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Ultimately, Only 2 Paths to Success

1/13/2015

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From the Harvard Business Review - 

Sell it for more. 
Here, your product or service provides better performance on attributes that are important to target customers and for which they are willing to pay a premium. This approach must continually avoid the following pitfalls:

  • Meaningless or false differentiation: the points of superiority are unimportant to customers or based on a false presumption of superiority.
  • Uneconomic or invisible differentiation: customers are unwilling to pay for additional performance or are unaware of the difference.
  • Unsustainable differentiation: the product or service features are imitated over time.


Or......


Make it for less. 
Here, your cost structure allows you to sell and make money at prices that competitors cannot. Realities in many industries typically allow only a few firms to compete successfully in this manner. Once they do, moreover, their scale advantages make it difficult for others to duplicate. To be a viable value proposition, therefore, this approach must avoid these pitfalls:

  • Price wars: any cost advantage is lost in price competition and no one extracts value.
  • Substitutes: you may have a cost advantage over competitors, but not over substitutes that are available to target customers.
  • Cost reductions versus lowest costs: lowering cost doesn’t necessarily mean your cost is lower than competitors and, in any market, there is only one lowest cost competitor. Never confuse these different cost positions.
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