The core principle of ‘Design-Thinking’ is “Look at your users and not at your competitors or competitor products”.
What Competitive Strategies Your Business Has?
We might be tempted to benchmark Competitor’s product to understand market signals, market behaviour, market trends, what competition has already done, how it has already positioned itself. These competitor data is a noise and a distraction from our core activities.
If you are trying to build every feature competition is doing, then you won’t be building things, what competition is not doing.
Have a look at the below picture of domestic water heaters from the market.
All are looking different in SAME Way and they race to the bottom in pricing.
Differentiation? — As one brand released a new version of the product, other companies rushed to copy each feature and finally, the differentiation is lost. Every product’s visual appearance is good as long as you see them individually but when you place them together, we are lost for choices. Above similarity between products show that most of the products are designed based on “Market Research” alone and not on “User Research”. There was no real focus on what people needed or wanted.
Instead of focusing on features, we need to focus on providing deep, meaningful engagement to the people who use our product/services.
Innovation? — Incremental Features or Incremental Innovations are not helping the businesses to increase market share. Adding an incremental feature in any product would diminish the experience a person gains from the product.
Hick’s law states “Adding more features exponentially increases the amount of time a user takes to make a decision”
Styling? — “Styling” ceased to be a differentiator. You cannot sell a product because it just looks different. Products aesthetics has become a basic necessity now.
Operational Efficiency? — A couple of decades back, ‘Operational Effectiveness’ through programmes such as TQM, Zero Defect, Benchmarking etc… helped companies to achieve a competitive edge. Later Outsourcing, Virtual Co-operation and Integration helped them to maintain the competitive edge. Those strategies are not more a competitive advantage as they are now followed by everyone.
Constant improvement in operational effectiveness is necessary to achieve profitability but not sufficient enough for long term sustainability of a business.
Are You in a Stable Industry? — FMCG, Consumer electronics industry have turbulent market scenarios now.Thirty years back, Most Industries were relatively stable, having predictable market and malleability and you can define strategy. But now, the industry borders are invisible, have unpredictable market conditions.
Do You Know Your Immediate Future Competitor? — Sometimes, we could not predict who would be our real competitor, from where would competition come. Some brands had competitors entering from adjacent industries, like how Pepsi entered drinking water industry and created a ripple. Some industries were disrupted by unknown technological startups, like how cab aggregators like UBER and OLA disrupted Taxi industry(When people thought this taxi industry is saturated).
To conclude, competitive Strategy is needed for the following reasons
- Understand the root cause of future profits
- Create frameworks for profitability over a period of time
- Sustainability for a longer period
- Remain non-vulnerable or adaptable to Technological Disruptions, Upstart Competitions, New regulatory regimes, Political changes, Unpredictable business environments.
FOCUS ON UNMET CUSTOMER NEED
Design thinking begins as an ‘Adaptive Strategy’ process relying on iterations, testing, validation and then moves to a deliberate strategy. The process involves in-depth user research(Empathy, Ethnographic research…) to discover unmet needs and desires of the users with respect to the various circumstances.
The best way to stay ahead of the competition is to continually follow the user’s needs/desires as they arise. If you need this, then you need not worry about competition.
UBER came to the market to satisfy an unmet customer need, which the leading brands had failed to observe.
We may not predict the competitor or substitute product but we know that there would be only one reason why an unknown competitor would disrupt our market — To satisfy the rational and emotional needs of user/customer.
GROW THE MARKET
As Michael Porter pointed out that first step for “Competitive Advantage” is to look at a market segment where competitive forces are weak.
In early 2000, Cadbury Schweppes was effectively locked into a form of “Red Queen Competition”, pushing the company to run faster just to stay in place. To maintain their market position, one option would be to increase the investments but Cadbury’s Chief Strategy Officer Todd Stitzer was not comfortable with it.
He asked his teammates “Look for a Strategy to grow the market rather than just aiming to grow the company’s market share. If I ask you to increase our market share, you will look at our competitors, and we may not succeed”.
Instead of fighting in the existing market boundary, Todd Stitz understood, that he needs to create a new marketplace or extend the existing market boundary. He wanted to find a new way of skinning the cat.
One of Todd’s teams focused on U.S chewing gum industry — How to grow the chewing gum market beyond the existing boundaries? Todd believed that Cadbury needs to explore beyond the chewing gum’s most obvious benefit — Breath Freshener. Only a detailed user observational research would uncover the hidden needs of a consumer. After research, the Cadbury team discovered that customer’s major worry was ‘Wellness’ of the teeth and also many of them were health conscious.
These research insights helped ‘Cadbury team’ to come out with new benefits like ‘Teeth Whitening, Stain Prevention, Cavity Repair and New Fruit Flavours’.
Cadbury launched the product with those new ‘Value Innovations’. Consumption increased and the company achieved higher growth rates.
By creating a new category or uncontested marketplace, we could enter a market where competition is weak. But soon, the competition would enter. How to manage this? Michael Porter provides an answer for this.
