18: Phase 1 - Establish Multiple Points of Differentiation
The author speaks of an "Eight Ps" framework he uses to teach innovation workshops. They consider specific dimensions by which a company can be considered: position, product, price, place, promotion, processes, physical experience, and people.
The basic exercise is to consider each of these eight qualities and determine how a company is significantly different to its competition. Specifically, a firm must differentiate itself from others in ways that customers love and competitors will not copy.
He mentions companies such as Dell (four points of differentiation), Walmart (four), Southwest Airlines (four), Rosetta Stone (four) Tesla Motors (five) and Vista Print (six).
He suggests weighting your scorecard on each of these points: zero points if you have no winning move, one if you have something the competition can copy within four years, and two for things that take five or more years to copy.
He then presents some examples of firms that show strong differentiation in each of the areas:
- Position - Urban Outfitters positioned itself for the affluent young adult market, which was once held by the Gap before they diversified into baby, maternity, and adult lines. The Gap could not return to its focused market without shedding its profitable lines, and had to surrender that ground.
- Product - Once-popular gaming company Nintendo equipped its Wii gaming consoles with a motion sensor device to allow players to use natural movements to operate video games, rocketing past competitors who surpassed it. It took years for Microsoft and Sony to launch competing products, by which time Nintendo had built a substantial lead.
- Price - Redbox pioneered dollar-a-day rentals, which underpriced competitors who offered the same titles at $3 to $4 a day. The low overhead of offering booths versus having physical stores left competitors unable to compete on price. (It's also noted Redbox customers end up paying as much or more because they keep the movies for a few days, but the perception of price is cheaper).
- Place - The author suggests that Dell revolutionized computer selling by avoiding the retail store and selling direct to customers online, making it very convenient. (EN: Gateway was actually ahead of them in this regard, but dell worked the commercial market and was able to underprice them.)
- Promotion - Vistaprint offers its customers business cards very cheaply, but includes its logo on the back of the cards, which makes every one of their customers a promoter for their site, which offers cards and other more profitable products. The firm pays absolutely nothing for marketing, and does a booming business.
- Process - A firm called Corporate Creations that helps companies register their businesses runs with an open-book policy, enabling employees to see exactly what the firm's revenue and expenses are each month, tying this to a bonus program, which his highly motivational and empowering.
- Physical Experience - Apple's retail stores were at first seen as a "dangerous diversion" from its core business, but the stores have one of the highest revenues per square foot of any retailer, and are credited with creating customers who are better engaged with the brand.
- People - To develop a teaching system for foreign language, Rosetta Stone shunned traditional learning experts and instead hired people who had learned a second language naturally, and developed a unique and superior learning system.
Having a single point of distinction can bolster a brand, but the more points of distinction it has, the more unique its identity to the customers, and the harder it is to copy.
He then presents a restaurant he visited that he feels introduced winning moves across all eight dimensions (EN: this doesn't add anything new, and in some instances he's stretching it pretty thin.)
He then runs through his list again, suggesting a question for each dimension:
- Position - What competitive position can we take that competitors have abandoned or see as unprofitable?
- Product - What qualities or features can we offer that competitors cannot or will not copy?
- Price - How can we compete on price? Or communicate prices and facilitate payments?
- Place - How can we challenge the accepted distribution model?
- Promotion - Are there channels through which we can promote our products that are not cluttered with competing messages?
- Process - How can we change the way our people behave in a way that would be an advantage?
- Physical Experience - How can we differentiate the physical experience of our retail environment?
- People - How do we engage our employees in contributing to the customer experience?
The answers to these questions may not be obvious, or even simple, but it's worthwhile to go through this exercise multiple times.