Post on 02-Apr-2023
G2G
ORGANIZATIONAL
STRATEGY AND
INNOVATION
MANAGEMENT A Case Study within a Dutch Startup
Amsterdam Business School Company Project
Submitted by: Dan Palmer Student Number: 11115513
Supervisor: Prof. Martijn Rademakers Submission Date: 30 August, 2016
Executive Summary
The purpose of this project is to analyze, and apply, pertinent frameworks for both
organizational strategy and innovation management to a globally focused start-up
initiative. Because of the unique challenges that startups face in the current
environment, special care must be taken in terms of both establishing organizational
strategy, as well as fostering continued innovation, in order to deliver their products and
services to the market in the most efficient manner and position themselves for
continued success.
Due to the non-traditional nature of the firm, and the inherent uncertainties in which
startups operate, additional scrutiny is given in order for the firm to have the maximum
opportunity for continued survival, not the least of which is a solid foundation from which
to operate. The G2G platform has been conceived to alleviate some of the pressures
that electric vehicle owners face due to the lack of necessary infrastructure, which
represents a radical departure from traditional business thinking and practices. The for-
profit company has been founded on the basis of meeting the needs of both consumers
and municipalities as the seismic shift away from the internal combustion engine
continues to gather steam.
While there are many applicable theories towards establishing and analyzing how
strategies shape the competitive advantages (or disadvantages) that many firms
currently face, there has not been extensive research done into how strategic pressures
and concerns affect entrepreneurial ventures and the conceptual foundations of their
business models. This paper will analyze the strategy of G2G against a multitude of
organizational and innovation management frameworks, as well as the possible
implications derived therefrom. Additionally, this project will serve as the foundation for
further refinement of the operating strategy, and as a guideline for the human resource
management strategy as the firm continues to expand. Finally, this paper will be a case
study in the conception, revision, and application of a multidisciplinary approach to the
foundation of a startup, and will future steps that the company will need to take as the
business continues to mature.
Preface
This company project was completed as the culmination of my studies for the Masters
of Business Administration at the Amsterdam Business School - University of
Amsterdam. It represents research and analysis completed during the formation of an
entrepreneurial venture with several classmates as co-founders. The genesis of the
idea was the result of a class project, the idea of which inspired the real-world action of
collaborating on a startup venture.
Firstly, I would like to thank my classmates and co-founders, Gali, Neeti, and Yu, whose
academic and professional contributions, abilities to produce unconventional ideas, and
light-hearted senses of humor were instrumental in not only the formation of the
company, but of the project in general. Our ability to professionally and socially interact,
and the resulting open communication and culture which resulted, is nothing short of a
miracle as we negotiated the trials and tribulations of the academic program.
Secondly, Dr. Martijn Rademakers has been instrumental in the completion of this
project. From offering helpful tips and interesting sources, to laying the groundwork of
this analysis via his Corporate Strategy course, his instruction and support has been
extremely helpful.
Finally, I wish to thank my friends and colleagues, who were a constant source support
and motivation (and would reflexively call me out on my procrastination).
Dan Palmer
Table of Contents
I. BACKGROUND ............................................................................................................................................... 4
A. HISTORICAL BACKGROUND OF ELECTRIC VEHICLES ........................................................................................................ 4 B. COMPETITIVE ENVIRONMENT FOR ELECTRIC VEHICLES .................................................................................................. 6 C. INFRASTRUCTURE CONCERNS ................................................................................................................................... 6 D. COMPANY BACKGROUND AND DESCRIPTION ............................................................................................................... 7
II. CASE DESCRIPTION ........................................................................................................................................ 9
A. THE CASE STUDY ................................................................................................................................................. 10
III. STRATEGY, INNOVATION, AND ORGANIZATIONAL LEARNING ..................................................................... 10
IV. CONNECTING STRATEGY AND INNOVATION ................................................................................................ 11
A. CONCEPTUAL FRAMEWORKS, THEORIES, AND TOOLS .................................................................................................. 12 1. Exploration versus Exploitation .................................................................................................................. 14 2. Resource-Based View ................................................................................................................................. 14 3. Core Competencies ..................................................................................................................................... 15 4. Market-Based Strategy .............................................................................................................................. 16 5. Blue Ocean Strategy ................................................................................................................................... 17 6. Porter's Five Forces..................................................................................................................................... 18 7. Identity-Driven Strategy ............................................................................................................................. 18 8. Knowledge-Based Strategy ........................................................................................................................ 19 9. Globally Born .............................................................................................................................................. 21 10. The Ten Types of Innovation .................................................................................................................. 21
V. FRAMEWORK APPLICATION ........................................................................................................................ 22
A. SUMMARY OF G2G’S STRATEGIC VISION .................................................................................................................. 23 B. MEANS-DRIVEN ANALYSIS .................................................................................................................................... 24
1. Managerial Implications ............................................................................................................................ 25 C. MARKET-DRIVEN ANALYSIS ................................................................................................................................... 25
1. Managerial Implications ............................................................................................................................ 27 D. IDENTITY-DRIVEN ANALYSIS ................................................................................................................................... 28
1. Managerial Implications ............................................................................................................................ 28 E. KNOWLEDGE-DRIVEN ANALYSIS ............................................................................................................................. 29
1. Managerial Implications ............................................................................................................................ 30 F. GLOBALLY BORN ANALYSIS .................................................................................................................................... 30
1. Managerial Implications ............................................................................................................................ 31 G. PORTER’S FIVE FORCES ANALYSIS ........................................................................................................................... 32
1. Managerial Implications ............................................................................................................................ 32
VI. FUTURE CONSIDERATIONS FOR G2G ........................................................................................................... 33
VII. CONCLUSION ............................................................................................................................................... 34
VIII. APPENDICES ................................................................................................................................................ 35
A. THE TEN TYPES OF INNOVATION ............................................................................................................................. 35 B. STRATEGIC PARADOXES ........................................................................................................................................ 37 C. TEN TYPES OF INNOVATION ADDRESSED BY G2G ....................................................................................................... 40 D. STRATEGIC MINDSET OF G2G FOUNDERS ................................................................................................................ 44
IX. REFERENCES ................................................................................................................................................ 45
I. Background
A. Historical Background of Electric Vehicles
Shifts in the geopolitical landscape, as well as an ever-burgeoning movement for
sustainability have provided the foundation for a revolution in both energy production
and consumption, particularly within the personal and commercial mobility fields.
Depending upon source, nearly half of all hydrocarbons reach the end user in a
transportation-ready form, typically as traditional Finish Motor Gasoline and Distillates.
While fossil fuel based transportation has allowed the modern global economy to grow
at an extremely rapid pace, mounting evidence has shown that the use of such forms of
energy leads to environmental instability, international conflicts, and is being used as a
funding source for terrorism. While hydrocarbons are an excellent source of energy from
an engineering standpoint, their continued use is becoming increasingly unsustainable
in the modern world.
Such pressures, in themselves, are often the impetus for lasting change in both
economic and technological terms, in particular to this case: the reintroduction of the
electric vehicle, which originally made its debut in the late nineteenth century (Kirsch,
2000). However, given the advancements made in petroleum based infrastructure and
internal combustion technology, electric vehicles, generally, could no longer compete in
the marketplace in regards to price1. The resulting pressures led to the rapid decline in
personal use electric vehicles, though it should be noted that many larger scale
transportation networks, such as public transit, continued to use the technology (Loeb,
2004). It was not until the early twenty-first century that the combination of competitive
landscape and other external factors allowed for a successful reintroduction of personal
electric vehicles.
Though competitive, environmental, and security pressures have set the stage for the
successful reintroduction of electric vehicles, the infrastructure required to allow for
1 https://www.britannica.com/technology/automobile#ref=ref918099
ease of transportation is still missing in nearly every marketplace. This lack of resources
is often forcing owners and drivers to compete for limited charge points, adjust travel
logistics, or simply avoid the technology altogether. In fact, one of the major, or
predominant (depending on geographic region), perceived drawbacks with electric
vehicle ownership is acutely tied to lack of infrastructure: drivers are concerned that if a
charge point is not readily available, the drivers will run out of battery, rendering the car
inert and leaving the driver with limited palatable options (Rolim 2012). This is especially
true in within the context of the largest oil consuming market on the planet, the United
States, where not only is the infrastructure tailored to internal combustion engines, but
also the distances between destinations are comparatively larger than most other
countries (Eberle 2010). As such, the largest economy has been reticent to quickly
adopt electric vehicles, despite subsidies offered by employers, municipalities, and the
U.S. Federal government, which has prompted large-scale spending on infrastructure
projects as well as alternative measures to alleviate the “range anxiety” that seems
pervasive among drivers, particularly within geographically large markets2. However,
investments in infrastructure needed have been woefully hard to acquire; in addition to
political uncertainties about incentives, there is also much that is unknown about the
future economic state of the world, the penetration rates for electric vehicles, and the
always looming pressures of technological breakthroughs.
