Tuesday, May 31, 2011

Will the Force be with the Nokia - Microsoft Alliance ?

Nokia - was the most successful European company of the 1990s and the most disappointing one of the 2000s. A decade ago, Nokia was the most successful business Europe had produced in a generation. It captured the emerging market for mobile phones and built the industry’s most powerful brand. Since Apple Inc. launched its phenomenally popular product – IPhone in 2007, Nokia shares have fallen by 47 percent. The company’s brand, once one of the coolest in the world, is battered. In a ranking of global brands by Millward Brown Optimor this year, Nokia ranked No. 43, dropping 30 places in 12 months.

Industry experts cite two main reasons among many for their downfall. Firstly, the brand became complacent in an industry where laziness is fatal. It worried too much about hanging onto its market share, rather than creating new products to excite customers. Secondly, the company clung to the model that mobile phones were mainly about calling people. It failed to notice that they were just as much about checking your e-mail, finding a good restaurant nearby, and updating your Twitter page

It is yet to be seen how the change in their leadership and their strategy helps them to bounce back in the highly competitive smart phone market dominated by the likes of Apple, Google, and Blackberry. Nokia took the stage at Mobile World Congress in Barcelona to better explain its new relationship with Microsoft. Instead of developing its own operating system Nokia plans to integrate Microsoft’s WP7 in its smart phones. Nokia specifically chose Windows Phone 7 and not Android because it wants for there to be at least three competing smartphone platforms. Nokia's primary goal is to bring down Android with its WP7 devices. The two companies will work together to create the right set of developer tools so Symbian developers can better adjust to creating for WP7, but it will not use Qt.

Some industry experts are citing this as a win-win strategy for both companies. In the long run, Microsoft needed a stronger hardware strategy to compete with Apple and RIM and to make headway against the ubiquitously sourced Android. Nokia’s choice of Microsoft instead of Android also makes it easier for them to settle their legal dispute with Apple.

Only time will tell whether such an alliance will work for Nokia and Microsoft to compete against the giants of Smart Phone Industry. We can only hope : "May the Force be with you".






Monday, May 30, 2011

Week II: The Strategic Planning Process and Evaluating Current Performance

In relation to strategy development – whether short-term or long-term -, i) planning, ii) execution of the plans, and iii) evaluation of performance are undoubtedly the key steps known to most of us. Over the course of time, scholars, academia, and professionals have developed, implemented, and suggested various methods that emphasized on improving strategy development techniques. Among many of the exemplary suggestions the following three were our suggested reading on which I would like to reflect my opinion.

(A1) “How to Improve Strategic Planning”,
(A2) “Using the Balanced Scorecard as a Strategic Management System” &
(A3) “Reinventing Your Business Model”

In A1, the writers stress that the corporate planning process fails to impact on either the senior managers’ actions or the strategic direction of the company and attribute it to the process wherein “financial and operational data is collected, forecasts are made, and lengthy presentations are made”. For a better strategy planning process, the article suggests the following process: start with issues, bring together the right person, adapt planning cycles to the needs of each business, implement a strategic-performance management system, integrate human-resources systems into strategic plan, evaluate and tie compensation to performance.
Similarly in A2, the authors emphasize that “budgets often bear little direct relation to a company’s long-term strategic objectives because they don’t take enough consideration.” To overcome these issues, the authors propose a balanced scorecard system and argue the system provides assistance in translating the vision into practicality, communicating and linking, business planning, receiving feedback and learning from them.
Similarly in A3, the authors provide insight on business models and their importance. Stressing on value proposition, profit formulation, and resources allocation, they argue that some companies fail to survive, whereas others survive even in the most hostile business environment merely due to a lack of proper business plan.

In A2 (page 8), the authors have advocated for “Linking rewards to performance measures”. However, I opine that tying compensation to current performance has its draw backs and following example signals otherwise.
Charles Price, CEO and chairman of Citigroup, made US$53.1 million over a period of four years during his tenure (2003-2007). The figure is comprised of base salary and bonus he received for successfully increasing shareholder’s equity. Among others his primary investment instruments were on Mortgage Backed Security and Collateralized Debt Obligation. Investment banks, including Citigroup, heavily relied on these instruments for profit and the corporate America bestowed them with billions of dollars in bonuses until the occurrence of the Global Financial Crisis (GFC) that proved otherwise. http://www.kingfinancial.com.au/downloads/Capitalism_and_crashes.pdf The point is however once-in-a-blue-moon-incident the GFC was, it revealed that tying compensation to current performance needs a second thought to it. I hope that future scholars incorporate this loophole in compensation.

