performance/ Fit and Coherence
competitive advantage
Specific to a particular firm

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STRATEGIC COHERENCE

“First rule of strategy”: Strategy must

be coherent Finance
A firm’s strategy must be
consistent and integrate across all
Marketing Operations
parts of its organization
STRATEGY
Information Human
Systems Resources

R&D

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STRATEGIC FIT

Another central role played by

strategy is to align the internal
elements of the firm with its external
environment (“FIT”)
The Firm Environment

-Values & -Economic-

goals Political-Social
Strategy -Technological
-Functions
-Resources & -Competitors
capabilities -Customers
-Systems & -Cooperators
Processes
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SWOT FRAMEWORK SWOT ANALYSIS OF EXXON-MOBIL

Early strategy framework
Incorporates core ideas of coherence and fit STRENGTHS: OPPORTUNITIES:
Oil and gas leases, Refining and Advantages to employing scale
Still widely used distribution assets, Engineering and expertise globally, Low asset
expertise, R&D capabilities, Brand prices, Non-fossil energy sources
Intuitive and easy to understand name (solar, wind, nuclear)
T H E E N V I R ON M EN T

WEAKNESSES: THREATS:
( INTE RNAL)

STRENGTHS OPPORTUNITIES Weaker government relation-ships Low price environment (excess

T H E FI R M

in emerging markets, Less supply), Political instability,

knowledge and investment in non- Environmental concerns (climate
fossil energy sources change), Non-fossil technologies
(solar)

WEAKNESSES THREATS

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SWOT FRAMEWORK DRAWBACKS SWOT FRAMEWORK DRAWBACKS (2 OF 2)

Very high level analysis No compelling connection to

No guidance on what or how to overall company performance
analyze Generally, only a starting point …
Confusion about categories
e.g. perceived “threat” may be
opportunity
No compelling connection to
overall company performance
Generally, only a starting point …

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MODULE CONCLUSION

Mission, Vision and Values

Role, and getting them right
Business Models
What are they? Why important?
V-A-R-S Framework
Key Ideas: Fit and Coherence
SWOT Framework

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