Great products, hard work and lots of passion is not enough in business – you need the right strategy.
Developing effective strategy requires directors and senior managers exploring their value statements and learning how use tools like the Organizational Value Quadrant (OVQ).
A simple four quadrant, the OVQ tool can help to define distinct operating models that relate a company’s positioning relative to the markets served by the business. Knowing which quadrant your business operates in and understanding how to navigate within the OVQ form can be the foundation of an effective strategic plan. So, what are the four organisational value quadrants, and what do they mean to a business in terms of strategy and investment?
Developing and Understanding a Client’s Value Proposition?
Defining your value proposition is a key part of formulating any growth strategy. A value proposition can be perceived as a powerful business or marketing statement that summarises why a customer should buy a product or service from your client rather than a competitor. This statement should help you to connect with a potential target market in a way that differentiates your product or service and describes how it will add more value or solve a problem better than other similar offerings. The elements of a strong value proposition include: connection, differentiation and substantiation.
The purest three elements of a value proposition are:
Connection: What is it that makes the product or service innovative and inspirational? The connection must compel the customer to want the product and say, “I need this.”
Differentiation: What is it that makes the product or service indispensable? The differentiation should help eliminate the thought of substitutes in the mind of the buyer.
Substantiation: What facts can you state about the product or service to help create credibility and trust? The substantiation should help the potential buyer to believe in the product or service and take action.
Organisational Value Quadrants
All growing companies and especially high growth businesses need to operate a business model designed to create value for customers and that is in alignment with their stated value propositions for each product and service. The value proposition should help to communicate the marketing and sales message, whilst the business model should deliver the value promised.
One way of helping clients to develop these ideas in practice is to engage them in a strategic level discussion tool such as the organisational value quadrant. Developed by Method Frameworks (www.methodframeworks.com) the four Organizational Value Quadrants are:
In their model, each quadrant represents the focus of a company or business unit and can be thought of as the strategy and business model adopted by the company. Below is a synopsis of each quadrant:
Quadrant 1: Companies operating in the ‘Customer Intimacy and Synergy’ quadrant (e.g. companies such as Marriott and Nordstrom) most likely fall into the Inclusion or Authenticity cultural model.
Quadrant 2: Companies operating in the ‘Operational and Organizational Excellence’ quadrant (e.g. companies such as Walmart and FedEx) most likely fall into the Achievement cultural model.
Quadrant 3: Companies operating in the ‘Customer Enrichment and Fulfilment’ quadrant (e.g. companies such as Whole Foods) most likely fall into the Authenticity cultural model.
Quadrant 4: Companies operating in the ‘Product / Service Superiority and Innovation’ quadrant (e.g. companies such as Apple and Lenovo) most likely fall into the Achievement cultural model.
Parallel Service Models and Culture
Typically, most companies standardise on one quadrant, but a business does not have to be entirely committed to an exclusive relationship with only one category and can use strategy to navigate and position themselves in different quadrants of the OVQ.
With more than one service model in the business, culture and structure may have to vary across segments in order to match the nuances important to success within specific quadrants. Recognising this can help you to develop and implement more effective strategies by modifying your implementation plans to work in concert with the realities of the operations.
Using the OVQ Tool
Understanding how an organisation’s culture and business service models align is the foundation businesses need to develop effective strategies. Understanding the components of culture, the most common cultural signatures and the alignments of those with organisation structure and value quadrants can help the strategic planning process. Businesses that excel in this area see results through improved strategy and executable plans.
For example, sales organisations have developed systems and processes for analysing and segmenting their customers to distinctive target groups. Many high growth businesses conduct detailed profit analysis exercises and develop the equivalent of ‘heat maps’ for profitability. They typically, analyse sales and profit data and develop a detailed understanding of which customers are providing them with high sustained profitability. With this combined insight, customer segmentation can then be applied to strategically approach these profit areas with segment sub-strategies. Segmentation strategy can then be applied to the decision-making process in relation to determining where to invest resources to secure and grow key customer relationships through integration of the company’s operations with those of the key customer’s in a tailored and effective approach. When this approach is followed, the investments can result in lowering key customer’s cost while increasing the profits of the supplier business.
Another example relates to customer integration within a value quadrant and can be accomplished by tuning customer inventories, smoothing order patterns and even deploying substitute products in carefully selected situations. The key is to partner with key customers and shift the focus of supply chain efficiency initiatives from optimisation solely within the organisation’s supply chain to an optimisation of the joint vendor-customer supply chain domain. This shift creates enormous new efficiencies for both organisations and helps increase the cost of switching vendors for the customer in the future.
This example illustrates how a business can straddle both the operational excellence and the customer intimacy quadrants. Using tools like the OVQ can help companies to review and develop their value proposition and to differentiate their offering to better serve specific customer segments.
Tools such as the OVQ can help you to develop and implement strategies to meet the needs of the different markets in which they operate rather than relying on a single approach across each of its markets. As a minimum this tool provides a framework for helping managers and directors to determine the optimal strategic focus of their business and the alignment of resources and management focus to deliver maximum customer value.