Non-Predictive Strategy - cloudfront.net
Non-Predictive Strategy
Philippe Margery, IMD [email protected]
© 2009 IMD International. Not to be used or reproduced without permission.
Things that happened in the predictable market •
• •
• • • •
A TV show aired on many different channels across Western Europe featuring radical kitchen redesign in people’s homes has become popular. Consumers’ interest in redoing their own kitchen increases only slightly. Analysis of sales figures shows that consumer preferences have not changed much. As the population ages, a higher percentage of people move to urban locations, though this has little effect on the market for refrigeration appliances. Biemens runs the same advertisements it did last year. Competitive Intelligence reports show that Whirllux and Electropool have maintained their price points. Environmental action groups praise the refrigeration appliance industry for its action against products that use ozone-damaging CFCs. ….
© 2009 IMD International. Not to be used or reproduced without permission.
Things that happened in the uncertain market •
•
•
• • •
A consortium of retailers (that even includes competitors) has started compiling new product requirement documents for refrigeration manufacturers, specifying functions, features and even price levels. A TV show aired on many different channels across Western Europe featuring radical kitchen redesign in people’s homes has become popular. Consumers’ interest in redoing their own kitchen increases tremendously. The press announces the breakthrough in freeze-drying food technology, where fully cooked meals (which had previously only been available frozen) can now be created, and only require water and 30 seconds in the microwave to be ready to eat. In a surprise move, Whirllux and Electropool merge and their economy of scale forces prices down. Consumers across Europe have stopped buying CFC-refrigerators. ....
© 2009 IMD International. Not to be used or reproduced without permission.
The group’s assessment of the Market Environment: Uncertainty 7
HIGH 6
5
4
3
2
1
Start
After the game
LOW © 2009 IMD International. Not to be used or reproduced without permission.
The group’s assessment of the Market Environment: Uncertainty 7
HIGH 6
5
4
Uncertain market
3
2
Predictable market 1
Start
After the game
LOW © 2009 IMD International. Not to be used or reproduced without permission.
As a group, when confronted with uncertainty, the initial reaction was to try harder to predict! Time 0
More Control
1
2
3
4
5
-0.1
-0.2
-0.3
Strategy Employed -0.4
-0.5
-0.6
More Prediction -0.7
© 2009 IMD International. Not to be used or reproduced without permission.
6
Novices MBA students at a small US university with no specific business experience either in multinationals or in start-ups.
Representative direct quotes on how each group:
Expert Entrepreneurs As individuals or part of a team, had founded one or more companies, remained with at least one company that they founded for more than ten years, taken it public and have it be worth more than $250MM.
I am looking at the market here, it talks about estimated dollar value of instructional technology is $1.7 billion. You got the dollar of the interactive game, which is $800million, and both expect to earn 20%. So, both are good markets. Obviously, $1.7billion is grabbing my attention, because it seems like a bigger market, and would probably be able to make more money in that market just from looking at it.
Gets started
I’ll start with somebody that’s been in the game business and partially a person who’s been on either side.. I am sure I wouldn’t take too long to track down the kinds of individuals ....that are knowledgeable about how to push games into the national distribution systems...there is one in Stanford that I know on the faculty…one of the venture capitalists who started Amgen with us...Chris Johnson there. I’d find out from him in a hurry if whether there is any place for this...he is a very bright guy and he’s got associates.
I tend to want to look over the information here a little more just to get a better feel. I guess the biggest thing I want to focus on is, as an entrepreneur, you want to go up with a product that you think is going to earn you the most money, revenue and profits.
Views and manages risk
If I thought there was a good market for it, I might license the product to a significant company who is already in the business, has distribution channels, knows how to market it, and take the risk out for me.
I’d want to know about the market as far as the competitors go and find out how they’re doing in the markets. How much of a market there is, potential customers who’d be interested in this product anywhere? Think of all the potential markets out there, whether it be high school, college, people sitting around at home. … To find out about this market, I’d go on the Internet first of all and look into the types of, just Google it and see what’s out there. And see if there is any kind of, see what the competition is…
Handles the external environment (partners and competitors)
So your competition is a secondary factor I think you are putting the cart before the horse…At one time in our company, I ordered our people not to think about competitors. Just do your job…Think only of your work…Customers ... let's start with them, rather than competitors…Let people play with it, and see how it works. If they like it, they can endorse it, things like that. And then, the way you would make your money would be to incorporate the changes they asked for, whatever, before you actually sell it, and market it as, “This great educational tool.” If IBM will endorse it saying that, “It teaches good lessons,” that would hold a lot of weight.
I think I would really focus on educators, because I think that it, to begin with at least. Once it would catch on, and it is a proven tool, it expands pretty rapidly in the educator segment if you can prove that it is of value, although it would cost quite a bit, so. I am not sure. I would have to do a lot more analysis than just a couple of minute’s worth. You know, when you are doing some number crunching, basically.
