Chrome Goes on Safari: Vertical integration advantage realized?

Chrome has been sucking power from your laptop batteries. Google has been playing catch up to Apple’s Safari in terms of power consumption on Mac computers for some time. Apple’s product is optimized to be more efficient to their own proprietary operating system while Google is optimizing development efforts across platforms. Indeed, Microsoft’s Internet Explorer also enjoys a power consumption advantage on Windows machines. Of course, this could just be a flaw in Chrome but it does seem like it might be linked to specialization on a single platform as opposed to cross-platform compatibility. Strategy classes might explore more deeply how valuable the advantage of vertical integration might be in this case. Also, what type of organization must be in place to realize this potential value. Of course, the ad revenue gleaned from these products may justify vertical integration but it is less clear how this would create value for users. Power consumption, on the other hand, would be important to users.

Contributed by Russ Coff

Apple Clones Jobs in Jony Ive

Rather than fully embed superior design capabilities in organizational routines, Apple has instead identified and promoted Jony Ive into the design guru role once occupied by Steve Jobs. Ive “worked closely with the late co-founder Steve Jobs, who called Mr Ive his spiritual partner on products stretching back to the iMac.” As before, the reliance on a single person in this role raises key questions: An article published in the New Yorker earlier this year described how “Mr Ive had been describing himself as both ‘deeply, deeply tired‘ and ‘always anxious’ and said he was uncomfortable knowing that ‘a hundred thousand Apple employees rely on his decision-making – his taste – and that a sudden announcement of his retirement would ambush Apple shareholders.‘” Can this be described as an organizational capability? An organizational routine? A dynamic capability? Does it matter that the capability is largely embedded in a single person who is not an owner? All good questions to kick off a nice class discussion…
Contributed by Russ Coff

Exercise: Show Me the Money

Here is a simple exercise to demonstrate competitive advantage on the first day of class. Hold up a crisp $20 bill and ask “Who wants this?” When people look puzzled, ask, “I mean, who really wants this?” and then “Does anyone want this?”  Continue this way (repeating this in different ways) until someone actually gets up, walks over, and takes the $20 from your hand. Then the discussion focuses on why this particular person got the money. How did their motivation differ? Did they have different information or perception of the opportunity? Did they have a positional advantage based on where they were sitting? Other personal attributes (e.g., entrepreneurial)? The main question, then, is why do some people/firms perform better than others? This simple exercise gets at the nexus of perceived opportunity, position, resources, and other factors that operate both at the individual and firm level. Note that instructors should tell the class not to share this with other students. However, if you do have a student who has heard about the exercise (and grabs the money), asymmetric information about an opportunity is certainly one aspect of the discussion. The following “vine” might also help drive home the point about money and resources…

Contributed by Rich Makadok

iPhone Killers? Not when Rivals are Complementors…

iphone_killer1There has been much ado over the years about how Apple rivals seek to introduce iPhone killers. Here is a sampling of so-called iPhone killers that turned out not to be. Horace Dediu points out the revenue that rivals like Google, Microsoft, Samsung, and Amazon get from the iPhone. It turns out that iPhone owners are more likely to shop on their phones. This creates much more ad revenue for Google and purchases for Amazon. Apple remains the largest customer of Samsung’s semiconductor division and the largest source of operating profits. Microsoft has licensed IP for the iPhone and is increasingly offering software applications for iPhones. This graphic is a bit busy but shows the revenue and operating income growth of Apple and these key rivals — all strongly positively correlated. Of course, the whole sector is growing so the correlational evidence may not be as convincing as one might like. Nevertheless, performance is increasing overall, why would these rivals want to kill their golden goose?

