One of the things companies usually get wrong is that they try to be better instead of different. Why?
Better is easy to package up. It's a playbook. You take an existing process and improve it. Humans are geared towards this type of progress – consistent advancement is (literally) in our DNA. Companies are the same way.
But better has diminishing returns. As a company continually races to improve, over time the results of these efforts matter less and less to customers. Great products eventually improve past what people need. Better is graded on a curve and has an endpoint. If you can remember anything from this article, I hope that’s it.
Think of McDonald’s – their business is quick-serve food. (Well actually it’s “fast food” but the industry managed to rebrand that.) Ray Croc’s innovation was speed and consistency. Same product, fast service, every time. But this is only half of the story because McDonald’s wasn’t just better, it was also different. In post-war America, two things happened: People fell in love with cars and everyone had a lot of kids. There was nothing new about cheap hamburgers. But McDonald’s solved the emerging problem of a growing middle-class needing cheap and convenient food. Better and different built a food empire.
Positioning, now more than ever
One of the ongoing themes in our work is that positioning matters more than it used to. Customers have a lot of information at their fingertips and know how to use it. The internet is great at serving up choice, reviews, and research that leads to comparison shopping and better optionality. Instagram ads show you what you want to buy. Being different matters more and more.
Consider the process of purchasing a mattress. How many reviews can you really read before your eyes glaze over? There are only so many ways to describe soft, hard, etc. “Better” is hard to grasp intuitively.¹ But, then you stumble on Casper. A mattress in a box? Delivered to my door? And I don’t have to go to talk to some person at Sleep Country about my bed? That’s different. It might not be for you, but it will be for a lot of people. More importantly, it reconfigures how you are sorting things. Suddenly the mattress matrix in your mind has a new category “Will it be shipped to my door without me having to talk to anyone”. That’s a powerful shift. Great companies create new comparison categories instead of just competing in the existing ones.
Different is clearly valuable. So why is it so much harder to do than better?
The answer has a lot more to do with human psychology than it does with business strategy.
Choosing to be different requires a stake in the ground. There is risk in it. Your peers will question your thinking. If your company is large enough, the industry press will probably lambast you for it. The people close to you will say “But that’s not how it's done”. It's more expensive – time, money, people. Great positioning requires a strong stomach and conviction. Saying “no” to a lot of seemingly good, typical things is a lot harder to explain to your team and customers. Take this example from Costco.
“When Costco president W. Craig Jelinek once complained to Costco co-founder and former CEO Jim Sinegal that their monolithic warehouse business was losing money on their famously cheap $1.50 hot dog and soda package, Sinegal listened, nodded, and then did his best to make his take on the situation perfectly clear.
"If you raise the price of the effing hot dog, I will kill you," Sinegal said. "Figure it out."
Costco ended up building their own hot-dog manufacturing plant.² Good positioning hurts.
The magic spot is when a company is better and different. Both. Companies that consistently do both can maintain margins and increase market share. Companies that don’t are in a commodity business.
But what is the path to get there? There are two schools of thought on positioning, both of which can be right in different contexts.
The first has been popularized by everyone from the Toyota Production System to the lean startup movement and it can be summarized simply as “talk to your users and understand what they need, then ruthlessly prioritize against that list.” Different and better in this context is the result of listening to what your customers want and building those features. As more data flows in, you continue the cycle improving while offering a differentiated product.
The second relies on intuition – the deep understanding of an industry problem and developing the right answer to it through pure conviction. This is rooted in the view that if you ask customers what they want they will only answer with better versions of what they know. Think Henry Ford’s “people would have asked for a faster horse” quote. Keith Rabois, a prominent investor, compares building a successful business to producing a movie. You develop a script and a vision and then film the movie. Then you sell tickets. It’s not about what people tell you they want, it's about delivering what they need.
Like all things, the truth is probably somewhere in the middle. But they share a common theme – ruthless prioritization against a singular objective. As you reflect on your own company's positioning, it can be a helpful exercise to plot out how you stack against your competitors. How are you really different? Blair Ens, a pricing consultant, recommends the following framework for positioning.
- Choose a focus.
- Articulate that focus via a consistent claim of expertise.
- Work to add the missing skills, capabilities, and processes necessary to support that claim
What I like about this concept is Step 3 – which gives a company permission to not have everything figured out yet before they start to double down on a position. Like Costco and McDonald’s, better and different is a journey, not an end.
¹ Marketers know this and use the best possible tool to hack your decision-making process.Price.We are wired to think that expensive things are better than less expensive things, regardless of the truth.
² Costco is opening their second hot dog plant next month.