Get inspired by how value chain thinking impacts your bottom-line performance. Learn from the views of Arnoldo C. Hax on how to put value chains at the heart of your strategy. Value chains are key in customer bonding. Customer bonding is key in improving your bottom-line performance. Learn from the views of Kaplan & Norton on how to translate strategies into actions. Get a premium from strategy execution. Engage the debate and share your thoughts with your peers. For more information, contact Prof. Dr. Bram Desmet (0497.58.28.60)

1. Value Chain Thinking
at the Heart of Your Strategy
Prof.dr. Bram Desmet
bram.desmet@mobius.eu
+32 (0)497.58.28.60
1

2. 1980  Compete on:
– Low Cost
Michael
Porter – Differentiation
 Strategy is war
 Focus on competitors
 Compete on:
1995 – Operational Excellence
Treacy & – Product Leadership
Wiersema
– Customer Intimacy
 Choose 1 dimension and be
the best!
System  Compete on Customer Bonding:
2010 Dominant Exchange
(eBay)
Lock-In
Proprietory Standard
(Microsoft)
– Best Product Offering
Arnoldo
Restricted Access
– Total Customer Solution
Hax (Eandis)
Customer
– System Lock-In
 Choose 1 dimension per
Horizontal Breadth
(IBM) Bonding Low Cost
(Ryanair)
Total Best
Customer
Solutions
Customer
Integration
(Axima) ???
Redefining
The Customer
(Apple)
Differentiation
(Apple)
Product
segment! Customer = Center.
 Strategy is love. Competitive
advantage comes from
Strategy has customer bonding, not beating
become more competition.
complex 2

3.  Proprietory Standard
2010 –
–
e.g. Microsoft
+ network of complementors
Arnoldo Hax improving your product
 Dominant Exchange
– E.g. eBay
System – An interface between buyers and
Lock-In sellers that is very hard to displace
once it achieves critical mass
Dominant Proprietory
Exchange Standard  Restricted Access
(eBay) – E.g. Utilities
(Microsoft)
– Significant barriers in place to
 Horizontal Breadth Restricted make it hard for competitors to
– e.g. IBM for IS Access access the customer
– “One Stop Shop” (Utilities)
– Satisfy all customer needs
 Low Cost
Customer e.g. Ryanair, Colruyt
 Customer Integration Low Cost
–
– e.g. ABB Horizontal Bonding – Lowest Price, Hassle-Free Service,
(Ryanair)
– We no longer sell robots ... Breadth = “Operational Excellence”
we sell “uptime” for (IBM)  Differentiation
“automation” – E.g. Sony
– Transfer knowledge to the Total Best – Always first on the market. Highest
customer to enhance its Customer Product specs. =“Product Leadership”
performance Redefining Differentiation – Early adopters & niches.
Solutions Customer
(Sony) – Get a price premium.
Integration Customer
 Redefining Customer (ABB) = “Product Leadership”
Relationship
Relationship (Apple)
– e.g. Apple (i-everything)
– Unique experience
throughout complete cycle
of ownership
The “Delta Model”
of Arnoldo Hax
3

4. The “Delta Model”
of Arnoldo Hax
System
Lock-In
Dominant Exchange
An interface between buyers and sellers that is Dominant Proprietory Proprietory Standard
very hard to displace once it achieves critical mass Exchange Standard Capture an extensive network of
complementors that improve our
Restricted Access
Restricted product performance
Significant barriers in place to make it hard
for competitors to access the customer Access
Customer
Horizontal Breadth Bonding Low Cost Low Cost
“One Stop Shop” Horizontal
Breadth Lowest Price, Hassle-Free Service
Satisfy all customer needs
Total Best
Customer Product
Customer Redefining Differentiation
Solutions
Integration Customer
Relationship
Customer Integration Redefining Customer Differentiation
Transfer knowledge to the customer Relationship Development of features and
to enhance its performance Unique experience throughout functionalities that make the product
complete cycle of ownership unique and command a price premium
4

