Chapter 5

Opportunity Screening
 5-Point Screening Questions for
Entering a Market
5-Point What it is?
Customer Is the market real?
Timing Is it big enough?
Finance Can it be profitable?
Product Can we differentiate
Competitiveness Can we win?
 Is the market real?
Entrepreneurs must have with those willing to
a sensemaking skill to transact with them, and
determine that a market finally, be competent
gap or market problem enough to know whether
truly exists, be practical or not the firm is in the
enough to do business best position to satisfy the
unmet needs.
 Is the market enough?
A market must be Channel of distribution
scalable as businesses can also determine the
must plan to grow. extent of market reach,
hence, the size of the
market.
 Can we profitable?
Entrepreneurs must know the breakeven point
of the company as well as the recovery period
of their investment, so they can plan to gain
critical mass of volume to have superior
financial returns.
 Can we differentiate?
Differentiation is about uniqueness, but
uniqueness can only be considered if there is
brand relevance.
 Can we win?
Entrepreneurs can have
profitable businesses but
their financial returns may
not be optimal yet.
Market leaders spending
the same marketing
investment will have a
much lower cost-to-sales
ration, hence, higher
return to sales ratio.
Entrepreneurs must not
just think about making
money but winning a
white space in the
marketplace for impact
and to be effective and
efficient.
 Criteria Used by Abenson to Screen
Opportunities
External Internal
Complementing Core Resource Abilities
Business Industry Knowledge
Market size People
Growth potential Capabilities to expand
Industry players
 Getting the Blue Ocean Strategic
Sequence Right
Blue Ocean Strategic Sequence Key Questions to Ask
Buyer utility Is there exceptional utility in your
business idea?

Price Is your price easily accessible to

mass of the buyers?
Cost
Can you attain your cost target to
profit at your strategic price?

Adoption What are adoption hurdles in

actualizing your business idea?
Are you addressing them upfront
 Key Factors for Success
Key factors for success (KFS) is a blueprint
composed of controllable and uncontrollable
variables critical to the success of a firm, that
must be managed well, in order to attain its
goals, and outperform competition.
Firms can also evaluate their strengths and
weaknesses (SW) against the KFS of the industry,
which represents half of the SWOT analysis, then
exploit the strengths while improving operationally
to neutralize weaknesses, or reinvent the industry to
make weakness irrelevant.
Water Phils, being selling-driven in promoting their
Waters Bio Mineral Pot 3-in-1 Alkaline, mineral and
purified home water system, identifies its key factors
for success as follows:
Large and motivated sales
force
Availability
Payment plans
Reward and recognition
programs
 Operational Improvements from KFS
of Water Philippines
Key Factors for Success Operational Improvements
Large and motivational sales Product range
force Recruiting
Training
Retention
Sales Leadership (Coaching,
Motivating, etc.)
Availability Branches
Independent Stockists
Delivery system
 .

Key Factors for Success Operational Improvements

Payment plants Credit scoring
Collection management

Rewards and recognition Photo wall of top sales

programs performers
Regular awards ceremony
(monthly branch, quarterly
and annual recognition)
5-star international trips
Car plan
Housing plan
Please note on the following when
formulating your KFS:
KFS are largely based on
industry winners-who they
are and why they have won
or are winning
The industry the firm
competes in must be
defined well so that the KFS
can be distinguished
thoroughly.
Define KFS by market
segment because what is
true in one market
segmentation may not be
true in another
Include similar products
that can provide the same
satisfaction to the
consumers in considering a
segment.
 .
The KFS must be reviewed
periodically because not all
rules will be the same over
time.
Market challenges must try
to reinvent the KFS in order
not to be trapped to play
catch up versus market
leaders. They need to have
new insights in order to be
guided in what to start
doing and what to stop
doing.
 Market Research
A teen clothing company had over P10million worth
of unsold clothes. The choice of clothes was based
on the personal preferences of the owners who are
not within the age profile of the target market. This
case is presented to illustrate the importance of
market research and the basis for demand
forecasting:
The personal preference of the owners may not be
what the customers want to buy.
A consumer panel composed of people within the
target market, as well as category buyers with track
record of hits more than misses, can be organized to
give opinion on what to order and what not to order.

Collective opinion can be superior versus an

especially in new, and unfamiliar
categories.
Patterns of consumer purchases should be
decoded to help understand consumer
preference.

A regular process of evaluating

studied.

Risk and effort can be reduced using a

disciplines method of making choices.
Marketing Research can be broadly divided into
qualitative and quantitative methods.

Qualitative market researches are conducted initially

which are validated subsequently with quantitative
market research, although qualitative researches are
also used to probe deeper into information (such as
Among the more popular market research
are the following:

Concept Test
Focus Group Discussion
(FGD)
In-depth Interview (IDI)
Concept Test
It allows entrepreneurs to
know the extent of how
much a product appeals to
the market. If there are
many ideas, test those
having higher potential first.
But entrepreneurs must be
mindful of choosing the right
target market to show their
concept, as well as understand
the effect of cannibalization to
existing offering. They must
take this into consideration in
choosing the product or
service that best creates
growth and incremental value
for the firm.
 Product Concept of Decolgen No-
Drowse Medicine
Target Market: Businessmen, employees or students experiencing

Existing Belief Drinking a cold tablet will make me

drowsy.
Emotional hook ako, do ako pwede

Reasons why Decolgen No-Drowse has no

chlorphenamine maleate, an
antihistamine which causes drowsiness

Product benefit Allows consumers to experience cold

relief without losing productivity.
Other Factors
other popular drugstores.
Focus Group Discussion
FGDS are conducted by
seasoned facilitators in a
relaxed atmosphere. The
small group is composed of
seven to nine people per
batch, chosen based on pre-
determined criteria. The
advantages of FGDs are that
it allows group members to
share experiences and to
build from
experiences.
However, there are
disadvantages as well.
Some people may not be
comfortable discussing a
topic with strangers in the
room, or a dominant
member may influence
opinions of others. Also,
facilitators are unable to
ask follow up questions
on individual replies.
In depth Interviews (IDI)
While FGDs are done with a However, IDIs are more time-
group of people. IDIs are done consuming, more expensive,
individually and with privacy, and do not provide a platform
which is good for people who for building from other
are conscious of the presence experiences.
of others. Individual
interviews also cannot be
influenced by opinions of
others and follow up questions
can be asked for clarity.
Prototyping and Rapid Testing
Entrepreneurs must ensure what they want is doable
they must convert a concept or an idea into reality via a
proof of concept, build a prototype and do rapid testing
and pivoting before being preempted by competition.
Thank you for listening!
 CHAPTER 6

