THE THREE TENSIONS

PERTEMUAN 1

KELOMPOK 4:
AULYA AGUSTIN DWI ANDHINI
PURI WIDYAKSARI
WIBOWO AJI UTOMO
TEGUH IMAM SANTOSO

PROFITABILITY VS GROWTH
The Three Conundrums
1.Focus vs Diversification
Hard to keep revenue growing with a
narrow business
Diversifying often end up reducing
profitability
2.Organic growth vs Growth by
Merger and Acquisition (M&A)
Majority acquisition are found to have
resulted in fewer benefit than cost
3.Profitability Business vs Growth
Business
What are leader do?
A manager suited to task of growth is
BALANCE
surely different from another suited to
Narrow & diversified portfolio managing profitability
Organic & Growth M&A
Profitability & growth

BATTING AVERAGE
Batting Average: A Measure of Success in Overcoming
Tensions
A companys batting average is a measure of how often a
company is able to succeed at two competing objectives at the
same time in any given year.

1. Portfolio Diversity and Batting Average

Degree of portfolio diversity
has very limited impact on
batting average.

BATTING AVERAGE
2. Acquisitiveness and Batting Average
There is no relation between batting average and
how acquisitive company have been
As acquisitiveness rises,
bating average stays the
same

BATTING AVERAGE
3. Market Exposure and Batting Average
Batting average do vary
according to industry
attractiveness
Batting average varies
more within industry than
across
Portfolio mix, exposure to
attractive market, is less
important in determining
batting average than
relative performance within
a market

BATTING AVERAGE
Batting Average doesnt behave as you might imagine:
companies with high batting averages have all degrees of
portfolio diversity, all degree of acquisitiveness, and all
types of portfolio exposure.
BALANCE IS NOT THE ANSWER TO SCORING A HIGH
BATTING AVERAGE

CUSTOMER BENEFIT
PROVITABILITY AND GROWTH IS THE IMPACT OF
SUCH ACTIVITIES ON CUSTOMER BENEFIT
Customer benefits is the reward that customers receive
through their experience of choosing and using a
product or services
Increase in customer benefit manifests itself in higher
prices, a higher market share, or both
The same product/services can have different benefits
for different customers and different purchasing context.
Revenue growth that is underpinned by high or
increasing customer benefit has much higher odds of
being profitable than revenue growth that is not.

GOOD COST VS BAD COST

A good cost is necessary to produce customer benefit.
Bad costs are costs that are not necessary to produce
the company's customer benefit, either now or in the
future.
Three types of bad cost:
1.Costs that are not necessary to accomplish a given
activity.
2.Activities that are not necessary to produce the customer
experience
3.Elements of the customer experience that produce no or
even negative customer benefit

HOW COMPANIES LOSE SIGHT OF

CUSTOMER BENEFIT

Grow Customer
Benefit

Grow customer benefit relative to

competitors
without growing bad costs

Shrink Bad
Costs

Reduce bad costs relative to

competitors while offering at least
comparable customer benefit

Grow Customer
Benefit and
Shrink Bad Costs

Grow customer benefit faster and

reduce bad costs more than
competitors

THE CUSTOMER FOCUS TRAP

GROWTH WITHOUT PROFITABILITY
Confusing features for benefits
Proliferating the offer rather than increasing the benefit from
the offer
Assuming that lower prices mean higher customer benefit
Leaning on sales and marketing "push when there is not
enough customer benefit pull"
Entering new customer segments because they look
attractive to you rather than because you look attractive
to them

TRYING COST TO EARNING TRAP

PROFITABILITY WITHOUT GROWTH
Managing costs more closely in the bad times than in the
good times
Basing prices on costs or costs on prices
Treating costs differently according to who owns them,
who sees them, or whether they are fixed or variable, as
opposed to whether they are good or bad
Overestimating economies from scale;
underestimating complexity from scope
Reinvesting cost savings into bad costs

WHAT CAN LEADER CAN DO

MAKE "GROW
CUSTOMER BENEFIT"
YOUR BROKEN RECORD

ASK HOW TO GROW

YOUR MARKET, NOT JUST
YOUR MARKET SHARE

ASK WHAT WOULD

GROW BENEFIT FOR
THE CUSTOMER'S
CUSTOMER

Managers are more used to justifying

acquisitions on the grounds of cost
"synergies" than customer benefit
Market growth makes you look to your
customers and the fundamental benefit
of your market.
Sometimes, changing the question by
changing the customer you are
considering can lead to new avenues for
profitable growth.

WHAT CAN LEADER CAN DO

DEFINE YOUR BUSINESS

BOUNDARIES BY
CUSTOMER BENEFITS,
NOT JUST PRODUCTS

Ask managers to consider the business

in both ways, product and customer
benefit

PREFER MARKET
STRENGTH TO MARKET
ATTRACTIVENESS

a company's relative position within its

markets matters more to a high batting
average than being in an attractive
market

GROW PRODUCTIVITY
IN GOOD TIMES AND
BAD

companies can set targets for continuous

improvement in cost efficiency-and
therefore reduction in bad operating cost

WHAT CAN LEADER CAN DO

MAP COST TO CUSTOMER

WILLINGNESS TO PAY

SEGMENT ONE LEVEL

LOWER THAN THE
COMPETITION

APPLY BOTH AN
OPERATING PERSPECTIVE
& A STRUCTURAL
PERSPECTIVE TO COSTS

How well costs are aligned with customer

benefit

Not all sub segments were losing money

because of bad costs

The best ways to increase the odds that

company costs are cut ever closer to
what is absolutely necessary to produce
high and growing customer benefit