All of these issues have created conflicting attitudes for consumers: the idea of an
electric car is appealing (whether for ecological or economic reasons), but there are
institutional roadblocks to widespread adoption. Sales of internal combustion cars still
dwarf all other categories, despite the collective complaining about gas prices or
political unrest in many oil producing regions. Coupled with the idea of “Peak Oil
Theory”, the future of the gas powered car is definitively in doubt, though it will be a
bitter pill for many to swallow (Deffeyes 2008).
2 http://www.torquenews.com/1079/test-ride-electric-car-free?page=2
B. Competitive Environment for Electric Vehicles
The aforementioned geopolitical and economic pressures have given rise to the
“modern” electric vehicle industry, as both end users and governments seek solutions to
the issues of transportation. Spurred by breakthroughs in both battery and materials
technology, many car manufacturers have begun offering hybrid and pure-electric
vehicle options to the marketplace, yet studies have shown that the penetration rates of
these vehicles has been fragmented and varies by market (Al-Alawi 2013). Additional,
multivariate analysis of the adoption of electric vehicles has statistically illustrated what
many have been saying anecdotally for quite some time: it is not only the purchase
price and financial incentives that motivate buyer behavior, but also a significant and
positive correlation between the availability of charging infrastructure and electric
vehicle market share (Sierzchula 2014). Given this context, car companies, consumers,
and governments all find themselves in a bit of a conundrum - there is latent demand for
electric vehicles, yet an unwillingness to shift away from internal combustion.
Within the industry, the response has been to rely heavily upon the continued
development of longer lasting batteries and both public and private investments in
infrastructure, as evidenced by the outlays of Tesla Motors, Inc. in both fields,
respectively34. And while it can be argued that Elon Musk is in several businesses, to
include power distribution, there is a palpable disconnect between the industries of
manufacturing vehicles and providing energy. Companies such as Tesla Motors, and
others, are likely engaging in these measures as ancillary activities to drive sales of
vehicles.
C. Infrastructure Concerns
While it may be difficult to place exact values on the geopolitical and environmental
benefits that switching to electric vehicles can provide, extensive studies have been
done in regards to the economics of governmentally provided charging stations. At best,
3 https://www.tesla.com/energy 4 https://www.tesla.com/supercharge
the installation of infrastructure related directly to the charging of vehicles has been
described as “risky”; a study of fast charging stations within the German market showed
that the high capital expenditures required to install a charging station was not
economical in most of the projected scenarios (Schroeder 2012). And while some
institutions and governments have, and will continue to, install public use charging
stations, it can be reasonably argued that they are doing so with a non-economic
incentive.
Given that the installation requirements of asset and investment intensive charging
stations remains highly volatile, with questions arising around future technology
developments, electric vehicle penetration rates, uncertain incentive plans, among
others, it remains unlikely that large scale development will supply the needed
infrastructure for electric vehicles, or supplant the traditional fossil fuel infrastructure
currently in place (Schroeder 2012). There are few, if any, reasonable governments who
do not see the need for such investment, but even fewer have committed the necessary
resources to allow for such an infrastructure update.
Additionally, widespread economic and political uncertainties have prompted many
governments to reconsider infrastructure investment of any kind. This has stifled the
potential electric vehicle market, though as noted above, private firms have attempted to
pick up some of the burden that others have thus far been unwilling to undertake.
D. Company Background and Description
The challenges faced by all actors within the electric vehicle ecosystem represent an
excellent opportunity for G2G: to establish a platform that not only helps service the
needs of the end users, by providing a system to alleviate the issue of “range anxiety”,
but also reduce the burden on car manufacturers and governments alike in terms of
infrastructure buildout. By reimagining what is required to “fuel” a car, the company
hopes to address concerns for all stakeholders, and to do so profitably. Doing so
requires a holistic and multidisciplinary approach; many orthodoxies about business,
consumer behavior, even the concept of the electric grid had to be challenged.
The startup initiative, G2G, was founded by four classmates from the Amsterdam
Business School as a final class project for the Innovation Management elective offered
in the M.B.A. curriculum as an elective. Comically, it grew out of the idea to deliver
gasoline to parked cars on the street, but legal and safety concerns made such an
endeavor a non-starter. However, we felt like we were truly on to something in regards
to the very basic pain-point we were trying to address: if most other services and
products are available on demand, why isn’t energy? Through many iterations, heated
debates, and cups of coffee, we arrived at an answer to that fundamental question,
while simultaneously exploiting an emerging opportunity within the market; we would
deliver the energy that electric (and hybrid) vehicles required, without having to plug into
the grid.
G2G is exploring the concept that sources of energy need not be tied to the
infrastructure, at least at the point of delivery. Similar concepts are pervasive in other
industries: you do not need a pizza oven in order to acquire some pizza, so why do you
need a plug to get some electricity? The company firmly believes that this is a major
driver of range anxiety, which has hindered the adoption of electric vehicles worldwide.
In addition, this also provides a solution to the question of the investment intensive
infrastructure construction that many municipalities and large corporations are hesitant
to undertake. By unplugging the plug-in car, G2G is aiming to capitalize on an
underserved market, alleviate pain points of buyers and suppliers, and capture a
significant amount of the value chain in the process.
It is expected that globally, electric vehicle sales will grow by 20 to 30 times in the next
quarter-century, and many municipalities will continue to struggle to provide the
necessary infrastructure to charge electric vehicles at locations other than the
consumer's place of residence5. Currently, charging relies on the use of designated
charging points and at-home wall solutions that require a fixed location and a
5 http://www.forbes.com/sites/rrapier/2016/07/06/triple-digit-electric-vehicle-growth-doesnt-dampen-norways-thirst-for-oil/#7cd1cf483e00
connection to the electrical grid; this represents a particular challenge in highly dense
urban areas, where parking is often at a high premium, and there are not enough
charge points to service the expected number of electric vehicles that will soon populate
the roadways.
G2G intends to provide an alternative solution for vehicle charging, by removing the
requirement for a grid connection and thus a fixed location for charging needs, in the
form of an on-demand mobile electricity delivery service. In the first phase, G2G sought
to create a platform that leverages the technology of its potential partners via their built-
in open APIs, and will be able to bring the necessary battery charge to the location of
the customer, alleviating the consumer's anxiety as well as pressure on the
infrastructure. The second phase will also incorporate additional monitoring on the
platform, and would function as an autonomous (from the consumer's perspective)
charging service, to be offered in parallel with the on-demand service.
II. Case Description
Given that Electric Vehicles, their markets, and born-global companies are
comparatively new to the business landscape, it is imperative that G2G establish a
flexible organizational strategy and innovation frameworks to deal with the dynamism of
the market. To that end, this study will build on, and incorporate, theories and
frameworks related to both organizational strategy and innovation, through the non-
traditional lens of a born-global firm. To establish a well-defined, yet flexible, operating
strategy, that places G2G in the most advantageous position to capitalize on a currently
underserved market while fostering collaboration and innovation will be paramount to
the success of the firm as a going concern.
The company has recently completed the ideation phase, and has begun market
validation and some very rudimentary organizational planning. This represents an
unusual opportunity in, and of, itself: there is no institutional inertia preventing the firm
from organizing how it sees fit; it can optimally structure itself as a knowledge and
learning organization from the start, and recommendations of this project can be put
directly into use in a real-world setting. Additionally, as a technology start-up,
continuous innovation will represent a key pillar to the success of the venture. To spur
innovation and collaboration, several innovation-based frameworks will be analyzed and
incorporated into the managerial recommendations that this paper aims to provide in a
holistic manner, and will function as the underlying strategy for the firm.
A. The Case Study
This case study will include a multifaceted examination of the pertinent strategic and
innovation frameworks, an analysis of how the concepts were applied, and a direction
on further strategic development within the firm.
III. Strategy, Innovation, and Organizational Learning
Though a more recent area of research and interest within the context of business,
Organizational Strategy has received an immense amount of attention within the past
50 years. It has been proven extremely difficult to establish a set of universal rules that
should govern a business - not only is the process highly complex and malleable, but
each company operates with a set of unique circumstances (Miles 1978). There is,
however, an understanding about the importance of strategy; many decisions have
lasting effects on a firm, for better or worse, and the nebulous idea of “strategy” is the
cornerstone of many modern business concepts, theories, and courses (Porter 1996).
