BUSINESS PLAN OUTLINE http://www.sbm.temple.edu/iei/competitions.html

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BUSINESS PLAN OUTLINEhttp//www.sbm.temple.edu/ie
i/competitions.html

• Executive Summary
• Company Description
• Including product/service technology/core
  knowledge
• Industry Analysis Trends
• Target Market
• Competition
• Strategy/Business Model
• Marketing and Sales Plan
• Production/Operations Plan

Technology Plan Management Organization Social
Responsibility Development Milestones Financials
Including Capital Requirements Financial
Statements Appendix
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STRATEGY FUNNEL
Goal Articulate and execute long-term,
defensible offer of unique value to customers
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WHAT IS STRATEGY?

• Plan
• Process
• Position
• Pattern
• Perspective
• Procedure
• Play
• Ploy

• Strategic Tactics

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STRATEGIC MANAGEMENT
Vision

• Disciplined, iterative process of driving towards
  vision, by finding or making and maintaining a
  defensible space or trajectory in a given
  business environment.

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STRATEGY CHECKLIST

• Value proposition
• Vision
• Position or direction
• Structure or resource base
• Revenue business model
• Timeline or guidelines
• Fit

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VALUE PROPOSITION

• Specific, concrete offer of benefits
• Price, quality, convenience, choice,
  cost-savings, reliability, etc
• To precisely defined customers
• Who recognize that the offer solves a problem for
  the
• EG Our clients grow their business, large or
  small, typically by a minimum of 30-50 over the
  previous year. They accomplish this without
  working 80 hour weeks and sacrificing their
  personal lives.

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VISION

• Stable core
• Mission Central audience core product/service
• Ideology Values, principles, culture
• Focused ambition
• Concrete picture of successful impact
• Serious, scary stretch goals
• Disciplined experimentation

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VISION EXERCISE

• Stable core
• Mission
• Ideology
• Focused ambition
• What success will look like in the marketplace
• One audacious goal

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POSITION OR NAVIGATION?

• Position Strategies
• Unique, valuable, defensible position in a market
  or industry
• Supported by a tightly integrated value chain /
  activity system
• Good for relatively stable industries/markets
• Navigation Strategies
• Vision-driven nurturing and leveraging of core
  resources
• Supported by tight culture and explicit learning
• Good for dynamic industries/markets

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STRATEGIC POSITIONS REQUIRE NICHES

• A niche includes the market the firm is uniquely
  qualified to serve

External Opportunities Threats
Niche
Internal Strengths Weaknesses
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STRATEGIC SITUATION
Social, political, regulatory, technological
community
Industry Attractiveness, dynamics, competition
Unmet customer needs desires
External Factors
Strategic Situation
Competitive position (through customers eyes in
industry)
Resources (know-how, people, money, etc)
Internal Factors
Vision, values culture
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Match SW to OT
Internal Factors
Strengths(S)
Weaknesses (W)
External Factors
SO Strategies -------------------------
WO Strategies ------------------------
Opportunities (O)
Offset weaknesses to take advantage of
opportunities
Use strengths to take advantage of opportunities
ST Strategies --------------------------
WT Strategies -------------------------
Threats(T)
Use strengths to avoid threats
Min. weaknesses to avoid threats
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SWOT EXERCISE

• Map SW to OT..

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TWO LEVELS OF STRATEGY

• Corporate
• Growth
• Retrenchment
• Stability
• Business
• Cost (price) Leadership
• Differentiation
• Focus

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GROWTH STRATEGIES

• Concentration
• Vertical and Horizontal
• Diversification
• Concentric
• Conglomerate

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GROWTH THROUGH CONCENTRATION

• Concentrate resources on a single business
• Concentrate vertically, i.e., backward or forward
  (supply or distribution)
• Concentrate horizontally by growing
  geographically or by expanding product or service
  offering

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MEANS TO ACCOMPLISH GROWTH

• Mergers
• Acquisitions
• Internal Growth
• Strategic Alliances
• International

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DIVERSIFICATION

• Used if firms current product lines do not have
  much growth potential
• Benefits
• Economies of Scope
• Increase market power
• Share infrastructure
• Maintain growth

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CONCENTRIC (RELATED) DIVERSIFICATION

• Outperform unrelated diversification
• Best when
• low industry attractiveness
• strong business strengths
• strong competitive position
• Allows use of distinctive competence
• Seek synergy

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CONGLOMERATE (UNRELATED) DIVERSIFICATION

• Best when
• Firm operates in unattractive industry
• Firm lacks abilities or skills easily
  transferable to related industry
• Focus is financial not core competence or
  synergy
• Balance cash flows
• Reduce risk

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STABILITY STRATEGIES

• Pause and Proceed with Caution
• No Change
• Profit

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RETRENCHMENT STRATEGIES

• Turnaround
• Captive Company
• Sell out or Divestment
• Spin-off
• Management buyout (MBO)
• Bankruptcy or Liquidation

