JNTU Strategy for Entrepreneurs by Kevin J Boudreau Research Paper Provide a 1 page summary each for the 11 papers listed
1 – A Short Guide to Strategy for Entrepreneurs
2 – Blue Ocean Strategy, Chapter six, Get the Strategic Sequence Right
3 – Dear Boss- Your Team Wants You to Go on Vacation
4 – How Fast Should Your Company Grow_
5 – Howard Marks New Tax Opinion
6 – Howard Marks New Tax Opinion
7 – Managing Risks- A New Framework
8 – Managing Risks- A New Framework
9 – The Big Lie of Strategic Planning
10 – The Different Approaches Firms Use to Set Strategy
11 – Why Family Businesses Come Roaring out of Recessions STRATEGY
A Short Guide to Strategy for
Entrepreneurs
by Kevin J. Boudreau
OCTOBER 17, 2017
ILYAKALININ/ISTOCK
It sometimes appears that the traditional rules of business are being upended by today’s megatrends of multisided platforms, big data, machine learning and AI, crowdsourcing, the internet of
things (IoT), and more. These trends have transformed the world of business immeasurably. But
they have certainly not repealed the timeless rules of strategy.
Yet for too many entrepreneurs, especially those steeped in tech and devoted to product, strategy
often seems to be an afterthought. Experiment and create a great product, the thinking goes, then
scale, and then figure out the business model once you’ve succeeded. It’s true that nothing beats
having a compelling product that customers badly want. However, while good products and good
“shopkeeping” are surely good business, they are no substitute for clear-minded strategy.
Savvy entrepreneurs and business founders might come across any number of tool kits and
frameworks — from jobs to be done to business model canvases to disruptive business models and
industry forces, all while seeking blue oceans, and so on. Each of these has value and can be the
source of useful ideas, but each represents only part of what strategy can offer.
The challenge of strategy is to develop an integrated view of the workings of your business and how
it creates and captures value within its operating environment. So, rather than develop allegiance to
one piece of the strategy puzzle, founders are best served by familiarizing themselves with the basic
tenets of the field.
What’s more, my academic research on strategy in the contexts of multisided platforms, crowds, big
data, machine learning, and IoT shows that it is only when timeless tenets are applied that
entrepreneurs can sensibly plot strategy. Today’s strategy is just too complex, dynamic, and
demanding to rely on partial storylines.
As a professor teaching strategy, most recently at Harvard Business School and Northeastern
University, I have tried to offer the minimum essential explanation of an integrated view of strategy,
to combine the best of the many frameworks that exist, show how they relate to one another, and
distill the field to the essentials that entrepreneurs need to know to get started.
I’ve published my notes to that effect in a hundred-page working paper, and I won’t try to sum
up the entire effort here. Strategy is hard work, and there are no magic shortcuts. What I offer here is
a starting point: the most basic questions that every successful business must answer.
Entrepreneurs who design their business around these questions will have a leg up when it comes to
crafting strategy.
To begin, you can sketch out your answers to these questions on a single index card.
What Value Are You Intending to Create, and for Whom?
Customers buy products and services because they perceive value in them. The first step toward a
successful strategy is to clarify how you plan to create value, and for whom. That means defining
who your customers are. That’s the first blank space on the index card above: Whom are you
serving? Your customers may be defined by any number of attributes — age, geography, interests,
the particular scenario or use case they find themselves in, or any number of other things.
The next step is to define your value proposition, also known, among other things, as a job to be
done or a problem you intend to solve. That’s the second space: What are you offering? This is an
area of strategy that greatly overlaps with other fields such as design thinking, and there is endless
reading and an endless numbers of frameworks and practices you can refer to. Central questions to
ask include: What dimensions of a solution does your customer value — speed, cost,
customizability? In what dimensions is your solution better than the competition? Where is it at
parity? Where is it worse? (Remember, it is usually not possible to be better than the competition on
each and every dimension.)