From Henry Mintzberg to Sun Tzu, influential people have taught us that strategy is
important, yet very few seem to elaborate much beyond the nebulous concept, or if they
do, it is under a very esoteric set of circumstances. Additionally, there seem to be as
many possible theories as there are PhD students to write about them - from the
Traditional to the Knowledge-Based Views, or Core Competencies to Blue Ocean, there
are many difficult tradeoffs to make for management that will significantly impact the
future of their respective firms. There is, however, a common theme that runs through
the heart of all strategic theories and links them to a common thread: competitive
advantage. A well-executed strategy, whatever form it may take, is the foundation for
any company’s hope at being an ongoing concern (Porter 1989).
Closely tied to strategy and strategic thinking, innovation has come to the forefront of
economic thought in the past few decades, as smaller and more nimble firms develop
models that completely up-end the existing status quo. The use of “disruption” within the
context of business might be an overused trope in the modern economy, yet the
theoretical foundations stretch back many decades, and are built upon the idea of
creative destruction (Schumpeter 1942). Having described innovation as one of the
main drivers of economic growth, Joseph Schumpeter’s book (which ultimately predicts
the end of capitalism), has been adopted into modern economic and business dogma,
where the struggle to find new ways to use the firm’s resources, new ways to engage
customers, even new business models, rely heavily on the process of innovation
(Ireland 2007).
Ultimately, it has been empirically shown that the level of innovation built into the core
values of an organization is directly correlated to the organizational performance, both
in terms of technological and non-technological terms (Subramanian 1996). In addition,
a high level of innovative thinking is directly correlated to organizational cultures that
emphasize learning, that are quick to adapt to changing market conditions, and that
engage employees at a much higher level (Hurley 1998). Thus, it is immensely
important that G2G, as well as other firms, place significant emphasis on spurring
innovation, as it is intrinsically linked to the long-term survival chances of the business.
IV. Connecting Strategy and Innovation
For the purposes of this study, an assumption has been made about the direct
relationship between the success or failure of a product and the success or failure of the
firm that offers said product (Klepper 1996). This was reached in the following manner:
if we assume that a for-profit firm retails a single product, the firm’s economic outlook
and performance should exactly match that of the individual product which it produces.
Adding additional products, and diversifying the revenue streams for the firm does
reduce the chance of firm failure due to a single product failure, in aggregate, but there
is still an inextricable link between offering performance and that of the company as a
whole (Klepper 1996).
To this end, the concept of product life cycle plays a very important role in determining
the future of a company. As products age, they are typically replaced by better variants
or fall out of favor, causing the economic benefits derived from the product to diminish
(Klepper 1996). In fact, this behavior regarding the product life cycle is actually quite
predictable, as most products follow a set progression through the following stages,
termed here: Introduction, Growth, Maturity, and Decline (Polli 1969). Other analyses on
product life cycle are even more granular, further dividing the stages, but they all follow
the same eventual pattern: the eventual decline and death of the offering.
As previously established, any firm that relies on a particular product, or bundle of
products, will eventually fail as the basket of products enter decline. The modern
industrial revolution and communications era has only sped this process up; products
progress much quicker through the life cycle, and the introduction of a new offering can
destroy competitors virtually overnight, a process that has been coined by some not as
disruptive innovation, but as devastating innovation (Downes 2013). A remedy for this
seemingly inevitable death is the introduction of new products, which requires
innovation, by definition6. Firms must consider innovation management when
(re)establishing their operating strategies; this applies to multinational conglomerates
and startups, alike.
A. Conceptual Frameworks, Theories, and Tools
In this section, there are two concepts that influence the selection and implementation
of an organizational strategy, yet do not necessarily lie within the bounds of what is
generally considered a “strategy”. As such, they will be listed separately, but it is
6 http://www.oxforddictionaries.com/definition/english/innovation
important for the reader to note that they have a significant impact on organizational
choices and strategic decisions.
Pervasive throughout the course of the company project, as well as through this paper,
is the notion that all of the decisions made, for better and for worse, have to be viewed
through the lens of bounded rationality. To think of humanity as a perfectly rational
being is deeply flawed, we are not willing to, nor even capable of, evaluating every
possible course of action, nor the litany of consequences that arise therefrom
(Gigerenzer 1996). The founders of G2G accepted this concept; some of our decisions
would be suboptimal, unexplainable, or even result in beneficial ways that we could not
explain. We would live a real life example of how to start a company with the unwritten
motto of “Good Enough”.
With this in mind, it is important to remember that some of the decision made during the
course of the project were not explicitly rational. Though there was an attempt to
evaluate and analyze all decisions against the applicable frameworks, theories, and
tools during the course of the project, it was simply infeasible. Some decisions were
made by intuition alone, particularly at the early stages of the project when the facets of
consequences were highly ambiguous. This project will attempt to evaluate some of
those decisions against the applicable frameworks, and incorporate the results into the
recommendations, even when the choices made were not explicitly rational. However,
there is an unforeseen benefit to acting in such an irrational way: by testing our
inductive reasoning against real-world results, we set in place the foundation for an
organizational strategy that incorporates learning (Arthur 1994).
This list is by no means exhaustive, but rather represents different organizational
strategies that were evaluated during the course of the project. Models that were
deemed overly-simplistic, unrealistic, or not applicable, such as Porter’s Generic
Strategies, were not evaluated at all. The strategies listed below received at least partial
consideration during the formation of G2G; it should be noted that some were accepted,
in part, to the formation of the operating plan and business model, while others were
deemed to be of little to no value.
More recently developed strategies, or those that are still being developed, are also
listed here. As previously mentioned, it is not the intention for this list to be exhaustive,
but rather as an explanation of different concepts that were explored during the course
of this study. Many of the strategies listed below were evaluated and incorporated into
the final organizational strategy.
1. Exploration versus Exploitation
It is a given that each organization faces a multitude of choices, some of which are
mutually exclusive, such as the deployment of limited resources. Extrapolated into a
strategic sense, there is a trade-off that firms must make, the choice between exploring
for new opportunities in the search for future economic benefits or exploiting existing
opportunities to maximize the current economic benefits available to the firm (March
1991). Neither strategy is sustainable for the firm when practiced at the extreme: too
much focus on future opportunities will leave the company vulnerable in the current
context, while overly focusing on exploitation will result in a lack of future cash flows.
Each firm must make a strategic choice as to where on the spectrum they wish to
operate; whether their focus is generally more on the present, or more towards the
future (March 1991). This decision is generally much easier for a startup where initially
they have few, if any, current opportunities to exploit, and can focus on exploration, yet
must constantly evaluate their decisions in the context of future opportunities for
exploitation (Porter 1996).
2. Resource-Based View
Often coupled with the VRIO framework, the resource-based view of the
competitiveness of a firm is still popular and applicable in modern circumstances, and
quite easy to adapt to many circumstances. This theory posits that the majority of
success (or failure) of a company relies upon the ownership and exploitation of
resources controlled by a company (Barney 1991). The basis of the theory lies upon the
idea that a firm owns or controls one or more types of resources; the classical resources
such as cash, equipment, or labor; and/or neo-classical intangible resources such as
intellectual capital, intellectual property, or human capital. These resources are then
exploited to generate value by the company, acting as the key inputs to whatever
processes the company employs to deliver value to their customers. The level of, and
duration of, value with each particular resource is generally progressively evaluated
under four criteria: valuable, rarity, imitability, and organizational support (Barney 1991).
For instance, if a resource is valuable, but rather common (not rare), at most the
company exploiting this resource could hope to achieve would be competitive parity.
However, should a resource meet all four criteria, the resource-based view suggests
that it will lead to a sustained competitive advantage (Barney 1991).
Many entrepreneurial ventures use this strategy because of its simplicity and because
of the context in which the ventures are formed; entrepreneurs have to make the best
out of what meager resources they control, in an attempt to attain a competitive
advantage and deliver value to their customers.
3. Core Competencies
Though also considered a means-driven strategy, the concept of core competencies
differs from the resource-based view in several ways. Similarly, it has an internal focus;
that a firm can extract value from methodologies and items within its control, and does
not have to overly rely on external factors related to its line of business. The key
differentiator between core competencies and the resource-based view is the nature of
the intangible assets that the business uses to drive value creation; both related to the
substance, and the ownership, of those assets (Prahalad 1990).
For example, a core competency for a business may revolve around its ability to create
an exciting and engaging brand, which customers will perceive as having additional
value over the firm’s competitors. If it is truly a core competency, the process to create
the brand does not explicitly lie within the human capital the firm has, but rather the
processes the firm uses to leverage the human capital available to it (Prahalad 1990). It
should not matter, within reason, who the firm employs in its marketing department, the
ability to create valuable brands should lie within the business itself.
