Term Paper: Strategic Planning for the New Economy

Pages: 10 (2956 words)  ·  Bibliography Sources: 1+  ·  Level: Master's  ·  Topic: Business  ·  Buy This Paper

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[. . .] 89). Eisenhardt asserts that, "The fundamental precept that 'strategy is about being different' continues to be true" (2002, p. 89). She posits that different strategy must be characterized by "simplicity, organization and timing" (2002, p. 89). Yet, a closer look suggests that the critical attribute of strategy is that it be agile. The high-velocity playing field, to use Eisenhardt's words, requires great flexibility in order to make speedy tactical, if not strategic, moves, ever responsive to uncertainty and ambiguity, while avoiding what can overnight become a critical flaw: an overly defined strategic position" (Eisenhardt, 2002).

Eisenhardt peppers her writing with team sports and military analogies -- the term war room having completely different connotations in the new central control room in heads of state gather to watch drones deployed remotely to engage in anti-terrorist actions. The problem with this language is not so much the connotations, but rather the way such thinking limits strategic thinking. Proctor and Gamble (affectionately aka P&G) has constructed a "war room" of sorts that consists of monitors that display up-to-the-second data about company metrics for the executive sales and marketing teams to view, analyze, and operationalize. Decisions are near instantaneous and are based on P&G's metrics, which are assigned to individual managers gathered in the space.

Eisenhardt highlights the strategic organizing of the Economist magazine, whose approach is remarkably similar to the blue ocean strategy it proceeds. The Economist operates more like a major print newspaper than a magazine. The Economist serves a niche of upmarket readers who are fond of the unique brand of long-form journalism, accomplished by giving writers "large swaths of territory and considerable freedom in choosing what to cover…compensates them more, both with money and with unfettered, interesting work" (Eisenhardt, 2002). Timing is pivotal to strategy: a strategy employed too early or too late can be not only ineffective but also damaging to a competitive position. The embodiment of a focus on timing can be seen in business practices where increasingly refined and powerful digital platforms are employed for real-time market analysis and market research. It is fair to say that Eisenhardt's premise is correct: strategy has changed. But more to the point, strategy is all about change.

As Walter Kiechel, author of the book Lords of Strategy, argues,

"…competitive advantage is eroding more and more rapidly. It would make sense that more people are seeking opportunities in unexplored places, including in the markets that have not been well served by large corporations. The first big challenge is responding quickly to changes in the environment. That requires devolution of the ability to think strategically from the top of the organization to everywhere else -- especially to the customer-facing periphery. The other challenge is figuring out how to integrate talent and strategy implementation." (Kiechel, 2010).

According to Kiechel (2010), the current trend of corporate short-term employment schemes may not be an effective approach, as short-timers may not understand the desired strategy, making decisions and allocating resources that do not result in fidelity of implementation. "Do project-by-project employees necessarily understand the company's costs, competitors, and customers well enough to make decisions that align with the strategy? It's a tricky challenge" (Kiechel, 2010). Kiechel also notes that private equity firms seem particularly successful at using short-term operating managers since they are "absolutely clear about what the strategy is," whereas large enterprises rarely possess that type of clarity and focus.

Porter developed the Five Forces analysis framework in response to his belief that the then-popular SWOT analysis was not sufficiently rigorous and tended to be ad hoc in nature (Porter, et al., 2002). That is, SWOT is not truly a framework or a model, but is more of a tool. The Five Forces framework is based on the model used in industrial organizational economics and referred to as the Structure-Conduct-Performance paradigm (Porter, et al., 2002). The Structure-Conduct-Performance model is a causal theory that attempts to explain the relation between market structure and market environment through feedback loops. That is to say that, market structure directly influences the economic behavior (conduct) of a company, which then impacts the market performance of the business -- and business conduct can influence the market structure (Porter, et al., 2002). The underlying consideration here that Porter was trying to address and convey is that the phrase used in economics ceteris paribus (all other things being equal or held constant) does not work in business since competitive strategy requires consideration of intervening variables. From the diagram below, it is possible to discern that three of the five forces are related to horizontal competition and two forces would come from vertical competition (Porter, et al., 2002). The horizontal forces include: the threat of new entrants; the threat of established rivals; and the threat of substitute products or services (Porter, et al., 2002). The vertical forces are: the bargaining power of customers and the bargaining power of suppliers (Porter, et al., 2002). The Five Forces are key to understanding the intensity and likelihood of competition, from which a business can derive an understanding to the attractiveness of a market, which is foundational to the overall potential for profitability.

