Adaptive Processes:
Linking Strategy with
Execution
Contributions of the Delta Model
Contribution:
Goal:
Implication:
Method:
The Triangle
Opening the mindset to
new strategic positions
The best product does not
always win
Three distinct strategic options
z Best Product
z Total Customer Solutions
z System Lock-In
Adaptive
Processes
Linking strategy with
execution
Execution is not the
problem, linking to strategy
is
Execution is captured through three
Adaptive Processes:
z Operational Effectiveness
z Customer Targeting
z Innovation
whose roles need to change to achieve
different strategic positions
Aggregate
Metrics
Measuring success
Good financials do not
always lead to good results
Aggregate performance metrics need to
reflect each of the Adaptive Processes and
their role based upon the strategic position
z Product performance
z Customer performance
z Competitor performance
Granular
Metrics and
Feedback
Discovering
performance drivers
Managing by averages leads
to below average
performance
Business is nonlinear. Performance is
concentrated, particularly when it involves
bonding. Granular Metrics allows us to
focus on underlying performance drivers,
to detect variability, explain, learn, and act
The Adaptive Processes:
Linking Strategy with Execution
Business Model
Innovation
Operational Effectiveness
Customer Targeting
• The process of new product
development
• Should ensure a continuous
stream of new products and
services to maintain the
future viability of the business
• The management of the customer
interface
• Identification and selection of
attractive customers and enhancement
of customers’ performance
• Should establish best revenue
infrastructure for chosen strategy
• The production and
delivery of products
and services to the
customer
• Should produce the
most effective cost and
asset infrastructure to
support the chosen
strategic position of the
business
• Operational Effectiveness: This process is
responsible for the delivery of products and services
to the customer. In a traditional sense, this includes
all the elements of the internal supply chain. Its
primary focus is on producing the most effective cost
and asset infrastructure to support the desired
strategic position of the business. In a more
comprehensive sense, operational effectiveness should
expand its external scope to include suppliers,
customer, and key complementors, thus establishing
an extended supply chain. This process is the heart of
a company’s productive engine as well as its source of
capacity and efficiency.
• Customer Targeting: This process addresses the
business-to-customer interface. It encompasses the
activities intended to attract, satisfy, and retain
customers, and ensures that customer relationships
are managed effectively. Its primary objectives are to
identify and select attractive customers and to
enhance their performance, either by helping to
reduce their costs or increase their revenues. The
ultimate goal of this process is to establish the best
revenue infrastructure for the business.
• Innovation: This process ensures a continuous
stream of new products and services to maintain the
future viability of the business. It mobilizes all the
creative resources of the firm- including its technical,
production, and marketing capabilities- to develop an
innovative infrastructure for the business. It should
not limit itself to the pursuit of internal product
development, but should extend the sources of
Innovation to include suppliers, customers, and key
complementors. The heart of this process is the
renewal of the business in order to sustain its
competitive advantage and its superior financial
performance.
