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National Community Reinvestment Coalition 2012National Community Reinvestment Coalition 2012
High-Revenue Positions in Value ChainsHigh-Revenue Positions in Value ChainsLeonard Greenhalgh, PhDLeonard Greenhalgh, PhD
Professor, Professor, andand Faculty Director, MWBE Programs, Faculty Director, MWBE Programs, Tuck School of Business at DartmouthTuck School of Business at Dartmouth
What business has What business has high revenue potential?high revenue potential?
• Growing industryGrowing industry• Central value chain positionCentral value chain position• Ability to deliver valueAbility to deliver value• PortfolioPortfolio
Are you in a growth industry?Are you in a growth industry?
• AutomotiveAutomotive • HousingHousing
Are you in a growth industry?Are you in a growth industry?
• AutomotiveAutomotive• Geriatric careGeriatric care
• HousingHousing• IT staffingIT staffing
Are you in a growth industry?Are you in a growth industry?
• AutomotiveAutomotive• IT staffingIT staffing• GiveawaysGiveaways
• HousingHousing• Geriatric careGeriatric care• Green solutionsGreen solutions
Even if you’re in a growth industry: Even if you’re in a growth industry: Are you in a good part of the value chain?Are you in a good part of the value chain?
• What is your place in the value chain?What is your place in the value chain?
• What actual value is being added?What actual value is being added?
• Are you getting your share of total Are you getting your share of total value-chain revenue? value-chain revenue?
• Can someone take over your position?Can someone take over your position?
How do you fit into the value chainHow do you fit into the value chain??
End-UseEnd-Use
CustomerCustomer After Market
DistributionAssemblyComponentsRawMaterials
Who is taking the profits in the value chain?Who is taking the profits in the value chain?
High
Low
Level of
Profit
End-UseEnd-Use
CustomerCustomer After Market
DistributionAssemblyComponentsRaw
Materials
Who is taking the profits in the value chain?Who is taking the profits in the value chain?
High
Low
Level of
Profit
End-UseEnd-Use
CustomerCustomer After Market
DistributionAssemblyComponentsRaw
Materials
An entrepreneur’s mission statement An entrepreneur’s mission statement that limits his value-chain positionthat limits his value-chain position
““We We traintrain sewage-treatment facility employees sewage-treatment facility employees to operate the local water treatment plants”to operate the local water treatment plants”
NeedsAssessment
DesignTreatmentFacility
Build TreatmentPlant
TrainTrainWorkersWorkers
Operate Facility
Maintain And UpgradeFacility
NeedsAssessment
DesignTreatmentFacility
Build TreatmentPlant
TrainTrainWorkersWorkers
Operate Operate FacilityFacility
Maintain Maintain And UpgradeAnd UpgradeFacilityFacility
Another Entrepreneur’sAnother Entrepreneur’s Limiting Mission Statement Limiting Mission Statement
““We provide high-quality We provide high-quality janitorial services”janitorial services”
Workspace Needs Assessment
LocationsRent or Build
Building Mgmt.
Clean Clean PremisesPremises
Determine Maintenance Needs
Repair and Refurbish
TenantServes
Customers
Workspace Needs Assessment
LocationsRent or Build
Building Building Mgmt.Mgmt.
Clean Clean PremisesPremises
Determine Determine Maintenance Maintenance NeedsNeeds
RepairAnd Refurbish
TenantIs
Customer
Strategic growth:Occupying more of the value chain
• Strategy is to grow in scope and to move into Strategy is to grow in scope and to move into higher-profit domainshigher-profit domains
Workspace Needs Assessment
LocationsRent or Build
Building Building Mgmt.Mgmt.
Clean Clean PremisesPremises
Determine Determine Maintenance Maintenance NeedsNeeds
RepairRepairAnd And RefurbishRefurbish
TenantIs
Customer
Strategic growth:Strategic growth:Leveraging strategic relationshipsLeveraging strategic relationships
• Strategy is to grow in scale and scope—through strategic business relationships
Think about the sustainable agriculture Think about the sustainable agriculture value chainvalue chain
Do you need to understand it?Do you need to understand it?
Can you grow into areas of Can you grow into areas of greater long-term opportunity?greater long-term opportunity?
Avoid having blinders on:Avoid having blinders on:
Consider your core competenciesConsider your core competencies
What are their What are their core competencies?core competencies?
• Amazon.com Amazon.com andand eBay? eBay?
What are their What are their core competencies?core competencies?
• Amazon.com Amazon.com andand eBay? eBay?
• Wal-Mart Wal-Mart andand The Gap? The Gap?
What are their What are their core competencies?core competencies?
• Amazon.com Amazon.com andand eBay? eBay?
• Wal-Mart Wal-Mart andand The Gap? The Gap?
• PayPal PayPal andand American Express? American Express?
