30 Aug Going beyond “me, too” customer experiences
Is competitive advantage obsolete? Today, competitors can copy the newest product enhancement, advertising claim, Web-site feature, supply-chain innovation or low-cost back-office process seemingly overnight. Indeed, it seems that no advantage is safe or sustainable for long. This realization has led many corporate leaders to conclude that the best (and only) strategy to pursue is to create organizations that can respond fast and flexibly to new opportunities or competitors’ moves.
Unfortunately, this approach results mostly in “me, too” behavior and very little that’s new. But a few companies have proven that creating competitive advantage beyond the short run is still possible. Dell, Starbucks, Toyota, Southwest and Wal-Mart have unlocked the secret by creating business models that deliver unrivalled customer experiences.
The term “business model” refers to how a business is organized and operates — from its physical and financial assets to its human resources, brand equity, knowledge capital and organizational culture. Copying a piece or even whole chunks of a competitor’s offering to customers or internal processes is not that difficult. But cloning an entire business model — and replicating the way in which the parts fit and work together — is nearly impossible.
Take Dell, for example. For the past 20 years no computer hardware company has been able to match its selling and delivery processes (or its revenues and profits) even though all products in the industry are built from the same generic components. That’s why companies like Dell with unique business models are often able to sustain their advantage over the competition for long periods of time.
Want to create a compelling customer experience and business model that can’t be easily copied? One way to get started is to carefully mix the following sources of value into a winning blend for customers:
1. Cost – Size. Scale. Brute economic force. Customers that buy based on price are loyal to the lowest price, period. Being the cost leader means relentlessly ratcheting up productivity and squeezing out expenses to drive down prices. Think Wal-Mart. Only budding 800-pound gorillas need apply.
2. Functionality – Some customers want the latest and greatest products and services that totally outperform the competition in how they work or the benefits they deliver. Apple has survived and indeed thrived in the brutally commoditized world of personal computing and entertainment devices by creating a business model that delivers a steady stream of leading edge products to its customers.
3. Aesthetics – Good design is like art – difficult to create but enduring in its appeal. Bang & Olufson, the Danish manufacturer of audio, video and communications components, is an example of how to create unique customer product experiences built around innovative and enduring designs. It survives and thrives in an industry otherwise known for disposable products and rapid obsolescence.
4. Personalization – Certain customers demand products or services tailored to their specific desires, wants and needs. In some cases it may be pure whim – such as with luxury products, in others utter necessity, for example, with leading edge medical technology. These customers are willing to pay more to get something that fits their needs exactly.
5. Convenience – A highly desired source of value, especially in frenetic consumer markets. These customers desperately want products and services that make their lives easier and reduce time and eliminate hassles. FedEx, Jiffy Lube, 7Eleven, and McDonald’s are exemplars of business models that deliver high convenience.
6. Service – A classic source of value that many customers claim to covet above all the others. A score of companies pledge their devotion to the service gods but few satisfy them consistently. Lexus, Four Seasons Hotels, and Nordstrom stand out for having business models that consistently deliver top notch service.
Some newer sources of value are emerging in the contemporary marketplace:
7. Advocacy – A growing number of customers buy from companies that share their beliefs and pursue their interests. Whole Foods is growing at three times the rate of the rest of the retail food business by selling natural and organic products and advocating the social values and life style interests of its customers. Patagonia and the Body Shop are other successful examples of companies that represent the interests and beliefs of their customers in their products and business practices.
8. Self-reliance – Increasingly customers want to be empowered to do things for themselves and flock to companies that provide them with the resources and tools to do so. Successful examples include – Home Depot which teaches it customers how to make home improvements, IKEA that enables them to assemble their own furniture and Charles Schwab which provides the tools and information for customers to make their own investment decisions.
9. Connections – In an increasingly networked world, linking people with each other is a coveted source of value. Ebay is a stunning example. It provides the platforms, processes and tools to enable individual buyers and sellers to find each other and to do anything from individual transactions to running entire businesses. Harley-Davidson does more than sell cool motor cycles, it connects the people that love them with each other through the Harley Owner’s Group.
Finding the right mix of customer value and creating a business model that delivers it will never be easy. But those executives and entrepreneurs with the courage to try could become the next Dell or Starbucks.
P. S. – With great sadness, I mark the passing of Julia Child, a champion of good food and joyous eating. Here’s hoping there is no fast food where you are now!
Tony DiRomualdo is a business researcher, writer, and advisor with Next Generation Consulting. He works at the intersection of people, business strategy, and information technology to help companies create a committed and high performance workforce. Tony can be reached at firstname.lastname@example.org.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.