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 19