Wholesale transfer pricing power is a phrase that describes a strategic objective. Something that we would like to have. Here is the basic idea
People like Steve Jobs, John Malone and Elon Musk understand the business problems associated with wholesale transfer pricing power as well as anyone in technology. Simply put: Wholesale transfer pricing = the bargaining power of company A that supplies a unique product XYZ to Company B, which may enable company A to take the profits of company B by increasing the wholesale price of XYZ. The way Steve Jobs used the iPod/iTunes business model even before iPhone to avoid the wholesale transfer pricing power of music owners was masterful.
In other words, you want to be able to anticipate the relative value of the components that go into a given product. This is an orientation that can be learned. You start by seeing more clearly what people want to do and what products they need in order to do it well. From that you can break down the components that can be improved upon.
Keep in mind that upgrading components takes time. You cannot just improve upon stuff by snapping your fingers. So your selection of improvement points must be done with precision.
I am from Philadelphia, and grew up with the NBA franchise, the Sixers. They have had their ups and downs, like all teams, but they have been really, really down this year. What do I mean? Well, they have lost their first 14 games. That is right. They have not won a game yet. And it looks like this is not a fluke. It is going to be a very tough year. Maybe they will win 10 or 15 games. If they win 20 over the season, some would be shocked.
So time to stop watching? Not at all. To the contrary, it is the time to start watching. Why? Because this is a young team that is just starting to gel. it is fascinating to see how these young guys come together — to make it or not. So they lost to Portland the other night. But there was good news. The level of play is going up.
What does this have to do with strategy? Simple. A key strategic question is about focusing. What do you focus on during the game? Is it just winning and losing? If so, you miss out on most of what is actually going on.
Anthony Davis came to the NBA with media fanfare. But in truth, his game was rough around the edges by NBA standards. Scouts knew this, but not much was written about it.
So Davis did not immediately transform his team into a champion. Nor did he contend as MVP. But step by step, Davis has upped his game. In other words, he saw what was needed and he worked to build the skills to make it happen. This BI article gives a closer look.
Bottom line — the rule is the compete against the best in the world — when you are ready to do it. Nerlens Noel take note!
Pat Riley argued that to be great, you need to identify and compete with great rivals. So his Lakers didn’t just have to play the Celtics and Larry Bird, they had to think about what the Celtics were doing to get ready and counter that.
This works in sports and according to Lafley and Martin, it works in business too. L&M say bluntly that you play to win and it is not worth doing that unless you are competing against the best in the world.
But it can be difficult to identify competitors. They don’t wear a badge saying “come and get me!” To do this well, you need to be able think backwards from winning to the present moment.
Can you think backwards? Do you use this tool to help you see your competition and win? If this interests you, follow me here! Better yet, write a comment so we can chat.