This is often a tricky subject to parse, because so much overlaps with the resource-
based view, but in the opinion of this author, there needs to be a distinction, due to the
nature of entrepreneurial ventures. The typical startup possesses very few, if any,
resources, yet must figure out how to create value; for a typical technology startup, it is
the business’ ability to find innovative ways to extract value that matters, not necessarily
the skills of a particular individual or value of an asset. Though the distinction between
core competencies and knowledge-based strategies becomes a little murky when the
headcount of a business is very small, and differentiating between the founder(s) and
the company becomes increasingly difficult, the distinction is an important one for the
purposes of this project.
4. Market-Based Strategy
This is a classical strategy that nearly all of us are familiar with, even in the absence of
and formal instruction; you look for opportunities to profit in the market, and then tailor
your value proposition to meet those needs (Anderson 2006). A “classical” business
strategy, one would find most of the practitioners are likely large firms, who, already in
possession of a myriad of resources, begin to look externally for opportunities to
generate value, often in the form of new markets (Ghemawat 2001). A market-based
strategy also provides the underpinning for other, more recent concepts, such as Blue
Ocean strategy, and is generally considered the foundation of an “Outside-In”
entrepreneurial mindset.
Particularly in the case of multinational enterprises, the market-based has historically
dominated the strategic thinking amongst the management; having saturated their home
markets with goods and services, they begin to look for new opportunities, either by
refining their current offerings, or seeking new markets in which to deliver value
(Anderson 2006). While the market-based view is not necessarily related to international
business, per se, there is an easily identifiable parable: foreign markets are often very
explicit in their demands, they see goods a different market and say “we want that, too”.
Outside the context of a large enterprise, the market-based view also influences
startups and small businesses, alike. Even in the most inwardly focused firm, there is
someone asking if there is a need for the product in the market, though perhaps the
consumers are not aware. Not only does such a mindset essential when considering a
customer focused offering, but also provides an opportunity to evaluate the needs of the
marketplace.
5. Blue Ocean Strategy
The Blue Ocean strategy is the next logical iteration of the market-based view, and
relies heavily on some of the fundamental concepts contained therein. The literature
posits that all industries and markets can be broken down into two mutually-exclusive
types: Red Oceans and Blue Oceans (Kim 2005). Conceptually, Red Oceans are
industries and markets where there are intense competitive pressures, where the
industry boundaries are generally well defined, and where companies attempt to
outperform their competitors under a generally accepted set of competitive rules (Kim
2005). Logically, this leads to an ever increasing burden on companies, and they turn
the oceans bloody as the potential for profits is hampered by competitors.
Conversely, Blue Oceans represent industries and markets that are not currently in
existence, and thus are uncontested, allowing for the opportunity for higher profitability
due to the lack of competition (Kim 2005). Though often thought of as outside the
bounds of current industries, this is not always the case: sometimes a Blue Ocean can
be created within the bounds of a Red Ocean simply by redefining the boundaries of the
competitive landscape, or creating a more innovative way to create and capture value
while simultaneously reducing costs (Kim 2005). The identification and establishment of
these “Blue Oceans” relies on several frameworks put forth by Kim et al., and will be
addressed in the analysis section.
6. Porter's Five Forces
Michael Porter’s seminal work is an attempt to create a universal tool that industry
participants could use to evaluate the opportunity for profitability vis-a-vis the firm’s
competitors. The conceptual simplicity of the model makes it a popular tool when a firm
is establishing (or reestablishing) the organizational strategy, because it breaks all the
real-world complexity down into five “fundamental” business forces (Porter 2008). With
the Five Forces tool, evaluating the attractiveness of a particular industry is an
assessment of the threat of potential entrants, the threat of substitutes, the bargaining
power of suppliers, the bargaining power of buyers, and rivalry intensity among existing
firms (Porter 2008). When all the forces are low, an industry might be very attractive to
enter, and conversely, if all the forces are high, it may be an unattractive industry in
which to compete.
7. Identity-Driven Strategy
Within the context and complexity of the “Modern Industrial Revolution”, there are many
who would argue that the abovementioned strategies are too simple, and that
evaluation along the traditional lines are incomplete. One of the emerging strategies that
was evaluated was the concept of an identity-driven strategy: that it was incumbent on a
company to not only create profit, but also to also deliver value to stakeholders,
economic or otherwise (Freeman 2010). This theory argues that the purpose of a firm is
not solely to its owners, but to society as a whole, and has recently gained a lot of
traction in the business community, with concepts such as fair trade, sustainable, and
socially responsible business.
Though conceptually sound, there is often difficulty in establishing who qualifies as a
stakeholder; theoretically it could be every entity, globally, or it could be a very select
few. An important concept when evaluating stakeholders is salience: some stakeholders
are more important than others, and it is generally a good idea to evaluate their needs
in a methodical way, with the most important getting the most consideration (Mitchell
1997).
8. Knowledge-Based Strategy
In the contemporary economy, or what some refer to as the “Modern Industrial
Revolution”, many theorists and practitioners have begun to eschew the concept that an
organization’s strategy should rely on the more traditional views. Their argument
suggests that considering both the inside-out and outside-in views of a firm will not
produce any long lasting tangible competitive advantage when executed properly, but
rather competitive parity, as all firms are not attempting to leverage their internal
mechanisms and actively scanning the market for opportunity (Grant 1996).
It has been demonstrated, within small and medium-sized businesses, that internal
characteristics are not the major driver of competitive advantages within these firms, but
rather their ability to leverage knowledge-based resources (Wiklund 2003). This
phenomenon is not unique to smaller businesses, though often more pronounced, but
rather applies to firms of all sizes, and suggests that firms that undertake the
development of knowledge within the individuals (as opposed to firm knowledge, or core
competencies), and facilitate the sharing of knowledge between employees, have been
able to secure an advantage over their rivals (Grant 1996). Given this research, paying
particular attention to the knowledge-based approach seems most fitting when an
entrepreneurial venture is establishing the strategy for the organization; not only could it
lead to development of other forms of competitive advantage, but it also helps spur
innovation, which is the epitome of value creation for a startup (Nonaka 1995).
Unfortunately, establishing a knowledge driven company is not an easy feat to
accomplish: there are technological, structural, and cultural “infrastructure” concerns
that must be addressed and developed, which adds to the complexity of the firm’s
organization (Gold 2001). Technological concerns, alone, add greatly to the complexity
of instituting an effective learning enterprise; internal technology must be sufficient to
allow for ease of tacit and expressed knowledge, which can take many different forms
(Grant 1996). Additionally, in a more traditionally organized firm, where different
business functions are provided by different business units, internal structures are often
cited as inhibiting the effective transfer of knowledge (Gold 2001).
On top of all of the aforementioned, cultural concerns represent a significant challenge
to effective management (Gold 2001). Some companies have a culture that promotes
interaction between employees, which fosters information and knowledge exchange,
while others have cultures which actively suppress such behaviors, which could
potentially damage any competitive advantage that a company enjoys. Because
company culture is often hard to manage and has many antecedents, many firms
struggle with the issue, but culture directly impacts an employee’s willingness to transfer
knowledge (Osterloh 2000).
Knowledge-based strategy suggests that the true competitive advantage that a firm
could enjoy is highly correlated to the knowledge contained within the firm. Practitioners
who follow this theory often place a great emphasis on human resource strategy and
acquiring and retaining human capital (Zack 1999). Because of the consumable nature
of tangible assets, the definitive life of many intangible assets, and the volatility inherent
in labor, it can be argued that any competitive advantage gained from more traditional
strategies (such as those listed above), is not only unsustainable, but often fleeting
(Zach 1999). Competitors can quickly copy products, services, or techniques, and such
supposed drivers of value no longer represent sources of competitive advantage, but
simply what is required to do business in the modern era (Kim 2005).
Conversely, knowledge has a degree of tacitness; it is often hard to describe, hard to
imitate, and is not diminished with use, but rather increased. On face value, fostering
learning and the sharing of knowledge makes sense, having a smarter workforce is an
advantage against competitors. This concept also holds true in practice: knowledge is
considered the most strategically important resource, and intellectual capabilities are
strongly correlated to firm performance (Zach 1999). To this end, this strategy
incorporates the concept of creating a Learning Organization, where the foundations are
put in place to further develop and refine knowledge within the company, as well as the
individual employees.
9. Globally Born
The concept of Globally Born is a relatively new entrant into the field of strategy, having
been appropriated from the world of marketing, and though while not an entire strategic
theory of itself, it heavily modifies other theories by providing a unique context in which
the formulation and execution of the organizational strategy occurs (Moen 2002). The
driving force behind the emergence of this mindset is the high interconnectivity of
customers and the idea that goods and services no longer need to be tangible; a
company can sell a virtual item to anyone on the planet, and thus is operating in a
global respect.
