1. http://paradygnamics.wordpress.com
CENTRO DE INNOVACIÓN
1
TECNOLÓGICO DE MONTERREY

2. www.gda.itesm.mx/innovar
CERTIFICADO EN INNOVACIÓN
G2 - ENERO-MAYO 2009
INNOVACIÓN DE MODELOS DE NEGOCIO
SESSION 02
The Delta Model – Setting the strategic Direction for achieving competitive advantage
FACULTY TEAM
Ing. Jorge Valdez Simancas
Ing. Angel Tonatiuh Flores (atflores@itesm.mx)
pandza@itesm.mx
Daniel Pandza, M.A.
Tel 01-(33) 3669 3000 ext. 2266
Centro de Innovación

3. Basic Assumptions:
Strategy is About:
1. Searching for New Sources of
Competitive Advantage,
2. Being Unique,
3. Creating Wealth:
Reduce Risk, Investment and Time,
4. Inventing New Rules and New Games
Strategy is About Discovery of Wealth
Source: C.K. Prahalad

4. Competitive Advantage over Time
Competitive Advantage Gap
– Distance from closest competitors
–New, better features
GAP –Lower prices
–Superior customer service
Moore (2002) Living on the Fault Line. Harper Business Press
Returns
CAP
Time
Competitive Advantage Period
– Barriers to entry
–Market share dominance
–Blocking patent
–Switching costs
–Brand loyalty

5. GAP/CAP matrix
Where are Your Offers on this Grid?
high
Differentiation
GAP
low
low CAP high
Sustainability

6. Competitive Advantage, Resource Based View,
Delta Model
Source: www.valuebasedmanagement.com

7. DELTA MODEL
The model on the right
represents the Hax´s point
of view regarding the
development and
implementation of the
corporate strategy.
1. Strategic positioning
2. Define Mission
3. Competitive positioning &
assessment of the
industry structure
4. Select strategic agenda
(i.e. value discipline)
5. Repeat iterations as the
competitive environment
changes

8. A Dynamic View of Strategy
Markides (1999)
reinforces the
importance of
viewing the stra-
tegic manage-
ment agenda as
a dynamic pro-
cess that is di-
rected for con-
tinously explo-
ring New Emer-
ging competitive
Positions!
Markides (1999). A Dynamic View of Strategy. IEEE Engineering Management Review. Winter 1999.
URL: http://ieeexplore.ieee.org/iel5/46/17508/00808247.pdf?arnumber=808247

9. The Delta Model | Three Distinct Strategic Options
Option 1: Best Product
Best Product
Product Economics
Value chain of the product
Intrinsic value (Standard)
Faceless customers
Mass distribution channels
- First to market
- Dominant Design Rivalry

10. The Delta Model | Three Distinct Strategic Options
Option 1: Best Product
Costos bajos:
• Southwest
• Nucor
MEJOR PRODUCTO
Competencia basada en
economía del producto
Diferenciación:
• Sony Wega
• Rolls Royce

11. The Supplier-Customer Relationship:
Traditional and New Economy Structures

12. ESTRATEGIAS NATURALES Y DE MIGRACION
Altamente
Interactividad y eficiencia de costo
III IV
diferenciado
Mercadotecnia Mercadotecnia
de frecuencia 1a1
(Cuentas Claves)
Valuación de
los clientes I II
Mercadotecnia Mercados meta
masiva nichos
Expander el set de necesidades
Uniforme
Altamente
Uniforme
diferenciado
Necesidades del cliente

13. MAPA ESTRATEGICO
Necesidades de los consumidores
Altamente
III IV Usuario Final Diferenciado
Consumidores
Flexibilidad Valoracion de los
en las consumidores
comunicaciones I II
H-P Competencias
Uniforme
Flexibilidad de Produccion, Logistica y servicios

14. Implicit Assumptions
1. Value is Created by the Firm
2. Value is Exchanged between the Firm and a Customer
3. Value is embedded in Products and Services
4. Innovation is about technologies/products/processes
5. Customers have a choice- to buy or not to buy;
Managers’ job is to persuade them to buy

15. Customer Heterogeneity
1. All Customers are not alike in their:
• Levels of Sophistication
• How they want to dialogue
• Tolerance for problems
• View of switching costs
• Propensity for Personalization
• Role as Individuals in a Social Network
2. Personal Experiences (Value) around identical
physical products can vary significantly.
• Consumers specify the price (auctions)

16. Typical Response:
Good News & Bad News
Product Variety means:
Richness of Features But not necessarily
and Functions Experience Variety
Technologies used for We have to Think of
creating Product Variety Technologies as
can be used to Create Experience Enablers
Experience Variety.