5. The Case of Castrol
(Lubricants)
Castrol = leading lubricant company System
Lock-In
• Best Product Strategy was going nowhere
• Differentiation through premium products easily copied by
competitors after 6 months
• Fast commoditization
• Differentiate by adding services (Total Customer Solutions)
• Build on accumulated knowledge about plant maintenance
Customer
(lubricant is used to improve the productivity of machinery
Bonding
and equipment)
• Rather than use this knowledge strictly for developing new
products, transfer that knowledge to selected customers
Total Best
Product
• In the fight against Customer
commoditization services can more easily be
Solutions
customized in comparison to products
5

6. Market Segments Vs Customer Segments
Often, companies segment markets by
identifying major clusters of business The Case of Castrol
applications. For instance for Castrol
market segments are “cement”, “sugar”, (Lubricants)
“pulp & paper”, “textile”, “food & System
beverage”, “wood”, “mining” and “glass”. Lock-In
The brilliant next step for Castrol was to
identify, within each market segment,
which customers to target with varying Redefining Customer
degrees of priorities. Relationship
Unique experience throughout
complete cycle of ownership
Customer Integration
Transfer knowledge to the customer
Differentiation
to enhance its performance Customer Development of features and
functionalities that make the product
Bonding
unique and command a price premium over
commodities
Total Best
Customer Product
Tier 1 Tier 2 Tier 3
Solutions Relationship Transaction
Support
Productivity Conscious Customers Cost Conscious Price Conscious
These customer are eager to receive These customers are concerned about These customers are basically buying
support that will enhance their total costs but they believe new from the supplier that has a recent
productivity, reduce total costs, and production does not necessarily yield quality level at a good price
promote higher sales. higher sales or economies of scale
= Primary Target Segment = Secondary Target Segment = Least Desirable Segment
6

7. Tier 1: Family Office
The client is composed of all the members of an
A Case from
exceedingly wealthy family including multiple
generations
Retail Banking
Family holdings are financial as well as non-financial
assets, comprising a complex porftolio System
The family office is run by a team of experts which Lock-In Market Segments Vs Customer Segments
manages these complex assets through a web of Traditional segmentation is based on the amount
financial intermediaries Dominant of the financial assets, e.g.
Exchange - From 0,1Mi – 0,5Mi
Tier 2: Wealthy Individual - From 0,5Mi – 5Mi
An extremely accomplished individual - From 5Mi – 50Mi
with impressive financial assets Restricted
- More than 50Mi
Needs a CFO kind of relationship, Access
This segmentation is a snapshot that ignores the
meaning a person who will be a fully
trusted advisor on every financial
evolution of the customer. The tiers defined
decision below recognize the potential evolution of
Customer clients.
Advisory service applied to a complex
tailor-made portfolio Horizontal Bonding
Long-term relationship is assured, Breadth
hopefully generating an exclusive
partnership Best
Total
Customer Product
Customer Redefining Differentiation
Solutions Integration
Tier 3: Matured Investor Customer
Succesful Individual with significant personal Relationship Tier 5: Basic Investor
holdings Typically a young person at the beginning of
Needs premium attention and customized his/her professional career
services including complete estate planning, with Demands basic quality services with low-cost
Tier 4: Accomplished Investor transactions
emphasis on retirement assets Typically a successful professional, at a middle
The creation of strong bonding based upon trust, Needs guidance on simple investment choices
career stage and promising future
transparency, and mutual benefits is established Potential for long-term relationship
Begins to accumulate some wealth
Requires advice on the selection of a more
sophisticated financial portfolio, with clear
understanding of risk/return tradeoffs
The seeds for a long-term relationship are 7
planted, if value added can be demonstrated

