“Innovate where you differentiate” was the major message of a webinar by leading innovation expert and author, Steve Shapiro, with his guest Scott McKain, a best-selling author and internationally recognized expert on business distinction. Structured as an open discussion between 2 top business consultants and their real-world experiences, they focused on proven strategies and practical steps on how to build irrefutable sources of differentiation for your business.
Business growth is propelled by creating exceptional value for your customers – While innovation processes are necessary for business owners to keep up with a rapidly changing marketplace and is everyone’s responsibility at a firm, it was warned that innovation for innovation’s sake is a waste of time and dangerous. You have to prioritize your energy and direct your experimentation into new ways to strengthen how you differentiate your business and services. This directs you to the best use of your time, money and effort where you will get the best return by attracting new customers and developing client loyalty – succinctly, innovate where you differentiate. Your ultimate goal in innovation is to profitably create experiences so compelling to customers that they would never want to go anywhere else.
An example was given of a home assurance industry client that stated their differentiation was in their “unique pricing models”. When asked how long after their introduction of a new pricing model did their competition copy them, the answer was a few weeks. It was pointed out that they were spending so much time and effort on pricing models as their differentiator for only the briefest of advantages and ultimately benefiting their competitors as they were rapidly copied. They were redirected to start innovating in other areas where competitors could not so easily replicate like building a unique network of sub-contractor services focused on their client’s needs.
Clarity precedes creativity – Knowing exactly how and where you differentiate can be difficult for many businesses. A retail marketing magazine article was cited that stated that 60-70% of small retailer owners can’t tell you with certainty why clients buy from them. For mid-to-larger companies, there can be a lack of alignment or agreement between departments and key managers. Part of the problem is also not just determining who you are, but also who you are not. Starbucks foray into music was cited as an unsuccessful distraction. The problem becomes: if you cannot define your differentiation internally, you cannot deliver it externally. You need clarity to deliver a differentiation in an exceptional fashion.
There were a number of exercises discussed that can help a company better determine and build on what their differentiation is. Ask: What does your product or service make possible in the lives of your clients? How do you deliver on your stated differentiation? How would a company most successfully compete with you? Why are you not doing some of those things a competitor could best be doing?
Unrelenting client focus – It was stated that it is easier to see what your strengths are by taking an outside perspective. Keep focus by defining what is critical for your customers in the area in which you work with them. An example was brought up that Amazon requires an empty chair at all meetings to represent and remind all participants to relate all discussions to how they would impact their clients. Remember that your customers ultimately determine what your differentiation is, not you.
Building wells versus fences – A great illustration of how to focus on your customers was given in a story related by an Australian executive who was raised as a rancher. He learned that when you dig a deep well providing access to cool water, it kept the cattle close to those wells and there was no need for expensive fencing to keep cattle from wandering away, resulting in substantial cost savings and easier management. He applied that learning to running his company where he instructs his team to spend more time building wells than building fences. They have no need for punitive retention strategies as all their time is spent on continuously building exceptional client experiences that will keep clients close to the firm.
USAA case study - Steve Shapiro did a case study of USAA as a prime example of innovating where you differentiate. USAA clearly focuses their financial services offerings on military personnel and their families. They have been constantly innovating on how to make the lives of their customers better by studying their customers’ particular life situation and needs. Besides quality financial service offerings, they created the deposit-check-by-mobile-phone feature responding to the transient nature of their jobs, as well as, offering grief councilors and establishing a non-prop foundation to support members returning from their tours of duty. The constant innovations from the company, directed specifically to their membership lives, has resulted in a 98% retention rate and 90% of their customers saying they will stay with the company “for the rest of their lives”. USAA’s customers are passionate about the company.
Expertise is the enemy of innovation – Both speakers warned that many top executives base their decisions on 30 years experience in one industry, on what has “happened”. Problem is that they may develop blind spots and can get trapped in their own perspective versus delivering new breakthrough ideas and sustainable ongoing innovation. Many times they need fresh eyes and would benefit highly from bringing in ideas and perspectives from outside the firm and industry.
Beware best practices – Steve Shapiro, having written a book entitled Best Practices are Stupid, is clearly not a fan of industry specific best practices. “Replication is not innovation” and someone else’s practice is not necessarily applicable for you and your business or area of operation. You also cannot export some best practices without having the same cultural or dispositional nature to be able to fully implement the practice in the same way. Most importantly, you are not working to deliver the unique leadership and value proposition you could be providing your customers.
On the other hand, Steve states that best practices from other industries can be very helpful. Applying how other industries have dealt with constraints can give you ideas you can tweak and implement into your business. As an example, a boat marina came out with a unique pricing plan of unlimited monthly access to boat rentals, but borrowed the idea from Netflix of limiting reservations to two at a time to prevent an unmanageable inventory situation.
All-in-all, a great conversation that reinforced how to get a better ROI out of your innovation efforts, as well as, how to build unassailable relationships with your customers.
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial services firms. We position our members with the necessary ongoing innovation resources and coaching to drive and facilitate their growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors -- Innovation Equity Partners, Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, MeridianIQ/AdviceIQ, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here.
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