FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Arena Layers: Corporate, Business Function- Define Hierarchy Refinement Stages: Arena, Focus, Action Create Strategy ARENAARENA FOCUS ACTIONACTION Arena actors: Partners, Threats; Current, Future Tailored Patterns. Dynamic Vectors: Change, Vision, Scenario. Guru 2 Gorilla Corporate Layer: Portfolio Businesses Maximize Value Function Layer: Process, Project and Product Agile value drive Business Layer: Positioning Products by Market Strategy Filter Criteria Prioritize attention Manage Control span The Fox Knows many tricks. The Hedgehog knows one big trick: Isaiah Berlin שמות י"ח: וישב משה לשפט את העם. ויעמוד העם על משה מן הבוקר עד הערב... ויאמר חותן משה אליו. לא טוב הדבר אשר אתה עושה. נבל תבל גם אתה גם העם אשר עמך כי כבד ממך הדבר לא תוכל עשהו לבדך... ואתה תחזה מכל העם אנשי חיל יראי אלהים אנשי אמת שונאי בצע... והיה כל הדבר הגדול יביאו אליך וכל הדבר הקטן ישפטו הם והקל מעליך ונשאו אתך. ויבחר משה אנשי חיל מכל ישראל ויתן אתם ראשים על העם. The ARENA Genome: Harmonic Strategic Planning

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Nortel: from End-To-End solutions to Focus Nortel 2001 crisis: Share price drops from $80 to $6, 2000 sales: $31B; John Ross: Up 30%; 2001: $20B Backbone optical 2000 sales: $10B; 2001: $1B. Most profitable product line: sales>$1M/day now<$1M/week. Margins: 30% -> 7%-10% Optical component lead times: 6-12 months… End 2000: 96,000 workforce; 2001:<50,000 Lucent: Discontinued 300 of 600 products. Countries Technologies Products Wireless Networks Optical Networks IP Backbone Sales > $1Billion/Year 50 Only Legacy Last time buy Enterprise System houses -> Value Added Reseller: High development & customization abilities Marketing, Sales and System engineering abilities Technical support and subcontractor management abilities. Local presence and working relationships. Africa Customers NAmerica East Europe South America EMEA

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Stan Shih: Navigating the PC Industrys Value Curve The PC industrys profit pool, HBR Going Global: Lessons from Late Movers, HBR, March-April, 2000 Software 15% CPU 35% DRAMLCDASIC Monitor 10% Motherboard Local Assembly 2.5% Local Sourcing Marketing Distribution E-commerce 15% Local Assembly

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Edutainment Channel Bottleneck: Edutainment to Content Development $100K-$10M: $1.5M Distribution $40/Unit; Myst:2M Copies $1b<96 Enabler 96=20M MMPC $2K, 20MX5CD/PC/YearX$40=$4B Producer + Distributor=$2 $1M/$2=0.5M Make it<200 Retail: $8 Average: $10 Research Development Manufacturing Distribution Retail Customer Research Development Manufacturing Distribution Retail Customer Drugs/ Aviation Chemicals/ Fabs Retail<1% #2,700/95 Content ProgrammingBackbone Access Set-Top Box Customer The Content Bottleneck Rocks Law: The cost of building a fab doubles every four years > $50B end of decade Media: Turner (MGM), Sony(Columbia)

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Focused-Arena-Strategy: FAST Core Strengths/ Weaknesses Action Arena: Opportunities/Threats Vision Focus Core: Root-Cause-Analysis Current-Reality-Tree Undesirable-Effects UDE Causality Root Problems Core-Competence-Tree Assets Causality Core Competencies Arena:PEST Stakeholder Analysis Porter: Risk Ansoff: Matrix Scenario Critical-Success-Factors Focus Critical-Success-Factors Core Competencies Root Problems Gap Analysis Economic Value Added Ease Value Oyster Pearl White Elephant Fruit Vision: Cyclone Contained Compound Action Resources Mission Milestones Real Options Core Competence Cyclone Assets Accomplishments Value

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Focused-Arena-Strategy: FAST Core Competence Cyclone Assets Accomplishments Value Core Arena FocusAction Vision UPS - $30B Global business: 1907-Local messenger service 1920-Retail delivery consolidator 1950-Common carrier (postal) 1975-National company 1986-Global company 1988-Airline (fastest startup) 1992-Information business (worlds largest package tracking system) rd party logistics provider 1994-a Dot-Com 1995-a same-day delivery service 1997-e-commerce facilitator (delivers>50% online purchases) 1998-a financial services company UPS capital 1999-a public company 2000-an integrated global supply chain company IBM: Services Software Hardware 16% 22% 62% 51% 16% 33% Credit Suisse First Boston Technology 1994 Boards 1998 Modules 2000 Chips 1995 Over 400M VoIP min VoIP min Over 40% Global IP Carrier Traffic Market Share 99&00 Systems2001

