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Transcript of [email protected]:(972)3-510-1768 -1- ARENA Copyright 2002 Alex Coman It is not enough to succeed;...
[email protected] Tel:(972)3-510-1768 -1- WWW.Coman.Org ARENA
ARENA Copyright 2002 Alex Coman“It is not enough to succeed; others must fail”. Gore Vidal
[email protected] Tel:(972)3-510-1768 -2- WWW.Coman.Org ARENA
ARENA Copyright 2002 Alex Coman
The ARENA Genome: Harmonic Strategic Planning
Arena Layers:Corporate, Business Function-Define Hierarchy
Refinement Stages:Arena, Focus, Action
Create Strategy
ARENA
F
O
C
U
S
A
C
T
I
O
NArena actors:
Partners, Threats; Current, FutureTailored Patterns.
Corporate Layer:Portfolio BusinessesMaximize Value
Function Layer:Process, Project and ProductAgile value drive
Business Layer:Positioning Products byMarket Strategy
Target CriteriaPrioritize attention
Manage Control span Dynamic Vectors:Vision, Resource, Deliver
Guru 2 Gorilla
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ARENA Copyright 2002 Alex Coman
Shareholder valueWarren Buffett, The Focus Investor’s Golden Rules:
«I’m 15% Phil Fisher and 85% Benjamin Graham»Benjamin Graham, quantitative: Fixed assets, current earnings, dividends.
Corporate filings and annual reports: cheap stocks.Phil Fisher, qualitative: future prospects, management capability.
Customers, competitors, managers: intrinsic value, long term.Invest: “Know nothing”: Index funds. “Know something”: 5-10 companies. Diversification overrated. It increases the chances of buying something you don’t know enough about.Volatility happens: thing long term 5 to 10 years.
DowJonesEuro
Stoxx 50
DowJonesEuro
Stoxx 50AverageEuropean
fund
AverageEuropean
fund1 Year
DowJonesEuro
Stoxx 50
DowJonesEuro
Stoxx 50AverageEuropean
fund
AverageEuropean
fund
DowJonesEuro
Stoxx 50
DowJonesEuro
Stoxx 50AverageEuropean
fund
AverageEuropean
fund
% I
ncre
ase
0
50%
100%
150%
200%
3 Year 5 Year
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ARENA Copyright 2002 Alex Coman2001 - Annual Report
Stratus:…manufacturer of fault-tolerant computer systems…$267M Revenues…were estimated to be $84M in 1999 and $345M in 2000…expected to peak in fiscal year 2002 and decline thereafter through the end of the product’s life (2009) as new product technologies were expected to be introduced by us. A risk-adjusted discount rate of 35% was used to discount projected cash flows. The actual results to date have been consistent, in all material respects, with our assumptions at the time of the acquisition, except as noted below…Product development relating to the…projects was discontinued due to our reprioritization of product direction…Consequently, we did not realize the forecasted revenues from these projects. During fiscal year 2001, substantially all of the goodwill and acquired intangibles related to the purchase of Stratus were written off as part of our restructuring program…Chromatis Networks: Next generation optical transport solutions that provide telecommunications carriers with improvements in the cost, efficiency, scale and management of multi-service metropolitan networks…integrate data, voice and video services…and combine this traffic onto a wave division multiplexing system.…$428M represented its estimated fair value using the methodology described above…Revenues were estimated to be $375M in fiscal year 2001 and $1 billion in fiscal year 2002. Revenue was expected to peak in fiscal year 2005 and decline thereafter…A risk-adjusted discount rate of 25% was used…As part of our restructuring program in fiscal year 2001, the Chromatis product portfolio was discontinued and all of the remaining assets…were written off.Spring Tide Networks: Carrier-class network equipment..that enables service providers to offer new Value-added IP services and VPNs with low cost and complexity…IP service switch carrier class platforms that combine the connectivity of a remote access server, the network intelligence of a remote access server, and the switching capacity and quality of service capabilities of an ATM switch in one integrated switch.
