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Yes, You can win without differentiation!

10/4/2013

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A quick glance through various stores and online markets, we see many products practically the same…Coming closer home to our pharmaceutical industry- How do we differentiate between a bunch of generic products containing same active ingredient? Or Law firms or Testing laboratories or CRAMS (contract research & manufacturing organizations), CRO (contract research organization) or CMO (contract manufacturing organization)? Broadly, they all are same (within their individual functions and class). So, why does the market  share statistics of service organizations fluctuate? Let’s peek into a bit of history on strategy-

For decades, strategy gurus have been telling organizations to differentiate.

From Michael Porter to Costas Markides and through the Blue Oceans of Kim and Mauborgne, strategy gurus have been urging executives to  distinguish their firm’s offerings and carve out a product niche to gain market position- simply because if you just do the same thing as your competitors, they claimed, there will be nothing left for you than to engage in fierce price competition, which would bring everyone’s margins to zero or negative!

The field of strategy arises from economics and the strategy thinkers who first entered the scene in the 1980s and 90s based their recommendations on economic theories existing then, which suggested that- as a competitor, you have to somehow be different to make money. 
 
But today, scenarios have changed. Strategy determinants based on extensive research, built on insights of sociology & behavioral science model established the following- “what sells” criteria have changed significantly. 

Coming back to our example of a service based organization such as a CRO or CMO or a law firm- There are umpteen number of them in the “Good” category. But is one “A” grade CRO/ CMO or law firm’s offering really so  different from it’s “A” grade counterpart? Not really. Yet one ‘A” grade CRO makes more business than another? Why this discrepancy? Their competitive advantage apparently does not come from how they differentiate their offering. 
  
Whether you’re a law firm or a hairdresser, people will find it difficult – at least beforehand – to assess how good you really are. But customers, nonetheless, have to pick one. A research study report in Organizational Sociology showed that, when there is such uncertainty, buyers rely on other signals to decide whether to purchase; signals such as the seller’s status, its social network ties and prior relationships. 
 
It has been found that, nurturing social network, making sure former employees become “alumni” and managing existing client relationships are three most crucial business gainers for service based organizations today. The  winning mantra however, is to secure more than 85 % of business from existing clients as “repeat business” year on year. 

Therefore, customer relationship management has gained prime status as never before. This is true for not only service based companies but all organizations across the board. Today, social network management should be an integral part of an enterprise’s strategic growth design model as much as analyses of differentiation, innovation, value propositions or customer segments. Are you ready with your winning strategy?

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