| DESCRIPTION |
The author of the Vulnerability Analysis technique
assumes that each kind of business is based on what he calls “pillars”.
The aim of this technique is to individuate the pillars
which the company is based on and to analyze the possible actions to be
undertaken in response to the events which might damage the individuated
pillars. This technique is suited for the Business Strategic Areas (BSA)
defined as product-market-technology combination of the company. Each
BSA can be destroyed, threatened or damaged by external events on which
the company has scarce or no control at all. This technique allows to
analyze these pillars and to obtain useful information for the company
strategic decisions (e.g. the introduction of electronic cameras led to
the extinguishment of the business of the “super 8” cameras
and related projectors).
The object of the vulnerability analysis is divided in
two groups:
- Company external factors, which are not under the company control
(e.g. resources, some inputs);
- Restricted competitive system external factors, it is to say those
elements from which the company is unable to defend itself, unless
recurring to radical innovations.
These are the phases of this technique:
- Business pillars identification
In other words, identification of the elements from which depends
the survival and lasting of a sector and of the enterprises acting
in it.
- Free and unconstrained idea generation on the events which might
damage or destroy one or more than one business pillars (see
also Brainstorming ,
idea generation techniques ).
- Evaluation of the event occurrence probability
and related impact (see also evaluation techniques).
The attention to be paid on a given threat should be proportional
not only to the event occurrence probability but to the multiplication
of probability and impact. It is to be avoided the attitude of those
business managership, which do not attend to evaluate the impact of
an event, when this is considered not likely to occur.
- Identification of the actions to be undertaken.
The actions must be distinguished in actions to be undertaken immediately
and actions to be performed only as the threatening event occurs.
In fact, the company can react immediately or it can simply plan some
actions, waiting for an increase of the threatening event occurrence
probability to actually implement their execution.
Even though the technique is subdivided in four phases,
it can be noted that the first is predominant in respect to the other
ones. In fact, the discriminating part of this technique consists in the
pillars analysis. The remaining phases could be implemented also recurring
to the other techniques. The vulnerability analysis has been positioned
among the techniques for the External Mapping properly according to the
weight and relevance given to the first phase. The author individuates
8 pillars typologies and states that when one of these waves it is necessary
to innovate. The identification of the pillars is not an easy issue, considering
that these are not coincident with the critical success factors of the
business.
The pillars classification is as follows:
1)Needs or use functions
Each business satisfies needs that are subjected to evolve in time: often
the need to be satisfied has disappeared and companies have not had the
skill or the resources to innovate and survive. It is the case of the
slide rule, which was used to calculate quickly. The diffusion of the
pocket calculators allowed to accomplish the same function in a more effective
way. The slide rules companies were forced to accept the decline of their
business, since they were unable to engage the competition with the pocket
calculators manufacturers.
2)Uses, habits, values
Bertone states that the existence of social values constitutes the pillar
of a lot of businesses and therefore he suggests that the related changes
analysis is very useful for the innovation of products and services.
Example:
«If the dominant value is consumption, the individual asks himself:
“Which of the goods I haven’t got would I like to have?”.
On the other hand, when shifting from a consumer attitude to a viewpoint
that gives more importance to the experience, the question becomes:
“Which of the experiences I never had would I like to have?”.
The consumer manager will be happy to receive as gift a gold fountain
pen branded Giugiaro. The experience manager would prefer a trip-coupon,
a training course, the subscription to some theatrical shows.»
(Bertone, 1993, p.124)
3) Technologies stability
A lot of businesses depend on technology, which can be embedded in the
product or in the productive process.
A well known example is given by the mechanic clock market. The coming
of electronics caused a strong contraction in the Swiss industry market.
In this case the Swiss companies of mechanic clocks found themselves “without
pillar” as consequence of the introduction on the market of electronics-based
products.
After a decade of crisis, a consortium of Swiss manufacturers (the SMH)
was able to offer an innovative answer to the electronic clocks solution:
the Swatch, which lifted up again the Swiss clock industry, properly when
it seemed to have been beaten by Japanese and Hong Kong manufacturers.
