Newsletter
Strategy Implementation, Part II of IV
Improve your Financials and Customer Satisfaction through Strategy Implementation.
Could you improve your organizations’ understanding of the strategy and direction of your business? Would you like to improve profits and reduce costs while delighting your customers? Would you like to improve employee morale and retention and involve your employees in achieving financial and customer objectives? We have the solution.
The first article in this series described how to create and live your strategy map and balanced scorecard. Next, there are usually four stimulating aspects of a strategy map that your leadership teams need to ponder and agree upon. These aspects are financial, customers, processes and people/automation. In this second article, we will discuss imperative questions to ask both yourself and your leadership teams about your financial and customer value proposition.
Typically, most business units have a very good understanding and tracking of their financial perspective. The question to be answered by your leadership teams is “If we succeed, how will we look to our shareholders?” Usually, there are two basic strategies within the financial perspective. First, how can we grow our business? Here we ask our teams (1) how can we develop new sources of revenue from new markets, new products or new customers; and (2) how can we increase customer value with existing customers to expand the relationship with our firm? Second, how can we improve productivity within our firm? Here you should brainstorm how to (1) improve cost structure and lower direct costs of products and services; (2) reduce indirect costs and share common resources with multiple units; and (3) improve asset utilization. In other words, how can you most effectively reduce the working and fixed capital needed to support a level of business by implementing greater utilization and more careful acquisition, or by disposing of parts of the current and fixed asset base?
During my last ten years of leading business units through strategic planning sessions, the most stimulating disagreement among leadership teams has been determining the client’s customer value proposition. While it is necessary to implement all three customer value strategies, success is determined by your firm’s ability to excel at one of those strategies. It has been shown trying to excel at all three customer value strategies results in failure of all three. WOW! Yes failure! Therefore, your leadership teams must decide (1) which customer value proposition strategy is most important for your firm, and (2) how your products and services map support this customer value proposition.
Let’s take a look at the three customer value proposition statements:
First is “Operational Excellence”. The important product and service attributes to this strategy are price, quality, time and functionality/selection. Your processes and investments must support these attributes. The key to this value proposition is quality in selected categories with unbeatable prices. The brand displayed to the customer is “the smart shopper”, which places less importance on the relationship. Examples of companies using this value proposition today are Wal-Mart and McDonalds.
Second is “Customer Intimacy”. The important attribute here is building a relationship with the customer consistent with the brand image of “the trusted Brand.” In this model, personal service must be tailored to produce results and build long-term relationships with the customer. Hence, the two most important attributes in this customer proposition are service and relationships. Determining how to invest and build strong processes around these two attributes is essential. For example, Lowe’s Lumber is notorious with its customers for building relationships through outstanding service.
Third is “Product Leadership”. This proposition offers unique products and services that “push the envelope” resulting in a brand of “best innovative product in the marketplace”. The target is to bring an excellent selection of new products with greater functionality to the marketplace in less time. Most firms are excellent at creating goals for financial perspectives, but customer value propositions are typically debated topics for leadership teams. You must perform well on all attributes of customer value propositions, while focusing investment and improvement initiatives on attributes important to both you and the customer’s value propositions. Even though it is sometimes difficult, successful market leaders routinely decline purchasing and investing in items not mapped to their strategy.
Have you determined the customer proposition value statement for your firm? Do all of your leadership teams agree on your customer value proposition? In answering these questions, you may be surprised to find your leadership teams have different views and opinions on the value your firm offers to its customers. A common vision and customer value proposition among leadership teams is essential to your firm’s success.
In the next newsletter, I will discuss how to develop processes and your people and automation strategies that must map to your financial and customer value proposition attributes. You will then be able to display your business strategy on a single sheet of paper which will easily communicate and show your alignment to all.
ACHC and Q4MedSource will be conducting a one-day workshop at upcoming trade shows on this topic to improve both your skills and your business in these areas.
Richard Wetherell, Senior Design Consultant of Q4MedSource, is an educator and specialist in strategic planning, balanced scorecards, and improving quality, market share and customer satisfaction. He works with businesses to develop, deploy and align strategic plans to achieve financial and customer results. Q4MedSource has offices in Cary, North Carolina; Houston Texas; and Orlando,