The reason why companies have worked photocopy business plans for so long is because they never thought to work any other way. It just seemed too risky. The rise and rise of producer nations, in the words of Michael Porter, “riveted attention on implementation”. Watching Japan, then China and India continue to progress, many companies fell further into the action trap. They believed that the only way to outrun their immediate competitors and their looming Asian rivals was to, somehow, out-do them.
But as Michael Porter has commented: “It’s incredibly arrogant for a company to believe that it can deliver the same sort of product that its rivals do and actually do better for very long…It’s extremely dangerous to bet on the incompetence of your competitors” – and that, he says, is what companies are doing when they rely on operational effectiveness for competitive advantage.
My sense is that operational effectiveness and efficiency currently account for about 50 – 70% of perceived competitive advantage, but that percentage is falling. It’s falling, because of course consumer expectations continue to rise – ironically as more and more best of breed thinking is installed – and consumer emotions continue to change – as more channels give consumers unprecedented access to brands and to each other.
As quality becomes ubiquitous, it’s harder and harder to gamble on incompetence.
And it becomes easier and easier for consumers to change brands for no reason whatsoever other than what they feel. Because the actual risk in doing so is getting smaller and smaller thanks to best-of-breed.
All this makes for an irrational economy. And the irrational economy plays by very different rules.
As Avi Dan points out in this article in Forbes, “Customers are now able find out much about the company they wish to engage with: where and how a company makes its products; how it treats its employees, retired workers, and suppliers; how much it pays its top executives; how seriously it takes its environmental responsibilities and the like.”
The criteria is no longer what they get. It’s just as much what they know – and therefore feel.
The role of Chief Marketing Officers in such a world, Dan goes on to say, is “to meld the internal and external faces of the enterprise”.