Strategy Dynamics: Sky TV subscribers ‘Strategic Management Dynamics’, 2008, by Kim Warren, from J Wiley & Sons. STRATEGIC MANAGEMENT DYNAMICS Kim Warren

© Copyright Kim Warren, All rights reserved. Example 1: Will Sky satellite TV hit 10 million subscribers by 2010 – as promised to investors back in 2004? 10,000 SKY SUBSCRIBERS 000s Jun 07 Sept 03 Mar Net new subscribers pq 000s Jun 07 Sept 03 Mar 10 There are 25 million households in total, most getting analogue TV services 14 quarters to +90,000 per quarter = + 1,260, just short of target … so strategy = give great deals [i.e. cut the price!] throw money at marketing Job done ? Here’s the situation mid-2007 after 3 years of effort …

© Copyright Kim Warren, All rights reserved. 10,000 SKY SUBSCRIBERS 000s Jun 07 Sept 03 Mar New subscribers pq 000s 400 Jun 07 Sept 03 Mar Subscribers lost pq 000s Sept 03 Jun 07 Mar Can Sky … 1. keep the win-rate up – or 2. slow down the churn? Where do new customers come from? How many are out there? Where do they go? … and why? How many have already gone [~3million]? Do they ever come back? Where else to potential customers go, and why? This framework alone provides big insight in surprisingly many cases – yes, ‘it’s obvious’, but only if you ask the question ! Will Sky hit 10 million subscribers?

© Copyright Kim Warren, All rights reserved. Example scenario for Sky satellite TV rivalry to 2010 As always, outcomes depend on the flow-rates. No realistic set of assumptions get Sky to 10 million See model of this situation on the strategy dynamics forum [go to Knowledge Exchange, Business]

© Copyright Kim Warren, All rights reserved. RBV - Resources, VRIO, intangibles and capabilities The problem [I believe]: ‘strategic’ resources drive performance ‘strategic’ = VRIO [valuable, rare, inimitable, and organisationally embedded … so simple tangible factors are dismissed But … The ‘performance’ of concern is assumed to be profitability, not earnings growth … or more generally, improving performance over time VRIO factors are abstract and ambiguous, described only vaguely and inconsistently in the literature A solution Profitability [or other performance] depends immediately on tangible factors These accumulate and deplete over time, and are interdependent. It’s ‘the system’ that drives performance, not a ‘list’ of resources, whether VRIO or not So … IF VRIO factors are to influence performance over time, they must do so by affecting the rate of accumulation of non-VRIO factors.... so we can’t ‘explain’ performance without including simple, tangible resources. i.e. You can’t explain airline performance without including ‘customers’ and ‘aircraft’ any more than you can ‘explain’ milk production without including cows !!