As part of the process of determining your business model, (as opposed to your business strategy), Glen posed a question – “Is your business Operationally Excellent, Led by Product Innovation or Customer Intimate?” Now at first glance you might like to be all three but with very few exceptions, (e.g. Amazon), it’s mighty hard to be two never mind all three – so you need to pick one to start with.
Operationally Excellent businesses include examples such as EasyJet, McDonalds and IKEA – they tend to provide fit for purpose products and services at extremely competitive prices.
Product Leadership companies are those that truly innovate and pioneer: Apple, Dyson and Google all fit into this category. Rather than let the competition overtake them in product or service development they actually cannibalise themselves with a new product replacing their, (often perfectly good still), existing one.
Client Intimate companies tend to include many from the service sector, although not all, (see Google above), such as First Direct (who are Operationally Excellent too), Hiscox and The Property Academy.
Many of the best performing companies truly understand this concept and stick to their model rather than trying to deliver two or three value disciplines and by contrast many companies that fail, do so because they’re not clear about the model most suitable for them. For example, Customer Intimate businesses that try and compete on price with those that are Operationally Excellent nearly always end up losing out because their infrastructure is based on personal relationships, which are much more expensive than automation and technology.
In the estate agency sector we’ve seen new models emerge that are seeking to be Operationally Excellent whereas the traditional model is Client Intimate. If success in business is measured by long term profitable growth then my money is on the Client Intimate model as people buying, selling, letting and renting want to be treated personally. But a word of warning, if the service is poor, with indifferent people treating clients with little if any personalisation, then cheaper, Operationally Excellent models, will flourish.
In a nutshell, Client Intimate businesses should focus on how they can be even more personal, even more individual, even more intimate and this will cost money so cutting fees is not sustainable, whilst Operationally Excellent companies should focus on automating their systems and processes…of course, as with First Direct, there might be one who can do both, but I predict many more will lose out trying to be all things rather than focussing on one.
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