Posts Tagged ‘criteria’

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Competitive Decision-Making

Thursday, August 23rd, 2012

No I am not talking about a race to make decisions, I am talking about making the best decisions to be competitive. In the current global economic climate, CEOs seek ways to maximize their company’s business performance, hence competitiveness. And that involves a myriad of strategic and tactical decisions made on an annual, quarterly and daily basis. I challenge any CEO to ask their executive team to define business competitiveness. Likely the responses will vary, and that is the crux of the problem – an impediment to effective decision-making that drives results is misunderstanding what makes a business competitive.

Business competitiveness are the internal advantages a company possesses, relative to their competitors, to sell, promote and deliver the products they offer to the markets they serve. Advantages can be either people or processes, but they must be perceived as valuable and unique compared to the competition and viewed as high quality and cost effective by customers. In the parlance of “Strategic Thinking” they are referred to as competitive advantages.

Competitive advantages manifest themselves in all companies through their business value chain — those administrative and operational processes, in which people work to sell, promote and deliver product to market. So decisions targeted to build advantages within the value-chain (as measured by business growth and profitability) are the driving force of competitiveness.

(Porter's value chain concept model)

Start by knowing the key products and markets – What are the key products offered and markets served? Sounds obvious, but many companies have many products that are not profitable, demand too many resources to service (money, time, and people), and add substantial costs without a positive financial or customer relationship return. Companies that say no to products and markets not driving profitability and growth are better positioned to target performance decisions on people and process issues that improve their competitive advantage.

Evaluate the value chain to determine strengths and weaknesses – With clarity on what to produce and what customers to focus on, companies can now assess the effectiveness of each element of the value chain. Activities that do not add value or are not regulatory/customer requirements should be stopped or changed. Use performance data, and walk through the value chain processes to assess:

1) Efficiency (cost) to perform the activities as currently outlined

2) Cycle-time (how long does it take) to perform the activities

3) Quality of activities and outputs as perceived by the customers and competitors

4) Timeliness (on-time delivery) as valued by the customers

This provides a clear performance picture on the activities to sell, promote and deliver products by exposing the “type, location and magnitude” of the value chain strengths and weaknesses. Now consider the value chain assessment from a competitor and customer perspective and ask, does the company excel over its' competition to cost effectively produce quality products on time to customers?

The answer to this question promotes decisions on what capabilities to build, sustain or enhance to drive internal advantages that translates to profitability and growth. Remember competitiveness is a function of the internal advantages a company has relative to competitors and as perceived by customers. Such advantages reside in the value chain activities.

(Now) Use decision analysis to design a competitive value chain – For this writing, I will talk about the two primary categories of “value” criteria, not how to conduct an actual design using decision analysis.

Decision criteria for designing competitive advantages into the value chains fall into two categories – competitor and customer. What can companies do that differentiates them from their competitor and does that differentiation translate to customer value? These two differentiations must work in tandem. There is no sense on having differentiated product or service in which customers don't see the value. Or conversely, customers see a great product or service, but there are several competitors that do the same basic thing – that is not an advantage.

Criteria that differentiate products or services from the competition:

1) Unique – is this product/service unique relative to competitor offerings?

2) Valuable – is there a need, market for the product or service?

3) Costly to Imitate – could your competition easily replicate the product or service?

4) Non-Substitutable – can the offering be replaced by some other competitor's product/service?

Criteria that differentiate products or services through the eyes of a customer:

1) Innovative – product/services viewed as a “better way” from other like products?

2) Quality – is the product/service more reliable compared to like competitor offerings?

3) Customer Responsiveness – is serviceability of the product rated high by customers?

4) Cost (efficiency to produce) – are customers willing to pay for the product/service?

Leaders need to evaluate value chain performance alternatives that improve competitiveness through the filter of competitor and customer differentiated criteria. Effectively done, the company is now making competitive decisions based on performance data.

Recap – Competitive Decision Making:
1) Know what creates business competitiveness – relative to the competition and customers
2) Focus on Key Products and Markets
3) Assess the effectiveness of your Value Chain to deliver key products to market
4) Use Value Chain effectiveness data to drive decisions that create competitive advantages

 

This blog post was authored by Keith Pelkey, Partner, Thinking Dimensions.

