In my recent article for Mindshare’s Markedshorisont magazine, I describe the upcoming race to re-take the highest value market positions as the economic downturn begins to bottom out. Companies will need to have clear positioning strategies in place and be able to adapt their brands, cultures, operations and marketing to reflect those strategies. Well-prepared companies will be able to increase control of their value chains in three key ways.
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In the global paper industry, companies fight to lift their products above the “commodity” label. Now, Philips Design has been hired to strengthen the differentiation of Stora Enso. Competitors beware.
It’s hard to argue with the power of Philips’ differentiation in a field of similar competitors. As mentioned in a previous post, the involvement of people in the process made the difference. Now, Philips Design is helping Stora Enso through a brand-driven transformation and it sounds like they are using the same thoughtful and engaging approach.
Jouko Karvinen, CEO of Stora Enso, was head of American Philips Medical Systems during 2002-2006, the years in which Philips developed and implemented their positioning strategy. He is already defining Stora Enso’s business more broadly than most, viewing materials like plastic and metal as the real competitive landscape. The collaboration with Philips Design, and the investments that follow, have the potential to change the game in the forest products industry.
In interviews and workshops we’ve conducted around the world, we’ve found that people have an intuitive sense for Volvo. There’s no doubt, Volvo has built strategic differentiation by making protecting human life the highest priority across its value chain. They drive volume and pricing of safety, influence safety trends and guide safety innovation internally and with partners. Although safety requires conservatism, Volvo also knows they need to try harder not to be boring.
Take a look at our interpretation of Volvo’s strategic differentiation below:
Back in 2007, Ian Davis, McKinsey’s managing director, explained the importance of integrating social issues into corporate strategy. The video is even more relevant today. He points out that in many cases, CSR policies and programs were connected with reputation management. In the future, more and more companies will embrace social issues as part of their strategic differentiation in addition to other strategic objectives.
Last week I met with Lars Frederiksen, President and CEO of Chr. Hansen, to discuss his company’s strategic differentiation.
Behind the scenes, Chr. Hansen is a company with the integrity and capability to lead their industry. Their unique way of building working partnerships with customers differentiates them today. Probiotics, linked to strengthening of immune systems, is one of the most exciting opportunities for the future. With the right strategy, Chr. Hansen could help customers drive the change in consumer behavior that would lead to market growth and related health benefits that would otherwise take years to develop.
People often ask us how generic ideas like performance, reliability or problem solving can be the basis for strategic differentiation. One part of the answer is that the idea you choose needs to be true, relevant and high value across your value chain. However, differentiation depends on how thoroughly and uniquely you execute on the idea. In fact, the simpler the idea is the better, and nothing illustrates the power of simplicity better than Philips.
Josephine Green, one of the primary drivers behind Philips’ repositioning, once told Mark and me how it came about. She described the research, the insights and the link to the business strategy. But the most important thing she said was that the focus on simplicity felt right to everyone involved in the process. They where putting people in the center and taking a very human view of the future.
That leads to the other part of the answer. Positioning strategy isn’t science. For most companies, there is more than one right direction. The important thing is that people believe in the direction you choose.
This video describes the sense in Philips’ simplicity:
On the 15th of January, Steve Fludder, the new head of Ecomagination at GE, was interviewed in Fast Company magazine. His honesty reveals a lot, “Customers can always buy on the economics alone. That’s why it’s a sustainable business strategy.” More clearly than ever, he emphasized that “eco” stands for both ecology and economy. In a very short time, Ecomagination repositioned GE as an environmental leader. And, their R&D focus and M&A focus has ensured it is a viable strategy even in a downturn by balancing environmental benefits and cost savings for customers. To ensure we (in the bigger sense) don’t lose the momentum of the past few years, every company should be sure they overtly link environmental responsibility with business benefit. If you can make environmental leadership a true, relevant and high value differentiator across your value chain, don’t hesitate just because everyone else is talking about it.
Surprising as it is, GE caught most of its major competitors off guard in 2005 by making the environment their growth strategy. Creating a “branded commitment” called ecomagination was a brilliant move. Without compromising the power of “imagination at work,” they lifted the environmental focus up to the level of their corporate brand for all employees, customers, media and analysts to see. They leveraged the strategic differentiation they had built as a problem solver, focusing the company on a clear opportunity and driving growth.
When we analyzed GE’s Quadric in 2004, the environment didn’t even show up. Since then, they innovated and bought their way into environmental leadership. Recently, GE was one of the companies with the guts to buy a Superbowl spot (and keep it). The reason is that they see improving the environment and cost savings as two sides of the same opportunity.
The video below describes what happened when GE decided to make the environment their growth strategy:
Strategic differentiation needs a focus that originates from within a company, but the way it is expressed needs to change with the times. Lately there has been a lot of attention given to economic trends. Here are two other perspectives worth a quick look: Trendwatching.com’s current briefing takes the “on-the-street” perspective and highlights themes found in their larger 2009 Trend Report. Leo Burnett’s Branding in 2009 video takes the advertiser’s perspective (although they may not appreciate it being put in that box). There are some common themes like the growing importance of authenticity, responsibility for the environment and respect for people.
There is a great article on HBR.org called “Seize Advantage in a Downturn” by David Rhodes and Daniel Stelter. It presents a good balance of recommended defensive and offensive actions backed up by analysis of companies that emerged strongest from past recessions. Most importantly, the authors recommend strengthening your differentiation in terms of what you cut, how you inform investors and the focus you give to innovation. (And, now our obligatory “crisis post” is out of the way.) Read article at HBR.org
