Video Transcript: Lecture 4

Hello everybody. Welcome back to Module number four, where today we will be  talking about evaluating the internal environment. I hope you're enjoying the  class so far, and now, as we transition into this next section, we will be  discussing all kinds of really great things regarding strategy. So, you know, we'll  be talking about cost analysis and and innovation, and we'll we'll talk about  ethics, and we'll eventually go into what strategic leadership is, and that will be  the final module. But for now, we're going to continue our evaluation. So as we,  as you remember, in last module, we talked about evaluating the external  environment, and now we're going to be talking about evaluating the internal  environment. And evaluating the internal environment is a little bit different.  There's different tools that you can use to evaluate the internal environment, and we will be talking about those. One of the things that I wanted to talk about is  when you're evaluating the internal environment, you need to look at everything  that you're doing and ways to gain efficiencies. And remember, it's all about  getting that competitive advantage. So at the end of the day, whatever you can  do to maintain and achieve competitive advantage is is the goal. So the book  talks about Southwest Airlines, and one of the things that it mentions is they are  very efficient, and they're more efficient than their competitors, and that allows  them to pass those cost savings on to their their customers, which brings them  drives more business and Things like that. So a couple things that the book talks about. One of the things that the book talks about is how they all use the same  fleet. They all use the same airplanes, and by doing so, that gives them an  advantage, because they only have to train mechanics in one way in one type of aircraft. So their training is simplified. Parts are simplified. All those things are  simplified, which makes them run very, very, very efficiently. So that's certainly  something that would be revealed in internal analysis. Something else that they  do, which I think is really cool, is they have commitment. So have you ever  heard, if you've ever flown on a plane, at least in the United States, one of the  things that we always that you'll always hear, is please take your seats as  quickly as possible. That way we can have an on time departure. And they talk  about on time, departure, on time, departure, on time, departure. So one of the  things that Southwest Airlines is really, really good at and this is their analysis,  and they focus very, very heavily on it is the turn. And what the turn is is a plane  comes into the gate, passengers disembark, they clean the plane, they restock  the plane. Passengers come on the plane, they push out from the gap, and gate on time, and they get in the air. I forget that figure, but the gentleman at  Southwest who was talking to us about this at dinner, he mentioned that their  their turn was down to, it was whatever it was, I think maybe 20 minutes or or 15 minutes or 30 minutes, whatever it was. It was like far, far, far above the industry standard. So some of the things that I asked him is, well, how, how have you  gotten your turn so low compared to everybody else? And he talked a lot about  about a lot of different things, but he said, we do analysis on our turn, and we 

incentivize our employees on the turn all the time. So that word analysis struck  out, stuck out to me, and the fact that they spend so much time on that turn, and what that allows them to is allows them to save fuel costs. It allows them to save employee costs. It allows them that make all these savings because they focus  on that turn, getting it from 40 something minutes down to 30 or less. So they're  they're incredibly efficient. They're efficient in their boarding process. They're  efficient in their in their maintenance, with their with their fleet. They're just a  really, really good company to look at when we're thinking about internal  analysis. So I'm really glad the book focused on them. So one of the things that I want to talk about is remember that in a Resource Based theory that  organizations own strategic resources and and and have competitive  advantage. They have to own resources over their competitors. So that may be,  that may be something tangible, like a technology that their competitors do not  have, that allows them to have significant advantage, or that may be something  that is that is less tangible, like intellectual property the smartest people working  for them, or whatever. So all those are part of resources, and they are part of  something that gives a firm competitive advantage. So let me give you an  example. So there is an app that allows you to, I'm just going to talk in generic  terms. There's an app that allows you to do something right. It allows you to do a certain kind of booking. And one of the things is that there is somebody who is  first to market in this space, and they have come into the space, and they  developed the app, but they are, they are continuing to try to drive to gain more  items for customers to be able to select from. So they're first to market, but  they're not the only people in market, and they have about 50 or 60 resources  right now, and they're trying to work their way up to 1000 Now, what if they were  able to find a software or something that would allow them to Remove the  manual process of putting those resources into the app, and it allowed that thing to be automated Well, that would give them a significant competitive advantage  over others that did not figure out that process. So when we talk about  competitive advantage, you know, finding things and being able to do that  internal analysis and being able to find efficiencies is critically important. So I  just wanted to drive that point home a little bit. Remember, we're going to be  talking about this framework VRDO, but there's things, and actually I'm going to  go ahead and share the screen. There are things that are valuable resources.  There are things that are rare sources. There are things that are difficult to  imitate, and then there's things that are organized to capture value. Now again,  this talks about Southwest Airlines, but this is it gives you a good example. One  of the things I love here is that Southwest culture that reflect all four qualities,  valuable, rare, difficult to imitate and organize to capture value, are ideal  because they can create sustained competitive advantages. And remember,  that's what it's all about. It's creating that competitive advantage, and it's  creating that sustained competitive advantage as well. So resources, you know 