Other writings related to Process Performance authored by Keith Pelkey - Partner, Thinking Dimensions Global

  • Are Your Business Processes Creating Value? www.blog.thinkingdimensionsglobal.com
  • Simplify the Path to Process Performance Management “ “
  • Managing Competitiveness Through Product Development “ “
  • Stop Reacting to Results and Learn to Manage Performance
  • Seize Control of Your Business Performance www.thinkingdimensionsglobal.com
  • “Mining” for EBITDA: Delivering Substantial Results in 30 Days “ “

 

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Posted in Implementation, Strategy |

Stop Reacting to Results and Learn to Manage Performance

Wednesday, July 25th, 2012

 

As CEO’s seek to understand the performance of their business, they construct elaborate Key Performance Indicators (KPIs), Strategic Performance Indicators (SPIs), or some other “acronym of measures” all designed to tell them how the company has performed. While such measures are important, they reflect the “past tense” of business performance and, in essence, they are lagging indicators. CEOs and consultants advising them are doing a disservice to the organization if they do not demand of the Value-Chain process managers to establish “leading” measures that warn of pending performance.

 

Why is this important?

1) Ability to manage verses react too business performance issues

2) Speed of corrective action to resolve value-chain performance issues that impact profitability (P&L) and growth.

 

Manage verse React – Value-Chain KPIs fall into four basic categories of measures:

1. Quality of Product or Service

2. Timeliness of Delivery

3. Cycle-Time of Production

4. Efficiency (or cost) to Produce, Market and Deliver products.

The KPI may be called different names, but the business interest for their positive performance remains the same – delivering a quality product or service on time at the target cost. It is the value-chain processes and their respective KPIs that provide the appropriate Quality, Timeliness, Cycle-Time and Efficiency performance data (the balanced scorecard) for executive decision-making. But, these measures only tell the story of results passed.

 

The sub-element measures of the value-chain processes that cascade up to define a KPI are often insufficient or poorly constructed to help executives or value-chain process owners understand what is causing specific performance of a key KPI. When a KPI reflects negative performance and the CEO asks, “what is the issue causing this performance”, the responsible party usually notes they will have to investigate further to get an answer. Effectively placed measures within sub-value chain processes would negate this problem and afford the responsible executive an answer readily at hand.

 

How? Design and install “in-process” measures at key risk areas of sub-value chain processes. Process owners or managers should start by asking, “what KPI or SPI is my sub-value chain process primarily contributing? For example, if the Out Bound Logistics value-chain element (see diagram above starting from the Michael Porter Value Chain framework) is a key source for the Timeliness of Delivery KPI, then assess where in the flow of the various Out Bound Logistics sub-processes is on-time delivery most at risk? Now design and place the appropriate “in-process” measures that provide data, and act as a trigger, of potential on-time delivery issues.

Measures placed at key risk areas of the process provide managers meaningful, and early, insight to the respective KPI or SPI. They are managing the performance of the process, and not simply reacting to lagging indicators. Sub-value chain early-warning measures should be reviewed frequently to see trends that demand corrective action. This data provides more detail of where in the overall value-chain issues have emerged.

Speed of Corrective Actions – In-process measures are predictors of end-of-process performance. If an in-process metric is showing a negative trend (i.e., key paperwork is delayed in the logistic process, or the quality of the paperwork is lacking), it is likely to impact the planned on-time performance. When process managers have the ability to see, early, where in the process issues arise, they also know where to pinpoint their corrective action focus faster. In reality, if they manage processes via in-process metrics, they can anticipate problems (and CEO questions) and be prepared with a more proactive answer to resolution. Mean-time-to-resolution is critical to profitability.

The Key Learning Point – Simply relying on end-of process business measures puts decision-makers in a reactionary position as they lack the data to expeditiously resolve performance issues.

CEOs and business executives should look at their company’s key sub-value chain process flows (assuming the flows exist) and see what and where measures exist. Likely the measures are on the outputs of the process and not areas within the process where true risk of performance resides.

Recap – Stop Reacting to Results and Learn to Manage Performance:
1) Analyze Sub-Value Chain process flows (or define them if they do not exist).
2) Ask what sub-processes have the most impact on the performance of KPIs/SPIs?
3) Ask where in the sub-process is the desired KPI/SPI performance most at risk?
4) Install appropriate “in-process” metrics at high-risk areas of key sub-processes.
5) Start managing performance

This blog was authored by Keith Pelkey.

Other writings related to Process Performance authored by Keith Pelkey - Partner, Thinking Dimensions Global

· Are Your Business Processes Creating Value? www.blog.thinkingdimensionsglobal.com

· Simplify the Path to Process Performance Management “ “

· Managing Competitiveness Through Product Development “ “

· Seize Control of Your Business Performance www.thinkingdimensionsglobal.com

· “Mining” for EBITDA: Delivering Substantial Results in 30 Days “ “

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Posted in Implementation, Operations |

LeisureEurope Case Study: In entering a new market, first decide “where to compete “, then “how to compete”.

