Three Factors Of Competitive advantage

1- Operational Excellence

o Lead competition in price & convenience

o Reduce costs & overhead, optimize processes, efficiency
o Value equation focus: Cost / Price
o Middle of market products; best price, least inconvenience (low price,
hassle free); "Their products last and last." Best total cost.
Examples: AT&T Universal Card Services and Federal Express.

Operational Excellence Value Discipline

• Focus on customer service is key part of discipline

• Operating models support zero defects

• Effectively exploit information technology

• Keep assets working; new ways to use existing assets

• Have a formula that can be replicated in other markets; formula firmly

associated with brand name

• Less product variety

• Not pleasing every customer

• Whole company is a single, focused instrument

 Examples:
 – Dell Computer
– Wal-Mart
– Federal Express

2- Product Leadership

o Continuous flow of state-of-the-art products

o Creative, commercial, cannibalize
o Value equation focus: Quality Innovation
o Push performance (product) boundaries; best product--period;
continuous innovation Premium priced but worth it Best product.
Examples: Intel, GE Medical Systems, Johnson Johnson.

Product Leader Value Discipline

• Product with little initial demand (customers don't yet know they want
it)

• Must prepare markets; educate potential customers

• Champions and contenders at the same time

• Continually striving to replace your own "hot" product with something

new

• Don't slavishly follow the voice of the customer; customers can't

define the next break-through product

 Examples:

– Johnson & Johnson (Acuvue contact lenses)

– 3M
 3- Customer Intimacy

o Shape product/services to fit customers

o Focus on long-term relationships
o Value equation focus :Flexibility Timeliness
o Deliver what specific customers want, not what the market wants;
provide all support for customer to achieve optimum results; don't
pursue one-time transactions--cultivate relationships; "They are
the experts in my business." Best total solution. Examples:
Nordstrom, IBM, Home Depot, Airborne Express

Customer Intimacy Value Discipline

• Not lowest price; not latest product features

• Better overall result for the customer

• Recognize hierarchy of customer needs: product, basic service,

identify broader under-lying problem, customer success

• Needs irreverent, out-of-the-box, transformational thinkers due to

rapidly changing world

• Take responsibility for customer results

• Have detailed and integrated customer data

• Carefully selects customers

• Customize services to meet customer needs

• Look for ways to penetrate into the customer's business

• Customer as partner; share rewards (company charges more for

"extras")

• Display confidence to charge more because it's worth it

• Have developed techniques for sharing among teams the best

practices of customers, suppliers, etc.

• Product changes are evolutionary, not revolutionary

 Examples:

– Home Depot

– Kraft