JWI 540 Strategy, Week6 Summary, 8/12/12
This week I learned how to identify core competencies, build a strategic opportunity portfolio by balancing risk and reward, and test the strategy using VRINE model.
Highlights I take away are shown below.
(1) Core competencies - Identify and build strategic capabilities of the firm
*****************************
Competition is dynamic: firms need to improve the game continuously
(2) Test strategy with VRINE framework
**********************************************
Test importance of specific resources and capabilities using VRINE framework for
- value, rarity, inimitability, non-substitutability, exploitability
(3a) Fundamental fact of business life is Uncertainty
*************************************************************
Changing markets, customer preferences, products, technology, skills needed to take advantage of opportunties
Bigger Risk, Bigger Payoff
Great strategists appreciate uncertainty and use it to their advantage.
Uncertainty provides opportunity to surprise the competition and delight customers in new ways.
It decreases the chances that all competitors will come to market with similar me-too offerings.
Uncertainty presents challenges
Lack of reliable information increases likelihood of introducing a product before people are ready to buy it or just as their preferences are changing.
Create a balanced portfolio of strategic opportunities with a mix of risk and reward.
(3b) Two types of uncertainty
*********************************
(i) Where to compete - which markets, customers, products?
(ii) How to compete -which technologies, skills ?
(4a) Manage an Opportunity Portfolio **********************************************************
Balance Market & organizational uncertainty vs Technical & execution uncertainty
(i) Low, Low = Core enhancement launches:low uncertainty about where and how to compete; skills already there
(ii) Medium, Medium = Platform launches: significant opportunity close to core business; build new skills
(iii) Low-Medium, High = Positioning options: Execution risk high; stretch to a new market, based on good information about consumer preferences; experiment cheaply to verify
(iv) High, Medium = Scouting options: High Market risk; experiment cheaply to check merit before investing heavily
(v) High, High = Stepping stones: where & how to compete is not clear; high uncertainty about market demand, competition, capabilities;
Reduce uncertainty with initial experiments; monitor signals
(4b) Type of manager who will excel in stepping stones situation: Big-picture thinker who is comfortable with ambiguity
- Launches small experiments and monitor tangible and intangible indicators of success
- sensitive to weak signals and qualitative indicators that precede customer adoption of new offerings
(5) Put together a winning Hand - Position the firm to succeed in any type of strategic opportunity in the portfolio
*************************************
(i) Capitalize on and expand on current capabilities
(ii) Assemble a portfolio of strategic opportunities
(iii) Balance Risk & Reward - risky vs certain bets
(iv) Create good match between the opportunities and the company's capabilities, current or potential
(v) Ramp up the firm's capabilities to meet needs of a desired strategic objective
(vi) Match new venture with the right person to run it & staff sensibly
(6a) Core competencies - What enables a company to do something real well
*****************************
- beyond plain hard work, timing, luck
At the core of every successful organization are a handful of capabilities that result in high performance.
Complementary value-creating skills or activities that other companies find difficult to imitate.
examples
- tehnical know-how
- reliable mfg process
- close relationships with customers or suppliers
- culture that fosters employee loyalty
- distinctive way a company exploits technology (not technology by itself)
Difficult to isolate and identify
Not appreciated until they have eroded or people responsible for creating them have left the company
Figure out the firm's core competencies - Maintain and strengthen them
(6b) Identify your core competencies
******************************************
(a) Does it truly create value from customer's view ?
(b) Is it difficult to imitate ?
Sustainable competitive advantage achievable when a competency relies on a complex combination of activities and knowledge.
(c) Does it further your strategy?
A core competency should be closely linked to the firm's strategic advantage.
(6c) Develop a Core Competency - Build or Buy it
********************************************************
Create something superior to the industry standard.
Quantify what will make the capability clearly superior.
Use current and relevant data.
Two basic ways to develop a competency in-house
***********************************************************
- Shift resources and decision making power to the competency you want to develop
- Skunkworks: free up and nurture a small group of stars to incubate the new idea
(6d) Acquire a core competency
*************************************
Gain the skills the firm seeks by buying another firm.
The skills needed may come with skills that are not needed.
Get rid of LOBs or Geos quickly so that resources can be redirected to core value-creating activities.
Competencies are embedded in a company's culture or rely on a complex set of activities or a team
Risk of acquiring a competency is the "embededness" can be disrupted
Understand the true sources of value - don't let the wrong people go
(6e) Maintain a core competency - Protect it
***************************************************
Create a core competency with numerous elements
requiring teams of employees
with special skills working together
Knocking off a product or imitating a service is easier
than creating same team skills and internal activities that resulted in that product or service
(6f) Continually invest in your competency
************************************************
Help employee upgrade skills
Hire more people
Add new machinery
shore up the firm's advantage - in ways that make the core competency difficult to replicate
(6g) Keep a close watch on rivals
***************************************
They may try to make the firm's competency irrelevant by investing heavily in their own
(6h) Resources should not be diluted in pursuit of too many paths to greatness
******************************************************************************************
If the right area is chosen, it will be the only one you need
*************************************************************
Only the best managers should be working in core areas.
- champion programs and follow through on them
- laser-sharp ability to keep priorities straight
- great communicator's about company's priorities
- see connections between their own area and other parts of business
These are powerful concepts to build and strengthen a firm
Dr DP
This week I learned how to identify core competencies, build a strategic opportunity portfolio by balancing risk and reward, and test the strategy using VRINE model.