Gate 2 Marketing: Mindset, Market, and

Message
 Opportunity Seizing
Entrepreneurs need to have an innovation
mindset so that they can stand out in the
marketplace.
Entrepreneurs should not wait for full
information to decide on an opportunity
because competition will also have access to
the same information.
 Identify the Target Market
The more focused the target market
definition, the better for the marketing
communication group to know who to send
messages to and for the sales force to know
who to approach.
Keep in mind that focus is not the same as
having too narrow a target market that limits
demand and growth.
 Creating a Compelling Message
Positioning is communicating the overall
positive impression of a brand, relative to
competition.
Three points to remember in product or
service positioning it must be relevant, it
must be unique, and it must be
communicated.
 List of Potential Compelling
Value Propositions
9 Ways to What is the Offer? Examples
Create
Value
Better Superior products or Cycles Mid Detergent for Babies does not
services have the harsh chemicals that leave
detergent residues, which may cause rashes
to babies with sensitive skin.
Faster Speed or capability to Phoenix Petroleum owner Dennis Uy had an
move quickly advantage when he was just starting
dealers can call him directly and decisions
can be made immediately unlike managers
of multinational competitors who cannot
make decisions on the spot.
Cheaper Lower prices with the Boy Kanin serves Filipino dishes ether in
same or better value carts, kiosks or in-line stores at reasonable
process versus the bigger competitors.
Closer Good relationship with Motolite car battery can be delivered and
customers, including installed wherever the motorist is located.
localization.
Large (or Wider choices, including Philippines is a shopping paradise with four of
smaller) bundled choices with
alliance partners country SM North Edsa, SM Mall of Asia, SM
Megamall, and SM Cebu City.
(if smaller, more
convenient) (For example, Bibingkinitan offers a smaller
serving size of bibingka, making it much more
affordable in the market.)
Easier Flexible service or total Linear Coffee Roaster does end-to-end service
solution provider starting from sourcing and roasting of beans,
to training and product consignment, and
even tie-ups.
Rarer Exclusivity, or being the Mansmith and Fielders Inc. created propriety
only choice in the area marketing seminars in the Philippines,
available only from them such as Market-
Driving Strategy, Marketing and Sales
Implementation, and 5 Skills of Master
Strategies.
Prestige Reputation from favorable Premium priced products like BMW in cars not
and aspirational perception only offer superior functional performance
but highly emotional benefit (from status or
social associations) as well.
Different New category or Omron electronic blood pressure monitor
innovation, including targeted housewives instead of targeting
targeting underserved or doctors using traditional blood pressure
unserved market (the machines with stethoscope.
innovation need not be
superior and can even be
inferior compared to what
is available.)
Being relevant is about identifying and solving
pain points. The pain point can be actual
(unsatisfied performance) or latent (creating a
higher level of satisfaction).
Being unique is about creating distinctive value
compelling enough to attract customers to buy
continuously.
Communicating is about converting a superior
product or service value advantage to a market
advantage.
 Alternative Ways to
Communicate Positioning
Alternative Positioning Examples
Price Cebu Pacific Air: Best deals, seat sale,
lowest airfare, and discounted flights.
Product Attribute Jollibee: Langhap Sarap (Delicious-tasting
smell)
Product Category Fit Flop Sandals: A Taste of Superb Comfort
Product Source Ginseng: Proudly Made in Korea
User Segment Duty Free Shopping: For balikbayan
shopping
Usage Behavior Viva Mineral Water: Wash Your Excesses
Away
Experience / Feeling BMW: The Ultimate Driving Machine
Against Competition Sustagen: Recommended by 8 out of 10
Doctors
 6-Question Positioning Framework
by Ries and Trot

1. What position do you currently own?

2. What position do you want to own?
3. Whom do you have to defeat to own the position you want?
4. Do you have the resources to do it?
5. Can you persist until you get there?
6. Are your tactics supporting the positioning objective you set?

It is important to be consistent in the positioning, or consumers

will be confused.
 Marketing Mix
More popularly known as the 4 Ps of
marketing is a set of controllable and inter-
related variables composed of product, place,
price, and promotions that the company
assembles to satisfy a target group.
If the target market is unclear, the marketing
mix is useless.
For the service industry, there are three
additional Ps namely: physical environment,
people and processes.
 Role of Each Marketing Mix Element

Product/Service To satisfy consumer needs

and wants.
Price To make product affordable to target
consumers.
Place To make product available consistent
with purchasing pattern.
Promotions To build and improve consumer
demand. Has four components:
- Advertising. To effectively inform, persuade
and remind the target consumers.
- Sales promotions. To convince customers to
buy immediately.
- Public Relations. To offer a positive image of
the company and the brand, as well as
promote an advocacy.
- Selling. To get the customers to buy.
 Service
- Physical Environment. To create the tangible
expression of the brand engaging the senses
through the layout and images of the
servicescape.
- People. To show a living presentation of the
brand promise.
- Process. To experience how the brand delivers
value.
 4 Key Decisions in Assembling the
Marketing Mix

Ink for Less was started by Miguel Aguiluz in

2002 first targeting the consumers, but shifted
to the corporate market when the trend
moved toward continuous ink, which was
heavily dependent on technology.
 4 Key Questions to Ask in Assembling the
Marketing Mix of Ink for Less
4 Key Questions to Ask in
Assembling the
Marketing Mix
1. What do I tell my target
market?
2. Where can I find my
target market?
3. How will I make my
target market try me?
4. Will my product and
service be compelling
enough to encourage
repeat and referrals?
Type of Decision Marketing Mix to Examples
be Used
The communication Advertising Ink For Less Pro Services offers free
channel decision Public Relations printers in exchange for a minimum
Selling 2-year contract, communicated by an
institutional salesforce
The distribution Place (Distribution) Top 500 corporations of the
channel decision Philippines
The sampling Promotions Price Product demonstration done by the
decision institutional salesforce, emphasizing
budget saving companies can use for
other projects.
The vale proposition Product Service Companies save 100% on printer cost
decision and save another 60% on ink cost
versus the original equipment
manufacturer (OEM), while giving the
same page yield and printing quality.
 Value Proposition
Among the elements of the marketing mix, the
first elements to be assembled is always the value
proposition, or the product vis-à-vis price, as
these two are inseparable.
The entrepreneur needs to decide if the value
proposition will be superior, parity, inferior or
even different to what is available in the
marketplace.
 4 Decisions About Value Proposition for Restaurants
Value What it is Typical Product Examples
Proposition Price Typology
Decision
Superior High Quality Full service restaurants like
available High Price and Fridays
Parity Same Quality
available Same Price
Inferior Not as good as Lower Quality The perceived basic hygiene
Lower Price practices of food carts (Jolly
Jeeps)
Different Different from Can be Higher or Suspended account concept
Lower Price where customers pay for two
cups of coffee but will get only
one cup, with the other cup
reserved for any poor person
wo wants it
 Develop a Brand Name
Good brand names are easy to
pronounce, easy to remember and helps
in the brand positioning process.
Marketing Mix and Product Life Cycle

To formulate the marketing mix, it is

important to know where the target market is
in order to be aligned with their needs.
This is especially important when introducing
a new product category.
Characteristics of the Product Life Cycle
Product Life Product Brand Stage of Amount of Speed in
Cycle Category Awareness Decision Information Decision
Awareness Needed Making

Introductory Low Low Extensive Large Slow

Growth High Low Limited Medium Medium

Maturity High High Routine Small Fast

During the product introduction stage, consumers
are confronted with a brand from an unfamiliar
product category. Marketers must remember that
the greater the complexity of a new product, the
slower acceptance it should expect because of the
higher risk associated with an unfamiliar product.
In the growth stage, consumers may encounter a
new brand in a familiar product category.
In the maturing stage, consumers are familiar with
both the brand and the product category.
Understanding Consumer Choice and
Marketing Mix
While marketing mix should be designed in such
a way where consumers get a compelling value
proposition while the company gets profit
maximization, the relationship of marketing mix
and consumer choice is not direct, because
consumers consider two other factors before
making buying choices as to category, product,
brand, channel, vendor, timing, quantity as well
as payment method.
 What is it? Elements Examples
Characteristics

