For those that are interested, we have now added new videos to introduce Thinking Dimensions Global and some of our services. You can view at:
http://www.brainshark.com/brainshark/vu?pi=925156997&dm=5&pause=1&appKey=77
Please feel free to share with your colleagues where useful.
Scott Newton, Managing Partner, Thinking Dimensions
In past postings, I’ve touted the value of “teamwork” in achieving company goals. That belief was based in part on my own experience as a CEO, recognizing that goals aren’t achieved through the dedication of productive silos! The way companies achieve growth goals is having cooperation and support across functional areas.
That reality has been integrated into Thinking Dimensions’ strategy implementation process and its critical component of holding employees accountable for living the basic beliefs that define for every company what “teamwork” looks like. A recent study has moved this fact from the “intuitive” to the “measurable”.
WorkplaceDynamics, a U.S. based research company, has tracked worker attitudes at over 7,000 companies in the last five years, 550 of which are public companies. Those public companies that scored in the top 10% in employee satisfaction have outperformed the S&P 500 index by 15.5%.
Stock Price and Worker Sentiment
The study found ” a strong correlation between stock price and worker sentiment on questions dealing with the company’s direction, execution and engagement of the employees behind the firm’s goals.”
All too often, particularly in larger companies, there is a disconnect between the top levels of the company and the people who are actually “doing the work.” Company leadership needs to monitor the temperature of the workforce. Feedback cannot be from “the top down”. The real value in feedback is “from the bottom up.”
4 Universal Components
Over the past years, as part of the Thinking Dimension’s strategy implementation process, we have asked CEOs and employees what the fundamental components of a successful company are. Their answers typically boil down to 4 distinct components:
1. Common goals
2. Everyone knows their piece of the goals
3. There is communication from the top down and the bottom up
4. Everybody works as a team
The first two points are easily understood and universally accepted as companies begin the implementation process. They are the big, tangible and fit into the business mode. The 3rd and 4th items are sometimes seen as “soft”. The reality is that having a workforce that works in concert and is getting and receiving feedback can create a competitive advantage.
But getting there isn’t just a matter of having a positive attitude or a memo to the troops. Creating the workforce that is aligned and committed to the company goals and each other, requires a structured, step-by-step process. A process that guarantees the goals and the teamwork aspect needed to achieve them get transferred from the CEO to the front-line management team and beyond.
Sustainable Advantage
As the study concludes, ” “having a healthy organization, in which workers feel engaged, valued and aligned with company goals, may be one of the last sustainable competitive advantages. If you’ve got a team that is enthused and rowing in unison, your reaction to shocks and setbacks will be more robust than somebody with a less healthy workplace.”
Smart leaders recognize that communicating with your employees and holding them accountable for mutually supporting one another is a smart investment…with a 15% return!
This post was authored by John Case, Partner, Thinking Dimensions Global
To gain a competitive advantage normally costs a lot in terms of effort, resources and investments: therefore it is important to value your competitive advantage and understand what actions can be taken to protect or extend it. Often, companies do not know which are (if any) their competitive advantages and have even less knowledge on the effects of this competitive advantage on their P&L.
How do you measure the impact of your competitive advantage?
A Competitive Advantage is a specific (distinctive) company capability or competency that provides a superior return relative to your competition and can be validated through the eyes of your customer. A distinctive capability is a competitive advantage only if it implies positive bottom line results (superior profitability) and higher top line performances (greater sales).
Measuring the impact of your competitive advantage means understanding to which extent your sales (and profit margins) are due to unique capabilities you are delivering to your customers. Customers are always the ultimate indicator of the value of your competitive advantage: when a customer is willing to pay a premium price he or she has identified a unique capability you offer.
A premium price measurement alone compared to the competitors, however, is not sufficient data for an evaluation. Once you have validated your competitive advantage, and the value per single opportunity (premium price), you need to estimate the potential market in terms of number of clients that have the same needs and therefore are willing to pay for your unique solution.
What is the impact of properly managing your competitive advantage?
An international B2B company we are working with for several years has a strong sustainable competitive advantage which management is aware of particularly from a technical perspective. Previously, it was clear where the performance of this company’s proprietary solutions offered improved performance relative to competitors. What was not clear to the management (and to the sales force) was that target customers were willing to pay a large premium for this improved performance.