Source: A diagram of Michael Porter's Five Forces, based on an image from Porter, M.E., (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press, p. 5.

Strategic Considerations of HubSpot

HubSpot is an Internet marketing company that is considering moving into the very small business (VSB) market that is characterized by an absence of information technology infrastructure (Halligan, 2006). This is a divergence from their typical target that focuses on companies that already have information technology, and the strategy would move them from a consumer relationship management (CRM) focus to a smaller customer managed relationship (CMR) basis (Halligan, 2006).

HubSpot is a company that is evolving its business model in order to attract customers that can be described as very small businesses (VSBs) (Halligan, 2006). From the perspective of these consumers, SalesForce is not an option -- it is too big and too expensive. Instead, the very small business consumers would consider hiring a consulting firm to help with SEO for a limited time, or outsourcing lead generation on a test basis (Halligan, 2006).

Applying the Four Actions Framework to the HubSpot business model leads to the following ideas for change (Halligan, 2006). Since the SalesForce version of CMR is not a tenable product for the target market, HubSpot will eliminate the large sales department that has been trying to push sales to the very small business target market (Halligan, 2006). Replacing this approach, HubSpot will create a department focused on generating referrals by customers to other small businesses (Halligan, 2006). The strategy recognizes this pattern as being typical of the way that decisions are made in the very small business realm (Halligan, 2006).

The Strategy Canvas shows the strong shift to a personalize support role that HubSpot intends to assume with its very small business customers (Halligan, 2006).

The value proposition that the Blue Ocean Strategy will address for HubSpot is to provide ways for the very small businesses to increase revenue by moving their businesses to an online platform in order to capitalize on the power of the Internet (Halligan, 2006). The target market has not accomplished this on its own because they don't have the knowledge, don't have support -- or cannot afford the support offering available to them -- or because the existing tools are simply too difficult for them to use (Halligan, 2006).

Conclusion

It is clear from the HubSpot example that the strongest competitive position to take is keep an eye on the competitors but not to follow them: instead, invent a different game on the same playing field as the competition. The overarching takeaway is that conventional wisdom about competitive strategy develops entropy over time, such that the very rules that once generated competitive advantage soon become irrelevant within the streaming context of the marketplace.

References

Eisenhardt, K.M. (2002). Has strategy changed? MIT Sloan Management Review, 43(2), 88-91. Cambridge, MA: MIT Sloan Management Review.

Halligan, B. (2006, September). HubSpot. Blue Ocean Strategy: A Small Business Case Study. Retrieved http://blog.hubspot.com/blog/tabid/6307/bid/54/Blue-Ocean-Strategy-A-Small-Business-Case-Study.aspx

Johnson, M.W., Christensen, C.M., & Kagermann, H. (2007, December) Harvard Business Review. Cambridge, MA: Harvard Business School Publishing Corporation. [Reprint.]

Kaplan, R.S. (2007, January). What to ask the person in the mirror. Harvard Business Review. Cambridge, MA: Harvard Business School Publishing Corporation. [Reprint.]

Kiechel, W. (2010). The Lords of Strategy. Cambridge, MA: Harvard Business Press.

Kim, C.W. & Mouborgne, R. (2004). Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant. Cambridge, MA: Harvard Business Review Press.

Kotter, J.P. (2006, January). Leading change: Why transformation efforts fail. Harvard Business Review.… [END OF PREVIEW]

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