JWI540Week2Lecture1214.pdf

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JWI 540 – Lecture Notes (1214) Page 1 of 10

JWI 540: Strategy

Week Two Lecture Notes

JWI 540 – Lecture Notes (1214) Page 2 of 10

DEFINING THE PLAYING FIELD

What It Means

Jack defined strategy as making “clear-cut choices on how to compete.” To develop a winning strategy,

you must first identify the boundaries that define your market and identify the forces at work within that

market. Understanding your competitive environment – your playing field – is crucial to your

organization's success.

Why It Matters

• Defining the playing field is the first step in the strategy development process. If you do not decide on what is and is not within the scope of your business, you will severely compromise your ability to make effective strategic choices.

• Setting an appropriate industry scope allows you to better assess future opportunities for growth.

• Clearly mapping out your current and potential competitors will enable you to better consider “what if?” questions.

“You can’t be detailed enough about

knowing the playing field…

too often, people like to call themselves

the market leader, so they end up

limiting

the scope of their playing field to make

that happen.”

Jack Welch

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YOUR STARTING POINT

1. Does your team have an agreed-upon definition of the playing field on which your business

competes?

2. If so, how would you explain your playing field in a succinct elevator pitch?

3. If not, in what ways might the lack of a clear understanding of the scope of the playing field

impede your ability to develop a competitive strategy?

4. When was the last time you conducted a thorough review of market conditions and other

players in the field?

5. Is the market growing or shrinking, and which sectors or products in the marketplace are

experiencing the most dynamic changes?

6. Where are your core products or services on the adoption curve? In other words, do you have

a highly innovative product/service or is it an offering that is part of a mature market segment?

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DEFINING YOUR PLAYING FIELD

Developing a winning strategy begins with a thorough understanding of your playing field. That means

defining what is and is not part of your potential market. The narrower your definition of your market, the

easier it is for you to be the top player, which can lead to a false sense of accomplishment as well as,

unintentionally, limit your potential for growth. Instead, try to cast your net wider because as you broaden

the vision of your market, your opportunities for growth expand as well.

Jack would advise us to consider a powerful example of how the competitive playing field could be

defined. Shifting your perception of the market dramatically changes your perception of the overall size,

number, and type of competitors. Imagine you are in a typical meeting room, sitting in a typical office chair

with armrests and wheels. Imagine that you are the manufacturer of that chair. Is your target market only

business chairs? If you broaden your vision, your market may be any type of chair. Change perspective

again, and your market could be all business furniture.

As you define your playing field, there are three areas you will want to focus on:

1. The characteristics of the market, segment, products, and/or services

2. The most important customers

3. Your competition

Let’s start with a focus on the playing field characteristics. Consider the following questions:

• What are the characteristics? For example, is it a commodity market, a high-end specialized

market, or something in between?

• Does it have a long selling cycle or a short one?

• What are the growth characteristics in this particular market?

• What drives the market?

• What are the drivers of profitability?

• What are the specific characteristics of your products and/or services?

• What are the geographic boundaries in which you currently compete or plan to compete? For example, are you focused on U.S. companies or global players?

• Are you competing with manufacturers, distributors, or both?

• Are you competing within a certain price point?

Identifying the multiple characteristics of the market and your own business can help you define a clear,

concise, and bounded playing field that will help you focus your strategic analysis going forward. The

playing field definition will help you exclude some competitors while including those whom you anticipate

being the biggest competitive threats.

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THE CHARACTERISTICS OF YOUR INDUSTRY

Companies that understand their environment are better prepared to compete and identify opportunities

to disrupt the marketplace to their advantage. It is essential that you undertake this exercise with a candid

perspective.

If your industry is part of a commodity market, make sure that your approach either addresses it as such

or creates a plan to change the game and differentiate. Often, sales and marketing organizations deny

that they play in a commodity business. There is little incentive in believing you play in a highly

differentiated industry if your customers are not willing to pay a premium for what you can deliver.

