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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P&G: A case for Strategic Innovation

This blog entry by Ken Favaro on strategy+business shares an insight into how P&G has done well not only in product innovation in the past, but has also demonstrated the ability to innovate in its business functions.

The article puts forth the need for more strategic innovation – or business model innovation, if I may dare to say so -for P&G to unleash the next wave of growth.

Click here for the article: Does P&G Need Product Innovation or Strategic Innovation?

 

Tale of the two ‘V’s – Vodafone & Verizon

An interesting in-depth view of what Vodafone can do with the 45% stake in it’s American counterpart – Verizon. (The complete article is at Lex in-depth: Vodafone via the Financial Times

Buying back this stake from Vodafone, Verizon will be better able to bear the fruits of profitability. Also, cashing out will bring in a cheque bearing a huge figure to Vodafone.

But (there is always one or more of them…) that said –

  • what can be done with all that cash?
  • what about the several re-organizations in JV’s
  • with the regulatory situation ever make a telco’s path to profitability easier

“Veni, vidi, vici” (I came, I saw, I conquered) – reportedly written by Julius Caesar in 47 BC as a comment on his short war with Pharnaces II of Pontus in the city of Zela. There was something that reminded me of this when I met Jean-Christophe Prunet, Managing Director, Rohde & Schwarz.

I had the opportunity to meet him courtesy the TEC On-Campus program in HEC. It wasn’t particularly this exact statement; I’ll present the right variation in shortly.

Let me first elaborate on this abstract idea of ‘TEC OnCampus’. The ‘TEC OnCampus’ program draws its inspiration from vistage.com (formerly known as TEC – The Executive Committee). To quote vistage – “It’s a fact of business today: Everyone’s working so hard there may be no time to step back and think, bounce ideas off your peers, or get wise counsel from an experienced mentor”

In short: Sharing with peers and being coached by a mentor from the industry. The program started off on an unconventional note – knowing our peers as we never knew them before. A realization dawned upon each of us: We all have had our share of happy and sad moments!

Our mentor in this journey is Bernard Bismuth, an industry stalwart in France, a successful entrepreneur since his early days. And thanks to Bernard and HEC, we have the privilege of sharing the lunch table with several achievers from the business arena.

Now, rewinding to Julius Caesar let me present a more appropriate analogy: “venit, audit, vicit” (he came, he listened, he conquered)

Yes, Jean-Christophe is an advocate of listening skills. He spent half a day with us, sharing his journey through life. And what came out most dominant was ‘the importance of listening’.

What I now share below are all takeaways from our discussion and interactions with Jean-Christophe. I am in no way an expert in this field.

Needless to say, listening to what others have to say has multi-fold benefits. We gain more knowledge than we already have. A discussion on a topic most familiar to us can also unravel something new for this. This is because of the exposure we get to ‘another perspective’. The more we listen and absorb, the more we’re prepared to form an opinion. A leader is expected to be a ‘know-it-all’ person. The best way for a leader to reach that stage is to garner diverse information and knowledge by listening to others. With the huge wealth of information at his disposal, a leader is therefore also better prepared to take on unanticipated challenges.

Jean-Christophe’s focus on ‘listening skills’ was particularly interesting because of the varying influences listening can have.

Listening skills impact decision making. He believes that one should be a 100% sure about the rationale of a decision (that can be easily achieved by keeping the ears and mind open to ideas). On the other hand, no-decision is better than an unsure-decision. In such cases, it often happens that the situation unravels itself in the days to come. This span can be better used to study the emerging trend and get additional clarity setting the path of the decision making process. Gut-feeling could also play a significant role sometimes. However, a strong gut-feel will only be strong-enough once one has enough knowledge in the domain under discussion. Decision making must also meet certain guidelines

Decision making process within an organization needs to be competence based than relationship based. This also sends a clear message within the organization about the expectations of the management. The fairness of this approach is often appreciated. This leads to how organizations behave when it comes to ‘people’ – what does the manager and the engineer bridge the gap?

People Management! The buzzword these days is more than a mere buzz! It defines how we influence our teams. An interesting insights shared was – a manager should prioritize his meeting-commitments with a technician in the firm, over his unscheduled meeting with the immediate boss. Seems unbelievable at first – my boss is the first person to please! BUT, I’ll have several occasions to attend my boss’s unscheduled needs and meetings, but the technician in my company deserves to be given undivided attention when promised. This helps strengthen relationships. People realize that we value our team equally, if not more than the boss’s orders (That’s too crudely put, but I hope the message is clear?)

Detecting Potential in people: the ability to figure out what a person is capable of. Someone not doing his job right is not essentially incapable. He might just be the right guy in the wrong place. To enable people to advance in their career needs us to be open-minded and alert. There are situations when your choice of a candidate for a job may not seem right to several (including the candidate himself), but if we are confident that the person can pull off the task with his under-utilized skills, then we must give him a chance.

So what’s the ‘Next Step’ like ? Often in our careers we are faced with dilemmas about the ‘next step’. When an opportunity presents itself, a lack of experience in the new role but the belief in our ability will help us move ahead. While faith in our own capabilities will be a core driver, the knowledge gained by listening will be the true navigator.

A final word of advice from Jean-Christophe – “You must try your hands at sales, at least once. Being a leader in the company, you are the first sales person. Understanding the pulse of customer expectations and behaviour will prove mighty useful in the leadership position”

It was a fabulous day of interaction. Each of us had several takeaways from this. A person so high up the ladder also finds time to travel and enjoy what nature has to offer. He is a photography enthusiast and has an amazing collection of images at http://bit.ly/w4SwQb

Our day in pictures : http://on.fb.me/xSdRbb