Martin V. Smith School of Business and Economics

Martin V. Smith School of Business and Economics
Startup Strategy Minder Chen, Ph.D. Martin V. Smith School of Business and Economics CSU Channel Islands

Business Model Environment Map
Playlist: From Idea to Business - Animated Series (link) Foresight Market Analysis Competitive Analysis Macro Economics

Why? Why does strategy matter for entrepreneurs?
Popular press focuses on execution  Strategy Matters. With very limited resources, having a strategy is more important for entrepreneurial management.  Guide your (very limited) resource allocation Formulating strategies helps entrepreneurs prioritize and focus.  Using focus strategy helps startups find the beachhead market Strategies need to pivot as a startup moving ahead  Be flexible

Key Trends Technology Trends Regulatory Trends Societal & Cultural Trends Socioeconomic Trends

Macro Economic Forces Global market conditions Capital markets
Commodities and other resources Economic infrastructure

Market Forces Market Issues: Identifies key issues driving and transforming your market from Customer and Offer perspectives Market Segments: Identifies the major market segments, describes their attractiveness, and seeks to spot new segments Needs & Demands: Outlines market needs and analyzes how well they are served Switching Costs: Describes elements related to customers switching business to competitors Revenue Attractiveness (Size and Margin): Identifies elements related to revenue attractiveness and pricing power

Porter’s Competitive Analysis
Online vs. Offline Competitors: Online vs. Offline Current vs. Future Source:

Comparative and Competiveness Study
Know the enemy and know yourself; in a hundred battles you will never be in peril. Sula Wine Case First realize that you are sick; then you can move toward health. 老子:以其病病是以不病。[諱疾忌醫] If you know your weaknesses are weaknesses, then they are not your weaknesses anymore. Vision Vision is the driving force that utilizes a firm’s strengths to turn threats into opportunities.

SWOT = Strengths, Weaknesses, Opportunities, Threats
What is a SWOT Analysis, How Do You Develop One? SWOT = Strengths, Weaknesses, Opportunities, Threats The SWOT analysis is the foundation for developing your strategies and tactics that then become the road map for writing your business operating plan. Prior to defining the company’s strengths, weaknesses, opportunities and threats you need to: Have a written Vision, Mission and Values statement. Have completed a thorough internal and external business status evaluation. SWOT Analysis Example View Larger Version Here This example is meant to show all the parts of a SWOT analysis with some typical results. To start putting together your analysis you can do so with 6 pieces of paper labeled: External Status Internal Status Strengths Weaknesses Opportunity Threats. If you have a staff you might call them together give each copies of the six pieces of paper and start brainstorming. There are two schools of thought on this. To start you can brainstorm together filling out each sheet of paper or you can send everyone off to fill out each sheet as they see the business then get back together to discuss and agree on a final SWOT analysis. If you are the staff it might be wise to seek outside consultation to work with you while going through the process and critiquing the information you put together. This could be a member, or members, of your board of directors, advisory group or a business management coach with expertise in business planning. What makes a SWOT analysis effort successful? You must start with your Vision, Mission and Values statement. You must objectively prepare your businesses internal and external status. You must be realistic and forthright in preparing the businesses, and your, strengths and weaknesses Be specific but keep it short and simple, don’t over analyze. Developing strategies and tactics that match the SWOT analysis results. Writing an operating plan based on your SWOT Analysis, strategies and tactics. Implementation of a resulting operating plan. The SWOT Analysis should be looked at as your foundation for creating a business or operating plan. A process flow chart for guiding you in developing your complete plan can be viewed here. For additional information, sample forms, or help developing your SWOT Analysis, contact us at a FREE consultation on putting a SWOT Analysis effort in place. For additional information on SWOT Analysis check out Wikipedia. Source: **SWOT Analysis

weaknesses into strengths
SWOT to TOWS Self-knowledge & determination is the key to turn your weaknesses to strengths! Turn a threat into an opportunity! Transform your weaknesses into strengths. Turn your weaknesses into strengths

Egg vs. Stone 兵之所加，如以碬投卵者，虛實是也。
Eggs 兵之所加，如以碬投卵者，虛實是也。 Troops thrown against the enemy as a grindstone against eggs is an example of the strong beating the weak. -- Sunzi, The Art of War.