You can think of the value you intend to create in a marketplace as akin to a position on a game
board. Your position is defined by the combination of your customer scope and your value
proposition. The best imaginable position is to offer a product that is highly valued and demanded
by customers and sufficiently unique as to defy duplication by competitors (more on that in a bit).
If you’re not sure how to answer these first two questions, think about your customers and their
preferences. What do they want more of, and what do they want less of? For example, perhaps your
customers value both variety and lower prices. How do you compare with competitors along those
dimensions? Perhaps your value proposition is to offer the lowest possible price, but at the expense
of the variety offered by your competitors.
How Do You Plan to Deliver That Value?
In plotting your position in the market, defining how you’ll create value and for whom, you also
need to define your operating model. The operating model is the set of choices and practices
defining how to carry out the business. This will typically imply a set of trade-offs in trying to find a
combination of activities that allows you to stake out your position — delivering certain dimensions
of your solution better than the competition.
This may be the most difficult of the questions listed above, since designing the operating model
means sorting out choices across the entire enterprise that need to work together. A successful
operating model is more than just “how you make money”; it’s a set of decisions that together
create more value than each would on its own. It’s about doing things that reinforce each other, to
create a whole that’s more valuable than the sum of its parts.
To get started, think about the steps in your value chain, and list any key practices that appear to
distinguish your company. Then think about how those practices fit together. Where are there
complementarities, where one activity is made more valuable by another? Finally, think about how
these practices connect to the position you’ve sketched out. How do these complementary activities
create value for your customers?
What Is Your Competitive Advantage — Your Sources of Uniqueness?
The last question on the index card is perhaps the central question of strategy: Why won’t you be
copied? Even if you’re delivering a great product that customers love and making money doing it, if
competitors can easily enter the market and copy you, economic theory suggests they’ll drive your
profits down to zero.
There are many sources of competitive advantage, but they come in roughly two broad categories.
Resource-based advantages are based in unique assets or inputs that are valuable, rare, hard to
imitate, durable, and specific to your organization. Position-based advantages involve your role and
the position you occupy in your industry — things like scale and incumbency or network effects and
early entry. Think about the resources you have that would be hardest for competitors to copy, as
well as any advantages that your position confers. What would keep another company from
replicating your operating model?
Understanding LinkedIn’s Business
The questions I’ve outlined leave out plenty of aspects of strategy. (Again, have a look at the full
notes for a complete account.) Nonetheless, they offer a starting point for understanding a business
and how it plans to succeed. Consider how LinkedIn might have answered these questions: It’s a
multisided platform, so its index card may look more complex than most. It has one value
proposition for job seekers and another for recruiters and consultants. Its operating model
emphasizes free access and easy onboarding, which in turn creates scale. Scale offers a competitive
advantage in the form of network effects. The more users LinkedIn has on the platform, the more
valuable it is for everyone. (In my notes you can see an example where I’ve sketched LinkedIn’s
answers, along with other businesses.) The card suggests some fit between LinkedIn’s activities. It
has a theory of the value it will provide, how, to whom, and why its model won’t be easy to copy. In
other words, it has a strategy.
One big limitation of this analysis is the fact that this depiction is static: It ignores how competitors
react to each other and how industries and technologies change. As you design your business,
whether from the ground up as an entrepreneur or by evolving a legacy operation, you’ll want to go
deeper into the field of strategy, to expand your theory of how you create and capture value. But
don’t lose sight of the fundamental questions that underscore a business’s success: offering
products and services that customers want, selling them for more than they cost to deliver, and
having some plausible reason for why competitors can’t easily copy you if it works.
Kevin J. Boudreau is an associate professor of Entrepreneurship and Innovation at
Northeastern University.
This article is about STRATEGY
FOLLOWING
Related Topics: ENTREPRENEURSHIP
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CHAPTER 6
Get the Strategic
Sequence Right
Y
to discover possible
blue oceans. You’ve constructed a strategy canvas that
clearly articulates your future blue ocean strategy. And you have
explored how to aggregate the largest possible mass of buyers for
your idea. The next challenge is to build a robust business model to
ensure that you make a healthy profit on your blue ocean idea. This
brings us to the fourth principle of blue ocean strategy: Get the
strategic sequence right.
