In order to understand recursion, one must first understand recursion. (Author Unknown)
The topic of competitive differentiation has been coming up in quite a few conversations lately. The context is usually a discussion on how to create “sustainable competitive advantage.” A variety of different frameworks are used to describe it, from Michael Porter’s classic to the currently in-vogue.
When I’m asked how to do this, I have only one answer: you can’t. You can (and must!) create both a process and a culture that continuously creates competitive advantage.
There are lots of ways to create competitive differentiation. A better product. More service. Something free. Customer service. Appealing to needs as yet unmet (even with the same product/service). Hire better people. Spend more on R&D. Create a “faster” organization. Lower your transaction costs. I can go on and on…and some of these things will work for a short period of time, and some for longer.
But can you create sustainable competitive advantage? Every single thing you can do can be copied by your competition. Most things can be done better (they can leapfrog you – and will).
There is really only one way to create “sustainable competitive advantage” and that is to sustain the effort of creating competitive advantage. Sound recursive? It is.
I’ll offer a recursive description of this process.
How to create competitive advantage:
- Do something disruptive. Create something that will not just frustrate your competition, but that will do the market equivalent of rendering them speechless.
- Assume that your competition (known or unknown) has matched you and outdone you.
- Based on the position you are in after that assumption, create competitive advantage.
And you know that if you don’t do this, your competition will.
4 thoughts on “Recursive Differentiation”
There is one competitive advantage that is sustainable and can’t be copied, namely your brand. But you must be committed to standing behind it and living your brand promise every day in every nook and cranny of the organization.
The most recent evidence of a great brand powering a big market advantage is the release of the iPhone. Whether you view the brand as the iconic Steve Jobs or Apple, it doesn’t matter. Our expectation of their new products is that they will be breathtakingly innovative, exciting, change the world kind of stuff. They will excel at simplifying and making the user experience more enjoyable through outstanding industrial design which succeeds at both a functional and aesthetic level, which they won’t compromise to save a few pennies on production cost.
I don’t believe that there is another company on earth that you could say that about, and that if you didn’t say the name Apple, most people would still know who you were talking about. That strong brand propels sales, inspires excitement and enthusiasm, and allows them to charge higher prices for fewer features than the their competitors.
There are other brands that are equally strong, although for different things — Lexus, Coke, Starbucks, to name a few. Competitors can copy your services, your products, your features, your pricing, your messaging — but they can’t duplicate your brand.
Paul:
Thanks for your comment.
As a long-time Apple loyalist myself, I have to agree about Apple’s brand. (and, yes, there will be an iPhone in my near future as well!).
Mostly I agree with your premise. “Brand” in the very best sense of the term (and the way you are using it) is how the customer experiences it. It’s the product, the image, the concept, and everything else that the market community experiences about the brand.
My experience tells me that most companies don’t really own an experience in the minds of their market community in the same way that the leading brands do. And creating that kind of brand power requires that they do something disruptively different in order to separate themselves from the crowd and own an experience.
Once they do, they can escape the all-too-common commoditization trap.
The other thing I’ve found in my experience helping companies transform themselves and their markets is that even the best of brands, even the strongest of brands are constantly being threatened by competition wanting to capitalize on the value (look at the number of Apple imitators).
Apple has held “cool” as a core image of their brand for a long time. But what “cool” is has change dramatically, and Apple’s success, in large part, has to do with their willingness to try new things, listen to their market community and keep innovating. And not just product innovation, image innovation, service innovation, retail innovation, process innovation, innovation in everything that the market community experiences about Apple.
I have an on-going debate with a friend (another marketing professional for whom I have great respect): She says that the point of branding is to determine what hill you are going to take and own. I respond that in order to succeed over time in owning a successful brand (which, as you point out is much of your marketplace value), you have to anticipate, adapt to, and shift with a shifting landscape.
Apple, and other successful brands have done this well over time.
But I still contend that in order to keep you competitors from duplicating your brand, you have to keep it ahead of them and relevant to the market community, and keep reinventing it continuously.
re: Apple. I think the reason Apple has adapted so fluidly and easily is the driving vision of Steve Jobs. In our culture, Steve is always a half step ahead — intimately aware of what’s going on around him, yet still able to be different and lead — and so he actually is one of the key people we look to who defines what ‘cool’ is. In a completely different field, look at the string of smash hits from Pixar — it’s unheard of to have 7 movies in a row of any kind all be that successful. That’s why I said it was debatable whether the brand is him or the company, and I wonder how they’ll do when he isn’t there.
re: taking a hill and owning it. I think this is right (for most companies), but if you define the hill too narrowly then you’ll have trouble. For young companies, it is important to have singular focus after you’ve found the hill to fight on – but we must also remember Moltke’s Theory of War — No battle plan survives first contact with the enemy — and listen to customers, study the competition and react to changing conditions quickly on the fly. Grown up companies need to be constantly evolving, or they become irrelevant, but the evolution should be over long periods of time. This doesn’t often happen because a) leadership changes too often at the top now, and b) most leaders lack the clarity of vision to ensure this evolution happens and have too much hubris.
Your friend seems to believe in constants, but there are only temporary constants. There is a Latin phrase for this: “ceteris paribus” — all things being equal — which shows how old the idea is, but it also acknowledges that things don’t remain equal, and that any given thing can only be assumed constant for a short period of time. It does no good to take and own a hill if the hill erodes or there is an earthquake (which is what we create with disruptive innovation).
re: the brand. What a brand stands for may evolve, but almost by definition, a brand is like a fingerprint. You cannot duplicate the sum of customer experiences from how I use a product, to its quality, to what I see communicated about it on TV, to how good customer service is, to how the phone is answered when I call reception (or if the phone is even answered — it happens too seldom these days), to its coolness, to reliability — it just isn’t possible for two brands to be identical and to have identical value to the consumer. We won’t ever choose the same things for the same reasons, but we will probably by and large agree on what a brand stands for and how it is perceived. You need to be in touch with what your customers want, and evolve your product, but not (necessarily) your brand identity. Reinvention of a brand can actually be quite damaging unless something is broken, because you break the engagement with the customer.
Anyway, I think we mostly agree, and these are fine differences.
Paul:
“Ceteris Paribus” – brings back memories of all-too-many economics classes 🙂
I think we are in basic agreement, and if we were in total agreement, I’d worry 🙂
I think there’s a lot to differentiation, but still hold to the idea that “Brand” is nothing more and nothing less than the total experience the customer has of your company (or you, or whatever..).
There are lots of ways to create an experience (think Apple, Disney, United), but whatever the experience you create – that’s your brand.
Thanks for all your comments and for engaging!
–Jeff