Pankaj Ghemawat in his book on the subject, Redefining Global Strategy, presents two strategic frameworks to help companies operate across borders. Two specific frameworks are – ADDING Value Scorecard and AAA.

The ADDING Value Scorecard is a framework to help companies assess whether a particular strategic move makes sense to add value to the business both locally and globally.

The acronym stands for –

• A – Adding volume, or growth;
• D – Decreasing costs;
• D – Differentiating or increasing willingness—to—pay;
• I – Improving industry attractiveness or bargaining power;
• N – Normalizing (or optimizing) risk;
• G – Generating and deploying knowledge (and other resources and capabilities).

One more framework to help companies deal with cross-border differences; it’s called the AAA triangle which stands for adaptation, aggregation and arbitrage.

• Adaptation strategies are designed to help companies adjust to differences across borders;
• Aggregation strategies are designed to help companies overcome some country differences by grouping them based on similarities;
• Arbitrage strategies seek to profit from some of these national differences rather than treating them as constraints.

Pankaj Ghemawat also has a blog, What in the World, on globalization. For my blog “Get off the drawing board”, the context of “learn-to-burn ratio” that he talks about in his blog entry  is topical.

• Recognize the value of options (alternatives) in an uncertain world. Strategy options often vary greatly in their "learn-to-burn" ratios – the rate at which they generate information about which scenario will come to pass versus the rate at which they commit resources to particular scenarios. Once you take this kind of option value into account, it opens the door to additional strategic possibilities: e.g., mixed supply chains (rather than complete offshoring or onshoring), toeholds as ways of exploring new markets and, more generally, sequenced strategies.

“Multi-sided Platform” is one of the business model patterns. Multi-sided Platform brings together two or more distinct but interdependent groups of customers. Such platforms are of value to one group of customers only if the other groups if customers are also present. The platform creates value by facilitating interactions between the different groups. A multi-sided platform grows in value to the extent that it attracts more users, a phenomenon known as the “Network Effect”.

“Network effects” and “Positive feedback loops” are economic terms that describe the snowballing benefits to front-runners in some markets.

For example, the more people that use Google search, the more data the company has, and that data is the raw material for refining its search results further. And the greater its market share in search, the more advertisers wants their ads placed on Google to reach the largest audience. That, in turn, solidifies Google’s position as the dominant ad market, and strengthens its pricing power. According to Bill Gates, “There are several positive feedback loops in this business, and they are particularly powerful”.

A business model describes the rational of how an organization creates, delivers and captures value. A business model dictates the long term and short term strategies for competitive advantage which in turn get translated to Operating model (Business Process, Technology, People, Ownership and Metrics) for execution. One example for “Multi-sided Platform” is developing a gaming platform. The platform’s value for a particular user group depends substantially on the number of users on the platform’s “other sides”. A video game console will only attract buyers if enough games are available for the platform. On use it. On the other hand, game developers will develop games for a new video console only if a substantial number of gamers already.

• From a strategic perspective, one way multi-sided platforms solve this problem is by subsidizing a customer segment. Though a platform operator incurs costs by serving all customer groups, it often decides to lure one segment to the platform with an inexpensive value proposition in order to subsequently attract users of the platforms “other side”.
• From an operating model/execution perspective, the organization aligns the sales, marketing, services, and support functions to deliver margins required by business for success.

Business Models, Strategies, and Operating Models are interrelated.

Link to the complete article is here.

• Promote employee acceptance of change. Cisco IT addressed change concerns through a variety of awareness and education efforts. For example, employees participated in a one-day workshop to learn about demand clearing basics. This also validated the demand clearing process and provided feedback to the operating model team. Additional workshops, presentations at team meetings, and monthly CIO update presentations also promoted employee understanding and acceptance of the new Cisco IT Operating Model.
• Use the right methodologies for the problem. The design and deployment of the IT operating model used components of multiple methodologies and process frameworks including ITIL (especially within operations and management processes) and Six Sigma/Lean methodologies for cross-functional process design. No single approach had all the answers; a combination of various methodologies gave the best overall result in designing and delivering the operating model.
•  Provide reminders that an operating model involves more than governance. Discussions about a new IT operating model and the associated design of new processes can easily slip into a focus on governance because people are more knowledgeable and comfortable with that concept. Everyone involved in implementing the operating model can benefit from reminders that its focus is more on collaboration than control:  collaboration among diverse Cisco business groups and IT, and collaboration across diverse IT groups, which requires a shift to a broader level of thinking about IT processes, strategies, and decisions. 
• Deploy the new model in stages. Cisco IT executives know that the scope of the operating model meant its changes could not be implemented all at once. Instead, Cisco IT is following a phased implementation and assessing progress against an organizational maturity model. Using a structured approach to the operating model deployment also allows integration with other complementary organizational initiatives.

My question to you – “How do you develop an Operating Model designed for effective collaboration?”

Padmasree Warrior, Cisco Systems’ CTO, notes the following predictions in her blog post –

1. Collaboration Networks will be to Enterprises what Social Networks are to Consumers
2. It is not about “on-premise” versus “on-demand”, it will be all about the User Experience
3. Innovation will be redefined by Operational Excellence
4. Organizations without boundaries will drive the next wave of productivity
5. Information Technology will evolve into Information Fabric

According to Forrester, Capability Map is a model of the firm associating the business capabilities, processes, and functions required for business success with the IT resource that enables them.

