Check out the interview with our former student Amanda

Amanda participated in the January 2020 program, and learn more about the daily routine of our students at Pearson College London.

Which course did you choose? How was the first day of the program?

I took the Contemporary Topics in Business Strategy (CTBS) and the Business English courses. The first day of the program was incredible. Pearson is a very welcoming institution, we were welcomed with a great breakfast. After that, they took us to a campus tour at the university and explained the structure of the course (classes, school days, schedules, professors and company visits). In that same morning, we had our first CTBS class, with Professor Nigel Wood, on Strategic Innovation Management and in the afternoon, professors Sona Lisa Bone lectured the first class on Business English.

How was your routine during the week?

I made some friends in the 1st day of class, and I found out we were all staying in the same hotel. Therefore, we would go together to the subway station, stop at the supermarket and buy something to eat, like Pearson’s delicious hot chocolate, and then go to CTBS class, which started at 9am and ended at 12:30 pm. Then there was a lunch break and we returned for the Business English class, which lasted from 2 pm to 4:30 pm.

Something I found interesting at Pearson is that the classes were held from Monday to Thursday, and since they would often end at 4:30 pm, we always had enough time to incorporate London’s entertainment. When the classes were finished, as well as on weekends, we took this time to sightsee the cultural features of the city, and the numerous museums and art galleries.

Why did you choose to study at Pearson College London? What was your favorite thing in college?

I chose to study at Pearson College London because the university and the courses seemed to be very well structured. I was looking for an institution that would guide me for the business world, which is, after all, what rules the economy today. Besides, I thought that Pearson would be a great opportunity for growth due to the classroom’s routine, the didactic and the constant feedback given by the staff.

What I liked the most about the course was the content I learned. Besides, London is the largest business center in the world and it was amazing to be in touch with such a dynamic and hectic city. The experience I had with the foreign language, since all the readings, classes and presentations were in English, was also amazing and helped me to improve this skill. Last but not least, I also loved visiting the Hackmasters company.

What were the professors and classes like?

The professors were excellent, very qualified. They made dynamic and participatory classes, besides being always available. We had many practical activities, like debates and case studies.

In addition to the course, did you take the opportunity to visit other places of London or Europe? If so, what place did you like to visit the most?

I went to the London Eye, the River Cruise, the Winter Wonderland, the British Museum, the National Gallery, the Tate Modern, the Buckingham Palace, the Harry Potter Studio, the Little Venice, the Abbey Road and the Natural History Museum. The good thing about London is that the city offers a lot of free cultural leisure, so every day we went to different places without paying ANYTHING.

On the 17th and 18th of January, Pearson also offered us a visit at the headquarters of the WTO and the UN, in Geneva, Switzerland. It was a unique and incredible experience. We saw whole building: the backstage, the meeting and conference rooms, the hall. It was possible to feel closely the dynamics of both International Organizations and their importance in maintaining and enforcing peoples’ Human Rights.

How was the graduation day?

Graduation was beautiful! A simple and solemn ceremony, held at Pearson, where they prepared a video with photos of students in class, during group meetings, among other remarkable moments. At the end, they called each student ahead to receive the certificate. Then, my group and I went out one last time to have fun. We went to Chinatown, a street all set in oriental culture, in the Soho neighborhood.

At the end of that experience, what do you believe was the most remarkable for you in the professional field? And what about the personal perspective?

In the professional field, what most impressed me was the knowledge obtained in the course that I’m being able to apply in my area, which is awesome, after all, business management is an essential requirement for any successful enterprise. In a law office, for example, methods of strategy and innovation are essential to retain and win new clients. A good lawyer is always updated and organized, generating a higher quality service for those it represents. The course was essential for me, as a new graduate, to learn how to innovate correctly in the legal market, after experiencing life in the largest business center in the world.

On a personal level, I learned a lot, but the most relevant was my ability to overcome the scenario of being for the first time in a different country, without parents or friends at the same time using a different language for everything. I had to deal with unforeseen situations and force myself to break the language barrier to get used to the dynamics of the city. I am extremely grateful for the experience!


Thanks for the interview and the records of your international experience, Amanda! May you be very successful in your professional life.

And if you are reading this post and want to have a similar experience that Amanda had, click here and learn more about the courses available at the Pearson College London! Studying for three weeks in London, having contact with students from different countries, Ph.D. professors, as well as visiting companies in the region will provide you with an incredible personal and professional experience. Don’t miss this opportunity and sign up for the scholarship selective process. There are more than 1500 students per year that join IBS Americas’ partner institutions in the United States and Europe.

Inside State University of New York: an interview with a former student, João Rafael Refatti

To learn more about the daily routine of our students at the State University of New York. Check out the interview with our alumni João, who participated in the January 2020 class.

Which course did you choose? How was your first day?

I took the Strategic Thinking course. The first contact with the program I can divide into two parts, Sunday and Monday. On Sunday we went to the university to take a tour, to know where the classes would be, the cafeteria, the underground tunnels (for the students to walk around campus when it snows), and everything. The second day, which was in the classroom, was more of a presentation of what would be done in the course and what would be discussed throughout it. We had lunch with the director of the university and those responsible for the courses. That was a day for adaptation, both to the language and to the university

How was your routine during college days? And, on the weekend?

Funny to think that a routine was created so fast and in a such short time (only 3 weeks), but it was basically going to the morning’s class (Strategic Thinking), having lunch at university, and going to the afternoon’s class (Business English). After class, I would go to the mall or Walmart to buy something to eat. Albany is not a big city, even though it is the capital of the state of New York, it didn’t have many options near the college and hotel to eat. Arriving at the hotel (where most of the students were) we discussed and worked on the projects that were supposed to be delivered in the last week of the course, in addition to studying for the next day’s class.

The weekends were the days to visit the surrounding regions or even get to know the small but full of history, Albany. Which was what I did on my first weekend in the city, I visited several museums, parks, and the New York State Capitol as well. (photo attached).

The second weekend I went to New York City, where there is a lot to do. I walked through Central Park, visited the American Museum of Natural History, watched an NBA game, Aladdin’s Broadway show, and visited several famous tourist spots.

Besides that, Albany is very close to several cities, and within a few hours of travel, you can go to many places (Philadelphia, Washington, NY, Canada, Boston, Chicago). For those who want something more active, there are some mountains nearby that you can ski.

Why did you choose to study at the State University of New York? What was your favorite thing at university?

The choice for SUNY (State University of New York) happened due to the advertisement made on the Facebook group of UTFPR (Federal Technological University of Paraná), where I study. I didn’t even know that courses were offered elsewhere, but NY is a place that everybody wants to visit.

Regarding SUNY, for sure what I liked most was the infrastructure. A gigantic place, full of tunnels to protect itself from the snow and to be able to move through the various blocks.

What were the professors and classes like?

The professors I had were super available and communicative, willing to answer questions, advise tours, and even had donuts in class for students. The classes, as I said above, were very participatory, in the course I took, we had to study cases from several companies and discuss about them in class, taking into account the students and professors. An interesting didactic, which has been improved with student feedback.

We also had two papers to be presented at the end of the course. The first was from the Strategic Thinking classes, in which we made a general analysis of a company, how it behaves in the market, its profits, marketing strategies, and much more. The second assignment was for all students, regardless of the course, where we should create something innovative and try to sell this idea, how it would work, the costs to make it real, how it would help others, etc…

How was the graduation day?

Every effort was made to arrive on the day of getting the diploma and graduation. The ceremony was at lunchtime, we even had lunch in the hall to celebrate. It was a simple ceremony, broadcast on Facebook for our family and friends to follow online. The pre-graduation was remarkable, I remember that we were afraid to walk in the snow, women were afraid to fall. It was a very funny day, in which I celebrated my graduation with people whose names I didn’t even know 3 weeks ago and now we were friends.

At the end of that experience, what do you believe was the most remarkable for you in the professional field? And what about the personal perspective?

In the professional field, it was a beautiful experience: being able to practice English at a high level, having to make a serious presentation and a lot of research, in addition to opening my eyes to a lot of the business world.

On a personal level, it was certainly the friends I made, it was one of the best parts of the trip. People from various regions from Brazil and Argentina. People I keep in touch with, it was a pleasure to meet them!


Thanks for the interview and the records of your international experience, João! May you be very successful in your professional life.

And if you are reading this post and want to have a similar experience that João had, click here and learn more about the courses available at the State University of New York! Studying for three weeks in New York, having contact with students from different countries, Ph.D. professors, as well as visiting companies in the region will provide you with an incredible personal and professional experience. Don’t miss this opportunity and sign up for the scholarship selective process. There are more than 1500 students per year that join IBS Americas’ partner institutions in the United States and Europe.

