1

Corporate Entrepreneurship
and Innovation

Chapter 12
Strategy and business model development

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CEI
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Core competencies

 The collective learning of the

organization, especially how to
coordinate diverse production skills &
integrate multiple streams of technology
… [through] … communication,
involvement, and a deep commitment to
work across organizational boundaries
 The glue that binds existing businesses &
the engine for new business development

Prahalad and Hamel (1990)

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Core competencies
 Should provide potential access
to a wide variety of markets
rather than generate competitive
advantage only in one
 Should ‘add value’ by making ‘a significant
contribution to the perceived customer
benefits Should be difficult for competitors
to copy
 Should be difficult for competitors to copy

Prahalad and Hamel (1990)

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Strategy development

Enduring Changing

Values Mission Vision Goals Strategy Tactics

Long-term Short-term
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Effectual reasoning
 Entrepreneurs’ goals are broad & evolve
based on personal strengths & resources
 Entrepreneurs go to market quickly & as
cheaply as possible (affordable loss)
 Entrepreneurs do not like formal market
research & prefer to ‘learn by doing’
 Entrepreneurs partner with stakeholders
 Entrepreneurs less concerned with
competitors

Sarasvathy, 2001
Explanation
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Advantages of using a business model framework

 Allows elements of model to be easily modified

 Allows innovative options to be explore in a
structured way
 Facilitates the understand of linkages between
elements of the model
 Allows the testing of new models against
established ones
 Allows experiment with different versions to see
which critical assumptions are most realistic
(revenue model; pricing, sales, costs etc.)
 Helps identify patterns & ensure consistency in
the elements of the model
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Phase 2
Market segments and value propositions
Target market segment(s) Value proposition(s)

Customer relationships / Branding

Marketing plan
Marketing mix
Pricing Channels
Communications
Scalability Resources
Capital available:
Human, social & financial

Capital needed:
Operations plan Human, social & financial
Risks Partnerships

Key activities / Critical success

factors / Strategic options

Financial plan
Sales, costs & profit Breakeven

Cash flow Balance sheet

NVC Intro
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Market segments

 Significantly different needs from other

segments
 Sufficiently large, or willing to pay a high
enough price, to be viable
 Accessible through communication or
distribution channels
 Defendable from competitors
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Value proposition

 How the product/service will solve a

problem for your target customers
 The benefits they can expect (not the
features of the product/service)
 Why customers buy from you rather
than competitors
Target market segment(s) 10
Value proposition(s)
(Insert text here) Market segments and value propositions Simply click on a sticky &
Target market segment(s) Value proposition(s) write over the ‘insert text
Customer relationships / here’ caption
Branding
Customer relationships / Branding
If you don’t need the
Marketing mix, Pricing, sticky you can delete it
Channels, Marketing plan (making more space)
Communications Capital available: Human,
Marketing mix social & financial
If the Worksheet
Pricing
gets Channels Scalability
crowed you can move the And you can always
Communications Or bring them to the
sticky so that it is Scalabilitysend stickies to the front Resources
more visible back Capital available:
Risks Human, social & financial
You can then ‘bring to Partnerships Capital needed: Human,
Capital needed:
front’ or ‘send to back’ OperationsRemember plan you can delete social
Human,& financial
social & financial
Risks & move stickies to make
Partnerships You do this by selecting
them visible the sticky & clicking on
Key activities / Critical
Key activities / Critical success
‘format’ in ‘picture
factors / Strategic options
success factors / Strategic tools’
options Sales, costs & profit
Most Case insights do not Breakeven
And, to fit in everything,
have financial data But your own business
you will need to do this Financial plan model will
Cash flow Balance sheet
Sales, costs & profit (Insert text here) Breakeven
So you will need to be
brief & succinct! Cash flow Balance sheet