A business is characterized by the capabilities required for that business to accomplish its objectives. Each capability is itself a collection of actions the business takes — like responding to a customer’s service request or defining sourcing strategies for new products.

In a business capability map, each business capability is associated with -

1. Business goals. The importance of a capability is characterized by expected outcomes resulting from the capability, expressed as strategies, objectives, and metrics. These work best when business management defines specific results for each capability — like reducing cost per package-mile for a shipping capability. But outcomes will inevitably cross multiple capabilities — like the goal of speeding idea-to-product time, which spans market research, product development, and manufacturing capabilities.
2. Processes and functions — and the information they work on. Business capabilities comprise business processes and functions that flow within and across them — like the process order-to-ship, which spans capabilities like sales, order taking, inventory management, and shipping. And the business processes and functions have information they work with — like order-to-ship process and associated applications, which manage a list of goods requested by a customer against finished-goods inventory or manufacturing capacity.
3. The “bill of IT.” A business capability map employs a “bill of IT” — the collection of the hardware, software, and IT services required to enable a specific business capability. The bill of IT is simple when there are dedicated systems but becomes complicated when a single system supports multiple capabilities — as in a virtualized data center.
4. Future-state capabilities. Capability maps can be the basis for comparing the “as is” and a “to be” state, yielding a picture of capability, process, and bill of IT gaps between these two states. And because the model maps capabilities to business goals, organizations, processes, and information, the future-state capabilities can form the basis for both IT and business planning.

I was watching a show on CNBC about Nike where there was a question posed to the VP of Nike about human work conditions at factories in Vietnam. The reply got my attention – “How do you run an equitable, just Global Supply Chain?”. The market wages are determined by the Government; the inflation rises due to various macro economic factors; and the quality of living – infrastructure, housing, food, education is dependent on the investments made by public and private sectors. I understand that there is Corporate Responsibility to drive awareness and influence the government to take measures to improve the living conditions for the people of that country, while the company takes care of the working conditions.

Multi-national companies are constantly searching for mechanisms/framework to improve or increase profitability back to the shareholders. Outsourcing, Near/off-shoring, BPO, and Joint Ventures are a result of strategies resulting in Operating Models. The same Operating Models create new challenges that the companies must address – one of them is equitable just global supply chain.

I would like to hear your comments, and thoughts on this topic.

Getting business results from analysis has become a more important facet of competitiveness due to a number of important reasons:

1. Globalization has increased the absolute level of competition present in most marketplaces.
2. Global economy is increasingly being characterized as a knowledge economy.
3. New economy is characterized by increasing imitability, whereby competitors have a greater ability than ever before to quickly replicate and copy most facets of a new product or service offerings.
4. Problems and opportunities are caused by increasing complexity and speed.

All these reasons necessitate good competitive insights which requires effective analysis. The following 10 methodologies will help you evaluate data and information more effectively and more decision relevant:

1. BCG Growth/Share Portfolio Matrix
2. Competitor Analysis
3. Financial Ratio and Statement Analysis
4. Five Forces Industry Analysis
5. Issue Analysis
6. Political Risk Analysis
7. Scenario Analysis
8. Macro environmental (STEEP/PEST) Analysis
9. SWOT Analysis
10. Value Chain Analysis

Enterprise Architecture as Strategy recommends that to execute Business Strategies, it is essential to first build the Foundation for Execution. And to develop the foundation for execution, it is very important to understand the current Operating Model of the company.  

What is an Operating Model?

An Operating Model is the necessary level of business process integration and standardization for delivering goods and services to customers. An Operating Model describes how a company wants to thrive and grow. By providing a more stable and actionable view of the company than strategy, the operating model drives the design of the foundation for execution.

1.       Operating Model is recommended to support a company’s strategy. Foundation for Execution is the IT infrastructure and the digitized processes automating a company’s core capabilities.

2.       Choice of an operating model is a critical decision for a company. It’s the first step in building a foundation for execution. An operating model enables rapid implementation of a range of strategic initiatives.

3.       Operating model is a choice about what strategies are going to be supported.

Market Strategy Viability

Hugh Courtney’s interview in the McKinsey Quarterly clearly articulates the need to rethink the Strategic planning processes. In the months to come, decisions will have to be made quickly on fundamental opportunities that may drive company’s earnings for the next decade or more. These decisions will have to be made in real time. That requires a continuous focus on market and competitive intelligence and far more frequent conversations among the top team about the current situation. Senior executives may not have the raw material and the structure to work through strategic decisions systematically. The daily leadership conversations have to move beyond getting through that day’s crisis to more fundamental strategic issues as well, because the decisions made today may open up or close off opportunities for months and years to come.

Also, corporations spend about $100 billion a year on management consulting and training, most of it aimed at creating strategy. Studies have found that less than 10 percent of effectively formulated strategies carry though to successful implementation. So something like 90 percent of companies consistently fail to execute strategies effectively.

The current financial woes of the companies are a sobering reminder that a Foundation for Execution cannot sustain a company if its market strategy is not viable.

Trying to understand….

When the range of strategic outcomes in uncertain environments is limitless, can the same operating model support initiatives with changing assumptions?