It's hard to tell one drugstore from another, except for company logos outside their lots. United Airlines and...
American Airlines seem to provide the exact services to its customers. Yet convenience stores, airlines -- and IT companies -- do have to figure out how to differentiate themselves from the competition.
Competing on price is not enough. You must also find ways to get premiums for the products or services your company provides. To do this requires knowing the areas in which your company excels. Only then can you begin to build on these strengths.
Typically, a company excels in one of three things: operational excellence, the quality of customer relationships, or innovation.
Of course, operations, customers and innovation are all important to your business, which means your company must at least do an acceptable job in all three. But an IT department can deliver the highest value if it focuses its work on the area in which the company excels.
- Operational excellence: When you think of operational excellence, think of companies like UPS. Packages move at great speeds and at low costs (efficiency). Seldom does a package get lost (quality). Operational excellence is about high quality at low costs. Does your IT department enable this efficiency? Do your systems connect your customers and your suppliers with your operations in a seamless way to reduce the total landed cost of your service or products? Are your own IT costs below industry averages? Do your processes and systems track and report on operational breakdowns so that quality issues can be addressed? These are the questions that you should be asking to guarantee your IT department supports your company's quest to be operationally excellent.
- Customer relationships: A company that has excellent customer relationships is sometimes described as being "customer intimate." It knows its customers well, and responds quickly to customer needs. Nordstrom, the Seattle-based retailer, has long had a reputation for "customer intimacy." And more recently, the low-price airline Jet Blue has proven that it's possible to know your customers and deliver a great customer experience even at low costs. For an IT department, this strategy means building systems that make it easy to do business with your company and provide a good customer experience. This is most important for your Internet-accessible systems. How many clicks does it take for a customer to get to where he needs to get on your site? Do you store and give back customer information so customers do not have to find and input information themselves? If you cannot answer the customer's question electronically, do you provide an easy route to a live service person? How does your help desk perform? Customer intimacy requires elegant systems that bring customers back to do business.
- Innovation: There are relatively few companies that compete on the basis of innovation. It's the most challenging strategy to sustain. Sony comes to mind as a product innovator. Dell has been an innovator in new business models and customer service. An IT department that supports a strategy of innovation has to be flexible, ready to move quickly to support a new product offering or even a new corporate direction. But it must launch new systems without leaving expensive, old legacy systems still operating -- because even a strategy of innovation requires a low-cost infrastructure.
There are also numerous ways to use IT directly to innovate on a company's offering, business model or customer experience. How far can you push technology to enable self-service? How far can you drive technology to provide variety and mass-customization, as Dell has done? How much IT can you embed in your company's product or service to make it more intelligent? The opportunities to innovate with IT are endless, but you must be sure that your innovations are delivering services that a customer really values.
Remember that your first job is to discover what your company is really good at. You may not find the answer written down, so watch how your company behaves. Is it obsessed with costs and efficiency (operational excellence)? Does it treasure its customers (customer relationships)? Or is it filled with new ideas (innovation)? Then align your IT department's strategy with your company's real strength. That's the key.
James Champy is chairman of Perot Systems Corp.'s consulting practice and head of strategy for the company. He is also the author of the best-selling books Reengineering the Corporation, Reengineering Management, The Arc of Ambition and X-Engineering the Corporation.