In-Process Research and Development « IPRD »In connection with the acquisitions in fiscal years 2000 and 1999 of Chromatis, Spring Tide and Stratus, we allocated non-tax impacting charges of $428 million, $131 million and $267 million, respectively of the total purchase price to IPRD. As part of the process of analyzing each of these acquisitions, we made a decision to buy technology that had not yet been commercialized rather than develop the technology internally. We based this decision on a number of factors including the amount of time it would take to bring the technology to market. We also considered Bell Labs’ resource allocation and its progress on comparable technology, if any. We expect to use the same decision process in the future.We estimated the fair value of IPRD for each of the above acquisitions using an income approach. This involved estimating the fair value of the IPRD using the present value of the estimated after-tax cash flows expected to be generated by the IPRD, using risk-adjusted discount rates and revenue forecasts as appropriate. The selection of the discount rate was based on consideration of our weighted average cost of capital, as well as other factors, including the useful life of each technology, profitability levels of each technology, the uncertainty of technology advances that were known at the time, and the stage of completion of each technology. We believe that the estimated IPRD amounts so determined represented fair value and did not exceed the amount a third party would pay for the projects.Financial highlights: Shareholders’ equity: 2000:$30.50 2001:$5.73, (81.2%).Annual Meeting to be held on 02/20/02 at 09:00 A.M. Proposals: Evelyn Y. Davis: “Repeal Classified Board.” (Reelection of directors annually vs. recent stagger system).After thoughtful consideration…directors recommend a vote against proposal 2.
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ARENA Copyright 2002 Alex Coman
Merchandising,Music,
Publishing
Schumpeter: Creative destruction
Disney corporate portfolio
AnimationMerchandising
AnimatedFeatures
MusicPublishing
TVProgramming
Disneyland
BookPublishing
DisneyStores
DirectMail
HollywoodRecords
SoftwareVisual effects
Disneyworld
Films TouchstoneHome videos
HollywoodPictures
MiramaxAcquisition
MovieEntertainment
LiveEntertainment
KCAL TV ABC
EPCOT
Disney StudiosMGM
Euro Disney
DisneylandTokyo
HotelsResorts
Holidays,Resorts,
Real estate development
DisneyChannel
Theater
BroadcastingHokey Baseball
AmusementParks
Animal KingdomDisney America
DisneyInstitute
CruisesCommunities
‘30‘20 ‘50 ‘60 ‘80 ‘90 2000‘40 ‘70
MovieEntertainment
MovieEntertainment
BroadcastingBroadcasting
LiveEntertainment
LiveEntertainment
AmusementParks
AmusementParks
Merchandising,Music,
Publishing
Merchandising,Music,
Publishing
Holidays, Resorts,Real estate development
Holidays, Resorts,Real estate development
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ARENA Copyright 2002 Alex ComanActive Portfolio Management
-10%
-5%
0%
10%
15%A business’s average total return to
shareholdersrelative to its industry
5%
1 5 10 15 20 25Business age in years
Comparing 1985 to 1995, the top 150 electronic-systems-companies
worldwide ranked by revenue: 75% of the firms in 1985
either slipped or disappeared by 1995
25% improved / 33% eliminated / 42% new
Source: Anderson Consulting (1997) “Exploiting Uncertainty: Hi-Techs High Performers Change the Dynamics of Competition
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ARENA Copyright 2002 Alex Coman
Pareto
Cum
Percent
0
20%
40%
60%
80%
100%
11
4455
15%15%25%25%
50%50%
44
15%15%
25%25%
50%50%
55
Sha
re o
f to
tal r
even
ue
Income Group
20%
40%
60%
80%
100%
Distribution of US federal Income-tax revenue by income group
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ARENA Copyright 2002 Alex Coman
Brandenburger and Nalebuff ‘95
Paradigmatic Isomorphism: Deep Structure
CompanyCompany
CustomersCustomers
SuppliersSuppliers
SubstitutesSubstitutes ComplementorsComplementors
Porter’s 5 forces:Sustainable competitive advantage; Entry Barriers
CompetitorsCompetitors
New entrantsNew entrants
substitutessubstitutes
SuppliersSuppliers BuyersBuyers
A. Grove, ’96: Six forces Diagram x10 force
The BusinessThe Business
ComplementorsComplementors
SuppliersSuppliers
ExistingCompetitors
ExistingCompetitors
A different wayA different way