This chapter discusses the strategic sequence of fleshing out and
validating blue ocean ideas to ensure their commercial viability.
With an understanding of the right strategic sequence and of how
to assess blue ocean ideas along the key criteria in that sequence,
you dramatically reduce business model risk.
O U ’ V E L O O K E D A C R O S S PAT H S
The Right Strategic Sequence
As shown in figure 6-1, companies need to build their blue ocean
strategy in the sequence of buyer utility, price, cost, and adoption.
118
F O R M U L AT I N G B LU E O C E A N S T R AT E G Y
F I G U R E 6-1
The Sequence of Blue Ocean Strategy
Buyer utility
Is there exceptional buyer utility
in your business idea?
No—Rethink
Yes
Price
Is your price easily accessible
to the mass of buyers?
No—Rethink
Yes
Cost
Can you attain your cost target
to profit at your strategic price?
No—Rethink
Yes
Adoption
What are the adoption hurdles in
actualizing your business idea?
Are you addressing them up front?
No—Rethink
Yes
A Commercially
Viable
Blue Ocean Idea
The starting point is buyer utility. Does your offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it? Absent this, there is no blue ocean potential to begin
with. Here there are only two options. Park the idea, or rethink it
until you reach an affirmative answer.
Get the Strategic Sequence Right
119
When you clear the exceptional utility bar, you advance to the
second step: setting the right strategic price. Remember, a company
does not want to rely solely on price to create demand. The key
question here is this: Is your offering priced to attract the mass of
target buyers so that they have a compelling ability to pay for your
offering? If it is not, they cannot buy it. Nor will the offering create
irresistible market buzz.
These first two steps address the revenue side of a company’s
business model. They ensure that you create a leap in net buyer
value, where net buyer value equals the utility buyers receive minus
the price they pay for it.
Securing the profit side brings us to the third element: cost. Can
you produce your offering at the target cost and still earn a healthy
profit margin? Can you profit at the strategic price—the price
easily accessible to the mass of target buyers? You should not let
costs drive prices. Nor should you scale down utility because high
costs block your ability to profit at the strategic price. When the
target cost cannot be met, you must either forgo the idea because
the blue ocean won’t be profitable, or you must innovate your
business model to hit the target cost. The cost side of a company’s
business model ensures that it creates a leap in value for itself in
the form of profit—that is, the price of the offering minus the cost
of production. It is the combination of exceptional utility, strategic
pricing, and target costing that allows companies to achieve value
innovation—a leap in value for both buyers and companies.
The last step is to address adoption hurdles. What are the adoption hurdles in rolling out your idea? Have you addressed these up
front? The formulation of blue ocean strategy is complete only
when you can address adoption hurdles in the beginning to ensure
the successful actualization of your idea. Adoption hurdles include,
for example, potential resistance to the idea by retailers or partners. Because blue ocean strategies represent a significant departure from red oceans, it is key to address adoption hurdles up front.
How can you assess whether your blue ocean strategy is passing
through each of the four sequential steps? And how can you refine
120
F O R M U L AT I N G B LU E O C E A N S T R AT E G Y
your idea to pass each bar? Let’s address these questions, starting
with utility.
Testing for Exceptional Utility
The need to assess the buyer utility of your offering may seem selfevident. Yet many companies fail to deliver exceptional value because they are obsessed by the novelty of their product or service,
especially if new technology plays a part in it.
Consider Philips’ CD-i, an engineering marvel that failed to offer
people a compelling reason to buy it. The player was promoted as
the “Imagination Machine” because of its diverse functions. CD-i
was a video machine, music system, game player, and teaching tool
all wrapped into one. Yet it did so many different tasks that people
could not understand how to use it. In addition, it lacked attractive
software titles. So even though the CD-i theoretically could do almost anything, in reality it could do very little. Customers lacked a
compelling reason to use it, and sales never took off.
