Doused with a great deal of prominent examples, Dawar has done an excellent task in getting marketers to “tilt” downstream in order to secure a competitive advantage for themselves in a world of options. Introducing readers to a broad sweep of marketing literature, Dawar states his case on why he thinks there is a need for a downstream tilt. For the uninitiated, he defines upstream as activities pertaining to product development, R&D, production, supply chain management; and downstream as activities pertaining to customer after-sales service, customer satisfaction, and distribution.
Dawar observes that traditionally, businesses have focused on building competitive advantage in upstream activities, and opines that the new game of building competitive advantage must now “tilt” downstream and this shift will have “profound implications for strategy and the way businesses are measured, monitored, and managed”.
One of the home-run examples employed by Dawar that resonates with Levitt’s rhetorical question “what business are you in?” is the one on the explosives company ICI. As all of its competitors defined their business as explosives manufacturers, they failed to differentiate themselves well and continued to compete fiercely on price, tightening margins and creating a downward spiral for the entire industry. When ICI took a step back to examine its product offering, it realised that its business was not in explosives per se but a service that it could provide to its customers. As ICI had the data on blowing up rocks to exact specifications and since its customers were seeking to obtain rocks at exact specifications by blowing them up, ICI decided that it would bill them based on the outcome (blown up rocks in the exact specs) rather than selling them explosives per se. This dramatically altered the game in their favour.
Perhaps the paragraph that sums up everything that Dawar needs to say: “The rules of the competitive playing field spell out how brands compete for the consumers’ consideration, choice, and loyalty. To break into the consideration set, your brand must meet the cutoff on the key criteria that customers use. If the criteria are unique to your brand or the cutoff is so high that only your brand makes it into the consideration set, you minimize competition by limiting the brands that enter the set. If you can persuade large numbers of customers to use the unique or high bar, you have a winning combination of a large segment and few competitors. If you enter the consideration set along with other brands, your competitive objective is to maximize your chances of being selected for purchase from within the set. You do this by maximizing the relative exchange rate between your brand’s key positioning criteria and those of your competitors—by increasing the importance of your criteria relative to the competitors’ criteria for as many customers as possible.”
Dawar articulates his thoughts succinctly into bit-sized paragraphs that make it easy for readers to connect with his points.
I personally like the manner in which he succinctly phrases questions for reflection both within the chapters and also at the end. For example, he asks three sets of questions to help C-suite executives locate their business’s center of gravity:
• Where is the greatest burden of your fixed costs? Is it in your factory, in your R&D, or in activities related to customer acquisition, retention, and satisfaction?
• Which of your activities do your customers most value? Which activities are they most likely to pay a premium for? Which ones are the reasons for their loyalty? Where do these activities reside
on the upstream-downstream spectrum?
• Where along the spectrum does your competitive advantage lie? What about your enduring differentiation?
Some of the points that he makes need to be reinforced with examples immediately to help readers crystallise some of by their own thoughts on the issues. For example, he wrote that “Competitors are quicker to replicate, neutralize, and commoditize upstream competitive advantage than they are to do the same thing with downstream advantage” and leaves the reader hanging without providing an example to follow the thought through, especially when he makes a statement that is likely to require something concrete to illustrate the concept.
Reviewed by: J.CJ (MBA), Editor, BLM (follow him on Twitter @jasonlimcj)
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