NVC
Target market segment(s) Business model for a low-cost airline 11
Value proposition(s)
Leisure and business Market segments and value propositions Safe, point-to-point air
travellers
Target market segment(s) Value proposition(s) services across Europe
Customer relationships / Consistent & reliable
Marketing mix, Pricing, Branding
Customer relationships / Branding Appealing fares (value-
Channels, Orange (very visible)! for-money)
Communications No-frills, value-for-money
Differential pricing Marketing plan Internet based relations
Capital available: Human,
Low-cost marketingMarketing – mix social & financial
Scalability
PR, brand,
Pricingweb-basedChannels
Flight & cabin crew
promotions etc. Communications More destinations, planes,
Scalabilitystaff needed for Efficient Resources
IT systems
Volume seat sales Good brand recognition
Max sales of other expansion
&Capital available:
marketing
products
Risks on web site Human, social & financial

Safety paramount Partnerships Capital needed: Human,

Capital needed:
Passenger volumes
OperationsAirports plan social
Human,& financial
social & financial
Exchange rate
Risks Engine manufacturers &
Partnerships Planes (leased?)
fluctuations maintenance Servicing facilities (sub-
Key activities / CriticalKey activities / Critical success
contracted?)
factors / StrategicProviders of additional
successOil price /fluctuations
factors Strategic options
services (rentals, hotels etc.) Crew (self-employed?)
options
‘Sweat’ assets
High operating efficiency Financial plan Breakeven
Develop staff High breakeven
(recruitment & training) Sales, costs & profit (High fixed costs, low
Breakeven
Develop supplier & Cash flow
variable costs)
Balance sheet
partner relationships
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Business Model Canvas

8. Key 6. Key 1. Value 3. Customer 2. Customer
partnerships: activities: proposition: relations: segments:
The network The most The product/ The types of The different
of suppliers important service bundle relationships groups of
and partners things you that creates you aim to people or
that make the need to do to value for each have with organizations
business make the customer each you aim to
model work business segment customer reach
model work segment

7. Key 4. Channels:
resources: How you
The most communicate
important with and
assets reach each
required to customer
make the segment
business

9. Cost structures: 5. Revenue streams:

All the costs that you will incur to The cash generated from each
operate your business model customer segment
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Lean Business Model Canvas

8. Key 6. Solutions: 1. Value 3. Unfair 2. Customer
Problems: Solutions to proposition: advantage: segments:
The key problems (8) The product/ Competitive The different
problems that service bundle advantage groups of
the value that creates people or
proposition value for each organizations
seeks to customer you aim to
address segment reach

(incl. in 4.
Channels?) 7. Key 4. Channels:
metrics: How you
The few communicate
actions that with and
matter reach each
customer
(6. Key segment
activities?)

9. Cost structures: 5. Revenue streams:

All the costs that you will incur to The cash generated from each
operate your business model customer segment
Canvas x6 videos
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Generic business models

Customer intimacy/
Focus

High

Operational Product
efficiency/ High High leadership/
Price Differentiation

Low

Customer intimacy/
Focus
Example
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Generic business models & price

High
Niche
business
model

Hi
g
he
rp
ri c
e
Differentiation
Lo
w
er
pr
ic
e

Low price or
commodity
business model
Low High
Customer focus
Explanation
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Generic strategies & business imperatives

High differentiation Customer focus Low price / cost

 Understand basis  Maintain close  Maintain cost
for differential customer leadership through
advantage relationships economies of scale
 Build on  Keep in touch with  Continually drive
differential & monitor down costs
advantage customer needs  Achieve high sales
 Build barriers to  Maintain customer volumes
entry loyalty  Improve efficiency
 Build brand  Maximize sales to  Standardization
 Continuous loyal customers
innovation (economies of
 Encourage scope)
creativity &  Build brand
innovation
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Questions to ask in deciding on strategy

 For each dimension, what proportion of
customers focus on it as their primary or
dominant decision criterion? How important is
each value discipline to each market segment?
 Which competitors provide the best value in
each of these value dimensions? Who is the
major competitor in each discipline?
 How does this product/service compare to the
competition on each dimension?
 If it falls short of the value leaders in each
dimension, how can this be remedied?
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CASE
insight
Quanta Computers

1. Which generic business

model is most appropriate
for Quanta?
2. What factors are likely to
determine the company’s
success?

