What differentiates your business from others in the same space?
Do you know immediately or is your answer a bit vague? Sometimes it’s not as clear as one might think.
No one would argue that differentiation is important. It’s obvious. Being different will help your business develop unique niches within competitive markets and allow it to thrive. Yet many companies try to be everything to everyone. And often they have no clear idea of what makes them unique.
When we ask our clients about their differentiators, they are often wrong. The assumptions they made just don’t hold up when we dig into the details of their business. This is where an activity fit card can really help. It’s something we use all the time to bring clarity.
The beauty of this tool, developed by Michael Porter in the mid 80’s, is that it takes our clients on a journey of discovery. For the first time, they can properly visualize their business model in glorious technicolor. It’s so satisfying to see their “Eureka” moment as the scales fall from their eyes!
What is an Activity Adjustment Card?
In a nutshell, an Activity Fit Map is a diagnostic tool to identify your company’s competitive advantage. It connects your value proposition to your organization’s activities that enable you to deliver that value proposition better than any competitor. OK – sounds good. But how does it really work?
The example often cited is that of the activities of Southwest Airlines.
They have built a highly successful value chain, resulting in impressive growth in profitability. In their model, frequent reliable departures are related to 15-minute door rotations. These in turn were connected to standardized fleets of 737s which correlated with low ticket prices. Like a set of interconnected cogs all turning together, it led to the growth of their business.
Interestingly, when Continental Airlines launched its own low-cost airline, Continental Lite, to compete with Southwest, it only copied part of that business. And it ended in dismal failure. They copied enough of it to make it useless, and worse, Continental Lite negatively impacted their core business. A complete “lose, lose” situation.
Find your activity adjustment card
When I look at the map from Southwest Airlines and others, like the one from Ikea, I always think they are brilliant but retrospective. Nobody sat there and mapped all of this out as a way to drive their strategy. It happened by chance. They ended up where they ended up and turned out to be the winners. And so, someone then builds their connected strategy to show how all of their activities work together.
However, it is possible to find parallels in other companies. When we start filling out the Activity Fit Map for our clients, we look for activities that complement each other. Those where an improvement in one is correlated with an improvement in the other. These are your real differentiators – the things that set you apart.
We take all the activities in the value chain and think about what the strategy will be in the next three to five years. Next, we determine what is different about the way you do that activity that will lead to that strategy. A great book to refer to here is “Connected Strategy” by Nicolaj Sigglekow – in fact, I interviewed him for my Melting Pot podcast in June.
Spot the differentiators
After placing all the activities in the value chain in the fit map, we color code them in terms of importance. If we encounter something that is likely to be a constraint, we project ourselves into the future, thinking about the possible results of that activity. Our client Smartsourcing has identified a future recruitment constraint for the A-Players it needs to drive its growth. Recruitment is therefore a high priority activity.
Ok good. Now that we have that, we put it on the map and build the resulting group of activities. What will they look like in three years? Attractive employer branding, large-scale testing and onboarding, public relations to build their image as well as platform software development were all included.
What about Southwest Airlines? Their differentiation was “wheels up”. All other airlines operated six domestic flights per day in the United States. Because Southwest could spin them faster, they could fly at eight. This is where they make their mark. All planes were the same, every pilot was trained to fly them, crews were trained to work in all areas, and even customers were trained on what size bag they could carry. All of these connected differentiators, propelling each other forward.
Identify less important activities
What’s fascinating about Activity Fit Maps is that you start to see the other things your company does that don’t impact your differentiation. Because they have no relation to anything else, we call them orphan activities. Historically, you’ve probably run the business in silos. Instead of a management team, you get a management committee with each department head thinking theirs is the most important area. Instead of collectively deciding where resources should go, they actually compete. And HR may have developed a silo around a particular activity because it’s their workhorse. Or maybe in operations, there’s this thing that they do exceptionally well but the customers don’t care.
These orphan activities can lead to under-billing and over-delivery. And the Activity Fit Map will help you spot them. Instead of starting with “Why” (to use Simon Sinek’s famous expression), start with “Who”. Look through the lens of your customers to identify the activities, products or services that really interest them.
A clear and unambiguous business model
We recently produced an activity adjustment card for a client law firm. Another “OMG” moment. Suddenly, they could see the three to five points of difference which were also the most connected. This caused them to change their whole approach. Historically, they were limited by geography, but having chosen a UK-wide primary customer, they have opened up new realms of possibility. They identified this type of primary client as an entrepreneurial company that ended up owning its own premises. Our client can provide the full range of legal services for this buyer.
Their activity adjustment map changed shape in the process. In the beginning, the key things they highlighted were reporting/technology/sound advice/customer responsiveness/recommendations. It turned into report/technology/great place to work/simple, efficient, open. Reporting is their priority because their competitors are typical law firms that tend to keep clients in the dark and pass it from person to person. It’s so important that they designed a brand promise around this activity.
A great workplace appeared on the final card because they realized that in order to build relationships, they needed to hire a different breed of lawyers. People who their customers will trust and who are good at building relationships. They want to give the impression that even if they’re not the cheapest, their customers will always know what’s going on, that they’ll never have to chase them down, and that they’ll be working with the same person throughout. of the process.