Given today’s global marketplace and ultra-fast pace of change, the maxim ‘differentiate or die’ is truer now than ever before. Companies need to stand apart from competitors near and far. Delivering a better product, better service or a better business model is often the difference between strife and success. Continually bringing something new to the marketplace keeps customers engaged and interested. But, being different is easier to say than do.
More often than not, businesses fail to adapt and evolve in ways that are creative and cutting-edge. They fail to find ways to continue to be unique and remain current. Once a company finds a ‘winning formula’, they tend to stick with it even as it becomes stale. Even massive companies have gone defunct because they failed to innovate and differentiate themselves in an evolving marketplace. In fact, only 53 companies remain today from the original 1955 Fortune 500 list, including Boeing, Campbell Soup, Colgate-Palmolive, Deere & Company, GM, IBM, Kellogg, Procter and Gamble, and Whirlpool. The fact that 90% of all Fortune 500 companies failed within 64 years indicates why differentiation is so important. Those that differentiate, innovate and stay current succeed. Those that don’t, fail.
Differentiation Done Wrong
So, the key is to differentiate – innovate and change – but in the right way. After all, there is a right way and a wrong way to be different. Here are some obvious examples of ways that companies tried to differentiate themselves, but in the wrong way, and ultimately did not.
From 2006 to 2015, Volkswagen tried to differentiate their automobiles from others by showcasing them as high performance vehicles that also managed to achieve excellent fuel economy and emissions so squeaky clean that they rivaled those of electric hybrids. The truth was that their engineers could not achieve what they were claiming so they devised “a different way” to deliver what had been promised. The exhaust control software in every VW diesel car was programmed to turn off as soon as it rolled off the auto emission regulators’ test bed. This was intentional. At that point, the tail pipe would spew illegal levels of two types of nitrogen oxides (referred to collectively as NOx) into the atmosphere, causing smog, respiratory disease, and premature death. This went on undetected for a decade. VW sold 580,000 of those cars in the U.S. alone. What they did was definitely different. However, this way of differentiating the company was obviously wrong — illegal, unethical and immoral. They were eventually caught and it cost the company $25 Billion in penalties as well as a serious blow to their brand reputation.
Another example of corporate differentiation gone wrong was seen with Parmalat. An Italian company that was a leading global producer of lifelong milk using Ultra Hot Temperature (UHT) processing as well as other foods, Parmalat found “a different way” to reflect profits. Founder Calisto Tanzi used “different” accounting practices, selling credit-linked notes to the company and diverting those funds elsewhere. This resulted in a €14 billion hole in the company’s accounting records. That was definitely different, and also illegal and unethical. It resulted in what remains Europe’s biggest corporate bankruptcy. While it did not destroy the company, Parmalat’s reputation was seriously hurt. It has functioned as a subsidiary of French group, Lactalis, since 2011.
It probably should go without saying that differentiation is good as long as it is within the parameters of what is legal, ethical and moral as well as acceptable business practice. But since we see these kinds of aberrations all too often, perhaps it bears repeating. Different is good within the scope of what is legal and ethical.
A Failure to Differentiate
There are, of course, companies that simply failed to differentiate when they needed to do so most. They were either lost or complacent and allowed the moment for them to ‘differentiate’ pass them by. An example of a company that failed to differentiate at a key moment was Pan Am. In its heyday, Pan Am offered flights to 86 countries on every continent save Antarctica, and their routes covered 81,410 un-duplicated miles. At the time, they were one of the world’s premier airlines, known for comfort and outstanding service and gourmet cuisine (back when all passengers received meals, not just first class). Their cabin crews were typically multilingual, college graduates with nurse-training. Unfortunately, Pan Am also became the target of numerous terrorist attacks and a host of non-terrorist related crashes throughout the 1950s, 1960s, 1970s and 1980s. There were 36 crashes, incidents and hijackings over four decades. At a time when little thought was given to how to make airplanes “safer,” Pan Am had an opportunity to pivot and implement policies and rebrand itself as the “safest and more secure airline”. They did not do that. Fear kept people from flying Pan Am. By 1991, after years of flying with many empty seats, Pan Am filed for bankruptcy and ceased flying. This is an example of a company that needed to differentiate and distance itself from its past. Failure to differentiate led to business failure.
However, the most typical situation in which companies fail to differentiate happens when a business finds success, falls in a rut and fails to differentiate in the face of market changes. An example of a company that got stuck in its comfort zone is National Geographic. Published continuously since 1888, the official magazine of the National Geographic Society was the first to master the art of visual storytelling. The publication inspired photographers around the world to take pictures of the most amazing examples of architecture, animal and sea life, scenery and historical artifacts around the globe. They pioneered the concept of quality content. Yet, in the 1980s, when pitched the idea to start an NG TV channel, based on the proliferation of cable channels, National Geographic passed. The producers who pitched the idea went on to create the Discovery Channel, History Channel and other networks that were purchased by entertainment conglomerates such as Viacom. By the time National Geographic got around to re-thinking that decision in 1997, they were late to the party. Eventually, NG was purchased and is now controlled by Disney, which was its salvation.
In hindsight, National Geographic’s leadership may seem foolish and shortsighted but they are in good company. Many businesses have failed to differentiate themselves at key moments and completely lost their footing in the marketplace. Blockbuster. Kodak. Borders. Yahoo. My Space. Commodore. Radio Shack. Palm Pilot. Blackberry. The list is seemingly endless. Many such companies are either defunct or hanging on by a thread.
Differentiation Done Right
If being current and cutting-edge is key, then the goal for every company is to find the proper way to reimagine, reinvent and remain relevant. Thankfully, there are just as many examples of companies that dared to be different and found success. As far back as the 1950s, Japanese companies decided to adopt a different approach to manufacturing. Using the Deming Method, factories began to improve their processes. They began to measure their economy of motion and ergonomics and apply it to the manufacturing line. Precision was key. They were able to reduce mistakes, streamline production and improve quality. The result pushed the Japanese auto industry to the top of global sales and reputation. Automakers such as Toyota, Honda and Nissan outsold companies such as Ford and General Motors for decades. This was instrumental in helping the Japanese economy rebuild itself after WWII into a major powerhouse from the 1960s to the start of the 21st century. Differentiation can be an economic game changer.
It is also important to note that, in business, differentiation is often confused with better or more which actually misses the point. The point of differentiation is to be, well, DIFFERENT… as in not the same. Better says ‘same but improved’. Better is not different. More absolutely implies ‘same but with augmented features or more quantity or quality’. More is not different. The focus on these approaches is to do the same-old, same-old with small refinements or additions. While there is nothing wrong with improving or increasing a product or service, it is just a differentiation without a distinction… and it is a brand trap. It is easy to walk through any pharmacy, grocery store or department store and find dozens of products claiming: redesigned… high quality… flexible… faster. The same is true of service providers. What they are really saying is “we are like them, but you should buy from us anyway.” Instead, companies need to think about how to actually be different.
Stay tuned next week as we look at what it means and what it actually takes to differentiate in business today.
Quote of the Week
“You have to do things right to stay in business, and that’s not easy, and that’s a choice on a daily basis, the choices you make in how to run your business and how to have a point of differentiation and how to be true to your brand, how to offer something that people want and to offer something that you love.” Venus Williams
© 2019, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.