If you are representing an organisation in the marketplace you must have a good handle on where your products or services sit commercially. As discussed previously commercial savvy is a critical attribute of a successful business developer.
Porter’s Generic Strategy
Though coarse in its approach, Porter’s Generic Strategy can be a good indicator of where your offering is being presented financially. At its core, the model utilises two characteristics to define your company offering:
- Scope – Does your offering target a narrow or broad customer base?
- Competitive Advantage – Is your offering advantage based on being the cheapest, or on its unique differences?
The overall company Scope and Competitive advantage are plotted along the horizontal and vertical axes allowing you to plot your company offering on the matrix determining the generic strategy that it fits into. See the figure below.
These strategies are:
- Cost Leadership (no frills, winning on cost alone)
- Differentiation (creating uniquely desirable products and services to a broad market)
- Focus (offering a specialised service in a niche market)
- Cost Focus (offering a no-frills, cheap service to a niche market).
For example, a dams and tailings consultancy servicing the mining industry would plot on the Differentiation Focus. They are offering a specialist service to a niche market. Meanwhile McDonalds sits firmly within Cost Leadership, offering low cost meal options to the mass consumer market.
Are Generic Strategies Useful?
I can hear you saying, these strategies are too general. But, while these strategies have do have coarse definitions, it allows the business developer to think broadly about how to approach the target customers. This allows framing of a message suited to their market.
Approaching customers with a Cost Leadership mindset is very different to a Differentiation mindset and would require widely contrasting conversations. I have seen environmental consultancies employ both models to great success. Though the customers and opportunities pursued by each were relatively separate.
For example, a Cost Leadership environmental consultancy might focus on government contracts where low price is the governing win factor. Alternatively, the Differentiation focused consultancy would focus on a specific industry where strong defensible scientific work is required for community engagement and licensing requirements. The latter can justify charging a higher price.
Further Thinking
Consider the business that you own or represent. Where do you plot on the matrix? Does this align with the message that you are sending to customers?
What do you do if you have multiple products that plot in different quadrants? We’ll be exploring this in a future post.
As always let me know your thoughts in the comments or via LinkedIn.
For more detailed information on Porter’s Generic Strategy visit this website.