There are two types of strategy. You can compete to be better, or you can compete by being different. Which one have you chosen?
Companies that compete on the basis of superior performance are eventually commoditized. It is difficult to sustain this type of advantage. Competing head-to-head is a zero-sum game. One company’s gain is another company’s loss. This undermines the sector as a whole.
The greatest competitive advantage comes from being different. A differentiating strategy describes a company’s unique approach. By being different, the company is able to provide something that others are not.
Differentiation is a sustainable advantage. It is typically an objective advantage. It spurs innovation and is healthy for the sector within which the company competes. It creates a larger market.
In 2009, I stumbled across a differentiating strategy for 3Pillar. The outsourced product development sector was dominated by offshore vendors. Each one touted a unique, typically agile, methodology. They competed on the basis of this methodology, their talent, and ultimately cost.
At that time, 3Pillar had grown into a boutique consultancy, almost by accident. We found ourselves following around these offshore vendors whenever they failed.
What if, we thought, we could offer a totally different approach? Instead of competing head-to-head with others, we created a different offering. We brought the value proposition of an onshore boutique together with the capital efficiency of an offshore world. We combined the promise of innovation, time to market, and quality available to the boutique with the deep bench of talent and sustainable price point of the offshore world.
We created what we coined a shore-agnostic approach. We became different. In an industry of two extremes, we became the alternative approach. The following year we grew 50% organically.
Southwest Airlines might deploy the most well known differentiating strategy. Other airlines operate on a hub and spoke flight pattern. Southwest provides short-haul point to point fights. They are different and continually outperform their peers.
Being different is powerful strategy. It creates a sustainable advantage. What are you doing to be unique?
This is the second post in the series “Lessons from a First-Time CEO.” Read the first post, “Experience Matters,” here.