Blue Ocean Strategy Blue Ocean Strategy

Value Innovation Uber and Airbnb  Sharing economy

Four Actions to Create a Blue Ocean
What factors should be raised well beyond the industry standard? Raise What factors should be created that the industry has never offered? Create What factors should be eliminated that the industry has taken for granted? Eliminate What factors should be reduced well below the industry standard? Reduce

The Case of Cirque du Soleil
Cirque du Soleil achieved rapid growth in a declining industry with low profit potential Cirque du Soleil created uncontested new market space that made the competition irrelevant If you have not seen it, please watch the following video 16

http://www. slideshare
Source︰W.Chen Kim., and Renee Mauborgne. Blue Ocean Strategy ,2005

Porter’s Generic Strategies
Competitive Advantage Product/ service Lower Cost Differentiation Broad Target Market Cost Leadership Differentiation Competitive Scope Narrow (Niche) Target Market Cost Focus Differentiation Focus *China Price/Cost They are the three scariest words in U.S. industry. Cut your price at least 30% or lose your customers. Nearly every manufacturer is vulnerable -- from furniture to networking gear. The result: A massive shift in economic power is under way.

Value Chain Analysis

Industry’s Value Chain
** Vertical Integration or collaboration (Virtual Integration)

Intended, Deliberate, Realized, and Emergent Strategies
故兵無常勢，水無常形。能因敵變化而取勝者，謂之神。 10%~30% Just as water retains no constant shape, so in warfare there are no constant conditions. He who can adapt his strategies/tactics in relation to his competitors will win. -- Sunzi, The Art of War. Pivot Adapt The primary determinant of realized strategy is emergent strategy. The decisions that emerge from the complex processes in which individual managers interpret the intended strategy and adapt to changing external circumstances.

轉型 Pivoting Multi-level marketing (MLM), 0r pyramid selling,
©2013 Flat World Knowledge, Inc.

RBV, Core Capability, & Dynamic Capacity
Dynamic Capabilities: The firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments.  the capacity of an organization to purposefully create, extend, or modify its resource base. Competitive Survival 窮變通久 a firm’s constant pursuit of the renewal, reconfiguration and re-creation of resources, capabilities and core capabilities to address the environmental change Capability Improved Performance 與時俱進 Resource Valuable Rare In-imitable Non-substitutable Competitive Advantage Core capabilities Bundle/integrate Capabilities and Resources Deploy/ utilize Sustainable Competitive Advantage Resource-based view (RBV)

Competition: A dynamic and relative concept
Awareness Motivation Capability Competition: A dynamic and relative concept Thrust: 迎頭退擊 Gambit: 棄車保師 Feint: 假 A thrust is a direct attack that forces a competitor to withdraw from a market because it fears further resource commitments will be too costly. This is akin to the military tactic of frontal assault. In the mid-1980s, the Japanese used a thrust strategy to drive Intel out of DRAM semiconductors, cutting prices by 10% on each target customer until Intel gave up the fight. (Ironically, Intel shifted its resources toward what was to become the hugely successful microprocessor segment.) A feint is an attack on a surrogate target. After a competitor diverts resources to defend against the feint, the firm shifts its resources to the real target. This is similar to a flank attack in military tactics. In the late 1980s, the American pet food industry went through a transformation with the emergence of a class of rich, diet conscious pet-owners with strong emotional attachment to their cats and dogs. Premium pet foods, often sold in pet supermarkets, were targeted at these consumers. Ralston, the market leader held off threats to its market share by launching a premium brand to be sold in pet supermarkets. This feint locked competitors into fighting for their share of premium pet food sold in pet supermarkets, leaving Ralston’s lucrative supermarket business untouched. In a gambit, a firm sacrifices its position in one market in order to attack in another. This is somewhat similar to the military tactic of strategic withdrawal. In the early-1980s, Gillette and Bic were competing in both razors and lighters. In 1984, seeing that Bic was making higher profits in lighters, Gillette withdrew from this segment. The gambit encouraged Bic to pour resources into its lighter business to further consolidate its position. Gillette was then free to enhance its sphere of influence in razors, building a 50% market share within two years. Source: Ming-Jer Chen Link

Winning the Competition
Fight with foreknowledge.  Business intelligent Be invincible.  Affordable loss Attain strategic superiority  Focus Build a cohesive team.  Human talents Coordinate momentum and timing for attacks. Ensure a solid military/organizational structure.  Execution and coordination Plan by surprise.  Creativity Be flexible.  Leverage contingency Seek knowledge (business intelligence) constantly.  Experimentation Develop effective communication.  Interact Adapted from The Costco Connection, May 2014, p. 15

