Strategic intent too often goes awry. Modeling the value proposition is the blueprint for avoiding unintended consequences.
Download Technology Forecast: Fall 08
you’re the parts supplier best known for quality in your industry. compared with competitors, you have the highest quality metrics. managers and workers know what your value proposition is, what makes you distinct—it’s the quality.
the economy takes off. you adopt a strategy to acquire competitors and the plants of some customers who want out of manufacturing. revenue grows, your stock soars. as you acquire plants, quality suffers a bit. no surprise given the acquisitions; what a great problem to have, you think.
fixing things causes some wear on your plant managers. they don’t complain. they just leave. employee turnover aggravates the quality issues. rework and other quality-related costs rise, narrowing profit margins. however, revenue continues to grow, and market share has never been larger.
then, as signs of economic softening and inventory build-ups appear, one day a big customer demands more supply chain visibility. you handle it as a one-off situation.
suddenly the economy sags. revenue slows, excess capacity grows. now every customer is demanding supply chain visibility to better manage their inventory costs. they still want quality as well as low costs, and they point out that your quality has declined. you’re still trying to bring the acquired plants up to standards through training and information systems.
but these fixes aren’t enough. customers threaten to switch to your main rival. they argue that your once-superior quality is now only equal to the rival, at best. the rival also made acquisitions, but not as many. it passed on some opportunities to build market share to ensure it could fully integrate the acquisitions it did make and to give customers supply chain visibility.
your crisis deepens. red ink and plant closings follow. what happened? you understood your value proposition. you seized opportunities that made the company bigger and should have made it stronger. as your CEO is shown the door and the new boss promises stockholders a return to profitability, a wall street wag, when asked what happened to your company, intones on CNBC: the best-laid strategic plans often go awry.