The Great Repeatable Business Model

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Differentiation is the prime source of competitive advantage.  You earn money not just by performing a valuable task, but by being different from your competitors in a way that lets you serve your core customers better and more profitably.  The sharper your differentiation, the greater your advantage. In studying companies that sustained a high level of performance over many years, Bain & Company partners Chris Zook and James Allen found more than 80 percent of them had differentiation at the center of their strategy. As the authors explain in “The Great Repeatable Business Model,” in the November 2011 Harvard Business Review, the cold truth about hot markets is this:  Over the long run, a company’s strategic differentiation matters far more to its performance than the business it happens to be in.  Every industry has leaders and laggards, and the leaders are typically the most highly differentiated. Consider three examples:
  • Nike’s differentiation resides in the power of its brand, the company’s relationships with top athletes, and its signature performance-focused product design.
  • Singapore Air’s differentiation comes from its unique ways of providing premium service at a reasonable cost on its long-haul business flights.
  • Apple’s differentiation consists of deep capabilities in easy-to-use software, the integrated iTunes system, and a simplicity of design and product line.
You can find high performers like these in most industries. Such companies relentlessly build on their fundamental differentiation.  They learn to deliver it to the front line, creating an organization that lives and breathes its strategic advantages day in and day out.  And they learn how to sustain it over time through constant adaptation to changes in the market. As their successes demonstrate, the best way to grow is by replicating your strongest strategic advantage in new contexts.  Companies typically expand in one or more of four ways:
  • They create or purchase new products and services.
  • They create or enter new customer segments.
  • They enter new geographic locations.
  • They enter related lines of business.
A company can pursue each of these strategies in various ways.  For...

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