New Economy Game

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New Economy Game

• Spring 2002

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The Executive MBA Game Spring 2002

• Welcome to the New Economy Game!
• The New Economy Game Series
• Setting up the Game
• Discussion of elements in the Game
• Thinking about the Visit to the Analysts
• Play the first three rounds of the Game
• Close

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The New Economy Game Series

• Why the Games were created
• Why Games?
• 90 retention of experience versus 30 --
• 65 plus on concepts and detail with good debrief
• Client and University Demand
• Leadership and Business Acumen
• Strategy Formulation
• Customized for Alignment
• University MBA/Executive Education
• The MBA Game
• A course structured version but a full game in
  its own right

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The New Economy Game How the Game Works

• Three teams of three
• Two separate games
• Head-to-head competition
• Some internal activities to improve your
  business
• Rest competitors decisions affect you
• The New Economy Game is a top-down transformation
  game

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The hand youve been dealt
Environment
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The hand youve been dealt
Environment
Lifeblood
Finances Cash Engine
Cash
Financial Markets
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Revenue
The hand youve been dealt
Markets/Brands Cost, Marketing, Product,
Experience
Environment
Lifeblood
Invest
Finances Cash Engine
Cash
Value Financial Risk
Financial Markets
8
Revenue
The hand youve been dealt
Markets/Brands Cost, Marketing, Product,
Experience
Environment
Integration
Operations
Value Network
Adaptability
People
Backbone
Support
Margin
Margin
Renewal
Innovation
Lifeblood
Invest
Invest
Finances Cash Engine
Cash
Cash
Value Financial Risk
Financial Markets
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Revenue
The hand youve been dealt
Markets/Brands Cost, Marketing, Product,
Experience
Environment
Share
Acquisitions
Consolidation
Integration
Operations
Value Network
Knowledge
Technology
Adaptability
Synergy
People
Flexibility
Partners
Backbone
Support
Margin
Focus
Outsourcing
Renewal
Innovation
Skill
Talent
Lifeblood
Invest
Invest
Finances Cash Engine
Cash
Cash
Value Financial Risk
Financial Markets
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Revenue
The hand youve been dealt
Markets/Brands Cost, Marketing, Product,
Experience
Environment
Share
Acquisitions
Consolidation
Experience
Integration
Operations
Value Network

• Capabilities
• Dynamic
• Integration

Hone
Buy
Knowledge
Technology
Adaptability
Synergy
People
Flexibility
Partners
Backbone
Support
Margin
Integrate
Focus
Outsourcing
Renewal
Innovation
Skill
Talent
Lifeblood
Invest
Invest
Finances Cash Engine
Cash
Cash
Value Financial Risk
Financial Markets
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Revenue
The hand youve been dealt
Markets/Brands Cost, Marketing, Product,
Experience
Environment
Share
Acquisitions
Consolidation
Experience
Integration
Operations
Value Network

• Capabilities
• Dynamic
• Integration

Hone
Buy
Knowledge
Technology
Adaptability
Synergy
People
Flexibility
Partners
Backbone
Support
Margin
Integrate
Focus
Outsourcing
Renewal
Innovation
Skill
Talent
Lifeblood
Invest
Invest
Finances Cash Engine
Cash
Cash
Value Financial Risk
Financial Markets
12
Revenue
The hand youve been dealt
Markets/Brands Cost, Marketing, Product,
Experience
Environment
Share
Acquisitions
Consolidation
Experience
Integration
Operations
Value Network

• Capabilities
• Dynamic
• Integration

Hone
Buy
Knowledge
Creativity
Technology
Experience
Adaptability
Synergy
People
Flexibility
Management Risk
Partners
Backbone
Support
Margin
Integrate
Focus
Adaptability
Knowledge
Outsourcing
Renewal
Innovation
Skill
Talent
Lifeblood
Invest
Invest
Finances Cash Engine
Cash
Cash
Value Financial Risk
Financial Markets
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Lets Get Started First Strategy Retreat

• The story to date
• The objectives
• Rewards for winning
• How shareholder value is calculated
• Getting familiar with the screens
• A selection of ideas built into the game
• Start playing!

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The Story to Date

• You are the new Executive Committee
• Micro-electric devices industry
• Disruptive technology
• Facing technology shifts changing customer
  response and product structure
• Aggressive new competition using new business
  models fallen behind
• Regional industry global consolidation

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The Objective

• Become the Analysts/Investors favourite
• Maximize short-term shareholder value
• Maximize long-term value Set up for the future

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The Reward of Performance

• Bragging rights
• A great memory
• Learning
• Job security
• Plus a great grade

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The Goal Creating Shareholder Value

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The Finance ScreenTheKeyScreen
0
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P L ReportNet Profit
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The Finance ScreenEarningsMultiple
Plus Capabilities
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The Brand ScreenCapabilities
Capabilities
Adaptability
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Various Index ReportsShow Details
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Financial and Management Risk ReportsShow
Sources of Risk
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The Brand ScreenRisk
Ignore
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Summary Shareholder Value Is

• Earnings Net Profit in the Period
• Earnings Multiple 10 Capabilities built
• Where Capabilities are in Creativity, Knowledge
  Conversion, Customer Experience and Adaptability
  of Culture
• Risk Combination of Management Risk and
  Financial Risk

For all purposes the only algorithm so relax and
enjoy
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Positioning the Brand

• Product
• Marketing
• Customer Experience
• Plus
• Lowest Cost?