Startups, in particular, are often seen employing this strategy: they design their offering
to quickly scale across borders and markets, and often pay no heed to geographic
distance, though cultural, administrative, and economic distances must still be
considered (Ghemawat 2001). Being a globally born company offers a particular set of
challenges: no longer can a business cautiously expand into new markets, but rather
the initial offering must withstand the scrutiny of a global marketplace from the onset,
while still dealing with local circumstances.
This presents an interesting challenge when dealing with the strategic paradox of
localization versus globalization: many startups wish to quickly scale and expand into
international markets, yet must constantly evaluate different markets from a local
perspective (De Wit 2010).
10. The Ten Types of Innovation
Innovation, within the context of new offerings of products and services, has been
broken down into ten different areas which are placed into three separate groupings
(Keeley 2013). A complete listing of the Ten Types of Innovation can be found in
Appendix A. This framework was used so that G2G could classify different aspects of its
offering as points of differentiation against current orthodoxies, with the intent of
creating a disruptive service. There is strong statistical evidence that both the viability
and the impact of an innovation is positively correlated to the number of innovation
types that product or service possesses (Varis 2010). A description of how G2G is
addressing the Ten Types of Innovation can be found in Appendix C.
B. Linking Strategy with Innovation
As previously discussed, both theory and evidence illustrate the importance of
innovation, particularly within the startup ecosystem. In order to compete, and
potentially disrupt, larger firms with greater access to resources, it is important that a
technology based entrepreneurial venture focus on the creation and delivery of value to
the customer in a novel way (Varis 2010). Startups, by their nature, have an interesting
advantage against their larger competition, unburdened by history or institutional inertia,
startups are free to challenge established orthodoxies in search of new business
models and products, which represents a sizable strategic advantage (Hamel 1993).
Additionally, if we accept the premise of big bang disruption, there is mounting evidence
that despite the resources enjoyed by an industry, innovative products and services can
not only out-compete, but often completely devastate many legacy industries (Downes
2013). It is posited within this framework that a highly innovative offering, one which
redefines as many of the Ten Types of Innovation as possible, holds the greatest
chance to not only create economic performance, but secure a longer lasting
competitive advantage (Varis 2010).
Finally, the theme of innovation is pervasive throughout the other strategy concepts
outlined in the paper; nearly all of the organizational strategies rely on some aspect of
innovativeness, particularly the newer theories, such as the knowledge-based view
(Leonard-Barton 1995). Not only will developing a novel concept help set the stage for
later strategic decisions and frameworks, but also is the underlying driver for the
creation of value (Schumpeter 1934).
V. Framework Application
This section is an analysis and discussion of potential competitive advantages for G2G,
vis-a-vis the capabilities of the founders, as well as the strategic and innovation
concepts previously identified. The major themes discussed amongst the management
of G2G will be further explored, as well as some of the theoretical and practical
concepts that drove the thinking and decisions of the founders. While any
entrepreneurial venture is chaotic and undertaken with great uncertainty, the initial
formation of the company was exponentially more so. Decisions made during this
seminal period will continue to drastically influence the direction of the company, frame
the strategic decision making, and will likely determine the success or failure of the
startup initiative. Because of the resources, capabilities, and mindsets of the founders,
particular attention will be paid to both the Knowledge-Based and Blue Ocean
strategies.
A. Summary of G2G’s Strategic Vision
The business model of G2G relies heavily creating a unique value proposition by
reimagining many facets of a traditional service platform within the context of the Ten
Types of Innovation as described in the appendices, in an attempt to create a Blue
Ocean in which to compete. Given the bounds of the skills and resources of the
founders, not all aspects of innovation were reasonable, which will be further discussed
in the appendices.
It is the aim of G2G to deliver value to its stakeholders by creating a decentralized
electricity delivery service that provides the vehicle owners with convenience and
anxiety alleviation, while simultaneously reducing the demand for nonessential
investment in power grid infrastructure, via a mobile based platform. By combining a
dynamic profit model, an open network of providers, and a structure that shifts assets to
independent contractors, G2G can provide a touch-less service platform, via mobile
application channels, that will redefine how the electric vehicle users view and interact
with energy providers.
B. Means-Driven Analysis
Startups, by definition, usually lack in many of the resources enjoyed by their larger
counterparts, and is often cited as reasons that startups fail7. In general, one would
suspect that analyzing a startup’s competitiveness with the resource-based view is an
act in futility - most resources are unavailable to microenterprises. This, however, is not
explicitly the case when it comes to strategy formation, and its relation to the future
business model of a company. Due to the enduring nature of strategic decisions,
entrepreneurs must conceptualize and evaluate certain resource-based arguments,
even if they are not pertinent at the time when the company is founded.
Extensive research exists linking the impact of strategic planning on the performance
and profitability of businesses, though unfortunately not much of it has been focused on
small and medium sized enterprises. However, some of the concepts are applicable,
despite the differences in size and industry, and underscore the needs for strategic
planning to increase performance and profitability (Schoeffler 1974). A key takeaway
from the study, which predates Barney’s work, but fits in well with the resource-based
view of organizational strategy, is the concept of efficient deployment of resources,
particularly in terms of investment intensity and expenditure management.
In its current state, G2G is lacking many resources that it could employ to produce a
competitive advantage: it has a negligible amount of capital and virtually no IT
resources or assets. These potential threats are not lost on the founders: of foremost
concern is the creation of a digital platform that the company can leverage to deliver
value to its potential customers. Additionally, management recognizes that the
acquisition of both resources and skills are essential to the establishment of core
competencies (Prahalad 1990). However, given the current, exploratory nature of the
startup, the lack of resources controlled within the bounds of the firm represents a
significant challenge to future business prospects, as well as hurdles for the strategic
shift towards exploitation.
7 https://www.cbinsights.com/research-reports/The-20-Reasons-Startups-Fail.pdf
1. Managerial Implications
The lack of resources and core competencies within a startup such as G2G is not a
surprising result, yet it represents a massive barrier to the continued existence of the
firm. Though innovation can be considered a core competency, without access to
valuable resources, the company is currently operating at a competitive disadvantage,
and is unable to leverage a means-driven strategy to deliver value to the customer
(Kandampully 2002). It is imperative that the management unify on a strategic execution
plan to begin development of the platform, which has the potential to be a resource that
will help the firm establish a competitive advantage, or the company will face certain
failure.
Additionally, the dearth of available resources has significantly shaped the
organizational strategy in terms of product performance and product system. These
decisions were made from a resource-based view: redesigning batteries, or physical
charging equipment, is an expensive process, which would require significant
investments in research and development, and those resources are simply not available
to the company at this time.
C. Market-Driven Analysis
From both a theoretical and practical standpoint, the market-based view is extremely
common amongst startup initiatives, and has been widely written about by both
practitioners and theorists. Conceptually, it is very straight-forward: segments of the
marketplace with few competitors would naturally be more appealing to new ventures,
particularly when they have comparatively fewer resources (Kim 2005). If, as Kim
states, “the market universe is composed of [...] Red Oceans and Blue Oceans”, it
makes intuitive sense for smaller companies to seek out areas where there is less
competition to improve their chances for survival (Kim 2005).
Additionally, there is evidence that companies that have a higher market-based view, or
orientation, are also companies that tend to be more innovative and have higher
degrees of organizational learning (Hurley 1998). As previously noted, innovation is a
key concept in strategic planning, but unfortunately, there is insufficient evidence that
high market orientation causes or results from innovation (Hurley 1998). However, the
issue of causality within the context of a startup is a moot point; because startups are
able to define themselves and their strategies without concern for alienating current
customers, they can specifically design their strategy however they please (Porter
1996).
In terms of creating “Blue Oceans”, empirical evidence suggests that the profit and
growth consequences of seeking out untapped markets has an outsized effect on
performance: while “Blue Ocean” opportunities represented less than one-seventh of
product launches, they accounted for nearly two-thirds of profits realized by a company
(Kim 2005).
The management of G2G believes that they have created a unique solution to the
challenge of delivering energy to vehicles. An industry strategy canvas was created to
compare the experience of a hybrid vehicle customer with G2G offering and three
substitutes: gasoline, home charging, and charge stations (Figure 1). The offering has
distinct points of differentiation versus all three substitutes: it excels in areas related to
convenience, as well as user experience.
Figure 1
Key points to the Four Actions Framework:
Eliminate:
Need for a vehicle to be stationary, in a designated geographic location in
order to be fueled/charged. G2G’s strategic vision is to bring the necessary
energy to the end user, regardless of where the vehicle is physically located.
