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Saturday, December 24, 2005

Geoffrey Moore, Strategy ,Business Models, Long Tail & Optimization

The latest issue of Harvard Business Review, has an article titled, Strategy and the Stronger Hand written by Geoffrey Moore, where he talks about two distinct models of businesses. As Geoffrey sees it, there are two kinds of businesses in the world – knowing what they are and which one your enterprise is – will guide you to the right strategic moves. In the complex systems model,enterprises can service large customers and can gor the customer base with large deals centered on mimimal number of transactions. 1000 customers provide a billion dollar business.In the other kind of business, the model is entered on volume operations – here the enterprise is on a hunting mode and strive to acquire millions of customers with significant number of transactions – Say FMCG enterprises.

These two models are world apart and have a different approach along the classic value chain. When enterprises try to mix and math both the approaches it creates strain on the managerial mindset and habits, analogical to the handedness – left or right hand dominance and he points out that industries with ambidexterity with due recognition of missed opportunities could pursue such an option but staying along the stronger hand would ensure lot more success. Talking about the education and heathcare sectors, Geoffrey highlights that the complex systems model is not scalable to the needs of a large society.The only model that scales is the volume operations model - It does so by transforming unique relationships into standardized transactions. It is not driven to achieve excellence but rather to meet minimum quality standards as economically as possible.For any society/enterprise, the constructive path forward begins with abandoning any expectation of providing broader access to the complex systems model and instead focusing our creative energies on raising the standards of the volume operations capability as much as possible. If we look at chris anderson’s much talked about long tail – where does Geoffrey’s postulation fit in – the long tail essentially means a large volume model. On close examination the value chain difference between the two models opens up some space for disruptions and scope for realignments(niche services/offerings) – that’s where the complex system model can accommodate a little more without sacrificing on its core idea of delivering high value to chosen customers.

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