Inside Pearson College London: an interview with a former student Karina Tolardo

You already know all about Pearson College London’s programs, but now it’s time to find out what the daily routine for our students during the programs looks like. This month we interviewed Karina Tolardo, who was our student in January 2020. Check out below:

Which course did you take? How was the first day of the program?

I took the Contemporary Topics in Business Strategy (in the morning), and Business English (in the afternoon). On the first day, I met other students, professors, and I walked a bit around the city. I remember I ended up being late for the classes because of the traffic, hahaha!

What was your routine on college days? And on the weekend?

I stayed at a cousin’s house, in London’s 6th district, so I used to leave the house early to catch the bus and arrive on time… The landscape from the bus window was beatiful. I used to prepare my lunch at home and take it to Pearson, and every day after lunch I would go for a walk around the region looking for places to try new desserts (Pearson is close to some really cool places!). After classes, I would always join the course’s staff to go out and visit new places!

One weekend we went to Geneva, and the other one I visited the Harry Potter studio with friends from the course. I also visited some neighborhoods, fairs, and did some of the walking tours. Oh, and I watched a Cirque du Soleil show!

Why did you choose to study at Pearson College London? What was your favorite thing in college?

I chose this specific course because I thought it would complement my major (Chemical Engineering) and help me to advance in the job market. In College, I thought that the experience with renewed professors and classmates from different backgrounds and perspectives was amazing.

What were the professors and classes like?

I had three professors, one per module. They were great! We discussed a lot about the subjects of the class and we always had some group tasks. The classes were very rich in content, we learned a lot in a short period. It was worth it!

In addition to the course, did you take the opportunity to visit other places in London or Europe? If so, what place did you like the most?

Yes! I visited various places in London! Then I went to Geneva, where I visited the UN and the WTO. I loved London, especially the Covent Garden area (I ended up visiting Neal’s Yard walking around, it was cute!), which is close to Pearson. Besides, there are some really cool museums in the city, most of them for free!

How was the graduation day?

We had classes in the morning and the afternoon was free, which I used to take the last walk in Covent Garden. In the evening there was the graduation ceremony, and then we went out to celebrate.

In the end, what do you think was the most remarkable experience for your professional field?

I decided to change my professional area after the course. Learning from professors with different backgrounds and activities than I had in the past, as well as studying and having classmates from different fields, helped me to understand better what changes I would like to pursue in my professional life.


Thank you for the interview and the records of your international experience, Karina! May you be very successful in your professional life.

And if you are reading this post and want to have a similar experience that Karina had, click here and learn more about the courses available at Pearson College London! Studying for three weeks in London, having contact with students from different countries, Ph.D. professors, as well as visiting companies in the London region will provide you with an incredible personal and professional experience. Don’t miss this opportunity and sign up for the scholarship selective process. There are more than 1500 students per year that join IBS Americas’ partner institutions in the United States and Europe.

IBS Americas launches new course model

Understand the concept of a hybrid course: six months of online and presential course.

After almost 18 years of innovation in the world of education with varied vacation courses, we decided to expand our horizons a little bit more, presenting the hybrid courses to the public.

Aimed for professionals who want to improve their Curriculum with a more extensive course, but can not spend a lot of time abroad, hybrid courses mix distance and face-to-face regimes, ensuring complete content and an international certificate.

There will be 4 months of live online classes and 8 days of face-to-face classes at the State University of New York. Distance classes will be taught at two times – the student will be able to choose the most convenient time – and face-to-face classes will be taught at the Albany campus in New York, both entirely in English. Like all courses already offered, hybrid courses also include visits to local companies and an optional visit to the UN headquarters in New York.

The name of the first hybrid course is Business Sustainability for Leaders, and the syllabus studies sustainability from a financial point of view. Exploring the ESG (Environmental Social Governance) concept, the student will learn to develop strategies and apply sustainability metrics to attract investments to a company. The first classes of the Business Sustainability for Leader course will begin in March 2021.


Did you like this new model? So keep an eye on our social media and the IBS Americas website so you don’t miss the registration period for the selection process and the launch of new hybrid courses!

And if you want to be part of the next class, click here to see all the details and participate in the scholarship selection process.

Inside CSUN: interview with former student Virgínia Alcoforado

We recently found on LinkedIn a very interesting post. The publication described the experience of our former student Virginia Alcoforado in her visit to Netflix in California.

Virginia participated in our Communication, Design & Innovation course, held at California State University, Northridge. We invite her to talk a little bit more about the course and her experience in California. Below you can see how this chat went.

How was your first day on the program?

My first day was unforgettable, a mix of feelings, but surely the feeling of belonging was the best one. Since my adolescence, I have had the dream of participating in an international educational experience and being able to reach this goal was amazing. Before the program started, I made some friendships on the WhatsApp group and, if I could sum up my first day in one word it would be: Excitement. I was excited to explore the campus, to personally meet the friends I had been talking to for months, to meet the other students and professors, I literally wanted to immerse myself in this experience.

Why did you choose to study at CSUN? What was your favorite thing at the university?

I confess that I did little research on CSUN at the beginning, I made my choice based on the course: Communication, Design & Innovation and I could not have made a better choice! I was lucky to take an incredible course in a structure that I had never seen before. The Campus is impressive, the library and the gym were the things that most shone my eyes for the immensity. But, I think my favorite place was Geronimo’s, an All-You-Can-Eat restaurant that was close to our accommodation. If someone who studied with me hears me say that, they will say I’m crazy, hahahah, but it became my favorite place for the fact that everybody used to gather together there. You could go alone to eat, but it would only take 5 minutes and your table was already full. I have good memories of conversations, laughter, and crazy mixes of food on one plate.

What course did you take? Why did you choose this course?

I chose to study Communication, Design & Innovation. I am graduated in Advertising and Administration, passionate about Marketing, so the course was the perfect choice for me. In terms of content, some things I had already studied, however, the richest point of the program and the content, in my opinion, was the contact with another market, the American market. It was super interesting to hear cases, methods, and reports from a different reality from the ones I experienced in Brazil.

Besides, I took the opportunity to take the extra Business English module too!

How were the professors and classes?

The professors were excellent, and they definitely take me out of my comfort zone. At first, it made me nervous, but then I thanked him for the learning. Prof. Keit (Communication & Innovation professor) was my favorite, he shared a lot of his market experience with us and also gave us space to share ours with the whole class. The exchange was incredible, both with teachers and students.

In the first week, they divided us into groups based on a questionnaire conducted before the course. I was super nervous because they put me in a group with 3 women very different from me, a Brazilian, a Lithuanian, and a Spanish. To my surprise, we managed to create an incredible product, which I am very proud of. This would certainly not be possible if I had been allocated to a group full of people just like me!

In addition to the course, you and your colleagues took the free days to visit some parts of California. What places did you like to visit the most?

California is incredible and I’m sure it can please everyone, from those who love excitement to those who enjoy calmness. I had the opportunity to visit incredible places, which makes it a little difficult to choose only a few, but three days are very remarkable for me! The first was when some friends and I went to Six Flags, the perfect program for those who love roller coasters. The second was the day we rented a car and gathered a bunch of people to do a mini-tour around Los Angeles, where the last stop was in Santa Monica to appreciate the sunset. Finally, of course, the day we went to Malibu!

Which companies did you and your class visit? How were the corporate visits?

We visited Netflix and Warner Bros. The visits were incredible, but my favorite was definitively Netflix. We had the opportunity to meet the team that manages the Latin American zone! It was a complete immersion in the universe that this entertainment giant created.

At the end of the experience, what marked you the most in your professional field? And what about your personal life, what did it change in you?

In the professional field, it was certainly the lessons learned from a different market than I was used to, as well as the teamwork exercises. In my personal life, for sure, what most affected me were the people! In addition to having the opportunity to meet a diversity of people from different parts of the world, I made lifelong friendships!

IBS Americas appreciates the statements and records, Virginia! May you be very successful in your professional life.

And if you want to have an unforgettable international experience at CSUN, click here and learn more about the university and the offered courses.

Porter’s Competitive Strategy: Netflix Case Study

“Lean” packages of cable TV or other streaming services? Follow the segmentation of the increasing multimillionaire television market.

