1. “It is not enough to succeed; others must fail”. Gore Vidal

2. The ARENA Genome: Harmonic Strategic Planning
Refinement Stages:
Arena, Focus, Action
Create Strategy
Arena Layers:
Corporate,
Business
Function-
Define Hierarchy
Corporate Layer:
Portfolio Businesses
Maximize Value A R E N F O C U S A C T I O N
Business Layer:
Positioning Products by
Market Strategy
Function Layer:
Process, Project and Product
Agile value drive
Arena actors:
Partners, Threats; Current, Future
Tailored Patterns.
Target Criteria
Prioritize attention
Manage Control span
AMEV vs. Drucker, Roadshow cloud vs. Robner (analysts)
Warren Buffet (Berkshire Hathaway): Financial vs. Business understanding
Management-by-exceptions, by-walking-around.
Jack Weltch, Stock market fluctuations, share splits.
Hierarchy: accounting -> Hypertext: zoom in/out: resolution management. Professional, geographic concentration.
Arena:
Focus
Action
Dynamic Vectors:
Vision, Resource, Deliver
Guru 2 Gorilla

3. Shareholder value Warren Buffett, The Focus Investor’s Golden Rules:
«I’m 15% Phil Fisher and 85% Benjamin Graham»
Benjamin Graham, quantitative: Fixed assets, current earnings, dividends.
Corporate filings and annual reports: cheap stocks.
Phil Fisher, qualitative: future prospects, management capability.
Customers, competitors, managers: intrinsic value, long term.
Invest: “Know nothing”: Index funds. “Know something”: 5-10 companies. Diversification overrated. It increases the chances of buying something you don’t know enough about.
Volatility happens: thing long term 5 to 10 years.
Dow
Jones
Euro
Stoxx 50
Average
European
fund
1 Year
% Increase
50%
100%
150%
200%
3 Year
5 Year
AMEV vs. Drucker, Roadshow cloud vs. Robner (analysts)
Warren Buffet (Berkshire Hathaway): Financial vs. Business understanding
Management-by-exceptions, by-walking-around.
Jack Weltch, Stock market fluctuations, share splits.
Hierarchy: accounting -> Hypertext: zoom in/out: resolution management. Professional, geographic concentration.
Arena:
Focus
Action

4. In-Process Research and Development « IPRD »
Annual Report
Stratus:…manufacturer of fault-tolerant computer systems…$267M Revenues…were estimated to be $84M in 1999 and $345M in 2000…expected to peak in fiscal year 2002 and decline thereafter through the end of the product’s life (2009) as new product technologies were expected to be introduced by us. A risk-adjusted discount rate of 35% was used to discount projected cash flows. The actual results to date have been consistent, in all material respects, with our assumptions at the time of the acquisition, except as noted below…Product development relating to the…projects was discontinued due to our reprioritization of product direction…Consequently, we did not realize the forecasted revenues from these projects. During fiscal year 2001, substantially all of the goodwill and acquired intangibles related to the purchase of Stratus were written off as part of our restructuring program…
Chromatis Networks: Next generation optical transport solutions that provide telecommunications carriers with improvements in the cost, efficiency, scale and management of multi-service metropolitan networks…integrate data, voice and video services…and combine this traffic onto a wave division multiplexing system.…$428M represented its estimated fair value using the methodology described above…Revenues were estimated to be $375M in fiscal year 2001 and $1 billion in fiscal year Revenue was expected to peak in fiscal year 2005 and decline thereafter…A risk-adjusted discount rate of 25% was used…As part of our restructuring program in fiscal year 2001, the Chromatis product portfolio was discontinued and all of the remaining assets…were written off.
Spring Tide Networks: Carrier-class network equipment..that enables service providers to offer new Value-added IP services and VPNs with low cost and complexity…IP service switch carrier class platforms that combine the connectivity of a remote access server, the network intelligence of a remote access server, and the switching capacity and quality of service capabilities of an ATM switch in one integrated switch.
In-Process Research and Development « IPRD »
In connection with the acquisitions in fiscal years 2000 and 1999 of Chromatis, Spring Tide and Stratus, we allocated non-tax impacting charges of $428 million, $131 million and $267 million, respectively of the total purchase price to IPRD. As part of the process of analyzing each of these acquisitions, we made a decision to buy technology that had not yet been commercialized rather than develop the technology internally. We based this decision on a number of factors including the amount of time it would take to bring the technology to market. We also considered Bell Labs’ resource allocation and its progress on comparable technology, if any. We expect to use the same decision process in the future.
We estimated the fair value of IPRD for each of the above acquisitions using an income approach. This involved estimating the fair value of the IPRD using the present value of the estimated after-tax cash flows expected to be generated by the IPRD, using risk-adjusted discount rates and revenue forecasts as appropriate. The selection of the discount rate was based on consideration of our weighted average cost of capital, as well as other factors, including the useful life of each technology, profitability levels of each technology, the uncertainty of technology advances that were known at the time, and the stage of completion of each technology. We believe that the estimated IPRD amounts so determined represented fair value and did not exceed the amount a third party would pay for the projects.
Financial highlights: Shareholders’ equity: 2000:$ :$5.73, (81.2%).
Annual Meeting to be held on 02/20/02 at 09:00 A.M. Proposals: Evelyn Y. Davis: “Repeal Classified Board.” (Reelection of directors annually vs. recent stagger system).
After thoughtful consideration…directors recommend a vote against proposal 2.
Purchase Peak Termination
Stratus: : Price: $267M, Revenues estimated:
Revenue negative for the remainder of the projection period
Costs to complete R&D estimated Discount rate:35%
Chromatis: Revenues attributed to the metro optical product: Revenue growth and negative later.
Spring tide Revenues attributable to the IP Service switch products:
Revenue growth: negative later.