CustomersCustomers
PotentialCompetitors
PotentialCompetitors
Mintzberg ’88: Generic Strategies
PrimaryIndustriesPrimary
Industries
ExtractionExtraction ProcessingProcessingFabricationFabrication AssemblyAssembly WholesaleWholesale RetailRetail
SecondaryIndustries
SecondaryIndustries
TertiaryIndustriesTertiary
IndustriesUpstreamIndustriesUpstreamIndustries
MidstreamIndustriesMidstreamIndustries
DownstreamIndustries
DownstreamIndustries
Hamel and Prahalad, ’94
Brand &Distribution
Brand &Distribution
Creating coalitionsCreating coalitions
Standards &Regulation
Standards &Regulation
Core
competencies
Core
competencies
Market Learning& ExperimentationMarket Learning
& Experimentation
Strategic Apex
Operating Core
Suppo
rt
Staff
Technostructure Middle
Line
Ideology
Marketing:7Cs: Company, competition, channel, customer,
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ARENA Copyright 2002 Alex Coman
Market segments: ExternalitiesMarket segments: Externalities
CompetitorsCompetitors
Spatial Paradigm: Vertical FlowUpstreamUpstream
DownstreamDownstream
FirmValue System
FirmValue System
Back OfficeBack Office
Front OfficeFront Office
Value/FoodChain
Value/FoodChain
DistributionChain/
Channels
DistributionChain/
Channels
SupplyChain/
Channels
SupplyChain/
Channels
SubstitutesSubstitutesComplementors
ClustersComplementors
Clusters
RegulatorsRegulators
ForwardIntegrationForward
Integration
BackwardIntegrationBackwardIntegration
VerticalIntegration
(Jumping theConnection)
HorizontalIntegration
900
Turn
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ARENA Copyright 2002 Alex Coman
HorizontalValue Chain:
Integration:Vertical
ControlInformation
Relationships: Business
Monopoly/ Regulatory Agency
Entities:Market
Firm/Coalition
Drugs
Teva
Farmer
Dairy
Distributor
Retailer
Consumer
Low
High
FDA
Syntax
Vocabulary
StructureConcise:
Link Markets rather than instances.Business implies information flow.Titles on significant arrows.
Pertinent entities only.
Web
ARENA Canonical Form
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ARENA Copyright 2002 Alex Coman
Application Programs
Integration
Operating Systems
UnixLinuxMS
WinNTMS
WinXPMS
WinCE
Word Excel Access Outlook Explorer Navigator
VerticalIntegrationForward
Horizontal Integration
Work Stations
Compilers
MSVisual
SunJava
Sun
VerticalIntegrationBackward
MSJoystick
Diversification Spinoff
IBMRolm
IBMAptiva
900
Turn
Compaq ‘83“Portable PC”
Deskpro ‘86PC
Armada‘88Laptop
Proliant‘89Servers
6000/8000’96Workstation
Palmtop’97PDA
TandemMainframes
DigitalSolutions & Services
DigitalAlpha Processor
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ARENA Copyright 2002 Alex Coman
DistributorsDistributors
Health-Care Corporate Arena
Drug ManufacturersDrug Manufacturers
EthicalEthical Generic Generic
GSKGSK TevaTeva
FDA Ministry of Health GMP
CTSCTS LemonLemon
Health Management Org.Health Management Org.ClalitClalit
VitamedVitamed
MacabiMacabi
Physicians
PublicPublic
Prescription
List
PharmaciesPharmaciesMacabiMacabi
Prescription DrugsPrescription Drugs Over the CounterOver the Counter
ShorTabShorTab
Advertising
IMS
SuperPharmSuperPharm
Web
ProductSpecialists
Glaxo ILGlaxo IL
TevaTeva NovoPharmNovoPharm
DiseaseManagement
DiseaseManagement
AmericanHospitalSupplies
AmericanHospitalSupplies
Telemedicine
eMed
EDI
Admin
ShahalShahal
PharmaPharma
NovologNovolog
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ARENA Copyright 2002 Alex Coman
Electronic Markets and Electronic Hierarchies Malone et. Al., Modeling Coordination in Organizations and
Markets
Supplier2Supplier2
Decentralized Market
Customer1Customer1
Centralized Market
Supplier1Supplier1 Supplier3Supplier3
Customer2Customer2 Customer3Customer3
Supplier2Supplier2
Customer1Customer1
Supplier1Supplier1 Supplier3Supplier3
Customer2Customer2 Customer3Customer3
IntermediaryIntermediaryBrokerBroker InfoMediaryInfoMediary
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ARENA Copyright 2002 Alex ComanRebuilding the value chain: Benchmark
Capital
Manufacturer/publisher
Wholesaler/distributor
E-retailer
Portal/aggregator
Consumer
ReintermediationDisintermediation
The e-commerce matrix
BusinessConsumer
BusinessB2B
GM/FordEDI networks
B2C Amazon
Dell
ConsumerC2B
PricelineAccompany
P2PEbay
Napster
Microsoft’s Nathan Meirvold: “Anyone standing between suppliers and customers will become road-kill on the information highway.”
