Wednesday, October 31, 2012

Post 1: Teach For America



I would like to profile or draw attention to the five-year growth strategy of an educational nonprofit organization called Teach For America. Teach For America is the national corps of top college graduates who commit two years to teach in under-resourced schools and become lifelong leaders in the pursuit of educational equity. In its 22-year history, Teach For America has recruited and trained more than 14,000 teachers, reaching more than 2.5 million students. For more information on the organization, visit www.teachforamerica.org.

I was a 2006 Bay area (CA) region corps member. In 2005, Teach For America embarked on an ambitious five-year plan that called for the Teach For America corps to expand from its current 3,500 members to 7,500 across more than 30 sites by 2010. For more information related to their growth plan, see: https://www.teachforamerica.org/newsroom/documents/TeachForAmerica_News_20060621.html

Their growth strategy has been successful throughout the five years, as they have made their “target” growth numbers, of recruiting more students into the teaching corps. This is interesting and impressive, especially during a national/global recession when funding for K-12 schools and education industry in general has diminished. In other words, while the budgets of school districts have remained stagnant for the most part or shrunk, Teach For America has not only been able to maintain its recruitment in these districts, but has actually increased recruitment.

As discussed in Porter’s HBS article, strategic position emerges from three distinct sources. Teach For America provides a teacher supply to public K-12 school districts in 30+ geographical regions throughout the country where an academic achievement gap exists. Following Porter’s three sources, TFA serves the few needs of many customers, that is the specific hiring needs of thousands of school districts. One common misconception is that TFA places teachers in districts where there is a teacher shortage. That is not the case. TFA only places teachers where an academic achievement gap exists.

My question to the class: How comprehensive does Teach For America’s growth strategy appear to be and what (if any) are its shortcomings? Teach For America recruits its teachers to public schools (both traditional and charter). How would the educational landscape in the U.S. have to change to impact this organization negatively?

Strategy Adoption and Evolution with Trend and Times

In the past few years, concepts and technologies like mobility, SaaS, cloud computing, BYOD (Bring Your Own Device) have dominated the IT space. The big players in the space have either had to step up their game or they are eased out.

A good example is IBM who noticed in the 90's that their reliance on servers and mainframes could not longer retain them as market leaders in the IT space. They decided to leverage on the contacts they had built via the long standing relationships they had with IT departments of companies through the supply of hardware to proffer B2B IT solutions. They repositioned the company and came up with a strategy to deliver IT consulting services. today, IBM is a market leader in IT consulting.

Taking a cognitive look at the industry,  we can posit that a new cycle has already begun. SaaS, IaaS, PaaS are but a few acronyms which weren't bourgeois a few years back. However, to succeed in the IT space today, small companies and big companies alike have to leverage on these technologies.

In the light of these, we can see the strategy that ERP giant SAP has adopted. Earlier this year,
"SAP AG announced that it was launching an "accelerated" cloud strategy spearheaded by SuccessFactors, a cloud provider it acquired this past February." [2]
In an article titled "SAP's strategy: All cloud, all mobile and all in memory" by Brain Bloom of ComputerWorld Canada, he writes about the heavy investment that SAP has infused into cloud, mobile and in-memory data analytics. The acquisition of SuccessFactors, a SaaS based company is a clear indication of the line that SAP is currently towing. Accordingly, Jim Hagemann Snabe, co-CEO of SAP predicted that in less than five years, all computing worldwide would be mobile, in-memory and available in the cloud.

SAP HANA, an  in-memory computing appliance that combines SAP database software with pre-tuned server, storage, and networking hardware from one of several SAP hardware partners has been one of their latest flagship; laying credence to the new mobile, cloud and in-memory strategy of the company.


Fig: SAP HANA Architectural Design
Source: SAP 2011


Would they be successful? They look to be on the right-track, but ultimately, only time will tell.


