Platt Perspective on Business and Technology

Fine tuning and adjusting a business in the face of change 1: building a model of positive and negative value sources of competitive position

Posted in strategy and planning by Timothy Platt on July 22, 2012

In the real world, every business faces change and every single day. Day to day, this can appear so slow and marginally incremental so as to go without notice, but change happens and even slow and incremental change adds up with time. And then there is the unexpected jolt of change that can arrive unannounced and at seemingly any time, from the sudden emergence of a new competitive challenger, from changes in the marketplace or in the overall economy, or from any of a wide range of other potential sources.

I have written about change and the need to strategically understand and respond to it a great many times in this blog and elsewhere. And I cite by way of example, a recently completed series: Finding and Managing the Right Simplicity Complexity Balance (see Business Strategy and Operations – 2, postings 262 and loosely following). My goal there was to at least briefly touch upon a number of issues that arise operationally and strategically when planning and developing for lean and efficient, while still accommodating changing needs and opportunities with the complexity that can require. My goal in this posting is to more specifically examine the issues of prioritization when addressing the challenges of change.

• Response to change and business adaptation to it carries a price, or more accurately a range of prices.
• Proactive change that is carried out in anticipation of new and emerging opportunities and challenges – or simply in anticipation of what might be coming next costs too.
• Both can and generally do include change to fixed operating expenses, and efficiency generating change essentially always brings with it reductions in at least some targeted source of those ongoing expenses, and if not as an absolute savings at least relative to returns gained.
• But even efficiency improving change can carry significant one time and short-term expenses if the business is to develop the resources and capabilities needed to capture new sources of ongoing efficiency.
• So trade-offs between short and long term costs and short and long term benefits have to be accounted for, and all in terms of cash flow and available liquidity.

Similar decision and execution processes have to be followed, or at least accounted for when considering any cost/benefits-significant change, and whether that is in improving efficiency of existing systems as touched upon above, or in developing new systems, to capture new market share, or to retain current market position and competitive value.

But this still leaves out the fundamental issues of prioritization in development and infrastructure spending. And with that as fundamentals-based background I turn to the issues of prioritization as the core topic of this posting. And I would begin that by making an observation that considered in vacuo would be considered almost trite – but that in practice and application becomes anything but:

• Prioritization should focus on maintaining and expanding competitive strength and market position.

That means, at least as an initial step, focusing on areas of the business that provide explicit competitive value. And part of the challenge of implementation can be in identifying and understanding all of an organization’s value centers.

• Value source of this type can be found in your products and services that you bring to market, and for their unique worth to your customers, and as perceived by them.
• Comparably compelling value can be found in distribution and fulfillment centers and their systems efficiencies: customer support and other operational processes and systems that are directly market facing.
• But perhaps more easily overlooked, comparable compelling value can be found in internal to the organization and back-end operations too, as they support and sustain capacity to identify and meet market needs. And because these sources of value are less easily seen, unique value proposition sources in this arena can carry longer lasting defining competitive value from being that much more difficult to emulate or build upon by others.

In summary of those three bullet points, prioritizing and expanding on sources and bases of competitive value starts with identifying all of your value propositions and sources of productive and marketplace-facing or empowering value, and where ever they are in your operational systems.

• Start with your unique value propositions
• Where ever you can develop or find and cultivate them within your organization,
• And in your products and services,
• In your customer-facing processes that support your offering them,
• In your internal and back-offices processes and operations that collectively support the business as a whole.

But this should only be seen as a first step, and that for a stable and effective organization. Now let’s consider the organization that is operating at a competitive disadvantage.

• Identifying weakest links and value reducing and losing centers becomes preeminently more important under those circumstances.
• This can mean changing and improving products to better meet market opportunities for your current markets,
• Addressing new and emerging markets and their needs, and perhaps with new products,
• Thinking though what markets you are competing in should be an ongoing exercise for any business with continual adjustment and refinement of your target markets models.
• Adjusting business model and processes – e.g. if your competitors pay their providers on a 30 days deliverable schedule, agree to pay faster in exchange for a discount, and refine your back office systems so as to be able to do this.
• Identifying internal to the organization and back office inefficiencies that deplete and reduce competitive position. And as counterpart to a point I raised above regarding sources of positive competitive value, these are less visible, harder to identify and analyze for their competitive impact and more difficult to address.

And with that, I have set up a dichotomy of addressing points of strength and competitive advantage, and points of weakness and competitive disadvantage. And while some businesses do in fact find themselves primarily facing one of these prioritization needs categories or the other, in the real world most functioning businesses face and upon review find sources of both positive and negative value to address.

• Ultimately prioritization across this larger set means making adjustments from a focus on profits and the bottom line.

And that observation, like one I made above, comes across as trite and obvious when simply stated in vacuo. I have written this posting as a first installment in a new series and will pick up on that point and on the implications and complications of the larger set of positive and negative competitive values in my next installment. You can find this and related postings at Business Strategy and Operations – 2 (and also see Business Strategy and Operations.)

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