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CENTRO DE INNOVACIÓN
1
TECNOLÓGICO DE MONTERREY
www.gda.itesm.mx/innovar
CERTIFICADO EN INNOVACIÓN
G2 - ENERO-MAYO 2009

INNOVACIÓN DE MODELOS DE NEGOCIO

SESSION 02
The Delta Model – Setting the strategic Direction for achieving competitive advantage

FACULTY TEAM
Ing. Jorge Valdez Simancas
Ing. Angel Tonatiuh Flores (atflores@itesm.mx)

Daniel Pandza, M.A. pandza@itesm.mx

Centro de Innovación Tel 01-(33) 3669 3000 ext. 2266
Basic Assumptions:

Strategy is About:
1. Searching for New Sources of
Competitive Advantage,
2. Being Unique,
3. Creating Wealth:
Reduce Risk, Investment and Time,
4. Inventing New Rules and New Games

Strategy is About Discovery of Wealth

Source: C.K. Prahalad

Competitive Advantage over Time
Competitive Advantage Gap
– Distance from closest competitors
–New, better features
GAP –Lower prices
–Superior customer service

Moore (2002) Living on the Fault Line. Harper Business Press

Returns

CAP
Time
Competitive Advantage Period
– Barriers to entry
–Market share dominance
–Blocking patent
–Switching costs
–Brand loyalty
GAP/CAP matrix
Where are Your Offers on this Grid?

high
Differentiation

GAP

low
low CAP high
Sustainability
Competitive Advantage, Resource Based View,
Delta Model

Source: www.valuebasedmanagement.com
 DELTA MODEL
The model on the right
represents the Hax´s point
of view regarding the
development and
implementation of the
corporate strategy.
1. Strategic positioning
2. Define Mission
3. Competitive positioning &
assessment of the
industry structure
4. Select strategic agenda
(i.e. value discipline)
5. Repeat iterations as the
competitive environment
changes
A Dynamic View of Strategy
Markides (1999)
reinforces the
importance of
viewing the stra-
tegic manage-
ment agenda as
a dynamic pro-
cess that is di-
rected for con-
tinously explo-
ring New Emer-
ging competitive
Positions!

Markides (1999). A Dynamic View of Strategy. IEEE Engineering Management Review. Winter 1999.
URL: http://ieeexplore.ieee.org/iel5/46/17508/00808247.pdf?arnumber=808247
The Delta Model | Three Distinct Strategic Options
Option 1: Best Product

Best Product
Product Economics
Value chain of the product
Intrinsic value (Standard)
Faceless customers
Mass distribution channels
- First to market
- Dominant Design Rivalry
The Delta Model | Three Distinct Strategic Options
Option 1: Best Product
Costos bajos:
• Southwest
• Nucor

MEJOR PRODUCTO
Competencia basada en
economía del producto

Diferenciación:
• Sony Wega
• Rolls Royce
The Supplier-Customer Relationship:
Traditional and New Economy Structures
 ESTRATEGIAS NATURALES Y DE MIGRACION

Altamente

Interactividad y eficiencia de costo

diferenciado III IV
Mercadotecnia Mercadotecnia
de frecuencia 1a1
(Cuentas Claves)

Valuación de
los clientes I II
Mercadotecnia Mercados meta
masiva nichos

Expander el set de necesidades

Uniforme

Uniforme Altamente
diferenciado
Necesidades del cliente
 MAPA ESTRATEGICO

Necesidades de los consumidores

Altamente
III IV Usuario Final
Consumidores
Diferenciado

Flexibilidad Valoracion de los

en las consumidores
comunicaciones I II

H-P Competencias

Uniforme

Flexibilidad de Produccion, Logistica y servicios

Implicit Assumptions

1. Value is Created by the Firm

2. Value is Exchanged between the Firm and a Customer

3. Value is embedded in Products and Services

4. Innovation is about technologies/products/processes

5. Customers have a choice- to buy or not to buy;

Managers’ job is to persuade them to buy
Customer Heterogeneity

1. All Customers are not alike in their:

• Levels of Sophistication
• How they want to dialogue
• Tolerance for problems
• View of switching costs
• Propensity for Personalization
• Role as Individuals in a Social Network

