Now that is a loaded question! Dominate? No corporate counsel in his or her right mind would use that word in any correspondence concerning the company. Dominate is a word that can trigger anti-trust inquiries. Is that really how you want your company to begin 2014 with an anti-trust investigation by the American Department of Justice? I don't think so.
You can relax because I am asking this question in a totally different context and that is in the way game theorists use the concept. For anyone who has played in the world of game theory knows a company should always apply its dominant strategy. That is because game theory states that "dominant strategy" means the dominance or strength of one of your firm's strategies over another – and not how you will dominate an opponent. Rather, it emphasizes how you need to play your strongest hand whenever you consider various strategic options.
Nearly every company has a dominant strategy. For instance Amazon’s online strategy will always be stronger than its retail strategy. Even though it has decided to plant storage lockers in local shops for direct store access to customers, its online shopping experience will remain its dominant strategy. Dell's customization of its laptops and online ordering system dominates its retail strategy – even though it now has an increasing retail presence via kiosks and displays at Best Buy and the like. Apple, on the other hand, offers a relatively simple online shopping experience with most of its online platform dedicated to selling content, not hardware. Apple's dominant strategy for selling hardware is through its high-concept retail stores. While Dell may not win more share in the market via its online ordering system, that remains its dominant strategy. Dell's battling Apple on the retail front will not be in Dell's best interests. Retail sales are not Dell's dominant strategy.
The list goes on and on. Every company in every industry has a dominant strategy, from financial services to life sciences and more.
You need to use your dominant strategy to at least maintain or eventually win in your market. You may not dominate a market with your dominate strategy but you will have the best chance at winning the most share or greatest margins by doing so.
Even as a little kid, I remember my father anxiously looking toward Black Friday (the day after America’s Thanksgiving holiday) and onto the end of the holiday season as the time his store made a large chunk of its profits for the year. Looking at my father, I saw someone who worried about this make-it-or-break-it time each November and December. A similar kind of threshold exists for those pursuing competitive knowledge but instead of a profit line it’s a risk line, the point after which you feel you have enough information to feel comfortable with your particular strategic or tactical decision. Maybe if he had Excel back then and could easily do a year-to-year comparison that exercise might have eased the worry a bit. But he was the co-owner of a small jewelry store and had all he could do to keep his customers happy and the store operating effectively.
Unlike Black Friday, though, this risk-comfort line is very much relative and not fixed to a particular calendar date. For some corporate executives this line is very movable but maybe at the very far end of someone else’s comfort zone. In other words, some individuals can work with very little information to arrive at a conclusion, a decision with far less information than their counterparts.
All companies and all managements have their Black Friday risk-comfort thresholds. What makes these supposed market risks less threatening is worrying you have too little information when you may not. Indeed, the fear of what you don’t know can push the fear ahead of the reality. Certainly there are competitive threats and rivals that want your market share but very often knowing just enough information will allow you to make decisions far sooner than you otherwise expect. Trying to achieve “information perfection” by a cautious management does very little to allay the fear. Delaying that decision in hopes you will acquire more supporting evidence at times may be warranted but from my experience only exacerbates the fear and exaggerates the risk.
Here’s a final confession: No one in my family could truly lessen my father’s Black Friday anxiety. We could offer some consolation or assurances and that was all. Companies are merely extensions of the people who manage them. The big difference is that modern management does have many tools to mitigate this risk-comfort stress. Today’s management has the Internet, filled with useful insights. Many B2C or B2B firms have data mining technology (now listed under the label of Big Data) from which it can analyze a customer’s likely behavior and buying patterns. In addition, today’s corporation can use instant communication to dispatch its staff to ask questions on the ground, questions whose answers will shed light on those dark rumors. Use these tools to improve your knowledge and reduce Black Friday fears.
