2024 - L6 Business Strategy - Business Models

St.
Petersburg School of Economics and Department of Management Saint Petersburg

2024
management
STRATEGIC MANAGEMENT
Leshchenko Natalya Petrovna,

Ph.D. in Economics, Ass. professor
St. Petersburg School of Economics and Department of Management Saint Petersburg
2024
management
Unit 6.
Strategy lens, business strategy
and models
Business models…
Department of Management Strategic Management Course Saint Petersburg
2024 3
LEARNING OUTCOMES
1. Understand the logic of the strategy lenses
2. Assess business strategy in terms of the generic competitive strategies of cost leadership,
differentiation and focus.
3. Understand the logic of hybrid strategies and how new strategies can be identified with the help of the
strategy canvas.
4. Apply principles of interactive strategies and game theory and the benefits of competition vs
cooperation to business strategy.
5. Identify and apply business model components: value creation, configuration and capture.
2024 4
Lecture issues:
1. The strategic lens and strategic choices

2. Business strategies: Competitive and Interactive strategies
3. Business models
2024 5
1. THE STRATEGIC LENS AND STRATEGIC CHOICES

2024 6
DESIGN LENS
Design lens Experience lens Variety lens Discourse lens
Rationality
The design lens views strategy
development as a logical process of
analysis and evaluation.
Igor Ansoff , Michael Porter.

'rational economic man’
Innovation Legitimacy
2024 7
DESIGN LENS
Three assumptions about Two key views about the IMPLICATIONS:

how strategic decisions are nature of organisations: The design lens is useful in
made: - Organisations are highlighting the potential
- Systematic analysis is key hierarchies value of systematic analysis,
step-by-step sequences and
- Analysis precedes action - Organisations work
the careful engineering of
mechanically
-Objectives should be clear organisational objectives
and systems.
2024 8
EXPERIENCE LENS – STRATEGY AS EXPERIENCE

Rationality
The experience lens views strategy
development as the outcome of people's
taken-for-granted assumptions and ways of
doing things.
History and culture matter.
Herbert Simon
Behavioural Theory of the Firm
2024 9
STRATEGY AS EXPERIENCE
IMPLICATIONS
Three important warnings: Positive practical advice:
- Analysis is typically biased to some extent. - Analysis can cost more than it's worth.
- Watch out for undue conservatism. - Experience may provide the best guide.
- Change is hard. - Challenge the consensus.
2024 10
VARIETY LENS – STRATEGY AS VARIETY

The variety lens views strategy as Rationality
resulting from the bubbling up of new

ideas from the variety of people in and
around organisations.
Evolutionary theory ( Variety, Selection

and Retention),
Complexity theory Innovation Legitimacy
2024 11
STRATEGY AS VARIETY
- Variety. Organisations and their Managers need to be wary of assuming they

environments offer a rich 'ecology' for the can wholly control the generation and adoption
generation of different ideas and initiatives. of new ideas.
- Selection. A good idea may fail simply IMPLICATIONS
because it does not meet existing selection
- Allow for emergence.
rules.
- Encourage interaction, experiment and
- Retention may happen as particular policies
change.
or preferences become embedded in the
organisation. - Attend to key rules.
2024 12
DISCOURSE LENS - STRATEGY AS DISCOURSE

The discourse lens views language as Rationality
important both for understanding and

changing strategy and for managerial
power and identity.
Michel Foucault
2024 13
STRATEGY AS DISCOURSE
Three effects of strategy discourse: IMPLICATIONS:

• Shaping understanding. • Use strategy discourse skilfully.
• Defining identities. • Treat strategy discourse sceptically.
• Instrument of power.
2024 14
Strategy as…
Design Experience Variety Discourse
Strategy develops A logical process of People's experience, Ideas bubbling up from Managers seeking
through... analysis and evaluation assumptions and taken- the variety of people in influence, power and
for-granted ways of doing and around organisations legitimacy through the
things language they use
Assumptions Mechanistic, hierarchical, Cultures based on Complex, diverse and Arenas of power and
about rational systems experience, legitimacy spontaneous systems influence shaped by
organisations and past success discourse
Role of top Strategic decision makers Enactors of their Creators of context Manipulators of language
management experience
Key implications Recognise that people's Undertake careful and Be sensitive to ideas. from See through strategy
experience is central but thorough analysis of the bottom, the periphery language to uncover
also needs challenging strategic issues and even outside the hidden assumptions and
organisation interests
2024 15
STRATEGIC CHOICES:
Strategic choices
Business strategy Choices Strategic directions Strategy methods