17. Eventos de compra independientes
Necesidades
satisfechas
Clientes
contactados

18. The Delta Model | Three Distinct Strategic Options
Option 2: Total Customer Solutions
Total Customer Solutions
- Customer Economics
- Strong customer bonding (relationship)
- Solving a wide range of customer needs
- Alternative, non traditional and direct channels.
- Share of wallet.
- Cutting finer
- Improve Customer Cost position, incomes and profits.

19. Eventos de compra condicionales
Necesidades
satisfechas
Clientes
contactados

24. Soluciones completas para los clientes
Hay tres maneras de lograr la solución total al cliente:
 Redefinir la experiencia con el cliente.
Alterar la relación con los clientes desde el punto de adquisición hasta el final
de la vida del producto o servicio.
 Saturn
 Disney
 Amplitud horizontal.
Proveer un conjunto completo de productos y servicios acerca de las
necesidades del cliente.
 Amazon
 Wal Mart.
 Home Depot
 Integración en el cliente. Esto es una forma de outsourcing facilitando
actividades que antes las hacia el cliente.
 Dell
 Transferir trabajo del cliente a la empresa o de la empresa al cliente.
Aquí se transfiere trabajo al cliente a cambio de una reducción de costos.
 Autoservicio en las gasolineras

25. Knowledge Capital Dynamics
Working with the customer to jointly
craft business opportunities that
Partnering would not have been possible without
a deep mutual understanding / trust
Shaping/ configuring an array of
Business benefits and features services to
Solutions provide the value creating
functionality required by a customer
Selecting/ proposing an “augmented”
Product
Solutions product/ service in response to an
expressed customer need
One time sale of a product/ service
Transactions

26. The Delta Model | Three Distinct Strategic Options
Option 3: Dominant System

27. Sistema dominante
• La opción estratégica de “Sistema dominante” tiene el mayor Valor
agregado posible.
• En vez de enfocarse estrechamente en el producto o en el cliente,
la compañía considera a todos los jugadores principales en el
sistema que contribuyen a la creación de valor económico.
• Hay tres condiciones necesarias para crear un sistema dominante:
– Efecto network.
– Feedback positivo
– Efecto de aprendizaje
• La compañía está particularmente preocupada en el desarrollo,
atracción y conservación de los llamados “complementos”.
• Un complemento no es un competidor sino un proveedor de
productos y servicios que mejora directa o indirectamente nuestra
oferta.

28. Sistema dominante
Hay tres formas de lograr un sistema dominante:
1. Estándar propietario. Tiene un network extenso de complementadores
dedicados a trabajar para nuestros productos.
2. Intermediación dominante. Una empresa posicionada como
intercambio dominante provee una interface entre compradores y
vendedores, o entre las partes que desean intercambiar informaciónón o
bienes. Cuando este tipo de negocios logran una masa critica es muy
difícil desplazarlos.
3. Acceso restringido. Los competidores son bloqueados de llegar a
los clientes porque el canal tiene capacidad limitada para manejar
múltiples proveedores.

29. The Delta Model | Three Distinct Strategic Options
SUMMARY
Competencia basada en
SISTEMA economía del sistema:
• “Complementor look in” .
DOMINANTE
• “Competitor look out”,
• Estándar de Tecnología
propietario.
SOLUCIONES TOTALES
PARA LOS CLIENTES
Competencia basada en MEJOR
economía del cliente: PRODUCTO
Reducción de costos de servir Competencia basada en
a clientes o incremento de economía del producto.:
ventas / utilidades. Costos bajos o
diferenciación.

