23/09: les 1
Theme 1: What is strategy?
Essence of strategic thinking and implementation
!!! Why is Netflix a success story?
Netflix has great strategy to respond to major transitions in the entertainment industry and knows
how to find competitive advantage → first-mover advantage
ex. Netflix was the first company to enable customers to subscribe to stream films
(it moved from logistics → providing content → creating films vs the competitor Blockbuster filed for
bankruptcy because they did not adapt to the new situation of the rise of the internet)
ex. Netflix uses the data of its subscribers to know what will work → the algorithm makes predictions
based on history
Strategy = continuously adapting to a new situation
→ a strategic choice = an informed bet → unsure it will work because it is about the future which is
by definition uncertain BUT you have data to base your decision on
→ NOT only about beating the competition but also about ecosystems
→ collaborate with certain partners while still staying competitive
ex. Nvidia (which focuses on AI) invested in Intel (which focuses on pc) with whom they usually
compete in order to compete with AND (which focuses on AI and pc) → Nvidia collaborates and still
competes with Intel → less focus on the battle field and more on ecosystems
!!! Competitve advantage = meeting customer needs more effectively (with products or services that
customers value more highly) or more efficiently (at lower cost)
- differentiation on features
- differentiation focus on market nice
- cost leadership: low-cost provider
- cost focus on market niche
Sustainable competitive advantage = giving buyers lasting reasons to prefer a company’s products or
services over those of its competitors
!!! The realised current strategy is a blend of:
- proactive (deliberate) strategy elements that include both continued and new initiatives
- reactive (emergent) strategy elements that are required due to unanticipated competitive
developments and fresh market conditions
!!! What is the difference between deliberate and emergent strategy
ex. Honda wanted to export their motorcycles to California (intended strategy) in the 50s (deliberate
strategy) but the Americans were not impressed but they liked the mopeds the Japanese rode on →
in combination with good marketing they launched this moped (emergent strategy) → once Honda
had established a good name they also launched their initial motorcycle
Intended strategy (plan of action) → deliberate strategy was not working: unrealised strategy got
replaced by an emergent strategy → realised strategy (pattern of actions)
,Business = creating and capturing economic value (WTP & WTS) → NOT profit
Companies can creaty value by
- increasing the willingness to pay (customers’ perspective) = maximum price that customers
would be willing to pay
o → you must enhance the customer experience
- decreasing the willingness to sell (employees’ and suppliers perspective) = minimum
price/wage that suppliers and employees would be willing to accept
o you must make it more attractive for vendors and employees to work with the
company
→ the greater the value provided and the lower the price → the more attractive the value proposition
is to customers
Key principles of value-based strategy: companies that excel at creating value
- focus directly on WTP + WTS
o companies that outperform their peers increase the willingness to pay and decrease
the willingness to sell in ways that are difficult to imitate
- focus on their competitive position inside an industry
o not on the average performance of their segment of the economy
Strategy is all about how:
- to outcompete rivals
- to respond to economic and market conditions and growth opportunities
- to manage functional pieces of the business
- to improve the firm’s financial and market performance
It is not about being the best in the industry → everyone has their personal preference → being
unique → will allow you to deliver value to customers who are willing to pay a proper price for your
value proposition
Maw it is about having good strategy and not just operational effectiveness (trying to be the best)
which your competitor also can do
,Successful strategy =
- strategic fit test = does it exhibit dynamic fit with the external and internal aspects of the
firm’s overal situation?
- competitive advantage test = can it help the firm achieve a significant and sustainable
competitve advantage?
- performance test = can it produce good performance as measured by the firm’s profitability,
financial and competive strengths and market standing?
