Business Model Renewal and Strategic Planning

© Linda Gorchels
Business Acumen for
Strategy
Linda Gorchels
Emerita Director of Executive Training, UW-Madison
Creativity Curator, Tomorrow’s Mysteries, LLC
lgorchels@bus.wisc.edu

Linda Gorchels
www.BrainSnacksCafe.com
Business Model Renewal
Amazon.com

Learning objectives
(Fall 2015)
By the end of this session you should
be able to:
• Connect the dots between business
models, strategies, leadership and
culture
• Define (and refine) your own
business model(s)
• Lead strategic maneuvers and
business model renewal through
relevant change initiatives

© Linda Gorchels
TacticsStrategy ≠

How long is “long-term?”
• It varies by company and industry. However,
here are some very broad guidelines.
– product: 2-3 years
– business unit: 3-5 years
– company: 5-10 years
– industry: 8-10 years or more
© Linda Gorchels

• Strategy is a long-term plan of action to
achieve a particular goal.
– Typical business goals include growth, market
dominance, efficiency, etc., with the intent of
achieving competitive advantage
© Linda Gorchels
• Strategy is sometimes viewed
as the policies taken to win a
war whereas tactics are the
actions taken to win a battle.
Both exist within the context
of business models.

Growth Initiatives
Corporate Strategies
Business Strategies
Product/Service Strategies
Field strategies
Inorganic growth
Organic growth
Mergers, acquisitions, etc.
Product development,
increased sales
Stockholder
focus
Customer
focus

Corporate Strategies Business Strategies Field Strategies
Enterprise mission, vision, values
Mergers, acquisitions, divestitures
Strategic market alignment
Organizational structure
Product line acquisition
Operational strategies
New product development
Channel redesign
Functional strategies
Account selection
Lead generation
Selling, account management
Fulfillment
Sales support & service
© Linda Gorchels

© Linda Gorchels
PlanningStrategy ≠

Michael Porter on Strategy
© Linda Gorchels

© Linda Gorchels
“Leadership and management are two distinctive and
complementary systems of action. Management is
about coping with complexity. Leadership is about
coping with change. Leadership complements
management; it doesn’t replace it. Companies
manage complexity by planning & budgeting, by
controlling & problem solving. By contrast, leading an
organization begins by setting direction, aligning
people to the direction, and inspiring people to
achieve a vision.”
» John P. Kotter

“Most of the management tools and
techniques we studied had no direct
causal relationship to superior
business performance. What does
matter, it turns out, is having a
strong grasp of the basics. Without
exception, companies that
outperformed their industry peers
excelled at what we call the four
primary management practices –
strategy, execution, culture, and
structure.”
Joyce, Nohria, Roberson
© Linda Gorchels

•Exploit existing assets and
capabilities before exploring new
ones.
•Diversify your business portfolio.
Great companies are adaptive, but
generally exploit economies of
scope.
•Remember your mistakes – and
don’t repeat them.
•Be conservative about change.
Christian Stadler
© Linda Gorchels

“An examination of over 400
companies listed at some point
on the Fortune 100 since its
inception revealed that 87%
experienced a stall. Fewer than
half were able to return to
moderate or high growth within
a decade, and for some the delay
was fatal.”
Matthew Olson & Derek van Bever
© Linda Gorchels

“Strategy has been the primary building
block of competitiveness over the past
three decades, but in the future, the
quest for sustainable advantage may
well begin with the business model.
Seven out of 10 companies are trying to
create innovative business models and
98% are modifying existing ones.”
“How to Design a Winning Business Model” (Ramon
Casadesus-Masanell, Joan Ricart), Harvard Business
Review, January-February 2011, pp. 101+
© Linda Gorchels

How is a business
model developed?
There are three parts …

• Context
• Strategic Decisions
• Alignment
© Linda Gorchels

Gorchels’ business model portfolio
Boost existing
customer markets
Move into adjacent
customer markets
Create new customer
markets
Cultivate and reframe
existing products,
offerings, revenue streams
and competencies
Sustaining
Growth
(shorter-term planning
horizon; mining the
core)
Cultivate and collaborate
with external partners for
products, offerings,
revenue streams and
competencies
Disruptive Growth
(long-term planning
horizon; incite
breakthroughs)
Transformative
Growth
(intermediate-term
planning horizon; advancing
into adjacencies)
©Linda Gorchels

