Jaynie L. Smith - Creating Competitive Advantage: Give Customers a Reason to Choose You Over Your Competitors

Contents

Acknowledgments

As with any book based on real-life experiences, the cast of participants is the foundation of the work. After years of working with so many wonderful clients as their consultant, coach, and teacher, I have clearly become the student. I would like to thank every client who has given me permission to use their rich experiences and stories in this book so that readers may learn from their failures and successes.

I am eternally grateful for the opportunity to be part of The Executive Committee (TEC), a worldwide organization for CEOs and Key Executives whose mission it is to improve the effectiveness and enhance the lives of their members. As a TEC Chair for almost seventeen years, I have had the opportunity to help guide the fate of so many companies, thanks to wonderful CEO roundtables and personalized coaching. The positive feedback I have received from TEC members inspired me to write this book, as did my good friend Jeanette Hobson, who graciously kicked me in the butt and inspired me to create a presentation and workshop based on my work.

Fate reconnected me with my friend Bill Flanagan, who so expertly helped to craft Creating Competitive Advantage. Not only did he understand and respect my message, he was able to help distill it into a book that is both fun and interesting to read.

My agent, Barbara Lowenstein, was invaluable at every stage of this books life, from helping us craft an outline, to leading us to a wonderful publisher, to acting as my advocate throughout the publishing process.

Currency Doubleday editorial director Roger Scholl and editor Sarah Rainone were passionate about this project from Day One, and it was their enthusiasm that kept me motivated throughout the process. I would also like to thank Currency deputy publisher Michael Palgon, director of publicity David Drake, publicist Laura Pillar, and associate marketing director Meredith McGinnis for their guidance and support, as well as Rex Bonomelli for creating the books striking cover. And without Chris Fortunato of Fortunato Book Packaging, and Rebecca Holland, Kate Duffy, Maureen Pickett, and Talia Krohn at Doubleday, this book never would have made it onto the shelves.

I would be remiss if I didnt thank the Wade sisters, Jennifer and Kim, who have kept the business ship afloat when I was drowning in book writing and editing.

Finally, I thank Craig Mowrey, my partner and best friend, for all his help rereading chapters when I couldnt see the forest for the trees and adding editing touches I completely missed. He knows my work inside-out, and he added perspective when it was most needed.

Chapter 1

C OMPETITIVE ADVANTAGE IS WHAT SEPARATES YOU from the rest of the herd. Its what keeps your business alive and growing. In short, its the reason you are in business. Yet the biggest marketing flaw in most companies is their failure to fully reap the benefits of their competitive advantages. Either they think they have a competitive advantage but dont. Or they have one and dont even realize it. Or they know they have a strong competitive advantage but fail to promote it adequately to their customers and prospects.

In my research with middle-market companies, I found only two CEOs out of 1,000 who could clearly name their companies competitive advantages. The other 99.8 percent could offer only vague, imprecise generalities. These same CEOs often rely on outside consultants to guide strategic planning sessions. Yet, in my experience, very few consultantseven seasoned onesgive competitive advantage evaluation more than a superficial glance. Why? I wonder. And no matter the size of your company or the kind of business you are in, your competitive advantages should be the foundation of all your strategic and operational decisions. Ignoring them can be an expensive and even fatal mistake. After all, theyre the reason customers choose to buy from you instead of the other guy. Without this edge, you will lose customers. Eventually, you will go out of business.

On the other hand, if you properly identify and exploit your competitive advantage, it will impact your bottom line early and often. Because your competitive advantage can be your deal closer. It answers the customers key question: Why should I do business with you? What are you offering that the other guy doesnt?

If you can articulate a clear, specific reply to that question, you have your competitive advantage. If you cant, this book will show you how.

Its easy for todays business managers to lose sight of the basics as they focus their attention on a host of other reasons why their margins may be shrinking. You read and hear a lot about the threats of offshore outsourcing. You worry about falling behind in your use of new communications tools and in making the most of the Internet. These threats are certainly real, but youll never have to deal with them if a more basic problem undermines your company.

In the U.S. Army, young recruits are taught this life-or-death lesson during combat field training. The recruits are alerted that three snipers (played by other soldiers) are crawling through the grass toward them.

As they wait for the aggressors to advance, suddenly, across the field, a figure pops up, and the recruits begin firing (using blanks). A little closer in, another figure pops up, and again the recruits direct their fire to that target. Two seconds later, the platoon is annihilated by hand grenades tossed by the third aggressor, who has managed to sneak up right next to the platoon while they fired at distant targets. The platoon was wiped out because it failed to act against the closest, and therefore the most serious, threat.

As a business manager or owner, the biggest threat you face is losing sight of your most important targetyour customer. He is the one who can blow up your business simply by going elsewhere. You may play golf with him, bend over backward to rush a delivery to him, and even consider him a friend. But you can lose him to a competitor if you lose sight of your competitive advantage.

Too often, managers who see their businesses drifting and their margins shrinking will try to compete based on price. But the manager who drops his prices while his market share is shrinking is courting tragedy. Its like that old joke: Hes losing $3 on every shirt he sells, but he hopes to make it up on volume.

Most businesses cannot exist by being the lowest-cost providers. Wal-Mart can, but you probably cant. Still, too many companies allow price to be their only differentiator. They tout their prices even in the era of the Internet, where the click of a mouse almost always leads to a lower price. All those companies racing to the bottom are ignoring this vital fact: Price isnt everything. When you compete on price, youre accepting commodity status.

In my work with clients, we do not even discuss price. Play the price game and you are tossing margins to the wind. You become a commodity supplier rather than a marketer, and unless you enjoy vast economies of scale like Wal-Mart, youll eventually find yourself whistling through the graveyard.

There are other ways to help your customers cut costs that have nothing to do with lowering your prices. If your products and services are more reliable, you can save customers costly downtime. Your service might be worth more because you provide it 24/7. Your products might be worth more because they are demonstrably better than the other guysor because you are the only company in the business that offers guarantees, free installation, free replacement, or employee training. Packaging, too, can make a critical difference.