I am ashamed to say that there are 4 iPod's in my house, and 2 of them belong to me. While the iPod is certainly a revolutionary product, Apple took a strangle hold on the music industry not through the iPod (a product innovation) but by bundling the product with iTunes (a service innovation).
While the iPod is sexy and gets all the attention, it is iTunes that was the disrupter. One of the unique things about purveyors of technology such as Apple and Intel is that they are not interested in incremental improvements to existing products. They are market makers.
Lowes
Real money is to be made in building new markets as was the case with innovators such as Starbucks, and Cirque du Soleil. In a study completed by the authors of The Blue Ocean Strategy, a review of 108 companies revealed that of their major product launches, 86% were line extension which represented 62% of sales and 39% of total profits. 14% were entirely new products, and represented 38% of sales and 61% of total profits.
Tips for Finding Key Differentiators that will Separate You from Your Competition
1. Challenge the paradigms of how your products and services are delivered. Starbucks was a new delivery system for coffee, Amazon a new channel for books and Southwest an alternative routing system for travelers. Zip Car is disrupting the delivery system for auto transportation, challenging the assumption that cars are worth owning. Offered primarily in urban markets, Zip Cars are available at a low cost at the time that people need them (such as college students visiting their parents out of town for an afternoon).
- Look at delivery systems for products outside your industry and look for applications to your product or service. For example, Nordstrom's personal shopper concept could be applied in many service industries.
- Convene a customer advisory board or 4-6 customers and dig deep into their specific business problems and opportunities. Ask them what your company can do to lead the pack. This interaction is a self fulfilling prophecy: your best customers who helped you to build the strategy and tactics will buy in and be early adopters.
2. Expand your bundle of services. Globalization has led to new competitors entering every market, and massive product proliferation, changing the balance of supply and demand. Almost every product has become commoditized. It is more critical than ever that companies expand their bundle of services to create points of differentiation.
- Lowes has upped the ante on their competition by offering free next day delivery and "haul away" for used appliances. By considering the customer's entire cost of ownership, Lowes is providing an innovative value added service by reducing the customer's cost and aggravation by picking up used refrigerators, washers and dryers.
- Take an activity based costing approach to evaluating steps in your service offering. Most merchants no longer require signatures for small credit card purchases as the risk of customers challenging the charges is smaller than the labor of securing it.
3. Reverse engineer customer needs and preferences. Service innovations are discovered through reverse engineering how people and companies use products, and through understanding their behavior. The top consumer product companies such as Procter and Gamble use innovative design houses like Ideo who follow consumers around, and watch them through one way mirrors to understand their shopping and consumption behavior. Ideo brought us the first standup toothpaste and truly made the world a better place.
- Conduct monthly customer satisfaction surveys and rotate in specific questions about your services and how they can be improved. Make customer satisfaction a success metric and engage team members to share in the results and solutions
- Provide a structure for front line employees to identify customer problems and report them to senior management. Jack Welch made his town hall style meetings with junior staff legendary. Reward innovation with the people closest to the customer.
4. Win with information as a differentiator. Last year I began a new food regimen that included protein for breakfast. I became hooked on Jamba Juice, in part because of the complete nutrition information offered in a binder within the store. When Robeks opened 3 blocks from my house, they did not have any nutritional information to offer on low calorie smoothies. This insight and corresponding benefit has created customer loyalty (in my case) that has nothing to do with quality, selection or price.
- Carefully review the information that you make readily available on your website, including product specifications and ordering requirements.
5. Use 3rd Party Certifications as a differentiator. The Internet has provided a new venue for customer feedback. Restaurants are rated by Zagat, hotels by Trip Advisor, thousand of merchants through ratings on eBay. Marketers are seeking third party validation through J.D. Power, ISO, and the Good Housekeeping Seal.
- Seek out 3rd parties who can validate your service claims, or training of key personnel.
- Do a touch point assessment, and have a 3rd party review your website, online ordering system, phone, reception area, invoices, etc to evaluate how easy it is to do business with your company
On Strategy - Use Points of Differentiation to Create Your Unique Selling Proposition Lowes