Hax’s Delta Model

What is Hax’s Delta Model?

Hax’s Delta Model is a strategic framework with a pro-consumer approach toward the implementation of effective management and corporate business strategies in an organization. The Delta Model was developed by Arnoldo Hax (of the Sloan School of Management at MIT) and Dean Wilde. It is a relatively modern business strategy framework that’s been receiving critical acclaim due to its efficiency and effectiveness.

Understanding Hax’s Delta Model’s Pro-Consumer Strategy

Hax’s Delta Model is pro-consumer in the sense that it is a consumer-centric strategy framework, with business strategies and managerial frameworks focusing on catering to the needs of the end-user. Hence, the model can be said to be based on consumer theory, rather than the much traditional producer theory on which several business and management strategy frameworks are based.

Since most existing business management models are more competitor-focused and product-focused, catering to the needs of the market prior to the increased dependency on the internet, they are now considered outdated by many. As a result, Hax and Wilde advocate for a more consumer-focused approach to business management strategies to cater to the current consumer-focused market. Hax’s Delta Model emphasizes the fact that “Customer bonding is the driving force in strategy.”

How It Works: The Triangle

The workings of Hax’s Delta Model are accurately described through its diagrammatic representation called “The Triangle.” The triangle basically describes three alternative ways to accomplish customer bonding, to put into effect the Delta Model’s business management strategies. The three strategic methods are:

1. Best Product Positioning

The strategic option present at the right side of the Triangle, called Best Product Positioning, focuses on total consumer satisfaction through effective and efficient product development. There are two ways of achieving the objective: either through cost minimization or through product differentiation.

The process involves developing an efficient supply chain (to ensure cost minimization), coming up with innovative ideas and techniques for product development (which ensures product renewal), and securing efficient distribution channels (which help distribute the product to all target markets). Hence, it basically advocates selling standardized and characterized products in order to maximize total consumer satisfaction and beat the competition.

2. Total Customer Solutions

The strategic option present on the left-hand side of the Triangle, called Total Customer Solutions, is completely different from its right-hand counterpart. The largest difference here is that, in spite of selling standardized and isolated products to maximize consumer satisfaction, it instead advocates focusing on providing solutions to consumers, customizing products and services in accordance with their unique needs.

It basically emphasizes building customer bonding through total cooperation with their unique needs, instead of selling products and services with a focus on just beating the competition. Such a strategic option advocates focus on full consumer satisfaction in a way that gives utility to customers’ financial capacity.

3. System Lock-In

The strategic option present on the top of the Triangle, called System Lock-In, emphasizes system economics as being the driving force for a business. The complements of the business play a vital role and are considered to be the basis for the system lock-in strategic option. The strategy claims to gain of the complements’ share as the ultimate objective, eventually resulting in a win-win situation of market dominance – which not only ensures a customer base lock-in but also a competitor lock-out.

Hax and Wilde cite the example of Bill Gates, claiming that he’s the richest man in the world not only because he developed Microsoft, but also because of his complements (as an army of people who are working for him but are not on his payroll) – creating an entire network that caters to his business needs, locking in a wide customer base, locking out competitors, and achieving total market dominance.

Gates was able to create an entire networking circle to his benefit in the form of consumers wanting to buy a computer with access to the largest set of applications and software developers (the complements) wanting to write applications for the computers with the largest installed base.

Illustrative Case Study Examples

• Sony Wega – Adopted the Best Products positioning strategy by offering unique, differentiated products and found success.
• Nucor Steel – Adopted the cost minimization aspect of Best Products positioning and achieved incremental success.
• Saturn Corp. – Adopted the Total Customer Solutions strategy very efficiently and completely redefined the purchasing experience of a car in the US.
• Fidelity – Adopted the Total Customer Solutions strategy and focused entirely on maximizing financial utility for their consumers by providing full coverage of financial services to their customers.
• Intel – Successfully followed the System Lock-In strategy, much like Microsoft.

Working: Adaptive Processes

In Hax’s Delta Model, adaptive processes play a vital role in achieving the strategic options of the triangle that the business chooses to adopt. They entail how the company and its several segments and processes must be aligned with the chosen strategic option. Hax’s Delta Model provides three business adaptive processes to achieve this purpose:

• Operational effectiveness: Focuses on establishing an efficient extended supply chain, including customers, suppliers, and key complementors to expand the business’ delivery scope. Its primary focus is on producing the most effective cost and asset infrastructure to support the desired strategic option adopted by the business.
• Customer targeting: Focuses on developing and executing activities that attract, satisfy, and retain consumer bases. It emphasizes managing customer relationships effectively. Its primary focus is on attracting customer bases and maximizing their financial utility and satisfaction.
• Innovation: Focuses on ensuring a continuous stream of new products and services by innovation. It emphasizes mobilizing all creative resources available, i.e., technical resources + production resources + marketing capabilities, etc., to encourage and introduce innovation in the business. It helps the business keep their game up and always maintain an upper hand over the competition.

Key Takeaways from Hax’s Delta Model

• Focus on the customer: Carry out an effective segmentation of your customer base. Execute consumer economics. Emphasize building relationships with consumer-customer bonding.
• Strategic option selection: Select the most appropriate strategic option from the Triangle that best caters to the business’ consumer economics policies.
• Adopt an adaptive process: Carefully examine and adopt the most appropriate adaptive process for the business, that aligns well with the strategic option selected.
• Facilitate strategic development: Combine the aforementioned to achieve successful strategic development.

More Resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant CFI resources below:

• FREE Analyzing Growth Drivers & Business Risks Course
• Ansoff Matrix
• Corporate Development
• Profit Model
• Types of Businesses
• See all management & strategy resources