8. Tier Solutions we provide Benefits client Benefits for us
(1) Family Office Outsourcing of Family Office Mgmt Comprehensive CFO services System lock-in possible through
Comprehensive CFO-type services outsourced management of all financial
(including structuring, Complete access to all FIC intermediary relationships
consolidations, ...) customized products and services Potential investment banking
relationship
(2) Wealthy Some CFO-type services (e.g. Risk Access to global and High margin products
Individual management, exclusive product institutional/alternative products, Cemented long-term relationship
access) and structuring of complex Potential to maximize “share of
Structuring and management of solutions wallet”
complex financial solutions Long-term relationship Potential next generation Family
Consolidation of total financial Potential for highly personlized CFO Office (dominant exchange and
picture service system lock-in)
(3) Matured Consolidation of total financial Access to global and High margin products
Investor picture institutional/alternative products Cemented long-term relationship
Some structuring and management and structuring of complex Potential to increase “share of
of complex financial solutions solutions wallet” with IRC
Risk and product appetite profiling Long-term relationship
(4) Some structuring and management Access to best-in-class products Client beginning to develop taste for
Accomplished of complex financial solutions Competitive pricing for wealth higher margin products
Risk and product appetite profiling management services Potential to cement long-term
Investor
Products, access to products and Long-term relationship with access relationship with more activist
transactional support to additional resources advisory services by CRM
(5) Basic Risk and product appetite profiling Access to best-in-class products Potential to establish long-term
Investor Products, access to products and Competitive pricing for wealth relationship
transactional support management services
8

9. Your Company
Think about 3 key customers /
customer groups in a given market
segment ... Where would you map
System them on the Hax Model?
Lock-In
Dominant Exchange
An interface between buyers and sellers that is Dominant Proprietory Proprietory Standard
very hard to displace once it achieves critical mass Exchange Standard Capture an extensive network of
complementors that improve our
Restricted Access
Restricted product performance
Significant barriers in place to make it hard
for competitors to access the customer Access
Customer
Horizontal Breadth Bonding Low Cost Low Cost
“One Stop Shop” Horizontal
Breadth Lowest Price, Hassle-Free Service
Satisfy all customer needs
Total Best
Customer Product
Customer Redefining Differentiation
Solutions
Integration Customer
Relationship
Customer Integration Redefining Customer Differentiation
Transfer knowledge to the customer Relationship Development of features and
to enhance its performance Unique experience throughout functionalities that make the product
complete cycle of ownership unique and command a price premium
9

10. 2008 2. Plan the Strategy 1. Develop the Strategy
Kaplan & Norton
• Strategy map/themes • Mission, Values, Vision
• Measures/targets • Strategic Analysis
• Initiative portfolios • Strategy Formulation
• Funding/STRATEX
Strategic Plan
3. Align the Organization • Strategy map
6. Test and Adapt
• Business units • Balanced scorecard
• Profitability analysis
• Support units • STRATEX
• Strategy correlations
• Employees • Emerging strategies
Operating Plan
• Dashboards
4. Plan Operations • Sales forecast 5. Monitor and learn
• Key process improvement • Resources rqts • Strategy reviews
• Sales planning • Budgets • Operating reviews
• Resource capacity plan
• Budgeting
Execution
• Process
• Initiative
Too many companies are (too) good in strategy formulation but
(too) bad in (a disciplined) strategy implementation!
10

11. A strategy map tries to describe the way the organization intends to create value for its stakeholders
2004 Productivity Strategy Long-Term Growth Strategy
Kaplan & Norton Shareholder Value
Improve Cost Improve Asset New Revenue Increase
Structure Utilization Sources Customer Value
Customer Value Proposition
Price Quality Availability Selection Functionality Service Partnership Brand
Product/Service Attributes Relationship Image
Operations Mgmt Customer Mgmt Innovation Regulatory and
Processes Processes Processes Social Processes
• Supply • Select customers • Identify new • Environment
• Produce • Acquire new opportunities • Safety and Health
• Distribute customers • Select the R&D • Employment
• Manage Risk • Retain customers portfolio • Community
• Grow business with • Design and dvlp
customers • Launch
Human Capital
Information Capital
Organization Capital
Culture Leadership Alignment Teamwork
11

