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 "BUSINESS INSIGHTS”

An Occasional Newsletter

 to our Clients, Readers, and Friends

 

Does your company need to outperform your competitors?

No!  It just needs to be different!

The past decade has seen a frenzied and desperate quest for operational efficiency with layoffs, cost cutting and reorganizations as companies have tried to preserve or enhance their profitability. In general, this approach has not worked.

With the current economy and changing industry structure, companies have turned to one management fad after another searching for answers.  They have benchmarked, tried time-based competition, TQM’ed, re-engineered, partnered and outsourced, and never achieved sustainable profitability.   

Fortunately, sustained prosperity is possible with a different approach. Sustained prosperity requires creating a unique value for your customers while improving both your top line and your bottom line.  

Instead of just pushing products or services out the door, a company needs to have detailed knowledge of who its customers are, and then consciously aim products and services to meet their needs.

For many years, I have been calling attention to the growing body of evidence that cost cutting and cookie-cutter process-improvement methods do not work.  Cost cutting alone does not lead to sustainable competitive advantage or even profitability. A company can outperform its rivals only if it can differentiate itself. 

To be sure, cost cutting and operational efficiency are necessary to be competitive – but not sufficient. Michael Porter, the strategy guru, cites two reasons for this.  

  1. Though cost competition produces overall improvement in operational effectiveness, it does not lead to relative improvement for anyone. Cost cutting raises the bar for everyone, but it does not lead to competitive advantage.
 
  1. Even worse, the more companies use the same methods and employ standard process methodology, the more they look alike.. This is referred to as “competitive convergence”. Porter's conclusion: "Competition based on operational effectiveness alone is mutually destructive, leading to wars of attrition that can be arrested only by limiting competition.

Firms need to look at the world through their customers’ eyes – something that all successful customer-based firms have in common.  These firms have an obsession with delivering value to their customers: value as defined by the customer.  They are focused on improving the customer’s experience and satisfaction with the product and pay very close attention to the customer’s attitudes and feedback.  They consistently deliver more real value to their customers.  These firms are focused on the long-term view.  They do not allow pressures for short-term profits to damage their customer relationshipsThese successful firms can only accomplish this because there is strong support from senior executives. 

So benchmark away, if you like, but you won't make much of a competitive difference. Competition based on operational effectiveness alone is mutually destructive, leading to lower profits. If everyone's trying to get to the same place, that causes customers to choose by price. Too many firms have slashed costs to the point where they disappeared.

The Wilson Marketing Group was founded on the concept of business innovation through custom designed strategies. We help selected clients become different in ways that offer a business advantage. We only work with selected clients who aspire to leadership and only on engagements where we are convinced that we can add high value. Our proven methods, skills, and experience have helped leading firms develop or maintain sustainable advantage.  

If your firm is stuck in a low growth mode, if you want to break out of the pack and create sustainable profitability it is likely that we can help. The journey to the future starts with taking the first step; without that first step, you are unlikely to break out of the status quo. 

Sustained prosperity is possible! There are many firms that are doing it today. Why not thrive instead of merely survive? Why not prosper?

 

About the Author:  Ken Wilson: Strategist, marketing guru, educator, facilitator, author, university lecturer and consultant, he can be reached at ken@wmg-mn.com  or 763-476-2216.

 Copyright ©2016 by Ken Wilson    All rights reserved.

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