Important take-home message
Strategy development is no longer an exclusive domain of senior executive and a linear annual event instead it is a long term process that has both non-linear and re-entrant elements.
Please make comments if you disagree or add something on the thought.

Competitor Analysis of Oracle Corporation

Today, I would like to introduce the strategy of Oracle Corporation in connection with the article, “Competitor Analysis”. In 1977[i], Lawrence Joseph Ellison founded Oracle Corporation as a database management software company.

In 1980s, DB2, the program product of IBM, dominated the mainframe database market. At that time, IBM was too large to compete. Oracle decided to avoid the competition with IBM, and they started to develop the database for distributed systems. The major players were Sybase and Informix in this market[ii]. Thus, the target market and competitors were determined. At the end of fierce battle, Oracle survived and dominated the database market for distributed systems in 1990s.

In the beginning of 2000s, new competitors appeared. IBM customized DB2 for the distributed systems and merged Informix. At the same time, Microsoft bought the license of Sybase on Windows platform and expanded its shares in the database market on Windows platform. Oracle had to competes with these two titans in IT industry.

In 2004[iii], Oracle decided to change the market and strategy to compete with rivals. They started expanding their business area from database products to application area in order to scale up the size of the corporation. This strategy was essential to compete with IBM and Microsoft. In order to grow faster, Oracle took the merge and acquisition strategy. Oracle merged PeopleSoft, Siebel, BEA and so on. At last, the scale of the corporation became large enough to compete with IBM and Microsoft.

In 2010, Oracle completed the acquisition of Sun. In my opinion, there are three advantages. First is the scale up effect of the corporation. Not only the size of the corporation, but also the acquisition of superior software and engineers seemed to be one of core incentives. Second is the improvement of the total solution service using hardware of Sun. Final is the preparation for expanding its market into the cloud computing area. Cloud computing will be widely used in near future all over the world. Oracle completed to collect key parts to compete in the market of cloud computing.

Thus, Oracle defined target markets and competitors through the history of success. We can learn from their strategy.

[iii] http://ja.wikipedia.org/wiki/%E3%82%AA%E3%83%A9%E3%82%AF%E3%83%AB_%28%E4%BC%81%E6%A5%AD%29

Be Nice! (or, Why Fighting With the Competition Is Naughty)

In every class I’ve had so far, professors go out of their way to stress the similarities between for-profit and non-profit companies. One thing that has come up in the past has been competition and how non-profits face competitors that have to be dealt with in the same way they would in the for-profit world. I think that’s really dumb.


In “Competitor Analysis: Understanding Your Opponents,” a competitor is defined as “any company that aims to satisfy the same customer needs that you do.” In the non-profit world of education, is this “competitor” really the enemy? The article lays the groundwork for dealing with this competitor, actually using an example of US Army war games that prepare soldiers to go off and kill the enemy in combat to hammer home the point.


In the field of education, too many leaders have heard similar nonsense on their way to an Ed.D. The Pittsburgh Public School District along with surrounding poorly performing districts such as Woodland Hills, which like many urban districts are pretty terrible in almost every measurable way, have taken up the fight against the “competition.” Denying charter applications has become the default position (a position that is regularly overturned by the state) and the Pittsburgh Public School District actually refuses to sell unused and unwanted buildings to charter schools because they don’t want to help the competition.


But shouldn’t it all be about the kids? Why not work together? Or, more to the point, why would you want a huge and failing non-profit organization to stay alive just to stay alive? Of course, charters do take money and kids away from districts. If I were in charge of a large district I would use that as an opportunity to close failing schools (there is no shortage of these in the districts charter schools want to operate in). There are many arguments for and against charter schools. I think the most powerful one is that charter schools have thousands of students on wait lists. And once in, I’ve never heard of a child returning to the public school they left. I think parents, perhaps, have a better sense of what’s best for their children than district administrators do.


