Arnoldo C.

Hax

The Delta Model

Reinventing Your Business Strategy

4y Springer
Contents

1 The Need for Reinventing Strategy 1

The Dangers of the Conventional Definition of Strategy -
Strategy as Rivalry 1
Reject Commoditization - The Essence of Strategy Is to
Achieve Customer Bonding 2
Managing in the Large and in the Small - The Extended
Enterprise and the Individualized Customer 3
The Selection of a Strategy and the Identification of the
Required Competencies - A Preview of the Delta Model 4
The Strategic Tasks of the Delta Model 5
Task 1 Customer Segmentation and Customer Value
Proposition (Chapter 3) 8
Task 2 The Existing and Desired Competencies of the Firm
(Chapter 4) 9
Task 3 The Mission of the Business (Chapter 5) 9
Task 4 The Strategic Agenda (Chapter 6) 9
Task 5 Monitoring the Strategy Execution (Chapter 7) 10
The Haxioms 10
2 The Delta Model: Creating New Sources
of Growth and Profitability in a Networked
Economy 15
How to Achieve Customer Bonding: The Three Major
Strategic Options in the Delta Model 15
Best Product 15
Strategic Positions of the Best Product Option 17
Total Customer Solution 19
Redefining the Customer Experience 20
System Lock-In 23
Three Ways to Get System Lock-In '. 24
The Various Dimensions of the Triangle: A Summary 28
^i Contents

3 Customer Segmentation and Customer Value Proposition:

The First Critical Task of Strategy 33
Behind the Customer Segmentation Process 33
Who Is the Customer? 34
Why Are Customers Different? 34
The Generic Dimensions of Segmentation 35
Segmentation According to Attitudes and the Willingness to
Do Business with Us 35
The Case of Castrol 35
Reflections on Segmentation Based on Customer Attitudes 38
Segmentation According to Different Degrees of Value Added . . . 39
The Case of the Waste Management Company 39
Reflections on Segmentation Based on Different Degrees
of Value Added 42
Segmentation According to Customer Life Cycle 44
The Case of the Investment Retail Company (IRC) 44
Reflection on the Segmentation Based on Customer Life Cycle . . 47
Segmentation According to Varying Buying Patterns 49
The Case of Singapore Airlines 49
Reflections on Segmentation Based on Varying Buying Patterns . . 51
Segmentation According to Alignment with the Distribution Channel 53
The Case of Unilever Food Services 53
Reflections on Segmentation According to Alignment
with Distribution Channel 58
Some Pitfalls from Conventional Customer Segmentation 60
The Mobile Phone Business - The Case of Singapore
Telecommunications (SingTel) 60
The Mobile Phone Business - The Case of Telefonica
Moviles de Colombia 62
Corporate Banking-The Case of Bank of Tokyo-Mitsubishi . . . 64
The Steel Business-The Case of Termium 65
The Test of the Quality of the Customer Value Proposition 67
Who Is the Most Attractive Customer? 70
The Need for a Customer Database 70
Notes 73
4 The Firm as a Bundle of Competencies:
Understanding the Depth and the Breadth
of Our Capabilities 75
Identifying the Bundle of Competencies in Practice 77
Investment Retail Company as a Bundle of Competencies 77
Singapore Airlines as a Bundle of Competencies 79
Delta Model and Competitiveness: A New Approach
to Competitor Analysis 82
Contents xvii

Sony Video Conferencing: An Analysis of Its Competencies 82

A Comparison of Polycom and Sony Video Conferencing: A
Contrast of Competencies 84
Using the Delta Model to Assess the Merits of Possible
Mergers and Acquisitions-The Case of Cognos and IBM 87
Lessons from the Delta Model 91
Notes 91
5 The Mission of the Business: Capturing
the Strategic Transformation 93
Strategy Means Change 93
The Mission of the Business 94
Planning Horizon 94
The Description of the Changes in the Business Scope 94
The Mission Statement 96
Strategic Transformation: What Others Have Done 96
The Case of the Chemical Coatings Company 96
Mission Statement of the Chemical Coatings Company 98
The Mission Statement 98
Statement of Products Scope and Services Scope 99
Statement of Customer Scope 99
Statement of End-User Scope 100
Statement of Distributor Scope 100
Statement of Complementor Scope 101
Statement of Geographical Scope 101
Statement of Unique Competencies Scope 102
The Case of Singapore Airlines 102
The Mission Statement 102
Statement of Product Scope 103
Statement of Services Scope . 103
Statement of Customer Scope 103
Statement of Complementor Scope 103
Statement of Geographical Scope 104
Statement of Unique Competencies 104
Notes 105
6 The Development of the Strategic Agenda:
A Call to Action 107
The Identification of the Strategic Thrusts 107
The Components of the Strategic Agenda 108
Strategic Thrusts 109
Organizational Structure 109
Business Processes 109
Performance 110
Culture 110
/Hi Contents

