In Atlantic City, New Jersey, a tourist destination known for its boardwalk and beach, you'll find dozens of t-shirt shops, restaurants, massage parlors and palm readers. Each store offers pretty much the same product or service, often for the same price—and they all want you to spend your dollars with them. The casinos are also pedaling similar services and experiences, and they, too, are competing for a slice of your paycheck.
You'd think that whichever store or casino stands out, and is the most different from the others, would find the greatest success. However, that's not always true.
The Story of Revel
At the northernmost part of the boardwalk is the Revel hotel and casino. This 70-story skyscraper stands out from the crowd.
Built in 2012, this casino cost $2.4 billion to construct. It's classy, high-end and luxury all the way. It has a completely different vibe than the rundown (and soon to be closing) Showboat casino next door. The Revel eschewed the all-you-can-eat buffets, instead opting for more opulent amenities, targeting the wealthy traveler. However, for all of its glitz and glamor, Revel can't attract a crowd. It is consistently ranked near the bottom of all the casinos in the city. Just two years after its opening, the casino has filed for bankruptcy twice and is on the verge of shutting down.
You have to know your audience. Atlantic City is not Las Vegas. Walking around the boardwalk, it quickly becomes apparent that most visitors spend the day at the beach, opening their wallets primarily for pizza, fried dough and cheap t-shirts.
The Revel is so different that it is out of place. And being different for the sake of being different is a losing proposition.
The 4 Ds: Innovate Where You Differentiate
When defining your innovation strategy, one of the first steps is to define your differentiator. As the Revel example demonstrates, being different is not the same as being differentiated. Knowing this helps focus your innovation investments.
Differentiation only occurs when you have all the following “Ds”:
Distinct: What is your competitive advantage? What sets you apart? When considering the answers to these questions, you need to recognize that it's difficult to be better than the current market leader in their area of differentiation. A game of catch-up is one you'll most likely lose. Instead, choose a different angle.
When Progressive Insurance decided to compete against the bigger players back in the late '90s, it didn’t try to go head-to-head against the strengths of others. Instead, it launched its Immediate Response Vehicles, a unique service where claims adjusters are transported to the site of the accident to provide immediate and accurate claims assistance. This helped position it to become one of the market leaders of today.
Defensible: Your differentiator must be difficult to replicate by others. A service contract firm—one that fixes broken water heaters—thought its differentiator was the unique way it bundled and priced its services. When asked how long it would take for their competition to replicate these offerings, the answer was, "About two weeks."
Unfortunately, it did all the heavy lifting, making it easy for its competition to duplicate. Digging deeper, it was determined that the true differentiator was its repair network. It took years to build solid relationships with the individuals who fix the boilers and would take an outside firm equally as long. With this knowledge, it shifted its innovation efforts to focus on nurturing this network. This created an unassailable competitive position.
Desirable: This is where the Revel, and many others, fail. Your differentiator must be something customers are willing to pay for. If it's not valued, you must look elsewhere. I often hear large companies claim that “leadership” or “culture” is their differentiator. But customers don't buy these; they buy the products and services that result from a great culture or leadership.
If you believe your culture is your differentiator, ask yourself, “What does our culture make possible that is of value to our customers and sets us apart?” Your answer will provide critical insights into your unique value. It is also important to note that you do not get to determine your differentiator. Your customers determine your differentiator.
Disseminated: If only a few at the top of your organization know your differentiator, it won’t make any difference in the long run. This information needs to be propagated down to every employee. This enables them to focus their energies on what matters most.
Let Your Differentiator Drive Your Business
Being different is not the same as being differentiated. Your customers must perceive and value your differentiation.
And once determined, your differentiator helps prioritize your innovation investments. In other words, “innovate where you differentiate.” Spend a disproportionate amount of energy improving the areas of your business that set you apart from the competition. This is the cure for chronic sameness, and is what leads to success.
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