Started in Seattle, the slow developing but budding six-chain coffee shop, Starbucks had potential. In 1987 the original owners sold the stores to a former store manager Howard Schultz. His vision was to expand as a gourmet coffee that would take people to Italy through their tastebuds. Also, he focused heavily on expansion. Within two years they had 46 locations. By the time the company went public in 1992 they had over 140 stores.
The focus strategy applies a laser like concentration on a specific customer type or product line. Starbucks targeted high end coffee drinkers that wouldn’t mind spending five dollars on a consistent cup of gourmet coffee. Their aim wasn’t to be the best cup of coffee but a repeatable high-end cup. Their focus on the customer segment showed that segment was not only in Seattle but in every American city and most countries. Zeroing their focus on this customer segment enabled them to replicate across the globe.
Starbuck’s second unique advantage was its ability to vertically integrate. This is the combination of technologically distinct production, distribution, and selling within the confines of one firm. Essentially, Starbucks roasts, brands, and serves its own coffee reducing its dependency on suppliers or vendors. In the early years of Tesla, they were experiencing component bottlenecks which in turn slowed and later stalled production. These early years represented a key time where they needed to put vehicles on the road in mass numbers to get a foothold in the market. Component backlogs from vendors were in essence leading their business to failure. Their only viable response was to remove the bottleneck and produce the component themselves.
A mission statement is business jargon of how your organization provides value. Your reason for existence. For example, TED who puts on 15 minutes talks on the internet, their mission statement is simply, “to spread ideas.” These statements are typically simple statements because if you have trouble verbalizing the value you provide there is a good chance that you won’t have any customers because they will not have a reason to give you money and you won’t be in business long. The value of a company mission statement is creating something that is perceived industry wide as being unique.
I’ve worked many jobs in my early life where I would hear comical lines of “what do we do here.” Most people in an organization understand before taking the job on how the company provides a service or product for the world. If not everyone in the organization can explain what value the organization provides outside of their specific role, you’ve done a poor job on boarding them to your workforce.
There is a secondary aspect to the importance of crafting a clear mission. That is keeping you from trying to do to much as a company. Missions adhered to help keep things clean, focused, and effective. Crumbs Bake Shop was a small mom and pop bakery that made gourmet cupcakes. They had established a brand name for their amazing cupcakes and expanded to 79 locations. However, cupcakes is not a high traffic business with repeat business and therefore they expanded their services. They started to offer gourmet coffee, then sandwiches, then at home baking kits. All striving to bring in repeat business, however this led them to no longer being special to their target segment and then their eventual collapse in 2016. Good mission statements that are lived by within the company help you stick to your core competencies.
Value propositions are a simple two lines that capture what you do and why you’re different. I am offering a (product or service) for (what type of customers) that (problem it solves) better than (current state or competition’s solution). The value proposition is concise and to the point so that everyone in the organization should know and be able to repeat to everyone who asks them what they do.
I am a writer, yet I also operate a small consulting business. My firm, 9m Consulting, focuses on facilitating innovation, strategy development, and change management. This also provides a keen opportunity to show how I applied my strategy to my own business.
During the Covid-19 outbreak and subsequent global quarantines, my business tanked. While companies weren’t mentally in a space to talk innovation or strategy, they were primed for change management. That was the pivot I chose to double down on to help companies navigate transformation with the hopes that it could eventually lead to additional innovation and strategy work. The first step was to change my value proposition:
9m Consulting offers change management services for organizations navigating transformations. Unlike self-managed or other consulting firms, we provide a highly engaging process that applies gentle nudges to increases the odds of change adoption and effectiveness.
The value proposition is a business basic and is probably elementary for you at your stage of maturity. However, it also serves as a strong reminder of what you can contribute and if there still is a market. Customers pay for your business; they must know your value. Others may provide those same services and products, but what is the difference that you offer.
The game of business is creating or acquiring customers. This leads to making revenue and competing for share of the available market. Winning the game means providing a better customer value equation. The two main ways to provide better customer value is applying cost savings or differentiating your product from your competitors.
Strategist Richard Rumelt believes that competitive advantage lies rooted in differences. Why to people go to Walmart over Target, typically it is for the lower prices. Why do people go to Target instead of Walmart, because they prefer the higher end experience that Target offers. The difference is the reason why people buy from you instead of others.
This differentiation is your advantage. You want to maximize your unique nature instead of trying to be a one size fits all. There you can use your relative advantage to impose out of proportion costs on the opposition and complicate their problems of competing with you. The value proposition helps you be a specific business and not a 7-11 one-stop-shop.
Strategy work is figuring out what is going on, not just deciding what to do, you must comprehend the situation. This situational understanding lets you understand how to best serve your customer. It is the insight that shows you how to be relevant.
The marketplace is a complex organism with numerous dynamics at play, To make good choices you need to make sense of the complexities of your environment. Winning and even survival is dependent on maximizing your limited resources with you saving time and effort for only the most important efforts.
The strategic framework works both ways in not only knowing yourself but knowing your competition as well. The diagnosis stage helps to understand the current state and market conditions while also providing insight as to how your competitors manage. This knowledge advantage enables agility to react quicker to inevitable shifts in the market.
William Tecumseh Sherman, a fellow Ohioan, served as Ulysses S. Grant’s right-hand General during the Civil War. Sherman would go on to lead the troops on the western half of the Civil War effort following Grant’s assignment to the East. Both Generals shared a common belief that the Civil War would only end after application of total war.
Total war is warfare that opens combat beyond the enemy in the field to all civilian resources and infrastructure. The goal is simply to demolish the competition and limit their ability to continue to fight. Sherman understood succinctly that the South had limited resources in comparison to the North and by applying a war of attrition or cost leadership, that he would be able to bleed the Confederacy out.
Michael Porter defines cost leadership as using superior resources or “brute force” to overwhelm an opponent. With Grant attacking from the North and Sherman from the South, the Confederacy was crippled in attempting to fight two fronts with dwindling resources. They mastered the ability to focus their resources to suffocate their competition.
Cost leadership is not that tricky, nor are many people able to apply it. You must come from a position of strength with ample resources. By positioning your products at a lower cost, you must already have a high position of market share. During the Civil War, cost leadership came in the form of troops, bullets, and food. The North held significantly more resources than the South, does your business have a similar advantage? If not, you will need to focus on a different strategy.
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