Alas, American baseball's season will soon come to an end. The song most recognized as this sport's national anthem is "Take Me Out to the Ball Game," sung in most stadiums midway through the seventh inning. Almost everyone knows this song's chorus but almost no one realizes that it has a back story, found in the opening stanzas of lyricist Jack Norworth's 1927 version. Those stanzas have mysteriously vanished from today's version - stanzas that tell you what motivated the heartfelt words we all know:
Nelly Kelly loved baseball games
Knew the players, knew their names
You could see her there every day
Shout "Hurray" when they'd play
Her boyfriend by the name of Joe
Said, "To Coney Isle, dear, let's go"
Then Nelly started to fret and pout
And to him, I heard her shout
Take me out to the ball game
Take me out to the crowd...
We don’t know whether Joe took her to the ballgame or not, but it seems unlikely that he could have misunderstood or ignored her – she’s shouting after all. The modern-day sports fan has never heard her voice at all; these stanzas have disappeared as the song has migrated into pop culture. In the business world, however, companies often fail to hear the shouts of competitors, just as Nelly’s shouts have disappeared from the song sheet. However, many of your rivals are as single-minded and as vocal as Nelly about what they want – if only we cared to listen. The competitor sends unambiguous signals about the intention to enter a market, launches a product, takes market share and leaves rivals wondering why they couldn’t see it coming. But as with baseball’s venerable anthem, there’s a back story. And by paying attention to it, those astonished rivals could have anticipated and maybe prevented their lost market share.
For instance, I have seen many a pharmaceutical company’s clinical trial announced on the US government website, clinicaltrials.gov, which declares a firm’s desire to examine and very possibly enter a particular therapeutic area. Market research and other business intelligence managers typically track such trials and their progress, building timelines that anticipate the launch date. They sometimes discover along the way that certain trials show poor results or that drugs have failed to progress to the next stage of development for some time – leading them to believe that the program has been put on hold or canceled. I have also seen some pharma executives in denial about their rival’s intentions. They assume that one trial failure will severely delay the rival’s FDA approval and, thus, push off the launch date by many months or even years. To their surprise, the rival often overcomes these delays by modifying its clinical trial approach. This Nelly had been shouting its intent all along only to be ignored.
Haier, the Chinese manufacturer of relatively low-priced refrigeration and air conditioning equipment, has established a very solid footing in the American market. In recent years it has surpassed Whirlpool to become the world’s largest producer of refrigerators. This did not happen overnight but neither was Haier’s march invisible or undetectable. Beginning in 1992 it began testing foreign markets by exporting and establishing distribution in Indonesia. By 1997 it moved into the Philippines, where it began to train multinational managers for other markets. In those years it learned how to build local manufacturing, design and distribution models to serve overseas markets. By the time it entered the US market in 2000 it had learned how to appeal to the US consumer at the right price point. This Nelly had been declaring its intentions for a decade, though far from Coney Island.
How can you make sure you can hear these Nellys before they pounce? How can you appreciate the signals or declarations that fairly shout to the market before the damage has been done? Mostly, the answer is watch, listen, and read. Have your employees close to a particular market read local newspapers for rumors or scuttlebutt about the rival – in whatever language they are written in. Ensure, as we do when attending scientific and industrial conferences and meetings, to sit in on key talks and listen to the question and answer sessions for competitive signals that may ride on the coattails of a technical talk. Most important: look for patterns, the direction the various pieces of information may be taking you. It’s a mistake to let any single piece of competitive information dictate your response. Compare and contrast all of the valid news articles, or conference speeches, then examine the signals as you would a large pointillist painting - step back and try to see patterns. Your rivals, the Nellys of this world, do not necessarily shout their declarations all at once but they make them nonetheless – through hiring, through re-launching a clinical trial, by establishing beachheads in new markets.
Come next baseball season, when you are singing Take Me Out to the Ballgame at a stadium near you, think about Nelly and why she – or your rival – so badly wanted to get to the game.