5. Schumpeter: Creative destruction Disney corporate portfolio
Movie
Entertainment
Live
Entertainment
Merchandising,
Music,
Publishing
Broadcasting
Amusement
Parks
Cruises
Communities
Holidays,
Resorts,
Real estate development
Holidays, Resorts,
Real estate development
Disney
Institute
Animal Kingdom
Disney America
Amusement
Parks
Resorts
Hotels
Euro Disney
Disney Studios
MGM
Disneyland
Tokyo
Live
Entertainment
EPCOT
Theater
Hokey
Baseball
Disneyworld
Disney
Channel
Kotler’s book: from Rajar Gupta’s lecture (McKinsey)”Starting Kick and growth maintenance?!”, August 4th 1997, Kellogg school of management
KCAL TV
ABC
Broadcasting
Disneyland
Animated
Features TV
Programming
Touchstone
Home videos
Hollywood
Pictures
Miramax
Acquisition
Movie
Entertainment
Films
Music
Publishing
Merchandising,
Music,
Publishing
Book
Publishing
Disney
Stores
Direct
Mail
Hollywood
Records
Software
Visual effects
Merchandising
Animation
‘30
‘20
‘50
‘60
‘80
‘90
2000
‘40
‘70

6. Active Portfolio Management
-10%
-5% 0%
10%
15%
A business’s average total return to shareholders
relative to its industry 5% 1 5 10 15 20 25
Business age in years
Comparing 1985 to 1995, the top 150 electronic-systems-companies
worldwide ranked by revenue:
75% of the firms in 1985 either slipped or disappeared by 1995
25% improved / 33% eliminated / 42% new
Source: Anderson Consulting (1997) “Exploiting Uncertainty: Hi-Techs High Performers Change the Dynamics of Competition
Commtouch ’91:Mainframe mail,’99 MS vs. Netscape damage - Outsourcing web mail 2Q M mailboxes. Last chance
Lee Dranikoff, Tim Koller and Antoon Schneider, “Divestiture: Strategy’s Missing Link” HBR, May 2002, pp
Richard Foster and Sarah Kaplan, “Creative Destruction”, Doubleday, 2001: age, return.

7. Distribution of US federal Income-tax revenue by income group
Pareto
Distribution of US federal Income-tax revenue by income group
100%
Cum Percent
20%
40%
60%
80%
100%
Share of total revenue
Income Group 4
15%
25%
50% 5
80%
60%
40%
“Getting personal”, Survey Globalisation and tax, Economist, Jan 29, 00, p.16 1
20% 4
15%
25% 5
50%

8. Paradigmatic Isomorphism: Deep Structure
Porter’s 5 forces:
Sustainable competitive advantage; Entry Barriers
Brandenburger and Nalebuff ‘95
Company
Customers
Suppliers
Substitutes
Complementors
Competitors
New entrants
substitutes
Suppliers
Buyers
A. Grove, ’96: Six forces Diagram x10 force
Marketing:7Cs: Company, competition, channel, customer,
The Business
Complementors
Suppliers
Existing
Competitors
A different way
Customers
Potential
Mintzberg ’88: Generic Strategies
Primary
Industries
Extraction
Processing
Fabrication
Assembly
Wholesale
Retail
Secondary
Tertiary
Upstream
Midstream
Downstream
Strategic Apex
Operating Core
Support
Staff
Techno
structure
Middle
Line
Ideology
Hamel and Prahalad, ’94: Competing for the Future, Harvard business school press, 1994
Andy Grove, “Only the Paranoid Survive”
Hamel and Prahalad, ’94
Brand &
Distribution
Creating coalitions
Standards &
Regulation
Core
competencies
Market Learning
& Experimentation

