Capstone: Strategy

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WHAT STRATEGY

LED TO THIS?

MBA600 Week 11

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DO NOT REMOVE THIS NOTICE.

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WEEK 11 FOCUSES ON TWO LEARNING OBJECTIVES

Acquire advanced knowledge and apply it in real workplace contexts to improve performance and competitive advantage.

Other learning objectives

Discuss and translate theory, skills and knowledge into effective management practice.

Critically assess a diverse range of theories accumulated throughout the Masters’ qualification and the connections that exist between each one.

Undertake independent research to solve complex business problems.

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WHAT WE LEARNED IN

PREVIOUS WEEKS A quick review of concepts

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Value Propositions

What value do we deliver to the customer?

Which one of the customer’s problems are we helping to solve?

What bundles of products and services are we offering to each customer segment?

What customer needs are we satisfying?

Key Partners

Who are key partners and suppliers?

What key resources to we acquire from them?

What key activities do the perform?

Key activities

What key activities strengthen Value Propositions?

What are the distribution channels?

What are the revenue streams?

Nature of customer relationships?

Key Resources

What key resources strengthen Value Propositions?

What key resources strengthen customer relationships?

What key resources strengthen revenue streams?

Customer Relationships

What type of relationship does each customer segment want from us?

What customers have an established relationship?

How are relationships integrated in the business model?

How costly are relationships?

Customer Segments

For whom are we creating value?

Who are the most important customers?

Cost Structure

What are the most important costs/investments in the business model?

What key resources and key activities are most expensive?

Revenue Streams

What value will customers pay for?

What value do customers currently pay for?

What is the customer experience when paying?

What is the proportion of revenue streams to total revenue?

Channels

What channels do customers what to be reached?

How are we reaching them now?

How are our channels integrated?

What channels work best?

What channels are most cost- efficient?

How are channels integrated with customer routines?

WHAT WE LEARNED IN

WEEK 5

Business model Canvass

WE WILL USE THE MODEL TO EVALUATE STRATEGIC POSITIONING OF RETAILERS IN BANKING PRODUCTS

Source: https://en.wikipedia.org/wiki/Business_Model_Canvas

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1 Identify the research problem

2 Determine research purpose

3 Develop theoretical

framework

4 Develop research questions /

hypotheses

6 Identify research scope

limitations

Define terms5

7 Decide methodology

8 Determine expected outcome

WHAT WE LEARNED IN

WEEK 9

Research Design Proposal ContentsResearch the fit of

transformational change with

business systems, processes, and

culture

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WHAT WE LEARNED IN

WEEK 9

Use of Persona and user story to

elaborate a strategy problem

A compelling purpose or reason convinces investors/executives how the research should create future capability, thus solving a strategy problem

Suggestion – state your research purpose in a user story template

As a [persona, customer segment, function or capability], I want [why it solves the strategy problem, why it contributes to profitability growth], so that [how it sustains the competitive strategy]

2 Determine research purpose

A)

B)

C)

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WHAT WE WILL LEARN THIS

WEEK

STRATEGY SLEUTH

FROM COMPETITOR OUTCOME TO STRATEGY IDEA Using the strategy planning steps backwards

Competitive strategy is a company’s best kept secret

Rarely can strategists sequentially follow the steps from an idea to competitive advantage

Mostly, strategists gain insights of competitive advantage from observing the outcomes of competitors

In Week 11, we will review advertising messages (competitor outcomes) and work backwards to a strategy idea (research problem)

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WHAT WE LEARNED IN

WEEK 10

IN WEEK 11, WE WILL DEBATE HOW TO

OVERCOME CUSTOMER CYNICISM IN RETAIL

BANKING

MODELS OF ORGANISATIONAL CHANGE

Kubler-Ross Change Curve

The change necessary to achieve business outcomes

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BANKING CUSTOMER EXPERIENCE AND DISRUPTIVE CHANGE

Banking industry is the most regulated industry globally

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ADVENTURES IN RETAIL BANKING

STRATEGY!

