Value Creation Wins Over Competition
We hear it all the time – new digital startups competing with traditional businesses, if not replacing existing industries and categories altogether. Disruptive technologies like cloud computing and enterprise mobility have lowered the barrier to entry, if not totally eliminated it. These highly agile and digital startups are leveraging emerging disruptive technologies (e.g. AI/ML, AR/VR) to gain an advantage over incumbents.
Today’s aspiring entrepreneurs need not worry about leasing an office space, hiring employees and investing in significant capital equipment. Those days are long gone. Now, it takes portable computing power (e.g. laptop), broadband access and a disruptive idea to launch a business. In short, socio-economic, technological advancements and market forces have brought forth a record-breaking increase in the number of startups globally, according to Forbes magazine.
Given the current state of startups and their incessant threat to incumbent businesses, what are business leaders to do?
Let’s face it: traditional business products and services are getting commoditized. Outstanding feature sets have now become the norm; digital consumers take them as a given. It’s getting harder and more difficult to compete on price and features alone. Globalization and excesses in the supply chain have contributed to this problem of the “sea of sameness.” Brands are becoming ubiquitous. Consumers have acquired a voice (Voice of the Customer or VoC). They are empowered. They are in charge. They demand to be engaged in every media channel and at any time. Customers can now choose how they interact with brands. The balance of the buyer-seller dynamics has changed in favor of the consumers. More importantly, brand trust has become more important than ever.
In the past, a regimented focus on competition has created growth models which have provided businesses stability in calmer and more static markets of yore. Given the chaos and complexity of today’s business, it is no longer enough to outwit the competition. In fact, additional investment in branding, pricing strategies and product feature sets is no assurance of sustainable growth. Rather, in this day and age of hyper-change and disruption, business leaders must focus more on value creation as opposed to competition.
I never thought I would read this in the news: Daimler and BMW, fierce competitors for the last one hundred years are joining forces. Why? Competition is now outmoded. “Coopetition” is in. Customer value creation is paramount. The real objective now is to join forces and create a mobility powerhouse. But it’s also survival – it may not be long before Google or Amazon fancy themselves as mobility companies.
One of my favorite athletes, Michael Jordan, the basketball player, is the epitome of creation. At the height of his career, he was not competing with anybody. Other players may have seen him as competition. But Michael’s focus was not the other team. He’s competing only against one opponent: himself.
His performance was in the level of pure flow. He delivered outstanding plays and exhibited basketball moves with grace and power. Wayne Gretsky, the Hockey Hall of Famer, was another. Instead of competing with fellow players, he played his game differently. Whereas other hockey players would skate towards the puck, he always skated to where he thought the puck was going. This way, he was at least a couple of steps ahead of the game.
Apple has always been a creator and innovator. Steve Jobs never really focused much on the competition. In fact, when designing products, he didn’t think much about what customers wanted now. He’s always set his goals on products that he thought customers would want. He may have addressed current customer pain points. But more importantly, he obsessed about their aspirations and dreams.
Before the iPod, there did not exist a device or service platform where consumers could be convinced to listen to music in a legitimate fashion (remember Napster?). Before the iPhone, consumers had no access to a device where they could listen to music, surf the Internet and make a phone call. Steve started the “smart revolution.” It is important to note here that as a value creator, Steve Jobs also didn’t mind cannibalizing his own business. The iPhone competed directly with the iPod and then the iTouch in regard to providing music services. As we all know, the iPhone, Apple’s major revenue, dampened iPod and iTouch sales; then eventually rendered them obsolete.
Hence, the goal is to focus on the customer; not just address their pain points, but deliver on their aspirational needs as well. Leaders must focus on creating new values for the primary stakeholder (e.g. customer) as opposed to engaging in traditional competition – which only leads to making incremental changes in features and benefits.”
Here are 4 ways to create value:
1. Deliver on Your Brand Promise
Your brand’s equity is composed of two things – the brand promise and the brand delivery. Most branding initiatives focus on the promise. Unfortunately, many businesses fail to deliver on that promise. In short, there is a disconnect between the promise and the delivery. The lackluster delivery or lack of thereof weakens the brand. Customers flee and loyalty goes out of the window. Make promises you can deliver on.
2. Design the Customer Experience
At a minimum, products and services have to be good. This is where commoditization occurs. But where business leaders can make a difference is by shaping the customer experience. It is imperative that businesses are aware of the customer’s buying journey. Identify all target personas. A seamless and consistent omni-channel experience goes a long way towards building brand equity. Customer Experience (CX) is the new competitive advantage.
3. Become Transparent
Startups like Uber and Airbnb are successful because they solve consumer pain points. Before Uber, we were at the mercy of traditional taxis and car services. In order to get a cab, we had to get out on the street and flag one. Once you request an Uber cab, you know exactly where it is and when it will get to you. Amazon was the first company to provide transparency in its delivery. Before Amazon, you never know where or when your package would arrive.
4. Build Digital
What does it take for businesses to have their pulse on the market? What do leaders have to do in order to be a couple of steps ahead of their customers?
Leaders must build agile, digital businesses. Companies must understand, explore and adopt digital business platforms. Speed and agility are the currencies of the Digital Economy. Uber and Airbnb are platform businesses. Imagine – a car service company that does not own any cars; a hospitality company that does not own any rooms or buildings!
These are exciting times for both traditional and startup businesses. The notion of engaging in business competition as a primary business activity no longer holds true. The real strategic advantage these days is to delight the customers and anticipate their needs. A commitment to value creation enables businesses to design sustainable growth platforms, define new business models and endear their brands with their customers. And in order to achieve customer centricity, the business must become agile and nimble.
Companies that create value for customers will never become irrelevant. The truth is that customers are their True North.