In the ROKC approach to business we do our best effort to break a business down into its component parts:
- Key component
- Competitive Advantage
- Transformational Process – Production
- Transformational Process – Consumption
- Risk Management
where all processes and risk management activities focus on maximizing the return on key component. And, each business component has an opportunity associated with it that a good leader can use to build a business.
In other words, you may have a key component which provides the opportunity to build a business. But an examination of the competitive advantage may be perceived as low in which case it is difficult – if not impossible – to actually build the business. Conversely, the competitive advantage may be high but the transformational processes may be difficult to achieve once again nipping the business in the bud. Or, the transformational processes may be easy but risk management too consumptive of resources leaving no excess value to reinvest in the business and return to investors. Exploiting all these opportunities to create a viable and robust business requires a skilled leader; a leader who may need to evolve with the business as it grows or a series of different leaders for each growth phase the business goes through.
In many situations the founders do an excellent job of getting the business off the ground but lack the management skills to take it further. They should not let their egos get in the way and reach out to those with the managerial skills to grow the business. This period is a great opportunity for the founders to learn the skills they need to develop and then take the reins at a later time. By way of an example, take a look at Google. Eric Schmidt was brought in and ran the company for many years while Larry Page learned from him, then Larry stepped in to the CEO spot. No harm in that.
In fact, many founders excel exploiting the competitive advantage their key component provides them with and can even give it expression in a product or service. The real challenge comes when they have to make the product or service acceptable to their customer base. We call this the Transformational Process – Consumption: How to make a product or service that customers want to consume.
The TP – Consumption includes a vast array of processes that depend on the product or service that his been made which in turn depends on the competitive advantage which takes us back to the key component. For example, in a market that is still very production oriented the importance may be placed on the product features or benefits, whereas in a consumption oriented market the emphasis might be place on the brand or other intangibles. Consequently, how and what is communicated to customers will vary accordingly.
One of the best presentations I have come across to illustrate in a very pragmatic and amusing way is a TED Talk from 2009 done by Rory Sutherland, a British “Ad Man”. In this talk, Rory makes a very persuasive case for generating value from the intangibles of a product using communication to influence customer perception.
“Advertising adds value to a product by changing our perception, rather than the product itself. Rory Sutherland makes the daring assertion that a change in perceived value can be just as satisfying as what we consider “real” value — and his conclusion has interesting consequences for how we look at life.”
(Source: Life lessons from an ad man – TEDGlobal 2009)
Here are links to other Rory Sutherland TED Talks.