(By Stephen Shapiro)
“I often hear large companies claim that “leadership” or “culture” is their differentiator. But customers do not buy these; they buy the products and services that result from a great culture/leadership. If you believe your culture is your differentiator, ask yourself, “What does your culture make possible that is of value to your customers?” Or, how does your leadership translate into something that customers would say sets you apart? Your answers will provide critical insights into your unique value.“
Every company has a limited amount of time, money, and resources that it can invest in innovation. That’s why they should focus their energies on opportunities that will set them apart from their competition — that is, they should innovate where they differentiate.
One company that does this exceptionally well is USAA, a financial services firm, which offers its services to military personnel and their families. Given the unpredictable and transient nature of the lives of its customer base, USAA knows that being easy to do business with is critical to its success. Its differentiator, in other words, is world-class customer service.
This commitment to service drives the company’s innovation efforts. It developed an app, for example, that allows military members to deposit checks from their cell phones – a major convenience for anyone serving overseas. Although you may enjoy the same convenience with your own bank, you can thank USAA for it. They were the initial developers of this technology and hold the patent for it.
The company also designs its business model around the needs of military members. One quarter of its new hires either served in the military or come from a military family. This allows the company to better understand the needs of those who serve. They also offer free financial advice to those who are being deployed, or returning to civilian life. Last year, its not-for-profit Educational Foundation conducted close to 850 financial management presentations to nearly 50,000 attendees in the military community. And its Survivor Relations Team helped over 50,000 family members cope with the death of a loved one last year.
This clarity of focus is why in 2012 USAA achieved 98% customer retention, and 95% of their customers said they will stay with USAA for life.
So what about your company? Is it differentiating itself? Is it investing a sufficient amount of its innovation efforts to make it a reality?
When defining your differentiators, consider the following:
Your differentiator must be difficult to replicate. Although you want to distinguish yourself from others, make sure you aren’t simply doing the heavy lifting for your competition.
A service contract firm that that fixes broken water heaters, for example, thought incorrectly that its differentiator was the unique way it bundled its services. Unfortunately, this differentiator was too easy for its competitors to duplicate. But when it dug deeper, it determined that its true differentiator was its repair network. It took years to build solid relationships with the individuals who fix the boilers and would take an outside firm equally as long. With this knowledge, the company shifted its innovation efforts to focus on nurturing this network. This created an unassailable competitive position.
Your customers determine your differentiator. I often hear large companies claim that “leadership” or “culture” is their differentiator. But customers do not buy these; they buy the products and services that result from a great culture/leadership. If you believe your culture is your differentiator, ask yourself, “What does your culture make possible that is of value to your customers?” Or, how does your leadership translate into something that customers would say sets you apart? Your answers will provide critical insights into your unique value.
You can’t catch your competition. It’s difficult to beat the current market leader in its area of differentiation. So choose a different angle.
When Progressive Insurance decided to compete against the bigger players in the late 90s, it didn’t try to match their strengths. Instead, it launched its Immediate Response Vehicles, a unique service where claims adjusters travel to the site of the accident to provide immediate and accurate claims assistance. This helped position Progressive as a market leader today.
Cascade your differentiator to the lowest levels of your organization. It is vogue in the business world to say that “innovation is everyone’s responsibility.” Unfortunately, this often translates into innovating anything, including irrelevant tasks like the speed of paper filing. This detracts from the bottom-line as it is wildly inefficient. Instead, make everyone aware of your differentiator and translate it in a way that helps all individuals prioritize their work.
Once you’ve identified your differentiator, use it to prioritize your innovation investments. By doing so, you’ll eliminate less critical opportunities, while devoting more resources to innovations that will see greater returns.
“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”