References
1) Kelly, Jeff. "What is SAP HANA? | SAP HANA Cost - Wikibon." A Wiki for Sharing Technology & Business Knowledge - Wikibon. Wikibon, 16 Nov. 2011. Web. 31 Oct. 2012. <http://wikibon.org/wiki/v/Primer_on_SAP_H

2)  Bloom, Brian. "SAP's strategy: All cloud, all mobile and all in memory - Page 1 - Enterprise Infrastructure." IT World Canada Information Technology news on products, services and issues for CIOs, IT managers and network admins. ComputerWorld Canada, 15 May 2012. Web. 31 Oct. 2012. <http://www.itworldcanada.com/news/saps-strategy-all-cloud-all-mobile-and-all-in-memory/145433>.


"Where the rubber literally meets the sky" Or "Why we don't have hover cars"

This post explores the connection between Mark Pontin's article "Why We Can't Solve Big Problems" in the Oct 26th 2012 MIT Technology Review (found here) and the Balanced Scorecard as discussed in the Harvard Business Review article "Using the Balanced Scorecard as a Strategic Management System."

Kaplan and Norton propose that using a scorecard allows a company to to fill the gap between short term measures and long-term strategy and implementation. Potin starts by asserting that today's technological sector has no long term vision.

"he ambitions of startups founded in the last 15 years do seem derisory compared with those of companies like Intel, Apple, and Microsoft, founded from the 1960s to the late 1970s. (Bill Gates, Microsoft's founder, promised to "put a computer in every home and on every desktop," and Apple's Steve Jobs said he wanted to make the "best computers in the world.")""

He discusses Kennedy mobilizing the country on an 8 year trajectory to putting men on the moon and contrasts that initiative to the current climate for innovation:

"Kennedy's words, spoken at Rice University in 1962, provide a better clue:  "But why, some say, the moon? Why choose this as our goal? . . . Why climb the highest mountain? Why, 35 years ago, fly the Atlantic? . . . We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills . . ."" 




"Max Levchin, another cofounder of PayPal, says, "I feel like we should be aiming higher. The founders of a number of startups I encounter have no real intent of getting anywhere huge ... There's an awful lot of effort being expended that is just never going to result in meaningful, disruptive innovation.""

Technology has to potential to irradicate hunger, poverty, malaria, climate change, cancer, and the diseases of old age; but why does it not? Pontin's descriptions of the challenges facing the technology sector can easily be paralleled to what a balanced scorecard could address.

Kaplan and Norton explain that a scorecard allows an organization to manage strategy through four processes:
  • Translating Vision - Clarifying the vision and gaining consensus
  • Communicating and Linking - communicating and education, setting goals, and linking rewards to performance measures
  • Business Planning - Setting targets, aligning strategic initiatives  allocating resources, and establishing milestones.
  • Feedback and Learning - Articulating the shared vision, supplying strategic feedback, and facilitating strategy review and learning.

While the challenge of ending hunger or creating hover cars is a multi-sector issue, the parallels in the strategy challenge the technology sector is are as follows: 

  • A lack of shared vision and purpose that hasn't been seen since the 60s and 70s
  • A lack of public/social investment and interest in being updated on smaller goals and why these issues are important
  • Institutional and financial support being absent from funding the large innovations as opposed to pushing funding towards the small "trivial toys"

These challenges are different than the ones proposed in the reading, as social issues differ from market opportunities, but the core principles of shared vision, investment, and targets remain the same.

"It's not true that we can't solve big problems through technology; we can. We must. But all these elements must be present: political leaders and the public must care to solve a problem, our institutions must support its solution, it must really be a technological problem, and we must understand it."

Zynga Bazinga !



In 2007 when Marc Pincus founded Zynga with the mission of "Connecting the world through games", social gaming was a relatively new phenomenon. Five years later Zynga has emerged as the biggest maker of social games, with 300mn monthly active users, five of the most popular games on Facebook, several acquisitions, and a revenue of USD 320mn. 