Reduce:
Cognitive and physical effort required in order to charge a vehicle. The
platform will provide all the information to the energy supplier, so that a single
interaction with the system is all that is required to initiate the service.
Raise:
Price. While the service will employ a floating price ceiling, which would make
it cheaper than traditional gasoline, G2G does not intend to compete with
other charging solutions in regards to pricing.
Create:
A pleasant user experience. G2G is shifting the customer experience of
charging a vehicle from a physical task that needs to be completed, to a
virtual experience via their proposed smartphone application. The strategic
direction for later iterations will include a completely automated charge
management system.
1. Managerial Implications
Based upon an outside-in perspective, it appears that G2G is doing quite well, and has
effectively identified a “Blue Ocean” in which it intends to compete. The firm has created
several points of differentiation within the energy supply, and by innovating the business
model, the delivery network, and the user experience, G2G is attempting to redefine the
boundaries of the industry.
These are, however, somewhat speculative, and heavily rely on the proper execution of
the development phase, as well as acquiring the necessary talent and resources. It is
also incumbent upon the management to continually refine their value proposition in
response to operating in different geographic markets, as well as changes in consumer
behavior. Additionally, the company needs to undertake significant market research in
order to validate some of the assumptions that have gone into this analysis: it could very
well be that the reason the “ocean is blue” is due to the fact that it is ultimately an
unattractive space in which to operate.
D. Identity-Driven Analysis
Though initially not considered, identity-driven concepts came to play a major role in
determining how decisions would be made in the company. Initially, new ideas
originated from a drive towards economic efficiency by the company, ranging from the
mechanism for delivering electricity to the engagement of customers. However, many of
these ideas were not congruent with the concept of sustainability that was at the core of
the product offering - it made little sense for the company to use gasoline powered
vehicles to deliver a green solution.
Additionally, there are other implications with a sustainable enterprise, such as the need
to engage many different stakeholders, as opposed to focusing solely on the concerns
of shareholders. Because G2G wishes to create a platform that engages both energy
suppliers and energy buyers, certain aspects of the Ten Types of Innovation had to be
addressed, particularly how to leverage the network aspect to deliver value to both
parties.
1. Managerial Implications
The concepts of “who we are as a company” and “how the world perceives us” are
powerful drivers in the formulation of strategy within a company. The former deals with
the internal motivations of management, such as the choice between shareholder and
stakeholder views of the purpose of business, and the resulting strategic decisions
therein (Freeman 2010). These are not decisions that are always rational from a for-
profit business perspective, but must be accounted for nonetheless: if a startup places a
greater amount of salience on a stakeholder than is the norm, it can be expected that
they will make suboptimal economic decisions when accounting for that stakeholder’s
demands.
But this is linked to the latter, or how the world perceives the firm, and can also be a
source of economic benefit; a powerful and compelling brand has been identified as a
competitive advantage in many studies, and can drive above-normal profits, even when
other areas are lacking (Cravens 2006).
In this aspect, G2G may have a sizable advantage over established businesses; it can
define its identity, while corporates often have to initiate a sizeable investment in order
to change their identity. For example, by evaluating an identity driven strategy, G2G has
structured its platform in such a way that economically encourages suppliers to also
adapt a more sustainable model.
E. Knowledge-Driven Analysis
The determination on how a startup initiative will foster and develop knowledge, as well
as manage that knowledge within the firm, should be the primary focus of strategy
development, as it has not only considered the most strategically important resource
available to a business, but also has proven to be a determinant of many other aspects
covered in this paper. While each company will require a different level of emphasis on
knowledge management, the strong link between knowledge strategy and innovation
has been well established (Grant 1996).
Particularly with companies that wish to develop a disruptive offering, defining and
developing an organizational strategy that places high importance on the creation and
diffusion of employee knowledge will prove instrumental in the ability of a startup to
develop competitive advantages (Gold 2001). Most, if not all, of the strategic paradoxes
play an important role in determining the knowledge-based strategy that a company will
pursue, and specific care should be taken in crafting a strategy that matches the
capabilities of the management and the company as a whole (De Wit 2010).
Based on extensive discussions among the founders, dialogues with local
entrepreneurs, and extensive theoretical and empirical evidence, the development and
implementation of a knowledge based strategy was the foremost concern during the
initial phases of the company formation. All of the founders understood the importance
of innovation, and wished to create an institutional and cultural environment that would
foster the development of innovative ideas. While the strategic survey of the founders
did not produce a consensus in any of the strategic tensions, even amongst the
dissenters, the importance of creating a company that fosters creativity, openness of
communication, and a less structured organizational context, was recognized early in
the process. It was also noted that a knowledge-based strategy was one of the few
frameworks with which the founders of G2G thought the firm could effectively compete
and hope to establish an advantage.
1. Managerial Implications
The idea of establishing a knowledge based strategy was understood and favored by all
of G2G’s founders, though the implementation of that strategy is not necessarily as
clear-cut. The founders agreed that most sources of competitive advantage, particularly
any which could be sustained, were reliant upon the knowledge possessed by
individuals within the firm, and that creating an organization that would be conducive to
the sharing of knowledge was a top priority.
To that end, extensive time and effort were logically focused on how to create and
maintain human capital, and how to lay the groundwork to foster a culture that would
enhance the competitive advantage that the firm wished to exploit (Li 2016). Though the
company is currently a microenterprise, extensive care must be devoted to developing a
coherent and comprehensive human resource strategy: the introduction of variability, by
means of selective hiring, can be a source of organizational learning (March 1991).
F. Globally Born Analysis
Under the assumption that a startup’s offering is truly disruptive, and highly scalable,
consideration should be given to the idea that internationalization will occur in a very
short time frame. Entering into international markets adds to the complexity of an
organization; traditional firms have to deal with cultural, administrative, geographic, and
economic distances which are not always readily apparent (Ghemawat 2001). Despite
these challenges, studies show that some startups are uniquely qualified to tackle these
issues at an early stage: performance in international markets is significantly correlated
to an entrepreneurial orientation and unique products, both of which are often a
derivation of innovative capabilities supported by a knowledge-based strategy of the
firm (Knight 2004).
G2G’s focus on innovative thinking and creating a highly-scalable offering lent itself well
to the concept of immediate expansion into international markets. Though Amsterdam
was selected as the initial test market, the platform is not bounded to a particular
geographic region. This is, in part, due to the very low investment in hard assets; the
offering of G2G, the marketplace, and the customer engagement, takes place in a
virtual manner. As such, the complexity surrounding geographic distance is diminished,
though the complexity of simultaneously operating in a global marketplace presents
significant challenges.
1. Managerial Implications
An analysis of the globally born nature of G2G provides insight into potential
advantages and disadvantages that the firm will face as it nears the launch of the
platform. The strengths focus on the abilities of the founders to adapt to different
markets; two of the founders have experience in operating a startup venture, and the
diversity of all of the founders is likely to help spur innovative thinking and the ability to
address a diverse set of challenges. The weaknesses to a globally born strategy are
primarily represented as a matter of complexity, and the resulting operational costs that
are incurred as a business operates in different countries.
Unmanaged growth and entry into new markets could quickly overwhelm the
capabilities of the firm, and establishing company and brand awareness in each market
represents a significant struggle (Chetty 2004). Particular care must be taken when
selecting markets in which to expand, as it represents not only a potential for the firm to
incur sizable losses, but also identity related risks, such as G2G’s reputation.
G. Porter’s Five Forces Analysis
Establishing the competitive landscape in which a firm competes is both difficult and
essential, and will vary with the nature of the offering of the startup (Porter 2008). The
five forces model is intrinsically linked to how the management views the network
paradox: should the firm cooperate, or compete, and how will it position itself versus
future rivalry (De Wit 2010). Firms that are entering an established industry may wish to
evaluate this aspect with increased importance, while those that are attempting to
create a new industry or niche, may find that this analysis is less important than other
considerations. However, even in the latter case, it is important for a startup to engage
in strategic thinking in regards to how the industry may look at a state in the future,
which could impact decisions made in the present.
Within the context of G2G, not all aspects of the framework apply, though it was still
carefully evaluated when creating the initial business plan. In particular, if a G2G
achieves a high-level of success, the threat of new entrants increases exponentially,
and consideration must be given as to how to deal with future competitive forces.
1. Managerial Implications
The threat of new entrants into the industry, and the potential to disrupt G2G’s business
is a threat that must be addressed from day one. In an attempt to mitigate this threat,
G2G has purposely added complexity into their business model, given additional
considerations to various stakeholders, and intends to globalize at a rapid pace. To
prevent potential competitors, G2G needs to continue to erect barriers to entry, through
the establishment of a strong brand, entering into agreements with car manufacturers
and governments, and creating a robust network of suppliers.