Sun Tzu’s The Art of War Model
Situation Appraisal Formulation of Goals and Strategies Evaluation of Strategies Implementation of Strategies Chow Hou Wee, Khai Sheang Lee, Bambang Walujo Hidajat, Sun Tzu: War and Management : Application to Strategic Management and Thinking, Addison-Wesley, 1996. Strategic Controls

Situation Appraisal Assessing self and enemy Desirability of War
Employee morals Environmental factors Location advantages Capability of management teams Management systems (rewards and punishment) and business processes Desirability of War As a last resort; Achieve definite advantages via relative superiority, and invincibility through defense Yes  Prepare for the War: Goals and strategies, resources and logistic management No  See non-military alternatives: Strengthen defense and consolidate resources

References

Business Model Environment
Playlist: From Idea to Business - Animated Series Foresight Market Analysis Competitive Analysis Macroeconomics

Balanced Scorecard Robert S. Kaplan and David P. Norton

Strategy Map Long term objectives Customer value proposition
Value creating processes Intangible assets Source: link

Market Forces Source: Business Model Generation, pp. 202

Strategy Canvas Yellow Tail

iPhone Strategy

Situation Analysis Framework
位 Position 形勢 High ∆Posture Posture Trends = ∆Time Full Solid middle Inside out  Outside in 時 Empty Low Time Initiate  Grow  Decay Be careful at the beginning Be cautious at the end The end is the start of a new beginning

Chapter 6: Weakness and Strengths 虛實
Sun Tzu said: Whoever is first in the field and awaits the coming of the enemy, will be fresh for the fight; whoever is second in the field and has to hasten to battle will arrive exhausted.  First mover advantage 孫子曰：凡先處戰地而待敵者佚，後處戰地而趨戰者勞。 Therefore the clever combatant imposes his will on the enemy, but does not allow the enemy's will to be imposed on him. 故善戰者，致人而不致于人。

Gain Relative Superiority 相對優勢
Divide and conquer (各個擊破) 我專而敵分 By discovering the enemy's dispositions and remaining invisible ourselves, we can keep our forces concentrated, while the enemy's must be divided. (Chapter 6) 故形人而我無形，則我專而敵分。我專為一，敵分為十，是以十攻其一也。則我眾而敵寡，能以眾擊寡，則我之所與戰者，約矣。

