The key elements of The Delta Model include:

 A New Set of Strategic Positionings

Three distinct positions can all lead to outperforming your industry over the long term:

  • Best Product — Low cost or differentiation
  • Total Customer Solution — Reducing customer costs or increasing their profits
  • System Lock-in — Complementor lock-in, competitor lock-out, or proprietary standard

The System Lock-In and Total Customer Solutions options offer new ways to compete that deviate substantially from conventional "best product" strategic positioning.

The first reflection that normally takes place in the process of defining the strategy of the firm or a business is to decide on the relevant strategic positioning. This is simply an attempt to capture the essence of how the firm chooses to compete in its relevant market place, or, in our terminology, how the firm decides to attract, to satisfy, and to retain the customer.

To address the issue of strategic positioning, The Delta Model challenges you to open your mindset to a new set of strategic options. These new options revolve around the concept of "customer bonding" and reflect the observation that "the best product doesn't always win". The Delta Model recognizes three distinct strategic options that offer three very different approaches for achieving customer bonding. Best Product reflects traditional thinking; the System Lock-In and Total Customer Solutions options offer new ways to compete that deviate substantially from conventional strategic positioning.

Best Product

The Best Product positioning builds upon the classical form of competition. The customer is attracted by the inherent characteristics of the product itself — either through low cost, which provides a price advantage that can be partly passed to the customer — or through differentiation, which introduces unique features that the customer values and is willing to pay a premium. The products tend to be standardized and unbundled. The customer is generic, massive, and faceless. The central focus of attention is the competitor that we are trying to equal or surpass. The drivers are the product economics and the internal supply chain, which provide the engine for efficient product production. Innovation is centered in the internal product development process.

The main limitation of this approach is that is generates the least amount of customer bonding, hence making the incumbent firms most vulnerable to new entrants. Its obsessive concern with the competitors often leads to imitation and price war, resulting in rivalry and convergence — the worst of all deals. In spite of the inherent limitations of this strategic position, it is by far the most widely adopted, and the default position for those business firms that do not deliberately consider other strategic alternatives.

Total Customer Solution

The Total Customer Solution is a complete reversal of the Best Product approach. Instead of commoditizing the customer, we seek an intimate and deep customer understanding and relationship that allows us to develop value propositions that bond to each individual customer. Instead of developing and marketing standardized and isolate products, we seek to provide a coherent composition of products and services aimed at enhancing the customer ability to create their own economic value. Instead of concentrating inwardly on our own supply chain, we seek to develop an integrated supply chain that links us with key suppliers and customers. Instead of focusing on competitors and imitating them, we redefine the ways to capture and serve the customer by putting together the overall set of corporate capabilities complemented by proper external parties that enhance our product offering.

We are outward driven; the customer's economics is our guide. Strategy is not war with our competitors; it is love of our customers. The innovation process is not oriented toward the design of standardized products; it is aimed at initiatives with our key customers for the joint development of distinctive products.

System Lock-in

The System Lock-in strategic option has the widest scope; it includes the extended enterprise — the firm, the customers, the suppliers, and most importantly, the key "complementors". A complementor is a firm that engages in the delivery of products and services that enhances our own product and service portfolio. The key to this strategic option is to identify, attract, and nurture the complementors. The complementors are often external, but may also be internal to the corporation, particularly in large and diversified organizations. These complementors are rarely detected and exploited effectively. That is why a system lock-in strategy has to start with a full corporate scope — not just for one product or business — and has to continue with the identification and incorporation of all the key external players that can become complementors.

The customer continues to be the central focus, but now we extend the enterprise to the fullest. We look at the overall system supply chain, not just the supply chain for our product, and we harness the innovation percolating throughout the system as a whole. The richness and depth of complementors supporting your product or service lick your product into the system and lockout the competition. This compels a customer to buy your offering, creating customer bonding. One obvious way for this to become a reality is for a firm to develop and appropriate the industry standard. Another key for this positioning is ownership of unique distribution channels that limit the access to external competitors.

A company that achieves system lock-in can exercise an enormous amount of power. A System Lock-in position, however, is not always possible; there is a necessary condition. Massive adoption of the product should in itself significantly expand the value of the product to the customer. There is a self-reinforcing nature of the opportunity to the customer. This opportunity can be realized by either appropriating a proprietary standard or by controlling the distribution channel. The challenge this position generates is two-fold: how to sustain it and how to exercise this power in an ethical way that does not create excesses of monopolistic behavior.

Votes: 0
E-mail me when people leave their comments –

You need to be a member of Global Risk Community to add comments!

Join Global Risk Community

    About Us

    The GlobalRisk Community is a thriving community of risk managers and associated service providers. Our purpose is to foster business, networking and educational explorations among members. Our goal is to be the worlds premier Risk forum and contribute to better understanding of the complex world of risk.

    Business Partners

    For companies wanting to create a greater visibility for their products and services among their prospects in the Risk market: Send your business partnership request by filling in the form here!

lead