Take Your Show on the Road | Harvard Business Review
By Leonard Fuld | October 21, 2013
Once in a blue moon, a brainstorming session produces an idea that is so blindingly good that people wonder not only “why aren’t we doing that already?” but even: “why isn’t everyone?” As someone who helps businesses conduct “war games” to inform their strategy-making, I suppose I see these moments more than most people; the whole point of these exercises is to devise new marketplace forays and anticipate competitive responses. But still, they are very rare.
So I’ve been especially impressed that one such idea has come up repeatedly in separate games we’ve staged recently. It has made me think I should consider it more closely, and share it more broadly.
The idea is as simple as this: why not have a mobile demonstration van for products, to take a fully-equipped, immersive selling experience to customers’ own sites? The managers who express this idea in our simulated competitive games aren’t thinking of some simple shelving-units-on-wheels format – the kind of oversized salesman’s bag that’s been hauled out to prospects for decades. They’re envisioning well-designed, self-contained environments, tricked-out with the latest high-tech, high-touch technology.
Take the demonstration vans now being used in the UK by Tyco Security which makes products like security cameras, monitors, and access control systems. The company already had a demo center outside London and a slick tradeshow setup to showcase how these work together in an effective system. Its goal for the vans is to replicate the same kind of experience for the customers who can’t come to them.
The beauty of these vans, and the reason I believe they’ve been dreamt up by managers in very different businesses, is that they perform a wide variety of marketing functions. First, they show the product in the best light, in the hands of an expert user. A food company, for example, outfits vehicles with entire kitchens to demonstrate the most effective and creative ways to use its specialty food ingredients in food service operations.
Just as important, the product is not presented as an isolated thing, but as part of an integrated system that solves a problem. The Tyco vans, for example, also feature building management products from other companies to show how the cameras and so forth connect seamlessly with them. “It’s important for our customers to have hands on access to integrated systems,” the general manager of the business explains, “so they can conveniently evaluate the most appropriate solution for their application.”
The vans are also used to provide education and training. Many products can be complicated to operate or dangerous if used incorrectly, and a van can save a customer from traveling to a training center. Providing education on the broader problem the customer is trying to solve gives the vendor a chance to show why its company’s products are better, safer, and more effective. Thinking even bigger, a vendor can consider what training a customer wants its employees to have in general, and provide it in a convenient environment that also carries reminders of the vendor’s product. A heavy equipment manufacturer, for example, brings trucks to its customers’ plants and provides rigorous safety classes for factory workers. This has helped cement the manufacturer’s brand as the most safety-minded player in the industry. Bringing the skills development that customers should be investing in anyway right to their parking lots is the kind of value-adding service that helps lock in channel partners.
I should note, by the way, that the word “van” doesn’t do these vehicles justice – some are as large as 18-wheelers. And sometimes the experience they bring isn’t even contained within the trailer. One industrial producer of state-of-the-art equipment packs its big mobile units with collapsible exhibits which it can set up quickly at construction sites.
And let’s not forget that the vehicles are also rolling advertisements. Is that a sufficient reason to invest in one? Probably not for your company. But if you think no company would invest in a truck and driver just to make brand impressions, you’ve never seen the Oscar Mayer Wienermobile roll by. This giant hot dog on wheels was originally built some 75 years ago just for the visual chuckle. Not surprisingly, 25 years ago, the company discovered the power of putting “ambassadors” on board, and having them criss-cross America taking part in festivals and parades.
As the Wienermobile shows (and also the LL Bean Bootmobile), there can even be a certain amount of excitement generated by the travels of a company’s mobile unit. Cisco Systems, known for its digital telephone switches and routers, had four 25-foot vans touring the country from 2004 to 2011, to events put on by its channel partners. Its Network on Wheels program showed off new products, emphasizing applications most relevant to a given event (often focused on one vertical industry). To let people know when a van would be in their area, Cisco created Twitter accounts for the vans, which managed to attract over 2,800 followers. The social media channel was another source of feedback to help Cisco hone its marketing messages.
