Products, Projects, and Strategy – How Do They Fit Together?

What comes first – your products or your strategy? And where do all your business activities, including processes and projects, fit into the picture? If you’re like many people I speak with, you probably feel strongly that products (and/or services) come first and that your business strategy should follow from there.

While I generally agree with this line of thinking, I’d argue that you’ve got to take a more nuanced and flexible approach if you’re going to achieve the type of business success I know you want.

Successful companies excel because they are focused on giving their customers “what they want, when they want it, in a way that makes them feel the way they want to feel”. They’re not simply designing a cool product or hot new service and then looking for a market and customer to sell it to as some kind of afterthought. However, I see this happening in companies far too frequently these days.

For successful companies, these important elements (i.e. giving customers “what they want, when they want it, in a way that makes them feel the way they want to feel”) form their customer value proposition (CVP) and they are determined, orchestrated, and managed in a close and dynamic relationship that enables successful companies to survive, thrive, and grow.

Here’s a picture of what the entire customer value proposition “system” looks like:

Customer value proposition system - Sandy Richardson

As you can see, many components go into determining the “what they want, how they want it” part of a company’s CVP. Did you notice that products and/or services, and their attributes, are just one part of the picture? And, did you notice that they aren’t even the foundation of a solid CVP? Does this surprise you?

It turns out that the foundation for a successful CVP is a clearly defined target customer and an intimate understanding of the range of their needs and expectations, including their MOST important need or expectation (i.e. the thing they value/yearn for the most and, if they are having trouble finding it, would gladly pay for if someone could offer it to them). It turns out that this information is critical in helping companies determine the best combination of attributes for their products and/or services (i.e. what they look like and what they do), evaluate competitors and assess the competitive landscape in a customer-centric way, and make their market space decision (i.e. whether they are going to compete in an existing market or innovate and create a new one). In addition, having an understanding of the needs, expectations, and preferences of their target customer allows companies to define their primary customer value strategy and design the ideal customer experience.

When you are beginning to define the “what they want, how they want it” part of your company’s CVP, it makes sense to start with the foundation first – your target customer. Doing so ensures that you select or create products and services that will be truly attractive to your customers. Products and services that fill a real customer need virtually sell themselves.

However, finalizing your “what they want, how they want it” go-forward decision is, in my experience, a more dynamic process – one that takes into account the inter-connected nature of all the elements involved in your CVP system. As you gather data and develop insights, evaluate information, and assess the potential in each part of this system, you often learn something that causes you to adjust your original thinking and direction.

For example, new information about the most important/number one need or expectation of your target customer may cause you to do a 180 with your products and services such as changing from a value-priced offering to a higher-end product and service. Changing to a premium product may require a change in your primary customer value strategy from a lower priced, self-service model to a high touch, more attentive customer value strategy and service model. The key is that your CVP system must be in alignment and “make sense” at all times if it’s going to work and give your customer “what they want, when they want it, in a way that makes them feel the way they want to feel”.

While determining your products and/or services doesn’t quite take a linear path, be sure to take a logical approach that ensures that your target customer’s needs and expectations drive your product and service selection (and not the other way around).

Now, once successful companies have got their initial CVP nailed down, only then do they move on to determining their business strategy and supporting business model.

A good business strategy outlines the value chain of strategic objectives required to deliver a company’s CVP. Different customer value propositions require different strategic choices so a company’s business strategy should always follow its CVP (and product and/or service suite selection). When it’s doing its job, your business strategy outlines the organizational capabilities (people, tools and technologies), internal process capabilities (how key business processes need to perform), and key customer benefits that support the delivery of the customer value proposition and the financial strategies and rewards associated with delivering this value to the target customer.