The Innovation Paradox
Robert C. Wolcott
© Linda Gorchels

• Context
– What’s going on?
© Linda Gorchels

Data
Hindsight
Plausible futures
Foresight
Business impacts
Insight
Environmental scan
3
Assess
2Project
1Compile

SWOT
Internal
External
Strengths Weaknesses
Opportunities Threats
© Linda Gorchels

Identify strengths (weaknesses)
Strengths can come from competencies,
capabilities, resources or assets that are the
source of a firm’s competitive advantage.
· e.g. – competence in low-cost manufacturing
· e.g. – capability of strong customer relations
· e.g. – superior access to resources such as
raw materials
· e.g. – unique assets such as location or brands
© Linda Gorchels

Dive into strengths
urable
nimitable/non-substitutable
aluable
xploitable
© Linda Gorchels

Monitor
external
trends over
time

Technology
• Describe technology, science &
innovation in your industry and in
similar industries.
– Can technologies from other
industries be adapted?
– Are novel applications possible?
• What technological changes are
expected or anticipated?
© Linda Gorchels

Industry & competition
• Think about your current or prospective
industry. How would you define industry
structure in terms of buyers, suppliers and
competition? (Porter’s Five Forces)
© Linda Gorchels
• How are you uniquely
positioned compared to these
competitors? What is your
value proposition and how will
you maintain it in the future?

Porter’s Five Forces
© Linda Gorchels

Market
• Is your primary market stable, growing, or
declining?
• Have you saturated this market, or is there room
for profitable growth?
• How might this change in the future?
• Are there adjacent markets that
offer opportunities for the future?
• What higher-level socio-cultural
trends (next page) could affect
your market(s)?

Generational Cohorts
(birth years)
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Cohorts
Traditionalist
Baby Boomer
Gen X
Millennial
Z ?
© Linda Gorchels

Economy, environment, etc.
• Are there existing laws or requirements that pose
opportunities or threats?
• What governmental and political changes might
happen?
– World affairs, politics, and public policy
© Linda Gorchels
• What pending legislation
might affect your future?
• What environmental or
sustainability issues should
you consider?

© Linda Gorchels
Upstream business goals
• Are your goals
determined or
affected by
higher-level
corporate,
division or
business unit
goals?

PROJECT
Environmental scanning – step 2
• Conceptualize plausible futures.
– Which technologies will be disruptive?
– When will patent expirations (either yours or the
competition) occur?
– How quickly will markets transform due to
demographic or other shifts?
© Linda Gorchels

Projecting into the Future
Complexity
Time
© Linda Gorchels

ASSESS
Environmental scanning – step 3
• Consider…
– The likelihood of each scenario
– The potential impact on your business
– How you might build on strengths, resolve
weaknesses, exploit opportunities and minimize
threats
• Think in terms of dynamic stability
© Linda Gorchels

© Linda Gorchels© Linda Gorchels© Linda Gorchels
What is contextual leadership?
© Linda Gorchels
• Leadership requires agility and contextual
intelligence. Effective leaders have to
judge from the context of the situation if
an autocratic decision is required, or
whether it's the opposite. They have to
adjust their style to fit the circumstances
and the needs of the followers. There are
times inspiration is most critical, and other
times when transactional skills of
motivating employees to implement a
strategy-- making them more productive --
becomes more important.

Leaders shape the future
© Linda Gorchels
• Core values
– Beliefs your firm’s members hold in
common
– May be different from aspirational
values
• Mission
– Defines why your firm exists
• Strategic vision
– A description of the desired future
state of your firm

Enduring principles that guide
the “culture” of a firm
Core Values
Link to reputation, positioning
and brand identity
May be part of the mission
statement or a separate
pronouncement

IBM Core values
For 72 hours in 2011, we invited all 319,000 IBMers around the world to
engage in an open "values jam" on our global intranet. IBMers by the tens of
thousands weighed in. They were thoughtful and passionate about the
company they want to be a part of. They were also brutally honest. …
In the end, IBMers determined that our actions will be driven by these values:
• Dedication to every client's success
• Innovation that matters, for our company and for the
world
• Trust and personal responsibility in all relationships
www.ibm.com, Feb, 2012
© Linda Gorchels

© Linda Gorchels
Mission
Why your organization exists (purpose)
What it does to achieve its purpose

Mission statement -YMCA
• The YMCA of San Francisco, based in Judeo-
Christian heritage [values], seeks to enhance
the lives of all people [purpose] through
programs designed to develop spirit, mind and
body [business].
Source: VolunteerMatch website, January 2008 (descriptors – values, purpose, business – added).
© Linda Gorchels