Prof. Ricardo Britto
Doctor in Business Administration at USP
Dean of the IBS Americas

At first it was just TV and it was present in almost 1.4 billion households on the planet in 2017. In 1972, HBO was created, and it was the first channel with exclusive content for subscribers. In 1997, Netflix was created in the USA (Van Der Werff, 2019). It had a huge success as the service offered affordable prices, movies and shows via streaming. The content was produced by Netflix itself or by big studios that were hired. The latter ones, however, realized how profitable the industry was and entered the market as well. These tendencies are slow, but they constantly reduce the number of cable TV subscribers. Moreover, there is also the increase of streaming services because of such companies as Disney, CBS, HBO, Amazon and others that mainly offer their own movies and shows (Heritage, 2019). Given that, the consumer, who already appears to be a cable TV subscriber, will pay a lot to access those services.

Many people wondered: “How can I watch my favorite shows?” The marketing professionals make another question instead: considering the segmentation of the increasing television market, what would be the strategy for a company to be established in the market and grow? 

This is what we are trying to answer. 

Michael Porter’s Competitive Strategy (1979) can be helpful in order to answer some of these questions. He offers an analysis framework that could help companies improve their position in the market and increase competitiveness as well as financial results in general. 

Among the concepts Porter offers, there is one that deserves special attention:  five competitive forces in a particular industry:  

  1. The Threat of New Entrants: new competitors can change the market share of existing companies. Apart from this, new firms can affect the access to resources for the firms that have already been long established in the industry.  
  2. Intensifying Industry Rivalry: competition tends to increase as new firms might appear or the industry in which existing companies operate is relatively limited.  
  3. Threat of Substitutes: when the prices of substitute products created by competitors remain low, the industry becomes less profitable.  
  4. Bargaining Power of Buyers: the more powerful the buyer groups, the less profitable the industry will be. 
  5. The Bargaining Power of Suppliers: by threatening to raise prices or reduce the quality of goods or services, suppliers can greatly reduce the profitability of an industry. 

Porter’s Five Forces Framework (Source: Harvard Business Review, 1979) 

Other key concepts of the author include choosing a strategy and stick to it:  

• A cost reduction strategy, in which a firm achieves dominance over its competitors and gains greater returns thanks to a policy of a reduced production and sales costs without affecting quality. 

• A product differentiation strategy. A firm creates a unique product or a service within the industry changing design, brand image or incrementing new technologies, which reinforces the sense of exclusivity and brand loyalty and, consequently, generates higher profits. 

• A focus strategy, targeting a specific buyer group, product line segment or a geographic market. 

In many cases, in order to implement the chosen strategy, a firm must also develop more than one of the strategies mentioned above. 


Porter, M. E. Competitive StrategyTechniques for Analyzing Industries and Competitors(Source: New York Free Press, 1980). 

Nevertheless, it is hard to predict a competitor’s future steps and perform appropriate competitive actions. One of the solutions is to determine relative profitability of a firm by subdividing industry into strategic groups. To undertake an industry analysis, a company must list all firms in the industry in “strategic groups,” and then assess each group according to the five competitive forces. Secondly, it is necessary to predict the industry’s evolution. To anticipate the necessary strategic adjustments, a firm must consider the likelihood that the industry will be affected by evolutionary processes such as new entrants, innovations, and changes in consumer segments (Porter, 1980).  

As it was expected, the Competitive Strategy received both praise and criticism. It can be observed that the use of typologies, such as Porter’s, reduces the wide range of combinations that a manager would have to consider. Some authors oppose Porter’s view that firms that achieve cost leadership should encourage competitors to do so as well. In addition, as multiple companies seek cost leadership (or a low-cost approach), the market gradually becomes more homogeneous. Thus, the cost leader would benefit as there would be less room for differentiation. 

It is important to note that Porter’s thinking has evolved since the publishing of the Competitive Strategy. In this work, he emphasizes the importance of the industry as a whole – that is, the external environment – in choosing the company’s strategy. Already in 1985’s, in the book called “Competitive Advantage” (1985), he seeks to describe how a company can gain a sustainable cost advantage or differentiate itself from its competitors. Here Porter pays more attention to internal dynamics, based on the exploration of unique content or distinct execution mode, which will enable the company to achieve a more advantageous position in the market.  

In any case, the knowledge of Porter’s strategies – as well as the criticisms and adjustments to his works is essential for managers to be able to improve their performance. The next step will be examining strategies efficiently developed in different segments of audiovisual industry and verifying if the Competitive Strategy analysis helps understand them better. 

One can note that in a shrinking cable TV market scenario and given the expansion of streaming movie and series providers, each of the main companies in these segments sought to follow a differentiated strategy. 

Among cable TV companies, some continued with “fat packages” containing dozens of channels. Others are betting on “lean packages” that offer fewer channels at an affordable price. This is what Sling TV has been doing: the company was launched in the US in 2015 and gives access to a small number of cable TV channels and a large streaming network (Jason, 2018). Sling TV can fit into at least two of Michael Porter’s five competitive forces: a “new entrant” that launched “substitute products” priced lower than those of competitors. 

Among streaming services, Netflix, which in 2018 became the world’s most market valued entertainment company estimated at $ 153 billion, has several competitive advantages listed by Porter. Netflix remains loyal to its relatively low-cost policy offering thousands of movies and series produced by itself or by many other companies. In order to do this, it applies three competitive strategies mentioned in the book. First, it strives to reduce its production and sales costs maintaining high quality. Secondly, it differentiates its products by offering some unique features within the industry in the form of technological advances. Third, while prioritizing the US and European markets, it also tries to attract specific consumer segments on the periphery of the audiovisual media world.  

It is clear that following its strategy, Netflix tried to kill two birds with one stone, or even better, three birds, while focusing on differentiation, cost leadership and niche markets. Despite having achieved unprecedented market success, the company risks losing its leadership position due to the dispersed focus. 

Indeed, it remains unclear whether Netflix will be able to maintain its policy offering high quality diversified products at low prices. Many movie producers refuse to renew their contracts with other companies to allow them to show their popular series, but even if they do, they charge high prices for that. This is the case of the NBC series “The Office”, which from 2021 will be shown only by NBC Universal streaming platform. Netflix paid Warner no less than $ 100 million to continue showing “Friends” for a year, but after that the show should move to Warner Media’s streaming service which is being created (Van Der Werff, 2019). 

Considering this policy, producers use the fifth competitive force: the bargaining power of suppliers. By threatening to raise prices – or withdraw the goods they produce – they get more money from the buyer. 

In fact, a number of the competitive forces mentioned by Porter manifest themselves in the increasingly fierce competition between Netflix and other streaming audiovisual media providers. New entrants threaten market share and often offer cheaper substitute products. Not surprisingly, there is also the growing “rivalry between competitors, resulting from different factors such as the presence of numerous competitors of equivalent strength”. 

One of these competitors is Disney, a giant of Netflix’s size. Stuart Heritage notes in the article  “Streaming TV is about to become very expensive – here’s why” (2019) Disney “will launch Disney +, a streaming platform that … will block a huge amount of content: Disney movies, ABC shows, Marvel and Pixar movies, Lucas movies, The Simpsons and everything else produced by 20th Century Fox”. 

Taking this scenario into account, it does not seem easy, according to Porter (1980), to “predict a competitor’s future moves”. Profits may decline, which will require managers in the industry to have theoretical knowledge, analytical skills, and good decision-making abilities. Moreover, the consumer will definitely suffer the rise in the price.  

The analysis conducted above allows us to identify the decay of two existing dominant structures. The first is a cable TV, with its “fat” packages. In the article “Media Companies Are Launching Streaming Services to Survive – Here’s How They Can Thrive” (2018), Daniel Jackson reports that in the US, the number of cable TV households has dropped from 103 million in 2012 to 92 million in 2017. 

While the rise in the number of these providers seems to be an irreversible trend, other factors indicate the blurring of the boundaries between the segments of audiovisual media. This is the case of Sling TV, a successful blend of cable TV (with “lean” packages) and a streaming network. This fusion may be one of the paths for the future of the media industry, and managers and future managers need to look closely at it. 

The impact of new technologies on traditional competitive models can be clearly observed in this particular market as well as in many others. While Michael Porter’s vision used to help managers understand their competitive landscape in the 1980s and 1990s, nowadays companies can build their strategies in a much more complex way. This approach opens new perspectives for managers, creating additional opportunities for growth. At the same time, it brings challenges, especially for those companies that are having hard time adapting to new technologies. The current challenge for managers is to drive the digital transformation in their firms as well as being able to reinvent their strategic options. Organizations that failed to cope with this dual mission tend to face growing difficulties in remaining profitable in the coming years. It is also important that the society and the government follow industries’ structural transformations. In the midst of the great transformations that are taking place in countless markets, some key sectors can end up being consolidated to the point of becoming monopolies, which leads to reduced competition and the loss of incentives for innovation commonly brought by healthy competition between companies. In a media communication sector, a monopoly would also bring the additional risk of losing the desirable diversity of ideas and points of view. This is something very relevant for democratic societies.