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Internal Scoreboard: FAST1 Core-Competence-Tree - CCTTree Accomplishments - External Strengths: Assets Internal+Stakeholder Challenges: External Weaknesses: UDEs Undesirable-Effects Internal+Stakeholder Root Problems Current-Reality-Tree - CRT Root Cause Analysis: Corporate Scoreboard Positive Reinforcing Cyclone Quality Rework Margins Negative Reinforcing Loops Core Competencies Outsourcing Products Projects Core Competence Cyclone Assets Accomplishments Value Core Arena Focus Action Vision

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Fast 3: Arena Scenarios Ansoff Product Line OldNew MARKETMARKET Market Development: Corporate Layer Diversification: Corporate, Business &Function Old Market Penetration: Functional Layer Product Development: Business Layer The Firm Old Market Old Firm Old Market Old The Firm Old Market Old New Market Old New Firm New Market New Firm Old Market Old Firm Breadth Market DevelopmentProduct Development Depth Vertical Depth Boutique PenetrationDiversification Core Competence Cyclone Assets Accomplishments Value Core Arena Focus Action Vision

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Fast 4: Gap 2 -Analysis Critical-Success-Factors 1.Trump Factor :מקדם שליטה Window-Of-Opportunity Entry Barriers Stakeholders Key Value Drivers Core-Competencies Given Competencies a Scenario and a Vision: 1.Trump factor: Will competencies trump the scenario? 2.Thrust factor: Whats the scenarios thrust at vision? Core Competence Cyclone Assets Accomplishments Value Root-Problems Core Arena Focus Action Vision

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Business Action: Komatsus strategic Roll-out – Skinning the Cat Maru-C: Encircle Caterpillar Protect home market against Caterpillar (81:50% world earth-moving equipment vs.16%) Licensing deals with: Cummins Engine, International Harvester. Acquire technology and establish benchmarks. Project Ace: Advance quality of small and medium-sized bulldozers above Caterpillars Quality Circles companywide to provide training for all employees Reduce cost while maintaining quality Cost Down Total Cost Down Make Komatsu an international enterprise and build export markets Develop Eastern bloc countries Komatsu Europe marketing subsidiary established Komatsu America established Project B to improve durability and reliability and reduce cost of large bulldozers Project C to improve payloaders Project D to improve Hydraulic excavators Establish presale and service department to assist construction projects in newly industrializing countries Respond to external shocks that threaten markets V-10 program to reduce costs by 10%; reduce parts by 20%. ¥180 program to budget companywide for ¥180/$ when exchange rate was ¥240/$ Response to Oil Crisis: Project E establish teams to redouble cost and quality efforts. Create new products and markets Accelerate product development to expand line. Future and Frontiers program to identify new businesses based on societys needs and company know-how. EPOCHS: reconcile greater product variety with improved production efficiencies. (84:Caterpillar=43% world earth-moving equipment vs.Komatsu=25%)

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Fast 1: Core-Competence-Tree - CCT Owner Value was created High Sales Growth rateSales to Market Leaders Strong Sales Department Good Engineering And Production Good Inter-functional Communications Technological Innovation and Professionalism Influence in Standards Committee Rapid multidisciplinary System view Development High employee Motivation Sales and Partnership with Leading Firms Technological Leadership Vision, Leadership and Managerial Ability Choice People working in an atmosphere of excellence

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Fast 1: Current-Reality-Tree - CRT Firms Market Value is Insufficient The Firm is Losing Money No Exit New markets Require Education Product Not Differentiated Enough No access to The end User Must Sell More Not enough Strategic Gating in R&D Product Over-Specification and Over-Design No Awareness to M&A Objectives Excessive Technology Orientation High Burn Rate Small Player In Giants Arena Focus on single New Technology A Firm with Technological and Tactical Excellence Lacking Financial Market Expertise and Backing

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Challenges Core-Competences 1 st Tier Customers Excellent R&DTechnological Leader Root-Problems Focus on a single New Technology Small player in giants Arena High Burn Rate Critical-Success-Factors Rapid Product Development Size Brand recognition Partnership with Market Leader Fast 4: Market-Gap-Analysis

FAST:Focused-Arena-Strategy Copyright 2002 Alex Coman Importance to the firm Strategic Tactical Strategic Grid WeakStrong Ease to Implement Fast 5: Action-Focus-Analysis Develop new Product line Establish Brand Recognition Partnership with Market Leader Cost Reduction