Fall 2017 — Week 04 Process Journal

The few sentences you need to dominate your market

Takeaways:

• If you advertise that you are the best at X, you better be able to prove it.
• Be clear about your value prop, people don’t have time to figure it out

4 steps to building a compelling value proposition

Skok writes about different kinds of problems, and proposes a way to measure which are good to have (Blatant and Critical, since they will provide the right level of impact, and the solution is needed). He presents a framework with four steps to build a value proposition:

- Define the problem

- Evaluate whether the solution is unique and compelling

- Measure potential customer adoption

- Build the value proposition

Questions

- Skok mentions that a successful venture delivers value in an order of 10x gain vs pain. Does this model hold across enterprises? (Opinion: no — tech might not be the same: implementing an ML model with minimal gains, has exponential downstream benefits).

Teece, Business Models, Business Strategy and Innovation

Teece opens up with a comment on how users expect a certain benefit from a free app or service — nowadays users will get many services for free (like Facebook, Instagram, email services, etc) because the users are willingly giving away information that platform companies sell to marketers which then pay back the platform to display ads to the users that match a specific target market or demographic. Teece also mentions that ‘Designing’ a business correctly, and figuring out, then implementing — and then refining — commercially viable architectures for revenues and for costs are critical to enterprise success, and highlights how hard it is for smaller companies to capitalize on inventions when they might not immediately be in products in the market.

Business models, such as aircraft systems and shaving razors, are not based on the first sale, but on repeat sales of parts or support. Teece illustrates the business model challenges midway through the paper: “Figuring out how to deliver value to the customer — and to capture value while doing so — are the key issues in designing a business model: it is not enough to do the first without the second”.

Questions

- How frequently should a business plan be revisited in order to balance execution and planning?

- How can small companies accurately target an audience with very limited r&d resources which might also be needed for execution?

Magreta, Why Business Models Matter

The focus for this week was mix between business model and value proposition. Magretta describes a business model as “stories that explain how enterprises work” early in his paper. Both Magretta and Teece dive into several complexities, like the close relationship between the value chain (split into the activities to make something, and those to sell said product/service) and the business plan that describes the process that an enterprise will use to generate value. They also mention that once the execution starts, the business model is put to the test. Changes to the business model are far from uncommon — if basic assumptions are not accurate, or the execution of the plan returns unexpected results, the enterprise must adapt and either modify their strategy or tactical execution (just as the Euro Disney park did not work with assumptions made with the American customer behavior).

Based on examples from (DELL — direct to customer after targeting enterprises), American Express (traveler’s checks that count as an interest-free loan to AmEx from their customers), and Disney’s misadventures opening a park in Europe, even with a seemingly good story, a new business model has the potential to become a competitive advantage when it disrupts established models and reaches critical mass.

Non-class reading: Facebook Changes Its ‘Move Fast and Break Things’ Motto

In 2014, after having for many years the motto: “Move fast and break things”, Facebook changed their motto to Move Fast with Stable Infra. The agility they had developed through the years, came at the cost of heavy re-engineering, and many systems with little known dependencies that risked massive service disruptions. Facebook changed their motto to reflect that they are not willing to risk the quality of their service and the underlying infrastructure, and hold people accountable to still be agile, while maintaining solid foundations for the core service.