In today's post I will be highlighting Zynga's strategic move of creating its own API -- 'Platform to Play' service -- via which third party game developers can develop games using Zynga's network to connect gamers even outside one's Facebook page. I believe this is significant to our first week's discussion on strategy, as it will highlight a young company's move to re-position itself not just as a content producer but also as a platform and service provider in an industry of diminishing returns, where there are low barriers to entry and where it is soon losing its dominant position.

Zynga's new platform is a 'social atmosphere' consisting zFriends, live chat and messenger that is available not only on zynga.com but also on mobile platforms such as the iOs and Android besides being available on Facebook, Google+ and other social networking sites. A player can start a game on her iPhone and then continue playing the same on Facebook or on her desktop. Players can invite each other in the 'network' to play a game. Given the fact that customer stickiness is key to propelling its growth, developing this kind of an integrated environment is important to Zynga as it will increase customer stickiness. Another dimension of viewing this would be the diversification of Zynga's revenue stream. Before the advent of its platform, several insiders and industry pundits criticized Zynga's business model and doubted its viability stating that it was 'over dependent on Facebook and other partner businesses.' In its latest news feed Zynga reports 100mn connections already between friends with 250mn clicks being registered on zynga.com.

In my view, Zynga lacks innovation in its games which can be easily mimicked. It tries to entice users by adding small improvements to its 'Ville' games which are just not enough to create longtime user satisfaction. At a time when it is being touted as Facebook's tail and facing ailing stock prices, Zynga's decision to release a social gaming mobile platform cannot be better timed. As the world increasingly turns social and mobile and small seemingly useless but entrancing games are the norm of the day, Zynga has painted an exciting landscape.

A third dimension to Zynga's story is its prevalent, heavily criticized corporate culture which enforces competition over collaboration, where internal teams compete to outperform each other and create an insanely stressful environment. Each team owns a game and is measured by how popular and successful one's game is when compared to another thus inculcating a culture of  'fierce unhealthy internal competition' as the employees picture it; 'meritocracy' as Marc Pincus pictures it; 'recipe for failure' as I picture it. 

My conflict lies in these two distinguishing strategies. The hope and promise this company gives us by creating what is being called the 'holy grail' of cross-platform gaming and the attitude it adopts towards its employees by laying them off, hassling them and moving to copy-cat strategies. I believe Zynga will win the race in the short term but will 'stress' itself out and fall in the long run. What do you think?

References:
  1. http://www.forbes.com/sites/tomiogeron/2012/06/26/zynga-builds-out-cross-platform-gaming-strategy/
  2. http://www.wired.com/business/2012/06/zynga-unleashed/
  3. http://techcrunch.com/2012/06/26/zynga-network-adds-social-lobby-for-users-across-all-devices-zynga-with-friends/
  4. http://www.businessinsider.com/zyngas-mobile-ambitions-2012-6

Applying War Strategies to Business Situations


In this week’s class, we talked about the history of strategy and its application in war by Sun Tzu, Vegetius, and other leaders. Today’s concept of the term “strategy” is derived from Sun Tzu’s thesis – “The Art of War” written in 500 BC. So can those strategies, made centuries ago, still be applicable in today’s world? Can war strategies be somehow translated into business situations?