Simon Sinek: Start with Why
© Linda Gorchels

Strategic vision
© Linda Gorchels
The “mental picture” of what the
company will be in the future.
– Where is the company going; what
will it look like; what will it become?
– What will it do differently to attain
profitable competitive advantage?
Martin Luther King, Jr. started his
vision statement with, “I have a
dream …”

Komatsu’s vision, 60s-80s
• Komatsu
– Encircle Caterpillar
– Date Corporate Challenge Activities
– 1960s Protect home market Licensing deals
Begin quality efforts Quality programs
– 1970s Build export markets Industrializing nations
– late 70s Create new products Future and Frontiers
markets program
© Linda Gorchels

Komatsu’s re-visioning
Komatsu’s vision changed in the
1990s.
• The exclusive focus on best
practices to compete against
Caterpillar caused Komatsu to
stop thinking about strategic
choices beyond head-to-head
competition.
• Now it seeks out new
opportunities
© Linda Gorchels

Interface Inc.
Vision
• To be the first company that, by its deeds,
shows the entire industrial world what
sustainability is in all its dimensions: People,
process, product, place and profits — by
2020 — and in doing so we will become
restorative through the power of influence.
Corporate website, February 2009
© Linda Gorchels

© Linda Gorchels
Work to create
readiness to change
today
in an effort to reduce
resistance to change
tomorrow

• Is there sufficient dissatisfaction
with the status quo to support
change?
• Do employees believe the
organization has the capacity for
successful change?
• Are there enough key
supporters throughout the
organization with a “readiness
to change” propensity?
© Linda Gorchels
Diagnose your firm’s
readiness to change

Change Readiness Matrix
Ready for learning Ready for change
Ready for resistance Ready for frustration
Leadership
Change Capacity
Organizational Propensity to Change
Low
High
Low High
Adapted from Douglas B. Reeves,
“Leading Change in Your School,”
ASCD 2009.

© Linda Gorchels
One final thought
(before getting to the
strategic business model
decisions of where and how
to compete).
Let’s explore four
different “mental
models”
(categories) of
strategy.

Category 1:
Grow from the core
© Linda Gorchels

Grow From The Core
• Strengthen and grow your core business
– Profit from the Core (Chris Zook)
– Beyond the Core (Chris Zook)
• Leverage core competencies
– Competing for the Future (Gary Hamel & C.K. Prahalad)
• Move toward BHAGs that build on core ideologies
– Built to Last (James Collins & Jerry Porras)
– The Soul of the Corporation (Hamid Bouchikhi & John
Kimberly)
© Linda Gorchels

Can your core
business be
grown?
Do you need to
move into
adjacencies?
© Linda Gorchels

Category 2:
Pursue competitive advantage
© Linda Gorchels

• Define the competitive structure of your
industry, identify the key success
factors, and work to either change the
structure in your favor or gain
superiority in the key success factors
– Competitive Strategy (Michael Porter)
– Market-Driven Strategy (George Day)
Pursue Competitive Advantage
© Linda Gorchels

Define key success
factors (table stakes) in
your industry and
determine how to
succeed by excelling at
them and/or redefining
them.
© Linda Gorchels

Category 3:
Seek untapped marketspace
© Linda Gorchels

Seek Untapped Marketspace
• Move beyond the boundaries of direct
comparative competitiveness
– Blue Ocean Strategy (W. Chan Kim & Renee
Mauborgne)
– MarketBusters (Rita Gunther McGrath & Ian C.
MacMillan)
© Linda Gorchels

Identify market
opportunities that you
have the skills to
satisfy, but that are
currently being
underserved in your
industry
© Linda Gorchels

Category 4:
Anticipate disruption
© Linda Gorchels

Anticipate Disruption
• This is another look at new marketspace, but
from the perspective of estimating when an
emerging trend will take off, and building a
strategy to take advantage of it
– The Tipping Point (Malcolm Gladwell)
– The Innovator’s Solution (Clayton Christensen &
Michael Raynor)
© Linda Gorchels

Follow technology,
industry, and market
trends to identify – and
take advantage of –
tipping points as early as
possible.
© Linda Gorchels

• Strategic Decisions
© Linda Gorchels
Where to compete?
(which customers?)
How to compete?
(what value proposition?)