Retailers complain about showrooming, where customers visit expensive brick-and-mortar stores to educate themselves about offerings, only to leave and order their choices from cheaper sellers online. At the B2B level, vans have turned this dynamic on its head, investing in assets explicitly to provide showrooms that educate and raise awareness. The expectation is not that the visit will end with the ka-ching of a cash register. The point is to enrich the customer’s relationship with the brand.
So if you’re in a B2B business – and perhaps even if it’s B2C – spend some time thinking about an idea that keeps coming up in competitive simulation exercises. I see it as a quietly effective strategy that has been rolling along, largely under the radar. It isn’t the version of “mobile marketing” that is all the rage now in business press – but it might be the best way you’ll find to drive sales.
Read Original Article Here:
What Do Mount St. Helens and Industry Disruptions Have in Common? | Bloomberg Businessweek
By Leonard Fuld | October 4, 2013
Photograph by Gary Braasch/Corbis
I recently watched a couple of YouTube time-lapse videos about the eruption of the Mount St. Helens volcano. From space or from ground level, you see a verdant landscape that suddenly fills with ash. When the smoke clears, whoosh, you see devastation. The time-lapse film renders this change in a mere couple of minutes, but in reality this change occurred over 24 years, from the initial 1980 eruption to the renewed activity in 2004. On the surface, environmental conditions eroded over a few days or weeks—a geologic blink of an eye. Under the surface, shifts in dirt and magma had been going on for two decades; we simply did not see it take place.
Big disruptions of industries mimic their geological cousins. The dawn of consumer digital photography began with Sony’s introduction of the Mavica camera in 1981. By 2005, Eastman Kodak was suffering its first losses and laid off thousands. Elapsed time: 24 years.
Telephone deregulation in the U.S. occurred in 1984. Yet landline phones still dominated with modest but increasingly improving features such as call waiting, call forwarding, and voice mail. But the cell phone began to change the mobile market forever, and the truly versatile iPhone broke it wide open. As of 2009, for the first time the number of U.S. households opting for cellphone-only use exceeded landlines. Elapsed time: 25 years.
When the 1973 Arab oil embargo hit the U.S. and Western Europe, with gasoline prices reaching all-time highs, the talk of electric cars began in earnest. But it wasn’t until 1997 that the first Toyota hybrids came on the market, followed by a spate of new electric alternatives over the following years. The market had begun to shift for automobiles. Elapsed time: approximately 25 years.
A lot of factors drove those industry shocks, including changing legislation, industry restructuring, and a host of new technologies. But make no mistake: These disruptions were driven by a market need. The companies that were able to spot the evolution early—Toyota in cars, Canon in cameras, and Apple andSamsung Electronics in phones—were winners years later. And in each case it was the incumbent that lost the most: Chrysler, Kodak, and the old former monopoly, AT&T.
What can you do to watch these shifts and anticipate the changes that may bubble to the surface over the coming 25 years?
First, forget about predicting the specific time and date of a disruption. That’s the kind of foresight found only in science fiction. All these disruptions could have brought many different opportunities to the marketplace—sooner or later or even in another form. The real trick is not to look for a single future story but to watch the indicators—the story elements that could come together to create that disruption. That is exactly what makes a little-known detail of the Kodak digital photography failure so fascinating.
Minoru Ohnishi, appointed president of Fuji Photo Film in 1980, witnessed two events—both early warning indicators of the digital imaging revolution. First, the Hunt brothers attempted to corner the silver market, and because silver is a critical ingredient in film stock, manufacturers faced a temporary shortage. Second, Ohnishi witnessed the introduction in 1981 of the first digital camera by Sony: the Mavica. Those two indicators told him that the photography market would be forced to change very soon. It also opened up an opportunity for Fuji to gain market share on Kodak in the U.S. Subsequently, Fuji spent more than $2 billion over the following decade to develop digital cameras and, even more importantly, digital photo processing equipment that in just a few years replaced Kodak’s equipment at drug and retail stores throughout the U.S.
