THE DELTA MODEL:

How to Capture Critical Tasks of Strategy

Siemens Power Generation -
Defining the Strategic Agenda
 From the Customer Segmentation
to the Value Proposition
Value Proposition

Dimension:
Customer Scope
Scope
Strategic
Positioning “From” “To”

1
2 Mission Statement
5 3 6 4

Classification

Strategic Thrusts
Customer Segment
 Step A: Customer Segmentation

Customer Segment Business Relationship

Description Description
y “Long-Term Investors” High value added relationship
Utilities & Independent Power Providers (IPP’s) Relationship oriented
with high outsourcing practices Willing to form long-term partnerships
y “OEM-Preferred” Medium value added
Small and medium-sized utilities & IPP’s Support oriented
who are not self-sufficient Willing to cooperate with suppliers
y “Traditional Integrated Customers” Medium value added
Large and mostly integrated utilities & IPP’s Less committed to partnership
who are self-sufficient Strive to differentiate or add unique values

y “Transactional Price Seekers” Low value added

Low price seeking utilities & IPP’s Transactional driven
who are self-sufficient No loyalty

y “Non-Turnkey AE’s” High value added, need and search for

Architect Engineers partnership
without turnkey capability Prefer integrated and complete solutions
y “Turnkey AE’s” Medium value added
Architect Engineers Transactional driven
with turnkey capability No loyalty
 Step C: The Delta Model & Strategic Positioning

Desired PG Strategic Positioning

System Lock-In

2
5 3 6 4
Total Customer Solution Best Product

Segment Positioning
1 Long-Term Investors High Value Added / Relationship
5 Non Turnkey AE's High Value Added / Relationship
2 OEM- Preferred Medium Value Added / Support
3 Traditional Integrated Customers Medium Value Added / Support
6 Turnkey AE's Medium Value Added / Support
4 Transactional Price Seekers Low Value Added / Transactional
 Step E: “From - To” - Statements
Dimension: Products and Service Scope
The Fossil division of Siemens Power Generation will become the
supplier of choice for customers seeking superior, individual and
/ or customized solutions in the power industry. We serve fossil
and nuclear power customers with a full range of new and
service-related products from 100-1,500 MW in Steam Turbines
and Generators, for Combustion Turbines from 70-260 MW, with
power islands and turnkey power plants, with I&C systems and IT
power solutions.
To achieve this, we will transform...

FROM TO
An organization with superior capabilities in
An organization with providing comprehensive solutions specifically
competencies in optimizing designed to the diverse needs of our customers.
individual products and This covers the whole range from total Fleet
services. Management, via innovative and expanded
maintenance concepts to efficient customer
engagement for new unit and service products,
based on competitive price and delivery.
 Step E: “From - To” - Statements
Dimension: Customer Scope

We view the customer as the center of all

Siemens Power Generation activities and
our goal is to increase his competitiveness
and the profitability of his generating
assets.
To achieve this, we will transform...
FROM TO
Covering all potential Approaching each customer segment differently
customers (including utilities, dependant on the needs, success factors and
IPP and AE’s) similarly and buying practices of the customer. This will span
treating them equally, without from an efficient and cost-effective interaction with
a well-defined, targeted customers on individual products, components and
strategy for the various services to customized, total solution offers. It
customer segments. includes the maximum use of standardized
products whenever they increase the customer
value.
 Step E: “From - To” - Statements
Dimension: Complementors Scope
Complementors are those engaged in the delivery of products and
services which enhance our product and services and thus our
position in the marketplace. Amongst others some important
complementors are customers, other Siemens divisions, the PG-
supply base, our JV’s/alliances/ licensees, financial and insurance
institutions, and consultants.
To achieve this, we will transform...

