“Vision without action is daydreaming, action without vision is chaos”.
The last couple of weeks of our Management Imperative module have been based upon this idea in terms of the starting point of business development. The overall aim behind this is of obtaining a clear understanding of your position within the competitive environment as well as your own organisation in terms of its core competencies and key USP points, thus mitigating venture risks. The strategic element is vital in order to take control of the future of your business rather than merely reacting to just the immediate circumstances and in effect just ‘treading water’. The key to this is the ability to step outside of your business and be ‘coldly’ objective, something which many working within the creative industries often fail to do due to being completely succumbed by passion.
At the fore of this is what known as the value proposition, a tool used to rank all the factors and model drivers in relation to competitors which then enables us to establish the company’s market position. These are Price (Cost), Features (Innovation), Quality (Execution), Support (Relationships), Access (Channels), Reputation (Brand) which can each be ranked on a 1-5 scale (1 being the highest) The price is then the leading force which sets the customer expectation for the other factors thus dictates to what standard these should reach. For example, if the company is targeted at the high end of the market, offering the most premium products, a customer would then expect highly innovative, original products, excellent quality, exceptional personal customer support & service, a sense of restricted access in terms of the fact that the products/ service is not readily available elsewhere thus is unique with the reputation of the brand being highly established. The key aspect to this theoretical model is that all factors must be consistent and aligned as in the case of this particular example, customers will only be prepared to pay the higher price if this is justified by high standards across the board. This is also a key tool to ensuring the basic ethos of capitalism which has been defined as the ‘equitable exchange of goods and services between other service organisations & customers’ with the crucial term here being “equitable”; that the customer input (in the form of money) is fairly balanced with the level of output (service/product) they receive. However on the flip-side to this if you set your prices lower (thus creating lower expectations from your customer) it gives you much greater means to manoeuvre within the scale. The value proposition model when dealing with B2B practice varies slightly, just focusing on the efficiency aspects of Cost Saving, Productivity, Risk Reduction, Reputation.
Common characteristics & strengths of successful strategies include:
ü Strong sense of vision
ü Flexible, adaptive but persistent (market is constantly changing environment, constant modifications have to be made)
ü Create capacity to deliver (i.e. ensuring we have the right resources, skill set from workers etc)
ü Manage change & maintain momentum
ü Attract allies, supporters & ‘friends’ (i.e. the press, suppliers, alliances with competitors to perhaps ‘share’ resources, increasing network base)
ü Must never test patience of your customers (can’t assume loyalty when business is not delivering expected standards)
ü Keep value proposition at forefront
ü Contain effective strategic reflection- assessing core competencies, capabilities & motivation
Personal Strategic Reflection involves asking yourself some key questions as to the direction of your business in relation to your own honest strengths and weaknesses.
What do you really want to do?
What motivates you intrinsically or extrinsically?
What causes you stress & aggravation or happiness?
What work scenarios are positive/negative for you?
What are your personal goals and vision and are they realistic?
What are your key core competencies? (What are you good at knowing?)
What are you core capabilities? (What are you good at doing?)
Then we have some broader questions to ask in relation to the business and your target market as a whole.
How do we compete as a business, now & in the future within the competitive environment?
Why do customers come to me or go to the competition?
Why do potential customers not engage with my industry?
How can we create new market space?
All these questions are designed to ensure that you examine the wider context and implications of business endeavours as well enabling to you to be critical of why or not you are not having commercial success in order to improve on weaknesses before it’s too late or gain further capitalisation on your strengths.
When assessing the competitive environment we must look at ‘Porter’s Five Forces’ centred around the idea of the ‘degree of rivalry’: Buyer Power, Supplier Power , Threat of Substitutes, and Barriers to Entry.
v Buyer Power- in a saturated market, customers have the advantage. Businesses have to deliver competitive prices, working on margins. Has the advantage in that you know there is a market for your product.
v Supplier Power- If it’s a unique product, businesses can drive down on the price of components from the supplier. However if your new in the line of business, suppliers have the power as you may not be seen as a priority so put them in the position to charge higher costs of manufacture.
v Threat of substitutes- Risk of competition producing something similar that’s perceived as better. Very prominent in the technological business, products can quickly become obsolete. People’s constant need for change means you must have ability to predict the future.
v Barriers to entry- Assessing risks of failure, complying with copyright laws, considering legality such as trade laws etc.
These differing ‘types of power’ vary in accordance with where your business situates in relation to the following categories:
Ø Original- ‘one of a kind business’- must have to consider barriers to entry (copyright laws etc) as the business potentially breaking ‘new ground’ (i.e. Dyson, Cirque du Soleil)
Ø Revolutionary- a business which starts a new trend- must consider the threats of substitutes as a product cannot stay unique forever, thus has to be constantly innovative (i.e. Apple, Google, Amazon, Ebay)
Ø Specialist Competitor/Leader- offers a specialist service but competes with others similar within the market- power most likely lies with supplier. (i.e. BMW)
Ø Broad Market Competitor/ Leader- competing within the mass everyday market- power often lies with both the customer and supplier. (i.e. Tesco, Walmart)
Ø Follower- Echoes competition, operates on tight margins thus potentially not in control- gives power over to buyers & suppliers (i.e. Sainsburys known to have fallen into this trap in previous years in relation to its rival Tesco.)
All this is what must be considered prior to even starting to devise your business model... no one said making a million would be easy!
No comments:
Post a Comment