STRATEGIC MANAGEMENT DYNAMICS Kim Warren Strategy Dynamics Sky

STRATEGIC MANAGEMENT DYNAMICS Kim Warren Strategy Dynamics: Sky TV subscribers ‘Strategic Management Dynamics’, 2008, by Kim Warren, from J Wiley & Sons. www. wiley. com/go/smd

Example 1: Will Sky satellite TV hit 10 million subscribers by 2010 – as promised to investors back in 2004? Here’s the situation mid-2007 after 3 years of effort … SKY SUBSCRIBERS 000 s Net new subscribers pq 000 s 10, 000 8582 7015 400 Sept 03 90 Sept 03 Jun 07 Mar 10 There are 25 million households in total, most getting analogue TV services 14 quarters to go @ +90, 000 per quarter = + 1, 260, 000. . . just short of target … so strategy = • give great deals [i. e. cut the price!] • throw money at marketing Job done ? © Copyright Kim Warren, 2008. All rights reserved.

Will Sky hit 10 million subscribers? New subscribers pq 000 s SKY SUBSCRIBERS 000 s Subscribers lost pq 10, 000 s 8582 7015 400 349 300 Sept 03 Jun 07 Sept Jun Mar 03 07 10 Mar 10 259 Sept Jun Mar 03 07 10 Can Sky … 1. keep the win-rate up – or 2. slow down the churn? Where do new customers come from? How many are out there? Where do they go? … and why? How many have already gone [~3 million]? Do they ever come back? Where else to potential customers go, and why? This framework alone provides big insight in surprisingly many cases – yes, ‘it’s obvious’, but only if you ask the question ! © Copyright Kim Warren, 2008. All rights reserved.

Example scenario for Sky satellite TV rivalry to 2010 As always, outcomes depend on the flow-rates. No realistic set of assumptions get Sky to 10 million © Copyright Kim Warren, 2008. All rights reserved. See model of this situation on the strategy dynamics forum www. strategydynamics. com/forum [go to Knowledge Exchange, Business]

RBV - Resources, VRIO, intangibles and capabilities The problem [I believe]: • ‘strategic’ resources drive performance • ‘strategic’ = VRIO [valuable, rare, inimitable, and organisationally embedded • … so simple tangible factors are dismissed But … • The ‘performance’ of concern is assumed to be profitability, not earnings growth • … or more generally, improving performance over time • VRIO factors are abstract and ambiguous, described only vaguely and inconsistently in the literature A solution • Profitability [or other performance] depends immediately on tangible factors • These accumulate and deplete over time, and are interdependent. • It’s ‘the system’ that drives performance, not a ‘list’ of resources, whether VRIO or not So … • IF VRIO factors are to influence performance over time, they must do so by affecting the rate of accumulation of non-VRIO factors. • . . . so we can’t ‘explain’ performance without including simple, tangible resources. i. e. You can’t explain airline performance without including ‘customers’ and ‘aircraft’ any more than you can ‘explain’ milk production without including cows !! © Copyright Kim Warren, 2008. All rights reserved.