Differentiation as a Small Business Tech Strategy

Putting It All Together

Last week, I brought up the ideas of core competencies, intellectual property, and values. These are things that make you different from your competitors. In combination, these things shape how a company uses technology for competitive advantage.

Imagine a World Where ...

Okay, here's how it works:

Company A. Imagine a company that requires their vendors to follow a specific process to do business with them (intellectual property) and a commitment to internal process efficiency (core competency), with a core value of "lowest price always". How would this company use its technology investments?

Company B. This company has a bunch of proprietary software and hardware (intellectual property) used to make reliable and dependable consumer electronics (core competency), with a value system that prides ease-of-use, fun, and effortlessness in everything they make. How would this company use its technology investments?

Company C. Here's a company with 50 years of machining experience (core competency), with a slew of patents on managing materials on an assembly line (intellectual property), that has a history of providing excellent customer service to its customers (values). How would this company spend its money on tech?

Transforming Competency, IP, and Values into Competitive Advantage

Well, you're a smart cookie and you've probably already considered that Company A sounds like a lot like Walmart. They spend money on technology to constantly reduce expenses, but as you've probably already concluded, they can't ever get expenses to zero so they also use tech to contain the cost of their growth (you guys remember my conversations on this stuff, right?). They get bigger, but they're so efficient, it costs them less to do more. Instead of hiring five people, they hire just one person to do the work of five people because they're so automated: fast, accurate, and reliable infrastructure. That's what sets Walmart apart. That's what differentiates them.

Meanwhile Company B probably sounds a lot like Apple. They spend money on Research and Development (R&D) to create products that offer new experiences. Price isn't an immediate consideration - they're more interested in how technology can be used creatively and they've got decades of experience doing it. And those new breakthrough technologies they make become intellectual property that they leverage to create market dominance and generate revenue. That's what sets Apple apart. That's what differentiates them.

And Company C? Well this could be any company, even a mom and pop down the street, and over time, they've leveraged technology to make themselves efficient and speedy, providing a reasonable product at a reasonable price, but their real claim to fame is service. Fast, immediate service. They'll spend money on technology to allow for immediate access to a localized call center with a Customer Relationship Management (CRM) system to immediately know all of the customer's issues, history, purchase background, and warranty status. They pick up the phone on the first ring and greet the customer by name. They might even allow for the customer to self-service what they need from their website - because they are that easy to work with. This company uses its information as an asset. It's what sets that company apart. It's what differentiates them.

Making The Connection

Wow. The last month and a half there of blogging - it's all coming together, isn't it? By this time in the classroom, I'd be bouncing up and down in front of the white board ... do you see the connections that have lead us to real strategic value? Exciting, isn't it?!

Using technology spending to constantly reinforce differentiation is what creates a competitive advantage. What you'd want to consider:

• What makes your company different? What combination of competency, IP, and values sets you apart in the marketplace?
   
• How can technology help you sustain that differentiation?
   
• How does that differentiation tie into brand promise? 
   
• How does differentiation speak to an existing demographic of customers and an emergent demographic? How can technology help you reach both to evangelize your brand promise?
   
• How is technology spending working against your differentiation strategy? Example: is your choice of technology causing poor response times, bad customer service, huge financial loses because of inefficiency? Where is your choice of tech actually hurting you?
   
• How does technology enable your company to do what it does best? Is it doing that? Or is it a distraction, keeping you from doing what should truly separate you in the market?

R