  References

Heritage, S. (2019). Streaming TV is about to get very expensive – here is why. The Guardian. Retrieved from: https://www.theguardian.com/tv-and-radio/2019/jun/27/streaming-tv-is-about-to-get-very-expensive-heres-why 

Jason, D. (2018). Media companies are launching streaming services to survive – here is how they can thrive. Business Insider. Retrieved from: https://www.businessinsider.com/media-companies-are-launching-streaming-services-to-combat-cord-cutting-2018-5 

Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York Free Press.  

Porter, M.E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, Vol. 57, No. 2, pp. 137-145. 

Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. The Free Press. New York.  

Van Der Werff, E. (2019). The future of streaming is the cable bundle. Vox. Retrieved from: https://www.vox.com/culture/2019/3/15/18225269/streaming-future-cable-netflix-hulu-disney 

Innovation Management: Embraer Case Study

“Most companies die not because they do the wrong things, but because they keep doing the right things too long.” Yves Doz.

Prof. Ricardo Britto
Doctor in Business Administration at USP
Dean of the IBS Americas

George Eastman invented photographic film, the portable camera and the industry of amateur photography. Founded in 1889, with the slogan “you press the button, we do the rest”, Eastman Kodak would dominate this industry for a century. By the end of the 1970s, the company controlled 90% of the American market for films (and 85% of the market for cameras) and had 100,000 employees all over the world (Tendayi, Toma & Gons, 2017). In 1989, the engineer Steven Sasson submitted to the board of Kodak the prototype of a digital camera (Films were the main business for the company, so the project was shelved by Kodak. When they realized their mistake, it was too late. The business of films virtually disappeared within a few years. The attempts to enter the new market of digital photography were not successful, and Kodak filed for bankruptcy in 2012. In the early 1990s, the company Embraer, founded in 1969 by the Brazilian government to produce airplanes like the “Bandeirante”, was facing some difficulties that led it to the brink of collapse. Ozires Silva, the president of Embraer since its foundation up until 1986, came back to lead its privatization, completed in 1994. In 2018, Embraer was the fourth aircraft manufacturer in the world (with revenues of US$ 5,07 billions), preceded by Boeing, Airbus and Bombardier (Saconi, 2019). How does it happen that some companies are successful… and some collapse? The main reason is most likely, among others, a matter of innovation.

There are several “types” of innovation. Clayton M. Christensen, from Harvard Business School, a world reference in innovation for large companies, introduces in his book “The Innovator’s Dilemma” (1997), two key concepts: Disruptive Innovation and the Innovator’s Dilemma. A disruptive innovation completely overturns a given market. Disruptive technologies initially create products that are worse in terms of performance, but at the same time offer other value attributes. These new attributes attract new customers and create new markets, but established companies rarely notice these opportunities. In other words, very well managed companies collapse by losing opportunities to innovate and create new products or markets.

The same qualities that make a company successful also put it at risk. The standards of success and failure of the companies that face disruptive technological changes come from good managerial decisions – this is the “Innovator’s Dilemma”. For example, the managers at Kodak acted to protect their business, but failed to perceive the signs of change until it was too late.

The thing is that corporations need consistent and growing profits, and disruptive technologies initially offer just small profits that are not attractive. When disruptive technologies seem attractive, it is too late. More responsive competitors have already conquered the market and the big first mover advantages.

Generally, managers assume that disruptive technologies are not a threat because these products will not have a performance comparable to that of existing products, and they do not wish to spend their time or energy on projects that seem small and that will not bring any real benefit to the company and/or for their careers. Besides, a failed idea will probably jeopardize their promotion; therefore, they will rarely be willing to invest in learning and would rather focus on conventional technologies. Finally, disruptive technologies create new markets with a size that was impossible to evaluate in advance. There is no way to foresee and plan: it will always be wrong (Christensen, 1997). Besides that, it is normal that disruptive technologies fail initially, but end up being used in the markets. When it comes to disruptive technologies, managers should experiment and learn. It is vital that a company creates opportunities for that purpose. The question is how.

Tendayi Viki, a co-writer of “The Corporate Startup: How established companies can develop successful innovation ecosystems” (2017) highlights that most companies were startups at some point. As they become successful, they start protecting their main businesses and distance themselves from the mentality that encourages innovation. Bureaucracy and traditional management practices tend to strangle “out-of-the-box” thinking and the capacity of the company to notice new trends. Furthermore, the fear of not meeting the expectations of the market and affecting the price of shares, as well as the lack of methodologies to manage innovation teams and processes, make it difficult for large companies to successfully innovate

In order to overcome these issues, big corporations have to be more flexible and apply an ecosystem approach to their operations. Thus, a firm can comprise a balanced mix of stable cash cows and, at the same time, develop its new products that can include disruptive ones for lower-end or emerging markets. The goal is to have various business models with the balanced portfolio of mature and established operations and early stage products aimed at future sales. Usually this strategy is also financially attractive as the money generated from cash cows invariably goes to R&D expenses (Tendayi, Toma & Gons, 2017).

Viki raises the fundamental question: why do innovation programs succeed… or fail? Failure seems to result from two scenarios: the first one, corporations try to manage innovation with conventional approaches: business plans, ROI analysis, etc. (these simply do not apply to innovation) or (on the opposite side) they reserve “creative spaces” for innovators to work with whatever they want, with no managerial process at all. In both cases, what we have is an “innovation theater” – where time and resources are consumed, generally with no result.

On the other side, success seems to depend on the capacity of implementing managerial tools adequate to well-established business models versus those who still are in research mode. This is what is called an ambidextrous organization: excellent in both research and execution.

The history of Embraer begins in 1968, with the inaugural flight of the prototype for the first Brazilian airplane, project IPD6504, led by the aeronautical engineer and then FAB major, Ozires Silva. Embraer was created the following year, with the mission of mass-production of Embraer EMB-110. Ozires Silva was the first president of the company, a position he held until 1986. In his conferences, he used to narrate a comment he heard about that prototype: “Did it have to be that ugly?!” (Carnevalli, 2019).

In 1991, Ozires returned to Embraer to lead its privatization, completed in 1994. The company went through a long process of restructuration, becoming one of the largest manufacturers of commercial jets in the world.

Nowadays, Embraer is one of the most innovative companies in the world. Its E190-E2 Program was awarded in the category Project of the Year 2019 by the Project Management Institute. According to Fernando Antonio Oliveira, director of the E2 Program: “Embraer created a legacy by daring the impossible, starting with the dream of producing airplanes in a country that did not even manufacture bicycles. 50 years later, the E2 teams proved that it was possible to dream big and develop a new high-technology commercial jet, even surpassing the highest expectations…” (Carnevalli, 2019).

Embraer sought innovation through partnerships. According to André Gasparotti, Technological Development Director, the “secret” is to collaborate with other companies, universities and startups. Embraer has, among others, a partnership with Uber for the development of urban and autonomous flying cars; and with Saab, within the framework of the program for the construction and codevelopment of Gripen fighters in Brazil. “Partnerships are already essential, but in the future, they will be even more. In the past, innovative organizations talked a lot about industrial secrecy. Today, industrial secrecy is still important, but companies act in ecosystems of innovation” (Kastner, 2018).

Regarding innovation, Embraer acts in two fronts that correspond to the concepts of adjacent innovations and transformational innovations. The former consists in identifying key players for the development of products for niches – more current/ foreseeable needs – that may result in products within the usual deadlines in the company. As for the latter, Embraer X acts as the radical innovation branch of the company. It has to do with thinking of new solutions, completely different, for a future that is difficult to foresee. “Development takes a very long time in the aircraft sector”, he affirms. “To innovate, you need to foresee the trends and create a robust technology that can be updated over time” (Carnevalli, 2019). It is important to mention that Embraer X was not included in the selling of 80% of the commercial area of the company to Boeing, and its creations remain independent.

The “flying car” is an example of the kind of projects developed by Embraer X – in this case, through a partnership with Uber. This is an “aircraft for the masses”, according to Antonio Campello, president of the unit. Since this vehicle will be electric and will use a rechargeable battery, operating costs are expected to be lower to those of a common helicopter. The aircraft’s design should be simple, with fixed parts and cheap maintenance, easily accessible and with the least possible noise, since the idea is that it flies closer to the ground than helicopter (Embraer Revela Carro, 2019).