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BUSINESS LEVEL STRATEGIES

• Cost (price) leadership
• Efficiency and scale
• Differentiation
• Quality, design, support/service, image -- that
  make a product or service special
• Focus
• Explicit tie to a broad or narrowmarket segment

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EXAMPLES

• Cost (price) leadership
• Dell Computers (logistics, volume)
• Motel 6 (location, services, salespeople).
• Southwest Airlines (corporate culture, service)
• Differentiation
• Quality (Mercedes)
• Design (Apple)
• Service (Nordstrom).
• Image (Nike).
• Special niches (Zitners candied apples
  independent films)

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EXAMPLES

• Focus
• Broad (Wal-Mart - rural)
• Narrow (NSP - activists, NRI - network
  administrators)
• Segmented (Computer security spooks and
  commerce, Financial services rich, poor and
  in-between.)

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VALUE DISCIPLINE POSITIONING

• Product Leadership
• (Differentiation)

• Operational Excellence
• (Cost Leadership)

• Customer Intimacy
• (Focus)

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VALUE DISCIPLINES

• Product Leadership - Compete on Speed
• Good design, great execution
• Educate lead the market
• Ad hoc, risk oriented culture
• Organization designed for innovation
• Operational Excellence - Compete on Scale
• Low price, limited options, ultimate convenience
• Managed customer expectations
• Measurement culture
• Processes transactions continually
  redesignedfor efficiency

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VALUE DISCIPLINES

• Customer Intimacy - Compete on Scope
• Offerings tailored to customers segments
• Deep insight into customer needs
• Problem solving service culture
• Full range of services, so customers stay
• Breakthrough thinking, unique solutions

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POSITION STRATEGY EXERCISE
Choose a position strategy and explain how you
will achieve it.
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STRATEGIC POSITIONS REQUIRE FIT

• Fit refers to the integration of every part of
  firms internal structures to better serve a
  niche.
• Well-positioned firms craft themselves to serve
  niches better than others.

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FIT ENTREPRENEURIAL ADVANTAGE

• Possibility of crafting a perfect fit between
  specific opportunities and internal capabilities
• Firms that fit opportunities extremely well have
  an advantage over bigger, stronger opponents
• Examples
• Dollar Express vs Dollar Tree
• Youthbuild vs School District
• Giovannis Room vs Borders

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VALUE CHAIN
After SalesService
InboundLogistics
OutboundLogistics
Marketing/Sales
Operations

• A strong value chain is a cross-linked net of
  activities that affects the cost or performance
  of the whole.
• Supporting a strategy by optimizing both
  individual functions and the links between them
  to support a strategy yields a powerful, durable,
  hard-to-duplicate advantage.

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ACTIVITY SYSTEM

• A less linear way of thinking about the internal
  fit that supports strategy.
• Map crucially interrelated features and functions
  that define a firms unique skills and strategy.
• Support competitive advantage with reinforcing
  patterns or systems.

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IKEAS ACTIVITY SYSTEM
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EXPERIENCE CURVE

• For positional strategies, experience is the
  ultimate source of advantage.
• Experience fuels the tacit knowledge that drives
  productivity improvements, innovations,
  elaborations of strategy, etc
• Successful firms are especially good at creating
  the social and institutional structures that
  support the shared development of such tacit
  knowledge

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FIT EXERCISE

• Draw the value chain for your firm
• Note reinforcing (and jarring) pieces
• Try to create more reinforcements
• OR
• Jot down functions and features
• Look for patterns and connections
• Try to crystallize patterns

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BUSINESS MODEL

• A business model describes what a firm will do,
  and how, to build and capture wealth for
  stakeholders
• Effective business models operationalize good
  strategies -- turning position and fit into
  wealth

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FOUR ASPECTS OF BUSINESS MODELS

• Revenue Sources
• Cost Drivers
• Investment Size
• Critical Success Factors

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REVENUE SOURCES

• Subscription/Membership
• Fixed amount at regular intervals prior to
  receiving product/service
• Volume/Unit-based
• Fixed price in exchange for product/service
• Advertising-based
• Exempt from fee or pays fraction of the value
• Licensing Syndication
• One time fee
• Transaction fee
• Fixed fee or percentage of total value of
  transaction

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COST DRIVERS

• Fixed item costs do not vary with volume
• Semi-variable variable fixed costs
• Variable item costs vary with volume
• Non-recurring item of cost occurs infrequently

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INVESTMENT SIZE

• Maximizing finance needs
• Positive cash flow
• Cash Breakeven

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CRITICAL SUCCESS FACTORS

• An operational function or competency that a
  company must possess in order to be sustainable
  profitable
• Perform sensitive analysis

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EFFECTIVE BUSINESS MODELS BUILD CAPTURE WEALTH

• Build wealth
• By efficiently (profitably) transforming inputs
  into something that customers value enough to pay
  for again and again and again
• By supporting growth
• Capture wealth
• By siphoning off some of the accumulated wealth
  for stakeholders
• And by developing recognizable value strategic
  positions, know-how, customers, free cash flow,
  lifestyles, social impact that can be captured