Managers responsible for Philips’ CD-i (as well as Motorola’s
Iridium) fell into the same trap: They reveled in the bells and whistles of their new technology. They acted on the assumption that
bleeding-edge technology is equivalent to bleeding-edge utility for
buyers—something that, our research found, is rarely the case.
The technology trap that snagged Philips and Motorola trips up
the best and brightest companies time and again. Unless the technology makes buyers’ lives dramatically simpler, more convenient,
more productive, less risky, or more fun and fashionable, it will not
attract the masses no matter how many awards it wins. Think, for
example, of Starbucks, Cirque du Soleil, The Home Depot, Southwest Airlines, [yellow tail], or Ralph Lauren: Value innovation is
not the same as technology innovation.
To get around this trap, the starting point, as articulated in
chapter 2, is to create a strategic profile that passes the initial lit-
Get the Strategic Sequence Right
121
mus test of being focused, being divergent, and having a compelling
tagline that speaks to buyers. Having done this, companies are
ready to expressly assess where and how the new product or service
will change the lives of its buyers. Such a difference in perspective
is important because it means that the way a product or service is
developed becomes less a function of its technical possibilities and
more a function of its utility to buyers.
The buyer utility map helps managers look at this issue from the
right perspective (see figure 6-2). It outlines all the levers companies can pull to deliver exceptional utility to buyers as well as the
various experiences buyers can have with a product or service. This
map allows managers to identify the full range of utility spaces that
a product or service can potentially fill. Let’s look at the map’s dimensions in detail.
F I G U R E 6-2
The Buyer Utility Map
The Six Stages of the Buyer Experience Cycle
1.
Purchase
The Six Utility Levers
Customer
productivity
Simplicity
Convenience
Risk
Fun and
image
Environmental
friendliness
2.
Delivery
3.
Use
4.
5.
Supplements Maintenance
6.
Disposal
122
F O R M U L AT I N G B LU E O C E A N S T R AT E G Y
The Six Stages of the Buyer Experience Cycle
A buyer’s experience can usually be broken into a cycle of six
stages, running more or less sequentially from purchase to disposal. Each stage encompasses a wide variety of specific experiences. Purchasing, for example, may include the experience of
browsing eBay as well as the aisles of The Home Depot. At each
stage, managers can ask a set of questions to gauge the quality of
buyers’ experience, as described in figure 6-3.
The Six Utility Levers
Cutting across the stages of the buyer’s experience are what we call
utility levers: the ways in which companies can unlock exceptional
utility for buyers. Most of the levers are obvious. Simplicity, fun
and image, and environmental friendliness need little explanation.
Nor does the idea that a product might reduce a customer’s financial, physical, or credibility risks. And a product or service offers
convenience simply by being easy to obtain, use, or dispose of. The
most commonly used lever is that of customer productivity, in
which an offering helps a customer do things faster or better.
To test for exceptional utility, companies should check whether
their offering has removed the greatest blocks to utility across the
entire buyer experience cycle for customers and noncustomers. The
greatest blocks to utility often represent the greatest and most
pressing opportunities to unlock exceptional value. Figure 6-4
shows how a company can identify the most compelling hot spots to
unlock exceptional utility. By locating your proposed offering on
the thirty-six spaces of the buyer utility map, you can clearly see
how, and whether, the new idea not only creates a different utility
proposition from existing offerings but also removes the biggest
blocks to utility that stand in the way of converting noncustomers
into customers. If your offering falls on the same space or spaces as
those of other players, chances are it is not a blue ocean offering.
How long does it take
to get the product
delivered?
How difficult is it to
unpack and install
the new product?
Do buyers have to
arrange delivery themselves? If yes, how
costly and difficult
is this?
How long does it take
to find the product
you need?
Is the place of
purchase attractive
and accessible?
How secure is the
transaction
environment?
How rapidly can you
make a purchase?
Delivery
Purchase
The Buyer Experience Cycle
F I G U R E 6-3
Does the product or
service deliver far more
power or options than
required by the average
user? Is it overcharged
with bells and whistles?
How effective are the
product’s features and
functions?
Is the product easy to
store when not in use?
Does the product
require trainin…
Purchase answer to see full
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