The structure of market-dominant organizations are based on a clear set of competences and is continually reinforced in a tactical way by the leadership team. Our research has found commonalities in corporate structures that set the guiding tone for sustainable long-term growth.
In this article, we examine the key imperatives growth leaders must consider in establishing a strategic framework that serves as a well-oiled machine.
Operating Model Segmentation for Executional Excellence
In this context, a clear and consistent differentiation is a prerequisite for success. The segmentation of the operating model is based on an established understanding of customer and market needs and of the company’s core competitive advantage. It is this understanding that distinguishes “the dominant” from “the laggards” in a marketplace.
In our recent survey of growth leader expectations, almost 40-percent of those whom were “somewhat” or “not” confident about their brand positioning are willing to passively-negate capital investment decisions in future expansion. Hence, profiling segments of the business enables management to better align towards strategic capabilities where growth opportunities exist.
End-of-Lifecycle (Expected) Customer Value
Defining a framework must critically include the total addressable impact (qualitative and quantitative value) on the customer’s relationship.
Companies need to know the answer to the question:
“Will my customers be willing to pay for this product or service, and what is the expected benefit worth to them?”
If there’s no clear answer to value creation for end customers, either inefficiencies exist in the operating model (such as the cost of manufacturing exceeding the total usefulness) or the product itself needs to be redesigned.
The product or service should be designed to meet the customer’s needs and to identify opportunities to add value to a customer’s relationship.
Companies must understand the customer’s actual experience and not just its perception. They must identify the cost to serve and the revenue to charge, resulting in the total profit to be gained and the cost to be shared across the value chain.
Pulling this figure back, it’s important to quantify the net present value (NPV) of the business from the investment allocators point of view.
Frameworks for Sustainable and Defensible Growth
The perspective required for sustainable growth is defined by managing expectations for defensibility. Therein growth is defined by profitability and speed to delivering customer value above all competitors. Note that we’ve taken an end-of-lifecycle perspective opposed to traditional “speed to market (entry)“.
Segmentation is not a matter of separate businesses, but of a whole new business built around a customer-centric model.
However, we’ve identified that companies which isolate their operations into separate entities often do so at peril. Particularly, the risk of developing a single-product-customer model through transfer pricing optimization; which ignores the core purpose of operating model segmentation and the focus on overall impact
The following case explores concepts from Amazon’s global expansion, in relation to the applied insights on customer-value and scalable growth frameworks.
CASE: Amazon’s Repeatable Models for Scalability
Take the case of Amazon.com, an internet company that was pursuing global expansion in the early-2010’s. The core of the business was e-commerce, and the expansion would require new capabilities in sales, distribution, and pricing. Amazon knew it needed to build those capabilities abroad, but it also focused on scale level operational design.
Amazon chose to invest heavily in repeatable business models—with the team and the front line working hand in hand—that would serve as the basis for the shortest endpoint to customer value creation. The repeatable model would involve leveraging the company’s brand and technology architecture (Amazon.in for India is a retargeted version of the underlying platform of Amazon.com), as well as its knowledge of scaling distribution capability.
Differentiated value (such as Prime shipping and unmatched product selection) would be the only way to attract customers and keep them engaged with the company over the long term.
Highly scalable and repeatable models evolve around four well-defined but critically important elements.
1: Value proposition and branding
The first key element of the model is the “why”: a clear and compelling reason that pans out on a customer-satisfaction and advocacy-metrics (net-PS) basis, backed by brand equity resilience.
The second, equally important, aspect was to align teams on the “how.” The model may involve creating customer orchestration scenarios, with a clear understanding of the sales objections, tactics, and onboarding plan.
The third facet is to embed the right recurring themes throughout the organization. For example, to reinforce the experience of customer-first solutions, and delivering targeted stories and messages to enable the right operating teams.
2: Enablement activity and processes
Companies must establish clear frameworks to enable executional excellence of the new strategy. These processes should include guidelines for escalating issues to the appropriate level or for making decisions around operating funding, reorientation of activities, and defining target outcomes.
A prominent example of this is how employees might raise the level of marketing or sales activity when faced with a sudden customer disruption, as exhibited in the 2020-economic contraction.
3: Skills and capabilities
Growth leaders need to create frameworks that reinforce corporate training and incentive plans to develop intrinsic capabilities.
This extends through to the front line with a clear mandate to manage continuous change, in people. Doing so effectively means leveraging knowledge sharing solutions and online learning delivery platforms for to succeed in the new competitive environment.
4: Technology infrastructure and organization
CIOs must also have a joint initiative with business groups to put in place a clear technology architecture and a well-designed PMO (project management office) that can meet the business’s demands for speed, flexibility, and the availability of relevant customer data.
However, technology needs to be paired with processes to ensure a consistent flow of the data to the right endpoint that optimizes the time to delivering customer value.
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