The Four-A Model of Strategy
from the Wharton School of Business
To guide framing, we often rely on the “Four A” model first articulated by Professor George Day of the Wharton School of Business. Employing this model, an organization asks questions related to:
Advantage - the positioning theme that differentiates your organization from competitors
Arena - the markets to serve, customer segments to target, products and services to offer
Access - the communication and distribution channels used to reach the market
Activities - the appropriate scale and scope of activities to be performed
Once the elements of strategy are chosen, the customer-facing brand promise—or Value Proposition— can be articulated. This is the reason customers will choose you over competitors or substitutes. Customers should be able to say “I choose this tribal enterprise because….”
Advantage
It’s been said that “if you don’t have competitive advantage, then don’t compete.”
The famous academic strategist Michael Porter argued that Competitive Advantage is a function of either providing comparable buyer value more efficiently than competitors (low cost), or performing activities at comparable cost but in unique ways that create more buyer value than competitors and, hence, command a premium price (differentiation).
You win either by being cheaper or by being different (which means being perceived by the customer as better or more relevant). There are no other ways.
Leaders and strategists must seize and sustain competitive advantage in order to succeed over the long run. By understanding their sources of advantage, leaders can then focus their tribes and organizations on excelling at a critical few “key success factors” related to maintaining advantage.
Arena
One of the first decision any organizational start-up must make is to determine the Arena in which it will compete.
You cannot serve all markets, so you must be clear on which customer segments you will pursue. You cannot meet all needs, so you must determine the type of products and services to offer, and be clear about the competition you will compete with. To make a good choice of Arena, it is essential to research the industry, markets, and customer segments that might comprise your areas of competition and ensure that you have capabilities necessary to win business.
Once the Arena is chosen, a company must be clear about “Access,” the channels and pathways over which you will find and service your customers.
Access
Often, unique Access channels best reach different customer segments. For example, consumers
and end-users of a product might be reached by a “Indirect” channel, such as third party brokers or vendors, while a small business owners might be best approached through a Direct Channel such as on-site visits by a sales person.
To determine the optimal strategy for Access to customers, the strategist must answer the following questions:
What channels are available to reach customers?
What segments best represent the differences among types of channels?
How do these different types of Channels vary in terms of the cost and return of working with them?
How is their profile changing?
What are the touch-points between customers and channels?
Activities: The Appropriate Scale and Scope of Business Processes
Michael Porter showed that once companies identify the Advantages they will bring to bear during competition, a set of Activities, also known as “Capabilities,” must be designed to realize the Advantages.
C.K. Prahalad and Gary Hamel coined the term core competence in 1990. A core competence is the collective learning and coordination skills behind a firm’s product lines. To Prahalad & Hamel, core competencies are the source of competitive advantage. A core competence should be difficult for competitors to imitate.
Strategy Statement
A Strategy Statement should include sufficient guidance to the organization in each area of the four A’s of strategy.