INTERESTING QUESTIONS OF COMPETITIVE STRATEGY

Banking industry is the most regulated industry globally

How can retail bankers differentiate customer experience, or compete except on low-cost?

Does online shopping effect retail banks similarly to other retailers?

Given global and visible misconduct in financial services, how can retailers overcome customer cynicism?

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A WORKED EXAMPLE

A worked example of industry analysis, evaluation of advertising narratives, and constructing customer experience

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WHY DO SOME RETAILERS HAVE A COMPETITIVE ADVANTAGE?

CA SCORECARD 2017 2018 2019

Bendigo Bank 2.36% 2.22% 2.36%

Westpac Bank 2.09% 2.11% 2.12%

Commonwealth Bank 2.10% 2.15% 2.10%

Bank of Queensland 1.93% 1.98% 1.93%

National Australia Bank 1.85% 1.85% 1.78%

ANZ 1.99% 1.87% 1.75%

Industry Average 2.05% 2.03% 2.01%

Banks with superior profitability on the Competitive Advantage Scorecard

1. Bendigo Bank

2. Westpac Bank

3. Commonwealth Bank

Profitability is measured by Net Interest Margin (the percentages reported left)

The difference between loan interest earned and deposit interest paid

Remember in banks: loan interest is revenue; deposit interest is an expense

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BRAND COMPETITION FROM BANKS WHAT CUSTOMER MESSAGE ARE THEY COMMUNICATING?

ABOUT BENDIGO BANK

An Australian regional bank with origins in 1858 in Bendigo (Vic) and Adelaide (SA)

Let's use the advertisement as an example for developing persona and user stories https://youtu.be/A1kBlVWKmZg

CA SCORECARD 2017 2018 2019

Bendigo Bank (net interest margin) 2.36% 2.22% 2.36%

Industry Average 2.05% 2.03% 2.01%

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BRAND COMPETITION FROM BANKS WHAT DOES THE PERSONA SUGGEST ABOUT CUSTOMER EXPECTATIONS?

As a mum with young adult children, I want them to succeed in buying a home and investing for the future, so that my grandchildren grow up in a financially secure family

Emily

Age 62

Confident, financially literate

Financially risk adverse

Occupation: high school teacher

Residence: North Adelaide, SA

Income: $65,000 per year

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BRAND COMPETITION FROM BANKS WHAT DOES THE PERSONA SUGGEST ABOUT CUSTOMER EXPECTATIONS?

As MBA students nearing graduation, my fiancé and I want good jobs and the flexibility to travel, so that we can enjoy our lives

Christine

Age 28

Self assured, serious

Plans for financial future

Career goal: Hospital Registrar, Doctor

Residence: Melbourne

Anticipated income next year: $103,000 per year

James

Age 28

Unsure, spontaneous

Financially disinterested

Career goal: Web Developer, IT Manager

Residence: Melbourne

Anticipated income next year: $82,000 per year

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Value Propositions

What value do we deliver to the customer?

Which one of the customer’s problems are we helping to solve?

What bundles of products and services are we offering to each customer segment?

What customer needs are we satisfying?

Key Partners

Who are key partners and suppliers?

What key resources to we acquire from them?

What key activities do the perform?

Key activities

What key activities strengthen Value Propositions?

What are the distribution channels?

What are the revenue streams?

Nature of customer relationships?

Key Resources

What key resources strengthen Value Propositions?

What key resources strengthen customer relationships?

What key resources strengthen revenue streams?

Customer Relationships

What type of relationship does each customer segment want from us?

What customers have an established relationship?

How are relationships integrated in the business model?

How costly are relationships?

Customer Segments

For whom are we creating value?

Who are the most important customers?

Cost Structure

What are the most important costs/investments in the business model?

What key resources and key activities are most expensive?

Revenue Streams

What value will customers pay for?

What value do customers currently pay for?

What is the customer experience when paying?

What is the proportion of revenue streams to total revenue?

Channels

What channels do customers what to be reached?

How are we reaching them now?

How are our channels integrated?

