Organisations that can consistently outperform their rivals whether the economy is doing well or not achieve this difference not because of luck, but rather because of deliberate actions in particular areas.
In this article we look at 4 of the key areas, and take Tesco as our example in how they effectively deploy these four different (but overlapping) areas of focus.
Firstly, the ability to challenge current industry orthodoxy. To do things that run contrary to what everybody else is doing at the time. Tesco moved into non food areas more aggressively than anybody else, indeed at a time when Sainsbury’s were going in the opposite direction (since reversed). Challenging existing normal practice makes you distinctive, and from distinction comes differentiation. They are currently doing the same thing with their US West Coast expansion with a very different supermarket format. Of course there are risks to this approach, but always having a basket of new ideas in development increases the chance of one or two becoming the new market standard.
Secondly, Tesco were able to get close enough to the thinking of their customers to be able to indentify their unarticulated needs. Every business is answering articulated needs, this is about giving expression through your offering to needs customer didn’t know they had, until they see it. Customers wanted the ability to buy a range of quality priced items. Before Tesco introduced their Value and Finest ranges people had to go to different shops to achieve this. Why? Because people thought that’s what they had to do. And marketers said you will get brand contamination if you put expensive and cheap next to each other. Tesco looked at this and said surely it would be more convenient for our customers to do more of their shop in one store. The key was making the different ranges prices points match the corresponding quality point. The Finest range had to be clearly superior to warrant the extra money.
Thirdly, to recognise the unseen assets you have and use them in new ways to develop competitive advantage. Tesco’s loyalty card scheme is now worth £100s of millions; was not built as part of a consortium, will not be outsourced because it’s recognised as a hugely effective way to track and predict buying behaviour. They would sell stores before Clubcard.
Lastly, exploiting trends before anybody else. Having a vision for the sector you are in, from developing a point of view around how the industry will need to change, and then building your strategic response. When the planning law changes meant that building superstores was going to be difficult, Tesco were one of the first to look at the fragmented local, corner shop market, buying up chains and indentifying sites. They saw that to grow they were going to have to develop new store formats and the local stores also gave them the chance to serve to urban, repeat shopper rather than the weekly family shopper.
How is your competitive advantage being developed?