9. Spatial Paradigm: Vertical Flow
Upstream
Regulators
Value/
Food
Chain
Supply
Chain/
Channels
Backward
Integration
Vertical
Integration
(Jumping the
Connection)
Complementors
Clusters
Market segments: Externalities
Competitors
Back Office
Substitutes
Firm
Value System
Horizontal
Integration
Front Office
Distribution
Chain/
Channels
Forward
Integration
900
Turn
Battlefield, Ecology, habitat
Downstream

10. ARENA Canonical Form Vocabulary Syntax Structure Entities: Market
Relationships:
Business
Drugs
Control
Firm/Coalition
Teva
Information
Web
Monopoly/ Regulatory Agency
FDA
Integration:
Vertical
Syntax
Horizontal
Value Chain:
Low
Farmer
Structure
Iconography, Syntax, Structure, Process, Patterns
Dairy
Concise:
Link Markets rather than instances.
Business implies information flow.
Titles on significant arrows.
Pertinent entities only.
Distributor
Retailer
High
Consumer

11. Horizontal Integration
Digital
Alpha Processor
Compaq ‘83
“Portable PC”
Deskpro ‘86 PC
Armada‘88
Laptop
Proliant‘89
Servers
6000/8000’96
Workstation
Palmtop’97
PDA
Tandem
Mainframes
Digital
Solutions & Services MS
Joystick
Diversification
Spinoff
IBM
Rolm
Aptiva
900
Turn
Horizontal Integration
Operating Systems MS
WinNT
WinXP
WinCE
Linux
Unix
Vertical
Integration
Forward
Work Stations
Compilers MS
Visual
Sun
Java
Vertical
Integration
Backward
Iconography, Syntax, Structure, Process, Patterns
Application Programs
Word
Excel
Access
Outlook
Explorer
Navigator

12. Health-Care Corporate Arena
FDA
Ministry of Health
GMP
Drug Manufacturers
Ethical
Generic
Vitamed
GSK
Teva
Teva
NovoPharm
IMS
Distributors
American
Hospital
Supplies
CTS
Pharma
Lemon
Glaxo IL
Novolog
Product
Specialists
EDI
Disease
Management
Health Management Org.
Advertising
Clalit
Shahal
Macabi
Admin
Tele
medicine
Boosh: Average Innovative prescription $72 vs. Generic $17
Copaxon: 1/day vs. Biogen’s Avanx 1/Week. April 2002 launched (British) Owen Mmford’s Pre-Filled syringe+autoject (hides needle, no need to fill with water, stored 7 days at room temperature(good for travel), can be used by deteriorating patient, can move freely, improves accuracy and consistency of injection: depth adaptor) + more discipline: Patients loose motivation to inject between seizures. Complaints: dull,thicker harder needle, partial injection – left in syringe.
Yoram Gabizon, “Given Imaging’s customer base grew to 26 million insured in the US”, Haaretz, July12,2002, p.10ג
Intercontinental Medical Statistics: IMS health: $8K average pharma firm spends $20M/year. PDS bought
Yoram Gabizon, “Shahal”, Haaretz, p.C10, monitor=ניטור
Shahal: FDA approval for 12/12:patient performs and transmits EKG including electro-cardio activity from 12 angles.
Cardio US Response time for short cardiac arrest 215 minutes shorter for Shahal patients (=mental suppression to call or not)->reduced damage to heart muscle and reduced daqnage to quality-of-life. Reduced redundant hospitalization days of 80% of 3.3Million patients complaining of chest pains, hospitalized with no attack. Telemedicine cost per diem=$30 vs. hospital=$1,200. Telemedicine 2000=20% to $2.8B.
Yoram Gabizon, “CardGuard”, Haaretz, p.C10, : Heart and lung monitoring system
M&A:1/2001 purchased Life Watch emergency services 70K subscribers, 8/2001: Instrumedics (San Diego) good brand competitor. Q12001: Quality diagnostic Services: 50K subscribers- cardio telemedicine.
List
Pharmacies
SuperPharm
ShorTab
Macabi
Physicians
Web
eMed
Prescription
Public
Prescription Drugs
Over the Counter

13. Electronic Markets and Electronic Hierarchies Malone et. Al
Electronic Markets and Electronic Hierarchies Malone et. Al., Modeling Coordination in Organizations and Markets
Decentralized Market
Supplier1
Supplier2
Supplier3
Customer1
Customer2
Customer3
Centralized Market
Supplier1
Supplier2
Supplier3
Broker
Intermediary
InfoMediary
Customer1
Customer2
Customer3

