This is the copy of an email sent to a client in Kashmir who is studying the ROKC™ Method. We felt it might be of interest to other readers interested in learning about the method.
Good morning, Peter.
You are such an amazing student. I am impressed. Thank you.
To answer you question in the fastest possible way – ha, ha, ha – the ROKC is a conceptual framework not really a calculation. Although it could be a calculation it is not used that way and probably should. The framework is based on the premise that a business exists to make an asset available to customers who will derive a benefit from it. You can call that benefit a competitive advantage or, as I do, a reduction in uncertainty, it makes no difference. The business itself is there to make the asset usable to the customer. For example, a business involved in licensing IP will be structured differently from one making a pen or selling food. Likewise, the asset will provide the customer with a benefit only in certain markets. For example, the business may start by manufacturing in the US or Europe where it is competitive but over time that competitiveness diminishes and the company moves its manufacturing equipment to an emerging market. However, the company may then shift in the US or Europe to brand strategy because in those markets that is the asset that gives the highest return while manufacturing in the emerging market where it is also optimizing it return and importing the finished goods to the US and Europe.
The ROKC Method advises the business leader to design processes and manage the risks of operating in a given market so that it maximizes the return on the key component. Using the example above, the processes and risks of a brand strategy in the central markets will be different from those related to manufacturing in the emerging market. Just like the manufacturing strategy in the emerging market might have to then be divided in two because one part of the product is exported to the central economies while the other is consumed within the emerging market itself.
Why an asset becomes ineffective over time depends on many factors. The first is related to the asset itself. Every farmer knows they have to rotate their crops because all the nutrients in the soil are exhausted from too much growing on the same parcel. The asset becomes impaired, we say. However, the farmer can add fertilizers and nitrogen to the ground thereby replacing the nutrients and getting a higher yield. But what happens if the price of fertilizer is too high? One of the processes becomes too expensive to get a return on the asset and the farmer stops farming. But the government considers it is in the public’s interest that the nation produce its own food so they tax everyone and subsidize farming. Here you can see how the processes and risks work together to help the business get a return on its key component: land. The same analysis can be done in every industry and sector in every country in the world.
In my view, it is only by focusing and monitoring the return on the key component that the company can truly determine how effective it is in providing the customers in a given market with a competitive advantage. Likewise, in doing so, the leaders can know when its effectiveness has been reduced to a level such that it is time to find another asset that allows a higher return. Just like in the case of the manufacturer who moves production abroad but follows a branding strategy in their legacy market.
So the short answer is what you wrote:
“Am I right if I state that ROCK is analysis of the very core of the business, process that takes assets, transforms into products and via distribution channels delivers to your customer.”
Good job, Peter.