The Next Step - Competitive Advantage

So, we've been discussing the importance of creating customer value and how a value proposition is the essence of any business. We've talked about how to choose a value proposition and the importance of choosing specific components of value. During the next several posts we'll spend time highlighting how to build competitive advantage in your business/unit, and how it relates to strategy and strategic planning.

Competitive Advantage Diagram

Click here to access the beginning of this blog: http://mybilliondollarfruit-stand.blogspot.com/2006/11/introduction-to-fruitstand-concept.html

On The Verge

In my previous post that introduces Marco's fruit stand, we identify that he has chosen a very specific value proposition and strategy. Marco provides his customers with the "best-tasting fruit." He has invested time and resources in creating business activities and processes that deliver his value proposition to the customer. At the same time he knows the importance of delivering other components of value reasonably and adequately. We call this the Verge. Marco doesn't differentiate his fruit stand from Ray by delivering vast selection, low price, or even convenience. However, he knows that if he doesn't meet basic standards and expectations in these components that his customers will cease from coming. The art of a successful business and successful management is understanding how to differentiate the product or service while maintaining these basic standards. The management team at Apple knows that it's products are differentiated by its cutting-edge and innovative image. However, they also know that "verge" standards must also be met in the pricing area or demand will vanish.

As you take your business through the strategic planning process you must ensure that you differentiate your product or service without ignoring other non-core types of customer value.

(Start at the beginning) http://mybilliondollarfruit-stand.blogspot.com/2006/11/introduction-to-fruitstand-concept.html

Technorati Profile

Default Customer Value (AKA..."we suck less")

We've covered the three primary ways in which organizations can create value for customers. These groups have been discussed to great extent by several well-known and respected authors such as Micheal Treacy, Michael Porter, and Geoffrey Moore. We're not breaking new ground here. However, we have added a fourth value strategy or value proposition. This can easily be categorized as an organization's "default" strategy. I refer to this strategy as the "we suck less" position. Essentially, any organization that creates a strategy without customer value as the central focus is planning for certain mediocrity. Firms that don't position their entire operating model around a clear and specific value proposition are sure to wind up competing on price. These organizations are basically saying, although most certainly not out loud, that we just attemp to "suck less" than our closest competition. If we are not as bad as our competitor and our price is lower then we win the business.

If you've read previous posts then you know that our fruitstand owner, Ray, has adopted an "all things to all people" strategy. We quickly categorize this strategy as no strategy at all. Where is the squirrel-like focus? Ray, without being aware, has adopted the "we suck less" strategy.

Examples of Best Product/Service Organizations

Here are a couple of examples that highlight my previous post about organizations that choose to compete by offering their customers the best product or service in their market. My favorite example, which I have posted about before, is Starbucks. Yes, their stock price has dropped significantly over the past year. However, they will continue to lead the marketplace over the long range by delivering a superior experience (aka - Best Product). They are investing in new high-end espresso machines for their stores that are designed to create the best coffee drinks available. They have also intensified their focus on Fair Trade coffees in Africa that produce the best coffee beans...period.

Another example is Apple. Need I say more? They dominate their space by constantly innovating and producing the latest and greatest tech gadgets and computers.

Both of these examples provide a classic look at organizations that choose to differentiate by offering the Best Product/Service.

Choosing how you create value for your customers drives your entire strategy and strategic planning process.

Click here to start at the beginning of this blog.

Best Product or Service

In our previous posts, we have outlined how choosing specific and compatible components of value to deliver to chosen customers is an important first step in strategy development. Certain components of value, when combined, tend to compliment each other to form a more complete offering that will draw customers. As mentioned in the book The Discipline of Market Leaders, the authors highlight three main categories that will make it easier to choose a value proposition during the strategic planning process. We have already explored the Lowest Total Cost and Best Total Solution categories, and in the next several posts we will dig into the Best Product or Service. (The diagram shows some of the possible components of value associated with this category)

Quick Tip

Before posting about the third value proposition, Best Product or Service, I would like to address a question I have been received lately with regards to analyzing the competition. The essence of the question is this; what's a good way to figure out my competition's value proposition so I can effectively position my organization to beat them?

Here's a quick tip: if your compititor is a publicly traded company then a very effective way to analyze their strategy is to listen to their quarterly earnings calls. You can access these calls on most company websites under a link called “Investor Relations,” or something similar. Every quarter you can listen to the company’s CEO discuss their performance, strategy, budgets, and overall outlook on the market. You can gain a vast amount of knowledge this way.

Best Total Solution Real World Examples

Here are some examples of organizations that excel at delivering personalization, customization, and tailored solutions through a business model that builds lasting relationships with select customers. Home Depot is a classic example, as they will walk you through the store educating you and helping you find the product you need. "You can do it...we can help." Also, Herbalife is a great example of how an organization uses a customer intimate approach to encourage and support its distributors to build their individual business.

We, at Start-Up Smart, just worked with a sales team for a market-leading book publisher. They identified themselves as a Best Total Solution organization. This value proposition differentiates them clearly in the industry, as the trend for their competitors is to outsource the sales function. Outsourcing is clearly a low-cost strategy and it removes the customer intimacy. This sales team now has a clear differentiating value proposition.

Here is an excellent link to a blog about the Best Total Solution. http://deoluakinyemi.com/2006/09/22/customer-intimacy/