Microsoft’s Nathan Meirvold: “Anyone standing between suppliers and customers will become road-kill on the information highway.”
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ARENA Copyright 2002 Alex Coman
E-Hubs: The new B2B Marketplaces. Steve Kaplan.
The Forward Aggregator Model
Buyers
Small resellers
IBMCompaq Cisco MicrosoftLarge Suppliers
Small Buyers
E-hub: Fulfillment, Inspection,Receivables, Financing IntegratorFOB.com
Distributors
DowDupont Ashland 3MLarge Suppliers
E-hub: Fulfillment, call center, Distributor
financing, configuratorsIngramMicro
The Reverse Aggregator Model
Direction Of
Aggregation
DirectionOf
Aggregation
What Businesses BuyOperating
InputsManufacturing
Inputs
How Businesses
Buy
SystematicSourcing
MRO HubsAriba, W.W.Grainger,
MRO.com, BizBuyer.com
Catalog HubsChamdex, SciQuest.com,
PlasticsNet.com
SpotSourcing
Yield ManagersEmployease, Adauction.com,
CapacityWeb.com
ExcangesE-steel, PaperExchange.com, Altra Energy, IMX Exchange
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ARENA Copyright 2002 Alex ComanTelecom Market
Equipment Providers/Integrators
Service Provider
Customers
Access Technologies
Component Providers
MTU SoHo Campus Rural SuburbanBusiness
Small Telco
BLECILECCLEC Large Telco
DLEC
Nortel Lucent Alcatel Cisco Siemens
FiberCopper SatelliteCable Cellular
OrkitVocaltecECICommatchAptonicsAmdoxRadcomNiceGilat ADC
Seabridge Motorola Comverse Comtouch
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ARENA Copyright 2002 Alex Coman
Time-To-Market: TTM
Garment Manufacturers
FarEast
Labels
Victoria’sSecret
Customers
Retailers
Fabric
FarEast
StandardZaraFocusCostSpeedManufactureO/SVertical
Info. Tech.Cash Registers
Hand Held devices
Models/Yr200-300>11K
TTM6 Months Design+
3M Manf..
4-5W design+1M 10-15Days
Delivery1/Season2/WeekBadproducts
?Off inWeeks
Inventory turnover3*GapAdv. Camp.NoneProfits+30%/year
Macy’s
Benetton
Benetton
BenettonWalmart
Inditex’7923 Robot
cut & Die #3>40%
Zara467Stores
Zara ‘75
400 SmallShops>50% Delta
Delta
H&M900
suppliers
H&M
InnerSecret
NWH&MGAPZaraMfg. Eur.vs. Asia50%17%80%Design to Delivery6-
8Months6Months2-5 Weeks
Inventory Unsold25%20-30%15-20%Profit margin12.4%10.6%14.9%Sales $Bill$3B$13.7B$2.6B
GAP
GAP
25-35yearsAnti Gap
Older&Wealthier
College CrowdTrendy Urban
Late TeensCost Conscious
Girls 12+UpCheap cool
Zara467Stores
Massimo Duti207
Pull&Bear238
Stradivarius114
Bershka127
St.Michael
M&S
SologTefron
HiTex
CK