If Not Excellence, What? Tom Peters & Business Models

Better business models lead to better businesses. One critical part of building a better business model is getting your value proposition right.

An excellent value proposition means that you have to be excellent at, well, something.

But what?

One framework that John uses a lot in his classes is this from The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market:

There’s a nice explanation of the figure here, but basically, it means that you have to choose. You can’t be everything to everyone – you need to build your value proposition around differentiation, customer responsiveness, or lowest total cost.

One important part of the diagram though, which is often overlooked, are the lines on each bar. These mean that even while you concentrate on excellence in one area, you have to be at least competent in the others. Where this baseline lies will vary from industry to industry.

Here’s an example, from the engineering company that I mentioned yesterday. They are in a very competitive industry. We evaluated the business model of four of their different business units. This turned out to be a pretty useful application of the business model concept to a large, well-established firm.

The one common thread across all four business units is that they have customers that are willing to pay a premium for reliable delivery of on-time and on-budget work. They have an opportunity to differentiate in this area.

However, their industry is fiercely competitive. So the benchmark level of operational excellence that is required just to be in the game is very high. While they are trying to build excellence and differentiation in reliability of delivery, they also have to keep improving efficiency.

So one way to identify a potential area of excellence is finding the things that your customers value and being fanatical about delivering in that area.

In his latest book, which, as usual, is excellent, The Little Big Things: 163 Ways to Pursue EXCELLENCE,Tom Peters includes a great quote from an anonymous commenter on his blog about how to do this:

Excellence can be obtained if you:

…care more than others think is wise;

…risk more than others think is safe;

…dream more than others think is practical;

…expect more than others think is possible.

So, to sum up. Better business models are built on excellent value propositions. To build one, you have to avoid trying to be excellent in all areas (differentiation, customer responsiveness, or lowest total cost), because you’ll spread yourself too thin, and get caught in the middle.

On the other hand, if you are simply competent in all three areas, you’ll also fail because you’re not excellent at anything.

You need to be competent at a couple, and excellent at one. You can help yourself define what you should be excellent in by thinking about that quote from Peters.

Excellence requires going fanatically overboard in something. That’s what excellent value propositions are built on, and those are what drive better business models.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

Please note: I reserve the right to delete comments that are offensive or off-topic.

10 thoughts on “If Not Excellence, What? Tom Peters & Business Models

  1. Good post Tim. Another useful way I’ve found to approach this exercise is to think in terms of Qualifiers and Differentiators.

    You have to be competent at the Qualifiers in order to play the game, so define the acceptable level and deliver it. In general the Qualifiers are only noticed by customers when something goes wrong. For example in many businesses on-time delivery is a given, it won’t win more customers but it can lose them.

    “Differentiators” is self-explanatory – define and deliver the level you need to reach in order to have competitive advantage. This is where originality and exceeding expectations can have a big pay off.

  2. Definitely in the “expect more than others think is possible” camp at this end, Tim. I’m reminded of a quote often attributed to Ghandi…

    “First they ignore you, then they mock you, then they fight you, then you win.” We’ve been ignored and we’re starting to get mocked. I can’t wait for them to fight us on this.

    High performance machines.
    High performance lives.
    Gearheads United. :)

Comments are closed.