In the world of education, before leaders start to worry about competitors that can “kill your business,” they should ask themselves if that business is worth keeping alive. Many superintendents have the idea in their head that bigger is better and do everything possible to keep their districts as large (in terms of the number of students) as they can, even if they’re performing terribly. This idea (similar to the growth idea I wrote about last week) is even more nonsensical with non-profits than it is with for-profits. Economic theories aside, let’s just say there’s only so much money to go around in the for-profit world and the bigger you are the more money you’ll get. But in the non-profit world it’s the mission that matters. And your organization being bigger (or even existing at all) might not be a good thing. Non-profits should be willing to collaborate, shrink in size, merge together, or shut down completely if it will help fulfill the mission. In the world of education, fighting against the “competition” (by not selling an unwanted and unused building to another school or denying applications from large charter systems with a record of consistent and measurable success – not to mention refusing to work together on more everyday kinds of things) only hurts the kids.

Sunday, May 29, 2011

Strategy Planning and its significance!

Strategic planning does not deal with future decisions. It deals with the futurity of present decisions. What we have to do today is to be ready for an uncertain tomorrow.
– Mr. Drucker, Prominent Business Authority

The above statement by Mr. Drucker precisely explains what a Strategy means to any Organization or its executives. Many times, Strategy planning is considered as total waste of time and often ridiculed by most of the employees. However, a deeper analysis of several aspects of Strategy Development will make people change their perceptions. It will not be hyperbole if someone claimed that a strong strategy has the potential to drive a company to the threshold of success and beyond. Hence it is of the utmost importance to put in required amounts of efforts and time in devising a strategy that defines the path of an organization.
There is a set of people who believe that the real strategies are designed at real time; instead of an outcome of a thorough formal strategy planning process. These people base their claim by citing the dynamic nature of market, competition, ever changing laws or emerging regulations, etc. This might be true for some exceptional cases; however this cannot be said about all the companies. There are numerous companies who invest significant amount of effort and time in their strategy planning. In fact there are some which hold annual events at one of their main development centre and invite unit heads from all the development centres. For example, Infosys Technologies Limited, holds an event named “STRAP” every year. All of the business unit heads come together and discuss with Executives to come up with a plan for developing Strategy. Also, all the employees are provided with a forum through which they can share their inputs. This initiative has been instrumental in making every Infosys employee feel that they are part of the organization and their views really do matter in Company’s strategic goals.
There are several important questions which should be asked while coming up with strategy planning process. Some of the most important ones are as follows –
·        Who should participate in Strategy planning reviews?
·        How long should the reviews be?
·        How should the conversations be conducted?
·        How much preparation is necessary?
·        What should be discussed?
·        Where should be reviews held?
·        What kind of follow up is necessary?
The strategic planning offers striking benefits. Through a strategy, one can difrect all the important resources in a focused manner and in right direction. Also, the direct involvement of employees in the process, as done by Infosys, may give them a sense of ownership. Many times, this leads to more efficiency, effectiveness and even greater innovation.
To sum it up, the strategic planning can be instrumental in taking a company to higher levels of success and hence sufficient amount of efforts and time should be invested in the Strategic Planning process.

Newspaper Industry: Comeptitors, Options Everywhere

Reading “Competitor Analysis: Understand Your Opponents” and Ramesh’s analysis of The New York Times new take on an online pay wall got me thinking about the newspaper industry, my industry. I haven’t applied Porter’s “Five Forces” model to it until now, and the picture isn’t pretty.

1. Threat of new entrants – Extremely high. Online, hyper-local news providers such as Patch.com and others are new players in many media markets of all sizes, including Pittsburgh. Content is often free. Costs are kept down by hiring recent college graduates and producing only online, not print, content.

2. Bargaining power of customers – High. Individual readers can choose to read online content for free at most newspapers instead of paying 50 cents to $1 for a newspaper. Large advertisers – another type of customers – likely have a great deal of power to bargain.

3. Threat of substitutes – Extremely high. Most markets have multiple news sources. Many people are content to seek news from TV stations or national publications. Even those who want focused, local news from print publications have more than one option (business journals, magazines, competing newspapers).

