This article explains the Strategic Triangle by Kenichi Ohmae in a practical way. After reading you will understand the basics of this powerful strategy and competitive advantage tool.
What is the Strategic Triangle (3C’s)?
The Strategic Triangle of Kenichi Ohmae, a renowned Japanese strategy guru, is a business model which focuses on three key success factors for success. Kenichi Ohmae states that these three factors must be in balance in the form of a strategic triangle. These three key factors for success are:
- The Corporation
- The Customer
- The Competition
This balance within the Strategic Triangle can lead to a sustainable competitive advantage.
Change in market segment
For companies, it’s important to monitor the changes in their market segment. The cause could be a change in demographics, distribution channels, technology, customer size, etc; influencing the market segment as a whole. Such changes require a shift of, for instance, company resources. In order to gain insight and possibly adjust the strategy, the 3C model can help.
3C model, the strategic triangle
1. The corporation
The Corporation needs to focus on the maximization of its strengths. As a result, the corporation can influence the functional areas of the competition that are critical to achieve success within a certain industry. Focusing on a key functional area may create a decisive improvement in other functions of the competition. (for example quality improvement). By functional areas is meant for example culture, image, products, services, technology, etc.
It is also important for a corporation to make informed decisions about subcontracting (capacity, cost structure, significant strategic advantages) and how effectively this can be realized with respect to cost reduction (selective purchasing, stock management, choice of commodities, use of automation).
It’s certainly not necessary for a company to excel in one specific function. If there’s a clear advantage in one important function, the company can then also reinforce and improve other functions from that strength.
If labour costs are rising, it can be an attractive option for companies to outsource part of the work. They then do need to consider the competition; if their production is outsourced to subcontractors, it can influence the cost price. To counter this, a company can improve the cost effectiveness. Firstly, by trying to lower the basic costs compared to their competitors. And secondly, by lowering the functional costs, including those for transport. A third option would be to combine certain key functions with other businesses, sharing overhead costs. Examples could be transport, warehousing or call centres.
2. The customer
The customers are the basis for any corporation according to Kenichi Ohmae. Without a doubt, a corporation’s foremost objective ought to be the interests of its customers rather than those of its stock holders or other parties. What is important are elements like needs, requirements, demands, problem areas, buying motives, value components, decision-makers, etcetera. Segmentation of objectives (use of products) and customers (geography, age, social interests ) and the market (potential customers, competitors) are important for constructing and adopting a strategy. Using (digital) questionnaires, reviews and platforms, a company can find out what customers are thinking and seriously include this information in strategic decisions.
3. The competition
According to Kenichi Ohmae these strategies can be constructed by looking at possible differentiation in functions such as purchasing, design, engineering, operational capacity, sales and maintenance. One of the most important factors is image and this can provide the necessary power. Both Sony and Honda for example, sell more than their competitors because they invest more in public relations and advertising. Smaller corporations and organizations can use franchise concepts or low margins and make the necessary investments in service.
Something that’s sometimes overlooked, is using the difference in profit source. Where does the company get most of its profits? With selling existing products, selling new products, selling services, etc. Related to this is the difference in the ratio between fixed and variable costs, which can be particularly important to low-turnover companies. Fixed costs can for instance lower prices in a slow market and help gain market share.
Hito Kane Mono
The Japanese business world is all about ‘hito-kane-mono’, which stands for people, money and resources. In the Netherlands, the standard trinity ‘nature, labour, capital’ can be compared to the Japanese concept. Streamlined company management is only possible if there’s a balance between these three factors, and if there’s no waste. This also plays a role in the 3C model; capable people within the organisation must take responsibility and involve their colleagues in decision making. They’re expected to use all available means responsibly and not waste any money. The resources can be translated as machines and equipment (operational capacity), but also technology and process knowledge. Even the use of raw materials and using them economically fall under this category. When the people (hito), have developed creative and feasible ideas, the company will be able to earn more money (kane). This does require them to properly use and apply the resources (mono). That enables a company to attract new customers and keep the competition at bay.
It’s Your Turn
What do you think? Is the 3C model, developed by Kenichi Ohmae applicable in today’s modern economy and strategy thinking? Do you recognize the practical explanation or do you have additions? What are your success factors for a good 3C model set up?
Share your experience and knowledge in the comments box below.
- Adetule, P. J. (2011). The Handbook on Management Theories. Author House.
- Ohmae K. (2005). The Next Global Stage. Pearson Education.
- Ward, D. (2005). An overview of strategy development models and the Ward-Rivani model. Economics Working Papers, June, 1-24.
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