article | October 30, 2016
Is Your Company Suffering from False Differentiation?
Your corporate strategy sets the direction for the entire organization, especially the sales and marketing teams. A CEO’s strategy often does not get executed because the sales, marketing and product leaders are in their silos pursuing what they feel is important. This causes strategic misalignment and results in sub-par revenue growth.
When selecting a competitive advantage, you need to develop differentiation that is sustainable and real in the eyes of the customer. If your competitors can match it without a large effort, then you’re in trouble. If the marketplace doesn’t care, then whatever you’ve chosen as a competitive advantage doesn’t matter.
SBI recently spoke with Jim Schleckser about developing corporate strategies. Jim is the CEO of the Inc. CEO Project, a coaching and peer advisory organization for high performing CEOs. Jim’s company specializes in issues that fast growth firms experience. He is uniquely qualified to answer the key question of how company leaders can avoid suffering from false or unsustainable differentiation. We have captured Jim’s insights for you to apply to your organization.
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How do you ensure your company does not suffer from false differentiation?
False differentiation is differentiation that’s either not important to the marketplace, or a false sense of superiority.
Lower performing companies spend resources conveying a point of differentiation that customers don’t care about and won’t pay for. That’s a complete waste of effort. The simple answer is that CEOs and functional leaders should spend time in what we refer to as player mode. Player mode involves performing the actual functional role (customer service rep, marketing manager, sales rep, etc.) inside the organization.
The real test for differentiation comes when you get in front of the prospect and you see how they respond. If they have genuine excitement and enthusiasm, then you know you’re on track. If they respond favorably and that it merits further discuss and consideration, then you probably don’t have the right differentiation.
CEO’s must invest time in the selling mode. You may think that’s a big hammer to bring the CEO in on the sales process, but we coach CEO’s to go beyond just the strategic input and perform Meta work. Get into the field and in front of the customer.
The question you should be asking yourself while you’re in front of prospects is:
All these question around product, process, talent, should be what’s going on in the background of the CEO’s brain while they’re engaged in the sales process.
We can test the competitive differentiation with the idea of having a mafia offer. The rule of thumb for a mafia offer is that it must be motivating enough to move a market by being twice as good or half the price. If you don’t have this level of motivator, then it’s not enough for people to take on the risk of change. The offer must be so good that it’s an offer you can’t refuse. Remember the mafia offer comes from the Godfather. It’s so good that I would be foolish not to say yes to what you just put in front of me. You need to spend time developing your Godfather offer and testing it in person.
How do you guard your company from unsustainable differentiation?
Unsustainable differentiation is a competitive advantage that is easily imitated by your competitors.
Your advantage is not sustainable if can be matched without a lot of effort. There is a great Warren Buffet quote about building moats around your business. That’s a good way to think about it. If there’s no moat around your competitive advantage, you’re probably not going to last long. This is because if you have a great product that moves the market, but it’s easy for everybody else to replicate, then it’s unsustainable.
Think about your moat as a barrier to entry you have around your point of differentiation. Is it unique technical talent or intellectual property that you’ve got patented? Is there a huge amount of capital required to do what you do making it an economic barrier that’s hard for anybody else to penetrate the space?
Entrusted information or data is known as an information or data moat. An example of this is the adoption of a CRM system once you’ve entered a large amount of your corporate data into the system. The switching cost to move to any other CRM is significant. Competitive CRM companies would need to provide an incredible offer for you to move all your data and take all that risk to switch CRM systems. There’s an example of an information mote that they’ve established by gaining position. If you don’t have a moat, it’s not a real competitive advantage.
How should a CEO approach corporate strategy development?
The first thing is that the strategy must be absolutely owned by the CEO. We see a lot of CEOs that say, “I have a strategy group, and they do the strategy for me.” This results in a diluted strategy and something that doesn’t necessarily resonate.
You are in the CEO role based on your set of experiences, knowledge, intelligence, knowledge of the industry, and your ability to sort of stitch together an understanding of the market. These are the competencies you bring to the company. You also have the talent you have brought in and the values you use to run your business. You are in a unique position to integrate all of that into an answer that’s powerful and resonates both with your clients and with your team.
It is hard to create strategy as a committee or a team. We recommend that you as the CEO own the strategy and come out with the first draft. Then you can bring it to the team and have them work with it. Your first approach is unfiltered with a concentrated view of where you’re going is most important.
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