Archives for the month of: September, 2012
  1. Numbered lists
  2. Lists about lists
  3. Meaningless lists
  4. Pointless lists
  5. Copied lists

In “The perils of best practice: Should you emulate Apple?” the McKinsey Quarterly examines the practice of copying successful companies, and uses Apple as a case in point. The theme is, can you identify best practices, and is it a good idea to copy them?

If only it were that easy.

You should also ask the “can” question: Can you emulate Apple and its best practices? More abstractly, can you copy the best practices of your more successful competitors and steal some of their market share, or begin to outperform the market yourself?

I don’t have the answers, but here are some considerations.

The VRIO framework talks about:

  • Value
  • Rarity
  • Imitability
  • Organization

(1) Does your product/service/solution provide value to the customer; (2) are you the sole or one of very few providers with that capability; and (3) are there notable barriers to copying your offering? In comparison to yours, how do competitive offerings stack up?

Most importantly, is your company organized in such a way that you can (could) consistently exploit your market differentiation? Being the best isn’t good enough, it’s being able to defend being the best that matters, and that’s what “organization” in VRIO speaks to.

O” is about all the things that are hugely difficult to emulate:

  • Operational effectiveness and excellence
  • Corporate culture that learns from success and failure
  • Ability to innovate — interpret signals from slow and fast culture
  • Comp plans that foster innovation
  • Customer-centric service design

Only when what you deliver is valuable, rare, and difficult to imitate, and you are fantastically well organized will you be able to emulate a company like Apple, or your very best competitors.

And then it’s not about emulation, but about domination. Taking a cue from the Five Forces: for example, what inputs could you dominate to keep competitors at bay? Apple has signed huge contracts for glass for its portable devices, purchasing as much as 70% (if I recall correctly) of the available supply. That (a) creates shortages for competitors, and (b) drives up the price for the remaining manufacturing capacity. In your business, do you have enough cash to manhandle your competitors’ supply chains?

Back to the larger questions of should and can you emulate Apple, which has a Superstack—a nearly wholly owned and fully integrated value chain (infographic PDF).

Accenture Superstack

Accenture Superstack (appropriated w/o permission from Superstack PDF. Sorry.)

[FWIW, as much as people say that Google purchased Motorola Mobility for its patents, I can just smell the Superstack synergies, which likely weren’t lost on Google. Watch for a similar Microsoft move. . .]

In an era of outsourcing and specialization, how vertically integrated are you? Should you engage in M&A or, against the recommendation of the Five Forces model for many alternate suppliers, should you have just a few highly symbiotic, tightly coupled single-vendor relationships. How would those be affected during economically tough times?

What does your more successful competitor really deliver? Is it a product or an experience? Apple delivers a fully integrated and portable experience. You can watch the photos you took on your iPhone either on your iPad or even on your TV via Apple TV. You can listen to the music you purchased on your iMac via your iPhone or iPod. Apple makes available what matters to you in your personal life anywhere you want to experience that. They’ve made a conscious choice to leave the office behind. Microsoft, Google, and Oracle will fight that battle (not just with data availability, but secure portable application availability).

The “should you” question really is about strategy. What do you want to be when you grow up? And will emulating someone else actually get you there?

The “can you” question really is about capabilities. Can you successfully implement similar strategic and tactical choices that will ostensibly result in the same outcomes for you as they do for your competitors?

Which question you ask first is of academic importance—they’re two sides of the same coin, and in both cases the answer needs to be “yes.”

Ask yourself these questions:

  • What is our company good at?
  • What is our company bad at?
  • What is our competition good at?
  • What is our competition bad at?
  • Is our product valuable, rare, and inimitable?
  • Are we organized in a way that provides value (triple bottom line?), and is that organization difficult to copy (causal ambiguity).
  • Who are our direct competitors; who is entering our space with a similar solution; what dissimilar (substitute) solutions exist that accomplish the same outcome?
  • How are our competitors organized?
  • Do we have a clearly defined strategy, and is everyone in the company aware of this strategy and working toward its success?
  • Is sameness a viable differentiation strategy? Yes? No? For what reasons? What gaps need to be plugged?
  • Do we have a brand in good standing?

Then you can ask yourself: Should I copy my competitors’ best practices? By now you ought to know if they would add value to your organization, and if you could implement them successfully.

Someone asked me today what the ideal customer is, so that he could target similar companies. I answered in the form of a question: “Patient, stupid, bags of money?” Of course, that’s not true, those types of customers make you dumb and make you lose your edge.

The real question was about segmentation. How can you tell what your best customer type is? There are myriad formulas for that. You want to be in good good standing with your customers, so net promoter score matters. You want them the to pay their bills on time (low risk credit score). You want them to give you repeat business (customer retention; customer lifetime value). You want them to be low-maintenance, self-sufficient. Then you want to do some cohort analysis to see if you can identify other commonalities that will let you target a specific sub-segment of a market.

Blah blah blah…

Your best customers appreciate that you make them more money, and in return they help you make more money. Simple.

Your best customers are those who realize real value from your solution, and who acknowledge that by paying you back with sending new customers your way unsolicited; you are in a mutually beneficial relationship. Are you tracking this metric?

Once you’ve identified that segment, look inward to see what you are doing for them that makes them appreciate you. Other customers have the same solution but either aren’t realizing the same value, don’t know that they are realizing the same value, or realize it but still don’t send you new business. Why?

Ask yourself, what are you doing for those that send you new business? Have you trained them better than others to fully exploit the capabilities of your solution? Are you still nurturing them post-sale so that they feel appreciated and consider you a partner instead of a vendor?

It’s not what you are offering but what you are doing that makes the difference. Find that and make it scalable, and you’ll have found the key to riches.

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