Friday, July 20th, 2012

“LeisureEurope” is a major boat manufacturer that had been developed a leadership position in Europe for different types of recreational boats. In a period when the overall size of the boat market in Europe was quickly shrinking the company believed the best way to position itself was to enter the USA market.

Unfortunately the resources and the investments “LeisureEurope” made for several years to enter the USA market were not providing the results the CEO was looking for. Why did this happen?
The CEO asked Thinking Dimensions to indentify the main causes for the poor results and to support the company in implementation of a plan to properly enter the market.

The poor results were due to the following causes:

  1. LeisureEurope started launching products for the USA market without having a clear understanding of the customer needs and of the competition offerings
  2. The USA market was different from European markets:
  • The size and the complexity of the USA market was much higher
  • For the type of products offered by “LeisureEurope”, the concept of “leisure boat” as intended by the final user was very different
  • Certain types of recreational boats that practically didn’t exist in Europe, represented an important quota of the total market in the USA
  • The criteria adopted by the customers (i.e. the retailers) to select their suppliers of boats were different from the one adopted by the European dealers

In the first 2 months after the first meeting with the CE0, Thinking Dimensions helped “LeisureEurope” answer the following questions:

  • Which are the main competitors in the USA market?
  • Which distinctive capabilities or product characteristics could “LeisureEurope” offer relatively to the competition?
  • Which customer segment were actually willing to pay a premium price for these distinctive capabilities or products?

The results of the first phase of the project were very surprising for the CEO: it showed “LeisureEurope” was competitive in a specific market segment that has not been even considered for the USA.

In the second phase of the project Thinking Dimensions worked with “LeisureEurope” to implement the market entry plan focusing specifically on the market segment that had been identified.

5 months after the first meeting with the CEO the company was already generating a volume of sales (and margins) far above the expectations of the CEO and the management team

 

This blog post was authored by Diego Miglioranzi, Partner, Thinking Dimensions

Feel free to contact the author directly for questions about this subject.

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Posted in New Market Entry, Strategy |

When you believe “there is a market there”, first test your assumptions- then enter

Friday, July 20th, 2012

Many companies combine “feeling” with the evidence that a “bunch of their competitors are already in the market” and make the fateful decision “we need to go chasing the opportunity, too”! As a second step, they start looking for agents, distributors, or other local parties that can assist in the new market.

We call this an opportunistic approach, meaning that  you are making decisions based on gut feeling without really knowing what opportunities and risks are out there in new markets for your company. Maybe it goes well, maybe not.

We believe that a company rarely has the luxury of understanding this only afterwards.

Our experience shows us that companies that successfully enter new markets adopt an analytical and structured approach to identify whether there is an opportunity in the new market for their specific company and whether the projected result justifies the efforts and the investments to get there.

In order to be able to measure the success of the initiative, for instance, you, together with your team, First need to define what would make the new market entry a successful project at least in terms of level of sales, minimum margin, level of investment.

Secondly, you want to understand what type of opportunity (if any) is there in the new market.

To be able to understand this you need to answer 3 sets of questions::

Who are our potential clients?

  • What are the segment of clients present in the market?
  • What is their size?
  • Where are they geographically located?
  • What are their buying criteria? And are those any different from those of the home market?

 

Who are our competitors?

  • Who are our competitors for each of the identified segments? (those are usually different)
  • What sort of products do they supply the market with and at what price?

 

How does our product position in the new market?

  • Can we differentiate from our competitors? And if so, how does the new market perceive us? Is the market willing to pay us a premium?
  • Will our  products be accepted  by the market or would those need to be changed in some way? Is it going to be a big change or a minor one?
  • What certifications/labels are necessary to be able of selling products?

 

Only at this point , going back to the goals that you and your team set at the beginning,  will you be able to say whether there is an interesting opportunity for your company in the new market or not.

What we have seen in our experience is through using a systematic process based market approach companies know clearly what to do, where to start from, and where to go to acheive their “share” of the market thus avoiding expensive and risky opportunistic trials.

   This blog post was authored by Laura Rainati, Thinking Dimensions

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Posted in New Market Entry, Strategy |

Strategic and Operational Decisions on Entering a “fast growing market”

Wednesday, July 18th, 2012

While the growth rates in developed economies are still projected to be sluggish in the next few years, emerging markets are booming and can provide lucrative opportunities for many companies.

