WHAT CAN YOU EXPECT? *A nationally broadcasted, 60-minute interview where students are immersed into the strategic thinking of an innovative and entrepreneurial leader in an industry they know and love—digital music. *Moderated by Ingrid Vanderveldt, host of CNBC’s “American Made,” SNOCAP CEO Rusty Rueff shares insights and answers real students’ questions about SNOCAP’s management strategies and their impact on the digital music marketplace.Inspire your students with a whole new way of looking at dynamic strategy! Please contact me should you have questions or need any additional information.

Google has agreed to buy YouTube, a popular website where users provide the content, for $1.65 billion. Now the world’s leading search engine needs to work out how to make it pay

INTERNET years, like dog years, act to speed up the ageing process. Google, founded in 1998, is now considered to be something of an elder statesman. Perhaps the firm hopes to enliven itself by its decision on Monday October 9th to use a whopping $1.65 billion of its own shares to buy YouTube, a website that lets users post home-made video clips for others to share and watch. The latter has been in business for a mere 19 months.

The world’s biggest web-search engine has probably splashed out on something worthwhile. The website is young, but it matters more that its user are mostly young people, who increasingly neglect television and other traditional media channels and instead seek entertainment online. Advertisers are hoping to reach this audience now and secure it for the future. And ads are the means by which Google hopes to rake in big revenues.

YouTube is big for a baby. It serves up 100m videos every day, making it one of the world’s most visited websites. The firm, which employs some 65 people, has not made a profit to date. But the growing popularity of social-networking sites, where users can exchange videos and photos and make connections with other people, has already convinced some old media firms to grab a share of the online crowds. Rupert Murdoch’s News Corporation paid $580m for MySpace in 2005. The media mogul stole a march on many of his competitors by recognising early on that a website with user-generated content is valuable for reaching young consumers. Mr Murdoch even roped in Google, already an expert in the field, in a lucrative deal to sell ad space. And rumours abound of bids for Bebo, Facebook and others, which offer similar services. Yahoo!, one of Google’s biggest rivals, apparently thwarted in its own ambition to acquire YouTube, reportedly wants the latter.

But it is unclear how the business will mature. Most agree that there is plenty of money to be made from YouTube, but no one is quite sure how. Putting advertising alongside video clips or other content provided by users may pose problems. YouTube has refused to insert adverts that cannot be skipped at the beginning of clips as that risks annoying or driving away users. And the content of sites like YouTube varies. Advertisers would not want their products flagged alongside anything off-colour or embarrassing. YouTube and its rivals have cast around for more sophisticated ways to present advertising for some time but without finding an answer.

What users may like about YouTube is that it breaks the rules. Google has promised that YouTube will continue to operate as a separate business. But it may chose not to continue carrying the huge number of music and television clips that breach copyright, as wealthy Google would make a tempting target for the litigious. But if YouTube removes the illegally-copied material its appeal may drop.

Google has made simultaneous deals with big entertainment firms to distribute their content. But, just as with music downloading, the lure of the illicit may be what draws some users. That may explain why the big internet firms have made little headway in this business so far. Google, along with Yahoo! and AOL, have tried to provide sites for user-generated material but those efforts have largely failed. That Google has bought a firm that competes with Google Video, one of its own services, is an unusual admission of weakness by the web giant.

The deal may put Google in a position to satisfy a growing demand for the delivery of television, film and music over the internet rather than through traditional channels. However, YouTube’s rapid flowering is a reminder that something newer and a little different that appeals to a young audience is never far away. Barriers to entry are low: rivals can emerge with just a good idea and a little money. Google itself, born in a university dorm and funded on its founders’ credit cards a few years ago, serves as a reminder of that.

SOURCE: ECONOMIST.COM

If you happen to have similarly-minded students, then you might open up a class discussion of — Change is brewing at Heinekin (Financial Times, May 9, 2006, p. 10 — www.ft.com ).  This article does a great job of laying out the five facets of the strategy diamond, showing the interdependence between formulation and implementation, and reinforcing the role that strategic leadership plays in effective strategy.  The beer story is a relatively easy one for students to get their arms around, since it is a global industry dominated by InBev, SABMiller, Anheuser-Busch, and Heineken. 

The inputs too are basic commodities like water, sugar, etc., and customers are segmented both by the channels (retail, bars and restaurants, and consumer), geography, and perceived beer quality.  Thus, students can talk to the arenas in value chain, geographic, and brand quality terms, the cost versus uniqueness differentiators, vehicles ranging from organic, to acquisition, to alliance-based growth, and different staging approaches (i.e., many brands in a market then moving to another geographic market, or taking the same brand across geographies).  It is interesting too to talk through the overarching economic logic of Heineken and other competitors as students can see how some players are going for a GE strategy — having 1st or 2nd brand in a market — or an overall market share strategy — or both (like Anheuser-Busch in the U.S.).

When we have taught about the beer industry, we have sometimes started with the Beer Indusry in China case by Eugene Salorio (see discussion of it at the BPS Teachign Toolkit). Again, this lets you get at the interesting interaction among the players, and then you can update a particular player like Heinekin using this FT article.  We have also found a nice complement in the A/V resources at www.cantos.com.  This site (must register but it’s free) has streaming video interviews from the beer industry executives at SABMiller, and a couple other beer biggies.  A really intriguing one is on SAB’s expansion strategy in Poland (SABMILLER in Poland: brand driven organic growth”), where it organically launches a new brand using a great resource-based logic.  You can help students see this logic in the staging of this move, show them how it is an example of a corporate resource that SAB seems to be able to leverage across markets, then ask the students to identify other ways they think that competing in Poland helps with SABMiller’s overall economic logic.  You can then again return to the Heineken example as a way to show them how they might think about connecting all the dots. 

We have employed the framework in our teaching since it was first published and are consistently pleased with how well undergrad and graduate students alike can learn to apply it quickly and adeptly.  Just as rewarding is the fact that our students return to us long after completing our courses to tell us how they continue to use the diamond model in their actual work. 
As Hambrick and Fredrickson describe it, “If a business must have a single, unified strategy, then it must necessarily have parts.  What are those parts?  We present a framework for strategy design, arguing that a strategy has five elements, providing answers to five questions – arenas: where will we be active?  vehicles: how will we get there? differentiators: how will we win in the marketplace? staging: what will be our speed and sequence of moves? economic logic: how will we obtain our returns?”
 

Since our text is concerned with dynamic strategy and the strategic leadership challenges of creating and responding to changes, the staging element of the diamond model perfectly signals to students that change is inherent – by design – in all good strategies. 

We came across “Inside the Box” in the April 25^th, 2006 (p. 17), issue of the Financial Times (www.ft.com).  The actual article is called “Unforeseen consequence: How a box transformed the world”, authored by Marc Levinson, as a thumbnail sketch of his book (The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, Princeton University Press, 2006).  A related article is found in the March 18, 2006, issue of the Economist.  

This little gem of a book chronicles how the container transport industry emerged and evolved, and how containerization (i.e., that big cargo box that goes from truck, to rail, to ship, to truck, to store) dramatically altered the competitive landscape of industries and even national economies (through strategic choices about investment in ports or ground infrastructure).  Chapter 7 of the book walks you through how the container became the standard in the late 1950s, and the rivalry that took place among container companies.  The story is a great example of strategic choices made by leaders, industry myopia, and how strategy formulation and implementation are inextricably linked.  We have found, that since the context is so well known by our students, and practically taken for granted, that the story of the box is one that they can readily relate to the challenges and opportunities presented by dynamic strategy.