Cultural How a learned world Culture, sub-culture, Buying airline business class
view can influence social class ticket or concert VIP ticket shows
buyer behavior social and economic wealth,
power and even prestige.
Social How people around us Reference groups, Junior Chamber International
can influence buyer roles, status, family Manila (JCI Manila) is the
behavior premier association for
leadership development among
young professionals. They are a
network of businessmen and
entrepreneurs.
Personal How personal Age, life, cycle stage, Competitive parents with young
circumstances can occupation, economic kids are a good market for
influence buyer situation, lifestyle, tutorials like Ahead Tutorials.
behavior personality, self-
concept
Psychological How self-concept can Motivation, perception, Red wine has been experiencing
influence buyer learning, belief, increasing demand, as people
behavior attitudes perceive it to be good for the
heart while giving the drinker a
more sophisticated image.
For business-to-business (B2B), there is a slight
difference as influences are taken into
consideration, as follows:
Environmental influences (supply conditions,
competitive developments, social concerns)
Organizational influences (Objectives, policies,
procedures, organizational structures, skills, and
system)
Situational influences (time, financial standing,
availability, exclusivity, special offers)
Interpersonal influences (Interests, authority,
status)
Individual influences (age, income, education,
job position, personality, risk tolerance, and
culture and customs)
 Consumer Decision Process
Consumer Decision What is it? Example: Home Water Purifiers
Process

Problem Recognition Why do I need to make A housewife spends P150.00 a week on drinking
this purchase? water. That sums up to P600.00 a month,
P7,200.00 a year or over P500,000.00 in her
lifetime.

The bottled water from most water refill stations

is also acidic and has a two-day shelf life

Information Search Where do get my Online review, social media page, blog, friends,
information relevant to my and advertisements .
need
Noli de Castro reported violators of water refill
stations to educate consumers to be careful.
Evaluation of What are the available attributes and
Alternatives how do I prioritize these attributes,
including brand image?
Purchase Decision What will I buy (product, brand), from
whom (seller), when and how much
(price and quantity)?
Should a housewife buy an expensive water
treatment device similar to the cost of a car?
Should she settle for a cheap water filter or
should she buy something in-between that can
give her family clean, tasty and alkaline water
that can hopefully be bought on installment
payment terms near her monthly budget for
drinking water plus give her peace of mind?
Buying a 3-in-1 alkaline-mineral-purified water
8.5 as per World Health Organization (a product
with higher alkaline level than 8.5 requires
medical supervision).
Buying from reputable supplier who has test
results from reputable laboratories, with
delivery and quick installation without breaking
any walls (product).
Buying from direct seller as part of helping an
individual to have inclusive growth (seller).
Delivering on a weekend (when), buying on
installment (price) together with sibling
(quantity).
Post-Purchase How do I feel after using the A housewife will feel more secure
Decision product or service? not just with warranty but also with
reputable suppliers providing
personalized after sales service
home visits besides available service
centers. In case of large parties and
events, the customer can borrow
water purifying units from the
suppliers instead of being required to
buy more units as part of a lifetime
partnership.
For business-to-business (B2B), there is a slight
difference in business decision process as BTB clients
go through:
Problem recognition
General need description
Product specifications
Supplier search
Proposal solicitation
Purchase decision (supplier selection)
Order routine and supplier performance review
 The 4-Mind Framework
The 4 Minds What is it? Examples Decision-making
Ideal point Customers know Dream home Customers compare
exactly what they every thing to the
want ideal
Market comparison Customers figure out Digital Camera Customers look at a
what is available in few key attributes
the marketplace
Local Comparison Customers decide Menu in a restaurant Customers compare
based on options based on limited
available at the choices
moment
Image point Customers decide Known brands Customers are brand
based on general conscious
comparison
 Marketing Mix for Service

Unlike the 4Ps of product marketing, service

requires three additional Ps, namely physical
environment, process and people.
 Marketing Mix of the Dr. Carl Balita Review Center (CBRC)
4 Key Questions Type of Decision Marketing Mix to CBRC
to Ask in be Used
Assembling the
Marketing Mix
1. What do I tell The Advertising Credentials of Dr. Balita
my target communication (including social Brand association of company name
market? channel decision media), Public with radio/TV talk shows of Dr. Carl
Relations, Selling Balita in DZMM
Unprecedented number of Board
Topnotchers
Testimonials of topnotchers and
passers
Movie Maestra and to
motivate younger generation to be
teachers and nurses
Daily social media video of positive
messages, shared by all branches and
franchisees
2. Where can I The distribution Place (Distribution) Close to 100 branches in the
find my target channel decision Philippines and abroad including Abu
market? Dhabi, Dubai, Jakarta and Hongkong
Physical Study-friendly branches in green color
Environment
3. How will I The sampling Promotions Seminars
make my decision Price, Conferences
target market Premium pricing
try me? People, Quality of reviewers and review
Process materials plus the manner of
teaching as process
4. Will my The value Product/Service Number of topnotchers in board
product and proposition exams
service be decision Franchise excellence award for
compelling franchisees
enough to Referrals from passers and
encourage topnotchers, their parents and
repeat and relatives and social media
referrals? reputation
 Expanding the Portfolio
Seizing the opportunity is an initial step, but once a firm
experiences success, the challenge is nurturing it to grow
in a sustainable manner.
One way is to consider expanding in the white spaces of
the industry before new entrants grab piece of the
pie.
Entrepreneurs must resist using good money to run after
bad money by not fighting in a red ocean market where
competitors are already well entrenched. They should
look for underserved and unserved market opportunities
Value Creation Strategies of Jimini Foods Group
Brands Jimini Pizza Pedricos
Year established 1999 2005 2012
Target Market Kids Family and Time-starved
Barkada (gang) individuals
Value Frozen-fresh Pasalubong Quick pizza with
proposition pizza that tastes (treat) with four supreme flavors,
like freshly flavors in one not just one
prepared pies pizza flavor variant
Channel Premiere Carts and kiosks High traffic
schools and where family transient areas
premiere and friends offering grab
supermarkets hang out + and go foods
convenience
stores
Growth Strategy of Jimini Foods Group

1. Product from Jimini, to Pizza Pedricos, then

Supreme Slice.
2. Market from kids, to family and barkada (gang), to
time-starved individuals.
3. Channel from carts and kiosks outside schools, to
inside schools, to convenience stores, to supermarkets,
malls or transient places.
4. Geography from Metro Manila to key cities, then
secondary cities worldwide.
Whether it be product or market expansion opportunity,
entrepreneurs must carefully plan their beachhead
market strategy which is a growth strategy where a firm
invests in a market to gain a dominant market share in
order to enter adjacent markets.
Three questions must be asked before a major
opportunity should be considered for adoption:
Can it add value to either the business unit or the
company as a whole?
Other than profit, can the benefit outweigh the
cost?
Can it have significant competitive advantage?
 Managing Risk
Risk is simply the possibility of losing something.
Entrepreneurs are mostly people with higher risk
appetites, but they are also good at recognizing and
mitigating risk before it affects their financial well-being.
Jay Aldeguer, founder of Islands Souvenir Group, shared
two uncertainties he identified before opening Islands
Souvenir in Cebu in 1992:
1. How the public would respond to their new
concept of souvenir shirts.
2. Uncertainty if department stores were the best
distribution outlets.
This is how Jay approaches the businesses he gets into:
He always starts small and conservatively (relatively).
His vision, however, is always ambitious and bold.
His teams are always armed with readiness to go
once they feel they have the business
figured out.
Their organization and culture are nimble and
resilient.
They always have contingency plans; this gets them
ready when faced with issues that have not been
anticipated.
 Exercise
1. Identify a business opportunity that involves the use of
middlemen. Recommend how the business opportunity can
be disrupted by bringing producers direct to consumers,
especially when the middlemen hardly add any value.

