Differentiation as a Small Business Tech Strategy

Putting It All Together

Last week, I brought up the ideas of core competencies, intellectual property, and values. These are things that make you different from your competitors. In combination, these things shape how a company uses technology for competitive advantage.

Imagine a World Where ...

Okay, here's how it works:

Company A. Imagine a company that requires their vendors to follow a specific process to do business with them (intellectual property) and a commitment to internal process efficiency (core competency), with a core value of "lowest price always". How would this company use its technology investments?

Company B. This company has a bunch of proprietary software and hardware (intellectual property) used to make reliable and dependable consumer electronics (core competency), with a value system that prides ease-of-use, fun, and effortlessness in everything they make. How would this company use its technology investments?

Company C. Here's a company with 50 years of machining experience (core competency), with a slew of patents on managing materials on an assembly line (intellectual property), that has a history of providing excellent customer service to its customers (values). How would this company spend its money on tech?

Transforming Competency, IP, and Values into Competitive Advantage

Well, you're a smart cookie and you've probably already considered that Company A sounds like a lot like Walmart. They spend money on technology to constantly reduce expenses, but as you've probably already concluded, they can't ever get expenses to zero so they also use tech to contain the cost of their growth (you guys remember my conversations on this stuff, right?). They get bigger, but they're so efficient, it costs them less to do more. Instead of hiring five people, they hire just one person to do the work of five people because they're so automated: fast, accurate, and reliable infrastructure. That's what sets Walmart apart. That's what differentiates them.

Meanwhile Company B probably sounds a lot like Apple. They spend money on Research and Development (R&D) to create products that offer new experiences. Price isn't an immediate consideration - they're more interested in how technology can be used creatively and they've got decades of experience doing it. And those new breakthrough technologies they make become intellectual property that they leverage to create market dominance and generate revenue. That's what sets Apple apart. That's what differentiates them.

And Company C? Well this could be any company, even a mom and pop down the street, and over time, they've leveraged technology to make themselves efficient and speedy, providing a reasonable product at a reasonable price, but their real claim to fame is service. Fast, immediate service. They'll spend money on technology to allow for immediate access to a localized call center with a Customer Relationship Management (CRM) system to immediately know all of the customer's issues, history, purchase background, and warranty status. They pick up the phone on the first ring and greet the customer by name. They might even allow for the customer to self-service what they need from their website - because they are that easy to work with. This company uses its information as an asset. It's what sets that company apart. It's what differentiates them.

Making The Connection

Wow. The last month and a half there of blogging - it's all coming together, isn't it? By this time in the classroom, I'd be bouncing up and down in front of the white board ... do you see the connections that have lead us to real strategic value? Exciting, isn't it?!

Using technology spending to constantly reinforce differentiation is what creates a competitive advantage. What you'd want to consider:

• What makes your company different? What combination of competency, IP, and values sets you apart in the marketplace?
   
• How can technology help you sustain that differentiation?
   
• How does that differentiation tie into brand promise? 
   
• How does differentiation speak to an existing demographic of customers and an emergent demographic? How can technology help you reach both to evangelize your brand promise?
   
• How is technology spending working against your differentiation strategy? Example: is your choice of technology causing poor response times, bad customer service, huge financial loses because of inefficiency? Where is your choice of tech actually hurting you?
   
• How does technology enable your company to do what it does best? Is it doing that? Or is it a distraction, keeping you from doing what should truly separate you in the market?

R

What Do You Believe In

What Makes You Different

The other day I wrote about competitive differentiation and asked you, the small business owner, what you're good at.  Our core competencies and intellectual property are those things that set us apart from other competitors and make us special, unique. It creates a difference between us and them. It gives the consumer a reason to do business with us.

Important as they are, another differentiating factor that I talk about in my strategic courses with students is the impact of values, thereby asking, what do you believe in?

This is About Personification ... Not Personhood

Now, you might find it odd that corporations (legal entities that purely exist to hold assets, accumulate wealth, pay taxes, and distribute dividends to shareholders) can have feelings, opinions, or values in the human sense, and indeed the political argument of corporate personhood isn't what we're approaching here, rather, it's the trend concerning the personification of businesses.

Businesses and brands want to become more like people. People, it turns out, are easier to relate to than a nondescript logo. Yes, it's true. And in social media, we're interested in learning about, asking about, collaborating with, and sharing content with people.  Businesses very much want to be in that game. They want to be trusted by the consumer much more so that their products and brand resonate on a very personal level. Examples:

• Sir Richard Branson of Virgin's support for LBGT and right-to-die causes
• Target creating policies surrounding open-carry of weapons in their stores
• Exxon, Urban Outfitters, Dominos Pizza, Purina, Cracker Barrel, Chic Fil A, etc. very public opposition to marriage equality and discriminatory practices towards their employees
• Hobby Lobby's infamous religious objection to covering contraceptives for their female employees
• Burger King's Gay Pride Whopper
• Starbucks' College Achievement Plan, their own response to open-carry, and their own CEO, Howard Schultz, advocating a hike in the US minimum wage

Companies Are Instruments for Promoting Values

You know, when I was in business school some twenty years ago, my professors were quick to tell me that corporations were generally neutral on social issues as to avoid offending broad consumer segments. I learned to write placid, vanilla corporate values like "return the highest form of shareholder equity" and be a "good corporate citizen" towards "human resources" and "environmental causes". Blech. Corporatespeak. Just leaves a film in my mouth ...

Anyway, think about it: historically: it's not like US corporations or their celebrity CEO's were coming out of the woodwork to address women's rights, racism, wealth inequality, environmentalism, supreme court decisions, and so on. But here we are.

