Month: October 2015

Telus Corp. recently announced a $1-billion investment aimed at vastly expanding Vancouver’s fiber-optic footprint. A move mirroring that of competitor Bell Canada (BCE) in eastern Canada. Fibre-optic connections bolster speed and network capacity to a large extent. And with data demands from consumers increasingly rising, fiber-op connectivity is rapidly becoming the norm. What interests me, however, is how the various Canadian telcos are adopting, implementing, and cerebrally marketing these network upgrades to strengthen their value propositions.

As an employee of Rogers Communications, I have experienced first hand how moves like this can intensify competition

My role with Rogers is within their Consumer Retention Division focusing primarily on wireless and home-based telecommunications service. Consequently, I work extensively with groups of customer-service-reps to understand what drives customer churn. That is, why are people leaving us?   To uncover insights we looked to one of our largest competitive threats: Bell Canada.

I have listened to hundreds of calls from clients requesting to disconnect their homes services to instead connect with Bell. Their reasoning varies greatly, but a common theme is Bell’s new fiber-op network. Clients seem fascinated and allured by this new technology. This was strange, because respectfully speaking, many of the clients that I personally solicited for feedback didn’t have much understanding of what technological enhancements they would actually receive. They simply knew it was supposedly faster, more reliable, and…..Fiber! What’s more, Bell had wireless set-top boxes, a feature which seemed to resonate with clients.

As the business model canvas illustrates, a value proposition should encompass either a solution to a customer problem, or the satisfying of their needs. In essence, a  business’s key features should match a customer’s problem or need. As evidenced from my personal experience with clients, the value message does not have to be overcomplicated. In Bell’s case it was simple: customers want faster internet, check; customers want greater bandwidth availability, check; customers want mobility in their set-top boxes, check! Through a combination of addressing client needs, solving client problems, and matching key products/needs. Bell has a stepped up their game, and placed pressure on Rogers to respond with an equally, if not more, valuable proposition.

Information was sourced from this Globe and Mail article.

As the semester progresses and we delve further into the facets of business, I find myself reading business articles through an entirely different lens. And although no business problem can be entirely force fit into a framework, it is interesting to see Michael Porter’s assertions applying in the business world.

Burberry—a luxury British fashion house—is an ideal example. In 2006, as global luxury markets boomed, Burberry struggled with stale brand perception, and paltry growth. Licensing agreements with manufacturers were diluting the company’s luxury appeal, and a decentralized design process was further compounding the problem.

In enters, Angela Ahrendts. As newly minted CEO, she was tasked with returning the brand to its former heights. And surely enough, has won praise for executing a sharp turn-around. Burberry’s top-line doubled over the next five years.

Ahrendts’ strategy reduces into a few, very simple, components. First, she identified that the company’s struggles were largely related to unilateral design teams not effectively working in unison. This resulted in inconsistent and—at times—unappealing products. Second, she noted that the company’s theme had shifted. The well-cut trench coats that were synonymous with Burberry’s iconic image had been relegated behind scores of other products.

So what’s the solution? Simple. Ahrendts understood that she needed to identify a focus, and organize the company’s activities accordingly. She shut down many design functions, and consolidated the remaining into one unit. According to Ahrendts, Burberry had strayed from its roots; and therefore, her team bought back 23 licenses, and centralized Burberry’s entire brand image around its classic trench coat. Interestingly, many of Ahrendts’ decisions mirror Porter’s sentiment on strategy. Porter contends that businesses must make tradeoffs in deciding what their offering will be. Doing too much can adversely impact the delivery of value to the consumer. Instead, a company’s activities must be organized around a chosen focus. Indeed, this very rationale proved effective in levelling Burberry’s downward trajectory.

** Came across this article on Burberry’s turnaround, and was compelled to do a little more research.  Take a look at this insightful  interview Angela Ahrendts did with the Harvard Business Review. Information was also sourced from these articles.

As new entrants including Chipotle and Shake Shack emerge in the fast-food industry, the customer experience has been redefined. These new players seem to offer a more contemporary and relaxed twist to the traditional fast-paced dining experience—all the while, touting customization, and placing an emphasis on ethical food sourcing. This new market segment fittingly labeled “fast-casual” has piqued the interest of McDonalds Canada.

McDonalds recently unveiled a new restaurant model that involves customers placing customized orders through digital self-serve kiosks, and food being delivered to tables via servers. Most importantly, a restructured menu will host a line-up of customizable “premium” ingredients that will parallel existing menu items.

Thinking back to Michael Porter’s arguments on strategy, as I’m reading this article the question swirls—what strategic position is McDonalds taking? Variety-based, needs based, or perhaps a confluence of both? Is it possible for them to co-exist as an extremely low cost fast-food provider, and a trendy—perhaps more upscale—restaurant outlet?

In this case, data insights from equivalent models McDonalds has launched in other geographies point to some form of success. For instance, reports from France state that customers spend 30% more when customizing items. That said, I’m now curious—will there be a cannibalization effect on the existing menu? If so, are the margins on the new products adequate to overcome lost sales, and boost top-line performance?

Coincidentally, this article was released concurrent to our class discussion on strategy. Though intrigued, I’m not necessarily convinced this move will deliver the returns McDonalds is looking for. In my opinion, the McDonalds brand is synonymous with fast and cheap. And to a large extent, this value proposition resonates with its core base. Radically changing that perception is no light task.

I’m curious to see how this initiative unravels, and plan to follow the story. Future earnings reports and news briefs should shine light on the implications of McDonald’s strategic decision.

Information sourced from The Globe and Mail and  Financial Post articles. Great reads, have a look!