The Delta Model

Toward a Unified Framework of

Strategy

-Nikunj Barnwal
Two fundamental paradigms during
the last two decades

 The Competitive Positioning

Framework- Michael Porter
 The Resources-Based View- C. K.
Prahlad and Gary Hamel
The Competitve Positioning
Framework
 Industry- Central focus of strategic
direction
 Two ways to compete- Low Cost or
Product Differentiation
 Two basic determinants of the
profitability and strategic agenda-
Structure of the industry and the
competitive position of the business
within that industry.
Five Forces which shape Industry
Structure
1. Intensity of rivalry among
competitors
2. Threats of new entrants
3. Threat of substitutes
4. Bargaining power of buyers
5. Bargaining power of suppliers
The Framework explaining the
profitability

Competitive Positioning Industry Structure

Strategy Formulation
and Implementation
Porter’s Value Chain
 Porter’s Winning Formula
 Pick an attractive industry.
(Attractive means one in which a
business can achieve as close to a
monopolistic position as possible)
 Achieve sustainable advantages by
beating their competitors in as many
key activities as possible.
 So STRATEGY IS WAR!!!
Resources-Based View
 Value Chain- Central focus of
strategic direction
 Looks for value derived from
resources, capabilities and
competencies
 Firm’s development of resources and
capabilities- Central focus of
competitive advantage
Four Key Components to attain and
sustain Competitive Advantage
 When Resources and Capabilities
generate unique core competencies
 When substitution and imitation is
minimized
 When benefits are retained and not
appropriated by competitors
 When Cost of the resources and
capabilities doesn’t offset the
resulting benefits
So RBV’s Winning Formula
 Develop resources and capabilities
(unique, valuable and non-tradable)
 Prevent imitation or substitution
 Prevent hold-up and slack conditions
 Cost doesn’t offset the resulting
benefits
Where goes the Customer???
 The importance of customer missed
by both the frameworks.
 In Porter’s model, customer has been
described as one of the five forces
whose bargaining power should be
resisted/diminished.
The Delta Model
 ∆ stands for transformation/change
 Bonding- Central focus of strategic
direction
 Bonding with customers as well as
complementors
 Business Models: Three Distinct
Strategic Options
System Lock-In

Total Customer Best Product

Solutions
09/15/09 Asian School of Business 13
Best Product
 Classical form of competition
 Customer gets attracted by Low Cost or
Differentiation
 Central focus of competition- Competitor
 Competitive advantage » Product
Economics and the Internal Supply Chain
 Drawback- Minimum customer bonding
 Most widely adopted and the default
position…
Total Customer Solution
 Deep customer understanding and
relationship
 Coherent composition of products and
services aimed at enhancing the
customer’s ability to create their own
economic value.
 Instead of competing and imitating, its
redefining the ways to capture and serve
the customer by corporate capabilities
System Lock-In
 Complementor- engaged in the delivery of products
and services that enhance our own product &
service portfolio
 Identification and incorporation of all the key
external players for a full corporate scope
 Richness and depth of complementors lock our
product into the system and lock-out the
competition
 Shift from Supply Chain of one’s products to Overall
System Supply Chain
 By owning or restricting Distribution Channels »
Competitors locked-out
Value Creation by Each Strategic
Option: Empirical Evidence

 Market Value Added measures mean the difference between a

company’s total market value of equity and debt and its book
value.
 Market-to-book ratio» (Expected Future Cashflows)/Investments
The Adaptative Processes- How to
Genuinly Link Strategy and Execution
 John S. Reed » “A CEO has just two
jobs, decide what to do and making it
happen. And, ninety percent of the
job is making it happen…”
 So three business processes have
been identified to capture the
essential tasks of execution.
Three Business Processes
1. Operational Effectiveness:-

 Responsible for the delivery of products and

services to the customer
 Focus » Producing the most effective cost and
asset infrastructure to support the desired
strategic position
 It should expand its external scope to include
suppliers, customer and key complementors,
thus establishing an extended supply chain
Three Business Processes
1. Customer Targeting:-

 It addresses the business-to-customer

interface
 It intends to attract, satisfy, retain customers
effectively and to enhance their financial
performance either by reducing their costs or
by increasing their revenues
 The ultimate goal is to establish the best
revenue infrastructure for the business.
Three Business Processes
1. Innovation:-

 Ensures a continuous stream of new products

and services to maintain the future visibility of
the business.
 Should not be limited to the pursuit of internal
product development, but should extend the
sources of Innovation to include suppliers,
customers and key complementors.
 Role of the Adaptive Processes in Supporting
the Strategic Options of the Triangle
Best Product Total Customer System Lock-In
Solutions
O.E. Internally efficient Maximization of the Enhancing the
cost infrastructure customer value overall system
through combined performance by
value chain of the firm consolidating
and its customers strong
partnerships with
complementors
C.T. Seeks maximum Developing individual Attempts to
coverage through customer bonds consolidate a
distribution harmonized
channels system
architecture
Innovation Speedy Development of a Develop and
development of the composition of appropriate an
firm’s products customized products industry
jointly with the standard,
customer
Delta Model’s Winning Formula
 Careful segmentation of the customer base
and develop as much knowledge as
possible of the customer economics (seek
customer bonding)
 Select the most appropriate strategic
positioning among the three key option-
B. P., T. C. S., I.
 Define the strategic agenda. Ensure that
the three processes are properly aligned
 Design the proper metrics and rewards to
facilitate the strategy development
Comparisons among strategy
frameworks
Porter’s RBV Delta Model
Framework Framework Framework
Focus of Industry / Corporation Extended
Strategic Business Enterprise
Attention

Types of Low cost / Resources B.P., T.C.S.,

Competitive Differentiation Capabilities, Core S.L.I.
Advantage Competencies

Basic Unit of Activities Core Products, Adaptive

Competitive Strategic Processes: O.E.,
Advantage Architecture C.T., I.

Strategy as Rivalry Real Estate Bonding

 The Triangle

System Lock-in

Total Customer Solutions Best Product

Mission of the Business

•Business Scope
•Core Competencies

Industry Structure
Competitive Positioning
•External factors determining
•Activities that drive profitability industry attractiveness

Business
The Strategic agenda

Innovation Operational Effectiveness

Customer Targeting

Adaptive Process
Strategic Agenda
References:
 www.12manage.com
 MIT Sloan School of Management
Working Paper 4261-02
September 2002
The Delta Model -- Toward a
Unified
Framework of Strategy
Arnoldo C. Hax and Dean L. Wilde II