Session 6 - Strategy implementation - 2024 - ADV

Strategy Implementation

Instructor: Arnaud DevleeschauwerProgram: Advanced Master in Innovation & Strategic Management, 2024

Importance of Partnership Strategy

• Growth Necessity: All companies require robust growth strategies to not only enhance their competitive positioning but also to mitigate operational costs and risks associated with market dynamics and economic fluctuations. Growth strategies can include market expansion, product development, and diversification.

• Resource Limitation: Not all organizations possess the expansive resources or assets required for growth strategies. As a result, forming strategic partnerships becomes crucial for leveraging external resources, expertise, and networks without the need for significant capital investments.

• Outside-In Approach: Businesses, including the largest corporations, must adopt an outside-in approach to identify new opportunities, reduce costs, and manage risks in an evolving landscape. This perspective encourages organizations to look beyond their current operations to discover innovations and improvements informed by customer needs and competitive pressures.

• Benefits of Strategic Partnerships: Effective strategic partnerships facilitate achieving these goals, enabling companies to combine their strengths and capabilities towards shared objectives that would be difficult to achieve independently.

The Balanced Scorecard Perspectives

1. Financial Perspective: This focuses primarily on revenue growth, profitability, and productivity metrics to enhance long-term shareholder value and ensure sustainability in financial health.

2. Customer Perspective: Understanding how customers perceive the company and its offerings is essential for achieving the company's vision and maintaining a competitive edge in the marketplace.

3. Internal Processes Perspective: Identifies the critical internal processes that must excel to satisfy customer needs, improve efficiencies, and support overall business objectives.

4. Learning and Growth Perspective: Concentrates on the necessary improvements and initiatives required to reach operational goals, foster innovation, and build capabilities that underpin future success.

5. Partnership Integration: Partnerships can be strategically integrated within the Strategy Map across all perspectives to ensure cohesive alignment with overall business objectives and performance metrics.

Types of Partnerships in Strategy Execution

• Marketing Partnership: Assists in creating a compelling value proposition for customers, transitioning from a traditional product focus to a more service-oriented approach, thereby increasing market relevance.

• Sales Partnership: Develops specialized sales and distribution strategies tailored to target niche segments, enhancing reach and effectiveness in penetrating specific markets.

• Innovation Partnership: Accelerates research and development efforts, embedding new technologies into the value proposition to drive competitive differentiation and enhance product offerings.

• Operations Partnership: Enhances operational efficiency through outsourcing or externalizing certain aspects of the value chain, enabling companies to focus on core competencies while benefitting from economies of scale.

• Technology Partnership: Provides essential access to IT foundations necessary for digital transformation, which supports innovation and improves operational capabilities.

• HR and Culture Partnerships: Can significantly influence company culture positively by fostering collaboration and tapping into diverse resource pools necessary for organizational growth and development.

Partnership Challenges

• Success Rate: Data indicates that over 50% of partnerships fail, often due to several underlying issues:

  • Underinvestment: Insufficient resources allocated to support partnership objectives, leading to unmet expectations and objectives.

  • Misalignment: Conflicted goals, unclear roles, and poor communication between partners can create barriers to success and cause misunderstandings.

  • Transaction Costs and Competition: Uncertainties related to customer ownership, intellectual property (IP) sharing, and conflicting incentives often hinder the potential effectiveness of strategic partnerships.

Forming Strategic Partnerships

• Types of Strategies:

  • Window Strategy Options: This strategy is suitable under high uncertainty, allowing organizations to explore diverse innovations and opportunities while simultaneously building capabilities.

  • Positioning Strategy: In scenarios of moderate uncertainty, organizations typically opt to partner for competitive advantages where capabilities between partners complement each other.

  • Examples with Universities and Startups: Partnerships aimed at developing new niches or innovative technologies have proven beneficial, particularly illustrated in sectors like the pharmaceutical industry where collaboration can lead to breakthroughs in drug development.

Case Study: Nestlé Innovation Partnerships

• Background: In 2007, Nestlé faced heightened competition from established players and emerging local companies.

• Innovation Drive: To combat this, Nestlé sought to innovate rapidly, adapting faster than its competitors by employing an open innovation model that invited external ideas and resources into its product development processes.

• Open Innovation Examples: Notably, Procter & Gamble has successfully leveraged crowdsourcing and strategic innovation partnerships, enhancing its capacity to accelerate product development cycles.

Organizing Partnerships to Fit Internal Needs

• It is crucial to align partnerships with core business strategies and internal capabilities to ensure that the partnerships reinforce organizational goals and improve performance outcomes.

Framework for Non-Organic Growth Strategy

• Types of Partnerships:

  • Non-equity Alliance: Collaborative efforts undertaken without a formal equity stake, offering flexibility while pooling resources.

  • Equity Alliance: Involves joint ventures or acquisitions that provide direct synergy opportunities and shared risk among partners.

  • Acquisition: Full buyouts occur typically when a high redundancy of resources exists and is seen as the most effective means to achieve integration.

• Market Uncertainty and Competition: The choice of strategic partnerships can vary greatly based on industry-specific uncertainty and competition levels, influencing a firm's approach to partnership management.

Telco Partnership Exercise: Home Hubs

• Focus on evolving from legacy business models towards establishing a comprehensive connected home service platform, thereby competing effectively against digital assistants and other technology hubs.

• This exercise identifies areas where telcos should consider forming partnerships versus pursuing acquisitions to enhance service offerings and expand market reach.

Channel Management Insights

• Channel Design: It is critical to select appropriate channels based on specific customer segments and the inherent nature of the products offered.

• Key Questions:

  • Which channels suit which segments?

  • How to design the channels for operational efficiency?

  • How to manage these channels effectively across various platforms and touchpoints?

Industry Mapping for Channel Strategy

• This process investigates the interplay of external and internal forces affecting channel dynamics, emphasizing the importance of understanding customer behaviors, channel capabilities, competitor actions, and broader external factors.

Google Glass: Distribution Challenges

• Explored Google’s initial ambitions, projected commercial viability, and distribution strategies as of 2012/2014, including aspects of market readiness and consumer adoption.

• Outcome: Google ultimately shifted its strategy, opting to partner with Luxottica for distribution but ultimately ceased retail sales shortly after, highlighting the challenges of aligning product innovation with market demand.

Summary of Takeaways

• Partnerships can be effectively leveraged for driving innovation, market penetration, and improving operational efficiency.

• A comprehensive understanding of both internal capabilities and external market conditions is critical for forming successful partnerships or making informed acquisition decisions.