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The Three Tension Chapter 2
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KELOMPOK 4:KELOMPOK 4:
AULYA AGUSTIN DWI ANDHINIAULYA AGUSTIN DWI ANDHINIPURI WIDYAKSARIPURI WIDYAKSARI
WIBOWO AJI UTOMOWIBOWO AJI UTOMOTEGUH IMAM SANTOSOTEGUH IMAM SANTOSO
THE THREE TENSIONS
PERTEMUAN 1PERTEMUAN 1
PROFITABILITY VS GROWTH
The Three Conundrums1.Focus vs DiversificationHard to keep revenue growing with a narrow businessDiversifying often end up reducing profitability2.Organic growth vs Growth by Merger and Acquisition (M&A)Majority acquisition are found to have resulted in fewer benefit than cost3.Profitability Business vs Growth BusinessA manager suited to task of growth is surely different from another suited to managing profitability
What are leader do?BALANCE
Narrow & diversified portfolioOrganic & Growth M&AProfitability & growth
BATTING AVERAGE
Batting Average: A Measure of Success in Overcoming Tensions
A company’s batting average is a measure of how often a company is able to succeed at two competing objectives at the same time in any given year.
1. Portfolio Diversity and Batting Average
Degree of portfolio diversity has very limited impact on
batting average.
BATTING AVERAGE2. Acquisitiveness and Batting Average
There is no relation between batting average and how acquisitive company have been
As acquisitiveness rises, bating average stays the
same
BATTING AVERAGE3. Market Exposure and Batting Average
Batting average do vary according to industry attractiveness
Batting average varies more within industry than across
Portfolio mix, exposure to attractive market, is less important in determining batting average than relative performance within a market
BATTING AVERAGE
Batting Average doesn’t behave as you might imagine: companies with high batting averages have all degrees of
portfolio diversity, all degree of acquisitiveness, and all types of portfolio exposure.
BALANCE IS NOT THE ANSWER TO SCORING A HIGH BATTING AVERAGE
CUSTOMER BENEFIT
PROVITABILITY AND GROWTH IS THE IMPACT OF SUCH ACTIVITIES ON CUSTOMER BENEFIT
Customer benefits is the reward that customers receive through their experience of choosing and using a product or services
Increase in customer benefit manifests itself in higher prices, a higher market share, or both
The same product/services can have different benefits for different customers and different purchasing context.
Revenue growth that is underpinned by high or increasing customer benefit has much higher odds of being profitable than revenue growth that is not.
GOOD COST VS BAD COST
A good cost is necessary to produce customer benefit.
Bad costs are costs that are not necessary to produce the company's customer benefit, either now or in the
future.
Three types of bad cost:1.Costs that are not necessary to accomplish a given activity.2.Activities that are not necessary to produce the customer experience3.Elements of the customer experience that produce no or even negative customer benefit
HOW COMPANIES LOSE SIGHT OF CUSTOMER BENEFIT
Grow Customer Benefit
Grow Customer Benefit
Shrink Bad Costs
Shrink Bad Costs
Reduce bad costs relative to competitors while offering at least
comparable customer benefit
Grow customer benefit relative to competitors
without growing bad costs
Grow Customer Benefit and
Shrink Bad Costs
Grow Customer Benefit and
Shrink Bad Costs
Grow customer benefit faster and reduce bad costs more than
competitors
THE CUSTOMER FOCUS TRAP
GROWTH WITHOUT PROFITABILITY
Confusing features for benefits
Assuming that lower prices mean higher customer benefit
Leaning on sales and marketing "push“ when there is not enough customer benefit “pull"
Proliferating the offer rather than increasing the benefit from the offer
Entering new customer segments because they look attractive to you rather than because you look attractiveto them
TRYING COST TO EARNING TRAP
PROFITABILITY WITHOUT GROWTH
Managing costs more closely in the bad times than in the good times
Treating costs differently according to who owns them, who sees them, or whether they are fixed or variable, as opposed to whether they are good or bad
Basing prices on costs or costs on prices
Overestimating economies from scale;underestimating complexity from scope
Reinvesting cost savings into bad costs
WHAT CAN LEADER CAN DO
MAKE "GROW CUSTOMER BENEFIT"
YOUR BROKEN RECORD
MAKE "GROW CUSTOMER BENEFIT"
YOUR BROKEN RECORD
Managers are more used to justifying acquisitions on the grounds of cost "synergies" than customer benefit
ASK HOW TO GROW YOUR MARKET, NOT JUST YOUR MARKET
SHARE
ASK HOW TO GROW YOUR MARKET, NOT JUST YOUR MARKET
SHARE
ASK WHAT WOULD GROW BENEFIT FOR
THE CUSTOMER'S CUSTOMER
ASK WHAT WOULD GROW BENEFIT FOR
THE CUSTOMER'S CUSTOMER
Market growth makes you look to your customers and the fundamental benefit of your market.
Sometimes, changing the question by changing the customer you are considering can lead to new avenues for profitable growth.
WHAT CAN LEADER CAN DO
DEFINE YOUR BUSINESS BOUNDARIES BY
CUSTOMER BENEFITS, NOT JUST PRODUCTS
DEFINE YOUR BUSINESS BOUNDARIES BY
CUSTOMER BENEFITS, NOT JUST PRODUCTS
Ask managers to consider the business in both ways, product and customer benefit
PREFER MARKET STRENGTH TO MARKET
ATTRACTIVENESS
PREFER MARKET STRENGTH TO MARKET
ATTRACTIVENESS
GROW PRODUCTIVITY IN GOOD TIMES AND
BAD
GROW PRODUCTIVITY IN GOOD TIMES AND
BAD
a company's relative position within its markets matters more to a high batting average than being in an attractive market
companies can set targets for continuous improvement in cost efficiency-and therefore reduction in bad operating cost
WHAT CAN LEADER CAN DO
MAP COST TO CUSTOMER WILLINGNESS TO PAY
MAP COST TO CUSTOMER WILLINGNESS TO PAY
How well costs are aligned with customer benefit
SEGMENT ONE LEVEL LOWER THAN THE
COMPETITION
SEGMENT ONE LEVEL LOWER THAN THE
COMPETITION
APPLY BOTH AN OPERATING PERSPECTIVE
& A STRUCTURAL PERSPECTIVE TO COSTS
APPLY BOTH AN OPERATING PERSPECTIVE
& A STRUCTURAL PERSPECTIVE TO COSTS
Not all sub segments were losing money because of bad costs
The best ways to increase the odds that company costs are cut ever closer to what is absolutely necessary to produce high and growing customer benefit