In her recently published book, Understanding Michael Porter: The Essential Guide to Competition and Strategy, Joan Magretta has much of value to say. In Chapter 4: Creating Value: The Core (Part Two), for example, she discusses Enterprise-Rent-a-Car, Zipcar, Southwest Airlines, Aravind Eye Hospital, Walmart, Progressive, and Edward Jones. Each has an especially effective strategy based on (1) a distinctive value proposition (actually, Aravind has two), and (2) on a tailored value chain.
Here are a few insights that caught my eye. Aravind is named after Sri Aurobindo, one of the 20th century’s most revered spiritual leaders and was founded by Dr. Govindappa Venkataswamy whose inspiration was McDonald’s. He wanted to produce cataract surgeries as efficiently and as consistently as McDonald’s produced hamburgers. He designed a system that did just that.
When Southwest established pricing, it was not to compete with other airlines also serving major cities in Texas; rather, to compete with the Greyhound and Trailways bus lines. That is why it has flown only 737s, eliminated most amenities, minimized turnaround time, and scheduled lots of flights for the lowest possible fares whereas American Airlines and other competitors schedule far fewer flights with much higher fare costs and usurious fees for basic services.
Enterprise is now the largest and most profitable rental car company but that was certainly not true when Jack Taylor founded it in 1957 in Saint Louis, leasing cars to residents. He had learned that 40% of all car rentals are by people who live in the same city and that most automobile insurance coverage included a car rental option for a modest additional charge. When expanding market penetration, he and his associates decided to select neighborhood locations that would be more convenient and less expensive than at airports. These locations remain within 15 miles of 90% of the U.S. population. Enterprise also cultivates strong relationships with all auto repair shops within or independent of dealerships.
Keep all this in mind as you now read what Adrian Slywotzky observes in his latest book, Demand: Creating What People Love Before They Know They Want It: demand creators “spend all of their time trying to understand [begin italics] people [end italics]…They try to understand our aspirations, what we need, what we hate, what gives us emotional charge – and, most important, what we might really love…They seem to know what we want even before we do. They wind up creating what people can’t resist and competitors can’t copy. Yet they almost never succeed on the first try…These demand creators recognize the huge gaps between what people buy and what they really want – and they use those gaps as the springboard for a process of reimagination that you might call the demand way of thinking.”
Magretta and Slywotzky discuss dozens of companies from which invaluable business lessons can be learned. Here are three:
1. Forget about “being the best” in an industry or even in a market segment. Be the best provider of what your customers need.
2. Be constantly alert to their unmet needs, especially those that are imminent, and fill those needs with products and/or services that add greater value than any others can. Then continuously improve what you offer.
3. Be the easiest provider for your customers to do business with by eliminating all hassles. Every person in your organization must be not only willing but eager to “go the extra mile.” Convince them that it is a privilege to assist customers whenever there is an opportunity to do so.
4. Competitive advantage is not about beating rivals; it’s about creating unique value for customers.
5. Don’t overestimate or underestimate the importance of good execution. It’s unlikely to be a source of sustainable advantage, but without it even the most brilliant strategy will fail to produce superior performance.