that they're there, they're subdivided into two categories, and that's tangible  resources, and we talked about those, which could be a piece of machinery, it  could be a it could be cash, it could be things like that. And then there's  intangible resources as well, which are a little more difficult to quantify, but exist  anyway. So those might be your reputation. Those could be things like your your culture. I could be the people that work for you and their knowledge. There is a  company, and I talked about them with mission, vision, values. There is a  company that that hires the best talent, and they and they pay for that talent like  certainly, in order to to retain top talent, you have to have a lot of things and and  pay is certainly a component of that. So they pay their employees very well. But  they, they, what they are known for is every single person is unbelievably  intelligent, driven, works hard, and that's what the culture demands. So if  somebody comes into the company and they don't fit that, then they move on  fairly quickly. So that's something to consider as well. Is. That would be an  example of an intangible resource, but one that is very necessary to that  company's success. So we talked about it. Cash is a tangible resource,  intangible resources. We talked about the skills of employees. Let's see one of  the things that the book talks about is Coca Cola and the idea of dynamic  capability, which Coca Cola can build new brands. And they do very, very well in  building new brands. Certainly, they were one of the first to get on the bottled  water craze. And they did, in fact, I think, I think the water I'm drinking right now  Nestle, I believe that is a Coca Cola brand, but they were one of the first to get  on there. They they tend to recognize trends. So that's, that's dynamic capability. Apple certainly would be considered somebody that has some dynamic  capability, especially with all the things they're doing. I mean, if you look at  Apple, they are a completely diversified company. So they have their products,  of course. So they have the Apple, watch, the iPad I have in my bag, the phone,  the computer, you know other things, Apple TV certainly is hardware, but they  also have software. And then the other thing they have is they have content,  right? So they have apple plus, so you could go on there and watch TV shows,  and they have some really good TV shows and some really good content on  there. In fact, I just watched a video the other day on how the world changed  since COVID, and kind of the effect on the environment from COVID. And that  was an Apple TV production. It was very well done. They have the apple credit  card, which actually I don't have my wallet right now, but they have the apple  credit card. They have Apple Music, so we can put on our favorite Christian  music right now, if we wanted to. They have just all kinds of different things that  are, that are out there that give them a dynamic capability and a diversified  strategy, which we'll be talking about diversification in a couple modules. So  VRIO, of the things that we let me see if I can make this smaller so we can see it all on one screen, and we can so I'm going to share my screen real quick. There we go, and one of the things that we need to look at is, is the resource valuable?

If the resource is not valuable, then you're going to be at a competitive  disadvantage. So is it rare, and that would lead to competitive parity if the  answer is no, if it's yes, is it costly to imitate? If the answer is no, then it's going  to be a temporary competitive advantage. If you think about that app that I was  just talking about, one of the things that I can tell you about it is it is not costly to  imitate anybody can do it. It does take resources, but that's going to give them a  temporary competitive advantage, and they need to take advantage of that  competitive advantage now get, get the resources they need in to get loyal  customer base now, before, before others launch similar in a competitor's app.  You know, certainly there's a couple out there that are on their way. So we'll see, we'll see what that means. And are they organized to capture value? If they are,  then that leads to a sustained competitive advantage. So this is a really good  chart, and what I would challenge you to do is to take a few minutes right now,  pause the video, and I want you to think of a company, and then think about, are they valuable? And you know, if we were to go through Apple, yes, yes. They're,  they're valuable. Their resource that they have, it is valuable is it rare you know,  one could argue that, depending on what the product line we're talking about or  with the resource we're talking about with them, the cost identity, those kind of  things. So pick a company and kind of go through this exercise and see if you  can figure out why a company may have a sustained competitive advantage or  not. So hopefully you did that and now you're back watching the rest of the  video. So remember that common resources such as cash and vehicles are not  strategic resources. So, you know, you can't, you can't have a an enduring  competitive advantage around those common resources. You know, one of the  things that I think about when I'm thinking when I go back to this chart, I  mentioned, I guess you can't see it when I go back to that chart, I mentioned  apple. But another company to think about is SpaceX. And I'm actually going to  bring up their website. So if you look at paint, is SpaceX, and then you compare  it to that chart that we're just looking at. They certainly have valuable resources  that are rare, that are costly to imitate and and they're organized to capture  value. In fact, they're they're one of the exclusive providers of of missions to to  space for NASA. So there's been some things in the news about that recently,  something else they're doing that certainly will give them a competitive  advantage is Starlink. And when you think about this, is the resource capability  valuable? Internet around the world is valuable? Is it rare? Yes, it is. Is it costly  to imitate? Sure it is. And is it organized to capture value? One could argue that, but the answer would probably be yes. So SpaceX, if you look specifically at  Starlink, they will definitely have an advantage here. So we're not going to watch this whole thing, because it's over an hour, but, but you know, just to give you an idea, you know, this talks about lifting off and then putting, putting some other  satellites in space so people can see, so people can get internet around the  world. So anyway, it's quite, quite an amazing thing that they are doing. And just 

