On Strategy is a series of thought pieces on issues of corporate strategy written by staff of Sacerdote & Co., Inc. Below are abstracts of essays in recent issues of On Strategy.

To obtain electronic or printed copies of the complete papers, please click on the appropriate boxes at the bottom of this screen. New papers are published semi-annually.

In this white paper we describe a thought process that enables CEOs to act decisively on limited information about a strategic problem and yet have the confidence in the expected results that can never come from merely "shooting from the hip." This process, which we call Facts for Action™, quickly identifies the facts needed to drive a portfolio of competitive actions. We arrive at the facts themselves using small sample research and corroborate them from multiple sources.

A number of companies such as Siebel Software and Cisco Systems have been celebrated in the press for seeing the start of the downturn before their competitors. But, anticipating the impact of the economic downturn and reacting early to control discretionary spending are not enough to enable a company to capitalize on the downturn. To gain market share and improve your company's competitive position, your organization also needs to know early on when to adopt a more aggressive posture, so that it can be winning new business as customers begin to reopen their wallets. Such a strategy will enable your company to increase its share of the most profitable segments of the market, while the competition is still wondering if the worst is past. This paper explores how to design a good early alert system for your company.

During leaner economic times, strong companies can capitalize on competitors’ weaknesses to gain significant marketplace advantage. As a result, such companies can enter the next up-cycle in the economy much stronger than the rest of their industry and earn materially larger profits. In this paper I examine several strategies to achieve these goals.

The media industry, not traditionally a technology-intensive business, is now forced to decide how and where to apply technology as a result of marketplace changes caused by the Internet revolution. Customers are demanding more and more and expecting to pay ever less for it. The leading companies in this industry are asking themselves how and where to apply the new technologies to add perceived value and/or reduce operating costs. Some have made brilliant choices, improving both top and bottom lines, while others have squandered time, money and staff resources pursuing initiatives that are unlikely to yield much in return.

In this paper we illustrate my firm's proprietary approach to dissecting a company's underlying economics, as well as those of its suppliers and customers, to find those places where Internet-related technologies enable it to capture the most value for itself. While the case examples are drawn mostly from the media and information industry, the approach applies broadly to all industries.

At the beginning of 1999, the major long distance companies were selling their services to consumers for 10 cents a minute. By September, the price had fallen to 5 to 7 cents, depending upon carrier, calling time, and calling plan. Only a few years ago, these same services were priced at 15, 20, or even 25 cents/minute. Similar price drops occurred in the business LD market and to a lesser degree in parts of the local telephone market. Forcing unit costs down at the same rate as unit prices strains the carriers' abilities to redesign their businesses and apply technology ever more cost-effectively. Indeed, AT&T reported a 23% drop in EPS for the third quarter of 1999 and announced a partial spinout of its wireless business to raise money to finance the ongoing competitive fights.

As executives in other industries, should we just gloat over our good fortune at the expense of the communications sector? Or should we study this situation to learn how to prosper when the same thing happens in our industries or among our suppliers or customers? By understanding how the communications companies got themselves into this fix, and what they are doing about it, we can avoid the trap for ourselves. If we understand how various suppliers and customers of this beleaguered industry have endeavored to drive down communications prices, we can learn how to win in our own markets. At the very least, we should determine how best to exploit this rapid change in the cost and effectiveness of communications to change the dynamics of our own markets. With these thoughts we begin our tale.

A major profit squeeze has taken hold in many industries. In some the squeeze is happening because companies are unable to fully pass on their rising costs to their customers. In other industries prices are actually falling while costs are steady to rising. As with all economic shifts, this squeeze will result in both winners and losers. The winners are companies that can exploit the underlying forces to lower unit costs, increase unit value, or grow their markets more than enough to offset the squeeze's impact. In this article, we explore the root causes of this squeeze and some winning strategies for coping with it.

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