You may be familiar with business-level and corporate-level strategy. Business-level strategy is strategy at the level of a business unit or a smaller organization and it is mostly concerned with creating a single clear direction for that unit or organization. Corporate-level strategy concerns strategy of large multi-unit organizations. It is typically about managing a portfolio of businesses, creating synergies between them and about mergers and acquisitions.
While these levels of strategy may still be important, there is a third, and increasingly quintessential level at which strategy need to take place in today’s age of continuous disruption: offering-level strategy. An offering is a product or service offered to a specific market. You may also call it a product-market combination, a value proposition, or simply a product or service. I prefer the term offering, however, because it is a simple term covering exactly what is meant, especially the idea that you offer some product or service to the market.
Why Offering-Level Strategy?
There are at least six reasons why strategy needs to take place primarily at the offering-level. They are:
- Your organization consists by and because of its offerings. You create value through your products and services. As such, they are your main reason of existence.
- You sell and compete with offerings. You only have customers and competitors at the level of offerings. That is what they buy and compete for.
- You make your money through your offerings. Your offerings is what is being paid for, not what your organization looks like or wants to achieve.
- Different offerings require different strategies. Even though you may have overarching business-level and corporate-level strategies, any offering needs its own particular strategy.
- Offering-level strategy is flexible. In today’s fast-changing environment, you need to adapt to changes all the time. Strategy at the offering-level allows you to manage your organization as a fluid portfolio of offerings.
- Only at the offering-level can you make strategy concrete enough to execute. At any higher-level, strategy is about averages and generic ideas – which are notably hard to execute.
How to Realize Offering-Level Strategy
Moving from business-level and corporate-level to offering-level strategy as primary level of strategy is quite a change in paradigm. We are used to thinking that strategy is about overarching ideas and generic directions for the organization. Descending to the level of offerings may seem way too detailed and operational. And it may look especially unstrategic. But that is exactly what is the core of offering-level strategy: acknowledging that the heart of business is creating offerings for customers that create unique value for them that is different from the competition.
But how to do that? Obviously, this post is not the place for a comprehensive answer to this question. To get the comprehensive answer, I invite you to read as many of the other posts posted here and especially Vaughn’s recent post on market alignment, since they all in one way or the other are about offering-level strategy. But the short answer is:
- Pick an offering. This is a particular product or service for a particular market, including an indication of which region. For example, rather than talking about Tesla’s strategy as a whole, you focus on the Model 3 for the private market in the US.
- Map the DNA of the value proposition. Identify which value is created along the four elements of DNA: price, quality, delivery and flexibility (see my previous post). For example, you might argue that Tesla Model 3 is mainly focused on quality intangible and price and slightly less on delivery (…).
- Assess how well the value proposition is aligned with the market. Confront the DNA of what is offered with what customers need and what competitors are offering. For example, you map the customer needs and the competition of the Model 3 along the elements of price, quality, etc. and identify where they are aligned and misaligned.
- Assess how well the organization is capable of actually creating and delivering the value proposition. Assess whether the operational means and financials live up to the DNA from step 2. For example, you identify Tesla’s key resources and assess how well they contribute to delivering quality intangible and price.
- Assess how well the DNA of the value proposition is aligned with the purpose, climate and environment of the organization. For example, you look at what Elon Musk aspires and what goes on inside and outside the organization and assess whether or not these aspirations and developments improve the Model 3’s positioning.
The Tesla example here immediately shows that offering-level strategy makes sense. Their other models, such as the Model X, operate in different markets, serving different customers with different needs and different competitors. Applying the same strategy along these different products and markets doesn’t really work. On the other hand, as the recent production problems show, combining such different strategies within a single company is quite a challenge – because they actually require different DNA’s.