The Delta Model provides three strategic positioning options as represented by the Triangle: Best Product, Total Customer Solutions, and System Lock-In. Best Product reflects traditional thinking; Total Customer Solutions and System Lock-In offer new ways to compete based on customer bonding. The bonding continuum maps to these positions and provides a richer understanding of the drivers of bonding – and eight ways to achieve these fundamental strategic options.
Competing as a Best Product is achieved through Low Cost or Differentiation, the traditional options in strategy. This position, however, is limited. There is typically only one “winner” in the Low Cost position per market (e.g., Nucor in the US steel industry), and the first mover advantage in the Differentiation position can be fleeting (e.g. Sony Wega). Nonetheless, because it is the most widely adopted strategy, this product-centric mindset is embedded in each process, activity and metric for most businesses, and thus the legacy that can be the biggest hurdle to changing strategic positions.
Total Customer Solutions
There are three ways to achieve Total Customer Solutions. The first is by Redefining the Customer Experience in a way that considers the full experience of the customer from the point of acquisition through to the complete life cycle of ownership of the product – Saturn used a unique “offer” to separate itself from the traditional car buying process, centered around the promise, “Satisfaction guaranteed or your money back, no questions asked.” The second way is Customer Integration, where the firm effectively substitutes for and/or leverages activities currently performed by the customer. The extreme example is the outsourcing of a complete function, as EDS provides for IT.
The third way is by offering Horizontal Breadth – providing the full set of products and services that fulfills the customer’s entire needs (often through a combination of internal products and external complementor offerings, as Fidelity does in the financial services industry). The bonding results from a single invoice, single point of contact, learning the breadth of customers’ needs, and, most importantly, through customization of this bundle by the customer.
There are also three ways to achieve System Lock-in. The first is referred to as Restricted Access, where potential new suppliers are denied access to an incumbent firm’s customers because the channel has limited capacity to handle multiple vendors, and/or other constraints. Coca-Cola’s dominance of the soda fountain channel, vending machines, and/or optimal supermarket shelf space, and Walmart’s strength in rural markets are two examples. Establishing a Dominant Exchange is another potential route to System Lock-In. Here the company provides an interface between buyers and sellers that once it achieves critical mass, is very hard to displace – sellers want to go to the site with the most buyers, and vice-versa (e.g., eBay, Yellow Pages).
The most extreme form of customer bonding is Proprietary Standard, where the customer is attracted to the product because of the extensive network of third-party complementors that develop adjacent products and services designed to work with the company’s product – like Dominant Exchange, this position has a self-reinforcing feedback loop, that allows the incumbent to strengthen overtime. For instance, with Microsoft, customers are drawn to its operating system because of the large number of applications written for it by complementors, and complementors write software for the operating system with the largest installed base.