How Generic Strategies Kill Your Profit
By pursuing a simple, generic strategy, many companies think they can make more money – but exactly the opposite is true. This approach can wreck your business.
One of the ways of thinking I’ve encountered in strategic planning is based upon the desire to make things easier. For example, companies automate processes to make things easier. Furthermore, since automation tends to simplify operations, more reliable equipment can replace highly variable workers – at least in theory. Consequently, this can “make things easier”. Likewise, we make our product design and marketing efforts easier by making product and service offerings “one size fits all”.
Thinking of customers and employees in the simplest possible terms, makes it easier to systematize processes
This simplification, however, comes with a cost. Not all customers are alike, and the same is true of employees. In many industries, the “generic” approach often dominates the market. Competitors attempt to create cost and distribution strategic advantages. But, by taking this approach, the dominant players leave a huge opening for smaller competitors.
The biggest opening smaller competitors have in a market dominated by “generic” thinking is to take the exact opposite approach
If your competitor is offering a commodity product or service at low cost, find the specialty opportunities that are neglected. This is equally true for employee management. If you are fighting a competitor that treats employees like interchangeable gears, consider how that diminishes the value for customers.
Simplification is far from free
When we make our operations more generic and commoditized, it’s important to remember that the simplification is far from free. Automation not only requires capital and different skills, but sometimes makes it harder to deliver exactly what customers want. As an example of this, consider clothing sizes. I know people who are, for example, a bit too large for size Medium shirts, but definitely too small for size Large. Catering to the “in between” tastes – or needs is possible, but much more expensive in a highly automated environment.
Beat competitors by doing the opposite of what they do
If your market is dominated by a commodity player, why consider a “non-generic” strategy when the costs are higher? It’s much easier to beat competitors by doing the opposite of what they do, if their resources are much greater. You won’t easily beat Walmart at low-cost mass discount retail. Alternatively, attract customers who dislike the generic commodity approach by offering something more suited to their needs and preferences.
Followers of our writing have seen a lot of strategic advice about differentiation. Furthermore, the best place to apply generic strategies is when a large commodity player dominates a market. How does your market work? Are any of your customers being underserved by generic strategies? We’d love to hear your experiences.
What generic strategies are you facing where you can use differentiation to gain an advantage in a niche? We’d love to hear about your examples. Attend our seminar on Simplified Strategic Planning to learn more about differentiation and other aspects of strategic planning.
M. Dana Baldwin is Senior Strategist with Center for Simplified Strategic Planning, Inc. He can be reached by email at: firstname.lastname@example.org