Contributed by Russ Coff

SocialCompare

Dollar Auction: Looking for Bubble

8410493_origEconomic bubbles reflect irrational escalation but there is always an element of underlying rationality. This classic exercise, the Dollar Auction, is an ideal vehicle to emphasize how this can come about — even with actors who intend to be rational. With much fanfare, the instructor auctions off a dollar bill (a very crisp one to reflect a “rare” asset). The bill goes to the winner; however, the second-highest bidder also loses the amount that they bid. The game begins with one player bidding five cents (the min), hoping to make a ninety-five-cent profit. However, a ten cent bid would still yield a ninety-cent profit (if bidding stopped there). If the first bidder bids ninety five cents, and the second bidder bids one dollar (for no net gain or loss), the first bidder stands to lose ninety five cents unless she bids $1.05. In this way, bidding continues well beyond a dollar, usually until one player issues a preemptively high bid to signal intent to outbid at any cost. Only the auctioneer gets to profit in the end. While the incentive structure is idiosyncratic, one might debrief with a discussion of why they didn’t anticipate this problem when they started bidding? This fits broadly in discussions where escalation is a risk (decisions under uncertainty, M&A, technology investments, etc.). You may find that some students have seen this exercise previously. However, it only takes two uninformed bidders to create a bubble. Of course, the following classic bubble video is a good fit in the debrief (came out right before the real estate bubble)…

Contributed by Russ Coff

The Emperor’s New Rope…

This is another in a series of reminders that individuals respond to perceptions even if they are inaccurate. The short video of the invisible rope prank might be followed by a discussion of how firms can influence the perceptions of their rivals, complementors, and/or customers. This is especially an issue in contexts where there is a great deal of uncertainty (entrepreneurship, technology, etc.). An earlier post presents a driving prank with a similar theme.

Contributed by Russ Coff

Grocery Stores Find a New Bag

Traditional grocery stores are losing share as new organizational forms emerge (15% over the last decade). Once thought to be as stable a market as can be, new business models increasingly challenge the landscape. The link above includes mostly additional services such as “Grocerants” (upscale restaurants within grocery stores), fishmongers, butchers, more delivery options. Also, online grocers are back and some are peeling off customers with more targeted business models. Many of these differentiated alternatives are more focused smaller stores serving specific types of consumers. However, not all of the change is on the differentiation side of the aisle. The trend also includes increasing popularity of lower cost alternatives alike Aldi. This is discussed in a related toolbox post with Aldi videos.

Contributed by Aya Chacar

Die Another Day Gazelle

This clip shows a cheetah catching a gazelle. Then a hyena tries to steal dinner from the cheetah. While they are busy fighting, the gazelle, who was playing dead, gets up and runs away. In this way, a cunning weaker firm might avoid being noticed by more resource rich firms until the moment when it has more resources of its own. A basic principle of competitive dynamics under bounded rationality is to fly under the radar so as to avoid retaliation from stronger incumbents.

Contributed by Russ Coff

Samsung Throws Apple for a Loop

Will Samsung Pay win a standards war over Apple and Google? Apple Pay and Google Pay may have gotten lots of buzz but adoption of contactless payment has been slow. The near field communications (NFC) technologies that they rely on require that merchants invest in new technology at the point of sale. Samsung has acquired LoopPay and its technology to allow phones to communicate with any magnetic strip reader. The new service is expected to launch in the 2nd half of 2015. Even if NFC is ultimately a superior technology, the ease of adoption may allow Samsung to dominate as users seek a solution that they can use with most merchants. Meanwhile, Google plans to include it’s Pay app on all Android devices which could increase its penetration. Though it is important to note that this might create a conflict with its key Android partner Samsung. This should engender a nice discussion of strategy in “winner take all” standards wars. In class, one might assign groups to debate why Google, Apple, Samsung, or other will win this market.

Contributed by Russ Coff

Network Effects Silence Phones!

In teaching industry analysis, I always make a point of discussing network effects as a potential barrier to entry (see Peter Klein’s comment to this post on the term “network externalities”). Usually, I use an example like the iPhone FaceTime application which increases in value depending on the number of family and friends who have iPhones. This, in turn makes it hard for rivals to enter because of the need for a large installed base. Google+ is another example in it’s failure to make much of a dent in Facebook’s market. Now, a new app gives discount points to students for locking their phones based on the number of other locked phones in the same vicinity. As such, when the whole class locks down using the PocketPoints app, they all get discount points. This pushes everyone to adopt the same app to get the most points and makes it hard for a competitor to enter. This might also be a nice way to turn the class into a lab to study game theory, or incentives. It does all this and keeps people off their phones in class! The following video describes the app.

