A unique approach to corporate strategy

March 17, 2010

In today's challenging economic environment, finding ways to differentiate and grow a business is more important than ever. In a new book, The Delta Model, MIT Sloan School of Management Professor Arnoldo Hax presents a fundamentally new approach to strategy focused on the customer rather than competitors.

"If you focus on competitors as your benchmark then you start to imitate them, which causes congruence in your industry. That is the worst thing that can happen because it leads to lackluster performance, ineffective customer service, and products and services that don't excite anyone," says Hax. "The alternative is to concentrate on the customer, which is the premise of The Delta Model."

Based on more than 30 years of research, teaching, and consulting, Hax offers a unique perspective on management strategy as well as practical tools to help executives successfully implement the Delta Model into their organizations. The model, which applies to small and medium-sized businesses as well as large corporations and nonprofits, builds on existing ideas yet expands and often counters conventional wisdom.

In the book, Hax explains how the process of incorporating the Delta Model can be broken down into five simple tasks. "First, managers need to deeply understand customers and never treat them all the same," he says. "They must create a unique value-added proposition that separates their business from the rest of the pack. That is when the process begins to creatively reexamine strategy and implement changes to really deal with the customer in a granular way."

Second, managers need to look at their organizations' competencies. "What competencies are present and what needs to be added to deliver the value proposition?" he asks. "It's not about benchmarking how you've done in the past, but making sure you have the infrastructure and ability to differentiate products to offer total customer solutions. You need to create 'white spaces' to determine the available market that exists for each customer."

The third task involves the mission of the business. "All businesses need to embark on change in today's environment. So the mission should be a powerful expression of what changes you will bring to the organization. It's about where you are now, where you want to be, and what changes are implicit in that transformation," he explains.

Next, managers must identify the "action items," decide who is responsible for executing the changes, and create a plan for how to manage the new processes, says Hax. And finally, managers need to produce an "intelligent budget" that measures the economic value created.

"It is imperative to respond to today's challenges with a fresh state of mind. Following the conventional ways of thinking about management strategy is not an option because those ways are anchored on competitors and rivalry," says Hax, who illustrates the Delta Model with dozens of international examples across a wide range of industries. "This is a new approach with powerful concepts and tools to help managers make this model a reality."
Hax, a native of Chile, is the Alfred P. Sloan Professor of Management Emeritus at MIT Sloan. He previously served as the School's deputy dean and as chairman of the strategy group for the Program for Senior Executives and the Sloan Fellows Program. The author and coauthor of nine books, Hax has consulted for clients around the world, specializing in the development of formal strategic planning processes.


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