The twin‐cycle washing machine and the art of creating value

Purpose – The author has previously written about the concept of “strategic market position” (SMP). Simply stated, SMP is a strategic discipline which ties together the principles of customer preference, producer economics, and corporate finance and helps companies understand when and how increased market share leads to stronger competitive position and higher profitability. Strong SMP creates the potential for a virtuous cycle of product improvement where strong products lead to strong market shares, which lead to economies of scale and higher returns, which can in turn fund innovation and investment to create even stronger product offerings. This virtuous cycle is what the author calls “Product Excellence”. There is a related virtuous cycle of “Customer Excellence”, defined by the metric of Customer Market Position, or CMP. Strong CMP is when companies are able to address a high share of customers' overall needs, developing a higher level of understanding and trust with those customers, creating opportunities to develop new offerings that create even further advantages and differentiation. Good companies often become skilled at one or other side of these cycles, but really great companies are able to balance both of these virtuous cycles together. This paper seeks to address these issues. Design/methodology/approach – In this article, the author discusses the benefits that accrue to businesses that have a high SMP or CMP within the markets and customers they serve. The author cites a number of case examples of businesses that have reinforced their commercial success through closely managing the strength of their product offerings and the depth of their relationships and share of wallet with key customers. Examples of businesses in the article involve hospital and medical product industries, including the results of proprietary surveys undertaken by L.E.K. Consulting. The author then draws lessons that can be applied broadly by any business. Findings – The key message proposed by the author is that companies need to balance both product‐centric and customers‐centric strategies in order to maximize their competitive advantage and long‐term value creation. Originality/value – This article sheds light on the economics and value of nurturing a business's product‐based and customer‐based competitive advantage. The article introduces metrics to manage and monitor both of these critical dimensions.