What are the core competencies What are the core competencies of a small of a small
hotel/motel owner?hotel/motel owner?
What are What are youryour core core competencies?competencies?
Are they applicable to business Are they applicable to business opportunities that will make opportunities that will make
more money?more money?
Even in a high-revenue business…Even in a high-revenue business…
You must not You must not
““put all your eggs in one basket”put all your eggs in one basket”
All products, services and All products, services and customers have a life cyclecustomers have a life cycle
TIMETIME
Why a portfolio?Why a portfolio?It’s better from a cash-flow perspectiveIt’s better from a cash-flow perspective
++
(-)(-)
Cash Cash FlowFlow
BREAKEVENBREAKEVEN
TIMETIME
A portfolio allows you to grow and be resilientA portfolio allows you to grow and be resilient
+
(-)
You lead with your value propositionYou lead with your value proposition
• Do it Do it betterbetter– Lower-cost, higher-quality, superior delivery, Lower-cost, higher-quality, superior delivery,
more-flexible, etc.more-flexible, etc.– Operational excellence strategyOperational excellence strategy
• Do it Do it differentlydifferently– Segment, target, and position; or innovateSegment, target, and position; or innovate– Differentiation strategyDifferentiation strategy
• Gain Gain customer loyaltycustomer loyalty– Repeat vs. conquest purchasersRepeat vs. conquest purchasers– Customer relationship management strategyCustomer relationship management strategy
Operations strategy falls into four Operations strategy falls into four categoriescategories
Operational Operational excellenceexcellence
QualityQuality
CostCost
DeliveryDelivery
FlexibilityFlexibility
Operations strategy depends on Operations strategy depends on key customer needskey customer needs
Operational Operational excellenceexcellence
Wal-MartWal-Mart
QualityQuality
CostCost
DeliveryDelivery
FlexibilityFlexibility
Operations strategy depends on Operations strategy depends on customer needscustomer needs
Operational Operational excellenceexcellence
Wal-MartWal-Mart
Quality 33
Cost 11
Delivery 22
Flexibility 44
Operations strategy depends on Operations strategy depends on customer needscustomer needs
Operational Operational excellenceexcellence
Wal-MartWal-Mart Red CrossRed Cross
Quality 33
Cost 11
Delivery 22
Flexibility 44
Operations strategy depends on Operations strategy depends on customer needscustomer needs
Operational Operational excellenceexcellence
Wal-MartWal-Mart Red CrossRed Cross
Quality 33 33
Cost 11 44
Delivery 22 22
Flexibility 44 11
Operations strategy depends on Operations strategy depends on customer needscustomer needs
Operational Operational excellenceexcellence
SchoolSchool
constructionconstruction
QualityQuality
CostCost
DeliveryDelivery
FlexibilityFlexibility
Operations strategy depends on Operations strategy depends on customer needscustomer needs
Operational Operational excellenceexcellence
SchoolSchool
constructionconstruction
QualityQuality 33CostCost 22
DeliveryDelivery 11
FlexibilityFlexibility 44
Operations strategy depends on Operations strategy depends on customer needscustomer needs
Operational Operational excellenceexcellence
SchoolSchool
constructionconstruction
Luxury homeLuxury home
constructionconstruction
QualityQuality 3CostCost 2
DeliveryDelivery 1
FlexibilityFlexibility 4
Operations strategy depends on Operations strategy depends on customer needscustomer needs
Operational Operational excellenceexcellence
SchoolSchool
constructionconstruction
Luxury homeLuxury home
constructionconstruction
QualityQuality 3 1
CostCost 2 4
DeliveryDelivery 1 3
FlexibilityFlexibility 4 2
Operations strategy depends on Operations strategy depends on key customer needskey customer needs
Operational Operational excellenceexcellence
EmergencyEmergency
DepartmentDepartment
QualityQuality
CostCost
DeliveryDelivery
FlexibilityFlexibility
Operations strategy depends on Operations strategy depends on key customer needskey customer needs
Operational Operational excellenceexcellence
EmergencyEmergency
DepartmentDepartment
QualityQuality 44
CostCost 33
DeliveryDelivery 22
FlexibilityFlexibility 11
Operations strategy depends on Operations strategy depends on key customer needskey customer needs
Operational Operational excellenceexcellence
EmergencyEmergency
DepartmentDepartment
Methadone Methadone ClinicClinic
QualityQuality 44
CostCost 33
DeliveryDelivery 22
FlexibilityFlexibility 11
Operations strategy depends on Operations strategy depends on key customer needskey customer needs
Operational Operational excellenceexcellence
EmergencyEmergency
DepartmentDepartment
Methadone Methadone ClinicClinic
QualityQuality 44 33
CostCost 33 22
DeliveryDelivery 22 11
FlexibilityFlexibility 11 44