Decisions are strategic IF at least 1/3 conditions is fulfilled:
- irreversibility of the decision
because of
o size of investment required
o time windows
- the decision is likely to provoke a reaction from the competitors or other companies
- necessity of coordination with other decisions in order to achieve coherence (cross section)
and consistency (over time)
Definition of a strategy = a set of rules that enable the company to make many decisions over a
period of time
= the guiding policy that explains how a company will achieve superior performance through a unique
value proposition and tailored activities, and improve or sustain the value of the company while being
faced with competition and uncertainty
The strategy is not the steps you undertake, but a long-term plan of action designed to achieve a
desired future state
A strategy must have a direction that is based on a proper diagnosis of the situation
→ absent a diagnosis → you cannot judge one’s choice of an overall guiding policy
A strategy must translate this overall directive into coordinated action to reach the objectives
Strategy is the link between the company (internal) and its environment (external)
Successful strategy =
- simple, consistent, long-term goals
- profound understanding of the competitive environment
- objective appraisal of resources
- effective implementation
, !!! what is the strategy of Taylor Swift
Example of a successful strategy by of Lady Gaga
1) clear goal: I want to be a superstar
2) understand the environment/industry: music business changed from selling records to doing
world tours and get in touch with fans on social media
3) know your strength and weaknesses: she is also a fashion icon and dancer
4) perfect implementation: people are devoted to her character, she is able to reinvent herself
consistently
Nowadays is not about your product anymore → it is about trust from clients → attention, connection
and community → audience first, brand second, product third
ex. Phia from Phoebe Gates: she did not start with ads but with a podcast
WTP/price/demand: unique value proposition: what, who, where
= a concise statement that communicates the specific, tangible benefits a product or service offers to
its target audience, explains how it solves a customer's problem, and highlights what makes it distinct
from and superior to competitors
→ it's the fundamental reason a customer should choose a particular business over others by
showcasing unique advantages and value
WTS/costs/supply: tailored value chain: how you make it
= a sequence of internal business activities designed to best deliver a company's unique value
proposition, creating a competitive advantage that is difficult for rivals to replicate
→ by customizing these activities* a company aligns its operations with its specific strategy to provide
greater customer value while outperforming competitors
S23 from product development to customer support: *input control → throughput control → output
control
Strategy: exploit (cash flow today) + explore (believe in a positive company’s future)
S25 different life stages of a company → different evolutions in cash flow
!!! why has Tesla a higher value on the stock market even though BYD has better sales for cars?
People believe Tesla is more innovative → explore element is better → higher expectations → more
investors
Same story goes for Walmart (bigger revenues) vs Amazon (higher stock) → stronger believe in
Amazon because their strategy seems more innovative → idea that Amazon will thrive longer
Theme 1: What is strategy?
Essence of strategic thinking and implementation
!!! Why is Netflix a success story?
Netflix has great strategy to respond to major transitions in the entertainment industry and knows
how to find competitive advantage → first-mover advantage
ex. Netflix was the first company to enable customers to subscribe to stream films
(it moved from logistics → providing content → creating films vs the competitor Blockbuster filed for
bankruptcy because they did not adapt to the new situation of the rise of the internet)
ex. Netflix uses the data of its subscribers to know what will work → the algorithm makes predictions
based on history
Strategy = continuously adapting to a new situation
→ a strategic choice = an informed bet → unsure it will work because it is about the future which is
by definition uncertain BUT you have data to base your decision on
→ NOT only about beating the competition but also about ecosystems
→ collaborate with certain partners while still staying competitive
ex. Nvidia (which focuses on AI) invested in Intel (which focuses on pc) with whom they usually
compete in order to compete with AND (which focuses on AI and pc) → Nvidia collaborates and still
competes with Intel → less focus on the battle field and more on ecosystems
!!! Competitve advantage = meeting customer needs more effectively (with products or services that
customers value more highly) or more efficiently (at lower cost)
- differentiation on features
- differentiation focus on market nice
- cost leadership: low-cost provider
- cost focus on market niche
Sustainable competitive advantage = giving buyers lasting reasons to prefer a company’s products or
services over those of its competitors
!!! The realised current strategy is a blend of:
- proactive (deliberate) strategy elements that include both continued and new initiatives
- reactive (emergent) strategy elements that are required due to unanticipated competitive
developments and fresh market conditions
!!! What is the difference between deliberate and emergent strategy
ex. Honda wanted to export their motorcycles to California (intended strategy) in the 50s (deliberate
strategy) but the Americans were not impressed but they liked the mopeds the Japanese rode on →
