Books applying 5-D Value to Amazon and auto companies
View the Books page with books presenting
– Amazon dominant in three conventional value dimensions (D’s), benefiting from reviving a fourth D and showing signs of the emerging fifth D named “Deep-Connect”
– The American auto industry in which e.g. Tesla managed to enter due to strength in Deep-Connect
– The European auto industry where BMW exhibits Deep-Connect value
Five-Minute Videos on Tech Companies and Ikea
View the Video page with videos presenting
– Microsoft managing relations to business customers and business partners in the four conventional D’s, where its business partners also offer 4-D value to the business customers
– Apple transforming itself to add a fourth strong conventional D in 2016
– Ikea building strength in the four conventional D’s in its supply chain between 1950 and 2010
– Ikea adding elements of Deep-Connect to the supply chain after 2010
– Google offering primary value in four dimensions to personnel and primary value to other counterparties in the dimension addressing their core demand
Article about knowledge exchange in Financial Times
Many years ago in 2002 I published an article in the Financial Times which shows the beginnings of the thinking behind 5-D Value and still has validity today.
The Knowledge Confederation
Tapping the expertise of customers and suppliers is a matter of give and take
The hallmark of the knowledge worker is the application of knowledge to the benefit of the company. But it is not only employees who possess knowledge that is valuable to their company. Customers and distributors, too, have market information that the company cannot hope to generate itself, while suppliers are experts in areas in which the company has chosen not to specialise. Investors, allies, researchers or even civil authorities can also provide thought-provoking advice from their experience.
Knowledge provided by these external stakeholders can be indispensable, but it is given to a company only when the external stakeholders receive something in return. Four examples illustrate how such give-and-take relationships work and the distinctive advantages they create.
First, Wartsila, the Finnish power company, is one of two leaders in producing the huge motors found in the world’s largest ships. Keeping these complex motors running smoothly without interruption under various loads and weather and marine conditions is the key performance criterion, calling for a systematic knowledge of the motor and its performance.
As part of the service package to customers, Wartsila offers its proprietary database of motor performance and its expertise in structuring and drawing operational conclusions from the data. Access is granted on condition that the customers supply their own motor performance data (rendered anonymous by Wartsila). In this way, Wartsilacan offer the most practical and informative platform on the market for managing motor performance, while customers build up knowledge of their motors.
Second, ESEC is one of three companies dominating the production of bonders to produce chips. It is a fast-changing market and the Swiss company relies on its core expertise of design and final assembly. But it also takes advantage of the specialised knowledge of the component suppliers. In return, ESEC provides key suppliers with a privileged position as sole or primary supplier, extensive technical support in meeting ESEC design standards and insight into the order books. Via the business relationship with ESEC, the suppliers gain access to cutting-edge technological developments in the semiconductor industry. Thus ESEC can benefit from supplier flexibility in accepting short-term changes in order levels.
Third, CosmopolitanCosmetics, a subsidiary of the German health and beauty giant Wella, is the world’s sixth largest seller of fragrances. The company has grown rapidly by building a portfolio of licensed fragrance brands – 27 at last count. The licensers, which include Gucci, Dunhill, Rochas, Yardley, Gabriela Sabatini and Naomi Campbell, are provided guidance on developing and marketing perfume, but they are also given creative freedom to exercise their individual taste and knowledge of their name’s market position. In this way Cosmopolitan Cosmetics is able to attract leading designers and personalities and use their names to build its own distinctive market profile. The licensers extend the penetration of their brand name into previously unavailable markets.
Fourth, the Swiss insurance division of the Zurich Financial Services, one of two leading universal insurers in Switzerland, provides independent brokers with product training, sales support from product experts and strategic information about the company and the market. In return, the brokers provide an in-depth risk assessment of potential customers as well as feed in their customer knowledge to Zurich’s product development. By working with Zurich, independent brokers gain commissions that are based more on product differentiation than on price – they are more long-term and rewarding – and Zurich gains access to targeted customers who otherwise would not have been accessible.
All of these companies manage the give-and-take in the stakeholder relationship according to several key principles.
•First, the companies and stakeholders know what is expected of each other. For example, a framework contract is agreed to structure the business relationship at a level higher than simply processing orders.
•Second, the companies and stakeholders coach each other on how to contribute the knowledge so that it best fits into their own operations.
•Third, both sides understand clearly the basis for their relationship, recognising the contribution each makes to realising the goals of the other.
•Lastly, all of the companies “live” a distinctive and overarching approach to the business. Wartsila is easy to deal with; at ESEC everything revolves around the fascinating products; Cosmopolitan Cosmetics cultivates individual style; and Zurich Insurance is thorough and comprehensive.
The stakeholders configure their roles accordingly, creating a fruitful platform of shared underlying values, common working styles and overlapping objectives. The result of the give-and-take approach is to build up long-term relationships that are mutually beneficial, and attract knowledge from all stakeholders that is customised to company requirements. The companies are thus able to draw on the strengths of their entire stakeholder network.