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Does
your company need to outperform your competitors?
No!
It just needs to be different!
The past decade has seen a frenzied and
desperate quest for operational efficiency with layoffs, cost cutting
and reorganizations as companies have tried to preserve or enhance
their profitability. In general, this approach has not worked.
With the current economy and changing
industry structure, companies have turned to one management fad after
another searching for answers. They have benchmarked, tried
time-based competition, TQM’ed, re-engineered, partnered and
outsourced, and never achieved sustainable profitability.
Fortunately, sustained prosperity
is possible with a different approach.
Sustained prosperity requires creating a unique value for your
customers while improving both your top line and your
bottom line.
Instead of just pushing products or
services out the door, a company needs to have detailed knowledge of
who its customers are, and then consciously aim products and
services to meet their needs.
For many years, I have been calling
attention to the growing body of evidence that cost cutting and
cookie-cutter process-improvement methods do not work. Cost
cutting alone does not lead to sustainable competitive advantage or
even profitability. A company can outperform its rivals only if it can
differentiate itself.
To be sure, cost cutting and operational
efficiency are necessary to be competitive – but not sufficient.
Michael Porter, the strategy guru, cites two reasons for this.
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Though cost competition produces overall improvement in operational
effectiveness, it does not lead to relative improvement for anyone.
Cost cutting raises the bar for everyone, but it does not
lead to competitive advantage.
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Even worse, the more companies use the same methods and employ
standard process methodology, the more they look alike.. This
is referred to as “competitive convergence”. Porter's conclusion: "Competition
based on operational effectiveness alone is mutually destructive,
leading to wars of attrition that can be arrested only by limiting
competition.”
Firms need to look at the world through
their customers’ eyes – something that all successful customer-based
firms have in common. These firms have an obsession with delivering
value to their customers: value as defined by the customer.
They are focused on improving the customer’s experience and
satisfaction with the product and pay very close attention to the
customer’s attitudes and feedback. They consistently deliver more
real value to their customers. These firms are focused on the
long-term view. They do not allow pressures for short-term profits to
damage their customer relationships. These successful firms
can only accomplish this because there is strong support from
senior executives.
So benchmark away,
if you like, but you won't make much of a competitive difference.
Competition based on operational effectiveness alone is mutually
destructive, leading to lower profits. If everyone's trying to get to
the same place, that causes customers to choose by price. Too many
firms have slashed costs to the point where they disappeared.
The Wilson Marketing Group was founded on
the concept of business innovation through custom designed
strategies. We help selected clients become different in ways
that offer a business advantage. We only work with selected
clients who aspire to leadership and only on engagements where we are
convinced that we can add high value. Our proven methods, skills, and
experience have helped leading firms develop or maintain
sustainable advantage.
If your firm is stuck in a low growth
mode, if you want to break out of the pack and create sustainable
profitability it is likely that we can help. The journey to the future
starts with taking the first step; without that first step, you are
unlikely to break out of the status quo.
Sustained prosperity is possible!
There are many firms that are doing it today. Why not thrive instead
of merely survive? Why not prosper?
Copyright
©2006
by Ken Wilson All rights reserved. |