2. Personal Experiences (Value) around identical

physical products can vary significantly.
• Consumers specify the price (auctions)
Typical Response:

Good News & Bad News

Product Variety means:
Richness of Features But not necessarily
and Functions Experience Variety

Technologies used for We have to Think of

creating Product Variety Technologies as
can be used to Create Experience Enablers
Experience Variety.
Eventos de compra independientes

Necesidades
satisfechas

Clientes
contactados
The Delta Model | Three Distinct Strategic Options
Option 2: Total Customer Solutions

Total Customer Solutions

- Customer Economics
- Strong customer bonding (relationship)
- Solving a wide range of customer needs
- Alternative, non traditional and direct channels.
- Share of wallet.
- Cutting finer
- Improve Customer Cost position, incomes and profits.
Eventos de compra condicionales

Necesidades
satisfechas

Clientes
contactados
Soluciones completas para los clientes
Hay tres maneras de lograr la solución total al cliente:
 Redefinir la experiencia con el cliente.
Alterar la relación con los clientes desde el punto de adquisición hasta el final
de la vida del producto o servicio.
 Saturn
 Disney
 Amplitud horizontal.
Proveer un conjunto completo de productos y servicios acerca de las
necesidades del cliente.
 Amazon
 Wal Mart.
 Home Depot
 Integración en el cliente. Esto es una forma de outsourcing facilitando
actividades que antes las hacia el cliente.
 Dell
 Transferir trabajo del cliente a la empresa o de la empresa al cliente.
Aquí se transfiere trabajo al cliente a cambio de una reducción de costos.
 Autoservicio en las gasolineras
Knowledge Capital Dynamics

Working with the customer to jointly

craft business opportunities that
Partnering would not have been possible without
a deep mutual understanding / trust
Shaping/ configuring an array of
Business benefits and features services to
Solutions provide the value creating
functionality required by a customer
Product Selecting/ proposing an “augmented”
Solutions product/ service in response to an
expressed customer need

Transactions One time sale of a product/ service

The Delta Model | Three Distinct Strategic Options
Option 3: Dominant System
Sistema dominante
• La opción estratégica de “Sistema dominante” tiene el mayor Valor
agregado posible.
• En vez de enfocarse estrechamente en el producto o en el cliente,
la compañía considera a todos los jugadores principales en el
sistema que contribuyen a la creación de valor económico.
• Hay tres condiciones necesarias para crear un sistema dominante:
– Efecto network.
– Feedback positivo
– Efecto de aprendizaje
• La compañía está particularmente preocupada en el desarrollo,
atracción y conservación de los llamados “complementos”.
• Un complemento no es un competidor sino un proveedor de
productos y servicios que mejora directa o indirectamente nuestra
oferta.
 Sistema dominante
Hay tres formas de lograr un sistema dominante:
1. Estándar propietario. Tiene un network extenso de complementadores
dedicados a trabajar para nuestros productos.

2. Intermediación dominante. Una empresa posicionada como

intercambio dominante provee una interface entre compradores y
vendedores, o entre las partes que desean intercambiar informaciónón o
bienes. Cuando este tipo de negocios logran una masa critica es muy
difícil desplazarlos.

3. Acceso restringido. Los competidores son bloqueados de llegar a

los clientes porque el canal tiene capacidad limitada para manejar
múltiples proveedores.
The Delta Model | Three Distinct Strategic Options
SUMMARY
Competencia basada en
SISTEMA economía del sistema:
DOMINANTE • “Complementor look in” .
• “Competitor look out”,
• Estándar de Tecnología
propietario.

SOLUCIONES TOTALES
PARA LOS CLIENTES
Competencia basada en MEJOR
economía del cliente: PRODUCTO
Reducción de costos de servir Competencia basada en
a clientes o incremento de economía del producto.:
ventas / utilidades. Costos bajos o
diferenciación.
 The Delta Model
Options for Strategic Positioning
Dominant Exchange

System Lock-In
Exclusive Channels Proprietary Standard

Horizontal Breadth
Low Cost

Total Customer Best Product

Solutions

Redefining the Customer Diferentiation

Customer Relationship Integration
Expanding Your Mindset:
Summary for Strategic Decision Making 1|2
STRATEGIC FOCUS RELEVANT BENCHMARKING

