“By now, your business knows what it takes to make and move stuff. The problem is, so does everybody else”
– Tilt, page 202
From the industrial age into the mid-1900s, competitive advantage was about economies of scale. The winners were those who could produce and distribute goods at a lower cost than their competition. However, in today’s world, where manufacturing, operations and logistics can be outsourced, what activities can truly set a company apart from its competitors?
In Tilt, Author Niraj Dawar introduces the “Tilt Strategy”, which encourages companies to stop focusing on “upstream activities” and tilt their focus to “downstream activities” to create a more sustainable competitive advantage. What’s upstream and what’s downstream, you may ask?
Upstream activities are those related to scale and production efficiencies. If your focus is on the upstream, you’re likely asking yourself, “How much more of this stuff can we sell?”
Downstream activities are those focused on the customer – such as distribution, marketing and service. If your focus is on the downstream, you’re asking yourself, “What else do our customers need?”
Discover your Downstream Competitive Advantage
"But when this account rep left to join the competition, the company realized that its efforts had made the customers loyal to the frontline salespeople, not to the company"
The author tells a story about a company struggling to keep its customers from leaving for the competition. At first, it seemed that their strategy was focused on the downstream. They grew their front line sales team, provided extensive training on the product line, and offered performance incentives to encourage employees to build deep relationships with their customers.
For a while, it worked. But when their top account rep was wooed by the competition and left the company, they learned that their employees weren’t a sustainable competitive advantage. You want to build a great team, but the team alone won’t make your company great. You need something more, some downstream activities that create value for existing and potential customers…
Reducing Risks and Costs
"The CEO should be busy seeking out more customers who value a similar reduction in costs and risk and uncovering additional costs and risks that the firm can reduce for its customers"
Instead of leaving this task solely to the CEO, everyone who deals with customers should ask themselves why customers are buying from your company instead of your competition. What problems do your products or services solve for your customers? Do they reduce costs, whether that’s the cost of your customer’s time or effort? Or do they reduce risk, such as the risk of making the wrong decision? One of the examples the book provides is a company selling wine in Britain. In order to grow their market share, they created a simple colour coding system to help people who don’t know much about wines. Rather than trying to determine if they needed a zinfandel or a pinot noir, all they needed to know was that red labels meant “light and fruity” to ensure they picked the right wine for their tastes. With this system, the company was able to reduce the time and effort that it took for customers to select and purchase a bottle of wine and they also reduced their risk of purchasing a wine that they wouldn’t enjoy.
If your product or service can reduce the costs and risks for customers, not only will you attract new customers, but your existing customers will see more value in your product or service and be less vulnerable to the competition.
Sharing your Knowledge
"You come into contact with a variety of customers, each with unique needs, problems, challenges, desires and resources… you gain a wider range of experience on these issues than any single one of your customers can possibly have"
As an organization, you have a bird’s eye view of the market you serve. Individual customers have their own experience but know little about other customers’ experiences with your product or service. So now that you have this knowledge, what can you do with it?
There are three ways to use your knowledge to create value for customers. The first way is Relaying and Connecting, which is when you learn from one customer, and use what you learn to help another customer. You may even go as far to introduce two customers, knowing that they could benefit from knowing each other.
The second way is Benchmarking and Mirroring. This method adds value using the data you have to show customers where they rank compared to other customers on areas that are important to them. This could be fertilizer use vs. yield for a farmer, or number of Twitter follows and re-tweets for a social media manager.
The third way is Predicting. Predicting uses your knowledge of the marketplace to forecast upcoming trends. It’s no doubt the most difficult to build, but once a model is created based on your customer data, it’s a competitive advantage that is difficult for your competitors to replicate.
In conclusion, if your company is looking to differentiate itself from your competition, look to create additional value for your customers through your distribution, marking and service activities. Make doing business with you easy for your customers, and offer solutions rather than just selling them product x or product y.