Quanta
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Business models for virtual products

 Direct sales (Amazon)  Freemium (Spotify)
 Bricks-&–clicks (John  Bait-&-hook
Lewis) (smartphones)
 Affiliate (Amazon, eBay)  Open (comparison
 Auction (eBay) websites)
 Flash sales (Groupon)  Pay-as-you-go
 Advertising (YouTube, (smartphones)
Facebook)  The long tail
 Pay-per click (Google)  Free to user + 3rd party
 Subscription (The Times data sale (Facebook)
newspaper)
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Some characteristics of successful

internet business models
 Unbundle generic business models – different
models applied to different market segments
 Long tails – a large number of small-volume, niche
products at high price
 Multi-sided platforms – bringing together different
market segments that derive value from the others
(network effect)
 Free product/services – non-paying customers
financed by other customers
 Open business models – where value is created
by partner collaboration
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Internet business imperatives

 Speed to market - first-mover advantage

 Speed of market dominance – this gives
market power, so it is generally better to
dominate a small market than to be a
small player in a big market
 Strength of brand - this is the tool that
helps carve out market dominance
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CASE
insight
Fortnite: Battle Royal

1. How many income streams are

there connected with Fortnite?
2. What are the keys to generating
this income for Epic?
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CASE
insight
Pinterest

1. Which business models would you apply to

Pinterest?
2. The inspiration for Pinterest came from a failed idea
for an app called Tote. What are the potential effects
on an entrepreneur of a failure like this?

Pinterest Silbermann
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Project-level strategic review

Identify &
Review of
evaluate
business model
strategic
performance
options 
against agreed
metrics

Strategic Decide Develop

on final Implement
review tactical
SWOT strategy plan
plan
analysis

Feed-back loop
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Tools for a SWOT analysis

 Market research
 Benchmarking against performance
metrics, industry norms and CSFs
 PESTEL analysis and other futures-
thinking techniques
 Value chain analysis
 Product/service life cycle analysis
 Product/market portfolio analysis
 Porter’s Five Forces analysis
 Business models
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Competitors

SWOT analysis
 Direct  Strengths
 Indirect  Weaknesses
 Opportunities
 Future
 Threats
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Competitors
The future
 PESTEL analysis
 Futures thinking
 Direct  Scenario planning

 Indirect
What are the critical
 Future success factors for
the industry/market?
What are our strategic
options?
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Critical success questions

 What drives competition?

 What are the sectoral, performance &
customer conventions that competitors adhere
to & how important are they to customers?
 What are the main dimensions of competition?
 How intense is competition?
 How can you be different & obtain competitive
advantage?
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CASE
insight
wiGroup

Why was the old

business model for
wiGroup unsuccessful
and why has the revised
business model worked?

Corporate TechReport
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Corporate-level strategic review

Core
values &
beliefs
Identify & evaluate
strategic options
Vision

Strategic Decide on Develop Implement

Overall SWOT final tactical
Review plan
analysis strategies plan

Strategic review of
individual projects
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CASE
insight
audioBoom

What lessons do you

learn from audioBoom
about changing your
business model?

Proctor
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Activities
1. Critically analyze the business model in Figure 12.5.
What are the strengths and weaknesses? Is anything
missing? Looking at the ‘key operating activities’
section of the Operations Plan, what are the critical
success factors & are there more strategic options?
2. Explain their business model(s) of 10 internet-based
product/services
3. Prepare a SWOT analysis on your course, college,
university or university department
4. Prepare a SWOT analysis on a product/service or
company
5. Undertake a full strategic review on a company.
What are it’s core capabilities & competencies?