Entrepreneurial Strategy - Value Chain Strategy

Summary

The transcript discusses the value chain strategy, an execution strategy focusing on enhancing competitive capabilities such as quality or cost. Unlike disruption strategies, it emphasizes collaboration within existing value chains rather than creating new ones. It targets existing customers and integrates old and new technologies. Companies like Drizly and PayPal exemplify this strategy, becoming vital links in their respective value chains by leveraging unique capabilities and forming trusted partnerships, which are key to capturing value and achieving success.

Takeaways

• 🔍 The value chain strategy is an execution strategy that focuses on capabilities for competition, specifically quality or cost.
• 🔗 It is similar to normal strategy but differs by not focusing on barriers to entry or control of strategic resources.
• 🤝 Value chain strategy emphasizes collaboration and insertion into existing value chains rather than creating new ones.
• 🎯 The strategy is defined by the choice of competition, usually focusing on existing end customers and integrating improvements with current technologies.
• 🏢 The modus operandi of a value chain strategy is to be good at competing in the moment, leveraging core competencies internally and finding the right partners externally.
• 📈 Value creation hypothesis in this strategy revolves around serving as a unique, vital link in the value chain and capturing value based on importance and irreplaceability.
• 🛒 Drizly is an example of a company that uses a value chain strategy by delivering alcohol directly to homes, leveraging existing distribution networks.
• 💼 Foxconn exemplifies a successful value chain strategy, demonstrating that it can be profitable even though it may seem pedestrian.
• 💡 PayPal's strategy was to simplify and secure online payments, making it an easy and safe option for providers and eventually being acquired by eBay.
• 💼 Sun Microsystems overcame the challenge of being a new entrant in the market by partnering with a major incumbent, demonstrating the importance of trust and reputation in value chain strategies.

Q & A

What is a value chain strategy?

A value chain strategy is an execution strategy that focuses on capabilities for competition, such as quality or cost, to compete better in the moment. It emphasizes investment in execution and orientation towards collaboration within existing value chains.

How does a value chain strategy differ from a disruption strategy?

A value chain strategy focuses on improving a specific segment of an existing value chain rather than creating a new one or disrupting the industry. It does not aim to control the entire value chain but to be a vital and irreplaceable link within it.

What are the key elements of a value chain strategy?

The key elements include a choice of competition, customer set, technology integration, internal focus on core competencies, external focus on partnerships, and the ability to capture value by being a unique and vital link in the value chain.

Why is the value chain strategy effective for startups?

Value chain strategies can be less resource-intensive for startups as they leverage existing industry partners and infrastructure. This approach allows startups to focus on specific value-adding activities within the chain without the need to build everything from scratch.

Can you provide an example of a company that uses a value chain strategy?

Drizzly is an example of a company that uses a value chain strategy by delivering alcohol directly to customers' homes using existing distribution networks, thus inserting itself into the existing value chain without building its own.

What is the importance of leverage in a value chain strategy?

Leveraging unique capabilities and resources is crucial in a value chain strategy as it allows a company to become an irreplaceable supplier, thereby capturing more value within the chain.

How did PayPal implement a value chain strategy?

PayPal pursued a value chain strategy by making online payments easy and safe for providers, enabling e-commerce and inserting itself as a vital link in the value chain for transactions.

What was Sun Microsystems' approach to establishing a value chain strategy?

Sun Microsystems offered to send half of its team to help a potential customer, Computer Vision, learn how to produce their workstations, which helped Sun establish a reputation and grow its customer base.

Why is finding the right partners crucial in a value chain strategy?

The right partners provide access to necessary resources and capabilities, help build a company's reputation, and are essential for capturing value within the value chain.

What challenges might a company face when pursuing a value chain strategy?

Challenges include building a strong reputation, especially for new companies, finding trustworthy partners, and ensuring that the company's capabilities are unique and valuable enough to be considered irreplaceable within the value chain.