Not all disruption stories are as dramatic as Kodak’s, but disruptions themselves keep coming. The more current tales of Elon Musk’s entrepreneurial ventures in launching relatively low-cost but large-scale rockets through SpaceX, or his selling sleek Tesla electric cars may not become the future story for either the military industrial complex or the auto industry, but they do represent indicators that rivals need to watch.
No industry is immune from disruptions. The trick is in finding the key indicators (not just the stories), tracking them, then acting on them when the time is right. Just don’t wait too long. A Mount St. Helens will not remain dormant forever.
Read Original Article Here:
You are scratching your head thinking that our year has not ended and that we have an entire 4 months remaining. You are correct. But in terms of long-term planning this is exactly the kind of shock or surprise that can creep up on company management. In recent discussions with executives I have discovered that they are extremely concerned with regulatory surprises. What if I rewrote the above headline to read: “What a great end to a decade?! Welcome 2020…” Regulations worldwide seem to move ever so slowly – almost glacially – until the very moment that they do indeed change; at that point any management response is a fire drill and any actions the company takes may have little effect.
According to our Boiling the Frog™ survey, regulatory change remains the number one issue among life sciences company executives and it is the same one they feel they are most unprepared for year and after year.
Below are a handful of regulations from a variety of industries and regions that are about to change in the coming years. To one degree or another, regulations affect all our markets. Consider the following short list and think about the domino effect the passage of such rulings or standards changes will have on these industries.
Web Business - New data privacy law may pass in the EU which could up-end the entire online Web model: The EU is reviewing a law that would prohibit certain data to be collected that could all but eliminate targeted advertising on sites such as Facebook, Google, Amazon and others. Other countries are also planning data protection laws that could equally hobble this online marketplace.
Life Sciences - Current manufacturing processes may be re-regulated – headaches for pharma: The US Department of Justice has announced that it will be reviewing Current Good Manufacturing Processes (CGMP) and may open up more manufacturers – particularly pharmaceutical manufacturers – to more litigation or government oversight. The Department of Justice’s sudden interest in this area was spurred on by several instances of misbranding and production failures in the pharmaceutical industry in recent years.
Banking - Germany may be the start of a new way of thinking about currency which can threaten the current banking system: Bitcoin is a digital currency, a peer-to-peer electronic cash system that is independent of any current central banking authority. It is currently relatively small but has caught the attention of the financial system worldwide, particulary as “Expats in Cyrpus turned to Bitcoins during the [Cyrpiot] financial crisis to move money and beat the banks” [full article here]. In August, the German parliament stopped short of granting bitcoin full currency status on August 19, but recognized bitcoins as "units of account" when it formally issued regulations for the popular virtual currency. As one blogger recently concluded, “The growth of alternative currencies, such as Bitcoin, has dramatic implications for banking. Bitcoin can exist alongside competitors, but the commercial banking system and its national fiat currencies cannot. These systems are incompatible to the point where the rise of one may destroy the other.” (Julia Dixon)
The question I leave you with is how have you prepared for changes in your regulatory environment? Are you taking the temperature of governments – local, regional, national and foreign – who can very quickly limit or eliminate your market with the stroke of a pen?
Many Western industries have based much of their future strategies on succeeding in Brazil, Russia, India and China (BRIC). All the pieces seem to make sense: large population, rising middle class, and either a consumer hunger for better products or a government that supports improving the lives and the welfare of those living there.
Unfortunately for some industries at least, the BRIC windfall may be delayed or severely reduced by unexpected events.
For well over a decade, large pharmaceutical firms have placed big bets on BRIC countries. Recently, this BRIC dream has come under assault. Bayer Healthcare continued its worldwide rollout of a premium-priced cancer-fighting drug, Nexavar, but the company was blindsided when the Indian courts. Just this month it was reported that the newly elected Chinese Communist Party leadership is threatening to force Western infant formula and pharmaceutical companies, including Nestlé and GlaxoSmithKline, to further lower prices. These pressures are likely to be exacerbated by recent accusations of bribery/corruption by senior GSK personnel (who are Chinese nationals) in the country.