Timing Duration Weight
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The Effects of Market Expenditures
Cumulative Effect
Weight
Duration
Periods
1
2
3
n
Timing
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Market Report Effects Summary
Item
Timing
Duration
Weight
Product
2 period delay
4 periods
Creativity
Market
Immediate
1 period
Knowledge
Customer
1 period delay
5 periods
Experience
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Positioning the BrandThe Whites oftheir
Eyes
Volatility and inertia
Timing Duration Weight
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BuildingValue NetworkCapabilityImproving
Operating Margins

• Decision
• By capability?
• By cost-benefit?
• By Synergy Group?

• Decision
• By capability
• By cost-benefit
• By Synergy Group

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BuildingInnovationCapabilityImproving
Operating Margins

• Decision
• By capability
• By cost-benefit
• By Synergy Group

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BuildingSupportCapabilityImproving
Operating Margins

• Decision
• By capability
• By cost-benefit
• By Synergy Group

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BuildingCultureCapabilityImproving
Operating Margins

• Decision
• By capability
• By cost-benefit
• By Synergy Group
• Adaptability Index

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Close Outthe Period
.
.
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Report to the Analysts

• What were we trying to achieve?
• What were our competitive results?
• Why are we positioned for the future?
• Why should you support us?

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A Lens on the New Economy A selection of
concepts built into the game
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A Selection of Ideas

• The new economy? The networked economy
• Creating value in the networked world
• Think strategically
• Networks, IT and Operations Realizing the Dream
• Networks, People, Culture and Organization
• Transformation/change As a Competitive Tool (I)

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The New Economy? The Networked Economy

• The 30 year story. A distinctively different
  business model rooted in technology and
  globalization.
• Transformation from stardate 1998

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Kondratieff, Long Waves and Boiling Frogs
2000
1990
1980
1970
Communications and Computing
MainframeGlasshouse
PC
Ubiquitous, instant, low cost communication
Globalisation
30x increase in world trade
Other 4/5ths of population joins the world economy
Release of Regulation
The questioning?
Triumph of private enterprise
Management Ideas
Single Fads Packaged
Solutions Process/Technology
Integration
Networked Enterprise
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Kondratieff, Long Waves and Boiling Frogs
2000
1990
1980
1970
Communications and Computing
MainframeGlasshouse
PC
Ubiquitous, instant, low cost communication
Globalisation
30x increase in world trade
Other 4/5ths of population joins the world economy
Release of Regulation
The questioning?
Triumph of private enterprise
Management Ideas
Single Fads Packaged
Solutions Process/Technology
Integration
Networked Enterprise
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Creating Value in a Networked WorldThe
Industrial Model Versus the Networked Model
Capital-based
Network-based

• Mass production logic
• Customer opaque/outside
• Asset/sales oriented
• Economies of scale
• Concentrated capital
• High fixed costs component
• Computing-centric
• Do-it-all-yourself
• Control by ownership

• Networked mass customization
• Customer transparent/inside
• Brand oriented
• Economies of network
• Dispersed capital across network
• Largely variable cost
• Connectivity-centric
• Networked key capabilities
• Control by shared interest

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Competitive Positioning NE Business Model
Brand-Owning Companies
Asset Companies
Shared Services Participants
Technology Providers
MetaMarket Managers

• Consumer/Customer Development/
  Management
• Customer Data Management
• Rapid Product Development
• Electronic Channel Management
• VAC Alliance Development
• Outsourcing Management

• Synchronized Supply Chain Process Management
• VAC Alliance Development
• Product Development

• Shared Service Process Management
• VAC Alliance Development

• Technology Development
• VAC/MetaMarket Alliance Development

• VAC Alliance Development
• MetaMarket Performance and
  MetaMarket Process Management
• ASP Infrastructure
• Business Creation Services
• Technology Maintenance/AP

The First Generation of Business Models Reflected
in the market and internally
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Competitive Positioning? The Move to 33 Economics
SustainablyDifferentiated

• Lowest Cost

Niche
Broad
Michael Porter Industrial Man?
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But, Technology and Process
Differentiation
Price
Me too
Sustainable
Porter Win
New Economy
Lowest
Crowd
/-5
Cost
?
Porter Win
Highest
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Cost of Coordination Part of the Brand Story
Market Coverage
All Niches
Single Niche
Related Niches
Product Range
Single
Related
Unrelated
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Business Points of View Have Shifted...

