A Simplified Strategy for Increased Profitability feat. Felix Oberholzer-Gee

Sep 24, 2021

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Award-winning Harvard Business School professor Felix Obelholzer-Gee says that data about the rate of change in companies is no faster today than in previous years. Hence, long-term strategies make more sense for businesses today, despite our rapidly changing world. His book Better, Simpler Strategy discusses the three modes of value creation-- value for customers, suppliers, and employees. This strategy promotes working on fewer initiatives with more significant impact, substituting the traditional complex frameworks.

Listen to Greg and Felix as rundown strategies that leaves exceptional impact, allowing companies to capture customers who are willing to pay, attracting the right employees, and choosing the best suppliers for their business.

Episode Quotes:

Does the role of strategy in business change consider the disruptive and highly technological environment we have today?

If you look at the competitive advantage of firms. And we all know that competitive advantage tends to decline over time, but that decline is actually no faster today than it was in previous times. And there's much more sophisticated research than just looking at the rate of decline where essentially you can't really see hyper-competition; you can't really say that today it doesn't make sense to plan for the long-term because who knows what the long term will bring? And we see it even in the most lively spaces. Microsoft has been among the 10 most valuable companies for the past 20 years. Through ups and downs, and they missed mobile, and then they did a bunch of things right, and yet, you see that they remained very competitive and very successful. So I start with this notion saying that planning for the long term makes as much sense as it did in the early 20th century or 1780.

How do strategies create value for customers, employees, and suppliers contribute to a company's profitability?

I think it comes from this place where if you truly know that you're creating value for someone in a way that is differentiated from the competition today, it's really added value to the economy, then there's almost no way you're not going to be financially successful. I like this shift, think value first and then profitability will follow.

If you increase the customer's willingness to pay for the product or the service, or in the case of employees and suppliers, if you decrease the willingness to sell, of employees and suppliers. And so there's real value creation in a monetary sense. The pie that is available for everyone has been increased. And then you can be relaxed about monetization opportunities. Once you have made that first step successfully.

How can businesses differentiate themselves if the customers care more about the price points?

Your experience is that customers think about price a lot, that it's their number one criteria. And that's the pressure on the business. But the pressure is created by strategic choices of the business, namely that you have a value proposition that is largely undifferentiated relative to everyone else.

Would it be wise to treat suppliers and employees more like customers if it works for most companies to create value for parties that businesses transact with?

I shy away from calling everyone a customer because I think it sometimes gets businesses into trouble because they confuse customers and value creation opportunities with the entity that pays them.

Time Code Guide:

00:00:56 The values of strategy for hyper-competitive companies

00:07:20 The Value Stick

00:13:27 Think value first and profitability will follow

00:15:57 Will somebody miss the business if it disappeared

00:18:02 How can a business differentiate itself from competitors

00:20:56 Increasing the customer’s willingness to pay

00:23:26 How to spot opportunities for value creation

00:26:47 Think of the final user as the customer

00:28:03 Value creation as the key metric for success

00:29:59 The Near Customers

00:33:51 Joint value creation with conflicting interests

00:35:43 Business substitutes and compliments

00:44:05 Value Maps

00:47:34 About After Hours podcast

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