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.

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Strategic Marketing: Internal Environment Analysis

 

Alexey Cherkasov

After you finished the Environmental Analysis, it is time to go to the internal analysis of your company.

The analysis of the internal environment of the company is the analysis of strengths and weaknesses, as well as the assessment of the potential that the company can count on in the competitive struggle to achieve its goals.

The main objectives of the analysis are to determine the factors and causes of the strengths and weaknesses of the organization.

One of the tools for internal analysis is ABC analysis.

ABC analysis is a method that allows classifying the resources of the company according to their degree of importance. This analysis is one of the methods of rationalization and can be applied in the field of activity of any enterprise.

It is based on the Pareto principle – 20% of all goods give 80% of turnover.

The essence of this analysis is to select data and divide it into three categories according to importance. At the same time, completely different indicators can be taken as a basis.

ABC analysis

ABC analysis gives you an opportunity to focus on tracking the most important sampling indicators for a company in order to increase the efficiency of both the management and operation of individual departments and the company as a whole.

Such analysis allows you to determine cumulatively the value shares of each of the goods sold, or the contribution of a particular company to the total turnover. Cost shares are calculated from their total cost of implementation for a specific period of time.

When conducting an ABC analysis, it is worth considering a number of factors:

• Include homogeneous groups in the analysis (comparing such groups as distributors and end users, as well as large consumers, should be done carefully)
• Select the correct interval for evaluation (month, quarter, year)
• Take into account the novelty (product, customer, supplier)

Usually carrying out an ABC analysis consists of the following steps:

1. Definition of objects of analysis (products, customers, suppliers)
2. Definition of analysis objectives. What we need the data for.
3. Ranking of objects in descending order of parameter value.
4. Calculation of the share of the parameter from the total amount with the cumulative total.
5. Definition of groups A, B, and C.

Data is usually divided into the following proportions:

• A – important, 20% (of goods, customers) give 80% (of sales, turnover)
• B – necessary, 30% (of goods, customers) give 15% (sales, turnover)
• С – unimportant, 50% (of goods, customers) give 5% (of sales, turnover)

One of the most important tools for the internal analysis of a company is to study its own clients, including their satisfaction with the services and products of the company, as well as their willingness to recommend the company to their colleagues and partners.

In order to determine the level of consumer loyalty, Frederick Reichheld proposed a unique method. In 2003, in his article The One Number You Need to Grow published in the Harvard Business Review, he proposed a method for determining consumer commitment to a product, company, or brand.

The method is called NPS (Net Promoter Score), and it can be described as “the index of readiness to recommend.” This index is also used to assess readiness for continuous purchases.

The research method consists of the following steps:

• The company’s clients have to answer the question “What is the probability that you would recommend a company/product/ brand to your friends/acquaintances/ colleagues?” On an 11-point scale, where 0 corresponds to the answer “I will not recommend it in any way”, and 10 – “I will definitely recommend.”
• Based on the estimates obtained, all consumers are divided into 3 groups: 9-10 points – product/brand promoters, 7-8 points – neutrals or passives, 0-6 points – critics (detractors).
• Then you calculate the index

Net Promoter Score Calculation Formula

After the data on external and internal analysis have been obtained, it is necessary to conduct a SWOT analysis.

The SWOT analysis is a method of strategic planning, which consists of identifying the factors of the internal and external environment of an organization and dividing them into four categories:

• Strengths
• Weaknesses
• Opportunities
• Threats

Strengths and weaknesses relate to factors of the internal environment of the company, while opportunities and threats relate to the external environment factors of the company.

SWOT Analysis Matrix

In the first case, the company can control and influence factors on its own, in the second case, the factors do not depend on the company’s actions, and it has to adapt to them.