As stated by Bogdan Cernat-Gruici, strategy is the combination of “planning the route” and “walking the path”. It is a link between an objective’s end and the exact means to achieve that goal. He also states that not only is making the right decision important, but it is also equally important to make those decisions in the correct logical order. Looking at the example of Napolean Bonaparte, he adopted four main strategies:
  1. Increased the speed with which the army traveled – this helped him deploy his troops faster than his enemies could, and so his enemies got overwhelmed as they could not get enough time to organize to mount a successful defense. Similarly, companies need to operate in a way that gives them a competitive advantage over other organizations. In order to be successful in a market, they need to launch products faster and at the appropriate time, penetrate international markets faster, and also react to environmental and regulatory factors quicker than the other contenders to gain a competitive edge.
  2. Organized his army into platoons that are self-sufficient – Napoleon’s platoons contained people that could see the bigger picture and perform multi-functional tasks. As globalization increases, the speed with which a company develops also increases. As more tasks and activities are performed outside the national borders, more multi-tasking, multi-functional units are required.
  3. Used supplies from conquered territories only instead of bringing them along. This aided to the fast movement of his army. The down side of this was soldiers stealing from the local people; however, this strategy was necessary in the short run. Organizations today, are leaning more towards the “Just in Time” method to reduce the costs of inventory instead of maintaining optimum supply quantities. The disadvantage here is that they are dependent on their suppliers.
  4. Attacked enemy supply lines – this eliminates the need for direct confrontation. In the business world, this is done by the use of exclusivity contracts. For example, if Pepsi has an exclusivity contract with Pizza Hut, Coca Cola is automatically eliminated as a contender for that segment. 

In conclusion, the opportunities for applying war strategies in business situations are limitless. A good war strategy begins with proper consideration of tactics whereas a good company’s strategy begins proper consideration of the market conditions.

Reference: “The Way to Victory-Using Military Strategies in Business Situations” - Bogdan Cernat-Gruici, The Romanian Economic Journal, Year XI, no. 29 (99-115)

Strategically Bridging the Private-Public Gap


           
In one of this week’s class articles, Kaplan and Beinhocker explore the idea of formal strategic planning as a business norm that may provide more harm than good. As a time-consuming and often overridden process, the legitimacy of such a practice may be quickly dismissed. While this is often the case when applied to corporate settings, a recent Wall Street Journal article illuminates the possibility that public entities and communities may play a more concrete role when offering their two cents to University expansion, an endeavor that often directly affects its surrounding elements in a variety of ways. 

Athavalev’s article "Cornell Set to Lay Out Campus Plans" outlines developments that are occurring at the University, as it attempts to implement an expansion strategy in the form of a new applied sciences building on Roosevelt Island. This plan may not more forward, however, without the approval of the city’s planning committee. In this case we see the government playing a direct role in the implementation of the University’s strategy, first as the generator of the city-wide development plan contest (an opportunity won by Cornell), and second as the approver of subsequent development plans. While the campus may have its own pre-determined priorities and goals, it is not without a formal and separate “okays” that they may finally move ahead with their game-changing development plan.

Traditionally, as a private academic institution Cornell would rely on the more informal advice of shareholders and donors to the University (who are typically the suppliers of the revenue essential to expansion projects), but this presents a particularly unique case in which the community perspective must be equally taken into account. As a result, it is likely that this factor will play a distinct role in Cornell’s submitted expansion plan. Designating the surrounding community and city planning committee as two relevant shareholders, Cornell is insuring themselves against a possible loss of control or a strategy-altering change in the development process.

As a major component of the University’s outreach and expansion, the decisions made in relation to the new physical building are sure to affect the University’s perception and future success as a whole. Therefore, it is essential that Cornell resist the urge to dismiss outside input into their campus developments and take the interests of the community into account when submitting their final proposal. Echoing the ideas presented in this week’s article entitles “Your Strategy Needs a Strategy”, Cornell must alter their shortsighted strategy to successfully achieve the goals outlined in their long-term strategy.

Source: Athavaley Anjali. “Cornell Set to Lay Out Campus Plans”. Wall Street Journal: New York Section. Web. Published 14 October 2012. Accessed 31 October 2012. http://online.wsj.com/article/SB10000872396390444354004578056982663721880.html

Unpredictable Unpredictability


I don't know about you, but when I think about innovative industries, the legal field (specifically law firms) is one of the last that spring to mind. We can turn to Sarah Kaplan and Eric Beinhocker's questions in "The Real Value of Strategic Planning" to quickly see just how immutable the legal field actually is.

