Arnoldo Hax, the Alfred P. Sloan Professor of Management Emeritus at the MIT Sloan School of Management and an operations management expert who introduced a customer-centered approach to competitive strategy with his Delta Model, died April 20. He was 87.
Hax joined MIT Sloan in 1973 as a member of the Operations Management group. An industrial engineer who believed that management could be improved through rationalization, Hax was an early member of the strategy group at MIT Sloan, and strengthened ties with the School of Engineering.
“He was a big proselytizer for the idea that management can be made more effective,” says Professor Emeritus Michael Scott Morton of MIT Sloan. “The Delta Model was the synthesis of the factors that he saw as most important in setting a strategy.”
Inside the Delta Model
Customer bonding is at the heart of strategy; it is “fundamental” for a company to get to know the customer and provide a unique value proposition from its competitors, Hax said in a 2010 interview with Emerald Publishing.
His customer-centric view challenged the notion of putting the competition at the center of a strategy and prioritizing domination over competitors.
“The danger here is that you tend to view strategy as rivalry and the way to win is to beat someone,” he said. “That anchors us in the past, and most dangerously, it creates an obsession about the competitor’s behavior.”
To illustrate this idea, Hax and MIT Sloan’s Dean Wilde created the Delta Model. In a 1999 MIT Sloan Management Review article, they wrote that under the Delta Model, strategy and execution are connected through adaptative processes. This is achieved by:
- defining the three strategic positionings (best product, total customer solution, and system lock-in);
- aligning a firm’s competencies with the desired strategic position;
- seeking a coherent integration across business processes to produce unifying action; and
- incorporating supplier and complementor companies to ensure fulfillment of the customer value proposition.
The Delta Model was an alternative to Michael Porter’s Five Forces, the strategy field’s dominant framework.
“Porter's view was quite simple: You were either a low-cost producer or you were differentiated in some shape or form. But Arnoldo's point was that there are different ways to compete,” says MIT Sloan Deputy Dean Michael Cusumano.
“The Delta Model was more from a customer perspective. You can either compete with the best product — and ‘best’ could be related to lower cost or differentiated through quality — or you can compete as a total solutions provider, or you could have what Arnoldo called a system lock-in. Today, we would call that platform competition.”
Nicolás Majluf PhD ’79, a systems and industrial engineering professor at the Catholic University of Chile, completed his PhD in management at MIT Sloan. He and Hax co-authored several books and papers on the content and process of corporate strategy.
“He told me many times when we were writing, ‘I want to be helpful, I want to tell people how to do strategic management,’” Majluf says. “He was trying to help companies, and he was refining the Delta Model at every step of his consulting work.”
Hax’s mathematical background led him to create 10 “Haxioms” for his Delta Model and “a distillation of his knowledge in strategy.”
The 10 Haxioms are:
- The center of strategy is the customer.
- You don’t win by beating the competition, you win by achieving customer bonding.
- Strategy is not war, it is love.
- A product-centric mentality is constraining. Open your mindset to include the customers, the suppliers, and the complementors as your key constituencies.
- Try to understand your customer deeply. Strategy is done one customer at a time.
- Commodities only exist in the minds of the inept.
- The two foundations of strategy are: Customer segmentation and customer value proposition, and the firm as a bundle of competencies.
- Reject these two clichés: “The customer is always right,” and “I know the customer needs and how to satisfy them.”
- The strategic planning process is a dialogue among the key executives of the firm.
- Metrics are essential; experimentation is crucial.
The Delta Model isn’t the only work Hax produced at MIT Sloan with real-world applications.
In 1973 he authored a paper on hierarchical production planning, which outlined four levels of decision-making, each with its own characteristics such as the type of manager in charge of execution, the scope of the planning activity, the level of collected information, and timeline.
“The lower one gets in the hierarchy, the narrower is the scope of the plan, the lower is the management level involved, the more detailed is the information needed, and the shorter the planning time horizon,” Hax wrote. “Each level of planning has its own objectives and constraints in which decisions have to be made.”
Connecting with the business community
Born in Santiago, Chile, Hax helped launch what is now the Leadership in Global Operations program, a dual-degree engineering and MBA track, and he led the MIT-Chile program — in 2013 he received the Medal of the Order of Commander from the president of Chile.
Hax’s integrative approach to strategy spurred him to explore new partnerships within MIT and made him notably successful with his consulting clients.
“Even though he came from operations research, having consulted with lots of companies and worked with them on planning and execution, he realized that you need people trained in organizations and strategy and management processes,” Cusumano says.
Gerhard Schulmeyer SM ’74 tapped Hax for help while Schulmeyer was navigating leadership positions including president and CEO of Siemens in the United States and as a senior vice president at Motorola.
“He helped me sort out where the strategy stood and what the changes were for the companies I took over,” says Schulmeyer, who eventually became a professor of the practice at MIT Sloan.
Executives loved him because “he could speak their language and he was teaching strategy,” says Thomas Magnanti, professor of operations research at MIT Sloan. “He was teaching how corporations can improve themselves, and these senior people who were coming to industry loved that.”
A version of this article was first published by MIT Sloan.