process differentiation for competitive advantagesamprad do consult with us… page 1 december 2009...

SAMPRAD www.samprad.net do consult with us…

December 2009

Process Differentiation for Competitive Advantage

By Venugopal Chepur

Rapid globalization, new technologies and knowledge-based economies are forcing every business to innovate and reinvent their business model more often than before. This may mean continuous redesign and realignment of business processes based on changing scope of value delivery and revenue models, customer expectations and market-play.

Companies while initiating changes to their business processes often tend to overlook those innate opportunities to unlock and capture value through the processes for Customer Value Proposition (CVP) to differentiate and gain competitive advantage. While the effects may appear benign or may not be even apparent, it may end up in de-marketing of the business.

Customer value perspective of a business process helps articulate the organizational differentiators in two forms: “experience” and “benefits”. Changes that customer actually “experiences/feels” directly as a result of efficient process innovation (e.g. Expedia and the others allowing consumers to explore travel directly rather than via travel agents) and the benefits that consumers enjoy but not so directly (e.g. supply chain or manufacturing processes) and how that is translated in to competitive advantage.

To initiate such process innovation efforts, brainstorm with revolutionizing questions about your process flow. Can a successful American sales process be used worldwide? Or should regional teams be allowed to perform their individual process? Can a bank loan processing system be benchmarked with drive-through facility at McDonald’s?

Consider these examples of companies (Table 1) where process innovation and/or enhancements were used effectively to be game changing differentiators for competitive advantage.


Table 1: Examples of companies that used processes as key differentiators (or game changers)

BUSINESS NAME PROCESS(INNOVATION, CREATION OR ENHANCEMENTS)

OUTCOMESCOMPETITIVE ADVANTAGE

DELL Direct Sales Process Entirely Different Business Model that changed the PC Landscape

TOYOTA Countless Manufacturing Best Practices Sustained Cost Advantage over Competition

SOUTHWEST AIRWAYS

Non-Hub System, Many Other Operating Efficiencies

Cheapest Airlines; “Fly for Peanuts” also became part of their branding

FEDEX Delivery Speed Reliability as a promise

EBAY Online Auction Auctioning made easy

PRICELINE Reverse Auction Pricing shifted in to the hands of customer

WALMART Refined Supply Chain Process Lowest Price Retailer positioning

COCA-COLA Use of Independent Bottlers to make the Product from Syrup, Bottle and Distribute

Market expansion with“Bottle Velocity”

EXPEDIA, ORBIT Travel Planning Replaced Travel Agents

PIGGLY WIGGLY Self-Service Self-Service Grocery Store

GOVERNMENTS

UK, USA

Single Emergency Phone Number 999 in The UK in 1937911 in The USA in 1968

Best Service with Tax Payer’s money, Government Assurance

Source: Personal research, and information through surveying Marketing Executive Networking Group (MENG), 2009


Interestingly, it would appear as if there would be few innovations or improvements possible, when another business may just be right around the corner to out-compete via process innovations.

Strategic Intent

Every business process whether stand-alone or aligned with other processes will yield some value, particularly more when aligned. So the process alignment must be designed to derive a quantified benefit to meet and outperform competition. Benefits must be pre-defined as a definitive gain, a differential value or superior experience - often measured through metrics of lead generation, speed-to-market transactions, sales, order fulfillment, after-sales service, repeat purchase, retention, cost reductions, margin improvements and pace of decisions etc.

Such process alignment would happen only by understanding and enabling how the business interacts with different internal and external constituents and customers, and where and how those intersections create or impede value. This needs interlocking people, process & tools with key elements of business model - Customer Value Proposition, Revenue Model and Resources.

Most of change/create process initiatives are induced by work-flow, technology upgrades, performance (continuous) improvements and/or changes in business/revenue model that influence primary & secondary activities within the value chain of a business. Every business can use process initiatives to build value linked to strategic intent (figure: 1) as they commit resources for the projects.Figure 1


Nesting value

So many companies would have copied Toyota processes and methodologies including quality precision benchmarks, but have they experienced as much success?

So many restaurants try to copy the most popular one in any given town, but would they be able to duplicate the same taste and ambience?

It is the sum of all process science and artistry. In other words, their processes have developed and preserved some differential value along the way that is unique and hence give a competitive advantage to the business.

Creation and optimization of process must therefore go beyond tools and practices. Custodians of a process must logic views of how people connect in the work-flow of a process, carry out tasks, and define the outcomes benefit experiences, and where and how value happens, what are likely obstacles/pitfalls, eventually how it produces (and retains) a sustainable value for competitive advantage. Come up with some solutions for each obstacle that can make a difference, and create the best differentiating opportunities.

Once the relative value of a process is defined, each hypothetical situation or a scripted opportunity point of a defining action needs to be challenged for the value it would generate against the expected total CVP value for deficit. This way the process progressively serves up to the established CVP. Processes must therefore carefully build such subtle value creation activities, connections, and work flow consciously to providing flexibility and scalability. This will help to thrive in constantly challenging markets to deliver on the promise with defined level of performance and differentiating experience, and enable to continually evolve through cultural shifts and improve.

Consider this example for a financial services firm (figure 2) that may use processes in the following manner to enable competitive advantage.


Figure 2

To figure what might help your process to derive CVP, ask some of the following questions:

Is there room for ambiguity both in actions and results? Is there a possibility of customers feel less attended? How is the process any different than your competition? How does it enhance or change your customer experience (phenomenally)? How precisely (not general guidelines) is the value yield estimated for each process? How your customers would value the outcomes/benefits? How do your outcomes map to the customer’s preferred outcomes? Does it enable customer with:

- Self-help?- more access to better knowledge and personalization- improved availability, interactive ability and relevant offers- customization, pay-for-use, and reduced prices- lowers risk by guaranteeing performance

Is the process consistent and executed the same way every time and everywhere for every customer?

Are there any gaps, missing links or service opportunities in the process flow? How the process is monitored (reports or metrics) and enforced?


Samprad can help you with your process building, optimization and innovation challenges for sustained competitive advantage and future growth. Please email us at [email protected] call Venugopal Chepur at 1-609-658-3053.

Visit: www.samprad.net

process differentiation for competitive advantagesamprad do consult with us… page 1 december 2009...

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