What channels work best?

What channels are most cost- efficient?

How are channels integrated with customer routines?

USE YOUR HANDOUT TO RECORD YOUR EVALUATION

YOUR TURN TO DEDUCE CAPABILITIES AND RESOURCES FOR BENDIGO BANK

Source: https://en.wikipedia.org/wiki/Business_Model_Canvas

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WORKSHOP TIME

The messages about competitive advantage from retail banks and financial technology (FinTech) providers

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STRATEGY SLEUTH

What messages do competitors think will

increase their revenue?

Use the Business Model Canvas to note differences in brand appeal to customer segments (persona) from banks and fintech

Individually or in pairs:

Define the customer persona in your opinion from the following 6 ads from banks and fintech companies

Record your evaluations on your handout of the Business Model Canvass

Take 5 minutes/video, 30 minutes total

Debate as a class:

Use the nominal group technique to reach consensus on a ranking of the ads from best to worst (60 minutes)

Total time: 1.5 hours

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BRAND COMPETITION

YOUR TURN TO EVALUATE OTHER BANKS AND FINTECH

RIVALRY BETWEEN COMPETITORS WHO

OFFER A SIMILAR PRODUCT OR SERVICE IN

THE SAME TARGET MARKET

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BRAND COMPETITION WHAT CUSTOMER MESSAGE ARE THEY COMMUNICATING?

ABOUT ME BANK

An online bank in Australia, backed by a consortium of superannuation funds

ME is an acronym for Members Equity Bank

https://youtu.be/rreyC4L7xI8

CA SCORECARD 2017 2018 2019

Me Bank (net interest margin) 1.50% 1.62% 1.50%

Industry Average 2.05% 2.03% 2.01%

22 Evaluate Me Bank

USE YOUR HANDOUT TO RECORD YOUR EVALUATION

https://youtu.be/rreyC4L7xI8

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BRAND COMPETITION FROM BANKS WHAT CUSTOMER MESSAGE ARE THEY COMMUNICATING?

ABOUT NATIONAL AUSTRALIA BANK

NAB is one of the four largest banks in Australia, and 50th largest in the world by value of total assets

https://youtu.be/Gz9sfr5mGa4

CA SCORECARD 2017 2018 2019 National Australia Bank (net interest margin)

1.85% 1.85% 1.78%

Industry Average 2.05% 2.03% 2.01%

24 Evaluate National Australia Bank

USE YOUR HANDOUT TO RECORD YOUR EVALUATION

https://youtu.be/Gz9sfr5mGa4

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BRAND COMPETITION FROM BANKS WHAT CUSTOMER MESSAGE ARE THEY COMMUNICATING?

ABOUT CHALLENGE BANK

A brand owned by Westpac Bank that operates in Western Australia

https://youtu.be/GguNetv_vb4

CA SCORECARD 2017 2018 2019

Westpac Bank (net interest margin) 2.09% 2.11% 2.12%

Industry Average 2.05% 2.03% 2.01%

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https://youtu.be/GguNetv_vb4

Evaluate Challenge Bank

USE YOUR HANDOUT TO RECORD YOUR EVALUATION

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BRAND COMPETITION FROM FINTECH WHAT CUSTOMER MESSAGE ARE THEY COMMUNICATING?

ABOUT ALIPAY

Part of Alibaba in China

Alipay is larger than PayPal since 2013 in the mobile payment platform industry

Backed by privately held Mybank, which employs about 300 people, half of whom are technicians

https://youtu.be/f-NIAUhU2E0

CA SCORECARD 2017 2018 2019

Not available

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https://youtu.be/f-NIAUhU2E0

Evaluate Ali Pay

USE YOUR HANDOUT TO RECORD YOUR EVALUATION

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BRAND COMPETITION FROM FINTECH WHAT CUSTOMER MESSAGE ARE THEY COMMUNICATING?

