Thursday, October 9, 2014

Strategic Planning Analogy #538: Three Questions (Part 3)

We have a persistent cat. When it wants to go outside, it is determined to go outside. However, we do not let the cat out when the weather is really bad, such as a thunderstorm or a blizzard.

When the cat wants to go out, it meows by the door. If the weather is bad, we show it the bad weather through the window and tell the cat it cannot go out.

This will satisfy the cat for about five minutes. Then it will go back to the door and meow again. We show it the bad weather and say no. This again satisfies the cat for about five minutes. And then the cycle repeats itself, over and over again.

It reminds me of the old definition of insanity: Insanity is doing the same thing over and over expecting a different result.

The cat kept going to the door, expecting a different result (to be let out). However, because the situation had not changed (the weather outside was still bad) the results did not change (cat still not let out). The only way the outcome would change is if the situation changed (the weather improved).

It sounds simple, but the cat didn’t get it. Sometimes I think business leaders are a lot like that cat. They want an improvement in their financial outcomes, similar to a cat wanting to go outside. They go to their financial dashboard, just like the cat went to the door, to see if their desire will come true.

The dashboard says that the outcomes haven’t come true. That satisfies the executives for a short while, but then they keep going back to check the numbers—over and over again—and the numbers do not change.

The problem is that the company has not done anything significantly different in the way it approaches the marketplace. And as long as nothing significantly different has been done, one should not expect significantly different results. So we’re back to the definition of insanity.

To get out of this loop, we need to emphasize doing things differently to create a more positive outcome.

This is the third of three blogs looking at the three questions businesses need to ask themselves if they want to prosper into the future. Those question are:

  1. What problem are you trying to solve?
  2. Why should the customer naturally prefer your solution over the alternatives?
  3. What are you doing differently to prove your superiority?

In the first two blogs (here and here) we looked at the first two questions. We saw that success comes from focusing on solutions and developing preference as the best solution. In this blog we will be looking at the third question and further understanding how to create that preference.

The Formula for Success
The key idea comes from the following truism:

a)     As long as you are seen as similar to the alternatives, you will never be seen as better than the alternatives.
b)     As long as you are not seen as a better than the alternative, you will not be chosen as preferred.
c)     Therefore, the formula for preference is as follows:
a.      First, create an obvious, meaningful difference between yourself and the competition.
b.     Second, use this difference to prove superiority over the competition.
c.      Third, use this superiority to create a purchasing preference over the competition.

Everything breaks down if you skip the first step. You have to start with differences. Otherwise you have no foundation for proving superiority. After all, how can you believe something is superior if you perceive it to be the same as the alternative? And without the perception of superiority, there is no reason to expect a natural preference.

So if you want better results in the future, you have to start by focusing on doing things differently. After all, as we saw in the analogy, if you don’t do something different, you shouldn’t expect different results.

But we’re not talking here about just any difference. We a looking for differences which will help the marketplace perceive us as superior.

One of my favorite stories is that of Oxydol detergent. Oxydol was the first laundry detergent to add bleach to its formula. That was supposed to be the change which created a perception of superiority. But it wasn’t working.

The problem was that consumers were having a hard time perceiving the difference. Oxydol looked exactly like the competition. You used it in your laundry exactly like the competition. Nothing felt different. Therefore, consumers concluded it wasn’t really meaningfully different. The net result was that consumers had no natural reason to see Oxydol as superior or preferable.

So Procter & Gamble put useless green crystals into the detergent. Now Oxydol looked different than the competition. Proctor and Gamble attached this difference to the fact that they had bleach in their formula and the competition did not.

Since the consumers now believed Oxydol was different, and that the difference made Oxydol superior, they began to prefer Oxydol. From that point on, Oxydol became the #1 laundry detergent in the US. It stayed #1 until Proctor & Gamble decided to shift its emphasis to making Tide #1.

So creating the perception of a difference made all the difference in creating superiority and then preference.

Followers, By Definition, Are Not Leaders
If all you do is follow and imitate the leader, you will never be seen as different in a superior way. If any difference is seen at all from your imitation, it would be that you are similar, except for being smaller and weaker and not the leading brand. That is not the formula to success.

If you want to be seen as better than the leader, you must do the opposite: stop imitating and do something differently.

Think about Dodge Ram trucks. They used to be a minor player in the world of trucks, way behind the Ford F-150 and Chevrolet Silverado. They were seen as just like the other guys only smaller, weaker and not the leading brand—the formula of death.

So Dodge abandoned imitation and went for differentiation. Instead of making their trucks look like Ford and Chevy trucks, they made them look more like the cabs of a big, industrial semi truck. To add to the differentiation, they put engines in these trucks that were manufactured by the same people who built engines for semis. Then the marking experts at Dodge used these differences to create the impression of superiority with a particular truck-buying segment.

It took some time to change the perception, but eventually it worked. Now Dodge Ram trucks have skyrocketed in sales and have captured a meaningful share of the market. And because they captured that share with natural preference build on differentiation rather than on bribery, the business is more profitable.

So, if you want different (better) results like Dodge Ram, you first have to do something different.

To succeed in the marketplace, one needs answers to three questions:

  1. What problem are you trying to solve?
  2. Why should the customer naturally prefer your solution over the alternatives?
  3. What are you doing differently to prove your superiority?

Regarding the third question, everything hinges on building positive differentiation. It is the differentiation which allows customers the ability to no longer classify you as the same as everyone else. You can use this to say that your difference is what makes you superior. Then you can turn this superiority into preference. And that’s how you win.

What are you doing differently from everyone else?

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