about business Choices of products, How to pursue strategies:
positioning relative to industries and markets to organic, acquisition or
competitors pursue alliance
2024 16
BUSINESS STRATEGY AND MODELS

cost leadership
differentiation
Competitive
strategies
focus
Business models
- value creation hybrid
Business
- value
strategy
configuration
- value capture interdependent
strategy
Interactive
strategies
cooperative and competitive
strategy (game theory)
2024 17
2. BUSINESS STRATEGIES
2024 18
COMPETITIVE GENERIC STRATEGIES
Competitive advantage
Porter’s Generic
Strategies Uniqueness
Low cost
(Differentiation)
Broad
1. Cost leadership 2. Differentiation
Competitive target
scope
Narrow
(Focus)
(niche) 3a. Cost focus 3b. Differentiation focus
target
2024 19
COST-LEADERSHIP STRATEGY
Cost-leadership strategy involves becoming

the systematically lowest-cost organisation
in a domain of activity. Economies of
Input costs
scale
Four key cost drivers:
Product/process
Experience
design
2024 20
COST-LEADERSHIP STRATEGY
Tough requirements for cost-based Market standards:

strategies:
• a business's cost structure needs to be • Parity with competitors in product or
systematically lowest cost service features valued by customers
• low cost should not be pursued in total • Proximity (closeness) to competitors in
disregard for quality terms of features.
2024 21
DIFFERENTIATION STRATEGY
Primary differentiation drivers

Differentiation strategy involves
uniqueness along some dimension • Product and service attributes
that is sufficiently valued by • Customer relationships:
customers to allow a price • customer services and responsiveness
premium. • customisation
• marketing and reputation (brand)
• Complements
Differentiators should pay close attention to costs, especially in areas irrelevant to their sources of differentiation.
2024 22
FOCUS STRATEGY
A focus strategy targets a Cost focusers identify areas Successful focus strategies
narrow segment or domain of where broader cost-based depend on at least one of
activity and tailors its products strategies fail because of the three key factors:
or services to the needs of added costs of trying to satisfy
that specific segment to the a wide range of needs. 1. Distinct segment needs.
exclusion of others.
Differentiation focusers look 2. Distinct segment value
for specific needs that broader chains.
differentiators do not serve so
3. Viable segment
well.
economics.
2024 23
HYBRID STRATEGY
Hybrid types of strategies that combine different

generic strategies are possible under certain
conditions.
They require diligent considerations as the
fundamental trade-off between low cost and
differentiation has to be resolved.
Hybrid strategies are often used in crisis.
2024 24
BLUE OCEAN STRATEGY
Managers should aim for 'Blue Oceans', new market spaces

where competition is minimised and avoid 'Red Oceans',
where industries are already well-defined and rivalry is
intense.
The Blue Ocean concept thus aims at identifying potential
spaces in the environment with little competition.
Strategy canvas – critical success factors (CSFs)
2024 25
STRATEGY CANVAS
The canvas highlights three features:

• Critical success factors
• Value curves
• Value innovation
Characteristics of an Effective Blue

Ocean Strategy:
focus, divergence, and a compelling
tagline.
© Chan Kim & Renee Mauborgne. All rights reserved
https://www.blueoceanstrategy.com/tools/strategy-canvas/
2024 26
FOUR ACTIONS
FRAMEWORK
© Chan Kim & Renee Mauborgne. All rights reserved
https://www.blueoceanstrategy.com/tools/four-actions-framework/
2024 27
THE STRATEGY CANVAS OF APPLE IPHONE
https://www.blueoceanstrategy.com/blog/strategy-canvas-examples/
2024 28
https://youtu.be/lVBnzvDmQFo
2024 29
INTERACTIVE STRATEGIES: INTERDEPENDENCE BETWEEN RIVALS
Competitors' strategies are interdependent and interact through moves and

countermoves.
The generic strategies should be seen as dynamic trajectories.
KEY DECISIONS:
Threat assessment - Differentiation response - Cost response.
2024 30
INTERACTIVE STRATEGIES: GAME THEORY compete or cooperate
Game theory encourages an organisation to consider competitors' likely moves and

the implications of these moves for its own strategy.
Two kinds of interaction: Game theory is particularly relevant where

competitors are interdependent.
1) how a competitor response to a strategic
move might change the original assumptions
behind that move.
2) strategic signals or messages
2024 31
INTERACTIVE STRATEGIES: GAME THEORY compete or cooperate
Interdependence exists where the outcome of choices made by one competitor is

dependent on the choices made by other competitors.
GUIDING PRINCIPLES: TWO METHODS:

• Get in the mind of the competitors. • War gaming
• Think forwards and reason backwards. • Mathematical game theory
2024 32
3. BUSINESS MODELS
2024 33
TERMS
The business model is the framework of the business, the instruction "how all this will
work.“
«The business model is built relationships of all resources, corporate strategy, business
processes and value chain for the customer.» /Peter Drucker, 1994/
A business model describes a value proposition for customers and other participants, an
arrangement of activities that produces this value, and associated revenue and cost
structures.
2024 34
COMPARISON OF ASPECTS
Industry
Business The company's
business
model strategy
system
2024 35
TYPES OF BUSINESS MODEL INNOVATION
industry models revenue models enterprise models
innovations in the
role the structure
innovations in innovations in how
of an enterprise
industry supply companies
plays in new or
chain generate value
existing value
chains
2024 36
RELATIONSHIP OF KEY ITEM UPDATES

Innovative
potential Business Model
Update
Business process
• An innovative business model update
has much greater potential for
success than an innovative Product update
product or process.
• Leaders update their business
models twice as often as
other companies.
Time
2024 37
KEY BUSINESS MODELING PREREQUISITES
Tomorrow's competitive advantage of companies will be based

not on innovative products or processes, but on innovative
business models.
We live in an era of short-term competitive advantage: success

can only be maintained if its root causes are constantly
reviewed and analyzed.
Steve Jobs
2024 38
BUSINESS MODELS: 55 Best Templates
• client (WHO?)
• value proposition (WHAT?)
• value creation process (HOW?)
• economic efficiency (WHY?)
https://businessmodelnavigator.com/
2024 39
BASE BUSINESS MODELS

What do you offer to
the customer?
What?
VALUE CREATION
Who?
How is a value
Why does the business
proposition created?
model generate profits?
Why? How?
VALUE
VALUE CAPTURE
CONFIGURATION
2024 40
BUSINESS MODEL FORMULATION DIFFICULTIES
1. Difficulty thinking outside the dominant industry logic.
2. Difficulty thinking about business models instead of technology and products.
3. Lack of system tools.

2024 41
MYTHS OF BUSINESS MODELING
The myth of the The myth of "large- The myth of

The myth of luck
pioneers scale thinking" technology
The myth of Research

The myth of Einstein The myth of size
and Development
2024 42
BUSINESS MODEL PATTERNS

pattern questions essence Examples
Subscription Why The customer pays a fee on a regular basis, usually Salesforce subscription rather than
What monthly or annually, in exchange for the use of a license
product or service.
Razor and What The main product is given away for free or has a Hewlett-Packard,
Blade Why very low price. These are consumables necessary Nestlé machines Nespresso,
for its operation or use, are expensive and bring
handsome profits.
Aikido What Aikido allows the company to do proposal, Six Flags (1961), The Body Shop
Why diametrically opposed to image and tradition (1976), Swatch (1983), Cirque du
competitors. Soleil (1984), Nintendo (2006)
Peer-to-peer What How The organising company offers a meeting point, eBay (1995), LinkedIn (2003), Skype
(P2P) Why normally an online database and communication (2003), SlideShare (2006), Twitter
service, which connects these individuals. (2006), Dropbox (2007), Airbnb (2008)
2024 43
BUSINESS MODEL PATTERNS

pattern questions essence Examples
Rent instead What The company benefits from higher revenues with Car2Go (2008)
of buy Why each product because payment is for the entire
period of use.
Experience What The value of a product or service is increased by an Harley-Davidson (1903),
Selling How additional customer experience offered with it. IKEA (1956), Starbucks (1971),
Why Swatch (1983), …
Affiliation How Affiliates typically receive either a sales fee or a Amazon Store (1995),
Why show fee. The Company has access to a diversified Pinterest (2010)
customer base.
Freemium Who The free offering attracts the highest volume of Dropbox (2007) LinkedIn (2003)
What customers possible for the company, while revenue Skype (2003) Survey Monkey
is generated by the (generally smaller) volume of (1998) Spotify (2006) Hotmail
premium customers. (1996)
2024 44
BUSINESS MODEL CANVAS
By Alexander Osterwalder & Yves Pigneur

