In a truly differentiated company, differentiation goes far beyond the product itself.

Editor’s note: This article comes from the WeChat public account “Harvard Business Review” (ID: hbrchinese) , Authors Lin Wende (Paul Leinwand), Marseilles (CesareMainardi).

Starting with the concept of “strategy” in the early 1960s, differentiation has become very important. Customers will choose a company that brings unique value. A company needs to let customers know that it is different from other companies in order to gain strong competitiveness in the market.

As business strategists, we have read countless articles about differentiation. We even see many executives trying to keep these opinions in mind. Despite this, most mainstream multinational companies still lack differentiation and miss many opportunities.

The problem stems from the perception of many business people about differentiation. For them, the object of differentiation is only a certain product, service or brand. After all, this is what customers see and what competitors can provide.

But differentiation requires continuity; it should not depend on individual products, services or brands. The core of differentiation is that the company can continue to develop and promote distinctive products and services and branded experience. What ultimately makes the company stand out is not the result, but every little thing the company does in the process.

In a truly differentiated company, differentiation is far beyond the product itself. At Apple, consumers buy not just a computer or mobile phone, but a series of related network services and the ability to help consumers solve problems. At IKEA, customers buy more than a sofa or cabinet, but a complete buying experience for decision, assembly and delivery.

The biggest challenge in fostering differentiation is to start with the company as a whole, rather than betting on the future with one or two separate products. This requires companies to build differentiated capabilities, that is, capabilities that few companies can master.

This is very different from previous differentiation strategies. As early as the 1980s, a company could distinguish itself based on scale, and the largest company in the industry could have a strong influence on cost, back office process, distribution, and marketing efficiency. However, from the beginning of the 21st century, these advantages have disappeared with the globalization, deregulation and the rise of digital technology. For small businessesIn general, the growth of customers and working capital is getting easier. Big companies find themselves never competing with so many rivals and global groups.

Differentiating products or services is a strategy, but as competition becomes more intense, this is not enough for a company to succeed. Companies with specialty products can become famous in one fell swoop; but once this product is unpopular or replaced by other new products, the entire enterprise will become vulnerable.

Credit card marketing is quite representative. In essence, credit cards provide the same service, namely unsecured loans, and credit card companies must find other forms of difference to defeat their competitors. This usually means cooperating with companies, such as: an air card that can accumulate flight miles, an additional guarantee provided by an insurance company, or a retail card that can get a premium price.

American Express is a typical example. It has reached an exclusive agreement with the Costco chain in the United States (CostCo). In some popular Costco, only the American Express card can be used for consumption. However, this advantage is too dependent on the partner. In 2015, Costco decided to cooperate with Citigroup’s Visa. In 2004, Discover had a similar experience with American Express. Wal-Mart abandoned the discovery card and cooperated with MasterCard.

In addition, when relying on products to create differences, you may encounter incoherence, because different products require different capabilities, and this will push the company in different directions at the same time. For example, Ames pet food is one of the high-quality brands on the market; owners who pay attention to pet health can only purchase Ames products in pet specialty stores.

When Procter & Gamble bought Ames for $ 2.3 billion in 1999, everyone thought it was a good acquisition option, because like Crest, Tide, Ivory Soap and other personalized and optimistic brands Ames became a new brand in the P & G family. But things are not so smooth.

In the next 10 years, the pet food market has become increasingly competitive. Procter & Gamble is unprecedented in the development and positioning of daily necessities, but it has not developed the ability to enable Ames to maintain differentiation in the pet food market. In 2014, Procter & Gamble sold Ames and its related brands (Yuka and Natura) to Mars, which has the aforementioned capabilities and other specialty pet food brands (such as Weijia).

The most effective companies do not stand alone by unique products, services or brands; on the contrary, they focus on creating a differentiated enterprise to create more attractive products, services or brands.

PwC Strategy & A book “Strategy That Works” (English version published by Harvard Business Review) explains these capabilities and how to plan and implement them. We recommend starting with senior executives and then slowly spreading to all corporate employees. Our suggestions include:

  • Sceptical about benchmarking analysis. Don’t blindly pursue practices that are not suitable for you, even if it is a common practice in the market.

  • Reverse push from the goal, clearly understand how to develop from the current capabilities to the capabilities required by the enterprise step by step.

  • Continued to carry out targeted interventions, as in the past to adjust the system and organizational structure, but the focus is on matching them to serve the realization of the strategy.

  • Being an excellent ability innovator, designing and establishing your own practices, thus bringing unparalleled strength.

  • When acquiring a company, look for deals that fill gaps in the company ’s capabilities, and pay attention to post-merger integration.

  • Build the company ’s capabilities with multi-functional teams.

  • Through arranging the content of the ability, the tacit knowledge is made explicit, but it keeps reflecting, improving and rearranging constantly.

    The ability to differentiate is not easily copied by others. Differentiation is reflected in all things of the company, which can generate returns in the early stage of construction, and will deepen its mark over time. It is becoming stronger and stronger, so that the company can apply it to products or services globally. Other forms of value creation are short-lived, while the value creation of differentiated capabilities is much longer. This is the only way we know we can continue to bring continuous success to the company. And day after day, everything the company does will have the same clear strategic goals.

    Paul Leinwand, CesareMainardi | text

    Lin Wende is PwC Strategy & Management Consulting ’s global executive partner for capacity-driven strategy and growth consulting services, and is also a PwC US partner.

    Marseilles is the former global CEO of PricewaterhouseCoopers Strategy & Management Consulting, and is currently a visiting professor at Northwestern University ’s Kellogg School of Business and a member of the Global Advisory Committee.

    Li Yuan | Edit