Business Lessons A Case Study: Marc Benioff and salesforce.com (link)
Marc Benioff interview Last month, the Philadelphia Inquirer reported: Like many business executives, Oracle CEO Larry Ellison has famously read The Art of War, the sixth-century B.C. Chinese military treatise, for application in modern times. The book, by Sun Tzu, encourages the judicious use of strategy and outsmarting, rather than overpowering, one's opponent. Has [Bill McDermott, CEO of SAP Americas] read it? "I have." But Oracle, he said, "is the JV team of The Art of War. To beat SAP, you gotta bring the varsity." Like many business executives, Oracle CEO Larry Ellison has famously read The Art of War, the sixth-century B.C. Chinese military treatise, for application in modern times. The book, by Sun Tzu, encourages the judicious use of strategy and outsmarting, rather than overpowering, one's opponent. Has [Bill McDermott, CEO of SAP Americas] read it? "I have." But Oracle, he said, "is the JV team of The Art of War. To beat SAP, you gotta bring the varsity." While the battle of words goes on between the two software companies' chief executives on who is best at implementing Sun Tzu's Art of War, Marc Benioff, Chairman and CEO of salesforce.com (NYSE symbol: CRM) continues to take action to fulfill his vision and mantra: "The end of software." As the world leader in on-demand customer relationship management services, salesforce.com has fully embraced the software as a service (SaaS) model. How can SaaS help your company? Instead of investing in hardware and updating and maintaining enterprise software at your facility, salesforce.com takes care of that for you; all you need to do is access the Web and log in. This is much like how you receive electricity from the power company: you pay only for what you use, and not have to invest in the power plant or worry about maintaining the power plant. By 2011, market analysts at Gartner Inc. project 25 percent of all new business software will be delivered by means of SaaS. Arguably no one is more capable and experienced in SaaS than Mr. Benioff's salesforce.com. Although large and formidable, traditional software companies like Oracle, SAP, and Microsoft should be concerned as their progress in SaaS has been slow and unfocused. SaaS may even perhaps be contradictory to their core business models. With over 500,000 active subscribers now using salesforce.com's services -- grown from 100,000 subscribers when it went public in Marc Benioff is well on his way to ending software as most businesses know it today. Mr. Benioff doesn't just "believe in the Art of War," he effectively applies it. Therefore, the part we found most remarkable about Marc Benioff and salesforce.com is the seemingly effortless way they apply the heart of Sun Tzu in the midst of the most embattled and dangerous of corporate settings, and with such great success. What he has done and continues to do, and what he describes below in our interview, is what Sun Tzu refers to as 'employing shih' at a very high level, and with wonderful examples of the extraordinary and orthodox as well as forming and transforming. It's effective yet at the same time natural, not contrived. And Mr. Benioff's insistence on the uniting the 'army' and the commander's vision as well as the conviction that bigger objectives -- universal access to software on-demand and the 'end of philanthropy' -- can both be served in business success and be values that can help fulfill business objectives. This is taking whole. Another observation is the connections between what Marc Benioff does and the text are not explicitly stated in this interview, yet informed readers of Sonshi.com will clearly see them. In our opinion, this understatement makes the example so much stronger, i.e., "the truth is stronger when communicated by implication." Mr. Benioff is understated and gentle in person, yet clearly immovable and resolved like a mountain. We are honored to have interviewed Marc Benioff and thank him for taking time from his busy schedule to share his business wisdom with Sonshi.com readers. You can learn more about him and his numerous recognitions and accomplishments at salesforce.com. Below is our interview with Mr. Benioff. Enjoy! Sonshi.com: What concept in Sun Tzu’s Art of War do you like the most and why? Benioff: The concept that I like the most, and the one that I’ve taken most to heart, is the belief that people can’t be united or focused unless they share a common philosophy—a philosophy that gives their effort a greater meaning. I’ve seen how important this concept is in business. To be truly successful, companies need to have a corporate mission that is bigger than making a profit. We try to follow that at salesforce.com, where we give 1% of our equity, 1% of our profits, and 1% of our employees’ time to the community. By integrating philanthropy into our business model our employees feel that they do much more than just work at our company. By sharing a common and important mission, we are united and focused, and have found a secret weapon that ensures we always win. Sonshi.com:Would you mind sharing with our readers a time when the book helped you to compete in business and/or helped you in your life? Benioff: One of the most important tenants of the book focuses on strategic thinking rather than combative thinking. That advice has helped us decide to position ourselves in a way that makes people want to join our mission—rather than attack us. A perfect example of this is exemplified by our decision to open up our platform. If we had been thinking combatively, we would have been afraid about competitors learning too much about us, or we would have had concerns about them duplicating our moves. Instead, we opened up the platform, first with API, then with something called Customforce, a suite of tools behind salesforce.com that allows regular business people to easily extend their current salesforce.com applications, and then with Apex, a breakthrough development platform that lets customers create and run any type of application on demand. By inspiring people to join us and work with us creatively, we gathered an army of innovators who are dedicated to making us better. Sonshi.com: What is your philosophy on managing people? In other words, how do you motivate your employees to achieve their potential and thus achieve the company’s goals? Benioff: One of the things we touched upon was the "1% Solution," where 1% of our equity, profits, and employees paid work hours are donated to philanthropy. We’ve found that giving employees paid time off to get involved in the community has motivated them tremendously. They feel a greater sense of personal pride and satisfaction—and they have become happier and more productive at work. What some people don’t consider is that this outside work doesn’t just give their lives deeper meaning (which is certainly important), but it provides an excellent training ground as well. I’ve seen how allowing employees to go off and work with nonprofits they have polished their leadership and management skills, built networking opportunities, and