LCA National Conference Competitive Edge Andrew Hely IGT Australia

Outline What is a Competitive Edge? Criteria for a Sustainable Competitive Edge Why do we need a Competitive Edge? Distinctive capabilities Distinctive vs Reproducible Capabilities Commoditisation Personal views on gaining a Competitive Edge

So what is a Competitive Edge? A clear advantage over the competition in terms of one or more elements of the marketing mix that is valued by potential customers. An advantage that allows business to survive and grow against its competition over a long period of time.

What are the criteria for a Sustainable Competitive Edge? Unique Difficult to replicate Superior to competition Valued by Customers Sustainable Application to multiple situations

Why do we need a Competitive Edge? In today’s world, customers want things quicker, cheaper and they want it their way ! Competition never gets easier   Products tend to get commoditised in the long term

Distinctive capabilities are the basis for a Competitive Edge – Things that can’t be replicated by competitors, or, can only be replicated with great difficulty, are the basis for a sustainable competitive edge. Tangible IP rights – eg. patents, trademarks, reg’d designs Exclusive licenses Intangible Strong brands Strong Leadership Organisational culture Teamwork ability Business processes Partnerships or alliances Good location

Reproducible Capabilities Technical capabilities Financial capabilities Marketing capabilities Explicit knowledge capabilities Non-exclusive licenses Reproducible capabilities = Zero Competitive Edge.

Distinctive vs Reproducible Capabilities Focus on distinctive capabilities that allow you to differentiate yourself ! The key is the ability to separate yourself and your product or service, from that of your competitors. Distinctive capabilities need to be combined with speed !!

Commoditisation Commodity A product that’s completely undifferentiated. Commoditisation Where a product becomes less differentiated, so that buyers don’t care who they buy from. Key Impact Reduces the pricing power of the producer - if products become more alike from a buyer's point of view, they’ll tend to buy the cheapest.

Commoditisation How do you avoid it ?   Need to be able to differentiate products with something unique, not easily copied by competitors, and which is valued by customers…..anything to convince customers not to buy the cheapest product.   ie. you need a Competitive Edge !   What’s the alternative ?   Compete on price.

Commoditisation Example: PC Market Initial differentiation with manufacturers having different proprietary hardware and software (operating system) ; Looked different, ran different software, had different capabilities ; Growth market ; differentiation; various Competitive Edges; Market matured, standardized, and largely commoditised PC’s ; Now little differentiation….. therefore compete on price.  

Commoditisation - Organisations who have adapted Dell Computers Commoditised global PC hardware environment with extreme price competition ; Dell developed their Competitive Edge in sales distribution…… took out the middle man !

Commoditisation - Organisations who have adapted Microsoft Early recognition of PC hardware becoming a commodity; Concentrated on software where they saw a sustainable Competitive Edge ; Now the unrivalled leader in PC operating system software…...higher margins due to competitive edge ! Bill Gates – “If you possess the market….you eventually possess the profits”.

Personal views on gaining a Competitive Edge Build a strong team culture  Culture of commitment by passionate employees;  Look for opposites in building your teams;  Look for the right attitude rather than technical excellence; Keep your management structure flat and don’t build hierarchies or silos; Look for team members you trust and enjoy working with; Don’t forget to have fun as well !

Personal views on gaining a Competitive Edge Empower staff, make them accountable, but encourage innovation  Share knowledge;  Be open and honest about performance;  Praise publicly, criticize privately;  Encourage staff to try new things and make mistakes…. the only way to learn…. the best in any discipline are those who handle mistakes the best !  

Personal views on gaining a Competitive Edge Focus on the process, not the outcome  Break things down into small pieces (chunk it)…. literally one step at a time;  Look after the small things and the big things look after themselves. Understand the competition, but don’t obsess. Focus on what’s important, ignore distractions

Personal views on gaining a Competitive Edge Lead with visibility, selflessness and conviction  Don’t lead from your ivory tower – must be visible ;  Stay in touch with the business without micro-managing ;  Try and make your staff look good, not you !  Look for fair outcomes in business and be generous with staff ;  Have an open mind to new ideas ;  Don’t take yourself too seriously…..you’re only one cog in the wheel ! Remember, the tone starts at the top! Above all……be yourself !

IGT Australia Vision & Values

Thank you!