For example:
1. Industry youthfulness? About 150 years old in its present form (though we all know that even dinosaurs had lawyers)
2. Concentration? Vastly overconcentrated. What did Shakespeare say? "Kill all the lawyers?" This wasn't what he was talking about, but reversing overpopulation may have been a positive externality if his declaration had come to fruition.
3. Growth rate? Completely stagnant circa 2009.
4. Innovation rate? Nope.
5. Rate of tech change? Shockingly slow compared to other professions.

So yes, about as malleable as a stone tablet.

But there are a couple of pinlights in an otherwise dark tunnel, one of whom I worked for this past summer. A firm who ten years ago decided that their clients would appreciate it if they offered similarly high-quality lawyers, often relative newbies, at a drastically reduced rate. And what did they offer the lawyers? Quality of life. Control over their schedule. Weekends. Telecommuting options. It was an absurdly crazy idea (see: Apple commercial circa 1997), but somehow it worked. The firm located the office to house these lawyers in a low cost of living area to cut down on overhead, and it is still thriving today.

I've spent the past six months wondering, how did they know? How did they know that the legal market as it was once known - the land of milk and honey (yachts for everyone!) - would collapse. That high-quality yet cheap lawyers would become a major selling point for clients.

Reading our articles for this week, a lightbulb went off. While every other firm seemingly on the face of the earth was employing classic strategy, this firm's CEO had switched to an adaptive strategy. He was still trying to optimize the firm's position in the industry versus pulling a game change, but he acknowledged that the profession was changing - that it was not as predictable as previously believed.  In “Your Strategy Needs a Strategy,” Reeves, Love, and Tilmanns reference using a flexible supply chain as a strategy for organizations in industries that are unpredictable but immutable.  In its own way, this law firm has done just that by decreasing costs (with cheaper associates) at the bottom of the chain.  Of particular note, this firm may have successfully implemented its crazy idea in part because of its leadership’s dedication to ensuring that people up and down the organizational chart know how the strategic plan translates into day-to-day choices for them… to the point that the clearly defined Vision Statement is prominently featured on each employee’s desktop.

But now, this firm has not only optimized its position in the market but fundamentally changed the game.  Now that the legal market is both unpredictable and, as this firm showed, malleable, should shaping strategies be employed instead of adaptive strategies?  What about the fact that it is unpredictable how long this archaic field will remain unpredictable?

Episode III: The Empire Jumps the S Curve

News broke yesterday that Disney has purchased Lucasfilm for $4 billion, a move that has elicited two very different responses from the public.  On the purist’s side of the equation, Disney is considered a carnivorous company eager to buy up and taint the legendary science fiction brand.  On the investor’s side, Disney stockholders widely applaud the purchase and look forward to seeing the ticker as the stock exchange responds in the coming days.

But who is right?  How can the investors love the move when the steadfast consumers disavow the acquisition?

If we can ignore the fact that Star Wars has created perhaps the most loyal customer base of any movie franchise, we rightfully interpret Disney’s purchase as a jump in the S curve.  That is, Disney hopes to stay stave off the staleness that often occurs in the entertainment industry by injecting a new brand and new possibilities into its repertoire.

We need not look too far into history to see that Disney commonly reinvents by acquisition, especially during the Iger years.  In 2006, Disney purchased Pixar Animation Studios, blending the highly talented design team at Pixar with the existing infrastructure at Disney.  The merger created the foundation for more Pixar successes—Up, WALL-E, and Cars 2 just to name a few.

Three years later, Disney acquired Marvel Entertainment, a purchase that has given way to a number of blockbuster films (Iron Man 2, X-Men First Class, Captain America, The Avengers).  This purchase broadened Disney's profile to include a substantial piece of the superhero genre, a previously under-utilized segment of their marketplace.