Example:
«Iernst Thomke, one of the Swatch inventors, declared to have
aimed to win the price competition. The competitive price depends on
the product-process concept. With the help of the designers Elmar Mock
and Jacques Mueller, it was invented an innovative mechanism compounded
by only 51 elements, it is to say almost half of those used in a traditional
electronic clock with quartz mechanism. The clock case, imprinted through
microinjection with a synthetic very resistant material, acts also as
assembly plate on which the components are fixed by means of welding
and ultrasounds. The glass – obviously made in plastic –
cannot be replaced and, in addition, the welding system makes the clock
waterproof till 30 meters of depth.»I (Bertone, 1993, p.124)
The low cost of manufacturing the product led Swatch
to success. The marketing strategy provided a decisive contribution to
the consolidation of the Swatch business idea, which detains more than
30% of its market segment, selling almost 10 millions clocks per year.»
4)Inputs and resources
Each business requires resources, also those given as obvious, such as
raw materials availability, energy, subsidiary services (mail, phone,
security, …) and one of these resources might constitute a business
pillar. However, generally the attention of the top management is focused
on those resources which have an higher impact on costs structure rather
than on those resources which are more critical for the survival of the
business. In fact, these latter are not considered relevant, until a problem
arises.
5)Niche or market segment
Bertone states that when customers are few the business is very vulnerable
and he cites the Piaggio company, which formerly sold 80% of its motorbikes
to under 18 years old teenagers. In other words, the company was dependant
by a single market segment. The pillars on which the motorbikes business
was based were the possibility to drive without using the helmet, without
the licence plate and without the driving licence. In particular, the
company believed that girls would not have appreciated the use of the
helmet, which became compulsory in 1986. At the same time, however, a
lot of drivers began to travel by motorbike in order to avoid the city
traffic jam, this resulting in new opportunities of expansion for Piaggio.
6)Existent constrains, sanctions, incentives.
The constrains, sanctions and incentives imposed by law restrict the operative
space where enterprises can act. It may occur that the competitive advantage
of a company would be vanished by some normative modifications. To better
understand the matter, two examples are provided below:
Example:
«The pharmaceutical products cannot be sold without the official
authorization by the institutions in charge of health surveillance.
The authorization is subjected to experimentation periods of over 10
years. This regulation, however, is applied only to the pharmaceutical
specialties and it is not extensible to the so called cosmetic products.
It should be considered that a more strict regulation of the products
offered by the cosmetic companies, requiring a major evidence of the
product efficacy or a more rigorous experimentation aimed to ascertain
the absence of dangerous “collateral effects”, could seriously
threaten the business structure.
Leader companies, such as l'Oreal and Shiseido, will likely be able
to adapt to the new context by modifying radically their present approach
and structure, which are characterized by marketing expenses reaching
even 40% of the revenues.
Instead, minor companies which are characterized by a business approach
that can be considered in some way “similar to that of pirates”,
would not be able to experiment and guarantee their products quality
and therefore they would be doomed to disappear.»
Example:
« In 1988 the European motor market absorbed almost 9 millions
of carburettors. This was due to the fact that the major part of the
new petrol engine cars were alimented by carburettors and only the high
range cars used electronic injection systems.
In the USA the electronic injection system was imposed, with a regulation
of 1983, since this was able to dramatically reduce the emissions of
harmful stuffs from the car drainpipe. Instead, in Europe the emissions
regulation was more tolerant and the imposed limit could be kept also
by a carburettor injection system. Therefore, in the USA the injection
system was a must, while in Europe it was a plus aimed to the high range
cars. In this context, the Italian Weber detained 65% of the European
carburettors market, while the German Bosch detained almost the monopoly
of the electronic injection systems.
In 1988, as the signals of a reinforcement of the CEE emissions regulations
increased, at Weber there was a lot of concern. The company had the
know how on electronic injection systems, since it provided this kind
of systems, those of road and competition models of Ferrari included.
Nevertheless, Weber top management was aware that the quick shift from
a carburettors manufacturing to a planning and in large scale manufacturing
of electronic injection systems would have caused an huge industrial
changeover and the abandon of a product as the carburettor, which was
become a cash cow.» (Bertone, 1993)
7)Complementary products and services
The existence of some businesses is based on the availability of complementary
products or services. For instance, if tobacco would be prohibited, lighters
will be sold no more and Bic, leader in throwaway lighters, could face
serious troubles.
8) Alternative products or services cost stability
To explain this pillar the author reports the case of a North American
bus service company which was able to link almost every city of USA and
that was troubled by the reduction in the prices of air tariffs due to
the price war among several air companies. |