Highlights I take away are shown below.
(1) Core competencies - Identify and build strategic capabilities of the firm
*****************************
Competition is dynamic: firms need to improve the game continuously
(2) Test strategy with VRINE framework
**********************************************
Test importance of specific resources and capabilities using VRINE framework for
- value, rarity, inimitability, non-substitutability, exploitability
(3a) Fundamental fact of business life is Uncertainty
*************************************************************
Changing markets, customer preferences, products, technology, skills needed to take advantage of opportunties
Bigger Risk, Bigger Payoff
Great strategists appreciate uncertainty and use it to their advantage.
Uncertainty provides opportunity to surprise the competition and delight customers in new ways.
It decreases the chances that all competitors will come to market with similar me-too offerings.
Uncertainty presents challenges
Lack of reliable information increases likelihood of introducing a product before people are ready to buy it or just as their preferences are changing.
Create a balanced portfolio of strategic opportunities with a mix of risk and reward.
(3b) Two types of uncertainty
*********************************
(i) Where to compete - which markets, customers, products?
(ii) How to compete -which technologies, skills ?
(4a) Manage an Opportunity Portfolio **********************************************************
Balance Market & organizational uncertainty vs Technical & execution uncertainty
(i) Low, Low = Core enhancement launches:low uncertainty about where and how to compete; skills already there
(ii) Medium, Medium = Platform launches: significant opportunity close to core business; build new skills
(iii) Low-Medium, High = Positioning options: Execution risk high; stretch to a new market, based on good information about consumer preferences; experiment cheaply to verify
(iv) High, Medium = Scouting options: High Market risk; experiment cheaply to check merit before investing heavily
(v) High, High = Stepping stones: where & how to compete is not clear; high uncertainty about market demand, competition, capabilities;
Reduce uncertainty with initial experiments; monitor signals
(4b) Type of manager who will excel in stepping stones situation: Big-picture thinker who is comfortable with ambiguity
- Launches small experiments and monitor tangible and intangible indicators of success
- sensitive to weak signals and qualitative indicators that precede customer adoption of new offerings
(5) Put together a winning Hand - Position the firm to succeed in any type of strategic opportunity in the portfolio
*************************************
(i) Capitalize on and expand on current capabilities
(ii) Assemble a portfolio of strategic opportunities
(iii) Balance Risk & Reward - risky vs certain bets
(iv) Create good match between the opportunities and the company's capabilities, current or potential
(v) Ramp up the firm's capabilities to meet needs of a desired strategic objective
(vi) Match new venture with the right person to run it & staff sensibly
(6a) Core competencies - What enables a company to do something real well
*****************************
- beyond plain hard work, timing, luck
At the core of every successful organization are a handful of capabilities that result in high performance.
Complementary value-creating skills or activities that other companies find difficult to imitate.
examples
- tehnical know-how
- reliable mfg process
- close relationships with customers or suppliers
- culture that fosters employee loyalty
- distinctive way a company exploits technology (not technology by itself)
Difficult to isolate and identify
Not appreciated until they have eroded or people responsible for creating them have left the company
Figure out the firm's core competencies - Maintain and strengthen them
(6b) Identify your core competencies
******************************************
(a) Does it truly create value from customer's view ?
(b) Is it difficult to imitate ?
Sustainable competitive advantage achievable when a competency relies on a complex combination of activities and knowledge.
(c) Does it further your strategy?
A core competency should be closely linked to the firm's strategic advantage.
(6c) Develop a Core Competency - Build or Buy it
********************************************************
Create something superior to the industry standard.
Quantify what will make the capability clearly superior.
Use current and relevant data.
Two basic ways to develop a competency in-house
***********************************************************
- Shift resources and decision making power to the competency you want to develop
- Skunkworks: free up and nurture a small group of stars to incubate the new idea
(6d) Acquire a core competency
*************************************
Gain the skills the firm seeks by buying another firm.
The skills needed may come with skills that are not needed.
Get rid of LOBs or Geos quickly so that resources can be redirected to core value-creating activities.
Competencies are embedded in a company's culture or rely on a complex set of activities or a team
Risk of acquiring a competency is the "embededness" can be disrupted
Understand the true sources of value - don't let the wrong people go
(6e) Maintain a core competency - Protect it
***************************************************
Create a core competency with numerous elements
requiring teams of employees
with special skills working together
Knocking off a product or imitating a service is easier
than creating same team skills and internal activities that resulted in that product or service
(6f) Continually invest in your competency
************************************************
Help employee upgrade skills
Hire more people
Add new machinery
shore up the firm's advantage - in ways that make the core competency difficult to replicate
(6g) Keep a close watch on rivals
***************************************
They may try to make the firm's competency irrelevant by investing heavily in their own
(6h) Resources should not be diluted in pursuit of too many paths to greatness
******************************************************************************************
If the right area is chosen, it will be the only one you need
*************************************************************
Only the best managers should be working in core areas.
- champion programs and follow through on them
- laser-sharp ability to keep priorities straight
- great communicator's about company's priorities
- see connections between their own area and other parts of business
These are powerful concepts to build and strengthen a firm
Dr DP
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