4. Bargaining power of suppliers – Fairly low, and I think the inability for most newspapers to come up with a way to charge for online content proves that.

The biggest takeaway for me from the competitor analysis article is the competitor positioning map. I think it’s an excellent, visual way to show what segments of the market your competitors have staked out. It’s a helpful, back-of-an-envelope way of showing a particular industry’s current universe of competitors and strengths. But why not also analyze the failures of former competitors? I think it’s something the article leaves out.

For example, Best Buy, the leading electronics retailer, is tweaking its traditional “big box” story business model so it won’t become the next Circuit City (Ref 1), which went bankrupt and no longer exists. According to the Associated Press, Best Buy has announced a plan to reduce the size of its big box stores by 10 percent, which will eventually generate $70 million to $80 million in savings. It will also create hundreds of mini-stores in the U.S., which apparently have produced better revenues. Best Buy will also try to offer more to online customers as online shoppers are a fast-growing segment of the electronics retail market. For a company as big as Best Buy, it’s a pretty substantial shift in strategy and seems likely to pay dividends down the road. If it weren’t for the failure of Circuit City, I wonder if Best Buy would have been motivated to make such changes.

References: Ref 1: http://www.dailyherald.com/article/20110414/news/704149875/


Balanced Scorecard institute

The reading on Balanced Scorecard is very interested to me. From my point of view, develop an appropriate strategy is only the first step. How to make the strategy “make sense” for the organization, and be able to be applied to the daily operation, served as a decision-making tool is another important part. The Balanced Scorecard is a good stepping stone to make strategy smoothly proceed from the first step to the second.

I found an organization serving as a strategy consulting company, and targeting providing Balanced Scorecard as the solution. Their link can be retrieved from:


I recommended this institute because they are focused and experienced in this area. While many consulting firm working on strategy development using different tools, Balanced Scorecard Institute is focusing only on Balanced Scorecard. They may lose clients need a general strategy development, but they well caught this particular methods. The positioning of Balanced Scorecard Institute itself is very unique. With their unique position, Balanced Scorecard Institute has consulted for hundreds of organizations among over 40 countries. Because their rich experiences, Balanced Scorecard Institute also provide training and certification on this area. I would recommend my colleagues who are interested in having strategy development as their future job and with special interest on Balanced Scorecard taking a look at this institute. They provide abundant resources like book, materials, courses and software that can be access easily, though a little bit costly.

Reference: Institute, T. B. (2011). About The Balanced Scorecard Institute. Retrieved May 28, 2011, from The Balanced Scorecard Institute: http://www.balancedscorecard.org/AbouttheInstitute/AbouttheInstitute/tabid/64/Default.aspx

Wednesday, May 25, 2011

BSC in the public sector

BSC is one the tools used in measuring performance in the organization where I work – public sector. Our initial decision to use BSC was to look at the impact of government strategies and policies on the services provided to the public. Everywhere in the world, public services performance are evaluated and scrutinized by the public. Governments produced a lot of reports in order to give the people a better perspective that by implementing new strategies and policies, those policies could change the services provided and further improve their effectiveness.

I personally think it was a good idea but things were not easy when we first use BSC. There were a lot of things that we need to redefine in order to make BSC works in the government sector as BSC were designed to be use in the private sector.

I would like to share articles by Paul Arveson that has helped me in understanding on how to implement BSC in the public sector. I would recommend these articles even if you are not in the public sector, just as an eye-opener. Those articles acted as guidelines on where to start and how public sector differs from private sector. But keep in mind as you read, as mentioned earlier, there are other things to consider and redefine especially when you are identifying the four perspectives and four processes.

1) http://www.balancedscorecard.org/BSCResources/PerformanceMeasurement/TranslatingMetrics/tabid/139/Default.aspx

2) http://www.balancedscorecard.org/BSCResources/PerformanceMeasurement/DesigningMetrics/tabid/140/Default.aspx

New York Times - Business Model innovation

I found the "Reinventing Your Business Model" reading very engrossing and fascinating. It was interesting to know that two companies (Diamond Multimedia & Best Data) have sold digital music players before Apple and failed. Thus, the key to Apple’s success was the nice blend of good technology and a great business model. This example emphasizes the importance of a very good business model.

