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Research and common sense tell us that it is smart to focus your company’s offerings on creating specific added value for customers. The reason is that this makes sure that your products and services offer something unique that at least a specific group of customers values and that makes you stand out compared to the competition.
As presented in earlier articles, there are four value orientations that you can have: price, quality, delivery or flexibility. Here, here and here I have discussed what it takes to be successful with those respective strategies. In this article, I close this short series by zooming in on the last of the four value orientations: flexibility.
As also was the case for the other three value orientations, there are four key areas to pay attention to in your strategy when centering it on a flexibility orientation: 1. a consistent flexibility-oriented value proposition, that is 2. aligned with your market, 3. aligned with your operations and 4. aligned with the structural environment of your organization.
Requirement 1: A Consistent Flexibility-Oriented Value Proposition
Having a flexibility orientation means that you offer products and services that are tailored to your individual customer’s needs. So, rather than offering standard solutions for a particular segment of the market, you offer dedicated, custom products and services. In its most extreme form, this means that your customers can indicate whatever product specification, service design, or customer experience they would like to see and you will offer it exactly as they want. The construction industry is a good example of this. Or, if you focus on quantity, it means that customers can place orders of whatever magnitude—1, 100 or 10 million—and you will deliver.
A flexibility orientation is also in place when you compete on options, like it is done in the car industry. The more options you can offer, the more precisely the customer can adjust your offering to their specific needs. Competing on the versatility of your products is an another form—think multi-purpose tools. In such case you are not so much competing on the tailor-ability of the product itself, but on the variety of purposes it can be used for. A last and particular example of a flexibility-oriented offering is giftcards. Their main purpose is to give the receiver the flexibility to decide themselves what gift they want.
Like with the other three value orientations, the key to a successful flexibility-oriented value proposition is to offer it consistently and vigorously. For a giftcard, for example, this means that it really needs to offer the receiver a broad spectrum of choice. If there are only three restaurants in your town you can use your restaurant gift card for, there’s not so much value in giving it to someone. The same for options, customization or other forms of flexibility: if you sell on flexibility, make sure your offering is flexible.
Requirement 2: A Matching Flexibility-Oriented Market
You can only be successful with a flexibility-oriented offering if this offering matches your market. This means first that there is a large enough group of people within your reach that want flexibility. This is a bit of a tricky one. Sure, we all might believe and say that we want to have unlimited options and choices so that a product or service perfectly matches our needs. But the reality shows differently. We are easily overwhelmed by the number of choices we have. Sometimes this makes us even walk away from otherwise interesting offerings simply because we find making all those choices too complicated.
This has made offering products and services with no or very limited flexibility a viable strategy too. Look at Apple or Tesla. Their range of products is rather narrow and within those products there is not so much you can customize. And they basically lock you in in their own infrastructure, which makes their offerings even less flexible. As these companies show, selling on the low end of the flexibility spectrum by deliberately not offering flexibility can be smart too.
Competing on flexibility used to be a primarily niche market strategy. Whether it is a product or a service, offering flexibility typically was very labor intensive and required close knowledge of and interaction with customers. With the increasing opportunities for mass customization, though, also larger markets can be addressed.
Whatever the size of the market though, a key requirement for a flexibility-oriented strategy is that you address a segment of the market that values flexibility more than price, quality or delivery. And this segment should not already be served by many others that compete on flexibility as well.
Requirement 3: Focused Flexibility-Oriented Operations
If you want to compete successfully on flexibility, this means that your operations should be flexible as well. You need resources, competencies and partners that can realize the flexibility that you offer your customers. To be clear, this doesn’t necessarily mean that your organization has to be agile, adaptive or flexible in general—a trend that we witness today. The point of a flexibility value orientation is not that you can change your organization easily. No, the point is that you can reliably create and deliver a flexible offering to the customer.
This used to mean that large parts of your processes and value chain had to be realized by manual work, involving people. This has made a flexibility-orientation rather expensive. Not surprisingly, we find it usually in the higher segments in the markets where consumers and businesses can afford to spend money on getting a customized product or service.
With the advancements in automation, robotization, digitalization and virtualization, though, offering custom or personalized products has become much less expensive and thereby accessible to whole new markets. In the shoe market, for example, this means that personalization is not reserved anymore for the exclusive handmade brands. You can personalize your Nike shoes too.
If flexibility in order quantity is your primary flexibility orientation, this means that your operations have to be very scalable. If you need to efficiently produce order quantities between, let’s say 1 and 1000, this puts quite some requirements on your processes, people and infrastructure. While you will always have to keep an eye on the other dimensions—price, quality and delivery— the key requirement here is that your operations need to be focused and aligned with the value proposition you are offering.
Requirement 4: A Fitting Flexibility-Oriented Environment
A last requirement for effectively following a flexibility-oriented strategy, is that the environment in which you operate is supporting you in this. As company you are embedded in the larger society and also internally there are structural and cultural characteristics of your company that you need to take into account. The more these factors are aligned with your flexibility-oriented value proposition, market and operations, the more likely you will be successful.
When we look at current trends, many of them seem to support a flexibility orientation. Due the technological advancements referred to above—automation, digitalization, robotization, etc.—it becomes increasingly possible to create cost-efficient customized and personalized offerings on a large scale. Along with that, customer demands in many industries tend to move towards more customization and personalization too. In that sense we can expect flexibility to be on the rise as an increasingly important factor to compete on.
At the same time, the very fact that these technology-push and market-pull trends move towards flexibility, means that competition on flexibility will rise too. Given that the whole point of focusing on a particular value orientation is to create value for your customers in a way that is distinct from your competitors, this doesn’t automatically mean that these trends are good for you. Maybe they are even better for your competitors because they are better equipped to respond to them. Which is bad news for you.
This indicates that there are also internal structural characteristics to take into account. What you offer and where you focus your operations on needs to be aligned with your organizational goals, values and culture. If those are not flexibility-oriented too, you will have a hard time succeeding with a flexibility-oriented strategy. As long as there are inconsistencies, there is still work to do.
Whatever value orientation is your primary focus, the key to success is alignment. For a flexibility orientation this means that, if everything you do is aligned around offering a flexibility-oriented value proposition, then your changes of success increase substantially. As the four requirements above indicate, this means 1. offering a coherent flexibility-oriented value proposition, 2. making sure this value proposition is aligned with your market, 3. creating operational alignment so that both the way you create and capture value are focused on flexibility and 4. adapting until what you offer is aligned with the more structural characteristics of your organization and its environment.
March 12, 2019 at 02:35AM
Forbes – Entrepreneurs