The Delta Model

KSOM Three strategic options Understanding the strategic options Economic perspective of the strategic options The bonding continuum Adaptive processes to link strategy with execution

@Ashok K. Sar

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KSOM

Delta Model: Four Major Contributions

1. Defines strategic positions that reflect fundamentally new sources of profitability. 2. Aligns these strategic options with a firms activities and thus provides congruency between strategic direction & execution 3. Introduces adaptive processes with the capacity to continually respond to an uncertain environment 4. Granular metrics are the drivers of performance in complex industries
MBA-II, General 2

KSOM

The Delta Model Framework

@Ashok K. Sar

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KSOM

The Delta Model Three Distinct Strategic Options

Systems Lock-In
Systems economics Market dominance Achieving complementor share

Enabled through Effective use Of technology

Total Customer Solutions

Customer economics Cooperation Achieving customer share
MBA-II, General

Best Products
Product economies Rivalry Achieving product share
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KSOM

Best Product Winning Thru Cost & Features Centered on Product Economies

Low cost Nucor, SouthWest

Tends to standardize the product offering, commoditize, and intensify rivalry

Differentiation Sony Wega, Rolls-Royce

Imitation, unsustainable competitive advantage

MBA-II, General

Total Customer Solutions Winning Thru Relationships Oriented to Customer Economies

KSOM
Redefining the customer experience - Disney, McDonalds, Carrier
Full experience of the customer from point of acquisition to the complete lifecycle of ownership Intimate customer knowledge, segmentation, differentiated treatment of the customer tiers

Horizontal breadth WallMart, Amazon, Yahoo!

One stop shopping for a unique solution Dominant position share of wallet of the customer Customer integration EDS, GE, Dell Substitute for or leverage activities currently performed by customers Firm as a bundle of competencies
MBA-II, General 6

KSOM Restricted access Coca-Cola, Walmart

System Lock-in Winning thru Complementors Focus on Complementor Economies

Barriers to entry, but regulatory practices tend to be deployed to prevent it

Dominant exchange Yellow pages, Visa/ Master Card, eBay, AOL

Firm as interface between buyer & sellers, hard to displace First mover advantage being critical

Proprietary standard Microsoft, Intel, Cisco

Presence of +ve network effects & complementors Isnt available in most industries
MBA-II, General 7

Lessons
KSOM
If the heart of strategy is the customer, an appropriate customer segmentation and a creative value proposition is often the most important critical step in strategic thinking. Be creative, be bold, be fast The winning formula is to have the overall network as The your primary scope. Dont play the game alone. It is not just you serving the customer. It is you, your critical suppliers and the key complementors. In a large, diversified corporation often the most important large, complementors are in your own firm.
@Ashok K. Sar Subject: 8

KSOM Scope Scale Bonding

Characteristics of the Three Options for Strategic Positioning (Fig.2)

9/17/2011

Ashok Sar@BP - XIMB

KSOM
Dominant Design - IBM

The Bonding Continuum: Product Customer (Fig.5)

First mover advantage features, services, price

Customer Lock-In personal web-pages

on Yahoo!

Collateral assets, brands, pricing structure, customized product, customer learning

Competitive Lock-out
Shelf space, relentless innovations, brands, patents

Proprietary standard
Develop 3rd suppliers to enhance to enhance appeal; leverage market share; customer seeking product with most players
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KSOM

Role of Adaptive Processes with Strategy Fig.6

@Ashok K. Sar

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KSOM

SpryLab
Segmenting, value propositionsFig. 1-9 Scope, CompetenciesTable 1-8 Define MissionTable 9 Set strategic agendaTable 10
Goals & Objectives Table 13 & 14

@Ashok K. Sar

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Segmenting
KSOM

@Ashok K. Sar

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Figure 2: Business Dimension for Tier 1 Exclusive Partner Customer Description KSOM Dimension Products Critical partner to client providing highly integrated, customer specific, high-value added turnkey solutions for legacy mainframe applications in Japanese market. Services 24x7 Maintenance of mission critical mainframe legacy applications. Application extension through analysis, design and development of new, integrated modules. Customers Japanese Corporations in Financial Services, Insurance, etc. Channels Direct, Referrals from highly satisfied existing clients End users Japanese Corporations, Japanese Government organizations Complementors IBM (as a h/w and s/w partner), existing clients, Accenture Unique 1. Combination of deep knowledge of mainframe applications competencies and understanding of Japanese culture (not available to other companies in India). 2. Very high level of quality (early CMM level 5 and Six-Sigma company in India) combined with all the other cost advantages available to Indian companies not available anywhere else in the world.
@Ashok K. Sar Subject: 14

Figure 3: KSOM Value Proposition for Tier 1 Exclusive Partner Value Proposition Description Element Experiences Seamless extension of client team with integrated culture, skilled technologists with deep understanding of clients business Value Delivery Dedicated client focused team immersed in all aspects of client's Systems culture Network integration to seamlessly extend client environment Open communication of all relevant information on both sides Executive sponsor, CEO oversight and full corporate reach CMM and Six-Sigma delivery methodologies Value added reselling of hardware and software for one-stopshopping Value Appropriation Value gained by customer: Superior ROI, improved time-to-market, Security, Resource Stability Value gained by SpryLab: Exclusive long-term relationship, higher margins, predictable revenue Value shared by both: Shared IP, shared learning, shared risk
@Ashok K. Sar Subject: 15

