The Fit for Growth℠ approach & Business Model Innovation

This post is based on my reading of “Fit for GrowthSM Framework for Telecom Operators: Aligning Capabilities, Costs, and Structure” by Martin Reitenspiess, Christine Rupp, Hannes Gmelin, and Chady Smayra, via Booz & Co.

It is an attempt to reconstruct the proposal made in the publication by drawing analogies to other pieces of work. This publication (from April 2013) from Booz & Co proposes a “Fit for Growth” framework to transition from price-based competition strategy to differentiation strategy. Not surprisingly the industry in question, Telecom, is industry characterized by the following observations:

  • Stagnating market due to saturation of primary revenue sources
  • Declining margins accompanied by price competition
  • Substitute OTT (over-the-top) technologies hurting the basic product offerings
  • Shift in consumer behavior demanding higher capital investments in technology upgrades

The figure below depicts the three tier approach proposed by the framework (the process above) and my simplistic interpretation of each step (the process below)

Fit for Growth Approach (by Booz & Co)
Fit for Growth Approach (by Booz & Co)

I couldn’t help but relate this approach to Business model innovation and its representation using the Business Model Canvas. One possible business model representation as described in Business Model Generation is the decoupling of Operations, Customer Relationship Management & Product Innovation.

Business Model Canvas (Source: Business Model Generation)
Business Model Canvas (Source: Business Model Generation)

An organization keen on business model innovation could use the Fit for Growth Framework and communicate the same using the business model canvas representation.

Once the leadership team decides to assess the ground realities of its business and charts out the current business model, it needs to take a call on which of the three aspects it will focus on. It naturally follows that leveraging current competencies is essential & management commitment to additional investments nurturing the key capabilities is imperative.

While additional funding may be secured from external sources, internal cost cutting is a long preferred approach. However this time, as the article suggests there are two ways of doing this. Firstly make ‘cost effective operations’ a way of life, not a one-time business exercise and more importantly identify rightly the good costs vs. bad costs. Secondly, the desired strategic focus area in tandem with the assessment of the current business model will bring out non-core area expenditures – seeking ways to cut costs dramatically in these avenues will go a long way in making a lean cost structure. My analogy between the proposed framework and business model innovation is depicted below:

Fit For Growth (& BMI)
Fit For Growth (& BMI)

The article has extremely interesting insights for this approach to seeking growth. However, I am in a fix about one specific observation. Exhibit 2 in the original article quotes “Experience Players” to be least profitable.

I would rather argue that experience players focus on the “customer experience” & hence should succeed in driving demand and raising the ‘willingness to pay’ among customers, while lowering non-core costs. Having said that, wouldn’t such a player also have a larger share of the industry profit pool?

Your thoughts?

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Blue Ocean Strategy for a networked society.. my two cents to some interesting posts…

Recently while working on a self-imposed assignment – testing the application of blue ocean strategy on an actual business situation – I came across a series of recent blog posts by Sami Dob at Ericsson. I was delighted to see an industry practitioner write about the blue-ocean-strategy. While it has insightful recommendations, it did challenge some of my understanding of the concept.

These blog entries refer to the application of Blue Ocean Strategy to the Networked Society – defined as a combination of heterogeneous networks, connected by end-point devices and served by the cloud ecosystem.

So? Why this blog entry?

For one, I wonder if the ‘Networked Society’ is the right ‘unit of analysis’ when applying this framework here? Secondly, there are couple of smaller observations I had about the application in this particular example. And lastly, it raised typical questions about organizational challenges.

What’s this about strategy and ocean?

Blue Ocean Strategy – as per my understanding – is a business model innovation framework; it enables a firm to ‘create an uncontested market space’, gaining a first-movers advantage, maintaining a lead and keeping competition at bay (apparently as competition is nullified).

A part of this – the four-action framework ERRC (Eliminate, Reduce, Raise, Create) – is instrumental in leveraging the ‘value curve’ to create the ‘new offering’. Changes to factors of competition can be driven by a motivation to improve the value for the buyer and/or reduce costs for the provider. The focus on these attributes can thus be eliminated, reduced or raised. Attributes in Create (C) are best when borrowed from the ‘closest-substitute’ industry (there are statistical ways to figure this out), adapting only the relevant, low-cost, high-value attributes relevant to the offering. For instance, in the (often mentioned) case of Cirque du Soleil the substitute was among those that ‘Entertained’! Theatre’s could be considered the closest match – and pulling in some attributes from here enabled creating a new offering as we know it today.

Back to the dilemma

Coming back to my initial conundrum I am still struggling with the question of substitution in this particular case? What can possibly substitute an aggregation like the Networked Society? Hence, I still wonder if it is the right ‘unit of analysis’?

Then,the value-curve (a.k.a the strategy canvas) for the red-ocean of the networked society, suggests that the offering level score of ‘Price’ for current buyer is way too low. I would argue however, that end-consumers today benefit from low prices thanks to the intensity of competition among telecom operators. This makes me conclude that the offering level score on this canvas for the red-ocean should be on the higher side. (Either that, or my understanding of the Y-axis’s representation is skewed)

Secondly, in the second part of the blog, Mr. Dob suggests that regulators “should remove national roaming charges in order to stimulate voice traffic”.  If that were the case, wouldn’t it give all the players the same level of advantage – competitive parity to all! How is it going to benefit a single operator? The notion of achieving a sustainable competitive advantage would fall apart here.

The organizational challenges when applying Blue Ocean Strategy in a leading industry incumbent player are two fold:

1. Cannibalization: The new service offering strategy would have a different value curve to the existing one, impeding continuation and growth  of the existing portfolio. This surely impacts the culture in an organization and hence needs a careful change management practice.

2. Managing multiple business-models – This is a derivative of the previous. An organization can decide to stick with multiple business models for the longer term, or decide to transition from one to another. This can be tricky to manage as outlined by Osterwalder & Pigneur

The articles have driven me to put some more thought to this framework, encouraging me revisit the literature! Hopefully I shall have some more clarity in the days to come.

Business Model Canvas – validating a reading – DxOLabs.com

I decided to pull out some  presentations I had created out of interest, and starting from this, I shall put these on to the blog here. 

The following content is an analysis of the business model of a company named DxOLabs. My interest in photography drew me to this company initially.

(A quick background: They’re into creating Photography editing/workflow software, providing imaging hardware solutions for the mobile world and bench-marking photography equipment under lab-conditions – http://dxolabs.com)



The synthesis in this presentation is drawn out of extremely limited public information and is based more on assumptions. As the title suggests, I have used the ‘Business Model Canvas’ by Osterwalder to represent the current & proposed business model. I have gone ahead and dared to make a couple of suggestions about proposed changes to their business model in order to exploit two new market opportunities. Feel free to challenge these.

p.s: Recent development about Adobe moving from software sale to software subscriptions was a delightful news to me. Not that I use the software myself, but that my belief about changing revenue models and (possibly) usage model (SaaS based) has been reaffirmed.