Differentiating Your Business

I came across an eight-year-old article the other day entitled Discovering New Points of Differentiation, by Ian MacMillan and Rita McGrath (not online, you can buy it from HBS). It provides a rigorous approach to identifying ways to differentiate your company from competitors on more than just product or service. Here’s a synopsis:

The first step is to map the ‘consumption chain’, the various points at which your customers and potential customers ‘touch’ (or could touch) your product or service:

  1. The point of first awareness (e.g. through marketing materials or advertising)
  2. The point of locating your product or service (initial purchase or direct pitch)
  3. The point of making the decision between your and competitors’ offerings
  4. The point of ordering and purchasing your offering
  5. The point of receiving delivery of your offering
  6. The point of inspecting and processing receipt of your offering
  7. The point of installing or implementing use of your offering
  8. The point of paying for your offering
  9. The point of storing your offering between uses
  10. The point of moving your offering from one location to another
  11. The point of using your product or service
  12. The point of receiving support services from you
  13. The point of returning or exchanging your offering
  14. The point of repairing, maintaining and upgrading your offering
  15. The point of disposing of your offering

Many companies today are using what has become known as ‘cultural anthropology’ — observing the purchase, delivery and use of your offering by customers, from the customer’s perspective, to find ways to improve it, and this technique can also be used to explore differentiation opportunities.

The second step of the approach is to ask the who, what, when, where and how questions at each of the 15 touch-points:

  • Who: Who is with the customer at this touch-point, and how do they influence the customer, and who else might be with the customer at each point who could have an impact on the customer experience?
  • What: What is the customer doing at each touch-point and what might they prefer to be doing, what problems might they be encountering (not necessarily due to your offering) and what else could you do to mitigate any problems or enhance their experience?
  • When: At what time of day/month/year/life do customers reach this touch-point in using your offering, and when else might they be used?
  • Where: Where physically are your customers at each touch-point, where might they rather be, and where else might they benefit from using it?
  • How: How does your offering meet the customers’ needs, how could it do so better, and how else might they use your offering at each touch-point?

What you end up with is a 15 x 5 matrix, in which each cell is analyzed for differentiating opportunities. Suppose for example your offering is nursing care and you’re looking at touch-point 11, the point of using your service. You might differentiate by who (i.e. what qualifications, what age, gender etc.) provides the care, or who you take with you who might offer synergistic services. You might differentiate by what you do (e.g. offering additional massage services to bedridden customers, or using a holistic healing process). You might differentiate on when you offer your service (e.g. 24-hour on-call, or only when you receive an emergency signal from the customer’s beeper). You might differentiate by where you offer the service (in the customer’s own home, or in a mobile fully-equipped van). And you might differentiate by how your service meets the needs not only of the patient, but of the patient’s family and other caregivers, perhaps with supplemental training and counseling.

These are just examples off the top of my head. The authors provide more extensive examples. I kind of like the idea of merging the ‘How’ and ‘What’ questions with the Strategy Canvas and the six utility levels (productivity, simplicity, convenience, risk, fun & image, and environmental friendliness) that Kim and Mauborgne suggest in their Blue Ocean Strategy book (sample canvas illustrated above). 

Is differentiating different from innovation? Looking at Christensen’s three types of innovation — sustaining, low-end disruptive and new-market disruptive, I’d suggest that since your focus is on existing and potential customers, this differentiation approach is best suited to sustaining innovation and, in some cases, low-end disruptive innovation (when your cultural anthropology uncovers over-served customers). In that sense MacMillan and McGrath’s approach is more at the incremental, continuous improvement end of the innovation spectrum. As Christensen has pointed out, sometimes an intense focus on customers can actually blind you to the opportunities for more radical innovation with entirely new customer sets and new markets.

Nevertheless, I like the rigour of this approach, and I think it makes a useful addition to any innovator’s toolkit.

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