In last weeks blog I looked at what makes good & bad strategy from a resource-based viewpoint drawing from Richard Rumelt’s recent work on this topic.  I ended by sharing some of my thoughts on how we could adapt Rumelt’s “kernel of a good strategy” that starts with the “outside-in” view of the customer, instead of the more common “inside-out” view focused on the company’s resources and capabilities.

By way of reminder (you can read this from last week’s blog below), Rumelt lists three essentials of a good strategy: diagnosis, guiding policy, coherent actions.  I believe these are a good framework for building a strategy but can be misapplied if we start with our own resources and move out to the customer.  What do I mean by this?

Well, in the resource-driven approach we focus our diagnosis on internal deficiencies that need to be addressed - improving customer service, faster time-to-market, addressing a competitive disadvantage.  It’s all about us and what we need to do.  This is where we get off-track, I believe.

So, essentially, it’s how we’re setting up the problem statement, or what Rumelt refers to as the “challenge to overcome”.  I believe, a market/customer-driven strategy will be setting up the problem by asking the question: “What is the customer’s problem we need to solve?”  This is a fundamentally different question and very different challenge to overcome.

Are we going to build our strategy around solving OUR perceived problems or our customers?   I suspect a lot of companies think they are doing that, but how do they go about coming up with their diagnosis?  The primary subject, if we’re really honest, is all to often focused on our selves - benchmarking our capabilities, comparing our products to the competitors, looking at our own financial and operational metrics (often obsessively) - very little is about the customer and market.  

What if we took this energy and applied it to really understanding what the customer’s needs and expectations were?  What they needed to do to serve their customers better?  What improved their operations or improved their bottom line?  Do we even know?  What are their marketplace dynamics and issues?  Have we asked them?  Do we carefully study their world?  

By making our customer’s problem our problems, we set up our strategy for success because we’re now really focused on true value-creation; first for our customers and, in turn, for us.  At VALUE:driven we call this “diagnosis” the Value Statement.  A succinct statement of what we need to do to solve our customers, high value challenges.  

Then we come to the “guiding policy”.  Which is essentially how we’re going to go about delivering this to the customer within a specific timeframe.   Yes, it may include developing or improving some internal capabilities, but only to the end of providing what the customer needs.  Great efficiencies can be discovered here because, all to often, we find that we’re doing things that the customers just don’t need us to be doing!  Scrap them - or at least, reduce them by making them as cost efficient as possible.  How many times have we found ourselves looking for cost reductions in all the wrong places?  Reducing critical capabilities that are the most valuable to the customer?  It’s easy to take this approach when you’re inside-out focused and building your strategy with the wrong focus, solving the wrong problem.  At VALUE:driven, we call this guiding policy the Value Strategy - how we’re going to deliver the required customer experiences that solve their identified problems.

And finally, “coherent actions”.  This is execution, pure and simple.  Well maybe not so simple... I don’t want to minimize the difficulty here, however, if the first two are done properly this isn’t usually so troublesome.  But, I want to call attention to two aspects of this:

Coherency - is the action we’re taking fit the approach that we decided in the policy.  Many companies don’t adequately articulate the strategy in a way that creates focused engagement and action by the organization and thus fail to deliver.  

Coordination - all aspects of the organization are working together to deliver on the strategy.  Typically we focus on communication and collaboration to address this.  And, yet, many times we still see a fragmented, frustrated and inconsistent effort across the organizational “silos”.  

I maintain that having a customer-driven strategy, if I may call it that, helps in the execution, tremendously.  How?  By enabling the organization to have a clear and compelling view of the customer’s problems to solve.  Too often, we tell our organizations that we’re customer-driven, but we don’t act like it.  This creates incredible dissonance within the organization and can tend to build a cynical view of the next “grand strategy”.  People don’t fully engage and embrace the strategy and poor execution results.

When our organization know’s what it needs to do to clearly deliver value to our customers, they engage energetically.  And, because we’ve clearly identified what we need to do for our customers, it’s much easier for the organization to make the tough choices to deliver in a coordinated way.  Some organizations, even find over time that they’re organizational structure needs to change to more consistently and effectively deliver for the customers.  Now that’s a radical concept!  I call that a "Value Culture."

So, where is your organization today?  Is the customer truly driving your strategy or are you?  What do you need to do to make the shift?  What can you do to move in this direction?

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    John Geffel

    Value is a much abused, misunderstood and misused word, everyone thinks they provide it but so few show real evidence that they do!

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