Conversely, if there are certain minimum requirements for any product or service being sold, then there

may be very little opportunity to deliver a suboptimal solution and try to come to the market at a lower

price point. By clarifying these factors for your business, you will have a better perspective on the macro

drivers of your industry. You can then start zooming in on your customers and competitors. To do that,

look at your customer base and ask yourself:

• Who are the key customers? Are they the ones that you have and the ones that you want?

• What are the typical characteristics of these customers? What do they value?

• How dependent are customers on the products you and your competitors provide?

• What has been the growth rate and evolution of your customer base?

• How do buyers perceive your product, service, and organization?

Your customers will ultimately determine if your new direction succeeds or not; “best-in-class”

organizations remain focused on the underlying customer needs and how to better serve them.

UNDERSTANDING THE PLAYERS AND THE GAME

All games, like industries, have players and rules. They have boundaries establishing the nature or field

of play. The players score points or gain field position by employing tactics designed to give them an

advantage over their rivals.

PARTS is an acronym for one framework that can help you understand the game already underway in

your competitive arena. It can also help to define potentially game-changing levers that may be

manipulated as part of your strategy (Brandenburger & Nalebuff, 1997). For example, you will view the

game differently if you define the players in your game as not just competitors, but also distributors and

customers. As an example, to illustrate the framework in action, consider the bookselling business, which

has experienced seismic shifts in the competitive field over the last two decades.

PLAYERS

The first component of the PARTS framework is the players, those individual participants or groups that

can take actions to create value and ultimately have a chance to be one of the game’s winners. In 1997,

established players in the bookselling industry were Borders, Barnes & Noble, and independent

JWI 540 – Lecture Notes (1214) Page 6 of 10

booksellers. A rising player by the name of Amazon had been in the game for only a few years.

Look at your industry. Do players team up to collaborate, or is it every man for himself? Can the number

of players change – can a company join or leave the game? In the bookselling business, should an

established player have asked Amazon to partner with it in the early days? Such a move would have

changed the way that game developed.

ADDED VALUE

The next element of the PARTS framework is a way to keep score in your industry. Say you are a

distributor. Storing, shipping, and tracking the items that your customer manufactures, and performing

these activities in a reliable, timely, and cost-effective way, adds value to the manufactured goods. The

degree to which these activities meet the needs of your customer, or the manufacturer, determines your

score.

RULES

In the book business, Amazon challenged the added value of the old-style booksellers head-on. Until

then, adding value meant offering a diverse assortment of titles in convenient brick-and-mortar locations.

With an inventory that included virtually every book, and the convenience of browsing on the Internet,

Amazon shifted the game. All the players had to adapt to a new definition of added value.

The third element, rules, defines what can and cannot be done in a strategic game. In the most literal

sense, regulators or legal entities set the rules. A bookseller must not reproduce copyrighted books

without the proper authority and payments, for example. Some of the most important rules in an industry,

however, are not of the legal kind.

Throughout the 1990s, book retailers ordered books to stock their shelves based on their market research

and marketing plans. Their inventory decisions were a major part of their strategies. The books that did

not sell might be marked down to lower prices. If they still failed to sell, they were returned to the

publishers to be destroyed without being paid for. There was no rule that legally required this unusual

form of inventory management, which dates back to the Depression, as a strategy to take the risk out of

the extremely common problem of unsold books. Regardless, it was the industry standard.

Think about the unwritten rules your business has with its customers, employees, and others. You may

find existing rules you would like to break or new rules you want to put in place. Often, you need to adapt

to the current rules of the game. Even within these limits, however, you might be able to gain the

equivalent of a home-court advantage or even put your rivals on the defensive with a full-court press. And

merely thinking about who makes the rules and what it would take for your company to set them can

generate new ways of thinking about, and playing in, your industry.

TACTICS

The fourth component of the framework is the methods that companies use to gain a better position on

the strategy game board, or score points with stakeholders, suppliers, or customers. In recent years,

Barnes & Noble has reinforced its strategic commitment to the total customer experience by creating a

generous loyalty program and opening in-store cafes where customers can relax and browse magazines.

