MIST 7500 - Fall 2013; B1 - Business Strategy Models

In this week's class, we expanded on business modeling and how it can be used to formulate/analyze a business strategy.

Based on the authored works of John Hagel and Marc Singer, they believe companies are comprised of three different segments.

1. Customer Relationship Management - The business segment that finds customers and tries to maintain them.
2. Product Innovation Business - The segment that creates new products or services.
3. Infrastructure Management - The management of essential operational components such as policies, operational processes, HR, etc.

These three components are very different in their initiative and scope of operation. At times they can be incompatible.

They expanded on the modeling aspect and determined that through their research, they are seeing five business model patterns emerge:

• Unbundling - Shedding off all the "extras" while maintaining the primary business. (Ex. Telecom companies spinning off their maintenance and service departments to independent contractors.)
• The Long Tail - Offering extended product lines to diversify the business and expand the customer base. (Ex. Netflix offering 1000's of Indy/European films that wouldn't have been exported to other countries many years ago.)
• Multi-Sided Platform - Mutual collaboration between separate companies. (Ex. Nintendo Wii brings together game players and developers on their gaming platform.)
• Free - Offering free products and supplementing revenues from a less-traditional source. (Ex. Trial versions that let you test software, before you buy.)
• Open Business Model - Allowing collaboration from many sources to improve products. (Ex. Linux is an open source operation system, with thousands of programmers around the world making improvements.)

Finally, we wrapped up the night with Porter's Five Forces. This is a simple yet effective format to determine the strengths and weaknesses of an industry from a company perspective. Each force is then rated as high, medium, or low threat. A high threat means it is easy to break into the industry and be successful, such as techy/IT businesses. A low threat means it is hard to break into the industry. There could be no room for growth, or government regulations that prohibit "easy" entry, such as the automotive industry.

Porter's Five Forces

1. Threat of New Entry
2. Buyer Power
3. Supplier Power
4. Threat of Substitution
5. Competitive Rivalry

Porter later added a sixth force: Business Complementors. These can be positive (Hulu and the major networks) or negative (government intervention and activist groups).
A simple diagram illustrating the five forces model (taken from simpletemplates.com).

 

A lot of useful information that can help businesses determine their opportunities for success. That is all for now. Until next time...