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In the previous article #14 The Entrepreneurial CRO – Evaluating your current Business Model, we proposed that Business Model innovation represents one of today’s most compelling opportunities for value creation and value capture. By focusing on cause-effect relationships, CROs are able to define Business Model configurations and evaluate the merits of different Strategic Options.
In the second of a series of short Articles, we will examine concepts, tools and frameworks that can assist CROs in their understanding of core Business Model configurations when evaluating different strategic options (defend, influence, exploit).
Concepts, tools and frameworks
To create and capture competitive advantage, not only do the sources need to be above the industry threshold, the firm also needs to continually adapt and disrupt itself.
There are a vast array of concepts, tools and frameworks that CROs could use, the following are but a few examples:
(1) Porters Five Forces
A classic tool that is useful in understanding how industry Key Success Factors drive competition that determines profitability.
- Concentration (number and size of firms)
- Product differentiation
- Diversity of competitors
- Fixed vs. Variable costs
- Brand equity (and loyalty)
- Consumer switching costs
- Bargaining power of Buyers/Suppliers
- Threat of substitutes
- Barriers to entry
(2) Strategic Groups
A useful tool for understanding competition and analysis of strategic opportunities including:
- The identification of strategic variables that are important to the insurance industry
- How the firm is positioned in relation to each variable and opportunistic ‘strategic spaces’ for revenue growth
- Clusters and the firms relative positioning
(3) Resources and Capabilities
The firm is seen as a combination of Resources and Capabilities.
- Resources – tangible (financial) and intangible (brand, reputation, relationships, culture and skills/talents)
- Capabilities – functional utilisation across R&D, Finance, Operations, Marketing
(4) Dynamic Capabilities
Provides a framework for firms to develop a core capability that continually monitors the internal and external environment.
In Explicating Dynamic Capabilities: The Nature and Micrcofoundations of (Sustainable) Enterprise Performance and Understanding dynamic capabilities: progress along a developmental path, the authors set out an approach to gain and sustain competitive advantage in dynamic and complex market environments.
Sense opportunities and threats – the organisational capability to develop valuable strategic insights. There are three elements within sensing:
- Scanning – obtaining information about events and trends in the external environment and monitoring changes
- Strategic hypothesis – draws on management intuition and entrepreneurial insights, often informed by scanning outcomes
- Trigger analysis – an assessment of the type and means of strategic change required to act upon various strategic insights
Seize activities – a decision to either launch a strategic change initiative, or incremental changes (small wins) that seek to ensure ongoing alignment with the external environment
Reconfigure resources – through experimental-learning, creating or acquiring new resources and capabilities
In todays dynamic world adaptive frameworks that offer the opportunity to continually learn, experiment and pivot are more essential than ever to a firm’s survival.
Scanning is a key activity within Sensing and involves both an externally orientated search to identify key events and trends, as well as the internal monitoring of changes in strategic assets or insights.
In dynamic environments, scanning efforts should focus on R&D, emerging technologies and of specific importance to the insurance industry, customers ‘wants and needs’.
External scanning covers both the remote environment (longer term trends, weak signals) and discrete tasks (factors that are in close proximity). Internal scanning monitors both changes in strategic assets and seeks to identify entrepreneurial insights.
Darren provides Enterprise Risk Management advisory services to the Insurance and Investment Management sectors. Helping Board and C-level executives address strategic challenges, by delivering solutions that create Enterprise Value and improve business performance.
Darren is an experienced executive with over 20 years’ global experience with multinational companies, including Chief Risk Officer reporting to the Board.
Darren is an Honorary Visiting Fellow of the Digital Leadership Research Centre, Cass Business School where he also holds an Executive MBA. Darren is a Certified Fellow of the Institute of Risk Management (CFIRM) and Chartered Insurance Risk Manager (ACII) of the Chartered Insurance Institute.
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