During a talk I had with Chicago Tube & Iron CEO Don McNeeley, the topic of sameness and differentiating value propositions came up. “By and large, there’s an awful lot of vanilla out there. There’s an awful lot of commoditization in the eyes of the customer,” he told me.
I would agree with that assessment. Here are five causes of it:
Product orientation: Product-oriented organizations are trapped in a world of sameness. There’s a fundamental rule that as good as the products and brands are that you carry, these products and brands will never again give you any kind of long-term competitive advantage. If you’re trying to compete on the basis of product alone, you won’t be able to differentiate yourself against competitors who are going to rightfully claim their product is just as good as yours.
From my research and my experience, I’ve determined 40% of a customer’s buying decision is based on your product and price. The remaining 60% is based on what makes you different or unique. Despite this 40-60 split, the marketing, positioning and leadership focus in most organizations is almost exclusively spent on the 40% part of the equation – the product and price – which only serves to drive much of the sameness and commoditization. When emphasis instead is focused on what makes you different or unique, your company immediately stands out from your competitors.
Focusing on competition: When you focus on your competition, you’re drawn to and thinking about what they’re doing and not focused on the things that might specifically improve your performance. Amazon founder Jeff Bezos extols the virtues of being customer-focused rather than competitor-focused. He tells us, “If you’re competitor focused, you have to wait until there’s a competitor doing something. Being customer focused allows you to be more pioneering and find new ways to add value.”
When you’re focused on doing what everybody else is doing – rather than blazing your own path – you’re trapping yourself and your company in a world of sameness and commoditization.
Competing on price: Nobody wants to compete on price, but most distributors and other businesses still do it. Just like with product, when you compete on price you’ll never again have any kind of long-term, competitive advantage.
I spend a considerable amount of time out in the field watching salespeople compete with one another. Time and again I see most salespeople praying for a better product and/or a better price. They run back to their managers who then run to their suppliers to request special pricing. They are operating under the assumption in order to make sales they must have better pricing, a better product or both.
This approach simply doesn’t work anymore. As soon as you lower your prices, your competitors will try to match or beat them. As soon as your supplier comes up with a better product, their competitors and your competitors will match it as well. When you compete on price you’re bound to a world of sameness and bound to a world of commoditization.
Legacy thinking: Too often, distributors rely on yesterday’s processes. When we believe our operational excellence standards of performance that allowed us to be different yesterday are good enough to break the sameness trap tomorrow or even today, again we are bound to a world of sameness and a world of commoditization.
When an organization asks questions such as: “Why change? Why innovate? Why think differently when sales are growing? Why think differently when we are profitable?” we’re in danger of being caught up in sameness.
Good times camouflaging poor performance: In most industries, there are good times and bad. In distribution, we’ve traditionally rode these economic cycles, but companies tend to forget this when they see a growth in sales.
A slight improvement in margin will often lull us into thinking we’re suddenly doing something better, when in reality we haven’t improved at all. The company is still the same; rather, it’s the economy that’s changed and helped to lift us. When our organization is doing well, we lose the urge to look deeply at ourselves and our value proposition.
Don’t be fooled by a growth in sales resulting from changes in an economic cycle. When you allow good times to camouflage poor performance, you’re again trapping yourself in a world of sameness and commoditization.
Next time: Four ways to break the sameness trap in your organization.
This article was originally titled “Self-inflicted sameness” in the June 2017 print edition of Supply House Times.