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
000s
Net new subscribers pq
000s
10,000
8582
7015
400
Sept
03
90
Sept
03
Jun
07
Jun
07
Mar
10
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
000s
SKY SUBSCRIBERS
000s
Subscribers lost pq
10,000
000s
8582
7015
400
349
300
Sept
03
Sept
03
Jun
07
Jun Mar
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 [~3million]?
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.