The approach of the company was to begin to attack different industries with the same proposition. In this way the sales force was able to sell some products at a premium price but often they were beat by the competition. This was a case where the customer was not the right target (not high emphasis areas of the strategy), and therefore not willing to pay for a specific and unique performance they did not require. This sales inefficiency was damaging the financial performance of the company: they were certainly not getting any benefit even though they had a “well known” competitive advantage.
Working with the management and finding the correct target for their products- considering who was willing to pay for their competitive advantage- the sales force became focused on the “new” emphasis target customers: Top line results increased by a 30% CAGR (calculated over a 3 year timeframe) and EBITDA increased from 5% to 23%.
This post was authored by Luca Girotto, Consultant, Thinking Dimensions.
Luca is currently based in the Thinking Dimensions NE Italy office and works with our B2B customers around the globe.
While product development is not the only contributing factor influencing a company’s competitive position, the growth and profitability driven by products (or services) speaks volumes of an organization’s prowess to meet customer “needs or wants”. A well crafted Product Development (PD) process provides insight on how companies view and understand their internal and external competitive environment to ensure the right prioritized product mix is in place to remain competitive. The prioritization of products to be developed helps shape the future competitiveness of a company.
Prioritizing product development starts with the formation of comprehensive sets criteria including:
Strategic Alignment – Will this product enhance, support our strategic objectives? This is predicated on the company having a clear understanding of the markets they serve relative to the products they offer. Within the defined strategic timeframe of a company, not all markets are equal in business focus, resources allocation or the proposed introduction of new, improved or modified products. Strategic plans are about growing the company and profits sustainably. Proposed products are given higher emphasis “weight” if they align strategically to important markets areas.
Key Capabilities – What is the technical complexity required to develop this product? This is a critical question relative to the competitiveness of an organization. It is really inquiring about the people and process skills necessary to develop and produce this product: do they exist in the company or need to be developed/acquired? This creates a decision opportunity for management on how they will address and prepare for their future technical competitiveness.
Core Competencies – Does this product fit our core business competencies? Through the prism of customers, suppliers, or competitors, most leading organizations excel at some aspect of their business – innovative product engineering, low cost production, or product/customer service. It is what they do well, and it provides a competitive advantage. Management must determine if the product or service fits within their core competencies relative to the market, product realties, or seek ways to enhance their core competencies to be competitive.
Customer Relations – Does this product improve, maintain, or degrade relations with our customers? This is a complex question that can best be answered relative to the particulars of the product being offered and who constitutes your customer base – general public, suppliers, government, etc. New products must be assessed through the eyes of the customer and on the existing strength of the relationship. For example, when Coca Cola introduced “New Coke” several years ago, they misunderstood the customer acceptance of the legendary Coke product being changed. When complaints poured in, the strength of the customer relationship afforded Coca Cola to quickly withdraw the product and avoid any negative competitive long-term impact to their business.
Costs – What is the investment and the ROI if this product is developed? This is the basic cost/benefit analysis expected of any new product. Again it is a direct link to the company’s strategic objectives relative to profitability and growth. In a world of competing resources, companies must prioritize the right products to develop in order to maximize their financial goals and avoid excessive operational costs that reduce their competitive standing.
Risks – What are the issues and concerns associated with developing (or not developing) this product? Aside from the normal legal, regulatory concerns that any new product may have, it is also the “lost opportunity” in sales or market entry that can directly impact a company’s competitiveness if the product is not developed. All risks need to be assessed with preventive and contingent actions be planned and applied to mitigate potential problems.
Recap – Competitiveness enables high emphasis products and services to be produced for high emphasis markets strategically targeted to be better served. Product development projects need to be weighted, ranked, and prioritized relative to each other per the following criteria:
1) Strategic Alignment – does this product support our business goals?
2) Key Capabilities – do we have the people and process skills to perform?
3) Core Competencies – can we exercise our competitive advantage?
4) Customer Relations – are we “positively” addressing a customer need/want?
5) Costs – does this product financially benefit the company in a timely manner?
6) Risks – what are the potential problems and what can we do to mitigate them?
The author of this blog post is Keith Pelkey, Partner, Thinking Dimensions Global
Once your company view of competitive advantage is aligned with the way your clients view you, there is a new opportunity to understand whether this competitive advantage is applied , supported, and reflected coherently throughout the company and outside the company.