14. Rebuilding the value chain: Benchmark Capital
Microsoft’s Nathan Meirvold:
“Anyone standing between suppliers and customers will become road-kill on the information highway.”
Manufacturer/
publisher
Wholesaler/
distributor
E-retailer
Reintermediation
Portal/
aggregator
Disintermediation
Consumer
The e-commerce matrix
Business
Consumer
B2B
GM/Ford
EDI networks
B2C
Amazon
Dell
C2B
Priceline
Accompany
P2P
Ebay
Napster
Rebuilding the value chain: Source: Benchmark Capital; The Economist

15. E-Hubs: The new B2B Marketplaces. Steve Kaplan.
The Forward Aggregator Model
The Reverse Aggregator Model
IBM
Compaq
Cisco
Microsoft
Large Suppliers
Dow
Dupont
Ashland 3M
Large Suppliers
Direction Of
Aggregation
Direction Of
Aggregation
E-hub: Fulfillment, call center, Distributor
financing, configurators
Ingram
Micro
Distributors
Small resellers
E-hub: Fulfillment, Inspection,
Receivables, Financing Integrator
FOB.com
Buyers
Small Buyers
Forward: integrators, Backward: bundling.
Steven Kaplan and Mohanbir Sawhney, Harvard Business Review, May-June 2000
What Businesses Buy
Operating
Inputs
Manufacturing
How Businesses
Buy
Systematic
Sourcing
MRO Hubs
Ariba, W.W.Grainger, MRO.com, BizBuyer.com
Catalog Hubs
Chamdex, SciQuest.com, PlasticsNet.com
Spot
Yield Managers
Employease, Adauction.com, CapacityWeb.com
Excanges
E-steel, PaperExchange.com, Altra Energy, IMX Exchange

16. Equipment Providers/Integrators
Telecom Market
Component Providers
Orkit
Vocaltec
ECI
Commatch
Aptonics
Amdox
Radcom
Nice
Gilat
ADC
Seabridge
Motorola
Comverse
Comtouch
Equipment Providers/Integrators
Nortel
Lucent
Alcatel
Cisco
Siemens
Service Provider
Small Telco
BLEC
ILEC
CLEC
Large Telco
DLEC
Access Technologies
Fiber
Copper
Satellite
Cable
Cellular
Arena streaming: Audiocodes: Supplier, distributor, potential purchaser. Siemens: Supplier, competitor.
Seamfree
New Yorker, September 18, 2000, J. Sorowiecki, “The Most Devastating Retailer in the World”.P.74
D. Bovet and J. Martha, “Value Nets”
Galicia, Spain, Tradition
Customers
MTU
SoHo
Campus
Rural
Suburban
Business

17. Garment Manufacturers
Time-To-Market: TTM
Standard
Zara
Focus
Cost
Speed
Manufacture
O/S
Vertical
Info. Tech.
Cash Registers
Hand Held devices
Models/Yr
>11K
TTM
6 Months Design+
3M Manf..
4-5W design+1M
10-15Days
Delivery
1/Season
2/Week
Bad
products ?
Off in
Weeks
Inventory turnover
3*Gap
Adv. Camp.
None
Profits
+30%/year NW
H&M
GAP
Zara
Mfg. Eur.vs. Asia
50%
17%
80%
Design to Delivery
6-8Months
6Months
2-5 Weeks
Inventory Unsold
25%
20-30%
15-20%
Profit margin
12.4%
10.6%
14.9%
Sales $Bill
$3B
$13.7B
$2.6B
Fabric
Inditex’79
23 Robot
cut & Die #3
>40%
Tefron
HiTex
Far
East
Delta
Garment Manufacturers
400 Small
Shops
>50%
Far
East
Benetton
Solog
Inner
Secret
Labels
St.Michael
M&S
Victoria’s
Secret
Benetton CK
Zara ‘75
H&M
900
suppliers
GAP
Stryker McGuire, “Fast Fashion”, Newsweek, September17, 2001, pp
Carla Vtzthum, Wall street Journal, “Just in time Fashion”, pp. B1,B4
Seamfree Santori? Hennes & Mauritz AB
New Yorker, September 18, 2000, J. Sorowiecki, “The Most Devastating Retailer in the World”.P.74
D. Bovet and J. Martha, “Value Nets”
Galicia, Spain, Tradition
Retailers
Benetton
Zara
467Stores
Walmart
25-35years
Anti Gap
Older&
Wealthier
College Crowd
Trendy Urban
Late Teens
Cost Conscious
Girls 12+Up
Cheap cool
Zara
467Stores
Massimo Duti
207
Pull&Bear
238
Stradivarius
114
Bershka
127
Macy’s
Customers