Caselet
1. Filipinos are not fond of eating vegetables. They prefer to eat
meat, and fish. In fact, the Filipinos have the lowest per
capita vegetable consumption in Asia. Recommend a
business concept that will make vegetable eating cool and
fashionable. How will this concept be communicated?
 Q&A with Serenitea Co-Founder Juliet
Herrera-Chen on Differentiation
Juliet Herrera-Chen founded Serenitea with her husband,
then boyfriend Peter, with the hopes of providing a better life
for her future family.
She is a graduate of De La Salle Benilde with a degree in
Import Management.
Immersed in growing business, she realized she needed to
develop herself as well.
She enrolled in an entrepreneurial graduate program where
she found herself being equipped with the knowledge she
needed to face the demands of Serenitea.
 Q1: Unlike your competitors, Serenitea brews
freshly brewed tea using an Espresso machine.
What was the insight for this move?

A: We did this to ensure the quality of our product so

as to deliver freshness in every cup. It also helps our
business minimize spoilage. a win-win move for
both customers and the company. It also happened
that no tea company or shop has ever done this in
the country when we introduced this way of
preparing tea. This innovation helped give us a
unique selling proposition aside from being
economical.
 number 1 in your industry even if you are market
pioneer, yet you are doing well with close to 60
stores. Why is this so?
A: We have close to 60 branches due to the support
of our customers and hard working employees. They
continue to inspire us. They believe in our brand.
why we never stop innovating in order to
provide them the best quality products and services.
This philosophy helped our brand reach its status
today. We are glad we achieved this without
competitive consciousness but with just a deep
desire to provide the best.
 Q3: What other things make Serenitea unique?
A: We never stop inventing and introducing new tea drinks to
keep our customers excited. We do this almost every quarter.
An excited customer always comes back. We also have our
signature tea flavors like Okinawa and Hokkaido, which we
only have. Constant innovation is what makes Serenitea
unique.
We import our cups from abroad and make sure we hold this
event only once a year to make it a promo activity everyone
looks forward to.
All our drinks are freshly brewed and prepared upon order.
We take pride in the quality of drinks we make for our
customers.
Our store ambience is designed to give the most perfect
setting to enjoy tea.
 Q4: Although many customers are starting to return
to drinking milk tea, what have you done to help
customers regain their trust and confidence to
Serenitea?
A: Most Serenitea stores have their mixing areas
open so that customers can see how the team
prepares their drink. This is similar to the concept of
an open kitchen in some restaurants. Also, our team
is prepared to answer their inquiries on how they can
assure the safety of their drink. We also make sure
that we have the following: monthly water lab tests,
a reliable water filter system, health cards for our
employees, proper labels on our ingredients and
yearly seminar for food safety and sanitation.
Q5: You have expanded to other businesses, what is
your vision for Serenitea group?

A: vision is to stay in the business for a

long time and to bring the brand internationally.
Team members/staff can have their own Serenitea
through a cooperative. My vision is not only for our
brand but also for our hardworking people.
CHAPTER 7

Innovation
 Innovation
Innovation is about having a new way of doing things with
commercial success.
It targets to solve, in a novel way, pain points of customers or
non-customers who are willing to pay for the solution, either
through a product or a service.
Innovation in product, service, process or business model can be
sustaining, differentiated or disruptive.
No innovation can happen unless there is a new truth or an
insight discovered, so entrepreneurs must hunt for the new
truths what people like or dislike, why they feel that way, what
barriers do they encounter and why these are important.
 4 Competencies of an Innovator
1. Creativity forming a mental image or new idea about the future
Am I visionary?
Am I able to see the big picture where innovation can reside?
Do I challenge the status quo?

2. Critical Thinking offering unique ways to solve defined problems

Do I understand different processes and approaches to solving
problems?
Am I able to generate novel but relevant ideas to solve problems?
Am I able to get inspiration from various industries or situations?
3. Collaboration developing relationships with the right partners to
attain objectives
Do I understand the jobs-to-be-done?
Am I able to define synergy benefits and share credit with each
collaborator?
Am I able to have good interdependent relationships with my
collaborators?

4. Communication engaging constituents to make them understand and

accept your message
Am I able to have conversations and listen to the opinions of my
constituents?
Am I able to make others see what I can see?
Am I able to get others excited about my idea on solving their
problems
 How to Improve Creativity and
Be an Innovator
A. Knowledge Update new ideas gained from experience and/or
education
1. Read to study diverse topics
2. Watch to observe other categories and industries
3. Online browsing to do social listening

B. Process a sequence of steps to attain new ideas

4. Conversations to have interactions with experts and those
with divergent views
5. Think like a child to be curious and keep asking questions
6. Probe to do data gathering and look for motivations
and deeper meanings
7. Rest and recreation to have a well-rested mind to welcome
ideas with clarity
C. Reflections serious thinking about a particular problem or idea
to increase and retain creative proficiency
8. Openness to listen to the opinions and ideas of others
9. Mind mapping to have a process of organizing
information
10. ME time to practice tasks and habits regularly