Process will help you managing and improving you competitive advantage. How? By giving you holistic coherence throughout your company.
The first thing you need to do is to ask five questions:
If, among the answers, there is at least one no, your company needs to act in order to address these issues.
Process helps in addressing and solving those issues in a systematic way.
When the various stakeholders making decisions in the company are in alignment about competitive advantage, performance improves- including profitability. The objective of looking for alignment is to avoid internal and external customers “dissonance in perception” and to improve your company profitability by focusing on the right products, services, and messages.
You want to focus on selling products where your competitive advantage is present and receive the benefits deriving from your superior offerings. In a product portfolio, however, it is often the case that only a few products or services deliver true competitive advantage: this will drive R&D investments, possibly including protection of intellectual property and underlying (eventual) patent investments. Do we want to invest money in R&D and patents for products that are not representing our competitive advantage? No.
Products that don’t represent our competitive advantage are often products that clients are not really interested in and/or products not truly differentiated from those of competitors. Why would we want to invest money on those type of products?
Products that do not provide advantages to our clients are also products that cannot be sold for a premium price and that have often very low margins.
Company’s resources are limited; as such, you need ot test whether a competitive advantage exists within your entire product portfolio(s). This is also neccessary when we consider new products to be developed and/or protected.
The final step in the process is to increase your competitive advantage and to ensure that customers are aware of what your competitive advantage is. Often it is just not visible as management would think.
This blog was authored by Laura Rainati, Thinking Dimensions
A firm’s competitive advantage is the unique and valuable combination of capabilities a company exploits to deliver higher profits relative to the competition. A company’s competitive advantage can only be confirmed if the customers truly deem it unique and valuable – and pay the premium. The definition is very intuitive to most executives – as they understand that price-cost=profit and they are either getting more, less, or a parity part of this equation. However the danger we observe on many occasions is that the dialogue on competitive advantage becomes too internally focused without testing the external factors that effect the three components of this Price-Cost=Profit relationship.
To enhance your management teams lateral thinking and cultivate strategic alignment we suggest you integrate the P-C=P discussion with the well known – but either, over, under or misused Michael Porter’s Five Force Framework (http://en.wikipedia.org/wiki/Porter_five_forces_analysis) in a two step process.
One, ask and capture the answers they have to the following questions.
Two – then show them how the five forces relate to the P-C=P cause effect relationship see below) and have them evaluate your own firm’s situation with the new insights they have uncovered armed with this new visual on how it all fits together. They quickly see the critical factors they can and cannot influence and importantly the impact to the business.
Three key benefits emerge from this management dialogue
1. It forces your management team to think externally about key dimensions that impact industry profitability and helps to guard against insular thinking.
2. It provokes them to focus on the causes of competitive advantage and discern if you really have one rather than the effects ( profitability) which is an outcome.
3. It simplifies, connects and makes actionable important strategy thinking tools that once seemed academic
This blog post was authored by Tim Lewko, Partner, Thinking Dimensions
In the past few years, cost cutting has been at the forefront of many company’s priorities. Whether in the form of cutting employees, outsourcing, reducing marketing expenses or a myriad of other options, reducing costs has been the de facto strategy for a lot of companies. Those same companies now are faced with the reality that cost-cutting your way to success is a very slippery path, most times leading to a dead-end. As a result, many of those same companies are now seeking ways to generate real top-line growth, now that they have created a streamlined cost structure.
The first question they need to honestly answer is….”what is our competitive advantage?”
What is it about our company that we do better than any one of our competitors?
Or put in another way, why do our customers choose us over our competitors?
More often than not, the answer is “I don’t know”. That may sound like an exaggeration, but its not. The fact is, during all that cost cutting activity, the investments into what made your company unique, your competitive advantage, may have gone away.
In order to grow, you need to either
1.recreate what you had as that competitive advantage, or,
2.decide what your new competitive advantage will and make the investments necessary to bring it to reality. This is often referred to as “pick it and be it.”
Understanding your true competitive advantage, and crystalizing it with everyone in your company, leads to a key criteria for decision making on a daily basis.
Does a planned investment reinforce your competitive advantage?
Does a new product help reinforce your competitive advantage?
