What is the SCP model?
Introduced in 2022 by Sergei N Freiman, the SCP model adopts and expands on the original idea from The Blue Ocean Strategy written by W. Chan Kim and Renée Mauborgne.
The authors suggest that in order to “produce a high-performing and sustainable blue ocean strategy” the company has to align value, profits and people propositions. Authors provide sufficient evidence to support this claim.
The SCP model expands on this idea. The model's proposed implementation is to seek an alignment between three pillars (S, C and P) when making important business decisions. S pillar stands for Stakeholders, C stands for Clients and P stands for Profits.
How is the SCP model helpful?
Every decision makes an impact — big or small. Management of all levels has to make decisions on a regular basis. The better the quality of a single decision the better the compound impact of all business decisions. The SCP model suggests an approach to qualifying such decisions.
Namely, it seeks an alignment between three SCP pillars in order to produce synergy between forces behind each individual business activity. When constituents of the three pillars are misaligned they pull the activity into different directions, subtracting from the whole rather than contributing.
The following fable by Ivan Krylov (published in 1814) can illustrate the core idea behind the SCP model best.
A Swan, a Crawfish and a Pike.
When partners act without accord
Their deed will not concord.
And soon the work feels rather torment-like.
One day, a swan, a crawfish and a pike
Resolved to haul a cart with load.
Got harnessed, three of them, as one, prepared to hit the road.
Exerting ‘selves inside and out; the cart — it will not budge.
The load seems light, about right size,
But swan is rushing toward skies,
The crawfish does a backwards trudge, to waters pike pulls with a nudge.
Now, who was right and who was wrong —
‘Tis not for us to say,
But bear in mind — the cartload’s there
Until this very day.
Constituent elements of the three SCP pillars
This pillar is about employees, founders, owners, investors and broader society that has a stake or direct interest in the company. It mainly revolves around people. Thus culture, values, behaviors and motivations are part of this pillar. Salary and all sorts of remuneration are part of the S pillar as well.
This pillar is about buyers, clients, prospects and leads. It is about the value company creates for these people. The pillar also includes such aspects as target market, differentiation, touch points, promise, offerings, features and benefits of products and services.
This pillar is about money. The company has to be profitable not for the sake of it but as a prerequisite indicator of its utility to society. The pillar is about business model, pricing, costs, competition, innovation, creativity, opportunities and risks.
Benefits of the SCP model
Here is how the SCP model helps improve the quality of business decisions.
Prudent resource distribution. Identify areas that require less resources (time, attention, effort, money) and those that need none at all. Misaligned activities are of lesser importance and shouldn't get a lot of resources. Aligned activities should be prioritized.
Incremental contribution to the whole. Each business decision management makes on a daily basis can either help, hinder or have no effect on the overall goals of the company. When each small business decision is aligned with the big picture, it contributes to the attainment of the primary goal. Good quality decisions accrue positive effects over time.
Get unstuck. Doubt over the quality of their next decision and its unknown consequences prevents many managers from making one. Unmade decisions stall movement forward. The lack of progress is associated with negative emotions. The SCP model helps with identifying the makings of a good business decision. This provides confidence to the decision maker, produces positive emotions and speeds up the process.
Identify important objectives. Knowing that there is an opportunity for alignment within the activity, decision makers can initiate discussions within the company and externally. Management can start asking the How questions, e.g. how can we alleviate losses and/or produce benefits for each constituent of the SCP pillars. The answers will reveal additional business objectives.
Application of the SCP model
How to qualify business decisions?
Prior to investigating whether an alignment of Profits, Clients and Stakeholders pillars is possible one must determine if a business decision pertaining to the activity passes a quick SCP test.
There are three questions to answer:
Will our activity have an impact on Stakeholders?
Will our activity have an impact on Clients?
Will our activity have an impact on Profits?
Another complimentary way of doing this test is to ask questions for each of the SCP pillars differently: Who of the constituents of (S, C, P) pillar will benefit from this activity? Will they loose if we don't do this right?
Failing the quick SCP test
Let's look into the following example. A manager of an engineering firm is tasked with hiring a graphic designer to create a new set of business cards for the organization. First, let's determine what should be evaluated at the three SCP pillars.
Who is going to interact with the end result of this activity? Employees, top management and clients.
1. Stakeholders. Our employees would probably love the new designs. They will feel happy about it. Morale boost. Check — Yes.
2. Clients. Will our clients benefit in any meaningful way from our new business cards? Highly unlikely. Will they loose anything if we don't introduce new business cards? Nope. Check — No.
3. Profits. Will our company make more money or increase profitability as a result of the new business cards. Very unlikely. Check — No.
In this case the SCP model does not apply and there is no need to seek alignment within this activity. A No in this quick SCP test doesn't mean the company shouldn't order business cards. What this test signifies is that for this particular situation investing substantial resources (time, effort, money) into this activity doesn't make any sense. It would be prudent for the decision maker to allocate as little resources as possible for this activity.
