Three Factors Of Competitive advantage
1- Operational Excellence
o Lead competition in price & convenience
o Reduce costs & overhead, optimize processes, efficiency
o Value equation focus: Cost / Price
o Middle of market products; best price, least inconvenience (low price,
hassle free); "Their products last and last." Best total cost.
Examples: AT&T Universal Card Services and Federal Express.
Operational Excellence Value Discipline
• Focus on customer service is key part of discipline
• Operating models support zero defects
• Effectively exploit information technology
• Keep assets working; new ways to use existing assets
• Have a formula that can be replicated in other markets; formula firmly
associated with brand name
• Less product variety
• Not pleasing every customer
• Whole company is a single, focused instrument
Examples:
– Dell Computer
– Wal-Mart
– Federal Express
2- Product Leadership
o Continuous flow of state-of-the-art products
o Creative, commercial, cannibalize
o Value equation focus: Quality Innovation
o Push performance (product) boundaries; best product--period;
continuous innovation Premium priced but worth it Best product.
Examples: Intel, GE Medical Systems, Johnson Johnson.
Product Leader Value Discipline
• Product with little initial demand (customers don't yet know they want
it)
• Must prepare markets; educate potential customers
• Champions and contenders at the same time
• Continually striving to replace your own "hot" product with something
new
• Don't slavishly follow the voice of the customer; customers can't
define the next break-through product
Examples:
– Johnson & Johnson (Acuvue contact lenses)
– 3M
3- Customer Intimacy
o Shape product/services to fit customers
o Focus on long-term relationships
o Value equation focus :Flexibility Timeliness
o Deliver what specific customers want, not what the market wants;
provide all support for customer to achieve optimum results; don't
pursue one-time transactions--cultivate relationships; "They are
the experts in my business." Best total solution. Examples:
Nordstrom, IBM, Home Depot, Airborne Express
Customer Intimacy Value Discipline
• Not lowest price; not latest product features
• Better overall result for the customer
• Recognize hierarchy of customer needs: product, basic service,
identify broader under-lying problem, customer success
• Needs irreverent, out-of-the-box, transformational thinkers due to
rapidly changing world
• Take responsibility for customer results
• Have detailed and integrated customer data
• Carefully selects customers
• Customize services to meet customer needs
• Look for ways to penetrate into the customer's business
• Customer as partner; share rewards (company charges more for
"extras")
• Display confidence to charge more because it's worth it
• Have developed techniques for sharing among teams the best
practices of customers, suppliers, etc.
• Product changes are evolutionary, not revolutionary
Examples:
– Home Depot
– Kraft