30. The Delta Model
Options for Strategic Positioning
Dominant Exchange
System Lock-In
Exclusive Channels Proprietary Standard
Horizontal Breadth
Low Cost
Total Customer Best Product
Solutions
Customer
Redefining the Diferentiation
Integration
Customer Relationship

31. Expanding Your Mindset:
Summary for Strategic Decision Making 1|2
STRATEGIC FOCUS RELEVANT BENCHMARKING
Complementors
Network
Extended Customers Competitors
Product
Enterprise
INNOVATION
VALUE PROPOSITION
Open Architecture -
Product & Service Portfolio
Complementors as Key
Extended by
Complementors
Internal
Joint with
Standardized
Customized
Product
Customers
Products
product bundle
Development

32. Expanding Your Mindset:
Summary for Strategic Decision Making 2|2
SUPPLY CHAIN CHANNELS
System - Extended & Massive | Direct
Complementors
Generic
Targeted
Extended Suppliers,
Internal Mass
the Firm, The Customers Direct
THE ROLE OF IT DEGREE OF CUSTOMER BONDING
Total Network Support Highest! Competitor Lock-Out
Very Small
Potentially
Customer &
Internal Depending on
Supplier Support high customer Product
Support lock-in Characteristics

33. Valor agregado
Incremento de valor agregado
Diseño Asegurar al Bloquear a la Estándar
Dominante cliente competencia propietario
Complementos
Retroalimentación
Distribuidores/
Proveedores
positiva
Producto
Producto
Look in
Po u t
r d co Po u t
r d co
Clientes
C ne
lie t s C ne
lie t s Clientes
 Ventaja de ser el primero:   Distribución del espacio en  Desarrollo de redes de complementos de 3as
Aprendizaje del cliente.
partes para incrementar el atractivo del
el anaquel.
 Atributos.  Producto Customizado producto.
 Marcas.
 Servicio.  Activos Colaterales.  Posición de apalancamiento como líder en
 Innovaciones implacables.
 Precio.  participación de mercado en la atracción de
Marcas
complementos.
 Patentes.
 Estructura de precios.  Los clientes buscan los productos que tenga
el mayor numero de complementos.
 Algunas veces los clientes pueden ser el
complemento, como en el caso de
intercambios.

34. Complementos
Producto
Clientes
Competencia basada en economía del sistema:
Aseguramiento de complementos, bloqueo de la
competencia, estándar propietario.
SISTEMA DOMINANTE
Intercambio Dominante Estándar Propietario
Acceso Restringido
Integración en los clientes
Costos bajos
Amplitud Horizontal
Diferenciación
Redefinición de la
SOLUCIONES TOTALES PARA experiencia del
EL CLIENTE MEJOR PRODUCTO
cliente
Competencia basada en economía
Competencia basada en economía
del producto:
del cliente:
Po u t
r d co Po u t
r d co
Costos bajos o
Reducir costos de clientes o
diferenciación
incrementar su rentabilidad
C ne
lie t s C ne
lie t s

35. THE CHALLENGES TO
TRANSFORM THE
ORGANIZATION FROM BEST
PRODUCT TO TOTAL
CUSTOMER SOLUTIONS

36. 1. Fight the product-centric mindset
 The Best Product Positioning is not necessarily
the most profitable or best way to serve your
customer.

37. 2. The transformation is not straightforward
 The alternative to a Best Product positioning are not
always easy to define or to accept .
(The case of Codelco and the International Copper Assoc.)

38. 3. You have to redefine the game you are playing.
 It is not that your products are unimportant; it is not that
you should ignore the efficiency of product delivery - it is
simply that often this is not enough.
(The case of CSN.)
Transforming the focus of the CSN Organization
From Support Units To Strategic Marketing Units
• Steel (e.g. processor, • Automotive
• Civil construction
rerollers, etc.)
• Export • House appliances
• Mining • Packaging
• Energy
• Ports

39. 4. The Challenge: “Commodities only exist
in the minds of the inept.”
 Product differentiation, as technology gets more
mature, is very hard to achieve. If your product
becomes a commodity, you are deprived from
superior financial performance, from serving your
customer splendidly, and from having fun. (You
violate the three tenets.)
 Do not sell products; sell customer solutions:
customization, learning, and services bundled with
products as a unique customer offering. (The Case
of National Starch).
 Use all the corporate capabilities supported by key
complementors. This is a corporate strategy. (The
case of Siemens USA.)