Hundreds of activities would be required to create, produce, sell and deliver a product or a service — from the User Touchpoints to production, assembly, packing, transportation and so on. Porter asks us to analyse how some of those activities could be made different from existing rivals. He mentions that more the similarity between activities, the more we lose the competitive advantage. He underlines that for sustainable competitive advantage, design “Unique Activities”.
How to choose ‘Unique Activities’? ‘Design thinking’ process has a solution. Do not think of making an activity different from a competitor but think of an activity that would add value and new meaning to the user’s life. Think every activity from the user’s perspective. Start with the customer and work backwards.
Design Thinking uses “Customer Journey Map(Or Activity Map)” tool to travel along with user from Need Stage to Knowledge Stage to Persuasion to Decision making to the Implementation stage. (Each stage has many sub-activities)
Customer Journey Map is a framework that aims at providing Unified and Wonderful Customer experience by filling gaps, removing pain points, combining activities, creating an inter-relational lock between activities.
Due to dis-similarity and inter-locking of activities, the competitor would find it tough to copy/imitate few activities alone. Operational Effectiveness strategy could be applied further to improve the efficiency of the chosen activities.
TRADE-OFFs and GAINS
A strategy is not sustainable unless there are trade-offs. Meeting all customer needs is not the best solution. Trade-offs could be piloted by the User Needs, Organisational Capabilities etc…
Neutrogena Soap is positioned more as a medicinal product than as a cleansing agent. The company says “No” to sales based on deodorizing, gives up large volume and sacrifices manufacturing efficiencies — M.Porter
Some activities are incompatible, so we may have to trade-off. A low-cost airline may want to reduce turnaround time at Gate, but serving meals may affect turnaround time, as food items have to be loaded on the flight, which would increase the cost of travel. Trade-Offs create the need for choice and help in brand building, consistencies in image creation, protect against competition.
Deep Understanding of Users will help in arriving at suitable Gains and Trade-offs
Some Design Thinking Tools which help in finalising Trade-Offs and Gains are mentioned below. User Behaviour and Contexts need to be accounted.
Value Proposition Canvas
Trade-offs can be due to organisation capabilities like inflexibilities in machinery, people or systems, which is outside the scope of this article.
CREATING A ‘FIT’ AMONG COMPANY’S ACTIVITIES
Choosing value propositions, trade-offs, activities, interlocking them, combining them — depends on the distinctive activities a company can perform efficiently, depends on the available resources, key partners, communication channels and the distributions channels. Designers use a ‘Business Model Canvas’ tool to find a fit among many activities.
BRAND’S INTERNAL CULTURE
‘Organisational Culture’ play a major role. Designers study internal brand culture as it would affect the consumer experiences.
Employees are responsible for breakthrough customer experiences and those employees are shaped by the company’s culture.
Employees of a company act as brand ambassadors, they are the interface between internal and external environments. They influence the powerful perception of the brand in consumer’s mind. Their behaviour can reinforce the brand value, and if it is inconsistent, it will undermine the credibility of the brand.
Whatever the brand perception a senior management like to create in a user’s mind has to be reflected in their employees. It simply means “Great brands have Strong Internal Culture”
An organisation culture is built up gradually, continuously reinforced through various practices and process. So, it is important to utilise the same to create distinct, coherent corporate identity
It would be tough for a brand to maintain the competitive advantage for a long time without a wonderful internal brand culture.
The way a company culture shapes the product/service is considerable and is largely irreproducible. Just visualise how an APPLE product and a MICROSOFT product feels. An iPod and Zune mp3 player.
Competitor can copy features of market leader’s product features, but cannot get the feel of employee’s inputs, working environment effects, work ethic’s influence, and emotional resonance.
Let’s look at Zappos. Anybody can create an online shoe store, but very hard to match the customer service and trust the company is known for.
KEEPING TRACK OF ADVANCEMENTS IN TECHNOLOGY
The mouse was invented in 1964, but it remained relatively obscure till Apple launched LISA mouse in 1984.
Buxton, a futurist at Microsoft describes “Any technology which is going to be humanized in 10 years is already ten years old. “
To learn and follow this slow process of technological humanization, we have to duck our heads below the radar to find it, which can be used in our respective fields. Somebody has to read those tech journals and attend those high tech conferences. Xerox had a competitive advantage for a long time — Because they ducked their head and discovered a new budding technology.
Design Thinking is a generative process, where we use provocative thinking to brainstorm for future situations. We use “What If” statements and word “Po” predominantly to think about various future scenarios, fictional narratives and solutions. It helps us to imagine all possible scenarios and force us to think of ways to handle the situation.
What if a competitor launches a product with a similar feature in the same time frame?
What if a user of our product/service encounters a dangerous situation while using the product?
What if Government comes out with a regulation to ban certain features?
What if there is a negative review in the press?
Answering these questions, acting out the situations would help us to understand the weaknesses of our businesses so that we could be prepared.
What to expect in part 02 of Design Thinking and Competitive Strategy
In part 02, We can see how Design-Thinking would help in achieving other competitive advantages — creating ‘Entry barriers’ for other businesses, garnering benefits from Demand-Side benefits of scale, increasing Customer-Switching costs, increasing customer loyalty.