BUSINESS PLAN OUTLINE
http://www.sbm.temple.edu/iei/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
STRATEGY FUNNEL
Environmental Trends
Customer &
Benefits
Market
Segment,Size
Channels
Perceptual
Space
Value
Proposition
Industry
Structure
Competitive
Space
Industry
Competitive
Dynamics
Strategic
Positioning
Goal: Articulate and execute long-term, defensible offer of unique
value to customers
WHAT IS STRATEGY?
•
•
•
•
•
•
•
•
Plan
Process
Position
Pattern
Perspective
Procedure
Play
Ploy
• Strategic Management
• Strategic Position
• Strategic Navigation
• Strategic Tactics
STRATEGIC MANAGEMENT
Environmental Scanning
Evaluation &
Control
Mission
Strategy
Formulation
Vision
Strategy
Implementation
• Disciplined, iterative process of driving towards vision, by finding or
making and maintaining a defensible space or trajectory in a given
business environment.
STRATEGY CHECKLIST
• Value proposition
• Vision
• Position or direction
– Structure or resource base
• Revenue & business model
• Timeline or guidelines
• Fit
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.
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
VISION EXERCISE
• Stable core
– Mission:
– Ideology:
• Focused ambition
– What success will look like – in the
marketplace:
– One audacious goal:
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
–
STRATEGIC POSITIONS REQUIRE NICHES
• A niche includes the
market the firm is
uniquely qualified to
serve
External
Opportunities
& Threats
Niche
Internal Strengths &
Weaknesses
STRATEGIC SITUATION
External
Factors
Social,
political,
regulatory,
technological
& community
Industry
Attractiveness,
dynamics, &
competition
Unmet
customer
needs &
desires
Strategic Situation
Internal
Factors
Resources
(know-how,
people,
money, etc)
Competitive
position
(through
customers eyes
& in industry)
Vision, values
&
culture
Match SW to OT
Internal
Factors
External
Factors
Opportunities
(O)
Threats
(T)
Strengths
(S)
SO Strategies
-------------------------
Weaknesses
(W)
WO Strategies
------------------------
Use strengths to
take advantage of
opportunities
Offset weaknesses
to take advantage
of opportunities
ST Strategies
--------------------------
WT Strategies
-------------------------
Use strengths to
avoid threats
Min. weaknesses
to avoid threats
SWOT EXERCISE
Environment
Industry
Customer
External
Factors
Strategic Situation
Resources
Internal
Factors
• Map SW to OT..
Competitive
Position
Culture
TWO LEVELS OF STRATEGY
• Corporate
– Growth
– Retrenchment
– Stability
• Business
– Cost (price) Leadership
– Differentiation
– Focus
GROWTH STRATEGIES
• Concentration
– Vertical and Horizontal
• Diversification
– Concentric
– Conglomerate
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
MEANS TO ACCOMPLISH GROWTH

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


Mergers
Acquisitions
Internal Growth
Strategic Alliances
International
DIVERSIFICATION
• Used if firm’s current product lines do not
have much growth potential
• Benefits
–
–
–
–
Economies of Scope
Increase market power
Share infrastructure
Maintain growth
CONCENTRIC (RELATED)
DIVERSIFICATION
• Outperform unrelated diversification
• Best when
– low industry attractiveness
– strong business strengths
– strong competitive position
• Allows use of distinctive competence
• Seek synergy
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
STABILITY STRATEGIES
• Pause and Proceed with Caution
• No Change
• Profit
RETRENCHMENT STRATEGIES
• Turnaround
• Captive Company
• Sell out or Divestment
– Spin-off
– Management buyout (MBO)
• Bankruptcy or Liquidation
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 narrow
market segment
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 (Zitner’s candied apples; independent films)
EXAMPLES
• Focus
– Broad (Wal-Mart - rural)
– Narrow (NSP - activists, NRI - network
administrators)
– Segmented (Computer security – spooks and
commerce, Financial services – rich, poor and inbetween.)
VALUE DISCIPLINE POSITIONING
Product Leadership
• (Differentiation)
Operational Excellence
• (Cost Leadership)
Customer Intimacy
• (Focus)
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 redesigned
for efficiency
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
POSITION STRATEGY EXERCISE
Product Leadership
•(Differentiation)
Operational Excellence
•(Cost Leadership)
Customer Intimacy
•(Focus)
Choose a position strategy and explain how you will
achieve it.
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.
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
– Giovanni’s Room vs Borders
VALUE CHAIN
Marketing/
Sales
Inbound
Logistics
Operations
Human Resources
Technology
Outbound
Logistics
After Sales
Service
Margin
Infrastructure
Procurement
•
•
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.
ACTIVITY SYSTEM
• A less linear way of thinking about the internal fit
that supports strategy.
• Map crucially interrelated features and functions
that define a firm’s unique skills and strategy.
• Support competitive advantage with reinforcing
patterns or systems.
IKEA’S ACTIVITY SYSTEM
Explanator
y labeling
Selftransport
Limited
Customer
Service
Easy
transport
Suburban
Location
Limited
sales staff
Hightraffic
store
layout
Selfservice
Selection
Self assembly
Wide
variety
Most
items in
stock
On-site
inventory
Modular
Designs
Flat
packing
kits
Impulse
buying
Easy to
make
Customer
loyalty
Design
focused
on low
cost
Yearround
stocking
Low Mfg
Cost
Long-term
suppliers
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
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
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
FOUR ASPECTS OF
BUSINESS MODELS
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Revenue Sources
Cost Drivers
Investment Size
Critical Success Factors
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
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
INVESTMENT SIZE
• Maximizing finance needs
• Positive cash flow
• Cash Breakeven
CRITICAL SUCCESS FACTORS
• An operational function or competency that a
company must possess in order to be sustainable
& profitable
• Perform sensitive analysis
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
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
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
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
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 realization
of value
BUILD A BUSINESS MODEL
EXERCISE
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Opportunity
Stakeholders
Wealth
Strategy
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Revenue Sources
Cost Drivers
Investment Size
Critical Success
Factors
•Model
-Structural implications, timing, capital needs, etc.
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
BIBLIOGRAPHY
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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 D’Aveni, 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 CEO’s 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 ManagementLong Range Planning, Vol. 31, No. 3, pp. 406-417, 1998
BIBLIOGRAPHY (CONTINUED)
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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
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Pamela Tudor, Notes on responsibility charting, 1999
Hamermesh, Marshall & Piromohamed, “Note on Business Model Analysis for the
Entrepreneur,” Harvard Business School, 2002.