Delta Model Strategy: New Strategic Inside to Define Our Company Direction and Improve Our Performance

 

Javier González Montané

I remember to trying sharing with a CEO and an academic person the advantages of using the Delta Model Strategy (Hax, Arnoldo C. and Wilde II, Deal L. “The Delta Model – a New Framework of Strategy.” Journal of Strategic Management Education, 2003) but it was very disappointed that those well-prepared people were not able to realize the contributions of this model to the strategy field and firms’ performance. Therefore, it is likely a good idea to summarize the Delta Model, and review a few pros and cons of this model.

Adapted from Arnoldo C. Hax and Deal L. Wilde II “The Delta Model – a New Framework of Strategy.” and Jay R. Galbraith "The Star Model"

Delta model strategy pros

• Although the authors do not mention the Star Model of Jay R. Galbraith, we can see that the general framework that they called “The Delta Model’s Winning Formula” fits “almost exactly” in the well-known Star Model. This is a good point because the “simplicity” of this model make much easier the complex task of strategy communication and execution.
• The approach to integrate Porter’s Competitive Position Model (focus on industry and the external environment) and Gary Hamel and and C.K. Prahalad Resource-Based View of the Firm (focus on the firm, internal approach), which can be complementary models although it does not fit 100%.
• Most of the strategic models assume the importance of Mr. Customer. However, the Delta Model explicit mention that everything starts with Mr. Customer. This explicit mention makes a huge different, because many firms forget the importance of Customers in many decisions. Furthermore, this explicit mention of Mr. Customer is probably one of the most important steps to walk in the direction of creating a real Customer Centric Organization.
• The model approach three of the main business issues in the last years. The commodization of products and services, the scarcity of demand (Customer Targeting), and the misalignment between strategy formulation and strategy execution.
• There was a couple of very well developed positioning models (Treacy, Michael and Wiersema, Fred. “Customer Intimacy and Other Value Disciplines.” Harvard Business Review, January-February 1993. – Hagel III, John and Singer, Marc. “Unbundling the Corporation.” Harvard Business Review, March-April 1999.) However, the Delta Model expands and improves the previous models.
• Many organizations assume that the main focus to grow on the Total Customer Solution strategic option is focusing on large accounts. Nevertheless, the Delta Model says something different from traditional wisdom, this model mentions that many of the large companies think that they are self-sufficient and therefore they do not need us except for access to products. If this is the case in your industry (e.g. logistics service providers), the focus should move on medium firms. At least, that could be an opportunity for medium firms trying to compete profitably with large multinational focus on large accounts.
• This model shows the Lock-in System strategy. That strategy is not just used for IT firms like Apple. There are other large firms in different industries that try to pursuit that strategy via acquisitions, creating economies of scale, and building a strategic position of “one stop shop” that offers a complete product/service portfolio in all the geographies.

Delta model strategy cons

• The model promotes correctly from my personal point of view the networked firm, I mean nowadays “no business is an island” but at the same time the model promotes the System Lock-In positioning that isolates the company. For instance, Apple lock-in strategy does not leave any space for other hardware and software firms.
• The delta model is based on cooperation rather than on competition and rivalry. Nevertheless, the most desirable positioning is System Lock-In and my question would be: what can create more competition and rivalry that trying to Lock-In the System.
• They suggest that the most desirable strategy is Lock-in the system, and they focus on the advantages of this strategy but they do not cover “properly” the so high risks of following that strategy. We have just to see the consequence of following a Locking-In strategy in companies like Nokia or Blackberry trying to lock-in the system rather than cooperating with other players like Google (using Android system). Additionally, we should wonder ourselves the following questions: are customers happier with firms Lock-in the system? That strategy means that customers cannot change the supplier easy, and they are going to pay an over price because their exit barriers are very high. So the next question would be: can a lock-in system strategy create a SUSTAINABLE competitive advantage if this strategy is much more focus on our company than on Mr. Customer?
• The model begins very well segmenting the customer, but at the same time it “suggests” that large firms attract customers in all the positions. As Michael Porter would say try to be everything to all customers used to create confusion in the employees and customers even for many of the large firms.  Segmentation is so important because is the base to create trade-offs, and strategy is about trade-offs.
• The only element of the Star Model that is omitted in the Delta Model is: People. But people are an essential element in a model that try to approach strategy not just from the formulation perspective rather than from formulation and execution point of view. Moreover, the Delta Model shows the importance of Balance Scorecard tools, therefore they should remark like this tool that the Innovation and Learning Perspective that it is very much focus on people issues are the rock stone of the tool. Finally, a strategic model that one of the main contributions is the focus on Mr. Customer and Customer Loyalty, it should likely approach people because as professor Luis Maria Huete stress to get Customer Loyalty, we need to develop Employee Loyalty.

At this point, someone could think that the model has many pros and cons. However, I would like to clarify that the contributions of the model are many and so important. The cons in reality are just personal suggestions that could expand and improve the extraordinary contribution to the strategy field of this breakthrough model.

https://tinyurl.com/3azsb87h

How to Measure Strategic Impact in a ‘Right Now’ World

 

by David Wilsey

The focus of most strategy and measurement efforts used to be long term. We encouraged clients to step back from the day-to-day whirlwind of daily operational activities and firefighting and think about desired long-term objectives. The word “impact” implies this more reflective thinking.

But the strategic environment has changed quickly for many of our clients, causing them to rethink this attitude to better react to what is being called the “right now” world. Whether it is post-COVID changes, political turmoil, inflation, or the tragedy in Ukraine, some clients are being forced to adapt to threats like never before. And some technology clients have long insisted that strategic agility was an absolute requirement for their success.

So how should a strategy or measurement professional adapt to this new environment? As usual, the most important factors are either related to culture or process.

