“There is nothing permanent except Change.”
We’ve all heard that statement, and rare is the individual who doesn’t believe it. It’s not a new concept; that quote is attributed to the Greek philosopher Heraclitus.
But now, 2500 years later, old Heraclitus would probably be shaking in his toga at the eye-watering nature of Change. These days, businesses experience Change that is VUCA: Volatile, Uncertain, Complex, and Ambiguous.
The Fortune 500 list provides sobering insight into the results of this VUCA environment:
- 52% of the Fortune 500 companies from the year 2000 are now extinct.
- 50 years ago, the life expectancy of a Fortune 500 brand was 75 years; now it’s less than 15.
So how do organizations deal with this level of Change? They take one of three general approaches:
- Wait for a crisis, then rapidly React.
- Try to stay ahead of Change by Continuously Adapting.
- Intentionally Change before circumstances dictate.
The first two are tricky. They require enormous amounts of time, energy, and resources, and are increasingly difficult to sustain over time. The third choice is more challenging—at least, at first—but can lead to a much more sustainable competitive position.
“We have Competitive Advantage! Wait…where’d it go?”
On its face, Competitive Advantage seems like a wonderful thing to strive for…and most organizations do so. But beware: there are significant challenges with gaining and maintaining Competitive Advantage in this new world of VUCA Change.
The problems with Competitive Advantage:
- It is short-term and instantly perishable.
The marketplace is full of competitors who can quickly replicate products and services, or even develop new ones. As Scott McNealy, co-founder of Sun Microsystems once noted, “Technology has the half-life of a banana.” The same can be said for almost every product or service.
- It is difficult —if not impossible — to sustain.
Traditional methods of maintaining Competitive Advantage simply don’t work anymore…at least, not in time. And often what is perceived as Competitive Advantage is in reality simply Vendor Preference…which can vanish without warning.
- Competitive Advantage may provide Customer Satisfaction, but not Customer Loyalty.
The landscape is littered with Customer Satisfaction surveys, but they are an imperfect measurement. Customer Satisfaction surveys measure attitudes and past performance; they are a snapshot in time, but are not a strong predictor of future success. According to J.D. Power, “A satisfied customer is a repeat customer… maybe.” And a Forum study found that 40% of “satisfied” bank customers switched banks within one year.
“So, what’s the Alternative?”
Amid all of this VUCA Change lies a significant opportunity, and that is to aspire to the long-term security of Competitive Immunity, rather than the short-term achievement of Competitive Advantage.
The benefits of Competitive Immunity:
- It is longer term and more sustainable.
- It is the real indicator of the strength, prosperity, and resiliency of the business.
- It releases resources for innovation and continuous improvement.
- It reduces the number of true competitors.
True competitors are those who are your equal in the eyes of customers. Competitive Immunity eliminates the pretenders and “nearly as goods” from challenging your market position.
- It makes it more difficult and expensive for competitors to match the offering…in short, they may catch on, but they won’t catch up.
Competitive Immunity is characterized by three major elements:
- Unique Value:
Value that is unique to your enterprise and establishes clear differentiation between you and your competition, and cannot be easily replicated by a competitive initiative.
An important Safety tip about Value: In the end, it’s the CUSTOMER that ultimately determines the Value of your offering…not you. You can define it, plan for it, work toward it…but you can’t determine it. For that reason, beware of using the phrase “Value-Added” when discussing your offering. Nothing is “Value-Added” until the Customer says it is.
- High Switching Costs:
The time, money, effort, and emotional cost associated with switching to a competitor.
- High Levels of Customer Loyalty:
- Repeat purchases of the product or service.
- Increased volume of purchases across the available product/service line.
- Referrals.
- Immunity from the pull of the competition.
If you aspire for Competitive Immunity, you have to bear in mind the following:
- People create Competitive Immunity; Products and Services do not.
Products and services are merely the table stakes for entering the game; they can always be replicated. It is the individual and collective insight, resourcefulness, creativity, and innovation of people that create Competitive Immunity.
- An organization’s Culture helps create and sustain Competitive Immunity.
Culture is made of Values: what’s important, and what gets recognized and rewarded. Culture can be a key differentiator from your competition, and is extremely difficult to replicate.
- Leaders Go First.
Any Leader who wants Competitive Immunity must choose Intentional Change, lead a Culture that supports Innovation, creativity, and employee development, and be a Role Model for the Mission, Goals, and Values that support Competitive Immunity.
Leaders who aspire to Competitive Immunity spend their energy on the important, rather than on the urgent. And they spend their time thinking about the future more than the present.
Creating Competitive Immunity is a challenging adventure, a commitment to creating change instead of reacting or adapting.
At its core, Competitive Immunity requires Courage. You must be willing to look at all aspects of your business differently…including yourself. It requires a healthy curiosity about what customers will need in the future, rather than focusing solely on what they want today. And it requires that all employees understand their role in creating Competitive Immunity, and how they are active participants in the innovation process.
Competitive Immunity means refusing to do business the way your competitors do, leaving them to spend their time, energy, and resources mastering a game you no longer play.