Companies & Industries

Outperforming by 'Outbehaving'


In today's hyperconnected world, power increasingly is derived through people—through relationships, authenticity, transparency, and openness

The source of sustainable competitive advantage in the 21st century is such a new idea that the term has not yet entered Webster's or Oxford's. You will not find "outbehave" in the dictionary—not yet, anyway.

What you will find, just below a definition of the prefix "out" ("in a manner that exceeds or surpasses and sometimes overpowers or defeats"), are dozens of words that describe deeply engrained habits of how we think and act. These terms—outproduce, outsmart, outprice, outfox, outspend, outthink, outperform, and many others—are remnants of pre-21st century human endeavor and business interactions. We learned, practiced, and embraced these thoughts and actions in an era when what we did mattered far more than how we did it.

By understanding why these old habits no longer provide a sufficient or lasting competitive advantage, 21st century business leaders can begin to help their organizations with the challenge of embracing behavior as an unique and renewable source of sustainable differentiation.

FROM COMPETITIVE DIFFERENTIATORS TO COMMODITIES

We all want to stand out, be uniquely valuable, and distinguish ourselves from the competition. Until recently, those sources related to what we did.

But in our commoditized world, we are running out of areas of differentiation. In trying to find them, we look for the sources of great variation. There is one area where tremendous variation and variability still exists—one that we have not yet analyzed, quantified and systematized and one, in fact, that cannot be commoditized or copied—the realm of human behavior.

Previously in business, finding advantage meant differentiating ourselves from the rest of the herd based on the products we produced, the supply chains we used to get our products to market quicker than the competition, and the service we provided to customers. If we outproduced, outsped, and outhustled rival companies, we also outsold them and "overpowered" the marketplace. This advantage was sustainable for longer periods of time in a less connected world, one in which it took competitors longer to catch up.

Today, we live in a hyperconnected world thanks to the explosion of communications technology in the late 20th century. Since hyper-connectivity breeds hyper-transparency, everyone can instantly see what we do and how we do it. As a result, everyone has grown much more interested in how we do what we do. This is especially true of our competitors, who can quickly see, study, and reverse-engineer our best-in-class supply-chain management processes, innovative product designs, and lightning-quick customer response times.

Hyperconnectivity and hypertransparency explain why so-called competitive advantage now lasts only weeks and months when it once endured for years and decades. We're running out of areas in which we can stand out because previous forms of competitive differentiation are quickly becoming commodities. Every service center can answer a telephone call before the second ring or an e-mail within a few hours. Any manufacturing company can develop just-in-time inventory practices. Almost any gee-whiz product can be copied by an agile overseas competitor and sold at a much lower price point.

What can't be copied is how the company pursues these strategies.

How a company approaches its decisions and how it executes them is as important as the decisions and actions themselves. But a company's how approach isn't defined by the hiring of a customer experience officer or mandating rules of engagement—those strategies are "whats" that can copied or reversed engineered. Instead, it is defined by the extent to which it pursues its aspirations with authenticity, openness, consistency, and with fidelity to its values and principles.

In the retail environment, for example, every employee gets trained on how to greet customers with the company tagline and direct them to goods and services, often walking with them to ensure they find the goods they are looking to buy. How is about what happens during the walk. It's about interacting and connecting with customers in an authentic way that they are delighted by the experience and are served in the process.

The emergence of how—or behavior as a source of competitive differentiation is evident in the humanization business is experiencing, as I explained in my last column (BusinessWeek.com, 9/5/08).

On the marketing front, a growing number of companies assert that they are about much more than their products or services—that "much more" translates to people. For example, Johnson & Johnson (JNJ) asserts that "Tylenol is different because of the people who make it." The product's site contains video testimonials of workers responsible for the product, who make promises about the care and commitment they pour into their production and quality-assurance processes. Johnson & Johnson seeks to differentiate Tylenol from competing companies not only on the quality of its product, but more so based on the quality of its employees' behaviors.

The entire "customer experience" movement reflects a similar desire, and it has been embraced by products and services companies alike. Business leaders have realized that customer service no longer suffices as a competitive differentiator, so they focus more time, energy, and investment in the human interaction their employees develop with customers.

Customer service is about how quickly an employee can connect with a customer. Customer experience is about the quality of that connection over time. Customer service is growing increasingly automated thanks to ATMs, interactive voice response (IVR) systems, and online self-service. Customer experience, which is designed to enhance the long-term loyalty of the most valuable customers, requires companies to outbehave their competitors.

A VARIABLE AND INFINITE SUPPLY

The notion of behavior as a powerful source of differentiation may prove difficult for many employees to grasp, and for good reason. Our initial introduction to the term may remind us of the scolding we received as children. We were admonished to "behave!" in response to our objectionable actions. From that age onward, most of us developed a perception of behaving as something we need to do only after acting badly.

Adopting behavior as a governing principle of human endeavor and business can also be difficult because our previous habits of thought and action—all the outs (outmuscle, outfox, outscheme, etc.) mentioned above—are deeply engrained.

These old habits of behavior allowed us to accumulate power over people through leverage. Our hyperconnectivity has greatly reduced the leverage we can exert over other people, however. In today's flat and hyperconnected world, power increasingly is derived through people—through relationships, authenticity, transparency, and openness.

We need new ways to help us develop behaviors that enable us to outbehave. Change is never easy, yet it is necessary and valuable. There is great variability in behavior (no two people think and act exactly alike) and, therefore, more opportunities for individuals and organizations to stand out based on their behavior.

Unlike previous sources of power and competitive differentiation, behavior is not finite. Behavior may be one of our greatest sources of renewable energy, as I will discuss in a future column. Although the term outbehave probably will not make it into the dictionary by next month, I believe it will become a crucial part of our language and business strategies for decades to come. Hopefully with it will come the understanding that to outperform you must outbehave and by outbehaving you achieve not just performance but principled performance, something at the center of any truly sustainable business.


American Apparel's Future
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