Businesses have values, or, it would appear that they're instruments of promoting values espoused by its management team. And it turns out that they're not concerned about pissing people off. They're trying to connect to consumers who resonate with their message in a media landscape that increasingly speaks to the individual and not the mass market; to consumers who're enabled (through technology) to make more value-based decisions when it comes to their buying behavior.

Values and Technology Spending

And this is where technology spending comes into place.

• What is your technology strategy doing to speak to the causes, issues, and positions that're of concern to your customers?
  
  
• How is your technology strategy making it easier for you to share those values, or, to business with like-minded consumers?
  
  
• How are your values broadcasted loud and clear to the most appropriate audience? What does your website do to address those values?
  
  
• Where can technology be creatively used to promote your brand and its values? A great example: I recently saw Chipotle's clever Scarecrow campaign featuring an animated short and video games promoting sustainable farming and nutritious fast food.
  
  
• How are your competitors spending their time on social media? How are they using Social as a strategy to connect to likeminded consumers and build buzz around their positions? 

Monetizing Your Values

I'll leave you with a parting thought. This week, I landed a new Portland, Oregon client who found me online, reviewed my website, and read my story and my values statement. They said they wanted to do business with me because I was truthful, genuine, authentic.

Bang. Zero acquisition cost, new client: these guys approached me because I openly believe the same stuff they do. Again, we do business with people, brands, and companies we trust.

So I'll ask you: what is your tech spending and Social strategy doing to express your company's authentic-self, and to express what you believe in to connect with others? Or, is your brand terribly, conspicuously silent on these issues ... like companies were back, you know, 20, 30 years ago?

R

What Are You Good At?

Think Fast

C'mon.

You're a small business owner ... What makes you different from your competitor?

Why would a customer want to do business with you over somebody else?

What do you do better than anyone?

What are you good at?

Yeah, you know this crap should be top of your head, back of your hand kind of stuff.

If you're unable to rattle these things off the top of your tongue then you might not be fully acquainted with them. And lucky for you, that's exactly what we're going to talk about next: core competencies and intellectual property.

What Are Core Competencies?

Core competencies are those things that you must do very, very well, every day, to execute your business strategy. Unless you're really good at doing these things all the time, you're not a competitor. Example. If you're:

• A car manufacturer that's bad at designing cars
• An attorney that chronically misunderstands the law
• An accountant incapable of distinguishing a balance sheet from a P&L
• A rodeo clown afraid of his own shadow
• A dog trainer that's a cat person

... it's not going to work. If you can't do what's absolutely required of you, you're not going to get the job done. What are those things? Are they specific? Succinct? What makes you better at those things than your competitor? Careful though: you can't be competent in everything. You shouldn't have more than three core competencies.

What is Intellectual Property (IP)?

Special knowledge and training, products, techniques, approaches, trade secret, patents, copyrights, processes ... IP is the secret sauce. It's the value that only you or your company can provide. Consider:

• The Colonel's Secret Recipe
• Coke's Secret Formula
• A Non-Toxic, Biodegradable Carpet Cleaning Solution That Doesn't Harm Kids or Pets
• A Unique Software to Diagnose a Rare Vehicle
• You've been classically trained to restore Baroque Italian paintings

Nobody else can give your client what you're able to because what you provide is unique.

How do Competencies and IP Relate to Tech Strategy?

I love it when people go out and spend, say, $10,000 on technology that does absolutely nothing to leverage IP or core competencies. I say "I love it" because it creates a stark contrast between reality and crippling, short-sighted strategy. It's like:

• "Let's go out and blow $10k on an email server because email is what we do best. Email is our core competency." Email? Say what? So email is what you've got to do day after day to execute your business plan? Uh, no.
   
• You're Ford Motor Company and you lay down $10k on a web design that talks about fruit. Fruit. Fruit, and maybe how it relates to an upcoming sales promotion with a Hawaiian theme, but still ... dude, you make cars.
   
• On a whim, one of your managers runs out and subscribes to a $10k Customer Relationship Management (CRM) system. Meh, it worked well at the last company they were at. But your brand is known for fast, friendly, personal, face-to-face service from knowledgeable people ... and now this manager wants to put your people behind a computer screen. That seems incongruous, no? Helllooo ...
   
• Your medical services company just spent $10k on a special piece of software that allows you to diagnose rare genetic conditions. And on Facebook? You're posting pictures of cats with stethoscopes. Because you want to be known for crazy cats with stethoscopes.

I think you'll agree with me. Technology investments should leverage what you're good at. Above all, investment in technology should yield some strategic value through differentiation, lower cost/price, create a distinctive brand, lead through innovation, scale through rapid growth, shrink time, build alliances ...

And over the next two weeks, I'm going to talk about each and every one these strategic values and explain what they mean, but listen up: if your tech spend doesn't capitalize on what you're good at, how do you expect to produce a strategic outcome? Think about it. Then start aligning your spending with what you're good at to produce specific strategic outcomes.

What You Should be Thinking About Now

• What are your core competencies and intellectual property?
   
• How does your technology spending complement either? How does your technology spending distract from either?
   
• How are your processes and systems accentuating, highlighting, leveraging either? How are your processes and systems diminishing either?
   
• Consider the culture and knowledge of your team. How does what they know - your training, hiring and selection criterion, certification regime, their aptitudes - reflect your core competencies and intellectual property?
   
• Do you completely lack IP? How does not being able to offer a unique solution to a problem put you at a competitive disadvantage? Is it time to find IP/make IP?
   
• How does your website / social media engagement  complement or highlight your core competencies and intellectual property? Are you talking about these things online?