And now, after another three year cycle, Disney has a buyer’s appetite again.  An investor should look favorably at the decision to buy Lucasfilm because it introduces new intellectual capital and property into the brand.  With such a durable franchise as Star Wars and other Lucasfilm titles are, investors should be encouraged that the move expands Disney’s breadth with the promise of future financial gain.

And provided Justin Beiber isn’t cast as Luke Skywalker in revival films, consumers will get over it soon enough.

A fair question worth considering: should Disney continue jumping the S curve through acquisition when similar innovation may be possible with less-costly internal reforms and innovation?

Source: http://www.polygon.com/2012/10/30/3577710/disney-purchases-lucasfilm-in-4-billion-acquisition-deal-includes









By Mark Heckmann

Medtronic’s Global Strategy for Profitable Growth




Medtronic’s Global Strategy for Profitable Growth

Medronic is the global leader in the medical device market. The U.S. based company has been facing weak demand and pricing in its second largest segment-Orthopedics and Spine. This has partly been because of the misuse of products and the consequent complications caused by them, in the U.S. To increase the returns on research spending, the CEO, Omar Ishrak, announced last year that he would “revive growth by expanding internationally”.  With 46% of the revenue coming in from overseas, Ishrak said, he believed that there was a great growth potential in emerging markets like India, China and Latin America.  To realize this growth potential, he believes that Medronic needs to penetrate these markets by catering to their respective value segments. This means that Medtronic would have to develop different pricing tiers for its products and lower the cost of manufacturing its products in these overseas markets.
This evidence of this strategy being played out can be seen in the company’s recent decisions. Ishrak recently gave heads of the various business units, additional global responsibilities. He also appointed Geoffrey Martha as the senior vice president of strategy and business development to develop Medronic’s global strategy. And, the biggest tactical evidence has been the Medtronic’s Chinese acquisition- China Kanghui Holdings Inc., an orthopedic implant company that specializes in spine and trauma products.
China Kanghui Holdings has seen a 20% annual growth, with 80% of its revenues coming from china and the rest from other international emerging markets. Medtronic’s $816 million investment is consistent with its strategy of penetrating the high growth emerging markets and catering to the value segment of the orthopedic space in the developing world. Kanghui not only brings with itself a strong product portfolio and pipeline that can be added to Medronic’s spine and trauma products, it also brings to the table, efficient R&D and operational capabilities for reducing costs, and wide and established distribution network and local sales force that is crucial for effective market penetration. This acquisition is seen as a gigantic step in Medtronic’s global expansion strategy to establish a stronger local presence in the emerging markets.
In class and in the readings we studied about profitable growth, without undermining your uniqueness as a company. This is exactly what Medtronic is doing to gain a competitive advantage.  Medtronic’s strategic investment has opened up larger markets for a focused product line. It is trying to further penetrate the needs of its customers to whom it is already distinctive as a market leader. Medtronic has been a leader in the spine and orthopedic space but, with slackening demand in the U.S, it has become necessary for Medtronic to aggressively tap into the global markets. This move is likely to reinforce Medtronic’s unique identity as a leader in the orthopedic and spine space. This was somewhat tarnished in the U.S with the serious complications associated with its bone graft product that lead to a decreased demand. However, now it will have a greater variety of related products that meet the focused needs of its customers.  Medtronic is trying to serve few and focused needs for a broad customer base. The acquisition of Kanghui is an effort to build on Medtronic’s core competencies, which makes Kanghui a strategic fit to the organization. Kanghui will enable Medtronic to reduce its costs and price competitively in order to serve the growing middle class, who make up the value segment, of the emerging markets.
What remains to be seen is how well the international company integrates itself with Medtronic in terms of its core values and mission. What problems do you think this relationship will face while building a global business together?
Sources:
http://www.nytimes.com/2011/08/24/business/omar-ishrak-head-of-medtronic-outlines-strategy.html?_r=0