Pres Arnaldohax

8/8/2019 Pres Arnaldohax

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1. The Creation of Economic Value

2. The Development of Customer Bonding

3. The Achievement of the Spirit of Success

THE TENETS OF STRATEGY


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Customer Bonding - The Driving

Force in Strategy


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The Delta Model - Three Distinct

Strategic OptionsSystem Lock-In

System Economics

Monopolistic Power

Total Customer Solutions

Customer Economics

Cooperation

Best Product

Product Economics

Rivalry


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The Triangle: Options for Strategic Positioning

System Lock-In

Total Customer

Solutions

Best

Product

Proprietary Standard

Microsoft, Intel

Low Cost

Southwest

Airlines, Nucor

Dominant Exchange

eBay, Yellow Pages

Horizontal Breadth

MCI Worldcom

Exclusive Channel

Walls

Differentiation

Sony Wega

Redefining the

Customer Relationship

Saturn

Customer

Integration

EDS


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Expanding Your Mindset

Strategic Focus Relevant Benchmarking Value Proposition

Supply Chain ChannelsInnovation

The Network Complementors Portfolio of Products

and Services Extended

by Complementors

System - Extended &

Complementors

Massive

Direct

Open Architecture -

Complementors as Key

Extended

Enterprise

Product Customers CompetitorsCustomized

Bundle of

Products & Services

Standardized

Products

Extended -

Suppliers, the Firm,

The Customers

Internal Targeted

Direct

Generic -

Mass

Joint with

Customers

Internal Product

Development


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The Role of IT

Total Network Support

(e.g. e-system)

Customer &

Supplier

Support

(e.g. B2B, B2C)

Internal

Support

(e.g. SAP)

The Degree of Customer Bonding

The Highest -

Competitor

Lock-Out

Very Small -

Depending on

Product

Characteristics

Potentially High -

Customer Lock-In


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THE CHALLENGES TO

TRANSFORM THEORGANIZATION FROM BEST

PRODUCT TO TOTAL

CUSTOMER SOLUTIONS


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1. Fight the product-centric mindset

The Best Product Positioning is not

necessarily the most profitable or best way to

serve your customer


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2. The transformation is not straightforward

The alternative to a Best Product positioning are notalways easy to define or to accept .

(The case of Codelco and the International Copper Assoc.)


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3. You have to redefine the game you are playing.

It is not that your products are unimportant; it is

not that you should ignore the efficiency of product

delivery - it is simply that often this is not enough.

(The case of CSN.)

Transforming the focus of the CSN Organization

From Support Units To Strategic Marketing Units

Steel (e.g. processor, Automotive

rerollers, etc.) Civil construction Export House appliances

Mining Packaging

Energy

Ports


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4. The Challenge: Commodities only exist in

the minds of the inept.

Product differentiation, as technology gets more

mature, is very hard to achieve. If your product

becomes a commodity, you are deprived from superior

financial performance, from serving your customer

splendidly, and from having fun. (You violate thethree tenets.)

Do not sell products; sell customer solutions:

customization, learning, and services bundled with

products as a unique customer offering. (The Case ofNational Starch).

Use all the corporate capabilities supported by key

complementors. This is a corporate strategy. (The

case of Siemens USA.)


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Competitive Driving ForcesProduct Differentiation

Product

Technology

Specialty Products

Specification Products

Source: Castrol

Premium

Products


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Competitive Driving ForcesProduct Differentiation

Source: Castrol

The technology is

mature less

opportunity todifferentiate

BeforeFuture


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Competitive Driving ForcesService Differentiation

Services

Responsive

Minimum Required to Maintain

Businesses

Source: Castrol

Significantly

Differentiated

Occasionally Differentiated


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Competitive Driving ForcesService Differentiation

Source: Castrol

Customers are

demanding more

than justproducts

BeforeFuture


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5. Decommoditize your customer.

Start with segmentation: segment your markets,

your customers, your customers customers, and

customers attitudes (productivity, cost, and price

consciousness). (The case of Castrol.)

