Ian Portsmouth: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of Profit Magazine. And we’ve developed this podcast in cooperation with BMO Bank of Montreal.
So what is your company’s competitive advantage? Every business owner should know the answer to that question and the vast majority of business owners would say that they do know the answer. But nothing could be further from the truth according to Jaynie Smith, my guest on this episode of the Business Coach Podcast.
Jaynie is the founder and principal of Smart Advantage Incorporated, a business consultancy based in ort Lauderdale, Florida. She is also the author of Creating Competitive Advantage: Give customers a reason to choose you over your competitors. And she joins me now on the phone from Stuart, Florida. Jaynie thanks for joining the Business Coach Podcast.
Jaynie Smith: Thank you for having me Ian.
Ian Portsmouth: So Jaynie, what is your definition of competitive advantage?
Jaynie Smith: Competitive advantage is the reason people do business with you. Yet there is so much confusion about the actual definition of this. What sets you apart from the competition? Why should I pay more? How in the buying decision, do you answer the question, why should I buy from you and not the competition that gives me, the buyer, confidence and reduces risk that I made the right decision? How do the companies articulate that, is the definition of competitive advantage, yet very few companies master this.
Ian Portsmouth: Everybody wants to have a competitive advantage and many if not most companies believe they have one, but you would say that they don’t. How many do and how many do not in your opinion?
Jaynie Smith: Well this is a choking number, I have asked companies for over fifteen years, and I think my number now is up to having asked about 4,000 CEOs of small medium size businesses, what is your number one competitive advantage, and less than 3% can answer the question in a compelling way with the true definition of competitive advantage. Most companies both CEOs, sales and managers confuse the company’s strengths with competitive advantages. I blame the good old SWAT analysis that companies do when they do their planning process, they list all their strengths and opportunities, weaknesses and threats and they come to believe that their strengths are competitive advantages, but most strengths are required just to be in business. You’ve got to have good people, good quality, good customer service, it is a given. That’s my expectation when I come to you in the first place. And if you tell me that, and so do your three or four competitors, how do I decide between you and them? Unfortunately the tie breaker becomes often price, and we don’t want price to ever be the tie breaker. We want to have solid competitive advantages that communicate real value, not just real value but value that means something to me, something important to me, the buyer.
Ian Portsmouth: So for example, a lot of companies out there will say, well our competitive advantage is that we have great people, or we have great customer service, or we are innovative. And I guess the problem there is that, that’s what everyone else is saying about themselves.
Jaynie Smith: Yes that is correct, and not only that, each of the things you have just said are, in my mind, categories of deliverables. You know, we say we have really good customer service, what does that mean? Take any company and I can list for you a minimum of ten different things that fall under the category of customer service. Customer service may be how quickly I answer the phone, how quickly I deliver, how friendly and trained my technicians are, my truck drivers are. All of those represent customer service, yet we try to package it under one big umbrella and say we have a really good customer service. The other thing is you tell me we have great customer service, your definition of great customer service and mine, might be years apart. So, I don’t know what you mean and when you try to say I should choose you because of your customer service. And how we break that down and articulate it has everything to do with our ability to close more.
Ian Portsmouth: So, can you give us some hypothetical examples of true competitive advantages that are well articulated?
Jaynie Smith: Yes, absolutely. When I speak to groups over the country, I ask them, what is your number one competitive advantage? And I have what is referred to, actually it is on page 100 of my book, I always remember this page number because I say it so often, I have this list called the 10 most common responses and it is saying things like good quality, good customer service, reputation, good people. And so, if you want to make it a competitive advantage, you have got to say those things in a way that is quantifiable, not arbitrary objective, not subjective. So, if you want to say it is good quality then tell me, I mean I’ve seem companies do this. We have good quality and let me tell you how we measure; we have less than one half of one percent returns in the last twelve months or the last eighteen months. That says to me okay I get pretty good confidence they are going to get it right.
Let me give you a wonderful example of a recent company that we just worked with, that most people will be able to relate to. A tour operator thought that their number one competitive advantage was that they had one tremendous number of travel industry awards. They were in Travel and Leisure magazine, Tour Wholesaler of the year, or on the top three, National Geographic voted them number one Tour Wholesaler. And when they did the research with their customers, in their case, customers were travel agents and then users, you and me would buy trips. Well, much to their surprise they found out that travel awards came in 20 out of 20 tested attributes, nobody cared, neither levels of customers. But what they did have, a really solid fabulous competitive advantage but they weren’t leading with it in their sales. And they had something called white glove service, which is if you and I go on a trip, and we are in the Amazon and we are out in the middle of nowhere and we get sick or we have an accident, or there is an emergency at home, what do we do? Well this company is literally at your finger tip at your beacon call 24/7 and they have marvelous stories about how they handle emergencies for clients. Recently, they had a client stuck in Santiago after the Chili earthquake and they handled it so well that the client said “I do not even want to leave, they’re just taking care of me”. And so those are true competitive advantages, but if you have them and you let them be your best kept secret and you don’t lead with them, then customers will never know that you really do have a difference. And we see that in over 90% of the companies, we find wonderful competitive advantages that are kept as the best kept secret.
