Years ago at an executive development program on strategic planning, I learned that great companies pursue one of three core strategies. While many small business owners may think strategy is only for the big guys, an experience last week reminded me that every company is pursuing a strategy whether they know it or not. (More on that in a minute.)
Strategy is simply where your company chooses to compete, how it’s going to win in that space and what your goals are for your market segment. The three strategies you can use to differentiate your business from the competition are:
— Product innovation: Develop products or services ahead of your competitors that are difficult to replicate (think Apple)
— Operational efficiency: Gain cost advantage through relentless attention to productivity improvement and cost management (think Wal-Mart)
— Customer intimacy: Build customer loyalty through a unique customer experience and exceptional customer service (think Four Seasons hotels)
Business clients of mine have often argued that they need to compete on more than one strategy, suggesting, as an example, that they need to be low cost and provide exceptional service. The problem with trying to be great at two things at once is that your competitors who pick one or the other will be better than you at each.
Your business decisions about what to invest in, what kind of people to hire and what marketing to pursue all flow from your core strategy. If you’re chasing more than one strategy, your resources get diluted and competitive advantage gets diminished.
Last week, I called a small, home services business that had done some work on my house a few years ago. An urgent problem had developed that I was certain would not be covered under their warranty. To my surprise, the company got someone to my home within a day, fixed the problem, made a follow-up phone call to me and told me there was no charge; the work was covered for ten years.
This company’s service is specialized — they encouraged a bat colony that had nested in my garage soffit to relocate. But they were not unique in their service and they weren’t competing on price. Whether they have specifically identified their strategy or not, they compete on customer service.
In this case, the second experience with them solidified the first from several years ago. I would refer them without reservation and will call them if I ever have a critter problem again. That’s customer loyalty and a business strategy.