Managing Value

internally and externally

Firm Success

Firm success is based on the volume of transactions which the firm can gain with counterparties - parties for short - on markets.

These transactions are the source of inputs from which the firm can grow and be profitable.

Parties choose to transact with firms on the basis of their primary and secondary value offers, where firms exhibit competitive advantages.

Thus the primary and secondary value dimensions are decisive for the success of the firm.

The vast bulk of the business world and the counterparties today still operate in terms of the conventional four dimensions of value.

In conventional business a firm's level of success, very broadly speaking, is determined by the number of value dimensions in which it makes strong offers. Firms offering primary value in the new dimension, Deep-Connect, are difficult to evaluate because they are not yet fully established. However, they appear to be strong in all five dimensions and thus represent startling potential for success. These competitive conditions are illustrated below with examples from the auto industry.

On the whole, however, there are a variety of ways in which firms can raise their level of success. Firms can choose between three interrelated paths:

  1. Align inputs and offers more efficiently and effectively: Align the value inputs and offers for each type of counterparty more rigorously to gain greater efficiency and effectiveness in the value exchange;
  2. Address counterparties in a targeted manner: Gain more counterparties by either addressing the value offer to the dimension(s) in which the weightiest preferences of the counterparties exist and / or addressing a greater depth of counterparties; or
  3. Add a strong dimension most suitable to firm and industry: Gain counterpartes with a wider range of preferences by adding / developing an additional strong value dimension which internally can be most readily leveraged from existing strengths and externally is least challenged by rivals

The paths above are ordered by the severity of the challenge and the level of complexity involved:

  1. Aligning value inputs and offers is similar to an organizational optimization initiative, a fairly straightforward management task which has been accomplished in the history of many firms;
  2. Addressing the value offers to targeted dimensions and / or greater depth of targeted parties is akin to changing the business model of the firm, a more complex challenge which however is increasingly tackled today; and
  3. Adding / developing an additional strong value dimension can be likened to a transformational change creating a new corporate culture, as well as new processes and structures, a much greater challenge which few firms have mastered.

In choosing which path or paths to take, an analysis of......

  • External conditions in the industry: In which dimensions are the rivals strong? What are the weightiest preferences of counterparties?
  • Internal capabilities of the firm: Are the inputs and offers well aligned? Can a wider range of counterparties be fruitfully addressed? How readily can an additional strong dimension be added?

.... will help assess the potential impact of each path.

On the basis of this analysis, priorities can be set more clearly and the scope of change initiatives defined more precisely.