Do not treat every customer equally. You couldnot and should not provide everyone the same

degree of attention. Select your customers. Do not

let your customers select you.


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Market Segmentation

Food & Beverage

Mining

Glass Cement

Sugar

Pulp & Paper

TextileWood

Source: Castrol


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Market Segmentation

Primary Target Segment

ProductivityConscious

Customers

These customers

are conscious of

total costs and new

production yieldshigher sales

Source: Castrol


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Market Segmentation

Secondary Target Segment

Cost

Conscious

Customers

These customers

are conscious oftotal costs but new

production does

not necessarily

yield higher sales

or economies of

scale

Source: Castrol


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Market Segmentation

The Least Desirable Segment

PriceConscious

Customers

These customers

are not necessarily

conscious of total

costs and generallybuy on price/unit

Source: Castrol


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6. Rethink the customer engagement process.

You are not selling products by the ton, or by the gallon, or by

the drum. You are selling documented improvements in your

customer costs and productivity. Use an executive team as

part of the customer management process. Sales are too

important to be left to the sales force. (The case of Castrol.)


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What is Castrol Logic?

A customized lubrication solution involving

products and services that results in

documented:

Cost Reductions

&

Productivity Improvements


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Customer ExperienceHow do we deliver cost savings?

Source: Castrol

Documentation

Client Engagement Process

Continuous

Improvement

Initial Information

Exchange

Management

Survey

ProposalImplementation


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7. Prevent the customer from commoditizing

you.

Your customers might feel they benefit from standardizing the

product offering of their suppliers, and move the bargaining

power in their favor. The problem isYou get what you pay for.

(The case of Eastman Chemicals Coating Business.)


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The Paint and Coating Industry

Paint and Coating

Manufacturers

Distributors

Eastman Chemicals End Users

Tier1- Preferred strategic

solution seekers

Tier 2- Large price seekers

Tier 3- Least attractive price

seekers

Tier4- Local manufacturers

Tier5- Specific targeted

companies

Tier1- Full alignment with EC

Tier2-Large power bargainers

Tier 3- Fragmented local agents

Tier4- Specialty distributors

Architectural

Automotive

Industrial maintenance

Building products

Appliances

Metal office furniture

Solvents

Resins

Additives

Colorants


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8. Channels are essential, they own the customers.

Ownership or control of the channels is critical to the pursuit of a Total

Customer Solutions strategy.

Generic channels are only effective for the average customer. They are

unsatisfactory for the very poor and the very rich. (The case of Hindustan Lever

and Unilever de Mxico.)

If you cannot own the channels, use a pull strategy. (The case of Unilever


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The Food Service Industry

Unilever Bestfoods

Food Service Distributors Operators Final Consumer

Corporate broad line

(e.g. Sysco)

Specialized distributors

Other national,regionaland local distributors

Tier1- 100 chains

Tier 2/3- 1500 chains

Tier4/5- Thousands of

independents

push

pull


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9. Use technology wisely: This is a very hard

task.

Joint development with our customers is an effective mechanism

to get customer lock-in.

Product technology is not enough, add service technical support.

Effective IT infrastructure is imperative: e-Business allows the

implementation of the integrated value chain, e-Commerce allows

access to massive fragmented customers.

Technology-based system lock-in is very hard to achieve, if you

can do it is a dream. (The case of Advanced Micro Devices.)


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10. Beware of the organizational structure

implications

You have to change dramatically the way you manage, assignresponsibilities, reward people, monitor the business progress, and

most important, the way you sell. (The case of Motorola Semi-

Conductors.)


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The Delta Model Framework


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Reinterpreting Porters five forces through the

Delta Model


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THE DELTA PROJECT:DISCOVERING NEW SOURCES OF

PROFITABILITY IN A NETWORKED ECONOMY

Arnoldo C. Hax and Dean Wilde

Palgrave, 2001

http://www.palgrave.comhttp://www.amazon.co.uk

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