Of all the metaphors used to describe business strategy, ‘war’ is the most pervasive. Business strategy is mostly visualised as war against competitors, ‘battles’ for market share, ‘invasion’ of virgin territories with advertising campaigns etc. Many companies have a sales ‘force’ team and market ‘intelligence’ personnel (spies). One of the most influential books, in business strategy circles, is actually an ancient 5th century Chinese military treatise ‘The Art of War’ by Sun Tzu.
Michael Porter at Harvard University 40 years ago launched the modern strategy revolution in business management. In 1979, as an associate professor at Harvard Business School, his landmark article ‘How Competitive Forces Shape Strategy’ was published in the Harvard Business Review. It is hard to overestimate the influence of Porter’s article on the teaching and research of business strategy and its influence on business practice. Porter’s article was about ‘forces’ to be overcome. His article begins with this sentence: “The essence of strategy formulation is coping with competition.” Porter’s article is about five forces governing competition in an industry: 1. Threat of new entrants; 2. Bargaining power of customers; 3. Threat of substitute products or services; 4. Bargaining power of suppliers; 5. Rivalry among competitors. Porter’s Five Forces Model, let’s call this paradigm the ‘Harvard School of Strategy’. It is interesting to see customers as one of the ‘forces’ to be overcome in this model.
At the Massachusetts Institute of technology (MIT), ArnoldoHax, a professor of management, established a different (and much lesser known) paradigm for business strategy formulation.ArnoldoHax believes that the customer should be at the centre of business strategy, not a competitor or a force to be overcome. This paradigm is called the Delta Model. The Delta Model represents change, it is an innovative approach to business strategy. Developed at MIT, this model is more aligned with the realities of the global market place, today’s networked economy. The Delta Model, according to Hax, was developed to “help managers formulate, articulate and implement more effective ways to achieve superior and sustainable financial performance and long-term profitability, providing a completely different perspective from the conventional strategic approaches used by most managers.”
The Delta Model moves away from the prevailing view of strategy as achieving competitive advantage: rivalry. This excessive focus on competitors leads to a backward view of strategy: focusing on what the competitor has already done. This leads to more imitation than innovation. Instead, the Delta Model looks to the future. ‘Delta’ is from the Greek word meaning transformation and change. The Delta Model focuses on the customer as the centre of business strategy. According to Hax “this paradigm shift constitutes a big transformation that can produce a constructive, long-term relationship with the customer and culminate in customer bonding, a mutually beneficial engagement based upon unbreakable trust and transparency…the essence of strategy becomes not to achieve sustainable competitive advantage with competitors as the benchmark – but to achieve customer bonding, with the customer as the driving force.”
With customer bonding as the strategic aim, the Delta Model offers three distinct options to attract, satisfyand retain the customer: 1. Best product; 2. Total customer solutions; and 3. System lock-in. These three options occupy the three corners of the Delta symbol graphically. The best product option offers product functionality, superior price or brand to differentiate the product and increase attractiveness to the customer. The total customer solutions option attracts the customer because it offers the customer something beyond the actual product the customer is buying. The ultimate option to aim for in business strategy is systems lock-in. With systems lock-in, the strategy is to achieve complete dominance in the marketplace so that the customer will really have no choice better that your option, locked-in.
The Delta Model’s strategic philosophy is best described in the principles ArnoldoHax labelled ‘Haxioms’ three of which are: 1. The centre of strategy is the customer; 2. You don’t win by beating the competition, you win by achieving customer bonding; 3. Strategy is not war, it is love “caring about the customer with a high sense of integrity is the smartest way of doing business.”
Uyiosa Omoregie is a petroleum economist and management analyst.
He can be contacted at [email protected]