The Strategic Agenda as the Integrator of Strategy, Structure,

Process, Performance - The Case of Chemical Coatings Company . . Ill
Identifying the Priorities of the Strategic Thrusts 114
Test for the Quality of the Strategic Agenda 116
The Case of Singapore Airlines 117
Strategic Challenges and Opportunities 118
Conclusion 118
7 Monitoring the Strategy Execution 121
The Intelligent Budget - A Requirement for Proper Strategic
Execution 121
The Balanced Scorecard 125
Strategy at the Center of the Balanced Scorecard 126
The Delta Model and the Balanced Scorecard 128
The Delta Model and the Adaptive Process 129
The Adaptive Processes and Aggregate Metrics 130
The Balanced Scorecard of the Chemical Coatings Company . . . 133
Value Creation by Each Strategic Option: Empirical Evidence . . . . 135
Notes 141
8 Putting It All Together: How to Integrate the Critical
Tasks of Strategy - An Illustration 143
The Case of DMK International 144
Customer Segmentation and Customer Value Proposition
of DMK 144
The Firm as a Bundle of Competencies 153
The Challenges from the Existing and Desired Bundle
of Competencies 155
The Mission of DMK 156
Challenges from Changes in the Mission of DMK 157
The Strategic Agenda . . . . • 158
The Intelligent Budget and the Balanced Scorecards 160
Notes 165
9 Managing Small- and Medium-Sized Enterprises
(SMEs) - Lessons from the Delta Model 167
The Importance of SMEs 167
The Challenges of Managing SMEs 167
The Best Product Strategy 168
The Low-Cost Positioning 168
The Differentiation Strategy 169
The Total Customer Solutions Strategy 171
Redefining the Customer Experience . 171
Customer Integration 174
Horizontal Breadth 174
The System Lock-In Strategy 175
Restricted Access 177
Contents xix

Dominant Exchange 178

Proprietary Standard 179
Final Comments 179
10 The Challenges of Managing Not-for-Profit Organizations . . . . 183
Who Is the Customer? 183
Which are the Competencies? 184
Reflecting on the Strategic Challenges of the Not-for-Profit
Organization 186
Best Product Strategy 186
Administrative Efficiency 187
Differentiation 187
The Total Customer Solutions Strategy 188
Attraction and Development of the Customer 188
Knowledge Transfer 189
Total Breadth of the Offering 189
System Lock-In Strategy 190
Channels of Delivery 191
System Support 191
Intellectual Value 192
The Unconventional Dynamics of Evolution of the
Not-for-Profit Organizations 193
The Case of Singapore Economic Development Board - An
Application of the Delta Model to a Not-for-Profit Organization . . . 195
Customer Segmentation 196
EDB's Existing and Desired Competencies 198
EDB's Mission 200
EDB's Strategic Agenda 201
Monitoring the Strategy Execution 203
The EDB Culture 203
Conclusion 204
Notes 205
11 A Comparison Among the Three Strategic Frameworks:
Porter, the Resource-Based View of the Firm, and the Delta Model 207
Porter's Competitive Positioning Framework 208
Low Cost or Differentiation - Michael Porter's Only Two
Strategic Options 212
Porter's Winning Formula 215
The Resource-Based View of the Firm 216
Unique Competencies 217
Sustainability 217
Appropriability 217
Opportunism and Timing 218
Core Competencies and the Resource-Based View of the Firm . . . . 218
The Resource-Based View of the Firm's Winning Formula 218
xx Contents

A Practical Framework of the Application of the

Resource-Based View of the Firm 219
Some Caveats to the Resource-Based View of the Firm 219
Comparisons Among Porter, the Resource-Based View
of the Firm, and the Delta Model Frameworks 220
Reinterpreting Porter's Five-Forces Model Through the Delta
Model: Thinking Out of the Box 222
Search for the 10X Force 223
Generate Barriers Around Your Customers 224
Your Competitors Are Not the Relevant Benchmarks 224
Develop and Nurture the Intrated Value Chain 224
Add a New Player; the Complementors 225
Fragmented Industries Offer Big Opportunities 225
Notes 226
About the Author 227
Index 229