Still, according to Campello, a large part of the project is being developed in Brazil. Embraer has not revealed a date for introducing the aircraft. As published by “O Estado de São Paulo” in June 2019, it is unknown whether the Brazilian company will participate in the first tests planned by Uber for 2020 in the cities of Melbourne, in Australia, Dallas and Los Angeles, in the USA.

In its Flight Plan 2030, according to the Embraer website, an air traffic management concept for urban air mobility, Embraer X establishes a vision of the future that drives the project of electric powered vertical takeoff and landing (eVTOLs) vehicles and of urban air mobility (UAM), which is based upon three main pillars:

  • A new generation of electric vehicles with vertical takeoff and landing will change our experience of urban mobility. Innovators are designing and testing a new generation of aircrafts that will serve as transportation in the cities of the 21st century;
  • For the initial launching, many eVTOLs will have an on-board pilot. After some time, however, those aircrafts will advance to a phase of autonomous operation;
  • The next decade will be vital for the growth and acceptance of the UAM industry. It is in that period that the standards of safety, protection and performance will be defined.

This case of innovation management of Embraer shows the concepts of ambidextrous organization (excellent in both research and execution); of the construction of an ecosystem of innovation that is balanced between current/ foreseeable products (core), adjacent and disruptive – with a company that dedicates exclusively to the latter, Embraer X. In conclusion, it is worth mentioning the “business plan” of the eVTOL project. This document establishes a clear and inspiring vision of the future; highlights the possible difficulties and obstacles; and does not venture into financial forecasts of any kind.

Even though the main goal of this article is to reflect on the matter of innovation from the point of view of business strategies, it is important to highlight an aspect that was seemingly forgotten: the ethical issue. An organization does not exist “to create profit”. Profit is supposed to be a “natural” outcome of the organization fulfilling its role in society. Therefore, here goes an alert against innovations which potential for profit is not linked to effective improvements for society, but to manipulative use of knowledge. It is particularly important being alert with developments with the potential to interfere in privacy, freedom and citizenship; and/or lead to undesirable impacts to the society and to the environment.

Innovating is necessary. Any company that loses its capacity to create, foresee or – at least – keep track of the pace of evolution in the sector and markets where it acts will be doomed to disappear. In this article, we have analyzed the issue of innovation within large companies, we have seen how and why they may fail, always making good (and old?) managerial decisions… for too long.

A corporation that has many resources, but is tangled in a web of decisions that supposedly guarantees the continuity and sustainable growth of the business, can also lead to financial failure (the “innovator’s dilemma”) and needs to become ambidextrous: developing the ability to research the environment and to identify new opportunities. The main recommendation seems to be avoiding the trap of the “innovation theater” in its two forms: the illusion of control represented by “business plans” (that never work); and the incentives to “creativity”, confused with innovation. Moreover, the development of a true ecosystem of innovation is an enormous challenge that must be faced.

Finally, we must keep in mind the ethical issues of sustainability. Business’ business is business – but the (legitimate) pursuit of profit cannot do without the fundamental mission of seeking the maximum common good. The purpose of the effort for innovation must be improving the lives of people – whereas profit is just a consequence of that.


Referencies

Christensen, C.M. (1997). The Innovator’s Dilemma When New Technologies Cause Great Firms to Fail. Harvard Business Press. Retrieved from: https://epdf.pub/the-innovators-dilemma-when-new-technologies-cause-great-firms-to-fail-managemen.html  

Tendayi, V., Toma, D., Gons, E. (2017, April). The Corporate Startup: How established companies can develop successful innovation ecosystems. Vakmedianet. Retrieved from:  https://www.startse.com/noticia/nova-economia/corporate/34647/kodak-como-ela-foi-de-uma-das-empresas-mais-inovadoras-ate-falencia 

Saconi, A. (2019). Embraer é única brasileira entre 100 maiores empresas do setor aeroespacial. UOL. Retrieved from: https://economia.uol.com.br/noticias/redacao/2019/09/07/embraer-ranking-empresas-setor-aeroespacial.htm?cmpid=copiaecola 

Kastner, T. (2018). Acordo faz Embraer perder quase R$ 3 bilhões na Bolsa. Folha. Retrieved from: https://www1.folha.uol.com.br/mercado/2018/07/acoes-da-embraer-caem-mais-de-14-apos-anuncio-de-acordo-com-boeing.shtml\

Carnevalli, E. (2019). O dilema da Embraer: tentar prever o futuro ou criá-lo? Época Negócios. Retrieved from: https://epocanegocios.globo.com/Empresa/noticia/2019/09/o-dilema-da-embraer-tentar-prever-o-futuro-ou-cria-lo.html 

Embraer revela carro voador ‘para as massas’. (2019). Estadão. Retrieved from: https://epocanegocios.globo.com/Tecnologia/noticia/2019/06/epoca-negocios-embraer-revela-carro-voador-para-as-massas.html 

Embraer. (n.d.). Retrieved from: https://embraerx.embraer.com/global/en/flightplan-2030 

Balanced Scorecard: Uber Case Study

Uber: an unprofitable company worth billions. But those who look only to the past or present are certain to miss the future ©.

Prof. Ricardo Britto
Doctor in Business Administration at USP
Dean of IBS Americas

According to the latest news, Uber had over $1b in net losses in the Q3 of 2019 (Feiner, 2019). The second quarter was even worse for the company: it lost $5b and had a record low revenue growth rate. Apart from this, Uber was refused to maintain the presence in its biggest market in Europe as the company lost the license to operate in London. Yet, after a slight decline, Uber’s shares gained ground again, and investors are bullish about next year’s business prospects.  


Uber Ride-Hailing Gross Bookings, Net Revenue, Net Loss/Profit (Source: Statista, 2019) 

Generally, large-cap companies that are losing money today are being punished by the market. But Uber has a very different story to tell: it is pioneering a new industry and working towards future goals, which sets the foundation for attractive long-term margins. Indeed, traditional companies, like Walmart, seem more attractive with their better-then-expected results in net profit, revenue and return on invested capital. But old valuation metrics aren’t always applicable anymore as today’s public market investing landscape has changed and investors are now in favor of risk takers and cash-burners (Baskin, 2014).  

In the digital era companies can no longer be competitive by just managing financial assets and liabilities well. Nowadays, firms have to mobilize and exploit their intangible assets to stay competitive and provide innovative products and services customized to specific market segments. Usually, in order to run business, companies adopt strategies around customer relationships, core competences and organizational capabilities, but they tend to use only financial measurements in order to motivate and evaluate performance. In 1992, Drs. Robert S. Kaplan and David P. Norton offered a more comprehensive management framework – the Balanced Scorecard (BSC) which adds indicators that connect long-term financial success to customer and financial objectives, internal processes as well as employee and system performance. The framework is based on four main areas:  

  • Financial perspective: measurements that indicate if the organization’s strategy, implementation, and execution are improving the bottom line. The data can include financial ratios, budget variances, income targets, etc.;  
  • Customer and stakeholder perspective: measurements that track competitive and strategic efforts in the business’s customer and market segments. The information is collected to gauge customer satisfaction with the quality, price, availability of products or services;  
  • Internal process: measurements that focus on existing and new internal processes to ensure the company’s current and future success. Operational management is analyzed to track any gaps, delays, bottlenecks, shortages or waste;  
  • Learning and growth perspective: measurements that track how the firm is improving employee skills, IT systems and specific organizational procedures.  

The BSC Measurements in Four Areas (Source: Balanced Scorecard Institute, 2019) 

The objective of BSC is to provide an alternative management approach that helps companies achieve long-term investment, instead of pursuing only short-term financial goals. Each of the components of the framework should be clearly specified and communicated using a corporate-level BSC, which is to be linked to the BSCs of each business unit. To get everyone to contribute to the implementation of strategy, companies must share their long-term visions and strategies with all their employees. Thus, BSC fosters a shared understanding of an organization’s vision of the future by aligning the day-to-day working process that employees are going to follow (Tarver, 2020). In other words,  it gives organizations a way to “connect the dots” between the various components of strategic planning and management, meaning that there will be a visible connection between the projects and programs that people are working on, the measurements being used to track success (KPIs), the strategic objectives the organization is trying to accomplish, and the mission, vision, and strategy of the organization. 