because I think it's cool before, before we go, we will just watch just a second or  two of this. Let's, let's get to, let's get to the cool stuff. Here we go. That's cool.  So there it is, going off into space. All right, so Starlink, let me go ahead and  close that out before I get distracted, and let us focus back on the mission. So  Starlink would be an example of in SpaceX. Starlink would be an example of  something that you could use that chart that we have talked a lot about. You can use this chart to determine if the resource gives you a competitive advantage or  not, and we can see here that it does. So. Moving on. Let's move on. I think we  talked about that a lot. So something else is the VR IO. They talk about that  different parts of the organization in the book, and they use southwest again,  certainly could apply it to to SpaceX, or any other company, but they talked  about how there's different things for different things. So if you look at this, they  do talk about their high time, high on time arrival, but they talked about that, how that's only temporary, because once people figure out what they're doing, then  they can imitate them, and then they could remove that competitive advantage.  So just something to keep in mind as we talk about competitive advantage. So  remember that resource based theory suggests that tangible or intangible  resources that are valuable, rare, difficult to imitate and organize to capture  value, best position somebody for long term success. So you can look at  Starlink and say that SpaceX is best positioned for long term success based on  that these resources help develop the capabilities that can lead to superior  performance over time and again. SpaceX is a good example. Southwest, which their book talks about a lot, is a good example as well intellectual property, so I  don't want to spend a lot of time on intellectual. Property. Just think about  intellectual property, though, as as creations of the mind, its inventions. It could  be artistic products. It could be symbols. There. There are different types of it.  You know, certainly Apple, their their logo is intellectual property, but let me give  you some examples. Forgive me, when I deleted SpaceX, I deleted, I deleted  this website that I had prepared before I show you this, I just want to talk about,  you know, copyright, trademarks, patents and then trade secrets are all  considered intellectual property. So, my gosh, I'm so sorry. I cannot seem to  bring up the intellectual property I was looking for, here we go. And it's not it  either. So we will, we will move. We will move past that. We will move past that,  because I cannot find what I was, what I was looking for. But one of the things  that I just want to talk about with intellectual property is just remember, it can be  a variety of things. It could be a logo. It can be a music, your favorite song. It  can be, it can be trade, trade process that you have, that you've copyrighted, or  things like that. You know, intellectual property can be a textbook. So in this  class, we're able to find a free textbook, but certainly that is somebody's  intellectual work as well, and if you were to use that resource without  permission, then you would be violating intellectual property law and and you  could potentially be in trouble. That is not the case here. So patents, again, are 

one example the book uses slinkies. But certainly there's patents everywhere. In case, if anyone has never seen it, you can actually get a patent through the  United States Patent and Trademark Office, which I will bring up here. And you  know, one of the things that always strikes me about when I go to this website is they always talk about driving innovation, and they always mention innovation  as something that's very important. So on this website, they talk about the  innovation and inventions that 3M has done. And for those of you that are not  familiar with 3m as a company, I would encourage you to look at them. I'm sure  you will find they use their products all time. I know I do. In fact, I have some  pictures hanging using their products. So you can go in here, it will walk you  through the process of doing a patent, doing a trademark, and you can see how  it's explained. So, you know, determine the type of intellectual property. That's  what we're talking about now that you need determine if what you have is  patentable. And then what kind of patent do you need? You figure that out, and  then you go ahead and apply. If you look here, one of the things I want to show  you is it's actually not that expensive to get a patent. So anyway, just just  something for you to look at as we talk about patents and as we go beyond the  material, I want you to just spend some time looking at how to receive your  approval, maintain your patent, some of the steps and then how that's different  from trademarks and then some of the intellectual property policies that are out  there, this is a matter of international law. So internationally, there are  protections for patents and trademarks and those kind of things and copyrights.  There are certainly countries that violate those but for the most part, there are  protections in place for intellectual property. So we will move past that, and now  let us talk about the value chain. So donuts is used as an example in the book,  and I think this is a good example for talking about value chain. So we're going  to actually just spend some time going through this. So remember that there is  part of value chain. It's everything. So there's inbound logistics. So you're getting these ingredients from local just realized you can see my picture. There we go.  You're getting these ingredients from a local manufacturer. In this case, it's a  local farmer that makes the donut plant in New York City unique. And then, you  know, there's a secret donut recipe. I always found it funny that the President of  the United States had donuts shipped, shipped to the White House regularly.  Voodoo Donuts in Portland, Oregon. They have outbound logistics, and they use a van. And actually, Voodoo is not just in Portland anymore. It's actually all over  the place. Marketing and Sales. You can see here they have a attention  grabbing building. So if you want to see what that looks like, let's bring that up.  Randy's, excuse me, Randy's donuts in Inglewood. there it is. So, so certainly,  they have an attention grabbing graphic and building that that brings people. I  mean, there's no ambiguity there, right? You're definitely going to get a donut  from that place. So anyway, going back to this, and then there's also things that  are related to service. Voodoo Donuts has dirty snowball. Remember that when 