in combination with good marketing they launched this moped (emergent strategy) → once Honda
had established a good name they also launched their initial motorcycle
Intended strategy (plan of action) → deliberate strategy was not working: unrealised strategy got
replaced by an emergent strategy → realised strategy (pattern of actions)
,Business = creating and capturing economic value (WTP & WTS) → NOT profit
Companies can creaty value by
- increasing the willingness to pay (customers’ perspective) = maximum price that customers
would be willing to pay
o → you must enhance the customer experience
- decreasing the willingness to sell (employees’ and suppliers perspective) = minimum
price/wage that suppliers and employees would be willing to accept
o you must make it more attractive for vendors and employees to work with the
company
→ the greater the value provided and the lower the price → the more attractive the value proposition
is to customers
Key principles of value-based strategy: companies that excel at creating value
- focus directly on WTP + WTS
o companies that outperform their peers increase the willingness to pay and decrease
the willingness to sell in ways that are difficult to imitate
- focus on their competitive position inside an industry
o not on the average performance of their segment of the economy
Strategy is all about how:
- to outcompete rivals
- to respond to economic and market conditions and growth opportunities
- to manage functional pieces of the business
- to improve the firm’s financial and market performance
It is not about being the best in the industry → everyone has their personal preference → being
unique → will allow you to deliver value to customers who are willing to pay a proper price for your
value proposition
Maw it is about having good strategy and not just operational effectiveness (trying to be the best)
which your competitor also can do
,Successful strategy =
- strategic fit test = does it exhibit dynamic fit with the external and internal aspects of the
firm’s overal situation?
- competitive advantage test = can it help the firm achieve a significant and sustainable
competitve advantage?
- performance test = can it produce good performance as measured by the firm’s profitability,
financial and competive strengths and market standing?
Decisions are strategic IF at least 1/3 conditions is fulfilled:
- irreversibility of the decision
because of
o size of investment required
o time windows
- the decision is likely to provoke a reaction from the competitors or other companies
- necessity of coordination with other decisions in order to achieve coherence (cross section)
and consistency (over time)
Definition of a strategy = a set of rules that enable the company to make many decisions over a
period of time
= the guiding policy that explains how a company will achieve superior performance through a unique
value proposition and tailored activities, and improve or sustain the value of the company while being
faced with competition and uncertainty
The strategy is not the steps you undertake, but a long-term plan of action designed to achieve a
desired future state
A strategy must have a direction that is based on a proper diagnosis of the situation
→ absent a diagnosis → you cannot judge one’s choice of an overall guiding policy
A strategy must translate this overall directive into coordinated action to reach the objectives
Strategy is the link between the company (internal) and its environment (external)
Successful strategy =
- simple, consistent, long-term goals
- profound understanding of the competitive environment
- objective appraisal of resources
- effective implementation
, !!! what is the strategy of Taylor Swift
Example of a successful strategy by of Lady Gaga
1) clear goal: I want to be a superstar
2) understand the environment/industry: music business changed from selling records to doing
world tours and get in touch with fans on social media
3) know your strength and weaknesses: she is also a fashion icon and dancer
4) perfect implementation: people are devoted to her character, she is able to reinvent herself
consistently
Nowadays is not about your product anymore → it is about trust from clients → attention, connection
and community → audience first, brand second, product third
ex. Phia from Phoebe Gates: she did not start with ads but with a podcast
WTP/price/demand: unique value proposition: what, who, where
= a concise statement that communicates the specific, tangible benefits a product or service offers to
its target audience, explains how it solves a customer's problem, and highlights what makes it distinct
from and superior to competitors
→ it's the fundamental reason a customer should choose a particular business over others by
showcasing unique advantages and value
WTS/costs/supply: tailored value chain: how you make it
= a sequence of internal business activities designed to best deliver a company's unique value
proposition, creating a competitive advantage that is difficult for rivals to replicate
→ by customizing these activities* a company aligns its operations with its specific strategy to provide
greater customer value while outperforming competitors
S23 from product development to customer support: *input control → throughput control → output
control
Strategy: exploit (cash flow today) + explore (believe in a positive company’s future)
S25 different life stages of a company → different evolutions in cash flow
!!! why has Tesla a higher value on the stock market even though BYD has better sales for cars?
People believe Tesla is more innovative → explore element is better → higher expectations → more
investors
Same story goes for Walmart (bigger revenues) vs Amazon (higher stock) → stronger believe in
Amazon because their strategy seems more innovative → idea that Amazon will thrive longer