Other elements present in the BSC framework are:  

  1. Strategy Mapping is used to visualize and communicate how value is created by the organization. A strategy map is a simple graph that shows a logical, cause-and-effect connection between strategic objectives; 
  2. KPIs monitor the implementation and effectiveness of an organization’s strategies, determine the gap between actual and targeted performance and determine organization effectiveness and operational efficiency;  
  3. Strategic Initiatives are projects that are designed to help the organization achieve strategic objectives and have significant organization-wide impact;  
  4. Cascading is a BSC means to translate the corporate-wide scorecard (referred to as Tier 1) down to first business units, support units or departments (Tier 2) and then teams or individuals (Tier 3). 

Due to the increasing complexity of organization, the Balanced Scorecard approach, when implemented correctly, can provide decision makers with the guidance needed to direct the company towards the achievement of its strategic goals. Nevertheless, the concept has some limits and has been criticized by some scholars. One of the drawbacks is related to the idea that it is just a list of metrics which does not offer a unified view or clear recommendations. The main problem is that it does not provide any practical steps for deployment and some executives might see it as a “quick fix” that can be easily installed in their firms. Moreover, while BSC tends to improve performance, it excludes external environment factors and focuses more on internal aspects. According to the Bain & Company’s Management Tools & Trends survey (2017) 29% of 1,268 managers mentioned the use of BSC with relatively low satisfaction rates (3.93 out of 5), which indicates that the framework might be outdated.  


Usage and Satisfaction Rates (Source: Bain Management Tools & Trends survey, 2017) 

Despite being criticized, BSC framework’s main strength is that it can be applied in multiple industries and companies’ types and sizes. Consider Uber as an example, a company that went from the most feared startup in the world to its massive IPO in 2019. Currently, the company has a market cap standing at $50.279b, its price-to-sales ratio is 3.39, it pays no dividend and it is unprofitable (Yahoo, 2019). It has a long-term $5.7b debt that will need to pay at some point. But many investors still believe its shares are worth buying for a simple reason: Uber’s success story attributes to going beyond traditional financial KPIs requirements and expectations of business performance (Kilgore, 2019).  


Uber Price-to-Sales Ratio Chart (Source: Yahoo Finance, 2019) 

Customer and stakeholder perspective: From the very inception Uber took a strong position regarding its seamless customer experience which actually minimizes clients-driver interaction time. The firm’s customer experience KPIs include clients’ satisfaction ranking, overall rating, surge and non-surge rating, acceptance and cancellation rates, fare reviews per trip, total 1-star and 5-star ratings; revenue and profitability from different customer tiers such as UberX, Uber Comfort, VIP, Uber Black and Uber Pool users, customer acquisition and retention measurements, etc.  A customer-centric model simply makes clients fall in love with the company from the first ride (Stankiewicz, 2019).  

Internal process: Apart from focusing on conventional performance metrics, such as improvements in costs, quality and schedules, Uber tends to derive internal processes from the demands and expectations of external stakeholders. The company integrated innovation and diversification as critical components in this perspective: it has extended its services to food delivery and micro-mobility system with electric bikes and scooters and introduced Uber ATG (Advanced Technologies Group) that is developing self-driving cars. 

Learning and growth perspective: A central group of drivers-based measures is used by Uber in order to track their performance. For example, a driver would be deactivated if his or her performance based on overall customers’ evaluation is lower that a certain minimum level established by Uber. What is also important is that Uber introduced the VIP status drivers receive when they sustain excellent rating over a period of time.  

All these measurement systems applied by Uber are linked to the company’s general strategic objective: making transportation fast, reliable and affordable for everyone and being the number one preferred service. In fact, the company is already estimated to have 100 million users worldwide with a 69% market share in the United States for ridesharing and a 25% market share for food delivery (Levy, 2019).  Market share of the leading ride-hailing companies in the United States from September 2017 to August 2019 Profit (Source: Statista, 2019) 


Market share of the leading ride-hailing companies in the United States from September 2017 to August 2019 Profit (Source: Statista, 2019) 

Implementing BSC measures helps the firm define and refine vision, strategy and objectives. But when it comes down to aligning strategic objectives from top to bottom, it is not easy for some companies to ensure that all workers contribute to the established goals and values. Uber, for example, has a sordid history around sexual harassment issues with both corporate employees and its drivers (O’Brien, 2019). While it successfully resolved the issue with the office stuff, the company can do little with its drivers who are not employees and are classified as independent workers. Uber’s business model is generally being criticized worldwide for undermining working conditions, clogging up city streets, destroying the traditional taxi industry, minimizing the tax it pays, side-stepping national regulations and fostering a culture of toxic masculinity. Consequently, Uber has been banned in cities including London, Frankfurt, Barcelona and Budapest. After losing its London operating license, Uber’s stock tanked 6% (Khan, 2019). As a possible solution, Uber might try to tighten up its driver registration procedures and track them more closely.  

Undoubtedly, ridesharing and the online food delivery industries have robust growth opportunities. With its plummeting revenue, safety issues and bold initiatives, Uber has a distinct profile of company suitable for risk-seeking investors. For those who are dissatisfied with the amount of money Uber is losing, there are other growth stocks to consider, such as Home Depot, Colgate, Costco, BestBuy or Walmart with historical EBITDA growth stability and increasing sales (Kolakowski, M.). But keep in mind that financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures might be inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.  


Referencies:

Balanced Scorecard. (n.d.) [BSC definition]. Retrieved from: https://balancedscorecard.org/bsc-basics-overview/ 

Baskin, J.S. 2014. The Five Keys To Uber’s Valuation. Forbes. Retrieved from: https://www.forbes.com/sites/jonathansalembaskin/2014/12/05/the-5-keys-to-ubers-valuation/#665ac8494886 

De Silva, D. (2019). Uber: An Underappreciated And Undervalued Company Suitable For Risk-Seeking Investors. Seeking Alpha. Retrieved from: https://seekingalpha.com/article/4297704-uber-underappreciated-undervalued-company-suitable-risk-seeking-investors 

Feiner, L. (2019). Uber stock falls after quarterly results beat estimates, but losses topped $1 billion. CNBC. Retrieved from: https://www.cnbc.com/2019/11/04/uber-uber-q3-2019-earnings.html 

Khan, Y. (2019). Uber stock tanks 6% after losing its London operating license: ‘There is a risk that other cities could follow’ (UBER). Business Insider. Retrieved from: https://markets.businessinsider.com/news/stocks/uber-stock-sinks-after-losing-london-operating-license-2019-11-1028714120 

Kilgore, T. (2019). It’s time to buy Uber’s stock, analysts say. Market Watch. Retrieved from: https://www.marketwatch.com/story/its-time-to-buy-ubers-stock-analysts-say-2019-11-22 

Kolakowski, M. (2019). 7 ‘Stable Growth’ Stocks That Can Lead as Economy Slows. Investopedia. Retrieved from: https://www.investopedia.com/7-stable-growth-stocks-that-can-lead-as-economy-slows-4772629 

Levy, A. (2019). Uber will soon join an ugly but exclusive club: Unprofitable companies worth more than $50 billion. CNBC. Retrieved from: https://www.cnbc.com/2019/04/27/uber-one-of-only-3-unprofitable-companies-worth-more-than-50-billion.html 

Mkwabi, J. (2018). A REVIEW OF UBER’S MAIN PHENOMENON: BAD LEADERSHIP PRACTICES. Research Gate. Retrieved from: https://www.researchgate.net/publication/324439397_A_REVIEW_OF_UBER’S_MAIN_PHENOMENON_BAD_LEADERSHIP_PRACTICES 

Norton., D., Kaplan, R. (1996). The Balanced Scorecard. Translating Strategy into Action. Business Book Summaries, 2014, HBR.  