you're thinking about donuts, that infrastructure is important. Certainly, Tim  Horton's is a good example of that that the book talks about. And then, you  know, you got to make sure that the people that enter a donut shop are friendly,  and that's an important characteristic as well. So I'll tell you that I made a call  yesterday for to somebody to a campground, actually, and I was, I was looking  to book for a stay, and I called, and the person immediately was like, hello, and  then proceeded to be very rude and very condescending to me a potential  customer. So I guess the question is, do you think I booked? And the answer is,  of course not. I did not book. I did not book at that place because of customer  service. So remember that human resources management is really important, as well as other factors like the logistics, the operations, the outbound logistics, the  marketing and sales, the technology, and also procurement, the procurement  process. So you can look at Krispy Cream, you can look at Dunkin. You can look at Voodoo Donuts, Tim Horton and other places, and you can see that that it's  quite complex to get your morning donut. It's not just walk into a shop and get a  donut, by the way, if you live in the United States and you're in New Jersey, one  of my favorite places in the entire world, it's in the middle of Central Jersey and  Monmouth County. It's in colts neck New Jersey, actually, and it is called  delicious orchards. It's a apple orchard. Delicious orchards, and they have the  best apple cider donuts in the world. So if you go, if you go to New Jersey, this is what it looks like. But if you go to New Jersey, you can get these apple cider  donuts that they're showing right here, or you could actually mail yourself some,  but they are well worth it, and certainly they would be part of that process that  we just talked about as well. So let us move on, and we are almost done with  with internal structure, but. But remember the point, and the reason I'm showing  you all this and we're going through this is because this is all part of the things  that you need to analyze when you're talking about strategy. So remember, you  can't just look on the outside and look at what the firm is doing on the outside,  but you got to look on the inside as all as well, and paying attention to things like inbound logistics, operations, outbound logistics, marketing and sales and  service is key. So looking at that whole value chain and then finding ways in that value chain to gain efficiencies, to give you a competitive advantage, which will  then give you a competitive advantage overall over your competitors, that's what you're looking for. You're constantly looking to to I'm pointing at the screen, but  you can't see it, so I use my mouse. You're constantly looking to have an  advantage using these things over your competitors. So just something to keep  in mind is that when we're talking about these internal factors, these internal  processes, these logistics, these operations, marketing, sales, these service and then all your human resource capabilities keep in mind that that you want a  competitive advantage in each of those areas, and that's going to help you  succeed. So remember that the value chain is always looking for a way that you  can add value to an organization, and it's certainly looking at the production of a 

good or service. Remember that it's that this we talked primarily by looking at  donuts, by looking at these other things we we talked primarily about goods, but  certainly services are there as well. If you think about Starlink, which is going to  be that internet provider for the world, satellite internet, that would be a service.  It's very expensive to get up, but once it is, it's going to provide an excellent  service to people. So before I close this in prayer, I just want to show a picture of delicious orchards one more time. So again, if you, if you're ever in New Jersey,  I recommend going and getting their donuts. I was hoping it would the slider  would go to the donuts, but it's not. Oh, we can force it. Here we go. So, so,  yeah, so I just wanted to end by looking at the donuts. All right. We will be going  into module five, next to where we'll be talking about strategic issues and  analysis, and we'll be synthesizing some of those thoughts, as we do with  everything, let us take a moment to pray then, then, and then you'll have some  activities due, and then we can go into a SWOT analysis for Module Five.  Heavenly Father, thank you so much for this time. Thank you so much for the  attention in the class. Lord. We love you, and we're just so thankful for you. As  as we continue to study strategic management, we continue to learn these this  material, I pray that you'll help us to use it in powerful ways for you, Lord and  that and that we will be able to do Kingdom work with the strategy that we learn,  and we'll be able to apply it to our workplace, to our personal life and certainly to our spiritual life. In Jesus' name, we pray. Amen. Thank you, and I will see you  back here next time, where we will be doing a SWOT analysis and going into  quite a bit of detail about that. Thank you so much.