May 13

The rules for a company's success: surprisingly simple but so difficult to pursue

The Harvard Business Review has recently published an article about an economic and statistic study, which has identified three rules at the base of the analyzed companies’ success: better before cheaper, revenue before cost, there are no other rules.

The first rule "Better before cheaper" underlines the importance of developing better, distinctive and unique value propositions. Customers buy and therefore reward companies that are able to impress them through high value goods or services. This high value can be reached through a loved brand, a unique style or high technological standards. Even in the case of low cost value propositions, successful companies are those that are able to propose an irresistible and different offer with the lowest price. Moreover, a competitive strategy based on differentiation could be more easily protected from competitors, compared to price wars that generally break out in markets focused on pricing.

The second rule "Revenue before cost" suggests an order of priority in the generation of profits. Indeed, value for Customers, developed by companies through the first rule, must necessarily turn into profits. Companies with exceptional performances first put their focus on revenues, either increasing sales volumes or fixing higher prices. The efficient management of business costs is an essential element, although secondary, i.e. a necessary but not sufficient aspect for the transformation of value into profit.

The third rule "There are no other rules" is actually an encouragement to be creative and flexible. Indeed, any other strategic and operational business decision can be taken and implemented with the utmost freedom, as long as it is consistent with the previous two rules.

But, how companies can pursue these rules, in order to configure and manage successful business strategies? We have paid attention on the first rule, proposing a concrete development path. First of all, companies need to analyze their own value curve and compare it with those offered by competitors. This graphic tool often leads companies to face up to a shocking reality: each market player, including itself, offers the same value proposition and competes on the same value elements. So, what can companies do to become distinctive, unique, better? The Value Innovation approach can be an interesting tool for the development of new, really effective and competitive value propositions. By using some unconventional techniques, companies can design different Customer Value Proposition, introduce and compete on new competitive factors, or new mixes of different factors, as well as redefine market boundaries, winning new Customer segments and expanding the boundaries of the industry.

The route to business success is clear, simple but difficult to pursue. It requires strong creativity and flexibility, but also the courage to change, questioning the cornerstone of a company's strategy: the value proposition offered to Customers, i.e. why Customers should choose us.