Network Complementors

Extended Product Customers Competitors

Enterprise

VALUE PROPOSITION INNOVATION

Open Architecture -
Product & Service Portfolio
Complementors as Key
Extended by
Complementors

Customized Standardized Joint with Internal

product bundle Products Customers Product
Development
Expanding Your Mindset:
Summary for Strategic Decision Making 2|2
SUPPLY CHAIN CHANNELS

System - Extended & Massive | Direct

Complementors

Extended Suppliers, Targeted Generic

the Firm, The Customers Internal Direct Mass

THE ROLE OF IT DEGREE OF CUSTOMER BONDING

Total Network Support Highest! Competitor Lock-Out

Customer & Potentially Very Small

Supplier Support Internal high customer Depending on
Support Product
lock-in Characteristics
 Valor agregado

Incremento de valor agregado

Diseño Asegurar al Bloquear a la Estándar

Dominante cliente competencia propietario

Complementos

Retroalimentación
Distribuidores/
Proveedores

positiva
Producto
Producto Producto Look in Producto

Clientes Clientes Clientes Clientes

 Ventaja de ser el primero:  Aprendizaje del cliente.
 Atributos.  Producto Customizado
 Servicio.  Activos Colaterales.
 Precio.  Marcas
 Estructura de precios.
 Distribución del espacio en  Desarrollo de redes de complementos de 3as
el anaquel. partes para incrementar el atractivo del
producto.
 Marcas.  Posición de apalancamiento como líder en
 Innovaciones implacables. participación de mercado en la atracción de
complementos.
 Patentes.
 Los clientes buscan los productos que tenga
el mayor numero de complementos.
 Algunas veces los clientes pueden ser el
complemento, como en el caso de
intercambios.
 Complementos

Producto

Clientes

Competencia basada en economía del sistema:

Aseguramiento de complementos, bloqueo de la
competencia, estándar propietario.

SISTEMA DOMINANTE
Intercambio Dominante Estándar Propietario

Acceso Restringido

Integración en los clientes

Costos bajos
Amplitud Horizontal
Redefinición de la Diferenciación
SOLUCIONES TOTALES PARA experiencia del
EL CLIENTE MEJOR PRODUCTO
cliente

Competencia basada en economía Competencia basada en economía

del cliente: del producto:
Producto Costos bajos o Producto
Reducir costos de clientes o
incrementar su rentabilidad diferenciación
Clientes Clientes
 THE CHALLENGES TO
TRANSFORM THE
ORGANIZATION FROM BEST
PRODUCT TO TOTAL
CUSTOMER SOLUTIONS
1. Fight the product-centric mindset
 The Best Product Positioning is not necessarily
the most profitable or best way to serve your
customer.
2. The transformation is not straightforward
 The alternative to a Best Product positioning are not
always easy to define or to accept .
(The case of Codelco and the International Copper Assoc.)
3. You have to redefine the game you are playing.
 It is not that your products are unimportant; it is not that
you should ignore the efficiency of product delivery - it is
simply that often this is not enough.
(The case of CSN.)

Transforming the focus of the CSN Organization

From Support Units To Strategic Marketing Units

• Steel (e.g. processor, • Automotive
rerollers, etc.) • Civil construction
• Export • House appliances
• Mining • Packaging
• Energy
• Ports
4. The Challenge: “Commodities only exist
in the minds of the inept.”
 Product differentiation, as technology gets more
mature, is very hard to achieve. If your product
becomes a commodity, you are deprived from
superior financial performance, from serving your
customer splendidly, and from having fun. (You
violate the three tenets.)
 Do not sell products; sell customer solutions:
customization, learning, and services bundled with
products as a unique customer offering. (The Case
of National Starch).
 Use all the corporate capabilities supported by key
complementors. This is a corporate strategy. (The
case of Siemens USA.)
 Competitive Driving Forces
Product Differentiation

Product Premium
Technology Products

Specialty Products

Specification Products

Source: Castrol
Competitive Driving Forces
Product Differentiation

“The technology is mature …

less opportunity to differentiate”

Before Future

Source: Castrol
Competitive Driving Forces
Service Differentiation

Significantly
Services

Differentiated

Occasionally
Differentiated

Responsive

Minimum Required to Maintain

Businesses

Source: Castrol
Competitive Driving Forces
Service Differentiation

“Customers are demanding

more than just products”

Before Future

Source: Castrol
5. De-commoditize your customer.
1. Start with segmentation:
 segment your markets,
 your customers,
 your customers’ customers, and
 customers’ attitudes (productivity, cost, and price
consciousness). (The case of Castrol.)

