- August 18, 2014
- Posted by: Javier González Montané
- Categories: Sales, Strategy
I remember to trying sharing with a CEO and an academic person the advantages of using the Delta Model Strategy (Hax, Arnoldo C. and Wilde II, Deal L. “The Delta Model – a New Framework of Strategy.” Journal of Strategic Management Education, 2003) but it was very disappointed that those well-prepared people were not able to realize the contributions of this model to the strategy field and firms’ performance. Therefore, it is likely a good idea to summarize the Delta Model, and review a few pros and cons of this model.
Adapted from Arnoldo C. Hax and Deal L. Wilde II “The Delta Model – a New Framework of Strategy.” and Jay R. Galbraith "The Star Model"
Delta model strategy pros
- Although the authors do not mention the Star Model of Jay R. Galbraith, we can see that the general framework that they called “The Delta Model’s Winning Formula” fits “almost exactly” in the well-known Star Model. This is a good point because the “simplicity” of this model make much easier the complex task of strategy communication and execution.
- The approach to integrate Porter’s Competitive Position Model (focus on industry and the external environment) and Gary Hamel and and C.K. Prahalad Resource-Based View of the Firm (focus on the firm, internal approach), which can be complementary models although it does not fit 100%.
- Most of the strategic models assume the importance of Mr. Customer. However, the Delta Model explicit mention that everything starts with Mr. Customer. This explicit mention makes a huge different, because many firms forget the importance of Customers in many decisions. Furthermore, this explicit mention of Mr. Customer is probably one of the most important steps to walk in the direction of creating a real Customer Centric Organization.
- The model approach three of the main business issues in the last years. The commodization of products and services, the scarcity of demand (Customer Targeting), and the misalignment between strategy formulation and strategy execution.
- There was a couple of very well developed positioning models (Treacy, Michael and Wiersema, Fred. “Customer Intimacy and Other Value Disciplines.” Harvard Business Review, January-February 1993. – Hagel III, John and Singer, Marc. “Unbundling the Corporation.” Harvard Business Review, March-April 1999.) However, the Delta Model expands and improves the previous models.
- Many organizations assume that the main focus to grow on the Total Customer Solution strategic option is focusing on large accounts. Nevertheless, the Delta Model says something different from traditional wisdom, this model mentions that many of the large companies think that they are self-sufficient and therefore they do not need us except for access to products. If this is the case in your industry (e.g. logistics service providers), the focus should move on medium firms. At least, that could be an opportunity for medium firms trying to compete profitably with large multinational focus on large accounts.
- This model shows the Lock-in System strategy. That strategy is not just used for IT firms like Apple. There are other large firms in different industries that try to pursuit that strategy via acquisitions, creating economies of scale, and building a strategic position of “one stop shop” that offers a complete product/service portfolio in all the geographies.
Delta model strategy cons
- The model promotes correctly from my personal point of view the networked firm, I mean nowadays “no business is an island” but at the same time the model promotes the System Lock-In positioning that isolates the company. For instance, Apple lock-in strategy does not leave any space for other hardware and software firms.
- The delta model is based on cooperation rather than on competition and rivalry. Nevertheless, the most desirable positioning is System Lock-In and my question would be: what can create more competition and rivalry that trying to Lock-In the System.
- They suggest that the most desirable strategy is Lock-in the system, and they focus on the advantages of this strategy but they do not cover “properly” the so high risks of following that strategy. We have just to see the consequence of following a Locking-In strategy in companies like Nokia or Blackberry trying to lock-in the system rather than cooperating with other players like Google (using Android system). Additionally, we should wonder ourselves the following questions: are customers happier with firms Lock-in the system? That strategy means that customers cannot change the supplier easy, and they are going to pay an over price because their exit barriers are very high. So the next question would be: can a lock-in system strategy create a SUSTAINABLE competitive advantage if this strategy is much more focus on our company than on Mr. Customer?
- The model begins very well segmenting the customer, but at the same time it “suggests” that large firms attract customers in all the positions. As Michael Porter would say try to be everything to all customers used to create confusion in the employees and customers even for many of the large firms. Segmentation is so important because is the base to create trade-offs, and strategy is about trade-offs.
- The only element of the Star Model that is omitted in the Delta Model is: People. But people are an essential element in a model that try to approach strategy not just from the formulation perspective rather than from formulation and execution point of view. Moreover, the Delta Model shows the importance of Balance Scorecard tools, therefore they should remark like this tool that the Innovation and Learning Perspective that it is very much focus on people issues are the rock stone of the tool. Finally, a strategic model that one of the main contributions is the focus on Mr. Customer and Customer Loyalty, it should likely approach people because as professor Luis Maria Huete stress to get Customer Loyalty, we need to develop Employee Loyalty.
At this point, someone could think that the model has many pros and cons. However, I would like to clarify that the contributions of the model are many and so important. The cons in reality are just personal suggestions that could expand and improve the extraordinary contribution to the strategy field of this breakthrough model.