Focusing on Differentiation

When we think about differentiation in a business-to-business context, our minds tend to go right to how products are unique.  We think about how Apple has been able to differentiate in the market through disruptive innovation or how a company made an acquisition to help strengthen their product portfolio.  We do see and understand, although less frequently, how service-related or customer-focused characteristics of a company can help to drive a competitive advantage as well.  But which is more important?  Differentiating by being a product-focused company or a customer-focused company?

Companies obviously have to pick one angle to stand on, likely supplemented by some level of operational excellence, in order to drive strategy. While that’s true, there obviously has to be a balance.  An extremely customer-focused company won’t succeed without a product that meets some bare minimum threshold of product satisfaction.  The same goes for product-focused companies that need to provide a level of service that allows them to retain customers.  Understanding this balance and the “breaking point” of profitability is what companies today continue to try and understand in order to separate themselves from the competition.

Where we as customer advocates can help our organizations with this balancing act is by helping to define what “customer focus” means.  Customer focus today requires a new approach, particularly with the shift towards customers having more power in the relationship than ever before.  They have greater access to information than in the past, access to many more alternatives, and the ability to communicate with other customers.

The key will be to figure out what’s next and how companies can continue to find their “sweet spot” that allows them to differentiate from their competitors.  One key component to this will be a focus on partnership.  Understanding from customers what you can do as a company to help their business be more profitable and using that as the driving force of strategy is critical.  More focus on customer profitability, less focus on product profitability.

We have continued to change our focus over time on how we measure customer feedback.  Shifting our thinking again to understand customer profitability and partnerships should be considered a logical next step in this evolution.  Without a focus on customer profitability and partnership aspects of the relationship, companies will struggle to differentiate in the future.

Katie Kiernan
Vice President, Consulting Services



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