Different customers are attracted by different attributes of a product or service. Companies such as DJC, Southwest Airlines and Wal-Mart for example, have attempted to differentiate themselves by offering the lowest price. Others, such as Crown Equipment, sought to attract customers who want higher performance, features or appearance. Still others such as ACC sought to differentiate themselves through superior flexibility or innovativeness. A company that decides to pursue a certain form of differentiation cannot, of course gain any long term advantage over its competitors to use the same operations structure and infrastructure as they do. Strategic fit requires that, having decided what kind of superiority it wants to achieve, it must configure and manage its operations organization so as to provide that form of advantage most effectively.
A company that seeks to provide superior product performance or precision for example, may need to acquire (or build) special production equipment and design and /or make some of its own components to standards that are higher than those available from external suppliers. It may also locate in regions that give it access to higher worker skills, and adopt internal measurement / reward systems that promote continual improvement in product performance. Its operating systems would be far different than those adopted by DJC, ACC’s Japanese competitor, which focused on being the lowest cost producer and therefore favoured product designs that sought the lowest possible material and processing costs while just meeting customers’ product specifications as well as proven manufacturing processes rather than newer processes whose reliability was still in question, and a production control system that gave top priority to achieving the highest possible utilization of its equipment and people.
Reviewing in this light the various examples of competitive attacks described above one sees that some were based on a company’s decision to address a critical need (sometimes a latent need) of some group of customers that its competitors had not given high priority to. Such opportunities often arise when customers’ needs evolve over time, or when these competitors attempt to address certain customer needs by making operating choices that impair their ability to meet other needs. APM clawed its way into the Australian fine papers market primarily by offering superior ( its reconditioned paper machine was able to make much smoother paper) and customer responsiveness. It tried to match its competitors’ prices but did not try to match their range of products or the variety of sizes and packages they offered. A large segment of the Australian market, it turned out, was more interested in high quality and rapid, dependable delivery than in a broad range of products and packages size.
This kind of attack mirrors that followed by Japanese auto producers when they first entered the US market. They offered cars that had fewer surface defects, superior economy and reliability and low maintenance all at prices comparable with lower than their larger competitors. US auto producers had long assumed that American customers were more interested in styling horsepower and exotic options – assumptions that proved to be out dated during the 1980s.
Crown Equipment’s strategy of designing radically new lift trucks was reinforced by its ability to design and manufacture its own components. Its competitors were constrained from being too innovative because they relied on outside suppliers to provide most of the components (often based on standard designs) incorporated in their products. Crown’s ability to customize its products to meet the specific needs of individual customer’s was similarly due to the fact that it had adopted and perfected a production process whereby batches of varying size were assembled using small teams of broadly skilled workers to perform a sequence of tasks in the same workspace. The flexibility of several of its larger competitors in contrast, was constrained by their use of assembly lines that were set up for long runs and staffed by workers having more limited skills.
These examples provide another explanation why entrenched competitors often respond to attacks so slowly and ineffectively. Once Company A has configured its operating systems with the goal of achieving superiority along certain competitive dimensions it becomes very difficult to match the performance that a new competitor has been able to achieve along other dimensions through an operating organization that was expressly designed with those other dimensions in mind. Company A can’t adapt effectively to a new set of competitive priorities by making a few simple alterations. A number of interacting changes are required and this takes time – as well as money and a sense of urgency. Faced with the prospect of such wholesale restructuring it is easy to delude yourself with the notion that the competitive advantages your new competitor is offering will appeal only to a small segment of the market, or are just a passing fancy that customers will soon tire of ( and compounding this leap of faith will then return top valuing the competitive advantages that you have traditionally provided them) Or that the approach being followed by this competitor ( while effective at small volumes in specific industries and in certain geographic regions) can’t be scaled up or transferred to other industries and regions.