Culturally, organizations must think of strategy and measurement in terms of general principles rather than absolutes. Strategy is not an event. Strategic thinking is a skill that can be applied to any endeavor over just about any time frame. As many OKR experts such as Felipe Castro and Dan Montgomery will point out, if our old static 5-year strategic plan is no longer useful due to a rapidly changing world, the principles of connecting dots and articulating desired strategic outcomes need to be applied in a more iterative manner that that can be used to validate (or not) shorter-term strategic hypotheses. If top-down culture and long feedback cycles are not effective anymore, use those articulated desired outcomes to create shorter-term alignment and faster performance cadences. Measurement and reporting need not be relatively static exercises done by the special few at the organization level. They are skills that should be taught to all managers and supervisors so that they can effectively do their daily job.

Of course, most improvement happens at the process level. BSI has a new KPI development process, called the Measure-Perform-Review-Adapt (MPRA) model. While we will be announcing more about that model at a later date, the key point for this blog is that the new model places the emphasis on a regular cycle of review and adaptation. We start by articulating and communicating strategic intent before measures are considered, selected, and defined. Then in the Perform-Review-Adapt cycle the organization has a chance to react quickly to changes in the strategic environment or reforecast targets for the next quarter. For many of our clients that were in the habit of setting their KPI targets and then forgetting them, this review cycle is the missing discipline needed to keep their teams on track and to get things done. It borrows the key principle from the agile world that assumes that we cannot possibly know everything about what we want at the beginning of the process and so need discipline around learning and adaptation.

https://balancedscorecard.org/

Adaptive Strategy

 

Continuous adjustment of strategy in the light of changing organisational context has been a recurring theme in my last three posts. This post offers something of a footnote to the earlier articles.

The header image above provides a slightly different perspective on the ever-shifting point of decision. The time dimension is emphasised here in a way that was less obvious in the previous schematics. Your monitoring of past performance is helpful in evaluating options in the present moment, to determine future goals, policies and actions (directing).

As your non-profit board recognises changes in both your stakeholder needs and the environment in which your organisation is operating, the answers to the key strategic questions also evolve. Reiterating messages from my previous post, those questions are:

• What should we do, and why? (Strategy)
• What could go wrong? (Risk)

Consideration of these two closely related queries will desirably include answers to ancillary questions, such as:

• What if we did nothing?
• What might we need to stop doing if we are to allocate adequate resources to the new strategic initiative/s?

Previous points of decision and their strategy outcomes are suggested in this chart by the transparent discs located on the ‘past’ segment of the timeline. While earlier decisions were relevant for the prevailing circumstances at the times they were taken, continuing relevance cannot be assumed given changes in stakeholder needs and the world around us.

Documented policies and strategies help us to remain focused on our purposes, but effective governance can only be achieved in the present moment. A steady hand on the tiller is fine in calm waters, but a storm (e.g. COVID-19) demands different navigation skills. Adaptive leadership, strategy, and governance require accommodation of new priorities, and de-prioritisation of goals and initiatives that are no longer relevant.

https://polgovpro.blog/2020/07/27/adaptive-strategy/

Strategy and Risk: 2 sides of one coin

 

The argument that strategy and risk are two aspects of one governance activity has been highlighted by many pundits over time. In practice however, some non-profit boards still separate strategic planning from development and review of their risk register.

My previous two posts (see links below) promoted the concept of continuous monitoring of the external and internal environments, and adjustment of strategy in the light of significant changes in stakeholder needs and emerging priorities. This post looks at the parallel issue of ensuring that risk considerations are integrated into strategic planning.

Risk Bow-ties

Let’s start with a schematic called the risk bow-tie, illustrated below. Risk managers use risk bow-ties to help them identify various threats associated with a particular type of hazard, and then to assign escalating threat controls to each in order to prevent the hazard being triggered. Subsequently, for each of the possible consequences of that hazard, a range of escalating mitigation measures is assigned, to minimise the harm or damage caused by the event.

A variation on the risk bow-tie makes provision for both unexpected threats, and unforeseeable events (often called ‘black swan’ events, like the COVID-19 pandemic).

Strategy Bow-ties

The bow-tie chart device has also been used as a marketing tool to identify ways of optimising customer retention. My version however, is more closely aligned with the risk bow-tie, as it adopts similar graphic elements to describe the consideration of options, strategic decision making, and execution measures for primary and secondary goals.

Adaptive Governance

COVID-19 has dramatically demonstrated the need for boards to be resilient, and to employ ‘adaptive governance‘. Recognising the continuous nature of the board’s strategic and risk management roles therefore, and the need to integrate strategy and risk deliberations, the chart below combines the risk and strategy bow-ties in a mirrored timeline. As the strategic question “What should we do and why?” is asked, the risk question “What could go wrong?” is posed simultaneously. That question is applied to each of the action options before the board, including the option to do nothing.

The parallel chains of strategy and risk bow-ties reminds us that responsible boards integrate their risk deliberations into all their decision-making and strategic planning. Treating them as separate and potentially unrelated activities, possibly addressed at different times on the board governance calendar, is likely to result in more adverse outcomes, with negative consequences for your organisation’s reputation and finances.

Whenever we schematise complex concepts and processes like strategy and risk governance, we are likely to over-simplify and generalise. That said, this ‘adaptive governance’ schematic is primarily intended to encourage non-profit directors to see risk as a key dimension of every decision they make, rather than a matter they attend to once a year when the risk register is updated.

https://polgovpro.blog/

Developing Robust Strategy for Uncertain Times: Expanding our Concept of Management Control to Deal with Dynamic Markets PART I: UNDERSTANDING THE BARRIERS TO STRATEGIC ADAPTATION

 

https://cutt.ly/z9UiIXI