O’Brien, S.A. (2019). Uber addresses workplace harassment as rider safety concerns linger. CNN. Retrieved from: https://edition.cnn.com/2019/07/16/tech/uber-sexual-harassment-purple-campaign/index.html 

Palmer, A. (2019). Uber and Lyft close at record lows as investors lose faith in ride-sharing companies. CNBC. Retrieved from: https://www.cnbc.com/2019/09/03/uber-and-lyft-stock-close-at-record-lows-as-investor-skepticism-grows.html 

Problems Implementing a Balanced Scorecard. (n.d.). BPM Institute. Retrieved from:  

Rigby, D., Bilodeau, B. (2018). Management Tools and Trends. Bain & Company. Retrieved from:https://www.bain.com/contentassets/caa40128a49c4f34800a76eae15828e3/bain_brief-management_tools_and_trends.pdf 

Spicer, A. (2019). Uber’s London woes show the need for a taxi app owned by drivers. The Guardian. Retrieved from: https://www.theguardian.com/commentisfree/2019/nov/26/uber-london-taxi-app-drivers-cities 

Stankiewicz, K. (2019). Shares of Uber are now worth buying, Jim Cramer says. CNBC. Retrieved from: https://www.cnbc.com/2019/11/25/shares-of-uber-are-now-worth-buying-jim-cramer-says.html 

Statista. (n.d.) [Uber statistics]. Retrieved from: https://www.statista.com/topics/4826/uber-technologies/ 

Tarver, E. (2020). Balanced Scorecard. Investopedia. Retrieved from: https://www.investopedia.com/terms/b/balancedscorecard.asp 

Yahoo Finance. (n.d.). [Uber Shares]. Retrieved from: https://finance.yahoo.com/m/5773b1b4-3f05-3416-8943-38b996d42d66/uber-shares-hit-after-losing.html 

Crash Course Blue Ocean Strategy: Amazon Alexa Case

Prof. Ricardo Britto
Doctor in Business Administration at USP
Dean of IBS Americas

Americas Business Review – Sao Paulo – May-June 2020, pp.1-10. www.ibs-americas.com

Despite its slowing sales growth in the e-commerce industry, Amazon managed to increase its revenue up to $232.89 billion in 2018 by constantly improving and introducing new products. Amazon still competes within the confines of the existing e-commerce industry and tries to maintain its current customers; at the same time, it makes huge investments into AI and developed uncontested market space of smart devices that made competition in this sector irrelevant. The company’s main AI tool Alexa created a so-called Blue Ocean, a previously unknown market space where demand is created, and cost/differentiation advantages could be achieved simultaneously. Amazon products prove that creating blue oceans builds brands. So powerful is blue strategy, that, in fact, in can create brand equity that lasts for decades.

Amazon revenue by segment in percentage, quarterly, 2017-2019 (Source: CNN Business, 2019).
Annual net revenue of Amazon 2004 -2018 in billion U.S. dollars (Source: Statista, 2019).

Traditionally, companies tend to focus on competition in order to expand their market share in the industry and increase profits. Firms, following Porter’s generic strategies presented in his work “Competitive Strategy: Techniques for Analyzing Industries and Competitors” (1980), thrive to achieve a competitive advantage across its chosen market scope opting for either lower cost or differentiation approaches. Thus, all companies within a particular industry seem to compete for a piece of one pie that is composed of the same customers, limited revenue streams and benefits. Such a market space is known as red oceans, where industry boundaries are well defined and accepted, in which the competitive rules are clear, and companies fight against each other for bigger shares of known demand. Certain tendencies in today’s business world such as globalization and technology significantly shrink niche market opportunities and lead to saturation, commoditization and price wars (Kim & Mauborgne, 2005).

From a different perspective, offered by professors W.Chan Kim and Reneé Mauborgne (2005), the market world has another dimension known as blue oceans – a new and unexploited market space untainted by competition where demand is created rather than fought over. As a result, the rules in blue oceans have not been created yet, which makes competition irrelevant and represents an opportunity for new ideas and profitable growth. In order to break free from less profitable red oceans, it is imperative for a company to shift its strategic focus from competition to value innovation which is a cornerstone of the blue ocean strategy. At the same time, firms that wish to succeed in uncharted waters of a new market must deny a conventional idea of tradeoffs between value creation and low price and focus on the pursuit of both differentiation and decreased costs. Regarding long-term benefits, the company that managed to dominate a new market might need to remain its first-mover advantage as long as possible until new competitors enter and make the blue ocean red again. According to the authors, in order to implement the blue ocean strategy, a company has to make a blue ocean shift – particular steps to move from red oceans of bloody competition to the uncontested market: choose the right place to start the initiative; get clear of the current state, discover the ocean of noncustomers; reconstruct market boundaries and, finally, select and test the chosen blue ocean move.

The blue ocean strategy seems to be successful in many industries, especially those involving technology; nevertheless, it is not flawless. it is possible to say that most of the blue ocean new concepts like “non-costumers” or “new market spaces” are just new ways to express old ideas developed in the past by Michael Porter (1980) and others. Another point is that thanks to advanced technology development, the existence period of blue oceans will likely shorten, and new entrants might appear. This speculation might lead back to one of the Porter’s five forces: the threat of new entrants. Amazon’s virtual assistant Alexa has found itself in a similar scenario, which is discussed in this case.

Although nowadays Amazon is the biggest shark in the e-commerce space, it definitely competes in the waters of the red ocean with other strong and well-established companies such as Best Buy, Target, Walmart, Alibaba Group, etc. It has been recently reported that Amazon sales growth slowed in 2018, but the company still positions itself as a profit machine: its total profit for 2018 topped $10 billion for the first time in its history. Here comes a question: how can Amazon maintain its position in a saturated, highly competitive industry? The thing is that only one part of the company competes in the red ocean – its e-commerce industry which works with operations every e-commerce business has: online ordering, checkout processes, fast delivery, returns, etc. These factors are not a source of competitive differentiation. According to Amazon Annual Report (2018), the growing profit comes from other sectors in which Amazon invests heavily: cloud computing, artificial intelligence, consumer electronics and web services in general. Amazon continually tries to create and implement blue ocean strategies in these areas introducing new products such as Kindle, drone delivery and virtual assistant solutions. Such innovations create uncontested space or blue oceans.

Amazon annual profit in 2018 (Source: CNN Business, 2019).

One of the most successful products Amazon developed is called Echo, a smart speaker that connects to the voice controlled intelligent personal assistant service Alexa (nowadays the words “Echo” and “Alexa” are used interchangeably). There are many features the device includes: voice interaction, music playback, making to-do lists, setting alarms, streaming podcasts, playing audiobooks, providing weather, traffic and other real time information.

Echo is being constantly improved and now is able to work as a part of IoT and act as a home information hub. Alexa has become a sleeper hit that could set a future industry standard in case more competitors come, but for now Amazon can enjoy its first-mover advantage and even move forward.

The company came a long way in an attempt to develop the world’s most famous virtual assistant. Trying to understand and predict future opportunities, the first step the company took was the detection of new trends in the market: it is assumed that Siri was the first voice assistant that reached a wide audience but was not able to create a blue ocean since it had a limited set of actions and was available only on IOS devices (Mutchler, 2017). At the same time, it can be argued that since the first company to introduce a virtual assistant was Apple, Amazon probably cannot be considered the first mover who created a blue ocean; conversely, Alexa entered a “purple” ocean where competition was not null and a new market was being formed.

The creation of Siri, in any case, served as a wake-up call for Amazon managers that pushed them for a change. As a result, the company started the reconstruction of its market boundaries by assuming several paths as strategies mentioned in the work of W. Chan Kim and Renée Mauborgne (2005). Amazon looked across alternative industries, the chain of buyers and functional/emotional appeal to buyers at the same time. AWS (Amazon Web Services) has proved to be a more profitable area for the company; Alexa, in particular, could generate between $18 billion and $19 billion in total sales by 2021, or around 5% of Amazon’s total revenue, according to a new report from RBC Capital Markets analysis (2018).

It is important to note that Alexa device does not converge on a single buyer group: it focuses on both B2B and B2C commerce. On the one hand, a personal use of Alexa includes playing music and games, asking questions and controlling smart home devices, such as light, fans and thermostats in the buyer’s house. But Amazon did not stop here: built in the cloud, Alexa always gathers more information and becomes smarter, so it can be used in the corporate world too. The virtual assistant can inform you about purchase history, office supplies refills and even generate corresponding documents. The device can be connected to everything starting from lawn mowers to laptops; currently more than 18.000 companies use Alexa with almost 2000 of them being in the retail and computer software industries mainly in the US. Finally, emotional appeal is a point of strength of Alexa: according to Microsoft analysis, Alexa’s broader success resides in its ability to alleviate stress of an overbooked life. With the simple action of asking Alexa relieves the negative emotions or uncertainty and the fear of forgetting; it seems like a companion that is always ready to engage (Austin, 2017). Thus, the product has a dual functional and emotional appeal.

Distribution of companies using Alexa by industry 2015-2018 (Source: Enlyft, 2019).

