The exchange relationship established between a company and its customers is through a product or service that means satisfaction for the latter. At first glance, the product or service is the company, because it represents it faithfully to customers, competitors, authorities and the general public. For example, beer, cement, soda, banking services, insurance, telephony.
The product is defined first, to later decide how to sell it: set a price, store it, design a distribution system, advertise it, promote it, guarantee it, etc.
Unfortunately, in strategic terms, it is not the product or service that defines the company. Equating its description to the definition of a business is dangerous, both because it follows a planning sequence in the opposite direction, and because it seriously limits its possibilities for growth and survival.
Traditionally, Strategic Planning processes start from an economic concept of Supply (product) and Demand (market) under which the combinations of products offered and markets served, current or new, define both the current business of the company and four possible ways growth.
However, product and market must be united by something that makes their exchange possible. Under an orientation towards the client, we must remember that a product or service, more than the set of its physical characteristics, represents for them a solution to their problems, a satisfaction of their needs; in a word, a benefit.
From the benefit that the market receives from the product, the value that makes it possible to develop a continuous commercial relationship is derived. This means that the company's business must be defined on the basis of precisely those three dimensions, Profit, Market and Product.
This makes it possible to identify eight possible growth paths that go from specialization to diversification, depending on whether the company wishes to maintain (current) or change (new) one, two or all three defining dimensions. And eight growth paths seem better than four.
But the most significant, in strategic terms, is the fact that the product or service of a company is the physical expression, result or consequence of choosing a certain technology.
For example, when comparing 8mm film cameras with video cameras, gas ovens with microwave ovens, conventional telephony with cell phones, or print media with electronic ones, we see that the benefit for the market is greater with new technology, as a result of the added value to the solution in terms of convenience, and that the basic benefit remains the same.
Since technology is indisputably the dimension that changes the fastest, since markets evolve slowly and basic benefits simply and simply remain over time, the company should not define its business on the products and services that result from it and risk disappearing.
Has anyone ever used slide rules? Are the same companies that produced slide rules that now produce electronic calculators? Those that produce electronic instruments or personal computers? Has anyone ever sent a telegram or a transatlantic cable?
Another example. If a phone company defines itself as such, its opportunities to grow include offering phone lines to new markets and new services to its existing customers through the same phone lines. Today, the original cabling allows voice, data and images to be transmitted remotely in thousands of communities around the world.
But, with this perspective that includes only technology and market, we see that additional uses of the original network can lead to aberrations such as charging for dial-up internet access for connection time, since the network is not designed to establish permanent communication between two users, even if information does not flow between them all the time.
In this particular case, if we define the business on the basis of the basic benefit of permanent communication to the Internet, we will understand that the family residential market will be better served by a technology that is clearly not conventional telephony. Moreover, not even the cable television network or the fiber optic network, but a radio frequency wireless signal, local or satellite.
On the other hand, if this new technology allows to communicate in a more convenient way than telephony, what will happen to the telephone companies? They could disappear or they could change technology to continue giving their current market the basic benefit of communication, not telephony. How do we imagine we will communicate with family and friends in the near future?
Products and services do not define the company; on the contrary, a correct definition of the company translates into successful products and services.
Focusing on the client requires sensitivity to identify the significant benefit that the market considers of value and flexibility in the selection of a technology that translates into products, services and delivery methods superior to those of the competition.