D. Experiences actual encounters with subjects

11. Inspiration to be mentally stimulated with different
sources like visuals, plays, etc.
12. Travel to take trips, especially in trend hubs, to
observe new ideas in other places
 8 Tips to Create an Innovation Mindset
1. Hiring recruit some people who are non-conformists with
uncommon sense, instead of acquiring the usual people with familiar
skill sets and common sense.
2. Training create innovation competency by providing tools,
frameworks and methods that are duplicable, ending with an annual
innovation tournament, instead of a passive suggestion box where
random ideas are given.
3. Idea Channel & Champion provide employees a to have
the option to submit to a high-level innovation executive, if their
immediate superior would turn down a major proposal which they
believe has high potential.
4. Behavioral Requirement establish innovation as a pre-requisite for
promotion and merit raise on top of revenue and profit growth.
5. Focus mull over business model innovation, instead of just
product and process innovation.
6. Bottom line look into the long-term effect of market
penetration, and not just short-term market shares as a key
performance indicator.
7. Reward and recognition create a climate where innovation is
rewarded or recognized.
8. Time allow specific time for people to work on focused
innovation projects during regular work hours.
 Exhibit7-1: Comparison of the Old and New
Business Models of Waters Philippines
Old Business Model
Offering
Target Market Buyers: Middle class(safety
but best value conscious)
Large and medium size
appliance dealers
Value Proposition Buyers- peace of mind
Dealers- profit generator
and image enhancer
New Business Model
Buyers: Middle
class(safety but quality
conscious, buyers from
water refill stations)
Distributors: Struggling
Filipino breadwinners
Buyers-peace of mind
without the lifetime
expense, pay on
installment rather than
cash for comparable
affordability
Distributors-
franchise(save and earn
money by being a
distributor)
Channel Appliance retailers Pre-sale: Exhibits and public
service
Transaction: Direct selling
Post-sale: Field service
representatives
Customer Bonding Pull events to the Training, events and
Strategy store functions
Participation of store Yearly-travel plan
sale, anniversary and 5-year-Car plan
store operating Long-term-housing
support System- inheritable rank and
privileges
Revenue Model Revenue from dealer Sale of units
sales Interest income(for
installment sales)
Parts, filters and home
service
 Old Business Model New Business Model
Operating Model Manufacturer Importer Manufacturer
Distributor Retail stores Promo Importer
personnel End users Distributor Independent
salesforce Independent
servicing distributors
End users Regional 3rd
party collection agencies
Resources and Exclusivity Exclusivity
Processes Product knowledge training to Relationship with sales
storekeepers leaders
Order fulfillment Training (class and field
buddy)
Credit scoring
Collection tracking
Recognition
management
Complementors Store Convert interested users
recommendations into distributors
Collectors
Configurations None Independent pay system
Incentivize cash sales to
reduce money cost
Cost Product cost Product costs
Trade investment Variable selling costs
Longer terms Administrative costs
Print Advertising
and sales
promotions
 5 Tips on Innovating the Business Model
1. From Facts to Assumptions
Look at how the industry operates and challenges every element of this
industry logic. Just because some companies have been successful do not mean
they have been doing all the right things right.

2. From Pain Points to Pain Killers

In the Philippines, many upper and upper middle households have an
extra car for days.

3. From Strength to Weakness

Lux(formerly Euroclean) was market leader in home water purifiers in the
Philippines in the 1980 using knock-on-the-door type of nationwide house-to-house
operations done by full time sellers. With households more concerned with security,
more women working and the popularity of condominium living, Waters Philippines
entered the market in 1995 and challenged this traditional direct selling approach.
4. From Non-Users to Users
Cebu Pacific Air targeted those who are users of sea and
land transportation as well as those who do not travel or do not
travel as much as they would like to. It turned out that the
numbers of non-users of air transportation were much more than
the users. The key to stimulate demand was to lower cost in order
to have lower price.

5. From Niche to Mainstream

Disruptors would often start as a niche before becoming
mainstream. The offer of a disruptor may not be attractive initially
to the existing users, especially if it would mean additional
investment. New users may be early adopters eventually attracting
existing users.
 Learning Innovation
1. Ask a question about your company (or your school) everyday
starting from the more obvious ones, and find out for yourself
whether the reply has some basis or are simply assumptions.
2. Ask what has been the greatest innovation in your industry for the
last three to five years and study the insights behind the innovation.
3. If there has been no innovation in your industry the last three to five
years, stop benchmarking and studying best practices, the latter is
only as good as the next practices.
4. Do not insist on getting an expert from your industry because they
will have the same conventional wisdom as all others. Conventional
wisdom leads to the usual or ordinary practices, not innovation.

Innovation is a big lifeline of companies, a potion to avoid

commoditization and price war.
 Innovating the Choice of Target Market
In February 2004, Facebook (which used to refer to a printed
directory with photos and basic information of students from a
particular school) initially targeted schoolmates of founder Mark
Zuckerberg as members, connecting student in the Harvard
University. From this base, it quickly expanded to other colleges
in and near the Boston area in the East Cost of the United States.
It then invited other Ivy League schools, eventually welcoming
all other universities in North America. In September 2006,
Facebook changed its college education focus to accept anyone
above 13 years old with an email address, reaching over two
billion members in twelve years.
 Innovating the Value Proposition

Martin Luther led the Protestant reformation in the

15th century and offered an alternative religious choice
based on (from grace) rather than
the and principle of Catholics. Luther
allowed the Bible to be available in language other
than Latin to expand his audience and allowed priests
to marry.
 Innovating the Channel Strategy
Netflix started as a DVD subscription business where customers
choose a plan that allowed Netflix to deliver a fixed number of
DVDs by mail, and then with the next set mailed to them after
the previous set had been mailed back. This disrupted market
leader Blockbuster with their dominance in brick-and-mortar
retailing, as Netflix did not have to pay for costly retail locations
and used fewer staff. In the Netflix business model, there were
no overdue fees, a pain point under the Blockbuster business set
up. The motivation for Netflix customers to return the DVDs
once they are done is to receive the next batch of DVDs under
the plan they availed. Eventually, the channel was changed to
online streaming, another success. This time, Netflix disrupted
cable TVs.
 Innovating the Customer Bonding Strategy

Amazing Race is a TV show that features teams

competing to reach a destination while the host
country displays the beauty of their location.
They have innovated on a tourism show using
gamification instead of the usual documentary.
 Innovating the Revenue Model
Recession Coffee in Eastwood is located at the
front area of the store of Digital Walker, which is
like their traffic builder. They had a pay-what-
you-want offer for their coffee which was a
novelty in the industry, but has since fixed the
price at P99.
 Innovating the Value Network
Xiameter, an affiliate of Dow Corning USA,
collapsed the processes of manufacturing,
warehousing and inventory management, by
shipping out on the day their silicones are
produced, thus, no longer requiring inventory
management or warehouse space. This resulted
in lower costs, enabling them to reduce the
prices of commoditized products with expired
patents.
Innovating the Resources and Processes
Ikea furniture is known for ready-to-assemble furniture
in flat packs. Its late founder, Ingvar Kamprad, was in
the mail order business when he was young, he knew
the importance of easy-to-ship/transport products. The
flat pack process enabled them to save on space in the
warehouse as well as in transportation, while also
reducing the cost for the customers who can opt to
save delivery charges by picking up and assembling the
furniture themselves.
 Innovating the Complementors
Hindustan Unilever offers income opportunities
to women in rural India. They tie-up with micro
lending institutions, non government offices
(NGO) for self-help groups, local government,
geographical stockists and local drama troops to
deliver their brand message via comedy shows.
 Innovating the Configuration
In the US, coupons are popular among fast food
brands. At one time, decided not to
print coupons and just post an announcement
outside the store that they will honor coupons
of other brands, saving them printing costs
while having the same effect as sales
promotions.
 Innovating the Cost Model
Instead of advertising in mass media, Arce Dairy
ice cream sells to Philippine Airlines, which
serves its ice cream to international passengers
after meals. The consumption by passengers
serves as a substitute for awareness and paid
sampling, enabling ice cream to be tried
without having to spend the media cost of
bigger competition.
 How to Innovate the Marketing Mix
on Demand
One tool used to innovate marketing mix is a 5-
Point Marketing Innovation Tool used by Mansmith
and Fielders Inc. and adopted by the White Space
Club.
It provides five ways to each element of
the marketing mix. The choice of which of the five
ways to use, depends on what can help solve the
pain points effectively in a novel way.
Point Marketing Mix Innovation Tool
On Demand

What can be raised or created? What can be reduced or

eliminated?