Attention must be given as to how to potentially “lock” customers into the service in the
hopes of increasing the switching costs, and continual iterative improvements must be
made in order to dissuade potential entrants into the industry. Additionally, G2G needs
to create some form of proprietary experience with the service that would be hard for a
new entrant to replicate, such as a quality user experience for the application, or
proprietary logistical algorithms.
The threat of new entrants and the threat of substitutes is also having an effect on the
human capital of the firm: the threats have created uncertainty about the platform, and
has led to some disagreements about the strategic direction of the firm.
VI. Future Considerations for G2G
G2G faces significant challenges as the business continues to progress: from the
acquisition and creation of valuable resources, to the exploration of potential markets,
there are many questions that need to be answered for company to survive. From an
inside-out perspective, the company is operating at a significant competitive
disadvantage; its lack of resources and core competencies are hampering additional
development of the platform, and also threatens the continued existence for the firm. In
retrospect, the lack of attention given to the more traditional strategies, particularly
resource and core competencies, was a strategic mistake during the initial ideation
phase of the firm.
However, from an outside-in, as well as identity-based and knowledge-based view, the
situation is much less dire. It is clear that the firm has placed significant value on
seeking out a “Blue Ocean”, establishing an identity that helps it differentiate itself, and
creating an organization that encourages learning. It is the founders’ hope that the
strategic decisions inherent in the business model help it establish a strong identity that
will help it attract talent, while maintaining the current open culture that the firm currently
enjoys.
The next step for the firm, in light of the analysis above, should be to complete the
market validation for the offering, and complete the development of the platform. This
will require a painful, but necessary, transition away from pure exploration, towards
exploitation.
VII. Conclusion
Firms of all size have to grapple with the questions surrounding strategies, where
formulation is often as much of an art as a science, and decisions can have long-lasting
beneficial (or detrimental) effects on profitability of a firm. As mentioned in the paper,
significant research has been done in the field over the past 50 years, as organizations
discover the value of strategy, and an increasing amount of attention has been paid to
innovation, as legacy industries fall by the wayside. However, much of the focus has
been on how corporations and multinational enterprises develop strategic advantages,
or concepts on how to build innovation into their business models, with far too little
attention being paid to smaller businesses.
Startups and entrepreneurs face an increasingly complex and uncertain world as they
undertake the founding of a new venture. There are near unlimited possibilities to create
a valuable offering for potential customers, but also as many potential pitfalls,
particularly when a startup fails to develop a strategic plan. This paper was an attempt
to apply the prevailing theories into the context of a technology startup, and illustrate the
reasoning behind, and evaluation of, strategic decisions that were made at the earliest
point in a company’s lifecycle.
The G2G concept was initially conceived as a class-assignment and thought exercise
on how many of the Ten Types of Innovation we could address in a simple business
canvas, but as the idea progressed, the founders discovered there were many implicit
and explicit strategic decisions that needed to be made, and the available frameworks
had a large influence on how the business concept developed. Out of this need, the
basis of this paper was formed: we needed a systematic approach to how we would
address these choices, and ultimately how we envisioned the company as a whole.
VIII. Appendices
A. The Ten Types of Innovation
Configuration
The related four innovation types are considered Configuration innovations; they deal
specifically with the internal workings of a firm, and how by (re)designing the structure of
a firm, or challenging particular orthodoxies, a product or service could be considered
innovative.
a) Profit Model
Innovating the profit, or business, model requires offering a new way to deliver value
and capture profit, within the confines of a given industry. An example would be the
introduction of “Freemium” applications, where the user is allowed to access the
application at no cost, but required to pay for additional functionality if he or she so
chooses.
b) Network
Network innovation is defined as how a firm joins with external parties to create value.
An example of this would be open innovation platforms employed by pharmaceutical
companies, which allow other firms to benefit from each other’s resources and
capabilities, and focus on their particular core competencies.
c) Structure
New or different alignment of talent and assets within the firm is termed structure
innovation. This could be novel ways of deploying resources, such as in the case of
Spotify, where employees are assigned to projects in an ad hoc manner, which can
foster more creative solutions.
d) Process
Process innovation is implementing a new way for the firm to develop and create of
offerings. An example would be “Pretotyping”, used by Google, which allows them to
rapidly test, develop, and market new products and features.
Offering
The offering subgroup relates to what is classically considered innovation, it
encompasses the aspects of the product or service, as well as the ecosystem related
therein. It is heavily focused on the output of the firm, and relies upon the production of
something superior to the firm’s competitors.
a) Product Performance
Product performance is a measure of how you differentiate the product or service
offerings against competitors. An example would be Intel releasing a new, faster
microprocessor. Product performance tends to be tied to the technological capabilities
of a firm, and often asset intensive.
b) Product System
Product system innovation generally centers around the creation of complementary
products and services, which help acquire additional revenue streams, as well as
increase the lifetime value of a customer. An example would be Apple’s iTunes store,
which encourages the purchase of other Apple accessories to get a better experience.
Experience
Experience innovation focuses on the customer, and how they perceive and use your
offering. While traditionally considered more support functions, there has been many
companies who reimagined the customer experience and have disrupted their
industries.
a) Service
Service innovation is defined as how a firm ensures and enhances the value of its
offerings. It does not necessarily mean offering superior customer service, there are
instances where consumers are willing to forgo any customer service, if there are
mitigating factors. An example of such is EasyJet, which offers bare-bones service, in
exchange for rock-bottom ticket prices.
b) Channel
Channel innovation often captures the attention of many marketing departments and
professionals, as it relies on finding a new way to connect your offerings with customers
and users. An older, but powerful, example is the Amazon.com bookstore, which
connected with users via the internet, as opposed to the more established brick-and-
mortar bookstore.
c) Brand
Brand innovation is how the firm represents its offerings and businesses to the public.
Building a strong and innovative brand can help drive customers to the offerings, even if
they are dissimilar. Virgin, which operates everything from record stores to spaceships,
is an excellent example of brand innovation.
d) Customer Engagement
Customer engagement focuses on how a firm can foster a distinctive experience when
using a firm’s offering. It generally requires reimagining what a product should “do”,
such as a smart-watch, which tracks the movement of users, provides phone
functionality, in addition to providing the time.
B. Strategic Paradoxes
Despite the type organizational strategy that a company chooses to focus on, there are
ten major strategic paradoxes that all companies must address that determine the
overall strategic direction a company will pursue (De Wit 2010). Outlined below are ten
issues that cause strategy tension, along with a brief explanation. Surveys of the
founders of G2G in regards to these paradoxes can be found in the appendices.
Process Related
a) Strategic Thinking - Logic and Creativity
This describes the general mindset of a person or group when thinking about a
particular problem or issue that a company faces. Should logic prevail when seeking
superior results, or should it be a more creative process? In reality, it is rarely one
extreme or another, though individuals will tend to prefer one of the options more than
the other. But, in aggregate, the mix of logic and creativity within the management of a
company will help guide and set the tone as to how challenges are conceptualized and
addressed.
b) Strategy Formation - Deliberateness and Emergence
Strategy formation is highly applicable, and observable in the economic world. How
often do the best plans go awry? Or a company is blindsided because they were caught
in unfamiliar territory? The idea about how strategy formation, and its corollary,
implementation, is a choice that managers have to make about how much they wish to
plan, versus how much they will see where the market takes them. Too much planning
may make a firm inflexible and unable to adapt to a changing marketplace; complete
lack of planning may result in a lack of direction and stagnation.
c) Strategic Change - Revolution and Evolution
When the markets change around a company, the collective preference between
revolution and evolution will determine the speed and manner in which the company
responds. This also holds true for processes like innovation, a company may wish to
release game-changing new products, or simply iterate on existing offerings, both in the
hopes of prolonging the life cycle of the company. It has been hypothesized, though not
proven, that this is significantly tied to the level of risk acceptance of the firm.
Content Related
a) Business Level - Markets and Resources
As discussed in a previous section, this paradox is how the company views its
resources and potential markets, and how it wishes to deliver value along those lines.