Can I achieve my goals
& a sustainable
advantage with existing
customers and
capabilities?
Might externalities
force a change?
When?
Will I need to move
into adjacencies or
new markets?
New capabilities?
How can I build a
portfolio of short-,
medium-, and long-
term growth
options?

Back to the Growth Portfolio
Boost existing
customer markets
Move into adjacent
customer markets
Create new customer
markets
existing products,
and competencies
Sustaining
Growth Arena
(shorter-term planning
horizon; mine the core)
revenue streams and
competencies
Disruptive Growth Arena
(long-term planning horizon; incite
breakthroughs)
Transformative
Growth Arena
(intermediate-term planning
horizon; advance into
adjacencies)
© Linda Gorchels

Is the timing
right?
Will we succeed
financially?
Can we win?
What will be my
differentiators?
How much effort
is required?
Is there a cultural
fit?
For each arena, consider …

Strengthen and defend the core!
Sustaining growth arena
© Linda Gorchels

To identify your core business, identify:
1. Your most potentially profitable,
franchise customers
2. Your most differentiated and
strategic capabilities
3. Your most critical product offerings
4. Your most important channels
5. Any other critical strategic assets
that contribute to the above (such
as patents, brand name)
… From focus comes growth; by
narrowing scope one creates expansion.
Chris Zook
© Linda Gorchels

• First, do what you do … better
• Improve focus through spin-offs or product pruning
• Consciously sustain the core while considering
various growth options
© Linda Gorchels

Transformative
growth arena
Cultivate new value from adjacency expansion.

Customer focus
Value proposition
Existing
customers
Adjacent
markets
Product/service offerings
Collaborative
external
relationships
Commercial
processes
New revenue
streams
Redefine
customer
targets
Reprioritize
customers
Increase share of
wallet
Enter new
industries
Enter new
geographies
Create new market
applications
Consider price &
fee alternatives
Generate revenue
from non-product
sources
Add complements
Modify offerings
Develop new
products
Re-bundle
offerings
Create new
collaborative
solution
Test open
innovation
Sellthrough new
channel
Create hybrid channel
Integrate
channel
Rethink
customer value
chain Rethink
automation
Simplify sales
transaction
Transformative Growth options
© Linda Gorchels

© Linda Gorchels
Disruptive growth
arena
Seek out new,
unexplored
opportunities
for future
growth.

When do the
organizational
competencies that
caused your
organization’s (or
industry’s) success
become impediments
to growth, suggesting
a need for
disruption?

© Linda Gorchels
Tips for disruptive growth
• Explore several plausible futures
• Avoid reliance on “best” customers
– jumpstart emerging markets
• Maintain a long-term perspective
(even long-term incrementalism)

• Alignment
– How to pull it all together:
Structure, strategy, culture,
people
© Linda Gorchels

Now think about alignment
Boost existing
customer markets
Move into adjacent
customer markets
Create new customer
markets
existing products,
and competencies
Sustaining
Growth Arena
(fine-tune current
strategy, culture and
structure)
revenue streams and
competencies
Disruptive Growth Arena
(redesign structure and incentives,
enable relevant differences in
metrics, consider separation of
sub-group)
Transformative
Growth Arena
(modify strategy, structure
and/or culture, perhaps via
traditional change
management)
© Linda Gorchels

Wolcott-Lippitz Innovation Structures
© Linda Gorchels
Sustaining growth
might use any,
including
Opportunist
Disruptive
Growth

Henry Mintzberg on culture
“Culture is the soul of the
organization — the beliefs
and values, and how they are
manifested. I think of the
structure as the skeleton, and
as the flesh and blood. And
culture is the soul that holds
the thing together and gives it
life force.”
© Linda Gorchels

What about
subcultures?
Subcultures
• Are located throughout the
organization
• Can enhance or oppose firm’s
dominant culture (i.e., are
countercultures)
Countercultures can:
• provide surveillance
• be an early indicator of
emerging values
© Linda Gorchels

Stable Innovative
Outcome-focused Process-focused
Team accountability Individual accountability
External orientation Internal orientation
Efficient Conversational
Conservative Fast-paced
Current position Desired position
Identify desired change gaps
© Linda Gorchels

Apply Kotter’s Change Management Model
1. Create a sense of urgency
2. Establish a guiding team
3. Create a powerful vision
4. Disseminate the vision
5. Motivate progress
6. Coordinate quick wins
7. Reinforce the direction
8. Embed into the culture
© Linda Gorchels