Heard Through Virginia Postrel

Dr. K Prescribes Strategy Videos

Dave Kryscynski has provided an excellent series of online videos to supplement your course or to help move portions of it online. These are very well produced and may allow you to spend class time on more experiential activities found elsewhere on this site. Below is the video on Porter’s generic strategies but I have provided links to all of the available videos below and listed others that you can gain access to through Wiley.

More Videos (below) Accompany New Text

The following videos are also available but are designed to accompany the forthcoming textbook: Strategic Management 1e by Jeff Dyer, Paul Godfrey, Robert Jensen and David Bryce (BYU Marriott School of Business). Continue reading

Boeing’s Self-Destructing Android

In a torrent of irony, Boeing is partnering with Blackberry to deliver a more secure line of smartphones. Do their capabilities transfer? Does their brand transfer? Did they pick the right partner to imbue confidence? This is almost an entry for the business combination scavenger hunt. Whether the business model makes sense or not, one might think Sony’s experience will help to create demand for this type of enhanced security. If asked to do a testimonial, will Sony byte?

 

Contributed by Russ Coff

Changing the Game

This interview with the founders of Justin.tv and Twitch presents an example of how founders shift their strategy in the face of feedback from customers, and emerging opportunities. They started Justin.tv to broadcast their lives, but soon discovered that people really wanted to watch gaming. This interview describes how they pivoted. In a strategy class, this illustrates intended vs. emergent strategies as well as the need for entrepreneurs to pivot off of initial ideas. There is also an interesting discussion of how technology has helped to make gaming and poker into competitive sports. You may think these guys are crazy, but Amazon paid $1 Billion for Twitch. The video goes on (@ 19 min) to discuss their involvement with Y-Combinator which provided seed capital. Warning: around 13:45 there is discussion of mature content that some students may find inappropriate.
Contributed by Susana Velez-Castrillon

Scenario Planning Success?

In 1993, AT&T released a series of commercials offering their vision for the future. Their predictions were surprisingly on target (ebooks, turn-by-turn GPS directions, iPads, sending documents via mobile devices, video conferencing, electronic tollbooths, on-demand videos). Someone had a good handle on technology possibilities that would transform our world. And yet, AT&T was decidedly NOT the company to bring us this future: it was effectively gone within a decade. Colbert offers some explanation for how the AT&T brand collapsed and rose again after the disappearance of the old ma bell. Mike Leiblein points out that the company may have failed to make appropriate investments or been concerned about cannibalization of their existing products. This old case about internal disruptors from Bell Labs trying to shake things up at AT&T suggests that is true – the company ejected the “disruptors” and tried to suppress the heresy that the internet would change everything. Ironically, at the time these commercials were filmed, Rebecca Henderson was writing about organizational limitations that hinder incumbents from successfully pursuing radical innovation. These ads make a nice point about the limits of scenario planning. Even if a company has people who can see the future clearly, it may be unable to execute. Here are a few slides that Charlie Williams uses to make that point.

Contributed by Charlie Williams

Teaching Tips @ SMS Madrid

The Strategic Management Society always has excellent teaching sessions incorporated in their conferences. Here are some sessions to check out at the Madrid conference September 20-23, 2014:

  • Sat, 9/20 @ 13-16:00. Competitive Strategy Interest Group Teaching Workshop. Building on last year’s workshop on innovation & education, the 2014 theme is “The Impact of New Technologies on Teaching and Higher Education.” The education industry is abuzz with talk of MOOCs, distance learning, computer-based instruction, and other innovations. How are these best incorporated into the curriculum? (Co-sponsored by the Teaching Community).
  • Sun 9/21 @ 8-9:15. Teaching Corporate Strategy: Insights & Opportunities. Panelists will share experiences teaching corporate strategy topics related to their research: vertical integration, M&A, industry consolidation, and diversification.
  • Sun 9/21 @ 9:15-10:45. Researchers Hooked on Teaching / Teachers Hooked on Research. Most academics polarize teaching and research into separate worlds. Building on last year’s very popular session we bring together world-class scholars who have successfully bridged this apparent divide. This engaging session will showcase their experiences in “translating” their research into teachable moments and their teachable moments into research.
  • Sun 9/21 @ 15:45-17:00. Alternatives Takes on Teaching Strategy: Balancing the (ex)Tensions. Strategy is a complex subject with multiple teaching approaches. This interactive session will provide insights from experienced educators on the methods that work, as well as addressing moves to online content.
  • Mon 9/22 @ 11:00-12:15. Challenging the Way We Teach and Practice Strategy. This is a common ground session comprised of submissions to the teaching community track.
  • Mon 9/22 @ 14:45 – 16:00. Teaching Strategy Philosophically. Ethics applies different theories to address Socrates’s question of how we should act. The application of philosophical principles in teaching strategy has multiple advantages including a better appreciation of underlying values and motivation, and increasing tolerance of ambiguity. Join us in this highly interactive session in how great scholars teach strategy philosophically.

