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Reimagining Reality

06.17.14| Strategic Market Planning

Reality is the leading cause of stress, amongst those in touch with it.

Lily Tomlin / Jane Wagner

Stressful or not, being in touch with reality has advantages.  I do try it now and then.

Connecting with future realities is a trickier matter, as forecasts are usually wrong. Even so, it’s useful to periodically envision alternate scenarios for our strategies and business environments.  Early this year, I put myself through a strategic planning process of greater breadth and depth than I’ve done in years. Very glad I did it. It wasn’t the heavily numerical strategic planning process many big companies do, with extensive year-to-year comparisons of financial metrics. I prefer a simpler approach that interweaves two Kevlar-strong threads:

  • Reexamining our past decisions about the customer types we serve, the value bundles we provide, and our business model (i.e. how we deliver and monetize those value bundles)
  • Scenario planning — thinking ahead to what might happen externally and how we might prepare and position ourselves.

Given the need for brevity, I’ll touch on just the first of those threads here.  If you’d like to read the full essay, contact us and ask for our white paper called Reimagining Reality. 

What’s Your Sweet Spot?

Over the course of time, any going business made decisions about the types of customers it serves, the product and service “value bundles” it provides, and its business model (i.e. methods for delivering the value bundle and getting paid for it). I use this Sweet Spot TriadSM tool to depict these decisions:

A start-up faces unknowns in all three poles of the Triad, so the team makes a set of hypotheses for each decision and embarks on a race to discover a workable combination while their initial capital lasts.

If your business is mature, why not act like a start-up and develop a set of hypotheses for at least one alternative Triad? Can you see a more advantageous place in the market under a different combination, one that might grow faster, and/or could be more profitable? An imaginative company — whether it’s yours, a competitor, or a new entrant — could shake up your marketplace with a new Triad.

Case in Point: Uber

For example, Uber and its competitors in urban transportation services owe more of their traction to an innovative Triad than to new-to-the-world invention. Uber’s Sweet Spot Triad looks something like this:

  • Customers: City-dwelling, mobile device owners who need short trips by car
  • Value Bundle: On-demand transportation that’s more available and reliable than conventional taxis
  • Business Model: A mobile device app that matches up a customer with available drivers, with Uber taking a fee for matchmaking and transaction processing

How Uber is upending the taxi business is a well-covered story, yet the company’s impact may broaden. Farhad Manjoo’s recent New York Times article makes the case that with Uber’s increasing availability and reliability, private car ownership may drop. This could materially affect auto manufacturers’ revenue. Uber allows people to buy car transportation services as needed, instead of keeping an oft-underutilized automotive asset with its attendant expenses and inconveniences.

Uber’s asset-light business model is rooted in a variation on the old saying to “Use other people’s money.”  Uber uses other people’s assets. True, the taxi dispatch business is already an asset-light model, since the taxi brands don’t own their own taxi vehicles. Those are typically provided by the drivers and their backers. However, conventional taxicabs are dedicated assets. By contrast, Uber can inexpensively field a fleet of vehicles by tapping private automobiles on a part-time basis. Many owner-operators apparently view their Uber revenue as incremental, and aren’t looking to fully amortize the cost of their auto asset by serving Uber’s riders. So Uber’s model is asset-lighter and lower cost — and its value bundle provides a further edge.

Like Uber, companies aspiring to asset-light business models must solve the information challenge of finding out and communicating:

  • Who needs the service an asset produces
  • Which providers have the asset capacity to provide the service when and where it’s needed
  • The matchup of the two

Application of smart mobile technologies, including payment processing innovations, facilitates solving that challenge and innovating other aspects of the business model. So we can expect to see more companies using asset-light strategies in the future. The cost advantages will be most compelling where the assets in question are expensive capital assets (such as land, buildings, equipment).  In other cases, it’ll be much more important that asset-light models can make feasible a value bundle that would otherwise be unavailable.

A Thought Question

Whose assets might your business utilize, instead of bearing the expense of dedicated assets?

Bob Sherlock

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