Implementation Issues CEDIR Program Summer 2001 Professor Ramiro Montealegre Implementation Issues

AGENDA FOR TODAY 8:30 - 9:20 Implementation issues 9:20 - 9:30 Break 9:30 -10:00 Group discussion 10:00- 11:00 Case STAPLES.COM 11:00 - 11:10 Break 11:10 - 12:00 Final review

Why Does Implementation Matter? Strategy Appropriate Inappropriate Success All that can be done to ensure success has been done Roulette Good execution can mitigate poor strategy, forcing management to success or Same good execution can hasten failure Good Implementation Trouble Poor execution hampers good strategy -- management may never become aware of strategic soundness because of execution inadequacies Failure Difficult to diagnose -- bad strategy masked by poor execution More difficult to fix -- two things are wrong Poor Source: Modified version of materials in Thomas V. Bonoma, The Marketing Edge, The Free Press, 1985

The Delivery System Needs to Support and Reinforce the Resource System Mapping the Resource System People Supply Chains Processes Systems Assets Source: Clayton M. Christensen, Meeting the Challenge of Disruptive Change, Harvard Business Review 78, no. 2, March-April 2000

Innovation is the mainspring of the new economy. Ideas are critical… Innovation is the mainspring of the new economy. But as more and more companies compete in ideas, the game changes to competing in the implementation of the ideas. In this next stage of competition: Getting an idea gives way to getting it done!

Where to Play: Online / Offline McDonnald’s Customer Interface Fulfillment Systems Yahoo! Bn.com Egghead Amazon.com Source: Rayport & Jaworski 2000

Marketspace Evolution and Need for Continuous Innovation Brand Promise Branding Marketing communications Customer interface Implementation Objectives Achieve strategic goals Adjust product offering and delivery system to rapidly changing marketspace environment Delivery System Innovation Process Deliver on the promised experience Renew/innovate the customer experience Source: Monitor Analysis

Form vs. Function

Content Archetypes vs Offering Types

Is Content King?

Communities: Elements, Types, and Benefits Elements of Community Types of Communities Member Outcomes: Participation and Benefits Just Friends Degree of Participation Cohesion Effectiveness Help Relationships Language Self-regulation Enthusiasts Need Fulfillment Inclusion Mutual Influence Shared Emotional Experiences Friends in Need Players Traders

Two Integral Components of Implementation Objectives Deliver the promised customer experience Turn strategic intent/concepts into results Build the infrastructure to deliver on the brand promise Objectives Maintain fit between marketspace evolution and the company’s delivery system and product offering Innovate/Renew the customer experience Source: Monitor Analysis

Case Discussion -- Staples.com CEDIR Program Summer 2001 Professor Ramiro Montealegre Case Discussion -- Staples.com

“Get Big Fast” Approach - Online revenue expected over next few years - Brand loyalties are malleable - “Winner-take-all” dynamics Network effect Scale economies Intrinsic ability to retain customers - Lifetime value of customer exceeds acquisition’s cost - Risks of competitor preemption is high - Can manage operational “growing pains” - Capital market rewards market leaders

Hawk or Dove? Dovish Choices Hawkish Choices - Sharing content - Separate physical location - Separate brand - Dedicated sale forces - Separate management - Separate reporting structure Dovish Choices - Sharing content - Insider CEO - Heavy cross-promotion - Double commissioning - Shared support systems

“Get it Right First” Approach - Protecting quality and brand is paramount - “Learning by doing” yields a big payoff

The Clicks-and-Mortar Spectrum Integration - established brand - shared information - purchasing leverage - distribution efficiencies Separation - greater focus - more flexibility - access to venture funding Strategic Joint In-house Spin-off partnership venture division Barnesand/ Rite Aid and Kbkids.com Staple.com nobles.com Drugstore.com

Which Clicks-and-Mortar Approach? Separation Integration Brand extends to Internet Different customer segment/product mix Price differently online and in stores Have Internet skills/experience Willing to judge Internet different Channel conflict Threaten current business model Distribution system translate well IS a solid foundation to build Are systems a competitive advantages Having trouble attracting/retaining talent Need outside capital to fund venture Is a supplier, distributor, or other partner key Brand Management Operations Equity

The Balanced Scorecard Strategy Into Operational Terms Financial To succeed financially, how should we appear to our shareholders? Customer To succeed financially, how should we appear to our shareholders? Internal Business Process To satisfy our shareholders and customers, what businesses must we excel at? Vision and Strategy Learning And Growth To succeed financially, how should we appear to our shareholders? Source: Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review 74 (January-February): 76, 1996

THE PRIMARY OBJECTIVES OF BOSTON.COM CASE STUDY WERE: 1) Discuss the threat and opportunity presented by the Internet to traditional media players. 2) Explore the strategic, operational, and financial questions an incumbent faces when implementing a Web initiative. 3) Evaluate the tensions between pursuing a “Get Big Fast” versus a “Get it Right First” implemen- tation strategy for incumbents who faces cannibalization.

CEDIR Program Summer 2001 Professor Ramiro Montealegre Final Review

Stages of Entrepreneurial Evolution Phase 1 Phase 2 Phase 3 Phase 4 Bureaucracy Complex Complexity Simple Coordination Achieving liquidity Control Growing the business Expertise Launching the product/service Building the business concept Young Organizational Age Mature

Competitive Positioning ECONOMIC POSITIONING What business are we in? Product/Service Market What is our position? Competition Value Are we creating value for all stakeholders ECONOMIC POSITIONING How will we make money? Revenue model Cost of designing, developing Cost model delivering, and maintaining Asset Model each product/service? Are we building and safeguarding assets? Business Performance Operating margins Operating Performance Budget performance Process performance Goals accomplishment Corporate Performance Financial performance Market share Attract qualified employees, Stakeholder loyalty partners, and investors Image, and reputation Enterprise Design Structure Is the extended enterprise Processes designed for: People & Culture - efficiency in decision making/action Technology - successful execution of strategy Resources - quick response to change

The Virtual Value Chain s t o m e r Content Place Space Context Infrastructure Value Chain Interface Demand

Economic Positioning Revenue Model How does (or will) the company achieve revenues from its products and services? Product sales Advertising Subscription fee Membership fee Commission Transaction fee Service/consulting fee Cost Model How much does it cost to operate the company and execute its strategy? People Advertising/Marketing/Sales Fees IT infrastructure Materials and supplies Physical infrastructure Asset Model Are we building and safeguarding assets? Financial assets Physical assets Intangible assets: Relationships Knowledge and expertise Agility Strength of brand

CEDIR Program Summer 2001 Professor Ramiro Montealegre THANK YOU!!!