Strategic Insight in 3 Circles*
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A Management Seminar for EIGCA Members
Co-sponsored by Toro and EIGCA
October, 2011
Presented by Mike Etzel
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*copyright 2007 Urbany and Davis,
Revised and used with permission
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©copyright 2007 Urbany and Davis
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©copyright 2007 Urbany and Davis
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70% of players who moved forward found the game more enjoyable
90% played faster or at least at the same speed as they normally did
91% like the concept enough to recommend it to a friend
52% said they would play more golf as a result of the program
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©copyright 2007 Urbany and Davis
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©copyright 2007 Urbany and Davis
MARKETING consists of
coordinated activities to plan,
price, promote, and distribute
want-satisfying offerings to
targeted prospects
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©copyright 2007 Urbany and Davis
Marketing is challenging
because it…
• Emphasizes planning before action
• Requires discipline in implementation
• Makes the needs of the prospect, not the
business or the offering, the focus
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©copyright 2007 Urbany and Davis
The 3-Circles
Market
You
Competition
Determine How they Overlap
Market
You
Competition
.
You
Market
Competition
Use the Interactions to Formulate Strategy
Objectives
• Prepare to serve a defined market (a
segment) better than the competition
• Identify unmet opportunities in that
market segment
The Core of Marketing
• Segmenting - Dividing the market into
groups with similar purchase-related
characteristics
• Targeting - Selecting one or more
segments to pursue
• Positioning - Designing strategies and
tactics for one or more specific segment(s)
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©copyright 2007 Urbany and Davis
S-T-P Examples
• Ray Kroc with McDonald’s
• Herb Kelleher with Southwest Airlines
• Howard Schultz with Starbuck’s
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©copyright 2007 Urbany and Davis
The area of the
first circle
represents a
market segment’s
requirements,
needs or desired
attributes.
Segment’s
Desired
Attributes
Your Equities
and Disequities
Next, add a circle that
represents the value
you are perceived to
offer this segment
Your
Equities/
Disequities
These are the assets,
skills, and capabilities
the segment perceives
you have to offer
Segment’s
Desired
Attributes
Market segment’s
requirements,
needs or desired
attributes
Your
Equities/
Disequities
How much does
what you are viewed
as offering overlap
with this segment’s
needs?
Segment’s
Desired
Attributes
Your
Equities/
Disequities
… in other words …
Segment’s
Desired
Attributes
Your
Equities/
Disequities
This is the value
customers in this
segment believe you
can create for them
Segment’s
Desired
Attributes
Your
Equities/
Disequities
Segment’s
Desired
Attributes
Positive
Value or
Equities
This overlapping
area is called
positive value or
“equities.”
Your
Equities/
Disequities
Segment’s
Desired
Attributes
You need to determine
how much your firm’s
equities overlap with
this segment’s needs…
Your
Equities/
Disequities
Segment’s
Desired
Attributes
These areas are
also meaningful
Your
Equities/
Disequities
Disequities and
Potential Equities
Maybe customers
feel they don’t need
some of the value
you create (yet?)
Segment’s
Desired
Attributes
Your
Equities/
Disequities
Disequities and
Potential Equities
Segment’s
Desired
Attributes
Unmet
needs
… and there likely are
needs the segment has
that are unmet…
Your
Equities/
Disequities
Segment’s
Desired
Attributes
Disequities and
Potential Equities
Unmet
needs
Next it is important to
recognize…
Your
Equities/
Disequities
Segment’s
Desired
Attributes
Disequities and
Potential Equities
Equities
Unmet
needs
Some of this space is
shared with competitors…
Your
Equities/
Disequities
Segment’s
Desired
Attributes
Equities
Disequities/
potential equity
… there are
competitors who
also create value
for customers…
Unmet need
Competitor
Equities/
disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
When Competitors are added…
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
Every unique area in the model
takes on meaning…
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
B
Points of
Parity
… Area B contains
the table stakes… value
you must create
to be in the game…
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
A
Your points
of Difference
B
Points of
Parity
… Area A is your unique
value to customers, the
most important concept
in competitive strategy…
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
A
Your points
of Difference
B
Points of
Parity
Yet, the competitor has
desirable points of
difference as well…
C
Their points
of Difference
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
A
Your points
of Difference
B
Points of
Parity
C
Their points
of Difference
Your profitability depends
upon the relative size and
importance of your Area A
compared to competitors’
Area C
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
A
Your points
of Difference
B
Points of
Parity
D
Common
disequity/
Potential equity
Area D …? This is value
we both create that may
not seem valuable to the
customer !
C
Their points
of Difference
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
E
Your disequity/
Potential
equity
A
Your points
of Difference
B
Points of
Parity
D
Common
disequity/
Potential equity
… and each
competitor has its
own unique area
of “non-value.”
C
Their points
of Difference
F
Their disequity/
Potential
equity
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
E
Your disequity/
Potential
equity
A
Your points
of Difference
B
Points of
Parity
D
Common
disequity/
Potential equity
Most significantly
for the future, every
customer/segment
has “white space”
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“White Space”
C
Their points
of Difference
F
Their disequity/
Potential
equity
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
E
Your disequity/
Potential
equity
A
Your points
of Difference
B
Points of
Parity
D
Common
disequity/
Potential equity
… an area
representing
customers’ needs
that haven’t yet
been met…
G
“White Space”
C
Their points
of Difference
F
Their disequity/
Potential
equity
Competitor
Equities/
Disequities
Your
Equities/
Disequities
Segment’s
Desired
Attributes
E
Your disequity/
Potential
equity
A
Your points
of Difference
B
Points of
Parity
D
Common
disequity/
Potential equity
This is the model… it
captures value as the
CUSTOMER
Perceives it
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“White Space”
C
Their points
of Difference
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Their disequity/
Potential
equity
Competitor
Equities/
Disequities
Conducting a 3-Circle
Analysis
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©copyright 2007 Urbany and Davis
Ten-Step Process
• Identify a Context
• Gather External (Outside) Data
– Customer analysis
– Sorting data into 3 circles
– Deeper diving
• Gather Internal (Inside) Data
– Firm’s resources
– Competitors’ resources
– Overlaps
• Analyze the Data
– Align capabilities with market needs
– Factor in change
– Identify growth options and tactics
Step 1: The Context
• Market - organizations with needs to
satisfy, money to spend, and a willingness
to spend it.
