Jack Welch offered lots of great advice as the celebrated CEO of GE but one particular bit stands out:
If you don’t have a competitive advantage, don’t compete.
In other words, don’t step onto a level playing-field. At least when it comes to business. But I think this is true for many things. Government programs, non-profit endeavors, even a softball tournament. Until you really understand your strengths relative to the challenge you face, and devise a way to use those strengths to your advantage, you shouldn’t enter the fray.
But how do you find a competitive advantage?
In the tech world, there is a writer named Ben Thompson who continually impresses me with his reading of the tea leaves. Like a military historian, he is able to explain past maneuvers on various fronts as an interplay of punches, counterpunches, and shifting battlefields. The competitive dynamics bring deeper color to the events — even if those dynamics weren’t totally understood at the time — and help him generate a few Newtonian-like rules for play. It makes for fun reading and allows us to build some armchair predictions of what’s to come.
And it all centers on the perpetual search for competitive advantage. Some players use network effects. Some use the power of convenience. Others use luxury status. These are the strategies. They shift with the specific venture and player.
There is a common theme in this search for advantage: product differentiation. It holds for services, too. So in every instance of his analysis, Thompson looks for what each competitor is doing to strategically set themselves apart.
Because ultimately, the copycat model doesn’t work very well for FAMGA. Or for anyone. Not in the long run. After all, if you’re offering the same thing I already have, why should I switch?
This is the reason Jack Welch’s wisdom is still quoted today.
There is a slight misunderstanding, though. If you read enough of Thompson, you’ll see the simple permutations of competitive ventures in the tech industry very clearly. It seems quite valid. You might then start thinking of ways to apply these concepts to your own work. But unless you’re in tech, or a corporate giant of some kind, this isn’t the best place to start.
So the question remains: how do you find your competitive advantage?
Imagine you want to establish a coffee shop in a crowded marketplace. To be successful, you clearly must do something different. Is it your service model? Your pricing scheme? Your sourcing methods? How about location?
In his wonderful book This Is Marketing, Seth Godin does us all a favor and spells out a whole variety of factors that you can use to differentiate any industry. I counted 23 of them. He says there’s more and I’m sure you can think of them. Whatever the number, things get interesting when you realize that these factors produce tension.
You can’t deliver on all the factors. You can probably only deliver on a few. It harkens back to the classic bit about being fast, cheap, or good — you can only pick two.
For Godin, real differentiation begins with an exercise where you select two of the factors that you want to value in your work. Let’s take price and performance. You chart these on a simple XY grid where top-right is the highest point of combined value and bottom-left is the lowest point.
Now assign your business, service, program, etc., by where you think you should be. If the X-axis is price, and you want to be a low-cost offering, your dot will drift you to the left. But if you want great performance, which is on the Y-axis, you’ll climb up the grid. Easy enough, right?
Now the fun comes in. Once you’ve placed your venture on the grid, peg your competitors on there, too. Make a nice spatial representation of your playing field. Where are they? Hopefully, the competitors are all scattered across the matrix, leaving you with a sense that you can stand out as someone properly differentiated.
With enough distance between you and the others, you can actually get a different view of these other industry players. They’re not your competitors anymore. Not really. As Godin writes,
They don’t compete; they’re simply on the same board.
And if there is enough to go around for everyone, this coexistence can last a long time.
But that still doesn’t satisfy. Eventually, one of the players starts to move their position on the grid. Maybe they roll out a new product line or a new service offering that’s just like yours. Whatever the case, they get aggressive and move in to take your share in an effort to take over the whole board. What can be done to prevent this? Anything?
I don’t know. But I do know that simple differentiation is just the beginning. If you want to be the best in quality, that’s fine. For now. If you want to be the lowest in price, that never seems like a good idea but you can certainly try. But these are just simple qualities. Small positions on the board. If you can do it, someone else can, too.
In other words, you’ll have to keep innovating and moving forward and fostering something unique. You’ll have to continue to stand out once you take your spot. That requires something even more unique than a location on the grid.
So what can you offer that others can’t? What is the long-term, inimitable advantage?
If I had to guess, it’s the way you treat people as you continue to evolve your work. As Godin writes:
We can think of the quest for the edges as:
Claims that are true, that we continually double down on in all our actions.
Claims that are generous, that exist as a service to the customer.
You might read that and feel a bit lost. It’s hard to shift the thinking when we originally fixate on the mere differentiation of measurable factors. Godin’s words here are softer, looser, and more penetrating. This isn’t about competitive leverage or price wars. It doesn’t even seem to be about business, really.
So what is a claim that is true that you can continually double down on?
In a case like Zappos, it’s customer service.
In a case like Apple, it’s design quality.
So while their initial place in the grid, based on mere differentiation, is nice and clean, it won’t be protected unless they continue to do the softer, more unique things that set them apart in the first place. This is why Zappos relentlessly pursues the perfect customer experience, answering the phone every time. And Apple, meanwhile, doesn’t make its beautiful store any bigger for the sake of dealing with more customer volume. They keep it small, designed perfectly, and full of people waiting an hour to be served.
That leads to the second point from Godin … what is a claim that is generous and exists as a service to the customer?
I get stumped on the language. A claim that is “generous” feels like it must be bad business. Aren’t you supposed to be neither generous nor greedy but priced just right? Maybe. But what Godin is really pointing at is the fact that generosity, in a service, isn’t what you perceive as the service provider but what your client perceives as the recipient.
Let’s consider Apple again. There is a whole world of unboxing videos today because Apple decided to be generous with the service of product packaging. They saw their customers frustrations and said “No more of this horrible plastic packaging! No more of this wrap rage!”
Instead, they developed a whole new experience. It was generous. Probably priced accordingly, too. But that’s not the point, of course. The point is that there was a mindful awareness of how this packaging experience could be better and the generous choice was to make that happen.
There are other ways of explaining that story. Just as there are other ways to rationalize a new venture or develop a new competitive advantage. All the same, there is something more meaningful about this approach, encapsulated with those two questions. It isn’t mere differentiation. It’s something else. A story we can tell about why we do things. It isn’t marketing-speak. But it’s still marketing.