One of the companies that went through a business model innovation recently was New York Times (NYTimes). The current chairman Arthur Sulzberger Jr. had already reinvented NYTimes previously in the mid 1990s by spending huge money to add new sections, broaden the newspapers distribution beyond its home city and expand globally by acquiring complete control of International Herald Tribune. NYTimes became one of the first old media companies to leverage the Internet. This helped NYTimes add a new source of revenue and also increase the outreach. In first half of 2004, the NYTimes digital division netted $17.3 million out of the total revenue of $53.1 million and were projected to be growing at 30% to 40% a year.

But in course of time, the revenue from the digital division stagnated. A majority of the readers viewed the paper digitally but the company was earning almost 90% of the revenues from paper edition. Thus, NYTimes had to adapt to the shifting market dynamics. They can’t depend only on the revenue from the paper edition, as the paper edition subscribers aren’t growing, while the digital edition subscribers are growing. Thus they had to innovate their business model to tap into the growing digital edition subscribers. The challenging part was how. Customers used to reading the NYTimes free of cost might be turned off, thus putting NYTimes position as the most visited newspaper website in question.

NYTimes came up with a hybrid approach to this problem. NYTimes estimated 85 % of the online users read less than 20 articles. Thus the cap on the number of free articles was 20. They targeted the other 15% of frequent readers with three different digital packages costing $15, $20 and $30. Though the jury is still out, I believe this a smart strategy. NYTimes had a clear need for a new business model as the current one wasn’t sustainable. They also had the customer value proposition in mind, which in this case is to make sure that quality journalism results in news that reaches maximum number of people. The 20 free articles make sure that occasional readers who are unwilling to pay are not shut out. The profit formula was designed in such a way that it creates value for the NYTimes without compromising on the readership base.

I realize that in this ever-changing business environment business model innovation is more important than ever. I also found it interesting to read that a business model innovation does not always mean creating a new model. It can also lead to tweaks in the current model to make it better. Netflix has been able to do this successfully. They encourage their customers(by charging more for DVDs on mail) to stream videos rather than get DVDs on mail in order reduce operating cost. This reading helped me realize the importance of business model innovation and the circumstances in which it needs to be undertaken.


Reinventing Your Business Model - by Mark W.Johnson, Clayton M.Christensen and Henning Kagerman



Business models for changing lives

The field of information and communication technologies for development (ICTD) is a relatively new field with enormous potential to change the world by empowering the base of the economic pyramid through technology. I work for a research group at Carnegie Mellon University called TechBridgeWorld that operates in this field. Our interpretation of ICTD is collaborating with developing communities around the world to create relevant and sustainable technology solutions that address their unique challenges.

Currently, most ICTD projects are in the pilot stage. As a result, two major challenges our field faces are scaling these projects and evaluating its impact, as recognized by Bill Gates during his keynote speech at the ICTD 2009 conference. TechBridgeWorld is currently tackling these challenges.

In reading, “Reinventing Your Business Model,” I thought: The entire ICTD field needs a business model. A pretty wild thought, I know. And the five strategic circumstances that recommend business model change probably do not cleanly apply to a largely academic field. But in reading through the circumstances, I realized:

1. We have the opportunity, through “disruptive innovation” to address the needs of large groups of potential customers – the base of the economic pyramid. These customers are excluded because current technology solutions are not relevant and accessible.

2. We have the opportunity to capitalize on a brand new technology by wrapping a business model around it. People often think that when working with the base of the economic pyramid, technology solutions need to be “dumbed” down. On the contrary, technology solutions need to be highly innovative in order to meet their needs given their constraints.

3. There are tons of jobs to be done in the developing world. One example is TechBridgeWorld’s Braille Writing Tutor. Pilot studies show that visually impaired students in developing communities need a low-cost and motivational way to learn and practice Braille writing.

For circumstances 4 and 5 (the need to fend off low-end disrupters and the need to respond to a shifting basis of competition, respectively), I believe this applies to industries with at least a few competing companies. Since this is a young field with very little companies specializing in ICTD, I think we should revisit circumstances 4 and 5. Plus, I’d like to think that since the overarching goal in ICTD is to help and empower people, we should compete for customer impact and sustainability, not necessarily profit or market share.

