3D Strategies for Successfully Charging More than Your Competitors
By Christopher W. Miller, Ph.D. & Gary C. Graziano, AIA
Every business shares the same goal: creating superior economic value (ROI) by finding and maintaining a competitive advantage. Value is created when customers are willing to pay more for a product or service than it costs to produce. Superior value is created when customers are willing to pay more for your product or service than competitors’, or when they prefer your version of a product or service to all others because it meets their needs better and maybe even exceeds their expectations.
While finding one sustaining competitive advantage is generally not possible, it is possible to develop a series of advantages that can sustain your business through continuous business innovation. Most sustaining advantages are born out of continuous innovation, not the annual strategic planning processes. The cumulative effect of many small things done well is usually better in the long-run than a big hit from the much sought after, and elusive, “silver bullet.”
Why are a series of sustaining competitive advantages important? Without them, a business will, at best, be average and will not grow beyond the rate of market growth for a sustained period. Pursuing benchmarking or “best practices” does not create competitive advantage, because it leads to doing what others do, and eventually being the same as everyone else — average. Similarly, internally-oriented “strategies,” such as Operational Excellence, also cannot create competitive advantage unless they support a market position that is highly valued by customers, and cannot be copied or improved by competitors.
As proof that your desk is a dangerous place from which to view the world, a few years ago, when Coleman was in financial trouble, they recognized “that camping is everyone’s favorite thing not to do.” With this realization, they determined that they needed to look at the bigger world of outdoor living and branched out into deck, patio, yard, and sports furnishings, tripling their business in only five short years.
To achieve competitive advantage — and superior profit — a company must do things differently or better than competitors in ways that customers value by engaging in strategic marketing, a customer-focused process that seeks to create unique and mutually beneficial exchanges between buyers and sellers. The exchange can involve goods, services, information, money, or loyalty — and always, benefits for customers.
If companies develop the right strategies — that is, they take the right actions relative to customers — they are rewarded with market share. And, if they manage well, they are rewarded with profit. Developing the right strategies is not easy, and many treatises have been written about strategy, but at their core, they all describe it the same way:
- Strategy is a set of actions relative to customers and competitors. Good strategy is about finding and occupying a unique and valued space in the mind of the customer. It is about constructive disruption and creating paradigm shifts in the way you do business or in the way you help your customers do business or live their lives.
- Good strategy is simple, simply stated, future-oriented, executable right away, and SMART — Specific, Measurable,Actionable, Realistic, and Time sensitive. It is also enduring. Without continuity of direction, it is difficult to develop the unique skills, assets, and brand reputation needed to achieve and sustain competitive advantage. Focusing largely on short-term results, or engaging in frequent “reinvention,” are symptoms of poor strategic thinking and fast tracks to mediocrity.
- Good strategy is also exclusive. It involves deciding what — and what not — to do. Improvements that do not require trade-offs become new best practices because anyone can copy them without paying a price. Good strategy aims to develop a set of unique, use- and customer specific customer benefits that are different from competitors’.
- In good strategy, a company’s actions cater to its strengths and are organized so that all activities are mutually reinforcing. “System fit” and alignment increase competitive advantage by making strategies harder for competitors to imitate successfully.
So how do you achieve the competitive advantage that comes from a unique and valued market position? Start thinking like a business innovator and begin thinking in three dimensions by asking these simple questions: 1) What is my market position and how can I improve it? 2) What kind of organization and operations do I need to support it? 3) Can I get the growth I need from what I’m doing to meet my goals?
To answer these questions, look to your customers and prospects and ask: what is it that they want? And, what are they doing, buying, or working around? Then look at your competitors and ask: what do they offer their customers? What don’t they offer? What can they do better than you? What can you do better than them? How can you disrupt the market? Where is there opportunity for growth? And, can you and your company get excited about what needs to be done?
Once you’ve begun to ask and answer these questions you’ll be on your way to developing three dimensional strategies to create superior value for your customers and your firm.