For example, certain automotive companies are focusing primarily on Brazil, Russia, India and China (BRIC) as they see these nations as the most important sources of future business growth. China is frequently considered one of the most interesting countries at the moment, given that the China is already one of the largest vehicle markets in the world and is progressively trending upwards even now.

What are companies looking for in new markets?

Market opportunities, natural resources, talents or tax and investment advantages are all reasons for companies to enter new markets and each of these requires different approaches and different capabilities and competencies. A strategic reason to enter a new market is certainly sales and production capabilities of the firm that can be leveraged in that specific market. One big mistake companies sometimes make is in attempting to enter a new market with their current products and services portfolio convinced they can easily apply the same winning business model used in countries already served. Often this “opportunistic” approach leads to a failure in the new market entry initiative putting and risks placing the parent company in a difficult position to explain to shareholders.

What should we consider when entering a new market?

Average disposable income in emerging and early stage markets is usually lower than in developed countries, however, the number of people that are moving towards a higher budget are rapidly increasing. Even if it is true that a lot of people are out of the target reach in emerging markets, it is also true that an enormous number of people will be requesting standard lifestyle products.

 

Product offering, approach and business models need to be adjusted to target the right offering for the new “local” consumer.   An interesting example is the new Disney park in Shanghai, PRC, which will open in 2015 and with a total investment of USD 3.84 billion- Disney has spent several years studying closely the needs and desires of their target customers and adapted the world renowned Disney brand and formula to best attempt to fit the exacting requirements of the market (see article here).  Entering a new market means knowing which products, what price, and what distribution channel(s) need to be used. Partnering with local companies (e.g. distributors) can be a good way to enter a new market, develop knowledge, and share new market entry risk.

 

A company we assisted in entering a new market recently set the first step in place developing a collaboration with a local distributor. In a few months (less than one year) the company was able to identify which formula of competitive advantage was mostly valuable in that market, which sales distribution channels were more appropriate and have a clear understanding on both the local buying criteria and the (different) process. As a second step, the company moved to a proprietary distribution channel having all the necessary capabilities and competencies available and confidence from the board that the ROI would meet targets.

 

Emerging and early stage markets are indeed enticing- completing thorough research systematically and setting place the right capability investments together with the best emphasis products and channels will increase the risk of success- something all shareholders want to hear and can trust in.

Luca Girotto This post was authored by Luca Girotto, Consultant, Thinking Dimensions.

Luca is currently based in the Italy offices of Thinking Dimensions and has worked on series of projects related to APEC, North Africa, and Latin America.

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Posted in Implementation, New Market Entry, Operations, Strategy |

Entering emerging and early stage markets- why strategic assumptions matter

Monday, July 16th, 2012

As “traditional” economies for many companies are stalling for growth a common theme for many organizations is to look towards emerging and early stage markets. The allure of emerging and early stage markets are the potential for “double and triple” digit growth with seemingly strong demand for years to come. Further enticement comes frequently from executives who visit the target countries and witness strong business to business and end consumer demand at price levels which at first glance can seem more lucrative than home based markets. The last step which leads many organizations to choose to emphasize emerging/early stage markets for entry are frequently statistics about GDP growth and disposable income trends (increasing)- which are indeed very interesting.

A number of our clients have achieved considerable success in both emerging and early stage markets- and while implementation challenges and resources demands are not easy to resolve- the proper initial screening at the strategic level can mitigate some risks and allow the company to focus on a few target areas where they have a higher probability to achieve bold growth.

One of the first steps in creating a portfolio strategy for entering emerging and early stage markets is to create strategic assumptions (if you have not already done so a good step in understanding what we mean by this is to read the blog post by my colleague Tim Lewko here).

The error we see many organizations make is to assume that general level growth (i.e. GDP, disposable income) will naturally translate into demand for the products and services they would like to sell in that particular market. Assumptions about demand are not frequently made visible and even more rarely are they validated with real current data. The error is even further compounded by not making clear the implications of the assumptions- and testing them in the target market.

The risk of error can be reduced by 3 steps:

1) Distilling down to the few critical strategic assumptions which really matter for your business. The growth of GDP is not good enough. The number of housing starts are not good enough. Disposable income is not an acceptable indicator. Push yourself and your team to really find the assumption and the data to validate or invalidate the assumption which will lead you to a reasonable implication that you can use to make decisions.

2) Validate and re-validate the data. Buying reports are not the only answer- and certainly cannot be relied on. Put people on the ground in the market, and have them use a structured process together with local support to gather, sort, organize, analyze, and verify information you and your executive team will use to take the most effective actions. Do not rely only on a local distributor or agency- even if you are considering an exclusive with them in the market- you need hard, objective, third party data.

