Types of Edge Strategies

In Their Own Words: L.E.K. Partners Alan Lewis and Dan McKone Discuss Edge Strategy

What are examples of product edges, journey edges and enterprise edges?

Dan McKone: A product edge is when you ask, “Is my product or my service exactly what all my customers want?” And inevitably, the answer is “no.” You may have it absolutely right for the average customer, but you will always have different customer segments with slightly different needs.

Lewis: A great example of a product edge is when you buy a television set. The retailer will offer an extended warranty, so if anything goes wrong with that television set, you have the peace of mind that you can be compensated or get a new one. The extra $20 or $30 you pay for that warranty transforms the profitability of that television set for the retailer.

McKone: A journey edge could be as simple as a company that offers heads of lettuce, cutting them up and preparing salads. If you think about that category, which is now a multibillion dollar category, it took an entirely commodity product, added a marginal amount of labor, bagged it, and completely transformed the economics into a high-margin product. It is a journey, because the customer looks at the lettuce and says, “Well, I can bring the lettuce home, but I still have a lot of work ahead of me. I have to cut that up, I have to prepare that for a meal. But if you do that work for me, I am willing to pay for that. I am more satisfied.” It is a lot higher margin for you.

Lewis: A great example of a company that took advantage of an enterprise edge is Amazon. Everybody knows them as an online retail giant, but they recognized when they were investing in their core business that they had built a huge asset in the ability to run a cloud-based infrastructure of servers and web platforms. What they built was not uniquely valuable to them, because any company that needed to have not just retail, but any kind of infrastructural backbone would also want that kind of capability. And today that is actually one of the most profitable parts of their business, but not a lot of people know that.

 
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