The inside-out versus the outside-in perspectives are truly fundamental. Should we use
our resources to build a product and search for a market to sell it in, or should we look
what the market is demanding, and acquire the resources necessary to meet that
demand?
b) Corporate Level - Responsiveness and Synergy
Responsiveness and synergy is an interesting conundrum, because modern business
education suggests that synergy is an excellent way to cut costs, and thus increase
profit. Unfortunately, synergy comes with a dark side: when processes are overly
synthesized, it becomes difficult, if not impossible, to make adjustments to a process
without having effects on many other areas of the business. The contrary also holds
true: if there is no synergy, the company is free to respond to stimuli as needed, but the
company will also have much higher resource expenditures.
c) Network Level - Competition and Cooperation
At the network level, competition and cooperation are the two ends of the spectrum on
how an individual, or company, views other players in the same space. It is a reflection
on the general demeanor of how the management team views business. Should the
competition be crushed, or are they partners? Interestingly, the barometer seems to drift
from one side to the other as time progresses: if there is too much competition in the
marketplace, cooperation could be an advantage; if there is too much cooperation in the
industry, competition could potentially claim outsized profits.
Context Related
a) Industry Context - Compliance and Choice
Compliance and choice are both choices a firm makes, and a result of the practices in
the industry in which the firm operates. However, even in the context of highly regulated
industries, some firms are more prone to “rock the boat”, while others pride themselves
on a “spotless record”. The differences between the two can be summed up as where
those firms fall along the compliance and choice paradox.
b) Organizational Context - Control and Chaos
The culture of the company, along with internal processes, can often be analyzed in the
organizational context. Control and chaos set the tone for the culture, but also have a
large influence on the other ten concepts listed here. Certain predilections lend
themselves better to a controlling or a chaotic environment, and decisions about
organizational context can either help reinforce, or extinguish, such behavior.
c) International Context - Globalization and Localization
This is the internationalization context in which the firm operates, as well as the context
to which it aspires. Some firms function much better on a local level, while others strive
to be multinational enterprises. Strategically, the firms will face much different choices
and pressures, and the firms will have to respond in the appropriate way.
Purpose
a) Organizational Purpose - Profit and Responsibility
The final tension is a representation of the overall purpose of the company, akin to a
moral judgement about what the function of a business should be. If the purpose of a
company is only wealth creation, the management clearly favors profit; if the good of
humanity is the primary concern, the management clearly favors responsibility. As with
many other of the paradoxes, it is rare to find an example where a company operates at
the extreme, but knowing where a company lies along this scale can help determine
future decisions and the general outlook of the management.
C. Ten Types of Innovation Addressed by G2G
Profit Model
The profit model of G2G is based upon dynamic pricing of a convenience service, and
will vary based upon the supply of charging units as well as the demand of the electric
vehicles within a given area. When an imbalance exists between supply and demand,
the platform will automatically adjust the pricing of the service, in an attempt to match
the two economic forces while capturing the most profit possible (Cachon 2009). In
order to keep the service economically viable, as well as fitting in within the mantra of
sustainability, a pricing ceiling will be enforced, which will correspond to the prevailing
price of traditional gasoline.
The company foresees this model to engage different types of customers in different
manners, as the needs of each type differ on a fundamental level. For plug-in hybrid
electric vehicle owners, the platform will function less as a convenience service, and
more as a traditional energy supplier. This will allow G2G to remain a competitive option
for hybrid vehicle owners, who often have much smaller range limitations for battery
operation, and often have to switch to traditional fuel sources. Conversely, all-electric
vehicles generally have a much greater range available in terms of battery, and their
motive for using the service would more likely be that of convenience. Not only does
G2G remove the challenge of finding an appropriate location to charge a vehicle, which
is a sizable difficulty in many cities, but also leverages the fact that a vehicle is
stationary over 90% of the time, allowing every parking spot to be a charging location.
Network
The G2G business model employs an open-ended supplier network to deliver its value
proposition to the end customer; actual suppliers will be independent entities who can
choose to participate as they see fit, much like the system Uber employs for its taxi
service. Any entity has the potential to be a service provider, provided they possess the
prerequisite resources, in this case, a battery, a connecting cable, and access to the
application. Because of the commoditized nature of the deliverable (electricity), and the
one-way nature of the transfer (vehicles are not capable of charging batteries),
management of G2G has decided that selection of suppliers is not a necessary
requirement for the service. Unlike other convenience services, delivery of the service
does not have an inherent aspect of customer satisfaction; customers will have little-to-
no interaction with the suppliers.
A conscience decision not to overly engage in logistical planning was made by the
founders of the G2G platform, and rests on a derivation of the concept of open
innovation: just as an open innovation platform allows for companies to focus on areas
in which they excel, knowledge of local geography and traffic is best decided by the
local providers, instead of complex scheduling and route planning being done by the
application (Chesbrough 2006). Additionally, though G2G does not have any restrictions
on how the batteries (and consequently the electricity) are transported, the founders
believe that economic forces would inspire innovative transportation of the batteries to
reduce the cost born by the supplier in terms of their transportation requirements. The
drive to maximize profit will serve as an economic deterrent for less sustainable energy
sources: filling the batteries via solar power, could create a near-costless operation for
the suppliers.
Structure
Closely related to the network innovation is the structural innovation built into G2G’s
business model: tangible assets are shifted to the individual contractor, while G2G
provides the information required for the suppliers to deliver the requested service.
Though access to the capital markets is difficult for all startups, G2G is embracing the
“little guy” attitude and building it directly into its value proposition. Based on Seth
Godin’s work The Bootstrapper’s Bible, the concept of seeking out opportunities that
require minimal capital has proven to be a widely accepted methodology for technology
based startup initiatives (Harrison 2004).
Directly tied to this point is the concept of growth versus scaling. In a typical company,
growth entails increasing the means of production, which consequently increases the
costs of production. As long as revenues continue to remain above costs, a company
would be considered to be “growing”. Conversely, the concept of scaling does not
require substantial additional investments to generate more revenue. G2G is operating
as a knowledge-based enterprise, its true value is not in the tangible assets of the
company, but rather in the processes and core-competencies, and it can easily expand
or contract to meet the requirements and opportunities within the market (Grant 1996).
Service
The touch-less service model is an unusual aspect of traditional energy delivery:
whether customers have to use a traditional gasoline fueling station, or plug their car
into a charging point, there is some interaction required at the point of delivery. The
G2G platform intends to completely eliminate customer interaction at the point of
delivery by technological means: the customer will request service via a mobile
application, and indicate the location of their vehicle, while all other aspects of the
transaction are handled by the G2G platform. Vehicle identification, payment methods,
even the near-field communications required to unlock the battery cover, will all be
handled within the application, allowing for the service to be delivered with minimal
effort expended by the end-user.
Channel
Unlike more traditional energy providers, G2G will engage end-users in a purely virtual
manner; much like Uber, the application will rely on the ubiquity of smartphones for
customer engagement. The choice of channel directly influences the behavior of the
customer, and their perceptions of the value of the service, and it is G2G’s intent to
capitalize on the fact that many potential users are in possession of their smartphones
nearly all the time (Van Doorn 2010).
Customer Engagement
The core differentiator between G2G’s offering and traditional methods of electric
vehicle charging is how the company intends to engage their customers. Unlike legacy
methods, G2G will enable the customer to request a charge from their smartphone,
instead of the customer seeking out charge points, or servicing their vehicles
themselves. Real-time data, gathered from the both the application and the APIs that
most electric vehicles provide allow the customer to get information about the battery
status of their car, as well as the location and estimated delivery time for service
providers within their given geographic location. Potential later stages of the offering are
intended to make the entire management of the battery accessible via smartphone, in a
completely automated manner.
Facets Not Covered
Product system and product performance are explicitly not points of innovation that
G2G intends to incorporate into their offering, as the founders believe that they are
simply beyond the scope of the businesses knowledge and potential core
competencies. These decisions were also made from a resource-based view:
redesigning batteries, or physical charging equipment, is an expensive process, which
would require significant investments in research and development, and those
resources are simply not available to the company at this time. Additionally, at the time
of initial offering, innovating on brand did not make logical sense: G2G is not
established within the marketplace, which makes the concept of brand innovation a
moot point.
D. Strategic Mindset of G2G Founders
The information within this table is a result of a survey, and represents the profiles of the
founders in terms of strategic styles. Each item was scored on a scale from one to five
along the spectrum of the strategic tensions and paradoxes described, with “one”
representing a strong preference towards the first option, “five” representing a strong
preference towards the second option, and a “three” indicating no preference.
Paradox Yu Gali Neeti Dan
Logic vs. Creativity 2 3 5 5
Deliberateness vs. Emergence 3 2 4 3
Revolution vs. Evolution 1 4 4 1
Markets vs. Resources 1 1 2 4
Responsiveness vs. Synergy 5 3 4 2
Competition vs. Cooperation 5 4 5 1
Compliance vs. Choice 4 2 4 4
Control vs. Chaos 4 1 3 5
Globalization vs. Localization 4 3 5 4
Profitability vs. Responsibility 1 2 4 1
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