COMBINATION
What can be combined or united?

What can be enlarged or What can be subdivided and

amplified? rearranged?
 Exhibit 7-3: Product/Service
+ x - Combination
Innovation on Demand
2-in-1 Phone with Debit External Hard Online
Shampoo + Internet, Card(cashless) Drive Shopping
Conditioner Cable, and free (+new
shows Drive Thru Acer Channel,
Lip and Cheek Restaurant Transformer x Time Open,
Tints Laptop -Parking
SM Advantage Vendors :
Reward Logistics)
Card(SM +
BDO + Bayad Center
Watsons, etc.) (+ Vendors
x Locations
-Dressing Up
Payment
Buying
Services)
Special What are you willing to do if someone
special like your own mother experienced pain
points?
Crisis Suppose your sales target has been
increased 500%, what else will you consider
doing?
Else Who else have you not considered? What
else can you do? How else can you do it?
 SCENIC Innovation Questions

Another way to foster innovation thinking is

through the SCENIC framework shared by
Mansmith and Fielders Inc. to help
entrepreneurs and innovators reflect on
innovation possibilities based on pain points
they are focused on solving.
Not Instead of thinking things are impossible,
think and look for new possibilities.
If Scenario building is another possibility, with
question.
Constraint suppose the government imposed
restrictions and you cannot do what you are
doing, what else would you do?
 How to Kill Innovation

Protecting financials came out as the most

frequently cited answer why market leaders
freeze when it comes to innovation, though
there is evidence that also shows how
innovation, and not just incremental
improvement, can be introduced by incumbent
market leaders.
1. Protecting Financials The role is ensuring healthy
financials. This means increasing revenues and profitability,
and not necessarily launching innovation, which may be seen
as an expense rather than as an investment.
2. Culture of Complacency, Status Quo and Conservative Attitude
Market leaders often become too comfortable with their
success. They have succeeded based on what they have done
in the past and are no longer as hungry and driven to change
their success for growth; after all, they already have a
name and the money.
3. Limited Paradigm, Knowledge and Methodologies A high
market share can blind recipients of the need to improve
market penetration radically. Also, being better is the
greatest enemy of being different.
4. Arrogance and Pride When a company is at its peak and
has a lot of resources, some of its key officers may think
they are indestructible for having high brand loyalty.
5. Focus on other strengths Market dominance may inhibit
strategic thinking, especially of new market spaces. Market
leaders have many areas they consider strengths and may
just allow a new player to do their thing.
6. Industry Conditions, especially Speed to Exploit Technology
and New Knowledge Availability of new technology online
has given rise to many new innovations and many new
billionaires.
7. Lack of an Idea Channel Employees may have very restricted
access to top management or may somehow be limited to
what their immediate bosses will endorse or not endorse for
management approval, prematurely killing good ideas in the
process.
8. Operational Issues Some companies are affected with many
internal inefficiencies that keep them in a perennial trouble-
shooting crisis. Innovation is then relegated to another
timetable.
9. Lack of the right marketing talent in the team Managers
should not only be able to provide directions with the usual
planning, organizing and allocating, they should be able to
make sense of the fast changing needs and wants of customers.
10. Focus and lack of vision or foresight Major innovations
happen when the proponents are able to connect the dots and
see a different future.
 Exercise:

1. Choose either the 5-Point Innovation on

Demand framework or the SCENIC
framework of Mansmith and Fielders Inc. to
come up with a potential innovation to
increase visit frequency to Abenson or similar
appliance stores. Explain how value can be
created for the consumers and how Abenson
can capture value.
 Caselet

1. Land launched Go Hotels in 2010

encouraged from the success of a sister
company, Cebu Pacific Air. Decode the
business model map of Go Hotel and identify
the innovations the have instituted to create
value for their target customers at low prices
but still have profitable operations.
Q&A with Cebuana Lhuillier President
Jean Henri Lhuillier on Innovation

Cebuana Lhuillier is in the Guinness Book of

World Records as the largest chain of
pawnshops in the world with over 2,200
outlets, bigger than many banks combined,
serving mostly the ordinary
population.
Q1: How do you go about understanding your
target consumers and what have you
discovered about them?

A: We know a lot about our clients, and the

market we serve. We talk to our clients in so
many ways, at our branches, thru our Customer
Care hotline and on our digital platform. On top
of this, we engage them on a national scale UAI
study complemented with other several
consumer researches thru FGD, etc.
 Q2: From pawnshops, you also have remittance, bills payment,
collection, e-loading and insurance. In fact, you have tie-ups with
some 100 companies. Which of these products are you most
excited about? Which represent the future of Cebuana Lhuillier

A: Cebuana Lhuillier believes in empowering the

masses thru financial inclusion. Each product we
come up with ensures more access for our clients to
gain financial access and security. We are excited in
every product we bring to the market. We have the
full application of the concept to make it
within the reach of our market. From
microlending/loans to remittance to microinsurance,
all of which are part of our community
empowerment vision.
 Q3: You are pioneering in micro insurance with over a million

where your branch personnel visited 750 barangays resulting to

over 300,000 policies but partly cannibalized the store sales. What
changes are you instituting to gain big wins on both fronts?

A: For micro insurance, out-of-branch efforts were

meant to educate communities about the value of
insurance. And the true measure of the success of such
info dissemination campaign was the number of
people who availed of it, and we were successful in
doing that. Bottom line, in business you wait for
your clientele, you need to reach out physically, and
electronically. This is our strategy to provide more
customer touch points thus access is not limited to our
brick and mortar branches.
 Q4: One of your core values is innovation. What
innovation are you proudest of so far?

A: Cebuana Lhuillier is a game changer, we have

changed the face of pawning, remittance and micro
insurance. We walk around telling our market of
our capabilities, they tell us what they need and we
develop the capabilities to serve them even better. Our
innovation is born out of our move in creating a culture
of appreciating our clients, making sure that the clients
who are the be treated even better than
those who are .
Q5: What other programs or products can you

A: Loyalty program, micro insurance, bills payment in

the pawnshops, customer convenience programs
(renew anywhere, send / receive anywhere), digital
platform for transaction updates, deposit links to
bank accounts, network remittance, collection
services, Cebuana Lhuillier On Wheels, insured pawn
items, web promos, social media based promotions
etc.
Q6: You now have over 5 million members in your 24k
rewards program. Other than your existing products,
what can you do to leverage on your power to radically
help improve the lives of your cardholders?
A: We know every cardholder we have. Our in-market
strategy for new products and services are normally
intended toward them based on their behavior,
financial transactions and general profile. For example,
our upcoming non-collateralized micro loans for
entrepreneurial purposes are geared toward targeting
our international remittance members who are either
already on a small scale business who wants to expand
or planning to put up one. We take our 24k members
to heart.
Q7: Cebuana Lhuillier launched the annual Happiest Pinoy
contest with over 10,000 nominees yearly and the annual
My Happiness photo contest. What was the insight behind
these contests? What are you trying to accomplish?
A: The search for the Happiest Pinoy is actually an advocacy of
our micro insurance brand with a long-term objective to
become a full brand campaign for the entire Cebuana Lhuillier
ecosystem of brands. Traditionally, insurance was introduced
to the market almost like a scare campaign. We wanted to do
it differently by anchoring on happiness which we Filipinos are
known for. It links to the very culture of our people thus the
instant connection it has to our market. This campaign will not
just improve our relationship with our market but also lift the
stigma of the old pawnshop concept. Who want to be
happy? We want to have happy clients, happy employees and
happy shareholders.
 CHAPTER 8

