sesión 8 - delta model - new sources of profitability - prof arnoldo hax

8/22/2019 Sesin 8 - Delta Model - New Sources of Profitability - Prof Arnoldo Hax

1/13

Discovering New Sources of Profitabilityin a Networked Economy

Professor Arnoldo HaxAlfred P. Sloan Professor of Management

Massachusetts Institute of Technology


2/13

The Delta ModelThree Distinct Strategic Options

System Lock-In

System Economics

Market Dominance

Achieving Complementor Share

Total Customer Solutions

Customer Economics

Cooperation

Achieving Customer Share

Best Product

Product Economics

Rivalry

Achieving Product Share

EnabledThrough

Effective Useof Technology


3/13

The Triangle:Options for Strategic Positioning

System Lock-In

Total Customer

SolutionsBest Product

Industry Standard

Microsoft, Intel

Low Cost

Southwest Airlines,

Nucor

Dominant Exchange

eBay, Yellow Pages

Horizontal Breadth

Fidelity

Exclusive Channel

Rural Wal-Mart

Differentiation

Sony Wega

Redefining the

Customer RelationshipSaturn

Customer

Integration

EDS

EnabledThrough

Effective Useof Technology


4/13

The Challenge to

Decommoditization:

Transforming the organization from

best product to total customersolutions.


5/13

Transforming the organization

Change your mindset

The transformation is not straight forwardThe case of Codelco and the International Copper Association

Total Customer Solutions Best Product

System Lock-In

Regulators

Underground cables

Efficient motors

Business Partners

Suppliers

Contractors

Complementors

Architects

Construction

Motor producers

Targeting Key End-Users

Alcatel

KME

ABB Electrolux

Carrier

General Electric

Siemens

Old Codelco -

the lowest cost

producer


6/13

Transforming the Organization

Redefine the game you are playing

Transforming the CSN Organization

Decommoditize your customer

The case of Castrol


7/13Source: Castrol

Documentation

Client Engagement Process

ContinuousImprovement

Initial Information

Exchange

Management

Survey

ProposalImplementation


Rethink the customer engagement process


8/13

Segmentation:The Key to Superior Strategy and Management

Segment everything, but most important, segment your customersand consumers (e.g., Unilever Asia)

Tier 3. Lower (but not bottom) LSM, less affluent

emerging consumers in developing parts of the

region

Purchasing basket primarily of essentials.

Tier 3. Including Retailers, Wholesalers, Drugstores,

Small Retailers

System Lock-In by being only Supplier to produce

ECR (Efficiency Customer Response) principles.

Tier 2. The middle LSM focused on upward

mobility and social migration

Upgrade to higher aspirational brands andaffordable price

Tier 2. Modern Trade. Smaller, more cash driven,

largely local

Shape and Win

Tier 1. The affluent high LSM (Life style

management) across Asia focusing on Aging,

Single/Working Women, and Teenagers

Satisfy their needs and vitality, Quality Time,

Customized Product, and Solutions

Tier 1. Modern Trade. Established Systems and

Business Scale, often International

Reaction and Conflict Anticipation and

Collaboration

ConsumersCustomers


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Transforming the Organization: Prevent the customer from commoditizing you

The case of Eastman Chemicals Coating Business

Channels are essential, they own the customersThe case of Hindustan Lever and Unilever de Mexico

Total Customer Solutions Best Product

System Lock-In

Channels

Massive Direct (the Case of Hindustan Lever D & E market)

Target Direct (the Case of Unilever deMexico high segment market)

General Channel/Mass Distribution


10/13

Transforming the Organization Use technology wisely: This is a very hard task

The case of Advanced Micro Devices

The

Role of IT

TheRole of

Innovation

Total Network Support

(e.g. e-system)

Customer and

Supplier Support

(e.g. B2B, B2C)

Internal

Support

(e.g. SAP)

Open Architecture -Complementors as Key

Joint

with

Customers

Internal

Product

Development


11/13

1

10

100

1000

10000

100000

UK3

.9%

Por

tuga

l1.2%

Israe

l2.6%

Slo

veni

a1.3

%

Czech

Rep

.1.5%

Saudi

Ara

bia0.7%

Slo

vakia

1.2%

Turk

ey0

.3%

Chile

0.7%

Braz

il0.

8%

IT Spend per capita 2001 GDP per Capita

Comparing EEMEA and ROWIT Spend vs. GDP per Capita*

*GDP per Capita is purchasing power parity (PPP)

*Scale is logarithmic to allow the IT Spend per Capita to show up (very small)

Sources: IDC Black Book Data, CIO World Factbook, The Economist

$US


12/13


Seek System Lock-In OpportunitiesThis is very hard to accomplish; however if successful

the rewards are enormous


13/13

Achieving Your Potential

The way to win is not to beat your

competitor but to bond with yourcustomers.

sesión 8 - delta model - new sources of profitability - prof arnoldo hax

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