Among the many examples that we show in our seminars, some of them are related to strategic maps, which clearly show how what we define in the title of this article is fulfilled.
In general, companies propose two strategies within their financial perspective: One related to improving their productivity, which in most cases is achieved through a better use of their current assets and a reduction in costs. The other is related to growth, which generally raises two themes: growing with new customers and / or increasing sales per customer.
The above does not pose a major problem to the rest of the strategic issues that the organization must consider. Where the dilemma comes in is when the strategies or value proposals are defined with which it will seek to attract customers.
In this particular, three generic strategies have been proposed for many years:
- Cost leadership, also known as “Operational Excellence”. Total satisfaction or “Customer Intimacy”. Product leadership or “Innovation”.
Dr. Kaplan proposes a new strategy, to become the "industry standard" or "lock in", which is not well known but applied by Microsoft, Intel, Dell, etc. In future articles we will talk about it.
Many authors have established why the company must raise a dilemma on which of these strategies to follow, since they do not recommend the combination of some of them. Apparently this had always been the case, however other "gurus" of the administration raise two new elements:
- You can have two strategies as long as each one is presented to a totally different customer segment (Personal Banking, Institutional Banking). The other element suggests that although the company should focus on a strategy, it does not imply neglecting the other two. You will need to pay attention to costs, even if your focus is on product leadership or total satisfaction.
Once these strategies are defined, the issues in the other perspectives fall by their own weight, either when we talk about processes, competencies that human resources should have, as well as information technology or the essential values to develop as part of the organizational capital of the company.
The following table shows more clearly how the strategy defines the structure.
| Perspective |
Cost Leadership |
Product Leadership |
Intimacy with the Client |
| Financial Perspective: |
Low cost or Operational Excellence |
Innovation |
Complete solution for customers |
| Productivity Strategy |
Industry Cost Leader |
Manage the total cost throughout the life cycle |
Reduce Service Cost |
| Growth Strategy |
Benefits from new clients Increase Participation in clients |
Benefits of new products Gross Margin of new products |
Benefits from new clients Increase Participation in clients |
| Clients Perspective: |
A low cost supplier Perfect Quality Speed of purchase Appropriate Selection |
First in the market High performance products, small, fast, light, safe New customer segments |
Quality of the solutions provided Products-services / customers Customer retention Customer profitability during their lifetime |
| Commercial strategy |
Offer Services that are consistent, on time and at low cost |
Products that push the boundaries of current performance |
Provide the best total solution to our clients |
| Process Perspective | |||
| Operation management |
Excellent relationships with suppliers Efficient distribution Produce at low cost, with quality and on time |
Robust and flexible processes Rapid product introduction Supply chain for rapid growth |
Extensive product line Rapid introduction of new products Provider network to extend capacity |
| Customer Management |
Convenient order handling Service flow Desired variety |
Educate customers about new products Capture ideas from customers |
Deliver results Create solutions Build relationships Customer insight |
| Innovation Management |
Process innovation |
Disciplined Time to market |
Identify new opportunities to serve Anticipate needs |
| Learning and growth: |
Qualified, motivated and technologically capable workforce |
Find, motivate, develop and retain the best talent. |
Qualified, motivated and technologically capable workforce |
| Capital |
Six sigma |
Deep experience |
Employees who create |
It is easy to see in the table above how the strategy determines what technological structure is required as defined. In a cost leadership strategy, communication with customers and suppliers will allow "better, faster, cheaper" products. But if the strategy is for product leadership, it requires technology like computer-aided design, simulators, etc. CRM (Customer Relationship Management) makes more sense in a "Customer Intimacy" strategy than in either of the other two. However, many companies regardless of their strategy adhere to the CRM philosophy, including the acquisition of expensive software.
The same happens with the application of the Six Sigma concept, which is applied without being clear about what the business strategy is. It is easy to recognize that in an Operational Excellence strategy, where there is identification with cost reduction through continuous process improvement, the application of Six Sigma or “Lean Manufacturing” are valuable tools. It is not being said that only in the cost leadership strategy, it should be applied, but that it is where it contributes the most, it does not imply, as was said before, that companies should forget about the other concepts, but if a company really has a clear definition of your strategy and that is how you want to be perceived by your customers, you should not wear yourself out in initiatives that do not promote the change that the company is seeking.
Finally, to maintain our focus of: "The Strategy defines the Structure", the concept is mainly true in the way in which the company defines its organizational structure, for which it must assess whether what is best for it is a functional organization, a process organization, a matrix organization (Process Champion), etc. Before embarking on new philosophies, tools or fashions, companies must clearly define their competitive strategy, in fact the decision for the rest of things is simple.
Additional information on this topic, as well as seminars and implementation processes, can be obtained by visiting www.grupokaizen.com or by requesting information from [email protected]