ABOUT SOFI LENDING GROUP

A Robo Advice platform for financial advisers

Privately owned company with 6 employees in the USA

https://youtu.be/CGTv6CZd2yY

CA SCORECARD 2017 2018 2019

Not available

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https://youtu.be/CGTv6CZd2yY

Evaluate SoFi

USE YOUR HANDOUT TO RECORD YOUR EVALUATION

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BRAND COMPETITION FROM FINTECH WHAT CUSTOMER MESSAGE ARE THEY COMMUNICATING?

ABOUT WEALTHSIMPLE

A Robo Advice platform for financial advisers

Privately owned company in Canada

https://youtu.be/yBGZKaQyyx8

CA SCORECARD 2017 2018 2019

Not available

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https://youtu.be/yBGZKaQyyx8

Evaluate WealthSimple

USE YOUR HANDOUT TO RECORD YOUR EVALUATION

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BRAND COMPETITION

IN SUMMARY, WHAT MESSAGES DO COMPETITORS THINK WILL INCREASE THEIR REVENUE?

https://youtu.be/A1kBlVWKmZg

https://youtu.be/Gz9sfr5mGa4

https://youtu.be/GguNetv_vb4

https://youtu.be/rreyC4L7xI8 https://youtu.be/f-NIAUhU2E0

https://youtu.be/CGTv6CZd2yY

https://youtu.be/yBGZKaQyyx8

BANKS FINTECH

BENDIGO BANK

RIVALRY BETWEEN COMPETITORS WHO

OFFER A SIMILAR PRODUCT OR SERVICE IN

THE SAME TARGET MARKET

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DYNAMIC CAPABILITIES AND RESOURCE LIMITATIONS

Strategy of ‘how to do it better’ for competitive advantage

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RESOURCES AND CAPABILTIES

KEEPING THE DYNAMISM IN DYNAMIC CAPABILITIES

Our group of retail banks and fintech communicated their product differentiation

Two questions to ask now

What resources and capabilities do the retailers and fintech need to keep their promises for customer experience?

What resources and capabilities are required to remain ‘dynamic’?

For answers, think about

History and risks of disruptive change

Retail banking market attractiveness

Concentration of product features and competitors

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DISRUPTIVE CHANGE AND MARKET COMPLEXITY

Disruptive change occurred in 4 periods

2004 – surge in demand for business loans surpasses housing and personal loans

2008 – demand for housing loans fall below demand for personal loans

2010 – reversals in demand for business loans and housing loans

2012 – reversals in demand for personal loans and business loans

Market complexity increased

Before 2012, personal loans were a lead indicator of business loans;

After 2012, products are trending simultaneously

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MARKET ATTRACTIVENESS IN RETAIL BANKING

Industry structure

Banks

Others (Money Market, Funds, Insurers)

Mutuals (credit unions, building societies)

Total market value increased from 2005 to 2019

Banks grew twice as large

Others grew by 1.4 times as large

Mutuals lost market share (did not grow)

The total market thus grew by 1.7 times

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Housing Loans $1,810b

Business Loans $968b

Personal loans $167b

A$ billion Source: RBA, Lending and Credit Aggregates, Nov 2019, https://www.rba.gov.au/statistics/tables/

CONCENTRATION OF RETAIL BANKING PRODUCTS

Three product categories

1. Housing loans

include owner-occupied and investment property loans

2. Business loans

Most loans to medium- and large-size businesses

3. Personal loans

Loans for cars, tuition, travel, weddings

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WORKSHOP TIME

Back to the future!

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DYNAMIC CAPABILITIES

AND RESOURCE LIMITATIONS

BRAINSTORMING, NOMINAL GROUP TECHNIQUE

Resistance to change at an organisation level can be attributed to a cynical culture

Using the nominal group technique in open class discussion, you will participate in 3 rounds of brainstorming

1. Identify your personal experiences of positive and negative organisational change (10 minutes)

2. Brainstorm how to rationalise everyone’s experiences to a few themes or categories (15 minutes)

3. Use the Business Model Canvass to debate your arguments for the distinctive capabilities that a bank or fintech needs for overcoming customer cynicism (15 minutes)

Total time: 40 minutes

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