twitter2  fb2  in2

Tenet #5 - Ten Tenets of Strategy

Rate this item
(0 votes)

by Larry Pendergrass, Principal

In my previous blog, Ten Tenets of Strategy –Tenet #4, I urged you to focus on creating a unique customer outcome delivered through your set of business processes. This will produce a defensible strategy, setting you apart from your competition. Of course, this customer outcome must be of value to your customers. From this, the rest of your objectives, activities and value delivery plans should flow.

Over the last few weeks and through this blog, I have offered Ten Tenets of Strategy, gained through years of personal experience and discussions with key thought leaders. These Ten Tenets are offered as guidance for the development of your strategy.

These Ten Tenets are :

  1. Your core competency is not your strategy.
  2. Compete on core capabilities, your set of business processes integrated throughout your value chain.
  3. Make hard choices. Decide what you will not do.
  4. Focus on customer outcomes. Design your strategy through the customers’ eyes.
  5. Analyze and design for the industry forces.
  6. Understand and analyze the landscape of possible customer outcomes.
  7. Know your competitors and their strategies profoundly.
  8. Diversify around your core capabilities.
  9. Balance the stakeholders.
  10. Strategy is dynamic. Adjust as necessary, but with caution.

 Here is more detail on the fifth of these Tenets:

Tenet #5: Analyze and design for the industry forces.

Michael Porter wrote of 5 industry forces of which you must be aware before setting out to form a strategy. They are:

  • The power in the hands of the customers
  • The power in the hands of the vendors
  • The barriers to entry and to exit
  • The competition
  • The substitutions for your product or service

Before you can set out to build your strategy, you need to understand this landscape and plan accordingly. This should be step one, even before understanding the possible customer outcomes, understanding your competition’s choices and before choosing your own winning customer outcome. Know where the power lies. If the greatest power is in the hands of your customers (say shelf space in a major supermarket) you need to develop a strategy that will address this. If the greatest power is in the hands of the vendors (due to limited or constrained supply of raw materials like natural diamonds) your strategy will need to take this into account. If the largest industry force is the barriers to entry (such as the price of building a 300mm semiconductor fab) this will need to be a focus of your strategy. Some of the most successful business processes respond to industry forces better than the competition.

Industries vary wildly from each other in this regard. And although there are some unique aspects to a set of industry forces for all time, these industry forces tend change as the industry matures. So your strategy will also have to adjust. For example, the minimum set of requirements to satisfy all customers grows as an industry matures and the power shifts more and more to the customers. In high tech industries, we have had recent and visible lessons in this, where at the outset pleasing a customer means delivering a key new technology into their hands on time and according to promised performance. As the industry matures, demands on cost, delivery, quality, service become clear and more vocalized by customers. The customer begins to expect everything, as their needs change and as the competition in the industry fights to supply all dimensions.

As we have seen in Tenet #4, your strategy needs to be built based on a unique and valuable customer outcome. But the successful customer outcome will change as the industry matures. Just to illustrate the point, here are some examples (not comprehensive) of potentially winning customer outcomes, and how the needs change as the industry matures.

Possible Winning Customer Outcomes… Varies with Industry Maturity

 

New industry, with new to world technology

Growing industry, in middle stages of maturity

Maturing or mature industry

A

First access to new technology

First access to new technology, roadmaps aligned with customer needs

[Hard to differentiate… as the need for new technology diminishes]

B

Not first access, but fast response with advantages in at least one dimension (cost, delivery, quality, service or…)

Not first access, but fast response with advantages in several dimensions (cost, delivery, quality, service or…)

[Hard to differentiate… higher performance isn’t needed… product  performance is adequate in industry for essentially all customers]

C

 

Highest performance products

[Hard to differentiate… higher performance isn’t needed… product  performance is adequate in industry for essentially all customers]

D

 

Best “up time” for equipment (Most dependable service and highest quality)

[Hard to differentiate… all products have same excellent quality by now]

E

 

Best custom solutions

Best custom solutions

F

 

Lowest cost

Lowest cost

G

 

One stop shopping, the biggest portfolio for your choices

One stop shopping, the biggest portfolio for your choices

 As an industry matures, other shifts in power should be noted and be a part of your changing strategy. These changes will be unique to your industry. But in general, you can expect the major issues to change and hence the leadership to shift from those that can recognize and generate hot new products and services (the technologists) to those that can increase the top line (the sales managers) to those that can increase the bottom line (the operations and finance managers).

Your strategy must take into account the industry forces, where the power lies, and the changes that are taking place as your industry matures.

In the next blog, I will discuss Tenet #6 and the importance of not only knowing the competition well, but understanding fully the range of possible customer outcomes and those chosen by your competition.

Leave a comment

Make sure you enter the (*) required information where indicated. HTML code is not allowed.

Corporate Headquarters:

TechZecs, LLC
1730 Kearny Street,
Suite F-3
San Francisco,  California
94133 USA

Principal and Founder

Dr. Scott S. Elliott
Telephone: +1.415.830.5520
Email: scott.elliott@techzecs.com
           info@techzecs.com

Grab our contact information

qr-linkUsing your smart phones, open your QR Code reader and quickly scan this image to save our contact information automatically .