The first real week of Mikes Bikes decisions! I have to admit my excitement soon turned to anxiety when Peter announced he was going to disable the offline mode. How were we going to test our strategies? Our team did extremely well in the practice rollovers , but this was with a heavy reliance on the ability to use the offline mode – was this a mistake? Another factor to consider is whether our first equal position in the class rank after the practice roll over was because of our decision-making or because of the poor choices of other teams. Was it our strategy or simply luck that got us to first place? In hindsight (after my mild panic attack) the decision to disable the offline mode was a sensible one. In the real business world, you don¿t get to test out strategies and then go back to where you started if that particular strategy doesn¿t prove to work. The absence of the offline mode also cuts some time off our decision making, because now instead of the constant rolling forward and rolling back to test out new strategies, we have to do our research and come up with (what are hopefully) the right figures to enter in for the next rollover. Still really enjoying my team, and there are beginning to be more contributions from each member, which makes for much more interesting meetings each week.
The article about red oceans and blue oceans was quite an interesting read. The blue market is what drives growth and what every new company is looking for (Kim and Mauborgne, 2004). This categorization of the two types of markets is very relevant to today¿s transnational business world where an undiscovered market can give you that first mover advantage which can have huge pay offs for a business. But with Mikes Bikes the five markets are already established for us – meaning they can be classified as red markets. We can aim for different segments within that market, but if we place a bike somewhere in the empty space around the market how can we compete with those businesses that are giving the consumers what they want? (unless we are providing the customers with a product they didn¿t know they wanted – but is that wishful thinking in the Bike market?). Anyway, our team kind of stalled this week in the decision-making when it came to what (red) markets we wanted to enter, and in the spirit of competition I obviously won¿t mention what we were torn about (incase it gives away our strategy), but I think we have made the right decision. Hopefully the choice pays off over the next couple of rollovers.
I really liked the Walmart example given in the Magretta reading as it really helps clarify the distinction between business strategy and a business model. The business model is how the different elements of the business fit together, whereas the strategy is more how you differentiate yourself from competition (Magretta, 2002). You can take a differentiating strategy even when you are operating on the same business model (or in some cases, such as Dell, a unique business model could be your key differentiator)(Magretta, 2002). Again our business model is pretty much dictated to us in the Mikes Bikes simulation. For example, we are selling bikes through a distributor, we cannot suddenly turn around and sell them directly to the customer from our warehouse wholesaler at this point in time. I think this emphasizes the need for a differentiating strategy in the simulation, with competition operating on the same business model we need to 'pull a Walmart' and make our business the best of them all. When thinking about successful business most people tend to think about being dynamic, flexible and adaptable to changes in both competition and the market, but sometimes it is good to stick to your strategy. Walmart was cutting costs even lower than it¿s competitors, and it paid off because they are still trading whereas its previous competition has all ceased to exist. I think this points out that even if your competitors are all doing the same thing (and it might work for them in the short term), being a sheep and basing your strategy on theirs may not always be the right option. Using a competitor¿s strategy as a model for your own means you will always be one step behind and miss out on those first mover advantages. Better to identify the gaps in the market and exploit them while you can. I think my role as the R&D person of the team does require investigation into the strategies of the other teams and finding areas in the market where we can place our bikes that will differentiate us from the rest of our world. So in a way our ideal ¿original¿ and differentiating strategy is based on our competition, but rather than following them, we are picking up what they miss or are ignoring.
Strategy is brought up yet again in the second Kim and Mauborgne article. The 'visual awakening' aspect of the article is something which could be very useful in the coming weeks. The whole idea is to place your strategy and the importance placed on each thing i.e. quality/advertising/supplier relations on a graph and then also fill in the strategies of your competitors to see how you differ and what may need to be changed (Kim and Mauborgne, 2002). The 'visual exploration' phase then involves looking at the advantages and disadvantages of different options available and collecting as much data as possible to help you make your decisions, and this stage is followed by the 'visual strategy fair' and 'visual communication' stages (Kim and Mauborgne, 2002). The whole point of this process is to give you a visual representation of what your company strategy looks like now compared what you want it to look like. This helps with decision-making as you can focus on the decisions that will get you to where you want to be (Kim and Mauborgne, 2002). Since I started writing this journal the rollover has happened and our team (although we aren't the team with the lowest SHV in our world), isn't doing the best. However upon closer inspection, all the figures for the rollover show that we are the leaders in all of the aspects of the business that we wanted to emphasise. But now what? our investments have left us in a cashflow state that is less than ideal. Did our focus on strategy blur our perception of how much money we actually had at our disposal? If we drew a visual map of our strategy as proposed by Kim and Mauborgne (2002), it would look exactly how we wanted it to, but at this point in time our finances are the opposite. The balance between strategy and cashflow is one that has proven to be difficult and maybe we were too ambitious with our investment for the first rollover. But that being said, I am looking forward to the next rollover and seeing if our investments made in this round will push us up the ranks.
Kim, W. C. & Mauborgne, R. (2004). Blue ocean strategy. Harvard Business Review, 82(10), 75--84
Kim, W. C. & Mauborgne, R. (2002). Charting your company's future. Harvard Business Review, 80(6), 76--83
Magretta, J. (2002). Why business models matter. Harvard Business Review, 80(5), 86--92