A duck can swim, walk and fly. Ducks can do a lot of things but they are not experts at any of them. The same thing happens when business owners decide that they should have the lowest price at the same time they offer outstanding customer service and the best products.
The “duck” business owner, who tries to be all things to all people, is fated to fail.
There are three main strategies that business owners can adopt to compete more successfully in their industries. They are:
- Production effectiveness: In this strategy, also known as operational excellence, the objective is to lead the industry in price and convenience. This is a great strategy for big companies that benefit from economies of scale and are able to offer products at a price that can’t be matched by their competitors. In this type of strategy, it is important to be lean and efficient to deliver value at the lowest possible cost. (Think Walmart.)
- Product Leadership: Companies that operate per this strategy are constantly focusing on innovation. They strive to produce state-of-art products and services and to commercialize their ideas faster than their competition. (Think Apple.)
- Customer Intimacy: In this strategy, companies are constantly improving their products and services to fit a progressively fine definition of their customer segments. In other words, they are always trying to understated their customers better and to adapt their offers to best serve them.
This can be costly but customer intimacy companies are willing to spend some money upfront to build customer loyalty on the long term and increase customer’s lifetime value. (Think Zappos.)
Focusing on one strategy is the key.
Business strategist Michael Porter states that a sustainable strategic position requires “trade-offs”. Trade-offs happen when activities are incompatible.
For example, it is common to find businesses that want to delight their customers with exceptional customer service while at the same time they want to offer the lowest prices. The extra cost required to implement a customer intimacy strategy combined with a low-price strategy will often lead to low profitability and limit growth.
If a company decides to deliver two incompatible things at the same time, it will confuse customers and, with time, it will undermine its reputation since customers won’t know what to expect.
It is therefore essential that:
- Senior managers decide how they want to position their companies
- The strategy is then communicated to all stakeholders
- Employees can then prioritize the day-to-day operations with a clear framework and goals directly related to the strategy
This well-defined strategy will boost consumer confidence as they will know exactly what to expect of the business.
What strategy do you have for your company?
Regardless of the strategy you choose, it is important that you are definitive and all decision-making is framed around achieving that goal.
Remember, focus is the key; don’t be a duck
Porter, M. E., 1996. What is Strategy?. Harvard Business Review, November-December, pp. 61-78.
Treacy, M. & Wiesema, F., 1993. Customer Intimacy and Other Value Disciplines. Harvard Business Review, January-February, pp. 84-93.