This is perhaps the most crucial of the four questions, as it determines what you might call your ‘value proposition.’ In other words, how do you add value for customers, or to put it even simpler: why would anyone buy from you? Despite the importance of the question, the choices awaiting you are limited and basic: you can either attempt to offer the lowest total cost of ownership to your customers, or you can put forth a differentiated product or service.
1.Offer the lowest total cost of ownership.With this option you focus on efficiency, efficiency, efficiency. It’s all about a formula that keeps cost down for customers. Think Wal-Mart or McDonalds.
2.Differentiate based on service. A good example in the U.S. is Nordstrom. Their customer service, derived from deep knowledge of their customers, is legendary, and keeps customers coming back for years. The goal at Nordstrom is not ‘the sale,’ it’s cultivating a relationship that may last for decades.
3.Differentiate based on product or service functionality. Organizations pursuing this path focus on innovation and design, developing breakthrough products that feature cutting edge functionality. Apple is a good example of a company focused on differentiation through product superiority.
If you think you can, or must, focus on all three, forget it. Here’s what Sydney said to Rory about that common misconception in “Roadmaps and Revelations” “I’ll grant you that good service, reliable products, and a fair price are table stakes in any business. But what I’m talking about is a commitment to how you sell. How you’re proposing to add value for your customers. Wal-Mart, Nordstrom, Apple, they’ve invested deeply in certain capabilities and hard assets to deliver on their promise. They can’t do all three things in a pure way. Not without going broke in the process. And neither can you or any other business in the world. Plus, when they’re faced with a decision, companies that have made a choice know how to react. At Apple they know that when push comes to shove, they’re always going to focus on the product. Companies that don’t have a focus will have managers running around like chickens with their heads cut off. They don’t know how to react.”
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