KSOM
Figure 4: Business Dimension for Tier 2 Strategic/Integrated Partner Customer Description Dimension Products Long term relationship with client to provide customized and integrated solutions across multiple business units Services T&M and Fixed price application development across multi-phase projects Joint application development enabled through deep understanding of client culture and methodology Dedicated retained teams as extension of clients IT organization Customers GE US, GE India, Kawasaki, Unisys Channels Direct End users N/A Complementors Other GE partners, IBM, other software partners, Accenture Unique 1. One of 12 exclusive outsourcing vendors for GE. Six-Sigma/ CMM competencies level-5 quality combined with India's cost advantage.
@Ashok K. Sar Subject: 16

KSOM
Figure 5: Value Proposition for Tier 2 Strategic/ Integrated Partner Value Description Proposition Element Experiences Integrated teams of skilled technologists with deep understanding of clients business Value Delivery Dedicated client teams fully trained in clients methodologies and Systems processes Joint development plans Cross-training and periodic two-way knowledge transfer Business Relationship Manager, CEO oversight and full corporate reach Value Value gained by customer: Superior ROI, improved time-to-market, Appropriation Resource stability, Shared risk, continuous improvement Value gained by SpryLab: Access to client network as sales channel, credibility, learning. Value shared by both: Co-development of shared standards and processes
@Ashok K. Sar Subject: 17

KSOM

Figure 6: Business Dimension for Tier 3 Project Solution Seeker Customer Description Dimension Products Individual product solutions without committed long-term relationship. Services T&M and Fixed price application development for discrete projects Customers Toyota, Honda, Department of Transport India, US prospects Channels Direct Consulting partners such as IBM and Strategic partners such as GE End users N/A Complementors IBM, GE, other software partners, Accenture Unique competencies Six-Sigma/CMM level-5 quality combined with India's cost advantage
@Ashok K. Sar Subject: 18

KSOM
Figure 7: Value Proposition for Tier 3 Project Solution Seeker Value Proposition Description Element Experiences End to end delivery of a project with high quality and competitive price Value Delivery Structured processes and teams with high quality of performance Systems Ability to quickly ramp-up on clients business and culture Process for seamless transition at end of project Dedicated project team manager with executive oversight Value Appropriation Value gained by customer: Experimentation, learning, flexibility, reduced time-to-market, high quality, ROI Value gained by SpryLab: Opportunity for long-term relationship, ROI, learning Value shared by both: Shared learning in business domain and new technology
@Ashok K. Sar Subject: 19

KSOM
Figure 8: Business Dimension for Tier 4 Body Shopper Customer Description Dimension Products Individual resources to supplement existing project teams and fill skill gaps (transactional) Services T&M and retained resources for fixed time durations. Provide specific technology development skills on projects. Customers IBM Japan, NEC Channels Consulting partners such as IBM, Direct End users Corporations Complementors N/A Unique competencies Consulting partnerships technology skill differentiation
@Ashok K. Sar Subject: 20

KSOM

Figure 9: Value Proposition for Tier 4 Body Shopper Value Proposition Description Element Experiences Supplement team with individual resources and fill gaps with skill expertise Value Delivery Strong bench that can be tapped on demand. Mix of skills and Systems expertise Value Appropriation Value gained by customer: Resources on demand and skills on demand Value gained by the Co.: Opportunity to up-sell, learning, improved bonding Value shared by both: Exchange of skills

@Ashok K. Sar

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Define MissionTable 9
KSOM

@Ashok K. Sar

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Set strategic agendaTable 10

KSOM

@Ashok K. Sar

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KSOM

Performance Metrics for the Business Drivers of the Delta Model: Figure 14

@Ashok K. Sar

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KSOM

DELL
Enabled through Effective use Of technology

Lowest cost Direct sales (no intermediaries) PC manufactured to order Matching production schedule with sales (no buffers) Cell manufacturing Fastest order entry to shipping process JIT delivery from suppliers Direct shipments of supplies to customers Co-location with Dell and suppliers Reduced number of supplier

Differentiation PCs tailored to customer needs Two lines of desktop and notebook computers (stable vs. latest technology)
MBA-II, General 25

DELL
KSOM
Customer engagement
Direct orders from customer Clear distinction between Relationship and Transactional Buyers Targeting large corporations and governments (> $1M purchase/year) Outside representatives for customized services Inside representatives and call center

Enabled through Effective use Of technology

Customer integration Dedicated team to provide customized solutions After sales service and technical support
MBA-II, General 26

DELL
KSOM Exchange Dominant
Customers entire purchasing history online 1-800-BUY-DELL for transaction buyers www.dell.comfor transactional buyers Premier page for relationship buyers Real time electronic links with suppliers

Horizontal breadth Desktops, laptops, notebooks, servers, workstations Off-the-shelf and proprietary software Installation and testing of computers and networks on customer sites Dell Financial Services (leasing, technology planning, asset management)
MBA-II, General

Enabled through Effective use Of technology

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KSOM Dominant Exchange

Lowest cost

Horizontal breadth

Enabled through Effective use Of technology

Differentiation Customer integration

DELL

Customer engagement

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