Companies that succeed through cost offer quality products with guaranteed low prices, convenient services, or both.
Succeeding Through Cost
They target those customers who are concerned with finding the lowest prices or with minimal hassle involved. Although they compete in a variety of industries, these companies have at least one of four activities in common:
- They have minimized costs and hassles by managing and optimizing their supply chains and fundamental services.
- Their operations are mechanistic; involving standardized, centrally planned, and tightly controlled operations that leave virtually no discretion to the average employee.
- Management focuses on discovering new ways to integrate operations in order to increase reliability and decrease transaction time.
- They develop an organizational culture that rewards efficiency and detests waste.
A firm that epitomizes the success through costs method is Dell. For instance, Dell utilizes its supplier relations to offer high quality personal computers for low prices, with minimal hassles. Dell offers suppliers exclusivity rights to provide computer parts in exchange for low prices and terms that increase efficiency. Simultaneously, Dell allows customers the convenience of building and ordering a customized computer from their own home. This mixture of low cost and hassle-free ordering has allowed Dell to be a key market leader in the personal computer industry for more than two decades.
Succeeding With Superior Products
To succeed with superior products, companies challenge themselves to develop highly desirable goods or services that are untested in the marketplace. Successful product-oriented organizations share several characteristics:
- They use creativity in regards to the desires of consumers. Whether inspirations originate from internal or external sources, these firms recognize opportunities and capitalize on them.
- Their operations are designed to react and implement revolutionary ideas quickly.
- Their cultures aim at continual innovation to stay ahead of competitors. Rather than allow other firms to surpass their products technologically, successful organizations constantly strive to discover the next revolutionary advancement. There is no time for companies to admire a product's success since competitors will already be busy trying to render it obsolete.
Succeeding With Human Capital
The most important factor for success revolves around the company's human capital.
To properly create a culture of innovation, organizations must hire appropriate employees that will foster creativity. They need to be highly flexible, cooperative with others, and able to work in teams. Moreover, they must be open to criticism and unafraid of failure. Successful ideas are rarely perfect at the moment of their conception. Rather, weeks, months, even years of trial and error are needed to properly develop a lucrative product. This reality requires companies to focus on long-term results rather than short-term profitability.
They must reward success, but not punish failure. Experimentation fosters the innovation that will give the company the above-average profits and market leadership it desires.
Succeeding Through Customer Relations
For many companies, the key to creating value for their products and services stems from the bonds they build with consumers.
They focus not on what markets desire, but rather the wants and needs of the individual customer. Constantly modifying products and services to meet and exceed the expectations of consumers allows companies to develop the greatest asset of customer loyalty. Rather than increase transactions from a wider consumer base through broad marketing and advertising campaigns, consumer-oriented organizations cultivate relationships with current customers to achieve repeat sales. They differentiate themselves by offering conveniences or modifications specific to the customer that competitors will not. These sometimes simple alterations make the consumer feel valued by the company and decrease the probability of a competitor stealing their business.
To succeed through customer-orientation, companies need to have more decentralized decision making structures. Employees must be empowered to make appropriate decisions regarding customer demands since they deal directly with consumers. Every interaction with a company employee affects, for better or worse, the customer's perception of the organization. Because of this fact, organizations need to properly motivate employees with appropriate incentives that reward customer retention. For example, pay based on the amount of time a customer stays with the organization keeps employees focused on doing everything they can to satisfy consumer demands.