• You - you, your firm, or a unit of your firm
• Competition - one or more organizations
pursuing the market being analyzed
Customers’
Desired
Attributes
Segment A
Segment B
Segment C
Priorities, rather than
major differences,
often distinguish
segments of a market
Market Segmentation
• Market Segments - Prospects in a
broader market who share demand-related
characteristics and can be most effectively
served by a tailored marketing program.
• Markets segments are based on:
– Particular need/benefit and/or priorities
– Particular behaviors
– Observable characteristics
Step 1 Outcome Is a Context
Statement
“My goal is to figure out how (I/we/my
company/division) can grow by
creating more value for
(customer/market segment) than (my
competitor) does.”
Step 2: Customer Analysis
• An internal and external exercise to
determine the segment’s:
– Desired benefits
– Perceptions of your capability
– Perceptions of your competitor’s
capability
A “Before” View of a Market
Segment
• Put yourself in the shoes of the customer
• Using the “Before” Worksheet:
– List the top reasons customers in this segment
choose a design firm
– Estimate the importance of each reason as low,
medium, or high
– Estimate how the segment rates your firm and the
selected competitor on each reason (below
expectations = 1, meets expectations = 2, exceeds
expectations = 3)
– Anticipating Step 4: Probe why you believe each
reason is important using laddering
An “After” View of the
Segment
• Do the same thing using the “After”
Worksheet but this time use
information OBTAINED DIRECTLY
FROM THE SEGMENT
– Talk to recent buyers
– See the equity and disequity questions in the
Analysis Guide
– Be a good listener
– Anticipating Step 4: Probe beyond the
obvious responses using laddering
Reconciling Before and After
Worksheets
• Resolving differences:
– Confirms the value of getting outside yourself
– Produces new insights
Step 3: Sorting
• You now know the segment’s:
– Important needs and their priorities
– Perception of your capabilities
– Perception of the competition’s capabilities
• Place these dimensions in the 3-circle
worksheet
Step 4: Deep Diving
• Determining the “why” of choice
attributes
– Attributes are good; consequences are better
• “Laddering” is a frequently used
probing technique
Laddering Technique
• A simple technique for identifying what
drives choices.
– It consists of repeating probes and listening to the
answers
• For “Before” Worksheet:
– “Why is (attribute) important to customers”
– “What do customers really get from (attribute)”
• For “After” Worksheet:
– “Why is (attribute) important to you”
– “How do you benefit from (attribute)”
Completing Step 4
• Add to the 3-Circle Worksheet the
reasons (the consequences to the
buyer) why each attribute is important
to the segment
– Consequences are often assumed or
“hidden”
– Success of a strategy often turns on
understanding consequences
Step 5 & 6: Assessing CARs
YOU
Capabilities,
Resources,
Assets,
Culture,
Social Capital,
Leadership,
Structure,
Knowledge
Competition
Capabilities,
Resources,
Assets,
Culture,
Social Capital,
Leadership,
Structure,
Knowledge
INSIDE is where
you find the
capabilities,
resources,
and assets used
to create customer
value.
Step 5: Your Capabilities,
Resources, and Assets
• Develop an organized list of your
organization’s capabilities, resources,
and assets
– Weak versus strong
– Heavily utilized versus under utilized
– Core versus peripheral
• Test your assessments externally
Step 6: Competitor’s
Capabilities, Resources, and
Assets
• Develop an organized list of your
competitor’s capabilities, resources,
and assets
Step 7: Overlap Assessment
• Identify capabilities, resources and assets
that:
– You have in common with the competitor
• Unlikely sources of distinctiveness
– Are unique to you
• Potential sources of differential advantage
– Are unique to the competitor
• Potential sources of differential disadvantage
Step 8: Align Perceptions and
Realities of Capabilities,
Resources, and Assets
• Compare the results from Step 2
(Customer Analysis) and Steps 5, 6 and
7 (Your and Competitor’s CARs)
– What characterizes the CARs?
•
•
•
•
Unique?
Substantive?
Difficult to duplicate?
Is the market informed?
• Add these to the 3-Circle Worksheet
Step 9: Dynamics
• How is the market changing or likely to
change?
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Size of the circles
Overlaps
Needs of the market
Your attributes
Competitor’s attributes
Step 10: Growth
Opportunities
• Strategy questions addressed by the model:
– Can we identify, build, and defend meaningful differentiation?
– Do we have hidden capabilities that could enhance customer
value?
– Are there disequities we can eliminate or improve?
– Do competitors have advantages we can neutralize?
– What unmet segment needs provide new growth opportunities?
• Identify value numerator and denominator ideas
– Use the 3-Circle Worksheet
– Develop tactics to accomplish the goals
– Estimate the likelihood of success (costs versus return)
Conclusions
• Strengths of the 3-Circle planning model
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–
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–
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Puts strategy ahead of tactics
Focuses on the market
Addresses all potential areas of strategy
Can be conducted at different levels of complexity
It works!