Picking up from where I left let’s try to dissect the strategic consideration framework/model that I had developed for X. Let me give you the most optimum business strategy that translates itself in to infinite wealth for your business or for that matter any businesses but of course in a perfect world :-). Peter Drucker suggests that purpose of business is to create customer and I have stretched my imagination by assuming customers will eventually translate in to wealth for the business.
Primary purpose of business strategy is to develop a competitive advantage that provides customers with superior value (benefits relative to costs) compared to competitive offerings.
The four dimensions that define business strategy that will lead to strategic advantage are:
· Product-Market investment strategy (Answers where to compete?)
· Customer Value proposition (Answers how to compete?)
· Assets & competencies (Answers how to compete?)
· Functional strategies & programs (Answers how to compete?)
Product-Market Investment Strategy:
The scope of the business and the dynamics within that scope represent a very basic strategic dimension. The scope of business is defined by the products(used interchangeably with ‘services’) it offers and chooses not to offer, by market it does and does not seek to serve, by the competitors it chooses to compete with or to avoid by its level of vertical integration. While business dynamics consider service or product level tactical entry or exit plan and repositioning of these, financial and non financial resources are allocated based on these product-market investment decisions.
The investment pattern will determine the future direction of the firm. Some broad level choices that are available are:
· invest to grow in existing market
· invest to maintain existing position
· milk the business by minimizing investment
· recover as many assets as possible by liquidating or divesting the business
The Customer Value Proposition:
Customer value proposition is the perceived functional, emotional, social or self expressive benefit that is provided by the organization’s offering/s. Therefore value positioning of a service or product should correlate to one or more customer value proposition listed. And this combination should be sustainable for the offering firm without exerting undue pressure over resources while at the same time should differentiate itself enough from its competition. Customer value proposition (CVP) can involve some or combination elements such as good value, excellence in service, best overall quality, product or service line breath (one stop shop), global branding, etc.
Competencies and Assets:
Strategic competencies are referred to those intangibles that have evolved organically within a firm or have been acquired and are hard to imitate by its competitors. Strategic competencies are based on knowledge that an organisation wields and an organization’s ability to capture knowledge from its talent pool. As such processes are considered as competencies as they are but knowledge product and can be included with in the category of organisation’s ability to manage knowledge.
Strategic assets are those resource elements that can be leveraged to gain competitive advantage while it also contributes in developing a firm’s competencies. Strategic assets include both tangible elements such as financial capabilities, installed customer base, etc and intangible elements such as brand name.
Competencies and assets together give an organisation its competitive advantage, careful planning in developing the two and there effective utilization should lead to synergies which in turn will lead to significant, enduring and sustainable advantage that will result over time.
Here it is important to point to the fact that strong asset or competencies are hard to build and even harder to quantify in absolute terms as sufficient enough; how much is enough will always remain a relative dysphemism. Competitive myopia translates in to yesterday’s hard won competitive advantage that provides customer delight in to today’s order winners and tomorrow order qualifiers. The ability of an organisation’s asset and competencies to support a strategy will in part depend on their power relative to those of its competitors. Competencies and assets provide sustainable competitive advantage (SCA).
Functional strategies:
Set of assets and competencies should mandate some strategy imperatives, in the form of a supportive set of functional strategies. These strategies are implemented through a host of short-term tactics. Some of the functional strategies are list below:
· Distribution strategy
· Brand-building strategy
· Communication strategy
· Segmentation strategy
· IT strategy
· Quality strategy
· Customer relationship strategy
Some introspective questions that drive functional strategies include: What conditions needs to be manufactured internally and externally in order to drive the agreed value proposition to end customer? What changes are required to manufacture these conditions? Are the assets and competencies in place to carry out these changes? Do these assets and competencies need to be created, strengthened, supported or changed? How do we do this?
Strategic Options
Since we do not live in a perfect world we are forced to choose between options available. Strategic options is a point of synthesis and distillation for the four dimensions of business strategy discussed above viz. Product-market investment strategy, the customer value proposition, competencies and assets and functional strategies. The over whelming complexity in the form of alternatives or choices that these four dimensions produced is narrowed down to specific few; a firm’s strengths and weaknesses combined with the opportunities and threats presented to it from the external environment will ultimately decide the business strategy. Therefore a strategic option is a particular value proposition for a specific product/service market with supporting assets and competencies and functional strategies.
Conceptualizing and labeling strategic options help crystallize and describe alternative business strategies. This in turn helps describe the selected business strategy and get the required approval from internal stakeholders (employees) and external stakeholders (partners, financers, customers, etc).
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