Contributed by Russ Coff

Technological Breakthrough: BookBook

This excellent ad for the 2015 IKEA catalog spoofs Apple’s over-the-top spots about their new products (as well as Samsung’s “next best thing”). This will spur some additional discussion about the value of older technologies and how to sell them to customers as the “best thing you always had.” It also is a nice opener for a discussion of how IKEA leverages their capabilities (advertising and reputation). You can find more background in this Forbes article. For an even lighter take on legacy products, see this Onion post on failing newspapers.

Contributed by Russ Coff

Power & Alliances: Dog’s Best Friend?

This short clip is probably self explanatory. Not all alliances work out in the end for all parties. Nearly all alliances involve contexts where power is unevenly distributed. What are the management challenges for both the favored and unfavored partners? This follows a similar pattern as the classic dog and bird alliance featured in this commercial (similar to Tom and Jerry). Click here for more posts on alliances.

Contributed by Russ Coff

Stuck in the Middle Blues

Samsung’s profits are down by a whopping 25% and they put the blame firmly on Chinese competitors entering with cheaper smartphones (see this NYT article). Companies like Xiaomi and Huawei have increased market share in China over the last year as they sell good products at break-even prices. Now, they have turned their sights on western markets that eat into Samsung’s bread and butter. Pressure on Samsung to respond with lower prices? Perhaps but Apple continues to compete effectively at the high end. It’s proprietary operating system keeps rivals from fully imitating many of the most important product attributes. For now, Samsung is signalling that it will accelerate efforts to differentiate their products — an innovation war more than a price war. The real winner may be Google which gains as Android dominates growth in this market. As you can see, this “live” case allows one to explore the complexities of how different strategies play out in the market. It also pushes us to explore how a sequence of strategies might unfold leading to a longer term competitive advantage. This case might go nicely with the HBS case on Samsung’s dual (cost/differentiation) advantage in memory chips and the threat of Chinese rivals. Of course, in the race for new features, one wonders what they will think of next…

Heard Through Michael Leiblein

Keeping Your Cool in Alliances

Quirky is a company that collects ideas on innovative products from it’s “community members.” It is governed somewhere between crowdsourcing and a holacracy (see the posts on Zappos and Valve). They have formed an alliance with the much more established and traditional, General Electric (GE). The two companies have very different strengths which can be the basis of complementarities that drive value creation in alliances. Together, they have produced Aros, a connected air conditioner that, for example, uses one’s Phone location to tell the system when to turn on and cool one’s house. This is a nice opportunity to apply the frameworks for achieving a network advantage (see Greve, Rowley, & Shipilov’s new book). For example, Shipilov describes the Alliance Radar framework which allows you to see if an alliance portfolio is balanced and identify what kinds of alliances will create the most value. Below is a video review of the resulting product. See also Henrich Greve’s blog post on the alliance for a discussion of how it has worked. While GE handled the product design, manufacturing and sales, the core idea came from Quirky.

Contributed by Aya Chacar

Special Orders Outsourced at BK

This funny video depicts the movement from poorly trained and low paid local workers to outsourced workers overseas and finally to flawed voice recognition software. The result is equally frustrating for the customer. Ultimately, this touches on a variety of subjects including human capital, global strategy, outsourcing, and technology strategy. One important caution is that the video reinforces stereotypes. This too should probably be a part of the conversation.

Contributed by Russ Coff