A major component of value innovation is to maximize demand by reaching beyond existing customers, which means seeking ways to attract noncustomers. Current Amazon Alexa demographics are mostly male millennials, specifically, 19-30 years old (Koksal, 2018). The type of Amazon’s noncustomers can be called as “unexplored noncustomers”: industry has always ignored them as they are assumed to be loyal to other products or the product for them simply does not exist yet. These noncustomers have already been identified by the company – kids. Amazon has been making a push for child-focused Alexa devices and skills. According to the information provided by Forbes (2018), it launched its first Echo Dot Kids Edition and is hoping to expand its userbase to children with safe and child-compatible products. This way the company is trying to create a new demand that has not been explored by other companies yet. As Alexa is already navigating blue waters, it seems that Amazon has a long-term vision trying to expand the boundaries of its existing blue ocean by exploring noncustomers segment. To some extent, it is currently developing a new blue ocean inside the existing one, which can be represented in the chart below:

In terms of financing, it is clear that Amazon does not need to overcome any resource hurdles since the company is already a top player in the market, which makes it also impossible for other companies to beat Amazon. In 2017 Amazon invested $23 billion on R&D development particularly in AWS (Fuscaldo, 2019). Such heavy costs must be recouped as fast as possible, so the need to build sales volume quickly is more important than in the past: setting the right strategic price is critical to attracting new customers in large numbers. Also, a new offering that combines exceptional utility with an attractive pricing is hard for competitors to imitate. Amazon made a similar play here: the firms original Echo device was priced at $199, but already in 2016, the firm released a revamped lower end offering, the Echo Dot, only for $50. That device’s popularity propelled the Echo installed base to 9 million US household – a figure that continues to grow until now (Shields, 2017).

Following the blue ocean strategy, Amazon also recognized the importance of partnerships with the objective to leverage its expertise, economies of scale and create new markets. In 2016 the company partnered with SAP in order to be able to perform business tasks and explore the possibility of future B2B sales. Another example is Amazon’s partnership with Cisco to build software tools to integrate Cisco with the Alexa: the virtual assistant connects with conferencing equipment providers, such as Cisco Telepresence and Zoom Rooms to simplify the conference experience (Somasundaram, 2018). But Amazon has its long-term objectives too: the company uses its partnerships for future innovations. Navigating blue oceans can dramatically increase the chances of success, but Amazon is aware that last week’s blue ocean is next week’s red ocean as innovation will be imitated. The key to long-term sustainability and renewal is to dominate the market space for as long as possible, while continually monitoring the changing scenario. When an innovator’s value curve begins to converge with that of the competition, it is time to create more blue oceans. Indeed, possible competition is already looming: Google is reportedly working in a smaller, less expensive version of its already existing Google Home smart speaker; Apple and Microsoft are also planning to get into the space, although their offerings are likely to be costly, so Amazon can still keep its edge in the uncharted waters. But the company needs to keep moving and keep innovating. Alexa smart assistant is just one device that can spark future development: the company created Echo buds, Echo frames, loops, Flex plugs and Amazon Sidewalk devices to connect to Alexa in order to provide a trusted and compatible service as well as to bring the device closer to the user. Over time, the company also created other versions of its Echo devices, such as Amazon Tap, Echo Dot, Echo Spot, Echo Auto, to name a few. One of the latest inventions was Echo Look that represents a camera with Alexa built in. The device can take pictures or videos and provide artificial intelligence outfit recommendations and does not have any competitors so far.

One of the features of a blue ocean strategy is the absence of market rules, tendencies and even laws. Almost all digital devices mentioned above epitomize some sort of tension between efficiency and privacy (Lynskey, 2019). According to digital rights specialists, virtual assistants can be co-opted in undesirable ways by large multinationals and state surveillance systems or compromised by malicious hackers. Technology companies’ business models usually depend on the knowledge about their customers in order to micro target advertising (Eadicicco, 2019). A possible solution to the problem might appear if a particular firm takes a lead and establishes a future market standard regarding human monitoring. Thus, new entrants would thrive to achieve safe and user-controlled voice assistants, which, by this time, will have become an industry requirement.

In general, the value innovation stands in stark contrast with the conventional practice of technology innovation. Despite existing criticism, there is a great potential for economies of scale, learning and growing returns in the world of new ideas and knowledge. Blue ocean strategy delivers a path-breaking message that can inspire innovation in companies across industries and around the globe. Inherent in blue ocean strategy are significant barriers to imitation.

While some argue that creating new demand and turn to noncustomers can be fruitful, other scholars believe that large corporations can have a two-pronged approach: increasing current customers’ lifetime value and, at the same time, trying to attract noncustomers and, as a consequence, create new demand. In case of Amazon, the latter approach worked. Most of its profit comes from the red ocean operations in e-commerce, an industry that appeared before Amazon was founded and, even so, Amazon was able to enter this red ocean, grow and turn into a market leader. While sailing in the red ocean in e-commerce, the company explored the blue ocean in AWS. Such a double approach might work in large corporations, whereas SME will probably have to choose whether they will keep a bloody fight within the existing rules, or they are ready to innovate and find growth opportunities in the uncontested market space.

Whatever the industry is, there is always an opportunity to discover a blue ocean through the search of new customers and new markets. However, leaning from Amazon Alexa case, a second possible lesson would be completely different: being profitable by being simply more competent than your rivals in red oceans. There is money in traditional markets too.

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Referencies:

Amazon Annual Report (2018)Retrieved from: https://ir.aboutamazon.com/static-files/0f9e36b1-7e1e-4b52-be17-145dc9d8b5ec

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Clement, J. (2019). Amazon: annual revenue 2004-2018. Retrieved from: https://www.statista.com/statistics/266282/annual-net-revenue-of-amazoncom/

Clement, J. (2019). Global net revenue of Amazon 2014-2018, by product group. Retrieved from: https://www.statista.com/statistics/672747/amazons-consolidated-net-revenue-by-segment/https://www.statista.com/statistics/672747/amazons-consolidated-net-revenue-by-segment/ Companies using Alexa (n.d.) Retrieved from: https://enlyft.com/tech/products/alexa

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Inside CSUN: interview with our former student Clarissa de Pádua

Courses, dates and specifications of California State University, Northridge courses you already know, but how about knowing more about the students’ experience?

We invited our former student Clarissa from Padua to talk a little about programs’ daily routine, professors and leisure time at California State University, Northridge. Clarissa attended our Design Thinking course in January 2020, and you can see what she has to say below.

How was the first day of the program?

The first day was different because, in fact, we had 2 different “first days”. The day before classes started, IBS and CSUN took the students on a tour at the University, so we could get to know a little of the space, so that on the first effective day we didn’t feel so lost, which I thought was very kind. The first day of class was very intense and profitable, I met my classmates, professors (from Design Thinking and Business English), I received the material and classes have begun.

What was your routine at the University? And on the weekend?

The days of the week were all dedicated to classes (except Fridays, which we had company visits), because we had a full-time basis classes, and the rest of the free time was for studying and carrying out the projects we received from professors. Even so, I could enjoy watching a basketball game at the university, getting to know the neighborhood, socializing with the other students (as there were 3 courses, it wasn’t always possible to see everyone during class time, so it was during breaks and at the end of the day we used to see each other to talk, to know how the classes were going with other professors), etc. On weekends, we usually gathered in groups to stroll around Los Angeles or visit nearby cities.

Why did you choose to study at CSUN? What was your favorite thing there?

I chose CSUN for having the course I wanted to attend and for the University’s reputation. What I liked most was the structure, rooms all equipped, buildings and the fact that everything we needed was there (or very close). Not to mention that it was beautiful, huge.

How were professors and classes like?

Professors (all of them, including Business English), were highly qualified, with an impressive work background, so it was common telling a case that fits the subject of the class, they explained something that had already happened to them, and that was amazing because we could see the material in an applied way. The classes were always full of information, very dynamic, we did group or individual activities to improve knowledge right there.

Besides the course, you and your colleagues spent your free time visiting parts of California. What places did you like to visit the most?

I really enjoyed visiting Santa Monica and LACMA in Los Angeles. I also visited San Diego, which is beautiful, and Las Vegas, which is exactly as the films portray, it was a very different experience.

How was the Graduation Ceremony?

It was amazing. We had lunch where we all sat together to be able to talk and relax one last time, we saw scenes from our trajectory at CSUN, we saw our friends receiving awards for their effort during the course, we received our certificates, we took pictures, (I cried too much hahaha). I will keep this day with great affection in my memory.

At the end of the experience, what do you think was essential to your professional field? What about the staff?

The experience of attending a Design Thinking course at an American university added a lot to my portfolio, mainly because this tool is used a lot in my area and CSUN is an outstanding university  in your curriculum. Since I came back from the trip I have used the methodology in my work and it has been very rewarding. On a personal level, I made friends from different places, with different types of training and experience, and being able to share experiences and learn from them was something transforming.

Thank you for sharing your experience, Clarissa! IBS Americas wishes you success in your professional life.

To receive more details on our executive courses abroad, send an email to blog@ibs-americas.com!