In the golden age of the industrial era, the key resource was the means of production, best symbolized by Ford, which emerged and thrived because of its mastery of mass production techniques that allowed it to capitalize on vast economies of scale. Companies gained competitive advantage by making and selling more and better stuff. In other words, they dominated the upstream activities.
Today, as explained by Niraj Dawar in his book, Tilt: Shifting Your Strategy from Products to Customers
To succeed in the new tilted landscape, CEOs and marketers (and may I add, salespeople) need to be asking themselves new questions.
- Why do customers buy from us?
- Why do potential customers not buy from us?
- What else does the customer need?
- How else can we slash the customer’s costs and risks?
- Are we criterion takers, or criterion makers?
- My own addition: how else can we help them grow revenues or serve their customers better?
How does a company compete for downstream competitive advantage? Although the book considers both B2B and B2C companies, I’ll focus here on the former. In Part 2 of the book, Dawar explains how a company can use its “perch”, or higher and wider perspective of the market, to bring innovations and fresh insights to customers. Because they deal with large number and wide range of different customers, they can see the whole forest, and use their knowledge to relay and connect ideas, provide benchmarking information, and make predictions that add value.
The second section of the book dives deep into the scarce resource that we should all be competing for: the customer’s attention and cognitive effort. Dawar poses an interesting thought experiment. If Coca-Cola somehow lost all its physical assets, would they be able to raise funds to restart their business? The answer is clearly yes. But if somehow the entire world got partial amnesia and forgot about the Coca-Cola brand, would anyone invest billions of dollars in the business? Clearly not. The point is that a brand, or a customer’s perception of your company, is a critical asset because it lowers the customer’s costs and risks of making a decision to buy. They don’t have to expend much attention or think very deeply about their decision. That’s why downstream competitive advantage can be not just sustainable but accumulative. Through network effects, habit, and confirmation bias, the rich brands tend to get richer by gaining more and more mind share.
One interesting insight the book provides is that what is important is not being first to market, but first to mind. Anyone remember the Erwise browser or Chux disposable diapers? The incumbents have managed to define and dominate the customers’ purchase criteria, and the only ways for a challenger to overturn this dominance is to either provide an offering that is clearly superior in the important criteria, or change the criteria of purchase. You can either be a criterion taker, or a criterion maker.
There’s so much more I could write about this excellent book, but I’ll let you take it from here. Let me just say that if you aim to be an intrapreneurial sales professional, you need to read this book soon, and you need to sit down and seriously reflect on the six questions above.
P.S. If you don’t have time to read the whole book, read Dawar’s summary article in this month’s Harvard Business Review. If you don’t have time to read that, you have my sympathy.
Let me tell you how great I am.
If I had seriously begun this article with that line, would you have kept reading?
Hearing people speak about their core competence is like listening to the boring high school friend who can only talk about how great he was back in the day. No one listens, no one cares, because it is totally irrelevant to their lives in any way.
So, you’re very good at something; so what?
People don’t care what you do; they care what you do for them. The only reason your company even exists to be in position to develop a core competence is to make a contribution to customers in some way. No one cares how good your mousetrap is if they don’t have mice, or if the one they have works well enough.
Remember the old saying that an expert is someone who learns more and more about less and less until finally he knows everything about nothing? Although not as extreme, that’s the risk you run into when you focus exclusively on your competences and not your contributions. Focusing on core competence keeps you looking internally, but needs exist externally.
You have to keep looking externally to stay you grounded in economic reality. For example, Sony still puts out excellent products, but it is a shell of its former self because it has not kept up with what consumers want and how they buy. Contributions keep you relevant, so that people want to hear what you do. If you can talk about that first, they will want to know more about your core competence.
So why not start with that—instead of talking about how great you are, why not talk about how great you can make your customer? Core competence focuses on how you do things, but the why always has to come first. The most important question, as Niraj Dawar reminds us in his book, Tilt: Shifting Your Strategy from Products to Customers
What do you contribute to your customer’s business or personal bottom line? What do you contribute to improve their personal experience? Do you make them more profitable, do you make them look good, protect them from harm or risk, make their lives easier?
When people ask you what you do, they are just following social conventions, but that’s not really what they want to know. The urge to be polite prevents them from asking what they really want to know: “What can you do for me?”
So, next time someone asks you what you do, save them the trouble and answer the question they wanted to ask.
I had to learn that message myself. For years, when people ask me what I do, I would answer that I am a corporate trainer. Now, I tell them that I make people more persuasive. It definitely makes for longer conversations!
