cdl (strategy) class 1
TRANSCRIPT
CDL (Strategy) Joshua Gans, 2014-15
Joshua Gans
Kristjan Sigurdson
Capitalised with great fanfare as a disruptive start-up aimed
at overturning traditional grocers, Webvan positioned
itself as an integrated substitute for supermarkets
With a much smaller capitalisation, and focusing on online grocery delivery
using existing chains, Peapod positioned itself as a
complement to traditional supermarkets
Two entrepreneurial companies…both having access to significant resources…
seeking to exploit the same opportunity….at the same time….
With fundamentally different strategies
Webvan ultimately burned through ~ $1 billion and went bankrupt less than two years
after its IPO…
Peapod established a partnership with Ahold
(Stop&Shop), who ultimately acquired majority ownership.
Highly profitable niche business, with Parkinson brothers still in
direct operational control of the company…
Why do some start-up firms earn extraordinary returns while others struggle to even survive?
What are the key strategic trade-offs facing innovation-driven entrepreneurs, and what factors should
guide strategy development and implementation?
How can I make informed choices that allow me to establish and sustain a long-term competitive
advantage?
Is Entrepreneurial Strategy Simply Coming up With a Great Idea?
“If a man can make a better mousetrap than his neighbour, though he lives in
the woods the world will make a beaten path to his door”
Ralph Waldo Emerson
Is Entrepreneurial Strategy Simply Coming up With a Great Idea?
“If a man has good corn, or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles, or
church organs, than anybody else, you will find a broad, hard-beaten road to his
house, though it be in the woods.”
-Ralph Waldo Emerson
Paradox of Entrepreneurship
Paradox of Entrepreneurship
Coming to market requires:
1. Market Knowledge - the process of gathering knowledge2. Market Experimentation - inherently limits the scope of
competitive advantage
Paradox of Entrepreneurship
Coming to market requires:
1. Market Knowledge - the process of gathering knowledge2. Market Experimentation - inherently limits the scope of
competitive advantage
Entrepreneurial Strategy is the plan a founder (and theirteam) undertakes to identify a system for value creationand value capture before the opportunity for value captureis dissipated.
• Combines systematic experimentation and learning with escalating strategic commitments
• Not a passive process, but the active choices that allow a firm to establish priorities, achieve internal coherence, time irreversible commitments, and ensure value capture
• A plan for choosing what NOT to do
Business Model/
Strategy
Business Model/
Strategy
Business Model/
Strategy
Business Model/
Strategy
Idea
Business Model/
Strategy
Business Model/
Strategy
Business Model/
Strategy
Business Model/
Strategy
1.Separate out core idea from strategy
2.Envision alternative business models
3.Conduct strategic analysis on each
Idea
The 4 Choices that Shape Entrepreneurial Strategy
Perfo
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Effort (Funds)
Perfo
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Effort (Funds)
Perfo
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Effort (Funds)
The 4 Choices that Shape Entrepreneurial Strategy
Lytro Light Field Camera • launched in 2011 • large VC interest • Jobs approach • $90m funding
Chose to build own product rather than
license with a partner.
“I am thrilled to finally draw back the curtain and introduce our new light field camera company, one that will forever change how everyone takes and experiences pictures. Lytro’s company launch is truly the start of a picture revolution.”
-Ren Ng, Lytro Product Launch, 2011
Review: Lytro still in early-adopter territory
Alice Truong, 2013
“The first time I came across Lytro last spring, a member of the product team explained to me that this revolutionary camera — purported to let you shoot now and focus later — isn't just for early adopters….
“In recalling this moment almost a year later, I decided to pack Lytro into my bag as I was heading on holiday…not to say I don't see Lytro's lure, but the experience proved to me that this is still very much in early-adopter territory…..
The 4 Choices that Shape Entrepreneurial Strategy
If you work at Chipotle, or Panera, or McDonald’s you might think we’re crazy
At Clover we do a lot of things unlike other fast food companies. Why? For taste of course.
It’s hard to overstate how radically different we operate vs. our competitors. The way we operate is unheard of in our industry. I mean unheard of to the point that others don’t believe me until I show them around. No, really, there is no back-of-house, everything we do is visible to our customers. At Clover we:
• Have no freezers. In the entire company. Not one. • Change our menu day-to-day to stay in sync with the best tasting seasonal
ingredients. • Cut food as close as we can to when you’re going to eat (e.g., tomatoes are cut
when you order) • Keep your money in your region. (40-85% of our ingredients are from the Northeast) • Use an unheard of amount of organic ingredients (typically 30-60% depending on
time of year) • Don’t EVER use any preservatives, “natural flavors,” “flavor enhancers,” “artificial
flavors”* • Make food that will improve your health (no need to tell the kids, but that food is
good for them) • Allow you to see us making your food. We have no “back of house” anywhere in our
company. • 100% of what we hand you is compostable. OK, nothing to do with taste. But it’s
the right thing to do.
The 4 Choices that Shape Entrepreneurial Strategy
Hipstamatic was launched in 2010 as a $1.99 iPhone app
with over a million users paying for the app and enhancements.
Instagram was launched in 2010 as a free iPhone app
with an emphasis on sharing with over two million users.
In 2011, Hipstamatic refused acquisition offers from Twitter and
changed to focus on sharing.
Instagram was acquired by Facebook in 2012 for around
$700 million.
OTI Lumionics
Michael Helander, CEO
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Maximum Consumer Is “Willing to Pay” for the Product
Price the Consumer Ultimately Pays for the Product
Production Cost Spent by the Firm on the Product
Number of Consumers who Purchase the Firm’s Product
“Traditional” Value Creation and Capture
But, this assumes we know the B and the C …
For a start-up innovator, the first task is figuring out how much value is being created (and for whom)…
The Challenge of Entrepreneurial Strategy
TRADITIONAL STRATEGY ENTREPRENEURIAL STRATEGY
Clear understanding of customers and willingness-to-pay
Clear relationship between value delivery (“B”) and cost structure (“C”)
Static Industry Structure
Sufficient resources and time to achieve operational effectiveness
Potential opportunities to establish a position that can then be made immune to competition
Diffuse understanding of customer needs and potential willingness-to-pay
Significant uncertainty about how investments and other costs shape value delivered
Highly dynamic and uncertain industry structure
Limited (and uneven) resources, unstructured organization, and limited time
The Paradox of Entrepreneurship
Your individual challenge …
Find a recently established venture (2011 or later)
Describe what they are doing
Identify their core idea
Identify their business model in terms of the 4 choices