Gate 3 Execution: Machinery, Methods, and

Management Skills
The importance of execution is highlighted in the
guiding principles of the Abenson Group, as four of
their guiding principles are associated with execution.
A Mind That Creates. A Will That Excels. A Heart
That Cares. A Team That Wins. An Institution That
Lasts. All for the Glory of
Mind That preparation and marketing
A Will That Excels and Heart That
execution and self-leadership
A Team That Wins and An Institution That Lasts
preparation and execution
All for the Glory of God self-leadership.
 Machinery
Machinery is an organization structure that can
deliver the value planned.
It can only be articulated after the value
proposition in the offering model is defined.
This means strategy is the key driver of structure
and value is created only if the structure is in
harmony with strategy. This also means a
change in strategy will necessitate review of its
organization design to avoid any contradictions.
 Methods
Methods are about systems and processes
that allow the entrepreneur information and
control.
Remember, entrepreneurs and his/her
managers must make decisions, essentially,
an allocation task, which is based on having
information, which is a monitoring task.
Good monitoring leads to good allocating.
 Opportunity Seizing via
Operating Model
An operating model aligned to the offering
model should be formulated, so the
entrepreneur can ensure that the value
proposition can be delivered seamlessly and
repeatedly.
An internal alignment of the operating model
with offering choices is necessary to help the
firm execute their strategy well and hopefully,
attain competitive advantage and superior
financial returns.
 Value Chain
Strategy must be mirrored in an activities,
behaviors, capabilities and resource allocation for
excellent execution.
What functions or business processes have to be done
excellently to achieve sustainable competitive advantage?
(a value creation approach)
In what value chain activities would poor execution
seriously weaken strategic success? (a problem solving
approach)
Value chain is the strategic linkage or a series of value-
adding individual activities required to create, produce
and deliver products and services to the customers.
Example of the Value Chain of a
Manufacturing Company

Sour-
Design R&D Mfg. Mktg.
cing

Distri- Supply
Channel End
bution Chain
Users
Marketing is the Interface of the
Company with its Chosen Market
 Importance of Value Chain
It defines the role each member plays in the flow of
materials, information and relationships with trust as a
central issue.
Materials Suppliers delivering orders is the most
fundamental part in a value chain.
Information Online e-commerce sites like
Amazon as well as logistics companies like Lalamove
have live tracking features for customers to
know status of their shipment.
Relationships Unilever Foundry in Singapore as a
co-working space that allows members to tap into
their network as well as to receive mentorship from
within the company.
It shows the profit pool of an industry by segment in the
entire value chain.
It identifies the potential complementors who can help
the firm create differentiation and barrier to competitive
entry.
It identifies the complementors who can help the firm
execute strategy that no other company can do as
efficiently.
It shows how value chain boundaries of tasks performed
can be expanded or collapsed in case of an innovation.
It identifies potential competitors, as members in the
value chain may want to stretch their activities beyond
their normal territory as part of expanding their core to
their adjacency.
 Value Network / Ecosystem
The value chain is an expanded supply
chain. Value network is an expanded
value chain that shows the involvement
of other stakeholders in each value
chain stage to co-create value. Value
network is also called an ecosystem.
 Resources
Resources are about hard assets (not people-
related) and soft assets (people related) that
are difficult to imitate, and provide an
advantage to firms, especially evident in an
economic downturn, when acquisition
becomes possible.
Hard assets are physical (channel,
infrastructure, technology), financial and
intangible assets (brand, IP, customer info).
Soft assets are human assets like
relationships, skills and knowledge.
 Processes
Processes transform inputs into outputs.
Examples are new product development
process in pre-transaction, order fulfillment
during transaction, collection during post-
transaction and customer service, also in post-
transaction all part of the entire value chain.
Entrepreneurs, especially start-ups are focused
on having their products out in the market to
be accepted by the channel and consumers,
hardly having time to think about the details of
different processes.
Managerial processes govern the operation of a system
such as corporate governance (norms, metrics).
Retail stores like 7-Eleven use metrics like foot
count, to determine viability of a location and
inventory days, shrink rate, among others, for
efficiency.
Operational processes are the sequence of value-adding
activities that function together that adds value to the
core process, which are manufacturing (planning),
marketing (voice telecom) and order fulfillment (E-POS).
Support processes are procedures that support the core
process, and these are purchasing (bids), accounting
(budgets, reports), technical (training) and recruitment
(rituals).
One basic technique is to remove each step to understand
what will really be missed and to determine whether or
not each step is absolutely required.
Another technique in innovation is by changing one
sequence of the steps, such as advancing a subsequent
step to an earlier step and think of its implications or
possibilities.

Processes can be improved with productivity tools

whenever available. Entrepreneurs must involve their
team for inputs, must listen and be open-minded with
feedback because team members who are more intimate
or directly interacting with customers.
Processes for 9 Ways to Create Value
9 Ways to Create Value What is the Offer? Some Critical Processes

Better Superior products or R&D, Distribution

services
Faster Speed or capability to IT, Logistics, Service
move quickly Empowerment
Cheaper Lower prices with same or Low-Cost Sourcing and
better value Distribution,
Standardization
Closer Good relationship with IT, Customer Service,
customers, including Service Empowerment
localization.
Larger (or smaller) Wider choices, including Sourcing, Distribution
bundled choices with
alliance partners

(If smaller, more

convenient)
Easier Flexible service or total Flexibility, Service
solution provider Engagement
Rarer Exclusivity, or being the Negotiation, Relationship
only choice in the area
Prestige Reputation from favorable Advance Technology,
and aspirational perception Branding, Design
Different New category or Innovation, Creativity
Innovation, including
targeting underserved or
unserved market (the
innovation need not to be
superior and can even be

available)
 Capabilities
While the offering model answers where
the firm will win, the operating model
completes the picture by answering how
the firm will win, identifying capabilities
needed to create an advantage.
Capabilities can be identified by the
entrepreneur in both the offering model
and the operating model depending on
where a person is assigned.
Key Operating Variables Critical to
Support Wealth Conversion
New firms need talents with customer
acquisition skill and challenger experience,
while the more established firms with high
market penetration need talents with
retention and defense marketing
experience.
Capability building can be initiated by
recruiting experienced talent with relevant
skills needed by the firm.
 Complementors
Companies need other people to help
them deliver the value proposition.
Other times, companies may want to do
something fast but lacks the capabilities
to do so.
Other times, outsourcing some
functions appears to make more
financial sense.
 Configuration and Cost
Entrepreneurs are always reconfiguring how
to grow revenues, increase differentiation,
improve cash position while reducing cost.
The reconfiguration of the business model
of low-cost carriers (LCC), better known as
budget airlines, to reduce cost and support
their low price model is interesting. This has
resulted to many LCCs attaining double-digit
profit versus single-digit for traditional
airlines.
 How Budget Airlines Reconfigured
Their Operating Model to be Profitable
The use of friendly online page and revenue
model
The use of standard fleet
The use of direct point-to-point travel instead
hub-and-spoke networks for short-haul travel
The No-frills offer
The pursuit of operational efficiency
 Management Skills
Execution can be built via building
infrastructure to increase capabilities,
which are composed of coordination,
commitment and competencies.
Management Skill is the ability to carry
out a plans.
 Management Skills
Management Skills What is required? Knowledge in

