Organizational Megalomania

 

Articulating a Marketplace Value Offering

Megalomania is the state of having delusional estimates of your own power, control, and relevance. The megalomaniac rushes forward to conquer with grandiose plans, but no recognition of personal limitations and little capacity for analysis.

Many organizations can act like megalomaniacs as they become delusional in their goals. They want to be product leaders with the highest quality and also the lowest cost, with the widest distribution and the fastest delivery. This is not a business strategy. This is a fantasy.

Strategy is as much about what you are not aiming for as it is about what you are aiming for. The key to designing an organization that can grow and keep costs under control is to understand tradeoffs and make clear choices. An organization that sustains differentiation understands which activities must be different from competitors’ and which activities can be at par or even below par. This process is called strategic activity analysis.

Strategic activity analysis begins with defining an organization’s value offering. An organization should craft a marketplace value offering that articulates the differences between what it offers compared to other organizations. Phrasing the language from a customer point-of-view helps an organization be clear on why a targeted customer would choose them.

For example, a customer might say, “I choose your company because:

1. You are faster in your response times than your competitors;

2. You have people who know more about my business and our industry than your competitors;

3. Your products and service perform more consistently than your competitors;

4. And although you cost more than your competitors, your price is reasonable for the value I receive.”

This customer might also say, “I choose your company for those offerings and despite the fact that:

5. Your geographic reach is narrower than your competitors;

6. The range of products and services you offer is more limited than your competitors; and

7. Your products and services are less innovative than your competitors, though at par with the industry.”

This fictional value offering shows a clear set of choices and tradeoffs. It indicates which activities must be different from competitors, above competitors, at par and even below par.

This is the essence of competitive organization design. Everyone has limited resources. Everyone must choose where value will and will not be offered. Understanding and appreciating this enables organizations to focus limited resources on the most strategic and differentiating activities. It enables leaders to be smart about where they prune costs. Believing that your organization can do everything—that it can be everything for everyone—prevents an organization from really differentiating itself in a sustainable way.