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EFFECTIVE BUSINESS MODELS REQUIRE HARD CHOICES

• About who matters
• Owners, investors, family, workers, community
• About what kind of wealth matters
• Financial capital, social capital, intellectual
  capital...ie., cash, good life, rich family life,
  entrepreneurial impact, social impact
• About the strategy that will deliver the wealth
  that matters to the stakeholders that matter
• About the structure that supports strategy

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BUSINESS MODELS START WITH WHAT THE WORLD GIVES

• 1.Describe the landscape
• Porter
• Environment, industry, and relevant trends.
• 2. Paint in competitors
• Competitor table. Perceptual maps.
• What do you need to play? How do competitors
  compete? What opportunities exist?
• 3. Identify strengths weaknesses
• Vision, skills, core technologies

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BUSINESS MODELS ARE BASED ON STRATEGY

• 4. Identify stakeholders you must serve
• Owners, family, workers, community
• 5. Identify the wealth you will capture
• Capital, good life, family life, fame
  entrepreneurial effectiveness, social value
• 6. Choose a position or approach
• And elaborate a strategy to realize this
• Especially a revenue model

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BUSINESS MODELS DEFINE STRUCTURE

• 7. Sketch a structure to operationalize the
  strategy
• Value chain, activity system, culture, simple
  rules
• 8. Work out the implications
• Functional strategies
• Timeline and milestones
• Financial projections capital needs
• Path to profitability, sale, or other
  realizationof value

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BUILD A BUSINESS MODEL EXERCISE

• Opportunity
• Stakeholders
• Wealth
• Strategy

• Revenue Sources
• Cost Drivers
• Investment Size
• Critical Success Factors

• Model
• Structural implications, timing, capital needs,
  etc.

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GOOD EXECUTION IS MORE IMPORTANT THAN GOOD
STRATEGY!

• Seeing a position or approach is fundamentally
  creative
• Immersion, scenarios, future search,
• Constructing a strategy involves careful analysis
  and planning
• Executing a strategy requires relentless
  discipline

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BIBLIOGRAPHY

• Verna Allee, Reconfiguring the Value Network,
  The Journal of Business Strategy, 21 (4), PP
  36-39.
• R Boulton, B Libert, S Samek, A Business Model
  for the New Economy, The Journal of Business
  Strategy, 21 (4), July-August 2000, pp 29-35.
• James Collins Jerry Porras, Built to Last
  (HarperBusiness, 1994).
• Richard DAveni, Hypercompetition (Free Press
  1994).
• Kathleen Eisenhardt Donald Sull, Strategy as
  Simple Rules, Harvard Business Review, January
  2001.
• Mark Feldman Michael Spratt, PWC, Five Frogs on
  a Log A CEOs Guide to Accelerating the
  Transition in Mergers, Acquisitions and Gut
  Wrenching Change, (HarperBusiness 1999).
• Craig Fleisher Babette Bensoussan, Strategic
  and Competitive Analysis (Prentice Hall, 2003).
• Pankaj Ghemawat, Strategy and the Business
  Landscape (Prentice Hall, 2001).
• G. Hamel C. K. Prahalad, Strategic Intent,
  Harvard Business Review, May-June 1989.
• Robert Hamilton lecture notes, 1998.
• Robert Hamilton, E. Eskin, M. Michael, "Assessing
  Competitors The Gap between Strategic Intent and
  Core Capability", International Journal of
  Strategic Management-Long Range Planning, Vol.
  31, No. 3, pp. 406-417, 1998

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BIBLIOGRAPHY (CONTINUED)

• TL Hill lecture notes, 1999, 2001, 2002
• J. D. Hunger T.L. Wheelan, Essentials of
  Strategic Management (Prentice Hall, 2001).
• Ivan Lansberg, Succeeding Generations (Harvard
  Business School Press, 2000).
• B. Mahadevan, Business Models for Internet-based
  E-Commerce, California Management Review, 42
  (4), Summer 2000, pp 55-69.
• Henry Mintzberg James Brian Quinn, Readings in
  the Strategy Process, 3rd Edition (Prentice Hall,
  1998).
• Henry Mintzberg Joseph Lampel, Reflecting on
  the Strategy Process, Sloan Management Review,
  Spring, 1999.
• Alex Moss, Praxis Consulting presentation on
  worker ownership, 1999
• Sharon Oster, Modern Competitive Analysis, 2nd
  Edition (Oxford University Press, 1994).
• Michael Porter, Competitive Advantage (Free
  Press, 1985).
• Michael Porter, What is Strategy?, Harvard
  Business Review, November-December 1996.
• Jim Portwood lecture notes, 1998.
• C.K, Prahalad G. Hamel, The Core Competence of
  Corporations, Harvard Business Review, May-June,
  1990.
• Pamela Tudor, Notes on responsibility charting,
  1999
• Hamermesh, Marshall Piromohamed, Note on
  Business Model Analysis for the Entrepreneur,
  Harvard Business School, 2002.