People Sharing meaningfulness Motivating

and pride in their work Planning
while accomplishing Problem-solving
required tasks. Decision making
Inspiring
Rewards Attaining a sense of
Communicating
identity with financial
Delegating
blessings while
accomplishing required
tasks.
Leadership Having a sincere sense of
mission and purpose while
practicing good
governance.
 Key Questions for Execution
Infrastructure
3 Ms of Execution Infrastructure Key Questions
Machinery (Organization Structure) How do we organize ourselves to
deliver value?
Methods (System / Process) Do we have the information and
control needed?
Management Skills
People Do we have the right people, the right
number, the right skills and with the
right understanding?
Rewards Are desired behaviors understood and
rewarded?
Leadership How do we provide guidance and align
everyone to attain common goals?
 Some Problems in Poor Execution
3 Ms of
Coordination Commitment Competencies
Execution
Machinery Diverse views Change too Plans are bad
(Organization intimidating
Structure)
Methods Not tied strategy for Not designing Cost of
(System / accountability processes & rewards implementation not
Process) for team to work considered
together
Management
Skills
People No follow thru No plan ownership Not linked to
capability building
Rewards Vague deadline Incentive problem Lack of training for
new skills required
Leadership Clear objectives but Weak leadership Unclear tasks with no
accountability and job descriptions
responsibility not
understood
 Mansmith Execution Framework
3 Ms of Key
Coordination Commitment Competencies
Execution Questions

Machinery How do we Job description Multi-skilling Culture

(Organization organize defined
Structure) ourselves to
deliver
value?

Methods Do we have Processes Best Practices Open

(System / the communication
Process) information
and control
needed?
Management
Skills
People Do we have the Job rotation Recognition Training
right people, the
right number, the
right skills and the
right
understanding?
Rewards Are desired Group Criteria for Developmental
behaviors incentives promotion assignment
understood and
rewarded?
Leadership How do we Consultative Leadership Action Plan
provide guidance style Skills
and align
everyone to attain
common goals?
 Exercise:
1. Think of a project that failed recently.
Investigate and identify barriers to
execution whether cognitive,
affective, motivational, resources or
political in nature. How could the
barriers been addressed differently?
 Caselet: FMCG Value Cain
1. Decode the value chain of the fast
moving consumer goods (FMCG) industry.
Then, make a list of questions you want
answered for each part of the value
chain. Cluster these questions for
commonalities. Interview someone from
the industry. Do second-degree probing if
the answer you got is not clear. Ask until
you have no more questions left
unanswered.
Q&A with Red Crab Group President
Raymund Magdaluyo on Strategy and
Execution
Raymund Magdaluyo
successful restauranteurs.
He has helped shape many seafood dining restaurant
concepts (Red Crab Alimango House, ClawDaddy,
Crustasia, Johnny Kahuku
Hawaiian Shrimp House), as well as non-seafood restaurant
concepts (SumoSam and related restaurants, New Orleans,

He was a recipient of the Mansmith Young Market Masters

(YMMA) awards in 2008.
He shares insights on how to start, compete and thrive in the
restaurant industry.
 Q1: You are well admired as the owner/part-owner of many
successful local-concept restaurants like Red Crab, SumoSan,
ClawDaddy all known for their excellent food and good

with new ideas?

A: I have been a full-time restauranteur since 1999. On one
hand, I led a bunch of mostly seafood dining formats such as
Red Crab Alimango House, ClawDaddy, Crustasia Asian
BluFish
Contemporary Coastal Cooking.
I have two general business and personal objectives: First is I
want to pick a few of the concepts and start building CHAINS
out of these 2 to 3 highly scalable restaurant brands. Second,
I also want out group to expand our reach outside food and
include other areas of the hospitality business we can
develop.
 Q2: We are sure you considered many options before
choosing a final concept. How do you actually decide which
one will become your final concept as well as determine the
right price for it?

A: For restauranteurs, aside from our usual customers, the

first market we have to satisfy are our landlords. Most of
them are mall developers and expert property managers
who have extensively researched on the community/ trade
area they want to serve. It is important to us that we know
what they want to achieve, and how we can fit in serving
their customers. We ask them what cuisines (of course, in
our case it is mostly a choice of our existing restaurant
concepts) they need or what their focus group discussions
reveal as far as dining preferences are involved.
Q3: Competition in the restaurant business is intense. Can you
update us on how consumer choices are affected with recent
threats from competition and substitutes?

A: Retail has indeed gone global. People around the world

are watching, eating, wearing more and more of the same
things. In the restaurant industry, the biggest competition

Filipinos are now bombarded by the same food brands they

see in Singapore, Hongkong, Tokyo and other big cities. Dry
goods retail giants are now investing heavily in food.
-

operators like us to continuously innovate and

position/reposition our concepts.
 plentiful. Many have lost money. What makes your group
thrive?

Our business is like running a talent management company.

In order to be resilient a healthy table needs several
concepts/talents. A chef friend mentioned how there is an
imaginary rotating plate wherein the global food trends
change by way of cycles. In short, at any given circle a good
group needs to have strong players.
Players like us need to compete in categories where we can
really make real contribution and value. We have to connect
and provide our diners with food that they crave for. But also
we need to deliver this in a context that is unique.
 Q5: Service excellence needs good and well-trained people.
Can you enlighten us with your recruitment and screening
process?
Service Excellence, especially in casual (and fine) dining establishments
is a lot more dynamic and variable (i.e., non-standard). There are no
cookie-cutter scripts and robotic employee manuals that tell them
exactly what to do.
What we do is arm and empower our service staff with what I call the 6
Petals Of Enlightened Hospitality:
Script (standard and dynamic) and service sequence
Service standards (how to bus out, serve, open, and serve wine, etc.)
Dining dynamics (more like knowing strategic dining positions not far
from basketball positions) host, order taker, runner, expenditer,
backups, eye, etc.
Offensive moves (15 to 20 time-tested small strategies to delight
customers)
Defensive moves (15 to 20 moves addressing usual service fail points)
Menu mastery
 Q6: From a supply standpoint, how are you coping with
increasing costs like the annual escalation clause plus
percentage of sales from malls?

A: Investment bankers/venture capitalists who have been

watching the local restaurant industry closely frown upon
groups that locate most of their stores in malls. Malls and
similar developments will always escalate rent and give you
more competition year after year. So the pressure is both on
top and bottomlines.
The long-term challenge is to balance choice of locations.
Getting spaces in areas where rent is low and lease terms
are more flexible is a step towards this direction.