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The 5% That Determine Your Company's Success

Mar 7, 2008
I have encouraging news for you: many of your competitors are afraid of strategy. You might call it strategophobia. Strategy has two terrifying characteristics. First, strategy is a choice. "We are going to go for target customers X, and not the rest," or "The major benefit we will offer consumers is Z and not all sorts of other things."

It seems that when you choose, you have to give something up. There are executives who are not willing to give up on a target group of customers, as if they "have them" or stand a realistic chance of getting them all. This is one of the sweetest but most dangerous illusions managers have. They aren't willing to define a particular benefit as the major benefit they have to offer their consumers, out of fear that the consumer might be tempted to try a different benefit elsewhere.

Strategizing means choosing to focus and concentrate your energies in order to provide yourself with an advantage. You go about this by establishing your brand as the source of a certain benefit. If you don't, you probably won't be identified with any benefit and consumers will have no good reason to think of you and buy from you when they need or desire something. When you adopt a strategy, you're "giving up" all sorts of things that you don't actually have in order to acquire something tangible, something you can sink your teeth into.

The second terrifying characteristic of strategy is differentiation from competitors. To be different that's really a possibility that could cause nightmares. Why? Primarily because basic conservatism says that if that's what everyone does, there must be a good reason for it. And that's true. The component of "good management practices," which everyone strives for, is essential. It doesn't create an advantage over competitors and you should never confuse it with strategy, but it is essential.

Beyond this, managers are always so busy dealing with competition that they are more worried about preventing their competitors from gaining an advantage than they are about creating an advantage for themselves. And so those managers are busy trying to imitate their competitors rather than striving to be different. A good defensive game really does help you not lose. But in order to win, you need to score every now and then. For this, you need a strategy. No alternative, sorry.

The 5 Percent That Makes All the Difference

By definition, strategy is the way you plan to achieve your goals. In a competitive environment, your goal is for your customer to buy from you and not from your competitors. Therefore, strategy is the way in which you plan to achieve an advantage over your competitors, in the consumers' eyes. Differentiation is almost always a pre-condition for achieving such advantage. You must do something differently from your competitors so that you provide certain consumers with a good reason for preferring you.

Many marketers think that differentiation means that a company has to be different than its competitors from A to Z. Not true. The comforting secret is that you don't need to be different in everything in order to succeed, only in certain things. If you look at the managers of competing companies in the same market category, no matter what the field, you'll see that 95 percent of their concerns, decisions and day-to-day activities are very similar. It may be surprising, but in 95 percent of their actions, executives in competitive companies are doing nearly the same things. That's the "good management" that we talked about.

If you take cellular company CEOs, for example, and interview each of them separately, asking them what's important to them, you're likely to hear pretty much the same thing from all of them: "I want an infrastructure technology with a horizon for future developments; I want more exciting phones; I must have great client service, a flexible and efficient billing system, and great added value and content services." Everyone will say exactly the same thing, because that is what is expected of a good cellular company. But good management isn't a strategy.

If everyone does the same thing, and everyone is talented enough to do it well, would consumers differentiate between companies? Why should they prefer your company? Because you do it better? There's practically no chance that "better" is something consumers will notice, nor is it an advantage that you can maintain over time.

The secret is in the other 5 percent. The 5 percent you do differently is your differentiation which is your strategy. If 5 percent sounds too little for you, I suggest that you remember that human beings and chimpanzees are 98 percent identical in their genetic makeup. If 2 percent can make that big a difference, then 5 percent, planned wisely, can do even more. Other concepts you know, such as positioning (your situation, relative to your competitors', in the consumer's mind vis-?-vis his purchasing considerations), and "critical success factors" (what you must do in your field in order to succeed) relate to good management, not strategy.

Note that positioning and differentiation are not at all synonymous! Positioning refers to the comparison between you and your competitors in all parameters that are significant to consumers, which they use to compare their options. Differentiation refers to what sets you apart. Since it's something that is true only about you, there's no comparison in this respect. Good management provides you with the entrance ticket to the competition. Strategy allows you to win the battle for the consumer.

I want to illustrate the principle of 5 percent difference for you with an admittedly unconventional, but very elucidating example. Mind you, I do not mean to glorify this company, just to make a point.

In Canada, there is a news company called Naked News, and it broadcasts upbeat news and current events programs to more than 170 nations daily on the Internet, as video on demand (V.O.D.) on cable and satellite-TV as well as over mobile phones and other handheld devices.

Most of what the managers and other staff in this news company do is exactly what their colleagues in any other news company in the world do. But Naked News does one thing a little differently, and that's the reason some viewers prefer it (despite the premium price). Tagged "the channel with nothing to hide," Naked News' attractive anchor persons (well, mainly young women) cover politics, business, sports, entertainment and the weather, while totally naked.

You may prefer a less controversial approach. That's fine. As long as you get the principle right.
About the Author
Dr. Dan Herman, a globally renowned strategy consultant, an author and a lecturer, is the author of "Outsmart the MBA Clones: The Alternative Guide to Competitive Strategy, Marketing, and Branding"
( http://www.outsmart-mba-clones.com ).
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