Thus, a SWOT analysis is carried out in the following several steps:

a) Assessing the strengths and weaknesses of the company

The first stage allows you to identify the strengths and weaknesses of the enterprise. In order to accurately identify them, you must:

1) Prepare a list of criteria to evaluate the company
2) For each criterion to identify strengths and weaknesses
3) Identify the most important strengths and weaknesses in order to put them in the matrix of the SWOT analysis

b) Assessment of market opportunities and threats

The second stage allows you to evaluate the market. An assessment of the situation outside the company is carried out to identify opportunities, as well as to avoid potential threats. The method of identifying market opportunities and threats is similar to the method of identifying the strengths and weaknesses of a company:

1) Prepare a list of criteria to assess the market
2) For each criterion, we compile a list of opportunities and threats
3) The most important opportunities and threats go into the matrix

c) Comparison of the data obtained

At the third stage of the analysis, it is necessary to compare the obtained data on the strengths and weaknesses of the company, as well as the opportunities and threats from the market. This stage provides an opportunity to assess the future development of the company’s activities.

• How to use company strengths for market opportunities
• How can the company’s weaknesses affect it
• Avoiding market threats with company strengths
• What are the threats under the influence of the weaknesses of the company should be constantly kept in control

The main task of the SWOT analysis is a structured description of the situation regarding which you need to take a decision. The conclusions drawn from it are descriptive without recommendations and prioritization.

To obtain the most complete result from the SWOT analysis, you have to prepare options for actions that are formed on the basis of the intersection of the matrix fields. It is necessary to analyze all combinations of external and internal factors.

Possible combinations of the SWOT model

The SO field shows which strengths need to be used in order to gain value from opportunities in the external environment.

The WO field shows the possibilities of the external environment for an organization to overcome existing weaknesses.

The ST field shows which forces need to be used to eliminate the threats.

The WT field shows which weaknesses need to be eliminated in order to try to prevent an impending threat.

And after you are through with the internal analysis you go to the last but not least step of your strategic marketing.

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What do you do if your industry is rapidly changing and you need to make strategic decisions?

 

1

Assess Trends

2

Gather Intel

3

Innovate Constantly

4

Engage Staff

5

Review Regularly

6

Diversify Options

1 Assess Trends

To stay ahead in a rapidly changing industry, you must first understand the direction in which it's moving. This means conducting a thorough trend analysis. Look at emerging technologies, evolving customer preferences, regulatory changes, and competitive dynamics. By identifying these trends early, you can anticipate market shifts and adapt your strategy accordingly. Remember, the goal is not just to react to changes, but to proactively shape your strategic response in a way that leverages these trends to your advantage.

 2 Gather Intel

In a volatile business environment, information is your most valuable asset. You need to gather intelligence not just on your competitors, but also on customers, suppliers, and technological advancements. Use this data to create a comprehensive picture of your industry landscape. This can involve customer surveys, competitive analysis, and staying abreast of industry reports and news. The insights you gain will inform your strategic decisions, helping you to tailor your offerings to what the market needs and wants right now.

 

3 Innovate Constantly

Innovation should be at the heart of your strategy when facing a rapidly changing industry. This doesn't necessarily mean inventing something new; it could be about reimagining existing processes, products, or services. Look for ways to improve efficiency, enhance customer experience, or enter new markets. Foster a culture of continuous improvement within your organization where creativity is encouraged and rewarded. By making innovation a routine practice, you'll be better equipped to adapt and thrive.

 

4 Engage Staff

Your employees are your frontline observers and can provide invaluable insights into where your industry is heading. Engage with them regularly to gather their observations and ideas. Facilitate an environment where staff feel comfortable sharing their thoughts and where cross-departmental collaboration is the norm. This internal knowledge pool can be a goldmine for identifying potential strategic pivots or innovations that could keep you ahead of the curve.

 

5 Review Regularly

In a dynamic industry landscape, what worked yesterday may not work tomorrow. Therefore, it's crucial to review and adjust your strategy regularly. Set up a schedule for periodic strategic reviews, where you can assess the effectiveness of your current approach and make necessary adjustments. This iterative process ensures that your strategy remains relevant and responsive to the ongoing changes in your industry.