What concerns me are the results of a recent global survey of life sciences executives (Boiling the Frog™). A majority of respondents stated that although they knew a major disruption was likely – such as the above cases from India and China – they failed to adequately prepare for these anticipated disruptions.
No one can absolutely predict if the BRIC markets will continue to disrupt strategy but one thing is for sure, life science company management must ask itself the following questions going forward:
How closely have you been tracking government legislation, on the ground, day to day?
Have you developed various future stories or worlds in which your company could be living? If so, how resilient does your strategy appear in each of these futures?
Are you aware of the existance of non-traditional competitors – in new geographies with disruptive technologies, and aided by non-traditional partners?
Do you have thresholds, trigger points after which you need to reassess your strategy in one or another of these countries?
What is the ability of manufacturers in China, India and Korea to effectively develop and commercialize both biosimilars and "biobetters"?
Have you determined the impact of global initiatives to lower the cost of medicine - compulsory licensing, local origination requirements, government-supported generic/biosimilar efforts and "hidden" price controls?
Are you monitoring your competitor's or channel partner behaviors in each of these markets? Do they appear to move faster or more definitely than you? Can you detect shifts in their strategies worth noting - particularly with respect to either further investments or reduction in the investment in one market or another?
Four Suggestions as You Face Your Industry's Steamroller | Harvard Business Review
By Leonard Fuld | July 16, 2013
Remember the scene in the first Austin Powers film where Powers, attempting to escape in a steamroller, warns one of Dr. Evil's henchmen to move out of its path? Despite its comically slow speed — and a huge distance between them, the guard stays rooted to the spot, yelling Stop! ... until it's too late. (The scene dissolves to his Donna Reed-like wife getting the news and noting tragically: "People never think how things affect the family of a henchman.")
On the industrial stage, something like that scene plays out all too often. A company finds itself in the path of an unstoppable industry disruption, can hardly fail to see it, yet simply fails to act. Only, it's not at all funny.
Consider the pharmaceutical industry, the focus of a recent global survey my colleagues and I conducted. We asked nearly 200 life sciences executives about long-term trends that posed fundamental threats to their businesses and how management was dealing with them. Despite the fact that all were able to foresee developments unfolding over the coming decade with the power to irreparably damage their companies, 76 percent of the European respondents and 81 percent of the American ones said their companies had made no significant changes to strategy to counter those threats. (Executives representing Asia-Pacific life sciences companies were more sanguine, with 56 percent indicating their firms had prepared for an industry shock).
In the face of knowable threats, is your own company making more than a futile effort to cry Stop? If you fear not, here are the suggestions we're sharing with the industry leaders we serve:
Inject a steady flow of timely information and (sometimes harsh) outside perspectives into your strategic thinking. This means fresh information heard on the street, not just more searches on Google, and the use of outside experts to identify oncoming threats that they see and you don't. I've seen this work wonders for a number of companies that want neutral, unvarnished views of their competitive position. A large pharmaceutical firm, for example, was about to make a big bet on a new class of drugs. But a panel of outside experts that had been assembled to critique the strategy warned management about an emerging risk. Citing early warning signals that were not being emphasized by the scores of industry newsletters and Wall Street analysts, it saved the company from the move that a competitor subsequently took — to its detriment.
Develop scenarios of how the world might look five or ten years from now. No one can predict the future, but by combining known trends in various ways it is possible to anticipate multiple possibilities — likely story lines about shapes the market could take — for good or ill. The few companies that have mastered this discipline have benefited mightily. A decade ago Oracle developed a series of scenarios that anticipated massive industry consolidation. Instead of waiting to be steamrolled, the company acted on this intelligence and went on a ten-year acquisition binge, acquiring over 90 companies from 2003 to the present at a pace surpassed only by Google. The result: Oracle became one of the most successful companies in back office database products and tools and has now moved onto advancing in the next market, the cloud.
