Introduction: Strategy – Success in Circles
Visual, or graphically based tools can be helpful especially if they can aggregate the output from the series of analytical and discussion based activities that together make up the strategy process.
This briefing looks at a new visual concept and presents some enhancements. The output is an easy to use approach that you may find helpful to drive your organisation’s strategy workshops. Importantly, you can use the approach as an quick audit tool to check:
How well your strategy process has explored the changing needs of your customers and what they will really value from you in the future.
How large the “white space” is – customers’ needs that are not being met either by you or the competition.
If your offerings really are different from the competition’s.
If your relationships with suppliers are different to those of your competitors.
Drawing the Circles of Success
Joel Urbany and James Davis (please see Information Sources at the end of this briefing) have developed a concept that they call “Strategic Insight in Three Circles”. It all starts with the client or customer. Understanding customer needs and what drives their purchasing decisions is of course a key step in crafting strategy that applies if our “customers” are either other commercial organisations or the end consumer.
We therefore start by drawing one circle and labelling it Customers’ Needs. Think carefully about what customers value, what their problems are and how your organisation can make their life easier. These are all factors that will determine how large the customers circle is.
Next, we must think about your organisation’s products and services – offerings – but the trick is to consider what your customers think about your offerings and the degree to which the offerings are meeting their needs. Now, draw another circle labelled Company’s Offerings and overlay the two circles that you now have – the amount of overlap reflects the degree to which your offerings are meeting the needs of your customers. At this point you can reflect upon how much you think that you really know about your customers and what customers need and value.
Urbany and Davis then tell us to take a further step and think about your competitors’ offerings. Think carefully about how competitors’ offerings duplicate the features of your organisation’s offerings and the degree to which the competitors’ offerings meet customer needs that your offerings do not. You can now draw the third overlapping circle – Competitors’ Offerings – and you should have a picture that looks rather this:
You can see that there are seven numbered segments:
Segment 1 refers to points of difference – customers’ needs that your offering meets but that competitors’ offerings do not. These are critical points of difference and therefore are the centrepiece of your strategy. The question must be is this area large enough?
Segment 2 shows us the common features of both your offerings and those of your competitors that meet customers’ requirements – known as points of parity.
Segment 3 identifies customers’ needs that your competitors meet but you do not. Is this a conscious move on your part?
Segment 4 again shows features of competitors’ offerings that are the same as your offerings. This time they may be superfluous benefits.
Segment 5 is the important white space in other words customers’ needs that are unexplored – unmet by you or your competitors – and is a space ripe for exploration.
Segments 6 and 7 show the apparently superfluous parts of both your offerings and those of competitors.
So, this is a relatively simple tool for communicating your organisation’s strategy and testing:
(a) How much you know about your customers
(b) How much you know about your competitors and
(c) How effective your strategy (and planning process) really is.
Try to reflect on your last planning exercise and ask these questions:
- When was the last time that we really explored our customers’ needs?
- Do we have any points of difference?
- Do our points of difference really appeal to the core needs of our clients?
- What can we do about our competitors’ points of difference?
- Have we planned to explore the “white space”?
But the next question is does this model go far enough – can it be improved? Are there more questions that we need to ask ourselves?
Well, whilst this gives a good simple overview, there are two additional steps that I would suggest.
The point is that competitive advantage is about positioning your offerings and relationships with both customers and your suppliers. Obviously, you want to ensure that your relationship with suppliers is substantially different to that of your competitors. So this needs another circle as shown in blue below. Critically, segments 9 and 10 tell you where there are substantial differences in your own and competitors’ relationships with suppliers.
This leads us to consider whether or not we have considered points of difference not just in our offerings but in our relationships with our suppliers – is segment 10 large enough?
And if I haven’t made life complicated enough for you yet, why not try drawing one last circle?
Things aren’t static – the future is uncertain. Your planning process should have considered alternative scenarios that you may face. So the final circle, shown in green in our last illustration, shows these possible future trends and their potential impact on your customers’ needs and your offerings – segments 11 and 12 – pointing towards new offering development possibilities.
So, the final question is has your planning process considered how customer needs might change and what the new opportunities are?
This is a relatively simple tool to use in the strategy process (or after it has been completed) that reflects:
* Knowledge of customers’ needs.
* The effectiveness of the positioning of your offerings.
* Your relationships with suppliers.
* Areas of white space for future exploration.
What do your circles of success look like?
Urbany, J E and Davis, J H (2007) Strategic Insight in Three Circles Harvard Business Review Nov 28-30