It is also a matter of philosophy, in short, how the company interprets the real world and thinks it will develop in the future.
There are many ways to break down business strategy.
Let’s perhaps, start with a simple break-down of business strategy, in three core parts:
- Market entry (or go-to-market) requires initial traction (also in a niche market).
- Growth and market share acquisition, requiring expansion (from niche to broader).
- And business model renewal, requiring integration, consolidation, or innovation (you either acquire, merge, or place bets).
- Market entry: context-based
- Growth and market share acquisition
- Business model renewal
- Connected Business Frameworks
Market entry: context-based
Instead, they might build, acquire, or grow products that have the potential to gain a large customer/user base, quickly.
However, if we instead take into account a business strategy for startups, therefore, companies entering a market as a new player, there might be three primary ways to do it:
Breaking apart existing offerings
Take the case of Apple turning the music industry upside down, by offering single songs on its iTunes (a model then made obsolete by Spotify as it offered all songs users wanted with a single subscription.
Breaking apart the distribution network
A second way is through disintermediation.
Therefore, the entry player will identify the part of the distribution network that can be substituted.
Breaking apart the value chain
Another entry strategy is that of identifying within the customer journey, the most valuable part, to offer that alone.
Perhaps, Birchbox offering a subscription service to provide customers samples of pre-selected cosmetic products, remove the hardest part from the value chain (select those products in the first place) while providing what might be perceived as the most valuable part (high-quality pre-selected cosmetics delivered straight to the customer, thus removing the most challenging part).
For instance, when PayPal entered the market, it didn’t do it by trying to bring in as many customers from all over the place.
It simply found out that many of its power users were on eBay, and it surfed, what it was at the time a giant.
As we’ll see by the end of the article, eventually eBay acquired PayPal, and by 2015, it spun it off. Today PayPal is worth much more than eBay.
Business model renewal
Once the company has reached a mature stage with its business model, it gets the time to renew it.
This renewal can happen in several ways. Some of them can be through:
Integration and consolidation: vertical or horizontal
An example of placing bets on the future is how companies like Google, have within their portfolio, a set of companies, which product and potential business model (many of them are still at the development stage) is in part adjacent (like self-driving that can be used also to improve existing products) or, for now, disjoined.
For instance, back in 2015, eBay spun off PayPal. Today PayPal has a market cap of over $200 billion, compared to eBay’s over $40 billion market cap.
Connected Business Frameworks