The Changing Role of Operational Effectiveness
Total
Customer
Solutions
Lock--In
System Lock
Strategic Position
Best Product
In supporting the chosen Strategic Position
Description of the Role
Focus of Attention
Output
Objective
Internal Value
Internal cost
infrastructure
Best Product Cost
Internal and
customer value chain
Combined internal and
customer infrastructure
Maximum customer
value
Internal, customer,
and complementor
value chain
System infrastructure
Enhance system
performance
The Changing Role of Customer Targeting
Lock--In
System Lock
Total
Customer
Solutions
Best Product
In supporting the chosen Strategic Position
Description of the Role
Focus of Attention
Output
Objective
Distribution channel
‘generic customer’
customer’
Channel mix
Maximize product volume
and product market share,
minimize distribution cost
Targeted customer
Target market intelligence,
Customer interface
Maximize share of each
customer
Relevant business system
Network of complementors,
complementors,
Complementor interfaces
Maximize share of
complementors
Best Product Companies Take a Horizontal Market Cut, Total
Customer Solutions Businesses Take a Vertical Market Cut
Customer Segments
B
C
D
1
A
Best Product, emphasis on
Channel 1
Channel 3
Product 1
4
Best Product
Direct
5
Product
Items
3
Product 2
2
Channel 2
Channel 1
E
F
The Traditional Customer Interface in the Best
Product Strategy
Rest of the
organization
Supplier
Salesforce
Buyers
Rest of the
organization
Customer
Source: Patrick Preux, “Customer Targeting, Sustainable Competitive Advantage, and he Competencies”
The Traditional Customer Interface in the Total
Customer Solutions Strategy
Line Executives
Line Executives
R&D
R&D
Manufacturing
Manufacturing
Marketing and
Distribution
Marketing and
Distribution
Finance
Finance
After Sales
After Sales
Source: Patrick Preux, “Customer Targeting, Sustainable Competitive Advantage, and he Competencies”
The Changing Role of Innovation
Total
Customer
Solutions
Lock--In
System Lock
Strategic Position
Best Product
In supporting the chosen Strategic Position
Description of the Role
Focus of Attention
Output
Objective
Common product
platform
Family of products
First to market, dominant
design
Customer’
Customer’s platform
Open platform
Joint development
•Manage proliferation of
complementors
• Breadth/range of
applications
• Application interfaces
• Enhance customer’
customer’s
results
• Customized bundle of
products
• Integrate into
customer’
customer’s activities
Harmonized system
architecture
The Role of Adaptive Processes
In supporting the Strategic Positioning of the Business
Adaptive Process Objectives
Strategic Positioning
Operational
Effectiveness
Customer
Targeting
Innovation
Maximum Customer
Value
Best System
Performance
Maximize Product
Volume, Low
Distribution Cost
Customer Share
Complementor Share
First to Market,
Dominant Design
Customized Bundle
Of Products
Harmonize System
Architecture
Best Product Cost
Best Product
Total Customer Solutions
System Lock-In
The Role of Adaptive Processes
In supporting the Strategic Positioning of the Business
Strategic Positioning
Best Product
Total Customer Solutions
System Lock-In
Best Product Cost
Best Customer Benefits
Best System Performance
• Identify product cost drivers
• Improve stand alone product cost
• Improve customer economics
• drivers
• Improve horizontal linkages in the
• components of total solutions
• Improve system performance
drivers
• Integrate complementors in
improving system performance
Target Distribution Channels
Target Customer Bundles
Target System Architecture
• Maximize coverage through
multiple channels
• Obtain low cost distribution
• Identify and enhance the
profitability of each product by
channel
• Identify and exploit opportunities to
add value to key customers by
bundling solutions and customization
• Increase customer value and possible
alliances to bundle solutions
• Select key vertical markets
• Examine Channel ownership options
• Identify leading complementors
in the system
• Consolidate a lock-in position
with complementors
• Expand number and variety of
complementors
Product Innovation
Customer Service Innovation
System Innovation
• Develop family of products
based on common platform
• First to market, or follow rapidlystream of products
• Identify and exploit joint development
linked to the customer value chain
• Expand your offer into the customer value
chain to improve customer economics
• Integrate and innovate customer care
functions
• Increase customer lock-in through
customization and learning
• Create customer and system lockin, and competitive lock-out
• Design propriety standard within
open architecture
- Complex interfaces
- Rapid evolution
- Backward compatibility
The Priorities of Adaptive Processes in Each
Strategic Position
Strategic Positioning
Best Product
Operational
Effectiveness
Adaptive
Processes
Customer
Targeting
System Lock-In
Product Economics
Customer Economics
System Economics
1.
2.
3.
Best Product
Cost
Target Customer
Bundles and
Customization
Target Distribution
Channels
Product
Innovation
Best System
Performance
Best Customer
Benefits
1.
3.
2.
Innovation
Total Customer Solutions
2.
Target System
Complementors
1.
3.
Customer Service
Innovation
System
Architecture
Innovation