Deals with contingency
I always live by the motto of ready fire aim. I think if you spend too much time doing, ready aim, aim, aim, aim, you’re never going to see all the good things that would happen if you actually start doing it and then aim. And find out where your target is...I don’t mean one starts out without thinking, not having a reasonable thought process...You just have to find how to make it possible, which you can’t do ahead of time…I think that if you are successful with this, you could probably do some spinoffs, either, not necessarily software wise, but you could either go the route of other type of products geared towards learning entrepreneurial skills, or you could branch out into side of it. permission. © 2009 IMD International. Not to be used or reproduced without
View of the Future • Prediction. The future can be reliably predicted.
© 2009 IMD International. Not to be used or reproduced without permission.
View of the Future • Prediction. The future can be reliably predicted. • When the future cannot be reliably predicted, what can you do?
© 2009 IMD International. Not to be used or reproduced without permission.
View of the Future • Prediction. The future can be reliably predicted. • When the future cannot be reliably predicted, what can you do? • Control/Design. Strategies for creating a desirable “future”. © 2009 IMD International. Not to be used or reproduced without permission.
Where to Start • Goals are given.
© 2009 IMD International. Not to be used or reproduced without permission.
Where to Start • Goals are given. • Means provide the basis for decisions and new opportunities: – Who I am – What I know – Whom I know © 2009 IMD International. Not to be used or reproduced without permission.
Attitude Toward Others • Competition. Set up transactional relationships with customers and suppliers.
© 2009 IMD International. Not to be used or reproduced without permission.
Attitude Toward Others • Competition. Set up transactional relationships with customers and suppliers. • Partnership. Build your market together with customers, suppliers and even prospective competitors.
© 2009 IMD International. Not to be used or reproduced without permission.
Predisposition Toward Risk • Expected Return. Calculate upside potential and pursue the (risk adjusted) best opportunity.
© 2009 IMD International. Not to be used or reproduced without permission.
Predisposition Toward Risk • Expected Return. Calculate upside potential and pursue the (risk adjusted) best opportunity. • Affordable Loss. Calculate downside potential and risk no more than you can afford to lose. © 2009 IMD International. Not to be used or reproduced without permission.
Contingency • Avoid Contingencies.
© 2009 IMD International. Not to be used or reproduced without permission.
Contingency • Avoid Contingencies. • Leverage Contingencies. Surprises can present new opportunities.
© 2009 IMD International. Not to be used or reproduced without permission.
Underlying Logic • To the extent we can predict the future, we can control it.
© 2009 IMD International. Not to be used or reproduced without permission.
Underlying Logic • To the extent we can predict the future, we can control it. • To the extent we can control the future, we don’t need to predict it. © 2009 IMD International. Not to be used or reproduced without permission.
Thank you ! Philippe Margery, IMD [email protected]
© 2009 IMD International. Not to be used or reproduced without permission.
Philippe Margery, IMD [email protected]
© 2009 IMD International. Not to be used or reproduced without permission.
Things that happened in the predictable market •
• •
• • • •
A TV show aired on many different channels across Western Europe featuring radical kitchen redesign in people’s homes has become popular. Consumers’ interest in redoing their own kitchen increases only slightly. Analysis of sales figures shows that consumer preferences have not changed much. As the population ages, a higher percentage of people move to urban locations, though this has little effect on the market for refrigeration appliances. Biemens runs the same advertisements it did last year. Competitive Intelligence reports show that Whirllux and Electropool have maintained their price points. Environmental action groups praise the refrigeration appliance industry for its action against products that use ozone-damaging CFCs. ….
© 2009 IMD International. Not to be used or reproduced without permission.
Things that happened in the uncertain market •
•
•
• • •
A consortium of retailers (that even includes competitors) has started compiling new product requirement documents for refrigeration manufacturers, specifying functions, features and even price levels. A TV show aired on many different channels across Western Europe featuring radical kitchen redesign in people’s homes has become popular. Consumers’ interest in redoing their own kitchen increases tremendously. The press announces the breakthrough in freeze-drying food technology, where fully cooked meals (which had previously only been available frozen) can now be created, and only require water and 30 seconds in the microwave to be ready to eat. In a surprise move, Whirllux and Electropool merge and their economy of scale forces prices down. Consumers across Europe have stopped buying CFC-refrigerators. ....
© 2009 IMD International. Not to be used or reproduced without permission.
The group’s assessment of the Market Environment: Uncertainty 7
HIGH 6
5
4
3
2
1
Start
After the game
LOW © 2009 IMD International. Not to be used or reproduced without permission.
The group’s assessment of the Market Environment: Uncertainty 7
HIGH 6
5
4
Uncertain market
3
2
Predictable market 1
Start
After the game
LOW © 2009 IMD International. Not to be used or reproduced without permission.
As a group, when confronted with uncertainty, the initial reaction was to try harder to predict! Time 0
More Control
1
2
3
4
5
-0.1
-0.2
-0.3
Strategy Employed -0.4
-0.5
-0.6
More Prediction -0.7
© 2009 IMD International. Not to be used or reproduced without permission.
6
Novices MBA students at a small US university with no specific business experience either in multinationals or in start-ups.
Representative direct quotes on how each group:
Expert Entrepreneurs As individuals or part of a team, had founded one or more companies, remained with at least one company that they founded for more than ten years, taken it public and have it be worth more than $250MM.