FROM TO
Viewing complementors as a valued, competent
A technology focused market and flexible gateway to increasing, win/win, global
approach and trusting in our business access. Therefore, we will leverage skills
own strengths within our and experiences from all possible sources to
individual businesses... complement our own core competence to then
optimize the value-added to our end customers.
We will develop processes, which are open to the
customers and complementors, and thus act
transparently with them.
Lessons from Siemens Power Generation

• The most important outcome of a strategic

planning process is reaching consensus among
all the key executives and identifying a coherent
strategic agenda with full accountability.
• One of the most important contributions of the
strategic planning process itself is that it allows a
critical and rigorous diagnosis of the business
through a well-defined methodology.
 The Paint & Coating
Company -
Segmentation to Guide the
Decommoditization of the
Business
 The Paint and Coating Industry
Paint and Coating
Manufacturers
Tier 1- Preferred strategic
solution seekers
Tier 2- Large price seekers
Chemical Coatings Tier 3- Least attractive price End Users
seekers
• Solvent • Architectural
Tier 4- Local manufacturers
• Resins • Automotive
Tier 5- Specific targeted
• Additives • Industrial maintenance
companies
• Colorants • Building products
Distributors • Appliances
Tier 1- Full alignment
• Metal office furniture
Tier 2- Large power
bargainers
Tier 3- Fragmented local
agents
Tier 4- Specialty distributors
The Delta Model in the Paint and
Coating Company

Tier 5

Tier 1

Tier 2 Tier 4 Tier 3

The Paint and Coating Company
Customer Segmentation by Tiers

Tier 1 - Preferred strategic solution seekers.

Tier 2 - Large price seekers.
Tier 3 - Least attractive price seekers.
Tier 4 - Local manufacturers.
Tier 5 - Specific targeted companies.
 The Paint and Coating Company
Customer Segmentation by Tiers
Tier 1 - Preferred strategic solution seekers. These are
strategic solution seekers that will be the recipient of
total customer solutions provided by a team approach.
We will target these preferred companies by offering
solutions intended to increase productivity and
performance, reduce supply chain costs, provide
eBusiness solutions and develop jointly unique products
and a variety of other value added services. It is
mandatory that the customer value propositions will
result in quantified and well-documented cost
reductions, performance and productivity improvements
for our clients, improving our customer sand our
shareholders profitability.
 The Paint and Coating Company
Customer Segmentation by Tiers

Tier 2 - Large price seekers. Composed of large price

seeker paint & coatings manufacturers, which may not
be as responsive to receive the total customers solutions
approach of Tier 1 customers. Our intent is to make
every effort to move these accounts towards a closer
collaboration, seeking a true partnership for value
added.
 The Paint and Coating Company
Customer Segmentation by Tiers

Tier 3 - Least attractive price seekers. These are the

least attractive price seekers that have non-existent
switching barriers to select a supply. These are
primarily transactional customers who will receive
minimal services.
 The Paint and Coating Company
Customer Segmentation by Tiers

Tier 4 - Local manufacturers. These are composed of a

large number of local paint & coatings manufacturers,
but because of their collective volume, provide attractive
opportunities to us but cannot be targeted in the manner
of Tier 1 and 2 customers. We will utilize eBusiness and
telesales technology to address and satisfy their needs.
 The Paint and Coating Company
Customer Segmentation by Tiers

Tier 5 - Specific targeted companies. Composed of

targeted companies that although small in size, deserve
special attention because they are either highly
innovative or address unique environmental concerns.
 The Mission of Chemical Coatings

Chemical Coatings will becomes the recognized leading

products and services supplier to the paint & coatings
industry.
We will accomplish this by developing a forceful
strategy that will make us the preferred total customer
solutions provider to the paint & coating manufacturers.
We will seek alignment through a careful segmentation
process to develop a distinct set of relationships with
our customers, distributors, end users, and
complementors.
 The Mission of Chemical Coatings
(cont’d)

We will have a coherent global strategy that maintains

our strong business base in the United States and
Western Europe while seeking geographical expansion
in selected developed and emerging economies in the
world. We will implement this transformation through
the addition of a significant set of new competencies. As
a result of this effort, we are confident that we will reach
exciting levels of growth and profitability, gain superior
customer loyalty and bonding, and generate a working
climate characterized by “A Spirit of Success.”
 Statement of Product and Services Scope
To achieve this, we will transform...

FROM TO
A portfolio of products characterized by Our product and service portfolio will
significant breadth covering oxygenated consist of a properly packaged set of
solvents, resins, coating additives, integrated solutions to our primary
curatives and colorants. This portfolio is customers, the paint & coating
composed by 20% of Flagship products - manufacturers. The resulting value
specialty solvents, coalescents, cellulose proposition that will emerge will be
esters and colorants. The majority of the directed to properly segmented and
remaining products have low margins and selected customers, which will
are being perceived primarily as constitute the essence of our
commodities. This product portfolio is leadership in the Paint & Coatings
supported by a variety of IT, Technology Industry..
and Supply Chain services. The resulting
products and services offering is rather
fragmented and is not focused on
providing an integrated, customized set of
solutions to our targeted customers.
 Statement of Customer Scope
To achieve this, we will transform...

