1. lower costs and raise margins 2. expand the business 3. develop capabilities 4. grow market share
Here is how it works....
There is a great cycle that really led my supply chain companies for over 10 years
- next level of customer requires service which requires new investment
- new investment increases our capabilities
- new capabilities allow us to capture new types of customers
- repeat
The problem with this cycle is the investment needed. This can often be quite high for a small business.
This shows up in business models and strategy all the time.
Trying to get all customers who might buy your product is a sure way to get almost none of them.
Starting with customer motives can help isolate a winning strategy
If the customer you want to serve has many options, doesn't care about quality, and has the means to acquire market information (know all prices), you are serving a cost-focused customer
This means...
... your marketing is focused on how you are cheaper than elsewhere.
Your operational strategy is to run as lean as possible.
Your sourcing and procurement are looking for consolidation and discounts wherever possible.
Proximity is a key ingredient in streamlining anything.
Everything has a switching cost. The closer two things are, generally, the lower the switching cost.
Here are some business ways to use this idea, and some alternative ways to think about "proximity".
1. Locational Proximity
The obvious one is how close one task is to another. The closer you can put similar or consecutive tasks, the faster they can be performed using fewer resources.
2. Similarity Proximity
When looking to streamline a process, put like pieces together.
If entering invoices, enter info related to the payment or in an adjacent screen at the same time... even if not needed until a later step.