Rich Horwath, Author, Deep Dive and Founder, Strategy Skills

Is your company strategically aligned for success? Do you know HOW to approach your business strategically? Or are you caught in a cycle of tactics and forecasting that ensures failure?

Listen to this week’s interview with the author of Deep Dive: The Proven Method For Building Strategy, Focusing Your Resources and Taking Smart Action. And yes, yes, yes, Rich has two personally autographed copies of Deep Dive available for you, DishyMix listeners. Just post your desire at http://dishymixfan.com to be a winner.

Here’s an excerpt from the show:

Rich Horwath: Really what we’re talking about is competitive advantage, and,  if you go around your office and you ask ten people, “What is competitive advantage?”, you’re most likely to get ten different answers. It tends to be that Holy Grail in business, but very few people have a concrete understanding of what that means to their business.

So what I try to do is break competitive advantage down into simply three things: capabilities, activities and offering.

Capabilities are our resources or assets.

Activities then are what we do with the resources and assets.

And offerings then are the things that emerge from our activities that customers actually see, hear, touch, feel, the products and services that we bring to the market, and the reality is that stepping stone of competitive advantage, going from capabilities to activities to offerings, is really how we differentiate ourselves from the marketplace.

Rich Horwath: It is ruinous for us to try and focus on all three — the reality is, we cannot be all things to all things, especially today. You look at companies like United Airlines whose gone bankrupt trying to be all things to all people, trying to come up with a low cost airline called TED to serve the cost conscious travelers, while still trying to do a really high-end job with business and international travelers. The reality is that’s going to lead you to bankruptcy. We’ve got to have a laser like focus today, and the value disciplines really help us think about where that focus does lie.

The triad – product leadership, customer intimacy and operational excellence are the options. You must choose one to lead with for competitive excellence.

What I’ve found in most companies is that they’re doing a little bit of each, and what that’s going to get you is a mediocre return on your business. You know, it’s like investing. If you spread your investments across the boards from bonds to gold to stocks to mutual funds, you’re going to probably get a fairly mediocre return, and it’s the same way in business. We’ve got to choose which one of those best fits our core competency and hone in on that.

Susan Bratton: What if, for example, you’ve been focused on all three – because you didn’t know that you have to focus on one of three value disciplines, and you’ve worked on having a really good product, you’ve worked it having operational excellence, you’ve worked at customer intimacy – but what if you say, “Boy, I actually think that the thing I’m doing the least well (customer intimacy) is the area where I can actually WIN in the competitive environment.”

Lets just say you have a reasonable product and your customers can get it from you and they’re reasonably satisfied, but you’ve never really focused on something like customer intimacy, and you decide that is actually the opportunity for your company. You realize that the real market opportunity is in customer intimacy, yet you’ve put no time there. What would you recommend on a strategic level that a company do? How would they go about implementing a change? And if it’s the worst thing you do as a business in this moment, but you see it as the market opportunity, should you go after it?

Rich Horwath: Susan, you hit on a really key point. You know, one of the things that we need to remember at the end of the day, strategy is always about serving customers.

Sitting in a conference room and saying, “Well, this is what we do best, so we’re just going to put the blinders on and go do it”, without really understanding where’s the customer value in the marketplace and can we serve that above and beyond our competitors. That’s the real thing people miss, is they put blinders on, they don’t focus on what’s the customer value.

So if you find in your research that customer intimacy is the real key to driving customer and brand loyalty, then absolutely what needs to happen is you need to get your people together, not just the senior ones, but mid-level, as well as some up and comers, and you need to sit down and have a strategic thinking session, two hours, three hours, where you really talk about what would it take internally to get our organization to be a customer intimate organization and what does that start to look like.

Susan Bratton: How do we do the research to find out what our customers want?  Assume we’re a small-medium business, because if you have money you can always do more, so assume we don’t have much budget…

Rich Horwath: Okay, yeah. If you don’t have much money, the first place to start is with your current customers. We tend to say, “Well, we know our customers.” But the reality is we don’t talk to customers, especially if we’re at a senior level, as much as we probably should. So the first place to start is to actually go on some customer calls, talk with customers, find out what they’re doing. Social media is another important area as well. You know, you can glean a lot of good insights from Twitter, from Facebook if you have a presence there, so understanding what are people saying about our industry, about our market, and then maybe even about us, relative to our products and services. And then the other thing – and this is more painful, but it’s an important piece – is you’ve got to contact, in some way, shape or form, former customers, people who no longer are working with you and find out why that is. What is the reason that they’ve moved to another offering or to another company? And if we do those three things that starts to help us better understand if this is truly an area of value.

To listen to the whole interview, especially understanding how to tell the difference between strategy and tactics, click here.

Rich Horwath on New Growth from New Thinking, Setting Your Strategy and Contextual Radar

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