1.5 - About University

Designing the Value ConstellationThis work requires understanding the overall organization’s dominant skills and relative weaknesses.• Decide what work to do internally, and what to farm out (e.g., alliances, joint ventures, contracting).• Reliance on others to perform essential activities, at which they are superior, may strengthen your overall bundle ofproducts, services, and prices. However, this carries risks (e.g., nonperformance, profit skimming, competition).Managing the Value ChainList the drivers of customer value, cost structure, and asset investment for each business activity (e.g.,research, design, assembly, marketing, distribution). Ensure integration across value-chain activities, including thoseperformed by business partners and contractors. This may include reduced development or delivery cycle times, morecustomization, smaller inventories, more effective communication, lower costs, and so on (e.g., electronic dataexchange between a supplier like Procter & Gamble and a retailer like Wal-Mart).H OW TO USE THIS LEADERSHIP TOOL“Once a business unit has defined the type of competitive advantage that it intends to establish, it faces thechallenge of actually creating the intended advantage, a process that has two parts: 1. designing the value constellation,and … 2. managing the value chain.”—Anil K. Gupta, in THE PORTABLE MBA IN STRATEGYFocusing strategy at the right level can be a challenging task. For example, should a paper goodsbusiness unit focus on “paper goods,” or one level down, on “diapers, towels, and tissues”? Youcan define strategy too precisely; for example a wristwatch business-unit strategy (circa 1970): “theproduction of mechanical, pin-levered watches.” This missed the now-burgeoning market for electronicwatches. On the other hand, if you define strategy too broadly, it doesn’t provide the crispfocus needed to guide day-to-day business decisions. The challenge of finding the right level isdefining business-unit scope. Indeed, challenges surface through all five stages of business-unitstrategy, and a lack of superiority along any critical dimension of relative competitive advantagewill sooner or later result in your business unit being unable to sustain its current market position.WEB WORKSHEETUse the workspace provided here to sketch out some opening thoughts about your businessunit’s strategy. This process will evolve as you work, and will take some time. Involve teammembers early and often in this process. Invite and encourage them to influence the strategyin meaningful ways. Implementation is next to impossible if people in the business unit don’tdeeply understand or aren’t fully committed to the strategy.Defining Business-Unit Scope80 SECTION 3 TOOLS FOR STRATEGIC THINKING