Many companies continue to insist in being a little of everything for everyone, so they don´t stand out at all for anyone.
This is a serious mistake in times of such uncertainty, speed and competition, in which the customer needs clarity of ideas. We live in a VUCA world, an acronym that began to be used in the 90s coming from the military world, which refers to a volatile, uncertain, complex, ambiguous environment.
As consumers, we are all aware that Ikea is Nordic style furniture at a good price. That Mercadona (a Spanish retailer inspired in its origins by Walmart) is home food products with good price and good quality, but above all, good price. That El Corte Inglés offers a wide variety of products and brands with a good service: the customer is always right; “if you are not satisfied, we will give your money back” was the company´s motto for many years.
That Media Markt is a variety of appliances and electronics at the lowest price – “I’m not dumb” is their actual slogan -. That Porsche are leading automobiles in its category, by brand and product, but not by service or price. Sure, Porsche has a good service, but we also know that one doesn´t buy a Porsche for the service, but for other things, such as performance, aesthetics and the connotations of this iconic brand.
That, likewise, the fashion firms Louis Vuitton, Hermes or Cartier are leaders in product, but not necessarily in service or price, where there are other more valuable options.
That IBM is leader in service, from the moment it was willing to offer the product of the competition if it was the best thing for its client. That Intel is leader in product while Lidl is in cost. That Nespresso is leader in product but Dacia wants to be it in cost.
We could continue indefinitely, one category of product (or service) after another.
Everything we have mentioned before are positions that, as consumers or buyers (this can also be applied to B2B business), we have engraved in our minds and are derived from the various experiences of purchasing, use and exposure that we maintain with the brands.
This kind of positioning applies mainly to brands, rather than their different businesses or their specific products, of which we could talk about another type of positioning.
A visual scheme that illustrates very well this concept of positioning is that of the three disciplines of value, elaborated by M. Treacy and F. Wiersema in their book “The Discipline of Market Leaders”, where each discipline or “generic” form of delivering value to the market can be represented on a different axis.
The idea behind this approach is that the leaders of different industries tend to position themselves clearly in one of the three axes or, at most and just temporarily, in two of them.
Let’s see in more detail what these axes are, and immediately relate them to the positions we have seen at the beginning of the post.
The “Leadership in product” axis means that you have the best product available, with the best performance and design, surprising with every launch to potential customers. It’s what Apple has been doing over and over again in the last decade, from the iPod to the iPad. Or Google, with its search engine, its Gmail service, Google Docs, the Chrome browser or the Google Hangouts app.
The “Customer focus” (service) axis, involves reaching a close relationship with customers, offering them the solution most suited to their needs, with a careful attention and treatment. This is what El Corte Inglés has done for many decades in Spain, or Emirates airline in the world of commercial aviation, as Jennifer Aniston tells us in a humorous way in this commercial.
Finally, the “Operational excellence” (cost) axis, that means having the best total costs for the customer, offering him a reliable product or service without problems, but above all, at low prices. Here we have countless cases today, such as those of Decathlon, the aforementioned Media Markt or Ryanair in commercial airlines.
The danger of falling into the middle
Companies can disappear for several reasons:
– Because they run out of oxygen (liquidity) as a result of poor financial and economic management.
– Because they run out of water in the pool (customer demand) due to the disappearance or displacement of their customer base.
– Because they lose visibility (positioning), the potential customers are not clear about what exactly their value is, so it ends up competing in prices (where they aren’t especially qualified).
Many times, the lack of liquidity and demand may be the consequence of years of the absence of a clear positioning – or maybe months, that this is going very fast today -.
Do you remember the Sony-Ericsson phones, or the Saab or Rover cars, or the Compaq computers? All of them ended up succumbing to financial problems, but long before they were already suffering from serious positioning problems.
Consequently, a major threat for companies is not to emphasize in any of the axes, not having a clear brand positioning because, sooner or later, they will become corporate corpses.