The Yes/No answers to this quick test will be different for different companies. Thus it is management's responsibility to make an appropriate assessment on application of the SCP model.
We can expect luxury brands such as Hermés to invest more money in business card design even though the alignment of three pillars is dubious. There is no direct negative effect on profitability should they choose to order off the rack designs. But it makes total sense to support and elevate the luxuriousness of the brand by paying attention to small details (as the brand does with its produce) such as business cards.
The quick SCP test evaluates eligibility for further, deeper assessment of the activity.
Passing the quick SCP test
Let's look at the following example. A legal firm wants to redo a company website and assigns a project manager to this activity. They set 25,000 USD as a preliminary budget and set a timeframe of three months.
Here is how the answers could look like for the firm:
1. Employees and management will be proud of our new website. Check — Yes.
2. Clients will also benefit because we will improve our website's usability, create helpful content, write better copy, etc. Check — Yes.
3. Profitability will improve in time because more prospects will be able to find us online. Check — Yes.
Since the activity passes the quick SCP test, it is eligible for pursuit of alignment. Let's look at how this company could go about attaining the alignment between three SCP pillars.
Stakeholers. How should our employees and management benefit from our new website? We should elevate the aesthetics so that they would want to share our website with other people — prospects and potential job seekers. We should introduce automation of repetitive tasks to make our employees' lives easier. We should add an area for job seekers to know more about us, our values, our mission and vision, and who we'd be happy to hire. We should allow them to submit their resumes with contact details so that we can start building a pool of candidates.
Clients. Our prospects should be able to self-qualify saving them time and knowing exactly what next steps they should take. Prospects should be able to see how our approach is different from other vendors. We should create valuable content that would allow us to get more leads. We should create a lead nurturing system that would increase our prospect-to-client conversion rates.
Profits. Having specific copy and lead pre-qualification in place we will be able to reduce the number of unqualified leads making our sales reps more focused and productive. We should increase the number of leads by X. This will allow us to increase our prices. We should improve lead-to-prospect and prospect-to-client conversion rates to be able to say no to the kind of work we don't want.
While going through each of the pillars decision-maker must be mindful of possible contradictions and make adequate amendments.
How does this approach help? Now that the firm has identified what needs to be done for each of the pillars they will review their budget and objectives for this activity. Since the activity isn't about a website redo anymore but about reaching specific business objectives perhaps they'd need to reconsider the initial budget and timeframe.
Conversely, if the reasoning for each of the three pillars was different, and there was no ambition of getting new business through the web app, the firm might want to make a deliberate decision to create a brochure type website. In this case, it makes sense to lower the budget and save money for other activities.
Apart from seeking alignment, the SCP model helps with defining business objectives for specific activities.
The significance of a vector for the SCP model
The alignment of the three SCP pillars itself cannot produce good results by design unless there is a vector to this alignment. It is management's responsibility to define goals, objectives, aims and general vision for the company. Only then the alignment can reach its full potential.
For a generalist firm that competes on price, for example, it would make little sense to try and create a culture of creativity (P pillar), knowledge (C pillar) and sharing (S pillar). Only competence-oriented firms would truly benefit from such alignment.
Thus it is management's job to define what the endgame is and then seek out an alignment of and within the three pillars.
The best way to discover this direction is through a clearly articulated mission, vision and purpose of the company. Once these are defined and aligned with one another all of the business decisions can be aligned pertaining to this core vector.
Consider Space X — a company from the aerospace industry. Their vision is to create a sustainable colony on Mars. That's what their tagline says — “Colonize Mars.” In order to attain this vision they have aligned their mission which at the moment (and it can change it time) is to build reusable rockets. The purpose of the company is aligned with both mission and vision as well — humans must become multiplanetary species.
There is no conflict between these core statements. And one reinforces another. That's what alignment is all about.
This higher-order alignment sets a vector and serves both as a filter and a prerequisite for future activity of the company. Whenever management has to make a business decision it can ask a simple question — is this activity aligned with our core vector?
Business decisions will produce better results when there is an alignment within a particular activity as well as the activity itself is aligned with the core vector.
What the SCP model is not?
The model isn't about whether or not a decision has to be made. It's not necessarily about making a faster decision either. Although subjected to frameworks decision-making process tends to proceed faster.
It's about how impactful the decision is likely to be and therefore how much resources (time, money, effort) should be allocated. SCP is a model for making prudent business decisions.
How useful is this SCP model?
Does the SCP model solve all the problems of decision-making process? Of course not. But it is another useful instrument in your toolbox for fine-tuning your business.
At the end of the day to make a company sustainable management has to figure out how to 1. deliver differentiated value to its clients, 2. hire and retain the right people to deliver on the promise and 3. continue to make profits to reinvest in innovative solutions for the target market. All of these tasks have to be achieved simultaneously. All of them have to be part of an ongoing process.
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