The Adaptive Processes
While the Triangle provides us with guidance on how to get the strategy formulation dialogue started, the Adaptive Processes tell us how to identify and organize the tasks critical to the realization of the chosen Strategic Agenda – "execution itself is not the problem, linking it to strategy is". To really link strategy with execution, we have identified three fundamental business processes that correspond to three common business outputs – delivering products to customers, managing customer relationships, and developing new products – and have defined how the roles of each need to change to support the chosen strategic option. These processes are:
- Operational Effectiveness - the production and delivery of goods and services: this process should produce the most effective cost and asset infrastructure to support the chosen strategic position of the business
- Customer Targeting - the management of customer interfaces: this process should drive the identification and selection of attractive customers and the enhancement of customers' performance to establish the best revenue infrastructure for the business
- Innovation - the process of new product development: this process should assure a continuous stream of new products and services to maintain the future viability of the business
What we find particularly intriguing is that most managers naturally define each process according to a Best Product strategy. Namely, Operational Effectiveness seeks to establish an internally efficient cost infrastructure; Customer Targeting seeks broad market coverage through mass distribution channels; and Innovation seeks the proper development of the firm's products aided by appropriate platforms and first-to-market expectations. However, the requirements of these adaptive processes are quite different when they support the Total Customer Solution (TCS) and System Lock-in (SLI) strategic options.
In the Total Customer Solution strategy, the key objective of Operational Effectiveness is the cost effective maximization of the customer value, and is supported by the combined value chain of the firm and its customers. Customer Targeting is aimed at developing individual customer bonding by increasing marketing intelligence and customer interface. Innovation is targeted at the development of a composition of customized products jointly with the customer.
In the System Lock-in strategic position, the role of each process continues to change and adapt. Operational Effectiveness is concerned with enhancing the overall system performance by consolidating strong partnerships with complementors. Customer Targeting attempts to achieve harmonized system architecture through a network of complementors and complementor interfaces. The ultimate Innovation goal is to develop an appropriate industry standard, managing the breadth and range of applications and interfaces.