First, stop focusing on your competitors and base your strategy around the customer. If you constantly look at and compare yourself to the competition, you end up basically copying each other – you may try to “one-up” them with a few new features or offerings but really have no major differentiation. You simply react. That is how commoditization happens. In this way, most Windows PCs have basically become commodities. They can all run Office, go on the internet, etc.
You must understand your customer and their environment. The customer must be your driving force and you create a value proposition that is unique for them, that distinguishes you from the others. In some respects, you are creating multiple niches – what Hax would say is strategy done one customer at a time. No two customers are exactly alike or will use your product in the same manner. Let’s go back to Windows PCs as an example. Panasonic was able to recognize a specific customer persona and market need in law enforcement. Two thirds of the 420,000 patrol cars in the United States today are equipped with the company's rugged Toughbook computers.
Make Love, Not War
So instead of a strategy focused on war (focused on beating the competition), go for a strategy of love (focused on embracing the customer).
Think about strategy on a more personal level. Did you pursue and win your wife or husband by focusing on your romantic rivals? No, you were focused on what your future spouse liked, what she/he cared about, and turned yourself into the most creative value proposition that blew away your competition!
Arnoldo Hax’s Delta Model is one of the best for looking at different customer, centric strategies. The Model shows a wide range of potential strategies – all pointing to the use of technology to promoting bonding (with customers, partners, etc.).
The range of Delta Model potential strategies include:
· Low Cost – Southwest Airlines, Walmart. This is very difficult since you must have the correct infrastructure and operations to sustain it.
· Best Product – best technical features, superior in performance, etc. Apple arguably has a number of products in this area.
· Redefining the customer experience – Amazon (both Amazon.com and via the Kindle), Starbucks, Apple iTunes, Singapore Airlines. This is an appreciable change in the customer value proposition.
· Customer integration – SAP, UPS, Fedex are tied deep into many companies’ IT, manufacturing.and logistics.
· Dominant Exchange - Google, YouTube, Facebook, Wikipedia, iTunes are the defacto paths to browse, see videos, network socially, research, and sell/buy music respectively. Dominant exchange is achieved when a critical mass of collaborating users (“complementors”) is reached and each new user makes the service even more useful (e.g. YouTube, Facebook).
· Horizontal Breadth – Fidelity, Amazon offer “one stop shopping” for financial products and very much all products respectively.
· System Lock-in - Intel, Microsoft very much own the microprocessor and operating systems in PCs. Apple owns the tablet market with Google Android moving in. Amazon is pursuing lock-in with e-content via Kindles and cloud. System Lock-in is the strongest form of bonding and integration among complete industries around a product (e.g. all the software companies developing Windows specific solutions). It focuses in the entire system economics instead of product-centered economics. Success is due primarily to the complementors that create solutions based on your product.
Strategies based on Best Product or Low Cost are the most difficult to sustain. Dominant Exchange and System Lock-in strategies are the most sustainable because they involve the complementors and the whole system.
You can see the Delta Model strategies being used in companies today. Amazon is a dominant exchange in ecommerce and becoming the dominant exchange in e-reading with the Kindle (ultimately, e-media content with streaming & Cloud). Apple is covering many of the strategies with arguably Best Product(s), Redefining the customer experience, Dominant Exchange, and System Lock-in. Google is arguably Best Product (browser and analytics), Dominant Exchange, customer integration (Analytics), and also moving toward System Lock-in with their Chrome browser and Android.
All of the companies mentioned are aggressively using technology to enable their strategies. How does Walmart achieve a low cost strategy? Technology is the foundation of their supply chain. Walmart has the largest information technology infrastructure of any private company in the world. Walmart can accurately forecast demand, track and predict inventory levels, create highly efficient transportation routes, and manage customer relationships and service response logistics through its network.
So remember: Focusing on the competition will have you constantly looking back over your shoulder; a customer-centric strategy will have you looking forward. You must take advantage of technology to employ your strategy.