Ian Portsmouth: So, how do you go about determining your competitive advantage? Is this really a function of asking your customers what they value in what you do?
Jaynie Smith: Well that is, that the second step, but the first step, we have a process we go into clients that we do and the first thing I suggest at any company looking to do this, sit down with your team and list all of your deliverables. If I hire you, if I go with you and you are my vendor of choice, what is everything that happens in our interaction, and what is everything you do to be able to deliver your product or service? And so, deliverables in my definition is anything that is not line item. For example, you may invest more heavily in your training of your people than your competition. So if in a sale encounter, you take that one deliverable and you use the definition, and you say to me, you’ve reinvested half a million dollars in training our people twice as much as our nearest competitor that’s created a competitive position and statement that could be a competitive advantage. So list your deliverables and then make statements about each deliverable in the way that meets that definition. Is it on time delivery? Do we measure it? What can we say about it? And here is the critical thing to creating competitive advantage statements for sales and marketing messaging. Critically number one, test it with your customer. We can go into a company and find 50 to 100 competitive advantages and competitive positioning statements. I always joke, you know, sit your customer down to get real comfortable because I have 100 reasons you should buy from us. No, we don’t do that. We do some market research, we get the voice of the customers, we say to them, out of the different attributes, what is the most important when you select a tour wholesaler or a vendor or a widget maker, whatever it is, what is the most important thing? We find the most astonishing things like, in a steel company, the number one thing most valued was that they got their documentation and shipping documents correct, and the company would have never guessed that was number one for their customers. We have a real estate company that found out, that security was the number one thing tenants who leased space from them wanted most and they were absolutely flabbergasted. So also, companies make operational decisions. In the case of a real estate company, let’s take some money out of landscaping maybe and put it in to security, the security systems are the most important to people who they were trying to sell to.
And so, you can create competitive advantages by listing your deliverables, finding out what you have measured or need to measure, and then making statements about it, testing those things with your customers and leading with the things that are most important to your customers.
Ian Portsmouth: It sounds to me like most companies would actually have a competitive advantage then, they just do not really know what it is or how to articulate it. But surely there are companies out there that are truly undifferentiated. How should they go about creating that distinguishing fact that the customer care about?
Jaynie Smith: My experience has been that every company has got the competitive advantages they don’t know they have because they haven’t gone through the exercise. Let’s just say we get in there, just really bump it up against the wall and we also allow ourselves to become a commodity that we are really having trouble articulating it. You know when I wrote that book “Creating Competitive Advantage” I had the opportunity to interview David Neeleman who was the CEO and founder of Jet Blue Airlines, you know, who flew up and down the East Coast of the States in their early days, now we’re flying more destinations. But, David said the most amazing thing and I think that answers your question. I asked him, how in the world did you come out with such a commoditized, I mean in the worst industry in the world Warren Buffet says to be is the airline industry and why, you know, you come out with this airline and you are just knocking your competitors on their butt and how you are doing that? And he said this, he said we ask each other, and this is what companies need to do, every company should do this, we ask each other once a week, what do we do better than them, meaning our competition, what do they do better than us, and how can we do that better than them? And that kind of internal culture around identifying what the competition is doing, what the customers value, and how we can get there create an opportunity to identify where we can create competitive advantages. Now we are seeing the fact that there is always innovation you know, we can innovate, but before we spend a lot of money on innovating, let’s find out if what we are going to invest in innovation is something the customer values. I see many companies invest heavily time and money in innovation and they come up with something the market place is not all that keen on it, now what.
So I think my firm believe, is you got to get the voice of the customer, you got to find out what they want, what they value.
Ian Portsmouth: It sounds like common sense but it is chocking that more companies don’t do it, so Jaynie thanks for joining the Business Coach Podcast and discussing how to create competitive advantage.
Jaynie Smith: You are welcome, thanks Ian.
Ian Portsmouth: Jaynie Smith is the founder and principal of Smart Advantage Incorporated at Business Consultancy based in Fort Lauderdale, Florida.
That’s’ it for another episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com, profitguide.com and iTunes. For other tools to help you build your business, visit BMO.com/coach. Until next time, I am Ian Portsmouth, the Editor of Profit Magazine, wishing you continued success.