Business Strategy

The Frame Work of Success

Written by James Garvin for Gaebler Ventures

Success of a company is based on keeping your business decisions and business strategy focused on one of three core value propositions for your customers. When choosing the activities that you pursue, they should always align with your core value proposition otherwise a firm will find itself losing its ability to maintain its core competitive advantage.

Starting and running your own business is a complicated task, but the underlying principles of identifying what your business is and what value you are providing should not.

There are a few guiding principles that you can use as a framework to help you simplify your thought process of what your business is and what value you are providing. Understanding the simple value proposition of your firm helps you later when trying to make more complicated decisions regarding your business strategy since your business decisions and activities should align with one of the 3 core principles below.

There are 3 core value propositions that a business can employ to create value for their customers:

1. Make it better, faster, or easier

2. Make it cheaper

3. Make you customers money

Before you try to explain what your business is or how it works, start by first understanding which of the core elements your business is based on. Wal-Mart and Southwest for example made shopping and flying cheaper. Quicken, made writing checks and balancing your check book faster and easier. Amazon and Ebay help customers make money by providing a platform that enables them to sell their goods for a profit. Wal-Mart makes business decisions through out its entire organization by choosing strategies and activities that help consumers save money. That is their guiding principle as a business and the reason why they are the dominant leader in low-cost retailing.

Goldman Sachs, a long time leader in investment banking and wealth management has excelled at making their corporate and individual clients huge amounts of money, so much so that they are considered the dominant leader in the investment banking and wealth management industry. Likewise, Vanguard has been exclusively focused on being the low-cost provider in the mutual fund industry by only providing low-cost index funds to their clients helping them maintain the lowest cost-structure in the industry. Quite the opposite of what Goldman Sachs is focused on, but their strategy of providing the lowest-cost investment vehicles to their clients has allowed Vanguard to emerge as the dominant leader in the index and low-cost mutual fund industry.

Lastly, Jiffy Lube is exclusively focused on making oil changes faster. They do not provide alternative services that most full-service mechanics do because if they did, it would slow down their turn around time of on oil changes. Like Goldman Sachs and Vanguard, Jiffy Lube has obtained a dominant position in its industry, by focusing on activities exclusive to their core value proposition.

Among all the decisions that you as an entrepreneur need to make, perhaps the easiest and most powerful decision you can make is to clearly identify what your core value proposition is and use this as a guiding factor in your decisions and activities that you pursue. This will help clarify the strategies that you do employ and hopefully prevent you from pursuing activities that will distract you and your company from delivering your core value proposition.

James Garvin began his education studying biotechnology. In recent years he has turned his interest in technology to helping two internet startup companies. The first business was an online personal financial network and the second was an e-marketing platform created to help entrepreneurs demo their web sites. Currently a student at University of California Davis, James is spending his summer incubating two new online businesses and writing about his entrepreneur experiences.

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