1. Create a sense of urgency
• The reason for change is not always
obvious
• Demonstrate how the status quo is
more dangerous than change
© Linda Gorchels

2. Establish a guiding team
• Ensure sufficient authority and
credibility
• Depoliticize senior management to
allow team members to speak freely
• Make sure it’s clear who is responsible
for leading the various change initiatives
© Linda Gorchels

3. Create a powerful vision
• Create a shared need. Do employees:
– See the reason for change?
– Understand why the change is important?
– See how it will help the business in the short-and
long-term?
– See how it will help them in the short- and long-
term?
© Linda Gorchels

4. Disseminate the vision
• Be an evangelist and
convert one mind at a
time if necessary
• Don’t worry about
redundancy (as long as
the message is consistent)
• Help employees get
excited about the change
© Linda Gorchels

Remember
People need to know:
- How is this change relevant to what
I do?
- What, specifically, should I do?
- How will I be measured and what
consequences will I face?
- What tools & support are available?
- What’s in it for me?
© Linda Gorchels

5. Motivate progress
© Linda Gorchels
• Cultural alignment must be
both leadership-driven and
grassroots-enabled
• Help people see what this
will look like when you’re
done

6. Coordinate quick wins
• Showcase success
• If necessary,
“nudge” it along a
bit

7. Reinforce the direction
• Don’t allow short wins
to lull people into
complacency and lose
sight of the bigger
picture
• On the other hand,
don’t resort to endless
meetings
© Linda Gorchels

8. Embed into the culture
© Linda Gorchels
• Make the change “the way we do
things around here”
• Ensure the structure, systems,
resources and people are in sync

© Linda Gorchels
What about multiple
futures?
• While all strategy
implementation is
“emergent” or
“dynamic” to an extent,
it’s even more prevalent
when the future is indeed
fuzzy, as may be the case
with disruptive change.

Degreeofchange
Small change
(incremental)
Large change
(radical)
One future Several plausible futures
Concreteness of change
Streamlined
change
management tools
© Linda Gorchels
Enlightened
trial-and-error
Traditional
change
management
tools
Business
model
portfolio

Build a business model portfolio
• Allow old and new to co-exist
as necessary
• Accept that growth may come
in regenerative spurts
• Evolve and sell off old business
models to make room for
investing in emerging ones
© Linda Gorchels

Remember ….
© Linda Gorchels
The actual strategies implemented
might not be the strategies planned.
• Strategy emerges through the
individual actions of various
employees.
• That’s why Henry Mintzberg used
the phrase “crafting strategy.”
• Be open to different approaches to
achieving your vision.

By now you should be able to:
• Connect the dots between
business models, strategies,
leadership and culture
• Define (and refine) your own
business model(s)
• Execute strategies and business
model renewal through
relevant change initiatives
© Linda Gorchels

So what does this mean for you?
• Determine the need for change
– Conscientiously scan the environment
• Shape the vision and define the goals
– Prepare long-term direction and plausible futures
• Craft strategic portfolios to attain the goals
– Manage sustaining, transformative and disruptive change
options
• Align business model components
– Adapt organizational structure and culture
• Manage change efforts
– Involve and energize employees and stakeholders
© Linda Gorchels

Just as we routinely upgrade computer systems, we must upgrade our own knowledge systems.
Linda has helped over 10,000 people over a 25+ year period with these educational upgrades,
merging anecdotal client experience with researched “best practices,” and sharing the resulting
insights with managers and executives. After working in the office products, publishing and
insurance industries, she joined UW-Madison’s Center for Professional and Executive Development,
both as a corporate trainer and program director. Now, as a director emerita, she provides
workshops for select clients.
An award-winning author of The Product Manager’s Handbook, she has also written The Product
Manager’s Field Guide, The Manager’s Guide to Distribution Channels, Business Model Renewal,
and Product Management ShortRead Series.
Linda is now a blogger, mystery author and Creativity Curator for her own company, Tomorrow’s
Mysteries, LLC.
Linda M. Gorchels

For more information, refer to the following books on
Amazon, follow my blogs, and download several free
articles from my website, BrainSnacksCafe.com.
The Product Management ShortRead Series is a collection of
“bite-sized” (about 100 pages) books on selected topics .
Product Management 101 and Product Strategy & Roadmaps
were published in January 2017.
Creatively Innovative is scheduled for late 2017.

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