40. Competitive Driving Forces
Product Differentiation
Product Premium
Technology Products
Specialty Products
Specification Products
Source: Castrol

41. Competitive Driving Forces
Product Differentiation
“The technology is mature …
less opportunity to differentiate”
Future
Before
Source: Castrol

42. Competitive Driving Forces
Service Differentiation
Significantly
Services
Differentiated
Occasionally
Differentiated
Responsive
Minimum Required to Maintain
Businesses
Source: Castrol

43. Competitive Driving Forces
Service Differentiation
“Customers are demanding
more than just products”
Before Future
Source: Castrol

44. 5. De-commoditize your customer.
1. Start with segmentation:
 segment your markets,
 your customers,
 your customers’ customers, and
 customers’ attitudes (productivity, cost, and price
consciousness). (The case of Castrol.)
2. Do not treat every customer equally.
 You could not and should not provide everyone the
same degree of attention.
3. Select your customers.
4. Do not let your customers select you.

45. Market Segmentation: BEFORE
Cement
Glass
Sugar
Mining
Pulp &
Paper
Wood Textile
Food &
Beverage
Source: Castrol

46. Market Segmentation: AFTER
These customers are
conscious of total costs
and new production
yields higher sales
Productivity
Conscious
Customers
Source: Castrol

47. Market Segmentation: AFTER
Cost
Conscious
Customers
These customers are conscious of total costs but
new production does not necessarily yield higher
sales or economies of scale
Source: Castrol

48. Market Segmentation: AFTER
These customers
are not necessarily
conscious of total Price
costs and generally conscious
customers
buy on price/unit
Source: Castrol

49. 6. Rethink the customer engagement process.
 You are not selling products by the ton, or by the
gallon, or by the drum.
 You are selling documented improvements in your
customer costs and productivity.
 Use an executive team as part of the customer
management process.
“Sales are too important to be left to the sales force.”

(The case of Castrol.)

50. What is Castrol Logic?
A customized lubrication solution involving
products and services that results in documented:
Cost Reductions & Productivity Improvements

51. Customer Experience
How do we deliver cost savings?
Client Engagement
Process
Initial Information
Exchange
Continuous
Improvement
Documentation
Management
Survey
Implementation Proposal
Source: Castrol

52. 7. Prevent the customer from commoditizing you.
 Your customers might feel they benefit from
standardizing the product offering of their suppliers,
and move the bargaining power in their favor.
The problem is “You get what you pay for.”

(The case of Eastman Chemicals Coating Business.)

53. Case: The Paint and Coating Industry
Paint and Coating
Manufacturers
Tier 1- Preferred strategic
solution seekers
Tier 2- Large price
seekers
Tier 3- Least attractive
Eastman Chemicals End Users
price seekers
Tier 4- Local
• Solvents • Architectural
manufacturers
• Resins • Automotive
Tier 5- Specific targeted
• Additives • Industrial maintenance
companies
• Colorants • Building products
• Appliances
Distributors
• Metal office furniture
Tier 1- Full alignment with EC
Tier2- Large power bargainers
Tier 3- Fragmented local
agents
Tier 4- Specialty distributors

54. 8. Channels are essential, they “own” the customers.
 Ownership or control of the channels is
critical to the pursuit of a Total
Customer Solutions strategy.
 Generic channels are only effective for
the “average customer. They are
unsatisfactory for the very poor and the
very rich. (The case of Hindustan
Lever and Unilever de México.)
 If you cannot own the channels, use a
“pull” strategy. (The case of Unilever
Bestfoods Food Service.)

55. The Food Service Industry
push
Unilever Bestfoods
Food Service Distributors Operators Final Consumer
pull
• Corporate broad line Tier 1- 100 chains
(e.g. Sysco)
Tier 2/3- 1500 chains
• Specialized
Tier 4/5- Thousands of
distributors
independents
• Other
national,regional and
local distributors

56. 9. Use technology wisely: This is a very hard task.
 Joint development with our customers is an effective
mechanism to get customer lock-in.
 Product technology is not enough, add service technical
support.
 Effective IT infrastructure is imperative: e-Business
allows the implementation of the integrated value chain,
e-Commerce allows access to massive fragmented
customers.
 Technology-based system lock-in is very hard to achieve,
if you can do it is a dream. (The case of Advanced Micro
Devices.)

57. 10. Beware of the organizational structure implications
 You have to change dramatically
the way you manage, assign
responsibilities, reward people,
monitor the business progress,
and most important, the way you
“sell”. (The case of Motorola
Semi-Conductors.)

58. THE DELTA PROJECT:
DISCOVERING NEW SOURCES OF
PROFITABILITY IN A NETWORKED ECONOMY
Arnoldo C. Hax and Dean Wilde
Palgrave, 2001
http://www.palgrave.com
http://www.amazon.co.uk