It’s not really feasible for a field to have a business model, but it’s important for research groups to seriously consider pairing innovative technology solutions with equally innovative business models to not only meet needs but to change lives.

Tuesday, May 24, 2011

Nintendo's history and its business model reinvention process

The article “Reinventing Your Business Model[i]“ reminded me of Nintendo. Nintendo is well known as a hardware and software provider in the area of digital game. In this blog, I would like to introduce their business model reinventions basing on the historical transition of successes and failures.

Nintendo was founded in 1889[ii] as a card game company. The grandson of a founder, Hiroshi Yamauchi, took up a post as CEO in 1942. After he took office, Nintendo invented plastic cards and customized cards for children using Disney characters.

However, CEO realized that the growth of the company was limited as a card game company. He decided to diversify business areas. The company started the operation of hotels and Taxi Company, the production of instant food, and so forth[iii]. Unfortunately, every trial was failed because the company did not have know-how. Among all, Laser Clay Shooting System, which the company bet their future as core business area, was the biggest failure. As a result, the company saddled with huge debt. At that time, an employee of Nintendo came to him in a flash watching a person used a calculator in the train. Thanks to this inspiration, Nintendo could invent the mobile game machine, Game Watch. This product became a hit and took up the debt. Thus, the company had a little strategy and operated on a hit-or-miss basis several decades ago.

In 1980s, Nintendo prepared for digital game market for the consumer. Basing on the previous failures, they analyzed the market and decided to reinvent their business model. At that time, Atari was the major player in the United States; however the Atari’s market was shrinking. Nintendo analyzed that the cause of decline stemmed from the low quality software. Therefore, Nintendo built software market management system before they would start selling new hardware platform “Family computer”, the first mega-hit product of this company. The system is that only licensed software companies could develop and sell the game for Family Computer. Nintendo screened the contents. And the contents providers had to request Nintendo to produce their cassette media. Thus, Nintendo provided not only hardware platform; but also they established new business models using four features. First was customer value proposition that certified the quality of software for customer. Second was profit formula that yields continuous income in accordance with the expansion of the game market. Third were key resources such as technology of hardware and brand of Nintendo. Fourth was key process that was established by software market management system.

The second crisis had come in 1994. Sony released Play Station that had a CD-ROM. At that time, Nintendo focused on the performance of CPU and loading time of the game. Therefore, they adopted 64 bit CPU and decided to use cassette as a media in their new product, Nintendo 64[iv]. As a result, Sony grabbed market share from Nintendo. Based on the market trends, Nintendo changed strategy and released Game Cube, which had a superior media. However, Sony released Play Station 2 at the same time. It was difficult for Nintendo to retake control of market share.

In this circumstance, Nintendo decided to reinvent business model again. They found that the number of people who play with digital game seemed to hit a peak. They thought that the causes had roots in the complex game system and its difficulty for the beginner. The reduction of these factors was requires for the increase of consumer market such as women and middle-aged people who did not interested in the game. And Nintendo also focused how they could provide efficient and productive environment for developers. The reduction of investment and software development cost had a positive impact on the increase in contents providers. Based on these analyses, Nintendo DS and Wii had developed. It can be seen as a blue ocean strategy, and it made Nintendo irrelevant from competition.

In conclusion, I learned that business model reinventions would be required periodically from history of Nintendo. The successes and failures of Nintendo might be the same as the word of Darwin, “"Fitness” does not refer to whether an individual is "physically fit" – bigger, faster or stronger – or "better" in any subjective sense. It refers to a difference in reproductive rate from one generation to the next.” Nintendo clearly learned from the failures, and they did not persistent in business model that succeeded in the past. The persistence in the past success might be result in Inertia as a gradual decline. On the other hand, the trials and errors of reinventions seems to raise employees’ skill and knowledge to cope with current and future crises.

[i] Reinventing Your Business Model, Harvard Business Review, Mark W.Johnson, Clayton M.Christensen, and Henning Kagermann

[ii] Nintendo Homepage


[iv] The crises that Nintendo overcame