 

6 Diversify Options

Finally, don't put all your eggs in one basket. Diversifying your strategic options can provide a buffer against sudden industry shifts. This could mean exploring new markets, developing alternative product lines, or even considering strategic partnerships. Diversification helps mitigate risks and gives you multiple pathways to success, ensuring that if one avenue closes due to industry changes, you have others to pursue.

How to create an effective pharmaceutical marketing strategy in 2024

 

By Gavin Llewellyn 

Combine opportunity, strategy, and action to identify the right approach for your pharma brand

The last few years have been a rollercoaster ride for many of us, not least those within the pharmaceutical sector. Digital transformation is rapidly altering the way pharma brands communicate and deliver their products: consumers are becoming more knowledgeable and proactive, whilst businesses are having to adapt to an increasingly digital-first world.

And this has all happened alongside broader trends which KPMG believes will have a significant impact on revenues and business and operating models:

“The pharmaceutical sector is at a crossroads. In a heavily disrupted marketplace, characterized by shifting payer attitudes and patient empowerment, neither incremental adjustments nor steady evolution are likely to halt the decline of the traditional pharmaceutical business model.”

As a result of these different trends, it’s important for businesses to evaluate their digital communications and value delivery. Within the pharma sector, brands need to continue innovating and make their online experiences and customer engagement communications more effective. Moving into 2024, it will be crucial to have a clear, coherent and joined-up marketing strategy to compete. 

But why is it important to have a marketing strategy? I’ve highlighted below some of the key elements from Smart Insights’ marketing strategy definition to help explain why?

“A proactive, data-driven approach to marketing and communication activity across all channels and touchpoints. The marketing strategy informs all marketing activity taking place for the business since all marketing plans stem from this overarching structure and vision. Once the strategy is set and communicated, marketers use tactics to put into place their actions that drive to the result.”

Smart Insights has a wide range of strategic marketing guides, resources, and templates for pharmaceutical and healthcare companies looking to develop their marketing strategies. As we know, to succeed in pharma marketing today, marketers and managers must apply a data-driven, customer-focused approach to their strategy and planning, such as our popular RACE Framework lifecycle.

Take steps to optimize your marketing by joining Smart Insights as a Free Member today. Gain instant access to a wealth of digital marketing tools, some of which are mentioned in the article below, designed to help you convert more customers.

Within this post, we’re going to look at some of the key steps you can take to create a pharma marketing strategy that will set you up for success in 2024. 

3 key trends in the pharmaceutical sector

Although many strategic marketing models, frameworks, and plans can be applied to companies across different sectors, we need to first acknowledge the key trends in the pharma sector that will underpin your marketing strategy.

1. The impact of digital transformation and AI on content marketing

Whilst increased global use of AI is no doubt the major trend impacting the pharmaceuticals sector, it’s worth exploring how it has influenced marketing. The pandemic has forced many pharma operations to move online and provided new options to communicate with customers. This has given pharma brands an opportunity to create content for both healthcare professionals (HCP) and patients, and distribute this across different channels.

Now, we see generative AI used to increase content production, although at Smart Insights we recommend taking a blended approach. You can read our Free ChatGPTprompt cheatsheet for more tips on working collaboratively with AI to improve your work.

Needless to say, it’s become more important than ever to have a clear idea of the customer/ patient information journey and how to communicate with them at different stages:

2. The consumerization of healthcare

Pharmaceutical consumers want to have the same experience in healthcare that they have from other businesses. The presence of tech brands like Amazon, Netflix and Meta has exposed us to new information and levels of service that weren’t present 10-15 years ago. This has influenced what we expect from other brands, meaning marketers must take a customer-first approach to their marketing planning.

If you're not already familiar with it, don't miss this handy infographic on 15 uses of Machine Learning, Propensity Modeling, and AI. Even if you're not using all elements depicted in the lifecycle, you can use this structure to plan improvements to your customers' online experiences of your brand.

