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Strategic Value Proposition
In every organisation, when you look beneath the surface, you find three kinds of business - a product innovation business, an infrastructure business and a customer relationship business.
Each of these businesses is very different. They tend to attract different types of people, with different skills and cultures. To be successful an organisation needs to be at least competitive in all three of these businesses, but to be world class (a requirement today), an organisation needs to choose one (and only one) to be world class in; then align everything in its business to reinforcing this.
It's a bit like going to the Olympics, you have to choose your sport and become world class in it. It's highly unlikely that you are going to be world class in boxing and swimming and high jumping because the body shape and exercise and food requirements are all fundamentally different.
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If you want to be winner you must choose your Value Proposition, otherwise you'll be grey, mediocre and nothing to anyone. |
When it comes to running an organisation there are only three "sports" and it's really important to choose which one you are going to compete in because it's highly unlikely that you can be world class in all three. And being stuck in the middle is strategically a very weak place to be.
Treacy and Wiersema have identified three value disciplines:
- Product Leadership. (e.g. Nike, Peter Jackson and Weta Workshop, Walt Disney or 3M) where the customers get products which are constantly redefining the state of the art. The emphasis is on innovation so they can constantly come up with market leading products and services.
- Operational Excellence. (e.g. The Warehouse or Mc Donalds) where the customer gets a reliable product or service at a competitive price, delivered with a minimum of difficulty and inconvenience. The emphasis is on operations/infrastructural management, so they can produce great quality products every time at leading prices... or
- Customer Intimacy (e.g. Booz Allen Consulting or IBM in the 1960s) where the focus is on delivering not what the market wants but what specific customers want. Customer-intimate companies do not pursue one-time transactions; they cultivate relationships. The customer gets a total solution. The company knows the customer's business better than the customer knows it.
In nearly all cases choosing the "right" area to compete will lead to significantly better results than choosing either of the other two. What's "right" depends on the industry you're in, the market you're in, your position within them and other circumstances.
This is where I really start to earn my money. Probably the most difficult strategy facilitation task I face is getting everyone on the management team to agree on the "right" one. You see it's partly science, but it's also partly an art. It's something you get a feel for and initially there's nearly always differences of opinion.
As I think back over the last couple of years, as I've worked with the Government Auditor, Swift Energy, CRL Energy and Huhtamaki Packaging and significant business units in the ANZ National Bank, MAF, MSD, Salvation Army, Prime Minster's Department, Department of Labour and many more, they have all sensed that this is a critical decision bifurcation point (proceed one way and you end up like Mc Donalds, proceed the other way and you end up like Weta Workshop).
If you chose the wrong option the outcomes you get will be sub optimal but it's better than NOT choosing. To not choose is to be not strategic. Fit, trade-offs and differentiation are key concepts in strategy. Not choosing means not being one thing or the other. Not choosing means being grey and colourless. This is because to be world-class in one Value Proposition means, almost by definition, that it is impossible to be world class in the others. For example the culture you need for Operational Excellence is very different from the culture you need for Product Leadership or Customer Focus. If you are not convinced, just think about the differences in Culture between Mc Donalds and Weta Workshop and the Image and the Service delivery. How successful do you think Weta Workshop would have been with Mc Donalds' culture? Or Mc Donalds with the Weta Workshop culture?
So why is it important?
It's a bit like the big spotlights that used to shine into the skies during the Blitz in London. All the firepower in the world was relatively useless unless all the guns wer pointing at the target caught in the light. Business is the same, all the skills and resources in the world are relatively useless unless they are all pointing in the same direction where it will make the most difference.
But narrowing your focus is even more important for another reason. This is positioning or branding. If you try to be everything to everybody, you will be nothing. You must be known for something. You need to own a word or an idea that's in every person's brain. Then you have power.
If you want to be more strategic and more successful you need to narrow your focus, you need to understand your Value Proposition and then align everything in your organisation to it.
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