12. E.g. Strategic Theme: Earn higher customer loyalty from innovative offerings
2004 Productivity Strategy Long-Term Growth Strategy
Kaplan & Norton
Shareholder Value
Extra Revenue by
Improve Cost Improve Asset New Revenue Increase
Extra Revenue from Increasing Share
Structure Utilization Sources Customer Value
New Products of Wallet
Customer Value Proposition
Price Quality Innovative Products
Availability Selection Functionality Service Partnership Brand
Product/Service Attributes Relationship Image
Operations Mgmt Customer Mgmt Innovation Regulatory and
Processes Processes Processes Social Processes
• Supply • Select customers • Identify new • Environment
• Produce • Acquire new opportunities
World-Class • Safety and Health
• Distribute customers •Internal Product
Select the R&D • Employment
• Manage Risk • Retain customers portfolio • Community
• Grow business with
Development
• Design and dvlp
customers • Launch
Stable and High-
Human Capital Workforce
Talent
Information Capital
Organization Capital
Culture Leadership Alignment Teamwork
12

13. Corresponding KPI’s, Targets + Initiatives
2004 Productivity Strategy Long-Term Growth Strategy
Kaplan & Norton
Shareholder Value
Extra Revenue by
Measures Improve Cost TargetImprove Asset
Initiatives New Revenue
Extra Revenue from Increase
Increasing Share
Annual Revenue Growth Structure +25% Utilization xx Sources Customer Value
New Products of Wallet
Percent Revenues from new products 30% xx
Customer Value Proposition
Price Quality Innovative Products
Availability Selection Functionality Service Partnership Brand
Measures Target Initiatives
Product/Service Attributes Relationship Image
Customer Retention 80% Relationship Mgmt Program
Share of Account 40% Gain-Sharing Program
Operations Mgmt Customer Mgmt Innovation Regulatory and
Processes Processes Processes Social Processes
• Supply • Select customers • Identify new • Environment
• Produce • Acquire new opportunities
World-Class • Safety and Health
• Distribute customers •Internal Product
Select the R&D • Employment
Measures Target Initiatives
• Manage Risk • Retain customers portfolio • Community
First To Market 75% Annual industry• showbusiness with
Grow program
Development
• Design and dvlp
Time To Market 9 months Development cycle time engineering
customers • Launch
Stable and High-
Measures Target Initiatives Human Capital Workforce
Talent
Specialized Competency Available 100% Competency Model
Information Capital
New Hiring Program
Key Staff Retention 95% Supervisory Training
Organization Capital
Benefits Program
Culture Leadership Alignment Teamwork
13

14. 2008 2. Plan the Strategy 1. Develop the Strategy
Kaplan & Norton
• Strategy map/themes • Mission, Values, Vision
• Measures/targets • Strategic Analysis
• Initiative portfolios • Strategy Formulation
• Funding/STRATEX
Strategic Plan
3. Align the Organization • Strategy map
6. Test and Adapt
• Business units • Balanced scorecard
• Profitability analysis
• Support units • STRATEX
• Strategy correlations
• Employees • Emerging strategies
Operating Plan
• Dashboards
4. Plan Operations • Sales forecast 5. Monitor and learn
• Key process improvement • Resources rqts • Strategy reviews
• Sales planning • Budgets • Operating reviews
• Resource capacity plan
• Budgeting
Execution
• Process
• Initiative
Too many companies are (too) good in strategy formulation but
(too) bad in (a disciplined) strategy implementation!
14

15. Thank You!
Prof.dr. Bram Desmet
bram.desmet@mobius.eu
+32 (0)497.58.28.60
15

16. TFC : The Value Chain
Experience
“The Fresh Connection” gives a real life value chain
experience within a simulated environment:
• SCM is not only the responsibility of one function or manager, it is
cross-functional teamwork
• Coordinated decision making is critical
• A strategy is necessary to have a common direction
• How to translate strategy into action
• The quality of the supply chain has a big impact on the company
profitability
• The right management information is very important;
• Internal and external collaboration is key to success.

17. The Fresh Connection
configurations
• The business simulation is highly configurable
• Experience the importance of internal collaboration
• Experience the importance of a clear strategy
• Learn to translate a strategy into action
• Experience the difference between target and plan
• …
• A number of simulations is available off the shelf
• Simulations can also be customer specific by including or
excluding content elements or events
What is the impact of such a strategic choice at tactical
level in The Fresh Connection?