JWI 540 – Lecture Notes (1214) Page 7 of 10

These tactics increase customers’ perceived value of what it offers without increasing the perceived cost

of a book. This helps them move below the value equivalence line – its perceived cost is lower than its

perceived value.

SCOPE

The last PARTS framework element, scope, refers to the boundaries of the game in your industry. Is this

a stand-alone game, or is it linked to other games? Could you gain an advantage if you provided that

link? For example, for a long time, Borders and Barnes & Noble competed against each other

simultaneously in a game of location, to gain prime retail locations in malls, and in a game of

merchandising, to get customers who were strolling past their stores to make impulse purchases.

Amazon, with its Internet retail business model, linked these two games, creating a single location in

which people could browse without having to wander the aisles.

Leonard Sherman, in his book, If You’re in a Dogfight, Become a Cat! suggested that, although the

playbook can be simple and straightforward, “business strategy is inherently dynamic and context

sensitive. No one universal framework or management prescription fits all business circumstances” (2017,

p. ix). Knowing what elements that should in your playbook is critical for winning at strategy. As we

proceed through the course, you will review various strategic tools, techniques, and frameworks. Make

note of those that you believe would be responsive to the specific requirements of your industry,

workplace, and context. A full and diverse toolbox is a critical resource for a strategist!

JWI 540 – Lecture Notes (1214) Page 8 of 10

SUCCEEDING BEYOND THE COURSE

As you read the materials and participate in class activities, stay focused on the key learning outcomes

for the week and how they can be applied to your job.

• Define the playing field and the scope of the business

Challenge yourself to look beyond the current scope of your business. Ask questions about how

you could grow the business if you were to define your playing field differently. Gather key

leaders in the organization to brainstorm ideas about the playing field.

o Do we have a clear definition of our playing field? Is it up to date?

o Is the current definition wide enough? Does it provide opportunity for growth?

o Have we identified our key customers and our key competitors?

o Do we know what it takes to win in our industry?

• Explore the use of Jack’s first slide to help assess market share and opportunity

Many business leaders are so focused on the day-to-day operations that they never step back

and think about what they could do to better understand what their customers really want and

what they could do to expand on that customer base. Gather your team to discuss the following:

o Who are our main customers?

Are you able to identify sub-groups within those buyers? If so, what are those sub-

groups and what percentage of your total business can be attributed to each of them?

o What characteristics are shared among customer groups?

For example, a large corporation may have global customers, regional customers and

distributors.

o How do our customers buy our products?

Discuss whether customers typically buy directly from you or through a third party. Do

they leverage the Internet to research and buy products? How much comparison

shopping do they do? Do you expect these patterns to change over time?

o Ask the group what additional products or services customers would be willing to

buy, but you don’t currently provide.

For example, if your customers buy equipment, they may also want to buy service plans

to maintain it. If you provide a service, you may be able to offer broader solutions that

answer similar needs of a customer. As an example, accountants who prepare end-of-

year tax planning.

JWI 540 – Lecture Notes (1214) Page 9 of 10

o What characteristics are shared among our competitors?

For example, you may have competitors that are very similar to you and others that cater

to a very different niche portion of the market.

o How do our competitors serve their customers?

Do they cater to customers differently than your own organization? If so, why have they

adopted a different service model? Has it worked well for them? What additional

products or services do your competitors offer?

• Evaluate potential strategic initiatives against the mission and values of the organization

As you begin the process of reviewing existing strategic plans and looking for opportunities to

reevaluate and grow, it’s a great opportunity to review the mission and values of the

organization. Why do we exist? What do we believe in? Are we fulfilling our mission? Could we

do more? Gather your team and have a “Mission Meeting” to share ideas.

JWI 540 – Lecture Notes (1214) Page 10 of 10

ACTION PLAN

To apply what I have learned this week in my course to my job, I will…

Action Item(s)

Resources and Tools Needed (from this course and in my workplace)

Timeline and Milestones

Success Metrics