Synesthesia

Over the summer I’ve been spending more time reading than writing, but even then the reading has been going more slowly than I expected! Just finished [bliki]Thinking Strategically[/bliki] and started to wrap my thoughts around [bliki]Strategy Maps[/bliki].

Unlike the previous books in my strategy reading which have focused on the [bliki]Game Theory[/bliki] approach to strategy, this book is more aligned to the core competence / resource-based view of the firm.

Strategy Maps are a visual way of drawing out the cause-and-effect relationships between the strategic success factors of a company, the internal goals that lead to them, the internal strengths that contribute to those goals and the necessary tangible and intangible infrastructure needed to develop those strengths. The authors bring in their earlier work on the [bliki]Balanced Scorecard[/bliki] by suggesting the map is stratified along the balanced scorecard axes of Financial, Customer, Internal and People/Knowledge factors.

My short-term goal is to look for a way to combine this approach with some elements of [bliki]Enterprise Architecture[/bliki] to create a pragmatic model for building strategic systems development plans.

Technorati Tags Books, Course_Notes, Strategy

I’ve been working through the books I added to my collection after the strategy course, especially Co-opetition
and (just started) Thinking Strategically.

When I was on the course, especially as we started to touch on the idea that certain strategies arise inherently from the structure of any situation (especially the [bliki]Value Net[/bliki]) it occurred to me that design patterns may be the natural way to express the thinking in a condensed form.

Unfortunately (in one sense) this was also a new idea to the people on the course, and as I didn’t have time to refresh my rather surface knowledge of pattern languages whilst I was on the course, I wasn’t really in a position to develop the thinking.

In the spirit of release early, release often, I’ve made a small start with this, indexed at Strategy Patterns, and will continue to build it as I work through the books and a review of my course notes.

Technorati Tags Business, Course_Notes, Patterns, pattern_language, Strategy

In the strategy course we touched on (in varying levels of detail) the three main views of company strategy - since the course finished I’ve been adding reading on all three to my “incoming” bookshelf:

The market-focused, competitive advantage approach of Michael Porter:

The resource-based view of the firm, typified by Hamel and Prahalad:

The game theory approach described by Dixit and Nalebuff:

and then popularised by by Brandenburger and Nalebuff:

Technorati Tags Books, Course_Notes, Strategy

Part 3 of the pre-work for the strategy course, based on the tram company fictional case study.

Continuing the [bliki]PARTS analysis[/bliki] started in part 2, I now look at Added Values. In [bliki]The Right Game[/bliki] Brandenburger and Nalebuff define Added Value as “the difference between the value created with the player included and the value created by the remaining players when that player is removed”

If we imagine the Biddiford economy without the tram company, clearly the overall income will be reduced by tram company revenues. There will be other effects too - in particular the businesses in Old Orchard Bay (which rely on the tram company as the monopoly source of transport to bring them their customers) are likely to see reduced revenues too. So the added value of the tram company is greater than the tram revenues alone.

Just as the Players analysis suggested that the Old Orchard Bay bars and restaurants were Complementors, and therefore that the tram company should explore strategies that worked to mutual benefit, the Added Value analysis suggests that the tram company should be able to extract more from that relationship - in one sense the bars and restaurants need the tram company more than the tram company needs them.

Technorati Tags Course_Notes, Strategy

More on the tram company pre-work for the strategy course.

Having identified one option fairly quickly by applying constraints thinking, I went on to use the [bliki]PARTS analysis[/bliki]:

Players
Using the [bliki]value net[/bliki] approach, who are the various players, and what do we know about them?

Customers
The customers fall into two groups:

• The local residents
  We know that they are price-sensitive, and regard the trip to Old Orchard Bay as only one option competing for their leisure time and spend.
• Peak-season tourists
  We are told that they regard the tram ride as a key feature of their visit and the fare is immaterial.

Combining these two factors gave rise to the seasonally-adjusted pricing strategy.

Suppliers
The only suppliers mentioned are:

• The contracted-out tram maintenance company.
  They are only mentioned in passing, so it is presumed they do a reasonable job.
• The staff who work for the tram company.
  It’s noted that the staff are on flexible contracts, and that there may be an opportunity to reduce staffing by making the driver role multi-functional. Training new drivers only takes 2-3 hours so it may be reasonable to assume that finding replacements for any who leave is relatively easy. So a later part of the strategy could be to reduce costs by introducing multi-skilling

Substitutors
There don’t appear to be any - the case study describes the tram company as having an effective monopoly on transport to Old Orchard Bay. A broader consideration, however, would be to consider the tram ride as an entertainment experience, therefore the Substitutors would be competing sources of entertainment that do not require the customers to take a tram ride - e.g. the attractions in Biddiford itself.

Complementors
The most obvious Complementors are the companies providing entertainment in Old Orchard bay, e.g. the bars and restaurants. They need the tram service to deliver their customers; the tram service needs them, to some extent, to create a demand for travel to the Bay. There may be demand stimulation strategies that are based on co-operation with Collaborators. Going further and considering how to stimulate competition amongst the Collaborators, there may be a way to exploit some kind of preferential relationship.

Technorati Tags Business, Course_Notes, Strategy

I’ve started looking at one of the pieces of pre-work for the strategy course.

Summary notes of the problem are here.

The challenge is to make the system profitable, with a strong steer to focus on increasing revenue. This post contains my first thoughts about a solution.

My first thought was to look at the constraints in the system - how could the management increase Throughput without increasing Operating Expense or Investment?

It would appear that there are different constraints at different times of the year.

In the peak summer season the trams run near capacity at all times, suggesting that there is excess demand, and the constraint is in the contribution received for each passenger carried. An easy strategy to try here would be to increase the fare price and thus the contribution per passenger carried. The case asserts that for the affluent tourists the current fare is insignificant, so the market should bear this.

In the early and late weeks there is excess capacity on the trams that run, suggesting that the market is the constraint. The passengers are mostly locals, and are price-sensitive. A 20% price rise has created a drop of 40% in passenger numbers in the early weeks of the season. If this is reversible then reducing prices in the off-peak part of the season should be offset by increased passenger numbers.

So strategy 1 is seasonally-adjusted pricing, with a reduction in the off-peak weeks and an increase during peak periods. There is a policy constraint that requires the average fare across the season to remain at $2.

Assuming that the price-sensitive drop in passenger numbers is reversible, then initial analysis suggests that reducing the price to $1.66 (i.e. a reduction to prices from 20 years ago) in weeks 1-13 and 25-32, combined with a price rise to $2.50 in weeks 17,18, 22-24 and to $2.60 in weeks 19-21 (the increases calculated to meet the average price constraint) will move the company to profitability, even accounting for the loss of state subsidy, wage increases and loan repayments.

To sense-check this would need some detailed figures on capacity which are not available in the study.

Technorati Tags Constraints, Course_Notes, Strategy

I’ve just received the joining instructions and pre-work for Developing Deliverable Strategies

There are two pieces of pre-work:

• The Right Game: Use Game Theory to Shape Strategy [notes]
• Will Biddiford’s Trams Make a Return? [notes]

Some interesting stuff to get my teeth into!

As I’ve noted here my learning goals are to:

• Enhance my ability to think strategically
• Gain further insight into overall business strategy and the ways to support and enhance that with technology.
• Understand the strategic drivers for organisational success.
• Acquire a toolkit for strategic thinking.
• Informal learning through networking with other delegates.

Technorati Tags Course_Notes, Learning, Strategy