what business are you really in? competitive strategy for business leaders
TRANSCRIPT
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I can’t tell you the key to success, but the key to
failure is trying to please everyone
-Ed Sheeran
“
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Tim HamiltonIntroduction
CompanyDigital product & platform developmentFounded in 2000Offices in Austin, TXTradition: Formal Fridays
BackgroundBorn in South AfricaWife: ChristySon: GrahamStudied Economics & MIS at UT Austin
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“When our circumstances change, we often fail to shift our perspective and
instead continue to try to see the world as we feel it should be.”
– The Tao of Boyd: How to Master the OODA Loop
OBSERV ORIEN DECID ACT
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“Strategy is not a lengthy action plan. It is the evolution
of a central idea through continually changing
circumstances.”JackWelch
OBSERVE ORIENT DECIDE ACT
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Spam blockers
CAN-SPAM Act
Tivo
Netflix
Pay-per-view
Pop-up blocker
s
Non-solicit
call lists
Sirius/XM
Radio
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OBSERVE ORIENT DECIDE ACT
The most important person in strategy is…
the customer.
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1Research from IAG Consulting. 2The Standish Group International Inc. 2002.
64% of software features are never or rarely used2
and…
68% of enterprise software projects
fail1
OBSERVE ORIENT DECIDE ACT
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AHA!We’renotinthesoftwaredevelopmentbusiness.We’reinthesoftwarecertainty
business.…whatbusinessareyou
in?
Hint: It’s about difference& relevance
OBSERVE ORIENT DECIDE ACT
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We have confused operational effectiveness for strategy.
Operationaleffectiveness
Strategy
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Total Quality Management
Six Sigma
ProductivitySupply Chain Management
Objectives Based Management
Just-In-Time Inventory
LeanOperational
effectiveness
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Operational effectiveness is about being better.
Strategy is about being different.
vs
Sustainable
advantage
“Strategy is the creation of a unique and valuable position, involving a different set of activities.”
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Variety-based Needs-based Access-based
Model: Strategic Positioning– Michael Porter, Havard Business Review
Performing different activities from rivals, or performing similar activities in different ways.
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Serving few needs of many customers.…a choice of product or service varieties rather than customer segments.
OBSERV ORIEN DECID ACT
Variety-based
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OBSERV ORIEN DECID ACT
Variety-based
…does not rely on any customer differences.
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Serving broad needs of a few customers.…some groups of customers need different amounts of info, support, and services…and have different price sensitivity.
Needs-based
OBSERV ORIEN DECID ACT
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Luxuriousshow-room?
NoBest-in-class
quality?No
Helpfulsales staff?
No
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Bessemer Trust Co. Citibank
Minimum $5M $250K
Clients : Advisors 3:1 125:1
Meetings On yacht / ranch In bank
Advisor-focus O&G, aircraft, racehorses Loans
Needs-based
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Serving broad needs of many customers in a narrow market.Hint: The key here is about access to that market.
Access-based
OBSERV ORIEN DECID ACT
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Access could mean: geography, customer scale or anything else that requires you to reach that customer in a different way.
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Access-based
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…like variety-based, doesn’t rely on differences between customers.
Access-based
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Unique subset of services / products.
Specific group with unique needs.
Exploit access to unique markets.
Recall: Strategy is about difference.
Variety-based Needs-based Access-based
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“Strategy is just a matter of picking what problems you want to work on
in the future…success simply means you get better problems.”
- Ari Weinzweig, Zingerman’s Deli
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Founder & CEO, Joie De Vivre Hospitality. Modified Maslow’s model of human psychology for use at Joie De Vivre and authored a book about it called “Peak.”Chip Conley
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Customer Pyramid
Creates customer satisfaction
Creates customer commitment
Creates customer evangelismMeets customer’s
unrecognized needs
Meets customer’s
desires
Meets customer’s
expectations
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Employee Pyramid
Creates employee base
motivation
Creates employee loyalty
Creates employee inspiration
The work I do is
meaningful beyond profit.
I value being recognized
for my contributions to
my company.
I feel that I am fairly
compensated for
the value that I
produce.
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Investor Pyramid
Transaction alignment creates
trust
Relationship alignment creates
confidence
Leaving a legacy creates pride of
ownershipI’m proud to be contributing to a
purpose that matters - making an
important difference in the
market.
I am aligned with the values and
approach of the company and enjoy
my relationship with the management
team.
My investment makes
an acceptable return.
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The Discipline of Market Leaders
No company can succeed today by trying to be all things to all people.
Choose your customers & narrow your focus.
We must instead find an uncommon value that to deliver to a chosen market.
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Build & manage systemsand facilities for high
volume repetitive tasks.
ID, attract and build relationships with customers.
Conceive of attractive new products & services
and commercialize them.
Product Innovation
Operational Excellence
Customer Intimacy
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Focus: invention, product development, and market exploitation
Product Leadership
InnovationKnowledge-
ManagementCollaboration
• Providing products / services that continually redefine the state of the art.
• Kill their babies.• Key core competencies are innovation
and quality control.• Strive to be the best.• R&D & talent management.
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• Total solution, not just a product or service.
• Focus on what the customer wants, not what the market wants.
• Cultivate relationships, not one time transactions.
• Specialize in satisfying unique needs.• Customer needs trump operating
systems and processes.• Go the extra mile.
Customer IntimacyFocus: total solution development, results management and relationship management
Relationship ManagementKnowledge
Management
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• Low cost offer (blend of high convenience and low price).
• Broad market focus.• Not product / service innovator; instead
delivery innovators.• Do not cultivate 1:1 customer relationships.• Execute extraordinarily well.
Operational ExcellenceFocus: product supply and basic service, streamlined to minimize cost and provide hassle-free service.
QualityCost
Speed
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While productivity is a goal, originality and quality are the goals.
Creative interactionsQuality management
Retaining & hiring the best Knowledge managementPush decisions down to the lab
Employee centered
Product Leadership Example
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Best price? Hardly.Best products? Nope.Latest technology? Negative?
Customer Intimacy Example
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It’s all about the total solution and the customer relationship.
Security monitoringSystem maintenance Cost managementMobile strategy Maintenance & support
Network management RedundancyPlanning new apps.
Customer Intimacy Example
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Cultivate 1-on-1 relationships? Negative?Low cost, most convenient offer? Definitely.Product innovator? Nope.Delivery innovator? Heck yeah!
Key competency? Capital allocation & execution
Operational Excellence Example
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What business you’re in has nothing to do with you!
OBSERV ORIEN DECID ACT
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Democratize the skies!They picked the 85%.
3LF’s: Low Fares. Lots of flights. Lots of Fun.
Needs-based
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They made trade-off decisions…
no meals unassigned seats
no interline baggage checking
no first or business-class service
only offers direct booking
only 737’s
no booking software
Short-haul flights only
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But a strategic position is not sustainable unless there are trade-
offs with other positions.
Trade-offs occur when activities are in-compatible.
