You have your business plan. You may even have five- and ten-year plans for what you want to accomplish and financial goals to achieve. You’ve probably agonized for hours over the precise wording to put in your mission statement… but what’s your competitive strategy?
Michael E. Porter, renowned Harvard Business School professor and author, describes competitive strategy as “relating a company to its environment. Although the relevant environment is very broad, encompassing social as well as economic forces, the key aspect of the firm’s environment is the industry or industries in which it competes. “ Michael Porter further goes on to define earning the highest ROI in your industry as the ultimate goal for your strategy.
Fortune 500 companies consistently compare themselves to their competitors and markets. They also are clear and precise on exactly what they do and how they do it. But, benchmarking is not simply for big corporations; companies of all sizes need to have a clear idea of their strategic priorities in order to gain a competitive edge and succeed. Knowing which competitive strategy to choose and how to maximize its potential is just one of the many ways you can get noticed and be profitable in a crowded and competitive marketplace.
Strategic priorities can easily be broken down into three categories. And your company fits into one of the following categories 1) even if you don’t know it yet and 2) even though you are not a huge company like the examples we use below.
Operational Excellence: These companies strive to excel at cost leadership. They implement every tactic to improve efficiency and performance, to cut out excess spending, eradicate errors, and get products and services to their clients in the quickest, most efficient way possible. Customers learn to expect a standardized product or experience that is the same each time. Think Fed Ex, Walmart, or McDonalds.
Customer Intimacy: These companies strive to excel at offering personalization to the customer, yet still uphold a cost value to its customer. Their customers can pick and choose services to create a solution that is a good fit for their needs while still staying on budget. The company must obtain insights to their customer’s needs and the solution is not the cheapest option on the market, and also not necessarily the most innovative. These companies adapt and change with customer needs and the temperature of the marketplace. Think Amazon, Nordstrom and Mercedes.
Product Leadership: These companies constantly innovate the marketplace with products and services meant to mesmerize their customers. They create the products that customers “must have now” and the customer experience that keeps them coming back for more. Creativity and teamwork are hallmarks of their success. Think Apple, BMW and Fidelity Investments.
Where do you stand?
All businesses, regardless of size, need to choose a focused competitive strategy. Just like creating your mission statement offers guidelines for who you are as a business, understanding your competitive strategy in the marketplace offers direction and focus which leads to greater sales and success.
A good business strategy is only as good as the data used to inform those assumptions. Contact Acumen Partners today to learn more about the ways we help companies just like yours to gain clarity about your business strategy and close the performance gaps that cost you revenue.