2. Do not treat every customer equally.

 You could not and should not provide everyone the
same degree of attention.

3. Select your customers.

4. Do not let your customers select you.

Market Segmentation: BEFORE

Glass Cement

Sugar
Mining
Pulp &
Paper
Wood Textile

Food &
Beverage

Source: Castrol
Market Segmentation: AFTER

These customers are

conscious of total costs
and new production
Productivity yields higher sales
Conscious
Customers

Source: Castrol
Market Segmentation: AFTER

Cost
Conscious
Customers

These customers are conscious of total costs but

new production does not necessarily yield higher
sales or economies of scale

Source: Castrol
 Market Segmentation: AFTER

These customers
are not necessarily
conscious of total Price
costs and generally conscious
customers
buy on price/unit

Source: Castrol
6. Rethink the customer engagement process.

 You are not selling products by the ton, or by the

gallon, or by the drum.

 You are selling documented improvements in your

customer costs and productivity.

 Use an executive team as part of the customer

management process.

 “Sales are too important to be left to the sales force.”

(The case of Castrol.)

 What is Castrol Logic?

A customized lubrication solution involving

products and services that results in documented:

Cost Reductions & Productivity Improvements

Customer Experience
How do we deliver cost savings?

Client Engagement
Process
Initial Information
Exchange
Continuous
Improvement

Documentation
Management
Survey

Implementation Proposal

Source: Castrol
7. Prevent the customer from commoditizing you.

 Your customers might feel they benefit from

standardizing the product offering of their suppliers,
and move the bargaining power in their favor.

 The problem is “You get what you pay for.”

(The case of Eastman Chemicals Coating Business.)
Case: The Paint and Coating Industry
Paint and Coating
Manufacturers

Tier 1- Preferred strategic

solution seekers
Tier 2- Large price
seekers
Tier 3- Least attractive
Eastman Chemicals End Users
price seekers
Tier 4- Local
• Solvents • Architectural
manufacturers
• Resins • Automotive
Tier 5- Specific targeted
• Additives companies • Industrial maintenance
• Colorants • Building products

Distributors • Appliances
• Metal office furniture
Tier 1- Full alignment with EC
Tier2- Large power bargainers
Tier 3- Fragmented local
agents
Tier 4- Specialty distributors
8. Channels are essential, they “own” the customers.

 Ownership or control of the channels is

critical to the pursuit of a Total
Customer Solutions strategy.

 Generic channels are only effective for

the “average customer. They are
unsatisfactory for the very poor and the
very rich. (The case of Hindustan
Lever and Unilever de México.)

 If you cannot own the channels, use a

“pull” strategy. (The case of Unilever
Bestfoods Food Service.)
The Food Service Industry

push
Unilever Bestfoods
Food Service Distributors Operators Final Consumer

pull
• Corporate broad line Tier 1- 100 chains
(e.g. Sysco)
Tier 2/3- 1500 chains
• Specialized
Tier 4/5- Thousands of
distributors
independents
• Other
national,regional and
local distributors
9. Use technology wisely: This is a very hard task.

 Joint development with our customers is an effective

mechanism to get customer lock-in.
 Product technology is not enough, add service technical
support.
 Effective IT infrastructure is imperative: e-Business
allows the implementation of the integrated value chain,
e-Commerce allows access to massive fragmented
customers.
 Technology-based system lock-in is very hard to achieve,
if you can do it is a dream. (The case of Advanced Micro
Devices.)
10. Beware of the organizational structure implications

 You have to change dramatically

the way you manage, assign
responsibilities, reward people,
monitor the business progress,
and most important, the way you
“sell”. (The case of Motorola
Semi-Conductors.)
 THE DELTA PROJECT:
DISCOVERING NEW SOURCES OF
PROFITABILITY IN A NETWORKED ECONOMY

Arnoldo C. Hax and Dean Wilde

Palgrave, 2001

http://www.palgrave.com
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