Creating Profit Through Alliances - business models for collaboration E-book | Page 21
A second major development is the change in flows
of capital. During the twentieth century, the objective
of virtually every business was growth. Growth
enabled them to achieve benefits of scale, it made a
lucrative position as market leader possible, and
above all: the business' growth and the related
investments were a sensible way of reinvesting the
profits that were made. The only thing that left the
company was a bit of dividend.
As the financial sector globalised, it became easier to
invest profits from one business in the other if the
latter yielded a better profit or had a lower risk
profile. During the past few years, transparency has
increased under pressure from large private
investment funds (some of whom are 'activist
shareholders'), making it possible to decide per
business activity rather than per business whether or
not to invest. The added value of a holding or head
office is a permanent point of discussion.
Seen from the investor‟s side, new opportunities arise
as well. Through the internet it is possible to lend
small amounts of money to entrepreneurs in
emerging countries; real estate funds like the
Canadian Homburg frequently run marketing
campaigns to sell their bonds. There are various
networks for so-called „business angels‟, mainly
seasoned entrepreneurs who invest amounts from
25,000 dollars up to millions in start-up companies
and help them with advice and new business
relations.
All these developments make it is easier to attract
capital on the basis of a good idea. Active investors
determine in which activity they invest and which
knowledge and expertise must be combined. As a
result, it is specialist organisations rather than large
businesses that become leaders in the new economy.
As such, the internal reinvestment of money in
accordance with the BCG portfolio matrix is no longer
self-evident, and synergy between products becomes
so much more important.
So how to make a profit in such a transparent world,
given the fact that:
the availability of information is growing;
the payback period of new products has to be
increasingly shorter, and;
shareholders and financers are increasingly
critical to invest their money in the most
lucrative activities.
Early in this section, I indicated that the chances of
profits are linked to achieving differentiation from
your competitors. That is why I will study the
different options provided by Porter and Treacy &
Wiersema in that respect, and evaluate them against
the help they provide in a transparent economy.
1. Focus strategy (Porter) and Customer Intimacy
(Treacy & Wiersema)
With the focus strategy of Porter and customer
intimacy as defined by Treacy & Wiersema it is all
about being relevant to the customer, despite the
fact that you do not sell unique products.
A good example is private banking: specialist banks
offer their customers a permanent account manager
who has an overview of all the financial affairs of a
customer and who can also offer a solution to
everything. Private banks offer a wide range of
normal products such as mortgages, investment
accounts and insurance, but they mould this into an
integrated package for the customer.
Knowledge of the customer and the relationship with
a customer are hard to copy. Additionally, the habits
and way of doing business with that customer may
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