Experience threats through war games. There is no substitute for feeling and "touching" the disruption before it arrives. War games translate arguments and assumptions about the future into a tangible setting, allowing rival contestants to play out roles and experience risks. A successful war game can anticipate the moves of market players with an uncanny degree of accuracy. Multinationals have used war games to align strategy in global markets, where regulations and competitors differ. In a number of instances, I have seen war games acknowledge the threat from changing government regulation, informing the company that it must proactively work with authorities to help moderate new regulations, which in turn softened or averted the disruption altogether.
Set trip wires for action. War games and scenarios should provide you with threads that you can track in order to determine which future world is emerging. You can spot these signals far enough in advance to change strategic direction — but you must regard them as imperatives to make timely decisions and to act on them.
Preparing for a future industry shock and anticipating its direction is all about honest, steady collection of intelligence and the readiness to alter your plans based on what you have learned. Plenty of executives lose sleep over approaching disruptions; a few vocally oppose them. Neither response will move you out of a steamroller's path. To survive, you'll need to watch, reexamine your position, make tough decisions, and take timely action.
Read Original Article Here:http://blogs.hbr.org/cs/2013/07/four_suggestions_as_you_face_y.html
The half-trillion dollar higher-ed market is about to experience massive upheaval, dragging along with it an entire supply chain - textbook publishers, real estate, credit and banking, food service, and technology...and the survivors may surprise you!
Mark the four-year college industry as almost boiling!
The signs are all around us and the picture is unsettling if our recently completed war game has predicted accurately: Cooper Union, a tuition-free school for the last 150-plus years just announced this past week that it would start changing tuition because of persistently nagging deficits. Massively online courses run by virtual platforms such as Harvard-MIT joint venture EdX or California's Coursera are registering more than 250,000 students from around the globe for free college-level courses. Where does this leave higher ed and all the industries supported by it? It is in big, long-term trouble, trouble that will persist and will cause hundreds of US institutions to inevitably close.
Here are some of the conclusions we came to in the war game, The Battle for the Educational Industrial Complex:
- Tuition and cost pressures will force traditional four-year colleges to outsource their most basic courses, often taken by students during the freshman and sophomore years, to online providers or to deliver themselves at a lower fee than today's on-campus tuitions.
Land grant institutions, such as the University of Florida, Michigan State, or the University of Massachusetts may become the power brokers in higher education, employing distance learning vehicles to attract large numbers of prospective students who may not ordinarily qualify for their four-year traditional programs, allowing them to accumulate courses and credits should these students decide to enroll in the full four-year college program.
The Massively Open Online Courses (MOOC) of the world, such as Coursera and the Harvard-MIT joint venture, EdX, will play the Netflix courses-on-demand card, serving up both basic and specialized courses from a wide swath of the higher educational landscape.
As an increasing number of traditional schools offer online alternatives, distance learning focused institutions, such as the University of Phoenix, will lose their competitive advantage and will likely be forced to seek revenues by licensing their technology platforms to the four-year colleges who are already becoming hybrids, offering both online and classroom experiences to students.
Corporations will form open partnerships with universities to help guide institutions to producing graduates who can meet workforce needs, rather than produce graduates who are mismatches with the workplace. Is Comcast College or FedEx U the future of higher education?
I am not sure if the Harvard's and the Stanford's have a lot to worry about when this roller coaster begins its ride but you can be sure that all the hundreds of small liberal arts institutions and general purpose colleges will face existential threats. What can they do about it? Plenty. Just consider the potential corporate partnerships, plans to service the non-traditional student and the co-opetition with the Courseras, the MOOCs of the world. All these can extend or even enhance their current market position. Most of all, keep monitoring your markets, track those quickly morphing MOOCs and the more agile non-traditional schools. These are your bellwethers.
Embrace the Business Model That Threatens You | Harvard Business Review
By Leonard Fuld | May 22, 2013
If your company is already well established and has smart management, it is likely that it will become a hybrid in the next ten years, blending its legacy business with a new business model that is rising to threaten it. Take Walmart, for example. After suffering several years of Amazon's online hegemony, Walmart responded with a hybrid approach. Merchandise ordered online can now be drop-shipped for same-day pickup at local stores. This and other creative solutions have driven over $9 billion of online sales to Walmart. (It's no surprise that Amazon — which has no physical stores — has mirrored the move from the other direction, installing lockers in neighborhood stores to allow for direct pickup.)