Does a new hire help reinforce your competitive advantage?
If you fall into the group that really doesn’t have an answer, don’t panic. Its not to late….yet.
When it comes to competitive advantage, “pick it…be it…and grow.”
This post was authored by John Case, Partner, Thinking Dimensions
Let’s start today with two common questions in business:
1) “Why will a customer buy products and/or services from you and not from a competitor”?
2) “What is your verified competitive advantage?”
What at first glance appear to be easy questions are actually difficult to answer in many organizations.
Prior to continuing the discussion, let’s clarify the Thinking Dimensions definition of competitive advantage. Competitive Advantage is “a specific company capability or competency that provides a superior return relative to your competition and can be validated through the eyes of your customer”.
My recommendation is to think about your company or business unit “competitive advantage” as defined by Thinking Dimensions and ask:
If the answers to both questions are “yes” you are at very good point. However your job – as a manager – is not complete because other important questions remain unanswered:
1) For which specific combinations of products and markets is your competitive advantage valid?
2) How long will the competitive advantage your company has today remain valid for when looking into the future?
3) Which strategic choices will your company make to maintain and enhance competitive advantage in the future?
In our experience only managers that can address the points are effective decision makers in building competitive advantage for their organization.
Consider 2 cases that refer to the situation of 2 separate companies:
Case A: a multinational player in the plastic sector saw their margins evaporating because the management team understood late in the game that customers were not willing to pay a premium price anymore for their customized products
Case B: A European company that develops and produces appliances almost went out of business after the management failed to recognize that the perceived ability to innovate was no longer perceived as distinctive by customers
Fig 1: Evolution of company capability in time (source Thinking Dimensions Global)
New market changes and rapidly evolving trends are increasing the volatility of competitive advantage and rendering previous assumptions invalid. Changes include:
The leading companies today are monitoring trends, evaluating how the relevant few impact on company competitive advantage, and, importantly, are making strategic decisions accordingly.
There are several source of data your company can use to monitor relevant trend and market changes but “current and potential customers” are in our experience two of the best which are frequently overlooked.
Please feel free to contact me with any questions, comments, and for additional information on this topic.
The author of this post is Diego Miglioranzi, Partner, Thinking Dimensions
“Is our competitive advantage working?” is a question raised in boardrooms and executive leadership team meetings around the world on a very regular basis.
The first step in understanding how effectively your competitive advantage is working is to understand what your organizational competitive advantage is- as viewed through the eyes of your customers. A challenge facing a number of companies today is that their management teams are not aligned on what the organizational competitive advantage is and how the customer views this perceived competitive advantage.
The understanding of your organizational competitive advantage commences with making your competitive advantage visible: I recommend during your next management meeting to take 10 minutes and ask each person in the room to individually write on a piece of paper the competitive advantage of the company which enables customers to choose your products and services over the competition. When the ten minutes has elapsed, ask everyone to tape their versions of competitive advantage to a wall, flip-chart, display screen, etc. If all the answers to this question are the same- this is a good initial signal. If the answers are varying- this is a good time to commence a discussion on competitive advantage and possibly schedule a work-session with your management team.
Once your competitive advantage is aligned- meaning that all of your management team(s) view this in the same way and can vocalize with consistency what the competitive advantage of the organization IS- the time has come to test this with your customers. One of the better approaches to testing with your customers is to conduct a third party survey of your most important customers, the customers you have lost, and the customers you need to gain in the future for your strategy to be fully successful- and in this survey validate that the attributes and buyer benefits of your competitive advantage translate into a unique and valuable combination as viewed by your customers.
On completion of this survey- which normally has a duration of four to six weeks- schedule with your management team to view the results and ask:
1) How closely do the results of the survey correlate to the competitive advantage we believe we deliver to our present and future customers?
2) What unexpected deviations in results exist?
3) What is the root cause of the deviations in results? If we don’t know- what data do we need to identify root cause?
4) What plans of action can we take/do we need to take to address the deviations?
The answers to these questions will assist your management team as one step in acheiving “Sustainable Competitive advantage”.
My colleague Diego Miglioranzi will be following up this week in our blog with greater detail on how to attain this important information from the best source there is: Your Customers.
This blog was authored by Scott Newton, Partner, Thinking Dimensions
