The Three Market Positions – You Must Choose One

Market position is important because it’s the perception that you want the buying community to have about your company. In this industry you absolutely have to choose, because the focus is so important. There are only three choices when choosing market position: low cost provider, customer intimate, or product innovation. Let me say a little bit about each of those.

The low cost provider is a very enviable position and not something to be thought less of. Wal-Mart is a good example for the low cost provider.

Customer intimate means that a customer sees something unique in you that they are willing to pay extra for and that’s the critical point. Don’t mix up customer intimate with customer service, because everybody has to have good customer service. To be customer intimate you are providing something unique that that customer is willing to pay for. Again, good example is Nordstrom’s as customer intimate. You will pay a little more for that blouse because what they are going to allow you to do is return it with no questions asked.

Product innovation means that you are relentless about constantly changing product and a good example of that one is Apple. People want to be part of that innovative product community, but they are not the low cost provider and they are not customer intimate because they don’t provide something unique to each customer, and they are certainly not the low cost provider.

There are conditions that favor each one of those. Being the low cost provider means that you are that because customers all look pretty much alike, they use the products the same way and there is intense price competition against those like services. If those are the conditions that you are playing in, then you would strive to be a low cost provider.

In customer intimacy, clients don’t use the product the same way. That can be nuanced. It doesn’t have to be huge differences, but they use it differently. Because they use it differently, you have to know the client a little better and because the client knows they are different they are willing to pay for it. Those are the conditions that if they came up that you would say, my product position is customer intimacy.

Product innovation comes up where there is a group of customers who are willing to be early adapters, who view themselves as a like group – whether it be tech geeks or whether it be fast car drivers or whether it be rich people – who view themselves as a cohesive group that likes this product. It is not mass market.

Those are the conditions that favor the three market positions and it’s critical that you know which one you are, because you have to drive all your activities towards being the best at the one you picked and being good enough at the other two.

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Keeping an Eye on Low-Value Work

The distinction between low-value work and high-value work is important. Low-value work is necessary work that has to be done. High-value work is work that gives your client a competitive advantage.

Low-value work is ticket-to-play, you must not do it wrong. Some examples of low-value work are getting payrolls out correctly the first time, making sure everything is in line when you are doing benefits administration, and that the deductions coming out of payroll are correct. That is work that clients expect and it’s in your back office. They don’t really care that it gets done better, they just want it done right. There’s a “Don’t get it wrong” mentality with low-value work, but doing it better isn’t going to get you anything either. For low-value work, good enough is good enough.

High-value work, on the other hand, is work that gives your customer a competitive advantage. They define that value and you get paid for that value – that’s work that you should be spending time on making sure you are meeting the clients’ expectations. Some examples of high-value work are giving them recommendations on what their benefit should be or presenting options of how to retain and attract the best possible workforce. If competitive advantage is a lower cost for them because they can spend the money, you can use that as high-value as well.

So high-value work gives your client an advantage and low-value work is a ticket to play. You’ve got to make sure that you are spending your money on the things that give high-value to your clients while still making sure you are providing that lower value work in the most efficient, cost effective way you can.

Role model companies have a relentless push toward these two things. They do everything they can to make sure that low-value work is being done at the quality that’s required, which means not overdoing it, but rather doing it at the lowest cost possible while still being done right. Then, they spend every dollar they can making sure the high-value work is being done to standards that meet or exceed clients’ expectations. That translates to into revenue retention and growth, no doubt about it. A company must understand the difference or die.

CogNet and Governance

CogNet’s governance begins right upfront when we are sitting down and talking about the contract and putting the Statement of Work together. We agree upon what the process looks like, what the units are going through it, what is the cost of that and how many hours will take you to that work. This way there are no surprises later on when we sit down once a quarter and have our governance meetings. Our simple axiom is that if you can’t measure it, you can’t fix it and you can’t improve it.

So it’s got to be measured. It’s right there in the contract. From there, once a quarter for every process that we have for you, we are going to sit down and look at those metrics.

Are we doing about the same amount of work that we thought we were going to be doing?
What is the cost on a per unit basis and otherwise of doing that work?
How productive are we? Are we just as productive as you were before, or less or more?

The bottom line is deciding whether or not we’re delivering what we said we would deliver to you as far as processing transactions and savings and having that conversation consistently so that nobody is ever surprised. It’s equally good to know whether we are exceeding those expectations, which we are always striving to do, or to know that we are not.

You can’t do process improvement if you haven’t documented and you don’t have numbers. So we can sit down and look at it and say, “Okay, great. What needs to happen here to make sure that we can deliver what we promised?”