SS

3.5.4 Strategy as a position

Strategy as a position is expressed as distinctiveness in the minds of customers. This often means competing in the same space as others but with a differentiated value proposition that is attractive to the customer. Whether it is about offering a wide range of services to a particular type of customer , or being the lowest-cost option, it is a strategic position. Three broad types of positions are variety-based positions, needs-based positions, and access-based positions.

3.5.4.1 Variety-based positioning

Variety-based positioning focuses on a particular variety of customers’ needs and aims to meet them in distinctive fashion. It requires a relatively narrow catalogue of services but with depth in terms of service level s, options, and packages. Service asset s are highly specialized to deliver this narrow catalogue. Service provider s try to meet all the needs of any given customer segment. Success is in terms of performing exceptionally well in meeting a sub-set of needs (Figure 3.27). Capabilities are strong on leveraging economies of scale , managing similar demand from different customers, and fulfilling it with a small and stable catalogue of services. Growth is based predominantly on new opportunities for the same catalogue of services. For example, a service provider may specialize in payroll services for several groups within a business unit , several business units within an enterprise, or several enterprises within a region.

Figure 3.27 Variety-based (left) and needs-based (right) positioning

3.5.4.2 Needs-based positioning

In needs-based positioning, service providers choose to provide most or all of the needs of a particular type of customer (Figure 3.27). It requires a relatively wide catalogue of services covering various aspects of the customer’s business . This is closer to the traditional approach of grouping customers in segments and then aiming to best serve the needs of one or more targeted segments. Service providers do not worry about meeting the needs of every type of customer. They distinguish themselves by performing exceptionally well in meeting most of the needs of a particular customer or segment. Capabilities are strong on leveraging economies of scope , managing different demands from the same customers, and fulfilling them with a flexible catalogue of services. Growth is based predominantly on new services in the catalogue from the same source of demand.

For example, a service provider may specialize in supporting most or all of the business needs of a group of hospitals. It may offer a catalogue of services that covers infrastructure service s, application maintenance, information security, document management and disaster recovery services specialized for the healthcare industry. It maintains expertise on electronic medical record s, privacy issues, medical equipment, and claims processing. Similarly, a provider focusing on the financial services industry has deep insight into the peculiar challenges and opportunities faced by investment banks, insurers, and brokerage firms.

Type I and Type II providers are often positioned to serve a customer segment of one. They have only one customer at the enterprise level even if there are several at the business unit level. Many internal IT organizations are expected to meet all the IT needs of the business that own them. They do not worry about meeting the needs of other enterprises and can therefore organize their service asset s to best serve one enterprise customer.

3.5.4.3 Access-based positioning

In access-based positioning, service providers distinguish themselves through their ability to serve customers with particular needs with respect to location, scale, or structures (Figure 3.28). Customer s vary in size, location, and structure. They deploy business assets in a manner that best serves their own business model s and strategies. Some operate networks of retail branches, stores, trading desks, or point-of-sale terminals that serve as access points for user s of their own services. Others have business assets concentrated at a few large-scale facilities such as factories, warehouses, distribution centres, and call centre s. The employees of some customers are highly mobile with extensive travel and intensive communications needs. Others may have staff mostly in offices and laboratories.

Figure 3.28 Positioning based on location, scale or structure

Positioning of any type requires service assets to be specialized and deployed in patterns that best satisfy the patterns of demand generated by business activities, cycles, and event s of the target market spaces. This is mostly an opportunity to consolidate, stabilize, learn, and grow into a high-performing service provider with focus. Specialization of service assets allows service providers to deliver greater levels of utility to targeted segments. It also means risk s from the high level of asset specificity when there are sudden or drastic changes in the market space from which some providers never recover.

Asset specificity

The more specialized an asset gets, the lower its usefulness for other purposes. A point-of-sale terminal has higher asset-specificity than a PC workstation or storage device that can be re-purposed. Asset specificity applies to organization and people assets as well. Type I providers who have never served more than one customer find it hard to adjust to corporate mergers and acquisitions.

When a tax collection agency decides to accept electronic filing of tax returns and electronic funds transfer (EFT), there is a significant change in its patterns of business activity . Consequently, some service providers, including the agency’s own internal units, have better access-based strategies than others to serve the agency. An insurance company offers to initiate the claims process at the site of an accident. It does so by dispatching claims handling staff to the accident site with all the resource s necessary for the claims process. This strategy not only provides distinctive value to its policyholders but also speeds processes and reduces administrative costs from lengthy cases. It puts an office-based clerical job out on the front-line in vehicles specially equipped with the necessary business applications. The insurance company itself adopts an access-based strategy to distinguish itself from competing insurers.

Other service provider s in turn may compete to win the business of this progressive insurer by offering mobile workplace services that automate and integrate the claims processing vehicles with back-office system s. Service providers with knowledge and experience in mobile systems and application s, similar to those used by emergency medical services, would have a distinctive advantage.

Service providers may adopt one or more of these generic types of positioning (Figure 3.29). There are no universal rules for these positioning strategies, simply plan s and patterns that work, or definitions to comply with. Concrete plans are required, however, to maintain strategic positions from which the mission and objective s are achieved. A sound position guides the organization in what to do and, just as important, in what not to do.