3) Review on a regular basis and be ruthlessly honest in your reviews. Emerging and early stage markets are experiencing a rate of change at a far higher velocity than what we are used to in business. Be prepared to change and adjust your course based on the new information that becomes available. Do not allow this information to hide from the leadership team, or permit your leadership team to deny intellectually what is going on in the market.

 

Entering emerging and early stage markets are both exciting and challenging- there can also be a premimum valuation attached to your company or comapnies if you are good at it. The use of structured processes and systematic tools together with both your current team and local expertise will help you in outperforming your competitors and the market.

 

 

This blog post was authored by Scott Newton, Partner, Thinking Dimensions

 

 

 

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Posted in Implementation, New Market Entry, Operations, Strategy |

New Market Entry Requires Specific Capabilities to Succeed (Read which specifically here)

Monday, July 9th, 2012

New Market entry is a strategic choice that must be deliberately made. It is the most natural path for growth because it intuitively asks ‘if we are having success with our products where else can we sell them? This is the normal path for every startup or legacy strategy – find a need – serve it and build capabilities to support it. As companies grow over time there reaches a point for many where they have had success but run into growth barriers including:

  • High Market Share – they have a sufficient share and are succeeding in home markets – but its getting tougher to sustain growth e.g. think of Coca Cola and Pepsi in North America – with a population growth that is relatively flat – there is only so much room for more people to drink more colas. The chart below indicates the flatness of the market in North America – where new growth through existing products is like squeezing blood from a stone.

  • Mature Markets- the market is maturing i.e. reshaping market needs requiring a change in product or face obsolesce. Chart 1: Comparative Regional & U.S. Workforce Growth 2000 to 2020 clearly shows that the type of needs in the US are much different than Asia – as the workforce or consumer is in a different stage of the lifecycle.

 

  • Emerging Markets – global markets become more attractive because opportunity is driven through size, proximity, scale or changing trade barriers and dynamics. If you are a company serving North America or Western Europe this chart clearly underscores what you already know – to sustain growth you must be prepared to look outside your traditional region.

 

 

To overcome these barriers and find growth for your company this deliberate choice is to enter new markets or another way to say it is to move to a “Products Offered” growth strategy. In a recent client example our client wanted to find new growth and formalize their path for growth in Latin America – looking to bring their proven product and service platforms to both Columbia and Peru.

 

With this deliberate choice for growth based on sound analytics and matched to their strategic assumptions they now are preparing the required capabilities for this choice. This is where many companies “fall down” on their growth adventures – they believe they can take exactly the same products and processes and replicate them in new markets. The reality is –although the fundamental needs may be basically the same –the new market development requires clear investments in skills, people, capabilities and processes to accomplish strategic goals and targets.

 

The following four capabilities are essential for success when seeking to enter new segments (emerging markets).

 

1. Product development capability for the modification of current products – whether “language” instructions, imperial to metric size changes, certifications by country and region, or even simply what colors and names “work” for the market.

 

2. Market research capability for identifying segments with the same needs the company’s current products satisfy. – this business intelligence must be gathered and factored into the decision making process – it cannot be only a gut feel that says “ I believe there is a market there”.

 

3. Marketing capability for entering new markets with the company’s products. How the product is promoted to one country does not translate to another necessarily.

 

4. Sales capability for convincing new markets to accept their products. This many times requires new hires in the locations and a patience for realizing profits in the bank – as the norms for selling and getting paid ( or even getting your money out of the country are different).

 

As I noted at the start – the majority of global trends and opportunities that support the drive to enter emerging markets are sound – but your strategic decision making process must be deliberate and based on data as you invest in your future. There may be gold in the hills next door to you ….but you must be prepared for the climb.

This blog was authored by Tim Lewko, Partner, Thinking Dimensions

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Posted in New Market Entry, Strategy |

Managing Competitiveness Through Product Development

Saturday, June 23rd, 2012

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

 

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Posted in Implementation, New Market Entry, Operations |

Implementing process to increase your (verified) competitive advantage

Friday, June 22nd, 2012

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:

  1. Are the products/services emphasized in the company strategy coherent with the verified competitive advantage?
  2. Are investment decisions made from the same view?
  3. Is working time allocated accordingly?
  4. Are the products in pipeline/in development in alignment with the strategy?
  5. Is our company communicating our competitive advantage in a way that the message is received correctly by the customers?

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

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Posted in Pricing, Strategy |

Create a True Competitive Advantage to Grow

Friday, June 15th, 2012

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

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