As product life cycles shorten and technology becomes easy to emulate, companies end up with few real competitive advantages.
A lot of businesses have taken on an interesting quality over the last years, as in the pursuit of the idea of not allowing their competitors to differentiate, they copy what they're doing in order to get a piece of the action, whether it's connected to the purpose of the company or not.
This seems to be poor management and a waste of time and resources.
One that happened recently was the announcement of Google (GOOG) that it was going to compete against Wikipedia in the reference category of the Internet. What does this have to do with the core purpose of Google? Absolutely nothing.
Part of the reason for doing it is in response to Wikipedia founder Jimmy Wales launching a competitive, user-generated search site to compete with Google's search engine. In other words it's an ego-driven response, basically saying if you want to compete with our core product, we're going to compete with yours.
This type of attitude and response is one of the reasons it's hard to differentiate in a meaningful way any longer.
Whether it's smart for companies to do this or not is no longer the issue; it's being done, and so we must be aware of it. I only bring up the Google response to Wikipedia as an example of being taken away from our core business in pursuit of satisfying someone's ego. It was also a marketing response, as Wikipedia had gained some strong press from simply making the announcement, regardless of how much it may be based in reality. The problem is of course today's assertions can become tomorrow's realities.
What Jack Welch recognized years ago, was the short life cycles of products and the emerging technology which is easy to copy, makes differentiation have to come from another source. For the future success of General Electric (GE), he knew he had to change things.
In the past a company could introduce a product which could have a long shelf life, as its life cycle was much longer. The product was able to be differentiated because of its longevity, which allowed it to be positioned in the minds of customers over a period of time.
Now the shortened product life cycles makes it difficult to brand within the minds of our customers.
How does one combat this reality? We must understand that the product we offer is only a small part of the equation. One strong strategy is to be excellent in service, and consider that more the core earnings generator than the product itself. As most of us know, most consumers and business customers are very underwhelmed at the quality of service offered in connection with a product.
Service is definitely a key differentiator; possibly the greatest their is at this time in the business world. The type of service we offer will get far more word of mouth - positively or negatively - than the product itself. No company can just copy quality service.
How to do quality service can be read about all it wants to be, but it's there that the will of a company and execution is crucial. It doesn't matter if it's known that this is the key, only those that perform it the best win here.
We must learn to look for differentiation in the service sector far more than in the product sector. Any product can be copied quickly and offered for less in the current business climate. Quality of service and its execution is a much more difficult thing to emulate. Do it right and very few will be able to top you.
Think of former market leader Dell (DELL) in the computer industry. Their inability to offer even decent service allowed their major competitor Hewlett-Packard (HPQ) to surge past them to take the No. 1 position in the world, and that lead is still growing. It was all connected to Dell not being able to properly service what they sold.
Other Jack Welch Resources:
Jack Welch's advice to MIT Sloan students
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