I am looking at the market here, it talks about estimated dollar value of instructional technology is $1.7 billion. You got the dollar of the interactive game, which is $800million, and both expect to earn 20%. So, both are good markets. Obviously, $1.7billion is grabbing my attention, because it seems like a bigger market, and would probably be able to make more money in that market just from looking at it.
Gets started
I’ll start with somebody that’s been in the game business and partially a person who’s been on either side.. I am sure I wouldn’t take too long to track down the kinds of individuals ....that are knowledgeable about how to push games into the national distribution systems...there is one in Stanford that I know on the faculty…one of the venture capitalists who started Amgen with us...Chris Johnson there. I’d find out from him in a hurry if whether there is any place for this...he is a very bright guy and he’s got associates.
I tend to want to look over the information here a little more just to get a better feel. I guess the biggest thing I want to focus on is, as an entrepreneur, you want to go up with a product that you think is going to earn you the most money, revenue and profits.
Views and manages risk
If I thought there was a good market for it, I might license the product to a significant company who is already in the business, has distribution channels, knows how to market it, and take the risk out for me.
I’d want to know about the market as far as the competitors go and find out how they’re doing in the markets. How much of a market there is, potential customers who’d be interested in this product anywhere? Think of all the potential markets out there, whether it be high school, college, people sitting around at home. … To find out about this market, I’d go on the Internet first of all and look into the types of, just Google it and see what’s out there. And see if there is any kind of, see what the competition is…
Handles the external environment (partners and competitors)
So your competition is a secondary factor I think you are putting the cart before the horse…At one time in our company, I ordered our people not to think about competitors. Just do your job…Think only of your work…Customers ... let's start with them, rather than competitors…Let people play with it, and see how it works. If they like it, they can endorse it, things like that. And then, the way you would make your money would be to incorporate the changes they asked for, whatever, before you actually sell it, and market it as, “This great educational tool.” If IBM will endorse it saying that, “It teaches good lessons,” that would hold a lot of weight.
I think I would really focus on educators, because I think that it, to begin with at least. Once it would catch on, and it is a proven tool, it expands pretty rapidly in the educator segment if you can prove that it is of value, although it would cost quite a bit, so. I am not sure. I would have to do a lot more analysis than just a couple of minute’s worth. You know, when you are doing some number crunching, basically.
Deals with contingency
I always live by the motto of ready fire aim. I think if you spend too much time doing, ready aim, aim, aim, aim, you’re never going to see all the good things that would happen if you actually start doing it and then aim. And find out where your target is...I don’t mean one starts out without thinking, not having a reasonable thought process...You just have to find how to make it possible, which you can’t do ahead of time…I think that if you are successful with this, you could probably do some spinoffs, either, not necessarily software wise, but you could either go the route of other type of products geared towards learning entrepreneurial skills, or you could branch out into side of it. permission. © 2009 IMD International. Not to be used or reproduced without
View of the Future • Prediction. The future can be reliably predicted.
© 2009 IMD International. Not to be used or reproduced without permission.
View of the Future • Prediction. The future can be reliably predicted. • When the future cannot be reliably predicted, what can you do?
© 2009 IMD International. Not to be used or reproduced without permission.
View of the Future • Prediction. The future can be reliably predicted. • When the future cannot be reliably predicted, what can you do? • Control/Design. Strategies for creating a desirable “future”. © 2009 IMD International. Not to be used or reproduced without permission.
Where to Start • Goals are given.
© 2009 IMD International. Not to be used or reproduced without permission.
Where to Start • Goals are given. • Means provide the basis for decisions and new opportunities: – Who I am – What I know – Whom I know © 2009 IMD International. Not to be used or reproduced without permission.
Attitude Toward Others • Competition. Set up transactional relationships with customers and suppliers.
© 2009 IMD International. Not to be used or reproduced without permission.
Attitude Toward Others • Competition. Set up transactional relationships with customers and suppliers. • Partnership. Build your market together with customers, suppliers and even prospective competitors.
© 2009 IMD International. Not to be used or reproduced without permission.
Predisposition Toward Risk • Expected Return. Calculate upside potential and pursue the (risk adjusted) best opportunity.
© 2009 IMD International. Not to be used or reproduced without permission.
Predisposition Toward Risk • Expected Return. Calculate upside potential and pursue the (risk adjusted) best opportunity. • Affordable Loss. Calculate downside potential and risk no more than you can afford to lose. © 2009 IMD International. Not to be used or reproduced without permission.
Contingency • Avoid Contingencies.
© 2009 IMD International. Not to be used or reproduced without permission.
Contingency • Avoid Contingencies. • Leverage Contingencies. Surprises can present new opportunities.
© 2009 IMD International. Not to be used or reproduced without permission.
Underlying Logic • To the extent we can predict the future, we can control it.
© 2009 IMD International. Not to be used or reproduced without permission.
Underlying Logic • To the extent we can predict the future, we can control it. • To the extent we can control the future, we don’t need to predict it. © 2009 IMD International. Not to be used or reproduced without permission.
Thank you ! Philippe Margery, IMD [email protected]
© 2009 IMD International. Not to be used or reproduced without permission.
