“You can’t keep serving bad beer…”

Dear Commbank, ANZ and Westpac

This is a really difficult letter for me to write. I think we all know this has been coming. For a long time now, my friends have all been telling me I could do a lot better for myself. That they don’t like how I act when I’m around you. Deep down though, I really feel that we’ve just grown apart.

I’ve decided I need to break up with you.

Honestly, it isn’t you … it’s me. I’ve moved on. Maybe I should have left you months ago. I don’t really want to get into the messy details …but then you do deserve an explanation.

It’s not just one thing that got me to this place – remember when you tried to convince anyone who’d listen, your customers had a great standard variable rate on home loans, but actually it was me, who offered my customers the lowest of the major banks for the last 18 months. Me. Not you. Me. That   really hurt.

There was also that time when I abolished all those annoying fees. I’m sure your customers hoped you would too. My customers saved around AUS$230m – yours didn’t. They should have.

I also can’t forget the way you treated Australian business when times were tough. Personally, I think it sucked that you just weren’t there for them like I was.

And you know what? Having the most ATMs out there doesn’t really help customers if they’re all crammed together. I mean would it hurt you to try and spread them out, just a little?

Look I’m sorry. I shouldn’t lash out at you like that. I don’t want to make this any harder than it has to be. I know I’m not perfect either. But at least I’m really trying to be a better bank for my customers.

I just think it’s probably best for everyone if we give each other some space right now and make a clean break. Nobody wants to make a scene.

NAB

P.S. You probably shouldn’t call  either.

You may well be wondering what the heck this is about? Well, it was part of an award winning advertising campaign run by National Australia Bank (NAB) a number of years ago whereby – on Valentine’s Day no less – they began the campaign with the widespread publication of the above letter as part of their attempts to differentiate themselves from the other big banks in the country, namely Westpac, Commonwealth and ANZ.

Now, if it had solely been an advertising campaign, then it would have been a worthy award winner (and it did win a number of national and international awards) but perhaps no more than that. However, as Greg Sutherland, the executive general manager of strategy at NAB explained in an online interview (1) available on ‘The Management Innovation Exchange MIX’ (www.managementexchange.com) – the ad was but one part of a far wider and deeper effort to differentiate NAB from other banks by, in part, really listening to customer complaints. As he explained, “when we set our path of innovation to actually be truly differentiated versus other banks, we said the first place to look was what our customers were saying”. Specifically, he went on to highlight that “for us the number one complaint is fees, and 80% of all the complaints were on one fee. . .so after ten years of looking at that, we made the call that we would launch our point of differentiation from getting rid of that fee. And I think Cameron [Clyne, NAB's chief executive] said something very powerful when describing that. He said, ‘You can’t keep serving bad beer, right?’ You can’t build a sustainable business, even if you think it is justified.If the customer doesn’t like it and complains about it, then you’ve got to change it.”

I like that bad beer analogy and as Greg Sutherland went on to explain “it served as a lightning rod for the company whereby the mantra became ‘if the customer doesn’t like it, then we’ve got to change it’.”

For me, and no matter what business you are in, this example should tell you two things. The first point it emphasises is that when you are trying to communicate a vision or concept internally (and indeed externally), sometimes the simple, or plain-spoken, analogy works as well, if not far better, than all the jargon or business-speak in the world. There isn’t too much explaining to be done vis-à-vis the notion of not serving bad beer. So, whenever you are seeking to communicate something important try to find ways of making it ‘stick’ for the intended audience.

The second point, and the substantive issue in today’s post, is that you should be continuously thinking about how you can differentiate your business from the competition. This, I find, is becoming harder and harder to achieve. All businesses watch each other closely these days, have similar access to expertise, use common benchmarking tools, have access to the same technology and the web in particular makes it very easy to find out about new ways of doing things. So, in many cases, differentiation is a moveable feast at best and you may well find something that sets you apart from your competitors but that will likely only give you a short-term advantage. On that point, and I am guilty of this myself sometimes,  when we talk about gaining ‘sustainable competitive advantage’ is that really possible these days? Maybe certain things are less ‘replicable’ like your culture or service quality, but ultimately your competition can catch up sooner or later. The trick of course is to always be one step ahead, so differentiation should be a strategic concern not something to be addressed every now and again.

That, of course, is easier said than done; constantly differentiating your offering from that of your competitors doesn’t just happen and requires a host of supporting factors to be in place within your business such as the right culture, engaged employees, an effective innovation framework and intangibles such as a collective desire to be the best. That’s why so many businesses follow the ‘differentiate-by-price’ route: it’s easier. But when you think about it, that’s the simplest option to copy and that’s why differentiating solely on price leads to downward pressure on prices which hurts all players in the market; and, in turn, this almost rules out the potential to differentiate by other means because with lower revenues coming in the resources to invest in product or service differentiation simply aren’t there.

There are any number of models of differentiation but one in particular caught my eye recently. In an article in Harvard Business Review (2) Chris Zook and James Allen, leading strategists, introduced their Differentiation Map which I have reproduced below:

As they explained in the article “We cataloged 250 assets or capabilities that can make up a company’s differentiation. We then sorted them into three major clusters, each with five categories, to create the Differentiation Map. Assuming that four or five categories are required to achieve differentiation, these 15 basic categories generate more than 5,000 distinct ways in which a company can differentiate itself. (It is possible, however, to break the categories down further, in which case the number of ways to differentiate explodes into more than a million.)

I find this to be an extremely useful conceptual framework to stimulate discussion amongst senior managers as to where the potential for strategic differentiation lies and it is in the various potential combinations (like if you excelled at Technology and Customer Relationships) that the map can help you to pinpoint where you can make strides to strengthen your approach to differentiation.

At an operational level, focusing in on one vital aspect of business performance, namely product and service quality, I frequently use the following framework to drive the discussions with managers, supervisors and employees as to how they can set themselves apart from the competition. I call it the Quality Window:

The framework is quite simple and focuses on designing, promoting and delivering products and services that are second to none and then continuously listening to your customers so that you are truly in tune with their changing needs. Again, I find it is a useful thought-provoker which can stimulate a meaningful discussion around issues such as:

Product: How do your products meet customer demands in comparison to those of your competitors. Where is the potential to develop/enhance/tweak your products to really differentiate them from others?
People: How does the service offered by your employees, across all areas of the customer experience, compare to others? What can you do to make your service quality a true distinguishing feature that cannot be so easily copied by comeptitors?
Procedural: linked to your service, do your procedures make it easy for your people to respond to customer needs? Again, are there procedures you could simplify or even erradicate that would make you stand out? Often this can be achieved in simple ways, for example, how complaints are managed can at times be overly cumbersome in some companies.
Physical: if your customers come onsite to buy your products, or experience your service, how do your physical facilities stack up? What aspects of your physical facilities or location can give you an edge?
Promotional: how do your promotional efforts compare to what others are doing? Are you really setting your offering apart by the way you promote it?

In essence the Quality Window can be a useful framework both to assess current effectiveness in the quality arena, but also to guide the conversation as to where you might be able to differentiate what you do from the rest of the herd.

And when looking at the potential for strategic and operational differentiation in your business, don’t be like the smart-alec who said to me last week when I introduced this topic: “is there any such thing as bad beer?”

Enjoy your day!

References

[1] Interview with Greg Sutherland – http://www.managementexchange.com/video/greg-sutherland-you-cant-keep-serving-bad-beer

[2] The Great Repeatable Business Model by Chris Zook and James Allen. HBR. November 2011. http://hbr.org/2011/11/the-great-repeatable-business-model/ar/1

 

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