Entertainment and medicine are other industries where hybrid models are beginning to emerge as resilient success stories. Netflix, formerly a media distributor increasingly threatened by the very entertainment companies whose programming it sells, has begun producing its own original programming (such as the recently released series House of Cards.) According to Netflix, offering popular original programming has attracted its customers to order more items from the rest of its media catalog — a hybrid win-win. The Veterans Administration hospital system has formed an alliance with Bosch Healthcare to offer a more efficient means to monitor and diagnose the elderly or infirm remotely, from their homes.
To understand how strategic logic leads readily to such hybrids, consider the results of a recent war game I helped to stage, in which participants sought winning strategies in one fast-changing sector: the US higher education market. Teams playing the roles of traditional large state and non-profit colleges confronted other teams representing the new Massively Open Online Course (MOOCs) and distance learning enterprises, such as Coursera and The University of Phoenix. At first the teams circled each other in the plenary session, each declaring its position and revealing strengths and weaknesses. It soon became clear to the teams and to the observers in the room that neither the online nor the traditional college "education delivery" model alone could prevail. Traditional brick-and-mortar schools suffer from a high cost base that has resulted in tuitions reaching stratospheric heights. Meanwhile, the alluring proposition of the online offerings — courses you can take anywhere, anytime, at a lower price point — is tainted by high drop-out rates and the somewhat lower credibility of their certificates and degrees.
As the war game evolved, so did the teams' strategic positions. The teams representing traditional schools knew they needed a strong — not just a token — distance learning component. In contrast, the online technology-driven entities sought the revenue stream and prestige the brick and mortar schools enjoyed. Each side appreciated that it needed the other model to grow, and that partnering was the most expeditious way forward, but the combinations had to figure out how they would build revenues and student bases without cannibalizing each other's position. Forced to deal with gathering change in the market and perceiving a need to catch a fast-moving wave before it crested, these teams began arriving at solutions that screamed hybrid, all of them combinations of the two worlds.
One, for example, featured the MOOCs of the world, such as Coursera and the Harvard-MIT joint venture EdX, playing the Netflix courses-on-demand card. At the same time, this solution called for the MOOC to serve as a student lead generator and revenue producer for brick-and-mortar university partners. The MOOC would receive funds from all its partner universities when students who had taken and completed the free online courses actually applied and were accepted into the four-year institutions. At the point of acceptance and enrollment, the universities would pay the MOOC a fee for each MOOC student enrolled. Thus a hybrid concept yielded a win-win for all participants.
Hybrids are not necessarily mergers. Often, one company is grafting on a piece of another's competency to solve a business challenge, without having to buy the entity outright. Both entities can remain intact and both can win in the marketplace. One way or the other, the hybrid approach allows an incumbent to address market shifts without losing the essence of what made it successful in the first place. It turns the threat of disruption and disaster into an opportunity. Instead of the outsider disrupting and destroying the legacy firm, it can pave the way to the incumbent's next strategic position.
Not every company can find or benefit from a hybrid solution. For an indication of whether one is in your company's future, ask yourself a few basic questions. Are there market pressures that we cannot respond to on our own, drawing on our existing model? Are the proposed solutions too far out of our competency range? Is the disruptive offering missing a piece of the strategic puzzle? Is the disruptive firm unable to make its own market soon enough or show a profit? Finally, can we find a combination — through partnership or merger — that will create a whole greater than the sum of the parts each company brings to the table? If at least some of the answers are coming up "yes," then the hybrid approach should be a strategic solution you start working toward — ideally, before your competition beats you to it.
Read Original Article Here:http://blogs.hbr.org/cs/2013/05/embrace_the_business_model_tha.html#disqus_thread