Department of Management Saint Petersburg
Strategic Management Course
2024 45
Step 1. VALUE Step 2. CUSTOMER Step 3. MARKETING

PROPOSITION
• What needs are we • Who are our most • How are we reaching
satisfying? important customers? customers and convincing
them of the value we
offer?
Department of Management Saint Petersburg
Strategic Management Course
2024 46
Step 4. Step 5. KEY Step 6. KEY Step 7. KEY

DISTRIBUTION ACTIVITIES RESOURCES PARTNERS
• Channels • What key activities • What key resources • What is the network
do our value do our value of suppliers and
• Relationships
propositions propositions others that makes
require? require? the business work?
2024 47
Step 8. REVENUE Step 9. COST Step 10.IMPACT
• Revenue streams • Cost structure • Social benefits

• Environmental benefits
• Economic benefits
2024 48
BUSINESS
Thank you for your attention!
MODEL
CANVAS
2024 49
Thank you for your attention!

2024 - L6 Business Strategy - Business Models

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St.

Petersburg School of Economics and Department of Management Saint Petersburg

Leshchenko Natalya Petrovna,

1. Understand the logic of the strategy lenses

1. The strategic lens and strategic choices

1. THE STRATEGIC LENS AND STRATEGIC CHOICES

Igor Ansoff , Michael Porter.

Three assumptions about Two key views about the IMPLICATIONS:

EXPERIENCE LENS – STRATEGY AS EXPERIENCE

VARIETY LENS – STRATEGY AS VARIETY

The variety lens views strategy as Rationality

resulting from the bubbling up of new

Evolutionary theory ( Variety, Selection

- Variety. Organisations and their Managers need to be wary of assuming they

DISCOURSE LENS - STRATEGY AS DISCOURSE

The discourse lens views language as Rationality

important both for understanding and

Three effects of strategy discourse: IMPLICATIONS:

Business strategy Choices Strategic directions Strategy methods

BUSINESS STRATEGY AND MODELS

COMPETITIVE GENERIC STRATEGIES

Cost-leadership strategy involves becoming

Tough requirements for cost-based Market standards:

Primary differentiation drivers

Hybrid types of strategies that combine different

BLUE OCEAN STRATEGY

Managers should aim for 'Blue Oceans', new market spaces

The canvas highlights three features:

Characteristics of an Effective Blue

© Chan Kim & Renee Mauborgne. All rights reserved

THE STRATEGY CANVAS OF APPLE IPHONE

INTERACTIVE STRATEGIES: INTERDEPENDENCE BETWEEN RIVALS

Competitors' strategies are interdependent and interact through moves and

INTERACTIVE STRATEGIES: GAME THEORY compete or cooperate

Game theory encourages an organisation to consider competitors' likely moves and

Two kinds of interaction: Game theory is particularly relevant where

INTERACTIVE STRATEGIES: GAME THEORY compete or cooperate

Interdependence exists where the outcome of choices made by one competitor is

GUIDING PRINCIPLES: TWO METHODS:

TYPES OF BUSINESS MODEL INNOVATION

industry models revenue models enterprise models

RELATIONSHIP OF KEY ITEM UPDATES

KEY BUSINESS MODELING PREREQUISITES

Tomorrow's competitive advantage of companies will be based

We live in an era of short-term competitive advantage: success

BUSINESS MODELS: 55 Best Templates

BASE BUSINESS MODELS

BUSINESS MODEL FORMULATION DIFFICULTIES

1. Difficulty thinking outside the dominant industry logic.

2. Difficulty thinking about business models instead of technology and products.

3. Lack of system tools.

MYTHS OF BUSINESS MODELING

The myth of the The myth of "large- The myth of

The myth of Research

BUSINESS MODEL PATTERNS

BUSINESS MODEL PATTERNS

BUSINESS MODEL CANVAS

By Alexander Osterwalder & Yves Pigneur

BUSINESS MODEL CANVAS

Step 1. VALUE Step 2. CUSTOMER Step 3. MARKETING

BUSINESS MODEL CANVAS

Step 4. Step 5. KEY Step 6. KEY Step 7. KEY