Strategy and Market forces – Get your ducks lined up

Let’s now take a brief look at my ‘nine competitive dimensions’  model.

This model will be familiar to some who will readily connect with the inclusion of government as an environmental dimension.

To reiterate.

One way of looking at the environment in which a competitive organisation seeks to survive and thrive is through the perspective of environmental forces, also commonly referred to as market forces.

The environment model that I use in client engagements helps to focus attention on major elements in a notionally or actually competitive and predatory environment, and is a useful aid to identifying and aligning market opportunities as well as for the more traditional forms of analysis, such as SWOT[1].

Figure 1 – Nine competitive dimensions[2]

What this diagram shows is the relationship between key environmental forces and dimensions of power, influence, projection and risk. For example, government exercises constraining power over business, but also over the business of governance, likewise, in some sovereign nations there are corporations (either private or publicly listed) that do exercise power over the political classes in general, and the government in particular. Likewise, one industry sector may hold power over another sector, or one sector group may exercise power over another group in the same sector. So, whilst labour’s ability to influence national public policy has vastly diminished, on the flip-side we see that the ability of the private sector to influence politicians and policy has massively increased, and frequently in ways that almost effortlessly cross trans-national boundaries.

• A: Customers – What forces can the client impose? Bargaining power, for sure. But bargaining power is a far grainier, wider and deeper field than that which is envisaged by the traditional business stratagem evangelists. What does this mean in information terms? Well, information management can be used to fill in many of the gaps that in your face KYI (know your customer) cannot hope to completely cover in this day and age. Data Warehousing can be used to help people think outside the box and to look outside the box when it comes to customers. Not all the choice and relevant customer related data will be in the operational systems, so that data will have to be sourced elsewhere

• B: Fresh entrants – This is an “out of the blue” entrant into the terrain of battle. In information terms, it’s the skinny on the ease with which new competition might enter the market. How can Data Warehousing be used to alert executives to fresh market entrants? Well, this is where the business side of the data warehouse process comes into play. Organisations who need to keep a finger on the pulse of this type of market force must have the competence or have access to the competence for monitoring the activities on the ‘fresh entrants’ front.[3]

• C: Government – Government whether it is local, provincial, autonomous region centric, national or transnational, may represent a significant and present risk to the strategic aspirations and business operations of some commercial organisations. This is not a general business rule – well at least one that people like to talk about in public – but it is the exception that some organisations will want to be aware of in order to ensure that governmental and political risks and issues are monitored, measured and legally and ethically influenced. Conversely governments, politicians and pressure groups can play the reverse risk game with similar framework models to the one that is being commented upon here.

• D: Complementors – The impact of related products and services already in the market. This is a term used to describe businesses that complement another business at the level of product or service, or both, and in turn providing additional value to their mutual customers. As an example, company A sells Greek style yoghurt, company B sells honey that goes well with Greek style yoghurt, people who like the combination buy from companies A and B. Big value-chain innovators such as Ikea and adidas are masters at leveraging complementors.

• E: Internal obstacles – These are the things that an organisation has that act as challenges to the timely creation of effective strategies, and there are a vast number of ways in which business will be its own worst enemy when it comes to strategy. Generally the more globalised a company is the more internal challenges it will produce, and the more difficult it will be to cut through the morass of bureaucracy, internal politics and cross-cultural divides, in order to reach a useful strategy.

• F: Concentration – This involves monitoring and measuring the potential impact, risks and opportunities presented by concentrations in markets of suppliers, producers, services and products. In economic terms, a concentration is measured as a ratio of the total output produced in an industry by a given number of firms in the industry. Concentration ratios are used to show the magnitude of market share of the largest firms in a particular industry.

• G: Brokers – This facet has traditionally focussed mainly on direct suppliers, but is also now including the market forces exerted by third parties along a provisioning chain, and the representation of hybrid supplier, partners and competitors. Brokers hold a degree of bargaining power that may present a risk to the organisation in focus. This means that the forces that a broker can potentially exert need to be monitored, measured, reported and managed.

• H: Industry – This area of market surveillance is focused on information regarding present direct and indirect competition. The primary focus is on direct competition; those companies that go head to head in the market, but again, also focused on indirect competition that act as complementors to direct competitors, and are therefore potentially competing against the home team.

• I: Alternatives – This is the threat of a new product or service that comes along and changes the game, and rather than compete head to head, will move the focus to a modified set of benefits, features and fetishes.

In growing our understanding of these essential business facets, and in understanding the strategic importance of the data associated with these facets, we can use this as a basis for providing accurate, appropriate and timely data into the strategy conceptualisation, formulation and execution processes.

Please take special care at the intersection of environmental forces and strategic decision support

In the context of IT and strategic decision support, it cannot be repeated enough that the primary purpose of strategic Enterprise Data Warehousing is to support strategic decision making, and if a strategic EDW is not built specifically for providing for this requirement then it is not meeting the key criteria that should serve to justify its existence.

Have a great weekend!

Yours strategically, Martyn

[1] SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture.

[2] Nine Competitive Dimensions. For the widely disseminated market forces model, see Porter’s five forces analysis framework: http://en.wikipedia.org/wiki/Porter_five_forces_analysis

[3] The framework for this type of cross-silo integration will be a feature of a work in progress that will be coming out later this year.