Using Value Curves in Strategy Management

02 November, 2015

We have become fascinated with strategy ever since we were introduced to it while developing our Program Management Professional (PgMP)© exam preparation course. In fact, we felt that there was so much more to the subject than what is required for PgMP© accreditation that we took all the tools and techniques we had encountered in our research and created a one-day specialized Strategy Management course.

Strategy is a reasonably difficult concept to grasp. It involves planning, but the execution of the plan takes place in a hostile environment. Or, as the Prussian field marshal, von Moltke, put it: “No plan survives contact with the enemy”.

If you take a typical project plan, there might be a lot of arguing during the initiating and planning phases, but there should be a broad consensus among the stakeholders before execution begins. Also, the plan should lead to benefits accruing for everyone involved. If the plan succeeds, everyone is better off.

In contrast, a strategic plan is asking for trouble. A typical example would be a rugby team manager. S/he will study the opposition team and decide whether to field a strong attacking team, or a strong defensive one. The goal of the strategic plan is to win the game. However, in the opposing camp, another manager is planning how to achieve the exact same goal. At the end of the day, a successful strategy involves someone else having an unsuccessful one. These situations are zero-sum games – for me to win, you have to lose.

In business, strategy involves the same conditions, except that there are many more players. If you enter a marketplace, you will have to gain market share to survive. Your market share involves someone else losing market share and they will not like that. Just like the rugby team manager, your strategy to elbow your way into the marketplace will cause a reaction from the incumbent players. They might object to planning permission; they might drop their prices; or, as an extreme example, they might send the boys around to break your legs! This response is the essence of strategy – your plan will provoke a response, but you are not sure what that response will be. Then you must adapt your strategy to cope with it.

One of the ways to formulate a strategy is to analyse your business or your product using a Value Curve. The Value Curve is a straightforward concept, but it requires a great deal of analysis to provide the correct data. What we need to do is characterize our business or our product/service offering in terms of defining factors. Then we rate these factors on a simple high/low scale for the typical product/service of this type. Now we challenge the values produced. If the industry rates a particular factor high, should it be high? Is it providing value to the customers? Is it only there for historical reasons? Similarly, if a factor is rated low, should it be? Is there an opportunity to appeal to customers by providing something strong in this area? What we need to do is to provide a product/service which appeals to the customer’s value curve, not the curve the market has decided.

As an example, let us look at building the proverbial better mousetrap. What factors should we consider when defining a typical mousetrap? How about these:

From a value curve perspective, this looks like:

There really is not a lot we can do to revolutionize the mouse trap. All the highly rated factors seem to make sense. Also, we are unlikely to get much business offering a maintenance service for a mousetrap. So the only factor that we could distinguish our product would be with a kill alert. Maybe a piezo-electric sensor in the trap could get a strong enough charge from the trap being sprung to signal another device? In the Internet of Things, such technology should be possible – eventually.

In summary then, the Value Curve is an analysis tool. It allows us compare what we are planning to do with what is already out there. We need to determine what is on offer and what the customer really wants. If the current, received wisdom does not align with the customers’ demands, then we could spot a gap in the market and develop products and services to fill that gap.

The only downside is: if we do make a better mousetrap, it won’t be long before everyone else is at it, so we will need to return to this analysis and decide where to go then. Strategy is a continuous process.

By Velopi Seamus Collins

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