3. Enhancing consumer engagement

Competitiveness within the pharma sector and the consumerization of healthcare mean that engaging and retaining healthcare customers is crucial. This trend requires pharma companies to review and invest in platforms that they can use to create a consistent view of the customer across many touchpoints, including targeting, segmentation, and performance management:

Use RACE to structure your pharma company's digital strategy

Find out more about how your company can benefit from utilizing the RACE Growth System to strategize each component of your marketing funnel.

From strategy and planning to reaching customers and getting known, from encouraging interaction to increasing conversions, and keeping hold of loyal customers and advocates, the RACE Framework has everything your pharmaceutical marketing team needs to achieve your goals.

What's more, all our marketing tools, training, and templates are integrated across RACE, meaning you can adapt and prioritize key customer journeys to target high-value customers, using data and insights to confidently make decisions about your marketing strategy. Download your free digital marketing plan template to start today.

Optimize your marketing strategy using the Opportunity > Strategy > Action Framework

Opportunity, Strategy, Action is a perfect starting point for pharmaceutical marketing leaders looking to audit and reinforce their marketing strategies. This simple 3-step approach empowers marketers to adapt and react to internal and external factors influencing their customers' lifecycles:

1. Opportunity
2. Strategy
3. Action

To help bring this further to life, let’s look at each section of the OSA framework with some examples of how it can be used to create an effective pharmaceutical marketing strategy.

Opportunity

This stage is about evaluating the current contribution of marketing channels by reviewing your data and setting future objectives.

The consumerization of healthcare will give you a macro view of the current situation and where to explore further. The trend of people influencing and controlling their medical and wellness care is here to stay and is only likely to grow:

The consumerization of healthcare means that there is an opportunity for providers to develop strategies and market offerings that fulfill customer needs and preferences while fully engaging them in an end-to-end customer experience. 

With this background insight in mind consider the following:

• Your current performance and business contribution from digital channels
• The digital maturity of your organization - are you currently set up to tackle the new challenges?
• Review employees marketing skill-set to ensure they have the right tools and capabilities 
• Benchmark your company vs. the competition 
• Set SMART objectives informed by your audience and marketplace analysis

Strategy

Once you have a clear idea of what you want to achieve (objectives), you must define a strategy for how you will get there and which tactics you will use for customer acquisition (Reach), conversion (Act and Convert), and customer retention/loyalty (Engage).

The objective you’ve set in the first stage will help you shape your strategy. For example, if you are developing a new product offering, you may need to focus on Reach to build awareness of your brand and grow your audience. But if you are already established you may instead want to focus on Act to prompt interaction, subscribers, and leads.

The key steps to consider at this stage include:

• Review new business model options
• Update your brand positioning, including your value proposition
• Ensure you have a content marketing strategy 
• Brand governance, including new planning processes or new controls on communications
• A long-term roadmap - it’s likely that your strategic initiatives won’t be achieved within 6 months or even a year 

Action

Finally, you will need to define how your team will execute the strategy and the methods you will use to measure and track success.

In this stage, you will take your objectives and strategy and translate them into an action plan. If your pharma strategy is going to take a very content-oriented approach to inform and engage consumers, for example, Smart Insights’ Content Marketing Blueprint provides a structure and workflow for planning a content marketing program:

Once you’ve established the key actions, the next step is to define the metrics and KPIs to determine success.

The key steps to consider at this stage include:

• Create 90-day action plans for each quarter that show the focus on different techniques across paid, owned, and earned media
• Structure different strategic initiatives and improvements for 90-day plans across RACE (Reach, Act, Convert, Engage)
• Create a detailed budget for prioritized activities across paid, owned, and earned media
• Define dashboards and KPIs to review progress against your targets
• Create a resourcing and development plan to ensure your team has the right skills 

Pharmaceutical marketing bottom line

Pharmaceutical marketing leaders looking for pharma/healthcare marketing solutions need to consider their marketing strategies in the context of the RACE Framework and OSA. By applying a practical, data-driven approach, you can streamline your marketing activities and focus on your patients' customer journeys.

Interested? Discover new opportunities for your company and implement quick changes to start optimizing your marketing funnel. Join as a Free Member to find out more.

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