answer this discussion questions.
ELEVEN NN
GreenskyCaseStudy2.0.pptx
Theories of Business Strategy
A case study of GreenSky – the Master of FinTech Mediation
Remember PitchVantage
Professor Vipin Gupta
Learning Objectives
Understanding Greensky’s strategic programming process
Major steps in the strategic programming process
Cost-effective differentiation
Focused blue ocean
Descalable growth
Critical Reflection – What can we really learn from the case of Greensky?
1. Understanding the Strategic Programming Process
Cost-effective differentiation
Leverage cost-effective organization and differentiated community to design technological value added
Focused blue ocean
Deliver a better solution and decide the focus for servicing
Descalable growth
Discover growth pathways and descale entropy pathways
2. Alternative Strategic Programming Process in a Global Context
VUCA makes strategic planning challenging
Instead of starting with an intent, the firms may seek to start with a programmed technological solution
Thus, the steps for strategic programming may be adjusted as follows
3. Major Steps in the Strategic Programming Process
Cost-effective differentiation
Discover organizational stakeholders for whom our technological solution can become a cost-effective differentiator
Focused blue ocean
Deliver the technological solution by targeting groups who allow us to be a cost-effective differentiator
Descalable growth
Develop additional growth poles, while descaling poles that make us less of a cost-effective differentiator for additional growth
4. Case Study: Greensky – The Master of FinTech Mediation
a. Cost-effective differentiation
Customers who gain Differentiation + Cost Leadership - Contractors
Differentiation
Offer a range of promotional zero interest and low interest financing, replacing credit card or second mortgage financing typical in the traditional home improvement projects
Especially attractive to creditworthy consumers
Sell projects now and with added options - 40% vs. 30% deal closing; 20% higher deal value; 60% higher revenues
Disproportionate value accrual; alleviates purchasing power concerns
Cost Leadership
Consumers offered most cost-effective financing for their credit rating and payment preference, with competitive offerings from a group of 14 lenders
Instant loan approval (95%) and funding (by next business day)
b. Focused Blue Ocean – Becoming cost-effective differentiator
Four Actions Framework for Blue Ocean
Reduce costs of servicing customers
Use merchants (incl. Home Depot) as motivated salesforce, who give 6% fee for each sales, instead of receiving commission
Eliminate cost-escalating customers
Eliminate merchants with deceptive practices, using end-consumer rating
Create new value-adding customers
Offer credit collection service to the lenders, generating 1% fee on annual balance
Elevate value added by value-adding customers
Invite a major lender (Fifththird Bank) to become an investor and market the Greensky platform to its network of merchants
c. Deciding Focus vs. Growth Poles
Home improvement vs. Additional Poles – Healthcare and specialty retail
Customers targeting creditworthy consumers vs. subprime consumers
Market the platform to additional lenders, within or outside Greensky network
Develop the Greensky technology to include hybrid financing – convertible into mortgage financing
Descaling Poles that are cost-escalating and differentiation eroding
Third party for vetting merchants a priori, besides consumer ratings
Third party for vetting informed consent at POS, besides consumer signatures
Summary – perpetually dynamic strategy
Strategic planning: compromise living designing joyful intent
Strategic programming: precarious living sustainable business strategy
Strategic learning: purposeless living purposeful competitive advantage
Strategic profiting: networking entropy proficient corporate strategy
Strategic development: exchange imbalance proficient functional value addition
Critical Reflection
Business Ecosystem Value (Strategy) Assessment
What can we really learn from the case of Greensky?
Can you help understand the issue?
It is the same manpower, material power, and marketing power
Subcontractors profit by not only providing quality service as SHEENY manpower, but also enhancing customer material purchasing power by marketing competitive loan products.
Lenders profit by working with subcontractors as their GUIDER manpower, and helping enhance subcontractor marketing power.
Lenders also had the capability to invest in a technological (machine) platform individually or collectively
Subcontractors (as well as lenders) lose business if they are not able to provide timely competitive financing for credit worthy customers
Lenders have to set aside provisions for bad debts, in case the subcontractors do false marketing or customers do not pay.
Yet only Green Sky saw the opportunity for an innovative method power
Lenders profit only from lending when dealing directly with subcontractors, but Green Sky profits also from helping subcontractor differentiation advantage as well.
Yet, lenders do not try to be cost leaders, by investing into a system for timely processing of credit worthy customers found by the subcontractors, and for the voluntary customer feedback on subcontractors.
Can you help understand the issue?
Greensky’s approach to strategic programming of business ecosystem value differs from the lender’s approach.
Lenders are ignoring opportunities for differentiating by helping their customers differentiate
Lenders are ignoring opportunities for cost leadership by helping their customers’ customers evaluate the cost-effectiveness of their customers
This is a blue ocean opportunity for any firm! Profit from the differentiation advantage being created for the customers, and eliminate customers who escalate your cost.
Greensky’s approach to its business strategy adds more value as compared to even Chobani!
Chobani’s business strategy is about value creation through SHEENY and GUIDER values, without creating SHEENY or GUIDER costs
Greensky’s business strategy is about value innovation through reduction of pre existing SHEENY and GUIDER costs
Its focus is on reducing the costs of networking, exchange, and workforce
It accrues a share of the differentiation advantage by visioning subcontractors as its workforce, and a share of the cost leadership advantage through its mission to network financial institutions with surplus funds. It creates a blue ocean advantage by exchanging both cost leadership and differentiation value with the customers.
What is Chobani’s approach to strategically program its business ecosystem value?
Supplementary values model
Program business strategy as a sequence of differentiated values
Understand the social benefits of ascending human, ecological, economic, national and psychological benefits.
Understand the global worker and social benefits of ascending uniqueness, inclusion, diversity, engagement and responsibility benefits
Ascend cost leadership of business ecosystem value by capturing SHEENY benefits and creating GUIDER benefits
Why is Greensky’s approach for strategic programming business ecosystem value? (does it have one?)
Complementary values model
Program business strategy as a sequence of blue ocean opportunities
Understand the social benefits of descending human, ecological, economic, national and psychological costs
Understand the global worker and social benefits of descending uniqueness, inclusion, diversity, engagement and responsibility costs
Grow business ecosystem value by reducing the costs of GUIDER organizing and SHEENY managing, even without strategic programming
e.g. unfilled human aspiration – solar panel
Ecological cost – more fossil electricity
Economic cost – more electric bill
National cost – more inflation
Psychological cost – more unfilled aspirations
e.g. unique aspirations – high returns
Inclusion cost – more customers excluded as not credit worthy
Diversity costs – more risky customers added
Engagement costs – more credit collection costs
Responsibility costs – higher risk adjusted returns expected
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A white ocean approach to strategic programming
White-ocean approach comprises of two values
Add blue ocean benefits using alternative SHEENY values for differentiation
Reduce red ocean costs using alternative GUIDER values for cost leadership
Allocate this white ocean value for innovative programming of additional GUIDER and SHEENY approaches
What questions Greensky founders had while trading-off direct servicing of low influence stakeholders (i.e. subcontractors)?
Can low influence stakeholders make it useful?
Can low influence stakeholders make it a better solution?
Who has the capability to be that valuable low influence stakeholder? (what can we do to empower them to add all three strategic values to our value chain – differentiation, cost leadership, and focus on desired target market, and thereby create a blue ocean for themselves and a white ocean for us)
