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Document 6518658
MG647 Innovation and Entrepreneurship Issues at Hand What is Strategy ? Entrepreneurial Strategy - 13 Role of Strategy in the New Economy Prof . Rajendra K Lagu School of Management IIT Bombay Prof . R.K.Lagu Entrepreneurial Strategy Relevance of Strategy for a Start-up Modifications of the Relevant Frameworks 13.1 Prof . R.K.Lagu What is Strategy ? Strategic issues Consider competitors and industry as a whole Long term impact Take a bird s eye view Tactical Issues Short tem impact Decide about operational matters Concerned with parameters inside the company Take grass roots view Strategy is always almost equal to Competitive Strategy Strategy is concerned with the ecosystem in which the firm operates and the other players coexisting in the system Entrepreneurial Strategy 13.3 Prof . R.K.Lagu Competitive Strategy Entrepreneurial Strategy Protected markets Dominant market position Own / purchased IP Team composition National / geographic advantages Virtual monopolies The core competency gives it competitive advantage if it chooses the right strategy Government protection through licenses and permits Strategic thinking done at the BOD level High entry barriers due to critical importance of physical assets Entrepreneurial Strategy 13.4 Old Industrial Environment Each firm has a core competency which it gains through Prof . R.K.Lagu 13.2 Strategic vs. Tactical Issues Vision, Mission, Goals, Strategy, Policy, Tactics Achievements, Deliverables, Milestones How is the strategy of a large organization such as HLL different from a start-up -- established player, baggage, entrenched position, defending the turf, large size Prof . R.K.Lagu Entrepreneurial Strategy 13.5 Prof . R.K.Lagu Entrepreneurial Strategy 13.6 1 Traditional Company s Asset Structure Current Industrial Environment Liberalized regimes Brand Capital Fast pace of technology changes Near perfect markets due to easy availability of information (Internet) Human capital Working Capital Global competition WIP, Finished goods Decreasing margins Physical Assets: Land, building Demanding customers Prof . R.K.Lagu Entrepreneurial Strategy 13.7 Modern Knowledge Based Company Prof . R.K.Lagu Entrepreneurial Strategy 13.8 Michael Porter s Five Force Framework Brand Capital: Patents, IP, Designs, Customer Relationships Threat of new entrants Company Example Bargaining power of suppliers Human Capital Bargaining power of customers CISCO Physical Assets Prof . R.K.Lagu Threat of substitute products Outsourcing partner Entrepreneurial Strategy 13.9 Prof . R.K.Lagu Strategy s Imperatives Entrepreneurial Strategy 13.10 Strategic Choices Differentiation Creating entry barriers Big Market Low Cost High Value Achieving sustainable competitive advantage Small Market Offering unique selling proposition Niche Creating a defensible position Guarding your turf Prof . R.K.Lagu Entrepreneurial Strategy 13.11 Prof . R.K.Lagu Entrepreneurial Strategy 13.12 2 Product Innovation Emphasis Strategic Choices Incur high expenses in R&D Product innovation Hire good scientists / technologists and retain them Beat competitors by quick and successive introduction of new products Operational excellence Customer loyalty Prof . R.K.Lagu Entrepreneurial Strategy 13.13 Customer Loyalty Emphasis Accept frequent product obsolescence so as to avoid product cannibalizing Examples: Nike, Sony, Nokia, Intel Prof . R.K.Lagu Reduce costs and inventories Examples: Home Depot, IBM Examples: Wal-Mart, Cosco, Toyota Entrepreneurial Strategy Employ industrial engineering and operations research staff Implement ERP and similar packages Monitor working capital, work in progress material Run an efficient operation 13.15 Prof . R.K.Lagu BCG Growth-Share Matrix High Low Milk Dog Cash Cow Low Stars: large market share in a fast growing market. Needs investment to achieve growth and maintain the lead. May become a cash cow as market saturates High Relative Position (Market Share) Prof . R.K.Lagu Entrepreneurial Strategy 13.16 Cash cows: large market share in a mature, slowly growing (probably saturated) market. Don t invest anymore, generate cash and invest in other product lines Star Liquidate Entrepreneurial Strategy BCG Growth-Share Matrix Invest ?? 13.14 Operational Excellence Emphasis Assemble a good marketing team Spend on brand building and getting mind share Retain your existing customers Announce aggressive deals and discounts, often linked with customer loyalty Prof . R.K.Lagu Market Growth Rate Entrepreneurial Strategy 13.17 Dogs: Small market share in a mature market. New investment may not help. Liquidate unless there is some other strategic purpose. Prof . R.K.Lagu Entrepreneurial Strategy 13.18 3 References Entrepreneurial Strategy -- Two Camps of Thinkers Corporate Strategists -- Adapt the established strategy frameworks to the peculiarities of a small start-up venture Michael Porter s Five Force Framework Strategy Mavericks For entrepreneurs, strategy is a hustle Entrepreneurial Strategy Amar Bhide, How entrepreneurs craft strategies that work , HBR, March 1994 Amar Bhide, Hustle as strategy , HBR, September 1988 BCG Matrix Prof . R.K.Lagu Kathleen Eisenhart and Don Null, Strategy as simple rules , HBR, January 2001 John Hamm, Why entrepreneur don t scale , HBR, December 2002 13.19 Prof . R.K.Lagu Strategy as a Hustle Hustle rush through fast with energy Businesses characterized by ease of entry and service intensity are like poker, not chess Play each hand as it is dealt and quickly vary tactics to suit conditions. Move fast, get it right most of the time and do things well operational excellence and good execution Take advantage of transitionary opportunities Exhibit vigour and nimbleness High profits stem largely from superior execution and forceful opportunism, not structural competitive barriers Entrepreneurial Strategy 13.21 Design, produce and sell a timely and cost-effective product that works Integrate action and analysis Prof . R.K.Lagu Strategy as Simple Rules 13.22 When business landscape is complex strategy is a few straightforward rules that just vaguely define a direction Capture unanticipated, fleeting opportunities to succeed When business landscape is simple, companies can afford to have complex strategies Entrepreneurial Strategy Entrepreneurial Strategy Strategy as Simple Rules Paradox of complexity theory simple systems can have complex control strategies. Complex systems have too many states and multiple transition paths between states and so only simple strategies give predictable results Prof . R.K.Lagu 13.20 Strategy as a Hustle Conventional paradigm outflank competitors with big plays Prof . R.K.Lagu Entrepreneurial Strategy Rules grow not out of clever thinking, but out of experience, especially msitakes 13.23 Prof . R.K.Lagu Entrepreneurial Strategy 13.24 4 Strategy as Simple Rules Akamai s rule for customer support: Every question must be answered on the first call or e-mail Intel s rule for capacity allocation: Sort products on gross margin Cisco s rule on acquisition: Acquire companies which have less than 75 employees, 75% of whom are engineers Nortel s rule on product development: Proceed if the product can be developed in less than 18 months Prof . R.K.Lagu Entrepreneurial Strategy 13.25 5 This document was created with Win2PDF available at http://www.daneprairie.com. 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