• Commodity supplier
• Build to inventory
• Customer-opaque supply chain
• Low slow innovation
• Vertically integrated - capital intense

• Customer value delivery
• Build custom to order
• Customer integration into the supply chain
• High innovation
• Intensely networked - low capital intensity

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As Have Business Values

• Sales push orientation
• Manufacturing culture
• Copy for volume
• Cooperation but inward focus (do it ourselves)
• Grow our own talent

• Brand orientation
• Customer culture
• Innovate for margin
• Network collaboration - Value Add Community
• World talent pool

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Think Strategically

• Value (shareholder or social).
• Positioning options Competitive, brand, market.
• Capabilities (indexes) Network based.
• Cost base Margin (cost-benefit, synergies).
• Strategic/transformational agenda.
• Dynamics timing Sequencing and grouping
  activities (synergy, indexes, returns).
• Actions acquisitions, alliances, partnerships,
  collaboration, etc.
• Affording it Drive the cash engine.
• Aggression Market spend.

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The New Economy Game Think Systemically
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Networks, IT and Operations Realizing the Dream

• The new platforms, integrating the nervous system
  into the network
• CRM, supply logistics, ERP, B2E, etc.
• Finally, customer focus from opaque to
  transparent to symbiotic.
• Multi-touchpoint, CRM, configuration, order
  visibility, service.
• Mass customization and networks the new DNA?
• Concurrent engineering, modularization, late
  customization, late realization. The portfolio
  solution.
• The speed imperative.
• Time to market to time to peak sales. Networked
  development. Cycle time.
• The conundrum of fixed cost in a turbulent market
  (I).
• Standard cost and labour to a fixed platform
  getting variable in a turbulent market (s).

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Networks, People, Culture and Organization

• The new competencies
• Cooperation to collaboration, individual cultures
  to group cultures, win-win relations
• From functions to SBUs to process
• The separation of cultures, outsourcing effects
• Performance in networks the market pervaded
  organization
• Personal, network members, the role of
  compensation and the social stress of high flyers
• The leadership challenge
• Leading without power (projecting passion),
  collaboration and culture assumptions (Br-cards).

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Transformation/change As a Competitive Tool (I)

• A world built for turbulence global competition
• Images of organization
• The impacts of disruptive technology
• The latest and greatest IT integration and
  change

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Finally!! We get to play
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Analyst PresentationA Template

• Exec MBA Spring 2002

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Instructions

• Reflect on your companys strategy and results.
  Prepare a presentation to the Analysts.
• This document is to help you create the Analyst
  Presentation.
• It lists the items that MUST be covered in the
  presentation.
• It also provides you with some working templates
  for collecting information.
• At this point, all data is public, obviously
  strategic intentions and commentary is not.
  Please respond when asked for key data by your
  competitors
• The presentation must be punchy, succinct, and
  relate your results back to the issues we have
  discussed in the course.

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The Analyst Presentation Required Content

• What was your starting positioning? Why?
• What was your strategy? Why? What capabilities
  did you try to build? How fast did you build
  them?
• How did your strategy evolve during the game?
  Why?
• Key indicators of financial and operating
  performance
• Competitive assessment. How well did you do
  versus your competitors?
• How are you set up for the future? Why should
  anyone invest in you?

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Our Initial Strategy

• Competitive positioning
• Our business values

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Our Key Strategies

• Operating strategy
• How did we decide which initiatives to do? In
  what order? How did we get the synergies? How
  did this fit with our competitive positioning?
• Brand Strategy
• What was our focus? Customer experience to go
  with our operating investments? Innovation? Pure
  marketing? Grow by acquisition? Some mix? What
  capabilities did we build? Creativity?
  Knowledge? Experience? What did this mean for
  our acquisition program?
• Talent Strategy
• What network capability were we creating? How
  were we developing adaptability? Dealing with
  stress? Who did we hire? How did they help our
  strategy?
• Finance strategy
• What was our financial structural strategy? Our
  business model. Where did decapitalization fit
  into this? How well did it work?

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Key Actions

• What key actions did we undertake to drive our
  strategies?
• In the market place
• Internally
• By acquisition
• By hiring talent and driving current competencies
• With partners and outsourcers
• Through collaboration
• To what extent did competitor actions affect us?

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Key Operating Indicators
Us
Benchmark
Comments
Revenue
Sales/Employee

• Revenue/Assets

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How did we deal with risk?

• How much risk did we carry?
• How did we seek to manage it?
• What were the primary sources of it?

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Strategy Results Commentary I
Competitive positioning Our business
values
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Strategy Results Commentary II

• Operating Strategy
• Brand Strategy
• Talent Strategy
• Finance Strategy

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How Are We Set Up For The Future?