sparked their creativity—all of which have made them not only more passionate, but more valuable employees. Sonshi.com: From your experience, what are a few attributes you usually see in a successful salesperson and/or marketer? Benioff: The one thing all successful salespeople and marketers have in common is a relentless focus on the customer and a real commitment to his or her success. That requires careful listening skills and then collaborating with the customer to visualize success. It also requires steadfast determination in order to make that vision a reality. These attributes are not exclusive to the sales team; to be successful, the entire organization must pursue this course. Sonshi.com: In 2004, you wrote a book called "Compassionate Capitalism" and just a few months ago your new book "The Business of Changing the World" was published. Why does philanthropy integrated into a company -- e.g., devoting one percent of revenues, one percent of employees' time, and one percent of the company's stock to the community -- make sense? Benioff:We have integrated philanthropy into our corporate culture from the inception of our company, and we have seen the difference that can be made with that model. The1-1-1 model—equity, profits (in the form of product donation), and employee time—was designed to ensure that as our business grew so would our contribution to the communities in which we operate. By leveraging the energy of our entire ecosystem—employees, partners, and customers—we have been able to make contributions that have even exceeded my expectations. In July 2000 the Foundation opened its first after-school technology center at a neighboring YMCA, providing free access to underserved youth. Since then, we have created more than 60 technology centers and media programs with schools and non-government organizations in 12 countries including Kenya, Israel, Japan, Ireland, and Singapore. Our 2,000+ employees have embraced the effort with fervor and donated over 30,000 hours to the communities that we serve. Corporations including Time Warner, Dell, and Cisco have joined our effort, donating services, time, and people. Together we’ve been able to reach more than 100,000 people worldwide with access to the Internet and state of the art technology programs. In the summer of 2004, we witnessed the true financial power of our integrated model. The salesforce.com initial public offering raised more than $12 million for the foundation—and proved the capability of pre-IPO companies to make a positive difference, if only they make an early financial commitment of equity. In addition to funds raised from salesforce.com equity, about half of our employees make annual stock or cash contributions through the matching gifts program; we also receive donations from outside individuals. Today the foundation is worth more than $18 million. I’m amazed by the potential of more companies employing integrated philanthropic initiatives at earlier stages in their life cycle. What if this were done on an even more massive scale? Consider what would happen if a top-tier venture-capital firm required the companies in which it invested to place 1% of their equity into a foundation serving the communities in which they do business. If embraced, this new model could dramatically increase the percentage of overall corporate donations and even lead to what Fortune magazine writer David Kirkpatrick has called "the end of philanthropy" and prove the true power of the integrated community service model. Sonshi.com: The mantra at salesforce.com is the "End of Software." How would a company looking for CRM benefit from choosing salesforce.com over more traditional software companies like Oracle or SAP? Benioff: Every company wants to focus on what they do best, and please their customers. And while the technology models of the past have promised to help them do this, the result was too often cost and complexity. We offer an alternative that allows our customers to focus on what’s important. We think that there has been something fundamentally wrong with the technology industry—particularly for buyers—for a long time. There’s been an unnecessary burden placed on customers to ensure that enterprise software delivers on the vendors’ promised results. The customer has been required to piece together an overall solution (traditionally of application software, middleware software, database software, networking & telecommunication infrastructure, hardware servers, and client devices). These pieces are assembled after purchase and require continuous fine-tuning and support. Maybe if these software applications worked, it would be okay. The problem is, they don’t. Over the past number of years, enterprise software customers have made large investments—usually more than they had anticipated—and received little in return. In fact, more than half of all new enterprise systems have failed completely! As an alternative to the current system, salesforce.com offers Web-based applications. It’s now been proven that on-demand solutions can deliver immediate benefits at reduced risks and costs. Our application utility model, which we promote as "The End of Software," focuses on eliminating conventional software in favor of a software-as-service model. What we mean by this is that users pay a reasonable monthly fee as opposed to tens of thousands (to millions) of dollars to install and upkeep the CRM solution. Since the solution requires no software or hardware to buy, install, maintain, or upgrade, customers typically realize savings of greater than 90 percent versus similar client/server solutions. The best part is that it works: salesforce.com is designed to be as simple to use as sites like Amazon or Yahoo, while at the same time it’s capable of handling a company’s complex CRM needs. Sonshi.com: What are your thoughts on balancing work and personal life? Benioff: I believe a balanced life is essential, and I try to make sure that all of our employees know that and live that way. It’s crucial to me as a manager that I help ensure that our employees are as successful as our customers and partners. I also think that employees these days expect less of a separation of work and personal life. That doesn’t mean that work tasks should encroach upon our personal time, but it does mean that employees today expect more from the companies for whom they work. Why shouldn’t your workplace reflect your values? Why is "giving back" not a part of our jobs? The answer for us is to integrate philanthropy with work. When I explain our company values and the foundation to prospective employees, they realize that they have an opportunity to do much more than change the way businesses manage and share information. When you take a workforce of smart, creative, dedicated people and say "take this company time to serve your community, and bring along your coworkers, customers, and partners" great things happen. [End of interview] A Case Study: Marc Benioff and salesforce.com (link)

Martin V. Smith School of Business and Economics

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