However, all of us realize that a good business strategy alone won’t guarantee success – you need the right mechanism to execute it. That’s where your business model comes in. Your business model includes the organizational culture, management and governance structures, infrastructure and resources (tools, technologies, and human resource skills and competencies), and the activities required to enable the execution of your business strategy. Different CVP’s and business strategies require different business models and a failure to properly align your business model, including the key business processes you must excel at and the projects you choose to focus on, has a direct impact on your company’s ability to execute your business strategy to its fullest potential.

In successful companies there is a clear and inter-dependent relationship between products, projects, and strategy. While that relationship can be summarized via the diagram provided below, it’s important to remember that this entire picture really works as a dynamic eco-system.

Strategy Business Model - Sandy Richardson

Your products and/or services, business strategy, and projects all have their place in this picture and a contribution to make to your business success – remove any of them, or do anything that puts any element out of alignment, and you will impact your company’s ability to achieve its customer and business goals and objectives.

The key thing to remember when it comes to products, projects, and strategy is this: Your ability to manage the dynamics of the elements in this entire eco-system ON AN ONGOING BASIS is the one critical factor that will, in the end, allow you to formulate a more effective response as your business situation changes – allowing your company to continue excelling at delivering even greater value to your target customer.

This is the thing that successful companies excel at – and your company must excel at it too!

Business Model Canvas Fusion is Your Best Approach for Business Success

A few years ago, Alexander Osterwald and Yves Pigner published their ground-breaking book Business Model Generation. Since its publication, their book has gone on to be one of the “must read” business books for start ups, entrepreneurs, and business leaders alike.

Billed as “a handbook for visionaries, game changers, and challengers”, Business Model Generation was created to enable business model creation and, more importantly, innovation – a way to re-imagine business models to create value in an ever evolving business environment while also getting an edge on old guard businesses using old school business models.

One of the most interesting things about the approach that Osterwald and Pigner’s book and model takes is that it allows you to depict your thinking and business model in a visual format (called the business model canvas). Though not new (the strategy map was introduced many years earlier as a visual strategy and business communication and management tool), the visual format provided by the business model canvas is really appealing in today’s quick information, sound-bite world. In addition, this approach makes it easy for business leaders and their teams to sketch out and test business models as they explore strategic alternatives and innovations.

If this is the first you are hearing about this book, I would strongly encourage you to check it out – it’s loaded with lots of great information, tips, and practical examples business leaders and their teams can use.

Let’s take a moment to look a little closer at the approach to business model creation and innovation outlined in the book.

Business Model Generation defines a business model as “describing the rationale of how an organization creates, delivers, and captures value”. I would agree with this definition but I would actually go a little further and frame it like this: “describing the rationale behind, and the way in which, an organization creates and delivers value to a specific customer (or stakeholder), AND demonstrating how it translates value creation and delivery into business benefits”.

Tweaking the definition of a business model in this way may look subtle but it actually makes a BIG difference to the approach you might want to take to business models (hold that thought for a moment!).

Very quickly, Business Model Generation adopts nine building blocks that are designed to cover four key business areas: customers, the offer, infrastructure, and financial viability. The nine building blocks, determined through a collaborative process roughly in this order, are:

1. Customer Segments (CS): The one customer or several customer segments the organization serves.
2. Value Propositions (VP): The customer problems the organization seeks to solve and the customer needs it strives to satisfy with its products and services in an effort to provide value to the customer segment(s).
3. Channels (CH): The communication, distribution, and sales channels that will be used to deliver the value propositions to customers
4. Customer Relationships (CR): The relationships you want to establish and maintain with each customer/customer segment.
5. Revenue Streams (RS): The revenue streams that will result from delivering the value propositions successfully to customers
6. Key Resources (KR): The assets required to offer and deliver everything that has been defined in 1-5 above
7. Key Activities (KA): The critical activities key resources must perform to deliver everything that has been defined in 1-5 above
8. Key Partnerships (KP): When some key activities are outsourced and/or some resources are acquired from outside the organization, partners and partnerships are required
9. Cost Structure (C$): The pricing structure the business model elements result in.