If you’re new to Customers, Etc., this is the last week in a four part series on “Is Your CX Strategic?” (1
), a reflection on Michael Porter’s 1996 Harvard Business Review
article, “What is Strategy?”
. The first three parts in the series are intended for the customer experience professional trying consider if and how their work in CX is strategic. Each of these was written from the perspective of being inside
the business. Today’s newsletter is from the perspective of being outside
the business, that is, of being a customer. How do we think of customer experience and strategy when we’re the customer?
It’s worth revisiting Porter’s thesis that “operational effectiveness is not strategy”, which we looked at in week one
[O]perational effectiveness is “necessary but not sufficient.” His argument…is that if competitors all strive to be operationally effective in the same way, solving the same problems for the same set of customers, businesses will start to look the same, in a process he calls “competitive convergence.”…
Competitive convergence necessarily leads to lower profitability for each competitor. For each competitor, having maxed out operational effectiveness independently, the only remaining way to become more operationally effective is to merge with a competitor or be acquired, but even this doesn’t guarantee profitability, only the hope of lower cost as redundancies are eliminated…. What this means is that even if you’re maxing out operational effectiveness in every area—you have a finely tuned sales machine, a great customer success team, the best-run engineering organization in the business, etc.—all of this could still lead to reduced profitability in the long term if your competitors are all doing the same thing. The piece that is missing, if you’re only focusing on operational effectiveness, is strategy.
I mean, I agree with Porter’s thesis here from a business perspective. If you’re the same as all your competitors, why should someone do business with you instead of one of your competitors? You really do want to find your strategic position. What starts to rub me the wrong way is the notion that no one benefits from improvements in operational effectiveness. Re-quoting what I shared at the beginning (emphasis mine):
“But although such competition produces absolute improvement in operational effectiveness, it leads to relative improvement for no one.”
No one? I mean, when every single retailer starts offering a better digital experience practically overnight, it seems hard to say that “no one” benefits.
Okay, okay. I’m equivocating on the phrase “no one.” Porter is talking about a group of competitors. I’m talking about the group of collective humanity. Besides, later in the same paragraph, Porter states (emphasis mine):
“But the resulting major productivity gains are being captured by customers and equipment suppliers, not retained in superior profitability.”
I’m having a hard time being too bothered by that? Sure, Porter’s talking about groups of competitors, but isn’t it okay to zoom out and look at the big picture?
When we think about the basic model of a business
, which includes shareholders, employees, and customers, most
of the relationships I personally have with businesses are as a customer. If the net effect of businesses investing in operational effectiveness is that digital experience get better for everyone, I’m all for it¹. As a consumer, I don’t care if companies have figured out if investing in digital experience is “strategic” (uh, it is
). I just want a better experience for myself and everyone else.