Prime Movers: Define Your Business or Have Someone Define it Against You

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Summary: ¿PRIME MOVERS¿
Review: 'PRIME MOVERS' Define Your Business or Have Someone Define it Against You

How did Nokia come to lead in mobile phones? How did Tetra Pak revolutionise milk packaging? How did VISA become so central in payments? How did Caterpillar become 'the' reference in Earth-moving equipment? How did photocopying come to be called Xeroxing?

This book tells the story of companies that have revolutionised their markets, some more than once, by completely changing the logic of value creation in them. Such companies are called 'prime movers'. The book explains this logic and provides detailed frameworks for implementing it.

The New Logic of Value Creation

The main thesis of the book, and the value creation framework it proposes, is that the role of a business is to identify, utilise and package its capabilities into offerings that help customers create value for themselves and their customers and counterparts.

This framework is fundamentally different from one that considers products (instead of capabilities) and markets (instead of customers). It captures not only the value of an offering to customers, but the whole value chain, including customers' customers. The overall network, in which value is created both with customers and their customers, is called a 'value constellation'.

An example shows how this was implemented by Xerox Corporation, which converted xerography into a commercial success. Later, competitors entered the market with smaller and cheaper machines. Xerox reconfigured the market a second time with its 'document processing' strategy.

An Architecture for Value Creation

The authors provide a framework for understanding the various value logics in the value chain and resulting value constellation. They show how to define a business model which should answer the question: what value do we want to create, and for and with whom? This comprises the capabilities to be deployed, the co-production partners to be involved, the offerings to be co-produced, and the customers to be targeted.

Different routes can be taken to create value:

* A firm aligns its value-creating logics to those of its customers.

* A company harnesses its existing capabilities to create new offerings for existing and new customers.

* A company develops and utilises new capabilities to create new offerings and attract new customers.

The book rests on the premise that value is customer-dependent. For example, a shirt may be bought by several different types of people. One may view it entirely as a piece of clothing, its value being based on its price relative to its quality. Another may be interested in minimising the time taken to acquire the shirt, and therefore buy it from a mail order catalogue or the internet. A third may be looking for something that will become an integral part of her wardrobe. A fourth could be a fashion student, who buys it to learn about design. Or the purchaser could be an environmentalist, concerned about the origin of the material, the environmental impact of the production process, and whether it can be recycled. Each of these customers has a different view of the value of the shirt, which needs to be taken into account when creating the offering presented to them.

Some Comparisons

'Prime Movers' has a common theme with 'Leading the Revolution' by Gary Hamel. However, it differs markedly in presentation and content. Both argue that to succeed, a business has to reinvent itself, often more than once. But whereas Hamel's revolution relates mainly to changing the organisation, Ramírez and Wallin's revolution is in rethinking the business.

It also has much in common with 'The Profit Zone' (Slywotsky and Morrison, John Wiley, 1998), in that both books focus on what customers value. However, whereas Slywotsky and Morrison look principally at the customer's point of view, Ramírez and Wallin also consider the firm's capabilities and its customers' customers.

This is not an airport bookshop best-seller, with a single idea and which can be read in a few hours. It is thoroughly researched, with notes and references on each chapter. It is very rich in ideas which demand careful attention, and its layout enables it to be read a chapter at a time. For a summary of these ideas, one can do no better than quote one of the concluding paragraphs. "Offerings reverse the ground of attention to which strategists have given priority. Instead of actors, interactions should be considered as the focus. Instead of companies, it is relationships. Instead of positioning within a given context, it is the enlarging and redefining environments which can deliver more effective companies, helping their customers to become more effective creators, ultimately making up better value constellations."

Rating:
Summary: ?PRIME MOVERS?
Review: `PRIME MOVERS' Define Your Business or Have Someone Define it Against You

How did Nokia come to lead in mobile phones? How did Tetra Pak revolutionise milk packaging? How did VISA become so central in payments? How did Caterpillar become `the' reference in Earth-moving equipment? How did photocopying come to be called Xeroxing?

This book tells the story of companies that have revolutionised their markets, some more than once, by completely changing the logic of value creation in them. Such companies are called `prime movers'. The book explains this logic and provides detailed frameworks for implementing it.

The New Logic of Value Creation

The main thesis of the book, and the value creation framework it proposes, is that the role of a business is to identify, utilise and package its capabilities into offerings that help customers create value for themselves and their customers and counterparts.

This framework is fundamentally different from one that considers products (instead of capabilities) and markets (instead of customers). It captures not only the value of an offering to customers, but the whole value chain, including customers' customers. The overall network, in which value is created both with customers and their customers, is called a `value constellation'.

An example shows how this was implemented by Xerox Corporation, which converted xerography into a commercial success. Later, competitors entered the market with smaller and cheaper machines. Xerox reconfigured the market a second time with its `document processing' strategy.

An Architecture for Value Creation

The authors provide a framework for understanding the various value logics in the value chain and resulting value constellation. They show how to define a business model which should answer the question: what value do we want to create, and for and with whom? This comprises the capabilities to be deployed, the co-production partners to be involved, the offerings to be co-produced, and the customers to be targeted.

Different routes can be taken to create value:

* A firm aligns its value-creating logics to those of its customers.

* A company harnesses its existing capabilities to create new offerings for existing and new customers.

* A company develops and utilises new capabilities to create new offerings and attract new customers.

The book rests on the premise that value is customer-dependent. For example, a shirt may be bought by several different types of people. One may view it entirely as a piece of clothing, its value being based on its price relative to its quality. Another may be interested in minimising the time taken to acquire the shirt, and therefore buy it from a mail order catalogue or the internet. A third may be looking for something that will become an integral part of her wardrobe. A fourth could be a fashion student, who buys it to learn about design. Or the purchaser could be an environmentalist, concerned about the origin of the material, the environmental impact of the production process, and whether it can be recycled. Each of these customers has a different view of the value of the shirt, which needs to be taken into account when creating the offering presented to them.

Some Comparisons

`Prime Movers' has a common theme with `Leading the Revolution' by Gary Hamel. However, it differs markedly in presentation and content. Both argue that to succeed, a business has to reinvent itself, often more than once. But whereas Hamel's revolution relates mainly to changing the organisation, Ramírez and Wallin's revolution is in rethinking the business.

It also has much in common with `The Profit Zone' (Slywotsky and Morrison, John Wiley, 1998), in that both books focus on what customers value. However, whereas Slywotsky and Morrison look principally at the customer's point of view, Ramírez and Wallin also consider the firm's capabilities and its customers' customers.

This is not an airport bookshop best-seller, with a single idea and which can be read in a few hours. It is thoroughly researched, with notes and references on each chapter. It is very rich in ideas which demand careful attention, and its layout enables it to be read a chapter at a time. For a summary of these ideas, one can do no better than quote one of the concluding paragraphs. "Offerings reverse the ground of attention to which strategists have given priority. Instead of actors, interactions should be considered as the focus. Instead of companies, it is relationships. Instead of positioning within a given context, it is the enlarging and redefining environments which can deliver more effective companies, helping their customers to become more effective creators, ultimately making up better value constellations."