There is only one exception to this rule: when you are the only player in the market, when you have no competition. In this case, you can be the best and the worst in everything at once, because there is no one who will shadow you. Not for the good, nor for the bad.
This is the situation that happens in recognized monopolies or oligopolies or in those unrecognized, but real in practice, as it is the case with companies well known to all, from industries such as oil (Repsol), electricity (Iberdrola) or telecommunications (Telefónica).
These companies don´t need to invest much in product, service or efficiency because they prefer to invest it in lobbying, in working their relations with the institutions, with the bureaucratic and political power, seeking to influence the people who legislate in order to continue enjoying their position without competition or with a competition only apparent, diluted, that is organized and rigged between a few.
However, as most of us know as employers and workers, in the real world there is competition, and the more competition we encounter, the more need to specialize in one of the axes mentioned above: product, service or cost.
When there is fierce competition, the real danger is to fall into the middle. Have a brand positioning that is neither one thing nor another.
Being nothing to anyone is a sure death, because you do not position yourself in the customer’s mind, who handles too much information and faces too much uncertainty so as not to have cataloged in his head, quickly, the brands of those categories of product and service that he is interested in.
It is much healthier to be someone relevant to a few (your target audience), even if there are others who do not accept or even hate you.
Someone could propose, with all reason, “why do not we try to be the best on all axes, to be up in all of them?”.
The answer is very simple: it is not possible because each axis requires alternative investments.
The investments that are needed to be a leading company in product (strong investments in R&D and marketing, in particular) are, in all likelihood, alternatives that one needs to be positioned as a leader in costs (large investments in facilities, highly efficient machinery and logistics) or as a leader in service (high investments in personnel, facilities close to customers, very flexible logistics).
That is why we have to choose between them when we find a lot of competition. In fact, business strategy basically consists of the art of choosing between alternatives, and, above all, deciding what it is NOT to do or be.
When you find an industry where there is a leader brand on two axes (eg cost and service), it is because there is not enough competition. Or the one there, being numerous, is not well qualified with respect to the leader. They are not good enough.
What usually happens in these industries is that there is enough demand, enough for everyone, so there is no serious over supply of demand. Possibly it happens more often in B2B businesses, between companies, than in B2C businesses, aimed at end consumers.
Or, that can happen in industries that are reinventing themselves, such as taxi, retail distribution or accommodation, in which we find new players like Uber, Amazon and Airbnb, who are leaders in several axes because they do not have yet enough competition . For example, Uber could be leader in product, service and cost, Amazon is in cost and service and Airbnb is also in cost and service…
Rigid and elastic strings
In the end, a company has a determined approach in each of the axes. The specific positioning of a company, seen graphically, is like a rope in which each hook to an axis is the position of the company in it: if we move out in one of them – improving our positioning -, you can intuit immediately that, in the other axes, the hooks of the rope recede towards the middle point (the intersection of the three axes).
Does this always work that way? No, there is a way to avoid string rigidity: innovating.
Innovation can make that imaginary rope more elastic, giving it a more rubber-like consistency: because it can allow us to improve the product a lot, without modifying our position, hitching in the other axes; or improving both in service and product, or cost and service without losing position on the other axis.
By innovating, we substantially modify the traditional way of doing things in a given business, and this gives us the possibility of progressing in one direction, or in several, without having to perform the usual (in that industry) excluding alternative investments. Just remember the cases mentioned before: Amazon, Uber or Airbnb, all of them innovative companies and all of them leaders in several axes at the same time.
What to do
Given the above, we should try to do 2 things:
1) Choose a brand positioning for which our company is well trained and pursue leadership in that axis, taking into account that you can be a leader in a specific niche, without having to be in the entire market; as is the Canterbury brand in rugby sportswear without being all over the sportswear market where it may be leading Nike.
2) Innovate to do even better on one or two of the axes. This will provide us with an appreciable advantage, for a time, that will increase our profitability; as Amazon has done in online retail distribution.
This will allow us to be remembered more easily and position ourselves clearly in the minds of our customers. Be something important to someone.