FROM TO
Covering a large set of global, multi- A focused segmentation with the
regional, regional, and local paint & differentiated strategies to satisfy, in
Coatings manufacturing customers the most effective way, the distinct
without a well-defined targeted strategy.. needs for products and services of five
tiers of paint manufacturers.
 Statement of Distributor Scope
To achieve this, we will transform...

FROM TO
A loosely defined set of The classification of distributors according to the four tiers
relationships with large signaling different kinds of relationships with Chemical
numbers of national Coatings with respect to the degree of strategic alignment
(US), regional existing between us and the distributors group.
independent, specialty
Tier 1: Full alignment with Chemical Coating. This group becomes our
distributors and local preferred set of distributors, receiving the highest priority for business management
agents.. attention and strategic alignment (training, tech service).

Tier 2: Large power bargainers. This group is formed by large distributors who
are power bargainers pursuing their own individual interests. Because of the
importance, we have to develop satisfying relationships with them, but they may not be
regarded as preferential partners.

Tier 3: Fragmented local agents. Provide customer relationships and

transactional capabilities with no real long-term strategic solutions

Tier 4: Specialty Distributors. These distributors provide an attractive focus for a

particular segment and can act as an extension of our sales force..
 Statement of End User Scope

The end users are the Paint & Coatings

Manufacturer’s customers.

To achieve this, we will transform...

FROM TO
Currently, our relationships are To have a thorough understanding of the
rather remote, lacking deep end user’s product and service needs so
understanding of their business. that we can assist the paint & coatings
They are classified in a rather manufacturers in providing solutions to their
conventional way into the following customers. We will understand the value
market segments: Architectural, system as a whole, so that we will identify
Automotive, Industrial Maintenance, where the major opportunity resides. Once
marine, Building Products, General again, the major objective is to increase the
Industrial (machinery, profitability of our customers and our
equipment),Can & Coil, appliance, shareholders, and quantify, document, and
Metal Office Furniture. communicate cost reductions, performance
and productivity improvements.
 Statement of Complementor Scope

Complementors are those engaged in the delivery of product and

services, which enhances our product and services and our position in
the market place.
To achieve this, we will transform...

FROM TO
A lack of an integrated The concerted effort to add value to our
approach in the use of customer solutions by a comprehensive use of
complementors. partnership of both internal and external
partners.
 Statement of Geographical Scope

To achieve this, we will transform...

FROM TO
Being primarily a NA and Extend significantly our business presence in
Europe Centric organization. selected areas in the world. Our intent is to
provide global support to our preferred paint &
coating manufacturers, wherever it provides
mutual value. We will continue our commitment
to the US and Western Europe and the
countries where we have an established
business presence, such as Central and South
East Europe, Korea, Canada, Australia, Japan.
Additionally,l we will provide new emphasis in
emerging economies such as Greater China,
Mexico, and Brail.
 Statement of Unique Competencies
To achieve this, we will transform...

FROM TO
Chemical coatings is a leading In order to achieve our desired customer
company in its industry. solutions strategic position, we need to
Among our most salient incorporate a set of new critical competencies.
competencies we can cite: our The primary ones are: Activity based costing
global coatings portal, our open and business system; TQM; the achievement
business environment, our of positive net flow of talent; technology
unique breadth of technological programs focused on customer, market and
capabilities, our ability to business needs; highly leveraged procurement;
manage large integrated efficient operation of small scale batch
manufacturing sites, our processes; small site management capabilities;
excellence in the supply chain. deep domain knowledge along the value
system; tier driven sales process; develop
partnering skills; establish a total customer
solutions engagement process; and customer
driven services.
Lessons from Chemical Coatings

z The most effective way to decommoditize the

industry is to segment carefully the key players
(customers, distributors, complementors, and end
users), and provide to each one of them a unique
and exciting value proposition.
z Do not commoditize your offering to the customer
(sell solutions, not commoditized products, and do
not let the customer commoditize you).
z Mutual learning and trust is of the essence.