TWO COMPETITIVE STRATEGIES

There are really only two competitive strategies...

Recently I completed a project for a medium sized public company. Their business is growing well, they've got some great brands and an exciting culture. Their difficulty was agreeing where they should focus their energies and resources so they asked me to help them develop a roadmap for growth over the next four to five years. It was an interesting project because the market they are in is dominated by big mainstream brands and it is difficult for them to compete on price. Someone, I think it was Michael Porter but I may be wrong, said there are really only two competitive strategies.

The first is price and the second is differentiation. It is of course a gross over-simplification but the point is well made. It is one that we as a very small and remote country competing in a large and competitive world, need to understand. In order to compete on price you must either have the lowest cost model for production and distribution or you need to be prepared to accept minimal margins or even losses. If you don't have the lowest cost model, you better find some other basis to compete ie differentiation.

In the commodities business, having the lowest cost model is a distinct advantage. But even then, differentiation strategies can help. Commodities suppliers have differentiated themselves on service, product features, packaging, delivery, speed, additives, additional products and services, guarantees, customised production run and run size, finished and near-finished product, vertical integration, billing procedures etc.
In New Zealand we've struggled to get past commodities supply into competitively differentiated finished product. The handful of companies who have achieved this deserve to be recognized, applauded and studied. The current government has acknowledged this. I watch that space with interest.

Getting back to my client, our project involved agreeing a growth strategy for the business which included:
1. An over-arching differentiation (as opposed to low cost) strategy and
2. The individual opportunities to be considered.

A tool we used which I refined in my fast food days was the long list / short list concept. I'd like to recommend this approach to you. Here's how it works.

1. Inside your business encourage people to generate ideas.
2. Every idea goes on the long list no matter what.
3. Develop a set of criteria for evaluating ideas. Every idea passes through the same filtering screen and there needs to be a forum in which this happens and everyone in the company understands this.
4. Every idea that gets through the screen goes on the short list.
5. Those ideas that don't get through the screen can be held over and placed in the 'maybe later' group and re-posted on the long list.
6. The short list is actively managed and projects are assigned for evaluation, feasibility, action etc and are reviewed formally every month by the Leaders of the business.

The beauty of this quite simple mechanism ensures that the organization is regularly generating differentiating ideas and good ideas do actually get actioned. It also ensures that the whole business is engaged.  I encourage you to try it if you don't already have something similar and are looking to create more differentiation and thus competitive opportunities.